In this month's mailbag, I rave about my new EV (despite my lifelong aversion to cars), explain why our political system would never permit a "decarbonization Trump", wrestle with solar geoengineering, and share my thoughts on why home batteries are so much pricier than the ones rolling around in our cars.
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In this episode, I talk with Patrick Robbins of Public Power NY and Johanna Bozuwa of the Climate and Community Institute about New York's groundbreaking Build Public Renewables Act, which empowers the state's public utility to build clean energy at scale. We explore how this surprising legislative victory happened, the challenges of implementation, and why public ownership might be the key to making renewable energy both politically resilient and economically accessible.
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Text transcript:
David Roberts
Okay, then, hello everyone. This is Volts for March 26th, 2025, "What's going on with public power in New York?" I'm your host, David Roberts. One of the core beliefs of “ecosocialists” and others on the green left is that the government should play a much more active and direct role in planning, financing, and building the clean energy necessary to decarbonize the economy. They argue — many pointing to the work of recent Volts guest Brett Christophers — that the market, left to its own devices, will never build clean energy fast enough. There just isn't enough profit in it. The power is in the public interest, so the public should pay for and own it, or at least a good chunk of it. So goes the argument.
Public power advocates have had few policy victories to point to in recent decades until last year, when the New York State Legislature passed the Build Public Renewables Act. The law would put the New York Power Authority, the state's public power utility created in the early 20th century, in charge of building the renewable energy needed to meet the state's ambitious targets and have it shut down its gas plants ahead of schedule.
It was a surprising show of strength from the sometimes fractious coalition behind the plan. Activists had spent the previous several years stumping for the bill, pressuring lawmakers and primarying key politicians who were wishy-washy on public power. So how did this thing pass? Is it working? What other policies are needed to help it along? Is it politically resilient? And what's next for the public power movement? To discuss all of this, I have with me today Patrick Robbins of Public Power NY, one of the key groups that secured this victory, and Johanna Bozuwa of the Climate and Community Institute, which advocates for public power.
So how did this thing pass? Is it working? What other policies are needed to help it along? Is it politically resilient? And what's next for the public power movement? To discuss all of this, I have with me today Patrick Robbins of Public Power NY, one of the key groups that secured this victory, and Johanna Bozuwa of the Climate and Community Institute, which advocates for public power.
With no further ado, Patrick and Johanna, welcome to Volts. Thank you for coming.
Johanna Bozuwa
Thanks so much, David.
Patrick Robbins
It's great to be here.
David Roberts
So much to cover here. I say that at the beginning of every pod, but, like, once I dug into this, I was like, "Oh, my God, this is like 12 pods." So we're going to try to move quickly. But Patrick, I want to start with you and maybe talk a little bit about the history here. The effort for this particular build dates back to 2019, but the choice to push for public power was a deliberate choice on the part of the movement. You know, there's a lot of meetings and discussion like, "What can we do? What can we win here?"
And you chose public power. So, maybe just take us back to 2019 and talk a little bit about why this, why public power as opposed to all the other things that are possible in New York?
Patrick Robbins
Just before we begin, I do want to say how thrilled I am to be on. I think it was your utility explainers back in the Grist days that got me thinking about the electric grid as a site of struggle.
David Roberts
Deep cuts.
Patrick Robbins
Yes, absolutely. With the quokkas. It definitely feels full circle. And thank you for having us on and happy to speak about the connection between the kind of origins of this campaign and the moment we're in now. So, I think we all know this is a really dire moment for everything we care about.
David Roberts
Oh, is there something blowing up...?
Patrick Robbins
Yeah, it's not great out there. And for renewable energy to survive in this moment, we believe it has to be as popular as Social Security. Public power is how we get there. That was a deliberate part of how we were organizing from the very beginning. So, if you go back to 2019, New Yorkers had just passed the Climate Leadership and Community Protection Act, thanks to the work of New York Renews. This was supposed to usher in a kind of new era for climate progress in New York State and established a legal mandate for New York to get 70% of its electricity from renewable sources by 2030.
And right around this time, a number of ecosocialist organizers in New York City voted to prioritize public power as a campaign. I think that from the very beginning, there was this idea that we needed to change the political economy of renewable energy. It has to work for everyone if we're going to be able to do more. I think there was also an awareness that the state was unlikely to meet even the ambitious legal goals that it had created. So, about three years ago, the New York Independent System Operator found that New York would need to add about 20 gigawatts of renewable electric capacity to meet its projected goals.
And there's a lot of reasons for that, the reasons why this has been so slow. Our ISO has for years been one of the slowest RTOs in the country. Only about 18% of projects make it through. And this is often because the cost of studies and upgrades is really prohibitive for individual developers. Then, on the financing side, in order to even be eligible to play the game, and your listeners will be very familiar with this, you have to be able to take advantage of the investment tax credits and production tax credits. So, right there, you're looking at private finance consuming 20 to 25% of the value of the project.
And this has real impacts for ratepayers. It makes it more expensive. It means that there's more uncertainty in the wholesale markets as well. So, that starts to factor in there as well. It's a really inefficient and wasteful system, and that has real consequences for everyday people. So, we were thinking, what can we do that changes the kind of political deadlock that we are in around renewables?
David Roberts
And can I just ask, it's New York ISO, right? You have your own ISO, the state?
Patrick Robbins
Yes, indeed. And so enter the New York Power Authority (NYPA). This is a New Deal era authority that was created to manage the state's abundant hydropower resources for the public good.
David Roberts
And this was created right around the same time and in kind of the same spirit as, you know, the Tennessee Valley Authority (TVA) and the... What's the other one? Starts with a B.
Johanna Bozuwa
Bonneville.
David Roberts
Thank you.
Johanna Bozuwa
Yeah, yeah, yeah. So, actually, NYPA was the predecessor. It was really actually FDR trying something out when he was governor. And that really laid the groundwork for him to actually think about utilities as a point of struggle up through the New Deal. It was really his testbed for TVA and Bonneville.
David Roberts
I did not know that.
Patrick Robbins
Exactly. And I will just share a little bit of personal context here as well. My great-grandfather was one of the lead engineers on Muscle Shoals and worked with the TVA and was deeply committed to public power. When I first started off working on this, I didn't really have a lot of context for that, but I started going through some of his old papers and just getting really inspired. So that was another really fortuitous connection there too. But yeah, NYPA already serves public institutions like the MTA and the SUNY system, so there is already proof of concept.
And it also serves the 50 or so small towns in New York State that own their own distribution lines, all of whom have cheaper power than anywhere else in the state, by the way. And that's not a coincidence. So, up until the passage of the BPRA, NYPA could not build new renewable generation capacity. And it was extremely curtailed in terms of the entities to whom it could provide power.
David Roberts
Wait, it couldn't by law?
Patrick Robbins
No, it couldn't by law. Yeah, it was limited in terms of the actual number of projects that it could own and operate. So, it was this kind of artificial restriction for the benefit of private generators.
David Roberts
Interesting.
Patrick Robbins
And so, we mounted a multi-year campaign to pass the Build Public Renewables Act, because we felt like here's this incredible resource that is not being utilized and in fact being deliberately suppressed in terms of the transformative power it could have for the state. And so, the intention of the BPRA is to reverse that. And rather than say you're restricted from building, you have to build new public-owned renewable generation whenever we're falling short of our legal renewable electricity targets. And one thing I want your listeners to take away is that we really have to use public institutions as a tool in the fight to grow renewable energy, because it's common sense.
If you have this resource, then we have to be using every tool in the toolbox. And we knew that we were fighting for something that was a pretty new idea. So it was important for us that this work for everyone, not just morally, because it's the right thing, but also politically. And so we had many, many conversations over years with environmental justice organizers, with labor unions in a variety of different sectors, with towns and organizers and advocates from every part of the state. It was a really, really exhaustive and grassroots process. And I feel like we won because of that, because we had built this incredible coalition.
And I'll say a little bit about what that looked like. All 10 of New York's gas-fired peak power plants are located in black and brown communities where asthma rates are much, much higher than the baseline. So, we spoke with organizations like UPROSE and South Bronx Unite and the Environmental Justice Alliance, and these are organizers that have been fighting against this environmental injustice in their own communities for decades in some cases. And so, we ended up working really closely both on the bill text and on the overall fight. So, that was one sort of plank. And then, organizing with labor was really interesting too.
It was important to us that these projects get built with absolute top of the line labor provisions. So, it was a little bit difficult at first to get some of those conversations going. I think that there are trade unions that have historically been opposed to public power for a variety of reasons. On the flip side of that, there's this long history of the climate movement, in my opinion, brushing labor's concerns aside. There is this kind of vexed relationship with renewable developers. When we were organizing this in 2019, that was when Bright Power broke the effort to unionize in Long Island just by firing everyone.
And so, there's a lot of trust that we needed to rebuild, but we did end up building that trust. After a while, the AFL-CIO itself came to the table and we basically told central staff in the legislature, "Just give them whatever they want." And that's how we ended up with some of the strongest labor language of any climate bill in the country. You know, this includes project labor agreements, prevailing wage provisions, applications of those provisions to contractors and subcontractors, and millions of dollars in funds for apprenticeship, pre-apprenticeship, and wraparound services. So, again, this is both the right thing to do, because it's the right thing to do.
We have to support labor, especially now when the NLRB is under attack. But it's also just pragmatically the right move. These are workers who are deeply embedded in their communities, who show up at hearings, and who work to protect their political interests. So, I think that cost and climate are often framed in opposition. But we were able to win because we exposed this as false or, at minimum, the product of specific policy choices. So, we said it's not cost versus climate or jobs versus climate. It's jobs because of climate, affordability because of climate. And we won on that.
And that was because of public ownership.
David Roberts
Well, you say you won, but that glosses over a lot of turbulence.
Patrick Robbins
No kidding.
Johanna Bozuwa
Campaigning in a nutshell, right?
Patrick Robbins
Well, like you said, we need 12 podcasts, but I'm happy to get into it.
David Roberts
Yeah, so, like, there was initially resistance; there was fighting. Then, Kathy Hochul tried to pass a kind of slimmed-down version of this. And you guys got up in her face and beat that. Very briefly, tell that story.
Patrick Robbins
That was a really revealing moment to me when that happened. So, this was during budget negotiations, and the governor's office put forward this plan that had kind of stripped away both the labor provisions and largely the environmental justice provisions as well. And this was happening after the leadership of 1199SEIU issued a statement in favor of the bill. And they did that in part because they have a lot of members in environmental justice communities, and a lot of their workers who work providing healthcare see firsthand the devastation of the existing energy system we have. So, it wasn't just about jobs.
David Roberts
I thought labor was like an 800-pound gorilla in New York. Why is the governor sticking her thumb in their eye?
Patrick Robbins
Well, I think that honestly, unpacking the psychology of the Governor is a little bit above my pay grade.
David Roberts
Her entire ideology seems to me —
Patrick Robbins
There's a lot about Hochul that baffles me. I'm not going to lie.
David Roberts
"Yes, good things, but just not that much good things. Just a little bit less good things." That's her ideology.
Johanna Bozuwa
As a treat.
David Roberts
"Good things, but not so much."
Patrick Robbins
Hundred percent. Totally, totally. But I think here's the thing, though, David, I think it's worth noting, like, what kind of compromises the governor is proposing. Because as much as I might joke about this, I do think that most politicians understand the power of a united coalition and a united constituency if they understand nothing else. So it's not a coincidence that the governor offered us a version of the bill that would have fragmented our coalition. So if you're wondering whether or not political economy is important in these fights, the people in power absolutely know that it's important.
David Roberts
But you hung together, and she just backed down.
Patrick Robbins
Well, yeah. I mean, after a while, I think it was really clear. After that statement from the 1199SEIU, I think we were talking about what kind of bill, not whether or not the bill was going to pass. And I do think that we saw the results of sticking to that and not isolating our coalition partners. And so, there was a period of time that NYPA took to develop their strategic plan.
David Roberts
We're going to get to that in a minute. But first, I also want to talk about one other episode in the process of passing this thing, which is the House put it forward, but the Democratic sponsor of the bill in the Senate — this is where New York politics gets a little opaque for me. The Democratic sponsor of the bill in the Senate refused to bring it to a vote in the Senate, which is not behavior typical of bill sponsors. And then y'all primaried him. Ran a primary against him. So, let me also tell that story very briefly.
Patrick Robbins
Oh, yes. Okay.
David Roberts
And that was quite controversial whether to do that, right?
Patrick Robbins
I mean, yeah, that was not a decision that was made lightly. And I think that is one of the advantages you have when you are working both within and without the traditional nonprofit climate world. There were many organizations that are structurally unable to do that kind of thing. They are structurally prevented from taking precisely the kind of steps that actually get results. But the DSA, at least so far, does not have that kind of limitation on its power. And so, the DSA did run a challenger that took our bill sponsor to task for essentially sitting on this and not moving it as the chair of the Energy Committee.
He wanted power over whether or not it was brought to a vote, and he wanted power over the campaign, and that's part of why he chose to sponsor it. But when you looked at the primary results, David Alexis came within a hair of putting him out of a job. And if there hadn't been a spoiler, it's anybody's guess what would have happened. And so, I will admit that there was this kind of surreal feeling after that when we watched Senator Kevin Parker bring the bill to a vote, kind of echoing our talking points, like echoing the very things that we'd fought him on for about a year.
David Roberts
That's how it's supposed to work, right?
Patrick Robbins
Yeah, yeah, it is.
David Roberts
Put the fear of God in him and then —
Patrick Robbins
Truly, you know, the fact that we did run a really fearless, aggressive campaign is also a huge part of why we were able to do what we could do. And one thing that I want to say on that is that I'm really, really proud of the campaign that we fought. But the story certainly did not end when the bill passed. In fact, it's kind of the opposite. I mean, anybody — you know this very well — anybody who's worked on climate politics or energy politics understands that you work and work and work to pass a bill and you fight for years and then the bill passes and that is when the work begins.
David Roberts
Yeah, I mean, well, the whole history of getting this bill passed is like people in power trying to screw you. And it's not like after it passes, they're going to stop screwing you. Yeah, they're still up there trying to screw you.
Patrick Robbins
Yeah, totally.
David Roberts
So before we talk about NYPA, the New York Power Authority and how it plans to implement this thing, let's just talk for a minute about what the bill says, what is in the bill?
Patrick Robbins
Right. So, the bill mandates that NYPA look at our progress toward meeting the state's climate goals and do an assessment with the ISO and with NYSERDA, and conduct this kind of robust stakeholder process to get a sense of where we are.
David Roberts
This is 70% by 2030.
Patrick Robbins
Yes.
David Roberts
And I'm assuming, like New York is nowhere close to on track for that?
Patrick Robbins
Oh, no. In fact, NYPA's draft report asserts that we are only likely to meet 44% of our demand with renewable electricity by 2030. So, that's not us saying that, that's NYPA itself admitting that.
David Roberts
Right? Yeah, 2030 is coming right up. It's funny, I've been talking about 2030 deadlines my whole career and all of a sudden, like —
Johanna Bozuwa
It's tomorrow, basically.
Patrick Robbins
Yeah, it really is. And I will share that the Trump development gives all of this some real urgency. You know, we need to get this built now. You know, there's the safe harbor provisions around IRA-backed projects, but I really don't want to depend on that.
David Roberts
Well, we're going to return to the Trump effect later, but let's get down exactly what's in the bill here. So, it tells NYPA, insofar as New York is falling short of its goal, you got to fill the gap.
Patrick Robbins
Yes, basically. And it gives NYPA fairly broad leeway in terms of how to do that. It can partner with private developers. Private developers cannot own a 50% or more stake in any of the projects, but they can partner on them. We recognize that this is a new thing that we're asking NYPA to do and we want them to be able to develop their capacity to do more. And that's not going to happen overnight. So we said, "Okay, sure, you can partner to a reasonable extent and work with private companies," particularly so that another concern is making sure that existing unionized workers on projects are able to preserve those contracts as well, so that was a concern for us.
But we worked it into the bill so that private companies can't own more than 50%; they can't own half or more. NYPA has to be the majority owner, even in cases where there are public-private partnerships. And that revenue then goes back to the New York Power Authority. The New York Power Authority has to conduct this kind of bird's eye view survey of where and how it's going to build and engage in a stakeholder process with a variety of stakeholders from across the state to kind of collectively develop a plan for meeting those goals with publicly owned renewables.
And in the final plan, it has to give a certain amount of detail about where and how much capacity all of those projects will be.
David Roberts
And then you have the labor provisions. All of these projects are using top-notch labor provisions. And then there's a bit about credits to low-income ratepayers.
Patrick Robbins
Yes, I'm really glad you brought that up. So, that's the REACH (Renewable Energy Access and Community Help) program. And REACH does this really great and kind of unique thing with the revenue from projects where it turns that revenue around and directly credits low-income ratepayers on their bills. So, it's this clear connection between renewables and affordability right off the bat. And so, one of the things that we've been working on is just trying to make sure that there are as many projects built as possible, because the more capacity you build and the more revenue these projects are generating, the more you have in the pot for that program.
David Roberts
So, the more NYPA builds, the more revenue it gets, and the more it can lower bills for low-income ratepayers. And is that low-income ratepayers across all of New York, or just ratepayers of NYPA?
Patrick Robbins
So, it's across all of New York, but it's also specific to utility region. One of the glaring gaps in the strategic plan as it exists now is that there's just not a lot built in downstate New York, which is of course right where there is the most demand. One of the reasons that's such a problem is that the way our Public Service Commission has structured REACH, it is utility territory by utility territory. So, we really need more projects built all over the state, but especially in New York.
David Roberts
You get more low-income rate reductions in a utility area, the more projects you build in that utility area?
Patrick Robbins
That is exactly right. I mean, one thing I do want to say though is, you know, I have these problems with it and certainly the campaign continues and certainly we're going to keep putting pressure on NYPA, but I think the program is a really big deal and I think it's really, really important that we have this, especially at this moment. So, I don't want to lose sight of that either.
David Roberts
Well, I mean, it's all out on the bleeding edge. Well, one basic question I have is, where does NYPA get the money to do this? Depending on, I mean, we're going to get into this with the implementation plan, depending on the implementation plan, depending on how much it builds, but it's going to need a lot of money, and not only a lot of money, but like the bill specifies, these are like top-dollar labor conditions, you know, like top-dollar nice facilities built. Not even necessarily where like a private developer — you know, a private developer would just look for the cheapest possible place to put it.
You're asking them to put projects specifically in congested areas. It will be more expensive and land is more expensive.
Patrick Robbins
Yes, we are.
David Roberts
So, all of this sounds like you're mandating NYPA to get some of the most expensive power possible. So, where does the money come from to do this?
Patrick Robbins
Well, I am so glad you asked. That is definitely one of the first questions that anyone asks about this ambitious program. And I think that NYPA is really a secret weapon when it comes to renewable finance because of its bond rating and because of its public financing capability. So, public entities like NYPA have the kind of bond rating that lets them do interconnection upgrades in a way that private entities often can't afford. So, first of all, they don't have to worry about the kind of tax equity swap dynamics that you and I were describing before. And so, the cost of capital is much, much, much lower for public entities.
So, a study completed using modeling from the Rocky Mountain Institute demonstrated that NYPA could replace its fossil fuel assets entirely with new renewable capacity without damaging its credit rating and keeping its debt service coverage ratio in that sort of like 2 to 2.5 range.
David Roberts
So, the bill passes, there's much celebration, and then we have NYPA. Basically, the next step is NYPA comes up with a plan to do this. And so, NYPA comes out with a plan and it proposes to build 3 gigawatts of renewable energy. And, you know, calculations are that to catch up with its target, to fill that gap we're talking about earlier, is going to require something more like 15 gigawatts of renewable energy, five times as much as NYPA is proposing to build. NYPA says, "Look, you guys, if we're going to build 15 gigawatts of energy all at once, that's like $30 billion in capital."
And they say that would threaten their bond rating. But I think also implicit in this is just like New York taxpayers are going to, you know, like, there's a limit to the popularity of renewable energy. So, talk a little bit about what the NYPA plan has in it, your objections to it, and what this kind of process — I've been reading about, like, they came out with the initial plan last year and then they were supposed to come out with a final plan, I thought, in January of this year. So, did that happen? What's in it and what do you think about it?
Patrick Robbins
Yes, so they did come out with the final plan, and it contained that 3 gigawatts of capacity.
David Roberts
And so, all the objections to the proposed — like, they came out with this proposed plan with 3 gigawatts. Everybody created a stink about it. The stink was ineffective, I guess. Like, the final plan still has 3 gigawatts in it.
Patrick Robbins
Well, not quite, because they've also signaled, and they were very careful during the vote when they voted for this plan. Leadership was very, very careful to say, "We are considering an additional 3 gigawatts as part of an additional summer session." So the first thing I'll say is that that existing 3 gigawatts would not have been built without our work, full stop. So I do think that that's important to keep in mind. And then I don't think that we would be talking about this additional 3 gigawatts either if there hadn't been this outpouring of public pressure from all over New York State with 5,000 New Yorkers showing up for what is often a fairly wonky, technocratic, kind of closed-door energy planning process.
So, we do want to see NYPA be more ambitious, and we'll see how things go in that additional summer session.
David Roberts
And the guy in charge of NYPA right now, or at least last year when all this was going down, is Justin Driscoll, a Republican, who could not get confirmed by the New York Senate. But Kathy Hochul, in her infinite wisdom, snuck him into the position basically by making his interim position there permanent. Why? Why, Kathy? So, is he still in there and has his disposition toward all this changed at all?
Patrick Robbins
He's still in there, but look, I think that we were not pleased when the Governor confirmed him anyway, obviously. And I think that we do not believe he's the right person for this job. But he's not the only person making decisions. And I know that there are a lot of people who genuinely really care about this, who work at NYPA. And for the most part, everything that I have described for you are things that we are calling on for them to do through bond financing. So the concern about taxpayers, that is real, but we want to see this done in a way that doesn't actually impact the state's budget.
NYPA has AA-rated bonds. In fact, their rating was upgraded in the last several months. And we know that they could be doing far, far more than they are doing now. The one exception that I will say is, frankly, I think it would be great if they would hire more people. I think the renewable team does a great job.
David Roberts
State capacity!
Patrick Robbins
Yes, yes, exactly.
David Roberts
Tapping the sign.
Patrick Robbins
Yeah, exactly. It's like, what are we doing here if we're not hiring enough people to get the job done? And that's true across so many different sectors. This is the definition of preaching to the choir. But that is one thing where we want to support staffers at NYPA to be able to do this work as well as they can.
David Roberts
So, what is their argument for why only 3 rather than 15? I mean, one argument that I can imagine is just that renewable energy is land-intensive and New York is like — the Northeast generally, but New York in particular — is like crowded and congested. There just aren't tons of swaths of open land. Is that what they're saying? Why are, what is, their argument?
Patrick Robbins
Well, I wish I knew, David. They have been telling us that they can't do this, but you'll notice that in their draft plan and in their final plan, it's really light on methodology. So, you know, we want to work with them in good faith. And, you know, if they're saying "We can only build this much." Our position is, "Okay, prove it." Have you done the modeling on this? Because we have and we have seen that you could be doing much more without damaging your credit rating. And the fact that they're kind of considering doubling the capacity from what they advanced before, one of the things that, that signals to us is of course they can be doing more.
They wouldn't be considering this if they didn't.
David Roberts
Well, if you're using highly precise and reliable models, you don't just go, "Eh, okay, maybe we can 2x it." Not really. That's not a small dream.
Patrick Robbins
No, you're totally right. And honestly, what I think one of the things, one of the many things that I think this speaks to, is the need for more planning and the need for leadership that takes these problems seriously. You know, I had a really funny experience when I went and testified at the NYPA board. A pretty high-level staffer came up to me at one point and said, people were very kind and they, you know, shook my hand and all of that. But one of them said, "You know what, what we really need is we need the governor to just get all the state agencies together and say, 'Here's what we need to build, here's where we're going to build it, here's how, and here's how much.'"
And I was like, "Okay, comrade, I totally agree." This is just a very funny thing to hear you say, but I totally agree.
David Roberts
This was like John McCain's plan for solving Afghanistan. Do you remember that? You just get all the warlords in a room together, bang their heads, tell them to get in shape. Problem solved, you're good to go. What's the problem here?
Patrick Robbins
One of the takeaways there is like, these are political problems. At the end of the day, these are not merely technocratic problems, although they present technocratic problems as well. There are ways to do this.
David Roberts
Well, there may be, let's not wave away technocratic problems. There may be technocratic problems. It's just like trying to discern them clearly through the haze of politics is the challenge.
Patrick Robbins
And having that political will is a precondition to addressing those technocratic problems. And I think that there are ways to do that even in states that don't have a legacy public power institution. Maybe you don't have a NYPA, but maybe you do have municipal bonds or a state pension or green bank.
David Roberts
I want to get back to that. So, the state of things is NYPA has come out with this plan you're pushing back, but where do things go from here? Do they just start building? In terms of process, is it just, "We're ready to get going and start building now."? Are there other process pieces that remain to be done here?
Patrick Robbins
Yes. So, there is a lot that they have to do in terms of developing contracts on individual projects. They are mandated to come out with a peak power plant shutdown plan in the next few months. So, we will be paying careful attention to that as well.
David Roberts
This is something that tripped me up a little bit. So, part of what the bill requires them to do is to shut down their — what is it, six...? Ten gas plants they own ahead of schedule. And the schedule was when, 2030? So, like, when are they shutting those down? So, it seems to me like at least in the coming decade or whatever, most of what they build is going to be to replace power that they're shutting down. Is that accurate?
Patrick Robbins
I mean, I would love for them to prioritize replacing that power directly. And I think that you're going to have a lot of, you know, legitimate concerns about reliability unless you are being as ambitious as you need to be in that specific load zone.
David Roberts
Right, right. Like, these are dispatchable assets in congested areas that you're closing down. Those are, like, very useful. And, you know, renewables, as we all know, are not dispatchable. So, like, a lot of batteries are going to have to happen here. You need transmission connecting things. Like, there's a lot of big stuff you need.
Patrick Robbins
That's exactly correct. And that is what we'll be watching for in the summer session.
David Roberts
Right. So, one of the things that sold the bill to doubtful legislators was the promise of federal funding. Big buckets of federal funding from various and sundry Biden policies, mostly the IRA, but also, I think, some other things. You know, as we see now, Trump and his people are doing everything they can to shut down that flow of money, to pull back what money they can. How badly would it affect this whole program in New York if Trump cut off the flow of federal money?
Patrick Robbins
So, I think that there is a real concern about that, and that's one of the reasons why we need NYPA to be accelerating their timetable and front-loading the planning that they're doing. Our understanding is that the treasury has guaranteed safe harbor provisions for renewable projects through 2026, but that's really soon. And so, we need to see projects, as many projects get started right now, and then you can start to build the kind of revenue streams that can then be reinvested, and you can build the kind of political will to keep going on this. And I think that for more, you know, more analysis and more subtlety around that, I think Johanna is probably the person to talk to on like big picture IRA prospects. But that's what I would say for now.
David Roberts
Yeah, yeah. Well, Lady Johanna, let's hear from you. You've been quiet.
Johanna Bozuwa
You know, the intricacies of New York state politics can be confounding to one. And you know, I think Patrick and the Public Power New York team have kind of masterfully navigated them, but you know, when it comes to these kinds of federal tax credits, I think it's a very real experience that not only NYPA is experiencing right now of like, "Oh my gosh, what is going to happen?" but the entire industry.
David Roberts
Literally everyone.
Johanna Bozuwa
Literally everyone. Exactly. And so, when you are losing some of those subsidies, I think what you can imagine is that the private industry, no longer seeing the profit margins, is going to potentially flake faster.
Whereas NYPA actually has some of this public interest, it has these, as Patrick's mentioned, like access to the bond financing mechanisms that actually potentially could make it a more durable actor that holds the tide from now until hopefully we regain a certain amount of power. So, I think it is right that everyone's going to be nervous about this. It could potentially cut down on access to financing and funding. And also, could this be the agency that's going to make sure that we keep on at least putting one foot in front of the other in these really unstable times?
David Roberts
Johanna, you're involved in the broader push for public power. So, I'm curious if you've been tracking public opinion around this in New York. As we've been discussing this — there are, like, acronyms involved in mechanisms and financing, and it's very obscure. And I'm guessing that the average Joe and Jane New York voter don't know most of what's going on here. So, I'm just curious, do we have any sense of what people know? What is the degree of support? Because one of the things I want to ask you about is the lessons you can take out of this.
What's next, where else to go and what else to do? So do we know whether it's working in New York in the narrow sense of retaining its popularity?
Johanna Bozuwa
I can speak to that a little bit. There have been polls that were done in the lead up to the campaign that showed that overall, public power is popular, and that's been true across the board. So, I live in Maine, David, where there was also a recent public power fight that lost. It is tough when you are going against 40 to 1 in terms of investment in the campaigns, which I do think also shows just like, how terrified the utilities are of, like, scrappy crews of volunteers, basically sick of their utilities. But even in those cases, even though the utility lost, there was pretty consistent polling that showed that people were in favor of public ownership.
But honestly what came through is that they were nervous about that transition, which I think is an interesting question for us, right?
David Roberts
I mean, who among us, right?
Johanna Bozuwa
Who among us? Like, it's change, right? Decarbonization makes people nervous, too. And I think it is about, like, making sure that people feel held through the process. And I have some polling coming out in a report on a retrospective on the Maine case. And actually, there was polling that showed they were asked the question, "Do you expect more or less of these campaigns to come in the future?" And the majority of people said that they expected more of these types of public power campaigns. And what I think that shows us is that people are in fact upset and sick of their utilities, right?
Like, they're sick of the shutoffs, they're tired of high utility bills. And that's why I think the BPRA example is interesting in this moment in which, for lack of a better term, Dems are in disarray. I think we've heard that everywhere. Everyone's trying to figure out, okay, like, "What does it mean? What do we do? How do we, like, reshore up?"
David Roberts
They need to show they can build, Johanna. This is what I keep friggin reading every five seconds. They need to show they can build.
Johanna Bozuwa
They need to show they can build. And they also, I think, have to show that they understand what working people are experiencing right now, which is like the number one issue for people is the cost of living. So, how are we connecting the cost of living to the climate crisis? How are we connecting the campaigns that we do to real implementation that then does the building? And I think that public power in some ways actually does have this tangibility to it. Do you hate your utility? Do they keep on increasing your rates but service is getting worse? I don't know. It's our grid. You're already paying for it. We should own it. And so that is compelling. When you go knock on the doors to pull in an anecdote from Maine. Like, imagine the most Mainer person you can imagine.
David Roberts
Get those L.L. Bean boots on, whatever those boots are.
Johanna Bozuwa
They have L.L. Bean boots on, and they're like in their garage fixing their snowmobile, right? This is the person my friend Lucy went and knocked on the door of and was like, "Hey, how do you feel about Central Maine Power?" And he was like, "I hate Central Maine Power. My bills keep on going up, and I don't understand why. Like, why is all that money going over to Spain with Iberdrola? We should own this thing." So, it's like, it does have this feeling of, you know, people right now feel like they don't have power, right?
They feel like the world is coming at them. They are not in control. And I think that there is a certain amount of public power campaigns that say, "Actually, we can have control."
David Roberts
"We can just do the things we want to do." Revolutionary message.
Johanna Bozuwa
Exactly. This is the thing, David, right? When we think of the world we've been living in for the past, what, 50 years of neoliberalism, right? The invisible hand of the market is going to take care of things. And I don't think we have 100% seen that give us the best outcomes that we could possibly have.
David Roberts
But my phone is so small.
Johanna Bozuwa
Oh, I know. Isn't it so great?
David Roberts
And the thing about utilities is, like, you can make an argument for the brute power of the market, even if it's got sharp edges, it does good things. And you can make a case for public provision. But, like this half-assed, worst of both worlds hybrid that we have in the utility sector, like, no one could love that. Who could love the current situation?
Johanna Bozuwa
No, it's absolutely, absolutely terrible.
David Roberts
Let me get the criticism, I guess, that I wanted to throw at both of you and see what you had to say about it. You know, you're aware of the sort of intellectual currents going around. There is this sort of abundance movement around that is very much saying, like, "Build, build, build." Dems need to build for a million reasons. You know, we covered some of them on the housing episode. And we need more decarbonization, we need domestic jobs and to revive domestic industries, you know, on and on. But part of what those people say, the abundance people, is "We need to build as fast as possible."
The problem with liberals is that, you know, this is referred to as everything bagel liberalism, is that they try to do everything with every bill. They try to do everything with every move. And so to me, a lot of this looks like classic everything bagel liberalism. Like, we need to build a bunch more renewables here in New York State. The thing to do if you really want to build a lot more renewables is to make it as easy and cheap as possible to build those renewables. But when you add on these labor standards and the revenue goes here and there and you can only charge this much, the more you try to, you know, sort of pile on your other values, even if any of those individual provisions are like noble and defensible, you end up with kind of an unwieldy thing.
And this, I think, would be the big worry of the abundance people when they look at what's happening in New York. You've created this system where the only output can be the highest, the most expensive possible power and therefore, you're not going to get as much of it as you want.
Johanna Bozuwa
So, my perspective on this, or to reframe that, is I actually think public ownership is efficient planning.
Patrick Robbins
Yes.
Johanna Bozuwa
I think that many of the bills that we have worked on over the past few decades of climate policy have been a series of carrots and sticks, mostly carrots, that are saying, "Please go this way, please go this way. Oh, yikes. Oh, you went off over there. But please, if you could go a little bit more over this way, and then we're going to create these regulatory places." It's very chaotic. It's hard if you're a private actor to actually even be able to make sense of that. Right. And I think we see the outcomes of that in the slowdown or private capital not rushing into the places that we need it. Whereas with public ownership, instead of having these tax incentives and regulations, you set the target and you march towards it. So, I think that that's just a major difference.
And if we are interested in this question of, like, what is populism, we need it to lower bills for people. We need it to feel like they have control. And that's what I think Patrick and the Public Power NY folks did with those provisions. They said, "Yeah, and it's gonna get you a good job and it's going to be high wage." And they said, "Yeah, actually, instead of those profits going to private institutions and shareholders who are the elite rich, we're going to reinvest it in you." And, like, the money was already going to go away anyway.
Right. Like, if it was a private institution, it was going to go to revenues, to shareholders, to their financiers. And in this case, because the ratepayers own the entity, they're the ones that are receiving the benefit. And so, I think that's where I kind of come into conflict with this theory of abundance, because I do 100% believe in abundance. It's just how we're setting it up for success.
Patrick Robbins
I would completely echo everything Johanna just said. And I do want to say that I have the polling in front of me on public power in New York and the Build Public Renewables Act in particular. And at least amongst the sample that they were polling, that's a 63% support rate, and that is actually higher than the percent of support for Governor Kathy Hochul, last we checked.
David Roberts
Is this the bar, though? Is this the bar? Is this the bar we want to clear? More popular than Kathy Hochul?
Patrick Robbins
I do think the way that we maintain that level of support is making sure that renewables work for everyone. So, it's really a false dichotomy saying we're either going to have labor and renewables, or we're either going to have environmental justice and renewables. In fact, the reason we have the political mandate to do more is because it works for so many people. And the way the financing works, there are plenty of reasons why the private market is enormously inefficient and poorly suited to this task, which many of your guests, like Brett Christophers, have gotten into. But I think it's also worth noting that left to its own devices, the market will select against the kind of things that help build that political constituency.
I still have, I would say, good relationships with a lot of friends of mine in the renewable development world in New York State. But there was one ACE NY that was pretty opposed to the passage of the BPRA. And you look at how they use their lobbying power in the legislature, and they consistently lobby against pilot payments to the communities where they are housed. And you just don't have that kind of thing with public institutions. You don't have public institutions spending vast amounts of ratepayer money on lobbying against climate progress, which you absolutely have with private institutions and sticking ratepayers with the bill.
I think that the beauty of public power is, it says okay in so many ways. We are already supporting these kinds of artificial markets through pools of money like RECs, and in other countries, you have contracts for difference and stuff like that. What we're saying is, we're already spending so much of this public money. The public deserves a voice if that's how it's going to be. We deserve a say in what our energy system looks like.
Johanna Bozuwa
A piece here that I think is also important, right, when we're talking about public ownership in the energy transition — I fully agree with everything Patrick said — I think a lot of us that are working on the issue of public power still expect a very mixed economy and that actually we see this as a potential accelerant for different forms of commerce. An example I'll give you, David, that's one of my favorites is actually NYPA and NYCHA, the New York City Housing Authority, working together. This was, I think, in the 80s, where the two of them got together and they're like, "You know what? We actually just like we need to lower the costs of bills and make our housing more efficient, our public housing more efficient."
So, what they did is they created a competition for energy-efficient, apartment-sized refrigerators that were manufactured in the United States. Right. Like all of those requirements. And if you were able to develop this thing, you got the contract. And so, they ran it and it actually was the thing that created the first Energy Star fridge that was of that size, slashed energy costs for public housing, provided that not only to public housing ultimately, but became consistent across apartment dwellers across the country.
And also, they created a recycling plant for all the old stuff in Syracuse, New York, like creating more economic benefit in the area. So, I do think that there are these opportunities for us to see public ownership as an accelerant for the larger new economy we're trying to build.
Patrick Robbins
And another example of that, Johanna, that will be very close to your heart, of course, is Nebraska. Right around the time all of these shifts were happening in how we generate power across the country in the 1930s as part of the New Deal, you know, there was Senator Norris fighting for public power in Nebraska, which is still deeply popular and sort of a source of local pride. And it's not an accident that the WPA had a whole theater department, you know, like, they literally had an entire wing devoted to making sure people understood and felt the benefits of energy in their lives. And this isn't a groundbreaking idea.
I'm thinking about Leah Stokes, for example, who I know you've had on the show before, and her idea of organized conflict between interest groups and that being kind of like the driving force for how the grid develops. And I totally agree with that, honestly. And the way in which you set yourself up for being able to build more renewables is by making sure it works for everyone.
David Roberts
Along those lines, is there any plan or thought about, like, do you guys have a theater department? Do you know what I mean? Are you thinking about how to ensure that New Yorkers know what is happening and that they're in charge of it? You know what I mean? Like, as we've seen, the Inflation Reduction Act (IRA) kind of, you know, lived and died. No one ever knew about it. The biggest thing that ever happened, and no one ever found out about it.
Patrick Robbins
Totally. And there's a lot of lessons to draw from that. I mean, I wish that there had been more attention to that at the federal level. I will say here in New York, we've gotten something like 45 major media stories in the last year. New York Times, New Republic. We've had as many public events as we can reasonably throw on this. And there's just going to be more. So, changing that and making sure people not just understand the benefits of planning the energy system and having a planned energy system, but feel some agency in being brought into that planning process.
I think that's the key to good organizing, and we only plan on doing more of that.
David Roberts
Yeah, and I will say, if I could editorialize a little bit, like Leah's point about the grid being shaped by the clash of different forces. I also think something similar is true in media in terms of public opinion. And this is something Democrats, kind of the Democratic establishment, legendarily doesn't get. They sort of are still acting as though there's a media that has to cover them, you know what I mean? So they can just say the safe, nice sounding thing and it will get covered. And what they have not, you know, updated their priors on, it's like no one has to pay attention to it all these days.
And the only way to get attention is to structure a conflict, you know, and like the right is so good at doing this, at ginning up these kind of symbolic conflicts that draw attention. And so, you know, I would just throw that out there. It's an ongoing way, like how to make New Yorkers aware of this, pick some good fights, you know what I mean? We're running out of time, but I wanted to ask Johanna. New York had a century-old public utility sitting there, more or less unused, just waiting to be pulled out of the shed and like tuned up and set going.
Very handy for a public power campaign in New York. Most states do not have one of those. So, what does the campaign for public power look like in places where you don't happen to have a giant public utility sitting in a closet?
Johanna Bozuwa
It's a great question and one I've contended with. Really, what it comes down to is, I think, that there are gradations of public power that we can talk about. Right? Like, it's everything from cities deciding to put solar on the top of their roofs to lower costs, to wholesale acquisition of a utility from nuts to soup. So, I think it really is context-dependent. It has to do with what you're trying to accomplish. Right. If we're being principled about why you're doing public ownership, it's like, what are you trying to accomplish with the public ownership?
That becomes important, and I'll give a couple of examples. One option is a public entity finance and own the renewable assets. We've actually been working with the Chicago Teachers Union on negotiating into their current contract, solar on schools that the city owns, and associating with that education around renewables, around renewable energy jobs. It's something that then can in turn actually lower the utility costs of the schools.
David Roberts
Yeah, I mean, renewable energy for schools is like the puppies and grandma of renewable energy. To me, anyway, it's like the perfect leading wedge to get this stuff started, you know?
Johanna Bozuwa
Absolutely.
Patrick Robbins
I totally agree.
Johanna Bozuwa
Like, it is the charismatic megafauna of renewable energy, honestly. Also, like the teachers, they say, you know, I was talking with my colleague Betul, who does most of our teachers' work, and she says that it's really amazing because teachers get to fight for something that lowers costs. Right. And that's a really great thing when you're also fighting for increases in your salary and support for your students. The Connecticut Green Bank has actually worked a lot with schools, for instance, and has some of the highest rates of solar on schools in Connecticut because they are doing public financing solar on schools.
So, that's an example of public power in action right there. It may not look the same way, but it really is about how do we marshal our public institutions to do the things that we want them to do?
David Roberts
Are there, beyond New York, fights over public power of particular note going on right now that people should clock? I mean, New York is the big one. I certainly don't think there's anything this big happening anywhere else. But are there other battles of note?
Johanna Bozuwa
There were just some campaigns that were in San Diego. San Francisco is actually continuing to investigate if they should municipalize their utility, which I know is spicy.
David Roberts
Yeah, that's fraught.
Johanna Bozuwa
Yes. But I've also heard rumblings of new campaigns kind of coming out of the woodwork in places like Oregon. I think Maine and New York were the two key ones that we had over the past couple of years. And now, I think we're in this next moment of like, "Okay, where is the next big campaign going to be focused?" And what can we learn from the campaigns that we've seen operate to date, too? Where have we won? Where have we lost?
Patrick Robbins
And to any of your listeners who are considering fights in their area, we would love to talk to you.
Johanna Bozuwa
One thing to mention as well is, even if you don't have NYPA, there may also be other entities that could operate in a similar way. So, California's Department of Water Resources is just looking for these random entities that have built stuff in the past. Right. And the Department of Water Resources is already working to procure renewable energy and already owns some of these assets. That's another place where you can build a campaign around that in the same way that NYPA is doing and just increase their commitment to decarbonization, for instance.
David Roberts
All right, well, that seems like a great place to leave it. I'm sure this is going to be an ongoing story in the run-up to 2030.
Patrick Robbins
Indeed.
David Roberts
When all the world's deadlines will suddenly be upon us, and we will see, we'll be able to see what happened in New York, I guess, will be very indicative. Canary in the coal mine, as it were.
Patrick Robbins
Well, thank you again so much for having us on and letting us share more about the work that's happening in New York. Really, really grateful for that.
David Roberts
Yeah, it's cool to find good things still happening.
Johanna Bozuwa
Exactly.
David Roberts
Points of light, or whatever. All right, Patrick, Johanna, thank you so much for coming on.
Patrick Robbins
Thank you.
Johanna Bozuwa
Thanks, David.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this episode, I'm joined by Toms Lumsden and Young (development manager and urban planner, respectively) to explore Blatchford, an ambitious sustainable community being built on the grounds of a former municipal airport in Edmonton, Alberta (Canada’s most conservative province). We dig into how this city-led, mixed-use development is creating a carbon-neutral community with pedestrian-first streets, a variety of housing forms, and a district energy system, right in the heart of oil country.
(PDF transcript)
(Active transcript)
David Roberts
Okay, hello everyone, this is Volts for March 19, 2025, "Canada's largest sustainable community takes shape." I'm your host, David Roberts. The city of Edmonton is in the Canadian province of Alberta, so associated with fossil fuels and fossil fuel politics that it is sometimes referred to as "the Texas of Canada." The city is known as a staging point for oil sands projects and for its concentration of oil money. Its hockey team is literally called the Oilers.
So, it might not be the first place you'd look for a sustainable, walkable community that’s working toward net zero emissions. But, you would find one nonetheless!
On roughly one square mile of centrally located land, once occupied by a municipal airport, lies Blatchford, a planned sustainable neighborhood that is meant to eventually house 30,000 Edmontonians, with a density three to four times greater than the surrounding suburbs and a goal of net-zero emissions.
The plan for Blatchford was approved by the Edmonton City Council in 2014, the year the airport closed, and in 2015 the city began clearing the land and installing basic infrastructure. The first residents moved into townhomes in 2020. If and when it reaches its ambitious goals, it will be heated and cooled by a sophisticated district energy system, filled with parks and green space, and served by two light rail stops.
Pretty cool stuff for the heart of oil country. I love big, ambitious projects like this, despite their inevitable controversies and delays. And, given everything going on, I dunno, now just seems like a good time for some pro-Canadian content.
So, let's find out how it's going. I'm thrilled to be joined today by a couple of Toms from up that way. Tom Lumsden, who works for the city of Edmonton as Blatchford's development manager, and Tom Young, an urban planner at a firm called Stantec who was closely involved in Blatchford's origins. We're going to talk all about what it's like to carve out a sustainable neighborhood in a car-centric, oil-soaked city.
All right then, with no further ado, Tom Lumsden and Tom Young, welcome to Volts. Thank you so much for coming.
Tom Lumsden
Thanks for having us.
Tom Young
Yeah, very glad to be here.
David Roberts
Tom Young, I want to start with you and talk about a little history here. The history actually goes back a little farther than 2014 and it was sort of interesting to me to read that the original plan here was very, very starry-eyed and it's actually a little bit of a stripped-down plan that got approved in 2014. So, I'm just curious to start with, what did get cut out in 2014?
Tom Young
Okay, well, let me reel back a little further just to talk to you about sort of where this came from in the first place. Like what the political origin was, because that feeds into the whole master planning principles document that became the launching point for the master plan. Okay, way back in 1997.
David Roberts
Whoa.
Tom Young
Yeah, yeah. Way, way back. Which I think is when you briefly lived in Edmonton as well, correct?
David Roberts
I live. Yes, I lived in Edmonton for one year in, I want to say, 1998, I think.
Tom Young
Okay. Well, a year before that, I mean, you probably would have flown into the International Airport because 1997 was the year that the city of Edmonton decided to move all their scheduled airline flights to the International. Previously, it had been kind of a split between the two airports. So that turned the city center airport into basically a hobby airport. Right. It was for, you know, people with Cessnas. It was for private jets, helicopter maintenance, and there were a few, like aviation-related businesses that had been there for a long time and sort of stayed at the airport.
But it drastically changed the economic viability of the airport. So, moving forward to 10 years later, it becomes an election issue. The mayor at the time, Stephen Mandel, was aware that in order to keep operating the airport, they were going to have to spend a few tens of millions of dollars to just keep it operational and functional. It had been built for a much different sort of level of service than it had. So, they were kind of like sunk costs that they couldn't get around if they wanted to keep it open. So, he was very financially driven and he's like, "We gotta close this thing."
"It's dead to me," sort of thing. You know, it was an airfield from 1925, I think it was the first municipally owned airfield in Canada. It had been used in the 40s as a training ground for World War II pilots. You know, it had a long history, but the city had grown up around it. It's in the midst of an urban area. So that was another reason to consider closing it. Now, Mandel wasn't really a green mayor in any significant way. He was sort of a business-driven mayor. He did have an interest in improving the quality of development in Edmonton, however.
And obviously, he wasn't the only person on council. There was also a sort of coalition of progressive councillors on council who said, "Hey, Stephen, we'll totally support you in the closing of this, but we've got some expectations around it." And they had ambitions. Like, yes, you said Alberta's Canadian oil country. Absolutely, it is. It is Canada's most conservative province by far, but Edmonton's a little different. It's like — no place is a monolith, obviously — but Edmonton's always also been a little bit politically contrarian. So this wasn't totally out of left field in terms of, you know, members of Edmonton City Council wanting to be progressive.
David Roberts
Well, I mean, it's also the case almost everywhere that cities are more progressive than their surroundings.
Tom Young
For sure. So that's the origin, that's the genesis of it in terms of the decision to close it and why some of the goals were so ambitious. After the decision was made to close it, the city of Edmonton moved forward with preparing, like, a project charter. I think they called it the master plan guidelines, something along those lines. And that became — it was kind of like a grab bag of all the best possible, most idealistic ideas that you could possibly plow into a document like that. From the perspective of urban planning, best practice and smart growth was a big idea at the time, and Transit Oriented Development was sort of becoming a really big driver in urban planning directions and policy at the time, and just like social and environmental sustainability.
So it was there that the idea of "Maybe we could do district energy, maybe they should have direct transit access for light rail" also sorts of other ideas were plowed into that, and they came up with some ideas that were actually approved by council originally, but that ultimately were not that practical. Like, there was a concept to do a pneumatic garbage collection system.
David Roberts
Yes, Tom, this was the whole reason I asked this question, because I love an excuse to talk about a pneumatic trash system.
Tom Young
Which, I mean, hey, super cool.
David Roberts
Yeah, I've seen them in operation. They are very cool.
Tom Young
Very, very cool. But, you know, sort of incremental environmental advantages. I think, like, it basically just means garbage trucks don't have to rumble around a neighborhood.
David Roberts
Yeah, well, there was going to be a biomass plant, too, right? Where all that stuff was going to get burned.
Tom Young
So, the district energy concept had a number of possible ideas, and one of them was biomass. One of them was deep geothermal. Which, you know, Alberta is really good at drilling, but when you have to drill down three kilometers, more than two miles to get to any heat, it's probably not practical.
David Roberts
Deep geothermal has come a long way in the last 15 years. I wonder if that calculation would still be the same if you approached it today.
Tom Young
Perhaps not. But, like, just from a cost perspective, I mean, the city here is the developer, and that's not a new thing for the city of Edmonton, you know, the city's been active in the development market as a master developer assembling land, selling it off to individuals and small builders — and part of the rationale for that is to make it more affordable. But the opportunity there is also to try new ideas. And Blatchford became a place for that to be a testing ground for ideas for infrastructure and sustainability.
David Roberts
Right. So, Tom Lumsden. So, you know, as the other Tom said, this is city-owned. So maybe you can talk about sort of like what all the city is doing here. What are the types of things the city is involved in? It's got to, for one thing, clear the land. What is the city's role?
Tom Lumsden
Yeah, the city, as Tom Young alluded to, is acting as the developer and specifically the land developer. So, we're creating parcels, we're servicing the land, we're creating the open spaces, and we're selling parcels to builders who will build homes for people to live in. So, we came in in 2014, the year after the airport closed, started demolishing the airport, taking down the buildings, ripping up runways, and then started putting in servicing for the properties.
David Roberts
While we're on that subject, talk a little bit about disassembling the old airport. You didn't just throw all that stuff away.
Tom Lumsden
No. Yeah. A big component again, being a sustainable community. So the official vision — and you alluded to it strongly — for the community is 30,000 people living a sustainable lifestyle, carbon neutral, using renewables. So part of our objective when we did demolish some of the buildings was to keep it out of the landfill. And our objective was to keep 80% of the materials of those old hangars and buildings out of the landfill. And we actually achieved about 93% when it was done.
David Roberts
93 diverted from landfill?
Tom Lumsden
Correct. So, these buildings were being, the materials were being repurposed for some reason, and somewhere. And then, on the other side of that, the runways were crushed and we used them for the base of the roads. So, we've been taking the airport apart and using it as best we can. There's a major highway project right adjacent to the property and they're using some of our runway as well because we have access.
David Roberts
Interesting. And I want to get into some of the urbanism and principles involved here, but let's talk just a little bit about the current reality of the thing. So, how many homes are built and occupied on site at the moment?
Tom Lumsden
So, the best number, again, our role is to sell property to builders and they will build the homes. So, we do have our district energy system, which you have kind of talked about a little bit. But, we have 134 customers right now connected to that system.
David Roberts
134 homes?
Tom Lumsden
Yeah, and some of those homes have a basement suite, garage suite. So, one of the 134 could be up to three different families living on one property.
David Roberts
Right. And so, you know, there's been some controversy. The original plan, I think, was to be doing something like 500 residential units a year starting in 2018. Obviously, you're not hitting that target. Why has it been slower than people expected to get really rolling?
Tom Lumsden
The biggest thing is the original business plan was approved in 2014, and like you said, it said people would be living there in the next couple of years. Our district energy system took a minute to figure out and decide what we wanted to do. So, the project was actually paused in 2016 to decide on our ambient loop system. To create a sustainable community, we were creating it kind of from the beginning, meaning where we're custom designing our roads, not specifically following the standards that the city of Edmonton approves. Now, while I work for the city, I still am treated as if I didn't.
And I go through the approval process. So instead of a 100-day approval process for our roads, it was two years to convince them that we could still fit a fire truck, a bus, everything down the road because we made them as narrow as we could and the sidewalks as wide as we could to encourage people to be out of their car and walking. Now, the other side of the story, so 2013, the last plane took off, 2020, the first people moved in. So it was seven years from an active airport to somebody living there.
A suburban development, I know some around Edmonton that could take up to a decade to get from a farmer's field to a community where people are actually moving into. So, it really isn't long. It was long compared to what the business plan suggested. The real estate market too. And again, everything's driven, we have to sell property, we have to sell homes. In 2014, the real estate market really took a hit. So when we got our approval, we were probably more optimistic than we would be today, and in hindsight. But really, in the grand scheme of things, we're actually going quite well.
David Roberts
So, but like the ultimate targets are still the same. Like the plan hasn't changed, it's just rolling out a little slower.
Tom Lumsden
Yeah, we're still planning to have 30,000 Edmontonians living a sustainable lifestyle. We have, like I said, we have 134 connected, but we have 270 homes either constructed or under construction and another property sold that will house 400 more. So, we are starting to hit our stride and most new communities take a year or two to get kind of that momentum going.
David Roberts
So obviously, one of the big principles here is, you know, for any good urbanism is mixed forms, mixed use, and mixed housing types. One of the things I've heard is that what's been built so far is mostly single-family homes and townhomes, and the apartment buildings and towers that would really concentrate people have not shown up yet. Is the balance of homes that developers are going for what you expected?
Tom Lumsden
Yeah, I think at the beginning — and just to correct you, there are no single-family homes. Our zoning doesn't allow that. The biggest thing is like a triplex.
Tom Young
The smallest thing is a triplex.
Tom Lumsden
Yeah, sorry, the smallest thing. So, as we had probably anticipated, that's what sold first and that's what we're having trouble keeping ahead of the market, actually. Like, our builders are waiting for us to bring on more lots.
David Roberts
Oh, for the townhomes?
Tom Lumsden
Yeah, we have sold other parcels that are townhouse zoned, but they're condo style, so they would be multifamily. So again, more density on the same amount of land. We have seven to ten of these simple townhomes. We have 15 on one lot, we have 26 on another one, and we have 90 on another one. So, townhouse style, but much more dense because it's a shared common property.
Tom Young
Yeah, and that was always the strategy, even from when the plan was approved in 2014. We started in the west district, the west side of the neighborhood, partly because the environmental cleanup of the ground had been mostly completed because servicing connections were already there, but also because that was the area furthest away from the planned light rail extension. So that was intended to be the most, like, relatively low-density part of the community. And lower density stuff always gets taken up by the market faster. It's just easier to build a townhouse than it is to build a high rise.
And it's really not that low density. Like, it's not a high rise in what we've seen so far, but as Tom mentioned, the zoning doesn't allow anything smaller than a triplex. The row house zoning allows a minimum of three units. But even within those three units, we also pioneered. The city of Edmonton zoning bylaw has leapfrogged beyond this. They're incredibly progressive now, but at the time when we first got the zoning approved, that was customized for Blatchford.
David Roberts
I wanted to ask about this specifically, so maybe you can expand on this. Like, I'm a bit of a zoning nerd these days. And obviously, I'm guessing, especially in 2014, there was no preset zoning category that would have allowed this. So, what was the process for zoning?
Tom Young
At the time, the Edmonton zoning bylaw — Edmonton had gone through decades of fairly typical suburban greenfield growth. That was the focus.
David Roberts
I remember being there in 1998. And my impression was like, big, wide streets, you know, like Denver style. If anybody's been to Denver, it's a little bit like that. And like weirdly few people. My impression over and over again was like, it's like a giant big city that oil built and like all the people haven't really shown up yet. But it was very sprawly. Like that was, you know, that stuck in my head.
Tom Young
There were decades of fairly low-density suburban development. And that is the majority of the city because that was happening through the biggest boom years. But that's changed significantly in the last two decades. Like when I started being a planner, I was excited to go work for the city of Edmonton because they were, you know, trying to innovate and pioneer new things. And that has finally come to fruition, I would say, in the new zoning bylaw. It's incredibly progressive.
David Roberts
Interesting.
Tom Young
Actually, American listeners who are interested in urban planning should really look at what Edmonton has done in the last couple of years. You know, there's no longer any minimum parking requirements anymore. Which is huge. It's happening in some other places. But I think Edmonton might be the biggest place that has enacted that. And they've completely overhauled the entire zoning process. There is no such thing as single-family zoning in Edmonton. I mean, you can still build single-family homes, but all zones allow a certain amount of density.
David Roberts
So, is it the case now that Blatchford fits with current Edmonton zoning? Like, you wouldn't have to get a special exemption. Like, if you were going to build Blatchford starting today, you wouldn't have to get a special exemption?
Tom Young
Yeah, I would say that they have caught up and probably gone further than what we put in place ten years ago now. And it's very urban. The urban design implications of the zoning bylaw are about a very urban form. Not like massive front yards and all the other setback things.
David Roberts
I want to get into that in just one second, but just for the other Tom, one final question about this. I've been reading articles from sort of over the years and I know people are always impatient with projects like this. They always take longer than people think they're going to do. And there has been some pressure, I think, from, you know, I saw the mayor mention this. I saw some city councilor mention this, saying if they would just loosen the standards a little bit, things would go faster and they would build faster.
Has there been a lot of pressure on that or do you think, like, there's enough commitment to these standards in the city council to hold them steady through this?
Tom Lumsden
So far, the experience has been exactly what you said. There have been comments about things like making those kinds of changes, but generally, as working for the city of Edmonton, we're looking for direction from the council of course. They've maintained and always voted in favor of keeping the course. So, it's pretty impressive that since 2010 they have maintained that kind of net-zero carbon neutral. And the plan and the way we're carrying it out.
David Roberts
A lot has happened since then. We haven't even mentioned Covid, but I'm sure that was not helpful to the project.
Tom Lumsden
Wasn't a friend.
David Roberts
Well, let's talk a little bit about those standards then. So, I love thinking about stuff like this. So, when we just think about streets, like, is there some master document somewhere with a list of sort of things that streets have to do or is it a loose category? So, like Tom Young, maybe you could address this. So, like, what is a good — I'm guessing one thing you don't have anywhere in Blatchford is a big four-lane stroad, which is mostly what we get here in Seattle. But what are the street design sort of guidelines?
Tom Young
No, there are no four-lane — I think in the future, you know, there will be some slightly wider portions at the edges of the neighborhood where Blatchford streets connect with the surrounding roadway network and adjacent roads to the southeast and southwest are stroady, I would say. And hopefully in the long term that can be tamed somewhat as those roads are reconstructed through periodic maintenance.
Tom Lumsden
The plan is to not have more than one lane of traffic in each direction for any of the roads in Blatchford.
David Roberts
Any interior road. Oh, interesting.
Tom Young
So, it would only be at the edges that you might have turning lanes.
Tom Lumsden
And specifically, yeah, coming off of the arterial roads that are adjacent coming in. But the only reason there'd be four lanes is two of them are for parking.
David Roberts
And you made them as narrow as possible. How narrow did they get? And how narrow would it, you know, like, how narrow would you like in a perfect world?
Tom Young
Now, we have to convert to feet and inches.
David Roberts
Oh, right. Oh, goodness.
Tom Young
Yeah, I don't know if I can do that on the fly.
Tom Lumsden
I know the experience I had, the lived experience, was being on the bus that tried to navigate. We have a traffic circle kind of at the end of our first stage, and they had to see if the bus would fit around it, and it did. The only comment the driver said was, "Maybe move the signs back a little bit" because it was tight. We did make it as tight as possible, but the bus can still go. The garbage trucks still come, still accommodates them, but it's not a place that you're going to speed through for sure.
David Roberts
Are there traffic calming features or is it just the narrowness that's doing that work?
Tom Lumsden
Well, the narrowness does it. But we have the bump outs, like I mentioned, like if there's four lanes, two of them are literally for street parking. And then we have the bump outs that narrow it down kind of at crosswalks or intersections to where the cars will actually travel. So those act as well. And we have boulevards everywhere, so there's never going to be a monowalk, meaning a walkway right onto the road. We have boulevards with trees everywhere. So again, the idea is people first, trying to make it comfortable for people to walk, ride their bike, scooter, choose that over getting in their car and driving away.
Tom Young
There are lanes planned for all of the townhouse stages. So, you don't have front drive garages everywhere. It is a grid, generally speaking, in terms of the street layout, which makes it very connected. And people can take lots of routes to get to where they're going. But at the same time, they're not necessarily as direct for people driving as they are for people walking. So, we've got walkways identified that allow people to go in a straight line, but that somewhat reduce the ability for people to shortcut or speed through spaces. So that's part of it as well. And cycle tracks and bike facilities from day one, like the first large road — and it's not particularly large, it's still just two lanes, one lane of traffic in each direction.
But Alpha Boulevard was built with a cycle track that will, once fully completed, permanently connect directly to the light rail station that's now been constructed as of last year.
David Roberts
Oh, very cool.
Tom Lumsden
And actually, two. One in each direction. So, one on each side of the road and again, a boulevard between where the cars will be and where the bikes will be. So, riding your bike through Blatchford's quite enjoyable.
David Roberts
Talk a little bit about the standards for the buildings themselves, the homes themselves, and how, you know, going back to 2014, how different were those standards from the sort of existing Edmonton municipal standards?
Tom Lumsden
So, we have two components. I guess as the developer, we have an architectural control. So, it's very wide open. The builders can look at what kind of inspires them to achieve what we want to do in Blatchford. And then we, as the developer, through our contracts, agree to what they're going to build. But the second part is we have what we call a green building code. So, that was developed after 2014, obviously, because we weren't set to sell lots. So, 2018 was really when it was finalized. And the simple one is more insulation in the roof, more insulation in the walls, triple pane windows, low flow everything.
It's just very prescriptive, very directive as to how they're going to build the home so they use less energy. Now, we have gone beyond that and made it so they can then model our prescriptive code and then, if they can create it a different way, they're allowed to. So, we're trying to make it adaptable. The one thing I can tell you, we do get questions around the architecture because it's not as straightforward as say it would be in a suburban community, which I used to work for a suburban developer. And those are very straightforward as to here's the four different styles.
David Roberts
Right. None of which are very inspiring.
Tom Lumsden
Yeah, pick one of these. Well, they're still nice communities, but our green building code, zero pushback. So, I think builders are doing a lot of this stuff already, but we're just making sure they're doing it. And we're also making sure they're bringing it to the level that we want to see in Blatchford.
David Roberts
Does it hit like Passive House standards? Are these like zero energy homes?
Tom Lumsden
No, but they're much closer than they would be in a standard kind of building code. In Canada, there are new tiering levels, tier one through five. And the base minimum if you build a home in Canada is tier one. We are approaching tier five. I think I was told the other day we're about tier three or four. So no, it's not Passive House, but it wasn't meant to be that. We still need to sell lots. We still want people to do this. I'm hoping people take what they learn in Blatchford and put it elsewhere. Well, we want people to live in Blatchford, but we also want to see the learnings transferred across.
David Roberts
Yeah, I was going to ask about the architecture. So, one of the complaints a lot of urbanists have here in Seattle is that we have this design review board which has to examine every proposed building. Even after the building hits code, is legal, you know what I mean? Like, hits all the requirements, still we have this design review board full of architects who just like to pick at it. The facade and the color of the bricks and all this kind of thing which ends up with two things: one, years of delay for every friggin' building, but also a kind of sameness and blandness to the resulting buildings.
And this is something I hear a lot about these sort of planned communities, or at least this is a worry people have when they hear something about a planned community. They worry about a kind of uniformity of architecture and a uniformity of look. How are you thinking about just the aesthetics of the buildings?
Tom Lumsden
Well, like you said, ours is kind of wide open. It's the inspiration of the builder that comes. And if you drove through our first, we're up to stage six now, you'll see very different buildings being built and approved. And we are, like I said, we're learning, we're adjusting as we go. But the builders are really, they have a pretty loose rein as to what they're allowed to build. We do have like no vinyl. We have certain rules material-wise; we want some brick or stone on the buildings. But other than that, like I said, if you drove through stage one, there's quite a variety in the homes that are being built already.
Tom Young
Yeah, so I was, as the consultant, leading the development of the design and architectural guidelines. And I would say it's not prescriptive in terms of style, it is more prescriptive in terms of urban performance. Like, it's not focused on the carbon, but it is focused on, you know, the street relationship. It's focused on, you know, how are you connecting with the surrounding urban environment, the public infrastructure. It's trying to make well-mannered buildings, but it's not trying to make cookie-cutter buildings.
David Roberts
Right, right. And you say in relation to the street. This one of the great principles here is there are no giant front yards here. There are porches. People are sort of close to the street. The idea is to activate the street.
Tom Young
Yeah, and we've even got some streets that aren't streets. Like, we've got townhouses that orient towards a public walkway that's meant as a muse type space so people can walk and bike through, but they're not looking at a field of parked cars.
Tom Lumsden
Yeah, one of my favorite stories to share is one of the families that live on that mews. Specifically, they have a 10-year-old. The dad's like, "Yeah, I open the door, he goes out and he plays with all the kids on the street," like on the walkway. He has no concerns. He sits back down, probably reads a book. And then he follows up with like, "I'm living a lifestyle I've only read about. This is pretty cool."
David Roberts
That's the dream. The idea that your kids can be safe outside and you don't have to be holding their hand constantly. What about solar on homes? Are you requiring it? Is it allowed? Does it work all the way up there?
Tom Lumsden
Yeah, it does work all the way up here. We get lots of sunlight in the summertime. In the winter, not so much. In our first round of green building code, we asked for, if they built a flat-roofed house, it would be able to support solar. In the second round of our green building code, we said put enough solar on to offset the major appliances. So, we are taking steps in the direction of kind of conquering the carbon neutrality of the power side of our equation too with that.
David Roberts
So, let's talk a little bit about the transit situation. Obviously, it's Transit Oriented Development. Transit's a big deal. Initially, there was talk about two light rail stations. One has been built, one is still in planning. What's the current transit connectivity?
Tom Lumsden
They both were built. They extend from the south part of Blatchford all the way to the north edge. The first station opened; the second station is built, but it hasn't been opened because we haven't developed up there. The first station actually just had its first anniversary, so it was a year ahead of schedule, which is a true success for LRT construction anywhere.
David Roberts
Not something you hear a lot from transit systems in North America.
Tom Lumsden
Yeah, so we were a year ahead. It replaced a temporary station. There's a polytechnical institute, NAIT, right next to our property, which actually they're going to build into Blatchford. So that NAIT station closed and this one opened and it actually has more ridership at the new station than it had at the old station. So it's an active LRT station. People are coming. One of my team actually did a little video, put it on Instagram, of walking from the existing homes to that LRT station. And it was like a 10-minute stroll. So it's there and accessible for the residents.
David Roberts
And the more northern one will open once there are more homes built up there.
Tom Lumsden
Yep. Hoping in the next kind of five, six years.
David Roberts
And just like, pardon my ignorance, I didn't really dig into this much, but like, how extensive is Edmonton's light rail?
Tom Lumsden
Well, it's growing. It was built in the 70s, late 70s, for the Commonwealth Games, which were here in '78. We did a lot of underground tunneling, so expensive type of LRT. The new LRT is more above ground. It's extending all the way to the west end of the city right now. It should be open in the next three or four years. The reason, and I kind of talked about the new LRT station in Blatchford being busier than the previous temporary one, is that there was a line from the center of the city all the way to the southeast that just opened as well.
So now, people in the southeast can live in the southeast. Take the LRT all the way to NAIT. So, it's part of the reason that it's become more active than the previous station.
Tom Young
The light rail system is currently about 23 miles long with multiple branches, but there are plans to basically double that.
David Roberts
So, it's popular, got public backing. People aren't nickel and diming them?
Tom Young
Very well used. I think the main line has — well, I don't know what the numbers are now, to be honest, but shortly before COVID, they were seeing 140,000 riders a day, which in the North American context is very high for a light rail system.
Tom Lumsden
I know from the news I've heard, it's exceeded pre-Covid numbers.
David Roberts
Oh, that's awesome.
Tom Lumsden
Yeah, so it's come back and been successful.
David Roberts
So, when I think about a sustainable community or sort of an eco-district, I guess they're sometimes called, I mean, one of the big things, you know, you think about sort of like sustainable building standards, you think about good streets. Then, like the other big thing that you want just for pleasantness, is amenities. So, like markets, places to buy your groceries, shops, commercial activity, green space, schools, daycare. All the kind of stuff you need to live life. And as I understand it, thus far, there's mostly homes, like what amenities are in and what is on the way.
Tom Lumsden
So, I guess as the developer, we're not building the buildings and renting space, so we're creating parcels and we're working with builders to build the homes. And ultimately, the whole south end of our community is going to be what we're calling Blatchford Market, which is where that LRT station is located. So that's going to be where the concentration of commercial will be. But we do have our four to six-story zoning which allows mixed use. So, main floor commercial on those buildings. The cool thing, and we didn't really set the context, it's a municipal airport. It's basically a 10-minute jaunt from the center of the city.
David Roberts
Yeah, it's very centrally located.
Tom Lumsden
Oh yeah. There are developed communities all around it. Superstore is a major grocery store. It's a five-minute walk from my residents who live in stage one. There's a Starbucks in the parking lot. There are amenities everywhere adjacent to the property. Now, 30,000 people, of course, will support — it's the size of a city, a small city. So once we get more people in the community, the market will start to enhance that. But in stage one, with the developer, the things we can control, we built a beautiful linear park space that has community gardens, a playground, plazas. Of course, there were buildings across the road that were full of businesses that supported the airport activity. Those businesses of course are gone. The one that I always talk about is there's a microbrewery right at the end of stage one. Like literally, you walk to the end of the street, you cross that one road, which is a quiet road and there's a microbrewery there that is very successful. There's a daycare next to it in another one of the bays and a convenience store there too. Now, while they're officially outside of Blatchford, they're still amenities that the people in Blatchford can access.
David Roberts
But in terms of commercial buildings inside Blatchford proper, you just haven't reached that stage of things?
Tom Lumsden
Correct. Yeah, in the next couple of years, I plan to bring on the first stage of the market area. And I have had lots of inquiries from developers who do commercial development. So we're planning to see some success in the near future with that aspect.
Tom Young
Most of the market district would be like proper mixed-use buildings, you know, mixing office, residential, and retail. I mean, in various combinations. But that is the vision. Not that it would be a bunch of like, there's no surface parking served, you know, strip development plan.
David Roberts
Yeah, of course. No, this is all mixed as God intended cities to be. When I toss this out into social media, one of the immediate responses from everybody, and this is a huge sensitive subject down here in the US, which is in the US because there are so few nice areas, because there are so few livable, even parts of cities, if you make one, everybody wants to live there. They drive the prices up. You end up with only rich people there. And then the surrounding community gets the idea that like, "Oh, these things are for rich people."
You're just building a community for rich people to have a nice little gated community in the middle of your city. So, I mean, obviously, you know, I have this argument a zillion times. I keep saying, like, "Well, if you just build more of them, more people could get one." But so, all of which is getting around to the subject of affordability: What are you, are there provisions? Are there set asides for low-income housing? How are you approaching this whole topic of affordability?
Tom Lumsden
Two aspects. The one, like the townhouses that people are living in, they're centrally located, brand new built, beautiful. They have a garage, they have landscaping. The market is the market, right? That's what people will pay. People say it's expensive. If you compare it to a suburban area, yeah, it's more expensive, but it's also centrally located. You can have one car. It's a different lifestyle. So the next phase, like I mentioned, there's townhouse developments on multi-sites. Their pricing is a little bit lower because it's more efficiently built. We do have plans or we've actually sold, I think, three of our four to six-story sites.
The first one's going to start digging in the next month. So, they will have a different product coming to market which is more apartment style in a condo situation. So, the affordability from a market perspective will be addressed that way. But the other thing, because we are a city, I work for the city and the city has a 16% objective for affordable housing in new communities. We will achieve that objective.
David Roberts
You said 16%?
Tom Lumsden
Yeah, 16%. And affordable housing could mean everything from near market to supportive. Right. So we have a couple of parcels in our first few stages that we've designated for affordable housing. We're working with the group at the city that looks after affordable housing in the city to find builders for those sites that will bring an affordable housing aspect. Actually, the first one's going to be more of a supportive housing with a provider for that. So there's that objective. But from a market affordability, like I said, it's going to be a diverse kind of product.
It's a central location still, like I said, if you're in the center of Seattle, I'm sure it's more expensive than being on the edge. So, it's definitely not a gated community. It's definitely not turning its back on the rest. In fact, the way we've designed it is it sides onto the kind of surrounding streets so people feel comfortable coming to it. The amenities, we have a huge park we're going to build in the middle of the community. It's meant to be city accessible.
David Roberts
A big city park.
Tom Lumsden
Yeah, we want people to come and use it.
David Roberts
When you say big park, what do we, what do we mean by big? There's big and there's big.
Tom Lumsden
80 acres of open space with their two storm ponds and in the park. So, it's huge.
David Roberts
Nice. Okay, so let's talk about district energy. Like, this is sort of how this came to my attention. So, you know, Volt's listeners by now are familiar with various and sundry heating options. So, it sounds like initially the thought was maybe let's have a geothermal plant and then a network, but instead, you opted for something which I've now done two pods on, which is a geo exchange system. I don't know, like, I don't know if there's official terminology for these things yet. It sort of drives me crazy. But, you have a series of deep boreholes and then water circulating in pipes throughout the community.
And so, basically, you're sharing heat. So, like, excess heat from one building can go into the network and another building that needs heat can draw heat out of the network. It's all very cool. Talk a little bit about how you decided on that. Because, you know, now there's several of those pilot projects going up in various American cities, like now that area is hopping. But back in 2014, as far as I know, like, you were one of the very first to do this. So maybe talk a little bit about how it settled out the way it did.
Tom Lumsden
Tom Young might be able to speak to the comparison between the different ones. Like I said, in 2016, I know the project was paused so they could make this decision because obviously it was a big decision. They decided on this ambient loop district energy system. As you mentioned, we have 570 boreholes, 150 meters deep. One of my favorite things when I give tours around the community is explaining it's not geothermal, it's geo-exchange. And I try to give them fun facts. So you can correct your friends when they call it geothermal. And they immediately say, "Well, okay, so the geothermal system..."
And I'm like, "Okay, that went in one ear, out the other."
David Roberts
Well, geothermal has fuzzy — I mean, even among experts, it's somewhat fuzzy what the boundaries of that category are anyway.
Tom Lumsden
Yeah, so when we are done, we will be the largest district energy system in North America for sure. 536 acres is how much land we have. So, like you said, it brings the energy up from about 10 degrees all year round at 150 meters deep. We bring that up, we upgrade it to 10 to 20 degrees, transfer it to water pipes. Every parcel has a connection to the water pipe and then they use it and then they expel, depending on what they need, heating or cooling. Because the heat pumps work in both ways.
So, it's the cool thing — ha ha. It provides cooling as well. So both hot and cold, it works. So we've had some pretty hot summers. We've had some pretty cold winters, and we're in our fifth season and it's worked perfectly for all of them.
David Roberts
Awesome. I remember that cold winter. I don't think I'll ever forget it.
Tom Lumsden
Yeah, well, and the hot summers have gotten hotter and, of course, you know, the smoke and everything else is apparent and gives us more reason to keep doing what we're doing here because things need to change.
David Roberts
Yeah, Tom Young, maybe you can weigh in on what were sort of the considerations back then in 2016 when you were deciding on a heating system.
Tom Young
I don't know that my memory fully explains it.
David Roberts
These are all a long time ago.
Tom Young
Well, partly it's a long time ago and partly I wasn't personally directly involved in that. But I know that Stantec did some feasibility analysis of a variety of different potential approaches. But then there was also a — and here's where my memory fails me again — there was another specialized district energy consultant that was brought on board to make final recommendations and do a prototype design or a conceptual design to sort of prove the concept at a neighborhood scale. And yeah, I wish I could give a shout out to that company, but I can't remember who they were.
Tom Lumsden
I think the high level, too, the biomass, the material, like we're in the center of the city. There's not an abundant supply of wood chips or whatever it was we were going to use to bring. So, you're going to burn gas to bring this to the community? It didn't make a lot of sense. Geothermal, well, they've had, like you said, it's progressed a lot over time. It would have been an industrial facility in the middle of this residential community. So, those are the two things that I've been told. We're kind of like, it doesn't work as well in this situation.
And the ambient loop does. It's worked for five hot summers.
David Roberts
You guys were incredibly early to it. I guess one of the criticisms I've heard is that building the initial system is quite expensive. And, you know, one of the cool things about a system like this is like, the initial building is expensive, but every new home you connect to it, in a sense, reduces that expense, amortizes it a little bit more so it gets kind of cheaper and cheaper over time. Are you finding that to be true as you build out?
Tom Lumsden
So right now, we have Energy Center 1, we have a cool name for it, and it supports the first six stages of development so far. We're going to have, at the end of the day, probably four of them. One of the future ones which we're going to build in the next five years is a sewer heat exchange. So our intention is to go and harvest the heat — I always say harvest the heat, not the smell from. There's 200-year-old sewers that run under the Blatchford property. And we'll use that. I think it produces about a third of the energy we need for the overall community.
David Roberts
So, these are existing sewer pipes that are already going beneath the community. You just have to tap into the heat.
Tom Young
Yeah. There's also smaller stuff too, like the light rail, for instance. Their utility building or tracks and station is, you know, it's designed to harvest heat and feed that back into the system. Isn't that correct, John?
Tom Lumsden
That would be more minor. I think we have talked about potential — what's the... it's not a call center.
David Roberts
Oh, data center.
Tom Lumsden
Yeah, data center, that's the word. So, we've talked about that. And if it fits in the community or not, because it really is not a big person driver, but it's definitely a heat producer. So, with the sharing system, like you said, if I like heat and Tom Young likes cool, I'm expelling my cool or dragging the heat out of the system. He's expelling his heat. We're sharing at the end of the day, I would suggest, and you know, this, you know, during the very cold days, we need to go to the source, which in stage one is under the storm pond.
But in seasons where the temperature is not with the way the houses are built, the sharing of the energy back and forth almost makes it neutral.
David Roberts
Yeah, that's very cool. The perfect balance, basically. No new energy required.
Tom Young
I guess my point with the LRT, sure it's minor, but you're trying to use multiple sources where an opportunity exists. We're making the connections to link in and improve the system.
David Roberts
Commercial or industrial building is going to have some waste heat. Almost, almost any, you know, sort of industrial type facility. So, as long as you're hooked up to this network, you know, might as well use it.
Tom Young
Do you want to talk about the utility as well, Tom? Because that's unique to the Blatchford thing.
Tom Lumsden
Yeah, so you talked about it being expensive to build. You're correct. Like we have, like I said, we have 134 customers and we've spent quite a bit of money building stage one. But as a utility, the intention is to break even. It's not to, you know, make money ultimately, but right now, as the city owning the utility, the intention is to, over a 50-year business plan where we'll have 12,000 to 15,000 customers when we're done. The input and output is equivalent. So with early days, there's an investment which, as the city, we're doing that.
We actually just got a big grant from the federal government to offset some of our costs. But that part's a challenge. I remember one of the guys who was working at it at the beginning. "What was Thomas Edison thinking when he started the power company?"
David Roberts
Wait, so you're acting as your own utility? There's a Blatchford utility that is administering this district energy.
Tom Lumsden
Yeah, we got the cool name BRE, Blatchford Renewable Energy. That's our utility. Our customers get a utility bill. There is a fiscal policy, too much information, but the city council has agreed to it. They won't pay more in Blatchford than they would outside of Blatchford. So, people are getting an energy bill from our utility, which they know when they come. It's part of the process.
David Roberts
Have you thought about, I mean, once you have the utility established and it has sort of open lines of communication with all the residents, are there other things you're thinking about doing with your utility? Like utilities can organize a lot of cool stuff?
Tom Lumsden
Well, not so much as the utility, but as the developer and the city, we're planning to look at community engagement, like kind of doing sustainability, I guess, workshops and things like that so they can embrace all the aspects that Blatchford has to offer and how they can add to it.
David Roberts
I mean, maybe there's no precise way to measure this, but are the people who are buying these initial homes, are they just sort of like ordinary townhome buyers? Or do you feel like people, especially the early residents, are coming specifically for the larger community and the larger plan in the future?
Tom Lumsden
I would say the first residents were definitely early adopters. They were excited by it. The density, the lifestyle, the built for them, the fact that it's going to be this carbon-neutral community. But we have, like we say the adage, location, location, location. We're literally 10 minutes from the center of the city. I'd say it's one or two LRT rides to the new hockey rink, which is where our beloved Oilers play. It's a great spot. And you know, I worked for a private developer who did suburban development. Always knew new families, right. In suburbia, typically.
So, in Blatchford, the big question was, "Well, who's your target?" And you think it would be more of a sustainable person. But we have young families, like, there's lots of young families who are in these townhomes so it's still a brand new community. There are schools in the neighboring — like we don't have a school within Blatchford. We do have two sites that they're designated. But early days, one day maybe the school will be there. But there are schools in the neighboring communities that I know the one family walks. So, it is a place that you can raise a family too.
David Roberts
Very cool. One last question about the energy thing before I move on from it. So, I was reading it, it said Blatchford homes will release about 75% less greenhouse gases than a typical Edmonton home. So, some of that is heating and cooling now has been taken over by the district energy system running by these ground source heat pumps which are very low power consumption. So, that remaining 25% of greenhouse gas emissions, is that just from the city's electricity mix?
Tom Lumsden
Yeah, Alberta is — we've come a long way. We were coal burning. Now we're natural gas. I think in the last couple of years, the last coal burning plant was shut down. So, natural gas is much cleaner than that. But we don't have the luxury of the hydro that other provinces do or other states, I guess, too.
David Roberts
So, you're basically dependent on the city on the Alberta electricity. There's no plan to sort of generate enough of your own electricity to eliminate that last 25%.
Tom Lumsden
We are working on it. We haven't gotten there yet. The 70% that you're talking about, 75% is strictly from, like traditionally in Edmonton, you have a gas furnace. So you don't have that in Blatchford. You can't, literally can't have that. That's the big thing. The one thing we can't control as the city is where people get their power from. There are kind of clean energy power suppliers that you can buy. I have solar panels on my house that — I mean, in the summer of course, emits back to the grid and in the winter I draw out of the grid.
David Roberts
What about community solar? What about a little solar field somewhere on site? Have you ever thought about that?
Tom Lumsden
We're going down that path, trying to look at what we can do. It is tough, though, because there are certain rules in Alberta about how the power is looked after.
David Roberts
So, there are lots of these kinds of ecodistrict projects happening in North America. Toronto has an abandoned airport it's redeveloping. Denver has an abandoned airport it is redeveloping. It's sort of funny that when a city has this brand new open chunk of land and they turn to their urban planners and architects and say, "What should we put here?" The answer is always the same. Narrow streets, low setbacks, renewable energy, walkable, lots of paths, lots of green space. So, when we build something new, we all want that. So, why are the cities around these areas not doing that? Do you know what I mean? Like, how do we reconcile the fact that clearly there's a consensus that this is the best way to build urban communities?
And yet the urban communities that they're in the middle of are not built like this? Like, what is the disconnect? Is it just a matter of they were built a long time ago? I mean, is that all there is to it?
Tom Young
Sorry, when you say the cities around, you mean...?
David Roberts
Like Edmonton, proper is not built along these. You know, it doesn't have narrow streets, it doesn't have mixed use. Like all these things that clearly urban planners have decided are the way to go.
Tom Young
Well, I mean, when you're talking about planning at a city scale, it's, you know, that's a beast, right? Like, that's a big ship to try to turn. And, you know, I was referencing some of the incredibly progressive things that Edmonton has done in recent years. One of those things is, you know, a completely new set of design standards for streets.
David Roberts
Oh, interesting.
Tom Young
Which I was once again fortunate enough to work on in the early part of the process. And that, you know, that has really shifted all the big, ugly streets that you saw when you were briefly living in Edmonton. I mean, a lot of those still exist because it takes a long time to change a city. But the new standards are much more progressive, much narrower.
David Roberts
So, not just for new streets, but you're rehabbing these older streets.
Tom Young
Yes, exactly. As older streets get reconstructed, you know, they have like 20 to 30-year lifespans and then they need to get redesigned and reconstructed. They're being redesigned with wider sidewalks, with narrower lanes, with more active transportation facilities like cycle tracks and that sort of thing. And so, like, Edmonton's spending $100 million over a period of four years on cycling investments. And that's part of the mix as well. But it takes a long time. Building a city is like, when you build infrastructure, it's like 100 years. Right. Like, even though you can go back and change a street, you know, 30 years later, there's just a lot of inertia in the way cities are built.
So, we really should be building them right off the bat.
David Roberts
Indeed.
Tom Young
But there are also so many players in this type of process, right? Like, Blatchford is unique in that the city controls almost everything.
David Roberts
Yeah, that is a big advantage.
Tom Young
But out on the edge of the city, in new neighborhoods, it's a lot harder. You've got a lot more actors, a lot of private investment. Everything's in negotiation. And Blatchford, you know, is thought of as kind of an exception, an exceptional opportunity. And I don't think the mindset is quite the same when we're talking about newer neighborhoods on the edge. Now, that said, planning in neighborhoods has changed dramatically in the last 20 years.
David Roberts
Even these new suburban neighborhoods?
Tom Young
Absolutely. They're much denser than they used to be. There's a lot more focus on active transportation. I would say, generally speaking, public transit is better than it used to be and is being provided earlier than it used to be. But new neighborhoods still have the challenge that even if they are built better, they're still on the edge of the city. And there's all this old development that's not good in between them and the center of the city. Right. So, it's a complex thing that takes a long time to shift.
David Roberts
It's cool to hear, though, that Edmonton is moving in the right direction. Maybe as a way, just by wrapping up Tom Lumsden, you could say, I imagine when Blatchford was originally being sort of imagined and proposed, etc., like one of the things that Edmonton wanted out of it is to learn, learn some things from it, try some things and learn some things. So, do you see — I mean, it's still, as we say, kind of early in the Blatchford process. I don't think I mentioned this, but I think you guys have a 2042 date. And that's when like all 30,000 people will be there?
Tom Lumsden
Yep. That's the target in our business plan. That's what it shows.
David Roberts
And that's not — I mean, it could go faster than that in theory?
Tom Lumsden
But like I said, it's market dependent. Like Tom Young talked about, we started on the west side. I plan to go to the east side and the market area in the next couple of years. So, three different programs. I believe that once we get our first four to six-story building in there, then things will really start to take off.
David Roberts
Yeah, is the city of Edmonton learning from this experience, do you feel? Like, is there a good sort of exchange of views? Is this proving fertile for the larger community?
Tom Lumsden
I think so. I know, like in our first stage, it took two years to get our drawings approved because the approving group had to wrap their head around what we were trying to do. So now, the next stage took eight months. Like, it's getting quicker, faster. We're doing things like we have a lot of low impact development features like bioswales and things like that in our community that sometimes the utility doesn't love because it's a new thing that they have to figure out how to look after. In Blatchford, we're doing it and they'll have those learnings and some of my developer friends on the private side will be able to take these and see, "Yeah, it has worked."
Tweak it a little bit to work in their community, or, you know, understand what we've done. So, we have been sharing, we will continue to share, and we'll continue to push the envelope to try to improve new things.
David Roberts
Tom Young, any concluding words you want to share?
Tom Young
Yeah, I would say, like you mentioned, you know, the other eco-districts or large site redevelopments happening in North America, and there are lots of them, whether it's, you know, former military bases being redeveloped or former airports, like Blatchford and Stapleton. But I don't think any of those projects that I'm aware of at least are going as far and as comprehensive in their sustainability philosophy as Blatchford is. So, I think that's something that the city of Edmonton should be really proud of and I think it's absolutely something that I personally am very proud of my involvement over more than a decade of work. So yeah, thanks for letting us tell your listeners all about it.
David Roberts
Very cool. Well, nothing is as helpful as real, tangible, touchable steel in the ground, as they say.
Tom Young
Absolutely.
Tom Lumsden
Yeah, exactly.
David Roberts
Toms, this has been fascinating. I love these, I love these kind of projects and thank you for coming on and sharing your experience.
Tom Lumsden
Well, if you ever venture back to Edmonton.
David Roberts
Yeah, I would love to come see, come see how much has changed. Everything I hear is that it's like, you know, night and day from the last time I was there.
Tom Lumsden
Yeah, I have keys to the tower, and that's my most endearing feature.
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.
1. 📫 Leave your mailbag questions below!
You may have noticed that I tried something new for February’s bonus episode: a “What the F is happening” news roundtable episode rather than a mailbag. People seemed to enjoy it? Perhaps I’ll alternate between the two formats. As always, if you have opinions, share!
📌 Note: This was the first time we’ve sent out a “free preview”, which is an abbreviated version of the bonus episode meant to entice free subscribers into signing up for a paid subscription. A lot of paid subscribers got that free preview, which understandably confused some of them. A reminder: paid subs can listen to full episodes of bonus content via the Substack website/app or by sending them to their preferred podcast player using these instructions.
2. 🍸Hey Seattle area subscribers — what are you doing this Wednesday, March 19, at 1pm? I’ll be taping a live guest spot on the Climate Papa Podcast at the 9Zero Climate Innovation Hub, followed by some audience Q&A, and you’re invited! Sign up here asap — it’s free or a $5 donation.
3. ⚡ Last March, I mentioned that we were putting the finishing touches on Volts: Jumpstart, a cross between a “Best Of” list and a “Start Here” list. We, uh … got distracted. But we’re back to it! Sam has put together a great list, but before we send it out, I want to ask y’all: which Volts episodes do you find yourself returning to and/or sending to friends and colleagues? Which ones are must-listens for newcomers? Let us know in the comments below!
4. 🚌 Episode update: in 2023, I spoke with Duncan McIntyre of Highland Electric Fleets about getting electric school buses into the hands of school districts like Montgomery County Maryland.
Welp. According to Bethesda Magazine:
MCPS has ended the remainder of its contract with its Massachusetts-based electric bus company following the county inspector general’s report that the district wasted “millions” of dollars by not enforcing the agreement, MCPS said late Friday afternoon in a statement.
….
The district’s long-term concerns include problems with a growing number of the buses experiencing “extended periods of service interruption,” especially during colder weather; the “current state of the EV school bus industry”; and recent changes that would “withhold federal grant funding related to alternative and sustainable” vehicles, Lopez said.
Bummer. (I need to check back in on electric buses.)
5. ✅ Community comment of the month: Philip has a critical take on stranded assets in Massachusetts’ push to decarbonize:
Just a reminder that I’m headed to Chicago next week. If you’re in the area, come to the Canary Media event or just hit me up for a coffee/beer!
This is your monthly opportunity to share! Use the comments section in this community thread to:
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EVERYTHING ELSE: Discuss David’s Notes or anything else climate-related
MAILBAG QUESTIONS: Ask a question for this month’s mailbag episode (anyone can ask a question but mailbags are a paid-sub-only perk). Volts has a form for those who are shy, but David prioritizes questions posted in this thread.
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In this episode, I talk with Devrim Celal from Kraken about ensuring all our smart home energy devices can actually talk to the grid. We discuss how Mercury will certify devices to create reliability standards, preventing your fancy EV charger or heat pump from becoming useless if a manufacturer disappears while helping utilities manage load growth.
(PDF transcript)
(Active transcript)
David Roberts
Alright then, hello everyone. This is Volts for March 14, 2025, "Making sure smart devices can talk to each other and the grid." I'm your host, David Roberts. America's homes are about to be invaded by a wave of "smart" products intended to coordinate energy use. Your thermometer, EV charger, solar panels, battery, water heater, stove — they're all going to be communicating with one another and with the grid, harmonizing their operations for maximum efficiency. Or at least that's the vision, which is sometimes presented as a kind of frictionless Eden.
But what if you buy your smart devices from a company that subsequently goes out of business and takes its proprietary software with it? Do the devices just get dumb? Do they work at all?
Or what if your HVAC and your EV charger each run their own proprietary software — will they talk with one another? How is all this stuff supposed to work together, especially in a chaotic and fast-growing market with startups coming and going like fireworks?
In response to concerns like these, more than two dozen big energy utilities, manufacturers, and tech companies have formed the Mercury Consortium. The idea is to come together around a common set of interconnection protocols and standards that will ensure that all these devices work together and with the grid. The inspiration is Bluetooth, a common protocol that grew out of a voluntary industry initiative.
The consortium is the brainchild of Devrim Celal, the chief marketing and flexibility officer at Kraken Energy. I'm excited to talk to him about how it's going to work, when we can expect a new standard, how to futureproof these things, and the question of privacy.
All right, then. With no further ado, Devrim Celal, welcome to Volts. Thank you so much for coming.
Devrim Celal
Thank you, David. It's a pleasure to be here.
David Roberts
I'm excited to talk to you. I want to kind of start before we even get to the standards thing, because I bet a lot of listeners share my sort of vague cloud of confusion, or at least the confusion I had before I started reading up about this episode, about exactly what Octopus and Kraken are. So, let me put it to you and tell me if I am getting it right. So, Octopus started as a retail utility in the UK, where they have retail utility competition. It grew and grew, became the biggest, I think, retail utility in the UK.
And then, the software system, the platform it used to run its utilities, to coordinate devices, to do customer service, etc., it spun that off into its own product called Kraken, which it is now licensing to other utilities so that they can unify these out-of-date, clunky old, separate systems into a single unified system that allows them to do customer service and manage distributed energy resources and all these other things. That's Kraken. That's Octopus and Kraken. Are there other pieces of that, of the Octopus beast, that I'm missing?
Devrim Celal
So, that is a great description of it. But within Octopus, we actually have this story that a debate on what came first. And it was actually Kraken was first. The idea was to build software that can positively disrupt the energy sector. And when the founders of Octopus Energy Group spoke to utilities, they either said, "Oh, that's a great idea," or "Thank you, we've got this covered, go away." But even those who said this is a great idea, they often ended by saying, "Let's see how others react." It became quite apparent early days that in a very conservative industry, and for good reasons, in a conservative industry like the energy industry, utilities act with caution.
So, it was imperative that we built our own, as you described, energy retailer in a competitive market to demonstrate the capabilities of Kraken, to show how successful a utility can be using this before we can sign the first big utility, which was E.ON, the German original national supplier. And then many came since then, in the last five years.
David Roberts
Got it. And so, I think when we chatted before, you said there were at least one or two other major divisions of Octopus, and afterwards, I couldn't think of what they were. Can you just quickly tell me what those are? It's such a huge affair.
Devrim Celal
So, our group structure is quite thin. Don't think of a big corporate. And underneath that, we have four distinct business areas. Electricity retail is the first one, and that's under the Octopus Energy brand. Active in eight regions around the world, including Texas. Today, with just over 9 million customers globally, as you noted, the largest in the UK across all energy and with some incredible customer satisfaction ratings. In Europe, we measure customer satisfaction by an agency called Trustpilot, where five stars is the highest. Octopus entities usually get between 4.8 to 5 stars. Our second business unit, which is quite nicely juxtapositioned to electricity retail, is all green electricity.
So, the second business is our fund management business, where we raise money in private and public placement and then deploy that capital either to develop or acquire solar, onshore, offshore wind, and storage projects, and then operate that asset through its life.
David Roberts
So, you have a whole power development business.
Devrim Celal
Exactly, a whole team raises money to develop renewable projects and then competitively sells the generation of that to markets where Octopus Energy participates and procures a significant chunk of that at competitive rates, because at the end of the day, it's other people's money that we use to develop those projects. The third domain, broadly called Octopus Energy Services, to me, is what exemplifies the mission of Octopus, which is using technology to accelerate the transition and enable access for masses to cheaper and greener electricity. And when you give that statement, you realize there are some big gaps. The first gap was to do proper optimization of the system; you need smart meters that give you real-time data of what consumption is.
Now, in the UK, that was a regulatory responsibility for a retailer to do. So, we built a smart meter installation business which rapidly expanded into installing all the devices that you mentioned at the beginning: charge points, solar on the roof, batteries, heat pumps. But then, you realize as you move through that journey, there are bigger gaps. And the first obvious one is electrification of transportation. When people buy an electric vehicle, you have to appreciate it's the first time they buy it. Up to that point, they've been buying something completely different that consumed gas and had a combustion engine and needed servicing, regularly needed oil in this engine, and now they buy this thing that runs on electricity which they can charge at home.
So, we realized rapidly that that needed a very different end-to-end experience and set up Octopus Electric Vehicles to sell cars.
David Roberts
Oh, interesting.
Devrim Celal
Yes, it started in the UK and it's one of the largest electric vehicle leasing businesses in the country today. And it's been driven by the power of the brand of Octopus, but also the user experience of giving them a tool to educate them to make that buying decision easier.
David Roberts
Interesting. And that's just in the UK for now?
Devrim Celal
UK, Germany, and Texas, and looking to grow in North America. The last point in Octopus Energy Services was the electrification of heating. In most of the world, heating is gas-based. Heating, in general, is one of the biggest pollutants. So, electrifying that required heat pumps and heat pumps, unfortunately, were not economical. To give you an example, it costs somewhere between $16,000 to $20,000 to install a heat pump in a home in the UK. That number varies a little bit by region, but not by much. Which pretty much says that it's only going to be a small part of the population that would choose to install a heat pump as opposed to a gas-fired boiler.
So, we looked at that and said, "The problem here is much bigger. We need to optimize how heat pumps are built, installed, and managed." The only solution to that was to go and build one from scratch. That's what we did. We acquired a heat pump manufacturer in Northern Ireland called RED (Renewable Energy Devices). We worked with that team to redesign a heat pump from scratch. We improved the form factor so it was more efficient but managed to reduce the cost of manufacturing to the point today that with a government grant, we can challenge gas-fired boilers in economics significantly.
And that product is now taking off. We're selling heat pumps faster than we can manufacture them.
David Roberts
Oh, interesting. And is that also in those multiple markets or are you just starting in the UK with that one?
Devrim Celal
So today, in the UK, we sell our own heat pump called Cosy 6 and Cosy 10 as 6kW and 10kW.
David Roberts
I've seen pictures; they're very cute.
Devrim Celal
And they look different, right? It's an appreciation of — it's garden furniture, it needs to look good as opposed to the usual white cubic boxes that you would get.
David Roberts
Yeah.
Devrim Celal
And that's a function of how the manufacturing of heat pumps started. It was corporations that designed and manufactured large-scale heating, ventilation, air conditioning systems that had this as a side business that needed to come from a similar industrial production line. So, they look like air conditioning units. That's why the heat pump looks different. It looks better and it's cylindrical, which is supposed to have much better thermal properties. We sell Cosys only in the UK. We also sell other heat pumps in the UK. Cosy isn't a heat pump for every consumer use case. We sell them in Germany, and now we're looking to expand that business elsewhere as well.
David Roberts
It's like Octopus set out to electrify things and kept just like discovering, "Oh, it looks like we gotta do this too. It looks like we gotta do this too. Fine, we'll just do all of it."
Devrim Celal
Well, if you look at the mission, if you start with the mission, we've always been true to that mission and we keep finding other things we need to do to achieve it. And Kraken fits nicely into that story because everything I've just described runs on Kraken. Whether it's helping a utility, its relationship with the consumer, billing meter, data management, all the forms of interaction, whether it's an app, web, or a call. Whether it's helping large generation managers manage their assets better so they get much better economics from them. Or it's for utilities to give their consumers special tariffs that incorporate managing the charging of their EVs, their batteries, or their use of their heat pumps.
David Roberts
Right. And so, the software — like it's not like utilities couldn't do that before, but it would have just been difficult to coordinate, difficult managerially, and the software makes it easier is the idea.
Devrim Celal
Exactly. So before Kraken, a utility would have dozens of systems to be able to do the things they do every day, from sending bills out, answering calls, resolving issues, collecting debt, or building demand response programs to manage charging of EVs for their consumers. With Kraken, all of that, as well as monitoring the distribution grid, comes into one place, which makes it a lot easier to optimize behavior at a holistic level, but also reward consumers to participate. Because I can tell a consumer, let the utility decide, when is it the best time to charge your car?
For as long as it's ready when you need it. And for that, we'll give you a 50% discount on your charging. That's a simple proposition to a customer. It says, "I will get cheap range as a result of that." Whereas, the utility gets to better manage its generation assets, its networks, its engagement with the consumer.
David Roberts
From the consumer point of view, you just have this sort of portal. Your utility gives you this portal and you go and you say, "Here's my water heater," right? "Here's my car. Here are the things I have. Here are my baseline needs." Like, "I need the car to be fully charged by 8 am. I want a minimum of 68 degrees temperature in my house," etc. And then it's just off and running for that. It just optimizes your energy use based on what you have and what you need. But after that, you don't have to mess with it.
Devrim Celal
And I'll give you a statistic on that. You don't have to mess with it. 80% of EV owners will say, "Charge my car up to 80% state of charge by 7 am tomorrow morning." 80% will never touch that again.
David Roberts
Yeah, that's funny. We need to get to the standards. I'm just sort of fascinated by Octopus. It's such an apt name for —
Devrim Celal
Yeah, and to close the Kraken story — and this is the part I was building towards — if you were Coca-Cola, which allegedly has the formula for Coca-Cola locked up in a vault in Atlanta, Octopus should have locked up Kraken and said, "I'm not showing this to anyone because that's my competitive advantage." Whereas if the mission is a bigger one, you don't behave that way. You say, "I will not only license Kraken to my competitors, but I would actually train them, help them transform their businesses to the same operating model that's made Octopus such a success. So they can replicate exactly the same thing both in my countries, but elsewhere as well."
David Roberts
So, for utilities, this is software as a service. So, they're basically leasing, kind of renting, the software from you and you're helping them. You're helping to train them and customer service, all that kind of stuff?
Devrim Celal
And it's actually beyond training. It's full transformation. Because if you look at a typical utility structure, you would have departments for billing, onboarding, issue resolution. They all have their own systems. And when you call a utility initially, you might get transferred once or twice until you can resolve an issue. What we do with Kraken, it's a transformation project where we create a new organization from the old one, where the model is what we call a "universal agent." So, any customer service rep will be able to pick up any call and resolve it on the spot.
No exceptions, no back office, no pass-throughs. In fact, I say this jokingly, but it's actually true. Octopus Energy energy specialists or customer service reps on their phones don't have transfer buttons because they should be solving issues that come to them. And what that does is it increases your customer satisfaction rating significantly because things get resolved. It helps you run a much more effective system. The cost to serve goes down by 40, 50%. But then here's the metric that I love: it gives you the highest employee satisfaction ratings. Because if people are autonomous employees enabled to perform well, they're happier.
David Roberts
Yes, people like to have agency and feel competent. Well, let's get to the standards because that's what this pod is about. So all of that background is by way of saying that Kraken, the software platform, is already managing millions of distributed devices. So, you were sort of the CEO of Kraken Connect before you became in your current position. I know you've been involved with Kraken for a long time, so maybe tell us a little bit of the history about how you ran up against this question of standards and what the need is.
Devrim Celal
So, I'll take a step back and give the background on that one. My business was called Upside Energy and we had built Upside Energy to be able to control and optimize millions of consumer devices so that the energy system could continue incorporating more renewables and not have to constantly upgrade the distribution infrastructure to manage that change in behavior.
David Roberts
These are virtual power plants, is what they're called.
Devrim Celal
Yes, in a matter of speaking, virtual power plants, people use different terminologies for it to describe different parts. Then, in 2020, Octopus Energy acquired Upside Energy to become the Kraken Flex arm of Kraken. Kraken's consumer information system, CRM, billing meter, data management capabilities were already in house, what Octopus Energy Group had built. And Kraken Flex was originally a separate entity. Today, we are singular. It's one Kraken to the outside, the operating system with multiple applications that also allow interoperability. So, if a utility says we want to have Kraken customer, but we have our own VPP providers, DERMS providers, they can access Kraken customer in exactly the same way.
Our flexibility products like SmartFlex, Improflex access it. So, it's an open system. It's actually an open ecosystem. We have to verify and ratify people who connect to it. But, it's an open system. As our customers come to us and say, "Here's our favorite players I want you to work with." But, that's sort of been built out to it. And today, to give you the exact numbers, we manage close to 400,000 devices in real time. That's about 1.6 gigawatt of power that can be turned up or down at any moment in time and space. And that's where consumer devices become really powerful.
Because if I have a network constraint in a certain part of my system, I can pinpoint the devices there now to change behavior to alleviate that congestion. If I have a system-wide energy problem like I want to use more renewables, I can orient charging and behavior to maximize that and move myself away from needing to run gas generation, for example.
David Roberts
Yes, and it's faster and more precise, I think, than gas generation. It's a better product.
Devrim Celal
And that's the interesting one and mildly controversial, even though it doesn't need to be.
David Roberts
I know, I know, a lot of people are stewing that I said that.
Devrim Celal
Big gas generation is a single point of failure. 400,000 consumer devices statistically is a lot more reliable because I can predict behavior. I can predict when people will get home, what will be the state of charge in their cars, what will they ask us to do for them? Typically 24 hours ahead with over 90% accuracy systemically. So, that's a very reliable tool to help me manage my system.
David Roberts
And these are mostly today, anyway, mostly cars and thermostats? Is that the bulk of what you've got connected?
Devrim Celal
It varies by region. So, in the UK, it's predominantly cars. In Texas, it's a mixture of cars, batteries, thermostats. In Germany, it's cars, batteries. Germany has a large residential battery penetration. In Japan, we're looking at a lot of air conditioning load and then batteries. So, it varies a little bit by the geography. The key to Kraken is we have all these devices pre-connected and I think that's where we're going to come to standards. And we allow the utility the ability to say, "Hey, I want to pick these devices, design this kind of product or tariff, and this is how I want to build my user journey so I can attract my customers to sign up to this, register their devices. So, I create flexibility from those devices as opposed to constantly building my infrastructure to manage the new peaks that they're creating on my system."
David Roberts
Right. Managing demand rather than managing supply, rather than adding supply.
Devrim Celal
Correct.
David Roberts
So then have you actually in practice run into a problem of devices having different software and different standards, or is this mostly something you are trying to head off before it happens?
Devrim Celal
So, we've been doing this since 2016. Today, we have a team of 70 software engineers in Manchester, United Kingdom, and in Houston, Texas, and some in Japan, some in Australia, whose job is to integrate new devices that our customer has asked us to have as part of their portfolio. I used to say we have about 50 different makes and models integrated, but recently one of our clients said, "Could we actually get an Excel spreadsheet that shows us everything on it as we're building our products against this?" And I asked the team to give me their Excel spreadsheet of what's been integrated. And the list was now nearing 250 integrations.
David Roberts
So, every new make and model of an appliance is its own little software project. Like, each one is a bespoke integration project.
Devrim Celal
Sometimes multiple integration projects. Because what happens is, it could be a year of manufacturing. So, when you are registering an EV with a utility that uses Kraken, you would get a dropdown, "What's your EV make and model?" And you'll choose it and you'll press a dropdown and say, "I've got this model." Then you'll probably have to choose which year it was manufactured in. Now, that sounds quite detailed, but the communication could change, the behavior could change by year of manufacture. For example, I just gave my —
David Roberts
That's crazy.
Devrim Celal
Yeah, and that forces us to have multiple integrations for each OEM in some cases. But then you have other things that make it easier on the surface, like OEMs starting to use certain protocols. Like one for EV charging is Open Charge Point Protocol, which gives you a framework; it's a protocol. But then there are slight nuances on how you interpret it and implement it as an OEM, a manufacturer, and how Kraken may have interpreted it. So then you have to work to figure out how to get the two interpretations of a certain protocol to work together. Naturally, that reduces the amount of work, but it doesn't make it a given that just because you both implement the same protocol that it's going to work seamlessly on day one.
David Roberts
I guess I don't know what I envisioned, but that's much more manual than I imagined. That's a brute force kind of thing.
Devrim Celal
It's manual to do it the first time. Some of the other things we come across is that you expect certain behaviors. For example, if I'm connecting to an inverter that manages my solar, but also helps push energy in and out of my battery, what we call a hybrid inverter, I would expect it to be able to tell it, "If your solar is generating now, I want you to pass 2kW off to the grid, 1kW to the battery, and the rest of it leave it for the home load," for example. It's rare that we get that depth of control.
It would be typically preset conditions that say, "Maximize battery first, then home, maximize home load, or export all of it to the grid." So, it's these nuances that we look for to allow us much more granular control so that we can tell the grid operator, "No surprises, we can get this device to do exactly what you need it to do so you can allow it to be installed without having to upgrade the network, so that we get rid of those planning bottlenecks that we're starting to experience at scale."
David Roberts
And so, is the idea here to move a little bit of this onus onto manufacturers so that the products they're making, by default, plug into your system rather than you having to do a special software project for each new model? Is that what you're pushing for?
Devrim Celal
So, the ambition of Mercury, the objectives are there are a number of them. The first one is exactly that. It is to say to — and by the way, we're working with the biggest manufacturers of EVs, batteries, heat pumps in the world on this one, and this wasn't a pull. They were all very interested in this because they see this as a way of unlocking some of the friction, but also building consumer trust. So consumers, as you described, "If my startup goes out of business, will I be able to use my battery, continue making a return from my battery?"
David Roberts
Well, can I insert a question here? Because I actually had a question about the motivations of the people involved. So, I can understand the appeal of interoperability to a manufacturer, but I can also see a manufacturer wanting to build a walled garden, you know what I mean? Like, wanting to trap people and not make it easier for people to get. I mean, we see this kind of stuff going on in software all the time, all around us, right? I mean, the software, the platform operators try every way they can to trap you and make it difficult for you to leave.
So clearly, that's a motivation too. Did you not run into any of that? Did you not run into any sort of resistance or anybody who's like, "I don't want to, I don't want to be part of an open system, I want to trap people in my garden." Did you not encounter any of that?
Devrim Celal
I would say so far, no. But we're early days, and people that we reached out to who said, "Yes, we want to be part of this," or who came to us proactively, are obviously people who see the need and the benefits of Mercury. So, so far, not. I expect that we would get to that point at some point. But then again, the real thing we're trying to solve for here is, and the metric I'm going to share is controversial, but whichever way you look at it, it's important. I say about 5% globally, 5% of consumer devices that can support the grid actually do. 95% don't.
David Roberts
Well, what do you mean by "can"?
Devrim Celal
Like so, an electric vehicle, heat pump, or a battery should be able to take a signal, whether that's a price signal or just simply a dispatch signal saying "do this." It should be able to receive that, accept that, and behave in line with that grid request for some benefit to its owner. That's what I mean by that.
David Roberts
"So, that's theoretically every electrical device. I mean, theoretically, every electrical device could play some small role, right?"
Devrim Celal
I agree. What I paraphrase there, though, it should be to us, our focus is every electrical device that can generate, store, or consume electricity that's a significant load in the home. So when you get down to your cooker or your washing machine, those don't make it for me. But the heat pumps, the batteries, the thermostats, air conditioning, hot water tanks, electric hot water tanks, all of these matter.
David Roberts
And those 95% that could, what's required to put them into service, is it just sort of smacking an interface on them? Like, I'm always curious about this particular piece of it. If I have a dumb water heater — I do have a dumb water heater. What is required exactly, physically, to make that part of a Kraken-style system where everything's working together? Am I just literally attaching some sort of electrical device to it? Like, what does that look like?
Devrim Celal
That use case wouldn't be our focus, but you could put a smart switch to it, a smart socket, if that's a safe use case to do with your hot water tank or something slightly more intelligent to give us the ability to monitor it, measure the temperature so we know which times we could switch the heater on and switch it off and know how long the heat will last in the tank. So when you get home in the evening or wake up in the morning, you have hot water to take a shower with. That's a very common use case in Australia, for example, where water heating is electric. Massive numbers.
And that's what a lot of utilities do. But the use case we look for is, I use the term "smarter devices." So, devices that already have communication capability built in, that we're doing a software augmentation on top to get the functional requirements done. So, be able to charge/discharge with an instruction at a granular level. Be able to take a schedule like 24 hours ahead. "If you don't hear from me, I want you to do this." To be able to provide telemetry from the right points with the right level of frequency and granularity. It's all these things which in the first instance could be just firmware updates to provide those from these devices.
So that's the first objective. The second one, the Mercury objective, is they give the utility the ability to communicate with these devices and reach their functional requirements. And that's where often Mercury and standard are used in the same description. In fact, Mercury will probably never define a new standard. And that's the biggest difference between Mercury and the inspiration, Bluetooth. The Bluetooth Consortium, kicked off by Ericsson, had to define the Bluetooth standard because there wasn't anything else in place to allow consumer devices to talk to each other. Whereas in our world today, there are a lot of standards and I can list several of them that we use actively today.
And they're good standards, so there's no need for us to define them. Instead, what we'll probably be defining is guidelines to say, "If you're implementing OpenADR, OCPP, here's a guideline of how we would like you to implement it because we know this works and we'll create uniformity of those implementations."
David Roberts
So, you're not asking — the standards are not for particular physical technologies. The standards are performance-based. Basically, you get the certification if the device can do X, Y, and Z?
Devrim Celal
That's it. And we'll set testing criteria to say we're going to run these tests to test the communication to be able to test the ability of the device to deliver against the functional specs. And if you pass, you get to carry the Mercury logo, which gives you that ability to say, "If I buy a Mercury certified battery, even if my startup goes out of business, the next one will be able to step in, a demand aggregator for example, and perform the same service so I can continue earning an income from my battery."
David Roberts
Now, how far are we from that? Like, are we really — is everyone really using different standards now? Like, is that, is this a real problem? Are a lot of devices kind of getting bricked by this? Like, what is the current state of play?
Devrim Celal
I don't think we're at the stage. I mean, the bricking of devices would happen if we were tinkering with firmware, which we never do. That's OEM's business. They should be the only ones updating, changing firmware on their devices. And that's required for cybersecurity, personal safety, personal data. What we are seeing now is the problem that I described at the beginning, the proliferation of makes and models coming to market. Across all the product dimensions that we talked about, there is a proliferation of standards. I was in a meeting earlier today where another entity is talking about developing standards in Europe.
So, what Mercury is trying to put is a framework across those to make existing standards work and to give guidelines to manufacturers from the utilities to say, "We like your devices to do these things so we can create value using them."
David Roberts
When I threw this out on social media and asked if people had questions about this, that's one of the questions I got more than the others, like, "How do you avoid just making more and more standards?" A standard piled upon standards. So, you're not actually making standards, you're creating a set of functional requirements —
Devrim Celal
And testing criteria.
David Roberts
and testing criteria, such that a utility using Kraken can go to a new home, and if the home has an appliance that is Mercury certified, you can just sign that right up without having to do some sort of bespoke software project on it. Is that the idea?
Devrim Celal
Correct. And let me broaden that. Kraken is one, only one of the technology partners today. So that could be Oracle, it could be Lunar, it could be Enphase. There are a number of other manufacturers and tech providers — SolarEdge is another one — who would benefit from this as much as Kraken and the manufacturer and the utility. So, I think this is — the founding members of Mercury are all equals who all stand to benefit, and ultimately consumers who all stand to benefit from what Mercury could achieve.
David Roberts
So, to put it more broadly, if any one company that's managing a set of devices for whatever reason disappears, with Mercury in place, any of these other companies could step in and manage those devices.
Devrim Celal
Correct.
David Roberts
I see. And when we talk about the sort of standards involved, are these all — how do I ask this? Sort of like, technical, about forms of communication and capabilities? Is there anything about just, like, good behavior? You know what I mean? Sort of like standards of behavior in addition to technical standards?
Devrim Celal
Expand on that for me.
David Roberts
I barely understand what I'm asking well enough to explain it to you, but you know what I mean? Like, are there privacy standards or, you know, things like that? Or is this purely a technical thing?
Devrim Celal
It's purely technical. And things like cybersecurity. How do you do authentication? How do you encrypt data?
David Roberts
Yes.
Devrim Celal
How do you manage consumer data? How do you manage consumer billing? All of those should sit in the protocols. Protocols define guidelines and ways of doing that. Or it could be tech providers like Kraken or any one of our peers that define those. And in this initial phase, it's not Mercury's focus because it's already solved for in different domains.
David Roberts
So this is all about technical interoperability, basically?
Devrim Celal
Correct. And I use interoperability quite cautiously because Mercury will not be defining how your heat pump interacts with your EV charger. It's how each individual device interacts with the grid. So, it's interoperating across the grids and with the grid as opposed to with each other.
David Roberts
I see, I see. But will thereby be meshed into a single system.
Devrim Celal
Correct, or multiple systems.
David Roberts
And so how exactly is this — just to get a little prosaic — how exactly is this going to proceed? Is this just like all these companies are sending representatives, you're having meetings? I mean, is there going to be some official output or is this like an ongoing thing? What are the actual mechanics of how it works?
Devrim Celal
Full steam ahead at the moment. So, EPRI is managing the process. We're just one of the participants. There are a number of committees established, working on different parts of the initial puzzle. They're all equally important. The first one is setting and agreeing on the charter of Mercury. So, what will Mercury do? How will it be governed? What type of membership will we have? Like on Bluetooth, I believe you have two types of members, the big corporates and the rest. How will we set the testing criteria? Who will be the test centers? All of that has been defined as the charter work.
We are in the process of establishing Mercury Consortium as a not-for-profit in the US and all the legal work that goes with that. So, that's one stream of work. The other stream is working with utilities to define their functional requirements. What do they need these devices to do? The founding member utilities access/supply 130 million homes around the world, from Australia, across Europe, into the USA. The next stage would be, once we've defined those, start putting those to certify the first device category, which will be an EV charger. The work on that is ongoing as well.
So, everything is leading towards an end of March initial announcement. Incorporation and finalizing things will probably take a few more weeks after that. But watch this space for announcements from early April into May.
David Roberts
So a Mercury certified EV charger theoretically could be on the market this year?
Devrim Celal
Yes, definitely.
David Roberts
Interesting. And then, you're sort of going to march through products, presumably as it goes?
Devrim Celal
Yes, and we put this to a vote. Initially, we thought it would be a battery. At the launch event in December, we did a poll on the go in the room and it was a battery. But then when we did a broader poll of our members, they all chose an EV charger, which I think was the right decision because it's more universal, it's a big load, it's a new peaking load, but less control. It's the one that gives utilities the bigger headache than battery systems.
David Roberts
This is the one that I'm guessing, if you talk to utilities, the one that they're freaking out about the most in the short term.
Devrim Celal
And if you think about the economics of it, it's been the cheaper car to drive for a while, but it's been the more expensive car to buy until now. And it looks like we're at the point where that economy will tip as well. So suddenly, it'll become the natural choice as people buy new cars.
David Roberts
Yeah. Okay, I have a question. I don't want to get too geeky here because I'm just a poor English major, but I would like to hear a little bit about some of the specifics you said you're talking to utilities about. What are these performance requirements? Like what do you want these devices to be able to do? Can we just say a few words about some of the granular, sort of like type of things that you're asking these devices to do? I mean, you mentioned some of them before, but could we just go through a quick list, like what are the sort of checklists?
Devrim Celal
I'll give you my list. I'm sure the team are in a lot more detail, but leaving it at the sort of my economics background, English major at that conversant stage. So the first set of criteria would be things that I need to be able to read and hear from the device. So I need the device to tell me what it's doing right now. And that would be "I am generating or I'm consuming so many kilowatts at this moment in time," I probably need the device to tell me what it is as well as part of that. If the device is able to, I may want it to tell me the current, frequency, temperature, where it is, and I may need that device to tell me that information at a certain frequency.
Like, it could be every second. It could be once a minute, once every five minutes. I may be able to want to configure that telemetry to say, "Do it every second now, but later on overnight," for example, "drop to every five minutes." And this could expand. It could be irradiation if it's a solar PV inverter that I'm controlling. So there'll be extensions of this depending on the device category. Then on the write capability, things that I want to be able to tell the device to do would be changes to its behavior. So if it's consuming 2kW now, it may have told me that I can change that.
"My ability to change is this," I may ask it to do that so I could be able to tell it to stop using that 2kW or go down to using 1kW or go down to 1kW in one hour's time. So, giving it a schedule to do things, it will be behaviors roughly in this category with extensions to provide more depth and relevance to the technology that we're controlling.
David Roberts
And so, all these are doable technologically. None of this is a stretch at all. It's just ensuring that it's all in one place.
Devrim Celal
And harmonized.
David Roberts
Right, right, right, right. You mentioned before that this isn't really a standard, it's a kind of coordination of standards. But, you know, there is the question of these other efforts floating around and I'm curious how they relate. So, for instance, there is the Connectivity Standards Alliance.
Devrim Celal
Yes.
David Roberts
The CSA. They have a set of smart home device standards called Matter.
Devrim Celal
Yes.
David Roberts
Is that different from what you're doing? Parallel, part of, you know, consonant with?
Devrim Celal
What's nicely positioned next to each other for collaboration. And I can add a few more. There's the Clean Energy Commission Australia, who's coming up with standards for how you control solar inverters. A big headache area for them. There is the EEBUS out of Germany to do something quite similar and overlapping to Mercury. There's the OpenADR communication protocol originated from the US. VHPready. So our role is not to replicate, duplicate, contradict, but to work in harmony with existing standard and communication protocol governance bodies so that we're getting a lot more out of what they've created and putting it into use.
Similarly, in the UK, the Department of Energy, called DESNZ in our case, has initiatives to start building standards, guidelines for these smart home devices to both be secure and able to provide grid supporting services. So, we're collaborating with them. There's the British Standards Institution. Again, we're collaborating with them because one of the things that Mercury can bring is a combination of technology firms like Kraken who move very fast, manufacturers who have a consumer mindset, and utilities who need to do something with that, we can move very fast. And that's why I confidently say we're going to have an EV charger Mercury certified very soon, and we'll have probably multiple more devices before the end of this year.
And that becomes sort of the spearhead that helps inform some of the more standards that will come afterwards, or how they could be amended to make them more relevant for the use cases that we're trying to solve for.
David Roberts
So, you don't worry about a proliferation of incommensurate standards. You think all these are going to sort of harmonize over time?
Devrim Celal
I would be worried if we didn't have a way of harmonizing them because that would just create more fragmentation in the market, which was the problem that we've identified. My hope for Mercury is it will become the unifying entity across those and manufacturers could say, or utilities, "This is the standard that I want, the devices that I'm manufacturing or that are installed in my area and they should be Mercury certified." So that means if a utility says "I want my devices Mercury certified," that's sort of the benefit case for manufacturers. And the benefit case for utility is they'll know exactly what they're getting from those devices.
David Roberts
One we didn't mention, one of your big partners in the Mercury Consortium is the Electric Power Research Institute, EPRI. They also have an initiative called Flexible Interoperable Technologies, FLEXIT. Is that again, just sort of harmonizing with what you're doing or a subset of what you're doing, or something larger than what you're doing?
Devrim Celal
So, I'm not familiar with which direction FLEXIT is heading, but my understanding is that it's more about the interoperability of devices. Whereas, Mercury is setting those functional requirements and defining how they interoperate with the grid systems.
David Roberts
Got it. Interesting.
Devrim Celal
But EPRI, to give EPRI the credit that's due, has been Kraken's partner in instigating this, orchestrating, and bringing a large number of the US utilities to the table to work alongside to conceive the founding team of Mercury.
David Roberts
And another question I got on social media when I said that the model here is Bluetooth, a lot of people's immediate response was, "Bluetooth sucked for several years." I mean, Bluetooth sort of was associated with maddening connection issues, et cetera, et cetera, you know, and that's like it's mostly ironed itself out now, mostly works now, but that did it a lot of damage early on, you know what I mean? Does that example ever loom in your head? Do you ever worry about that?
Devrim Celal
So, we don't have the one benefit that Bluetooth had, which was they were building something, or challenge if you will, they were building something completely new and they did it absolutely the right way. They went to market early, it was very techy. I mean, it's called the Bluetooth Special Interest Group. It started as an engineering project and it was the absolute right way. Get something out there, get some people testing it, learn from it, and constantly iterate and improve and that's what they've been brilliant at. Today, when you go and buy a set of headphones, you don't think if it's going to work with your mobile phone, you assume that it will.
So, I think today where they got to is excellent. Now, what we can't afford to do is have that bumpy start at the beginning.
David Roberts
Yeah, headphones are one thing; the heat in your home is a different thing. You don't have as much patience, I think.
Devrim Celal
But fortunately, we have founding members like Kraken, Oracle, AWS, Lunar, SolarEdge, Enphase, and I'm missing a few, so please nobody be upset with me. I think all the members are brilliant and it's all on the website. But look, collectively we have an incredible amount of experience and the manufacturers as well, the Renaults and Daikins of the world and we've been working with consumers and deploying very successful large-scale demand-response programs to date. So we need to bring all that learning and make sure whatever we design, implement, and launch from day one just simply works. Because our biggest challenge is to build that consumer trust, take the friction out of the consumer journey so that we can switch that 5% participation metric to 95% participation.
David Roberts
The sort of vision here in the future is that electricity-using devices sort of, by default, communicate with the grid. They're just sort of built-in. So, we're heading toward a future in which basically everything electrical is networked. How close is that, do you think? What is our state of progress towards there, and how fast do you think we can get there?
Devrim Celal
I've seen a lot of positive change, especially in the last couple of years.
David Roberts
Yeah, it's been a crazy couple of years in this area, particularly.
Devrim Celal
And one of the things that I can sort of pinpoint as a use case for this, or as a case study, is a growing number of car or EV manufacturers launching their own communication protocols or APIs. Up until not too long ago, the majority of these were monitored and controlled through reverse-engineered APIs. And there are players who specialize in that, because that was the only way to communicate with these devices. But increasingly, these manufacturers are coming forward and saying, "Look, there's a better way of doing it. Here's our API." And we work closely with them, as Kraken, to say, "We know what we want to get out of these devices."
We know how to do this and collaborate with them in helping define how to design these. And that's something they do, how to operate them and in some cases, how to commercialize them. And if we get this right, there's an incredible amount of value for the manufacturer and the consumer in this. And that's the change that I've seen, that what was reverse engineered is increasingly becoming official APIs, which says there's a future in this connectivity.
David Roberts
Yeah, and as a kind of final question, to get back to the sort of VPP question or whatever we're calling these aggregations, you sort of work as a retail utility in areas with retail competition, like the UK and Texas, which has retail utility competition. What about areas without retail utility competition where there's a retail utility monopoly, basically? So, retail utilities are competing with other retail utilities and have a strong incentive to lower costs for consumers to trim, to be efficient. You know, sort of legendarily, monopoly utilities don't necessarily face those same incentives. In fact, they like spending money.
It's how they make money. So, are they biting on this? Do they want Kraken as well? Are you working with, like, monopoly utilities? Are they installing Kraken?
Devrim Celal
Before I answer that, to put a clarification point: So, Octopus Energy is in those countries, but Kraken, obviously, we work with competitors of Octopus, so we have to treat Octopus like another customer. We operate in multiple more countries and in often cases, we work with what I call integrated utilities, where you have distribution, transmission, retail, and generation, as well as other competitive retailers like the ones in Texas. So, Kraken is quite comfortable working with those utilities, but also appreciating, as you put it, their context is very different to a competitive one. They're not fighting for customers, but they're trying to run their systems more effectively.
And as part of this electrification and also increase in renewable penetration, these utilities are having to run their systems differently. Their commissioners, their regulators are asking them to do that as well. Therefore, I think they will continue having to invest a lot of money to enable the transition. But what Kraken allows them to do is help them better prioritize those investments, in certain cases help defer those investments by getting more out of the existing infrastructure. To give you an example, we have what we call transformers deep in the distribution network where a high voltage cable comes in and it gets distributed to multiple lines into homes.
David Roberts
Very difficult to get these days. Very difficult to buy these days.
Devrim Celal
Exactly. And that's one challenge. There's a big supply chain challenge. Well put. But also, as you get more electric vehicles and heat pumps and rooftop solar, that's the part of your network that gets congested first. So, you could upgrade them, you could replace them, but that means supply chain issues. But it also means public works. You need to dig the streets, which people don't like happening too often. So, what Kraken allows you to do is both monitor the network in real time, sign up your customers to these intelligent tariffs that give them a benefit, cheap range, or better economics in your home comfort.
But, it gives the utility the ability to shift the behavior so that you're shifting loads away from peak times to allow you to use more of the capacity of the existing infrastructure and defer some of your CapEx to later years and avoid that costly financing cost and public works. So, we're building use cases around the whole system running as opposed to operating better in competitive markets.
David Roberts
So you think there's no utility that couldn't put Kraken to use?
Devrim Celal
There is no utility that couldn't put Kraken to use. The first use case in North America is St. John Energy in New Brunswick. They're vertically integrated. They have distribution, retail generation. They manage their own balancing responsibility, buying and selling of power. They are now implementing the full Kraken stack. It will help them deliver incredible customer service, get them to operate more effectively, and manage what we call the peak load effectively so they reduce their cost. Everything I've just described could apply to a competitive utility, but a regulated one as well.
David Roberts
Right. And if Mercury is successful and Mercury certification becomes the industry norm, and thus Kraken can sort of, by default, incorporate new devices without this kind of bespoke work, what are the savings there? Is that going to save a lot of time and money for these utilities to have the devices sort of automatically ready? I'm trying to figure out sort of like how big of an impact is that going to have on this market?
Devrim Celal
So, let me give you some metrics. The capital deferral cost will vary by utility. So, the two benefits you get, and it depends on — actually, three benefits — but this will depend on your regulatory framework. So, if you're in California, you will think about procuring electricity, but if you're in a vertically integrated utility, you'll have your own generation and procurement is not part of your thought process. But if you were, it would be running your system more effectively, so achieving more from your grid and prioritizing the investments that you make. Second would be improving how you procure electricity, or running your system on greener electricity would be another way of describing it.
And finally, delivering your consumers an incredible product that they both get savings from. So, the kind of metrics we're looking at is reducing EV charging costs down to 2 to 3 cents per kilowatt per mile to drivers that give them a clear, crisp reason to participate. It could be four or five, depending on where in the world you're in, but it's still a significant drop from the 30 or 40 cents that you would pay for your regular electricity. And then, allowing your employees to have such a great product that they're happy to be working for you.
David Roberts
What a thought in the tech world these days. Devrim Celal from Kraken Energy, thank you so much for coming on and walking us through this. I'm so interested to follow the development of this in the next few years.
Devrim Celal
Thank you, David. It's been a pleasure and 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. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this episode, Harvard Law's Eliza Martin and Ari Peskoe join me to unpack how data centers' skyrocketing electricity demand could leave ordinary customers subsidizing Big Tech's power bills. Most chilling is the potential alliance between utilities and tech giants that threatens to derail much-needed utility reforms while entrenching fossil-fueled infrastructure.
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(Active transcript)
David Roberts
Alright, hello everyone. This is Volts for March 12, 2025, "Who is paying for all that data center power?" I'm your host, David Roberts. As everyone in energy world knows by now, data centers are coming and they're going to increase demand for electricity, by an amount that no one really knows but everyone seems to agree will be quite large. If the more enthusiastic forecasts bear out, data centers could go from consuming roughly 1% of US electricity to something more like 12% by 2030, quintupling the pace of demand growth. There are reasons for skepticism regarding those upper-end forecasts, but even the more modest ones are daunting.
In many regions and for many utilities, data centers not only represent the vast bulk of electricity demand growth in coming years; they could quickly become the vast bulk of electricity demand, period.
How is that going to affect the relationship between hyperscalers and utilities, and between utilities and their other customers? Who is going to pay for all the new electricity infrastructure required to connect and run all those data centers?
These questions are mostly being decided behind the scenes in obscure utility rate cases, but they deserve to be brought to light. To that end, I just read a great new paper called "Extracting Profits from the Public: How Utility Ratepayers Are Paying for Big Tech's Power."
I'm lucky enough to have the authors, Eliza Martin and Ari Peskoe, here with me to talk through it. Eliza is a legal fellow in the Environmental and Energy Law Program at Harvard Law School, and Ari — a repeat Volts guest! — runs that school's Electricity Law Initiative.
We're going to get into some nerdy stuff about ratemaking, but also some bigger and more fundamental questions about the future of electricity regulation in an age of AI.
With no further ado, Eliza Martin and Ari Peskoe, welcome to Volts. Thank you both so much for coming.
Eliza Martin
Thanks for having us.
Ari Peskoe
Thanks so much for having us.
David Roberts
This paper is just — I am the target audience for this paper. This paper is squarely targeted at my pleasure zones, but it's quite technical, so I just like just a little bit of background. I think the reason we're all talking about this is that the electricity system is changing very quickly in some very fundamental ways. The main thing is these new loads are coming online. And this is not like the past 20 years of loads coming online. It's not like a new house coming online. It's not even like a new business, even a new factory coming on.
These are enormous loads. Like when you have a half gigawatt, a gigawatt chunk of new load, that's just like a new thing for utilities, and we're having not just one of them, but a whole series of them. So basically, this rush of data centers is crashing into our conventional way of running utilities and regulating utilities and setting rates in such a way as to make a mess. And the danger in that mess is that ordinary ratepayers are going to end up stuck with the bill for a lot of the new expenses required by these big data centers.
And I think we can all agree that having ordinary ratepayers subsidize mega-jillion-dollar companies is not a good outcome. So that's why we're all worried about this. That's why we're talking about this. But I think to understand why and how that might happen requires a little bit of delving into utility business. So I think the place to start is: listeners may or may not know, you know, I think listeners, they know they pay their electricity utility a certain rate, a certain amount per unit of energy. What they may not know is that for any utility, there are multiple classes of ratepayers that pay different rates.
And the principle that is supposed to guide the setting of rates for different classes of customers is called "cost causation." So maybe, Eliza, we can just start there. Like, what is the principle of cost causation? What are utilities trying to do here?
Eliza Martin
Sure. So, cost causation is really just sort of the guiding principle in rate making, that consumer prices should align with the cost that the utility company incurs to provide service to that group of people. So, it's more expensive for utilities to provide service to certain groups of people. You know, ratepayers who are like, you know, normal homeowners, they're spread across a longer distance, so maybe there's more distribution infrastructure. So, the costs are just a little bit different for different groups of people. But, it's a very imperfect system.
Ari Peskoe
There's no objective method for allocating these costs generally. You know, set aside the data center issue. If a utility wants to build a new power plant because demand is growing, how are you going to split that cost among, let's say, residential, commercial, and industrial ratepayers? One way you might think about doing it is just, "Well, we'll just do it in proportion to how much energy each group is consuming." And that might seem like a fair way to do it, but you might also say, "Well, actually, what's really driving the need for this new power plant is that growth in peak demand," right?
"O n that hot summer day, that's really why we need this new power plant. And so, let's actually split these costs based on how much each of those ratepayer classes contributes to that peak." And there's no real objective way to say which way is right and which way is wrong. And so, you just have all these groups coming in, arguing in their own self-interest for why their way is sort of the objectively right way to do it. Even though it's just a sort of subjective determination.
David Roberts
Yeah, and just to underline the point you're making, it's not that there is some objective way that they're all lying about. There is no fact of the matter here. There is no right answer about cost. These are inherently subjective decisions.
Ari Peskoe
It's everyone coming in, arguing for their own self-interest.
David Roberts
Which is like, again, you can sort of make sense of in your head when you're talking about normal customers. Right. But again, if you're a multi-billion-dollar company with a gigawatt of new load coming, it is clearly going to have resources in that fight that other people in that fight don't have. Like, they're clearly going to be the 800-pound gorilla in that fight. So, the way utilities do this is they add up all the revenue they think they're going to need in their next rate period and then they get that approved by the public utility commission, and then they divide that up.
Who's going to pay what in that amount? These different ratepayer classes. So obviously, you have these different ratepayer classes sort of jockeying against one another, trying to lower their rates and increase the other rates for the other guy. And there's a lot of fuzziness, as you say, involved in that. So maybe just talk a little bit, Eliza, about what is the source of that fuzziness. I mean, there's not a, like a clear, you know, some answer you can say, "This class of customers costs the utility X amount." There's lots of fuzziness. So maybe just talk a little bit about what are some of the sources of uncertainty and fuzziness in that process.
Eliza Martin
So, I think that there is this initial fuzziness, as you mentioned, sort of about what the revenue requirement is for the utility company. This process is really utility-driven. So, the utility proposes how much money it needs to recover first. So that in and of itself is a contested issue. And then you have the actual, as you mentioned, the sort of discussion amongst the different groups of people about how much money they should be paying for their costs. So, industrial consumers have, you know, they'll get attorneys and everyone will comb through the utility filings and try to argue that their cost should be lower than, say, the normal consumer's cost.
But it's not an exact science. It's a really messy process that's based on competing approaches to cost causation. And it's a battle sort of in the filings about who should be paying what.
David Roberts
And as you say, PUCs, public utility commissions, who are hearing these cases, they might have their own preferences, too.
Eliza Martin
Public utility commissions are inherently a political body. So in some states, the regulators are appointed by the governor, and in other states, they're elected officials. So there's political pressure, whether that's from a governor or whether that's from, you know, the people that elect these regulators to favor their interests. So, you know, it's not a scientific process, for better or for worse.
David Roberts
Yes. Also, the one other thing you mentioned in the paper, the reason there's some fuzziness in this process is that, and here I have in my notes, it says "utilities lie." Which is just to say, when a bunch of people are arguing about how much they're costing the utility, that's pretty technical. There's lots of numbers involved, there's lots of information involved, and the PUCs are sort of reliant on utilities to tell them that information. And as you document in the paper several times, utilities have been caught basically just lying about the cost of various things. So that fuzzes up the process, too.
So then, alongside this process where you have ratepayer classes competing over who's going to get the lowest rates, you have these special contracts which are like — it's funny, I'm constantly coming across new stuff in the electricity world where I'm just like, "Can't believe it exists." I felt that way the first time I found out about utility holding companies. Like, we legally separate generators and transmission companies, and then we just allow one company to own them both. How is that separation?! Anyway, so, special contracts. So, Eliza, what is a special contract? If they already have this process, what is a special contract on top of this process?
Eliza Martin
That's an excellent question. Special contracts are really just statutorily created mechanisms that allow a utility company to request a deviation for a customer from the standard rate. So, oftentimes, they'll have to be approved by a public utility commission, although Mississippi recently changed that law for data center customers. So, it just allows a utility to offer terms of service to an individual consumer that otherwise aren't available for anyone else.
David Roberts
Again, that just seems crazy on its face that individual ratepayers, individual customers, are negotiating their own bespoke individual rates with utilities. So, when you say political pressure, why would there be political pressure to do these things? Like, what's the background there?
Eliza Martin
Oftentimes, it's that regulators don't want to be seen as the veto point for an economic development opportunity. So, if you know, a governor's publicized that there's a big data center that's coming to locate in this area of their state, then regulators don't want to be the reason why that economic opportunity or that data center decides to not locate there. So, there may be pressure to approve a special contract.
David Roberts
Yeah, lots of politicians want these things to come, and then, I guess, are probably pressuring their PUCs to make things easier on them to come. So these are the processes. You have ratepayer classes arguing over cost causation, and then sort of alongside that, orthogonally, you have special contracts whereby utilities are creating special rates for individual customers. So this is the background. This is the process that's going on. I want to discuss the many ways within that process that costs can get shifted to the public through shenanigans. But before we get to the shenanigans, it's worth making the point you make in the paper that just if rate cases just proceed in the normal way, that's going to involve some cost shifting. Because when new customers come on and you need some new infrastructure to serve the customers, new power lines, say, who pays for those new power lines?
What happens is the cost tends to get split. Maybe, Eliza, we could just walk through that before we get to the sort of shady stuff. Just like the normal way that new customers are treated and that new infrastructure is treated inherently involves some shifting of these new costs onto ratepayers. Can you walk through that a little bit?
Eliza Martin
Sure. So, just when a utility decides that or anticipates that there's going to be increased demand on its system, it just, you know, projects that it will have X amount of new capital costs for its infrastructure.
David Roberts
Yeah, and these are power lines, transformers, that kind of stuff.
Eliza Martin
And, you know, that's the bread and butter of utility profits because they enjoy an opportunity to earn, you know, a rate of return on that infrastructure. So, utilities have, you know, always had an incentive to pursue growth, and so they will just do that in their normal, you know, rate cases. They'll say that there's a lot of demand and that they need to build new infrastructure to meet that demand, and then they'll use the cost allocation formula that they already have approved by the Public Utility Commission to spread those costs across everyone else.
David Roberts
Yeah, we're going to get to those screwy cost allocation measures. But maybe just by way of preview here, it's just worth saying so. Like, you could say, and utilities have said in previous cases, like "X new big customers coming online in our system that's going to require us to build X new amount of transformers and power lines and whatever else that will cost X amount. But that new infrastructure will benefit everyone in our region, not just the new customer. And so, everybody should share the cost of that new infrastructure." Which makes sense if you're talking about adding normal, you know, like a subdivision or a commercial center or normal loads.
But when you're talking about adding a new gigawatt load to a utility area that maybe, you know, only has a couple of gigawatts of demand in the first place, then it seems crazy to share the cost of that across everybody. Then it's very obvious that it's the new customer that you're doing the new stuff for. So let's talk about some of the ways that costs are getting shifted. And one is through going through these special contracts. And it's crazy to me to read about Eliza, but like, these special contracts, as you say, they're often like, "Big new economic development is coming to our area. Let's do this!"
Right. So there's pressure on legislators, there's pressure on the PUC, pressure on the utility: "Let's do this. Everybody wants this. Let's do this." And so they do these special contracts outside of the normal process. And as you write in the paper, these special contracts get incredibly little scrutiny. So maybe just talk about some of the ways that the terms of these special contracts can serve to kind of shift costs to ratepayers. And why aren't they being scrutinized? I mean, I guess that, you know, we're back to the political pressure again. But it just seems crazy to me that some of the biggest, you know, these are some of the biggest decisions you're going to make around your electricity system.
To move those biggest decisions into a private process that bears no scrutiny seems crazy to me. But talk a little bit about what goes on in these special deals.
Eliza Martin
I mean, there's a whole plethora of procedural issues. I mean, when Ari and I were looking through the contracts, I mean, the terms are not publicly available. The utility will make a claim that there's proprietary price information and that the public can't see these pricing terms. But of course, that creates an issue because if there is a cost shift — so if the utility is offering a price that is lower than the utility's cost of service — to serve that ratepayer, then the problem is no one really knows until there is, you know, down the line there may be a rate case and the utility has a much higher revenue requirement.
So, you know, there's this initial claim for proprietary information, and then the regulators often just reflexively approve that. So, I did not run across a contract where the PUC rejected a claim for proprietary information.
David Roberts
Really? Not one?
Eliza Martin
No, I don't. Some were more redacted than others, but I did not see a contract that was totally available, which is unfortunate.
David Roberts
Yeah, it's wild. So again, like a publicly granted utility, monopoly utility, striking a deal with a private party that the public is not allowed to know what the deal is. Again, it seems crazy to me. Ari, maybe you can tackle this one. One of the kind of subtle things that's going on in here is that utilities, again, we're back to utility holding companies that own both sort of competitive businesses in competitive markets and regulated utilities, and they have some incentive to shift costs from the one to the other. So maybe explain how that works in the context of a special contract.
Ari Peskoe
Yeah, I mean, one reason we're skeptical about these deals is because of the long history of utilities exploiting their monopolies to benefit their competitive lines of business. And there's certainly right now a nationwide competition to attract these data centers because building the infrastructure can be a sort of lucrative business for the utilities.
David Roberts
Right. As Volts listeners are well aware. But I'll say it one more time, this is how utilities make money: They make money by spending money. So they want to build a lot of infrastructure. A new data center coming is an excuse to build a bunch of infrastructure. So they all want the data centers.
Ari Peskoe
Yeah, I mean, so utility regulators are supposed to watch out for these incentives and opportunities to exploit your captive customers that basically have to pay your bills. And so, what we're concerned about and what regulators ought to be more concerned about, and it's distressing that there's not more concern in these special contract proceedings, is whether or not utilities are, in fact, through these secret contracts, shifting costs of discounted rates to big tech companies onto other ratepayers.
David Roberts
Right. Maybe go into a little bit more about the distinction a utility has between its competitive and its non-competitive arms, and how this cost shifting works. Like, a little bit about the mechanics of what the cost shift is. Does that question even make sense?
Ari Peskoe
Well, so in this particular case, it's not really a — so there are instances where the utility does have an affiliated business and it can use ratepayer funds to prop up that business, right? So, for instance, the utility owns a power plant that's through one of its corporate affiliates, and it has that corporate affiliate sign a contract with the utility. The utility can sign at an inflated rate because it has captive ratepayers that will have to pay for that contract. And that's a way to sort of funnel money to this business, this power plant, that has to compete in the market.
Here, it's slightly different in that these are both sort of utility businesses. The data center is part of the utility's business, and these sort of captive ratepayers are part of the utility business as well. The distinction is, though, that there are these captive ratepayers that have to pay their bills, and then there's this utility also trying to attract these customers that have the ability to sort of go in all different parts of the country, these big data centers. And again, but it's the similar concern, which is that the captive ratepayers may be subsidizing the utility's sort of competitive lines of business.
And here, though, there's just no affiliate company, but it's the same kind of principle.
David Roberts
Right. Another way of shifting costs is this — call it a gap between federal and state regulations. So, FERC sort of tells the PUC to divide up transmission costs, and the PUC has this cost allocation formula. Talk a little bit, Eliza, about how those cost allocation formulas end up serving as a subsidy.
Eliza Martin
There's a couple of different issues. So, you know, first, FERC approves a cost allocation method for its RTOs. So, you know, like, if FERC approves its cost allocation for PJM, which splits certain costs and assigns them to the utilities, then each state will allocate the costs that are assigned by the RTO to ratepayer classes of every utility that it regulates. So the result of this is really that residential ratepayers who are not maybe causing an RTO to plan new transmission the way that the data center wants, that they're still bearing the cost for that. And transmission is complicated just because, you know, there are benefits that flow from that for all of us, but the way that the transmission is being built and for whom it's being built results in this cost shifting, potentially through FERC approved to, you know, PUC approved cost allocation.
Ari Peskoe
I would go a little stronger on this and just say that, you know, PJM's regional transmission plan was $5 billion last year. They said data center growth is one of the main drivers. PJM's role here is basically to bill each utility, but it's then up to the state regulators and the utility to figure out how those costs are divided among residential, commercial, etc. The bottom line is that in some states, we have residential ratepayers bearing two-thirds of the cost of this new transmission that is really being designed for data center growth. Now, there are some ancillary benefits that ratepayers do receive from this new transmission.
So, it's not like they're not getting any value out of it, but they're certainly not the cost causers of that new transmission. And I think this sort of approach to cost allocation is really on the presumption that we're building broadly beneficial projects. And that's simply just not the case when we have a few identifiable, very wealthy corporations that are driving a lot of this need.
David Roberts
Right. And just to repeat this point one more time, up until now, the assumption that new transmission infrastructure was broadly beneficial to all utility ratepayers more or less held. This is a new state of affairs that you get a gigawatt new customer for whom you have to build considerable new infrastructure. These assumptions that — it's not that this was necessarily a shady or corrupt practice, it's just not suited to the present circumstance, maybe you could say.
Ari Peskoe
That's right. I mean, it's the scale and the speed of the forecasted growth that certainly doesn't have a modern-day precedent, certainly not in the past several decades.
David Roberts
Right, right.
Ari Peskoe
And a lot of the approach to regional cost allocation has really just evolved relatively recently.
David Roberts
Yeah, and then another way PUCs allocate costs is by peak demand. As we mentioned earlier, a lot of infrastructure gets built just to meet these peaks of demand at certain times of day, certain times of year. And so, this is another thing that's just kind of jaw-dropping. Utilities charge big customers peak demand charges for their contribution to those peaks, but apparently, it's entirely possible for a data center to find out what period of time is the utility's peak, thereby what period of time the utility is going to use as a reference, and then it can just reduce its power use for that couple of hours and thereby reduce its demand charges all year.
Eliza, is that right? Am I getting that right?
Eliza Martin
Yes, basically. And it's, we've heard that there are companies that sort of do this, that help people forecast when peak demand is. So, it is a way that you can cost shift if the system is built based on a theory of peak demand.
David Roberts
Yeah, and it's one of the things if you're fiddling around with a couple of megawatts too. But again, if you're fiddling around with a gigawatt, that's going to make a substantial difference to the final outcome.
Ari Peskoe
Yeah. Again, it's this problem of scale because other energy users can also stop using utility-delivered power in order to reduce their demand charges. But the scale of this can potentially have a major impact. And I'd also just add that there are better ways to design demand charges that can mitigate this possibility. But it's really a matter of what the utilities and what regulators have approved, and there are some on the books that can allow for this just massive avoidance of costs. And the other aspect of this is that so many of these data centers have just this armada of diesel generators on site.
So, when this peak demand hour comes, they can keep operating by just turning on all these diesel generators, but they can save money in the process. So, the incentives here are just all unfortunate.
David Roberts
Yeah. And again, it's like one thing if a utility sort of misses a megawatt or two, but it's another thing if it's like the scale we're talking about. And the third way you mentioned about shifting costs, which I found really interesting, is you have some suspicion around colocation here and we're going to get into a different kind of collocation later when we talk about solutions to all this. But it seems like you all see some shenanigans going on under the banner of colocation currently. So Eliza, maybe just talk to us about how that works. What do you think data centers are trying to kind of get away with with this colocation strategy?
Eliza Martin
Well, colocation is, I mean, it's obviously top of mind given the FERC proceeding. But a general colocation arrangement, or the type that we sort of talk about in the paper, is when a data center would connect directly to an existing power plant behind the point of interconnection. And so, by delivering and taking power without using the transmission network, power plant owners and data centers argue that they should be exempt from paying any utility delivery fees or any grid services, basically.
David Roberts
Right, right. So, you got a data center right next to a nuclear plant. They're both behind the interconnection to the grid. The nuclear plant is feeding power directly into the data center. And so, both the nuclear plant and the data center are arguing to the utility, "We're not using your transmission infrastructure for this. It's just a direct connection. Therefore, we should not have to pay these fees and for the upkeep of the transmission charges." That's what they're trying to do.
Eliza Martin
Yes, and there's some discussion about whether or not that really is a feasible technical arrangement, like whether it's fully integrated with the grid or whether it's isolated. So, there are some technical issues around it and then just the regulatory issues, which is, "Is this allowed? Who regulates it?" That's sort of the ongoing proceeding.
David Roberts
Have we gotten PUC rulings on this yet? Like, are PUCs allowing it? What's the trend?
Ari Peskoe
Well, these transmission issues are under FERC's jurisdiction, but there is, to the extent we have a nuclear plant selling directly to a data center, that could be a retail sale that would be under state jurisdiction. So, this type of colocation is probably only allowed in states that have sort of opened up the system a little more to retail competition, which is primarily the Northeast and a couple of other states out there.
David Roberts
Right. I mean, and the thing that strikes me immediately, like if I were a PUC commissioner, I would be thinking, "The data center plopping down next to the nuclear plant is going to siphon off an enormous amount of the nuclear plant's power." And then wherever else that power was going is then not going to have power. And then you're going to have to build the infrastructure for that missing power. In other words, it seems like even if you're not directly mechanically using the transmission and system, it seems like you are still having a substantial effect on the transmission system such that you should pay. Am I — is that crazy?
Ari Peskoe
No, I mean, that's potentially the largest cost shift here is if this nuclear plant is no longer selling into the market. The market prices are set basically by supply and demand. And so, if a huge chunk of supply leaves the market, all else equal, prices are going to go up, at least in the short term. If the nuclear plants in PJM, for instance, can make more money by selling directly to data centers, well, then that's what they're going to do. And there's going to be a shortage, at least for a little while in PJM, and that's going to drive up prices for everybody else.
Eliza Martin
And just to add, you can end up with extending the life of other assets that maybe are dirtier because the price has increased so they can now bid in.
David Roberts
Right, right. You divert a bunch of your nuclear to a data center. Then you have a power shortage. Then you have a case for keeping your coal plant open, which is also a shenanigan that's going on. So then let's talk about what to do about all this. You know, and as we've said over and over again, this is in the utility world, relatively new. This just is a giant new thing that's happening. So, like, everybody's scrambling a little bit. And it seems to me like, just intuitively, the decisions and procedures that get established now are going to have a long tail.
And so, there's a lot of very important decisions being made now, up front. So, let's talk a little bit about solutions. One you mentioned, Eliza, the first one is just there should be some guidelines for PUCs reviewing special contracts. It's crazy to me that there aren't, but what do you mean by that?
Eliza Martin
I mean, in some states, like in Kentucky, there are some more specific guidelines or findings that regulators have to make before they can approve a special contract. So it's really, I think, more about showing your work, kind of, so making sure that, you know, the contract, the rate, you know, doesn't exceed the utility's cost to serve that customer. You know, limiting discounts to certain amounts of years, if there are any discounts. So being able to just sort of see what the utility is proposing doing, and there being a record of that, I think, is really what this comes down to.
But, I mean, ultimately, I think Ari and I are generally pretty skeptical of special contracts, and it ultimately comes down to whether or not the regulators have, you know, the ability, the will to challenge them. So for that reason, you know, we often think that maybe tariffs would be better instead of special contracts.
David Roberts
Yeah, yeah. The way this is framed, if you're going to use special contracts, at least there should be some guidelines for assessing them instead of them just being a black box, free-for-all.
Ari Peskoe
And I think that maybe the most important criteria that Kentucky has is that they only allow special contracts when there's spare capacity, because then maybe there's — you know, effectively that means we can only offer a discount when we're not going to have to add a lot of new infrastructure to the system. And that's just simply not typically the case these days that we have a lot of spare capacity around. So that could eliminate the possibility of a number of these contracts across the country if we put in that criteria.
David Roberts
Yeah, and you all make a note that, like, guidelines can only do so much. In the end, a lot of this just comes down to you needing good regulators. Like a lot of this just comes down to you needing empowered, informed, and good-judgment-having regulators. But as you say, special contracts in general seem shady. And I completely agree. It's amazing to me that they exist. It's hard for me to imagine a principled justification for their existence. It just seems like special deals for big customers who want to rush past the process, which, like, you know, I get why economic development officers like that.
But it seems unfair to the other people using the system. So, the second thing you counsel is just quit using these special contracts and shift to tariffs. And so, here we get to what I thought is a really interesting question that's being fought out now in utility proceedings all across the country, which is: should data centers have their own special tariff? Should they just be treated like other industrial customers have the same tariff that other industrial customers have, or should they have their own for some reason? And this battle is being fought in Ohio, Indiana. FERC weighed in a little bit.
What is the case for saying, "Yes, data centers are special and deserve a special tariff."? What is the argument for that side?
Eliza Martin
It's my understanding that the argument is really based on this idea that similar consumers, similar utility customers should be grouped together if they have similar usage. The cost of service for the utility company for providing service to these customers is the same. So, that's why you have sort of this ratepayer class or the consumer residential class. That's why you have an industrial class. There's an argument that data centers, because they are more energy intensive and run 24/7, are materially different from other industrial users of energy.
And FERC got into some more nitty-gritty issues around cryptocurrency customers that they can move, so there's greater stranded asset risk and stuff like that. So, utilities have a requirement to provide non-discriminatory service. The issue is whether or not they can discriminate for data center customers, basically to isolate them from other consumers.
Ari Peskoe
I wanted to pick up on one point there, which we didn't discuss earlier, which is possibly the biggest potential cost shift here, which is the stranded asset problem.
David Roberts
Yeah, yeah, yeah, let's talk about that.
Ari Peskoe
Yeah, I mean, you know what makes data centers potentially different from other large customers is the riskiness. So, we can imagine all sorts of reasons why this data center growth may fizzle out over the next few years.
David Roberts
Yeah, yeah. I mean, we should say these projections are very uncertain. No one knows.
Ari Peskoe
Right.
David Roberts
No one knows what's actually going to happen with data centers.
Ari Peskoe
And so, the concern is that utilities are going to start building all of this new transmission, power plants, et cetera. It's going to be billions of dollars of costs. And then, the data centers are going to try to cancel their contracts and disappear.
David Roberts
Yes. Because also, what's going on behind the scenes is that you've got multiple states, multiple utilities wooing these data centers. So, the data centers have every incentive in the world to play them off one another and to sort of flirt with each one. Right?
Ari Peskoe
Yeah, or just, you know, it turns out we don't need all these data centers, maybe. And so, one of the unique aspects that utilities benefit from their business model is the idea that they can socialize these risks to ratepayers. There's a history of utilities trying to pass on these costs of these stranded assets to ratepayers. So, one of the key issues in these tariff proceedings is how to ensure that data centers are on the hook for infrastructure costs that the utilities are incurring just to meet these data centers and preventing consumers from being on the hook.
David Roberts
It's one thing if you build 10 megawatts of infrastructure that you don't need, but again, it's a totally different thing if you build the infrastructure necessary to handle a gigawatt of new load and then the gigawatt doesn't show up. That's just a very — that's a different class of spending.
Ari Peskoe
I mean, so in this Ohio proceeding, the utility AEP argues that data centers are distinct because of the sort of newness and riskiness of this new type of customer.
David Roberts
Are PUCs weighing in on this? What are PUCs saying so far about this argument?
Ari Peskoe
We are on the edge of our seats, waiting for the Public Utility Commission of Ohio to weigh in on this one.
David Roberts
Interesting.
Ari Peskoe
Yeah, I mean, as you mentioned, FERC did weigh in and just said it was just one of those sorts of proceedings where FERC just said, "There's not enough evidence in this particular docket for us to make a decision in your favor." But they were not sort of uniformly opposed to data centers being different. They just wanted to see a stronger case made.
David Roberts
Right. This seems like such an important question, how this comes out. It seems incredibly significant. So, yeah, there's the whole argument about whether you have a special tariff for these things at all because of their scale, because of the riskiness of abandoned assets. And just because, like, you know, building a giant power line to serve a gigawatt load is not a sort of universally beneficial thing in the way that like previous infrastructure buildout was. It's like very bespoke and very specific. And it's not like you have another gigawatt load that can just slot in there if the data center doesn't show up.
So, in response to these dilemmas and this, you know, this question of whether there should be an individual tariff, a special tariff for this class is like, again, there's no capital R right answer, somewhat subjective. So, in response to sort of these concerns and these questions, y'all end up recommending or sort of coming down in favor of the idea of energy parks, which we discussed here on Volts a couple of months ago. But maybe Eliza, so maybe just tell us like what do we mean when we talk about energy parks and why is there an advantage here? Why does this sort of like clarify this question?
Eliza Martin
So, an energy park, I guess, is sort of also a form of co-location, but not the one that we were talking about earlier. But basically, the data center customer would bring generation assets and they would be totally isolated from the grid. So, you would avoid this sort of utility interconnection processes. You would be able, if you were a data center customer, you could choose what electricity was the cheapest or if you, you know, some of these big companies have commitments to get clean energy. So, you would be able to isolate yourself from the utility network to bring your own generation.
David Roberts
And then, if you're doing that, you're very clearly paying your own costs. Right. Like that's just, that's kind of like settles the question of cost shifting. Like if you're islanded from the utility, building your own generation and your own connections, that's a clear-cut case of like you're, you're paying your own costs and we're not paying for you. So, like, can that happen anywhere right now or are there regulatory circumstances required for that to work?
Eliza Martin
There are regulatory changes that need to happen, yeah. Really, there is just state protection of utility monopolies. So, state laws would need to be amended to allow these projects.
David Roberts
Right. So, if I'm behind the meter building a data center and then I build a giant solar panel field next to it, and the solar field is powering the data center, I am in the state's eyes selling power, which only utilities are allowed to do. Right. So, what you'd need in that case is, I guess, what we now call "retail competition." Is that the same thing?
Ari Peskoe
Yeah, I mean, I would just say we did not do a 50-state survey of this issue. This is one of those things where I can give the generic response of "it varies by state." And so, I think there are many states, particularly where we have the traditional vertically integrated utility that's built all the power plants, where they fiercely defend the scope of their monopolies, and this would most likely not be allowed. Then you have on the other end of the spectrum a state like Texas, where particularly if you're in some of the top parts of the state where there are rural cooperative utilities, you may actually be able to do this sort of arrangement today.
But I think, you know, in most of the country, we would likely have to change some of these laws that establish utility monopolies.
David Roberts
And that's a legislature thing, not just a PUC thing.
Ari Peskoe
Most likely, yeah. And you know, obviously, the utilities would generally not be a fan of this sort of change in state law.
David Roberts
Just because — well, explain what's the political economy here?
Ari Peskoe
Well, the utilities' monopolies are really their most valuable asset. It provides steady and perpetual profits, and so they generally fight against any effort to weaken their monopolies. There's a lighter version of an energy park which is just that the data center would be the utility customer, but the data center would be allowed or even required to contract itself for new generation. And that would certainly mitigate cost shifts because building power plants is quite expensive. And if you let the utility do it, it then has opportunities to push some of those costs to other consumers. But that would be sort of a compromise position that still a lot of utilities would oppose because they make a lot of money by building those power plants and want to have those opportunities for themselves.
David Roberts
From a kind of wonk perspective, it seems perfect, right? Because it's like a giant new customer, clearly paying its own freight, clearly paying for its own power, clearly paying for its own connections. It's very tidy from a wonky perspective. But it seems to me that the political economy is against it sort of at every turn. Like, is there a substantial, you know, constituency in favor of this solution?
Ari Peskoe
Yeah, I mean, I guess I would clarify that this lighter option is not foolproof for protecting consumers because it would still be a utility customer, presumably still paying for all the delivery charges. There'd still be some opportunities to play some funny games and shift some costs there. But we went through this about 30 years ago when several states did remove generation from what the utility does. These utility restructuring laws that several states passed, and one of the justifications, rationales for it, was that utilities in some parts of the country didn't have the financial strength to fund power plant development, so sort of getting it off their books.
And so, to the extent that there's just so much growth happening in some parts of the country, there maybe could be some argument for getting this off utility books. But I don't know if utilities would go for that these days.
David Roberts
One other solution you mention, which is also an intriguing and ongoing argument, is the idea that maybe new data centers should only be allowed to commence service if they commit to being flexible. So, there's a lot of argument right now about whether they can be flexible. If you ask the hyperscalers, they'll tell you, "No, we need 24/7 power, we need foolproof power all the time. It costs us billions to shut down," et cetera. But then there's been some new research. Tyler Norris and his group had a paper about it. There's been a lot of talk about maybe there is some flexibility.
So Eliza, maybe just talk about why would it be, what would you get out of this?
Eliza Martin
So, because as we sort of talked about, the system is built for peak demand. We spend a lot of the time during the year not reaching peak demand. So, there's theoretically a lot of assets that we've already built that could be used. So, that would just reduce the short-term investment that we need in infrastructure that, you know, we all are getting charged, would get charged for in order to bring on more data centers, to serve more data centers. But there's obviously, you know, there's the issues that you talked about, which is that we aren't sure whether or not data centers would really commit to this flexibility.
And then, utilities have resisted efforts to try to be more efficient in the past, whether that's with non-wire alternatives or GETs or other issues. So, I guess I'm a little bit skeptical that it could actually play out in practice. But, I think there is a way where regulators could require utilities to condition service to data centers on being flexible.
David Roberts
Yeah, and you cite a study in the paper that shows that if these giant data centers could just be a little bit flexible, just shut down for a few hours a year, it could save billions of dollars, which it seems to me like is somewhat in their interest. Because if it becomes easier for a utility to say, "Yes, go ahead and interconnect," then you could just get more data centers online. So, it seems like it's to their benefit too. Ari, do you have any perspective on the question of flexibility in data centers?
Ari Peskoe
Well, it eats into the utilities' profits because the point of flexibility is to reduce the new infrastructure we need, and that's how they're making their money. So, you know, as Eliza was talking about, that's why utilities have historically been, at best, lukewarm on these sort of flexibility initiatives like demand response.
David Roberts
They like high peaks. I guess it justifies their spending.
Ari Peskoe
But again, maybe we're in a situation where growth is escalating so much, so fast, that they have to start thinking outside the box. But our concern is that actually this data center growth is just causing them to just entrench all of their existing worst practices and just double down on their narratives and not really attacking these sort of opportunities to reduce costs for everyone. And instead, they just want to keep building more infrastructure.
David Roberts
Right. This is like an alcoholic, the booze was starting to run out and like, a new truck has showed up outside with barrels of whiskey on it. So well, we're getting near the end of time, so let's transition to that then. So those are a few solutions, which is like, I gotta say, and I know this is not, you know, your fault, but, like, none of these are really, like, super satisfying. All of them are a little bit piecemeal. All of them are going to work in some PUCs and not others. Some of them require legislative changes, some of them don't.
So, there's just a lot of, like, distributed work that needs to happen to prevent this from taking place, to prevent the public from getting stuck with these costs. But to sort of wrap up, like, the last section of the paper — so you go through a thing where you say that data centers don't necessarily pass the cost-benefit test because in addition to getting subsidized by utilities in all these various ways, they're getting, like, economic development grants, they're getting state grants, they're getting local municipal grants, they're getting, like, sales tax exemptions. It sort of reminds me of the sports stadium issue, right? Like, everybody thinks they want these things and everybody thinks they're great.
But, like, once you subtract out all the subsidies you spent to get them in your area, are they really paying out anymore? Anyway, you sort of argue that, like, they don't deserve these subsidies anyway. And all the sort of, like, national security arguments to the contrary are a little bit silly. But the one point I wanted to hit on, and Ari, I want to hear you talk about this before we're done. So, you say one of the dangers here is that subsidies to data centers could interfere with needed power sector reforms. There's a little couple of sentences I want to read here from the paper.
"As utilities wring profits from the public through special contract approvals, they may be developing a new alliance with Big Tech. Uniting utilities' influence-peddling experience with the deep pockets of Big Tech could further entrench utility control over the power sector." I will say, Ari, these are two of the most chilling sentences I have encountered in any PDF in years.
Ari Peskoe
Yeah, I'll take that as a compliment.
David Roberts
I mean, this is like, genuinely terrifying that basically, Big Tech's going to come along with giant bags of money and it's just all going to serve as an excuse for utilities to keep doing what they've been doing. Right? Like, in a sense, this is, they were nearing a situation where they were going to be forced to change their ways. But now, like, here comes all this new load, big bags of money, base load coming like, they're like, "Yes, we know how to do this. You build gas plants and expensive new transmission lines and get a rate of return. We're all over this." So, explain the political economy danger here, basically.
Ari Peskoe
Yeah, so we're seeing a lot of data centers being met with sort of low-hanging fruit in the utility world, which is big transmission projects and big gas-fired power plants, the sort of stuff the utilities have been making money off for generations. And as you know, Volts listeners know there's about 100 different ways we could be reforming the system to improve outcomes for consumers and for clean energy. The concern that we have is that that momentum is just being completely lost because of these shiny data centers that utilities absolutely cannot resist. They say, "The only way we can meet this urgent sudden need is by doing what we've always been doing."
Now, there's a long history of large energy users, like the big industrial consumers, kind of being watchdogs in utility rate cases because they have the biggest incentives to make sure the utility is not being wasteful. But, what if we have a world where the largest customers are now all getting on the system here in the 2020s through these special contracts?
David Roberts
Right. So, they then don't care if the utilities overcharge everyone else, right?
Ari Peskoe
Well, their biggest interest will be keeping those special deals going. And so, yeah, they may not be concerned with the rest of the system. And that's really the concern, is that they become allies of the utilities.
David Roberts
Not just allies, but like borderline owners. Like, if you're, you know, like some of these utilities are going to have a situation where the data centers are the bulk of their total load, which means that those customers are going to have incredible influence, just incredible power over the utility.
Ari Peskoe
Yeah, I mean, that's the concern here. And then that just entrenches the status quo, which has been the utility bias forever. Because this cost of service rate-making model has been working for them for a century.
David Roberts
And if they're allowed to use that basic model on data centers, they're not wrong. They will profit immensely because they are going to have to build a bunch of infrastructure. I mean, in other words, we're once again in a situation where utilities are acting against the public interest but are accurately acting in their own interests, right?
Ari Peskoe
Oh yeah, they're absolutely following the incentives. And it's, I think, a sort of inversion of what the big tech companies had been doing in this space. I mean, they had for years been advocating for increased competition, particularly in parts of the country where we don't have RTOs. But I think there's a real danger here that they just sort of switch gears and really focus on just getting these data centers connected through the utility processes and then protecting whatever special deals they get.
David Roberts
Whereas the alternative path that you all outlined, where data centers power themselves, then they become sort of a counterweight. Then they become almost competitors to utilities and then you have like a balance of powers keeping each other in check kind of thing.
Ari Peskoe
Yeah, I mean, that's our theory. I mean, I suppose you could spin other theories here as well. You could be really optimistic and think that somehow Big Tech with all of its technological powers will somehow modernize the utilities and bring them into the 21st century. I suppose you could come up with other theories. But our concern is the story that we lay out. It's a somewhat pessimistic view of how this could play out.
David Roberts
Well, I mean, it's hilarious hearing me argue in favor of pessimism. Of course, I'm always pessimistic, but to me, just the quantity. I mean, we've mentioned scale over and over again in this pod, but you can't mention it enough. It is a change of degree sufficient, I think, to amount to a change in kind here. What's happening, like what's happening around utilities, is fundamentally different. And right now, everybody is in panic mode, everybody's in growth, everybody's in beat China, everybody's in, "Oh my God, the other company is going to get there first." Just like to me, it looks like they're happily going to jettison their scruples about clean energy and good utilities.
You know what I mean? It just seems obvious to me. They're all just stampeding in one direction.
Ari Peskoe
It does seem like speed is the priority. And yeah, I'm not sure it seems like that's going to carry the day. But you know, this situation has changed pretty quickly over the last couple of years. So, you know, again, it's going back to the stranded cost issue. It's one reason why I think that has the potential to be the biggest driver of cost shifts is if this turns around completely the other direction in the next couple of years and then we have all these half-built transmission lines or something like that.
David Roberts
Oh my God.
Ari Peskoe
And then, consumers are left holding the bag.
David Roberts
Yes, well, this is, at the very least, something that, you know, if PUC commissioners are listening, I know some of them are. I guess it's ridiculous for me to tell them they need to be thinking about this since that's all any of them are thinking about, I'm sure. But, like, this is definitely the question of our time.
Ari Peskoe
Yeah, and go back to something that Eliza said earlier, which is just the value of good regulators here. Right?
David Roberts
Comes back again and again.
Ari Peskoe
Yeah, like, there's no silver bullet, as we've also heard many times on many, many Volts episodes. But there's also no replacement for just regulators doing their job really well and trying to protect consumers as best they can. And you know that that can be really hard when you have all this sort of background noise about national priorities and economic development.
David Roberts
Yeah. But again, I'll just reiterate that, like, decisions made now are going to compound over time. So they're very important that we get a lot of this right on the front end, I would think. All right. Well, this has been fascinating. Somewhat ominous, but fascinating. Eliza Martin, Ari Peskoe, thank you for your work, the paper, and thanks for coming on.
Eliza Martin
Thank you.
Ari Peskoe
Thanks for having us.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
Why are housing and urban land use so central to climate policy? In this episode, I try to answer the question squarely, in dialogue with Matthew Lewis of California YIMBY. We discuss why EVs alone can't decarbonize transportation fast enough, how the climate-driven insurance crisis will bankrupt states, why the climate movement’s own internal NIMBYs are its greatest impediment, and when green philanthropists and leaders will finally catch up.
(PDF transcript)
(Active transcript)
David Roberts
All right, hello everyone. This is Volts for March 7, 2025, "Why housing is a pass/fail question for climate." I'm your host, David Roberts. Longtime Volts listeners know that housing and urban land use constitute one of my central preoccupations, to which I've returned several times over the years. I talked with researchers at RMI about the greenhouse gas reductions that density brings. I talked with a kick-ass Washington state legislator who has gotten lots of housing reform passed in recent years. I talked with mobility activists about the social and psychological benefits of car-free cities. I ranted with Dan Savage about short-sighted land-use policy in Blue America. Just last week, I talked with two YIMBY activists from New York and Texas.
What I haven't done yet is an episode that straightforwardly explains why housing and urban land use belong on a podcast about climate and decarbonization. I think the connection is far better understood today than it was even a few years ago, but the mainstream climate movement has not fully metabolized the need to prioritize urban land reform. Nor have the movement’s funders taken it to heart.
So, I thought I would tackle the subject head-on with one of the best in the game. Matthew Lewis has been in and around California politics, policy, activism, and advocacy for decades now, in a variety of positions, but he is currently the director of communications for the advocacy group California YIMBY.
We're going to talk about why urban land use is a climate issue, why EVs are an insufficient solution, how the insurance crisis is crashing down on the housing industry, and what kinds of policies can lead us to a better place.
With no further ado, Matthew Lewis, welcome to Volts. Thank you so much for coming. It's been a long time coming.
Matthew Lewis
David, it's so exciting for me. I'm thinking back to when we met and actually, in preparation for this conversation, realized it was right around the time that I was getting pulled into the climate movement from more of the energy and land use side. And so, I feel like we're coming full circle here.
David Roberts
Yeah, we both ended up here in YIMBY. The more I thought about how to structure this episode, the more my brain started to short circuit. There's a lot to cover here, but maybe let's just start at the highest level. So, there is climate mitigation, reducing greenhouse gases, and there's climate adaptation, which is just adjusting to the changes that are already underway or inevitable. And there's a reason why housing is central to both those stories. But let's start with mitigation, because I think this is kind of the connection that people don't fully get. So, if you were doing just the sort of elevator pitch, 5-minute version, why housing and urban land use are not peripherally, but central to climate change mitigation, to reducing greenhouse gases, how would you put it? To someone who, you know, your average educated person who just hasn't really thought about it?
Matthew Lewis
Yeah, yeah. If you'll humor me for a minute, I think it would be illustrative to explain how I came to notice because I didn't really. It wasn't inherent to me either. And I want to start there because I fully understand why someone who's steeped in climate technology and policy, it takes a minute to grok, "Wait, what the hell does housing have to do with this?" Because I was in the same boat. So my evolution into becoming a strident YIMBY, I knew that we had a housing crisis in California. I'm a homeowner, very lucky to be a homeowner in Berkeley.
And I was working in industrial climate policy at the time, helping to pass some laws around cleaning up heavy industry in California specifically. As a part of that, I was reading all these state reports on various climate initiatives. The state of California is very aggressive, at least through the legislature, in passing laws to reduce carbon emissions and address climate change. And I tend to read that stuff. I came across a report in 2016 or 2017. I want to give credit here. I'm going to give a shout out to all the climate journalists who listen to this podcast and sort of note to the funders, guys, we need good journalism.
It's very important for the movement. I mean that. But there is a woman named Melanie Curry who is the editor for Streetsblog, and she recently retired. So hello, Melanie, if you're listening to this, thank you for your career of good work. But I want to mention her because she started going to these really obscure meetings of the California Air Resources Board related to some transportation topics. That was her job. I read this Melanie Curry piece and it was like this bombshell buried on page 17. It basically said that the California Air Resources Board was admitting that there was no way for the state of California to meet its climate goals unless it reduced this very equally obscure concept called "vehicle miles traveled," which in plain language is how much you drive. How many miles do you drive?
And so, the report was like, "Look, we've got all these lofty goals about vehicle electrification." We have these things called sustainable community strategies that were the result of a law passed a dozen years ago by Darrell Steinberg called SB 375, the Sustainable Communities Strategy. And it all set these targets for reducing vehicle miles traveled. But what I didn't quite understand was like, well, I thought electric cars would take care of that. And for your listeners who are not from California, something about me that I'll share: I used to go to this festival called Burning Man. Some of you might have heard of it, but it's in the Nevada desert.
And in 2007, they actually called it sort of, there was a side thing within Burning Man called the Green Man — and you'll see where I'm going with this. And at the time, I was working in the solar industry doing like solar promoting solar panels and all the various accoutrements that go into the solar industry. But we managed to get this sort of area of Burning Man set aside for people to sort of demonstrate new clean technologies. They were really into that. So we're out in the desert and that was the year that this guy, who you may have heard of, named Elon Musk, drove the very first roadster out to the playa and showcased it to the burners.
And we all thought, "Oh my God, this guy's going to save the world." Well, obviously, yeah, sigh. What else? I mean, yes, giant, giant sigh. But so I had sort of drunk the Kool Aid. I was like, "This is amazing. We're going to have electric cars solve this problem of the fact that we have too much pollution from burning gasoline and so on and so forth." But then I saw this Melanie Curry story and it was like, "No, no, no, that's not the case at all. Inclusive of having the most aggressive electric vehicle rollout standards of any state in the country, we have to reduce how much people drive by 25% by the year 2030." And I was thinking, "Wait, wait, that's soon. That's not some distant future."
Because if you're in climate, you understand that everything we care about carbon are these long-term curves. Everybody's like, "Oh, look at the curve, look at the curve. Is it coming down, is it going up?" The same report from the California Air Resources Board showed that the vehicle miles travel curve was going up steeply. Not like kind of maybe it was going to go down and maybe it was feathering around with like, "Oh, we're going to solve the problem." But it was just on the steep upward curve. And the report concluded, "Yeah, we're going to miss the targets. Completely inclusive of full vehicle electrification."
And that was sort of like my wake-up call. Which is, "Oh, wait a second, so what do we do?" And they weren't equivocal about what do we do. They said, "Well, we have to change land use. We actually have to make it possible for people to have better choices about how much they drive." And it was a framing for me that I also hadn't thought about. It was like, "Oh, wait, yeah, are people choosing to drive as much as they do, or are they kind of being forced to by the built environment?"
And I am someone in my own personal life, I just hate driving. I think it's miserable. I hate sitting in traffic. I hate all the other people who are trying to muscle in front of you and all that stuff. So, I've made choices to avoid driving as best I can, but I'm very fortunate to have been able to make those choices. And when you look at what's happening not just in California, but all over the country, we're essentially building a residential environment that is locking in no choice but to drive. That's true all over the place, but it's also still true in California.
This is proving to be quite a catastrophe for us on several fronts, one of which is, of course, climate change. But it bleeds over into other issues, David, that you touched on at the opener related to the insurance crisis we're facing. The fact that we actually lost population for a couple of years, and it wasn't just because of the pandemic, it's because of housing costs. There are other implications for politics that get even darker and more dire, but I think we're going to try to keep this on the lighter side for now. So that was my introduction to this whole field of pretty established research around the relationship between land use, housing, and carbon emissions.
And it's massive. It's actually one of the largest of all of them. And it doesn't just stop with the driving. And I want to give you a chance to butt in, because I could keep going, but that was my introduction to it. And so, I just went down the rabbit hole of understanding, wow, full fleet electrification is a critical task and just completely insufficient to what we need to do to get carbon emissions going where they need to go.
David Roberts
I think a lot of people are still in the stage you were at in the beginning, which is like, "We can EV that," and they don't understand why. So, at the root of this, then, is the basic insight that there is simply no practicable way for us to electrify the auto fleet fast enough to meet our climate goals. That's the root of the climate angle on urbanism.
Matthew Lewis
That's right.
David Roberts
And we'll just say, you sort of alluded to this, but I'll just say as a framing device going forward. This is just, we're just talking about the climate part. Like, it's better economically for cities. I mean, it's better culturally, it's better politically to have people like — this is kind of what I wanted to say in the intro, but then I realized if I went down this road, I would just ramble on too long. But, like, cities are the greatest human invention. They are the greatest invention of human civilization. They produce wonders.
Everything, every technology, every culturally significant, everything you want to point to as human accomplishment comes out of cities, comes out of people living close together, you know, full stop. Like just seeing each other, running into each other. That, to me, is the root insight here to everything else sort of spills out from that. And greenhouse gases are just one part of that. But this is just — greenhouse gases are just one of many arguments.
Matthew Lewis
It wouldn't be a great podcast if we didn't make fun of economists a little bit.
David Roberts
Of course.
Matthew Lewis
And so, what an economist would call this in their cold, calculating verbiage, is an agglomeration.
David Roberts
Yeah, agglomeration. And it's magic. It produces wonders.
Matthew Lewis
Yeah, I think the thing that I really hope folks listening take away, especially if they're climate activists or funders, is in the list of things of major problems you need to solve for humanity, I would actually put this problem, this question of making cities affordable and accessible to the majority of humans, actually higher up than climate, both for the reason you cited, but also because from the typical person's experience, people are experiencing climate change, but most people aren't climate activists. Like, they're not looking at the world through the frame of "What am I doing today to improve the climate?"
Even if they say that they are, they usually aren't. And so, the reason I think it's so important to frame it that way is that cities are like a cheat code for solving climate change. And the benefits that people get are all these other things. It's sort of like, do you remember back in the day when all this efficiency stuff was first taking off? This is. I'm going to go back in Twitter history here a little bit to the early days of the online climate wars. And there were these debates about Jevons Paradox and "efficiency doesn't work."
And Amory Lovins was out there saying, "Oh, no, they don't want, they don't care about the electricity. They want a cold beer." Right? Like, that's still true today. People don't really care if their car is electric or gasoline. They want to get to work on time. People don't really care if their house is heated by a heat pump with solar panels or whatever. They just want it to be comfortable inside their house. And that actually extends to the urban experience, right? Like, people don't want to sit in traffic. People don't — I'll tell you, I think that there's a super cultural opportunity here.
And there's a guy in Portland who's really doing some incredible work on this with something called the "bike bus."
David Roberts
Oh yeah, I've seen them. They have those in Barcelona.
Matthew Lewis
Oh man, he's a hero. That guy's a climate hero. If the climate funders are going to fund anybody, it's in stuff like that. And the reason is, I see it as a cheat code is because if you talk to any parent with small children or just school-age children, the bane of their existence is the school drop-off line. Right. Why do we have a nation of school drop-off lines? I walked to school every day and I'm old, but I'm not that old.
David Roberts
But Matthew, people think they want that. Well, people don't want those things, but they think they are the price they have to pay to get the things they think they do want. And they think they want a yard. They think they want their own grill, their own pool, their own big TV, their own privacy. And I want to get into some of why they think that, but we're already behind schedule so we got to keep going. So, I'm going to do a little speed round here.
Matthew Lewis
Okay. Yeah.
David Roberts
The premise here is that people need to drive less. If you just follow that string, pull that string, everything else follows from it. You end up with the need for more compact communities to have more people living together, closer together. So, they need to drive less. There are a bunch of, I think, standard arguments you hear against that basic push. I want to just speed run through a couple of them, starting with the dumbest and building up to some that I think might actually have some merit. So, starting with the dumbest, what do you think about this worry about — because this is my experience in Seattle — this worry about urban trees and, more broadly, the character of the neighborhood?
What do you think about this idea that people moved somewhere that had a certain feel and they think that they are owed basically that feel staying the way it is when they bought it? Is that just "screw you, life is hard," or do you have something more to say about that?
Matthew Lewis
So, I'm glad you started with that because I actually think there's some merit to it, but not for the reasons the people making that argument think.
David Roberts
Okay, and remember, this is the speed round, so...
Matthew Lewis
I'm going to remember this is a speed round. We can't gloss over the incredible destruction of urban renewal, and this is literally razing cities to the ground to make freeways and suburbs. The reason I want to mention that is that part of what happened was people ended up in those car-dependent suburbs largely because there wasn't a second alternative. Something we know about human behavior is that once you've bought something, there's not just the sunk cost fallacy, but we're actually really resilient to change as a species. When you move somewhere, you start to think, "Well, this is just my preference," even if you didn't actually have a choice in the first place.
The task of leadership on climate is to recognize that a lot of the complaining you hear isn't people saying, "This is the only way possible for us to live." It's them saying, "I don't know another way, because there isn't a choice." The way we can prove this is true is by just using the classic, very simple, economic principle of prices. If you look at the price of housing in a walkable neighborhood in the United States, it will be 30 to 50% higher than a house in a car-dependent place.
And the reason is that a lot more people would prefer to have the house in a walkable neighborhood. They just don't have that choice.
David Roberts
Yes. Okay, second argument. The real problem is foreign investors buying up houses and apartments and leaving them vacant, thus driving prices higher. All we really need to do is ban foreign investment and then there's enough housing. We just need to put people in it.
Matthew Lewis
I mean — so as a bicycle investor, I personally have invested in a dozen bicycles specifically to prevent people from riding them so that I could make money on the bicycles later. So this is a great argument for me. I mean, it's just silly. The notion that someone buys a revenue-producing asset to keep it off the market is economic illiteracy. It just doesn't happen at any kind of scale that makes a difference. And foreign investment, first of all, is a good thing. I know that's not a very popular thing to say in the era of Trump, but one of the things that has made the US economy the most powerful economy on the planet is that we are a very attractive destination for investment and that actually has accrued to the benefit of most people by lowering costs, not just the cost of the goods they consume, including housing and everything else, but lowering the cost of capital.
And I think people are going to get a hard lesson in what happens when you reverse that, because we're kind of in that process right now. But the notion that there's foreign investors buying a lot of homes is not backed up by any of the data. Most homes in the United States are owned by their occupant. 67% of Americans own their homes and a significant portion of the rest are small mom-and-pop landlords who own, you know, two to three to four properties. So it's just really a non-issue.
David Roberts
How about this one? The supposed emission savings benefits of cities go away if you incorporate embodied emissions represented by all the stuff and services you have to import into the city to service city dwellers.
Matthew Lewis
I like this one because one of my favorite climate projects that I've ever come across is the CoolClimate Lab here at Berkeley that Chris Jones and the team put together several years ago. So, you can actually pull up on the CoolClimate Lab website, you can type in your zip code, and it will tell you what your emissions profile looks like. And it includes a lot of — not all embodied emissions, it's very hard to get 100% of embodied emissions — but it will tell you most of your embodied emissions. And what it shows is what you'd expect.
The resident of a central part of Washington D.C. has significantly lower carbon emissions than a resident of the suburbs of D.C., and it really is a very simple thing to break down. Most of that is car travel. But there's an important second piece that we didn't get into, and I just want to touch on this because there's really good research on this as well. Energy consumption in multifamily housing per square foot is significantly lower than energy consumption in a single unit house. And it's a very simple equation to figure out. When you put a 2,000 square foot flat on top of another 2,000 square foot flat, and then another one on top of that, you're basically capturing the energy. Most energy, of course, heat rises; it goes up through the roof.
But if there's another unit up there, then it goes into the other unit. What the researchers showed is that just doing that can reduce energy use by as much as 30%. Just the simple act of stacking. And it can be higher if you use passive house principles and do this stuff —
David Roberts
And you're just sharing, I mean, you're sharing infrastructure. It's pretty obvious.
Matthew Lewis
You also reduce embodied emissions because instead of having four boilers for the house, you have one larger boiler. I mean, there's all kinds of things you gain in economies of scale from doing multifamily.
David Roberts
I want to get back to this question, how far that goes, but one more, couple more arguments. What about the idea that the problem here is not too few houses in the hot cities where the jobs are? The problem is the jobs being concentrated in too few cities. And the answer here is to spread out the jobs so that you can have, instead of two or three giant congested metros, you have say 20 that all have kind of medium density jobs and medium density building and nice little suburbs. Everybody gets their suburb, everybody gets their jobs.
More cities, more cities get more of the pie. Why shouldn't we work toward that?
Matthew Lewis
I always find this one kind of curious for two reasons. One is the assumption that the people proposing it, especially if they own businesses, I sort of like, "Well, why didn't you do that?"
David Roberts
It's like when Obama, remember when Obama was talking about Mitch McConnell? "Why don't you, why don't you go hang out with Mitch McConnell?"
Matthew Lewis
"Why didn't you do that?" And the reason I start there is because there's a reason businesses locate in cities and —
David Roberts
It's agglomeration. We return to our theme.
Matthew Lewis
Yeah, return to our theme. But there's an important subcomponent of agglomeration, which is cities actually do this already. So, it doesn't matter if you go to St. Louis, Denver, San Francisco, Los Angeles, Chicago, or, you know, Cleveland. That's kind of already happening. The difference that's lost in that, "So why don't we just let people live in other cities?" is that you have specialization that happens. So, like you will attract a certain type of worker who specializes in a certain skill set based on what are the major industries in your city.
And you can't just suddenly decide, "Oh, we want all the tech workers to be in Omaha now because Omaha has lower cost housing," because all the tech workers actually live in the Bay Area and they're settled here. And it's by the same token, like you're not going to attract a ton of auto workers to Denver from Detroit because they're in Detroit. And there's this assumption like, "Oh, well, if we just decide to do this thing —" No, that's not how agglomeration works.
David Roberts
I never understand what the mechanism exactly is supposed to be.
Matthew Lewis
The mechanism is, "I feel like my neighborhood is full and why can't these people go somewhere else?" That's the mechanism. And I think the thing that's really fun for me is to try to keep a lightheartedness about it, the fun about NIMBYism is, man, do they come up with some creative ways to say, "I just don't like people and don't want them around me anymore."
David Roberts
Well, I try so hard. I mean, I actually, this is funny. I interviewed these two YIMBYs last week from New York City and Austin, and I was like, "Well, I consider myself an open-minded individual, you know, whatever. I want to know, like, what are the arguments against doing this stuff?" So, I went to AI, Matt, I went to Perplexity, the AI, and said, "List the top five arguments against urban density," and they suck. It's all the ones you're familiar with. It's the dumb stuff about trees, it's the dumb stuff about foreign ownership. It's the dumb stuff about "We're full."
Like, there are no good, empirically backed arguments hiding behind the bad arguments. It's bad arguments all the way down. Which goes to your point, which is all of these are reverse engineered. That's how they come across and that's what they are. They're reverse engineered from "I don't want anybody moving into my neighborhood."
Matthew Lewis
But, I think part of what we need to do as a movement is to unpack how people arrived at that place in the first place because it's not actually inherent to human behavior. You and I were talking before we got started, and I'm introverted, so I actually need alone time. But, I live in a major metropolitan area. I don't have a hard time finding the space I need to recharge my batteries. I think that this does come back to, we now have several generations with no experience of choice in where they live.
Like, they got pushed into a suburb because that's just where we build housing in the United States. And that's not unique to California. Like, that's a problem all over the country, that cities have been sort of run by NIMBYs for decades.
David Roberts
Yeah, but try telling people that their preferences have been —
Matthew Lewis
You can't say, you can't say that their preference is wrong. And this is why the work is really to break open the logjam against giving them a choice in the first place. I do want to say the one thing that we do come up with, and I think is something we could be better at as a movement, is just the word density is sort of dense. Like, it's so loaded of a phrase. Because in my vision of a "dense urban environment," I'm thinking like Paris or Milan, you know, I'm thinking Copenhagen, I'm thinking Oslo.
David Roberts
Let me get my question in here. This is my number one most important question. I think it's the one thing that I wrestle most with, and you're circling it now, so let me just ask it straight out, which is: I think there's a perception of the YIMBY movement, that they just want density uber alles, no matter what. And of course, in the real world, you're weighing density against some other values, and I can list a couple of those. And I'd like you to talk a little bit about how YIMBYs think about just raw density versus these other values.
So, one of the other values is just livability, right? And I think one of the main reasons there's so much opposition to density in the US is that most US city dwellers, their experience of density is that it's ugly and gross. And I bring this from Seattle, where — you know, not to go off on this whole rant again, because I think listeners are probably getting sick of hearing this rant — but like all the new population in Seattle is being herded into these ticky-tacky apartments alongside four and five-lane stroads. So, I mean, they're transit accessible, I guess in some definition, in that they're a couple of blocks away from a bus stop.
But, you would never walk anywhere. You can't walk anywhere. It's dangerous. There are people trying to parallel park in front of these things as other people are driving by at 40 miles an hour. There are kids running around coming home from school. It's like in Seattle, density where you find it is unpleasant, is generally unpleasant. I wouldn't want to live in most of what passes for density in Seattle. So, this is like one value you weigh against just the raw benefits of density. What about quality of density? Quality of livability, green space, walkability, public spaces? That's one thing.
Another one is, how do you weigh the merits of density versus the quality of the buildings themselves in terms of how tightly their envelope is built? Are they built to net zero standards, et cetera, et cetera? And then there's another value you might weigh against it: resilience. How much do we weigh just raw density versus density built specifically to be resilient against the effects of climate change? And then there's the justice thing too. So, on the one hand, you just have sort of like raw density. Get as many people as possible into as small a space as possible.
And then there's all these other things that you also value. But if you truly value them, you will, in practice, somewhat slow down and raise the price of density. If you do density well, you're going to do it a little more slowly and a little more expensively. So, how do you weigh the trade-off between just the need for density versus these other values that you might want to build in?
Matthew Lewis
There's a lot packed into that.
David Roberts
Yeah, that's 38 questions.
Matthew Lewis
Let me start at the top. So, the thing to remember is what YIMBYs are asking for — I mean, I think we use density as a shorthand for a whole bunch of things, and that's... and I kind of want to kill that because it gets such a charged reaction. But the truth of how housing works in practice is that a builder builds a house and if somebody wants to live in that house, they buy or they rent it. And what happens in these conversations about how many homes on a block or in a particular neighborhood or whatever is, cities decide that they're afraid of all the people living in the single unit neighborhoods who don't want any more housing anywhere near them.
And what that does is, they end up only allowing higher density zoning in a couple of specific neighborhoods. That has the effect of really distorting the entire market because you're constraining the place where all the people competing to build more homes can build. So, they're bidding up the value of the land where it's legal to build more homes. So, you're actually driving up the price by constraining the options. And then you end up with, what's the lowest cost building they can get done past their design review board and their historical architectural review board, and then the parking committee and the commercial committee and the parks and zone district committee.
It's like, it's like you just layer on all these costs and you end up with a building that's kind of like, "Well, it's not the most beautiful building we wanted to build, but it's the one we could get built." And I think that the principle here that YIMBYs are fighting for is that you really should have multifamily zoning in the entire city.
David Roberts
And this is, this is what they call gentle density. Right?
Matthew Lewis
But see, this is what happens if you do this citywide — again, a builder is a business person. I think this is something that people forget, but somebody who builds a house is actually in the business of providing a house for somebody who wants to live in it. They don't want to build a product that nobody wants to live in. Right. They also don't want to build a product that doesn't have nice amenities because they're competing against all the other builders. And so, you know, everybody wants to get more money for their home. But if you build enough of them, what you end up with, and I mean, across the city, is all kinds of different housing typologies.
And if you do it in the right way, you actually don't end up with that many high rises because you don't need them. Like, if you're doing fourplexes in four stories or six-story apartment buildings and they're legal kind of all over the place, you get like a few here and a few there and a few over there and a few over here, and you end up satisfying the need with a superior style of housing that not only fits into the neighborhood, but that can have all kinds of amenities that you just can't get in a high rise. And there's actually a guy in Seattle who, I don't know if you know who he is, Michael Eliason, who writes extensively about —
David Roberts
Oh yeah.
Matthew Lewis
So, you know Mike. So, he's got this whole thing and he's the guy. I mean, I learned so much reading his work about not just Passive House, but like —
David Roberts
His book grew out of a guest post on Volts.
Matthew Lewis
Oh, that's so cool. I love to hear that. But so, he's got this, you know, if you look at, for the listeners who want to check it out, the buildings that Mike is talking about are spectacular. Like, you have people beating down the door to live in these buildings.
David Roberts
Yeah, but this is the problem, like, no, Americans see those. We're back to our basic problem.
Matthew Lewis
They're illegal to build.
David Roberts
Exactly. So, this, we're in a — I don't even know what you call it, we're in a trap where no American consumer can see a better alternative and therefore, they don't think they want one.
Matthew Lewis
This is why the housing shortage and affordability crisis is a crisis of political leadership. And the reason is that no matter what you try to do, and I'm talking anything you want, a bike lane, somebody's gonna oppose it. You want to put in a preschool, somebody's gonna try to oppose it. You want to put in a park, somebody's gonna try to oppose it. You're gonna put in a new Indian restaurant, somebody's gonna try to oppose it. Like, that's the nature of cities. There's always some crank who thinks that time ended the day they moved into the neighborhood and that nothing should change after that.
And this is actually — I think that there's a deep philosophical question here, and I want to push back against the premise that I know you were sort of straw-manning it, so I appreciate that. But the very notion that anything should be subject to not just a pocket veto of a neighbor's, but that the neighbors can sincerely express a desire to have no change happen to them ever, as if that's a real thing that's possible on this planet. And I mean that sincerely, because I think part of what we're confronting here is a society that has become afraid of change.
And that's a much deeper problem than housing. Like, housing is an expression of that.
David Roberts
It's that lack of social trust, which infects everything.
Matthew Lewis
But there's an entire — I mean, I got to do this because this came up yesterday, and so it's so timely. But there's a Native American writer, Leslie Marmon Silko, who wrote a book in the late 70s, early 80s called Ceremony, and it's about this young Puebloan guy who's, like, lost on the reservation. He doesn't know which way his life is going. And he meets this older kind of witchcraft lady who's, like, mentoring him and teaching him stuff about how to make life work in the white, colonialist, modern world. And he's struggling and struggling, and she finally says a bunch of things to him about change.
And there's this quote in the book that I want everybody to fully internalize, which is, "She taught me this above all else: Things which don't shift and grow are dead things."
David Roberts
Yep.
Matthew Lewis
And this is where we are. We're at this place where we're so allergic to change and growth that it's killing us. And it's not just — we see this in housing, but it's not just in housing.
David Roberts
US political history is, like, around the 2010s, there's a big wave of, "Hey, maybe we should be less racist. Maybe we should be less misogynist." And the backlash against that is ongoing and may very well literally destroy the country. Like, people really hate change across the board. And I don't know how you solve that on any kind of mass level.
Matthew Lewis
Well, let me put it this way. You're not going to solve it at a planning and zoning commission hearing, but for some reason, we've made that the place where people get to express these fears. And I don't want to undersell the fact, especially for your listeners, that if you're afraid of what's happening nationally, if you're freaked out about national politics — I've been saying this on Facebook to anyone who would listen to me — go down to City Hall and get involved. Because you would be shocked by the number of very consequential decisions that are being made in your city that will have a much more immediate effect on your life than anything that's happening in Washington, D.C.
And in fact, I would argue that a lot of the explanation for what's happening in Washington, D.C., is the degree to which people have completely checked out of local politics and don't know why their city looks the way it does. Like, they don't know why there's so much homelessness. They don't know why housing is so unaffordable. They don't know why they're sitting in traffic for three hours a day.
David Roberts
People don't even know — I mean, this was one of the original insights of early feminists — it's not like they know it's a political issue and they don't know the right explanation. They don't even know it's an issue. Like, do you know what I mean?
Matthew Lewis
It's the water they're swimming in; it's the fish swimming in the water.
David Roberts
Women didn't think of doing more housework as a political issue as such until it was framed as such. Then, you see the world in a new way. A lot of people just don't think, "Why is the city this way? What could be different?" But this question about local control is interesting because, on the other hand, it seems like one of the principles of the YIMBY movement — I don't know if I elevate it to a principle, but it's one of the strategies — has been to try to push decision making, the locus of decision making, up out of the local area.
And in fact, as far as I can tell, the higher you get it, the better policy you get. Like, the really good policies we're seeing are coming out of the state level. How do you think about the tension between, in terms of democracy and in terms of outcomes, the sort of tension between local control and pushing it up?
Matthew Lewis
So, the initial tension really comes from the emergence of the YIMBY movement in the first place. It was a bunch of us, and I was sort of one of the early acolytes of, you know, showing up to these hearings — this is going back 10, 12 years — and I was like, "Oh my God, I'm outnumbered 40 to 1. But I'm going to be, I'll be the stink at the party because that's the fun of being a YIMBY," right? But part of what happened along the way, so my boss, Brian Hanlon, I met him at one of these planning and zoning commission hearings in Berkeley of all places.
And he went on to found California YIMBY because he kind of quickly unpacked, like, "This isn't going anywhere and it doesn't scale."
David Roberts
I look at the live tweets from those meetings. You don't have to go to many of them to see, to grok exactly what's going on.
Matthew Lewis
Exactly what's happening. So, he very smartly started a statewide policy organization focused on changing state housing law and then cramming down, making more homes legal in the cities that had basically made them illegal and now have like the worst homelessness crisis in the developed world. But I think there's this knock-on effect that has happened over time and I want to get to your question. It's not really an either-or. So yes, it's critical that states that have cities run by anti-housing factors or that have just unaffordable housing crises and burgeoning traffic and pollution and all those other problems, they do need to come to their cities and say, "You guys aren't solving this problem."
And by the way, states actually have a significant, urgent interest in solving these problems that go way beyond just climate change. Like, if you don't have affordable housing, your population starts to go down, and that's catastrophic.
David Roberts
Well, California's losing legislators. I mean, I keep pounding the table about this, literally, concretely losing the Democratic Party.
Matthew Lewis
We're probably going to lose four seats at the next apportionment. That's right. And it's insane. But that's the cost of a housing shortage. But what I wanted to get to was, you got to do the state work because then you can get all the cities at once and sort of say, "Hey guys, like no, no, we want our cities to be places where as many people who want to live there as possible can." So that's part one. But there's another part that we realized along the way and we've actually pulled this off in Berkeley of all places, which is that the people who were showing up to these meetings — and there's actually research on this which is kind of stunning — but the people who show up at meetings to fight against housing are not representative of even their own neighborhoods.
David Roberts
Oh, no, there's tons of research on this.
Matthew Lewis
They are just the people with the free time to go to all the meetings.
David Roberts
And who has free time? Older, wealthier, whiter.
Matthew Lewis
Yep, it's true. But in Berkeley, what happened was because we'd sort of built this movement, we actually ended up doing both. So there's a bunch of folks who were involved in sort of standing up state legislative capacity on housing that came from East Bay, Berkeley, Oakland, and San Francisco. But along the way, we identified all these neighbors who were like, "Yeah, I'm totally with you guys. I don't know why the city keeps blocking all this housing." And that, over time, led to us kind of winning almost all the seats on the Berkeley City Council.
And so, the reason I want to point that out is that the only reason you need states to intervene is because the cities have, like, very vocally said, "We don't care how expensive housing is. We don't care how many people are homeless. We don't care how much pollution this causes. We just like things the way they are."
David Roberts
Well, if you're like Marin, like, you're sitting pretty. What internal incentive do you have?
Matthew Lewis
Well, I'll tell you. I mean, actually, I'm glad you brought up Marin, because this comes back to our first principle: Marin is losing children, as in, their school districts are shrinking, and so they're actually starting to lose funding for education because the formulas work on how many pupils they have. But there's another even worse part of this from it — well, it's not worse, it's all bad in Marin. But 70% of the people who work in Marin County commute from another county. And so when you look at the carbon emissions impact of Marin's intransigence on housing, like, this is a county that sort of prides itself on being "We're all sustainable. And we're like —
David Roberts
In this house.
Matthew Lewis
"In this house, we like science, except not as long as it doesn't get too sciency." Like, what kind of science are we talking about here? But they're literally causing pollution all over the Bay Area because they don't allow more housing to happen. And they'll tell you, "Oh, no, but that's not true." And I've had people say to me, "Yeah, but Elon Musk is..." And I'm like, "Don't even say that. Don't, don't, don't finish that sentence. Please don't finish that sentence."
David Roberts
"He's building tunnels."
Matthew Lewis
Tunnels. Yeah.
David Roberts
I mean, this is a political dynamic I'm interested in, because one of the worries that I hear from a lot of people is if you go up to the state level, pass policy there, and then go back down and impose it on cities that don't want it, you are going to be pissing off and alienating Democratic voters, and you might drive them into the arms of the reactionaries, or you might just cause a backlash that causes them to elect a bunch of NIMBY Democrats. Or you might... You know what I mean? Like, by overriding local control, you risk political backlash.
Now, if what you're saying is true, if, like, local control is in some sense an illusion and the locals are actually with you on this, then there's less danger.
Matthew Lewis
There's actually a third phenomenon, and it's actually even cooler than all that. So, we talked earlier about how what people are afraid of is change, which is really being afraid of something that you haven't seen or don't know or don't understand. Right? What ends up happening is you build the apartment, and people are like, "Oh, that's not so bad."
David Roberts
No one ever goes backwards on these things.
Matthew Lewis
So, literally, the people who will go to the meeting and say, like, "This is going to destroy the entire community. It's going to kill thousands of children. All the dogs are going to run out of town. Like, this is the worst project we've ever seen." You literally build it, and the next day they're like, "Oh, yeah, that's not so bad." And so, this question of a backlash is sort of like it's a red herring because you don't end up actually... I mean, I think the thing that people need to understand is most of the housing that will ever be built in the United States has actually already been built.
Yeah, like, we need 5% more homes, you know, and it's kind of like... And guess what? You can actually put them... if you spread them out enough, you'll barely even be able to tell. And I actually do this thing in Berkeley when I get the chance with somebody where — I actually did this with a columnist for the Orange County Register a couple of years ago. We were walking through a neighborhood, and I was like, "Look, I'm just going to... we're going to walk through this neighborhood, and I want you to try to guess which house is an apartment building and which house is a single family."
And he couldn't guess. Like, he couldn't tell, "Oh, yeah, no, there's four units in that." Well, but it looks like, it looks like one house. They don't even know.
David Roberts
I'll concede this, but with a big "but". And this is one of the things about urban land use fights in general that baffle me, and I've raised it a bunch of times, which is: you're right that if they just build the apartment building, you won't get sustained backlash because the fears are mostly made up, they mostly don't play out, and apartments are fine and they're apartments all over the place. Everything's fine. And it's the same with bike lanes. It's the same with shutting a highway. Almost any YIMBY-esque urban reform, people never go backwards and want to get rid of it after it's there.
Once it's there, people are almost always like, "Oh, that? Well, that's fine." There's no backlash. But on the other hand, nor does the fight materially change the next time. In other words, no one learns from the fact that they built the apartment and it was fine. The opposition to the next apartment building is just as furious as the opposition to the last one.
Matthew Lewis
I would push back on that and I would give a few examples of why I don't think that's necessarily true. So, one is here in Berkeley, where the support for more housing grew as we densified the downtown. It went up. The same happened in Emeryville. But, Emeryville has always been very pro-housing. It's also a very small city. Sacramento has been crushing it on homebuilding for years and they keep doing more, they keep going further. Cambridge, Massachusetts, just this week legalized, I think, six-story buildings throughout the entire city. The entire city.
David Roberts
And is this changing minds or is this just bringing people who agree out of the woodwork and making them politically visible?
Matthew Lewis
I think it's a combination of various factors. I think it's that for sure. It's sort of bringing in the originally aligned people who were on the sidelines. I think there is the reality of an actual housing shortage and affordability crisis where you're building a political movement that's like, "No, this is affecting us and we have to solve it." I think there's a whole bunch of things that are coming into play here.
David Roberts
So there is momentum, you think there's momentum and there's change? People are changing their minds?
Matthew Lewis
There's momentum in the YIMBY movement. And I want to be, I think, something that really inspired me from the very early days of YIMBYism. Coming from climate activism, these were people who were showing up that did not have an institution.
David Roberts
Right.
Matthew Lewis
They did not have, there was no one — like, they were just like, "I'm going to go to this meeting because, damn it, this is insane that they're blocking a senior housing place like downtown on city-owned land." Right. And so it's organic. There are people like this all over the country and it's sort of like the bright side of the dark side of the problem. So the dark side is that we have a legitimate housing shortage and affordability crisis in most of our cities. The bright side is that the people who are experiencing that have agency and are showing up and using that agency. The YIMBY movement is channeling it into both better election results at the city level, but also state-level reforms that will accelerate progress on this.
David Roberts
And bipartisan state level.
Matthew Lewis
And bipartisan, yeah. That's both yours and my favorite word.
David Roberts
Well, this is like one area of policy where it legitimately is kind of a little bit bipartisan. A little bit. We haven't talked about the insurance thing yet. Obviously, I did a whole pod on this with Kate Gordon, which was great. People should listen to it.
Matthew Lewis
Oh yes, that's right, that's right. I remember I set you up with her.
David Roberts
So, we don't have to rehearse the whole insurance thing. I think people get that insurance rates are rising because of climate change. Let's just do the sort of summary. So, to the extent you can summarize, why does the insurance situation lend urgency to YIMBY reforms? What is the connection between climate, insurance, and YIMBY?
Matthew Lewis
The journalist Abrahm Lustgarten has a book out, about, I don't know, about two years now, and it's called "On the Move: The Overheating Earth and the Uprooting of America." In the book, he gets, it's a pretty straightforward climate change book, "Here are the impacts that are coming." It builds on things such as that I was involved with a dozen years ago with Kate, the Risky Business Project. And it essentially extrapolates, "Here are parts of the United States that it will be very difficult, if not impossible, to either build or maintain a home because of either fires, flooding, extreme heat, or extreme hurricanes."
And so, he extrapolates a little further and says, "There's going to be 10 to 15 million Americans who need to move in the next couple of decades." And when you think about that, like the next couple of decades is the life of most existing mortgages in the United States. So, these are homes that people are still making payments on. And when you unpack the fact that the mortgage can't be held if it's not insured, you realize the scale of the crisis we're looking at. And this is, you know, we are in the immediate throes of this in Los Angeles with the fires.
I don't think people in Los Angeles realize how bad it's going to get, even if the state does everything right, because Los Angeles is a city built to block housing. I mean, it is just a political body that has perfected the art of creating homelessness, displacement, and overcrowding. And it's what it is best at. And that's on top of the fact that a lot of these people were underinsured, which means they'll get a payout for the house they lost, but it will be nowhere near enough money to rebuild what they had. This is happening all over the country.
I mean, it's happened in New Orleans. It's happened in South Texas. It's happened in Florida. And so, the YIMBY case again, I mean, I ascribe to the housing theory of everything. So, like, if you ask me what a problem is, I'll explain to you how it's connected to housing. But the reason the climate movement needs to be freaked out about this is that 10 to 15 million people in a country of 380 million doesn't sound like a lot. You still got to figure out where they're going to go. And on top of that, I think something that gets lost in all this is that the trend of people moving from rural areas into cities is continuing, even if they're moving into the suburbs and exurbs of those cities.
Right? So, it's not like we've ended history and said, "Oh, no, now we can do remote work and everybody can just live wherever the heck they want." Like, that was a very weird development during COVID where people were like, "Oh, yeah, this means you don't have — " No, actually, you need teams. People work in teams. Like, agglomeration is real.
David Roberts
I just want to underline that agglomeration has not been cancelled.
Matthew Lewis
Agglomeration has not been cancelled. It has not been cancelled.
David Roberts
It's still very real.
Matthew Lewis
It's still very real. So, you have these two things piling up on each other. You have the existing housing shortage in cities that were sort of blocking agglomeration effects. And there's been economic analyses that suggest this is very expensive for the US economy.
David Roberts
It's a macroeconomic effect.
Matthew Lewis
It's like wiping out trillions of dollars in value. I mean, it's just insane. And my personal — I mean, I would be remiss if I didn't say this on your podcast: I hate that all this money goes to the car industry.
David Roberts
Yeah, I was going to say. I was going to say one of your core beliefs is that the car industry is way worse than most people appreciate. I wonder if you want to just say a few words.
Matthew Lewis
Way worse than most people appreciate.
David Roberts
I'll give you a little, like a one-minute rant, if you want to.
Matthew Lewis
So, I drive a car sometimes because, you know, we live in the United States and sometimes it's necessary and even nice to be able to drive somewhere. The problem is that we're talking about a $5 trillion annual expense to the American people. And if you dig up the statistics on what people report about how much they drive, do they like it? How do they feel about it? What does it do for human health? What about the health costs of all these crashes? The numbers are just, they're mind-blowing. And it's all a subsidy for the car industry.
And I'm sort of like, "Look, if somebody wants to drive around, I don't really care, but don't let them run me down on my street and don't make me subsidize their parking." Like, I'm fine if you want to drive everywhere you go, I don't actually have a problem with that. I just don't want to pay for it. And I think that there's... I get that people are like, "Well, but this is a proper role of government to sort of subsidize how people get around." And I'm like, "Yeah, on a bus!" But we're talking about a private industry.
Like, we're subsidizing a private industry, and it's larger than anything else we subsidize. I mean, people don't realize, like, it's trillions of dollars a year that we actually give to these.
David Roberts
And to get back to the point you made earlier: if something is ubiquitous long enough, people lose sight of the fact that it's a choice. I just saw, you know, Seattle has this program. I think a bunch of cities had this post-COVID program where you close off a few streets, make them pedestrian streets, right? Because people are stuck at home, et cetera, et cetera. And then some cities tried to make them permanent or semi-permanent.
Matthew Lewis
Yeah, yeah.
David Roberts
Seattle did it in its normal half-assed way. There are some streets still, but it's still temporary marking and no one cares. But I was looking at Nextdoor, you know, which I should never do. I was reading this guy on Nextdoor who basically said, "The arrogance of these people to cut off a street from its intended purpose so that a minority of people can have access to it." And I'm like, "Dude, what do you think the status quo is? What do you think the city has roped off that area for a minority of users its entire history? You're just mad that it's a different minority of users."
Matthew Lewis
I have to say, I think the most darkly funny thing that's happening right now in the country is that a car salesman, who built his company on Democratic electric car subsidies and sold most of his products to liberals and Democrats in blue cities, has gone on to completely dismantle the entire United States government that liberals were depending on to defend the country. And I was like, "Yeah, we paid for that."
David Roberts
As I've been watching it all, I've been like, "This is Matthew Lewis' worldview unfolding right in front of me. Like, you empower the car guys —"
Matthew Lewis
Look, man, I told you guys we should never trust a car salesman. Just don't. If you don't trust the car salesman, everything else is going to be fine. But nobody listens to me, man.
David Roberts
We are already over time. I knew we could talk about this forever, but I want to get to at least a little bit of the question of policy. So, there are a zillion things you could do in the name of driving less and having people live more closely together. We've had now, you know, the experiment run in several different places. We've had several different kinds of policies passed. Are we far enough along now that we can make a list of the most efficacious — like, if you want to get involved in this advocacy, you want to go to your city hall, what is in your back pocket? What is the sort of top three list of reforms that...?
Matthew Lewis
Let me do three to five. So, people give YIMBYs a lot of heck because they're like, "Oh, all you guys care about is zoning reform." And we do care about zoning. Zoning reform is important. It matters a lot. And it's still got to be number one, because a city's ability to restrict how many homes you can build on a piece of land is the gating factor for all the other things that you got to do. So, you've got to do zoning reform. And ideally, you do it citywide to prevent the unintended consequences of driving up costs in a few places where you allow multifamily, you actually make housing more expensive when you restrict it that way.
You also don't end up with the ability to create the kind of neighborhood connectivity that you want in a city. Like, you do want to have an area where you're not just walking on one block and then it's a car sewer on the next block. You want to connect these things, and so you want to do that citywide. But zoning alone is actually not sufficient. And there's two reasons: One is there's a bunch of other processes and barriers that cities have put in place that you also have to address.
David Roberts
When you say zoning, do you mainly mean no more single-family zoning? All lots have to accommodate two to three dwellings? I mean, there's a lot of different kinds of zoning reform.
Matthew Lewis
Yeah. Something that's really important to point out is that under all scenarios, anyone who wants to build a single-family home will still be allowed to do so.
David Roberts
I know this is the funny thing about people who yell. They're like, "Washington is shoving this one-size-fits-all solution on us." So again, what do you think the status quo is?
Matthew Lewis
We're not taking anyone's single-family home, and we're not going to prevent you from building a single-family home if that's the kind of home you want. There's no YIMBY alive who wants that. Because it just is irrelevant to the conversation. What we're saying is, "If you want to build two homes, you're allowed to. If you want to build four homes, you're allowed to. If you want to build six to 10 homes, you're allowed to. If you want to build one, that's also fine." And if you live in one right now and it's just a single-family home, that's completely fine. Like, good for you. You have a house to live in. We hope you live long and prosper in that house. But that is all a zoning question.
And in an ideal world, you would taper this — you don't really need to, but I think the politics will lean this way — you allow denser housing as you move closer to urban cores or importantly to transit centers, because that's where the value is. And this is actually a critical point: Cities and states have put billions of dollars into public transit systems of public money, but then they allow the single-family homeowners around those transit systems to dictate the land use. And it's like, "Guys, you didn't pay for that amenity."
David Roberts
This is Seattle, Matt. We spent whatever, like $5 billion on light rail.
Matthew Lewis
Oh, it's everywhere.
David Roberts
And basically accepted light rail that provides about 10% of the value it could have added if you just built around the station.
Matthew Lewis
It's a giant subsidy to those homeowners. And it's not quite similar in scale to what we do with cars, but it's a similar philosophy, which is, "We'll spend all this public subsidy, but only let some people actually have access to it." So, zoning is one. There's another one, and this gets into the details of what actually happens in a city planning department, which is the permitting, the entitling, and then the design review and related processes around the type of building you build, when it can get built, how long that process takes, etc. So, permit streamlining is really, really critical.
San Francisco is one of the worst offenders on permitting in California. It takes almost three years to get a permit to build a house in San Francisco. And it's just, if you think about it, people are like, "Oh, it's so expensive. Well, it's expensive because it takes three years." I mean, that process is — you're paying somebody to make it through the process over three years.
David Roberts
Yeah, and I don't know how common this is, but it took me a while to even wrap my head around this one. But, you know, Seattle has this design review board where you propose a building. You design the building, and then the building passes all the code. Like, it lives up to code. It does all the things that legally it's supposed to do. And then you take your legal building and run it in front of this review board that just says stuff like, "Eh, I don't like the shade of the bricks on that corner. Go fiddle with those bricks." And that alone, that right there, that's six months of reviews, redoing the design, coming back to the design review board. And that can go on for years. Who are these people?
Matthew Lewis
Coming back to something you said earlier, which is, why do we end up with these buildings that just aren't that attractive? Well, that's why. Because what you end up with is an architectural community that's like, "Well, we've run through these traps so many times. This is the only kind of building that will possibly pass design review." And it's stupid. It's like, if you go to a modern country like China, you're like, "They have all kinds of interesting architecture."
David Roberts
And it turns out, diversity is interesting to the human eye. Who knew?
Matthew Lewis
It's interesting. That's right. But design review is one of the worst, worst things that cities do for buildings, because the reality is that architects are freaking talented, man. And they don't want to build ugly buildings. They want to put a beautiful building on their resume. I promise you, they care about that. So let's let architects do what they do and make our cities more beautiful. But that requires changes to the permitting process, the review process. There's a bunch of stuff that's in the world of finance that gets very tricky. So one of the things that we realized was when you pay your fees, if you're forced to pay your fees when you pull the permit, as a builder, you're paying a very high interest rate on the fees before you've ever got a certificate of occupancy.
So, we wrote a law that says, actually, you pay your fees when you get your certificate of occupancy. And it saves so much money on some of these projects that they're actually able to add 1 to 2 to 4 to 5 units to the building. But that gets into the weeds of some of the changes. I think that the big one, and this is probably the biggest challenge which we face, is access to finance for subsidized affordable housing. And this is where there's this cleavage on the left for some reason that I still don't understand.
David Roberts
Yeah, I wanted to ask about this. This is the number one question that you saw on social media. The number one thing people ask.
Matthew Lewis
It's so weird, man.
David Roberts
People want housing to be a human right, and they want the whole thing to be publicly administered. And, I don't think people appreciate what that would involve, like what that would involve and the prospects of that actually happening.
Matthew Lewis
I get the sentiment of where it's coming from because there's a certain cohort of people who just think that the problem is actually capitalism. And capitalism has its warts. Let's be really clear. It's not a perfect system. But 90% of Americans live in market-rate housing. And part of the reason is that it can be built much faster and you get more variety and you get more choice and so you end up with a much more abundant housing ecosystem when you allow the market to build what it builds. People have made the mistake of thinking that what we currently live in is what the market can deliver.
And that's the problem because it's like, "Guys, the rulings are all in the books. In the 60s, 70s, and 80s, they made it illegal to build most types of housing. Like, this is not what the market delivered. This is what NIMBYs delivered."
David Roberts
This gets back to the confusion we were talking about earlier. Like people view this, they think, "Well, if this is what the market produced, this must be what people want."
Matthew Lewis
Yeah, that's right.
David Roberts
"This must be what I want."
Matthew Lewis
That's right. It's that famous meme of the guy, like with a butterfly, like, "Is this efficient?" No, it's not. But I think that the place where YIMBYs are in full alignment with some of the far-left folks who critique us is we actually do need a lot of subsidized housing. That is an unquestionable truth. And we need not just the housing, but we need the funding for the housing. And it is very hard in some states to get that funding passed; it requires a tax increase of some kind.
David Roberts
Well, also the place they look for that money is from developers. So then, they put a bunch of fees on development to raise money for that stuff. But then, that has the sort of knock-on effect of slowing down and making it more expensive.
Matthew Lewis
There's a whole rabbit hole we could go down around inclusionary zoning, which is just a total catastrophe, which is what you're describing.
David Roberts
Yeah, you don't want to make building slower in order to fund —
Matthew Lewis
"You don't tax the thing you want more of." That's right.
David Roberts
Well, there's a shorter way to put it.
Matthew Lewis
But the thing is, you know, there is a way to raise a lot of money for housing subsidies, and we need to be exploring more of those ways because the reality is that for somewhere between 5 and 10% of the population, they're never going to be able to afford market-rate rent. And I was having breakfast with a guy this morning — I just want to use an illustrative example because Oakland has built about 10,000 new market-rate apartments downtown in the last 10 years. Almost all of those apartments are affordable to the median income earner in Oakland.
So, 80 to 100% of AMI. So, when we talk about affordable housing, people get confused because, like, "Well, affordable to who?" And the YIMBY answer is affordable to most people. Like, if it's affordable to most people, then we've achieved our goal. What the far left has been saying is, "Yeah, but that's not good enough. We want it only to be affordable to people at the very bottom of the income stream." The problem is that that's such a distorted view of the populace because you're only talking about 5% of people. The whole middle of the country also needs housing.
Right. And so, if you build enough of it at that range, you actually can house them. And affordability, by the way, is defined by the Department of Housing and Urban Development as about 30% of your income. So, there's actually this is not like an unknown, it's like that's the number you're aiming for. But we still need billions of dollars in subsidies to provide housing for people at the bottom of the income scale. And California YIMBY has sponsored every measure we could find that would actually do that. We're totally on board with trying to get social housing reintroduced in the state of California because that's another way to approach having the state build homes for people who need them.
David Roberts
What's the model? Different countries, different cities do social housing in many different ways. A lot of people point to Vienna, but that's sort of like, you know, that's like 80% of that is subsidized or something like that. Do you have a...?
Matthew Lewis
Well, so subsidized and social are not the same thing, to be clear. Like, it's an ownership model. It's not just about the subsidy. So, you can have social housing that doesn't necessarily get a huge amount of government subsidy. It just is owned by a government or a quasi-government entity that can control rents and manages the structure.
So, I think people assume that this means that you can't have ownership in social housing. You actually can. The difference is that when you buy into a social housing project, your resale value is capped. Now, that also has the benefit of capping your cost. It goes both ways. Right. So, there's a lot of different ways to do this. I think that the challenge is that the history of social housing in the United States is not great, but it also ended so long ago. We're like generations beyond when that was going on. And I think that the zeitgeist has changed enough where it's worth taking a look at.
But, I think everybody needs to be really clear, like, there is almost no plausible future where 100% of the homes built in the United States are social housing. It's just beyond comprehension because you're talking trillions of dollars and the government will never have the money. The worst part of this is it's not just that the government will never have the money. It's that the market already has the money and wants to build the housing at a price that people can afford because those people are earning money and they want to pay for that housing. And so, this notion that we should stop a willing buyer and a willing seller from having a transaction because it hasn't achieved our ideological goals is, frankly, cruel. It's cruel.
David Roberts
Yeah, that was the point I wanted to make. Every bit of housing you build, it's not just that a developer made money, blah, blah, whatever, it's that a family got housing. You know what I mean? Like, every bit of housing you build relieves a little bit of suffering. It's not a neutral thing here. So, delaying it, waiting for an ideological revolution is not neutral. You're hurting a lot of people.
Matthew Lewis
And I think this gets at a sort of deeper philosophical question about both governance and society and economics, which is, should people be free to choose where they live and in what kind of structure they live, or should the government be deciding that for them? And I know that's a very oversimplified version of the conversation, but at the end of the day, we kind of fought these ideological battles 50, 75 years ago. And while I think there's a lot of things we need to improve about American capitalism and the social welfare state, and I'm very curious and interested in, like, universal basic income, especially as we have artificial intelligence coming on, I think it gets more salient.
But, we live in a country where people like to choose where they live. And the best way to satisfy that is by building a lot of housing and giving them a lot of options and making builders compete with their products, their house that they build for people who want to live in them. And this notion that there's some way for someone to insert themselves and say, "No, you're the wrong person to live in that house. This is the right person to live in this house. That's the wrong kind of house to build. This is the right kind of house to build."
That's kind of what we're grappling with here. Like, I actually. It's been really wild, David, because I didn't start as, you know, I was never like a "Rah, rah, freedom" kind of guy. Like, my background is much more on the left side of the spectrum, but housing kind of freedom-pilled me a little bit in a way that I didn't expect. Because, no, actually, people should be able to choose where they live. Like, that seems fundamental.
David Roberts
Yeah.
Matthew Lewis
And the fact that we're having to debate this on the left is disappointing. But I gotta say, like, I think for the most part, people are pretty aligned. I think these fights are much more online in general. There are big exceptions to that. Like, we definitely have a political problem in California with some of this, especially in cities like Los Angeles and San Francisco. But I think those are actually being slowly resolved through better engagement. Like, more people are getting involved in these questions.
David Roberts
Big victory in Cambridge mere days ago. Cambridge, which is right in the sort of, like, heart of old money NIMBY Northeast, you know, that's the heart of darkness there. And if they can do it. So, there's a million other things I could ask you, but we're way over time, and I want to touch on at least one thing before we're done. So, we'll make this the kind of the final topic, which is, I think it's fair to say, and I think you would agree, that the institutional climate movement and climate funders are not as hip to this aspect of the climate fight as they ought to be.
As a matter of fact, I just had an experience last week. I won't even say any of the names because it's all, none of it's real yet, but suffice it to say, a bunch of big names, wealthy people are getting together in conclaves trying to figure out our climate problems. You know, putting our climate problems into buckets, et cetera, putting the best people on the buckets. All this is the kind of thing that rich people do. You know, they build their foundations to do these kinds of things. And housing was nowhere, land use was nowhere. Even like most demand side stuff was kind of nowhere except for energy efficiency thought of in a very early 2000s way.
Like, I really don't think the institutional climate movement has picked up on this yet. So, what would you say? I mean, there are two ways you could go here. One is you could say, "Look, we are, we being YIMBY, are succeeding and building a coalition way better and faster than the climate movement is. So, don't put your chocolate in our peanut butter. We're doing fine. If anything, you'll just slow us down. If we get attached to you, we'll just get slowed down." The other way to look at it is there's a ton of money in that world that is alleged to be devoted to reducing greenhouse gas emissions.
And this is a big way to reduce greenhouse gas emissions. So, they ought to be, the climate movement ought to talk more about it, fund it more, et cetera. Where do you come down on that?
Matthew Lewis
It's been the biggest disappointment of this stage of my career, to be honest, because I came from climate philanthropy. I mean, this was my, this is what I was doing when I met you, was working in climate philanthropy. And I did what I had been trained to do, which was to follow the carbon, right? Follow the carbon and find out where it's coming from, figure out what the intervention is, and then stop it. And somewhere along the way, and there's some folks who validated this for me because I thought I was going crazy. Like, "Wait, why am I the only person who is making this connection?"
But there's a guy, Darryl Young, who used to be at the Summit Foundation and he's now at a different foundation in Cambridge of all places, I think. And Beth Osborne, who runs Transportation for America — I've got to put in a plug for some good organizations here. And I sat down with them and I was like, "Am I crazy?" They're like, "No, no, no, no, no. You've nailed it. This is completely correct." And what I had nailed, it was really just like observing and saying, like, "Hey, is it my imagination or is all the climate money on land use going to subsidize electric cars?"
And it was true. All the money in climate on land use is going to subsidize electric cars. I couldn't explain to you why that's the case.
David Roberts
I think one thing that's in a lot of people's heads, I wanted to raise this earlier, is the idea that even if you can't get all the way there with electric vehicles, the mechanisms by which you can push electric vehicles out are very clear. They're gaining momentum. You're getting a big chunk of climate gases for it. Whereas trying to do better urban land use is excruciatingly difficult. It's slow. It's a city by city by city by city battle. So even if you think both of them are important, you can just get a lot farther, a lot faster with EVs.
I think that is what is in the back of people's heads.
Matthew Lewis
I think that was the calculus, and I think there were a couple of major errors in the calculus that would have probably been difficult to see at the time, so in fairness to how it ended up that way. But one of the big errors was miscalculating the US auto industry. And this was something that I think some of the folks knew. I'm also not going to name any names, but there were people who were involved in this fight earlier who were like, "Yeah, they really don't want to do fuel economy." And that was clear for a long time.
They did not want to improve the fuel economy of the fleet. And they made that very clear by putting in the loophole, the SUV loophole, back in the 90s, and then deciding, "Oh, yeah, by the way, we just decided to stop making sedans." It's like, "Oh, so the kind of car that's regulated by fuel economy, you just decided to stop making those."
David Roberts
And now, here come the people on Twitter telling me, "Oh, Americans just inherently love giant trucks with high grates."
Matthew Lewis
It's so crazy because I was alive to say, "No, actually, that's not what happened." You know, like, you're not going to gaslight me into thinking that that's true. So, there was just a miscalculation about the US auto industry and its DNA and its culture and its willingness to actually pivot to cleaner cars. Not just culturally, there's this whole other aspect of it which is financial, which is a car factory is expensive to build. So, once you've built 50 F150 truck manufacturing factories, you're going to make as many of those damn trucks as you can because you're trying to capitalize on the investment.
And so, we're now living in the place where, like still today, most of the cars sold in the United States are gas-guzzling SUVs. The number one car sold in the United States is a Ford F150. Half of the top 10 cars are like these gas-guzzling trucks and SUVs. That's today, that's in 2025. That was one thing that I think they miscalculated on was how, how would they be able to pressure the US auto industry on this?
David Roberts
They underestimated the perfidy of the car companies.
Matthew Lewis
They underestimated how, frankly, I'm sorry, but how much these people do not care about human life and safety. And I extend that to the vehicles themselves where they're, you know, they've now designed these grills of these trucks. It's almost like, I mean, I'm sure this isn't what they set out to do, but if you wanted to kill children —
David Roberts
They're kid killers.
Matthew Lewis
that's how you would design a car.
David Roberts
And they regularly kill kids.
Matthew Lewis
And they regularly kill kids. So, "Oh yeah, they're going to kill kids, but they're also going to act on climate change." Like, give me a break. It doesn't add up. But the other thing where I think they missed and where they were wrong was on the speed question. So, I actually heard this a lot was, "Oh yeah, it's faster to switch out cars." Let's say you had the perfect car industry and you had a regular pace of fleet turnover. And you know Costa Samaras?
David Roberts
He's been on the pod.
Matthew Lewis
Oh, great. So, he actually did a calculation about fleet turnover and found that, under the best case scenario, the deadline — this was great, this blew my mind, this was a few years ago — he said under the best case scenario, the deadline for the United States to have 100% of new car sales be electric, was 2020.
David Roberts
And this is with normal turnover. We should acknowledge, if we got religion, we could theoretically buy out people's remaining auto life, like if we really wanted to.
Matthew Lewis
So, here's the thing. It's not just that, but like if you decided you were going to spend three and a half trillion dollars to retire the existing fleet, that same $3.5 trillion would buy you almost all of the housing plus high-speed rail that you need to actually wipe carbon off the map. And this is where things got weird on the climate side. Here's the reason the mayor of Paris has taken that city — it was a motorhead city, I don't know how many people went to Paris 25 years ago, but it was choked with diesel and it was just a traffic nightmare — she has completely turned that city around much faster than the pace of electric vehicle sales, even in France.
So, this question about land use, I agree, it's hard. And I was actually in those conversations with people like, "Yeah, it's too granular, you've got to go to City Hall." And I was like, "Okay." Before I was a YIMBY, I kind of understood that. What was missing though was they just sort of assumed that because city halls are run by NIMBYs, it will take too long. And they didn't actually anticipate either the realization that you can get much further, much faster with state action, but also that people actually want these things.
There's consumer demand for walkable neighborhoods; there's consumer demand for letting their kids just walk to school. And they just kind of erased all of that from their minds as like, "Oh, no, we're past that era, we're never going to get there again." And what we've shown is actually, it is actually faster to change land use when you set out to do that than to turn over the fleet.
David Roberts
Well, yes, but how fast is it going to be to make every US city into a Paris, though? I mean, that's the real, like, if they all had the willingness, then they could do it very fast. Right, but that's not the source of the slowness.
Matthew Lewis
The thing that makes this conversation — you know, it's all speculation. There's no way to sort of try the counterfactual. But imagine if the climate movement broadly and climate funders back in 2005 said, "We're going to do both hands, we're going to max out on electric vehicles and we're going to solve this land use problem in cities." I think after 20 years of trying, we would be so much further along than we are now. And it was just a giant missed opportunity from thinking — and I was there, so I want to take my little, tiny slice of the blame.
I was at Burning Man when Elon Musk showed up with that roadster, and I was like, "Oh, my God, this guy's going to solve all the problems, right?" There just wasn't a recognition that, like, yeah, you need all the electric cars you can build and you need to deploy them as quickly as you can. And if you fix cities along the way, you actually achieve the goal. Like, you can actually get there if you do both. But for whatever reason, the decision was made to only do one of them. And I understand that it seemed impossible back then, but also, they didn't try.
Like, it wasn't, "Oh, we tried all these different things and it didn't work." It was, "Oh, Elon Musk went to Burning Man with a roadster and here we are."
David Roberts
Well, I mean, I don't think it's a coincidence that the vast, vast, vast majority of America's ruling class lives in big suburban houses and drives everywhere they go, right? Like, it's just not in their personal world. Even city leaders, I know even the leaders of dense cities live in —
Matthew Lewis
I think the thing, the most transformative thing that most people can do that they literally have access to, regardless of what happens with the rest of the country, especially if you live in a city or even just a metropolitan area, and you have, you know, your votes or your local folks vote for people who ride transit. And the reason that's so important, it doesn't matter where they are on the economic spectrum, because I ride BART and Muni, and I promise you, there's a lot of very wealthy people who are riding BART and Muni because it's the Bay Area, right? There's money there. So it's not about an income spectrum.
But people who ride transit just inherently get the connection between housing and mobility and agglomeration, especially if they're running for office. Like, they're just going to be those kinds of people. And on top of that, if they don't know climate already, they get it in an instant. Usually, they tend to know climate, in my experience. But so that's my, sort of my parting message to folks, is that if you really want to transform your city to make it more climate resilient, reduce pollution, all that sort of stuff, really pay attention to your local elections and just focus on people whose platform is, "I want more housing, I want more investments in transit, I want more walkability, and yes, I want to create some public charging for electric cars." But if all they're doing is public charging for electric cars, "Oh, yeah, that's all we got to do."
Then, your spidey sense should be going off because that person's not serious about solving urban problems.
David Roberts
All right, well, you know, there's a million —
Matthew Lewis
I know. We could go on, this is great.
David Roberts
A million more things to touch on, but we'll have to leave it there. We've busted my time limit.
Matthew Lewis
I know, I know.
David Roberts
All right, man. Thanks for coming on.
Matthew Lewis
I'm super psyched we finally got to do this, David.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this episode, I'm joined by Albert Gore to discuss the fate of the electric-vehicle tax credits under the Trump administration. Gore explains how the consumer credit provides a demand-side signal to complement the supply-side manufacturing credits, and why eliminating either would primarily benefit Chinese manufacturers.
(PDF transcript)
(Active transcript)
David Roberts
Okay. Hello, everyone. This is Volts for March 5, 2025, "The fate of the EV tax credits." I'm your host, David Roberts. The future of the Biden administration's climate agenda has been the subject of fevered speculation since it became clear that Trump would be president. Hardcore MAGA ideologues (and Elon Musk for some reason) want to get rid of all of it, while many Republicans in Congress would prefer a more surgical approach, i.e., they're loath to give up money that's going to their states.
Then again, Congress seems to have been reduced to a peripheral and meaningless onlooker in American public life, so maybe what they think doesn't matter! Maybe DOGE will just press a button and the tax credits will vanish.
Like everything these days, it's extremely difficult to predict. Instead of getting overwhelmed by pondering the fate of the entire agenda, today, I'm just going to focus on EVs, or more specifically, the tax credits that support EVs.
On one hand, the manufacturing tax credits have helped build a ton of EV battery and manufacturing capacity in red states. On the other hand, it has practically become conventional wisdom that the consumer EV tax credit is doomed. My guest today disagrees with that prediction.
He certainly disagrees with the prescription. Albert Gore leads the Zero Emission Transportation Association, a trade group representing companies up and down the EV supply chain. Naturally, he has many thoughts on these matters. We are going to talk all about the credits — their history, the effects they've had so far, the amount of bipartisan support they maintain, and what might become of them in the coming years. So, let's get into it.
With no further ado, Albert Gore, welcome to Volts. Thank you so much for coming.
Albert Gore III
Well, thank you so much for having me.
David Roberts
So, how to approach this? We should just say up front — I mean, I feel like I have to say this now for every pod forever, but like, events are moving quickly, lots of things are happening. Like, for all we know, by the time we're done with this conversation, major government departments could have vanished. So, all of which is to say we're recording this on February 21st. So, you know, let's hope it holds up for two weeks until I can get it out. But just to start with, then, Albert, give me a taxonomy of the tax credits involved here.
Everybody, I think, when they hear "EV support," they hear "EV subsidy," they hear "EV tax credit," they just think mainly of the $7,500 consumer tax credit that you get when you purchase an eligible EV. But there are a bunch; there's kind of a cluster of tax credits. So, can we just, like, figure out what we're talking about here?
Albert Gore III
Yes, always good to name the credits that we're talking about, talk about what they do, and just at the outset, I want to say, I think your summary in broad strokes is representative of a view that a lot of folks have. I would say from my perspective and in my experience, there are many, many caveats to that and a lot of reasons to be hopeful about the reasonableness on the Hill among some folks who, you know, when they're talking about national politics, especially so close to the election, are using us as talking points, but really are trying to be productive in the conversations that we and others are having.
David Roberts
Sure, we're going to get into all that.
Albert Gore III
Yeah, we'll get into it. But to go in order of, I think, large to small, the 45X production tax credit is designed to bring advanced manufacturing investment into the United States. It's not specific to EVs or batteries. It also includes solar and wind energy components.
David Roberts
Am I correct that the bulk of the result thus far is EV and battery manufacturing capacity? Like, is that the bulk of sort of what's been announced in the wake of 45X or am I making that up?
Albert Gore III
That's correct. And I think part of that was an existing wave of investment, a smaller wave spurred on by real movement on EV deployment in the United States between 2015 or so and 2020. So, coinciding with the launch of the Model 3, the Model Y, I mean, these were produced and sold in volumes that were really kind of game-changing, not just for Tesla, but also for the other companies that were seeking to compete and kind of had one foot in, one foot out, but were saying, "Okay, we need to dramatically increase our production capacity. We've now seen proven demand for EVs beyond early adopters and folks who are trying to reduce their carbon footprint."
David Roberts
So, 45X is the big one.
Albert Gore III
It's the big one. And for batteries in particular, I think it incentivized a number of companies, LG, Samsung, Panasonic, SK, to form joint ventures with automakers or form their own battery manufacturing facilities and increase the size of the investment and the speed with which they were seeking to bring these projects online. Because 45X, the value of it, is really targeted at closing the gap between the cost to manufacture a battery in the United States versus manufacturing a battery in China, and the cost to produce things in China doesn't always reflect the price of the products when they enter the market.
A lot of times, they're sold below the cost to produce. So, it's a very difficult challenge. But nonetheless, $35 a kilowatt hour really goes a long way towards closing that gap. And also, for folks who have been tracking this — I'm sure you have for a long time — getting closer to price parity for a comparable EV on a price per kilowatt hour basis for, you know, over 300 miles of range with a comparable ICE vehicle.
So, a big deal and incented new investments in the United States, but also enhanced and pulled forward and made bigger a lot of investments that were sort of already in the planning stage. So, a huge deal. And you mentioned they are disproportionately located in red districts. And that's true. I tend to think of it, you know, more in terms of they're disproportionately located in places that have a really long history of manufacturing and a lot of blue-collar families who are excited about that investment, regardless of where they sit on the district line, excited about the economic opportunity created by a big new, you know, seven and a half billion dollar joint venture battery and EV plant.
David Roberts
Well, I mean, not to rehearse all this history again, but that was sort of by design. I mean, it's not a coincidence that those places are red. You know, it's almost like describing the same thing in different terms. Like these are places that used to have manufacturing. They're hollowed out, hollowed out by globalization, etcetera, etcetera. Thus the sort of reactionary turn in American politics. And the whole kind of theory of the case was you got to revive those areas, flood investment into those areas. And the idea is that it would change politics, which like maybe someday, maybe someday it will. But it doesn't seem to.
Albert Gore III
A 100%. The actual tax credit itself has no bearing on where a company locates other than in the United States. You know, states like Tennessee, Georgia, Kentucky, Ohio, Michigan, the Carolinas, they have really amazing economic development teams that go around the world to pitch specific sites in their states. "This is a mega site for a battery facility, a vehicle assembly plant." And so it enhances that proposition. There are some areas in the, particularly in the battery and the mineral supply chain and you know, everything adjacent to EV assembly, where there is a bit of a zero-sum game between resources and talent and IP and investment going into the United States or within the community of FTA countries that, the US sphere of influence, or going to China or to countries that are being invested in or being served by China with their growing demand for batteries and EVs.
It's a bit of an oversimplification, but not really, because there are some statistics that are pretty staggering that I think we can highlight later. But the degree to which the Chinese auto market has really exploded over the last 25 years, it's gone from 0% to 40% of global automotive sales. And a lot of those are EVs, their capacity to manufacture batteries. You know, we saw this in the solar industry too 15 years ago, and to the detriment of some domestic solar manufacturers flooding the market with cheap solar panels. It was not great for investing in that type of manufacturing in the United States, but it did seed the world with a ton of low-cost panels.
So, what we're doing with EVs now is very, very different than that. And by the way, there is now a really thriving domestic American solar manufacturing industry.
David Roberts
I mean, the whole proposition was, "Let's not let the same thing happen to EVs that happened with solar panels." I mean, that was kind of like from the clean energy people. That was sort of the premise of the whole thing. Like, we don't want to just enjoy the cheap outcomes, we want to be involved. Okay, so 45X is a big one, but let's get through them.
Albert Gore III
Yeah, we'll go on. So the next biggest is the 30D consumer tax credit. So the new clean vehicle tax credit. So this is the one that is $7,500, but with a bunch of caveats. And you know, you mentioned the discussion about, you know, how to handle this relative to solar. So the original 30D credit or the previous version of it had a 200,000 unit per manufacturer cap.
David Roberts
Yeah, can we talk about the history real quick? Because this, this one in some form, has been around for several years. Like, what's the origin? Do you know where it first cropped up?
Albert Gore III
I believe it came about after the financial crisis. You know, I kind of want to double-check that. But you know, back before really anybody was making EVs in the United States or selling EVs in the United States. But you know, go back 15 years. Yeah, the Nissan Leaf, you had the Chevy Volt and then the Bolt. And you know, some of those vehicles were sort of designed to capture the credit, you know, in terms of their. Because it was tied to battery capacity. I won't malign the Leaf in that way. By the way, I'm always happy to see those on the road.
But really, Tesla in 2012, with the Model S, started to produce higher volumes.
David Roberts
Sure. Well, Tesla famously, that tax credit, i t was the bulk of their income for the first many years of Tesla's life.
Albert Gore III
Well, there were the regulatory credits as well from the performance.
David Roberts
Oh, right, yes, right. My mistake.
Albert Gore III
Which would fit that description better.
David Roberts
Yes.
Albert Gore III
But you know, but those, you know, that's an important policy. It did work as intended to — you know, people are skeptical of those types of market-based mechanisms, but in general they work to a certain extent.
David Roberts
Yeah. I want to discuss the caveats later.
Albert Gore III
Yeah, we can get into that.
David Roberts
But, let's get through the credits. There's one on leasing. Is that separate...?
Albert Gore III
Yeah. So, the 45W commercial clean vehicle credit is similar to 30D in terms of the value for light-duty vehicles at $7,500. It also, I mean, it's intended to apply to any commercial vehicle. So all, all the way from ride-sharing fleets and rental car fleets up to medium-duty, last-mile delivery, and Class 8. They're really effective. It does not contain the sourcing requirements, the mineral content, the foreign entity of concern. I mean, 30D has income requirements, MSRP caps, all kinds of sourcing — it's the most stringent credit on like five different. The most stringent and the most vulnerable for some reason.
David Roberts
But it's the one that has "Manchin was here" spray-painted on it.
Albert Gore III
Correct. And it's essentially doing what he wanted it to do.
David Roberts
But wait, so the commercial credit has none of those, it's just any, any EV?
Albert Gore III
Correct. And it really is intended to incentivize commercial entities putting vehicles to commercial use.
David Roberts
Right, fleets?
Albert Gore III
To buy EVs, yeah. A lot of fleets are light-duty vehicles, but also for these delivery vans, last-mile delivery, and freight. I mean, a huge deal. It became the subject of really intense criticism because the way the law is written for a consumer who leases a vehicle, the taxpayer who buys the vehicle from the OEM is the leasing trust and they thus are eligible for the credit because they are putting the vehicle to commercial use by leasing it out to customers.
David Roberts
Oh, is that where the leasing thing comes from? It's in the commercial vehicle credit.
Albert Gore III
Correct.
David Roberts
This is why everybody's leasing vehicles now instead of buying them, because you can still get the credit through a lease that you can't get by buying it.
Albert Gore III
That's right. If you don't qualify for 30D, either as a taxpayer or because the vehicle isn't totally compliant, then you can lease. So, I think that's pretty vulnerable. Senator Manchin certainly didn't like that interpretation.
David Roberts
Yeah, can we — I don't want to get into a rabbit hole on this, but quickly, like Manchin says, this was a deliberate attempt to get around the restrictions in the consumer tax credit. Do you think it was? Like, do you think that the people who designed this knew what they were doing and knew that leasing would be this kind of loophole that would let a lot of cars through?
Albert Gore III
What I'll say is, if you ask, you know, the authors of the bill, they will say it's being implemented as intended, as drafted. I also think that the bill text, you know, now law text, doesn't really allow for any other interpretation. If I lease a car, I don't own it.
David Roberts
Right.
Albert Gore III
The owner is the commercial entity that is leasing it to me, which is the commercial use.
David Roberts
So, you've got the manufacturing, consumer purchase, commercial purchase. And is there one related to used EVs? Is that separate?
Albert Gore III
That is separate. Yeah, that's the 25E credit. And that has even lower income requirements than 30D and a much lower MSRP cap. I think the MSRP is 25k on that one. So, it's a great credit for expanding access and particularly with a lot of used EVs coming into the marketplace. And really, it is only available to people who, I think, earn under 75k a year in income. They're still going to be vulnerable. But, you know, that's what that credit is. It can only be taken once per vehicle.
David Roberts
Oh, interesting.
Albert Gore III
But it's a good credit.
David Roberts
Yeah. Am I hallucinating, or is there one on chargers, specifically on EV chargers?
Albert Gore III
Yeah, that's the Alternative Fuel Vehicle Refueling Property Credit. Just call it the charging credit. It's 30C, also a really important credit for lowering the upfront costs to install chargers. The stakeholders for that credit are, you know, pretty widespread in terms of municipalities and places that really are excited to get new charging installed, particularly charging that isn't going to be really highly utilized right away. The most difficult economic case is accounting for the time between when you install a charger, particularly like a fast charger, and when you reach high enough utilization that you're recovering all of your fixed costs.
David Roberts
Yeah, I mean, that's a dilemma facing every single charger. Right? I mean, sort of the entire industry is kind of in that weird lacuna state right now.
Albert Gore III
That's right. Because, you know, the utility needs to be able to deliver 150 or 250 or 350 kilowatts to each of those posts whenever it's demanded. So there's a cost to that. And if it's not being utilized, you're not really absorbing any of that cost. So, you can build a bunch of Level 2 chargers and then leave them sitting there, and it's not going to cost you a whole lot. But Level 3 chargers need to be utilized. And so, taking a little bit out of the upfront costs goes a long way to get more of those chargers in the ground in places where they're needed.
David Roberts
All right, so we got manufacturing, consumer purchase, commercial purchase, used EVs, and chargers. That's five. Is that all the EV-related tax credits to your knowledge?
Albert Gore III
Almost. There's one more that is less well-known, less publicized, but the Qualifying Advanced Energy Project Credit 48C is an investment tax credit. And it is an important part of our industry. I don't think it's on the chopping block in the same way that some of the others are because, again, it's an investment tax credit. But we'll add that to the list. These are the credits we really work on.
David Roberts
Okay, so let's then talk about which out of those, you know, there's so much chaos going on, there's so many people saying things. So let's try to just kind of like reveal —
Albert Gore III
That's an understatement.
David Roberts
What are the concrete threats here? Like, which ones of these has someone in a specific position of power said something specific about, like, which ones of these are you worried about politically? All of them? Are there one or two? Or do we even know enough to know that much yet? Sort of like, what's your threat assessment here?
Albert Gore III
Yeah, well, it would be naive to say that I'm not worried about any one particular credit because I think each of these credits has merits and they make a lot of sense. I think I've recited your summary of the history of policy from the BTU tax to the cap trade to the carbon tax. And here's why the IRA exists. I loved it. Actually, there was, I got to tell you, there's one time I was, I was like, mid-spiel and somebody goes, "I think I listened to this dude, Roberts," and I was like, "Oh man, you got me."
I was like, "Yep, nope, that's the one."
David Roberts
Yeah, all the logic, all the policy logic for why IRA was a desirable thing. I mean, despite the chaos and insanity of our times, all that logic is still there. It all still makes sense, you know what I mean? Like it's all still chugging along in the background.
Albert Gore III
Yeah, absolutely. I mean, cap and trade was designed around reducing emissions, and Build Back Better was designed around getting as many EVs on the road as possible. I think industrial policy — which I reframe as federal investments in the industrial sector — there's broad agreement that the United States as a country needs to think about big issues of national importance, such as looking at what's happening in the world. Can the United States remain not just a global competitor, but a global leader in manufacturing of advanced technology? And we certainly can from an R&D perspective, from, you know, an entrepreneurial perspective. The United States has a lot going for it.
We have great capital markets, we have a great education system. A lot of people come here to start companies and succeed. So, federal investments in things like battery manufacturing, mineral production, refining, battery component manufacturing, and vehicle manufacturing, those are non-controversial.
David Roberts
Yeah, no one's arguing. Yeah, no one's arguing against any of this currently based on the old kind of conservatism, the old small government libertarian conservatism. Like, I don't really hear those arguments against IRA insofar as you hear any arguments against it.
Albert Gore III
I think the libertarian perspective on industrial policy is complicated, I think. And there are a lot of really smart folks that I like to read, like some folks at Cato, that have, I think, good criticisms of how to make these things better, more effective, you know, so it's not a pure conservative idea to do this. But it is a sort of — it's an approach that I think works when you're connecting it to things of national importance that people really do agree about. And also, you can connect it down to the local level, whether it's in a red district or a blue district.
Towns like Savannah, I was in Savannah this week, or, you know, the area around Phoenix, Memphis, or Chattanooga. These are places that need investment, they have the workforce, and it's a worthy federal investment to say, "We're going to, as a country, decide to make this sector as competitive as possible with our chief global competitor in this arena," which is not operating on a market-based system, is setting global commodity prices in the global commodity market, but oftentimes below the cost to produce the commodities. And that significantly negatively impacts the ability to finance projects outside of China's sphere of influence. So there's broad agreement about the need to do something about that.
To get back to 30D really quickly — I don't know if I even mentioned 30D at the start of this, but you asked what's the most controversial credit.
David Roberts
30D is the consumer one?
Albert Gore III
Yes.
David Roberts
And as far as I know, is that the only one that Trump and his people have specifically called out as targeting, or have they explicitly said anything about the others? Like, do we know, do we have a handle on which of all these credits we discussed they're actually going after?
Albert Gore III
Well, I would say that from the administration and even going back to the campaign, it wasn't really that specific on tax credits. Things were generally sort of lumped together, and the vast majority of, I think, the political weight associated with EVs was the regulation. So the new light-duty emission standards, the heavy-duty standards, the CAFE rule, and the ACC2 waiver, or in general, California's waiver to set its own air quality standards. So the rulemaking period for the EPA rule on light-duty was long. It's like 11 months between 2023 and early 2024. And it was just — it created a real intense battleground around, you know, legacy OEMs, EV OEMs, oil and gas industry. And it was right as this, right as the presidential campaign was taking off. So there hasn't been like a zeroing in on any one credit.
David Roberts
Although I have heard Mike Johnson say these are — I mean, he is lumping them all together — but he's saying these are wasteful. You know, these wasteful clean energy credits are just wasting money and raising costs. So he at least is saying things that make it sound like he wants to go after all of them.
Albert Gore III
For sure. At the Congressional level, there's more specificity around.
David Roberts
Yeah. This brings me to my next question, which I think is particularly salient these days, which is, how would you revoke these credits if you wanted to? Am I right in saying that in a sane, normal, constitutional world, Congress has to do this right? Congress has to pass a new law saying, "The credits we passed, we're unpassing them." That is, as far as we know, what has to happen to get rid of these. Is that right? Like, Trump can't just kill them. I mean, legally, he's killing lots of stuff illegally, but he can't legally just kill them, is that right?
Albert Gore III
Well, it depends on the credit. But we could get in detail on what the executive branch could do to effectively neuter the 30D or the 45W credit.
David Roberts
Oh, even if it's on the books, you think they can still screw it up?
Albert Gore III
I think 45W would be a bit harder because of the bill texts. But 30D — so the new clean vehicle credit, the $7,500 credit — went through a very long implementation process, and it was actually incredibly well done, I think, and very stringent. But a lot of interpretation between, you know, Treasury and DOE with regard to how do you define eligible, you know, critical minerals or qualifying critical minerals. And where do you draw the line in a process that starts at, you know, rocks coming out of the ground, getting sort of processed into powder and going through a lot of different chemical processes.
And at some point, you know, there's a slurry that's sprayed onto a wafer, and the wafers get stacked, and then it, you know, eventually becomes a battery cell. But the way the law was written, it had battery components and critical minerals, which are subject to different requirements. And there was a new category of constituent materials. It's not in the law, but it made sense for the implementation. So there's a way for the administration to go in and mess around with that stuff through rulemaking. But I don't think that that is likely. I mean, for one reason, I think we're looking right now at sort of an unfolding jurisdictional fight between the House and the Senate as to who is going to, you know, have the pen to move these priorities forward.
So, you have, you know, Senate budget resolution, House budget resolution. Tax policy has to originate in the House in Ways and Means and the Ways and Means Committee and several other committees. Going back to the middle of last year, they were already soliciting input and trying to draft a tax reform bill. I mean, they've been thinking about this for a long time.
David Roberts
Well, it's the one thing they reliably do when they are elected: cut taxes for rich people. All the other things they say, you never know whether it'll happen or not, but that is definitely going to happen.
Albert Gore III
Well, and, you know, this tax bill in particular is a big one.
David Roberts
And we should say, just for context, they've made a lot of promises about cutting a lot of spending. And anyone who knows the federal budget very well knows that there just aren't a lot of places to find spending to cut. It's certainly not popular places. So, they're looking everywhere to cut spending. So, that is a lot of the sort of context and talk around this is like, "Where can we cut, oh, look, here's a bunch of subsidies to clean energy. We can cut those." They wouldn't, we should say, save all that much money in the grand scheme of things.
Albert Gore III
But, you know, this gets into the minutiae of like House rules versus Senate rules. But there is a rule in the House under the Republican majority that, you know, no bill should be introduced that has new spending that isn't offset. And so, from that perspective, Ways and Means doesn't want to introduce a tax reform bill that doesn't have all of the new spending offset. It remains to be seen how much of a guiding force that's going to be for folks in the Senate and in the White House who I think want to make sure they move this tax reform bill forward because the House has a very slim majority.
And, because of the impact of industrial policy, I'd say, particularly in our industry, even though we're in the crosshairs, but across multiple different clean energy technologies and others, there are tech-neutral credits. They're having a big impact and people really believe in them. And then, beyond that, from the business community, their message has been, 'We as a group just committed hundreds of billions of dollars in investment in the United States in reliance on this policy. So please don't just repeal the entire thing.' You've seen a lot of statements to that effect.
So, this is what I was referring to in my first statement about the intro. I think there are a lot of folks on the Hill that certainly get that.
David Roberts
Well, I want to hear your argument — I mean, this is, I think, the core argument of this pod. The whole kind of point of, I think what's happening in D.C., you know, with all the usual caveats, is I think a lot of people on the right are thinking, "We've got to cut something. The manufacturing tax credit is sending money straight to red states. So we'll just cancel the consumer one because that looks like it's just hitting a bunch of upscale libs who buy EVs," right? But your argument is that the consumer tax credit and the manufacturing tax credit are connected and the consumer tax credit is driving investment in manufacturing capacity.
It's not just, you know, it has industrial policy implications beyond just, you know, giving money to wealthy people. So, to lay out that argument, because I'm sure this is what you're saying to Congress people when you talk to them.
Albert Gore III
Yeah, absolutely. Thank you. I mean, I think there's an understanding of the consumer credit that's a bit outdated. It's sort of rooted in this pre-2022 world where any EV qualifies for the $7,500 tax credit. It was capped. So, Tesla and GM hadn't taken any credit since 2018 because that's when they hit the cap. But you know, the initial proposal in Build Back Better was just to restore that without a cap to turn over the vehicle fleet as quickly as possible. That has coincided with just this enormous growth in the Chinese vehicle market, the Chinese battery market.
So, Senator Manchin, as you mentioned in the interregnum where the IRA looked like it was dead, but really it was being fine-tuned into this China-competition US-onshoring bill that it became, and 30D is the most fine-tuned example of that. So, Senator Manchin took a credit that would apply to any EV and basically said, "This is only going to apply to EVs made in North America." So, vehicle assembly has to be in North America and in practice right now that's almost entirely the US, there are a few EVs made in Mexico. But beyond that, we're going to put an income limit on who can take the credit.
So, if you're making, I think, it's more than 140,000 a year...
David Roberts
Household, not just individual? Household.
Albert Gore III
No, that's individual.
David Roberts
Oh, is it?
Albert Gore III
Yeah, so sorry. It's 150k for individual filers, 225k for heads of households, and 300k for married couples filing jointly.
David Roberts
Got it, got it.
Albert Gore III
We're going to put MSRP caps on $55k for sedans, $80k for SUVs, and then escalating requirements for critical mineral and battery component by value in the vehicle battery. So that started at 40% of the critical minerals by value needed to come from the US or an FTA country, and 50% of the battery components needed to be assembled in North America. Manufactured or assembled in North America.
David Roberts
Cumulatively, those are incredibly tight requirements which had the effect of excluding most of the, you know, most people in most EVs. It ended up narrowing the thing considerably.
Albert Gore III
It narrowed it quite a bit. I mean, no foreign-made EV qualified and no sedan over 55k qualified, and frankly, SUVs over 80k, which you know, at the time there were just a few. Now, there are more coming into the market that qualify. But you know, the idea that this is still just subsidizing purchases for rich people is false. It's outdated. But what's been most important is these critical mineral and battery component requirements because they start at 40 and 50% but they go up to 80 and 100% in fairly short order. I'm talking like seven, eight years.
So, what that did is it created a huge motivation and wave of investment by automakers in moving supply chains and developing new supply chains either in the US or within FTA countries for critical minerals. And in order to continue to meet those escalating requirements. So, every year it goes up 10% until it gets to 100% of battery components and 80% of critical minerals. The other thing, and this is the major hammer that comes in, is in January of 2024, the foreign entity of concern rule went into effect for battery components. So, no battery component could have been manufactured or assembled by a foreign entity of concern.
So, no Chinese company, either in China or abroad, could manufacture a component for an eligible vehicle. It disqualifies the whole vehicle if there's any ineligible component. And in 2025, so just, you know, last month, the same rule for critical minerals went into effect. So, no mineral extracted or processed by a foreign entity of concern in China or abroad. It would take a long time, but they created very, very thorough and strict definitions of what happens if it's a JV, what happens if there's a licensing agreement. They really took their time, thought it through, and made it work.
I mean, the intent was for none of this revenue to go towards helping China build up its dominance over this part of the upstream supply chain.
David Roberts
The way to look at it then is, if 45X was a subsidy of manufacturing supply, 30D is meant to create a demand pull for that same manufacturing. Both of these are required to pull the manufacturing in here.
Albert Gore III
That's exactly right. And you know, people ask me all the time, "What's going to be the impact of the repeal of 30D if it's repealed?"
David Roberts
Indeed, I was just about to ask you.
Albert Gore III
So, in general, the question is, what's going to be the impact of that on EV deployment in the US? And there, there are estimates around that, you know, 30% decline, etc.
David Roberts
A 25-30% decline in EV sales in the US is what one big study found.
Albert Gore III
Correct. And that matters a lot to me. It doesn't matter a lot to the folks that I'm really trying to convince of the merit of this credit. But what the real story is here is the main impact of 30D repeal is not to vehicle OEMs or consumers, although it is going to put upward pressure on prices for EVs to consumers. The real impact, the biggest impact, is on the mining sector and the battery component sector in the US and among the trusted trade allies of the US that are all working together to try to catch up to China, which has spent 15 years doing its own type of policy, which is very different, but certainly has the demand pull.
And so, for companies that are in the lithium space, in the cobalt space in the US — the US does have domestic cobalt production that's actually being done responsibly but is now shut down because the price of cobalt is sort of artificially suppressed below the price that would actually support operation at that facility in Idaho. And we see this with lithium projects as well. These aren't the old, you know, the mining projects from 50 years ago. These are really, you know, established companies trying to do it the right way and trying to serve US demand for these minerals.
David Roberts
And we should say that starting a mine is not like, I mean, it's not even like building a factory. It's a long-term, capital-intensive kind of thing that you're only going to do if you feel very confident about the demand on the other side.
Albert Gore III
That's exactly right, exactly right. You can have the best resource in the world. It's still going to take a massive amount of upfront capital investment and finance. So, you've got, you know, your financing costs that you carry for, you know, through the permitting process, through the NEPA process, maybe five years, seven years, through a litigation process.
David Roberts
Yeah, what do they say? The average is like 10 to 13 years or something to get a mine up and running. Which, we could talk about how helpful is that even going to be to the US. I mean, trying to start mines quickly is maddening.
Albert Gore III
There are some things that I think we can do to improve that process as well. Also, you know, restore the trust in the regulatory process and social license and all that. But when you are investing on an estimated commodity price for, let's say, lithium, the global lithium market is a commodity market, but it's a highly illiquid market. And China produces a lot of lithium and, more importantly, refines a lot of lithium. Three quarters of the lithium in the world comes out of Australia and the Atacama Desert area, Bolivia, Argentina, and Chile.
But, you know, the majority of it is refined and processed into battery-grade lithium in China.
David Roberts
It's like in the high 90s percent, it's like 98% or something absurd like that.
Albert Gore III
For lithium, it's a little less than that. For graphite, it is.
David Roberts
Oh yeah, it's graphite I'm thinking of.
Albert Gore III
Nearly 100%. But, so how do we solve that problem in the US? Actually, the new clean vehicle credit is the most effective policy we've ever had at attacking that problem because domestic producers, and you know, this extends down the supply chain, have offtake agreements based on the value of the credit with automakers. GM invested $650 million directly in Lithium Americas Stacker Pass project. Albemarle has offtake agreements with many different automakers. Ioneer has a joint venture with Ford for refining.
LPO has been very active in this space as well. It's a whole other topic, the importance of honoring those commitments from LPO. But that is contingent on this demand signal that is telling these companies that have resources and the ability to deliver, basically the engine of the clean energy economy, we want it to be here.
David Roberts
I want to talk about, sort of, what is the disposition of Congress on this? You know, which might be sort of different than what people say for the microphones. I wonder, do you think that this connection between the consumer credit spurring manufacturing investment, this idea that the manufacturing tax credit and the consumer tax credit are of a piece, are an ecosystem, both of which are required to spur the manufacturing. Do you feel like that's well understood in Congress? What's your read on — I mean, trying to predict anything is a fool's game these days — but what's your read on Congress's disposition on this?
Is there enough undercover support, undercover understanding of this that you think it's going to survive? What's your take on Congress right now?
Albert Gore III
Well, the short answer is no, I don't think that it's well understood. But I do know that there are many people who do understand it. This is where, you know, the 30D credit in particular suffers from the just baked-in political weight of the campaign and the conflation of any EV policy with the EPA rules. You know, the message is like, "The government shouldn't tell me what car to buy. They're going to take away your gas cars." I mean, that has absolutely nothing to do with the 30D credit. But it's an easy talking point.
And what we're seeking to do is just bring it back down to the local level. So instead of talking about it conceptually, which is important, showing people the economic impact not just in making cars, but making every part of the supply chain. So we've been trying to host, you know, business roundtables. We did one in Phoenix, in the Phoenix area last year. We put, we had a bunch of folks get on an electric school bus, drive 60 miles outside of Phoenix to the Lucid factory, took a tour there, went to a copper mine next door. You know, we had a series of discussions at Salt River Project's headquarters there in Tempe where, you know, we're talking about grid issues, we're talking about the sort of standalone battery manufacturers that are in the region as well.
But trying to make it as clear as we can to folks, "If you think about an EV, think about all these jobs in Arizona." And you know, we were in Savannah this week with Congressman Buddy Carter who I think understands these issues about as well as anybody in the Republican caucus. You know, Hyundai's in his district, LG has a joint venture there. There's a really thriving domestic solar manufacturing industry in Georgia. And you don't have to go far. You go up to North Carolina and there's a huge lithium asset there that Albemarle is developing. You've got in Chattanooga, you've got domestic synthetic graphite made by Novonix.
They've got offtake agreements with every automaker. And, you know, you've got SK making batteries in Commerce, Georgia, going to Chattanooga, put into VW ID 4s, and, you know, showing the value chain and the jobs and the economic impact represented across all these small towns. Commerce, Georgia is not a big town. Yeah, Savannah is not a huge city. But $7.5 billion invested in EV battery manufacturing there, that's a huge deal for that community. And Congressman Carter made this point very well. It's not just $7.5 billion. It's that much or more in indirect economic impact because you got to have all of these things: housing and every service that a community needs that provides jobs.
So, connecting that in as many towns as we can across the country where we, you know, our companies have a footprint in Ohio, Michigan, Tennessee.
David Roberts
I don't know if this would be any use in an argument with a congressperson, because it's a little bit more abstract, but also there's just like the US promised you X amount of money, you came in and invested several hundred million or a billion dollars, and now in the midst of your investment, we're going to yank it away. They're just like at a certain point, the trust — you know what I mean? Like, capitalism relies on trust in a lot of ways. Like just viewing the US Government as a stable partner, viewing the US as a stable investment, you're going to lose all that eventually if you keep offering things and yanking them away and proving yourself so inconstant. Like that has ambient effects on people's willingness to invest in your country over time.
Albert Gore III
That's right. And I think there are a lot of people that get that. You know, the pressure to cut things, you know, and this isn't specific to EVs, but it has a specific flavor when we're talking about EVs, you know, it's a real thing. There are deficit hawks, there are folks that are genuinely concerned about the debt and see this as an opportunity to do something about it. So, you know, the analogy would be, you know, if you're running a company and, you know, your choice is bankruptcy or cutting a significant amount of your cost structure, you have to cut things that are good and you wouldn't otherwise cut, but you feel an obligation to do it as, you know, in your fiduciary, to your management duty. So I think there are folks that are really coming to it from that perspective.
David Roberts
And also, can I just throw this in there too? Because this is like a hobby one for me. Like one of the premises of sort of right-wing economics, conservative economics, is that tax cuts pay for themselves, right? The idea is like you cut taxes on someone, they become more productive, they make more stuff, they therefore generate more tax revenue than they otherwise would have and you end up with more money than you started with. Why wouldn't that exact same logic apply to tax subsidies like this? They pay for themselves. You're subsidizing a factory, but then the factory is up and running and all the jobs and indirect jobs and all that tax revenue is going to amount to more than you paid for the subsidy.
Like, it's the same logic on the other side. I don't know why they treat them differently.
Albert Gore III
That's where it really does have to do with EVs and the politics around them. I mean, there are, you could call them tax subsidies or call them federal investments in the tax code all across other industries that have been there for 50 years or more and they're so baked in that you can't even really find them all and aggregate. People do studies on this, particularly in the fossil fuel industry —
David Roberts
At a certain point, when a subsidy has been around long enough, you sort of stop calling it a subsidy. Right? I mean, it becomes like architecture, it becomes infrastructure.
Albert Gore III
It's just there. But it lowers the cost of an industry to do business, which produces more jobs and more revenue and all that. So, this is a new one. But I like to talk about it in terms of, you know, what's a worthy federal investment? A federal investment in a community that has a multiplier effect and creates benefits far beyond just the value of the federal investment. That's a good investment, particularly in this industry.
David Roberts
Another question about whether this is a good investment or not. Like to me, it seems sort of dead obvious that EVs are going to triumph in the long term. Like that just, I hardly see an argument around that. It's just, we're just arguing about the time horizon, right? But you know, I take that for granted. Do members of Congress take that for granted? Like you hear, you know, like they used to talk about reviving coal, which was ludicrous. Like, do they understand that this is in some sense an inevitability and that you got to get on this train at some point or do they really think that this is a fad that they can sort of head off?
Do you have a good sense of that?
Albert Gore III
Well, I think there are other stakeholders that certainly make the case that, you know, EVs are going to go away. But the industry estimates, I mean, Cox Automotive has no agenda when they estimate that, you know, 80% of people will be considering EV by the beginning of the next decade. I think that's more rooted in, like, looking at EVs just as another car. So if you have a comparable EV and a comparable ICE vehicle, you know, what do they estimate the rate is of people that will choose the EV? So, you know, and you can look at other countries that don't have the same type of politics, don't have the same domestic, you know, energy production politics around oil and gas and all that stuff.
You know, EVs are viewed far more as just cars in the market. But I do think that, you know, there is a disconnect between what's actually happening with EV adoption in the United States and the understanding that folks that represent communities that don't have significant deployment of EVs, and they really haven't seen it. I mean, there's a social proof effect. See this with rooftop solar as well. I started in the rooftop solar industry. There's no substitute for, like your neighbor putting solar panels on their house.
David Roberts
They're contagious.
Albert Gore III
Yeah, because, you know, it's one thing to talk to a salesman about it or read an advocate telling you why it's good. Just talk to your neighbor and be like, "What do I need to worry about here?" You know, and then it kind of makes sense. So, I think that the story around EVs has gotten lost. A little bit lost. We're doing our best to try to bring it back to the forefront, but, you know, some of the campaign messaging was like, "These things are all made in China."
David Roberts
Yes, this was what Mike Johnson said, "We're putting money in China's pockets." Like, did you not read the tax credit that your own Congress just passed? It was like a year ago.
Albert Gore III
74% of EVs sold in the US in 2023 were made in the US.
David Roberts
Yeah, people do not get that. I'm about to get an Ioniq 5, which I'm ludicrously excited about, waiting for it to show up at the dealer.
Albert Gore III
Made in Savannah.
David Roberts
Yeah, it was made in Georgia, I think.
Albert Gore III
Yeah, I was just at the site where they're making it. It's got an LG battery.
David Roberts
Yeah, people do not get that. One other substantive question on policy: it seems certain that the EPA is going to go after climate regulations, including mobile source climate regulations. So, there are two ways they could do that. One, they could just run a new rulemaking procedure and weaken the fuel economy standards that were just passed last year. Or, if they wanted to go big, wanted to go nuclear, they could go after the endangerment finding, which is the premise of all carbon regulations at the EPA, which just says, "Hey, CO2 is a dangerous air pollutant." In terms of effects on the industry, how do you rate that threat relative to the threat to the tax credits? Which of those two policies do you think is driving more actual change?
Albert Gore III
Well, on the endangerment finding that was in one of the executive orders, it's certainly a huge concern, but it was settled law at the Supreme Court: Mass versus EPA. I think that would be a much larger fight. You know, the EPA rulemaking that culminated in 2024 really did take into account a lot of industry feedback. And, you know, the innovators actually intervened in support of it. And when there were petitions for review filed, so did we. But I think they'll certainly advocate for something that is less stringent. They would say it provides more flexibility and lets consumers lead the way.
That's sort of the message. But I think that there will be a desire to avoid what happened seven years ago where the EPA rolled things back so far, farther than the industry wanted, that it kind of bifurcated the industry. They went after the waiver and you had automakers, you know, opting into an agreement with California on air quality standards even without the waiver, based on the expectation that it would be restored. So I think there's a little bit of fatigue around that. I mean, at the end of that four-year period, legacy automakers had, I think, kind of been in limbo and Tesla had the whole market to itself almost, and by the end of 2021 was like a trillion-dollar company.
Because if you're serving a market that industry analysts estimate has significant demand and don't have a lot of competition, you're going to do very well. So, I think there's the market pressure underneath all of this. That if you believe the folks like Cox Automotive and Bloomberg New Energy Finance stuff to estimate based on everything they know about consumers, that a lot of people are going to like these cars, whether they're Democrat or Republican or libertarian, they're just cars and people like them, then, you know, you really need to be moving in this direction if you want to compete.
David Roberts
Yeah, this is the other thing I want to know because you talk to auto companies presumably frequently, and I'm sort of curious whether they buy this argument, which is just that, even if the US Government takes the pressure off you right now and for the foreseeable future, the market is moving towards EVs. And while you're mucking about hoovering the last bit of money you can get out of giant gas SUVs, Chinese automakers are establishing dominance in this market. So, it's incredibly short-sighted to do this one way or the other.
Eventually, you're going to have to compete in this market. And the longer you wait to get started on it, the longer of a lead Chinese companies have. It seems like if you're a US automaker, that ought to be compelling to you. But then, I'm not a US automaker, so what do I know? Like, do the US automakers understand that?
Albert Gore III
Absolutely. I think that's driving a lot of investment. And I think the EPA's mandate is not to determine what kind of cars people make or drive. The EPA's mandate is to look at the current technology, the current trends, and reduce pollution based on what's feasible. And so, they created a rule that would have reduced tailpipe pollution. It would have cut it in half by 2032. And you know, the final rule gave a lot of flexibility with regard to what kind of powertrains, you know, can be used for that. And you know, plug-in hybrids. A plug-in hybrid that's got 80 or 100 miles of range is very different than one that has 20 miles of range.
David Roberts
Yeah.
Albert Gore III
And so, there will be certainly a rule for that. And then you've got, you've even got some new technology that has been deployed in China. Now, a couple of US companies are looking at it with an onboard range-extending generator.
David Roberts
Yeah, those are intriguing. I can't decide where — can't decide where I come down on that. I mean, just based on first principles, you have to believe that like a car with two separate propulsion systems is, it's not going to win in the end. Like that's —
Albert Gore III
I mean it, it still, it just has an electric motor, the generator —
David Roberts
The generator charges the electric motor.
Albert Gore III
Correct. So, you have, you'd have like 300 miles of range on your battery. And then, I think in theory, the generator can extend that to like 600. I mean, BYD has vehicles like this in China.
David Roberts
Yeah, those seem like a killer app. Why are we not have a single one of those available to this market? Like a plug-in hybrid EV that would go 80 to 100 miles on electric and then could switch over to gas is the sweet spot right now for the US market and it's not here. Like, you can buy one of those in China today and you cannot in the US today. What the hell?
Albert Gore III
Yeah, and speaking of kind of abandoning, I mean, the US used to export a lot of cars. GM was the biggest company in the world, you know, middle of last century. And I think as demand for EVs has been proven, you know, we look at places like Central America, Latin America, you know, BYD's got cars for sale for $20,000.
David Roberts
And the two- and three-wheelers, you know, two- and three-wheelers are going electric faster than any other category.
Albert Gore III
The Chinese share of the EV market in, you know, many of those countries, is going to be 90%.
David Roberts
Yeah.
Albert Gore III
You know, so we need to move quickly. We really need to move in this direction. Do everything we can. Use every tool in the toolbox, and that includes the federal investments in the tax code, that includes LPO. If it's working, it ought to be retained. I mean, I think that there are a lot of folks on the Hill.
David Roberts
So simple, but so out of step with our tax.
Albert Gore III
Yeah, I mean, you know, you have to understand the top-down pressure to cut spending and then the political pressure to go after EVs is pretty significant. But there are plenty of folks who understand that and are willing to say, "If it's working, we ought to keep it." And so what we're trying to do is just give them the ammo, say, "Here's exactly how it's working. Here's a picture of how it's working. Here's a video. Here are all the people that are working here and they are really excited about this." And the great thing about the supply chain, from critical minerals to battery components to recycling to EV OEMs, charging companies, and utilities, the workforce across all those sectors is 7 million.
It's crazy. Across the entire country, there's a built-in constituency that is just all in on this. And when you're talking about investments that benefit the country overall and also our lifelines to these communities that really want the jobs and the economic opportunity, but also are really excited. They have a stake in this project of national importance. The same with the chips manufacturers. I mean, that's a huge deal. There are lots of people that recognize the strategic importance there for the country overall. If you take any political feelings out of it about EVs and folks who just haven't seen a lot of EVs deployed in their community yet, it's a no-brainer for a lot of people to say, "Yeah, this makes sense."
David Roberts
I mean, find me an EV owner on the planet who would go back to a gas car.
Albert Gore III
In surveys, you know, 90%. P eople really like these cars. They're fun to drive. You know, you can plug in anywhere. I still have friends who have not installed Level 2 chargers, may come down to my house if they've got to take a road trip. But like for their day-to-day commute, they're just recovering, you know, 30, 40 miles.
David Roberts
Yeah, we have a Level 2 at our house, but I probably, we probably charge our EV like once every two weeks. Everyone overestimates, you know, how much range they're really going to, practically, practically need. So, like, these are like a good product. It's popular, it's driving jobs, the policy's working, it's got bipartisan support. In a normal, sane and normal political world, that would give us confidence that these credits will survive. I guess the question which neither of us can answer is, are we in a normal political world and just how abnormal is it?
I guess we'll find out. One final question I want to ask you before I let you go. If the feds kill this tax credit, we know that some states have EV tax credits. Is there any real prospect that, like a coalition of states, say like the same states that are on California's EPA waiver, which by the way is also on the chopping block, but like the same states, if they all got together and said, "We're going to sort of replicate the federal EV tax credits, we're going to include our own domestic sourcing requirements." Like, could a coalition of states accomplish anything close to what the national credit is doing?
Like, could they compensate for the loss?
Albert Gore III
Yeah, it's a really interesting idea. You know, there are a collection of states that have had either a sales tax exemption or an EV rebate. When you're at the state level, state budgets are sometimes more challenging. Some states have legislatures that meet every two years. I mean, it's difficult to create a funding mechanism that is steady enough. But I think the idea to replicate the requirements within 30D is an interesting one. It would stretch the money out a bit longer. I think that states are committed. We call them Section 177 states that joined California under that section of the Clean Air Act. But that's about EV deployment. It really is the role of the federal government to make investments that benefit the entire country, particularly in this global competitiveness, national security, supply chain security, and building up our trade partnerships outside of China so that we can really own the future of our advanced technology deployment and our transportation sector.
It's a really, really important thing that this is what the federal government is supposed to do. Because you're talking about a demand signal for products that may be in any of the 50 states, but that is pulling investment into, you know, Tennessee and Georgia, South Carolina. Asking another state to do that — it may be something that comes into effect. My hope is that there are enough folks that do understand this. They really understand the importance of future US global competitiveness. A lot of folks, you know, they have a set of China talking points, but putting the data on the automotive sector and the battery sector in front of them as a basis for support of these policies, I think, sometimes has a profound impact.
David Roberts
I mean, if your whole political personality is China, China, China, this should be like table stakes. If you want to compete against China, this is it. This is where they're dominating. These are the industries they're dominating. So, like, if you want to compete with them, you got to dominate. You got to compete in these industries. You know, it's just like, math.
Albert Gore III
That's right. This isn't — the 30D credit isn't Joe Biden's credit. It's Joe Manchin's credit. And that's his whole deal.
David Roberts
Oh, I hate giving that man credit for anything.
Albert Gore III
You got to give him credit for the IRA.
David Roberts
Do I?
Albert Gore III
Yeah.
David Roberts
That's a different pod. All right. Well, this has been fascinating. You know, it's always difficult to talk about these things when in the surreal environment we're in. But I think anyone who listens to this pod will have to acknowledge that sense is on the side of these credits, like policy logic is on the side of these credits, even raw political self-interest of Republicans legislates in favor of these credits. So, like, if we are in anything like a sane world, I think we should probably be pretty confident that the credits will survive. Is that fair? I'm scared to say that out loud.
Albert Gore III
But I hope so, and in some form. I mean, I think no politician, you know, has a long career when they're voting against huge factories in their district. And you know, more to the point, when you get outside the sort of national political coverage and go talk to folks in their district. Like, a lot of them are from the district. They care a lot about it. They were business owners or they, you know, they were state legislators. I mean, they care a lot about what's happening in the district. And a lot of these places have felt kind of disconnected from the rise of EV deployment over the last decade, but they're coming around to the view that they have a big stake in it because they're making the things, you know, they're producing or refining the minerals or making the battery components.
David Roberts
It's just a question of whether this, whether even self-interest now can overcome the immense weight and ubiquity of national politics. You know, everybody's always lamenting politics has gotten so nationalized that it's like some of these people on the ground level seem to care more about, like, what Target puts on its displays than they do about the economic health of their own district. At least some of those voters, I mean, they're probably over-represented in media, so, you know what I mean? So, we'll see whether self-interest still —
Albert Gore III
Never bet against self-interest.
David Roberts
Oh, well, all right, well, that's a good note to leave us on. And we'll see whether self-interest can triumph in the end.
Albert Gore III
But, you know, it's the interest of the community too. You know, I, I don't want to be so cynical, but yeah, I think, I didn't mean to step on your outro there.
David Roberts
No worries. All right, Albert Gore, thank you for coming. Thanks for walking us through this and good luck talking to these folks.
Albert Gore III
Thanks so much for having me.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this episode, I speak with Canary Media journalists Clare Fieseler and Julian Spector to assess the early impacts of Trump's executive orders on clean energy. We explore what's actually happening with offshore wind projects, manufacturing investments, and tax credits from the Inflation Reduction Act.
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In this episode, I speak with Mustafa Amjad and Waqas Moosa about Pakistan's extraordinary solar boom — nearly 30 gigawatts of panels have flooded into the country since 2020! We explore how punishingly high grid electricity prices combined with dramatically cheaper Chinese solar panels have created a bottom-up energy revolution that could become the blueprint for energy transitions worldwide.
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David Roberts
Hello everyone, this is Volts for February 26, 2025, "Pakistan's solar boom." I'm your host, David Roberts. There is something quite remarkable taking place in Pakistan right now. Though the precise number is difficult to pin down, it appears the country has imported something close to 30 gigawatts worth of solar panels since 2020. In a country with a total installed grid capacity of around 45 gigawatts, that is seismic. What's even wilder is the recent jump — from 2.9 gigawatts of imports in 2023 to 16 in 2024, with 2025 on pace to beat that. It's still ramping up.
And to be clear, almost none of it is utility-scale solar farms. These panels are going on roofs, barns, and irrigation canals. What has prompted this explosion of distributed solar is some combination of punishingly high prices for grid power and solar panels getting very, very, very cheap. A glut of Chinese overcapacity means that the price of panels in Pakistan has gone from 24 cents a watt to 10 cents a watt in just the past year or two. Distributed solar is breaking over Pakistan like a tidal wave, despite utilities and a grid that do not seem entirely prepared for it.
So, who's buying all this solar? What are they doing with it? How do the utilities view it and what are they going to do about it? To talk through all this and more, I've contacted two experts. Mustafa Amjad is the program director at Renewables First, an energy think tank based in Islamabad. Waqas Moosa is the current chair of the Pakistan Solar Association and the CEO of Hadron Solar, which sells and installs solar systems across Pakistan.
These gentlemen have been on the ground and seen the country’s solar boom close up. They have thoughts on how it’s happened, what it means, and how to keep it going, and I can't wait to talk to them.
With no further ado, Mustafa Amjad and Waqas Moosa, welcome to Volts. Thank you so much for coming.
Mustafa Amjad
Thank you so much, David.
Waqas Moosa
Thank you, David, for having us.
David Roberts
I want to start with you, Mustafa. Before we even get to the solar, I was reading this report that your think tank put out on all this and the crucial background here is that the price of grid power in Pakistan is rapidly rising. Although, as far as I can tell, the level of service is not rising, the level of reliability is not rising, but the price is rising very, very quickly. So before we even get to the solar, why is that happening?
Mustafa Amjad
In the 2010s, we were struggling with undercapacity, so the solution that the government thought, you know, to solve the electricity crisis, was to put on more capacity and that all of that capacity mostly came through thermal power projects or IPPs. We installed a lot of local coal, imported coal power projects. We started our investment in RLNG projects. All of those came online in 2020 or early 2020s or late 2010s, and they added a lot of capacity payments to the cost of electricity. Yet, with COVID coming in, with the Russia-Ukraine crisis in play, the cost of imported fuel, both imported coal and RLNG rising, and then generally Pakistan's currency crisis, what it meant was we had to go into an IMF program.
The government was asked to remove all kinds of subsidies that were provided to different consumers. So, all of a sudden, we saw a jump of almost 155% in electricity tariffs over the past three years. And that was unprecedented, right?
So, people were actually paying more for their utilities or electricity essentially than they were paying for rent for a house in a metropolitan city. So, that was what the change meant in terms of the livelihood of people. Essentially, bad investments, bad decisions taken by the government, overcapacity, dependence on imported fuel. In an era where people were actually moving, governments were actually planning for renewables and with renewables, Pakistan continued investing in utility-scale thermal projects. And that was essentially what added a lot of capacity payments that had to be then recovered from the bills and the tariffs.
David Roberts
Right. So, these contracts with these fossil fuel plants require capacity payments to be made whether or not the plants are running.
Mustafa Amjad
Yes.
David Roberts
Whether or not they're producing anything, and you have overcapacity. So, a lot of them aren't producing anything, but you're still making capacity payments to them.
Mustafa Amjad
Yeah, so some of them are way too underutilized. So, we had some RLNG projects come online a couple of years back, and their utilization rate is somewhere around 5 to 10%. We have imported coal power projects that essentially didn't run the whole of the last summer because we had hydro available. And with the solar rush effectively in play, the demand on the grid is not increasing, or it's cliffing. So, that in itself is a parallel crisis which is growing at the utility level. Yet, for the people of Pakistan, with the solar coming in, the prices of electricity are going down.
So, it's a win-win situation if you are considering it from a public perspective. But from the government's perspective or from the utility perspective, it's a crisis that is brewing.
David Roberts
I want to talk a little bit later about what the utilities can do, what they can do with all those fossil fuel power plants. So, this is just the context then: It's not that Pakistan is short on power capacity, it has more power capacity than it has demand. It's just big, expensive fossil fuel power plants. So then, in the face of this, in comes this flood of cheap Chinese solar panels. So, Waqas, maybe turn to you, you're out there installing solar panels for people. I have sort of two questions. One is, who are these people?
Like what kinds of people are buying this solar and what are they using it for? And number two, sort of what are they telling you about why they're buying it? Is it pure economics here?
Waqas Moosa
So, I mean, just to add on to the point which has already been mentioned, it's sort of like a perfect storm coming together at the same time. So, on the one hand, you have rising electricity costs because the capacity charges are going up. It's like, you know, you had a wedding party and you were expecting a lot of guests over, so you booked 10 cars or 15 cars and then so many guests did not arrive. So now, you still have to pay for the rent of those cars, right? So, you can save on the fuel costs.
So, that's what the power plants are. So, you know, you've got these huge power plants put in place and suddenly there is not enough consumption. You can say the anticipated growth did not come in, there was a flaw in the planning, or there were some hidden agendas in terms of, you know, putting those in. Obviously, there's always a mix of these things. So, we end up with a situation where today, I think, I was reading the State of Industry report for NEPRA, which is the power regulator in Pakistan for 2024, and in some cases, 60% of the unit cost of electricity is being driven or is being derived from the capacity charges.
So, you know, 60% is overheads and only 40% is the actual energy cost. So that's one area.
David Roberts
Yikes.
Waqas Moosa
Cost is going up. On the other hand, we also have an infrastructure issue in terms of the — so, you know, with power there are two things: there's the production cost and then there's the distribution cost. Generally speaking, these decisions, these power sector decisions, are taken by politicians and bureaucrats to some extent. But, you know, politicians frequently drive those policy level changes. Putting up big power plants is always easy. You know, it's something which is visible, it's a huge infrastructure. You can brag about how many megawatts or how many gigawatts of power you put in. And I remember in the 2013 elections, this was a big issue, the rolling blackouts.
We have this term, load shedding. You might have heard of this in South Africa as well, where, you know, when there is a short capacity, some areas get cut, rolling blackouts kind of thing. It's sometimes scheduled, sometimes it's unscheduled. So we had that as an issue. There was a lot of investment going into the production side, but not enough investment going into the distribution side. And because of that, and with an aging infrastructure of the grid, we also had frequent power outages. So from a common man's perspective, on the one hand, electricity prices are going up.
On the other hand, even when electricity is available or when you're willing to pay the higher prices, there might be, you know, there used to be days in 2013, 2014, 2012 in the early 2010s, you can say, where we had 8 hours, 10 hours, 12 hours blackouts in urban areas and even larger, longer blackouts in the rural areas. So there's, on the one side, this problem. A lot of people are trying to find alternatives. So that's where solar kind of came in. At the same time, the prices of solar are going down.
So, it's like this whole multiplier effect kind of thing. Everything is coming in place at the same time. And then the second question. So, with all of these things coming in, it kind of created a momentum for solar. And the last couple of years, as the prices of solar panels across the world have gone down with the supply glut and also improving technology, and as we've seen with all other technologies, mobile phones, the processors and speed of your cameras and stuff like this. So, the solar panels have also improved drastically in the last five, ten years.
Every year is like another capacity or another milestone achieved in terms of efficiencies. So, we're getting all of these things coming in, and people are starting to find that the return on investment on solar projects, you know, started from five years, then went to four years, three years. And now, in some residential scenarios, you know, we have a one year, one and a half year kind of payback, which is very attractive. So, that makes a lot of sense. The second question which you asked me was, "Where is it going?" So, it's pretty much going across the board.
We are seeing large industry put in solar because they want a consistent supply and they want to save on their electricity costs. Over there, it's primarily a financial decision. So, they're putting in large plants, 1 megawatt, 2 megawatt, 15 megawatts, even for their own captive usage, which they're using themselves. We're seeing this in residential customers. People who have houses are putting up solar panels on their rooftop and becoming sort of independent of the grid. So, that's the second area where we're seeing that. We're seeing this a lot in rural areas. In rural Pakistan, a lot of the economy is agriculture-dependent.
So, we need a lot of water. And the water is usually pumped out from the ground. So, it's groundwater which is pumped out. So, a lot of these pumping solutions, agriculture pumps, we call them tube wells in Pakistan, they require a lot — usually they run on diesel generators or sometimes on electricity. So, a lot of the solar panels are going there as well. And then you have those areas which were completely off grid or very seldom on grid, you know, remote rural areas where the grid has not reached. So, we're getting a lot of people.
And it's amazing to see this. You know, you have people in residential areas where their electricity bills have dropped 80%, 90%, or even 100% in many cases. So they love it. They're telling their neighbors, and when their neighbors are seeing it, they want to know more about solar. And, you know, everybody's seeing this success story. We're seeing this in rural areas. So you go to a village and it's amazing. You know, you go and there's like this tire shop, somebody who's repairing tires for a motorcycle or for a cycle. And the guy opens the shop in the morning, he picks up the shutter, and then he brings out a solar panel and, you know, sort of attaches it with a stick and makes it stand straight.
And there are two wires going into a battery, and they're there giving him the light for his small bulb and maybe a fan.
David Roberts
Are you selling a lot to people who previously had no access to electricity? Because there are 40 million people in Afghanistan who have no electricity access at all. Are they getting any of this solar?
Waqas Moosa
Yes, they are. I mean, not me personally. I mean, as Hadron Solar, we are more focused on the urban and the small commercial kind of segments. But I also, I'm part of the Pakistan Solar Association. In fact, I'm the chairman of the Pakistan Solar Association in this term. So we have a lot of companies who are focused on rural area solutions as well, where they're doing solar projects. And some of them are with NGOs, some of them are direct, some of them are with microfinance institutions where they develop these small packages. I remember there was this story which one of our microfinance guys was telling me.
There's a concept of dowry in Pakistan. You know, when there's a marriage, the bride's father usually, or the bride's family, would put together some appliances and, you know, the durable goods kind of thing, and they would make it as a gift to the newly married couple and then they settle in. So recently, we've started seeing solar systems or smaller solar systems like a 3-kilowatt inverter with, you know, maybe four or five panels. And it's become like something which is sometimes included in the dowry itself.
David Roberts
Incredibly useful for a new family, right?
Waqas Moosa
It's probably more useful than the washing machine or a television. So, it's something which has become acceptable. So, we do supply equipment to these rural areas as well. So, there is like, you know, wholesalers or markets where they can go and buy panels. And then the local electricians are very creative and, you know, they would go in and do the installations. And solar is not that difficult to install, especially the smaller systems.
David Roberts
In the US context, one of the criticisms of solar and wind is that you can't run industry on this because it's only generating during the day and industry needs a steady supply. So, it's funny to hear that businesses are turning to solar in order to get a steadier, more reliable supply. So, does that mean they're just running it during the day while the sun is out? They're just sort of tying their production to the sun being out?
Waqas Moosa
To some extent, yes. I mean, but looking at it from a background of the industry, a lot of them already have a secondary source of power on their own site. So it's like captive power plants. Either they're diesel-based generators or furnace oil-based generators or typically gas-based generators which use LNG or RLNG form of fuel, so what we do is then we do mixing of this. And that's something which I believe is innovation. I remember reading about the PV diesel or PV genset controllers which sort of manage the mix of these energies where the generators are running more efficiently because solar is tied in.
And this is something which, when we saw in the European markets, we realized that this is something which we were doing and it was so intuitive and it was something which was so easy for us to catch on to because this is something which was almost already happening. I mean, we'd sort of created these. So, we have a lot of suppliers who are doing these controllers who put together the equipment, the sensors, and the controller equipment, and they're able to sort of combine the solar power, the PV input, with the diesel generators or the grid. So, we have multiple sources.
And that's something which I think — I mean, it's, you know, as they say, necessity is the mother of invention. So where there is a necessity, the need is created. And this is something which we're seeing a lot happening and that's how they power this. And of course, now in the last, let's say, year or so, the holy grail is being completed with the batteries.
David Roberts
Yes, well, that was my next question is how many of these, I mean, in your current practice, what percentage of the solar systems you're installing? Are you installing batteries alongside?
Waqas Moosa
When we talk about residential systems, I mean, it's not that difficult to incorporate a battery. So, you can say that maybe 40 to 50% are already thinking about it or have already done it. I mean, previously, it used to be more of on-grid solar solutions without the battery. But in the last couple of years, we've seen a lot more inquiries for batteries and we're sort of studying battery technology. Batteries were something which were very common in Pakistan because of the outages. So, you know, people are used to the idea of having a main circuit in a house.
In Pakistan, one of the interesting things is that, in the way, for example, in California, they say that you cannot live without a car. This is what I've heard. I mean, I haven't had a chance to experience this.
David Roberts
Sadly, true.
Waqas Moosa
Yeah, so similarly in Pakistan, you cannot have a house without a UPS or a backup supply because, you know, you never know when the light would go out or when there would be a blackout. Sometimes it would be regular, sometimes it would not be. They might announce nine to three and they just decide to go from nine to six or they might not announce it at all. And you just live with it, you take it in your stride. So all houses already have some sort of backup solution available, otherwise, you won't be able to get work done.
So, offices will also have either generators or battery-based backup options. Because of that, there's already this trend of having these backup systems at homes and then having a secondary circuit. So, you know, you have a main circuit which powers your whole home. And then for the critical requirements, like for example, if you want to have an air conditioner and you know, the summer is quite hot in Pakistan. So, you'd have air conditioners which would be plugged into or which would have a generator supply coming in. So, maybe if you have five air conditioners in your house, like those split units, maybe two of them would be also covered by a generator.
Or, if you really like it, you'll have all of them. So, those people are now shifting from those generators towards those battery-based solutions. So, on residential, it's pretty much, I think, in the next year or so, especially as we expect some changes in the net metering regulations, that we will start seeing a lot more of the battery — maybe 80, 90% of the systems will start being integrated with the batteries. On the larger size, the factories and the bigger projects on that segment, which is a big segment of the overall power requirement, batteries are now coming in.
So, previously, batteries would just play the role of a bridge. Once the power goes out, you need 10 minutes to switch on the generator, but you can't stop your production or the process is such that there will be wastage if there's an interruption. So, they have a 10-minute or 15-minute battery backup. But now, a lot of them would start using batteries more. And then the batteries, they're also starting to see the other benefits of the batteries. And that's something which we're exploring for our customers. I would say that 80% of my commercial customers or industrial CNI customers are asking about batteries.
Not many of them have done it yet, but they've started exploring and they've started looking at the options.
David Roberts
That's interesting. So, Mustafa, let's talk a little bit about how all this is affecting power utilities. So, what's one very interesting thing that's going on alongside this, as all these solar panels flood in, power demand in Pakistan is actually falling, at least sort of like utility demand. And so, there's some question. You know, I read these, I read these reports and papers. It's a lot of math going on, trying to figure out exactly why power demand is going down. But at least some part of it, some big chunk of it, is that a lot of grid demand is shifting over to solar panels.
So, if you have these utilities with these big contracts with these old fossil fuel power plants that are already producing this expensive power that is driving people to solar, and then you drive people to solar, which means the cost of the power plants is then getting split by a smaller group of ratepayers, which makes the cost go up, which drives more of them to solar, which makes the costs go up, et cetera. This is the much-discussed utility death spiral that everyone worries about all the time. It seems like that's what's in front of Pakistan's utilities. So, how are they thinking about this?
How are they responding to all this?
Mustafa Amjad
So, that's exactly what it is, right? It's a utility death spiral in effect. And talk to global experts and they have their fingers crossed to pilot this in Pakistan, but that's the situation. So, I think it's important to understand that electricity in Pakistan, like most other countries, is a commodity, not a public service. Right. So, what is transpiring in Pakistan isn't something that is happening because of the government. It's despite the government in a lot of instances. Yes, the government had a lucrative net metering policy in place with excellent, you know, buyback rates for the overproduction of household solar systems.
But the government's forecasts, for instance, didn't really, you know, see this much addition of solar power coming in at the pace and the scale. So, what sets Pakistan apart from other solar transitions in the past versus solar journeys for other countries in the Global South is the speed and the scale of this transition. This is a very rapid, people-led, and market-driven, you know, solar revolution essentially. And to put it into context, I think the government puts out an annual indicative generation capacity expansion plan every year. And the last one had forecasted the addition of almost 3 gigawatt solar net metering for the next 10 years.
You know what the number of net metering is right now in Pakistan? It's almost 4 gigawatts and it's increasing at the rate of 300 megawatts per month.
David Roberts
Oh my goodness. Can I actually jump in here? Because this brings up another question, which is: Do we have a good sense of all these solar panels flooding into the country — because that's sort of how we're measuring this, just by the number of panels coming in — do we know how much of these solar systems are ending up grid-connected with net metering compensation versus just going to these off-grid, you know, where they're hooked up with a battery or something or just on a canal somewhere? Do we know what percentage is on and off-grid?
Mustafa Amjad
So, the only thing that we have a number for is what goes online and is grid-connected. So, you need to, you know, register your net metering connection. Even within net metering, a lot of people then get a net metering license and then they add more solar panels because the panels are so cheap. So, there is that quantum that goes unreported. So, when I say, you know, 4 gigawatts is installed, it's probably a gigawatt more because most people — as Waqas will, you know, be ready to jump in on — a lot of people have added more solar panels to their systems because solar panels were dead cheap.
And then, the payback periods are amazing, right? For each consumer class. Waqas mentioned less than a couple of years for residential consumers, for agricultural it is pretty similar because the conversion is essentially from diesel to solar. For industries, the equation is completely different with, you know, carbon border adjustment mechanism coming in with, you know, a lot of impetus to go green for export-oriented industries. So, there are always, you know, lots of those situations that are playing towards people moving more towards solar at the grid level.
David Roberts
You just mentioned this, but I just want to underline it because I think it's an interesting background fact here. It's like one of the things that's going on is international buyers, consumers want cleaner, greener supply chains and there are all these sort of like regulations and stuff going on around supply chains internationally. So, any business that's selling into international markets, apart from any environmental anything, just as a business matter, needs to clean up its supply chain to compete in these global markets. I thought that was an interesting point.
Mustafa Amjad
Yeah, so that's exactly it, right? And this is the business or the industrial side of the equation. At the utility level, now coming back to your first question, which was, "How is the utility perception about this?" Unfortunately, net metering is still perceived as competition rather than something that can complement grid electricity, and that results in certain delays of net metering connections. Technologically, there is no challenge for more solar to come online. But again, it requires a lot of unthinking of the way we perceive electricity or electricity markets in general in Pakistan, because for the longest time we had those firm capacities, those base load plants, a 600 megawatt, 1200 megawatt producing flat electricity for the day throughout.
So, shifting from that to something very modular, something very community-led, decentralized, requires a lot of rethinking in terms of policy, in terms of execution of the transmission system. Add to it, you know, all of those expensive fossil fuel or the fuel-guzzling power plants that we've set up in the past few years or the outdated ones. Rational policies would essentially require, you know, to start thinking about closing down these expensive, little-used, you know, coal and gas projects or power stations. So, the government is thinking on those lines.
So, we are — at the expense of further investment or even alienating a lot of our future investors — Pakistan is renegotiating its IPP contracts. Yes, those contracts were terrible contracts, by all means. Those were, you know, offering excellent incentives, dollarized returns payments irrespective of consumption of electricity. So, Pakistan did retire five thermal projects early. It's renegotiating 18 other projects in various different stages, changing their terms from take-or-pay to take-and-pay. So, there is that shift happening in parallel as well. But the impact of it also, at the end of the day, the utility will have to also start planning in terms of, you know, how do we integrate all of this solar, take this as an opportunity rather than as a challenge and then, you know, avoid the utility death spiral because that's going to happen if inaction is the route that the government takes.
Case in point, Waqas mentioned with batteries coming in. So, if the government, you know, goes s hush on solar panels, what people will do essentially is move away from the grid altogether because the business case will keep on improving.
David Roberts
Are there signs that they're going to revise net metering to lower the rate? Because I imagine they're kind of panicking right now, and so maybe that's kind of the first thing they can think of to do.
Waqas Moosa
Yeah, that's true.
Mustafa Amjad
That's definitely in the works. The government is quite adamant they're going to reduce, or almost halve, the rate of, you know, net metering buyback. Having said that, I think it wouldn't affect the market much, to be fair. There is enough adoption. The business case is such that even with the revised repeating rates, the payback would perhaps go up by a year or two. And at the end of the day, the next challenge for the solar revolution is to make it just and inclusive. Right. So the next step that we want out of this revolution is to make sure that those that require to move away from the grid or would benefit the most from moving away from the grid are also made a part of this revolution.
And there are some wonderful use cases, by the way, some wonderful stories on the ground. I was in Peshawar last week and there was this person who had set up a solar system at the back of a truck and they were sharing it between different households. So, in the morning, it was connected with one house for two hours, then the other, then the next. I saw a picture where somebody had just covered the circumference of their house. So, you know, forget about efficiency or making sure that the solar panels are facing the sun. All they did was, you know, just cover the circumference of their house with solar panels.
So, these are the kind of things that are happening on the ground. It's something that we should focus more on in making this journey more inclusive and making sure that, you know, those that would actually benefit the most from leaving this grid are also made a part of this transition.
Waqas Moosa
And that's the most important thing which we need to communicate and which we are trying to communicate, you know, as the Pakistan Solar Association, and definitely Renewables First as well. Last month, on the 30th of January, we had a conference about the solar rush. And, you know, it's like based on the gold rush. And we're trying to sort of share the insights with the regulators and the people in charge or the people who are making the policy. And, you know, we do expect that net metering rates would be revised. This is something which we've seen across the world and I think this is, this is fair.
It's something which we agree with. Obviously, we need to create, everybody needs to share from the benefit of the solar rush. However, we have to keep in mind that there's this elephant in the room. It's called the battery. So once the battery comes in and, you know, that's something which again, as the Pakistan Solar Association, we've been, I think, four years ago, we published a paper, "Utility 2.1, what the future of the grid is going to look like with distributed solar generation." And, you know, we are anticipating, obviously we are closer to the field so we can see the battery technologies and maybe we have optimism.
That's why we're in the solar industry, and that's why we're talking on this podcast. So, we have this belief that there's going to be improvement in battery technology. Now, it's coming to light. Today, we're hearing these words, you know, the duck curve and the utility death spiral being spoken of in the power corridors of Pakistan, which we've been trying to tell them about for the past four or five years. So, that's something which is good, but now we need to educate them, and we need to tell them that, "Look, if you reduce the buyback rate too much, you're going to sort of, you know, people are going to start installing batteries in their house."
When there is a battery on the other side of the meter, you're out of the game. You know, you need to sort of, as the distribution company or as the power sector, understand that you're in the business of selling electricity. It's not in the business of selling the electricity which you produce; it's selling and buying electricity. It's a distribution company. So, you know, why don't you put in the batteries and start thinking about letting the market play itself?
David Roberts
Even in sort of wealthy markets, it's not a small thing to integrate a bunch of distributed solar into the grid. It requires a little bit of control technology and you need some pretty high-tech equipment so that it's on the grid. Everything is speaking to one another and there's a lot of modernization involved, and these utilities are facing the need to do that in an incredibly short period of time.
Waqas Moosa
Unfortunately, that's true. But, you know, this is what's happening. So, what solar and batteries have done to the power sector is something like what YouTube, Twitter, and TikTok have done to the media world. Everything has just turned on its head and it's going to happen whether you like it or not. You know, solar has kind of democratized power generation. Everybody is now a producer as well as a consumer. So, what happens is that some of our existing models will need to be upended, some of them will need to be changed. Obviously, we cannot do everything overnight, but, you know, we can start working on pilot projects and start looking at how things are going to happen.
In a way, we are fortunate, you can say. I mean, I'm always the glass half full kind of guy, the optimistic guy. So I say, you know, "Yes, we've got these capacity charges and we've got this huge, you know, boatload of plants which are active and we've got a lot of electricity. But on the other hand, if you look at the per capita consumption of electricity in Pakistan, it's still bottom third." You know, it's amongst the lowest in the world. So we have a lot of way to go. So in a way, it's kind of a blessing that this decision has already been taken.
You know, we've gotten these power plants already there. Now, the only thing which is missing is the growth. So now, you've ordered pizza for 200 people. So, it's, you know, let's open, let's invite the neighbors, let's get everything going. And what does it mean practically? I mean, of course, everything needs to be rooted into practicality. And this is something which we are working hard as the Pakistan Solar Association, Renewables First, other think tanks, and other organizations to educate. And I think this is something where a lot of the other countries in the world can also sort of like get a crash course.
In a way, Pakistan, by luck or by design. I mean, definitely not by design, but like, you know, mostly by luck. We are in a situation where, you know, we're sitting on the doorstep of China. So, when there's a panels glut, one of the first countries that gets it is Pakistan. We have the electricity crisis and, you know, as I said, the perfect storm is here. The batteries are just coming around the corner. The market is already very used to working on batteries. So, all of these things will increase the adoption even further. So, we are going to see a situation where the utility business is going to be stressed heavily by the new business model, which is the solar and battery and kind of business model.
And what does Pakistan do? It's something which a lot of others, maybe not the fully developed countries, but you know, there's a lot of countries behind us on the development scale. A lot of them can learn and sort of see what we do and we need to sort of do these things well. So, I can see, for example, one big area obviously is economic growth. You know, if you have growth, electricity consumption will increase. And you know, we have these power plants coming in and solar kind of complements them. That's kind of the most difficult part.
It's difficult to get consistent growth. I mean, that's something which we do know, and there are people working on it, and obviously, we hope that they'll do a good job on it. But second, there are other things which we can do, you know. So, for example, we also have a lot of gas consumption in Pakistan. Natural gas, we use that for power plants, we use that in homes. So, you know, in terms of gas usage, for example, there is the usage in space heating. So that's something which, if you increase the gas prices and make it — you know, we also import gas, so we spend dollars on that as well.
So, if we can save those dollars, increase the price of gas, and you know, the invisible hand of Adam Smith, which will, once you let the prices be natural — and it's already happening, I'm seeing this. So, for example, when gas prices have gone up, space heating and water heating have already kind of started to shift towards electric. We're seeing this trend, new houses being built with electric-based heaters instead of having gas connections in all rooms. We're seeing this in Europe as well. I don't know if, I'm not really sure.
David Roberts
Yeah, that's everywhere.
Waqas Moosa
It's happening everywhere. Cooking is something for which we use a lot of gas. That's something which, you know, in the world, there's a lot of electric usage, so that's something we need to build on, educate people about. And again, I think if we increase the prices, that kind of takes care of half the problem. You know, if your food doesn't taste very good when it's cooked on electric ovens, but when it's cooked on gas, it's better. But when you increase the prices, the taste will also change. So that's something which we'll see.
The third big one, and I think this is one which we really need to push on now, is the EV revolution. And you know, when we say EV, for a lot of us, EV means four wheels, because that's the — but the real EV in Pakistan and a lot of the developing market is the two-wheelers and the three-wheelers. You know, I was reading somewhere, I think with, discussing with Mustafa, that about 60 to 70% of our fuel consumption is on two-wheelers and three-wheelers. And those are so easy to electrify. We're seeing this and again, this is something which is happening already.
It's not something in isolation, and we need to push this. So, basically, we're trying to engage the policymakers, the government, the regulators, and push them towards it. Don't be afraid of solar. Solar is your friend.
David Roberts
Maybe this is obvious to you, maybe you're already saying this, but like sending less money out of the country to buy fuel, you know, if you're not sending it out of the country, it's staying in the country and all things being equal, that means more economic growth, right? I mean, if you're after growth, one great way to get growth is to stop wasting money on importing fuel.
Waqas Moosa
And then, you know, when we increase consumption of electricity for charging these motorcycles, scooters, and tuk tuks, and we increase electricity consumption for the gas requirement and the heating requirement, what happens is your capacity charges problem also kind of solves itself. Because as you increase consumption, the capacity gets divided. So you play the problem on the other side. And that's where the utilities, we want them to focus on. Yes, we understand that there's some imminent crisis and, you know, yes, net metering regulations need to be changed, but we have to keep that in context that, you know, net metering based connections are maybe taking 20% or 30% of the solar capacity, as Mustafa was saying.
A lot of the solar is being installed in places where there's no net metering. So, they might be connected to the grid and consumption is going down. So, even if you change the net metering policy, if you change the net metering policy and there is somebody who's installed solar in his house, they might just increase the amount of solar they have and you can control it if it's going to come on the grid or if they try to sell it back. But, you know, once the batteries come in, they might just say, "You know what, okay, it's okay, you can keep your — I mean, I will not sell it back to you."
David Roberts
You can imagine. I mean, obviously, this would be, I think, a terrible way to respond to all this. But like, you can imagine the government just sort of panicking and trying to just cut off imports. I mean, is there any talk about just trying to cut this off before it drives more crisis?
Waqas Moosa
That's what we're trying to avoid. There's always people on the fringe who might come up with ideas like this. But we're very, very optimistic that this is a fringe only. They might change some policies. For example, I mean, we were hearing about the possibility of imposing a tax on solar panels, for example. So that's something we'll fight tooth and nail, obviously. Mustafa will help us on that, but we'll educate them that, you know, there is, it's always a matter of if you tax solar, you're kind of reducing — and you know, if the demand goes down by 10%, I mean, let's say you put a 10% tax and demand goes down by 10%.
So, that 10% which you saved with a breakeven of two years and a life of 10 years, so the 10% that you saved today is going to end up costing you five times that over the next 10 years in terms of the fuel which you could have not imported, you know, and the petrol which you did not import and use electricity for that. So, I think we have enough sensible people. You always hope that.
David Roberts
They're fuel-saving machines. Maybe that's how you pitch them. Mustafa, I know you talk to policymakers a lot. Do you have, I don't know, like in your back pocket, a set of like two or three sort of top reforms that you would like to see the government make to sort of, you know, to make this into a positive experience rather than a bust?
Mustafa Amjad
Yeah, so in Pakistan, electricity is still very vertically integrated as a subject. It's government-owned. There are conversations of privatization across the board. So, for distribution companies as well. And that is exactly something that is also driving the question of, you know, maintaining the health of the utility or maintaining the profitability of distribution companies. Something that the IMF is also, you know, peddling and in tandem suggesting that let's slow down the solar revolution. Let's manage the solar revolution. So you can actually privatize these companies first and then let it be a private problem. But nonetheless, there is that competitive market and a model that is in discussions in the works that Pakistan is shifting towards.
So, opening up the market, allowing more competition would actually better manage the supply and the demand question. I think that's one step that would be necessary. Secondly, I think electrify everything. That's something that already mentioned. It's a huge, huge market, by the way, for EVs. So, Pakistan just put out an EV policy draft last month. So, that's something that once approved can definitely drive a demand for electric vehicles.
David Roberts
You must have access to cheap Chinese EVs too, right?
Mustafa Amjad
Everything. Chinese batteries, Chinese solar panels. Even our coal power projects are Chinese, by the way. Just a heads up. So yeah, China is always going to play a huge role since there's an FTA zero-rated imports coming through. That is going to be a huge factor with EVs as well. I think the industrial electrification and decarbonization, that's another huge avenue. Pakistan's primary consumption off the grid right now is the domestic sector. That isn't necessarily the case in a lot of developing countries. I think that's something that we need to reverse quite urgently. So, more productive load with better building designs, better energy efficiency.
So, it's going to require a lot of lifestyle change. But at the same time, I think it requires a lot of proactive action at the government's end. Grid modernization is another major challenge. Integrating renewables is a challenge, like you said, rightly so, it requires a lot of proactive planning, some excellent markets, some robust systems, peak shaving and whatnot. So, all of that needs to be done in a very short span of time for Pakistan to actually come out of this utility death spiral. The challenge is huge for sure, but it's not something that cannot be addressed.
And then, I think Pakistan is an excellent market, by the way, to also pilot early coal retirements. So, ETFs, just energy transition partnerships, it's a market ready for that conversation for sure. That's another area that could be identified. But the key message is: just drive demand.
David Roberts
Seems like it must be complicated, these contracts. It's complicated to figure out exactly how to retire these things and if so, who pays for them? Are the people of Pakistan going to get stuck with the bill if these things shut down early, or are those talks underway?
Mustafa Amjad
So, the business case is there, right? It would make a lot of economic sense. You are going to pay for capacity payments irrespective of the next 10, 15 years and these plants will have minimum to no dispatch because of solar, because of no demand increase. So, there is business sense, let's pay them off one time and then recover the cost. But at the same time, you have to understand it's Pakistan. There are always going to be competing economic interests and obviously, you have better uses for that money. So, that is where international finance can definitely play a role.
And my final, I think, conversation that Waqas very briefly talked about, but this is a very new energy transition model as well, David. So for the longest time, the blueprint of energy transition was conceived as something that the IFIs (International Financial Institutions) will drive or MDBs (Multilateral Development Banks) will play a role. So we will de-risk or we will make solar and wind profitable for utilities. And that would essentially drive energy transition across markets, especially the Global South. But what has happened in Pakistan, what has transpired in Pakistan, is quite the opposite, right? Pakistan was struggling throughout last year to get a single bid in a competitive auction process for a 600 megawatt utility scale solar project.
Yet, in the same window under the same economic situation and conditions, so Pakistanis were reporting, you know, almost 20 plus gigawatts of solar panels.
David Roberts
Can we, can we pause on that? Why is there not more, I mean, especially given how cheap solar is, why is there not more utility-scale solar happening? It seems like that would be cheap too. What's kind of the, what's the holdup?
Mustafa Amjad
So, Pakistan was one of those countries, by the way, that actually started its renewable journey prior to investing in a coal power project. Fun fact. So, we actually set up wind and solar projects three to four years before we actually set up a coal power project. But then again, I think the direction was set by vested interests, by a few lobbies suggesting that "Let's — RLNG is quite cheap, let's set up those projects, wind and solar is not available, it's not dependable, it's not something that is ready to be adopted at a mass scale." So, Pakistan missed the bus essentially despite being one of the first people to jump on the bus, ironically.
On the other hand, I think right now we are also struggling with a lot of risk associated with the market, with the government, with investing with the government, especially with IPP (Independent Power Producers) renegotiations happening. So, the investor confidence is very low in terms of negotiating with the government. The government's reputation due to the currency devaluation due to the economic crisis at hand also plays a big role in making more market-led solutions and not essentially doing contracts with the government. But there's the opportunity, I think, for a lot of Global South countries. So, this is not something that we associate with Pakistan only.
This is quite common in a lot of other Global South economies as well, or developing countries as well. And that is where I think the focus should shift for the energy transition in general as well. I think for far too long we've been focusing a lot on those top-down approaches to energy transition. Here's a model that actually tries to empower the people, democratize the system. And that's the pipe dream for a lot of us advocates, right? An energy system owned by the people that they can control, they can manage. So that's what the solar revolution in Pakistan is.
And that is why I think it becomes all the more important for this to sustain and to be not a warning sign for future revolutions, but actually a blueprint to follow. And that is where I think the PSA and our work becomes all the more important.
David Roberts
Yes, I have one more question about that. But briefly, I just have one final question for Waqas, which is among the things that are needed for this solar revolution obviously is a workforce, you know, people who are trained in dealing with solar panels and inverters and setting them up. And I imagine there's a lot of, you know, in these cases there's, there's a lot of sort of improvisation needed, a lot of different kinds of situations, a lot of different use cases. Does Pakistan have the workforce that it needs to keep up with the flood of solar panels?
Waqas Moosa
In short, the answer is "not now." But I mean, it's like as soon as we get these technicians and students ready for work, they're snapped up immediately. So, in the solar companies, there is immense competition. You know, the wages are going up. And so, an engineer who graduated in 2010, for example, so you know, in 2010, when solar was not that cool or it was not that in a thing, those engineers are behind in terms of salaries versus engineers who graduated in 2015. So, they have five years or double the experience, but they're getting paid less because the solar guys have just, they have the skill which is required in the economy and it's, it's growing and it's booming.
And I guess that's what happens when there's like a gold rush or the solar rush. This is something which we're dealing with and we need to plan this as well. We are working with the vocational training institutions, multiple vocational training institutions, who would give diplomas, who train technicians. We are also trying to come up with our own certification program for, you know, electricians who have already been working on the field in different, similar kind of areas and give them like a three month, six month, two year courses which they can take and make themselves qualified because we want to make sure that these installations are safe and they're easy to do.
It also opens up a lot of entrepreneurship opportunities, especially in these rural areas. It's typically the electrician is his own boss, so it's their own work. So, teaching them quickly about sales techniques, how to explain solar to their customers, how to do the right calculations. So, a lot of people are learning on the job, but we're also trying, not just as, I mean, Pakistan Solar Association definitely, but also there are other entities. We are seeing this again. We're trying to work with the government because there are some existing opportunities or existing network of — we're trying to update their courses.
So, they're still teaching people about poly panels versus mono panels. And we're like, "Guys, that's like last century. Let's move on and let's talk about the latest things which are coming in." But, so that's something which we're doing. In fact, we have a vision of, you know, I believe that we're lucky in the sense that we're getting to do a lot of this at home and we're getting to do a lot of this deployment and troubleshooting. And, you know, whenever something new comes in, obviously there's a lot of learning which needs to happen.
So, if we can do this right, there's a lot of other markets. Typically, you know, Pakistan exports a lot of labor to the Middle East, especially the GCC (Gulf Cooperation Council), you know, Saudi Arabia, UAE, Qatar, these markets. So, that's again, solar is another area where they're also coming into this. I mean, I was reading the statistics. Pakistan is the number one importer of Chinese solar panels for 2024 in the Asia region. I think we were at 17 gigawatts, followed in second place by India. I was looking at the numbers for Saudi Arabia. They're also at around 15 gigawatts.
So, they will need help in deploying this solar. And that's an area which, you know, so we, we can not only benefit ourselves, but based on that, be able to export manpower or expertise. And like we talked about, the idea of how factories which have daytime solar, but they have a 24/7 load profile. So, how can they merge solar with batteries and solar with genset controllers and, you know, these diesel and PV controllers which can combine these energy sources. And that's something that, again, we have a lot of expertise on because we've been doing this for the last three years.
We've burnt enough machines to know, you know, what doesn't work and what does work.
David Roberts
Well, yeah, I mean, it occurs to me that, like, the training that you would need to fit into the industry in the US or Europe is a little bit different. The training you're giving people is specific to these kinds of markets. And these are the kinds of markets where solar is booming right now. So in a sense, it's almost like a specialized form of labor.
Waqas Moosa
And that's something which we can capitalize on, we can leverage on, you know. If we look at all of Africa, very similar market segments, a lot of Asia, you know, even Middle East to some extent, there are some differences but there is like Egypt, you know, Iran perhaps, I mean Afghanistan. All of these markets have a similar kind of broken infrastructure of energy, the kind that we're living in unfortunately. So this model which we create or which we are sort of creating on the fly or we're working on as we go, that's something which can easily be replicated in other markets as well. I mean obviously the learnings can be replicated, but some of the people who got those learnings can also then go ahead and share those thinking with other people.
And even when we look at some of the more developed markets, in the developed markets, it's like, you know, they're kind of doing a watch and see approach. They're thinking and they're saying, "Okay, let's take baby steps, we'll do one step forward and then we'll do something." In Pakistan, we're like, "You know what, we're just jumping in." So we've kind of jumped into the deep end of the pool and we're learning to swim and hopefully, with the help of well-wishers and, you know, people, the sustainability and solar people around the world, we will be able to come out of the deep end, hopefully with learnings which can then be used in other parts as well.
I mean, we can have case studies and we can have things coming in that will be useful for a lot of people who are watching the solar horizon.
David Roberts
To me, that's one of the things that's so interesting and so great about solar in general is that it's so small and so modular that it just stimulates all this innovation. Not just like innovation in the manufacturing, but just innovation. Like the guy who puts the solar on his truck and shares it between houses. That's innovation. Figuring out how to do things in a low-income market. There's all kinds of innovations waiting to be had there. And then you give, you know, these kind of small holders a little bit of solar and a battery and then they become entrepreneurs, right?
And then, they're figuring out ways to make money. So, it's just so, as you say, Mustafa, so ground up rather than top down. Which brings me to my final question. Because we're short on time, but I love the vision of a bottom-up energy revolution coming to the developing world. I love that idea. I love the idea of a bottom-up; these people are getting powered despite institutions around institutions. But my question is, looking out 5, 10, 15 years, when you talk about really making the shift from developing to developed nation, when you talk about really industrializing, what is the handoff between sort of solar panels and then like enough power to run, you know, mega factories?
Like, do you see how the one transitions into the other, or how this bottom-up sort of becomes fully developed? If you see what I'm asking.
Mustafa Amjad
Yeah, that's the analyst bit. Right. So, Waqas was very right in saying what Pakistan has done is jumped into the deep end of the pool. And obviously, that has its benefits. Obviously, that's where, you know, the good water is. We enjoy swimming but, but there's also a chance of, you know, drowning much higher than compared to the shallow. And so, so, so it's very right. Pakistan will have to, you know, be very proactive in this revolution. There are models so we would now have to be some of the first adopters of some of the technology changes that are happening associated with solar.
We will have to revolutionize the system as it exists. We would not have to sail against the tide, continuing with the example of the pool, but we would need a more proactive approach. So, what could be a model that can work is using these decentralized systems, combining them with the grid, coming up with financial products or financial schemes that could actually provide the capital that is required for solarization to some of the communities that wouldn't necessarily be able to go solar, come up with solar for cities, then join them to the grid system altogether, provide a market where different consumers can actually sell to the grid as well and then use batteries. So, you can either go the California system or you could go the South Australia system.
Right, so, there is that in-between that Pakistan will have to decide. But nonetheless, these are exciting times. To be very fair, I think it's a good crisis to be in because at the end of the day, it is empowering lots of people in the country. And with the US, I think also at a very global scale with the US leadership change, it's also an opportunity for China to actually, you know, with more tariffs coming in, they are looking out for more markets for their solar panel. That would mean more solar panels going into the global south or economies or the developing countries at cheaper rates.
And that would also mean that China would have to decide between, you know, more leadership at the energy transition front, or if they still want to, you know, keep some eggs in the coal basket. So that's also a direction that, you know, they can also have to decide, probably because of the US leadership change, but nonetheless, for the solar revolution, I think it's an exciting time. Pakistan is at the forefront of it. But whatever transpires in Pakistan would essentially be something that would also happen in the Middle East, in Africa, in some Southeast Asian countries, in South American countries.
So, it's something that, if anything, should be sustained rather than taken as a challenge.
David Roberts
I was going to say "canary in the coal mine," but I guess we need a new metaphor.
Mustafa Amjad
Something to do with solar.
David Roberts
Yeah, a canary flying over the solar field.
Waqas Moosa
You know, we have now entered the renewable age, the age of renewables. You know, the Stone Age did not finish because we ran out of stone. And the Iron Age did not finish — and the fossil fuel age is not going to finish because we're going to stop using fossil fuels. But the new technology is ready to take the throne, especially with the coming in of batteries. And you asked a very interesting question. It was, "What's the point at which there is this handover from solar power to — can solar really power the whole economy?"
Especially when you look at an industrialized nation which needs so much power, the optimist in me says, "Yes."
David Roberts
Well, wouldn't we love to see it?
Waqas Moosa
Yes, and we always see these forecasts that if you look at the Sahara Desert, just like X square kilometers of the Sahara Desert is going to be enough to power the whole world. And you're always thinking these are these solar optimist guys, dreamers talking. But what we're seeing now is that we can start seeing a bigger and bigger chunk of this happening. And a lot of this is going to be based on distributed generation. And what we are starting to see now in Pakistan is how the pieces of this puzzle are fitting together. Luckily, we're sitting in a situation where we have a long way to go in terms of our electricity demand.
So, if we can, you know, even if we have a lot of capacity already deployed, if we really go up to the potential of demand, even this capacity will be short for us. You know, in another maybe five years, we will be thinking of what's the next plant to put in. And that's where we will start seeing solar and renewable contribute maybe 50 to 60% of the requirement of the energy for the country versus, you know, an ambitious goal, kind of thing where you stretch and you push, but this is going to be a realistic number where the terawatt hours consumed are going to be 50-60% from renewable and solar. So, hopefully, this happens.
And that's the vision I have. You know, every rooftop needs to have solar. Wherever there is space, just put it up.
Mustafa Amjad
Just to give some numbers to this, Waqas, by the way, so Pakistan is the fifth most populous country in the world and our consumption or per capita consumption is quite low. So, he's very right in saying, you know, Pakistan still has a long way to go in terms of driving more demand. So, there is that element of industrialization and development that will always require more electricity.
David Roberts
It's amazing what's happening, and it's amazing, you know, what could happen. So, thank you two so much, Mustafa Amjad, Waqas Moosa, thank you so much for coming on Volts and walking us through this. This is going to be, I think, just fascinating to an American audience. So, I really appreciate it.
Mustafa Amjad
Thank you so much.
Waqas Moosa
Thank you so much. It was amazing talking to David. I heard a few of the other podcasts of yours as well. Very interesting topics and I love your audience and the kind of topics which you pick up. They're like deep dives into issues which we're facing and which we're looking at, and, you know, which intrigue the curiosity. It was a pleasure.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this episode, I'm joined by James Van Nostrand. He is the top utility regulator in Massachusetts, the first state to explicitly tell gas utilities to plan their own phase-out. We explore this complex transition, including the fate of existing gas infrastructure, the potential of networked geothermal as an alternative, and protections for both workers and ratepayers.
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(Active transcript)
David Roberts
Greetings, everyone. This is Volts for February 21, 2025, "The Massachusetts utility regulator trying to orchestrate a shift away from gas." I'm your host, David Roberts. The state of Massachusetts has some extremely ambitious greenhouse gas reduction goals — 50 percent cuts from 1990 levels by 2030, net zero by 2050 — and hitting them will involve rapid, concerted action on the part of both natural gas and power utilities. Basically, power utilities need to think about how to handle substantially more load, while gas utilities need to think about how to gradually wind themselves out of business.
Guiding them along this tricky path will be the state's utility regulator, the Department of Public Utilities (DPU). Listeners who need a reminder of the importance of public utility commissions should go back and listen to my pod with Charles Hua.
Last year, the DPU issued an extensive and (to my knowledge) unprecedented proceeding on the Future of Gas, which directly addressed, or at least began the process of working through, a variety of thorny questions around how to shift residential consumers from gas to electric heating while holding their costs down.
The orchestrator of this complex process is the current Commissioner of the DPU, James Van Nostrand, a longtime energy expert and law professor who runs the Center for Energy and Sustainable Development at West Virginia University College of Law. He's also the author of a book called "The Coal Trap: How West Virginia Was Left Behind in the Clean Energy Revolution."
Van Nostrand has been around energy regulation his entire life — he is the son of an energy regulator — so no one understands better than him exactly what utility regulators do, what impact it has, and what Massachusetts is trying to pull off. I can't wait to talk to him.
With no further ado, James Van Nostrand, welcome to Volts. Thank you so much for coming.
James Van Nostrand
Thank you, David. Thanks for the opportunity to join you.
David Roberts
I've got tons of questions for you, but I want to start at a general level. So, I want to give people a sense of how much of what you do on the DPU is simply implementing what the legislature says, and then how much do you have some latitude to do sort of policy thinking on your own? So, maybe just start by saying, sort of like, what are the kind of legislative mandates under which you are working here? What are the big targets you have been assigned to help reach?
James Van Nostrand
Probably, the biggest one is in the area of greenhouse gas reductions. Back in 2008, the legislature enacted the Global Warming Solutions Act.
David Roberts
2008?
James Van Nostrand
Yes, and then subsequent climate bills directed the Office of Energy Environmental Affairs to produce a clean energy and climate plan which includes sector sub-limits. So, we have the overall Net Zero by 2050 from the Global Warming Solutions Act, and then we have, under the Clean Energy Climate Plan, sector limits in terms of greenhouse gas reduction. For example, when we issued the order in our Future of Gas docket 20-80, it was really looking at, "Okay, we need to put the local gas distribution companies on a path to achieve those sector limits that were set forth in the Clean Energy and Climate Plan." So that's a pretty clear directive. The legislature says we need to achieve these greenhouse gas limits, but then, okay, they turn it over to us to figure out how we're going to get there.
But the policy direction and the goals were pretty much enacted there. And so, that provided the framework. But then, it's largely up to us how to get there.
David Roberts
That's... I mean, that leaves you a pretty wide —
James Van Nostrand
Oh, yeah.
David Roberts
a wide field of play. So, you are then — I mean, I just want people to grasp this — you're not just approving or disapproving rate cases here. This is a much more sort of active policy development and interaction thing that's going on here in Massachusetts.
James Van Nostrand
Yeah, there are some things where we're giving some pretty clear direction. And I think the legislature in Massachusetts is fairly active in terms of prescribing things that it wants done and how. But there is still a lot of discretion that's afforded us in figuring out how to get there.
David Roberts
Right. So, let's talk about the future of gas then. I'm not sure that this has gotten out to a national audience that this happened at all. It's kind of a big deal, as far as I know, and correct me if I'm wrong, is Massachusetts the first and to my knowledge only state to sort of explicitly say, "We're winding down gas, we're figuring out a plan to slowly wind down and get rid of gas?" Is that unique as far as you know?
James Van Nostrand
I think we're probably the furthest along of any state in the country in terms of having those statutory targets and directing the LDCs (Local Distribution Companies) that we need to be on a path to achieve those targets, the net zero targets by 2050. Yeah.
David Roberts
Yeah, it's a pretty big deal. So, I think when I tell people that this is happening, they have a bunch of immediate questions. Let's get to the immediate ones that occur to people first, which is: how many utilities — you oversee gas and electric utilities, yes? Water too?
James Van Nostrand
And water, yes.
David Roberts
And water. So, give us a sense of how many entities we're talking about here. Like, how many electric utilities are involved in Massachusetts?
James Van Nostrand
Three electric utilities: Eversource, National Grid, and Unitil. There are a couple of different divisions of some of these utilities, but just generally, we have three electric utilities and five local gas distribution companies. Eversource, Unitil, and National Grid have both natural gas and electric. And then we have a couple of LDCs, local gas distribution companies that are gas only, Berkshire and Liberty.
David Roberts
Sort of a tractable number of entities we're dealing with here. So the first question that occurs to people when I say, "Yeah, Massachusetts is winding down gas," which is there are a bunch of gas utilities that exist to distribute and sell gas to people. What happens to those companies? Right, and I think there's a difference here. You just sort of touched on it in passing. But there are utilities that do both electric and gas, which you can easily imagine those simply moving their gas customers over to electricity and you know, all is well still their business, but they're also a couple of just dedicated gas utilities.
So, what are we telling these gas utilities? Are you just saying, "Plan to not exist in 2050 and plan accordingly"? What is supposed to happen to these utilities? I guess that is the question.
James Van Nostrand
I want to start off by emphasizing that this is a very long-term plan. This is still 25 years out, but that is one of the things I think was made clear in the 20-80 order. And the fact that the Clean Energy Climate plan sets out these targets is where we need to be in 2050.
David Roberts
Yeah, I mean, it's implied in all the targets that all the states and all the utilities have. But it's one thing, you know, for this to be implied, and it's another thing to sort of just state it outright, which is, you know, it shouldn't be that big of a deal but is kind of a big deal just to state the consequences.
James Van Nostrand
The Clean Energy Climate Plan really sets out interim targets as well. No, it's very, very complicated in terms of how we actually accomplish this. As you noted, I think it's a little bit easier to solve when you have combination or dual fuel utilities that just sell more electricity and sell less gas. In Massachusetts, it's a little bit more complicated because the utility service areas don't necessarily overlap neatly. So, you might have Eversource providing electricity and National Grid providing the gas. And then, like I say, we have the two standalone LDCs.
David Roberts
LDC is just for listeners?
James Van Nostrand
Local gas distribution companies.
David Roberts
But they're aware that they're going to wind down over time, wind down their operations in Massachusetts? And they are, they've taken that on board and accepted that fact?
James Van Nostrand
I can't say for how much they're accepting it. I mean, I think it's very clear from the order. One of the things I said when we issued the order, which came out in December of 2023, is that I don't think there should be seen as many surprises in here. What we're doing is implementing the greenhouse gas sector limits that have been given to us. My job as a regulator is to put the local gas distribution companies on a path to get there. There shouldn't be any surprises here. And we know we have 25 years to sort this out.
But I mean, one of the things that we can talk about with the 20-80 order, there was a future gas docket. We're requiring the local gas distribution companies, the LDCs, to file climate compliance plans beginning in April every five years. So, show us how you're on a pathway to get there. So, that process will start, I think, to make it very clear what our expectations are and we'll see how those first round of climate compliance plans look. But I think that really forces them to think about, "Okay, how are we actually going to get there? How does, what does this wind down look like?
David Roberts
Well, in the Future of Gas docket, in the intro kind of list, the six big buckets, the six big things you're trying to do here, number four is "Manage gas embedded infrastructure and cost recovery," which is a big question everybody also has. Massachusetts has, you know, thousands of miles of natural gas pipelines that are actively distributing gas. Who is on the hook for, you know, if you shut those down as opposed to, you know, reusing them or finding something to do with them? If you just shut them down, somebody's got to eat a lot of cost.
James Van Nostrand
Yeah.
David Roberts
How do you think about that?
James Van Nostrand
Well, one of the things we made very clear in the 20-80-B order is that nothing we do here is going to imperil the recovery of all that existing investment. I mean, there's the regulatory compact. Those investments were made, they were prudently incurred. And I'm not going to suggest that we're doing anything to suggest that you're not going to recover those costs because there's no finding of imprudence. What we did say very clearly, going forward, we want to discourage any additional investment in natural gas infrastructure. We want to discourage that. So we made it clear that before you make any additional investments in natural gas infrastructure, you need to show that you performed a non-gas pipeline alternative or an NPA analysis.
Is there a way that you could accomplish this without putting additional investment in the ground? So, we just wanted to lay that burden on the utilities. You need to show your work, show us that you considered alternatives that would avoid putting additional investment in the ground. It's very similar on the electric side, the non-wires alternatives. Right before you invest more money in T&D infrastructure, show us that you considered non-wires alternatives. And so, we lay that out. And of course, there are a couple of different pathways. Electrification, whether either ground source heat pumps or air source heat pumps or energy efficiency.
How can you get there? And right now, the utilities are working on that framework. We turned them loose and said, "Work it out with the stakeholders." And so, they're working on that now. We're expecting to see that any day now. But it's going to be part of the climate compliance plans that we expect the utilities to come back and show us what is your MPA framework. Your analysis for considering whether there are non-pipeline alternatives. Because that's a real critical part of how this all fits together is to just get them thinking you need to be looking at different ways of accomplishing this.
David Roberts
Well, I heard from a couple of activists in Massachusetts that they're still out there, fighting several natural gas expansion projects. So, it sounds like if the expansion is slowing, it's maybe not yet visible. When is that going to kind of bite?
James Van Nostrand
Yeah, some of those are FERC certified pipelines. The open season process where they can say, "Hey, we're thinking about building a pipeline. Who wants capacity?" I'm somewhat frustrated. The fact that we still have compounded annual growth rates in our forecast gas and supply plans in excess of 1%, like 1.5% . These utilities are still adding new gas customers. And I don't know how you make the case that "Oh, we're going to get to net zero by 2050, but we're going to continue adding new gas customers." So, one of the things that we've said in 20-80 we're going to look at is the policy for line extension allowances.
David Roberts
Oh, let me just make a note here for listeners too. When you refer to 20-80, that is the number of the Future of Gas ruling proceeding.
James Van Nostrand
Yeah, that was DPU 20. So the order is 20-80-B. That's the order that we issued in December of 2023. And so we said, "Hey, there's a bunch of things we're going to be doing to implement this order." One of them is to look at line extension allowances. And, you know, out in the Northwest, Oregon and Washington have already done things to direct the local gas distribution company to stop providing allowances when a new customer wants to hook up. They say, "Oh, it's going to cost $10,000 to do that. But based on the throughput and based on the lifetime of this investment, we're going to give you an allowance of $8,000 to help you cover that cost."
So, you only owe us $2,000." They tend to make very generous, optimistic assumptions about the throughput. We're revisiting that right now. As we told the local gas distribution company, "File your line extension policies or contributions in native construction. File those policies." We're going to look at whether or not it makes sense to continue providing an allowance. Are we still in that? Do customers all still benefit by providing additional, having additional customers on the grid? That was certainly the case many years ago. We're all better off by adding more customers and spreading those fixed costs over...
Is that still the case? We're looking at that because that's one way that you potentially cut off new growth. We're not going to give you a generous allowance anymore. But it's to be determined. We teed that up as something that we need to consider. There's just a whole range of actions that we need to take to implement that order, and that's one of them.
David Roberts
So, if they turn in plans that you deem insufficiently ambitious, which kind of just between us seems inevitable, what power do you have? Do you have the power to materially force them to do things? What's your sort of police power here? What is the risk to them for going weak on these plans?
James Van Nostrand
There'll be adjudications. Each utility will have an adjudicatory proceeding to review those plans. We'll review them and issue an order accepting, or we could just reject them or say, "Your plan is deficient for the following reasons."
David Roberts
One of the things you're telling utilities is, "Let's try to actively get customers electrified here and decarbonized." This runs into, I think, a renewable energy problem that people are just starting to grapple with. When you're up north, you're in a cold climate, there's a lot of heating load in the winter. If you move all that load from natural gas to electricity, suddenly you have a ginormous new winter load, and you might not have the generation or the grid to handle it. How are you thinking about that? What do you see as the technological way forward here to get everybody off gas, residential wise and small businesses?
James Van Nostrand
In terms of the loads, we're still summer peaking in Massachusetts. What the utilities are showing in their electric sector modernization plans is that they're not going to be winter peaking until probably 2035, 2036. I think maybe Unitil is 2033. So, we have some headroom there by the fact that there's existing capacity because the system right now is designed to serve summer peak. That's really helpful. But going back to what did the legislature direct us to do? Well, the 2022 climate bill required the electric distribution companies to file electric sector modernization plans or ESMPs.
Those were filed with us last January. We had seven months to look at them. That's where the electric distribution companies are telling us, "This is all the additional T&D infrastructure we're going to need to build in order to accommodate EV charging, electric heat pumps, integration of new solar and battery storage." So that's pretty much what those dockets show; the load will pretty much double by 2050. It's because of electrification. That's what we're doing to decarbonize. We need to have electric heat pumps, we need to have EV chargers. The electric distribution company is saying, "Here's the stuff we're going to have to build in order to be able to accommodate that plus integration of solar and battery storage facilities."
David Roberts
How much control do you have over their transmission plans? Because a lot of those are big plans, multi-state plans, regional type plans. Like, if Massachusetts utilities need a bunch more transmission to get the power they need to do this, do they have the power to get it? Do you have the power to get it?
James Van Nostrand
Well, there's transmission that's done more on a regional planning basis. That's ISO New England. I think the New England states have done really well over the last few years of pushing ISO New England to do long-term transmission planning with state goals in mind.
David Roberts
Yeah, I was going to ask about your relationship with ISO New England. Do you feel like they're a good partner in this?
James Van Nostrand
We're getting there. I mean, I tell you, the nice thing about this job is my boss is the Secretary of Energy and Environmental Affairs, Secretary Tepper, and she has an amazing team. We have a person, Jason Marshall, who really handles the stuff at the ISO New England level. I don't have to spend as much time doing that as probably PUC chairs in other states because it's all being handled at that level and that's just an amazing team. But I think there are good things and bad, but we're getting there. I mean, there's a lot of challenges in terms of the transmission build-out.
I think one of the things that we're seeing around the country is the amount of transmission spending that doesn't have much effective oversight. That's a big concern for state regulators because that's just a pass-through. I mean, those FERC transmission rates are just a pass-through. We want to make sure there's oversight of these asset conditioning projects that tend to go below the radar, but they add up. You're seeing some states that are getting very active on the transmission planning front. But I think it's working pretty well because we have a very good organization of New England states that's very involved at ISO New England to really push the planning process to accommodate state policy goals.
David Roberts
So, if you want a bunch more power in winter, there's a limited set of options: You can get a bunch more transmission to bring it in from outside the region, you can do a bunch more storage, or a bunch more local DER generation. But one intriguing way to heat a bunch of homes electrically but without a huge load is these thermal networks that were discussed on Volts a few weeks ago. These are sort of like shallow geothermal, they bring heat out of the shallow earth. You drill these boreholes to bring the heat up and then basically all the neighborhood is connected.
It's just like a natural gas network, except it's carrying hot water rather than natural gas. The furnaces are replaced by heat pumps. Very excited about these. The Volts audience is very excited about these. One of the signal features of them is that they can heat a bunch of houses with relatively low electricity load. So, how are you approaching those? How are you thinking about those? From what I can tell from the docket, the Future of Gas docket, you are putting quite a bit of weight on those, like making quite a big bet on those.
James Van Nostrand
Well, we definitely made the decision in that docket that electrification is the primary pathway. We're not looking at blending in RNG or blending in hydrogen. We're going to be electrifying. And that would include both air source heat pumps and ground source heat pumps. We required the utilities, the gas utilities, by next March, to file demonstration projects with electrification projects. And those will include both air source heat pumps and ground source heat pumps. But as you know from talking to Zeyneb Magavi and Eric Bosworth on the show, Eversource has this project in place in Framingham which is the first utility-scale network geothermal project in the country.
It's very exciting. And there are a lot of attractive aspects of network geothermal. I mean, one is, as you mentioned, it's so much more efficient because the coefficient of efficiency is so much higher. So the peak loads are lower, which means we don't have to build as much T&D infrastructure to accommodate them because they're so much more efficient, which means fewer electrons go through the ISO New England market. So the market clearing price is potentially lower. So there are grid benefits, but also from a workforce transition piece, which we're really mindful of. What's the just transition for the fossil fuel workers?
Well, I've toured the project in Framingham a couple of times, and you're putting pipes down the middle of the street and you're running laterals out to houses. You're just running different stuff through the pipes. So, the workforce transition aspects of network geothermal are very attractive. And that's back to the bigger picture. What are we telling these gas distribution companies? Well, the legislature in Massachusetts specifically authorized them to get into the network geothermal business. And it's very attractive for those workforce transition issues.
David Roberts
Should we worry that National Grid canceled its thermal network pilot in Lowell, Massachusetts? I believe because they said it was too expensive.
James Van Nostrand
It's a little worrisome. But these are demonstration projects. It's lessons learned. They ran into, I think, more ledge, which is the hard rock, than they anticipated. But that's the lessons learned. They're moving forward with the Boston Housing Authority project at Franklin Fields Apartments. So that's moving forward. But we're at the early stage of this and we don't want to be unwisely spending ratepayer dollars and give network geothermal a bad image because we're chasing a project where the numbers just don't work. And so, National Grid briefed us and said, "We don't think this makes sense with these numbers and the level of participation."
And so, they're still moving forward. But National Grid, last month, late December, filed with us an electrification demonstration project for two environmental justice communities, Leominster and Winthrop. And so, they're moving forward with what we asked them to do in the Future of Gas, the 20-80 order was a demonstration project by March of 2026. Well, they filed one in December.
David Roberts
Is that going to be mostly air source heat pumps?
James Van Nostrand
Yes.
David Roberts
Yeah, you know, a lot of people, when discussing the future of gas, let's just say, I'll put it this way. When the gas companies discuss the future of gas, a frequent topic that comes up is renewable natural gas, as you said, which is natural gas derived from agricultural operations, landfills.
James Van Nostrand
Right.
David Roberts
Et cetera, et cetera. The gas companies have this idea that, like, "Oh, we'll keep our infrastructure in place, and we'll just inject some renewable natural gas which will bring down the average carbon intensity of the gas." Or same thing with hydrogen: "We'll synthesize some clean hydrogen, inject it and bring down the carbon intensity of the gas." I think among energy types, the consensus here is that this is ludicrous and never going to work. And that seems to be what you concluded. But I don't know if it is worth saying something about that, like, how much time did you spend on that? Or why did you end up rejecting it?
James Van Nostrand
I mean, that's fair to say. I think we were fairly skeptical. We definitely did not want to encourage, "Oh, we're just going to blend in some hydrogen or RNG, and it's going to be business as usual" because we just don't think RNG can be scaled up enough. It's going to be very expensive. At the same time, though, I don't want to take anything off the table because I think we're still learning about hydrogen and I think there may be some hard-to-electrify industrial uses where we're still going to have to have some gas running through the pipe.
But, I think we wanted to make it very clear that we don't see that as, you know, business as usual for residential and commercial heating. It's going to be, you know, we have to go down a different path.
David Roberts
What's the — I forget who did the analogy, but someone compared putting hydrogen into your residential natural gas pipelines to pouring champagne into your municipal water supply.
James Van Nostrand
It doesn't seem to make sense, but obviously, we have all these hydrogen hubs and we're spending lots of billions of dollars exploring the possible uses of hydrogen. So, we don't want to take anything off the table because there are still some hard-to-electrify industrial uses. Although, I think those uses are getting, with the continuing technological developments, it seems like the hard-to-electrify industrial uses are getting smaller in number all the time.
David Roberts
That category shrinks, yeah, with every passing day.
James Van Nostrand
Yeah.
David Roberts
One thing a lot of people brought up when I raised the prospect of talking to you is just affordability. Massachusetts has pretty high electricity rates. How do you think about simultaneously engineering this sort of mass transition to newer technologies while at the same time trying to bring down costs? Like, how do you think about affordability?
James Van Nostrand
I mean, that's exactly what we were looking at once I started getting into the Future of Gas docket in 20-80. And I think with our aggressive climate goals and my sense of urgency about addressing climate change, we need to move forward full steam ahead on addressing climate change by meeting these greenhouse gas targets. That being said, how are we going to address affordability? So, about 13 months ago, we started what we call the Energy Burden docket, which is docket 24-15, where we looked at: can we design our rates to make it more affordable for the varying levels of income that we have in the state?
A number of states have a percentage of income payments. A number of states have tier discounts. So, we opened a proceeding to look at that, because the way it was for most utilities is you either get the discount or you don't. The discount is 32%, 40%. And what National Grid did in the case that we just approved this last fall was they implemented tiered discounts, five tiers, basically. So, the lower the income, the higher the discount. The higher the income, the lower the discount. And that's one solution that I think has a lot of promise.
David Roberts
This was National Grid's idea, not your idea. They brought it to you.
James Van Nostrand
They knew we were looking at it, but I think they looked at the issue of this cliff where you get a 32% discount or 40%, and all of a sudden you just popped over 60% of the SMI, this median income state median income, and now you get nothing. And so, they recognized that and so they spent a lot of time studying it, but they made a filing and they spent a lot of time developing those tiers. And we tweaked it a little bit, but we pretty much approved it.
David Roberts
Am I right then, that if like they still have to recover the same amount of money?
James Van Nostrand
Yes.
David Roberts
So if low-income ratepayers are being given a discount, does that imply that higher-income ratepayers are paying a little extra to cover that?
James Van Nostrand
Yes, the revenue requirement is going to be the same. The utility has to recover a certain amount of dollars. That's what we said in the rate case. But then, how that's allocated among the customers. And so, basically, the bigger the discounts you give, then the more of an under-recovery that needs to be recovered. And we do it from all ratepayers, basically. But obviously, if you're not getting any discount at all, you're going to end up paying more. That's how it works.
David Roberts
Is that something that you think the other utilities might follow suit?
James Van Nostrand
Yes, I think we just had a technical session last week on this, and all the utilities are at the table, along with some really good witnesses from the Attorney General's office, from the National Law Conservation Center. I mean, some really good experts on this issue. It makes sense. And Eversource has designed a similar program in Connecticut. So, they shared their experience with us. It's complicated because you kind of go into it thinking, "Well, let's put the tiers here, the discounts here," but then you actually have to populate, based on the actual customer data, those tiers and figure out, because you might have a number in mind in terms of what is that under-recovery?
Are we okay with 3%? That's going to get spread to everybody, and then it may turn out to be a higher number or a lower number. So, you're kind of — it's an iterative process. And then, the legislature in this climate bill that just got passed last year gave us the authority to provide discounts to moderate-income customers. So, we're looking at that as well because right now the cutoff is two times the federal poverty limit or 60% of the state median income. So, we asked for additional comment on what is moderate income? How would that look?
So, that's going to complicate a little bit more in terms of the income verification process. But I'm really optimistic. I think everybody's on the same page that we need to get this done. So, it's in place for National Grid and I think Unitil and Eversource and the local gas distribution companies will follow. But we need, we need to provide the guidance and develop an order saying, "Okay, here's the template," and then each utility will have to file to actually implement it.
David Roberts
Well, that kind of solves the problem in that it gives relief to lower-income ratepayers. But does that solve the larger problem of just like the amount of recovered money being high in the first place? Are costs being high in the first place? In particular, it seems like transmission costs are just skyrocketing everywhere and killing everyone. And so, is there anything that the utilities can do to bring down overall cost to reduce rates for everybody? Or are we just kind of in an era of rising costs structurally?
James Van Nostrand
I mean, we're looking at a lot of infrastructure costs with this transmission distribution build-out to accommodate electrification. There's no question about that. I mean, I think longer term, as we rely on renewable energy and we move away from high price and volatility associated with fossil fuels, this is a miserable experience that we had in Massachusetts with the global price of LNG doing what it did a couple years ago. And so that highlights the fact that we need to get off fossil fuels. So I think long term, wind and solar have zero fuel prices, fuel cost, right.
So, I think longer term, we're going in the right direction. And frankly, our job as regulators is making sure that utilities are doing all they can to hold down costs. So, when we look at when the utilities are implementing their electric sector modernization plans, we're going to make sure there were cheaper ways you could have done that. Much like the non-gas pipeline alternatives for the local gas distribution companies. It's not non-wires alternatives, it's virtual power plants. We don't want you to build any more transmission distribution infrastructure than you absolutely have to. So, our job as regulators is making sure that they're not building more than they have to and that's how we keep costs down.
And obviously, we provide very close oversight in the rate cases when they file them periodically.
David Roberts
Before we leave behind the subject of rates, another tool that I think the clean energy world has come to see as sort of key in this battle is the fact that electricity is worth more at different times of day and in different geographical areas. Temporally and geographically, it varies, but rates tend to be historically flat, volumetric, not reflecting that differing value. Have you encouraged your utilities to implement time or place varying rates, sort of more dynamic rates? Is that on your radar?
James Van Nostrand
Definitely. It requires advanced metering infrastructure and smart meters, which we're going to be rolling out for Eversource over the next three years and National Grid over the next three years. So, four years from now, that advanced metering infrastructure should be in place across the state with smart meters. Then we can roll out the time varying rates so we can send customers those price signals, and then because that's going to help us manage the peaks, right? That's going to help us avoid unnecessary transmission distribution infrastructure. If we can send strong price signals to customers through time varying rates and then expect them to manage their loads or, you know, there's lots of products out there to help customers manage their loads seamlessly.
But that's really tied into the affordability issue, is time varying rates and managing the loads.
David Roberts
You know, there's the whole supply management side of things, but then there's the whole demand side of things management side of things.
James Van Nostrand
Definitely.
David Roberts
And that requires those smart meters, that requires that knowledge of that granular knowledge of what's going on in there. So, actually, Governor Healey signed a law in November, I believe, that among other things, called for a statewide depository of this information from these advanced meters. Do you know when that goes live, that data repository? Because, you know, a lot of utilities — this is something we've podcasted here on Volts about also — a lot of utilities have this information, but they just don't share it or won't share it in a useful format. They're very proprietary over it. What's the status of that?
James Van Nostrand
Data access is an issue that we're looking at because I think we're going to be spending a lot of money on the advanced metering infrastructure and the smart meters to give customers those pricing options. A lot of customers just don't want to spend the time messing around with it. They need some interface. Right. A third party is going to come in there and say, "I'm going to do all these things with your thermostat or just do these things to smart-charge your car in the middle of the night without you having to do that yourself."
But that means all this stuff needs to fit together, and it's interoperability, it's digitalization. So, we're looking very closely at that because as we're spending these massive amounts of dollars on advanced metering infrastructure, we want to make sure the utilities are taking advantage of the latest technology. So, when these products are rolled out, that will help customers manage their energy costs. These things all work together. But, data access is a big deal. And, having been on the utility side of the fence for a number of years, I mean it's confidential customer-specific information, and we don't like to let that out.
And then, you have cybersecurity issues to make sure that it can't get hacked. But it's definitely part of the discussions because these things, it's not going to happen if the other players. Because what we don't want is the utilities to be sort of the gatekeepers of technology. So, the other players need to have access to the customer information. But, we got to work that out so that it's done in a responsible way.
David Roberts
Yeah, I mean, that's basically the premise of the whole demand-side market, the whole virtual power plant market, all that stuff requires that information. Do you know specifically when that repository is going to exist?
James Van Nostrand
No, I don't know the date certain.
David Roberts
Let's talk about these transition plans, which I think are very interesting. So, there's a lot of pressure everywhere in the country to decarbonize and everybody's got their plans. States have plans, utilities have plans. But this is interesting because you are telling each individual utility, "Make it explicit, tell us what you're going to do." So, what have you told them that those plans must include? Like, what do you expect them to look like? And have you seen them yet? And what's your take on the enthusiasm of their compliance thus far?
James Van Nostrand
These are the climate compliance plans for the local gas?
David Roberts
No, the electric sector.
James Van Nostrand
Oh, electric sector modernization plans?
David Roberts
Yeah. Are these different? The gas utilities have to have plans, and the electric utilities also have to have plans. Are those separate plans?
James Van Nostrand
Yes, they're separate plans. The climate compliance plans come out of our Future of Gas docket. So every five years beginning in April, and then on top of that, we have this LNG import facility right here in Everett, the Everett Marine Terminal. And so we had four of the LDC's local gas station distribution companies are off-takers of that. So it was going to otherwise close down once the Mystic Power plant closed down. And because we need, I think the Everett Marine Terminal is a pretty strategic asset because it can put LNG directly into the wholesale pipelines right there.
And also, the vapor can go right into the National Grid distribution system, and there's also truck loading facilities right there. So, as an insurance policy, because if we do have an extended cold snap, we were convinced that we needed to keep the Everett Marine Terminal open. But as part of the orders that we issued in May of last year approving six-year contracts, those utilities who are off-takers from the Everett Marine Terminal have to file every year. It's kind of another aspect of the climate compliance plans. But what are you doing between now and when those contracts run out in the spring of 2030?
What are you doing to reduce your reliance on the Everett Marine Terminal? So, it's very similar in terms of the climate compliance plans, but focused more on when do we need the Everett Marine Terminal. What particular uses or neighborhoods or geographic areas are we increasing our reliance on the Everett Marine Terminal, and how can we phase that out? So, that's another aspect.
David Roberts
So, you're trying to make that into a kind of backup or last resort rather than a main source.
James Van Nostrand
It's a very expensive insurance policy. Because the fear was, without the Everett Marine Terminal, if you have an extended cold snap and we're going to be trucking LNG over potentially long distances, it was risky. So, we decided we needed to step up and have the LDCs pay the insurance policy premiums to basically keep that thing open. But we don't want it to last any longer. We have an Office of Energy Transformation which the Governor, Governor Healey, Healey-Driscoll administration, created, being headed up by Melissa Lavinson. One of her three focus groups is on this very issue, working with the local gas distribution companies, really pressing them on their reliance on the Everett Marine Terminal.
What can we do to reduce that? So, that's going to be a part of the climate compliance plans that we get in April. There's going to be for those LDCs that are off-takers from EMT, there's going to be a separate discussion, and "Here are the things we're going to be doing." That's an annual requirement during the term of that contract. So, really complementary paths, but it's really helping get the message that we don't want to have to renew the contract to keep the Everett Marine Terminal open past 2030. So, we've got to reduce reliance.
David Roberts
This is all pretty remarkable. Are you not getting pushback from the gas utilities?
Like, are they, you know, sort of resigned that this is all inevitable and they're on board? Or do you feel like they're complying in good spirit? It feels like you'd get more fight.
James Van Nostrand
I mean, it's great having Melissa Lavinson on the team helping with this. She's got a lot of experience in the utility sector, and I think she can have more difficult conversations with them than I can in the context of what the Office of Energy Transformation is doing. But I think they're getting the message that we are very serious; we're going to do all we can to hit these targets. Massachusetts, I think, has had a long track record of being one of the leading states in the country in terms of addressing climate change. We take it very seriously.
I certainly take the urgent need to address climate change very seriously. So, I think they are getting the message and it's great to have that additional push from the Office of Energy Transformation helping us with these gas transition issues.
David Roberts
Yeah, it's good to have a united government. I will say the levels of government are on the same page.
James Van Nostrand
Yeah. The Healey-Driscoll administration has been great, and Secretary Tepper and the folks at EEA have been great. It's a great team, and we're all on the same page.
David Roberts
Well, what about these electric sector modernization plans? What do you want out of those?
James Van Nostrand
What those show is what's going to be spent over the next five and 10 years, and then over the next through 2050. I mean, it's been really helpful to think about what this decarbonization, what electrification actually looks like in terms of how many additional electric heat pumps do we need to accommodate? How many additional EV chargers, how many solar facilities, how many battery storage facilities? And just forcing the utilities to take that long-term look is how much is your load going to increase and where are we going to put these facilities? And then I think it gives us the opportunity to really push hard on sort of the non-wires alternatives, the virtual power plants.
Are there lower-cost options that you could be pursuing? And, I listened to the podcast you had with Cara Goldenberg because I've talked to her many times at RMI. I try to pick her brain whenever I can because she's one of the best people in the country on this issue. But, it's, "How can we put in incentive mechanisms so that our interests in achieving these clean energy goals are aligned with the utilities' financial interests?"
David Roberts
Right. This is performance — this is for listeners who might not remember — that was the pod about performance-based rate making, which is just —
James Van Nostrand
Or regulation. Performance-based regulation.
David Roberts
Yeah, performance-based regulation, which is just compensating utilities based on their performance rather than just cranking stuff out the door.
James Van Nostrand
And we've been doing that for years and years in Massachusetts with multi-year rate plans and decoupling. And with the National Grid case, we actually put in place performance incentive mechanisms and said, "Here's a couple of things that will motivate the utility. They're aligned with our goals." We put a performance mechanism, incentive mechanism in place for integrating distributed energy resources.
David Roberts
Interesting.
James Van Nostrand
So, there's an upside and a downside. If you put a certain number of megawatts in there and if they exceed it, they get rewarded. If they fall way short, they get penalized. And the other thing was enrolling customers in these income-eligible, the discount programs. They did a great job of designing these tier discount rates. Now, go out and enroll your customers. And so, we put a performance incentive mechanism in place there that will reward them for getting low-income customers and income-eligible customers enrolled. Because these discounts don't do much good if we can't get the people who need them enrolled.
And I think the numbers showed out of 370,000 eligible customers in terms of the low-income discounts, only maybe 150,000 were currently enrolled. So we thought that was a good place to put in a performance and incentive mechanism. That's just another aspect of performance-based regulation that we really hadn't done much in Massachusetts. And another piece of performance-based regulation is service quality indices. Because we hold the utilities accountable, we take it very seriously. The frequency and duration of outages. And over the last 20 years, we've imposed penalties of $42 million against the distribution companies under our service quality standards.
So, I think we've got a pretty good track record on implementing performance-based regulation. The challenges are great with the billions of dollars that the utilities are proposing to spend on these electric sector modernization plans. To figure out how we can address what's obviously a bias of the utilities is to build more T&D, put it into rate base, and earn a return on it. How do we address that bias by including some sort of incentive mechanism? Because the tools that we have available are really not all that great.
It's a prudence review. Right. You've already built the thing and we decide, "Oh, there was a lower cost solution that you could have done and now we're going to disallow a portion of the cost." Well, it's already built, so that's not a great deal.
David Roberts
And you're dealing with counterfactuals, which are...
James Van Nostrand
Exactly, exactly. And it's very, very, very hard. The staff resources that it takes, and we've got a great staff at the DPU, but the staff resources that it would take to do a prudence review, to second-guess T&D infrastructure investments because it requires a lot of technical expertise. And utilities, they can out-resource us and they will.
David Roberts
Way better to get it right.
James Van Nostrand
Right. With the incentives. Which is where Cara Goldenberg and her team at RMI come into play. Yeah.
David Roberts
Another big complaint of electricity folks, including myself, is the interconnection queue. I think at this point, clean energy folks are familiar with this. Just like build a power plant, you apply to put it on the grid and then you wait for whatever, three to five to seven years. Do you have your hands on that at all? Do you have any control over that, how that works or any way of speeding that up?
James Van Nostrand
We do that. In fact, Secretary Tepper at EEA pretty much said 2025 is the year of interconnection for us. So, we identified at all three levels. I mean, at the power plant level, that's really mostly ISO New England, but we're very much involved in that process. Those interconnection queues to hook up a power plant are largely in control of ISO New England, but our New England states coordinate on that. And that interaction, I think, is working well. But at our level, we've got the integration of solar projects and battery storage projects. And that's where the ESMPs (electric sector modernization plans) come into play because it helps us identify where that infrastructure is going to be necessary in order to accommodate that.
And then we have interconnection just at the local level. So, you know, a home builder comes in and says, "I got this subdivision done. And the utility says they can't hook me up because they don't have any transformers." And so the home builder, "I can't close. Right. I can't get my money because —" you know, and so we're dealing with that too. So at all three levels. And so at EEA we've set up an interconnection task force to attack that at all three levels. Again, just a great team. Mike Judge, the undersecretary, and then Josh Ryor, who works for him.
David Roberts
I'd be really interested to see the outcome of that process because, man, is that a thorny problem.
James Van Nostrand
It is. And it's, you know, with supply chain issues with the transformers. And for us, we've had a process of capital investment project, sort of a cluster study, kind of what FERC was proposing in some of its recent orders. We've been doing that. You know, when you have these upgrades that are necessary to accommodate a solar array, for example, you're also going to be improving the grid to some extent. So, some of those costs should be borne by customers, some of those costs should be borne by the developers. That's a very intensive process to figure out when you do these cluster studies.
But, we've been doing that. We issued a couple of orders this year approving eight of those capital investment projects. Four for National Grid and four for Eversource in the electric sector modernization plan going forward. Then, we have a long-term system planning process as part of that. But, that's where that comes into play is looking at where those DERs, those distributed energy resources, including the battery storage systems, where those are going to be integrated and what kind of infrastructure is necessary in order to accommodate that. So, we're on it.
David Roberts
Right. Well, in terms of figuring that stuff out, the DPU has created a new department within itself called the Division of Clean Energy and Resilience Engineering. Tell us what that is and whether you think other PUCs ought to follow suit.
James Van Nostrand
When we look at what are the things that we've always done and what's going to be different going forward, and so, looking at those work streams, one that really comes to mind is what everybody's calling "integrated energy planning." Where it's, you know, the gas utilities do their thing, the electric division does their thing.
David Roberts
It's all the same thing now.
James Van Nostrand
Here at the agency, we have an electric division and a gas division. But if we're going to accomplish this gas transition, you've got to figure out, "Okay, this is based on leak-prone pipe" or whatever characteristics. "This is an area of a gas service territory that we could potentially decommission. But does the electric company that serves that territory have the capability to take on that additional load?" So, that's a big aspect of what the Clean Energy and Resilience Engineering Division is going to do. And part of the electric sector modernization plan statute requires that utilities make investments that are going to improve the resiliency of the grid, being very mindful of climate change, extreme weather events.
And so, that's another piece of what that engineering team is going to do, is evaluate these electric sector modernization plans to make sure that the investments they're categorizing as resiliency investments really are improving the resilience.
David Roberts
And these are like engineering nerds, right? This is not an economy thing. It's not a prudence thing. This is about nuts and bolts and whether it works.
James Van Nostrand
And they help us analyze the capital investment projects in terms of that allocation of cost between the developers and the ratepayers. But no, it's basically all our engineers. And I think it's a tough market for higher-end engineers. I think that's going to give us a little bit of, "Hey, we're doing the cool new stuff here at the DPU. Come join us and work with this great new division for a few years." We're excited about it.
David Roberts
Yeah, that's pretty cool. That's a pretty cool job opportunity. And it really highlights to me one of the important things about the PUC discussion generally, which is just that, you know, it's not the sexiest topic, but just resourcing them adequately is, you know, you get a lot of what you want out of them just by resourcing them adequately, which I don't think most states do. The fact that you're starting teams of engineers suggests to me that maybe you are actually getting the support you need.
James Van Nostrand
The Healey-Driscoll administration has been very supportive because the legislature gives us these assignments. The electric sector modernization plans, as is a good example, the new siding and permitting bill. And now we've got to hire the people to implement that. And there's a recognition that, "Hey, we're giving you additional things to do and now we got to support you in your budget requests and personnel requests to make sure that you have the bodies to get this stuff done." The electric sector modernization plans, we had seven months from January to August to basically review probably 1500 pages of filings with the three initial and issue an order.
David Roberts
Yeah, you just need bodies, bodies in chairs to do that stuff.
James Van Nostrand
Right.
David Roberts
Another cool thing that Massachusetts did, that I don't think got really enough press, is that Governor Healey signed into law a bill that reforms siting and permitting. So this is, you know, the subject of immense angst among clean energy people nationally. Does that bump up against you at all? Are your hands on that at all? Does that help you at all?
James Van Nostrand
Our Siting Division here at the DPU pretty much serves as the staff for the Energy Facility Siting Board. So, we're going to be staffing up considerably because there's a recognition and electric sector modernization plan certainly highlighted that with the number of additional substations that need to be built and all the infrastructure and it's a sense of urgency about getting it done. And so, we need to streamline the process. So, the Governor appointed the team that's looking at the clean energy infrastructure siting and permitting process that met for months and months and months and came up with a consensus piece of legislation that got passed.
But it puts us on a stricter timeline for getting these things done. It's kind of a one-stop shopping thing in terms of not having to get local permits, but it's put a lot of pressure on us to hire enough people to process these things more quickly. Another exciting piece of it is the public engagement aspect of it because I think citing energy infrastructure projects kind of gets a bad name. It's like, "Oh, we've decided we need to build this substation and we're going to put it here. Now let's meet with the community and ask them what they want from us in order to put it there."
We need to move that process up in terms of public engagement. It's about doing things faster but also doing things better in terms of public engagement. So, we've got a new division of environmental justice and public participation that's really going to help that process.
David Roberts
It's just a good reminder that we don't have to wait for national action on this.
James Van Nostrand
We are not, not in Massachusetts.
David Roberts
States can do a lot of stuff on their own. Slightly random question, but you recently approved what's called the New England Clean Energy Connect, which as I understand it, is just a big fat power line bringing Canadian hydropower down to you. A, say a word about that. But B, what I actually was wondering most is, do the tariffs affect that? Because I feel like that's a big pipeline of cheap power that's going to be very helpful to you in keeping costs down.
And are you worried at all that it's not going to be as cheap as you thought?
James Van Nostrand
Yes, yes, we are. I mean, that's a good example of depending upon where the tariffs end up landing. But I think it's 10% on energy from Canada, but no, it's bringing 1,200 megawatts of electricity of cheap hydropower down from Canada over a 20-year period and that could be a 100 to 200 million dollars a year increase from what the price otherwise would be. Just because, guess what, that's energy coming from Canada. So it's going to be subject to a tariff. So it's something that will reduce costs and it will flow through the lower rates. But that benefit will shrink if those tariffs take effect.
David Roberts
I saw you had a ruling on what are called municipal aggregators. So, for listeners' benefit — I think I've done a podcast on this a few years ago — but basically, the idea is if a town wants to, it can basically opt out of utility procured power and procure its own power. Generally, I think it's done — well, generally right now, people can get cheaper and cleaner power by doing it. I don't know how long that's going to last. But how do you think about — you know, the worry in California, the worry I always hear from utility types in California is that like if all these towns are opting out, they're also opting out of the fixed grid costs.
Right. Which is just leaving fixed grid costs on a lower and lower number of customers. Do you worry about the utility death spiral? Do you worry about that getting out of hand? How do you think about the role of municipal aggregators?
James Van Nostrand
I know in California, I mean, it's still a vertically integrated state, so you've got the utilities who still own their power plants, right? And they're looking at, "Hey, we procured all these resources in order to serve a certain amount of load and now that load is disappearing." We don't have that problem being a restructured state in Massachusetts because the EDCs (electric distribution companies) are still going to be delivering the electrons. And it was just giving the municipalities the procurement ability to manage that supply themselves. And if they want to procure a higher percentage of renewables.
But it's a local control aspect of it. And it was a huge problem when I got here. I mean, literally, even before I started the job, I did kind of meet and greets with the two chairs of the utility committee on the telecommunications, utility, and energy committees. And they said the first thing they hit me, "You need to solve this municipal aggregation issue. Because we had applications that had been languishing for up to two and three years and —
David Roberts
Oh, "solve" just means like "Hurry it up."
James Van Nostrand
Yeah, and I just signed off on one today. We are now doing it and we've committed to do them in less than 120 days. And we just approved one today that we're two weeks ahead of the 120-day deadline. We're now issuing four-page letter orders instead of 45-page orders, but we've cleared the backlog.
David Roberts
Am I right that most of them are getting cleaner power? Is that generally the motivation you see?
James Van Nostrand
Well, it's up to municipalities. They can decide to offer power that's more aggressive in terms of clean energy goals than basic supply. So, we still have a customer in Massachusetts who has three options. They can do nothing and just get the supply from their utility. They can do municipal aggregation through the municipality. I live in Cambridge, for example, they have a very good muni AG program. And then there's also competitive suppliers. We have vendors that will do —
David Roberts
Right. You have retail.
James Van Nostrand
we have retail suppliers, which has been sort of problematic. The administration would like to stop retail suppliers in the residential sector. But, so long as it's there.
David Roberts
Really, do you want to unwind that restructuring and just undo that?
James Van Nostrand
That's the position that the administration is in. I mean, as long as it's there, as long as an option here at the DPU, I think we still have an obligation to protect customers and make sure it works. But there's just been a lot of abuses out there. The Attorney General has issued a couple of reports that just show some bad actors out there that just take advantage of customers.
David Roberts
And I don't — I mean, this is just me editorializing — but I've never seen any data or reports that really convince me that there are large savings to be had here. Like, it's the promise, the original promise of it doesn't seem to have particularly paid off.
James Van Nostrand
I think the savings are there, but it takes a lot of time to sort that out. You can do the analysis when you first sign up. Where customers are getting killed is in these automatic renewals. You get this teaser kind of a thing for a year or two and then that rolls off and all of a sudden you're paying 30, 40, 50 cents a kilowatt hour.
David Roberts
Just the same way you ended up subscribed to Paramount Plus, or whatever.
James Van Nostrand
Exactly.
David Roberts
You signed up for the cheap month, and then they —
James Van Nostrand
Exactly. So, actually, our competitive supply team here at the DPU has got an idea in mind. And so, we're going to be rolling that out within probably about a month from now to see if we can try to solve it. But there's also the legislative solution, which is just, "Let's just pull the plug on competitive supply in the residential market." But either way, we've got to address it.
David Roberts
That's really interesting. So, you know, last year I interviewed the head of Connecticut. The relatively new head of Connecticut, Marissa, who's awesome, has come in and really shaken things up. She told utilities, "The cushy free ride is over. You have to actually —" you know, she actually turned down a few requests for rate increases. And the reaction of the utilities in Connecticut, I don't think I'm exaggerating when I say, is hysterical. They have lost their minds. They're suing right and left. They're writing cease and desist letters.
They're hassling the governor to fire her. They're just like, it's a full-on tantrum. Which, I think, one of the things it reveals is that they are very used to what I think is still probably the general state of things, which is regulatory capture, which is like utilities have a hold on utility regulators. Either it's financial or just in many cases, they used to be employed. You know, they're trading employees back and forth. There's a lot of different ways the sort of regulatory capture works. And it looks like losing those privileges in Connecticut has driven them crazy.
So, I'm sort of wondering. Now that you're in this position, you probably have a clearer view of it. I wonder if you could just say a little bit about how you think regulatory capture works, how you try to avoid it, and whether, like for instance, Eversource is the utility in Connecticut — that's one of the Connecticut losing its mind — it also operates in Massachusetts. Is it also threatening you in Massachusetts, suing you, and trying to get Healey to fire you? Like, talk about all that.
James Van Nostrand
There's a lot there, David.
David Roberts
I know, I know. Sorry to drop that on you with five minutes to go.
James Van Nostrand
I think we strike the right regulatory balance. I think we've got consistency. I was in this business for 40 years. I spent 22 years in Seattle.
David Roberts
Your family was in the business.
James Van Nostrand
My father was a regulator in the state of Iowa, and I represented utilities in the northwest for 22 years. I also represented an environmental NGO and environmental non-governmental organization in New York. So, I've worn a lot of different hats. It's a complicated job. We really are balancing the interests of the utility, which has a fiduciary obligation to its shareholders to maximize profits. But our job is to — I like to use the term, I think I stole it from John Rhodes, who is the former chair of the New York Commission: We are the stewards of the ratepayer dollar.
Our job is to protect the ratepayers and strike that balance so the utilities can still raise capital on reasonable terms, but customers can still get rates as low as possible, consistent with reliability and—
David Roberts
Then, decarbonizing also in the midst of all that.
James Van Nostrand
Yeah, and I think we strike that balance in a little bit different way. I mean, it is troubling for me that the credit downgrade that Eversource is suffering in Connecticut is affecting Massachusetts ratepayers. That's not ideal for me because that does affect me and I didn't have any control over that. I don't think we're not regulating Eversource in a way that says that the credit risk is greater. But different regulators have different philosophies. But I think I bring to bear the years of experience I have. We've got two other great commissioners that work with me. We've got a great staff.
I think we're striking that balance in the right way. We're implementing performance-based regulation and we have done so for years. I think we've got a pretty good track record of continuity and I think that serves ratepayers in the long run; that consistency. The financial community knows. They pretty much know what they're going to get from Massachusetts regulators. I think we have a good relationship with the utilities, but we have candid conversations. We certainly don't have regulatory capture in Massachusetts. I think there's a pretty healthy dialogue and I can have some pretty candid conversations when there are things going on that I'm not particularly happy about.
But I think overall, we strike a pretty good balance.
David Roberts
All right, well, then final question. How long do you anticipate serving at the DPU? And are there big, like the Future of Gas thing, is big. Are there other big things you want to check off your list before you're done there?
James Van Nostrand
Well, my term on the commission is coterminous with Governor Healey, so that's through like January of 2027, and my term as chair is two years. And I don't have any reason to think I'm not going to be reappointed as chair. So, I'm going to serve that till January 2027. I tell you, the two big things are a lot right now. The Future of Gas and the electric sector modernization plans and this clean energy buildout. Those are very complicated. Yeah, it's really a lot to keep me busy. I think we're still making some progress just on transparency.
We've had a lot of customers expressing confusion about reading their bills and trying to figure out what's going up and why. I think we have accomplished a lot more in terms of public engagement and transparency, and just having more of our proceedings open to the public. I think we've come a long way on that, but there's no shortage of things to do.
David Roberts
All right, James Van Nostrand, thanks so much for coming on. It's fascinating getting a peek inside utility commissions and all the many, many, many things you're busy with. So thanks for walking us through it.
James Van Nostrand
Thank you, David. It's been great.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this episode I'm joined by Annemarie Gray and Felicity Maxwell to discuss how the YIMBY movement is finally cracking the code on housing reform in major American cities. We examine the recent groundbreaking victories in New York City and Austin, exploring how pro-housing groups are learning from each other through networks like Welcoming Neighbors Network, and wrestle with the challenge of increasing housing supply while protecting existing communities.
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David Roberts
All right, hello everyone. This is Volts for February 19, 2025 — I have to keep reminding myself — "What YIMBYs are learning from their victories across the country." I'm your host, David Roberts. Few social movements have had as many political and policy victories in recent years as the YIMBY movement. It stands for "yes in my backyard," and it refers to the loose coalition of groups and constituencies that are pushing US cities and towns to rapidly increase housing supply.
It has gained momentum from the growing acknowledgment of a housing crisis in the US — a crisis that is suppressing economic growth, exacerbating economic inequality, increasing traffic, pollution, and greenhouse gases, and siphoning voters away from dense blue areas into red exurban and rural areas. By making it difficult to build housing, progressive blue city leaders are shooting themselves, and progressivism, in the foot.
Two of the biggest housing breakthroughs, both the result of years of patient effort, have taken place recently in New York City and Austin, Texas, both of which have passed sweeping reforms including everything from upzoning to reduced parking requirements.
My two guests today played key roles in those victories. Annemarie Gray runs Open New York, a grassroots pro-housing advocacy organization, which she joined after several years as a policy advisor to New York City government. Felicity Maxwell is a long-time housing advocate and organizer in Austin who now runs Texans for Housing, a pro-housing advocacy organization, and is on the city planning commission.
Though both are focused on their local campaigns, they are also part of the Welcoming Neighbors Network, a growing coalition of pro-housing groups across the country dedicated to sharing insights and strategies. I am extremely keen to hear about those insights and strategies and how well they might transfer across geographies, so let's get into it.
Annemarie Gray
With no further ado, Annemarie Gray, Felicity Maxwell, welcome to Volts. Thank you so much for coming.
Felicity Maxwell
Thanks for having us.
David Roberts
Super excited about this conversation. Just to frame things a little bit — and I discussed this with both of you in advance — the reason I wanted to do this and sort of the mindset from which I'm approaching this is, to me as I've gotten interested in urban issues, housing, transportation, transit density, that whole network of one thing about it has struck me over and over again. I've never quite been able to put it adequately into words, but I want to compare it to the Sunshine of the Empty Mind or whatever that movie is called, insofar as, I mean, it seems like no one ever learns anything.
Like the battles never change, like the battle over the bike lane in 2025 is the same as the battle over the bike lane in a different city in 2018, or 2010, or 2005. It's like the same constituencies arrayed against one another, the same arguments, just the same everything. It seems like it's always struck me like nothing ever changes. There's no momentum. You know, it's like you're starting over again every time. It's very frustrating in that way. I don't exactly know what the term is for that or whatever.
All of which is to say, it's very exciting to me to hear about this network of pro-housing groups that are trying to share what they've learned, share strategies. Just the idea that, like, we might actually be figuring out how to do this better and quicker over time, you know, just like that's very hopeful to me. And this sort of run of victories that has popped up lately seems to indicate to me that, "Yes, like, maybe we are learning, maybe we are getting better, maybe it's not the same every time." So, that's what I'm excited to hear from you guys is like, what we've learned that might be transferable.
But to back up a little bit — sorry, that's a whole second introduction — to back up a little bit. Let's just start by maybe each of you what has happened in your city. I referenced it very briefly in the introduction, but Annemarie, maybe I'll start with you. Maybe just tell people, like in the last two to three years, what happened in New York City? What are the reforms that passed?
Annemarie Gray
Sure, and super great questions. The positive answer here is, I think, we are making progress. Right. As you mentioned, I worked in government and most recently in city hall for 10 years total, three years in city hall, really overseeing planning and land use and housing issues. And frankly, the momentum that we've seen and the narrative change that we've seen even in these short years has been so interesting. In 2020, 2021, I worked on the SoHo, NoHo and Gowanus rezonings, which were two of the first the city has passed in decades that were in sort of high opportunity, well-resourced neighborhoods.
And that kind of had seemed to be politically off-limits before that. And you had this emerging group of some established orgs, but also just some kind of like loosely organized individuals, volunteers who were tied to this group, Open New York in the early stages start to show up and sort of have this new and newly visible constituency saying, "Yes," especially to these types of projects.
David Roberts
Yes, I want to. I want to get in later to exactly what that constituency looks like.
Annemarie Gray
Yes. And so, I saw that from the inside and honestly, I made the jump almost two and a half years ago to become executive director of Open New York and really grow it to focus on not just project by project, but citywide. And now we're even doing statewide work. And we've grown tremendously because there just has not been this outside force in the same way.
And then, we've been part of this network that has also just grown exponentially in the last couple of years and really learning from each other. What's been so interesting is, since I took over, we saw the first proposal at the state level for the types of state-level reforms that New York has never passed yet, but other states have. That was in 2023. And then, the City of Yes for Housing Opportunity proposal is sort of rooted in a lot of the work when I was back in City Hall and a lot of the sort of fair housing focused work.
And that passed in December after a really huge push that us and our organization, our members were really, really, really active in. And that, frankly, was the first real pro-housing win for New York. And it was actually taking a citywide approach rather than these one-off, kind of like toxic neighbor to neighbor fights to actually say, "We need to do this, we need to bring this to a higher level of decision making and pass these really sensible policies that impact every district." We are also now — yesterday we were up in Albany relaunching the first major pro-housing bill that would be statewide, called the Faith-Based Affordable Housing Act.
David Roberts
Maybe just tell us, I mean, I know it's a lot, there's a lot in there, but maybe just give us the brief, sort of high line, like what is the City of Yes? It's a package of a bunch of things. What are the sort of top-line items in it?
Annemarie Gray
Yes, so yes, it's a citywide plan passed in December. It has a bunch — the tagline has been, it was introduced by the city and was really passed with a lot of leadership also from the City Council. It's a whole package of reforms with the idea it's a little more housing in every neighborhood. And so it includes legalizing accessory dwelling units in some of the lower density parts of New York City, making it easier to convert an office building to housing, some transit-oriented development, lifting parking mandates in a lot of parts of the city, and introducing a program called University Affordability Preference that added an affordable housing bonus in a huge swath of the city and a handful of other things like that.
So, something that touched every neighborhood in a very sensible way.
David Roberts
And this is, you know, as you said, just to emphasize, this is really the first citywide shakeup in zoning and land use in New York City in ages.
Annemarie Gray
Correct.
David Roberts
Okay, Felicity, what did Austin do?
Felicity Maxwell
It's funny because it sounds a lot like what New York did, except in Austin. So, yes, for those who may not be familiar, during COVID and even before then, Austin had sort of become this hot, hip city that everyone wanted to move to. And of course, we had this huge run-up in housing, a result in a real constraint on supply. And I think some people may not be aware that we'd actually tried to do a lot of work around reforming our land development code, like how we build in the city for basically 10 years.
So, it's interesting to hear, Annemarie, because what they did in maybe a shorter time, we did over a much longer time. The organization that I'm with, or I have been a board member of, AURA, has actually been in Austin for over 10 years. And so, the work was much slower here, but then suddenly accelerated very quickly after 2020.
David Roberts
What's the quote? " Slowly, and then all at once."
Felicity Maxwell
All at once. That's literally what happened. We had some elections that really led to a big turnover in who was leading the city and the city council members. And there was suddenly this huge appetite to really address in a very holistic and, I think, I would say, dramatic way: How can we sort of try to attack the unaffordable housing in Austin? So, we had a suite of reforms. They were a little bit more piecemeal than I think what they all did in New York. We didn't have a great tagline like "City of Yes".
David Roberts
It is a good tagline, I gotta say.
Felicity Maxwell
It's a good tagline. But, you know, we kind of, I like to joke, we speed ran it because we eliminated parking minimums across the city. We did minimum lot size, we did three units by right. We did a lot of work around our new Project Connect, which is our transit system. So, that's ETOD work. We also did something related to compatibility, which is how close you can build to a single-family home. So, it was literally all these kind of thorny issues that had been part of Austin's — like the underlying causes of all of this for years and years and years that have been sort of intractable.
David Roberts
When you say three units by right, will you just unpack that very briefly?
Felicity Maxwell
Oh, absolutely. So, similar to what Annemarie mentioned, we now have the ability to put up to three units on any single-family lot in Austin.
David Roberts
And when you say "by right," that just means you don't have to ask. You can just do it.
Felicity Maxwell
Don't have to ask. Essentially, it replaced — we had duplex rules and ADU rules, which were quite onerous and made the units kind of unattractive and unaffordable. I'll say, like, really impractical. And so now it's very simple. If you have a certain lot size, you can build up to three units. There are some limits in terms of how big each one can be and it gets into complicated things like FAR, which — let's not talk about that. But the idea generally being that if you have a certain size lot in Austin, you can build, you know, more than one house, which really does help with infill.
And then, of course, the second part of that is, if you don't want to have three units on your own lot, you can subdivide your lot. And that's where you get into things like dividing lots into smaller sizes. Austin went from 5750 in terms of our lot size down to 1800 square feet.
David Roberts
That's pretty wild. That's a huge jump.
Felicity Maxwell
And, you know, I've been in this fight for probably the last five to 10 years, and it's amazing to me that we did that all basically in like 18 months.
David Roberts
I know, I know. Well, I'm going to ask a little bit later about what we think about durability and that sort of thing. But, in both cases, you had pressure over a long period of time, and then, like a dam, broke and a bunch of stuff happened all at once. So, I want to sort of get to what I think of as the key question. I want to hear from both of you on this. So, anyone who has been on the YIMBY side of any fight or campaign in any city is familiar with a basic asymmetry involved in these fights, which is to say, the people who have the time and money and wherewithal and knowledge to know what's happening and to show up to the meetings and to lobby tend to be the people who already live in these areas, which tend to be older, wealthier, and whiter.
All things being equal, that's who tends to show up to these meetings where, you know, they have their coordinated T-shirts, they have their neighborhood groups. They've been in these neighborhood groups for years. They share info, etc. They're very organized, etc. And on the other side, the pro-housing side, you know, sort of by definition, like the hundred, you know, 200 people who will live in the apartment building that might or might not get built, don't know who they are, no one knows who they are, no one knows who's going to live in the building yet. So they're not showing up.
Right. And lots of times, if it's affordable housing, like lower-income people have jobs they can't get away from or just have less social capital, more trouble finding out, these things are going on. So all of which is just to say that the forces of inaction, the forces of freezing neighborhoods in place, the NIMBY forces, have a sort of built-in advantage here, which means the organizing task facing YIMBYs, it's just a higher bar, they just have more to do, it's more difficult. And I would say that New York City and Austin were known in these circles for years not just for having these neighborhood groups, but for having particularly organized, vigorous, some might even say vicious neighborhood groups, specifically in both those cities.
So, what I'd like to hear, just at a high level, is just like what's kind of your theory of change as you approach that asymmetry? How do you think about how to cobble together a force that can match that very organized pre-existing force that already exists in every one of these places? Annemarie, you can start.
Annemarie Gray
Sure. So, we have chosen — city and state level policy actually could intervene here — but we have chosen to defer these types of decisions to sort of hyper-local constituents. It's not a representation of the district or the needs of the city. You know, exactly as you said, they skew better housing insecurity, they skew older, wealthier, whiter. And so what we've done is really, I mean we just have a whole new crop of people who are feeling this. And frankly, I do want to recognize there are people who have been feeling the crush of the housing crisis for so long, but I think that it has gotten to such a degree that it is now hitting frankly middle-class people.
It is hitting a much wider swath of the population, such that organizing the shared interests and the number of people riled up about this is easier. So, we really strategically organized just volunteer members of ours who live in their district to show up at these exact meetings that have just for decades been monopolized by these same particular voices. And what's so interesting about it is we're not talking about all that many people. Right. It's just sort of. We've chosen to defer these processes to a very small minority of people that's not representative. And that is, that is a choice.
Right. That is a choice that city and state policy could actually intervene on. And so, I think that our theory of change of all this is really make it visible. You know, we pick the types of projects that really make visible how unfair and undemocratic this is for the consequences of the problem for the whole city, the region, and frankly, the country of New York City. And then also strategically build more of a narrative and more of a movement to take these issues out of the reactionary project-by-project fight. We're never going to solve this by fighting project by project.
So, we are, you know, New York City is kind of a small state. City of Yes was the first time we actually did something citywide such that you just negated the need for a huge number of hyperlocal fights. And the real ticket that we're working on, you do that at the state level, you do that even further. Right. So, these just have to reach a higher level of government, which is the way that we decide other major policy issues. Right. Housing is kind of unique in this.
David Roberts
This is the maddening — the maddening thing in this particular area. For some reason, it seems more than any other area of policy, people are like, "The more local it is, the more democratic it is." And that just doesn't follow. It doesn't make any sense. Like, there are more people in New York State than there are in that neighborhood. So it's more democratic if more people weigh in on it. You know, almost by definition, the larger polity you're working with, the more democratic it is. Like, why would it be democratic for, you know, 12 old people to run land use?
Like, I don't get that instinct.
Annemarie Gray
It doesn't make sense, and it's not working.
David Roberts
Yeah. So, who — maybe put a little meat on the bones. Like, these are young people who are in apartments who can't afford houses you're organizing? Are these people who want to move to New York City? Are they people who are — insofar as you can, you know, broadly characterize them, like, who's involved in these other constituencies?
Annemarie Gray
Of our membership?
David Roberts
Yeah, yeah. Just like who's pushing for YIMBY reforms now, like, who are the kind of groups?
Annemarie Gray
So, we're the only pro-housing, major pro-housing group in the whole state, actually, and the city. So, we're filling, we're growing quickly, filling a huge void. We, at this point, have over 800 members, you know, starting in New York City. So that's our largest base, but we've been growing chapters across the state too, and then also partnering with other groups with shared interests. So honestly, you know, it's a quite diverse bunch. Right.
We do have people of all ages. They skew younger because they skew people. People who are renters and, you know, they like, want to build a family, they want to live here, and they just don't see how that's going to be possible. And sort of the story of New York City as the place of promise, the place of opportunity, the place that's really open to everyone, is just not really feeling true. And it's getting so much worse exponentially. A healthy housing vacancy rate is about 7 - 8%. New York City's been about 4% for the past decade.
Last year, we had a 1.4% vacancy, which is basically nothing. It's just basically nothing. Right?
David Roberts
I know. And it's always... There's always a slightly maddening, crazy to me that, like, this is viewed as a big problem for a city. Like, what could be a better problem for a city to have than a bunch of people want to live there? Like, you know, it ought to be like celebrating. And yet everyone in the, you know, everyone in these neighborhoods is like, "Ugh, people, blah." Makes no sense to me. Felicity, tell me. It's the same, I know the neighborhood groups in Austin are very well organized. Who did you find to do an end run around them?
Felicity Maxwell
Funny, because I like to think of it also as your city's getting younger, smarter, and more involved. I just have to say in Austin, there's been this influx of people from other cities. Obviously, San Francisco, the Californians moving to Texas is a big narrative, but maybe priced out of some of these other blue cities. And then they came to Austin and they're like, "Hey, wait a second, what do you mean you can't have a sidewalk cafe and an apartment right next door?" And I think the other thing that sort of Annemarie touched on, which is the way we were doing it, didn't work.
And we spent a lot of time trying to make those neighborhood groups, who were very well organized and quite politically powerful, happy, and there was no version of it that they could live with. So, I think that's the other thing is for political folks, at some point you stop beating your head against the wall and say, "We're going to do something different." And that is exactly, I think, the thing that I like to emphasize is elections make a difference. Political leadership makes a difference. So, as much as you organize and have people come to these ridiculously hyperlocal meetings, you have to have someone who's willing to listen.
And unless you have that type of leadership who's saying, "You know what? Maybe the neighborhood groups aren't right, and maybe we should be having more people live here." I mean, Austin did 10 years of, "If you don't build it, they won't come," and they came anyway. So, it was like we were just at a breaking point. And so, I think that that does help, is that not only do you have new faces and names and people coming that are excited to make your city the best it can be, that sort of dynamism helps you to create a narrative that is different from what has been there before and also makes those folks seem a little bit head in the sand.
If you want your city to grow, you have to have new people, and they have to have a place to live. They're contributing to the economy. They're paying taxes. One of the biggest things in Austin that I think is interesting is that we have our state universities here, University of Texas at Austin, and we have tons and tons of college students who live in Austin, sometimes for only, you know, two to four years, but sometimes much longer. And there was this real sense of, "If you went to UT, you should be able to stay in Austin."
Like, that's a long, honored tradition. And guess what? They couldn't. There was no place for them to live. Apartments were outrageous. So, it was just this sense of, "Hey, wait a second. This has been something that generations of Texans have done." Come to Austin, gone to UT, slacked off for a few years, then, you know, moved back to Dallas and maybe grew up. Right. But you couldn't do it anymore.
David Roberts
I have relatives in my very own family who lived that exact arc. Well, here's a question. It is the kids of those very older, wealthy NIMBY homeowners who can't afford to live in the same city as their parents. Is that not reaching any — ? Like, does that not affect them in any way? Like, does that not change any minds? Their own kids have been priced out of their city. Does that argument not reach any of them?
Felicity Maxwell
I think it does, actually. To be fair, I think that some families understand that you can't expect to have your grandkids live near you if there's no place for them to be able to buy a house. And I'm sure Annemarie's heard this story over and over, that people now leave New York when they want to start a family. So, if you are, you know, there's no opportunity to live there in a sort of townhome or a larger, like you were talking about, tiny apartments by and large. So, it's very difficult to feel like you can have a family life that works necessarily in New York.
And then in Austin, the same thing. You are moving out to the suburbs, you know, these outer kind of exurbs area far away from, exactly to your point, these nice inner suburban areas or sort of core parts of Austin. And people are like, "What do you mean? My daughter has to live in Round Rock?" And you're like, "Have you looked at housing prices in your neighborhood? That's why." And so, I do think it helps with the light bulb. But there is this fundamental sense, going back to where we started with this conversation, of these folks are neighborhood preservationists, and as much as they might want their granddaughter around the corner, they're not really willing to give up the sense of, "Oh, that might mean an extra house in my neighborhood."
You know, like, there's a real tension there.
David Roberts
I'm so glad to hear you say that, like, these people are unreachable because, honestly, you know, I'm a good liberal. I'm like, "Well, maybe, like, maybe they have a point. I should listen to their arguments." You know, so I actually, it's funny, I went to one of the AI engines for the first time I've ever done this. I was like, "Alright, AI, tell me, what are the arguments that the NIMBYs use, you know, in New York City? Like, what are they saying? I'll try to engage these." And they're just bad arguments.
Like, they're just — and they're the same bad arguments that have been refuted a gazillion times. So, it's very difficult for me, even as a sort of bending-over-backward liberal, to like — the vibe you get is like, "These people just aren't going to change their minds. These are not good faith arguments." Like, you know, the arguments, like the stuff about trees and all this stuff, it's just like you people are dug in and you're reverse engineering arguments from a place of immovable insistence. Like, that's, anyway, so. But there is one, there is actually one argument that I think kind of tugs at the values and the heartstrings of liberals like me.
And of course, like, it directly affects communities involved, which is this notion of gentrification and displacement. So, I think the communities who live in the places that are proposed to be up-zoned will say, "If you do that, it gets nice. They're going to build a bunch of luxury apartments, a bunch of rich people are going to move in, we're going to get pushed out." And that argument, I think, motivates them. And I think it also has a kind of hold more broadly too. Like, I think your general progressive is like, "Yeah, that bugs progressives too."
So, I guess I would just ask like A, what is the right way to think about that? And then B, what are the arguments when you're dealing with those groups that are under that threat? What do you tell them? How do you interact with those groups? How do you deal with that issue? I'll start with Annemarie.
Annemarie Gray
Again, it's a really good point, and it's actually something, you know, the first founders of Open New York, even before me, made a very intentional choice that we are focusing on the most exclusionary neighborhoods, the whitest, wealthiest neighborhoods. And frankly, in New York City, I mean, a lot of them, not only are they not building any housing and they're in the middle of Manhattan, in the middle of some of the nicest parts of Brooklyn, they're on top of transit. They're next to the best job and transit centers in the entire country. Right.
They're not only not building anything, they've been on net losing homes. Actually, there's been some really fantastic research by a member of ours, especially in, we have a lot of historic districts — again, love-struck buildings. But like when you're not building any more housing, what's happening is you're losing apartment buildings invisibly by, you know, wealthy people converting a whole, you know —
David Roberts
Oh my God, so they're losing housing units because rich people are merging houses?
Annemarie Gray
Correct. And we're not building anything else.
David Roberts
That's dystopian.
Annemarie Gray
That wouldn't be as big a problem if you were actually building anything. There's actually some reporting that New York City has lost 100,000 units in the last couple of decades.
David Roberts
God, that's amazing.
Annemarie Gray
Right? Yeah. So, we have like, you know, the whole maps show parts that are growing and parts that are literally negative. So there has been a very intentional choice to focus on that. And then, the same with sort of — this is how I came at all of this work from a very deep fair housing lens. Frankly, these are all fair housing violations. Right. Like the way we do this really actually should be seen through that lens and that especially in New York City has really helped build much more alliances with progressive movements, with groups that have been working on different types of fair housing policy for decades and creating a narrative that, kind of to your point earlier, there are some people who feel this stuff very, very strongly.
I actually really firmly believe a lot of people, they don't care nearly as much. But the problem is they're given a choice to fight for something and they get all worked up. We actually are, we're advocating around one particular project in an area that hasn't built an affordable home in 15 years. And the local community board is just like extremely oppositional to this one, like a 12-story building. But those exact same people, that exact same community board unanimously voted to pass City of Yes, which does actually almost the same thing.
David Roberts
I mean, that's what they all say, right? That "We're not against affordable housing." No. Like, you can't find any of them that will say they're against affordable housing. "It's just not here. Not here in my place."
Annemarie Gray
Yeah, and I do really think that people's perspectives are malleable because I think that's what you've really seen, at least now in New York City. You compare articles from even a couple years ago, people are saying, "Oh, we need to build more homes." And that has become a progressive stance. And I think we are very, very intentional to also say, "This also doesn't solve all the problems." Right. We have, we very intentionally have a broad housing platform that covers things like tenant protections, covers different ways that we need to make sure we're building deeply affordable housing.
But, this has been a missing piece of the puzzle that there has never been a sustained advocacy force around. And, I think you're seeing that in a really smart, interesting way right now.
David Roberts
Felicity, have you dealt directly with these groups? And how do you think about it? It's not just what are the policy mechanisms, but really how do you think about it? Do you worry that people are being displaced? Like, is it a real phenomenon? Like, how do you think about that?
Felicity Maxwell
Oh, absolutely. For those of you who are familiar with Austin, you've probably driven on I-35, which basically bisects the city into East and West Austin. East Austin just has borne the brunt of a lot of the development and has been transformed. And of course, that was traditionally black and Hispanic neighborhoods. They've been displaced to other parts, again, to those exurbs that are more suburban. And there's been a huge loss of history and culture of those communities in the Eastern Crescent, as we call it here in Austin.
So, absolutely, when we started talking about housing reform, this became a huge issue because it was suddenly like, "You're going to give us more housing? Like, wait, what? We don't know. We're the ones who've already had this direct displacement because of the development that's happened in Austin."
David Roberts
I know it's such a torturous debate because, like, you see that point. But then, on the other hand, you're like, "Well, the solution can't be to keep your neighborhood run down on purpose, to avoid this." Like, that can't be a good solution either. There's got to be some third way.
Felicity Maxwell
Yeah, well, so our emphasis really was on citywide. Exactly the same. Because then you are not carving out special districts. So, you know, white, wealthy Austin does not get special privileges to say "no" to three units by right. Now, you can build ADUs anywhere. And it was sort of this idea of like, "Look, you've had the brunt of this because we intentionally created policies that made it easier to build on the East Side." And your point about the neighborhood preservationists, they're like, "I don't care if you build housing as long as it's not here." So there was always a "here" that's not here.
And that was the east side of Austin. And so, we saw this happening in real time. So our point was always like, "Look, this is actually undoing a lot of the bad faith," or sort of intentional or unintentional sort of carve out of where you could develop easily in Austin, Texas. And I do think that that was very successful. And I will say this, like we went back — so one of the original plans in Austin is called the 1928 Plan. The zoning category, it's racist, like, there's absolutely no doubt. And so, like, I think that was our point too, is we are legitimately trying to undo historical harms in a way that benefits the community and try to repair some of the things that have happened.
And I would also say that we have really great, again, leadership on this because we did things like financial assistance around, you know, building ADUs and a lot of things work to make sure that those communities felt like there was a benefit to them for this. It wasn't just rampant development that's been the same thing that they've seen for the last 20 years. We're talking about displacement, we're talking about gentrification, and we're doing the things we can to address it. Is it fixing everything? No.
David Roberts
I mean, this is the question, like, what do you do? What is the best case outcome, I guess, in your head? Is the idea that like these communities build up and all or some substantial number of the people who live there before that process starts are sheltered and can remain there? And is that like practical? Is that viable? Like, what is the best case scenario here?
Felicity Maxwell
I think that's an excellent question. And exactly that, because unfortunately, a lot of the housing stock in East Austin or other places that are of lower income status, it's older now. Like, it might be at the point where it is really fine. To your point, you can't keep neighborhoods run down just because people may not want to move or, you know, that feels right to them in their community. We have to think about what it looks like to have new housing stock that is replaced. It's like having an older car. Great that it sits in your driveway.
Probably not practical over the long term. I think that's what we would say too, is if there's a way to gently turn over housing stock in a way that feels compatible with the community that's still there. I think it feels good. I would also say — this sounds strange — but things that we've done, which is that gentle density and trying to encourage ADUs, that's the idea that people can stay in these communities and build a new granny flat. So they can, you know, so you're trying to come up with creative solutions that recognize community but also understand that change is necessary and the change that they feel comfortable with, like is positioned not as we are telling you what to do.
We're giving you a suite of options so you can figure out what feels right for this neighborhood or this street. I don't think it's perfect by any means, but it's certainly better than setting up policies where you get run over by developers because you literally can't build anywhere else.
Annemarie Gray
I think it also points to the reason why it's so important that we have a whole suite of policies and sort of like an "all of the above" approach. Especially in New York, we've very intentionally been like, "People are really rightly feeling the pressures when we're not building enough in the neighborhoods that we are actually most focused on," sort of the most centrally located, well-researched neighborhoods. Those pressures are real and they're not going to change overnight. People respond very differently to new projects if they don't feel like they themselves have some more protections as a tenant, if they're a tenant, for example.
Right. So, we've very intentionally been like, tenant protections go along with this. Right. Same with programs that are really trying to address like predatory forces of longtime black homeowners right in parts of Brooklyn that are now suddenly really hip, right? And these fears are super duper real, and we have to think about all of them because those fears are real and they are going to be barriers to this, this idea that everywhere should be growing. But it's been so unequal. And people's fears and feelings about that are very legitimate.
David Roberts
There's also a bunch of research that's come out lately, which I think is cool and interesting, which shows that even if what you're building in an area is luxury apartments for, you know — like no one, there is no set definition of what that means.
Felicity Maxwell
What is a luxury apartment?
David Roberts
People say that as a kind of slur, you know, like "developer," like nobody knows exactly what they mean by it. But even if, say you're building high-end apartments in a place, the research shows that wealthy people will shift into those and then less wealthy people will shift into whatever apartments they abandoned and so on down the line. You're freeing up units and if you build a bunch of those, lower average rents in a place over time. But I will say, despite there being a lot of research to that effect, boy, howdy, do people not believe that. Boy, do people not want to hear that.
Like, I have yet to encounter a person who's convinced by that in the wild. Do you guys even try to bring that argument into play at all?
Felicity Maxwell
I'm going to jump in on this one because if you look at Austin's housing and our rental prices, and how much we've decreased rentals just because we've added supply —
David Roberts
Case in point.
Felicity Maxwell
I am just going to say, we are the real-world example of what that is, which is filtering. And if you don't believe it, if you live in the city, like I've got a bridge to sell you in Brooklyn, right? You just have to understand that it works. And we are actually proving it month by month, year over year, because we're adding supply.
And sure, it's not all in the central corridor or whatever, but the more multifamily units we've added, the more we've seen rent decreases. And like, we see examples of people who've moved from two bedrooms into three bedrooms and got a rent decrease in Austin. And so, that's the thing is that type of supply and market demand, it shifts how renters are treated. And what's available to them. So then, this narrative really becomes much more like, "Oh, I have housing options" versus feeling housing pressure.
And I think that's really important because when people feel like they have housing options, they're like, "Oh, I like these reforms. Oh, maybe I should. You know, I want to be supportive of the things." And so we just literally saw that with our own elections. We essentially had a good housing council here in Austin and now we've elected another additional person who's pro-housing and reelected our mayor. So, like the votes were there to support the work we did. So not only did we do all the reforms, but then when election time came, the public said, "Please do more of this." And so that feels great because I think that is a, exactly to your point, a real-world case example of like economics work, supply works.
And guess what? When you do it right, people respond.
David Roberts
Yes, and this is only novel and odd sounding to people because it's in housing. In any other area of life, this is just basic supply and demand economics. Like, you increase supply and prices go down. This should not sound weird. And yet, for some reason, people have the weirdest sort of folk notions in their head about housing. How about — Annemarie, my guess is, this hasn't been going on in New York City long enough to draw a lot of results. Is that true?
Annemarie Gray
I often reference Austin and how rents did actually fall. And other cities that have done that. And very much seconding , sort of like people feeling this as optionality. A line that we've actually used a lot is like, "Your landlord should be worried that you can find another apartment." That's the other way around, right?
David Roberts
It's like a strong labor market, you know, it's the same. It's exactly analogous to a strong labor market. Like, if there are fewer workers, workers are more empowered.
Annemarie Gray
Totally. But to your first question, even if the sort of academic research does draw this out, I do not tend to use the argument of like, "Oh no, no, no, you build like that building across the street." But it's also, it's — yes, it might lower your rent, but by a very marginal, like a tiny amount. It's just not, it's not a great argument project by project. But this is yet another reason why this cannot be discussed or analyzed or fought project by project. Because if you did that citywide and especially region wide, again, it is just completely bonkers.
The number of parking lots we have near train stations, especially in like Long Island, Westchester, and the New York City region.
David Roberts
And it turns out, the minute you go after one, every single one is a precious, historic parking lot that the community loves, that it could not possibly live without.
Annemarie Gray
But it's also just — it's exactly the reason that you have to bring this to a higher level of decision-making, because citywide and region-wide, that impact is so real. Right. New York City, honestly, the best example in our region of that is New Jersey. And the only reason New York's housing crisis isn't even more insane is because New Jersey has sort of been a release valve.
David Roberts
Oh, yeah.
Felicity Maxwell
Yep.
David Roberts
Let me ask about partisanship here. So, one of the things that the sort of network of these groups, the Welcoming Neighbors Network, kind of emphasizes is that you're going to end up with strange bedfellows, coalitions to make these things happen. You know, like we sort of discussed earlier, you're sort of cobbling together coalitions and those are necessarily probably going to be cross-partisan in most places. And I will say that it seems like, and I'm knocking on wood, honestly, even saying this, but it seems like to some extent the simple push for more housing has not yet been polarized, has not yet been dragged into the polarization machine and made into yet another polarized issue. That seems to me like both an incredible and increasingly rare advantage.
And also, it just feels like you're all dancing through minefields here. You know what I mean? It's so easy — there's such a heightened sensitivity around that stuff these days that it's really easy to run into those tripwires. So, I'm sort of wondering how you, I mean — let's start with you, Annemarie. I mean, New York City's blue, so, you know, maybe it's not as big of a deal for you, but I'm just wondering, how do you think about not tripping those partisan tripwires?
Annemarie Gray
Yes, I think we're on one end of the spectrum in the network because, you know, in New York City, the City of Yes just passed without a single Republican vote and the Republicans we have are nuts and aligned with our current president. Right? There's a massive baseline democratic values disagreement here.
David Roberts
But, like New York Democrats, are like, I mean, no offense, no great shakes.
Annemarie Gray
Oh, don't worry, don't worry. I deal with them every day. It's sort of been a, especially in New York City, it's sort of like center, center-left, and progressives. And if you look at how all the votes shook out for City of Yes, that was all very, very needed. And that's been so much of the focus of how we talk about this work and how we've built coalitions and built strategy. We are on the state level — the interesting thing about New York State is the major, major policy passes in the budget, which is three Democrats in a room.
Again, they are responding to their, with sort of different levels of representation, responding to all of the legislators that do have some Republicans or do have some more centrist Democrats that are very worried about a Republican challenger. And again, we are learning in real time how to pass housing policy in Albany because we haven't passed it yet. We're kind of one of the lone states that hasn't done that at the state level yet. And so we're learning that in real time. But it has been interesting that we have a particular budget process where major things pass that is not kind of your standard whip count.
And so, what we're trying to figure out and sort of build momentum from, we're really, truly learning in real time. And there are also, you know, we have Long Island Republicans who are a very certain type, like far western New York Republicans, actually have a different approach to some of these things. So, we're just learning this in real time. But our strategy has been so centrally focused on the whole span of the Democratic coalition. And again, some of the biggest opposition we've seen is in the deepest blue districts.
David Roberts
Oh, sure, like the "D" next to your name is no guarantee on this issue for sure.
Annemarie Gray
No, which is partly why really showing like this is the right side to be on if you want to call yourself a Democrat or progressive on any front. And also, then you mentioned this at the beginning, but the national implications for the Democratic Party of New York losing seats is enormous and is extremely, extremely driven by how those same Democrats are not doing anything on housing policy.
David Roberts
Yeah, so just to, like, just to put a line into that, because I don't know if I really spelled it out in the intro or if people are aware of this, but, like, refusing to build housing is literally losing these blue areas population to red areas, which means they're literally losing congressional representation. Which means, I heard — this is like an apocalyptic factlet for you — if you just reran the 2020 election with the new districts based on the newest population numbers, Trump would have won, like, in incredibly close national elections, Democrats are literally, like, losing votes in Congress.
I don't know if people get this, but, like, that, I think, is one of the reasons that the national Democratic Party is slowly but surely waking up to this issue, because it's starting to threaten their reelection chances. So, Felicity, you're down there. You're a little blue island.
Felicity Maxwell
Yes.
David Roberts
In a big red sea.
Felicity Maxwell
I was gonna say, well, we'll happily take those congressional seats here in Texas.
David Roberts
How do you think about partisanship? I mean, I can only assume that it's kind of more of a thing down there.
Felicity Maxwell
Yeah, it's a very different reality, obviously, because Austin is quite liberal, very similar to New York City, and we have that same sort of, shall we say, spectrum of how you view housing. And I actually think an interesting thing to think about on the Democratic side is the age of the people who are in leadership, because I will say that we do see the kind of more conservative around housing issues tends to really go with an older politician, certainly someone who's more enmeshed and, to your point, has maybe been a part of those neighborhood groups and had those T-shirts for years. So, like them feeling the pressure.
David Roberts
And we should just say, live in suburbs, and drive everywhere. Right?
Felicity Maxwell
Exactly. So, I think as we've seen younger folks come into leadership here in Austin in particular, that has shifted because those people are all Democrats, but they believe very much in the pro-housing reforms that we implemented here. I think at the state level in Texas, the very interesting thing is probably the most deregulatory pro-housing folks in the state of Texas are Republicans.
David Roberts
Interesting. I was going to ask about that. Like, is there meaningful Republican support here?
Felicity Maxwell
Absolutely. And that is all related to the fact that we have this thing called the Texas Miracle, which has been this huge growth of Texas, hence all the new congressional districts. But the idea is exactly that, is that we have welcomed new industries, new businesses, new people. And all of that requires services and housing and sort of just this kind of growth machine, if you think about it. And that's happened probably over the last 15 to 20 years in particular. And in Austin, for example, that's the tech scene. In other places, Dallas finance, it's been different in different parts of the state, but the same result everywhere, which is net migration.
And also, of course, just growth in the sense of everything is booming. And so, when you look at it that way, for those Republicans who support this deep in their heart and believe in the economics of what we're doing in this state, they understand that housing becoming unattainable for workers who move here or moving throughout the state, that's unacceptable. That basically breaks one of the cogs in the machine and the machine falls apart if housing prices basically get out of —
David Roberts
You know, who restricts housing and thereby limits their growth? California. Do you want to be like California?
Felicity Maxwell
No, please. There's people in Texas who might faint if they heard you say that.
David Roberts
Right, exactly.
Felicity Maxwell
That's exactly. I will actually — it is actually so true though. It's like basically you can't say the C word around Texans because we know what it looks like when you have the growth magic growth machine and then you turn off the housing spigot. That's California. And I think there's a very clear understanding of we don't want to be like that, so what can we do proactively? So our situation at the state is very much, Republicans are leading on this. And how can we get Democrats, some of whom are of that older generation, to understand, "Hey, no, no, this is a statewide issue."
To your point, that is not chewed up with partisanship. That is not actually something that needs to be thought of as left. Right. It can be something that works for everybody.
David Roberts
And you can point to Montana, right? That's the —
Felicity Maxwell
Exactly. Montana's the big example. And, you know, Montana's a pretty small state, but I would also say that they had a similar situation where they had such an influx of people, again from California mostly and other places on the west coast, where they saw their sleepy little towns get overrun and just that huge spike. So, I think in some ways, that kind of crash to the system does have an impact on the policies that come out of it. And that's why I think at the state level, we will see some state housing reforms this year, because there's just that sense of we can't wait two more years.
Yes, the Texas Legislature only meets every other year, so we have a time clock on us. Because two years from now, that growth machine might be starting to look a little shaky. And that would be because of housing prices.
David Roberts
So you think not only is there Republican support for these kind of reforms, you think there's majority Republican support sufficient to get it through an extremely Republican legislature?
Felicity Maxwell
Absolutely. The lieutenant governor just named housing affordability as one of his 20 key priorities. So, I think it's SB15. The bill is not officially announced yet, but he will be leading on a specific housing bill. And so, like, when you see it at the highest level of Republican government in the state of Texas, my job here is not to talk to Republicans and say, "Hey, we need to do this." They've already gotten that message because of the way they think about the economy, what they want for their communities.
What I have to do is go and talk to Democrats and say, "This is something we can do together, and we can make it better by doing it together, because then we'll be able to talk about things like affordable housing, displacement, gentrification, and all those other things. You know, don't let them lead us to a place that works just for the free market. Let's get to a place that works for everybody."
David Roberts
And, Annemarie, wouldn't it be embarrassing if the Republican Texas legislature passed a bunch of housing reforms and the Democratic New York Legislature did not?
Annemarie Gray
I would love to. I ask that question every day. Right. You know, I say that line all the time. But... yeah.
David Roberts
Are you optimistic about statewide reforms? Like, do you feel like this has gained enough momentum that it's got a statewide majority of Democrats?
Annemarie Gray
So, it's gained so much momentum so quickly. As I mentioned, we've been running the first housing bill in the state general. That's actually something that's passed in other states, working with a whole coalition of faith-based organizations. We had a rally yesterday with pastors and folks from all faiths, just the state, making it legal and empowering them to build affordable housing on their land if they want to. It's been known as "Yes, in God's backyard."
Felicity Maxwell
YIGBY!
David Roberts
Such a small ask, such a modest ask.
Annemarie Gray
But it is. And sort of the crux of it is, it is the state using the powers that it has to say, "This makes sense. We're going to use these powers and make that legal, even if that is not what local zoning says." Right. And so you get the same sort of local control fight, which, you know, in some cases, that's the argument used to defend school segregation, right?
David Roberts
Yes, well, I mean, local control does not have a proud history here in the US, let's just say.
Annemarie Gray
It definitely does not. And so, I'm feeling optimistic. One, because I should go to something else if I'm not. But also, it's just so pressing. It's getting so much worse. And I think that the narrative has changed so quickly. We also do a ton of really grassroots organizing, both with our members and with these coalition groups. We have really smart policy people that are there just explaining stuff to legislators who have never thought about this before. They just haven't.
David Roberts
A lot of this stuff is just so new.
Annemarie Gray
Yeah, it's really wonky. You say the word zoning and people's eyes just glaze over. We're also doing a lot of really smart comms and political communication. Last year, at the advice of frankly everyone that's worked in New York politics for a long time, we started an electoral arm of our organization to actually put money behind our endorsements and also build up enough influence to eventually challenge people that have been really bad on these issues. And so, it's growing quickly.
It's tough, you know. And I will say I think some bipartisanship, I think there's also some uncharted territory with what's happening on the national level and how that plays out. But I think that we're really — to say the least — but I think that we're really like, the narrative has changed so quickly. Even people who a year ago were like, "Eh, don't bother with that," are like, "Okay, this is a good bill." And so we're throwing everything we have at it.
David Roberts
Along similar lines, this is all fairly recent. So, I know any lawmaker's main worry is reelection. Right. So, I know that despite what they may say, all of them are sort of approaching these kinds of things, like, "Well, is this going to screw me? Is this going to get me booted out of office?" So, I'm wondering, like Felicity, the reason this stuff happened in Austin is that a new city council got elected, a substantially new city council got elected. Have we had elections since this stuff happened? Do we know enough yet to say what the electoral implications might be?
Felicity Maxwell
Absolutely. I think I mentioned that we just reelected our pro-housing mayor and then have actually flipped an additional housing seat on the city council.
David Roberts
And that was all in the wake of this?
Felicity Maxwell
Yes, that literally was in November. So, we had just finished. We basically did all of the last set of reforms passed in May, and then we had basically an election season and everyone won reelection, which seemed like a pretty good sign to us. I would say, generally, I think the thing to think about also is just that there's a lot of education that has to happen on this. And you know, I will say for political leaders who maybe have thought more about, I don't know, police contracts or how you're getting water utilities, you know that the things that the municipal sort of bread and butter has really been overwhelmed by this housing affordability crisis and attainability crisis.
And that's at the local level. So, like, those are the folks who felt it first. But if you think, you know, county level and then, you know, state level, those people have a certain amount of distance from all of this. So as the crisis kind of deepens or gets to a pinch point, you have to really educate at every level. And so, I think to Annemarie's point, we spent a lot of time the last session, so two years ago in Texas, just getting people to understand what the issue was and getting them to understand it and giving them exactly that.
"I know zoning sounds really boring, but I swear it's really important and you can make an impact," kind of conversation. And now they've heard it and they've seen it, and so now I think they're ready to do the work. But I will say that's the same thing at every political level, is that you just have to — there's a certain amount of education and outreach that has to happen and organizing, to your point, but then at some point it clicks and you see that willingness to, like, lead and to be a little bit less afraid of the electoral results. And to know — and I do think that this is where you get a shifting electorate — there are people who want you to do this and they will turn out and vote for you. And like, that is critical.
David Roberts
You know, it was always the NIMBYs who were active. There are a lot of passive YIMBYs, you know, out in the world. It was always the NIMBYs who were organized and active. And that is what I think has changed more than anything else. It's like the YIMBYs are starting to get activated. How about you, Annemarie? Has there been enough electoral activity in the wake of all this to be able to say anything about what effect it might have?
Annemarie Gray
Yeah, I mean, I think reiterating and also sort of talking about the entire network, something else that's really interesting. It's just really important to remember how insanely young all of this work is. Right? I mean, we've all been at this for only a couple of years and sort of the broader Welcoming Neighbors Network, it's, you know, I think it's been an official organization for less than three years and we already have like 42 members across like 25 different states. And what's been interesting is we've had like, a sponsor of our bill has been talking to a legislator in California who passed a similar bill to be like, "What helped pass it?"
David Roberts
Right.
Annemarie Gray
And they're also seeing other electeds elsewhere in the country be like, "Oh," like, "Oh, they got reelected because of this." They're standing up and saying that that's good politics. But also at the same time, sort of back to some things from earlier in our conversation, it's really, really important that — and the network has, I think, done a really good job of this — empowering whatever strategy works for the city and state that you're in. Because all of our, like, our messaging looks different, frankly. We have a whole different, a wide range of messaging that we use if you're in Westchester, if you're in parts of New York City, if you're far upstate, and different things resonate with different electeds .
David Roberts
Yeah, and one thing I want to say, this is like in the network's literature too, and you're sort of implying it here, but I just want to underline it, which is: When people are not familiar with an issue, they're not familiar with the wonky ins and outs, they're not familiar with the policy or the economic dynamics in that situation, who is the messenger who is trying to persuade them becomes so important. When you're leading people into new territory, who is on that stage is so important.
Annemarie Gray
A thousand percent. And it's also why it's so important, like groups like what Felicity and I are running and all of our sort of counterparts around the country: you gotta be in these rooms to really understand, like, whose message works best, who they listen to, more or less. And you just tailor it. And what's so interesting about a lot of this work is we're kind of talking about the same things sometimes, but in completely different ways. And that's fine, right?
Felicity Maxwell
Yes, and in Austin, we actually got to host something called YIMBY Town, which is kind of our big hurrah last February. And WNN was, the network was a critical part of all of that work and sort of helps to facilitate the YIMBY Town gathering. And obviously, we were honored to host it. But the most impactful thing was exactly what Annemarie said was, you know, getting to hear people talking about the exact same issue but approaching it in different ways and having different messaging, but they're succeeding, like, you know, and learning from that opportunity. And a great example of this is, I think Annemarie mentioned the YIGBY bill.
Texas is going to have a YIGBY bill. There are several other states. We're going to do a network call so we can all talk about it. And you know what? Our YIGBY bills are not going to be the same. They're not going to look the same. We're not going to talk about them the same way. But fundamentally, it is a statewide reform that has a likelihood of passing in 3, 4, 5, 6 states this year. That is a huge win and something that would not have been possible 2, 3, 4, 5 years ago, certainly not 5 years ago. A, because nobody was talking about housing this way, and B, because we didn't have that collaboration and ability to learn from each other.
So, I think there is this certain amount of momentum that's not only are the wins building on each other, we're learning from each other and building a network that's going to be, I hope, a force to be reckoned with.
David Roberts
Well, I love to hear that. We're running a little short on time, but I did have a couple, just like two more questions that I really wanted to get to, and this one requires a little bit of wind up, if you'll indulge me. So, I'm in Seattle and there are a lot of NIMBYs in Seattle. There are a lot of people who oppose new housing. And then, when I look out at Seattle and I look out at, practically speaking, what does it look like when Seattle builds new housing? What happens is we don't want to offend anybody who lives in a single-family home neighborhood.
Those are inviolate. So, what does that leave? It leaves the narrow corridors in between single-family home neighborhoods. And so, all of Seattle's new housing consists of beige, ticky-tacky apartment buildings alongside giant three, four, and five-lane arterials. So yes, that's density, yes, it's new housing and that's good in and of itself, but it's pretty ugly and unpleasant. And like, you go outside your door and there's the din of traffic and there's the smell of traffic. Like, I literally, in Seattle planning documents, have seen these apartments on the corridors referred to as buffers to protect the single-family homeowners from that noise and that smell.
So, all of which is just to say, like, if I look around at Seattle and that's what density looks like: well, gross. Like, you know, it makes sense to me that people don't want that. And so, when I look at the policies recommended by your network and the sort of top-line policies that you've passed, all of them or most of them look to me like they're basically devoted to just more housing as such, more on a lot, divide the lot smaller. You can build more kinds of housing here, you can build taller here, but I don't see a ton of stuff devoted to making that density nice, i.e., trees, green spaces, public spaces, you know, the kinds of things that make the little cute European cities so nice to go visit. It's not just the density, it's the amenities, it's the layout, it's the quality of life. So, I'm just wondering, like, I know the main thing is we just need more housing, but it seems to me like you're going to smooth the skids, make it easier to build more new housing if when people see new housing, it looks nice, it looks like a place you might want to live. And like in Seattle, that's not the case.
So, I'm just wondering, how do you think about the balance there? Just like blunt force, more housing versus trying to make the places where more housing goes in nicer, nicer to live in. How do you think about that balance? Annemarie, I'll toss that one to you first.
Annemarie Gray
Sure, sure, yeah. A number of thoughts on this. And funny enough, I studied architecture before I went into all of this space, so I'm sensitive to some of that. But I think that one, there's been just needing to get over this baseline hump that building more homes is good, right? And I think that there are people who you could have the nicest multifamily building you've ever seen, and it doesn't matter, right? So, I do think there's a component of that. I think there is a component of there's a whole slew and almost — I mean, ours and I think a lot of different YIMBY group platforms have things like building code reform in their policy agendas as well. Because we also have, you know, if you followed any of — like single stair buildings.
David Roberts
I tuned into that fight.
Annemarie Gray
I'm sure you have. Like, there are also just kind of structural barriers to build better buildings that are part of this. I also very much fundamentally believe that it's very cultural. I mean, you know, the most beloved parts of Brooklyn, like brownstone Brooklyn, you go back when they were first built, people said the exact same things they say about new buildings now about those, right? And so, there is something very cultural about it. And I also think there is something, you know, people want something that feels human, right? And so, anything new is, by nature, needs to be lived in a little bit to feel more natural, right.
I think the main thing I point people to is one, like, you gotta get over the whole multifamily building thing. And in New York, that doesn't fly, right? Like, you know, it's about, is it a massive tower or is it like a low apartment building? So, we just, that's — I mean, we have some low-density districts, but it's just not the same.
David Roberts
Well, all the amenities I'm talking about only work with a certain level of density, right? They just don't work. If it's single-family homes or all duplexes or whatever, you gotta cram enough people in the space to activate the public spaces and whatnot.
Annemarie Gray
Correct, correct. Yeah, that's 100% true. And the one other thing I'd say is if we lived in a world where you take the entire New York City region and you had legalized missing middle housing across the entire region, like, just reality would be so different, right? Housing pressures would be so different. The pressure for one particular lot that you can finally get some housing on to be as tall as possible, it just would look different, right? And I think that, you know, if our historic preservation regulations were different, other countries have figured out how to have new buildings next to old buildings and the sky doesn't fall.
Right. What is tricky sometimes is, you know, every single new building might not check every single box we possibly want, but all of these policy changes collectively would make such a better reality for everybody. And how we figure out how to explain that and talk about that in ways that feel real is a lot of the challenge.
David Roberts
Yes, but to be clear, I'm not just talking about buildings. I'm talking about neighborhoods, basically, like transit, you know, like land use more broadly than just the building level. I mean, in a lot of American places, like kind of the horse is already out of the barn on that. It's so grim already. But like, a lot of, you know, I think if you want to bring in a bunch of density, people are only going to do it on some level if it's decently nice. How about you, Felicity?
Felicity Maxwell
So, yes, you actually said that perfectly, because zoning is more than housing is the thing. So, I like to point out that exactly we need more housing and it's a place that's added a lot of supply in a lot of, I'll just be saying, ugly buildings. Maybe we have something here called the Texas Donut, which is essentially a building that wraps around a parking garage. It's great housing, but is that really the, to your point, the pinnacle of housing in the 21st century? No, obviously it's not. But I will say I totally agree about building code reform.
We're working on single stairs reform right here now in Austin. And that's a really important thing because I think as you get past that supply tipping point, which thankfully has happened for us, you can start to think about exactly the questions you're asking. And I do really want to say that there is something fundamentally wrong with our planning when we say that the only place you can add density is along the most congested, polluted, noisy parts of the city.
David Roberts
I hate it so much.
Felicity Maxwell
I totally agree. And we have so many stroads in Texas because we love our highways.
So, I really feel that. Exactly what you're talking about. And also, it's fundamentally unfair because then you're basically saying that renters can live there, but people who own single-family homes get to have quiet neighborhoods.
David Roberts
It's segregation.
Felicity Maxwell
It is. So, like, I just want to totally acknowledge that that is an issue. But I think we're right now in the supply crisis, so we can't really start to think about the nuance of what it looks like when we have a better version of supply. But I do hope that we will get there. And I think to your point, that requires a lot of infill and thoughtful development that we just haven't seen.
And guess why we haven't seen it? Because neighborhood preservationists don't let us even think about it. Like, the people with the T-shirts show up and they're angry because you want to put gentle density in their neighborhood. So, I think this comes back full circle to where we started. In some ways, we've done great with supply in a lot of maybe easier places, but the really beautiful supply that we might want for the central part of our neighborhoods or next to those nice parts, that's trickier. And I don't think we've gotten there yet.
David Roberts
Yes, and another thing that new density needs is transit. You know, if you want people to — you're removing parking requirements, which is part of what's enabling you to build more units on those little lots. You know, if you don't have to have a set number of parking spaces, but if you're going to get rid of a bunch of parking, you need other ways to get around. And I just wonder, like, are both of you, do you both also consider yourselves transit activists, or is it just like you have enough on your plate and you hope the transit activists do their job?
Felicity Maxwell
I think it's actually a great question, and AURA, the group that I've been involved with for a long time, we literally call ourselves pro-housing, pro-transit. That's our job. And I will say in Austin, because we've never had the opportunity to have really robust transit, we are eventually going to get a train. We always knew that you had to advocate for the trains and better transit, and that requires a certain level of density. And I think to your point, now we're at this place where, okay, the train is theoretically coming, assuming we continue to fund trains at the federal level, which that's maybe, we don't know yet, but assuming the train is coming, that means we have to actually think critically for the first time what does it look like if you have that train?
What does the housing look like? What does the environment look like? And so, we have this chance to be transformative.
David Roberts
Don't do what Seattle did, which is put a train on your highway.
Felicity Maxwell
So, I will say, I think that that's the exciting thing about the next phase is not just that supply. It's a better version of that supply. And to your point, linked to transit hopefully.
David Roberts
Annemarie, the New York City transit situation is somewhat unique in the country in that you already have some. But how do you think about this?
Annemarie Gray
Yes, and I think this is where we're a little different. One, our members, so many of our members are also transit activists. My partner works in transit, so it's all very much the same family. But I think what's different about New York and, if we're talking about the New York City region, I think parts of upstate western New York are a little different, but we actually already have this infrastructure. It's one of the most incredible things about New York is the transit system. And actually, the problem is there are stations, especially further out in the suburbs, that are losing ridership because they're not building housing.
And we think about the whole network in a somewhat comprehensive way. We have zero region-wide housing planning that actually uses the capacity of the most miraculous, incredible system in the country right now. And we still have fights in New York City about building more. I mean, again, we have a lot of apartment buildings in most places, but we have some low-density districts and even just mid-density districts. They still fight about building higher density when you're next to a train station —
David Roberts
That is just madness.
Annemarie Gray
that's 15 minutes away from Grand Central.
David Roberts
If there's one obvious, I mean if there's just one thing that no one should be arguing about, build up around your transit stations. Not to, you know, this podcast is not intended to be a Seattle gripe fest, but like we put, we've spent billions of dollars on light rail and we're putting all our stations next to the interstate and we're barely upzoning around them. Like the station that's closest to my house has a friggin' golf course right next to it. It's just like, it's a nature preserve. That's what they'll say if you try to get rid of it.
Like, "What about all the birds?" It's just unbelievable. But, building up around transit is just an utter no-brainer.
Annemarie Gray
And also, really tying that, like that is climate strategy. Like that is really, really making sure how closely these all tie together because we need all of the activists and all of the advocates to see these all as connected.
David Roberts
Yes, this is like I was going to put this in the intro, but it would have made the intro too long. Just like, why am I talking about housing on a climate solutions podcast? But I think that sort of deserves its own dedicated podcast just to sort of make the case at length. Like this is a climate issue, but that's sort of, that's implicit in everything we're talking about. And implicit in the reason I'm talking with you is this is, among other things, how you cut emissions. So, I could talk to you all forever. But just one final question, which is: what is next?
What is next, Annemarie? What is next for New York?
Annemarie Gray
We're in the middle of a state legislative session. We're trying to really, really break through and start to pass this bill. They're working on the YIGBY bill and then build from there. I mean, a region-wide transit-oriented development bill is definitely on our radar. And then at the city level, again kind of post city bs. We're in a year of a mayoral election, but there's actually, we're doing some work around. There are two commissions looking at the city charter and we're really thinking about, there are things you could only do with charter reform that you otherwise need State legislation that get at exactly these same incentives that are built into our land use review process. That and then we're making endorsements for a lot of our races happening this year to try to really build more pro-housing champions and truly expanding our footprint to organizing statewide.
David Roberts
New York has not always had the best of luck in its mayoral choices. If I could —
Annemarie Gray
Understatement, understatement, understatement.
David Roberts
Is there a chance that you're going to get an actual pro-housing, pro-transit champion out of that process this time? Dare we hope?
Annemarie Gray
I'm still young, but I've worked in this long enough to moderate my expectations about the quality of our politicians. But, come back to me in a couple of months.
David Roberts
We'll see. All right. All right, we'll see. How about Felicity? What's next in Austin, Texas?
Felicity Maxwell
So, we're in a similar sprint through the Texas legislative session, which will end in June, and we have a myriad, a smorgasbord of housing bills. We'll see how far we get with some of them. But our goal is to definitely have two to three, hopefully, bills passed by June and supported and make those official. And I think that will make a huge launching pad for us as an organization. It's also just kind of really bringing the pro-housing movement statewide. That is actually also the focus is to be building up the work that we've done in Austin to replicate that in other major cities in Texas and also to be thinking about what does it look like to be pro-housing in sort of, I don't want to say smaller, but certainly places where maybe that housing crunch isn't as acute, but it's there.
I think Annemarie touched on regional housing planning and a lot of other things we have some great ideas of. What does it look like once you've gotten past this initial hump, or you have a good start? What comes next? I think that does look like state housing plans. Where do we need more supply? How can we be thoughtful about helping communities that are smaller but still struggling with housing? What does it look like to have housing in more Latino and border areas? It's a big state with lots of challenging problems, but we'll be here working on it, hopefully for the foreseeable future.
David Roberts
This is awesome. It's so rare I get to talk about good news and good things happening and people winning. It's like a little island of goodness here. So, I don't want it to end, but we're over time. So, thank you two so much not only for coming on and walking us through this, but for all your work. It is God's work you're doing. So, Annemarie Gray, Felicity Maxwell, thank you so much.
Felicity Maxwell
Thank you.
Annemarie Gray
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.
1. 📫 Leave your mailbag questions below! There’s a lot of stuff to talk about. (All you paid subscribers, don’t forget to check out January’s mailbag — and thanks for your feedback on the clips episode experiment. Stay tuned on that.)
2. 🛣️ Canary Media is throwing a shindig in Chicago on March 27th and I’ll be joining them to interview Rep. Sean Casten on stage about [waves hands] all of this. These events are always a hoot — I love meeting subscribers and fellow energy nerds. As always, we’ve set aside a handful of free tickets for paid subscribers: register your interest here. You’ll probably get a ticket if you register, unless demand is nuts, in which case winners will be chosen at random.
Paid tickets are also available to anyone & everyone here.
3. ✏️ In last month's mailbag, I discussed the idea of making introductory content for Volts. I’m probably not going to do that, but I should have mentioned that Volts subscriber (and philosophy professor) Jeffrey Seidman has developed a wonderful set of gateway pages for people who are looking for digestible introductions to these topics. There’s a section on climate solutions and a section on climate careers, designed for students (but anyone, really) looking to wrap their heads around what needs to be done and how they can contribute. Plus there are tons of links to Volts pods throughout. Great place to send people looking to get started.
4. 💎 My recent conversation with Fervo’s Tim Latimer featured some talk about diamond drill bits and it got me wondering what diamond drill bits actually look like. They are, sadly, not particularly bedazzled:
Still, drilling with diamonds is pretty cool. If you want to read about drill bit learning curves — and you know you do — check out this new piece on the evolution of polycrystalline diamond drilling from Construction Physics:
5. ✅ Community comment of the month: Craig chimes in with some skepticism regarding a claim on the recent pumped hydro episode:
I believe Erik’s statement that pumped hydro accounts for 90% of grid storage might be based on out of date data, as battery storage has grown dramatically over the last four years. A May 2024 article on “RenewEconomy” website titled “Battery storage is about to overtake global capacity of pumped hydro” indicates that on a global basis pumped hydro made up 90% of grid storage in 2020, but by 2023 it was down to 68% and expected to end 2024 at 56% and that battery storage would surpass pumped hydro in 2025.
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
MAILBAG QUESTIONS: Ask a question for this month’s mailbag episode (anyone can ask a question but mailbags are a paid-sub-only perk). Volts has a form for those who are shy, but David prioritizes questions posted in this thread.
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At this live event in Austin, Texas, I was joined by Austin Energy executives Lisa Martin and Michael Enger to discuss how a progressive municipal utility charts a course to clean energy in Texas. We explore their multi-pronged approach to reaching 100 percent carbon-free electricity by 2035, from expanding distributed energy resources and battery storage to piloting first-of-its-kind geothermal technology.
(PDF transcript)
(Active transcript)
David Roberts
Hi, hi, hi! This is Volts for February 14, 2025, "Austin's quest to reach net zero." I'm your host, David Roberts. In January, Canary Media held two live events in Texas, one in Austin and one in Houston. At both of them, I recorded podcasts for you folks!
This one, from Austin, is a conversation with Lisa Martin and Michael Enger, who are, respectively, the chief operating officer and the VP of energy market operations and resource planning for Austin Energy, the city's municipal utility.
Austin Energy has adopted a goal of electricity decarbonization by 2035, and it is located in a city, Austin, that is targeting total citywide decarbonization by 2040.
How is it doing on those goals? What technologies is it drawing on? And why is it still building new natural gas plants? We dig into all of this and more, with a few spicy audience questions thrown in at the end. Enjoy.
Lisa Hymas
This is David Roberts, he is the founder and journalist behind Volts, which is a podcast and a newsletter that you all should be following. Welcome, David. Thank you for being here. We're also excited to have two folks from Austin Energy with us today. Lisa Martin is deputy general manager and chief operating officer, welcome, Lisa. And Michael Enger is VP of energy market operation and resource planning. So thank you all for being here and let's kick things off.
Michael Enger
Thank you.
David Roberts
Hi, everybody. Thanks for coming. I'm sorry to be sitting here awkwardly looking at my phone. Normally, when I do this, I'm in my home office in my underwear, and nobody's looking at me. So, I don't know how to do this in public. So, Lisa, I thought it would be good to start, just to frame things, maybe to tell us what mandates Austin Energy is operating under. Some, I think, are self-chosen. And then there's the city council, and then there's state and federal stuff. So, like, what targets are you trying to hit just to frame sort of everything here?
Lisa Martin
Well, in general, we operate in a highly regulated environment. There's some federal, there's some state, there's some local. But I think what you're trying to hone in on really is related to some of our renewable energy in our carbon-free energy, clean energy, space and whatnot. And so, essentially, Austin Energy has a resource generation and climate protection plan. And the city council just adopted the most recent version of that. That's a plan that goes out to 2035 and it sets a goal of 100% carbon-free by 2035.
David Roberts
Carbon-free power generation, power use or carbon-free Austin?
Lisa Martin
Carbon-free generation as a percentage of the load that is necessary to serve the customers in Austin. And those percentages have changed over the years. They've increasingly grown. I think the first one was adopted back in 2003. And every so many years, the plans have adopted either an increasing goal for the same year or a higher goal for a higher year until you get to 100%. And then that's the goal. Right.
David Roberts
And then, this is in the context, is it not, of Austin having a total decarbonization goal sort of around that? Right. Like the rest of the non-power generation stuff. Is Austin trying to get all the way?
Lisa Martin
Yeah. So, Austin also has a climate equity plan, and the goal there is net zero by 2040.
David Roberts
2040. So, that's pretty pressing. Can you give us a sense of what the current portfolio looks like? The current Austin Energy portfolio? Like, where is Austin getting its energy now, roughly?
Lisa Martin
Yeah, that's Mike's space.
Michael Enger
Sure. So, we have a very diversified portfolio right now. We are a one-sixth owner of the South Texas Nuclear project, which is the nuclear power plant down near Bay City. We own about 600 megawatts of coal that we run very low through environmental dispatch. We have about 800 megawatts of natural gas here in the Austin area. That's a combination of a combined cycle as well as 10 peaking units. We have a wood waste facility out in East Texas, Nacogdoches, the biomass plant. We have about 1800 megawatts of wind under contract. And that's throughout the state, mostly west and down along the coast and then in South Texas.
And then we have about 975 megawatts of utility-scale solar throughout the state as well, with about 175 right here in Austin.
David Roberts
Right. And so, just to be clear how things were, you are purchasing power from ERCOT, right? Like any ERCOT customer, basically. So, you have a choice of any ERCOT resource.
Michael Enger
So, the way ERCOT works is, you are offering in all of your generation on offer curves, and then it is using security constrained economic dispatch to optimize the overall generation fleet to serve all of Texas. And then, we are buying all of our load from ERCOT. So, you sell all of your generation into ERCOT, and then you buy all of your load from ERCOT.
David Roberts
I guess one question, maybe this is naive or dumb, but if you're trying to get to 100% clean, it seems like within the state of Texas, cumulatively there's enough clean energy to satisfy Austin. So, why couldn't you just buy all clean tomorrow? What's stopping you from doing that?
Lisa Martin
I'll give it a start, and then Mike will come in and fill in the details. But yeah, it's really interesting because when Mike talks about our generation portfolio, it's quite diverse in a couple of different ways. Not only in the fuel mix that he talked about, but also in the geographic location. And one of the benefits of working and operating in this ERCOT market is that we don't have to have the generation right here. You can just buy it from wherever. But as you noted, there's a ton of wind and solar and renewable and carbon-free generation in the market.
But you also have to make sure that generation can get to the load where the customers are using it. And that's not always the case. That's happening in the market. There are pricing signals that are happening in all different places. And so people just say, "Well, why don't you just contract, Mike? Why don't you just contract for more PPAs for renewable energy? You could just do that for free." Right? And the fact that the prices are constantly changing and that we're buying at the price of what generation needs to be to serve the customers in the Austin area, but we're getting paid the price that the generation is, you know, garnering wherever it's located.
And sometimes, the signals are saying, "Too much over there, not enough here." That really throws things out of whack and really makes it difficult for us to serve our customers in a reliable and affordable way. What would you add to that, Mike?
Michael Enger
I think it was perfect.
David Roberts
Another consideration that just occurred to me is, how big of a piece of the puzzle are transmission costs? Because, of course, wind out in East Texas is dirt cheap, like below zero sometimes, but then you have to pay to get it over here. How big are those costs as a — ?
Michael Enger
Yeah, so when you do a power purchase agreement to buy a renewable, you are going to pay a fixed price for every megawatt they produce, and then you're going to get back the market price. So when you see wind below zero out in West Texas, that may not be beneficial for our rates. For example, you typically see prices the lowest when the intermittent resources are generating the most. And so, that can start to put potential pressure on rates. So, I would say that that's maybe part of it. But transmission costs are under what is called a t-cost where transmission is still a regulated market, and it's uplifted to everybody in the state.
I think last year, the net cost to Austin Energy on transmission costs was a little bit over $90 million. So, there's a significant amount of transmission cost and investment going to be able to move all the electrons to the places in the state where we need it.
David Roberts
At least in theory, there's a case to be made for the merits of local energy then, right? Is there not? I was going to get to this later, but let's just go there now. There's a value of solar — so just to back up a little bit for context in case everybody has not been keeping up with these things. Big fights over net metering and solar: How much do you pay residential and commercial consumers for the solar power they generate? Every utility in the country, practically, is fighting over this. The rates are getting lowered here and there. And you, I think, or Texas did a big value of solar proceeding to figure this out.
And then also, there's the... I can't remember the name of it. Mike, help me out. The solar offer?
Michael Enger
The Solar Standard Offer.
David Roberts
Thank you. The Solar Standard Offer. So, maybe tell about this standard solar offer in the context of the value of solar proceeding.
Michael Enger
Sure. So, we often will go out and do purchase power agreements for renewables. We do have a value of solar program for residential. If they want to put solar panels on their roof, we'll pay them for what they produce and then we'll charge them our retail rate for what they consume. Oftentimes, there are situations in Boston where the individual who owns the building is not the person paying the electric bill. That's the renters or the tenants or who's leasing the building. And so, there is kind of a differential in values there for the lessee versus the building owners.
What a Solar Standard Offer does is, it produces a rate we're willing to buy that power from and allow developers to maybe go out and lease some of those spaces on the roofs of buildings and parking lots in order to get more local solar here to help benefit our community and kind of get away from what is referred to as a "split incentive."
David Roberts
And, are there... This is a bit of a niche question, but recently on my pod, I had a discussion with a guy named Pier LaFarge who — there's this long-running tension in the clean energy world where it seems like utilities are somewhat hostile to distributed energy resources. This fight back and forth — are not hostile but do not properly value. And so, his solution is just, why don't utilities just procure distributed energy resources? And that way, they could, instead of just reacting to them coming online, wherever they come online, and whenever they come online, they could have some control of like, "We need a bunch here, like, you know, the grid's congested here."
Procure DERs in an active way. Has there been any discussion of that at Austin?
Lisa Martin
As a matter of fact, that particular podcast was homework for one of my staff meetings so we could have a conversation about how we could continue to think about readying the grid for more and more of what we call customer energy solutions, distributed energy resources. I'm going to take the long way around to get to the answer to your question.
David Roberts
Please, that is the podcast way.
Lisa Martin
But as you noted just a few moments ago, there is a real argument for the value of local generation. And that generation can come in all different shapes and sizes. And yes, we do want to make the best use of all of the different variety of resources that are available across the state. But what we have is a real problem where we need to make sure we can serve our customers. Our mission is to provide safe, clean, affordable, and reliable energy and excellent customer service. We're a vertically integrated utility in the deregulated ERCOT market, and we are focused on what our community needs and they want all of those things.
By the way, they say, "As you go for that clean energy transition, make sure that it's equitable too." So, we have to be thinking about a lot of different variables here and trying to manage them all. All that to be said, prioritizing customer energy solutions like the rooftop solar, the battery storage, the electric vehicles in people's garages, the demand response, energy efficiency, that is the priority. That's the first part of our resource generation plan. And Austin Energy has been a leader in that area for a very, very, very long time. And so, what I'm ultimately looking to get at is that when people say, "Hey, wait," — I was actually surprised at the very end of that podcast where the guy says, "Well, there's actually a sweetness in the utility because they're trying to work through these complex areas."
And you were like, "I don't ever hear people describe utilities that way." And I was like, "What do you mean? Why don't people love us? We were just here trying to help you provide work for the community. We are public power. We are you." Right. And so then I was like, "Oh, wait a second, wait. Okay, got it. That's not the way everyone thinks about it." And sometimes they just mix us up with... Not that all utilities are bad, but IOUs who have this built-in profit margin and whatnot.
David Roberts
Yeah, I think IOUs were mostly the targets of...
Lisa Martin
I know, I heard it. But I loved when he said, "There's a sweetness in it." I was like, "Yeah, a lot of hardworking people trying to do what's best for the community." And the community wants distributed resources. And that's a huge part of what we do and prioritize, figuring out the right value to make sure that we can not only integrate those resources into our system, but that Mike's real-time desk can use them appropriately on the market to make sure that they can extract the most value to keep costs down for our customers and that we can still provide reliable power.
It's kind of all part of the equation.
David Roberts
Yeah, so Mike, how do distributed energy resources interact, if at all, with the wholesale ERCOT market? Because you can aggregate them and bid into the markets, right? So, are you procuring DERs through the wholesale market, or are you trying to sell DERs into the wholesale market? How do those things have anything to do with each other?
Michael Enger
So, we have a few different ways we approach that. I would say one is aggregating like demand response, for example, which isn't maybe distributed energy resources. It helps us reduce our —
David Roberts
You're acting as the aggregator, the utility is acting as the aggregator, right?
Michael Enger
We work through a third party, and then we dispatch, but we aggregate that together. That will help us reduce load. So, I mentioned we buy all of our load from ERCOT, and we sell our generation in, so we're able to reduce load. That lowers the overall cost that we're spending. We are also looking at aggregating other resources. Some resources could be settlement-only generators. If it's large enough, it can settle into the wholesale market, and we'll represent those as a qualified scheduling entity. We're also looking at another program. We have customers that are very interested in resiliency and backup generation for when we do have some of these extreme weather events that were mentioned earlier.
We can help, benefit, and work together. It is cheaper for them to put in a diesel generator for backup, which has much worse air quality. But we can partner together and look to have them install natural gas generation. But then, we should be able to call upon that for a handful of hours, maybe 200 hours a year for those really scarce events where, as we talked about, the sun is predictable with solar. But sometimes, we do get through those periods where we don't necessarily have that sunny period, or we have periods where we don't have windy periods or the sun's going down and there's not enough wind, and we end up with these really tight ramping issues.
And that's where we can lean on that and benefit everybody in Austin. So, we can help the customers that are customer-driven and want that resiliency because of some of the winter experiences they have had. We can help make that a cleaner solution for everybody in Austin. And then we can leverage that and use that during those really scarce events to lower rates for everybody in Austin so that we have another way we're looking to utilize distributed energy resources.
David Roberts
So, the idea is that during those tight times, you can call on those households basically to consume less or to release more out of their batteries, or —
Michael Enger
To consume less or use backup generation to produce more.
David Roberts
Do you have enough of that now that it is like a substantial tool in the toolbox or is it still kind of pilot-y?
Michael Enger
We're looking to grow it.
Lisa Martin
Yes, I will say that several years ago, I got to work on a project. It was DOE grant-funded, called the Austin SHINES Project. The SHINES stands for Sustainable Holistic Integration of Energy Storage and Solar PV.
David Roberts
Well done.
Lisa Martin
DOE acronym, a DOE acronym. And we looked at integrating battery storage solar at three different levels along the utility value scale. We were looking at residential, commercial, and what I would say utility scale, but it was at the distribution level. And then sometimes we were doing lots of different types of controls. Sometimes it was autonomous control, set it and forget it on the smart inverter on someone's solar PV. Sometimes it was third-party aggregated controls, and sometimes it was utility control. And this information is a little dated now, but that study, if you will, really helped show the value of distributed resources, but also realizing that they all have different use cases at different times.
And when you can find a management system that can optimize them, the magic to me is in the control of it. You got to not only monitor it, but also be able to control it. Is the DERM system and is Mike chasing price spikes or is he doing energy arbitrage or is it congestion management or voltage support? All of them have values in different ways. I keep hearing different people and entities talk about one or two. I think for it to really take off, we got to kind of try to stack all those values together.
David Roberts
Yeah, and EVs are part of that too. Are you guys trying to induce EVs? Or more to the point, the EVs that are out there — this is a worry of utilities everywhere, as you've got basically giant loads wandering around totally out of your control, you know, swamping the grid at certain times. Are you doing anything to try to sort of coordinate EV charging or use EVs as an asset rather than a liability?
Michael Enger
Yeah, we do managed charging today where we could reduce the charging during peak times or times that we need to. And we're also studying vehicle to grid as well through a small pilot project.
David Roberts
And what about speaking of my other pods, as I so painfully often do, what about also taking off, specifically taking off here in Texas is this idea of virtual power plants, which is just aggregators, like we were saying, but you know, on a larger scale and big utility scale, are those on your radar? Are you procuring power from big VPPs out there in Texas?
Michael Enger
We're working on a project to define scoping for that DERM system that would allow and facilitate that virtual power plant. And we're working on incentives to get more batteries out and distributed throughout Austin so that we have more control and can really manage that. So, that is something on the radar, something we're working towards right now.
David Roberts
I guess all my questions have been sort of circling around this, which is that it seems like there are lots of, you know, so the big problem with renewables, if you want to see it as a problem, is variability. You need to fill in the gaps. You need something to smooth it out. Traditionally, that role has been played by natural gas. But now we're starting to see alternatives to natural gas coming online, including VPPs, including DERs, including geothermal, which I want to talk about in a minute. So, why are you proposing to build new natural gas plants?
Lisa Martin
That was the ultimate question we got asked over and over again. It's not at all new. First, I would say that what we were trying to do, and what we did, was the resource generation climate protection plan is a policy document and it had a prohibition against any new fossil fuel resource. We're trying to say that we need to make sure that we have all the tools in our toolbox to be able to mitigate all the various types of risks that we see. The risks are real.
Sometimes, it's on the wire side, the transmission congestion, sometimes it's the financial risk in the ERCOT market, sometimes it's the extreme weather or it's the load growth that we're talking about. And all these things are coming and hitting us in a number of different ways. We are experiencing a very different energy landscape than when our last resource generation plan was adopted in 2020, which was before COVID, it was before Winter Storm Yuri, it was before the ice storm of 2023, Winter Storm Mara, that anyone in Austin felt drastically as well. And so, lots of things had changed and we needed to make sure that we kind of opened the doors to provide some flexibility for us to be able to evolve and move through the changing energy landscape.
And so, the plan sets forth four major buckets. Prioritizing customer energy solutions is first and foremost. Developing local solutions is next. One of those local solutions, in addition to local solar and local utility-scale batteries, is more efficient natural gas peaker units. They're just an important tool in the toolbox because, as you said, there's variability. People say, "Why not batteries?" Well, there's a duration situation, especially in an extreme weather situation. Plus, they can help us mitigate the financial risks. So, it's about using them smartly, using them when they're needed. And right now, the tools in our toolbox, Michael said, are about 800 megawatts of current natural gas.
A lot of those are peakers. Most of that's peakers, but they're old technology, they're not as efficient. So, why not? We're going to fill the gap. We've got a need, we needed it yesterday. They could have paid for themselves and some of the congestion costs that we had to pass on to our customers. Then, why not try to stop that bleeding and then continue towards our commitment to decarbonization? That's a huge component of the plan. And the last and final bookend of it is furthering the culture of innovation to make sure that we're adopting the evolving and maturing technologies that are going to continue to emerge that help us reach those clean energy goals.
David Roberts
Did your plan not also involve delaying the shutdown of some of those older natural gas plants?
Michael Enger
Yeah, I mean, the plan that passed did mention we will not prematurely shut down natural gas plants here locally until we have viable solutions for that replacement. Newer, more efficient peaking units could be part of that viable solution. And just one other thing I might add is having peaking units in the right location also makes us a viable black start utility. What a black start utility is, is there is a handful of utilities that if the whole grid does fail, which we hope it never happens, they're the ones putting it back together. And if that ever did occur, we want to be part of the solution.
We don't want to be sitting on the sidelines waiting for other people to fix the problem.
David Roberts
Well, Lisa sort of already asked this question in her answer, but I'll just pick it out and amplify it. I was looking at the portfolio and it said you have three megawatts of battery storage.
Lisa Martin
Yay, SHINES.
David Roberts
Which I first thought was an error, I had to go find a second source to verify. Like, that seems crazy to me. Why is that not 300? Why is that three and not 300? Why not batteries? Because batteries can do this. That's what they're for. They can come on. And duration is just a quantity question. You know what I mean? Have enough. You can have battery power for a long time. So why is the battery — why do you have so little battery power now? And why not just double down on that?
Lisa Martin
So we're going to have slightly different answers. They're not going to be competing. They're just slightly different answers. So I'm going to go first and let Mike fill in the gaps. When I say "Yay, SHINES", I know people are like — I used to stand in front of people and say, "Well, we have these goals." One of the old gen plans had a goal that had 10 megawatts. And someone would say "10 megawatts?" And this was like, I don't know, 2016, 2017. They're like, "That's your goal?" And I was like, "I'm trying to get the three megawatts off the ground."
Like, you know, because when you're dealing with the small ones, right? I mean, there's a lot of a learning curve there. That said, right, people are building them in hundreds of megawatts, right? And so then it's a question about space. So, I just want to clarify that that 3 megawatts does not count the amount that's on the sides of people's homes, right? That's just the culmination of the two utility-scale smaller batteries that we have in the Austin area.
David Roberts
Utility-scale battery installations: In front of or behind the meter?
Lisa Martin
They're in front of the meter, yeah. They're connected directly to the distribution feeder and they're about 1.5 megawatts each. And one's in the Mueller neighborhood. And different technologies and lots of learning curves and challenges. What we found there, though, was that the value when we did the analysis in SHINES was that the value of investing and putting more of those — sometimes people say they're substation batteries, right? They're of a certain size. They're connected to the distribution grid. Less than 10 megawatts. In this case, I think there was actually a study by the Webber Energy group that talked about keeping them less than a megawatt.
And that's where you get the value, which is true because it helps reduce the 4CP cost. But essentially, the value we were receiving from them in terms of operating in the market, it wasn't offsetting the costs. And so, we didn't continue to build out more of that. Now, why don't we have a bigger battery storage system in Austin? Mike can talk about that. And then, you can also just kind of maybe open the curtain to the battery storage RFP.
Michael Enger
Sure. So, we did look at a very, very large utility-scale battery right here in Austin back in 2021, 2022. Ultimately, because of some of the uncertainty that was going on in the supply chain and tariff risks, we had to take a pause until we redid the resource plan. After this resource plan was approved, we do have large battery goals for local utility-scale batteries, and we are planning to issue an RFP hopefully on Thursday, January 30th, is what my team tells me. But we'd like to get that out before the end of the month, giving people about eight weeks.
"And we're looking to do 100 to 150 megawatts, two to four-hour duration battery right here in Austin. And we'll be looking to take that back to city council for approval this summer."
David Roberts
And that would be a big single installation, not an aggregation of consumer batteries?
Michael Enger
Well, we are going to request proposals and then we'll look to optimize the projects in the best, most capital-efficient way to meet our customers' needs.
David Roberts
So am I right then in thinking that if you're committed to total decarbonization by 2035, you're implicitly committed to shutting these new natural gas plants down by 2035, are you not?
Lisa Martin
The answer is yes and no. And every time I say that and pause, there gets to be a huge chuckle from the audience because the goal is 100% carbon-free as a percentage of load. And then people go, "Oh well, that means you're trying to sneak around the back and say you just want to still keep these things running and whatnot." The idea is — between "Can we shut down those units now?" or "Can we predict today that in 2035 we can shut them down?" — it's going to depend on what other resources are available to help us provide clean, affordable, and reliable energy to our customers.
What the plan says is 100% as a percentage of load. The intent, the goal, is to have the supply stack as well. But we adopted the phrase from Dr. Michael Webber and threw it in our plan as well, "Do your best and clean up the rest." And so, if technology doesn't allow us to get there, then what can we do to make sure that the emissions coming from the stacks are as minimal as possible, as little as possible, to essentially get to the equivalent thereof? And time will tell because there's 10 years between now and then.
And we got to see how that culture of innovation continues to adapt and adopt.
David Roberts
Can you shut them or can ERCOT, like, once you open that and they're running, cannot ERCOT just come in and say you have to keep running them? Like, is it yours? Do you have the final decision over whether they shut down or how they operate?
Lisa Martin
I got this question a ton during the resource generation plan as well. Do you want to start? You are going simpler than I am.
Michael Enger
You submit a notice of suspension of operations, and then ERCOT will look at the reliability site, and they can RMR (Reliability Must Run) that unit and put it under contract. In that case, ERCOT runs the contract or pays the cost of the plant and has you operate as they dictate or for reliability purposes. But those typically tend to be shorter in nature while they find another solution because everybody pays for that Reliability Must Run contract.
Lisa Martin
Yeah, and I want to just throw in there. So, it's considered an out-of-market condition, right? It's done for a reliability purpose. They have to be able to prove that there's a reason for it. As Michael said, there's a short duration for it. It's something you don't want to happen. It's an unwanted outcome. And so, what happened is when we were talking to city council and stakeholders in the community, people would just say, "Oh, well, you have no control over it if it gets built, there's absolutely positively zero control. ERCOT can say you run it anytime you want, or they could say you have to keep it running no matter what."
And that's simply just not the way that the mechanism works. It's to handle a short term — because it's the only thing else that's out there. And there are mechanisms that are being put into the ERCOT market to reduce the use of both RMR units and RUC (Reliability Unit Commitment) units, which is when they tell you to turn it on because you have to, because it's the requirement.
David Roberts
I actually appreciate you not saying, "Oh, we're just going to run them on clean hydrogen." But I'm going to give you a chance to say that now if you want to. But do you — how realistic do you think green hydrogen is? Is it realistic enough that you're including it in your plans in a meaningful way, or is it just more of a wait and see thing?
Michael Enger
I think we're constantly looking at all of the available technologies and monitoring the market and looking to see if that can be a reality. I think in reality, you're going to need more of a hydrogen economy in an area to make it work with multiple demand off-takers and customers. I will say that, you know, there was a big push on the rules around that to where it's not even needs to be made by wind and solar anymore. That if you use nuclear and it's low carbon, that you may be able to qualify for the whole credit.
And I believe you're already seeing some people in Texas working towards that. So, I think it's something we're going to monitor, keep watching. It does have some benefits, it has some challenges, but there are multiple technologies that we constantly monitor and look at, and see when they're ready to delve into.
David Roberts
When are you going to escape coal? It seems like that ought to be job one for any decarbonizing utility. You got this lingering coal bit left. And I believe in your new plan you extended that. Do you have a target date for being able to say, "We're coal free" here?
Lisa Martin
Yeah, so we don't have a crystal ball. So, we don't have a target date. And when you say "We extended it," we didn't exactly extend it. We just missed the date before, because the old plan said "shut it down by 2022" and there was no viable path to get that shut down. So, by saying in our plan that we're reaffirming our commitment to exiting coal and using the REACH program in the meantime, and I'll let Mike talk about REACH in a second, people say, "Well, you're extending the deadline." We're like, "Well, the date passed." So, I mean, it is what it is and we are letting you know that we're reaffirming that commitment.
And one of the questions you asked earlier about like, "Why peakers?" and we were giving you all these reasons why. The one that when Mike threw in, "Oh yeah, blackstart." And I was going to say, and we need that local supply, whatever it is. Right. And maybe it'll come in the form of demand response and energy efficiency and local storage and local solar. But I think it's going to also have to come — to get all the variables of risk mitigation together — I think it's going to have to also come in the form of some peakers that we have to make sure we have that set up so that we can affordably and reliably exit coal because of the nature of that plant, because its legacy prior to ERCOT deregulating, it's almost financially acts and operates as if it's sitting locally.
So, it acts as a financial hedge in some ways. I'll let Mike kind of correct me or rough around the edges on some of that, and then talk a little bit about REACH and what we're doing in the meantime.
Michael Enger
Sure, yeah. So, with REACH, which is Reduce Emissions Affordably for Climate Health we look at valuing the cost of carbon to our community or a cost of carbon in our community to meet our goals. And we put that into our dispatch into the ERCOT market. And so, we typically run that unit down at what's known as the low sustainable limit. That's the lowest a plant can run and stay online. And we keep it down there. And through doing that, since March of 2020, we have reduced over 6 million metric tons that otherwise would have been produced and emitted.
But then, there's also those times when the market gets very, very scarce where the wind or solar is not as abundant and prices can go very, very high. And in those situations, it really helps us protect the rates for our customers and maintain that financial viability. So, it's a great mechanism rather than a mandate. It's a market-based solution to meet two different goals that are maybe competing a little bit from time to time.
David Roberts
It seems like one thing you could do if the Texas grid gets congested is, there's a whole country around you that you're not connected to. Obviously, that's not your decision, but I just wonder if you have opinions on whether it would be easier for you to do what you're trying to do if ERCOT were integrated into the larger country grid. We're not an island.
Lisa Martin
Aren't we in the heart of Texas? It really becomes difficult because we're not talking about being on the edge of our grid where a connection could help. When I think about some of our real current day problems, I don't see that solving Austin Energy's and our customers' problems because we have to work on increasing the import capacity even just into our service territory. And then across the service territory, do we have the appropriate voltage support to push the power across our service territory? I know that's not answering your question, it's really a cop-out by saying, "I'm in the middle, I can't be around it."
But it's a policy discussion and decision. And so, I don't know that I have the easiest operational answer for you.
Michael Enger
I would say we are connected to the rest of the grids through DC ties. If you want to be synchronously connected, that would be a very, very large lift in cost, as well as a significant number of market rules changes, different oversight from different regulatory bodies. It's just a big, big, big endeavor to take off.
David Roberts
And there's, as far as I can tell, not even a germ of a seed of a movement to make it happen. So, it's probably not even worth talking about. So, speaking of clean, firm technologies that can step in and fill the gaps in renewables without creating additional emissions, tell us a little about the advanced geothermal project you're messing around with and where you think that might lead.
Michael Enger
Sure. So, we're very excited about this technology and to see if this technology can work and overcome any challenges that we may experience along the way. Anytime you do something for the first time, you're probably going to come across something you were not expecting. But traditional geothermal utilizes water as the fluid that you use to make the steam to push the turbine. This would actually use CO2 in its supercritical form. And so, the advantage of this geothermal is you could potentially put it in many different locations. You don't have to find —
David Roberts
Is that closed loop?
Michael Enger
It's closed loop, yes. And so it actually leverages some of the carbon capture and sequestration credits under the Inflation Reduction Act. But it's also a neat way — I think we talked a little bit earlier about, or I heard earlier about, moving oil and gas jobs into that new green economy. It's the same skill set drilling for oil or drilling for natural gas to then drill these geothermal plants. And that's actually where this company started. They were drilling oil and gas and have moved into this geothermal area. So we're pretty excited about it.
The other great thing about that is, since they have been in the oil and gas industry, they kind of know all the depths and all the heat throughout the state of Texas. So, we can start identifying different areas where you can drill lower or less depth to get there, which is where a lot of the cost is. And so, if it is able to work the way we'd like it to work, and we can overcome all those challenges and we can scale it up, I think it can change the energy landscape of Texas. I think much like wind and solar have eroded the economics of coal and pushed them out of the market, geothermal would have the potential to do that for natural gas combined cycles and give us good baseload generation and as well as potentially do it much quicker and at a lower capital cost than nuclear.
So, you're going to get a lot of the same benefits that baseload carbon-free generation, but you're going to be able to do it faster and cheaper, hopefully.
David Roberts
Yes, are there other closed-loop CO2-based geothermal projects operating anywhere, or is this a real first?
Michael Enger
This is a real first of its kind. At least, my understanding is a real first of its kind. They have been running a turbine down at the Southwest Research Institute on the CO2 to prove that out. And we're looking to take delivery, or not us, the developers looking to take delivery of that turbine from the manufacturer sometime in May or June.
David Roberts
And the advantage of supercritical CO2 is just it can carry a lot more energy per unit than water?
Michael Enger
It's supposed to be more efficient, and then you don't — yes, you don't have to have the water, and you can go to more locations to find areas that you can do this.
David Roberts
Right. Well, you know, Fervo, the advanced geothermal company who I'll be interviewing in Houston — come watch — is developing a different kind of advanced geothermal, but is like cutting costs, really rapidly expanding, signing contracts. Have you talked to them at all?
Michael Enger
I did. I was down at a geothermal conference at the Southwest Research Institute and met them as well. Yeah, they are still using a little bit of — they were using water in their process. I think they call it enhanced geothermal instead of advanced geothermal.
David Roberts
Yeah, all the different geothermals. But you're just leery about water because of water shortages.
Michael Enger
Water shortages also limit some of the areas where you can actually produce it. Right. So, this just opens up to more areas that we might be able to leverage this technology.
David Roberts
Interesting. One other thing that people online insisted I ask you about is your e-bike program. The people online love e-bike programs. How's that going? And, well, what's the impetus and how's it going, and are you considering expanding it?
Lisa Martin
So, I think the technical term is e-ride because it's not just bikes, it's scooters and other things. But yeah, so our electric vehicles and emerging technologies team is pretty stellar, and they find all kinds of ways to reach all kinds of markets. And, so after, you know, making sure that the bikes that are around, in and around Austin that you can just rent for a little bit are, you know, powered 100% by our Green Choice program, which is 100% wind energy and whatnot, then they're like, "Well, wait, hold on. Like not everyone can afford to buy an electric vehicle, but people still need mobility, right?"
And so, maybe the e-bike, maybe the e-ride, maybe the scooters, that's something that we should be working on as well. And so, yeah, that team developed an incentive and reached a different market. And I actually was talking to my neighbor's father-in-law the other day who was saying like, "You know, we just bought our own e-bikes and we love them." And I said, "You know, Austin Energy has a rebate." He goes, "I know, the store I bought it from just took care of it for me." And I was like, "Yeah, that's great, I'm glad to hear it."
I work for Austin Energy. And he goes, "You do? Thanks!" I was like, "Oh yeah, I can't take any credit for that." Just like that whole —
David Roberts
I mean, every e-bike incentive program I'm aware of in the country is wildly oversubscribed the second they pop up. Is that true of yours as well? Are you going to blow that out a little bit? Like, I want one of these things to go beyond just being a little cute side-thing, you know what I mean?
Lisa Martin
We'll take it back. I haven't looked at any of the numbers lately to figure out where they are compared to subscription and how that's working, and what kind of ultimately incentives we can count on. It's interesting because e-bikes are electrification, which is great, but that's adding to the megawatts.
David Roberts
Same with electrifying buildings and transportation, too.
Lisa Martin
But the whole goal of this work group under Austin Energy customer energy solutions has been to reduce the megawatts. And they're actually maturing those goals and saying, "Wait, wait, no, we want all these other things." So now it's greenhouse gas avoidance. And so, how do we mature to adjust to those, to take credit for it? One of the biggest questions that council was asking as we're talking about beneficial electrification and greenhouse gas avoidance goals and things like that was, "Are you taking credit for all of the electric vehicles?" And I was like, "Sure, it makes perfect sense that we should."
Let's talk to the EMV and the soon-to-be-hired entity to make sure that can be accounted for appropriately.
David Roberts
I mean, in a sense, you're trying to decarbonize. You're sort of like — the goal is receding because of electrification. I mean, it's sort of true nationally, it's true everywhere. Like you're trying to decarbonize, but also you're using more and more electricity. So it's like climbing a hill that's getting steeper as you're climbing it. This is probably an unpleasant-ish question, but it seems like Texas keeps trying to steal Austin Energy back from the people of Austin. There's a bill, it seems like every session to de... whatever you'd call it, demunicipalize Austin Energy. How big of a factor is that in the back of your head as you're choosing your policy?
Does it make you nervous? Do you worry about that? Do you worry that given national events that that is going to become more likely? How do you think about that?
Lisa Martin
So, you know, Austin is Austin and we're a special place with a special group of folks that doesn't always align with everything else in the state of Texas. But the fact is that when the legislature is in session, we have a couple hundred extra customers that are part of our community as well. And we have to make sure that we are always providing them good service and staying abreast of what they're thinking and trying to do, and navigating that. Unfortunately, the last couple of sessions, we've had some pretty significant winter storms here during the session.
So, that kind of ultimately then turns the spotlight a little bit back on you and whatnot. But yeah, we monitor and navigate and work closely with the city's intergovernmental relations office and whatnot to just navigate those waters.
David Roberts
Do you feel safe for the time being at least? Can you reassure the citizens of Austin that they're going to keep their utility for the time being?
Lisa Martin
We have an excellent city council, and the council of the whole utility oversight committee is highly engaged and wanting to listen carefully to what the community wants. And you know, we are customer-driven and community-focused, yeah.
David Roberts
I want to take some audience questions, but just a final issue and maybe this is sort of too local to be of interest to a wider audience, but you have this weird setup where you're a source of revenue for the city government. There are these big transfers of funds from Austin Energy to the city government, which seems like it would, all things being equal, make the price of power look higher. So maybe explain why that happens and what the fight about it is about and how you think that's going to resolve.
Lisa Martin
Yeah, so I mean, I'm going to start the answer to that question the way I ended the last one. We're customer-driven and community-focused, and we are — Austin Energy is a department of the city of Austin. Just like the water department and the airport and whatnot. We are part of this larger community that brings the benefits to the city of Austin. It's one of the beauties of public power. And so, that's really just helping to make sure that we're paying for the parks and the libraries and all the services that make Austin, Austin and make it the city that people want to live in.
And so, we think about that as if we were an investor-owned utility, then there would be some sort of amount of dollars that go to a shareholder. And in this case, we are owned by the community. So, we contribute back to the community through this transfer as an enterprise department of the city.
David Roberts
All right. Actually, I thought of one final question. Sorry, it's a bad habit of mine. But your answer made me think of it. A lot of the people I talked to who are big proponents of local energy, including local DERs, local but also municipal utilities, a controlling entity that's close to the ground, is that you can then have your power utility cooperate with sewage and land use and land planning and building and have a more coherent approach where there's kind of more of a seamless whole and everything works together. Do you work with other Austin departments?
Do you feel like you're all helping each other and on the same page, and do you feel that sort of cooperation?
Lisa Martin
Absolutely. Yeah. So we're all one city. And when someone wants to do business in Austin, build something new, right, they don't get an option. We're going to provide them their power. Someone's going to have to give them a building permit. Someone's going to have to make sure they provide them their water. All those someones are departments of the city. So whether it's a developer of a high-rise building, a neighborhood, or just a single-family home, they need to come through the processes of the city of Austin. And you could probably ask a lot of people.
There've been a lot of pain points along the way, but our leadership, in terms of the mayor, city council, city manager, all of them have made it a priority to say, "Let's streamline this. Let's figure out how to make this better." And there's a big effort that was done to come up with some hired third party to figure out how to streamline that. Austin Energy is part and parcel of all of that as well. And we are constantly trying to take in opportunities for continuous improvement to make it a better experience, because we know it's not always easy to work through all the various steps of those processes.
Michael Enger
And we do look for synergies with other departments where we can mutually work together to meet goals. One example is we work to put the solar on top of the covered parking out at the airport and are looking to expand upon that. We've been exploring the idea of putting a solar farm on a closed landfill where you otherwise probably would not use that land for much else. So, looking for synergies there, looking at other building spaces providing structures around backup power generation for water so that we have a more reliable and resilient water supply. So, we do try to work together with departments to see where we have that overlap where we can help each other out.
Lisa Martin
Great points.
David Roberts
Another synergy might be that denser land use, as I hope everyone knows by now, involves lower energy consumption and lower greenhouse gases. Austin is also doing a bunch of cool stuff on that. I'm having an Austin YIMBY person on the pod in a couple of weeks to talk about really some extraordinary stuff there. But I just, I was just wondering, like, are you just doing that in parallel? Are you guys? Yeah. Because density seems to also serve all the goals you've laid out here in terms of reliability, et cetera, et cetera. That was editorializing on my part.
Okay, well, I'd love to hear if anybody has any questions. So, I don't just keep rambling on and on, I guess. Come down to the mics if you do.
First Audience Question
I'll say I'm glad I'm a customer of Austin Energy. I'm delighted that we are integrated and all these goals seem so good for everybody. And so, I — you do a good job. But not everything's perfect. You mentioned some things. There are no signals to those of us who have electric cars for when to charge the cars. There's no time of day pricing that would incentivize someone, other than their altruism, to plug their car in at a better time for the grid. We can't participate in VPPs. There are at least three, maybe four, VPP programs going on in ERCOT wide — local municipal power companies can't participate in that. It seems like an opportunity missed.
And the value of solar that we have is insufficient to justify the cost that those of us who put solar on our roofs spend. It takes 15 years to get the payback, not to mention the return on investment calculations. And I know that there are complicated formulas. I've looked at the formulas for how much other people are subsidizing who and how this all works out. But it seems like more recent analysis has shown that some of those calculations are no longer being done in the right way. So, it's mainly altruism that's driving rooftop solar in Austin, where just a little bit of tweaking could lead to a lot more.
David Roberts
It seems there are a couple of questions in there. Is time of use pricing or other rate reforms to induce this stuff on the table?
Michael Enger
I believe we had a small pilot for time of use, but I think we have a number of challenges we need to overcome to make that work. We kind of need to be everybody's on time of use or nobody's on time of use to create the equity that we're looking for throughout the city and throughout our rate structure.
David Roberts
Is that something you hope to work toward? Because when I talk to electricity nerds, this is always the thing they come back to that DERs are never going to be done in a way that is helpful to the grid until there are those temporal and geographic price signals. Is that a long-term goal?
Lisa Martin
I had a friend ask me a very similar question and I said, "Yeah, but part of the concern and the issue—" I think it is a long-term goal. But I think Mike hit on a very important part, is that we have to make sure that we serve all of our customers, everyone in Austin Energy's community, and we have to make sure that there's an equitable way to do that. And it gets quite complicated when you talk to someone who's like, "Yes, I can do this and I can navigate, and I want to have exactly that thing." But then we have to make sure that we can recover all of our costs because we're ultimately passing all of those costs directly to customers.
And so, someone's going to have to pay for it. And we have to make sure that we thread that needle very carefully. So, yes, there are continual efforts to navigate and figure out how can we provide appropriate incentives to help people with not only managed charging, but also how are we calculating the right value of solar. And one of the products we talked about, the Solar Standard Offer, is something we're really excited about because it has the opportunity to scale and just continue to fund itself. So, I think there's more of that kind of stuff on the horizon.
I'm glad that you raised it, and I wish we had answers to just pull out of the pocket.
David Roberts
But the value of solar thing, is that a statewide thing or is that just you guys?
Lisa Martin
The value of solar is Austin Energy. Yeah.
David Roberts
So theoretically, it's in your power to tweak that at will, okay.
Michael Enger
And I believe the pricing of that is adjusted on a three- to five-year basis, where we do relook at that. It's adjusted as market conditions change.
David Roberts
Yeah, because as you say, there's lots of new studies. I mean, this is an endless argument. You can find people on both sides. But a lot of new research seems to show that DERs have more value than we thought. Yeah, go ahead.
Second Audience Question
So, I think everyone loves that we have a public power agency here, but I've got another structural question. Since at least 2014, when we had the new district 10/1 council, between 9 out of 11 and 11 out of 11 council members have wanted to close Fayette. Obviously, that's complicated, but —
David Roberts
Fayette is the coal plant.
Second Audience Question
That's right. But from a structural perspective or systems perspective, why is it that you think if, you know, 9 of the 11 board members of the council want to do something, it's hard to get done. Is there a structural problem or is it a political problem?
Lisa Martin
I mean, structurally, we're not the sole owner of the plant. So, it's not just a matter of saying, "Oh, we're just going to plan to shut that down." So, we have to come to an agreement with our co-owner, and it has to be done in a way that makes sure that we can still meet the needs of our community.
Second Audience Question
I appreciate that. I'm not asking why we haven't done it, but I'm just asking structurally, if we have a public power agency that's democratically governed and 9 or 10 of the 11 board members want to do something, is there a gap in our message of democratic power or publicly owned power? Just at a higher level, I'm not trying to point fingers about Fayette. I'm just wondering about governance or structure, things like that. Or, you can dodge the question, I don't mind.
David Roberts
Yeah, I mean, it is odd that most council members, and I'm guessing most citizens of Austin, would vigorously vote to shut off coal power. And it's democratically controlled and it's municipal. How do we square that circle?
Lisa Martin
Yeah, I think the best thing I can offer you is that we in Austin Energy want to exit coal as well. And we are working feverishly to try to get to that point. We need to make sure that we reduce the emissions, as Mike has said, through the mechanism we have right now, which is to REACH as much as possible until we get to the point where we can completely remove those emissions. But in the meantime, right now, that source, which financially acts like it's within our load zone, really helps us during those extreme cases. And so we need to make sure that we have the replacement, if you will.
So, it's not just exit, it's an exit and replacement strategy. And I think that this new gen plan helps to chart the path for that.
Third Audience Question
I'd like to point out that we have really great, awesome programs. I totally applaud Austin Energy. I'm proud to be a 40-year resident of this city and I've seen these things. But, I would note that 10, 20, 30, and 40 years ago, your predecessors were saying that the things you're doing today are impossible, utopian, and overly expensive. And the activists did not get the respect, but they got the goods by opposing the South Texas nuclear project, the canceled lignite plant, and the divestment of the Fayette coal power plant. And that's the only way we've gotten these programs in line to where they're leaders.
But, my question: I see probably 100 parking garages, multi-level in the city, mostly in the downtown UT area, that are lit up all floors all night long with no cars in them. And I know it's off-peak, but surely we can do something about excess lighting, if not a mandate, some sort of incentive? Just your response on that. Thank you.
Michael Enger
Certainly, something we could look into. I would wonder if some of that had to do with safety as well. Motion sensors, potentially.
David Roberts
All right, we have two minutes left. So, we're baffled by that. We don't know how to answer that question, so we're going to go to the next one. That's going to be the final one.
Fourth Audience Question
Hi, Dave Savage with Apex Clean Energy. I'm a resident in Austin, a former Austin Energy member. I'm out in Pedernales now. But part of our strategy as a clean energy developer is what we call fuel switch, which is we work with coal plant owners and operators that are planning on retiring their coal units to replace them with wind, solar, and battery storage. We just signed a 1100 megawatt deal with Xcel Energy to replace Tolk with wind energy up in Muleshoe, Texas. And my question to you is about the Fayette coal plant. Your contract with LCRA, are you planning on terminating that contract?
If so, when? I know the mayor and the city council were very interested in doing that, and I lost track of the news threads on where that was.
David Roberts
Did we just discuss it?
Lisa Martin
We just did.
Fourth Audience Question
Yeah, I know you brought it up a second ago, but is that — ?
David Roberts
Well, they're going to when they can. Is there any talk of, I mean, just for context for listeners, the reason this is an attractive model to replace coal plants with clean stuff is that the coal plants have the transmission connection already there and they often have turbines already there, which could sometimes be reused. If you were going to do a, like a geothermal or whatever, I don't know if that's in the cards for the Fayette plant or if anybody's talking about that.
Lisa Martin
I think there's a lot of different potentials that are looked at. And so, that's why we don't just talk about just shutting it down or getting out of it. We talk about exiting coal, getting the coal generation to stop. So, yeah, we'll see where it takes us.
David Roberts
All right. Well, thank you, everybody. I've seen more utility love in this room than I typically do. So, it's a nice change of pace. Thanks for coming and thanks for all your work.
Lisa Martin
Thanks for having me.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this episode, recorded at a live event in Houston, I catch up with Tim Latimer, the CEO of Fervo Energy. Since the last time I interviewed him, almost two years ago, the company has proven out its technology, reduced its costs, started construction on a large-scale commercial power plant in Utah, and signed contracts for many more. We discuss enhanced geothermal’s benefits, its momentum, and its bipartisan support.
(PDF transcript)
(Active transcript)
David Roberts
Greetings, friends, and neighbors. This is Volts for February 12, 2025, "Catching up with enhanced geothermal." I'm your host, David Roberts. Last month, Canary Media hosted two live events in Texas, one in Houston and one in Austin. At both events, I recorded podcasts for you folks. This is the one from Houston.
So, back in July 2023, I interviewed Tim Latimer, the CEO of a somewhat obscure startup called Fervo. The company was attempting to transfer the technology advancements made recently in gas fracking over to geothermal energy production. At the time, it had just finished building its first small test plant with funding from Google.
Not even two years later, a great deal has changed. Fervo built its test plant in short order, brought its drilling costs down by 70%, and started on its first large-scale commercial power plant in Utah.
Far from being obscure, Fervo is now an industry darling on the tip of everyone's tongue.
The prospect of 24/7, always-on, fully dispatchable, carbon-free power seemed like a dream not long ago, but it is a reality now and it is set to shake up the entire energy world. What a great time to catch back up with Latimer. We talked about the company's recent achievements, the pipeline in front of it, the hyperscalers that are knocking on its door, and geothermal's bright future. In a rather depressing political and social moment, this is the pick-me-up you need.
Hi everybody. So, a few years ago — well, actually even more years ago, I think it was 2019 — I wrote an article about geothermal power at Vox where I worked at the time. Because I had sort of just started kind of hearing it out of the corner of my ear a couple of times and I had sort of been vaguely aware of it and I was just like, "Well, what's going on with that?" And so I went out on what turned into a journey of discovery — turns out lots of stuff going on. And one of the companies I came across was Fervo and the advanced geothermal.
And so, then Tim, when he had done, I think, his first sort of like test, came on the podcast, sort of just basically demonstrated that the technology could work. He came on the pod. That was two years ago and lots has happened even since then. So, I'm here mostly to catch up, but just to set the stage, maybe you could just start for, I mean — I'm assuming most people in this audience know, but maybe just give us like the minute-long "What is the technology in question here?"
Tim Latimer
Well, I have to say, a lot more people know the answer to that question because of your 2019 article. This kind of was maybe an example of how off the radar geothermal is. Sometimes I'm asked now, like, "Oh, why doesn't anybody talk about geothermal?" Or alternatively, I'm asked like, "What's all the hype around geothermal?" And I'm like, "Well, both of those things can't be true." And I always remember the days before you wrote that article in 2019, where I think for the next at least two or three years, everyone had either never heard of Fervo before or they directly cited your one article on the topic.
So, I appreciate you for putting a spotlight on it, and I do think we're part of the conversation now a lot. So, like, everybody should listen to David's podcast and read all the articles he writes because —
David Roberts
And subscribe.
Tim Latimer
you can find out what the trends are six years ahead of schedule. So, it's been a while, but for those who still don't know, one, go read David's article on it. But geothermal is a way to get energy. And that can be heat. That can be heat that we use directly, or it can be heat that we then convert to electricity. And it's an energy resource that's been around for electricity generation for over 100 years. The first geothermal power plant came online in Italy over 100 years ago. By the way, sitting five feet away from me is Ann Robertson-Tait, who's run GeothermEx for a couple of decades.
And so, I'm way more nervous about getting anything wrong about geothermal than I normally am. So, if y'all hear a loud woman proclaiming that I'm wrong about something, you know who it is. Thank you. She said she's going to be tame. But that first plant came online over 100 years ago and, basically, all geothermal power works the same way. There's heat in the ground, and you figure out a way to get that heat moved up in a way where you can spin a turbine. And historically, we've only really had the drilling technology to make that work if you're sitting on top of really special geologic hotspots.
So, Italy was first, but famously, Iceland gets most of its energy from geothermal. Northern California, New Zealand, Kenya, there are countries all over the world that get it. But they all face these characteristics where you can make power from it by producing steam or hot water, spinning a turbine with it to generate electricity. But historically, it's been limited to these specific hotspots. I'm sure you're going to ask us what Fervo does in the future. But generally, the basic concept of what Fervo does is that geothermal has all the things you want in an energy resource.
It's 24/7, it's carbon-free, it's quick to build, it's proven tech. But historically, it has only worked when you're sitting on top of one of these hotspots. And so, there's been R&D initiatives for a long, long, long time to say, what can we do with drilling technology, stimulation technology, fracturing technology, you name it, to try to get geothermal to work in more places. And that's what Fervo does. But that's the basic concept is: The Earth is hot, we can use that heat for something, one of those things we can use it for is to generate electricity.
David Roberts
And just to toot Tim's horn a little more, the big advance here is that Tim has taken fracking technology borrowed from the natural gas industry. And so now, he can go down and create fissures underground, which then he can circulate water through, and it heats up. So, you don't have to find fissures anymore. You can make them, which means you can do it — maybe not anywhere — but a lot more places than you used to be able to do it. So, it's a really cool story, but back when I talked to you, you were just planning on building basically your first actual bona fide power plant for Google.
That was two years ago. You built the plant, you came out with a white paper about the results. It was pretty eye-popping. Why don't you tell us what you guys figured out building your first plant?
Tim Latimer
Yeah, so, even though EGS (Enhanced Geothermal Systems) has been something that had been worked on since the 1970s, it was Los Alamos National Labs and the Department of Energy that first kind of put the research dollars into this and learned a lot of really interesting things. There have been projects in Japan, France, Finland, and all over the world moving forward, but most of them had fallen short of the technical results that you really needed to prove out commercial viability. A lot of that came down to flow rate. It's very expensive to drill.
And if you're going to drill, you need to make sure you're getting a high energy output per well that you drill. So, one of the things we set out is a bunch of different targets in terms of power output per well. And, by the way, for the scope of some of this project, what we did is we found a geothermal power plant in Northern Nevada that had been producing for about 15 years. But they'd oversized the power plant relative to what the actual field could produce, which is a situation you find all the time in geothermal.
Because the scary thing about conventional geothermal development is, you drill a couple of wells and it looks good. You size your power plant, you build it, then you drill a couple more wells, and oh no, you got a dry hole. And so, this plant found its way into that situation where the plant could produce more power than the amount of geothermal steam that was able to flow to the plant. And so, we decided to go out to one of the areas in the southern part of the field where they'd had multiple dry holes using conventional drilling technology. And we did the first kind of Fervo system, which is, as you mentioned, we're borrowing fracking technology from the oil and gas industry.
But that actually wasn't new for geothermal. That had been tried before. But the new twist on it that we had was the integration of horizontal drilling into the process. So, in this project, we drilled about 8,000 ft down, and then through granite, we were able to turn the bit horizontally and drill 3,000 ft plus horizontally. We put two wells next to each other, parallel at that 8,000 ft down, and flowed through the fractures from one well to the other. And the key thing that made our geothermal work was when you turn horizontally, you get access to way more hot rock per well that you drill than a vertical well.
And so, we were able to flow across a much larger system of rock so we could get way higher flow rates. Importantly, they could sustain at the same temperature for a lot longer. So, we flow tested that well. We were able to show that it could flow at over 60 liters per second, which at that power plant, operational efficiency means that our two-well system could produce over three megawatts of electricity. And that was more than double what any other enhanced geothermal system technology had done. And it was also, you know, 10 times higher than what I would say, the average output of prior EGS attempts.
And all because we could get more bang for our buck because of the horizontal drilling. Then we were just talking to you about how excited we were about the well test results. The exciting thing for us was a couple of months later, we were able to build the pipeline, tie that into the power plant, get that system online, actually producing electrons that went to the grid through part of our partnership with Google. The second big de-risking thing that the product was able to do is in October of last year we hit 12 months of production and we're able to maintain the same production temperature from day one all the way through day 365, which is one of the other risks of geothermal is if you don't get a system large enough, it can cool down too quickly.
And so, in one big demonstration project, we showed that we could get enough bang for your buck in terms of power output per well. And that, you know, everyone always says, "Well, what if it fails in 20 years?" And I was like, "Well, in 20 years we'll have de-risked that." But right now, it's just been one year. But one year of completely flat, stellar production and output is a hugely de-risking thing for this tech. So that's what we were able to accomplish there. And we consider it to be the first true breakthrough in commercial viability for enhanced geothermal systems.
David Roberts
And you brought down your drilling costs over the course of that by a lot, by a very large number. 70%. How? Like, you know, to somebody like me, drilling is drilling. Like, how does it get 70% cheaper the second or third time you do it?
Tim Latimer
Yeah, so first and foremost, drilling time is probably the biggest element that goes into the drilling cost. It is incredibly — you know, if you go to visit one of our drilling sites — we have an incredibly sophisticated piece of equipment, a large drilling rig. We have photos of them everywhere. There are dozens of people out there working at any point in time. So, each day you're out there is incredibly expensive, like on the order of $100,000 plus. And then there's a lot of equipment that goes into it as well. And so, when we drilled our well — you know, oil and gas and geothermal drilling is quite a bit different.
Geothermal drilling, we're in higher temperature rock. We're usually targeting granite because that's where it happens to be that most of the high-temperature rock is. We were drilling larger holes and there's 18 other things that make it different from oil and gas drilling. And so, when we first started out, I mentioned this to you earlier, we weren't big enough to get the attention of the oilfield service companies broadly. So, we were just taking off-the-shelf oil and gas drilling tech and trying to shoehorn it into working in this process. And the problem is that you have these amazing innovations that have made drilling in oil and gas really efficient.
Like the one I talk about a lot is the polycrystalline diamond cutter bit. So, like over 100 years ago, Howard Hughes invented the tricone roller bit, and that made him the richest man in the world. And that technology dominated the oil and gas industry for about 100 years. And then, right when I was starting my career a little over a decade ago, you saw the PDC bit leapfrog and become the predominant drilling bit for oil and gas. And that is, rather than rolling bits that crush the rock, you have a fixed cutter bit where the tips of that bit are synthetic diamonds, because diamond is the hardest substance you can get, and that scrapes the rock away.
And so, that actually was one of the huge unlocks that opened up shale oil and gas. But all of those bits had been designed for soft rock, because that's what oil and gas drills through. And we had to adapt it to work for hard rock. So the first time we drilled a horizontal well, it took us 75 days. It took us $13 million to drill that well because it took so long. In the horizontal section, we drilled 3,000 ft, and we broke 13 bits in the span of drilling that 3,000 ft. And a lot of innovation is not sexy.
It's not always that you come up with a whiz-bang. It's not like Doc in Back to the Future where you trip in the bathroom and hit your head on the counter, and the flux capacitor comes to you in a vision. A lot of times, it's just breaking a lot of things. And then running a really rigorous program to figure out, why did it break? How do you make it better for next time, and how do you improve? And so, there wasn't a lot of experience of people using PDC bits in granite before. And this is just one example.
I can tell you, through every component on the drilling rig, where we've improved things. But we started working with the bit suppliers to say, "All right, it broke here this time. Can we add some extra support here? Can we make the blades a little bit longer? Can we change where we put the cutters?" And what we saw is, actually, by the time we were drilling our 10th well, we drilled an entire lateral section through solid granite, 5,000 ft, and we only broke one bit instead of 13. And that meant that we were drilling wells in 17 days instead of 75 days.
And it was just a lot of new improvements from a bunch of different innovations, a lot of which was come up with by our team and it's proprietary for Fervo, a lot of which is a partnership through great suppliers. And a lot of this is, you know, as somebody who used to be a drilling engineer in the oil and gas industry, it's sort of like you do the whole 25 years of the shale revolution. But we got that version of the textbook that the teachers get where there's an answer key in the back. Because there's a bunch of tools that have been developed for oil and gas drilling over the last 25 years, since the first shale well was successful, that weren't developed for the hole sizes and the rock type of geothermal.
And we don't have to go invent those from scratch. We can just go to the service companies and say, "We want one of those, but we want it in this size and work at this temperature." And so, our pace of improvement has been tremendous. And so now, we're drilling wells at under $4 million when we used to drill them at $13 million.
David Roberts
So, you said the thermal level did not drop over the course of a year, which is big. But I think a lot of people, a lot of the questions I get when I talk about geothermal to people who are not familiar with it, is they think, "Do you not sort of suck all the heat out of the ground at some point? Is heat a finite thing that you can deplete or does it regenerate fast enough?" Like, what's the story there? What's the balance there?
Tim Latimer
Yeah, heat does regenerate. If you waited for that heat to regenerate through rock, which rock is not a very good conductor of heat, you would have really, really low output wells. And so, we don't really try to meet steady state in terms of the heat of the rock stays constant over time. Because then, we wouldn't have 3 megawatt wells. Or our most recent well test was 10 megawatt wells. It'd be much, much lower than that. And so, we think about this more in terms of "How do you design a well program where each one of those wells lasts for 30 years or longer?"
And then, what we have is an ability to, as we continue to innovate on the drilling side, we can drill deeper and deeper and deeper into the resource. So, you get to where there's virtually an unlimited supply. And so, the heat does replenish, not at a rate that's fast enough that it would be sort of like your economic optimum to do it. And so, we typically drill these wells and space them out and try to access a body of rock that means that it can produce at the right temperature for about 30 years. And then, the way we think about our long-term asset management is, whenever you get a well that starts to where it's cooled off the rock locally too much, you can decommission it and start producing from other wells that we drill.
And so, the way we kind of think about this is, we like to design our projects so that the wells last for 30 years, but the assets last for centuries. And that's kind of the general idea of how we think about geothermal resource management.
David Roberts
Just out of curiosity, though, and maybe you don't even know this, maybe we should ask a geologist. But like, if you had tapped out the heat to the point that it was no longer economic and you shut the well down and you just waited for the heat to build back up. Is that like 10 years, 100, 200, a 1000?
Tim Latimer
In rock conduction, it's probably — like we got the geologist right here. And the expert geologist says... I called on you, so you get a free pass. Says, you know, so if we run it for 30 years, wait 50-100 years, and the heat will recover. And actually, there's been concepts here where people have actually talked about rotation farming. Like people used to talk about in the —
David Roberts
Are the fields replenishing? The soil is replenishing, kind of similar.
Tim Latimer
Yeah, and by the way, the general crux of this is that there's so much heat in the earth, and that heat is also continually regenerating. The reason geothermal is considered a renewable energy resource is that the heat supply is almost inexhaustible. And I've gotten into debates with people about this in the past where — and there was a good analysis that a geologist did, and they published it in a Wired article a couple of years ago that I always point them to — where I hear people say, "Well, the heat depletes locally, so it's not really renewable." Or, "You know, there's only so much heat in the Earth."
And so, you do the math on it. If you were to take 2024 global human energy consumption and then divide it over the amount of heat in the Earth, what you get is that we only have about 17 billion years' worth of heat in the Earth. And so, my response is, "Okay, fine, it's not renewable. Because in the ultimate heat death of the universe, nothing makes it. But most estimates for the sun are that it'll only last for 5 billion more years. So, you know, we're three times longer than solar energy."
David Roberts
All right, so you built this test plant for Google. I don't even know if we should call it a test plant. Like, it's pretty big. It's not like a little — it's not a pilot.
Tim Latimer
Yeah, it's a real plant.
David Roberts
But now, you are building. No longer... no more demonstration. You're out building a commercial power plant called Cape Station in Utah. So, tell us how big that is and how long is your list of off-takers? How big could you get it before you exhaust your off-takers?
Tim Latimer
So, what we've publicly announced so far through the first two phases is 400 megawatts. And we started drilling this project in 2023. And so, just some scale, right? We're going from 3 megawatts to 400 megawatts in one jump. If y'all are energy entrepreneurs. Almost always, like I'd say, a lot of my board meetings and a lot of people's board meetings are always the question of "How big do you do this time and how big do you go for the next one?" Everybody has really strong rules of thumb about, oh, don't do more than a 10x scale up or something like that.
But I'll tell you, the really nice thing about the scalability of geothermal is, even though our first project was only three megawatts, it was two wells: an injection well and a production well.
David Roberts
Yeah, it's modular, so it's not like you're building a giant well. Yeah, you're just doing well, well, well, well, well.
Tim Latimer
Exactly. And so, that's what gave us conviction that we could go way bigger for project two. Because it's just a repetition. You know, other times when you scale up a plant, you have all sorts of scaling factor issues. Okay, if this is 10 times bigger, are my pressure and volume ratios going to get off? And all sorts of other questions. And with our case, the fact that we're just repeating that base unit of two wells over and over again, you don't have those scale-up issues. We were willing to jump in with both feet and say we're doing a 400 megawatt project.
David Roberts
How many wells is 400 megawatts?
Tim Latimer
It'll be about 80 wells in part because — and we've announced this in our first flow test results that we did at our Utah site — we've actually tripled the power output per well compared to our pilot project because we've gone deeper, hotter, longer laterals. So, our pilot project was at 350 degrees Fahrenheit. We're going to 420 degrees Fahrenheit now. Our pilot project was 3,000-foot laterals. We're doing 5,000-foot laterals now. And there are other changes we made, but we've basically been able to take it to where rather than getting 3 megawatts out of a production well, we get 10 now.
So, the wells are more productive. And so, we're going to do 80 total wells. We've already drilled 20 of them. So, we're well along our way here. We're going to put the first megawatts on the grid in 2026 from this project. 100 megawatts in 2026, 300 megawatts in 2028. We started power plant construction there. In October, the Biden administration announced that we'd gotten our final NEPA federal permitting action to expand the site all the way up to 2 gigawatts. So, I told you earlier, we've only announced 400 megawatts publicly. The 2 gigawatts thing may give you a clue of how we're thinking about expanding that asset.
David Roberts
One other question about the replicability: How many power plants per well, or how many wells per power plant, I guess would be the right way?
Tim Latimer
So, because we're doing directional drilling, we can put a bunch of wells on one pad. And what we found is the most economic way to do this, to actually eliminate pipeline cost and reduce the footprint of the power plant, is to build one power plant per well pad. And so for phase one, we're doing a little bit smaller wells. That's what we're on right now. We have three well pads of eight wells each and three 33 megawatt turbines that sit on each well pad. And we're generating roughly 100 megawatts of power when we commission that plant. We're actually going to even longer laterals and even bigger wells for phase two, and we're going up to 10 wells a pad.
And so, we're going to do 50-megawatt turbines for phase two. And to get back to this point on modularity, I think you did a great podcast a couple of years ago about learning curves, which I think is the most important possible concept in technology innovation — I don't mean technology innovation like what software people do, I mean technology innovation like what we do — is learning curves, which you can get a learning curve if you can drive standardization and modularity from unit to unit. Our team did a huge amount of analysis, and we now call these geo blocks because we've worked with our turbine suppliers to give us a standard 50-megawatt turbine generator combo that matches exactly with our one well pad output.
And we put one per well pad. And the idea is that rather than try to get infinite economies of scale by making the turbines bigger forever, we actually get the right balance between shorter iteration cycles for improvement, while not sacrificing too much on economies of scale by specifically choosing to do a 50-megawatt power unit. So, when we do phase two of this 300 megawatts, we're going to do six power blocks over and over again and turn it into something that's a lot more of a mass manufacturing type approach that allows you to unlock these learning curves that rely on standardization and short cycle times.
David Roberts
Right, right. And, is there, in terms of depth that you can get to with your current technology and in terms of lateral feet, some limit? Like, you've pushed it out a ways now. Can you push it out further and further? Like, how far lateral can you go before you get lost out there?
Tim Latimer
A lot farther. We'll find out. We've gone from 3,000 to 5,000 just in the span of the last two years. We're going to do 7,500 later this year. To give you some context, the horizontal wells that the oil and gas industry is drilling now, you know, back when I left the oil and gas industry in 2015, we thought it was like the coolest thing that we could do, a 5,000-foot lateral. And you talk to people now and the records are 20,000 ft, 25,000 ft, 30,000-foot lateral. And here's a crazy thing for you, if you haven't followed the technology space. Where the oil and gas industry's found the limit isn't from a technical limit, but it's because landowners typically don't own land that extends six miles across.
And so, you get so much efficiency from having a longer lateral. No joke. What a lot of the oil and gas industry drillers are pioneering right now is what they call horseshoe wells, where they literally drilled down 5,000 ft in one direction, do a U-turn, and come back 5,000 ft in the other direction. And that's because sometimes you can't put enough landowners together to drill longer. So the technical limits aren't there. For us, we're having to go through this iteration cycle of learning how to drill in granite and learning how to drill at 450 degrees Fahrenheit, which is a different beast from what the oil and gas industry does.
But we think we've developed the right technology tools to go to 7,500 ft now. And we're planning on expanding that to 10,000 ft to 15,000 ft in the next two to three years.
David Roberts
Could you horseshoe? Because I remember when I was looking at the geothermal company Eavor, which is doing a closed-loop thing, their water circulates just through pipes rather than loose underground. But they were, you know, they were talking about drilling the pipe down and then having laterals kind of going off like a tree kind of thing. Like, is there any reason you couldn't do a lateral out and horseshoe back and another lateral? I mean, is there a limit to the number of laterals?
Tim Latimer
No, I'd say what we're doing now is because it's economic and it works. And so, no need to kind of push the technical boundaries when we already have something. I'm also a big believer in — people call the concept "deployment led innovation" or "learning by doing". When you look at the hard tech companies that have really done transformational things over the span of a couple of decades, you never, ever, ever find a company that said, "We're going to work on a 20 or 30-year moonshot and it's going to be all science and R&D for 20 and 30 years. Then we're going to flip a switch and it works.
What you find is a company that figures out how to improve and make money every step of the process. Because you gotta have some flywheel to fund the process. So, like, you know, SpaceX didn't start out with Starlink and they didn't start out with the gigantic, you know, Starship rocket they're doing now. They figured out how to make smaller ones and start with more traditional commercial satellites and then how do you scale up to make larger rockets there? And so, the answer to your question is, we're looking at all of those things and no telling what 10 or 20 years of dedicated geothermal drilling innovation will do to these.
But we have a system that works right now, and we're stepping our way into that. And I'll tell you one other big difference from oil and gas to geothermal that actually opens up a whole new wave of innovation possibilities. Oil and gas is always limited in the fact that they have to find hydrocarbon-bearing zones to develop their projects, and so like you wouldn't do crazy well geometries. Or sometimes people say, "Well, if you could drill that deep, wouldn't the oil and gas industry have done it by now?" Well, if there's not oil deeper, you don't have an economic incentive to do it.
And the oil and gas industry is not in the industry to do strange, sciencey things. Geothermal is far different. So, like when I joined in South Texas, the Eagle Ford Shale, a lot of times you only have a pay package there that's like 300 ft thick. So, nobody's asking the question, "How do you go to 15,000 ft or 20,000 ft?" or something like that. But geothermal is quite a bit different because generally the deeper you go, the hotter it gets. And so, when we think about what does the industry look like 10 years from now or 20 years from now, we want to drill — yesterday's wells are at 350 degrees Fahrenheit and 8,000 ft, today's wells are at 400 degrees and 9,000 ft, the wells we're drilling next year are 450 degrees and 11,000 ft.
And the fascinating thing is, because we're not chasing a hydrocarbon package, the fact that we're just chasing heat means that if we improve the technology so we can drill hotter and deeper, it improves our economics. So, like, it's an industry that has a totally different technology curve than oil and gas because there's actually a technology and financial incentive to figure out how to go deeper. And that's not something that generally the oil and gas industry has had. So, I think when you think about what our industry will look like over a 20 or 30-year period, everything you just said about multiple multilaterals or crazy loops or wild designs is in the cards because it actually doesn't follow the same constraints as oil and gas drilling.
David Roberts
So if you're going to identify, say, the three big trends that are going to bring costs down for Fervo going forward, deeper, farther lateral, are those the main things?
Tim Latimer
"Deeper" matters a lot. Because if you can go from 400 degrees Fahrenheit to 450 degrees Fahrenheit, you can actually improve your power output by 30%.
David Roberts
Yes, you can flow exponentially.
Tim Latimer
It gets exponentially better. So, that'll be a huge thing. We're going to continue to drive drilling costs down. What's fascinating, if you were to take like the NREL CapEx stack for an enhanced geothermal system project from two or three years ago, before Fervo published our results, what they would have told you is the power plant would have cost you like $3,000 a kilowatt, and the drilling would have cost you like $30,000 a kilowatt. And so, all of the R&D focus was on driving down the drilling costs. And $3,000 a kilowatt is pretty expensive for a power plant.
But when it's just like the tail wagging the dog, there wasn't a lot of R&D focus on it. What we've done now from Fervo's standpoint on drilling innovation — keep in mind, just in the last two years, I told you we've tripled the productivity of our wells by dropping the cost by 70% — we've dropped our subsurface costs by an order of magnitude. And so now we're talking about sub $3,000 a kilowatt subsurface costs, actually getting close to sub $2,000 kilowatt subsurface costs. And so all of a sudden there's been decades of focus on the drilling side of this equation.
And in the span of about two years, we've taken the drilling part of the equation from being the prohibitively expensive part to the cheaper part of the operation. So, you look at our engineering team, you can tell what we were focused on, because three years ago, I think Quinn is here somewhere. Is Quinn here from our team? He may have stepped out, but Quinn was the entirety of our power plant engineering team, a team of one, because it just wasn't a primary focus of ours. And we probably had 20 times as many people on subsurface technical challenges.
We now have more engineers on the power plant side focusing on cost-saving opportunities than we do on the subsurface side, because all of a sudden it's the bigger part of the CapEx.
David Roberts
Let me ask about that, because if there's one thing that seems like it's been standardized over time, it's a steam turbine. Is there something unique about these steam turbines that is bespoke to geothermal?
Tim Latimer
So, there's some geothermal that uses steam turbines, particularly the really high-temperature resources if you're in one of the conventional New Zealand or Northern California plays. But almost all of the growth in the US geothermal market over the last 10 or 20 years has been in organic Rankine cycle turbines, which isn't a new tech. Rankine was in the 1800s, I think. So, it's not like it's new, but it's only just now finding like mass market adoption. And the key is, you can get higher efficiencies at lower temperature. And so, until ORC units got rolled out, the cutoff for your minimum viable temperature for geothermal might have been 500F or 550F or something like that, because it just wasn't efficient enough to run a steam turbine there.
So, we do organic Rankine cycle systems. And even though there's been hundreds of gigawatts or thousands of gigawatts of steam turbines built over the years, collectively there's only been 4,000 megawatts total of organic Rankine cycle turbines. So, it's still a technology that's not that far down its learning curve. And so, you think about the one project we're doing in Utah right now is going to be 10% of the global market for ORCs just in one project. And if you look at Fervo's growth targets, we're going to get there very, very quickly. And so, there's different technology innovation tools.
We're pretty wedded to using organic Rankine cycle turbines. I'll tell you one of the keys for this.
David Roberts
Even if you're deeper and getting hotter?
Tim Latimer
Yes, and I can tell you the reason. There are two reasons for it. One is financial. Geothermal brine can have different things in it, and exposing your steam turbine and all of your equipment at the surface to that geothermal brine can lead to crazy corrosion and scale issues. I'd say the second thing is, it is important to Fervo as a company, and I think the geothermal industry, to be zero emission. A steam turbine is not necessarily zero emission because if there's CO2 or other things in the geothermal brine, it can actually lead to emissions. I'm a little tired of the industry having to explain — like we're a tiny enough industry as it is and having to explain different stories.
It's probably confusing whenever you start talking about it because is it low emission or no emission? Do we use some water or no water? There are just all these questions. If you use an air-cooled system that is an organic Rankine cycle, because all we do with the geothermal brine is bring it up, run it through a heat exchanger, and pump it back down, it's a no-emission technology. And I think as we scale, it's going to be more and more important over time to be no emission, not just low emission. Standardizing and driving innovation on a closed-loop organic Rankine cycle system with air cooling is a way where you can go and put those power plants anywhere in the world, not worry about the emissions, not worry about the water, and just go.
And so, we think it's a superior technology. And Fervo is all in on that. Because I think the standardization benefits and the environmental benefits of this type of power generation outweigh any potential upsides from using different technology.
David Roberts
And there's lots of innovation headroom.
Tim Latimer
There's a lot of innovation headroom.
David Roberts
So, before we get beyond the technical stuff, let's talk about drilling deeply. We just visited — some Canary folks and I earlier today — Quaise, the company Quaise, which is trying to go deep by using millimeter waves — I always want to say lasers, I wish it were lasers — millimeter waves to literally melt rock. We watched them melt rock in front of us. It's quite mind-blowing. So, that's one area of innovation for getting deeper. How are you going to get deeper and deeper?
Tim Latimer
Yeah, it's a good question. We're excited to follow Quaise's journey. I should say we, at the end of the day, are a developer that uses technology to further our progress. And so, nothing would thrill me more than to see Quaise have a breakthrough in technology. We would immediately be a huge customer of theirs. We think for the next five to 10 years, while there are other alternative technologies that are trying to kind of scale up to get to higher levels on the technology readiness level. You talk about innovation headroom: I think there's been so little drilling with modern rigs and automation with PDC bits in a granite environment that what we've done by cutting our drilling times by 70% in the last 18 months is not close to scraping the bottom of the barrel here.
And what we've done now is we consistently are drilling faster than 100 ft per hour. We consistently are having bit lives where we can drill for 2,000 ft, 3,000 ft or longer. And I think we're going to get to a point relatively soon here where we're at 200 ft per hour, 10,000 foot bit life. And when you start hitting those kinds of numbers, going to 15,000 ft or 20,000 ft, which is kind of in our medium-term plan, is imminently doable. And by the way, if you can get down to 20,000 ft, there's enough geothermal resource to power the United States many, many times over.
And so, we're already in an area where the innovations we've gone through have allowed us to increase the depths of our wells by a few thousand feet just in the span of the three years we've been drilling. They aren't slowing down anytime soon. And we think we're going to be unlocking a market that is ubiquitous in terms of geothermal power generation relatively soon, just on the trajectory we're on right now.
David Roberts
Okay, so let's talk about applications. Although, I guess in our current context, power demand is so crazy and rising so fast, what to do with your energy is probably not high on your list of worries. But, it seems like data centers are everywhere. Data centers are on everyone's mind. You know, this is a vexing thing for the clean energy folks. These data centers need enormous amounts of always-on, steady power. Which is very challenging with existing zero carbon technologies. Although, you know, there's white papers out there on how to do this with solar and storage mini-grids.
But it's a vexing problem, and this seems to fit hand in glove with those needs. So, do you have data centers knocking down your door already? Are they on their way to Utah to build next to you? What's your relationship right now with data centers?
Tim Latimer
Yes, well, data centers and the leadership in the tech industry are one of the key things that got Fervo started. We already mentioned the partner for us on that very first project we did was Google. It was because Google, even going back into 2018, launched this 24/7 carbon-free energy initiative, which was focused on total decarbonization of their electricity supply and recognition that even though they're one of the largest buyers of wind and solar in the world, they needed to complement that with emerging technologies to get all the way to 24/7.
And we've been excited to expand that partnership. In the summer of 2024, we announced what we call the Clean Transition Tariff, which is a multi-party agreement between Fervo, Google, and NV Energy so that we can develop and sell Google 115 megawatts of power through a new project that we're going to be developing in Nevada as part of that continued partnership. So, it's definitely happening. The renaissance — it's cool to be in power again, that's the thing. And when we started this company, actually, the number one reason VCs passed on Fervo back in the early days was they just didn't think anybody would want the power.
Which is quaint to think about today, but the idea is that you think about 2020, there had basically been flat power demand growth in the United States for two decades.
David Roberts
Which means, you add something, you take something else off, which is a fundamentally different situation than we're in.
Tim Latimer
It was a zero-sum game. We were also looking at a situation where solar had gotten really cheap. And I think people were just basking in the glow of the success that solar was cheap and natural gas had gotten really cheap. And I think people were basking in the glow of the success that natural gas had gotten really cheap. And you weren't seeing these ambitious 100% renewable energy targets or 24/7 carbon-free energy targets. So it's kind of like, "Ah, nobody's going to want the power." You fast forward to today, it could not be a different market in the power world.
You have many jurisdictions and many companies that have actually committed not to a 10% or a 20% renewable portfolio standard, but 100%. You have things like, you know, we're here in Texas obviously. Like I think, like most of y'all, I lost power for a week during Winter Storm Yuri. And that was not fun. One of the big things for our business is, in August of 2020, the state of California had its first rolling blackouts since the energy, since the old Enron energy crisis two decades before. And that spurred the California Public Utility Commission into action to think about "How do we round out capacity for reliability?"
And they did a procurement mandate that included geothermal. And so, you were already seeing new demand signals. And then, late in 2023, ChatGPT goes viral and everything about the world got turned upside down. And now, all of a sudden, you know, there's sort of now three phases in the American electricity grid. The 100 years where it was growing exponentially, the 20 years where it was completely flat. And now we're back on the exponential curve again. And the relationship — we think a lot of our business is going to be driven in the near term by this data center demand.
And I can tell you, the way these conversations have gone is, five years ago, we talked to somebody and they wanted 20 megawatts of power somewhere and they didn't really care what it was. And you talked to them about siting and they were like, "Well, we need to go where the fiber is good. We need to go where there's a workforce. We need to go where you have access to water for cooling. You know, Utah doesn't check the box." So like, "Have a nice life." And that was the answer we got because energy access was probably one of 15 different criteria for siting a data center.
And now, all of those customers are coming back and saying, "Hey, we'll come to you. Can you do a gigawatt for us now, not just 20 megawatts?" And what you've seen is the market has shifted enough. Energy access, I think, went from being, you know, middle of a list of 15 priorities for data center siting to probably number one. And I've asked some of our folks like, "Well, you told us it was a non-starter two years ago and here we are," and it's like, okay, it turns out all the other problems are solvable and energy access to new energy, reliable energy is sort of the gating factor there.
And so, if you ask 10 people, you'll get 11 different opinions on how much power demand AI is going to drive over the next five to 10 years. The answer is, it's positive, it's large, it's huge, and it's a totally different set of customers and strain on the growth of the US electric grid than anything we've ever experienced before.
David Roberts
Yeah, and I'll just throw in here, within 10 years, we're going to be well into electrifying transportation world over, electrifying buildings, heating and cooling world over, electrifying industry world over. So, the rise in energy and electricity demand, there's no danger of being any kind of blip or short-term fad. That's the rest of our lives.
Tim Latimer
And I will say, I'm glad you pointed that out because I do think AI is the shiny object. So that's what gets all the attention. But let's not forget, even before the ChatGPT moment, demand forecasts were rising again because we're onshoring manufacturing, we're electrifying buildings, EVs are coming onto the grid, there's new economic development. And really, what you had is a system that was used to growing like this, where like you said, one in, one out, that's it. You know, it's not the employees, the supply chains. Nobody was set up to bend like this. We were already bending like this.
And then, we had a new form from those things: industrialization, clean energy, onshoring, manufacturing, electric vehicles. And then you add one more thing to it, and that was the thing that really got people to realize it's a totally different era.
David Roberts
So, before I leave the data center thing, they want a gigawatt from you. So, you've got this eight-well pad that is producing how much? You said 50?
Tim Latimer
That's 30 megawatts now, working on a 10 well pad.
David Roberts
So, I'm trying to help us envision what a gigawatt of your geothermal looks like. That's a big chunk of Utah desert, is it not?
Tim Latimer
So, yes and no. Is it a sizable industrial complex? Yes. Is it a smaller footprint than any other way you're going to get that level of energy from a surface disturbance standpoint? Yes. And so, if you come out to our site — and by the way, happy to take you out to our site anytime, it's a fun thing — what we have is these eight well pads that we stack up one and then we put another one a little bit to the north and another one a little bit to the north, and we build the turbine generators right off the pads.
And so, we basically just have a line of pads that you can stand and look at and, collectively, just to give you some sense of scale, that 400 megawatts when we bring it online and when we bring in the last phase online in 2028, will be over 10% of Utah's power generation. And we're going to be able to do that within a few square mile area at one spot in the center of the state. So, is it big? Yes. Is it big relative to the power output and economic value that it brings to the grid? No. And I think that's one of the other features that's very powerful about geothermal is, it's compact from a land use standpoint.
David Roberts
Certainly more so than solar, but not as much as nuclear, right? I mean, nuclear has a problem of being mostly imaginary, but if it were real, it would be smaller, right?
Tim Latimer
It is difficult to compare our actual project results to imaginary project results. But to be a little less flippant about it, nuclear is also a very energy-dense area. I think there's a renaissance going on in nuclear right now, which I think is very encouraging for the country too. I think when you look at things like the security and standoff requirements of nuclear plants and counterattack and the footprint of mining that goes into it and other factors, it's not too dissimilar. I'm sure that an endless number of academics have published endless numbers of papers on these that show directionally, I'd say they're in the same ballpark, they're better than a lot of other energy resources.
If somebody wants to really duke it out with me and fight that nuclear is slightly more land compact, I'll concede. But we both have attributes that are very attractive from an environmental impact standpoint.
David Roberts
Right. So, practically speaking, in the short term, the competition to power data centers, your competitor is natural gas. Like, if you were a cynic, right? You're watching a lot of big companies with a lot of very lofty clean energy goals run up against the limits and you wonder, well, which is going to give: the hunger for more data centers or the clean energy target? And you know, I'm guessing the clean energy target. And gas is cheap. It's right there, it's right at hand, it's easy to build, utilities know it, lawmakers love it, et cetera, et cetera.
So just maybe just like flatly, like, how do your current costs of your current Utah plant compare to natural gas?
Tim Latimer
It's difficult to compare directly to natural gas for a couple of reasons. One is we don't have fuel cost, so you have to take a view on what the long-term prices of natural gas are. And you also have different regulatory risks and exposures and things like that. I can tell you right now we are generally at a point — and I'm happy to discuss the specific CapEx numbers because we actually published this in our Technology Day that we hosted here in Houston in September — we are building these projects at around $6,000 a kilowatt right now, which on a CapEx basis is significantly more expensive than what you get from a new combined cycle gas plant.
Although, I'll say our costs are going in different directions because we're dropping our costs down pretty dramatically. What you're seeing is the supply chain for natural gas power generation isn't used to a huge call on demand like this as well. And so, you're actually seeing costs go in the opposite direction for there. So, the gap is just closing naturally. But we also, on that tech day, published where we think our costs are going, which is at the span of two or three projects. We think we can drop costs below $3,000 a kilowatt. And I think we're going to do that for the reasons I talked about.
Standardize the power plant, move into a mass manufacturing mentality, dropping drilling costs and drilling hotter wells. At $3,000 a kilowatt, you can remove all the subsidies. You could remove all the other things that tip the different scales and just on a CapEx basis, and you take the fact that geothermal doesn't have fuel cost, and I think we have got a better cost than natural gas. And that's even absent any environmental attributes or any REC factors. We're not there today. What we do is we offer a valuable enough product that our offtake prices we still make an attractive financial return, which is why we've been able to raise capital and we can find customers who want this.
But our vision for geothermal is, by 2030, to drop that cost to some $3,000 a kilowatt. The thing that we think about the energy transition and driving sustainability is, you have to offer an end product that is irresistible to your buyer, regardless of the whims of their climate commitments that they may or may not be sticking to. And I think we're on a path to be there in geothermal within the next five years.
David Roberts
So, I'll just repeat that to put a fine point on it. You think you have a line of sight to being cost-competitive with natural gas, absent subsidies, absent carbon prices, absent anything else. Pretty cool. So, a lot of people don't know this, but there was a national election recently and things changed a bit.
Tim Latimer
I need to get my beer for this.
David Roberts
I think for wind and solar, you know, for dim colored energy, this is obviously dire. No one knows how dire or exactly what kind of dire. No one knows anything yet. But as I was thinking about this, like you seem like, you know, maybe alone among all of Americans, you seem like you're really well positioned, like this could actually be quite good for you. Because I think there's still going to be some impetus for decarbonization. There's still going to be some — and I don't think administrations or state governments are going to want to look like they're just shutting the whole thing down, right?
So, they're going to favor the non-renewable clean things, you know, which involves a lot of nonsense, a lot of CCS, a lot of hydrogen, but it also involves geothermal. So, I would just wonder like, you know, the first time I talked to you, I remember years ago you were like, "Our problem is not that anyone hates us, it's that no one knows we exist. Right. It's that no one knows about us." Now, people know about you as far as I can tell. Still, no one hates you. Do you feel like the new political landscape is advantageous to you?
Tim Latimer
Yeah. In fact, when I told you that years ago, I probably used the same joke that I now use every time I talk. So, I apologize to anybody in the room who's ever heard me talk before. But the thing we find with geothermal is, it used to be bipartisan in D.C. in the sense that neither party knew what it was. And we have, I think, fairly deftly navigated through multiple different administrations, through a huge shift in energy policy priorities, becoming both known and bipartisan. And there are concrete examples of that. You know, one of my favorites, if you look at the new Senate, the chair of the Senate.
David Roberts
Do I have to?
Tim Latimer
Yes, you have to. The chair of the Senate Energy and Natural Resources Committee is Senator Mike Lee from Utah, a very proud and principled conservative. He will tell you that he is probably one of the most outspoken people in the Senate in terms of his diehard conservative principles. The ranking member is Senator Martin Heinrich from New Mexico, who is very proud of his progressive bona fides and proud to tell everybody that. You look at where there is common ground for those two people to overlap between the ranking member and the chair of the Senate Energy and Natural Resources Committee.
I can tell you where it is. Sponsorship of the GEO Act that they both co-sponsored in 2024 to drive more incentives and streamlined permitting for geothermal. And so, what we find is that there's a lot to like on both sides of the aisle for what geothermal can provide. It's carbon-free energy that employs people from the oil and gas workforce. So, it's a just transition workforce story, which is fantastic. It's a climate change story, which is fantastic. You know what else it is? It uses uniquely American innovation, domestic, the drilling sector, which is really exciting.
Exciting. And it's baseload, you know, which is the thing that has become — I think somebody did a quote looking at Secretary Burgum's confirmation hearing and I think there were like 100 mentions of the word "baseload" because that's what people are thinking about right now. How do you get that reliability? So, we find that bipartisan line and we think it's an area that we will make significant progress in energy access and climate over the next four years. And where there may not be that many other opportunities for compromise between the Democratic leaders and the Trump administration.
And to kind of drive this point home on a little bit more of a personal level, soon-to-be Secretary Chris Wright — who just got voted out of the Senate ENR Committee 15 to 5, several Democrat votes, so he has bipartisan support — invested in Fervo through his company Liberty Energy in 2022 and has been a board observer of ours. And so, I know a lot of folks on the Democrat side are very inconsistent, antsy about him because he's outspoken on his views on climate. But in his whole hearing, he was unabashed that he's very excited about geothermal and moving forward.
So, I certainly see this is going to be one of those areas where we're going to have bipartisan support through the next four years to make significant progress on climate and energy access. And yeah, I hope to keep it that way.
David Roberts
What happened to the GEO Act? What's the status?
Tim Latimer
The GEO Act got taken wholesale into EPRA. So, that was exciting. It got very close to passing and then, when EPRA fell apart at the end of the last Congress, we went back to the drawing board. But there are many provisions in there that fix some long-standing redundancies of geothermal permitting that would really accelerate project development. And we, you know, if there is an opening for a bipartisan compromise on permit reform in 2025, I think geothermal will be included in it. We were a little sad to see that the big compromise bill fell apart right at the end of the last Congress because I actually don't know if we're going to get a window for a bipartisan compromise on permitting ever again.
So, we'll see what happens.
David Roberts
But that's not a must-have for you?
Tim Latimer
We have certainly managed to get projects through the federal permitting process already. I mentioned earlier, our project in Utah is already permitted to expand up to 2 gigawatts. It took us about three years to go through the federal permitting process on that. So, not as fast as it could be, but not something that is an absolute project killer. The other thing where I think there's alignment both on the outgoing Biden administration and the incoming Trump administration is there's a lot of things that can be done administratively to streamline permitting. And one of the final actions of the outgoing Biden administration was actually pushing through administrative categorical exclusions for geothermal permitting that don't require new laws to be passed because that was a priority, you know, developing clean American energy on federal lands was a priority of the Biden administration.
And so, that was one of the final acts. It's actually already made a huge difference in our business. And, we do not expect the Trump administration to be bashful on trying to push further permit reforms. So, I don't think that progress is going to be walked back.
David Roberts
Got it. If you think about your experience, like you, you came out of the oil and gas industry and started this thing. So, you have been a dude with a pitch deck and a gleam in his eye.
Tim Latimer
That's all it was in the beginning.
David Roberts
You've been a technology developer, innovator. You've been a first of a kind. Now you've been a pilot plant. Now you're moving into a commercial enterprise. Just like, how is your head still on straight? Like, this is like, it's wild how rapidly you've accelerated through all these phases. And it seems to be like the plane seems to be holding together. And you seem to have your Zen about you. Like, what's your secret, Tim? How do you...?
Tim Latimer
Thank you. Every day isn't that zen, but we make it through. It is fascinating. I'll tell you a couple of things that I'm proud of in terms of the culture that's been created at Fervo. One thing we repeat all the time that I think is an important thing to think about from a personal growth standpoint and a company growth standpoint is, I'll say this phrase a lot. And it's caught hold in our company that our goals are so ambitious and we're growing so fast that we have to be willing to totally reinvent ourselves on a quarterly basis if we want to succeed.
Because it is true, the things that it takes to go from pitch deck to pilot are different skills than going from pilot to developer. And I can be concrete about this. When you fund a really early stage, like a pre-seed company, what you're looking for is a market size so massive and a technology leap so huge that the entrepreneurs, the naive entrepreneurs sending you the pitch deck, can be wrong about nine out of the 10 things that they tell you. But as long as they're right about one thing, you still have a business. And that's kind of the idea that "move fast and break things" and try stuff is to shoot for something so big when you're early stage. You know, celebrate failure, move forward with that, and you have to embrace that in your DNA as an early company.
I see some of my friends in the room who are project developers here. Project development — you cannot imagine a more polar opposite.
David Roberts
You do not want to break things in project development.
Tim Latimer
And I'll also tell you, it's totally inverse. You know, if you're wrong about nine out of 10 things in a startup, you're really right about that one thing. You've got a business if you're right about nine out of 10 things as a developer, but you forgot a permit or you didn't have the right contract provisions in your insurance agreement, or you didn't get your interconnection in queue in time, or like, oops, transformers take five years to come around, or you didn't get the right labor agreement put in place, guess what? You don't get an A for getting nine out of ten things right.
That's a zero. And product development is completely unforgiving. I think what we have at Fervo, I'm really proud. Some of my colleagues are here in the room and it's just the team that I think has really taken that mentality of personal growth and continuous growth to heart. It's a lot of the same people who had that wild-eyed "let's move fast and break things and let's shoot for the moon" mentality. As we've learned, we've been slowly beaten into being developers where we don't want to make any mistakes. But if you want to be successful in scaling a company, you've got to be willing to go on that journey.
And everything's about the people, right? And what we've done is we've been incredibly lucky that every step of the way in Fervo's journey, we've been able to get kind of the best of the best talent to join. I don't know, I feel shameless doing a plug, but we have 20 open positions on the fervoenergy.com careers page right now. So if you want to, if you think you're the best and the best and you want to join, please think about joining our team. But, yeah, the reason I stay sane is because we've got a team that has taken the challenge of growing themselves with the company seriously.
David Roberts
Excellent. Well, we have time for a few questions, and I bet people have them over there.
First Audience Question
Well, thanks to both of you for a great discussion and hearing some things we, in following this area, haven't heard before. I talked to a couple of your colleagues at the break and I didn't swab them too hard, but I'll swab you. You talked about scalability in your blue sky view to the degree that you're comfortable talking about it, Tim, how do we downscale? Because people are talking about small nuclear reactors that, if everything goes right, are going to take 10 years between permitting execution. You can fill a pad and drill it out in a year or two.
Both direct use and smaller-scale electric generation. Again, to the degree you're comfortable talking about it, where do you see the future for that? Both in North America and elsewhere? Because we know where the Great Basin is in East Africa, Iceland, and Java, Sumatra, and that's going to limit us. But there's a big world out there where heat is going from the mantle to the surface and we can capture that. Thank you.
Tim Latimer
Yes, I think I heard — you know, how do we scale beyond these hotspots and also how do we maybe do smaller projects to tackle this market?
David Roberts
Smallest viable. Like, is it distributed at all? What's the smallest viable project size?
Tim Latimer
Five or 10 megawatts is probably as small as we'd go. I could say what we've learned through doing these projects is our products do benefit from economies of scale. There's a reason why we're pushing for multi-hundred megawatt projects. And so, that's what we're pushing on right now. I can tell you that we are looking to go smaller. And to go smaller, you have to get more value for it, right? Because no one wants to pay more for electricity unless you're getting something there. So, when we look to go smaller, that is because we are looking for a direct heat business that may have a different load and clean heat is incredibly valuable.
And as proud as we are about the conversion efficiencies going from heat to power that we have on our sites, you're still talking about low-grade heat that only has somewhere between a 15 to 20% conversion efficiency. So, if you can just keep a direct heat, there's a lot more you can do there. So, we definitely see that going forward. Fervo is certainly not the only company in the space too. I mean, I think I've been really excited to see the ecosystem around geothermal grow up. I think Bedrock is a company that just announced a $12 million Series A just last week, and they're going after more building heating and cooling things.
So, I think there are things you can do to go smaller. It may not be what Fervo does right away, but there are other companies out there and it's a big market. Moving beyond the basin and range and the East African Rift and things, it's just a function of drilling costs. If you can drill a 20,000-foot deep well tomorrow for the cost of a 10,000-foot deep well today, you can make that project in the money. And so, that's why we're so relentlessly focused on dropping drilling costs, because ultimately we don't see any geology as being a place that's not developable.
It's just how ambitious can we get on driving drilling costs down?
Second Audience Question
So, my question is: The comparison was made between geothermal, nuclear, and natural gas, and it always is. But my question is a comparison question as well between Fervo geothermal and traditional geothermal. If on your eight-well pad, where you're generating 30 megawatts of power, if Joe Geothermal, the traditional geothermal guy, rocked up and drilled those, their typical eight wells on that same location, what do you think they would have produced or what would it have cost or what? You know, pick your metric. I'm just trying to draw an apples-to-apples comparison.
Tim Latimer
Yeah, I think that if you look at the well test results, well number one, conventional geothermal technology probably wouldn't have gotten much of anything because it's so reliant on natural permeability. But if there were to be, like I mentioned this before between Los Alamos and really when Fervo started, there's been about 50 different EGS attempts and the vast majority of them got 5 liters per second to 10 liters per second if they were successful. And many of the projects didn't even get to a flow test. And you compare that to 60 liters per second on our pilot project, and we got to 120 liters per second on our flow test there.
So, we're at least one order of magnitude more productive than what any prior enhanced geothermal systems attempt had been. And that's why in 2025, we're talking about EGS and it's not on the fringes anymore.
Third Audience Question
Oh, sorry, man. I have a technical question for you. So, I know geothermal is lumped into baseload, which is so hot right now, but was not so hot just a year or two ago when solar was ascendant and we wanted everything to be very flexible, right? And still, in some places, I expect flexibility will be the premium thing and not the baseload. So, can you tell us, can you be flexible and how much with geothermal? Is there a problem with depleting the well or having it, you know, lose?
David Roberts
Oh, I love this question and I love the answer.
Tim Latimer
"Yes" is the answer. So, we actually have a technology that we've developed. And actually, you know, I haven't mentioned it a lot, but we've gotten a wonderful partnership with the Department of Energy for the last eight years since we started Fervo. We expect it to continue under the new administration as well. And one of the things we got was an RPE grant just to test the technology we call Fervo Flex. And actually, at that pilot in Northern Nevada, I can tell you the last year of production, we just brought it on as baseload. Because as you can imagine, in an offtake agreement that's megawatt-hour based, that's your incentive as a developer.
But we know where the market's going and we know baseload went from being the thing to being dead to now the phoenix rising from the ashes. But clearly, the electric grid of the future is going to be one that's driven by ever-increasing levels of variability. So we do think that dispatchability attribute is going to continue to be important. And so, what was interesting about Fervo Flex is we, basically through this ARPA-E grant, were able to test our well system in Nevada to operate in a storage and dispatchability mode. And I think one of the things that's interesting about the way we develop our systems is the fact that there's no permeability for the last hundred years has meant that you can't develop geothermal there.
But because it's impermeable, it actually gives us an interesting way to do energy storage. Because the only permeability that ends up in the geothermal reservoir is the fractures that we create, and the surrounding area is actually impermeable. And so, what that means is that we operated the mode in a flexible cycle where we shut in our production well and kept pumping down our injection well. We mimicked specifically sort of 12-hour diurnal cycles of no production, flush production, no production, to sort of simulate a solar heavy grid of the future. And found that we got really great numbers on round trip efficiency.
You know, we were able to actually get much higher max peak output than our steady state operations through that energy storage.
David Roberts
Just to be clear, you're capping the output and you're still pumping water down. So, just pressure? Yes, it's the energy being stored as pressure.
Tim Latimer
That's right. And so, you know, I told you it's roughly a 3-megawatt project. Right. And what you find is that the pumping of that can take up 500 kilowatts or 700 kilowatts. And so that sort of eats into your output in a normal time. But if you actually can run the system in a mode where you only pump, let's say for example, during the daytime when there's a lot of solar, you take all of your parasitic load and you become a net energy consumer during the day. And you actually build up so much storage in the reservoir that it will self-flow even without any injection pumping during the evening.
And so, we sort of simulated that and showed that we could get really strong round-trip efficiencies day to night. Because baseload is so hot right now, all of our current agreements, like people, just want that power around the clock and that's what's driving things. But when we start talking to our customers about 2030's project delivery, building these inherent energy storage capabilities into the geothermal reservoir is something that's driving increasing interest.
David Roberts
Is this something that's far enough along that you have any sense of your duration, just how far out you can push your duration?
Tim Latimer
Yes, and anybody who wants to read more about this, you can look it up. We co-authored a bunch of different papers with Jesse Jenkins and Wilson Ricks from Princeton's Zero Lab.
David Roberts
I did a pod with Wilson Ricks on this very question.
Tim Latimer
You can listen to the pod, which I think is, in true Volts fashion, an hour plus long deep dive. You can also read the papers, which I think there's 200 plus pages of how this works. It was a great thing because we looked at reservoir simulation results and we asked the question of for grids at different levels of solar penetration, to simulate today's grid, or a grid five years from now, or 10 years from now, or California versus the national grid, what was the optimum cycle time? We usually found a diurnal cycle time was best. And with the data field data we've collected, for sure, we can hit an 8 or 12-hour storage time.
We have not yet kind of pushed the limits on can you do multi hundred hour energy storage?
David Roberts
What would happen if you just capped it and kept pumping and pumping and pumping them? Is something going to blow up or pop off or what?
Tim Latimer
Nothing's going to blow up. It would be completely dependent on the reservoir. I say impermeable. Impermeable is not really a great — it's a meaningless word. Nothing is impermeable. Things are just more or less permeable. And what you find is even as you pressure up, there's more and more fluid loss. And so there's all kinds of things that are reservoir dependent and system dependent that would shift performance and round trip efficiency. But we've done some tests where, for example, we'll pressure up wells and then we'll go off and do other operations on other wells and come back and a month after we've worked on the well, there's still pressure in the system. So it's completely formation and reservoir dependent, but it certainly has the opportunity to be a multi-day storage system.
David Roberts
Interesting. Well, that is all the time we have. I'm being told to wrap up, so thank you all so much for coming. Thank you, Tim, for all your work. Thanks for Fervo.
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this special compilation episode, I share highlights from January's conversations. From the attention economy to thermal networks, this clip show gives you a taste of what you might have missed and helps you choose which episodes to explore.
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In this episode, I talk with climate scientist Zeke Hausfather about how enhanced rock weathering (ERW) turbocharges a natural process to permanently store CO₂. We dig into how it profits from existing infrastructure, and the big questions around measuring and verifying the carbon captured. Zeke also explains why farmers might actually benefit from spreading all those rocks — and why ERW could become a key, if limited, piece of the broader climate puzzle.
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David Roberts
Okay. Hello everyone, this is Volts for February 7, 2025, "What's the deal with enhanced rock weathering to store CO₂?" I'm your host, David Roberts. If we want to restore a safe atmosphere, we will need not only to stop emitting carbon dioxide but to start pulling it out of the atmosphere and permanently sequestering it. Lots of it. Billions of metric tons of it.
There's broad and intensive work being done right now on various methods of carbon dioxide removal (CDR), most of which — like industrial direct air capture — seem dauntingly expensive and infrastructure-intensive.
One method that has attracted a great deal of attention and money lately is enhanced rock weathering (ERW) — truly one of the worst in a family of terrible acronyms — ERW, which at least in theory could get started using existing infrastructure.
ERW sets out to accelerate the natural process whereby carbon in the air bonds with silicates in rock to become bicarbonates, which eventually filter their way down into rivers and oceans, where they are stored for thousands of years. That's the theory, anyway. This is a normal part of the terrestrial carbon cycle, but ERW turbocharges it by crushing up and exposing large volumes of basalt rock, mainly on agricultural land.
Farmers already distribute crushed rock over their fields, so the infrastructure to do so is in place. They just need to use a different crushed rock.
Is ERW the first carbon-removal technology with a clear path to scale? Needless to say, there are all sorts of devils in the details. To dive in, I'm excited today to talk with Zeke Hausfather. Zeke is a climate scientist, modeler, and communicator, a longtime fave of the online climate world, but what's relevant here is that he also works for Frontier, a fund that is helping to scale up carbon dioxide removal and has a lot of money ready to go for ERW. So, let's get nerdy with this.
With no further ado, Zeke Hausfather, welcome to Volts. At last. Finally. I've been wondering when you'd finally make it over here.
Zeke Hausfather
Thanks, David. Yeah, I've been a long-time listener, first-time guest.
David Roberts
First, I just want to say, am I right? I heard your colleague Jane on a different podcast talking about rocks and she, by her own acclamation, rock-pilled, has gotten very excited about this. Am I wrong in saying that this seems to have kind of elevated itself a little bit among the carbon dioxide removal choices as sort of like the most promising short-term move here? Is that accurate?
Zeke Hausfather
I think it's definitely one of the more promising short-term options we have, both on a cost basis and also a time basis. You know, it takes a long time to build a giant new industrial-scale facility for something like direct air capture. You know, putting rocks on fields is low tech. And as you mentioned, you know, farmers have been doing this forever with carbonates or limestone. The problem, of course, with carbonates, as the name implies, is they have carbon in them. And so really, all we're talking about here is switching from carbonates to silicates, which don't, or, you know, applying silicates on land that traditionally have not been limed.
David Roberts
Right. So, what we have here is, at least in theory, the prospect of sequestering pretty large volumes of carbon using infrastructure that is mostly already built. So, this is like a way you can get immediately started, which is, I think, unique among major CDR options.
Zeke Hausfather
It also is an approach that potentially has less objectionable aspects than some other ones. You know, it's interesting, there's a lot of CDR approaches that involve adding alkalinity to natural systems. Ocean alkalinity enhancement is the most prominent one. We've talked about river alkalinity enhancement before.
David Roberts
Can we just pause there for the science illiterate among the Volts' listenership, including its host? Can you just talk briefly about what we mean by adding alkalinity and why that matters, why it helps?
Zeke Hausfather
Sure. So, in rocks like basalt or olivine are cations, particles like magnesium, calcium, a little bit of sodium — there's not that much in the rock. And these particles are very basic. So, they neutralize acid. And that neutralization of acid, if done to carbonic acid, which is very prevalent in soil , because rain comes down with a bunch of carbonic acid in it, forms bicarbonate minerals, which are durable. They get swept out to the ocean and stored for tens to hundreds of thousands of years before eventually precipitating down as carbonates, which then get subducted, come out as volcanoes, and the cycle repeats.
And so, this is, as you mentioned in the intro, the biggest driver of the natural carbon cycle over geologic time. So, every year, the world sequesters about a gigaton of CO₂ from the atmosphere in the form of primarily silicate weathering.
David Roberts
And this is just an array of base materials absorbing the carbon out of carbonic acid and making it into rock. Basically, yeah.
Zeke Hausfather
As rivers run through their beds, they weather some of the, you know, basaltic minerals or other mafic or ultramafic minerals. Those then form bicarbonates. And so, that gigaton that's being removed every year from natural rock weathering is roughly balanced by about a gigaton of CO₂ coming out of volcanoes every year. And so, those two are in balance over, you know, tens to hundreds of millions of years.
David Roberts
Right. So, this process that we're talking about is underway all the time. It's natural. It's removing about a gigaton of CO₂ a year. So, the idea here is just to take this ongoing natural process and just boost it.
Zeke Hausfather
Yeah, so it's a big number globally because the globe is really big. But, you know, a given chunk of rock is going to weather very, very slowly, unless it's already in super fine form. And so the idea is to speed up this weathering process by, ideally, initially at least, using waste fines. So, leftovers from construction aggregates in basalt quarries.
David Roberts
Yeah, I want to get to the source of the rock, but just on the question of how to accelerate it, it's just as simple as increasing the surface area exposed to air and rain. Is that all there is to it?
Zeke Hausfather
So, the conditions also matter a bit. You know, the warmer and wetter it is, the faster the material weathers. All things being equal, more acidic soils will tend to result in a bit faster weathering than more basic soils. And if the soil is too basic, you can actually get carbonate precipitation. So, you know, it forms carbonates, which is not great. You ideally want it to form bicarbonates to get exported. It's one of the reasons that folks are targeting enhanced weathering projects in, you know, fairly acidic soils like the Eastern US, like Brazil, like India, areas where the level of acidity in the soils has actually become a problem and started hurting crop yields.
David Roberts
So, there are geographic constraints in where this can be applied.
Zeke Hausfather
Yeah, you don't want it on soils that are too basic. You don't want it in a place that's really cold. Now, there might be some ways around that. For example, there's a number of folks looking at a material called wollastonite in Canada. Now, Canada is cold, not that wet, but wollastonite is super, super reactive. There's just in the range of tens of millions of tons of it, readily accessible, not, you know, tens of billions of tons like we have for basalt.
David Roberts
Let's talk a bit then about where the rocks come from and what the rocks are. So, what you want is rocks with lots of silicates in them. Right? And those are mostly basaltic rocks, mostly volcanic?
Zeke Hausfather
Well, you want rock ultimately with lots of calcium and magnesium, but ideally, you don't want fossil carbon in those rocks. And so, limestone, for example, has a lot of calcium in it, but it also has carbon. Whereas silicates like basalt have a lot of calcium but don't have the carbon. They have silica instead. And so, the silica itself is not the active ingredient, so to speak.
David Roberts
Right.
Zeke Hausfather
It's the calcium, or in the case of olivine, the magnesium.
David Roberts
And so give us a sense then, of, are there any material constraints in our ability to find this kind of rock? Or, like, where all — if we scaled this up, where would we be getting these rocks?
Zeke Hausfather
So, basalt is more or less the most — one of the most common substances on the planet. It comes out of volcanoes that strip the CO₂ out of it, and so it can reabsorb that CO₂ on the flip side, when it weathers in the future. The challenge, though, is that you have to move a lot of material, and you ideally want to locate areas that have relatively acidic soils or could otherwise benefit from enhanced weathering that are within, say, 100 miles or so of a source of basalt. If you're starting to go longer and longer distances, you start getting a bigger and bigger hit, at least in today's world.
Maybe in the future, when we have completely electrified transportation, that's less of a burden, but it certainly adds to the cost as well. So today, we're primarily looking at locations where there's basalt near farmland. There are some other materials, like olivine.
David Roberts
And that's just natural — that just happens geologically in some places, not others.
Zeke Hausfather
Yeah, I mean, basalt is in deposits in certain regions and less common in other regions. Though, again, it's pretty common all around the world.
David Roberts
What about these waste rocks that you're talking about using? What are they from?
Zeke Hausfather
So, when people quarry basalt today, it's primarily used for aggregates, for road construction, that sort of thing. And it turns out that you don't really want the rock dust in your roads. You want small particles. And so today, when basalt is quarried, they produce a huge amount of byproduct dust. Somewhere around 15% of the rock is waste fines, as they call it. And they pile these up in giant mountains next to the quarry, and when the quarry closes, they bulldoze it in, fill it up, call it a day. But those fines are exactly what you want for enhanced rock weathering, because they've already been ground up to really fine conditions.
David Roberts
Oh, good point.
Zeke Hausfather
And at least in the US, most states require that basalt be washed before it's sold to reduce the risk of dust exposure in projects. And so, because of that, you end up with really, really fine particles from that washing process that are, you know, recovered and stacked.
David Roberts
So that waste rock then is, when you find it, ready to be distributed, there's no additional processing that needs to happen to it?
Zeke Hausfather
Not really, no. I mean, again, it depends a bit on how fine it is. And there's some quarries and some states that have finer fines than others. The bigger challenge is just there's going to be a limit to the amount of waste fines available. You know, today there's somewhere in the range of 10 or so million tons of waste fines produced per year in the US, which is still a decent amount of CDR, but it's certainly not talking about the scale we're thinking about in the long term. There's another maybe 50 or 100 million tons of fine piles that have accumulated from previous quarry activity.
But eventually, you're going to run out of that, and at that point, you're going to have to grind new rock that's quarried specifically for enhanced rock weathering. Now, that isn't necessarily as problematic as you think from an emissions perspective.
David Roberts
I want to pause on this point because I want to get a sense of scale here. So, like, envision in the future a fully up and running global enhanced rock weathering business. How big of a chunk could the — whatever you call it, 20 million pounds of basalt waste — how big of a chunk is that? I mean, is that like 1%, 10%? Like, how far can we get with the existing waste piles, I guess, is what I'm trying to get.
Zeke Hausfather
Well, we're talking tons per year, not pounds. But regardless, you know, there's about 0.4 tons of carbon removal per ton of basalt when it fully weathers. So, let's say somewhere in the order of 5 or 6 million tons per year of carbon removal would be possible from existing streams of waste fines. And, you know, add in a fair bit more if you mine these legacy piles that have just accumulated in the past. But we're not really talking about beyond the like 10 million tons range available from fines in the US Obviously, other countries have fines as well.
But if we're thinking about hundreds of millions or billions of tons of carbon removal per year from enhanced rock weathering, you quickly run out of these wastes and you have to do dedicated quarrying.
David Roberts
Got it. The reason I'm trying to clarify this is just that this industry, if it really got up and running, could get a boost, a head start with existing waste rock, but eventually would have to transition to basically digging up and crushing rock on its own. That would be part of the industry. In the end, you're not going to ever get enough quarry mining to sustain what we need?
Zeke Hausfather
Yeah, and there already are some companies today that are doing dedicated production. You know, some projects in Brazil, for example, are using new rock — projects using olivine, which is a much more material with a much higher CDR potential. So, you get 1 ton of CDR per ton of olivine compared to 0.4 for basalt. That is purposefully quarried today for projects. So, a little bit of this is happening even if most of the players today are starting at least with the waste fines if they can.
David Roberts
And if you dump a bunch of this waste rock on a field over and over again, year after year, are there no trace contaminants in there that might mess with your soil? Like, is this rock really clean in a way that's going to be okay for fertilizing plants?
Zeke Hausfather
So, you do have to be a little careful. Right. You have to make sure you're characterizing what you're putting on the fields. Most basalt deposits are pretty benign. There's not much contamination of things you don't want, but you'd still want to test it just in case. And at least with basalt, there's not really a huge worry about the accumulation of anything problematic at the rates we're talking about here. Olivine is potentially more of a challenge because it has high levels of nickel in it. It also has high levels of chromium, but it's not the chromium that we're worried about.
It's chromium 3 rather than chromium 6, which is not bioavailable. But even then, you'd want to carefully monitor that.
David Roberts
Are people mining olivine for other reasons or is it just a sequestration thing?
Zeke Hausfather
So, there are a few other industrial uses of olivine. It's used in some steel-related processes. But global production of olivine is relatively small. There are huge reserves. There are hundreds of billions of tons of olivine accessible. But historically, it's just not been a particularly valuable commodity. The one other challenge with olivine is, depending on the deposit, it could be co-located with asbestiform material or asbestos as we call it. And so, you want to make sure that the olivine you're getting doesn't come from deposits that have asbestos contamination. Because no one wants to put that on fields.
David Roberts
Right. And this is all, all of this care and consideration goes in on the front end. You're not going to crush up a bunch of rock and then do stuff to it to purify it. I'm guessing that would just add a bunch of cost.
Zeke Hausfather
It's pretty impractical to strip out things. You want to test on the front end. Make sure the deposits you're working with don't have any contamination that's problematic. And then, once you're starting to deploy this on fields, you are sampling the soil every year and making sure there is not a buildup of nickel or anything else that would be problematic. The good thing is, if there is, if you start seeing nickel levels that are higher than you want, you can always stop. You're not going to end up in a situation where you've contaminated the soil and it's too late.
David Roberts
Right. It's a slow-motion process.
Zeke Hausfather
And you're just not adding much rock per unit of soil. You add a lot over the entire farm, but any given piece of soil gets a small amount each year.
David Roberts
One more question about constraints. So, the amount of waste rock is somewhat of a constraint. You'll have to shift to quarrying its own rock. The geographic constraints we discussed, you need deposits of basaltic rock in proximity to acidic soil, basically.
Zeke Hausfather
Or other alkaline materials, you know, olivine, wollastonite. There are folks looking at things like steel slag or coal ash, but those have their own issues.
David Roberts
Yeah, coal ash would be interesting anyway. You need a source of some material next to acidic soil. Is that a meaningful restraint, or are we going to be able to get all we want out of those areas?
Zeke Hausfather
So, this is by no means a silver bullet. Right. Our best estimate is probably somewhere in the range of 1 to 2 gigatons per year potential of enhanced weathering globally at scale. To put that in perspective, we're emitting 40 gigatons per year today. Most of our scenarios have somewhere in the range of 6 gigatons per year of negative emissions by mid-century to deal with, you know, leftover emissions in the economy that we can't fully reduce.
David Roberts
So, even in the best-case scenario, this is a relatively small piece of the carbon dioxide removal puzzle.
Zeke Hausfather
Yeah, it's probably, if I had to guess, you know, 10 to 20% of the solution by mid-century.
David Roberts
Do you think it will be the single biggest piece?
Zeke Hausfather
That's a tough question to answer. I mean, I think the other one that is competing for that prize in the near term is biomass-based carbon removal. That has its own challenges around sustainable sourcing, making sure you're not cutting down trees to stick carbon underground, that sort of thing. The other area we're seeing a lot of movement in the near term is on big biomass-based carbon removal projects. Either things like bio oil, like Charm Industrial is doing, biochar waste injection of biological solids like Vaulted is doing, or the sort of big retrofits of bioenergy plants that we're seeing in Europe.
David Roberts
I just have such a thing about biomass. It's so messy and so tangled in so many different problems. I have a real aversion, a real aversion to it. You said alkalinity is sort of a family of solutions here. Talk us through a little bit about why you'd prefer to do this on agricultural land versus my understanding. The two main alternatives are you spread it on the beach, which I guess gives you more confidence that it's going to end up in the ocean, or you just put it in the ocean directly. Why would you prefer one of those over the others?
Zeke Hausfather
So, what you put in the ocean is going to differ a bit from what you can put in soils for a couple of different reasons. One is that soils are an environment that's really good at dissolving rocks in a way that's not necessarily true for marine environments. If you put basalt in the ocean, it's going to sink to the bottom, get mixed in with the sediments, and never really dissolve. The ocean's just really bad at dissolving basalt. It's too basic. The chemistry is different. It doesn't really have the conditions good for that. Olivine could dissolve in the ocean, but even then it's taken a lot longer than folks initially expected in some of the field trials folks have done around spreading olivine on beaches.
And so, there is some potential there, but it doesn't really fit well in today's markets because it's really hard to measure once you put stuff in the ocean.
David Roberts
We're going to get to that in a minute. That whole thicket.
Zeke Hausfather
For better or worse, when you put stuff in a field, it tends to stay there until it dissolves. This is not true for other environments, which makes the tracking somewhat easier. Though, there are other challenges.
David Roberts
I see. So, you think doing it on land is going to win in the end, or there will be some of each?
Zeke Hausfather
I think there'll be some of each. And I think it might be different materials. I think basalt is pretty firmly only going to be used in farmland, pastureland, maybe forest land. I think that if you're looking at rivers, there's been actually some interesting work being done there with traditional calcium carbonate. Even though it has some carbon in it, it still ends up being net CDR. It's not as efficient as silicates would be, but it dissolves a lot faster in freshwater and then in the oceans, there's a lot of interest in what we call ocean liming.
So, that would be taking limestone, heating it up in an electric calciner, stripping the CO₂ out of it to produce calcium oxide, sequestering that CO₂ underground, and then putting that calcium oxide in the ocean. But that ends up being a lot more complicated because you're sort of doing a traditional CCS technology on top of then distributing this calcium oxide in the ocean. I know the last approach that we're seeing is electrochemical approaches for ocean alkalinity enhancement. And there, you're essentially taking seawater and using electrodialysis or similar approaches to split the seawater into an acid and a base.
And you're taking that acid and disposing of it — question mark exactly how — and putting the base back in the ocean to enhance the alkalinity. And so that doesn't require any material. You're just splitting apart seawater with energy, but it requires a lot of energy, unlike the other approaches.
David Roberts
Interesting. So, this is just yet another area where, if you could reach that Valhalla of basically trivially cheap renewable energy, this is one of the things you could do with all that surplus renewable energy: speed up carbon dioxide removal.
Zeke Hausfather
Yeah, there's sort of two backstop technologies in the carbon dioxide removal world that could scale almost infinitely, given enough cheap clean energy, and those are direct air capture and ocean alkalinity enhancement, particularly the electrochemical types. But we're still pretty far from that world today, and it's pretty hard to justify projects that use a huge amount of clean energy that might otherwise contribute to grid decarbonization in the near term.
David Roberts
So back to this. You're spreading it on the soil, on agricultural soil. And the idea here is that it forms bicarbonates, and then the bicarbonates end up through the natural cycle, filtering down into rivers and then ending up in the ocean. And it is them ending up in the ocean that vouchsafes their permanent storage, basically. So one of the questions that came up when I was talking about this online earlier is that there seems to be some new research that shows that they're staying in place in the subsoil, basically, which risks, I guess, them losing their carbon again if they encounter the wrong kind of material.
So, I'm just curious about recent research. How confident are we that these things are actually making it to the ocean? Which is kind of the whole premise.
Zeke Hausfather
So, we're quite confident that they'll eventually make their way to the ocean. There is the potential, particularly in some types of soils, that you could have lags in the soil itself, or cation exchange site lags, as we call them. This is an area of very active research. There's been one paper that got a lot of criticism from one side, but support from another. But even that paper suggested that it really is going to be regionally dependent in sort of like sandy soils like in the Southeast, or soils in Brazil that have strong fracture flow patterns where you have very rapid drainage, it's probably less of an issue.
And somewhere like the Midwest, where you have a lot of water retention in soils, it's probably more of an issue. And so, even to the extent that this is a problem, and I think it is one that we need to take seriously, even if it doesn't affect the ultimate potential of enhanced rock weathering, it is going to be very regionally dependent. And it's something that folks, both economic researchers and companies, are starting to directly measure in deployments today, taking deep soil cores, you know, down to 80 centimeters, to track what's happening not just at the surface, but in the deep soil.
David Roberts
Right. So, just explain briefly, like, what's the danger here? What are we worried might happen instead of them going to the ocean?
Zeke Hausfather
Yeah, so in general, we're worried about anything that might cause either a delay in the effect of carbon removal or a reversal of the carbon removal. Delays can be things like the cations, the calcium and magnesium get stuck on soil exchange sites and don't sort of get out of equilibrium with the atmosphere for a couple of years, which then delays when the effect of CDR happens. The other things we worry about is it's possible if you add too much alkalinity to soils or you're adding it to sort of basic soils, soils that are not acidic, that some of the bicarbonate can precipitate as carbonate.
So essentially, you lose half the CO₂ you're storing, and that would make it half as effective. Now, that doesn't seem to be a big risk in most of the places we're targeting for deployments today. But if you tried to do enhanced rock weathering in, say, the Western US, you'd quickly run into problems with carbonate precipitation because the soils are more basic.
David Roberts
Right. But this is something you could track with testing. You could know if this is happening.
Zeke Hausfather
Well, if it's happening in the shallow parts of the soil, it's pretty easy to measure. If it's happening deeper in the soils, you know, it becomes more difficult to measure, but it is something that we nominally can test for. And then the final area of leakage that we're worried about, the final main one I should say, is what happens once the bicarbonate leaves the fields. And so there, you could, you know, drain into an acidic lake, for example, which would cause it to be re-released. You could end up encountering acidic water in waterways. In a different method though, we do sort of track pH of rivers.
So, this should be something that at least is reasonably easy to assess. And then, I think the biggest loss that we see in modeling at least, is what happens when it reaches the ocean. And there, it turns out that fresh water, for various reasons, is better at absorbing CO₂ by adding alkalinity than saltwater is. And so, saltwater is about 15% less effective at absorbing CO₂.
David Roberts
Oh, that's kind of a bummer, isn't it? If we have such big plans for storing CO₂ in the ocean.
Zeke Hausfather
Yeah, but I mean, those numbers are sort of baked in, right? But you do end up losing somewhere in the range of probably 10 to 15% of the carbon you capture in the rivers and sort of the coastal areas when it equilibrates with the ocean. And so, those are all accounted for in projects today, at least as best we can.
David Roberts
Well, this sounds to me — let's go ahead and wrestle with the MRV (Measurement, Reporting, and Verification) then. This sounds like a nightmare to track. Like, if there are things that can go wrong in the field and then deep in the field and then in the river and then in the ocean. And what you're interested in is how much of those bicarbonates made it to the ocean and got to the bottom and were safely sequestered. A) How on earth do you measure it and track it at all? But B) with such a complicated process, how do you get a shared measuring system upon which you can build actual markets?
Zeke Hausfather
Yeah, so one of the developments that increased confidence in enhanced weathering as a pathway and led to folks starting companies and actually trying to do commercial projects with it, is dramatic improvements in the way we can measure the dissolution of the material. So, it used to be that folks suggested, "Oh, I'm going to spread this rock in the field and then claim a carbon credit for it." And obviously, if you're doing it on the wrong field or you're spreading millimeter-sized chunks of rock instead of micrometer, it might not dissolve for 50 years and it's not actually doing that much. And so, what we've been able to do in recent years is fine-tune the measurements of the rock dissolution using mass spectrometry measurements.
So essentially, what scientists can do is sample the soil in discrete locations before the deployment of the rock, immediately after the deployment of the rock, and then on an ongoing basis, either every six months or every year. And you can measure for the same location how much of the material is still there. But what you can also do, and this is particularly clever, is you can use stable tracers in the material to determine how much rock was applied in the first place. So, for example, basalt has a decent amount of titanium in it, not enough to cause any problems to the soil.
But titanium is a super super stable material. Once it gets into soil, it doesn't wash out. And so, if you know the ratio of titanium to calcium and magnesium in the soils, that actually tells you both before and after the deployment, how much of the rock was applied to that spot and what percent has weathered based on how that ratio has changed. If you've lost half of the calcium and magnesium, but the titanium hasn't changed at all, you've weathered 50% of the material.
David Roberts
So, that will tell you how much of the material has dissolved.
Zeke Hausfather
So, that's step one. That's when we can say there is, you know, "potential CDR has occurred." You know, the rock has dissolved, it's released the alkalinity that should be interacting with carbonic acid in the soils and forming bicarbonate. Then we have to do deeper cores and water-based measurements to actually track where the cations are flowing through the soils. And here, you know, it's a little harder. You're not going to do it like every acre like you would for the soil measurements. You're probably going to set up —
David Roberts
Just to be clear, just to back up for one second, the soil measurements: These are a human being tromping out into the field and doing something physical. Right? This is manual...
Zeke Hausfather
It's a manual process. It's building off a huge existing industry for agronomic measurements and soil sampling that exists in places like the US. So, it isn't a new thing. A lot of farmers get their soil sampled pretty regularly. This is just a bit more intensive than you'd normally do. And instead of just tracking soil organic carbon and a few other things in the soils, you're actually running them through a mass spec machine and doing an isotopic analysis or elemental analysis of composition. So, it definitely is a bit more expensive on that front. And actually, today MRV is a big part of the cost of enhanced weathering projects.
A lot of projects we're seeing are spending $100 a ton of CO₂ just on MRV today. But the idea there is that by collecting all this data at a very high granularity and high spatial resolution, we can then hopefully develop models that mean that we're always going to have to do some measurements, but maybe if we have good enough geochemical models, we'll have to do fewer measurements in the future. And so a lot of what early buyers like Frontier are trying to do right now is effectively buy down the cost of the pathway by collecting the types of data we need at large scales to reduce these uncertainties.
David Roberts
Part of what we're doing right now is figuring out how much measurement we need?
Zeke Hausfather
Exactly, and making sure we're measuring all the right things. I think that's the second challenge, making sure we're doing enough deep soil measurements, we're doing enough fluid measurements. There's also some interesting potential as we start scaling enhanced weathering deployments, to do measurements at a watershed basis.
David Roberts
Like, I can imagine measurements in the field of a variety of kinds. And I can imagine measuring like, "Okay, we dumped X amount on here, and then, you know, Y amount is gone. So that means X amount, you know, a certain amount is free in the soil now." But how do you measure that it got into a river and then subsequently that it got into the ocean?
Zeke Hausfather
Yes, so deeper soil measurements can show how the cations are flowing through the soils in fields themselves. But once you get to the rivers, you can also measure these concentrations of dissolved inorganic carbon of free cations in the water. Now, the challenge with that historically has been that depending on the watershed, there could be a lot of different fields draining into that one river. And if you're doing like a single field in this entire watershed, you run into a huge signal to noise problem. But once we start seeing much larger scale deployments, like we're seeing in Brazil right now, for example, on thousands or tens of thousands of acres, then it becomes a lot easier to see a signal in river data as well as in the fields.
The oceans are always going to be a bit of a modeling world, just because the further downstream you go, the more dilute everything gets. But thankfully, we are actually pretty good at modeling ocean chemistry and, you know, carbonate chemistry in the ocean in particular. And so there might be a couple percent uncertainties, you know, beyond our best estimates.
David Roberts
But help me with this, Zeke, because the ocean's real big. Like, you put a little bit of base material in it, you know, from one field, it's like a one to kajillion ratio. Are you really able to detect that level of change?
Zeke Hausfather
Well, again, you're modeling what's happening in the ocean. You're not measuring it directly. But it's also important to emphasize that the actual carbon removal, the capturing of the CO₂ in the formation of bicarbonate, is happening in the soils. You're not actually relying on the oceans to do anything except for store the bicarbonate. And oceans store an immense amount of bicarbonate. There's something in the range of, I forget if it's 20 or 60,000 gigatons of bicarbonate in the ocean. And so, changing that a little bit isn't going to affect ocean chemistry significantly. And so, as long as you're accounting for the dynamics of carbonate chemistry equilibration when it reaches saltwater and reaches the ocean, once it's there, it should be very stable.
And there's not much uncertainty on that front.
David Roberts
So, you helped write four Frontier guidelines for companies doing this on how they should measure and verify what is sort of good practice versus bad practice. Having gone through that exercise, are you now personally comfortable that we are able to measure this in a way that you feel confident about? That you would feel confident building a multi-billion dollar market on top of?
Zeke Hausfather
So, I think the challenge with enhanced weathering is that we have to make sure people are doing it right. The barrier to entry is so low to spread rocks in a field.
David Roberts
Yes, it's very true.
Zeke Hausfather
Anyone can kind of do it and make claims. But the actual doing the science right behind it, having a lab that can do hundreds of thousands of mass spec measurements, that can do all the sampling management and track the data over time, that's a much higher bar. And so, what we put together in these guidelines was essentially a guidance for buyers who are thinking about enhanced rock weathering. What to insist to make sure that it is doing it right, at least as right as we can today. Now, to your question of am I confident in this?
I think that it's always going to have more uncertainty than something like direct air capture, but at the same time, it has a lot more co-benefits. We haven't even talked about yield effects.
David Roberts
I just worry because this is something that comes up a lot in discussions of carbon credits and the exchange of carbon credits, which is just that the market actor has an incentive to want to maximize their apparent carbon removal, and buyers just want the cheapest carbon removal they can find. So, they're not super incentivized to scrutinize this sort of like nobody involved has a direct incentive to make sure things are done. You're putting all that weight on the regulators. You're basically, you need really good, really alert regulators in a market like this because there's just incentive to fudge around every corner, it seems like to me.
Do you not worry about that?
Zeke Hausfather
I mean, that's certainly the story of what we sort of call the legacy carbon offset market, writ large. Avoided deforestation credits, renewable energy credits under the clean development mechanism. That was additionality baseline manipulation. There's no end to shenanigans.
David Roberts
Yes. All that stuff. Does all that stuff not transfer right over to here? I mean, these things are being sold on carbon credit markets already, aren't they?
Zeke Hausfather
Yeah, so I think there is a real worry that the market will move that way. I think right now we're sort of in a weird situation where there are a pretty small number of buyers. Like, for enhanced rock weathering, at least it's Frontier, Google, who's a Frontier member, but has done some of their own stuff, and Microsoft. And all three of us are primarily concerned about getting this right and scaling these technologies rather than maximizing the amount of tons we can claim. That said, that's going to change.
David Roberts
But this is true of any small, early market. Right?
Zeke Hausfather
I think now is the time to put in these safeguards, to have external standards organizations, to have registries that are putting science first. And in the case of enhanced rock weathering, we actually helped support a big community effort run by a nonprofit called Cascade that brought together 49 different academic scientists, as well as various other folks in the community, and spent a year putting together a foundation for some enhanced rock weathering document that sort of lays out the best practices for how to address each of these uncertainties. And we've seen the registries, the Isometrics, the Puros, the folks who put their stamp on these credits, increasingly align with that effort. So, I think there is a real need for external scientific bodies like what Cascade did to create standards for the field.
I think there is a need for standards organizations that are not just the buyers and the suppliers. And to be honest, the registries themselves, depending on how they're set up, might not have the purest of incentives.
David Roberts
Yeah.
Zeke Hausfather
And so, what we've been trying to do is not just prove this out in the field, but also build all the supporting infrastructure on the science side to make sure, you know, it's done right going forward. Because there is a real risk that someone does this badly. Either creates contamination of soils, using materials they shouldn't, or makes sweeping claims that can't be backed up by the actual measurements and creates a black eye for the field.
David Roberts
Right. Or we just spend millions of dollars for nothing.
Zeke Hausfather
Yeah, I mean, we know this works on a macro scale, right? I think the uncertainties are primarily around timing and the magnitude of some of the leakages. I would be hard-pressed to see a world where there's more than 30% of the carbon that's initially captured, lost before it's in durable storage. But that's still a pretty big number, right? Our best estimate is close to 15% now.
David Roberts
Tell me if this is crazy. This just seems like one of those things to me that's like, on the one hand, we know it's good, and we know that doing a bunch of it would be helpful, but on the other hand, it's just devilishly difficult to precisely quantify exactly. So, I just wonder, is quantification and credits and trading and buying of credits the right way to do this? Is there not some other way we could just sort of incentivize "do as much of this as possible," you know what I mean, and not pretend to be able to count the angels on the head of a pin?
I don't even know what that would —
Zeke Hausfather
I mean, I feel like you're channeling my friend Jane Flegal, who — this is one of her big arguments. I think there's some truth in that. Right. Like, I actually don't particularly like making offsetting claims with carbon removal, be it tree planting, enhanced rock weathering, or direct air capture. Like, I think it would be a better world if we're doing this because it's the right thing to do, not because we're, you know, pushing around some number in a spreadsheet to counterbalance our emissions.
David Roberts
Right. And a big thing, like the public, you know, it's like waste removal. It's something that the public should pay for.
Zeke Hausfather
Yeah, at the same time, there's not really any other game in town right now except for private, you know, voluntary carbon markets. Now, I don't think anyone, I don't think anyone thinks that's the long-term solution. Like, corporations doing things out of the goodness of their heart isn't going to solve our problems.
David Roberts
I have questions about this. Well, well, let's use this then to pivot. Because one of the things that's intriguing about enhanced rock weathering, and one of the reasons I've paid attention to it when I mostly just screen out CDR (Carbon Dioxide Removal) talk for now, is that there are reasons to do it aside from carbon storage. And therefore, there might be reasons that people would pay to have it done other than carbon storage. Right. Because carbon storage doesn't help anyone. It helps everyone, but it doesn't help anyone in particular. It's not really something that is of value to people beyond the sort of PR of appearing to be doing good things.
Right. Which, and I'm skeptical how far that's going to take us, but putting this stuff on soil does positive things to the soil that are a potential source of value. So, talk us through that just a little bit.
Zeke Hausfather
Yeah, and just to cover my bases, my previous argument, because I don't want to leave it on a statement that the voluntary carbon market is completely useless, I think how we see it is we're using this decade to create a bridge toward a world of compliance markets, of government procurement, of mechanisms that actually scale this that are not just corporations acting under the goodness of their heart. So, things we do right now should be aimed toward that, not just maximizing tons on paper. But on the co-benefits front, there's a few different co-benefits that are important to mention here.
One is that we've seen increased crop yields associated with enhanced rock weathering deployments. This is particularly true if you're deploying in a region that hasn't historically been limed. So where you haven't added limestone, you're not replacing it, you're just doing something new.
David Roberts
And what's the mechanism? Why would that happen?
Zeke Hausfather
So, there are two mechanisms where enhanced rock weathering can benefit crop yields. The primary one that's the most straightforward and most well understood is simply managing soil pH. If soils get too acidic, plants get less good at taking up nutrients, fertilizer is less effective, you have to add more of it, and your yields are lower. And today, farmers add enough limestone to their fields to get to the point at which the cost of adding more limestone is more than the yield benefit they get.
David Roberts
Right. So, this is why there's this giant industry in place already to spread crushed limestone on fields. It is to bring down the acidity of the soil.
Zeke Hausfather
Exactly. But most farmers don't add as much lime as they should if they really wanted to maximize yields, because at some point, it just gets too expensive or too operationally complex to add more.
David Roberts
Oh, the limestone gets expensive.
Zeke Hausfather
Yeah. Or the yield benefits per unit of additional limestone decline after a point. Yeah.
David Roberts
Do we have any sense of how much this kind of rock would cost relative to limestone?
Zeke Hausfather
So, it's generally going to be a bit more expensive than limestone simply because you need more material to have the same pH benefits for soils. At the same time, if you're effectively subsidizing farmers deploying this based on the carbon benefits, you could more effectively manage soil pH. So, instead of stopping at the point at which you hit diminishing returns, you could actually add as much alkalinity as you can to maximize crop yields, because the carbon removal scales pretty linearly, even if the soil benefits start decreasing after some point.
David Roberts
And the carbon removal will pay for it.
Zeke Hausfather
Yeah, there's also a lot of parts of the world, like smallholder farmers in Mexico, like rice paddies in India, where there just hasn't been historical pH control because there's not the availability of limestone or it's too expensive for farmers to do. And there we see really big benefits of this. There's a company called Mati in India that's shown very large increases in rice yields. There's a company called Flux in Kenya that's seen similar findings on smallholder farms there. So, you really get the biggest bang for the buck if you're taking an agricultural system that hasn't done any mineral amendments, any rock amendments, and putting in silicates.
David Roberts
That's a pretty big deal. That's a pretty big benefit. Yeah.
Zeke Hausfather
And so, there's a lot of potential interest in what are the development dividends of this in the Global South. So, you could sort of get two for one, right? Help farmers increase their yields and sequester carbon. But the other way that you could potentially get higher yields from basalt compared to limestone is because basalt has a bunch of micronutrients in it that limestone doesn't. Limestone is pretty pure. There's just calcium carbonate and so those various nutrients like manganese, zinc, other things can also — the silicate itself actually can also help with crop growth. And so, even in side-by-side trials where you put the same sort of liming strength equivalency of limestone and basalt on side-by-side fields, we're starting to see bigger yields from basalt, though we still need more data there.
A lot of these field trials are still in the early years.
David Roberts
Interesting. So, this is a source of value to farmers. So, how is this going to be integrated into the sort of market for this stuff? Like, how do you envision it working? Like, I'm a company, I go to a farmer and I say, "Hey, you're currently spreading limestone on your fields. I can supply you with a different kind of rock to spread on your fields and you'll get boosted output from it and we'll pay you to do it." What is the business model here?
Zeke Hausfather
Yeah, so we've seen a few different ones. Some of the early companies are just paying farmers to spread the rock, period. They're not charging them anything. So, they both save on not having to pay for limestone if they previously did that. And they get the rock to spread for free. The revenue from the sale of carbon credits covers that. There are other folks who are looking more at models where you essentially charge the farmer a small amount, but you're still subsidizing a lot of the cost through carbon markets. And the reason for that is, again, as I mentioned earlier, you simply need more material in most cases for silicates than you would for carbonates.
Olivine is the one exception there. But olivine is also harder to get to a place; it's less ubiquitous than limestone. And so, for example, Eion, which is a company that's doing olivine-based enhanced rock weathering, is barging their olivine from Norway, which sounds crazy, but it turns out —
David Roberts
Holy moly!
Zeke Hausfather
Oh no, no. It turns out, barging is remarkably efficient. Like, the carbon impact of barging is incredibly small compared to the distance traveled.
David Roberts
Oh, interesting.
Zeke Hausfather
But it still adds to the cost, primarily, and so that affects it as well. And so, it's hard to see a world where farmers are going to do this without some sort of incentive for the carbon benefit.
David Roberts
Yeah, yeah, that's what I was going to try to get at. Like, do we envision this, like could we envision this being the one kind of carbon dioxide removal that doesn't need a constant flow of public funds? You know, I mean, could it ever be self-sustaining just based on these co-benefits? Or do you think it's just like going to take the price down a little bit?
Zeke Hausfather
It's going to be a tough sell in most places to apply silicates compared to carbonates without some sort of incentive based on the climate benefits. Now, where I could see this happening is twofold. One is the existing voluntary carbon market that we see right now, which for all its warts and flaws is putting money toward this. The other that's potentially more interesting long run, is this idea of supply chain insetting. So, there's a lot of companies that have huge agricultural supply chains making food products. And agriculture is one of these fiendishly hard to decarbonize parts of the economy.
And so, this is one of the few ways that agriculture can durably store carbon as part of the agricultural process. You know, soil carbon, organic carbon is the other, but that's its own can of worms, no pun intended.
David Roberts
So could this show up in the farm bill then? Like is there interest in this outside of sort of carbon nerd circles?
Zeke Hausfather
There is. So, there has been some push to create a conservation standard as part of the farm bill that would give a subsidy for the application of silicates for soil pH control, similar to how there's a conservation practice for things like biochar. Right now, that's a relatively small amount of money, but every little bit helps. I think the other thing that folks have been looking into is there are some ways to create a pay-for-practice system at a bigger scale. So, essentially, pay folks to spread silicates at larger scales on farms through farm bill type incentives, or carbonates for that matter.
Liming is not great, but it turns out that particularly if you keep adding limestone beyond a certain point, it does become CDR, albeit half as effective.
David Roberts
So, all this lime spreading that's happening right now is, in some marginal way, a version of CDR.
Zeke Hausfather
It is. It's just not very good CDR. And there's sort of an ongoing debate about how much of the benefit is counterbalanced by interactions with other acids in the soils, which is also a risk for silicates, but less so because you don't have the carbon penalty. Right. But in an ideal world, if all of it dissolved and all of it formed bicarbonates and all of it went to the ocean, limestone would be about 40% as effective as basalt or olivine.
David Roberts
Interesting. And so, just like on the front end, the supply of waste rock is enough to get started, but not enough to sustain this at scale. We did end up having to dig up rock and crush it. Similarly, how big of an offtake is agricultural land? Is that going to be able to absorb all the rock we can dig up, or are we going to eventually run out of that too and have to find different places to spread this?
Zeke Hausfather
So, our best estimates, and I think I mentioned this earlier, is that global farmland and pastureland in places that have the right conditions, that are close enough to a source of rock, could probably scale to between 1 and 2 billion tons or gigatons per year. Once you want to go beyond that, you're going to have to look into different approaches, and that could be sufficient mineralization of these materials. You create a big pile of more reactive stuff and let it carbonate. You could potentially try to get it to dissolve in waters, but that is just harder with silicates, like putting it in rivers or beaches.
There are other ways that folks are looking into doing this, beyond just agricultural fields, but it seems, at least today, that this stuff dissolves by far the easiest in agricultural settings.
David Roberts
Right. So, just like waste rock and agriculture are the starting gun, kind of like the ways to get this up and rolling.
Zeke Hausfather
Exactly. And agriculture might be the ending gun too, depending on how much we end up needing to scale this.
David Roberts
Right. How well it works. I'm trying to get a sense of, like, how much infrastructure would be required once this is scaled up and how much energy is required, maybe relative to, like, other CDR proposals. I mean, you need transportation of the rock, the spreading of the rock. I assume all that's in place. So, I mean, it just seems like to get started here, there's not a huge infrastructure barrier. Is that accurate?
Zeke Hausfather
Yeah, so today, particularly, if you're working with waste fines, all you really need to do is to find farmers who are willing to do it with you and find some trucks that can carry it from the quarry to the field and then use existing spreaders. You do need bigger spreaders in some cases. So, folks have used manure spreaders and others just because you're dealing with more material than you would with liming. But you could also use a smaller spreader and run it more times. You just have a slightly bigger hit in terms of the emissions if it's a gas-powered vehicle.
But overall, when folks have looked at lifecycle assessment studies of this, it's somewhere around only about a 5% hit to CDR over the lifecycle associated with transportation and spreading.
David Roberts
All of that accumulates to 5%?
Zeke Hausfather
If you're using waste fines as a starting point, if you're doing dedicated coring, that could be higher. It's going to depend on a lot of factors like what is powering your grinder? Is it electricity? What's the grid in the region? But that said, we're pretty good at crushing rock efficiently, at least down to the like 100 micrometer scale that we're talking about here. If you want to get it really, really fine, then it gets exponentially more difficult. But for the size of particles we're looking at for commercial deployments today, that'll primarily dissolve in the first five years.
You could probably do it for maybe another 3 to 5% hit on life cycle.
David Roberts
I don't know. It's just like when I think about mining, digging up millions of tons of rock, that just sounds like a big deal to me.
Zeke Hausfather
This is better thought of as quarrying than mining. And the reason is that most of these basalt formations that we'd be using are very close to the surface. So, you're not creating giant deep mines to get this material out, you're just sort of scraping it off the surface. There still obviously are impacts of that, right? Quarries displace forest, land or farmland. They create potential impacts in the community — and potential jobs in the community. There's trade-offs here, but a single quarry can produce a huge amount of material from a CDR standpoint. So, even if the scale to a gigaton scale, globally we'd be doing like a 40% or so increase in the current scale of global aggregate production somewhere in that range.
David Roberts
Very interesting. So, let's talk about Frontier and what it's doing and what you sort of envision the sequence of events here, the sequence of political events and policy events. So, Frontier was started because we need a lot of CDR, governments are not doing what they need to be doing. So, the idea here is you're collecting private money, you're offering what are called advanced market commitments, which just says, "If you can sequester the carbon, we will pay for it." So, just talk a little bit about how that works in the context of this, what that means.
Zeke Hausfather
Yeah, so if we go back in time a few years to say 2019, when Stripe Climate, which then sort of developed into Frontier, originally started, there was a huge amount of talk about carbon removal and pretty much nothing happening in the real world. And so, Stripe Climate was the first customer of Climeworks, of Charm Industrial, of all these initial startups in the early days of this market. But they quickly ran into a problem where there was no real buyer for expensive durable carbon removal. In part because there are existing carbon markets, but they were paying, I don't know, I think the average price now is $4 a ton, which if you are paying $4 a ton.
David Roberts
These are like optimistically 100, $150 a ton, right?
Zeke Hausfather
Yeah, and if you look at things like direct air capture, you're probably upwards of $500 a ton today. So certainly, some of the technologies are expensive, but the point is that these can get cheaper and the only way to make them cheaper is to actually do them in the real world and learn how they work. And so, the idea with Frontier was less about maximizing the amount of tons we're removing and more about being catalytic on the technology side to essentially use this decade to figure out what works and what can scale, to sort of maximize shots on goal.
And that's one of the reasons that we try so many different approaches in ocean alkalinity enhancement, enhanced rock weathering, direct air capture, bio oil injection, BECCS; there are dozens of different types of CDR approaches.
David Roberts
So do you have concrete Advanced Market Commitments, AMCs, do you have them out on paper to all those technologies at this point?
Zeke Hausfather
So, there are two different types of projects Frontier does. The first are small-scale pre-purchases, which are really almost grants. We don't count any carbon from them for companies. But the idea there is, it's a lab-scale prototype with some professors with a good idea who want to build their first project. And so, those are half a million dollar initial grants with a potential million dollar re-up if they show progress. So that's one side of the equation that's trying to find all the crazy new ideas that might not work, but at least we want to try them.
And that's sort of where we started, but the other side, that's becoming much more of the focus now that some of these pathways are maturing, are large offtake agreements. These are usually somewhere in the range of 20 to $50 million agreements that are pay on delivery. So essentially, we say we will buy this many tons over this period from this facility you're building, but we will only pay once those tons have been removed from the atmosphere and verified.
David Roberts
Yeah, this is just crucial to emphasize. This is not "We're going to give you money and we hope you go do this." It's "If you can sequester the carbon and demonstrate that you did it, then we pay."
Zeke Hausfather
Yeah, we'll give you a purchase order. But the important thing there is that that company can then take that purchase order to the bank and say, "Hey, look, we have this $50 million deal with these very reputable companies. Can you lend us money to build this first-of-a-kind plant?" It's still challenging for them. They'd prefer to get the money up front, to be honest.
David Roberts
I'm sure they would.
Zeke Hausfather
But we also want to hedge our bets here a little bit. And so again, the idea with spending the billion dollars in change that we're going to hopefully be spending by 2030 is to really catalyze as many different areas as possible. At this point, we've done offtakes in enhanced rock weathering, we've done offtakes in direct air capture, we've done offtakes in multiple different types of biomass approaches. We've done offtakes for river alkalinity enhancement, wastewater system alkalinity enhancement. We haven't done anything directly in the ocean yet.
David Roberts
This is slightly off our topic, but I'm just curious, so I have to ask. As you say, there was a bunch of talk years ago, but nobody really knew. It was mostly talk. Nobody's really doing anything, so nobody really knew what kinds of things would work. There's a lot of big ideas floating around. Now that you've had — what is it, five years — of real practical experience funding and building these things, are there sort of macro conclusions that have emerged about sort of like, what are the promising areas and what aren't? Like, have we learned enough to foreclose any routes or elevate any?
What are the kind of, the big things we've learned?
Zeke Hausfather
There are some examples of pathways that just haven't really panned out. Macroalgae sinking is one that got a huge amount of attention a few years back.
David Roberts
People love that. People love that. So, that's not paying off.
Zeke Hausfather
No, it turns out it's really hard to actually do in practice and really hard to track what's happening. One of the bigger companies that raised a lot of money in that space ended up shutting down last year. So, that's an example of an area that we've probably pivoted a little way from. We can't fully preclude the possibility that something would work there. It's just been a lot harder than expected. In general, we've gained a recognition for how hard it is to build things in the real world. One of the corollaries of that is that there's something to be said for low-tech approaches.
One of the reasons why pumping poop underground or doing enhanced rock weathering, or adding lime to rivers is a good idea, is that it's pretty easy to do. "You don't need many miracles," as we say. Whereas, stuff like direct air capture has huge potential down the road. But you need both huge amounts of cheap clean energy and a lot of technological developments. At the same time, you could make the argument that you might get more learnings from building a DAC plant than spreading rocks in a field. But, spreading rocks in a field, we're still taking a huge amount of measurements, doing a lot of science on that too.
So, I think it's too early to preclude particular pathways here. But we've definitely seen some fall in cost faster than others. And some, like direct air capture that are still promising in the long run, are probably going to be a bit more expensive in the near term than we originally thought.
David Roberts
Right. And so, through this process, is what sort of enhanced rock weathering kind of rose to the surface as A) low tech, B) able to get started using existing infrastructure, and C) has some co-benefits that could ease its passage into the real world. I mean, is that accurate? That's why this one has sort of like gained a little prominence.
Zeke Hausfather
Yeah, I'd add one more to that, which is that people don't mind doing things to farms that they would mind in other contexts. So, there's been a huge amount of difficulty in getting ocean alkalinity enhancement projects up and running. Part of that is some mess around the London Protocol and dumping and the legacy of the Russ George guy who tried to dump iron filings off the coast of Galapagos and rogue geoengineering experiments.
David Roberts
Right, I forgot about that.
Zeke Hausfather
That's cast a whole mess over the field. But even beyond that, there's been a lot of community opposition to putting, to be honest, pretty benign chemicals like magnesium hydroxide into waste pipes, because it's putting chemicals in the ocean.
David Roberts
Even if we've sort of made peace with science and farming together, right?
Zeke Hausfather
Exactly. We already put all kinds of stuff on farmlands. And so, even though it all ends up in the ocean, at the end of the day, it's much more palatable for environmental groups and for others to do interventions in farming systems than in natural systems like the ocean.
David Roberts
So, the big arguments in favor of enhanced rock weathering sound to me then are political economy arguments. They're practical.
Zeke Hausfather
I mean, it's also relatively low cost compared to a lot of other pathways and fast to deploy. You're not spending three to five years building a giant facility. You can put rocks in the field next year.
David Roberts
And if we were hoping for substantial cost declines, where would those come from? I mean, the advantage of the infrastructure already existing is that you can just start using it. But the disadvantage is that to the extent you can squeeze costs out of that infrastructure, a lot of them have already been squeezed out. So maybe there's not a lot more to squeeze out. Do you envision this getting much cheaper over time?
Zeke Hausfather
So, I think compared to where we are today, which is the very, very early days, it can get a lot cheaper. We're seeing somewhere in the range of $300 a ton for most projects today. Some a bit cheaper, some a bit more expensive.
David Roberts
There's just a bunch of tests going on, right? This is not happening. Everything that's happening around this is a test at present, right?
Zeke Hausfather
Yeah, I mean, some of them are being done by commercial companies, but they are very much research-driven at this point. We're not seeing scaling to millions of acres or hectares with projects operating today. And so, I think costs can come down in a few ways. One is we can get the MRV cheaper. We can have models that we trust and not be paying $100 a ton to do huge amounts of mass spectrometry measurements of soil cores. Another is that we can just get economies of scale in terms of efficiency and logistics. A big part of that is getting more favorable agreements for the feedstock with quarries.
If you're a bigger customer, you can get down prices a lot. Part of it is getting more farms that are closer to quarries enrolled, reducing transportation costs through larger loads or bigger deployments. There's a lot of different ways that some of these costs can come down. And so, we think that ultimately the range of costs we're looking at on a dollar per ton of carbon basis down the road is probably somewhere in the range of $80 to $150 a ton of CO₂, which is still expensive, but for permanent carbon removal, stuff that takes carbon out of the atmosphere for tens to hundreds of thousands of years or more, that's among the cheapest that we have today.
David Roberts
I was going to say that's relatively cheap in the family of permanent sequestration methods.
Zeke Hausfather
Yeah, it's not going to be cheaper than planting trees, but it's also a different thing.
David Roberts
Still quite aspirational.
Zeke Hausfather
Yeah. But even today, $300 a ton is on the cheaper end of —
David Roberts
Oh, good God.
Zeke Hausfather
But again, we're five years in. Right? Everything is a first-of-a-kind project.
David Roberts
Yeah, yeah. You know, the whole reason Frontier exists is that national governments were not doing what they need to be doing. And given recent developments in national governments, it doesn't seem like we're entering a period where there's lots of good policy that's going to happen. But nonetheless, in the spirit of hope and optimism, if the US government got religion on this, what kind of policy would you like to see?
Zeke Hausfather
So, I think you raise a bigger challenge here, which is something that keeps me up at night a little bit. You know, working in at least part in the CDR world, is that CDR only really makes sense if we solve the other parts of decarbonization. If we're emitting 40 gigatons a year, in 50 years, CDR is going to be setting money on fire.
David Roberts
And I just like, I know you know that and I know that. I hope everybody else knows that because I get real worried that there is a class of people who would love to see this as an excuse to keep going on fossil fuels. I know that those people exist.
Zeke Hausfather
I mean, if you're spending even $100 a ton, not to mention $300 or $500 a ton, to remove carbon from the atmosphere after you put it up there, that's a lot more expensive than 80 to 90% of the emission reductions we can do globally today.
David Roberts
Yes, it would be the most expensive way to go about it.
Zeke Hausfather
This idea that people are going to just do a ton of CDR down the road to clean up our mess doesn't pass the smell test. And I think that in that sense, the high cost is a bit of a feature, not a bug. I worry a lot more about the moral hazard issue with the $4 a ton offset credits on the voluntary market today than I do $500 a ton credits. Nevertheless, I think it's important to be clear how we talk about this. But yeah, to your question, I think that governments, this is only going to scale if governments take climate more seriously broadly and if governments take CDR more seriously as we start getting closer to meeting our climate goals.
And those two sort of go hand in hand. We started seeing, during the Biden administration, some important steps in the Department of Energy around procuring CDR, a procurement prize, wasn't a huge amount of money. I think it was like $50 million.
David Roberts
Right. So, one thing government could do is just exactly what you're doing. These advanced market commitments.
Zeke Hausfather
No, we'd love to see a Frontier for governments. Yeah, we shouldn't spend too much money on that. If we spend 1% on CDR of what we're spending on mitigation globally, I think that would be fine today. You know, it's probably going to be 10% by mid-century or more as we start getting closer to net zero and don't have to do as much mitigation. But we're also spending $2 trillion a year on clean energy globally. And so, 1% of that is still not chump change.
David Roberts
Right, right. So, advanced market commitments, do you think that's the main thing? Just because they're technology-neutral, they get everybody moving? They get everybody moving towards a common goal? Is that it? Do you want DOE doing direct research in CDR?
Zeke Hausfather
Yeah, I think we need a few different ways that the government can be involved here. One is on standard setting. As you mentioned earlier, there is a real need for strong guardrails to avoid repeating the mistakes of the legacy carbon market here. And to the extent that the government can play a role there, I think it's a really important one. At the same time, we need to be careful because, as the legacy of corn ethanol teaches us, government itself is subject to some regulatory capture on the science side. So it's not a perfect thing, but it certainly can play an important role on the standard-setting side.
I think direct procurement is a useful function, and I think there's also just a lot of basic science that still needs to be done. NOAA can develop better sensors for ocean pH that can help validate ocean alkalinity enhancement experiments. There's a lot more interesting science that is being done, particularly in some of the more emergent CDR pathways that I think the government has a strong role in supporting. So, I think AMC type approaches, direct procurement, standard setting, and research are all areas that I think are important. We will see where that goes in the new administration.
David Roberts
Yeah, I was going to say, it kind of feels like you're on your own for the next four years. Do you have any reason to believe otherwise? What is your sense of the bipartisan-ness of this whole area?
Zeke Hausfather
I think CDR, for some weird reason, codes a bit more bipartisan than other things. It's similar to nuclear in some ways, in that regard. And I think we need to be a little careful if we embrace that, to make sure that the arguments being made for CDR are accurate and not treating it as a "get out of jail free card" for actually getting rid of fossil fuels.
David Roberts
I worry that that's precisely why it's a little bit more bipartisan. It's because, yeah, there's that hovering in the background. Well, Zeke, this is absolutely fascinating. As I suspected it would be. Thank you so much for walking us through this. And thank you to all you folks at Frontier for getting going on this, because nobody else would.
Zeke Hausfather
Thanks. And again, you know, we want to be humble and recognize that, you know, CDR is 10% of the solution to climate change, but 10% of a problem as big as climate change is something that deserves having people work on it.
David Roberts
Absolutely. Absolutely. Absolutely. Well said. Thanks, Zeke.
Zeke Hausfather
Take care.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this episode, I speak with Harry Krejsa of Carnegie Mellon about why cybersecurity experts and clean energy advocates need to work together. Drawing from his White House experience, Krejsa explains how a modernized clean energy grid could actually help defend against China's cyberthreats — for the benefit of both peaceniks and natsec hawks.
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David Roberts
Hey, hey, hey, everyone. This is Volts for February 5, 2025, "The cyber security implications of a clean-energy grid." I'm your host, David Roberts. Last year FBI Director Christopher Wray warned Congress that China is engaged in large-scale efforts to hack vulnerable US infrastructure, including the US electricity grid. Agencies like the Government Accountability Office have warned for years about the grid's increasing vulnerability.
Into that milieu, we are introducing gigawatts of clean energy, which tends to involve systems that are much more digital and online and interconnected than their fossil-fuel predecessors. Is all that new "smart" tech going to increase vulnerability to Chinese hackers? Or can it help guard against them?
Harry Krejsa has lots of thoughts on that subject. Until recently, he was working in the Biden White House, helping to develop the 2023 National Cybersecurity Strategy. Now, he is the director of studies at the Carnegie Mellon Institute for Strategy & Technology, from whence he has just released a new white paper with the somewhat overheated title “Sun Shield: How Clean Tech & America’s Energy Expansion Can Stop Chinese Cyber Threats.” So, will clean energy be a cyber shield or a cyber vulnerability? We're going to dig into all the details.
All right then. So, with no further ado, Harry Krejsa, welcome to Volts. Thank you so much for coming.
Harry Krejsa
Thank you for having me. I'm honored to be here.
David Roberts
This is a subject of much fascination for me, and I feel like it's an undercovered subject that's going to be covered a lot more in the coming years. So, I'm glad to get here on the front edge of it. But I'll just tell you, just putting my cards on the table up front, I am, in my heart of hearts, a dirty hippie, what they used to call a peacenik, and as such, have what I think of as a pretty healthy skepticism toward the US security apparatus and US security agencies. So, I will just say that when Christopher Wray comes to Congress, in the context of asking Congress for a bunch more money and says, "Ah, there are Chinese hackers everywhere, they're behind you right now. They're probably under your desk, like, this is a looming threat, we need lots more money." I am — my eyebrow goes up. And I kept reading these articles about the Chinese threat and one thing I thought was notable is that at no point does anyone say, "The Chinese hacked US infrastructure and then did X, had X effect, caused X damage, X dollars of damage." It's all "they're preparing and lurking and they're out there just waiting." So, you see where I'm coming from as a peacenik. All of this sounds like classic US security apparatus threat inflation to me somewhat.
So, I want to just start by maybe you can just convince me that there's a real and pressing threat here.
Harry Krejsa
Certainly. And that skepticism that you mentioned is a healthy one. And it's why I was excited to come talk to you and the Volts audience, who I imagine probably share some of that skepticism. Skepticism that I also shared coming into this space. I'm a Chinese linguist by training. I began my career working in China and Taiwan. And when I came back stateside, I started researching US-China technology competition, which brought me into government service. I started in the Pentagon on their civilian staff during the first Trump administration. And then after the Biden transition, I took a political appointment into the White House.
And across that time in government, I was the most granola-crunching person I knew at the Pentagon, but —
David Roberts
Probably a pretty low bar.
Harry Krejsa
Indeed, but I cleared it. But during that time, I learned all about how and why China's building these kinds of cyber capabilities to threaten our infrastructure, and to my pleasant surprise, how clean energy could be uniquely capable of helping protect us from exactly those kinds of threats. There's a cliché that the thing that Americans most frequently get wrong about international relations is that other countries have domestic politics too.
David Roberts
I thought they just sat around talking about America. Like, "What do you think about America?"
Harry Krejsa
Well, I think that might be the case in lots of places and that their politics also reflect that part of our politics. But yeah, they have their own internal considerations, as it turns out. The domestic politics of China, the People's Republic of China, revolve specifically around the Chinese Communist Party's obsession with remaining in power and protecting itself against challenges to its legitimacy. That includes decades of talking points about how democracy and democratic values are just not appropriate for or compatible with Chinese history and culture. The problem with that line of argument is, of course, Taiwan.
You know, Taiwan is this flourishing, self-governing democracy of 25 million people who have the same Chinese lingual and historical heritage.
David Roberts
Kind of embarrassing that it's just sitting right there, next door.
Harry Krejsa
Yes, and its continued existence, as you said, is an embarrassment and a source of frustration for the Chinese Communist Party, one that Xi Jinping has said in speeches he does not intend to pass on to a successor. So, it's been widely reported that he's told his military to be prepared to violently conquer Taiwan by the end of the decade. These preparations include a buildup of arms and ammunition, construction of amphibious landing craft to cross the hundred-mile strait of Taiwan, and storm its beaches. We can see these craft from space.
But it also includes preparing to kneecap the United States so that we cannot come to Taiwan's rescue.
David Roberts
Yeah, I was going to say the last I heard, and I haven't followed this closely, but the last I heard, Biden was asked very straightforwardly, "Will you step in if they go after Taiwan?" And he said very straightforwardly, "Yes." So, as far as I know, the US Government's position, correct me if I'm wrong, is still "This will trigger action on our part."
Harry Krejsa
We have historically had a strategic ambiguity about that answer. And so, that level of explicitness, there's been some debate about what was said and what was meant and all that.
David Roberts
Whether Biden was fully in control of all the implications of his speech, you mean?
Harry Krejsa
Right, but that is probably why China has not done so yet. And in addition to the political affinity that we share with Taiwan, being a long-time partner and democratic friend, the global semiconductor market is centralized in Taiwan to a tremendous degree. And so, any kind of violent confrontation over Taiwan would be very likely to damage the famously fragile semiconductor manufacturing base there and could, you know, as a result, plunge the globe into a worldwide catastrophic depression.
David Roberts
And this was, if I'm not mistaken, a large part of the impetus for the CHIPS Act. Right. I mean, it's the whole reason we're trying to onshore that industry.
Harry Krejsa
Precisely, precisely in partnership with Taiwan. Though that dependency does help give them more confidence in our friendship and willingness to come to their rescue in the event of such a violent takeover.
David Roberts
Right. So, it's really just all down to Taiwan? Like, I mean, there are larger, major power maneuvering considerations going on here, surely?
Harry Krejsa
Sure. And I think that Taiwan is more of the lens through which the general two last superpowers-standing kind of dynamics are unfolding, right?
David Roberts
Yeah, yeah.
Harry Krejsa
And unfortunately, it's a very sharp lens through which that is coming together. We know that these kinds of cyber attacks on critical infrastructure are not science fiction because we've seen them unfold elsewhere. Just a decade ago, Russia was able to bring down Ukraine's power grid with a series of cyber attacks that plunged hundreds of thousands of people into darkness. At the beginning of the Biden administration in 2021, Colonial Pipeline suffered a ransomware attack by criminal gangs that caused a fuel shortage and momentary gas panics on the eastern seaboard. There was even a water treatment plant in Florida where, again, a criminal actor was able to remotely access the control systems for that water treatment plant and set it to flood its water stores with lye.
But that was, like, caught and reversed at the last minute.
David Roberts
Yeesh.
Harry Krejsa
Yeah.
David Roberts
It's also the case that, like, three drunk rednecks in North Carolina shot an electricity transformer and shut down electricity service to an enormous swath of the region. By which I mean, US infrastructure is vulnerable in a lot of ways. And it seems to me a lot of those ways are domestic. Entirely domestic. And a lot of those ways are analog. Do you know what I mean?
Harry Krejsa
Absolutely.
David Roberts
So what percentage of the total vulnerability of US Infrastructure is foreign digital hacking specifically? I guess I want to try to contextualize it a little bit.
Harry Krejsa
So, it's qualitatively different buckets. Right. You know, it's difficult to protect a random rural substation against anti-government activists from shooting it up with an M16. Right. But that is not very systemically impactful. It could have a local impact. But the threat advisories put out over the last year and a half or so by Microsoft and reporting by various news outlets and those congressional testimonies you mentioned have all been pointing to the Chinese security services attempting to gain access for systemic impact into places like, again, according to publicly available reporting, the Texas power grid, water utilities in Hawaii and Guam, major west coast ports, things that, because of their digital connectivity, are able to leverage it into systemic impact for two effects, right.
The first one is to scramble our logistical ability to mobilize a rescue mission for Taiwan. But the second, as you mentioned from Director Wray, was to disrupt essential services for US civilians, and as another government leader put it, to "induce societal panic" so that we wouldn't have the political will to support that rescue mission.
David Roberts
So, the idea is that this is all basically to thwart any US effort to save Taiwan? It seems like a little bit of, like a bank shot. Well, wait, aren't they more direct?
Harry Krejsa
The Chinese Communist Party sees the United States as probably the only actor that could stand in the way of a violent takeover of Taiwan. And so, they're doing everything they can. They're pursuing missiles that are particularly good at targeting and taking down aircraft carriers because that's one of our comparative advantages. They are trying to bulk up on ammunitions that can get to Taiwan and destroy Taiwan's defenses before our ships can make it across the Pacific Ocean. But they do see our disproportionate digitization as a society, as an economy, as a way that they could try and circumvent our conventional military advantage.
And that's what's motivating them.
David Roberts
And I think they also view us as kind of lush, decadent, weak-willed, and unlikely to put up with much sacrifice in the name of defending a faraway land.
Harry Krejsa
That is correct. I think that they might be off there as far as like a "rally around the flag" technique if they indeed started trying to target American civilians. But whether or not — in like, China analysis circles, it is a truism that China has generally been bad at predicting the political intuition for democratic countries. Like, they just don't have practice at it. In the 90s, Taiwan was flirting with electing a more pro-independence party for the first time. And so, China fired a series of missiles over Taiwan to try and intimidate them out of it.
And of course, that just inspired Taiwan to rally around those candidates.
David Roberts
It sparked weeks-long rallies and people in the streets.
Harry Krejsa
Exactly right. And so, that's like, I think, an underrated source of instability.
David Roberts
Well, I mean, the inability to predict the US response is one thing. The inability to predict a Trump administration response is perfectly forgivable and understandable as it is.
Harry Krejsa
Exactly. But I think that the fact that we have now found Chinese hackers lurking on civilian critical infrastructure, gaining and maintaining access and the ability to control it, including infrastructure that doesn't have a military purpose.
David Roberts
Right. But to be clear, the examples we have on record are them gaining access. We can't really point to them having done anything with it yet, can we?
Harry Krejsa
Absolutely. But part of that is because doing something with that would be seen as an act of war, like targeting civilians. Right. So, what you would want, if you are the PRC and you want to, you know, frighten or deter the American people out of coming to Taiwan's rescue, you want to be in place to pull the trigger.
David Roberts
Keeping your powder dry.
Harry Krejsa
Precisely.
David Roberts
But accumulating powder.
Harry Krejsa
Exactly.
David Roberts
All right. And explain what Volt Typhoon is in the context of this.
Harry Krejsa
Sure. Volt Typhoon is a taxonomic moniker, a code name that Microsoft's threat intelligence shop gave to a part of the Chinese military, the People's Liberation Army, or PLA, that has particular expertise, tactics that they can recognize over time and track to different kinds of targets. And so, Volt Typhoon is this corner of the PLA that has been — with particular skill and stealth — embedding itself in various critical infrastructure networks, those power grids, water utilities, ports, et cetera. And Microsoft unveiled this in, I believe, late 2023.
David Roberts
So, it was a private Microsoft investigation that uncovered all this stuff.
Harry Krejsa
It's often — there is a fair amount of collaboration in both the unclassified and classified spaces where governments and threat intelligence firms will pass information and say, "Are you seeing this? Do you have context for that?" Indeed, Microsoft was able to track this down in the public domain. That also allowed the United States to connect a few more dots together and provide that context and declassify intelligence for Congress to do that.
David Roberts
Did the Chinese Communist Party ever acknowledge Volt Typhoon or admit, or is it all full denial down the line?
Harry Krejsa
It is all full denial down the chain. And this has been the case forever, including when, like, we are able to track the forensics of various hacking operations. And they all, like, start at 8 a.m. Shanghai time and conclude at 5 p.m. Shanghai time. Like, you know, they're getting much better at their tradecraft. But even when it has been obvious, they have a, you know, "We will never acknowledge this" sort of posture, of course.
David Roberts
And let us not be naive. Surely, there are groups of Americans working to penetrate Chinese infrastructure systems. Do you not think?
Harry Krejsa
Well, surely I would not be naive, but I don't have anything further to say about that.
David Roberts
We should just deny that all down the line, too.
Harry Krejsa
I would say that the United States observes international standards and norms around the law of war and humanitarian protection, and targeting civilians in peacetime is not something that we or our allies do.
David Roberts
Okay, well, I'll just leave that there with my raised eyebrow. So, let's talk then about the vulnerability of the grid, basically. This is about the digital vulnerability of the grid. So, before we get to clean energy, the grid that all these people are talking about being more vulnerable is, for the most part, not composed of clean energy. The one that we're talking about being increasingly vulnerable is still mostly the fossil fuel grid. So, why, given that the grid has been basically the way it is for like, a century now, why is it suddenly becoming more vulnerable to hackers?
Harry Krejsa
So, you had mentioned at the top those GAO reports about how the threat is proliferating. Basically, the dynamic here is if you're trying to think of the cybersecurity of a complex system like our grid, you can think of your options along a spectrum. On one end, you have basically no Internet connectivity whatsoever. In tech policy, we call that an air gap where there's nothing connected to the Internet.
David Roberts
Certain nerds in the audience right now will be thinking about Battlestar Galactica.
Harry Krejsa
Precisely, the Adama maneuver, that's right.
David Roberts
"Reboot," which begins with a fully analog ship, because the robots have taken over all the computers.
Harry Krejsa
Exactly. And there are benefits to that approach. Indeed, some extremely valuable but extremely fragile parts of our infrastructure, of our national security apparatus, are indeed air-gapped and they depend on that kind of thing.
David Roberts
Oh, interesting, because I was going to ask like, is that a substantial part of anyone's recommendations that we sort of have like some percentage, some small percentage of power infrastructure air gapped, just in case?
Harry Krejsa
It depends on particular circumstances. I think the issue is like the opposite end of that kind of spectrum of security perspectives from the air gap is leaning in totally on being digitally native, on recognizing that, you know, we are living in a digitally enabled world. The ship has sailed on, you know, some parts of our infrastructure being connected to the Internet. So, we might as well.
David Roberts
The only way out is through.
Harry Krejsa
Exactly, exactly. And so, you want to say, "All right, we're going to make everything as digitally native as possible, where it can be updated, it can be patched, it can, you know, fail gracefully and quarantine the bad stuff." Unfortunately, where we are is in that messy middle, which is the worst of all worlds. I'm exaggerating when I say, "Dams with dial-up modems slapped to the side of it," but only slightly.
David Roberts
So, we have infrastructure that was not designed to be digital, not digitally native, that has been sort of drafted into digitization, slapped a modem on the side of it. And so, we're kind of in a worse of both worlds.
Harry Krejsa
Exactly, exactly. And the promising thing about the clean energy transition is that it is bringing a wave of recapitalization into the electricity sector of new technology that is digitally native, that can be made defensible.
David Roberts
Right. And here we come to, I think, a really central question because, like my strong, I guess I'm guessing probably anyone's strong intuition is just that if you bring in much more digital equipment, you are proliferating your threat surfaces or whatever the hell they call them in the security world, you know what I mean? Like, you have now digital interfaces by the millions. And what's more, I mean, I'm getting a little ahead of myself now, but we'll get all this out now. What's more, not just lots more digital equipment onto the grid, but digital equipment coming from small vendors and like mom and pop shops, like startups.
You know, there's lots of — now there's like, it's not just a couple of big power companies that you could theoretically corral and control. We're proliferating the places from which things enter the grid too. And, it's just that's distributing too. So all of that sounds to me like more vulnerability. More, more, more. So convince me that a distributed grid filled with digital interfaces is not more vulnerable to hackers.
Harry Krejsa
Absolutely. And your intuition is correct and historically well supported. But as we said earlier, the only way out is through here. And so, it is both simultaneously true that the threat surface is proliferating exponentially and we are gathering the tools we need to make everything more secure, resilient, and defensible than it would have been in a legacy fossil infrastructure paradigm otherwise. One of the analogies that I like to use is basically the fire code before the 20th century. You know, in the 19th century, you hear all these stories about how like, Chicago and London and every developed city, every few years would have a citywide fire that would wipe out a tinderbox of all these buildings.
Right? Because every piece of our built environment was contributing to risk, right? Unregulated materials, unregulated stoves. And people didn't have an intuition for how flammability worked. And so, you were just, everything was a tinderbox and you would have catastrophic wipeouts every few years. And if we approached the built environment today, like our cybersecurity paradigm is today, I'd be saying, "Hey, before you go into this building, you need to put on your fire suit, your own oxygen tank, and carry an axe with you," which is no way to organize our modern society. But instead, today, every piece of a building contributes to its safety rather than its risk.
Like, every layer of paint has had a fire retardant coat and everything.
David Roberts
Right, right. And this is all just by boosting code so that all new buildings have a certain level of hardened infrastructure to them. And it more or less worked.
Harry Krejsa
More or less worked. But also, with that boosting of code, was also an intuition. Like, you know, "Oh, there's paper towels on the stove, I should move that." Or like there is, you know, the individual is not in charge of their own fire safety alone by themselves anymore. But there's still an intuition of safety that you can see when things feel off. And we are trying to — the way through this is to cultivate both, you know, that pincer movement of top down and bottom up.
David Roberts
Right, top-down being the codes. Bottom-up meaning more of like a cultural sensitivity.
Harry Krejsa
Just exactly right.
David Roberts
Pay more attention, care more, keep an eye out. But that's like you're trying to cultivate a culture again among, potentially, hundreds of thousands of small vendors. So that almost seems more challenging than the codes.
Harry Krejsa
Absolutely. And it's hundreds of thousands of, as you said, peaceniks, folks who have, you know, people coming from the climate and clean energy sort of pipeline.
David Roberts
Not security-minded people, maybe.
Harry Krejsa
Precisely. Right, and it is true in the other direction as well. When we were in the White House working on this issue, my glowering, risk-focused national security folks would look up from their keyboards and say, "Wait, you're doing what to my power grid?"
David Roberts
They'd sniff the air. "Is that patchouli somewhere?"
Harry Krejsa
Precisely. Whereas indeed, the climate policy folks whom I adored and had a great relationship with at the very beginning were like, "Wait a second, are you trying to throw a wet blanket on this? Are you coming in here with your military-industrial complex biases?" When in reality, their worlds have way more common cause than I think they necessarily appreciate.
David Roberts
Yeah, yeah, I should have maybe framed that a little bit better in the intro. Like the thrust of your piece, the whole thrust of this project, is to get the glowering security folks in the security blob and the hippies doing clean energy just to talk to each other and start cooperating and collaborating more, because they are, like, physically now part of the same concern. But culturally, I think you'll know better than anybody, still quite worlds apart.
Harry Krejsa
Absolutely. And I think that this union will be especially important in the next few years, where we're going into a political environment where decarbonization is probably going to drop several rungs down the priority ladder, and national security and competition with China is going to move up it.
David Roberts
Well, I mean, you could argue, I would argue that even in the Biden administration, it was concerns about China that pushed climate legislation over the top. It's already, you know, that's — those melding of concerns is already somewhat underway.
Harry Krejsa
That's right. And the ability of clean energy to kind of clear out that technical debt and make our grid more defensible and resilient is a huge national security asset and imperative. And you can talk about that without ever using the word carbon in a very compelling way.
David Roberts
Right, right. Well, let's talk then a little bit — like, one of the points you make, which of course I love, because I love talking about grid architecture, is just that the architecture of a clean energy grid in and of itself is more cybersecure. So, talk about that just for a second. The sort of benefits of this kind of nested architecture.
Harry Krejsa
Absolutely. So, as your audience will know well, we are moving from this paradigm of a few centralized nodes of electricity generation pushing electricity out in one direction to distribution into various neighborhoods, to one that is dramatically more flexible and interconnected, where we have distributed generation — electricity capable of moving up and down the same wires in both directions all the time. And that kind of architecture, if implemented thoughtfully and with security benefits in mind, can be a second pillar of national security benefit here because it's able to recover. And as our mutual friend Costa Samaras at the Scott Institute at Carnegie Mellon —
David Roberts
Former Volts guest.
Harry Krejsa
Precisely, he refers to this as "a self-healing kind of system" where you can have, whether it's a hurricane or a hacker who takes down some portion of the grid, you can have smart inverters and grid-forming technologies and batteries say, "Whoa, I detect something bad happening there." And I can surge electricity of the right frequency to try and restabilize the grid, or failing that, I can quarantine off that portion that is being disrupted.
David Roberts
Yeah, that's the key bit. So, like electricity heads will remember, like in the massive blackouts of years past, it's often just like one squirrel eats through one transformer and the faults just cascade and there are no natural fire breaks, so they just cascade out of control through an entire region. And the idea here is that your clean energy grid, you know, people will remember this from several previous pods with Octopus Energy with Lorenzo Kristov. This idea of like at the neighborhood level, you have a microgrid, right, where everyone's communicating with one another within the microgrid, but that microgrid just has one single connection to the larger grid.
And then, that could be inside a city-sized microgrid, which could be inside a regional-sized microgrid. There's this nested quality. All of which means there's tons of fire breaks. So, you can isolate the fault relatively easily with that kind of architecture in place.
Harry Krejsa
Exactly. There was a squirrel in Ohio in 2003 that did almost as much damage to the Eastern seaboard as Vladimir Putin did to Ukraine in 2015. But that is like —
David Roberts
But here we come to a question, which is: that architecture, well implemented, is safer, but like, do we see that being implemented that way? Do you know what I mean? What I see is an uncoordinated herd of just a chaos of people storming onto the grid, and the architecture not really keeping up.
Harry Krejsa
That's right. And I think that the answer is like, it's hard to know in many cases because we don't have the visibility that we need. And we can get that from uniting the tree huggers and the dragon slayers, both inside government and outside more effectively. In the critical infrastructure protection space, there are these public-private coordinating bodies, sectoral coordinating councils, where representatives from the various major private sector stakeholders for a given sector will gather, will interface with government, will receive threat intelligence about what they should do to protect themselves against new and emerging risks, and they will translate that and send recommended actions out to their private sector counterparts.
And those sectoral coordinating councils have been slow to modernize and reflect the clean energy space.
David Roberts
You mean the ones in electricity specifically?
Harry Krejsa
Yes, that's right. Yes. So, like last year, the Electricity Subsector Coordinating Council (ESCC), which serves this role for the electricity, the bulk power sector, admitted American Clean Power (ACP) as the representative for the clean energy space. But that took a long time. It took longer than it should have. And well after clean energy had a systemic level presence on our grid. But that was for two reasons from both directions. One was the kind of creaking institutions that came before; they were used to legacy energy actors that had been unchanging for decades, kind of not being prepared to integrate those new entrants.
But also, from the other direction, the new entrants not knowing how to organize themselves, not necessarily having the intuition for security and knowledge that they should be there. And we have work to do to ensure that the liability of that space, of the diffuse number of actors, can be an asset of dynamism and technological innovation. But it has to work from both ends.
David Roberts
Well, before we get to governance, which we are going to talk about in a sec, let's just talk for a minute about the tech itself. You have an interesting observation in here about the difference between IT and OT, between information technology and operational technology. Talk a little bit about what that distinction is and what is the significance of that distinction here.
Harry Krejsa
So, information technology is what you often think of when we talk about tech today, right? Like computers, Internet networks, those kinds of machines. Whereas operational technology, OT, is often used to describe a category of stuff that changes things in the real world. Pumps and switches and substations.
David Roberts
So, the former is sending information hither and thither, the latter is moving physical objects in the physical world.
Harry Krejsa
Exactly, yeah. The atoms and bits distinction, right? Yes. And for most of the existence of IT, it has been generally separate from OT. There's been relatively rare intersections of the two. And we're moving into the world where they are colliding. Even before the clean energy transition began, you know, we were slapping those dial-up modems on the sides of dams. And there's a business case that's irresistible for that kind of work to bring together IT and OT. Any infrastructure operator is going to have distant and remote substations or assets that are difficult, time-consuming, or dangerous to send someone to.
And so, if you're wanting to just every so often adjust some gauges and flip some switches and you don't want to send someone out there every single time, then it is irresistible to slap a dial-up modem to the side of that dam and have the ability to do that. But a lot of those dials, switches, and operational technologies were never designed with that kind of connection to the outside world in mind. Like the designers of those technologies, they assumed if you wanted to flip that switch, you were going to walk into that building. The guard would say, "Hey, David!"
And that is the paradigm that it was built for. And by slapping it onto the side of it, we are opening this door to the entire world. Being able to look in there and turn those knobs and flip those switches with no identity checks, no authentication, no firebreaks, unless you build it in intentionally on top of it. And that is just not the case in most of these places. A lot of utility operators have extremely narrow margins. Many of them do not have the kind of technical sophistication to know that this is a problem. And unless you take action to swap out those OT so that they have a layer of sophistication on top of it to be like, "Hey, is this who I expect to be coming in here and turning the knobs and flipping the switches?"
David Roberts
But why can't you build that sophistication into the modem that you slap onto the side of it? Like why do you have to rebuild the thing from the ground up?
Harry Krejsa
Well, you can, but that's a single point of failure. In IT right now, the big kind of trend is towards what's called "zero trust architecture" where you have to be authenticated every time you go to a new folder, a new place. And so, this is not to get into too much inside baseball, but the security paradigm for like government networks used to be organized around on-premises or on-prem security where as long as you passed one check, you could look at anything, go anywhere. And now we're moving toward like you are continuously authenticated. It is more like if you're working on collaborative Google Docs, right.
You have to be signed into Google, and the browser needs to know that that's you before you can open that link from someone else who only meant to share it with you and not everyone else who has the URL.
David Roberts
Right, right.
Harry Krejsa
And so, similarly, like you want that kind of digitally native layers of security. Which, to a human user, would hopefully look like nothing. It would be the easiest thing in the world if you're doing it right. But it is a sophisticated amount of engineering on the back end and in most cases, your old OT is not capable of that. And you could build everything you want to into that modem you slapped onto the side of it. But if it is a single point of failure, that's an intolerable amount of risk. And the rule of thumb we have for these, these state-based hackers is they have so many resources and so much patience to throw at this that they will eventually get in. Like the key is how many layers of defense and how resilient you are to recover.
David Roberts
And so, one of the points you make is that the OT involved in clean energy is sort of better suited to this sort of security.
Harry Krejsa
Correct.
David Roberts
Say a little word about that.
Harry Krejsa
Sure. So, there's kind of two dynamics there. One is a lot of clean energy was just designed from the ground up in the Internet era and so started with that as an assumed possibility. But the other part of it was that you need your clean energy technologies to be capable of much more sophisticated activity. And so, of course, you're going to design it with software-defined abilities to interact with each other. Right?
David Roberts
Right. Yeah. Like everything is going to be talking to everything else and talking to the grid. That's sort of like the tidal movement in clean energy. This is a big part of why clean energy proponents think clean energy is going to be able to do what dirty energy used to do. It's not going to have to replicate the brute force. It's going to, through digitization, be a lot smarter and then more efficient.
Harry Krejsa
Exactly. Your variable source generation, like solar and wind power, needs to be constantly considering, "Where do I send this power? Am I storing it? Am I transforming, transmitting it across space or time?" And your future energy parks that you discussed in an episode recently of on-prem generation and consumption is now introducing new multivariate interactions with the grid. Like all the things you want your clean energy technologies to be able to do require software-defined interactions with the real world. Like from the start on the tin.
David Roberts
Right. So, what you like here, what we would like to happen, is for these digital technologies to be built with top-level security built in such that every piece you add to the grid improves — rather than making the grid more vulnerable — it improves grid security.
Harry Krejsa
Exactly.
David Roberts
This is what we want in our future. But then, we come to the sort of million-dollar question here, which is governance. What standards and who is it that's making people do this? Because as you say in your section on governments, the first part of the section on governance is the governance of the US electricity system is an absolute jalopy, Rube Goldberg nightmare of overlapping jurisdictions. So, it's not even clear if you had a sort of US God emperor with great standards in his back pocket, how he would proliferate them to all the necessary actors here.
So, how do you get around that?
Harry Krejsa
Well, you know, federalism is a drag.
David Roberts
Although, we should just say here, in the coming four years, we might feel much more fondly towards federalism than we do right now.
Harry Krejsa
You're absolutely correct. And you know, man, I was just thinking about how great Greg Abbott is with all that clean energy in Texas.
David Roberts
I know. Go, Greg.
Harry Krejsa
Yep. The way I think that you start — what's that line about how do you possibly start eating an elephant? One spoon at a time. Same case here where we need to approach this from a prioritization framework. Like, what can we get our arms around most easily? What's the most systemically important? What tools do we have? And so, one of the last things that I did in government in this kind of collaboration between the glowering natsec folks and the utopian climate folks, was identifying a list of linchpin technologies. Right. Like recognizing this is a huge undertaking.
What are the technologies that are the most critical to the near-term success of the transition and have the most sort of digital exposure that we should be ranking above the others and thinking about their systemic importance relative to one another? And to that end, if you're thinking about solar panels, they are relatively dumb machines. Yes, they're the workhorse of the clean energy transition. And yes, they have some semiconductors in them and most of them are made in China, but they're pretty dumb. They aggregate up into inverters and substations.
David Roberts
That's where the intelligence is. Right?
Harry Krejsa
Persistent inverter, indeed. Yes. And so, I'm not too terribly worried in the immediate term about the risk from a solar panel. On the opposite end of that spectrum are your virtual power plant software and similar tools that are entirely software-defined. They can move megawatts or even gigawatts of electricity around and concentrate a lot of that risk in a single, systemically important place. And so, that's one of the very first things we should probably prioritize.
David Roberts
What would that translate to? Prioritizing smart inverters? That just means getting some minimal security standards in place, and that would affect the inverter manufacturing industry. Like, what does it mean to prioritize inverters?
Harry Krejsa
It means figuring out, like, what are the sources of risk here? What does the software, like — who makes inverters? What does the software and hardware supply chain for inverters look like? Do adequate existing standards cover the software supply chain for inverters? If not, how do we make sure that we update standards to that end? The tricky part there is that the clean energy transition is happening faster than most of the standards-making process.
David Roberts
Yes, I mean, I run into this problem a lot —
Harry Krejsa
Indeed.
David Roberts
on Volts, which is like the tech is racing out ahead. People are doing this already. And the standards-making bodies comparatively are like Ents in Lord of the Rings, just sort of lumbering along slowly behind.
Harry Krejsa
That's right. The thing we learned at the White House. Any honest, you know, alumni of a White House policy council will tell you that the formal powers that the White House has, legally, are actually pretty narrow. It is mainly through other agencies and stuff like that that you work. But one of the things that we can do very well is host parties and hosting parties where you bring together this very diffuse ecosystem and say, "Look, I, Mr. Government, don't know what the right standard looks like for the cybersecurity of a smart inverter, but everyone here has a piece of what that answer is.
So, let's put our cards on the table and figure it out." Then, everyone goes home and has learned a lot more that day about how to think about this. Even if it takes another, you know, 18 months for a formal standard to roll out, you have done a lot of the work. This is the reality for lots of standards; often by the time it is published, most of the industry has already coalesced around what it looks like.
David Roberts
That's interesting. In this distinction between kind of dumb physical technology like a solar panel and a smart digital technology like an inverter that you need to worry about, I'm sort of curious where EVs come on that scale because they kind of fit both. Like, you can have a car that's not digital at all. Like, we've had them for many years. But on the other hand, like EVs are like rolling smartphones. And it seems to me — like I don't want to give China any ideas or whatever — but like in terms of threat vectors, EV chargers and EVs are like, you know, you stick a bug in an EV and then it carries it to a new charger.
They're like deliberately bug-spreading devices. So, how do you think about EVs in the context of this security?
Harry Krejsa
So, the good news and bad news. The bad news is your intuition is exactly correct. But the good news is that the technologies that make that so in an EV are also found in lots of other parts of our electricity ecosystem. And so, if we are able to make progress on vendor trustworthiness for battery development or the standards for safe bidirectional electricity flow as controlled by software, then we're making progress in all those directions.
David Roberts
So, the EV interface with the grid is not unique. If you just solve that sort of interface problem, you're solving that problem too. Or at least somewhat solving, getting at it.
Harry Krejsa
Somewhat solving. You'd also get at it from the direction of like virtual power plants and how they interface with the grid, because virtual power plants are probably going to tap a lot of EVs as they unfold. Also, like, there's been a lot of news lately about Chinese EVs and BYD kind of taking the world by storm.
David Roberts
Indeed.
Harry Krejsa
And that's the reason why the recent import controls and limitations on BYD cars coming into the United States primarily focused on the software component of it. Right. It was the fact that it is Chinese-made software on those cars that was one of the key distinctions.
David Roberts
I mean, even if we put standards in place and say you can't sell an EV in America unless it meets these standards, you still have an enormous enforcement problem, don't you? Right. Because you're going to have millions upon millions of Chinese EVs coming in, any one of which could — you know, like, how do you enforce that? It's hard enough to enforce it on domestic manufacturers. How do you enforce that when it comes to imports?
Harry Krejsa
Right. And while you also saw, a lot of folks in my part of this ecosystem noticed the Israeli pager operation against Hezbollah with great interest.
David Roberts
Creepy. Didn't get the attention it deserved. Super creepy.
Harry Krejsa
I completely agree. And it is a great demonstration of how easy it can be to hide nefarious intent in a supply chain network. Right. And so, how do you get confidence in the provenance of these kinds of technologies and imports?
David Roberts
These are some pretty long supply chains too.
Harry Krejsa
Absolutely.
David Roberts
A lot of nodes in that supply chain to worry about.
Harry Krejsa
Absolutely. And there are different ways that you could approach this. One is the way Apple does it where yes, your iPhone is probably almost entirely made in China. We trust it with the most intimate parts of our lives, but we have trust there because Apple is deeply vertically integrated. They have a great understanding of the hardware bill of materials and they have total control over every byte of software that is on that phone.
David Roberts
I mean, in terms of like knowledge and control over supply chains, Apple is sort of like an inn of one, is it not? You can't expect other companies to —
Harry Krejsa
Precisely. And so, the way that you can get at it if you are merely one actor of many in this marketplace is things like the various national labs have done teardowns of EV charging equipment and EVs themselves to kind of look for that kind of stuff. But that's difficult to scale, particularly if you want to do that before you order 100,000 widgets. And in fact, this is actually something I'm optimistic we can make some progress on in the short term. A lot of standard contracting language in both the public and private sectors for these kinds of imports have what are called anti-reverse engineering provisions where you are not allowed to get a widget and tear it down and inspect it before ordering.
And so, a lot of my former colleagues in government are working to put together new model acquisition and contracting language for government purchases where we can tear down the widget before we order 5 million pieces of it and do those kinds of inspections because it is the kind of close physical access to advanced technology where you could prod and poke and plug in and see how it reacts to different kinds of environments where you can get that kind of confidence. And so, this is one of those things where tweaking some contracting language could make a big difference.
David Roberts
Interesting. And here's a somewhat cynical question which came up online and which I think is very apt. We get sort of naturally outraged when we talk about privacy violations done by China. Ooh, scary China. But of course, in the average American's life, the people who are invasively taking their data and using it for nefarious purposes are entirely domestic. You know what I mean? Like these are, this is what the big tech companies want to do. And part of me sort of thinks that putting standards in place that would truly protect consumers against, you know, ill-willed foreign hackers would also preclude domestic actors from doing a lot of the data mining and shady crap that they want to do.
And so, there might be some pushback from domestic actors against safety standards and privacy standards with real teeth. Am I off base in thinking that?
Harry Krejsa
I think that is true in some particular circumstances, like around right to repair laws and being able to get in and fiddle with things. But I think in most spaces, and particularly those around which I'm trying to bring together, the tree huggers and the dragon slayers, Meta is not trying to collect ads on you in a way that would blow up your car.
David Roberts
Well, not yet. I mean.
Harry Krejsa
Right.
David Roberts
It's the trajectory of these guys. I don't know.
Harry Krejsa
But these are, I think, two categories of concerns with Chinese activities of collecting information on you and pre-positioning access in places and in ways that could only be used in a way to harm civilian Americans.
David Roberts
Right, but can you really in practice cleanly distinguish between those and leave Meta all its data mining capabilities while blocking all of China's ability to do something nefarious? Like can you really make that distinction in practice?
Harry Krejsa
I think that in most cases, when we're talking about public safety, yes, we can. I think when it gets fuzzier into how the information that China is collecting on Americans so that they can socially engineer them, so that they can phish them more effectively.
David Roberts
"Propagandize them on TikTok," apparently, is the big problem.
Harry Krejsa
Indeed, yes, that's where things can get fuzzier. But when it comes to the safe functioning of our infrastructure and the delivery of essential services, you can separate the two pretty cleanly.
David Roberts
I don't know. I would just put on record that, like a lot of shady security stuff, you know, sort of approaching it through the lens of China fear, I feel like it distorts it a little bit since we are constantly subject to privacy and security violations all the time by actors who are multinational at best and have only a light allegiance to domestic policy and domestic actors. So, but anyway, one other thing I wanted to hit on with you before we run out of time, which I was just delighted to find. So, you finish your report with these sort of recommendations for, you know, "lines of effort," you call them, going forward, most of which are around trying to sort of get the security people and the clean energy people to talk to one another and work together.
But one of the things you say here, which I agree with entirely and have not yet encountered in the actual buttoned-up, suit-wearing halls of D.C. and think tanks, is this. I'm going to read the quote from the report. "The possibility of electricity generation so clean, cheap, and abundant as to test the bounds of energy scarcity is increasingly linked to the concept of artificial superintelligence and arguably possesses a scientifically clearer pathway to near-term deployment. The US Government should invest a similar urgency in understanding the potential of this abundance agenda as it is in artificial intelligence and in assessing whether or not it should be racing to realize it before Beijing."
So, just to restate that, you're saying the prospect of energy that is clean and super abundant, the end of energy scarcity, which has characterized our species' development from the very beginning, right? It's been an absolute feature of life on Earth up until the present. The end of energy scarcity is a real possibility here. And as you say, arguably there's a clearer path from here to energy abundance than there is from here to AI superintelligence. And yet, AI gets all this hype, all these billions of dollars, all this like carpet bombing AI on everything now. Whereas the prospect of energy abundance, which to me is like massively more promising for the welfare of humanity, is also sort of within sight.
And yet, you never hear anybody talk about it. We don't — there's no formal government recognition of it. We talk about competing with China, but we never discuss it in that vein. So, a) thank you for just like bringing this possibility into this world, but like, b) talk about that a little bit more. How do you see that fitting into this larger security framework?
Harry Krejsa
Yeah, absolutely. And indeed, I feel like I'm taking crazy pills. Like, this is a clear —
David Roberts
Me too, man.
Harry Krejsa
It is a clear potential that is absolutely, like a little speculative, but not that speculative. Right?
David Roberts
Less speculative every day.
Harry Krejsa
Absolutely. And I think that part of the issue is among my colleagues, that prospect of the potential end of energy scarcity and resource abundance is talked about today in a way that I recall people talking about AI in policy spaces, like, five years ago, where it was like, "This seems like it could be a big deal. I don't want to sound like a crackpot." But, like, the tech is really —
David Roberts
Rendering crackpots of all of us, right?
Harry Krejsa
Indeed, right. So, I indeed wanted to intentionally make sure this was included there because, you know, as you described, my title being a little overheated at the top, I am intentionally doing that to try and make sure that some of these arguments kind of extend out of our circles of climate and clean energy tracking wonks. Right. These are ideas and arguments that are useful in different circles in different ways. And the abundance piece of it is, I think, under-discussed in our climate and clean energy circle, but way under-discussed outside of that.
David Roberts
I mean, I can't imagine anything that would have a more profound effect on national security than energy abundance and global geopolitics. It's like everything these security people think about all day is just going to be profoundly affected by energy abundance if it happens. And yet, as you say, I never see it come up. Is it just fear of, like, fear of looking like a crackpot? Like, is that still just, like, what's holding people back?
Harry Krejsa
I think that's part of it. I also think that, you know, Brian Thompson or Ezra Klein might have tweeted something like this. So, I don't want to steal their valor here, but I think there was a line about how we have had a sort of scarcity mindset in our economic policy debate for a while now. Our arguments around energy usage have been focused on efficiency because of pollution concerns. The troubles that we've had with wealth distribution and the unequal gains of internationalism, trade, and automation over the last couple of decades have, I think, given Americans an intuition of scarcity, like a zero-sum world.
David Roberts
Yes, and I'll just say, because you probably won't, but I will like every bit of conservative or reactionary politics anywhere you find it: if you pull the string, you find scarcity at the root of it. Like scarcity and fear of not getting enough. Right. The sort of zero-sum mindset, "There's only a set amount, there's more of us than there is of it. All of life is a competition for that resource." Like that is the root of conservative politics. Which is why I've always wanted the Democrats to adopt the slogan, "We can have nice things."
Harry Krejsa
Yes, and I think the good news there is, I feel like we're starting to — the ship, the aircraft carrier of public discourse, I think is starting to move in that direction. And it would have indeed profound impacts on climate, on human flourishing. But also, if you need a hawkish argument, you know, to push forward this agenda, it also would have profound import for our national security.
David Roberts
I mean, among other things, if every nation had a domestic supply of energy sufficient for its needs, just the motivation for a lot of fuckery would disappear. You know what I mean? Like, the reason people go out and do corporate espionage and all that stuff, a lot of reasons for doing that would vanish. Like, why bother?
Harry Krejsa
Absolutely. And it's part of why I am actually optimistic about the sprint to artificial intelligence having positive spillover effects there. Because I think that it will bring with it a lot of demand for more energy infrastructure. Right. Like Ben Thompson of Stratechery likes to make the analogy to the 90s era build out of fiber optic cables around the country where there was a big over-construction of fiber optics that ended up not making a ton of economic sense when the fervor over web 1.0 kind of died down. But if we're in a situation where the initial kind of sprint towards AI in this near term ends up resulting in a ton of energy parks of giant solar and storage or SMRs —
David Roberts
It's forcing the issue on all sorts of things that clean energy people have been after for a long time.
Harry Krejsa
Absolutely. And I think with the cloak of national security import atop of it, it will be a great supporting argument, especially over these next few years. And I think in our entire conversation here today, with all this enthusiasm around clean energy's potential, I'd point out we've probably used the word carbon fewer times than maybe any other guest on Volts.
David Roberts
Right. So, the idea here is sort of the overarching idea you're getting at with this paper and your whole sort of like this whole push is just clean energy and security people have common interests and need to work together. And furthermore, deploying clean digital technologies on the grid can improve US national security. So, you should, no matter how deep your glower, how deep your cynicism, and how deep your contempt for hippies: if you want a more secure grid, you should want more clean digital technology on it. That's sort of the take-home.
Harry Krejsa
That's correct. And no matter how skeptical you are of the motivation behind American foreign policy, or whether we have a military industrial complex at the core making decisions or not, there are security imperatives for clean energy that you can use in conversation with people who are more concerned about those security imperatives and persuasively make that case.
David Roberts
Well, let's conclude with that then. Just say a little word like, obviously, decarbonization, as you say, is going to take a bit of a backseat in the coming years. And that doesn't just look like the US either, like not to doom scroll a little bit, but it looks like momentum is flagging all over. Do you think there is — you know, like if I'm a grizzled, glowering Republican security hand of decades and the hippies come to me and they say, "Oh well, guess what? We discovered we're actually secure too. We're actually helping you be more secure too."
Obviously, my eyebrow is cocked, right? Obviously, I'm skeptical. Do you think that this style of argument, this argumentative sort of space you've opened up here, has enough purchase to get some bipartisan consensus in the coming years? Like, are there enough people on both sides of this divide that get it, that you can see an actual germ of cooperation starting in coming years?
Harry Krejsa
I think that it would be an important part of the equation, a part of the recipe that helps make it so. You know, very unfortunately, energy has become, you know, another battlefield of culture wars. Right. And cleantech has been coded as liberal and people negatively polarize against it. And anything we can do to attenuate that reality, I think is going to be very important and helpful. And the incoming Secretary of Energy, Mr. Wright, he was an investor in advanced geothermal. There are ways to come at this in a different direction, to talk about some different ways.
David Roberts
Yeah, it does seem like he's reachable with reason. I don't know if you've had any direct dealings with him, but it seems like he is the kind of person who might bite on this argument.
Harry Krejsa
Indeed. And I think that Doug Burgum could be, too. With Mr. Burgum postured to chair this new policy council in the White House, he had a similar kind of investment in energy dominance. Precisely. And the intersection here that I am also cautiously optimistic about is the role of big tech or hyperscalers.
David Roberts
Yeah, that's really the X factor in a lot of things going on right now.
Harry Krejsa
Indeed, yes. And, you know, big tech occupies this rare point in our economy of folks who understand energy economics, understand technical risk, and how much Xi Jinping is trying to hack into their systems all day, every day, and are filled with a workforce who wants to be able to say that their work is powering clean energy and making the world a better place.
David Roberts
And crucially, they have giant sacks of money.
Harry Krejsa
Correct.
David Roberts
They're too big to code liberal. They're too big to — I've got to come up with some sort of slogan there, but, like, they have too much money to be dismissed as hippies.
Harry Krejsa
"Right, exactly. And the coding of liberal is attenuating pretty quickly, right?"
David Roberts
And for good reason.
Harry Krejsa
Yes, you know, Sam Altman, announcing the big build-out at the White House, right, with Donald Trump.
David Roberts
Oh, my God, Sam Altman sort of trailing along after all the other tech guys, being like, "Wait, wait up, guys. I like Trump too. Guys, wait up." It's just the most — all right, I won't go off on this. It's just the most pathetic thing in the entire universe.
Harry Krejsa
But, yeah, all the big CEOs, you know, were at the inauguration. They're trying very hard to be nonpartisan and to code as less democratic. Right. And so that is a valuable factor there where if it looks like the Trump administration is embracing the sprint to artificial intelligence, it looks like they're embracing energy economics, energy dominance, or whatever we want to call it. There's a — to make a Dune reference here — a golden path that unites these things that could push all of this forward.
David Roberts
Right. Clean energy is our digital firewall against China, basically, like, this is the sales pitch. Well, Harry Krejsa, it's been a delight and a pleasure. This is really interesting. This is something I think we'll have to return to in coming years, but I think it is a very helpful intervention to arm the dirty hippies in Volts' listenership with this argument that clean energy is security, is cybersecurity, is conducive to cybersecurity. I think it is a good intervention and very well timed. So thank you for coming on.
Harry Krejsa
Thank you for having me as the most granola-crunching listener in the Pentagon of your podcast. It was an honor to be here.
David Roberts
Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
In this mailbag episode, I tackle listener questions with Lisa Hymas, starting with Trump’s Greenland fixation and whether his authoritarianism signals "climate fascism." We then dig into whether we can fix utilities without public ownership. I geek out about teaching a college course on liberal democracy’s existential stakes, mourn journalism’s collaps…
Chris Hayes — author, MSNBC host, and previous guest on Volts — is just out with a new book, The Sirens Call, about the corrosive effects of the modern attention economy. In this episode, he and I dive deep into attention: what it is, when it became commodified, why it is so easy to steal, where industry is looking for new supplies, and how the harried and distracted can defend themselves from the onslaught.
(PDF transcript)
(Active transcript)
David Roberts
Okay! Hello, everyone. This is Volts for January 29, 2025 — which I'm still getting used to saying — "Chris Hayes on the attention economy." I'm your host, David Roberts. There is little that is more personal to each of us than our attention. Our lives are composed on a moment-to-moment basis by what we choose to pay attention to. What draws our attention creates our world in a very real way.
But, attention has also become a commodity. And not just any commodity, but the central commodity of the modern economy. The attention economy has eaten the real economy, and now all of us, from the biggest brands to the most obscure social media posters, are in a war of all against all: everywhere you look, all the time, everyone wants your attention. That makes it pretty tough to use it wisely.
That, anyway, is the basic thesis of The Sirens’ Call: How Attention Became the World's Most Endangered Resource, a new book by longtime MSNBC host and author Chris Hayes, who needs no introduction here.
I've known Chris a long time, I've been on his podcast and he's been on Volts before. I'm keenly interested in this subject of commodified attention, and this new book of his really got my brain revving, so I am super excited to talk to him all about it. (Seattleites: Side note, if you can't get enough of Chris here, catch him live at Seattle's Town Hall next week, on February 4th.)
With no further ado, Chris Hayes, welcome back to Volts.
Chris Hayes
It's great to be back, Dave.
David Roberts
Great book, man. Cool — good book. Well done.
Thank you. I appreciate that. I appreciate your loss for words. I think that's good. I'll take that as a good review.
I feel like modern life — whatever you call modern life, the puzzle of modern life — you've grabbed a big chunk of it here, I think, so I'm excited to get into this. But I want to start at the most focused, specific level. Let's just talk for a minute about attention itself before we back out into the social and political stuff. You talk about three kinds of attention. Let's just start there. Let's just start with a topology or a typology of what we mean by attention.
Chris Hayes
Yeah. So, I think the most intuitive thing we mean by attention, and William James wrote about this, you know, in the 19th century, is just where we flash the spotlight of thought is, you know, if you want to use a metaphor. Right. So, it's a focusing mechanism. You know, where there's a spotlight on a stage, there could be a chorus on the stage, but if the lead of the musical starts to belt out a big number, and the spotlight goes on that lead, you know, that's where you focus your attention. And we can do that with our own thoughts.
You know, you can be in a room right now as I'm talking to you — and this is actually a useful exercise at any moment — there are so many things I could be paying attention to in this room. There are so many places that I could put my attention, but I'm focusing them on you. And that's an exercise of my will and my conscious thought.
David Roberts
Right. Volitional. On purpose.
Chris Hayes
Volitional and on purpose. It's voluntary in the sense that I'm choosing to do it. So, that's the main thing we tend to think of in attention. Right. Like, "Where do I put my thought? Where do I put my focus?" Then, there's this other component to it that is really important to grasp, which is involuntary attention. And because attention is a faculty that evolved for very clear evolutionary reasons. Right, I mean, if you are, you know, around the campfire and you're listening to a story of the hunt, and then a big predator comes through the bushes, and you hear the twig snapping, right, there's some aspect of attention that has to be essentially compelled or involuntary.
Right. Where some part of your consciousness snaps to that sound of the predator in the bushes. And we experience this all the time when a siren wails down the street, when an infant cries on a flight, if someone's being disorderly in a public space or on a subway car. Like, it's not that you volitionally choose to put the spotlight on them, it's that your attention snaps to them before you get a conscious say.
David Roberts
Right. You can't help it.
Chris Hayes
You can't help it. And it happens before you even get to consider it.
David Roberts
Right. And I don't know if this is the best way to describe the division, but it's sort of. I think of voluntary attention as more of a kind of a frontal cortex, higher thought type of thing. Whereas, the involuntary attention tickles your lizard brain. Right. Which is deeper and more fundamental. And therefore, when activated, trumps the higher thought. Right. That's sort of how the brain works.
Chris Hayes
Absolutely. And most people, I think, have had the experience of, say, coming upon deer in a meadow or in the forest. And, you know, they're doing their thing and then they hear something and their heads snap up. Right. That moment of involuntary attention for them, because it's an animal. You know, animals have it, too. They don't have the other one. I don't think the deer could be like, "What am I doing with my life?" Or, "I really want to listen to you on a first date." So, yeah. So those are sort of two sides of the coin.
And then the third, which I don't think kind of maps onto the psychology literature, but I think is as important, is what I call "social attention." The short way to think of that is when we are paying attention to other people and when other people are paying attention to us. It has, I think, a kind of difference in kind, a specific set of psychological and philosophical implications that are distinct from paying attention to other things.
David Roberts
Right. And you can almost think of this as a kind of subcategory of involuntary attention. It's so deeply rooted that it's very difficult — like you in the book, you talk about being at a cocktail party chattering, and you sort of naturally screen out other conversations, just sort of automatically. But if in one of those other conversations someone says, "Chris Hayes said, blah, blah, blah, blah, blah." Like, that will reach your lizard brain from across the room, and you'll immediately be like "Huh?!"
Chris Hayes
And this isn't just a thought experiment. This is actually an experimental finding that your own name will penetrate and wrench your attention away. And that's because social attention has this specific force and all these implications for kind of who we are and what we are that are wired deep in us.
David Roberts
Right, I want to come back to social attention in a minute, but what falls out of this typology, I think, is one of the most important insights in the book. One of many things which, once you hear it, you're like, "Oh, yeah, that's obvious." But like, a lot falls out of it, which is simply this: It is easier to grab someone's attention than it is to hold their attention. Involuntary attention has a power and an immediacy that you cannot replicate with voluntary attention. So, it's just easier to get attention than it is to hold it. So, talk about everything that is implied by that, because sort of like almost like all the rest of your book falls out of that.
Chris Hayes
Yeah, and I think to illustrate that point, you could go to any single person and say, "I'm going to have you walk in this room. There's 500 people in there. I just need you to get everyone's attention." And basically, everyone could do that. I mean, if you walked in and you screamed, or you got up in front of the room, you start taking your clothes off, I mean, if you had any means available. But if I said, "Look, there's 500 people in there. I want you to go on the stage and hold them spellbound for an hour."
What the hell would you do? Right? So, what falls out of that is because compelling attention and grabbing it is easier than holding it, the more ferociously competitive a market for attention gets, the more iterative you sort of unleash attention capitalism on people where you're competing second by second. The more you will drive towards the lizard brain, the brain stem, the compelled attention, almost as a kind of unavoidable aspect of the incentives. So, what you're going to drive towards is grab, grab, grab, grab, grab, grab, grab.
David Roberts
Yeah, and this is, to me, this is just an inevitable result if you want attention, if attention is what's valuable to you, if attention is literally money to you. You know, like everyone who creates content on the Internet is very aware of just how difficult it is to hold people's attention. Everyone who's, you know, like, you've seen metrics. You're, I'm sure, intensely familiar with metrics.
Chris Hayes
Yep.
David Roberts
You know, and anybody who's ever written a headline versus a story, right? Like, the headline is meant to grab attention. The story is meant to hold it. And we know from every metric, from the history of the Internet, it's real easy to grab people's attention, but they start falling off almost immediately.
So, what you call this grab, grab, grab, grab, grab model is the slot machine model. So, say a little bit about that and why it's so powerfully effective.
Chris Hayes
Yeah, I mean, this part of the book is taken from a great academic named Natasha Dow Schüll, who wrote this amazing book called "Addiction by Design," which is about how machine gambling works in Vegas and slot machines. It's about the kind of attentional trance that the games produce in people. And part of the point that she makes about these games — which have basically taken over more and more casino floors because they're the most profitable thing on a casino floor.
David Roberts
God, that is so depressing.
Chris Hayes
To illustrate the point, right, is that they create this kind of attentional trance where, you know, she'll talk to people that have really intense compulsions, you know, addictions to these games. And they're like, "I'm not playing to win. I know I'm losing money. It's the experience of the trance that I'm after."
David Roberts
Right.
Chris Hayes
And so, what we have, and I don't think it's an accident, is that the vertical sort of scroll, the flick of the thumb, is essentially the same visual element of the casino slot machines. We're all just playing dopamine slot machines on our phones all day with our thumb.
David Roberts
Yep. And we know from the psychology, science that getting irregular rewards, like sometimes you get a hit, sometimes you don't, is more addictive than it would be if you reliably got a reward.
Chris Hayes
Exactly.
David Roberts
The sort of element of chance just keeps coming back. Yeah. So, like a slot machine, it just grabs your attention and holds your attention just long enough to see the flowers rotate and stop, and it grabs it again and grabs it again and grabs it again. There's a little squirt of dopamine each time that happens. But, when you put these facts together, just what we've laid out so far, there's voluntary attention, involuntary attention, and a particularly powerful kind of involuntary attention called social attention that is now valuable. We're going to return to why it's so valuable in a minute.
But that means, if you're in a marketplace that wants your attention, the best way for someone who wants your attention to get it is to grab it over and over again, to shout over and over again.
Chris Hayes
Particularly, the best way to get it at scale, I think, it's useful to think about the way food and hunger work for this. Because, you know, we have biological inheritances in our appetites, right? Like, we're drawn to sugar because it's very calorically packed. We're drawn to fat. Like when the Bible conjures a land of plenty, it's milk (fat) and honey (sugar), right? So, if you want to sell food at scale, right, not like a 30 seat restaurant, but like to billions of people, you drive towards what, burgers, fries, Coca Cola, right? All that processed stuff that is lighting up our biological inheritance and you can sell it anywhere in the world.
Now, that doesn't mean that's all people want to eat, and it doesn't mean you can't make a profit selling other stuff. In fact, the amazing thing about humans is they'll eat anything. It's just incredible, you know, like from bugs to caviar to all sorts of plants that you wouldn't think to flowers and salads. I mean, there's a million things people eat, right? But you've got these side by side. You've got the kind of food as culture and identity and bonding and cuisine, and you've got food as, you know, industrial scale, like demand. And we've got a very similar thing happening with our attention.
And that industrial-scale demand is going to drive towards that kind of compelled, lowest common denominator.
David Roberts
I want to set up this framework because I want to return to it later because — and I think the food analogy is good and it works — in that you say, just take me as an example, in this minute, I want a sugary snack, right? Because a sugary snack squirts this dopamine. It feels good, tastes good. So that's one sense in which I want something. But I also, in another sense, want to be healthy and to lose some weight. So which of those do I want? Which is my real want? And what I think we're seeing is a massive capitalist competition for my food dollar, right?
You're going to appeal again and again to my lizard brain's immediate-instinct want. And what happens in capitalism, and I want to come back to this later too, is we start seeing anything that might serve that second kind of want, that longer-term want. Like, if you want that longer-term thing, by definition, you have to gatekeep the short-term thing, right? Some force, someone, some mechanism, some institution, some practice has to gatekeep what comes in front of you if you want that longer-term health. So what does that, what do we trust to gatekeep our food?
And capitalism sort of inherently distrusts and is kind of corrosive to any kind of gatekeeping that serves that second, longer-term desire. And that's what you see in attention too, is just like the cheapest, easiest, most short-term version of it just getting shoveled at us. And we mistrust gatekeepers. Anyone who gatekeeps, you know, that information, decides what we should see and what we shouldn't, is just getting eaten away by, I guess, capitalism. I don't even know if that's the right word for it.
Chris Hayes
And this tension between the different parts of ourselves, the self that wants the snack, and the self that wants to eat healthily. I mean, the title of the book, like the animating first image, is Odysseus bound to the mast, resisting the sirens' call. Where there are two selves, there's the prior self of Odysseus, who wants to make it home to his family, and under the advice of Circe, binds himself to the mast so that he won't fall prey to the allure of the sirens. And then there's the self in the moment of Odysseus, who wants to go towards the sirens, is desperately begging his men to steer towards them.
And the commitment device there, the gatekeeping that works there, is that he binds himself to the mast. But it's because he's at war with different versions of himself in time and different aspects of his self. And that war that we're just constantly — we've been living that war in our bodies for a long time, if you know, the amount of food advice and obesity and exercise. But we're now living that war in our minds second to second.
David Roberts
Yes, it's intentional now. And one thing that's worth pointing out is, even though binding yourself to the mast looks like I'm disciplining myself, right, this is a solo thing. Even that depends, in some sense, on other people.
Chris Hayes
Yes.
David Roberts
Not untying you when you tell them to. Right. So, it's social. Any gatekeeping, any form of lashing yourself to the mast to resist these short-term pressures, is social and requires some social trust of someone. And I just want to, I want to make the point that I didn't, I didn't feel like you hit it hard enough in your book. It just could be because I'm angsty about it. But I just want to say that one of the reasons we're talking about all this is that developing any skill or expertise requires sustained voluntary attention. That is sort of the nature of it.
That's what practice is. So, you know, people talk about losing the ability for sustained voluntary attention like, "Oh, I can't even read a book anymore." But like, it's a bigger deal than that. Like everything humans are good at or can do or that is worthwhile in human society requires sustained voluntary attention.
Chris Hayes
Yeah, that's a great point in terms of the implications. And I think, you know, you're seeing that manifest in the world. You're particularly seeing this — I don't want to take us off on a tangent — but I think you're seeing it in, there's some evidence that there's some gender differences, you know, whether the source of that is something biological — I'm skeptical of — and more likely the sort of way that, you know, boys and girls are acculturated and you know, you're seeing this in higher education pursuits, like all kinds of things that, you know, require this sort of sustained voluntary attention, you know, that boys are doing worse at.
And I think there's a connection between those.
David Roberts
So you think at least in current society, for whatever reason, women are acculturated, are better able to offer their sustained voluntary attention?
Chris Hayes
Yes, 100%. Yeah, I think that's pretty clear. I mean, I think it's actually a huge source of a lot of what's going on in the sort of increasing gender divide.
David Roberts
That's interesting. I wanted to talk briefly a little bit, just focus on social attention, because I think social attention, much like attention generally, much like food, much like the rest of the analogy. There are kind of junk food forms of it and sustaining forms of it. And one of the things you talk about is that, you know, the quest by these platforms, by these tech companies to get our attention. You know, obviously, anyone who wants to sell us anything wants our attention. Anyone who wants to teach us anything. Anyway, people have always wanted our attention.
But what you have now is the ability to personalize that outreach to attention. This is what the algorithms are. This is the sort of effect of you giving all your information to the Gods of Online; they know you now and can customize their bids for your attention in a way that triggers this social attention. But you talk a good bit about how to be online is just to be subject to social attention and to give social attention. It's kind of what online is now.
Chris Hayes
That's what online is.
David Roberts
But what you're getting is not the sustaining kind. So, you have this phrase, "We're stuffed but starved." Like, stuffed with attention, but starved for what we really want, which is recognition. So, explain that difference just a little bit.
Chris Hayes
Yeah, and first, I should give a shout out to Raj Patel, who's the author, who wrote a book called "Stuffed and Starved." Again, about the weird perversity of the global food system. That stuffed and starved is: yes, we're getting more attention than we've ever gotten. I mean, up until very recently, the experience of social attention from strangers was something that a tiny fraction of anyone at a given time could ever get. I mean, movie stars, politicians, you know, people that achieve some kind of fame. Most people were not being subject to social attention of strangers.
I mean, let me also say, women, particularly walking through public space, you know, female bodies of all ages, unfortunately, are being subjected to social attention. The gaze from strangers has been happening forever. So that's, and that is distinct. And obviously, half the population experiences that. But I mean, the specific thing of, like, strangers saying, like, "Your idea is stupid."
David Roberts
Yeah, and you'll be old enough to remember that, like, back in the day, there were local newspapers, and occasionally the local newspaper would be like, "Rando at this random church, like, won a TV in a giveaway." You know what I mean? And it would be such a thrill.
Chris Hayes
Yes.
David Roberts
For that person to be like, "My God, I'm in the paper. I'm in the newspaper." You know, it's just like the divide was so fundamental, was so distant.
Chris Hayes
I'm thinking of this scene in The Jerk when Steve Martin's like, "The new phone book is here. The new phone book is here. Everyone's going to know my name." You know, until recently, this was a very, very, very tiny fraction of people who were experiencing this, particularly in the way we're experiencing now. Now it's totally democratized. I mean, social attention from strangers is basically the traffic of the Internet. And the point I'm making is that the thing that's so fascinating about attention as a force is that it's both very powerful and also mere. It's sort of always necessary and never sufficient.
You need social attention for all the things you actually want out of human relationships, like love, caring, support, and friendship.
David Roberts
And as you point out, like, as a human, the human species uniquely needs it to survive. When we're born, we are born helpless.
Chris Hayes
Yes, and so you need it literally from the moment you come screaming into the world, but it's also not enough. And so what you get in this stuffed and starved dynamic is you're getting a lot of attention, but what you really want is something deeper, which, you know, I say is basically recognition. You know, the philosopher Alexandre Kojève says that what human desire fundamentally is, at its core, is the desire for recognition, to be seen as human by another human. The Internet doesn't really give you that, but it gives you this kind of close approximation, this facsimile, that makes you feel like you're close to getting recognized and keeps you kind of going for more and more of it, but always coming away, not sated.
David Roberts
You talk about this, I think it was Hegel, the sort of master-slave relationship. Like, the master can get attention from the slave, but it's not sustaining for him. Because what you really want is recognition from someone you acknowledge as a human being yourself, from a full other human being who you recognize as a human being. And sort of almost definitionally, the people you encounter online are not that. They're simulacra. They're performances. Right. They're literally images. They're avatars.
Chris Hayes
Yes.
David Roberts
So, almost by definition, you cannot get what you want and need from those people. And yet, like you say, you can't stop trying.
Chris Hayes
Right. That's exactly right. Because you can't fully actually recognize them as human.
David Roberts
Right. It's funny, you talk about the sort of disorienting effects of fame, of getting this social attention, which, as you say, used to be so rare that the people subject to it weren't even really allowed to talk about it because no one cared. You know, because it was — it would be like a God on Olympus complaining about... You know, like no one cared.
But it became more and more common. It became more and more of a kind of a standard subject of like the disorienting effects of having all these people pay attention to you. And now you say this is available to more and more and more. Like it's going lower and lower. Like you are at a certain level, you know, you're like on TV, so you're recognized to some extent. But, you know, I've even tasted a tiny little shade of it. And it is wild how thoroughly and rapidly it fucks with your brain. I don't think people appreciate...
And you and I have seen in the social media age, sort of like randos, just normal, random people thrust into the spotlight for one reason or another. And God, people just have the most weird, bizarre flailing. They lose their minds. People are not prepared for it.
Chris Hayes
I mean, it's like an evil science experiment to produce psychosis.
David Roberts
And as you say, now we're getting attention when we want recognition, but it kind of seems like the constant pursuit of attention now is starting to occlude those activities by which we would get recognition. Do you know what I mean? Because recognition, seeing people as human beings, that takes some time and a little bit of devotion and a little bit of willingness to work through some awkwardness.
Chris Hayes
And mutual relationships, mutuality. I mean, that's the other key part, right? Like, there are a few reasons that attention is weird, right? Social attention. One is that it's kind of mere, it's necessary but not sufficient. Two is that it doesn't have to be mutual. Like, you can pay a lot of attention to Brad Pitt and not know him, right? It could go in one direction, right? You can't be in a friendship with Brad Pitt and not know him. You can't be in a romance with Brad Pitt, not know him. You can't be in a mentor-mentee — you know, there's no relationship you can be with him, but you can pay him social attention.
And then, the third aspect that's weird is it can run the gamut from deep love to like, hatred to like — you know, someone's screaming in your face on the subway, is paying you social attention. So, like, that's the other thing is there's no valence to it. And in fact, negative attention, I think, is in some ways, I think negative attention kind of out competes positive attention, if that makes sense.
David Roberts
One of the very common phenomena of our time is dudes — not always dudes, but usually dudes — who are so palpably desperate for recognition that they will accept negative attention as a substitute. Right. I mean, that is the life of Elon Musk in a nutshell.
Chris Hayes
I mean, the two most powerful people in the country are —
David Roberts
Yes, and Trump.
Chris Hayes
Trump and Musk, I mean, are just... And I think it's born of their personalities. But I also think they have backed into a kind of feral insight. Like, I think trolling, which is the pursuit of negative attention, essentially, is an efficient means of getting attention, if you don't care about whether it's positive or not. Right. So it's like, if all you want is attention, it's probably easier to get negative attention than positive attention.
David Roberts
Yeah. I mean, I think that's pretty well established. It's the negative emotions —
Chris Hayes
Yeah.
David Roberts
that grab you. Right. Outrage, anger, resentment.
Chris Hayes
And so, you've got this kind of trolling model that I think is, like, before our eyes, kind of colonizing all of public discourse. And it really is. And I think Musk is important in this because I think Trump is so sui generis, even I thought I was a little unclear to me how much he was sui generis. And now you've got this iterative 2.0 version in Musk that makes you recognize, like, "Oh, and I write about Musk in the book a lot more than I thought I would." And at a certain point, I was like, "Is there too much Musk in this book?"
It's like, "No, dude, this is — the reason he keeps showing up is because he is at the vanguard of this." And so now that you've got Musk, it's like, "Oh, this is something more than just the weirdness of Trump. We've got another one now." And it's because of what the attentional incentives are.
David Roberts
Yes, and, you know, we don't want to get off on psychological diagnoses, but I think a lot of these people are incapable of doing the kind of things that would bring recognition or affirmation. That requires a little bit of mutuality, requires a little bit of seeing out into the world rather than only seeing your own ego. You know what I mean? So, like, these guys are never going to get what they want. That's the thing. It's so clear from the outside. They're trying so hard, and they're so never going to get what they want. But that is true on some smaller scale for all of us.
We're all kind of doing a little bit of what Musk is doing. Right? That's the horrible thing.
Chris Hayes
Yes, I mean, the comparison I make in the book is Willy Loman in Death of a Salesman, who says, you know, basically, opening scene, he comes back from a sales trip, and it's like, "I'm not there. No one listens to me." And his wife, to her sons, when lecturing them, is like, "He's a human being and attention must be paid." That's the line she says. She's not even asking her sons to pay Willy Loman love or the fidelity of sons. And we think of him as like, this unbelievably pathetic figure and this tragic figure, but it makes Willy Lomans of us all.
You know, here I am, I'm going around, I'm doing a publicity tour for my book.
David Roberts
Yeah, and I have a podcast. Like, that's a lot of attention. And yet, here I am, out every day on the Internet, shouting and yelling in pursuit of I know not what, unable to stop. So, one of the other big planks of the book's argument, so you have this stuff about attention and how it works and the different kinds. And the reason that this slot machine model has developed just in that grab, grab, grab, grab, grab, over and over again is easier than grab and hold. And that's true especially for social attention as well. But then you also have this other argument, which is that — as I said, everyone's always wanted attention, right, like the competition for attention is not new — but you think there's something new in the modern economy, where basically every other sphere of life is now starting to orient around attention, that the attention economy is eating the real economy. Just sort of make that case briefly.
Chris Hayes
Yeah, I'll try to make this as quickly as possible. I mean, the first step in the argument is to recognize that this sort of move from the industrial economy to the information economy, which I think is a fairly common thing. Right? Like, a lot of the economic activity now is generated by moving bits and not atoms. Right? So, if you're comparing a claims adjuster to a steelworker, right, the claims adjuster is just at a laptop all day. You know, she might be making more than the steelworker, but she's not physically moving the world. Right?
So, we all kind of understand there's this thing called the Information Age, the digital economy. The key insight here is that the most important resource of the Information Age isn't information, it's attention.
David Roberts
Right. Information consumes attention. I think that's another one that seems obvious once you read it, but, like, a lot falls out of that.
Chris Hayes
Exactly right. And that's from Herb Simon, a brilliant economist and political scientist, who wrote this paper, gave this talk about decision making in organizations under attentional constraints. And the finite thing is attention, not information. Your information's everywhere. David Roberts' information is in 10 places or a thousand places, does it matter that much? You don't even know. You know, it doesn't matter. It doesn't change your life if your attention is somewhere and not another place, you know, because that's yours and it's finite.
David Roberts
Yes, and information has become trivially cheap.
Chris Hayes
Yes.
David Roberts
Wildly oversupplied. And it's happened so quickly. Like, I really think, and I think you probably agree with this, I really think a lot of weird generational stuff has to do with the fact that old people today, our sort of oldest generation today, grew up in a world where information was still a relatively scarce resource. Yes. And that if you had it, you should hoard it. And that, like, and going out and seeking it and finding it was important. And those just mental and physical and political habits formed in that environment are now wildly out of place.
Chris Hayes
I mean, look at the notifications of any boomer, you know, on their phone. I mean, every single one. And the reason is for exactly that reason. Like, it used to be that someone would try to call you at your house and you weren't there, and you just missed the call. And, you know, there's entire Seinfeld plots around this. You know, people can tell you stories about missing some key call in their life that had some huge effect. "I asked this girl out, and then she called me back, but I wasn't there. And then she ended up going out with my friend." You know, something like that.
So, what does a boomer's phone look like? It's constant. It's like nothing's muted. It's all notified. I mean, God bless and love the boomers in my life, including my parents, who I love.
David Roberts
It's the same reason they keep their good china, you know, and like, every book they've ever had in their life.
Chris Hayes
Just, like, because it's valuable.
David Roberts
Yeah, they were raised in a time of information poverty.
Chris Hayes
Yeah.
David Roberts
Right. So, now information is everywhere. But, and this is the key insight of this chapter of the book, is just that, like, the flip side of information is attention. And for every bit more information you have, that makes attention more and more valuable because information is infinite and attention isn't.
Chris Hayes
And that's where you get this kind of supremacy of the brand over the product in the global economy.
David Roberts
That was a really interesting point.
Chris Hayes
I mean, this is Naomi Klein's thesis of No Logo, which is basically like, you know, at a certain point in globalized production, like, there's just a bunch of early in the, you know, 90s and 2000s, there's just a bunch of factories in Shenzhen.
David Roberts
Yeah, like, I don't know which factory in China is good at making shoes versus the one that isn't good at making shoes.
Chris Hayes
But you know, the swoosh, that's Nike. You know, the three stripes is Adidas. Like, what is a brand? A brand is an attentional focal point.
David Roberts
Yeah.
Chris Hayes
And so, what you get is a supremacy of the brand over the product in this kind of information economy. Right? Where the industrial production has become so commodified. Right? Like, it's indistinguishable from one place to the next. And obviously, there are difficult problems to solve. I don't want to minimize how hard it is to make a high-quality shoe at scale. That's a serious thing. But it's basically a solved problem. Right? And Amazon's a perfect example. This is the funniest thing. Amazon's the next iteration of this because it's even surpassed the brand. And here's what I mean.
So, the No Logo version of this is, you don't know where the shoe comes from. You just know the three stripes or the swoosh. The Amazon version of this is almost an inversion of this. How many products have you ordered whose name is like RJ4532i? And the reason you ordered it is because when you search in Amazon, the attentional focus on the top of the search results, which is the thing they are monetizing, is the thing that pops up that says, like, "Here's the best coffee percolator." You have no goddamn idea who the brand is or anything.
David Roberts
It's like a meta-brand. Amazon has become, has transcended mere brands.
Chris Hayes
Exactly. And it's so wild. That experience of ordering a thing from some company you've never heard of.
David Roberts
Yes, and just the assumption, my background assumption is just like, "Whatever this is, it's probably made in the same Chinese factory as the one with the other brand name." Like, what do I care?
Chris Hayes
Oh, totally.
David Roberts
Like, I have no connection at all to the roots or the physical source of those things. But make the case that, I mean, the core of the book is that attention has become the central resource of the modern economy. Make that case, why? And this has happened as we've watched. I mean, again, wild how fast.
Chris Hayes
Yeah, so I think if you put those things together, right, we've moved to the information economy. The information economy, the most valuable resource almost as a logical matter, is attention, because information consumes attention and there's more information than ever. And because we're in an era of post-material production and as more and more of the world moves into that kind of economy, then the finite thing left, the thing that's the most important thing to get is attention. Because it's finite and because there's competition for it. Right. Because you can't just generate more of it. It's like there's only so many people who are spending so many hours awake.
David Roberts
Yeah, yeah.
Chris Hayes
The competition for it is fierce, and the supply is not that plastic. So, you gotta keep finding new places to take it. Like, if you push people's bedtime down, if you could start getting six-month-olds, if you can get people to watch three things at once, you gotta keep kind of trying to find new places to mine it.
David Roberts
Yes, this is to me one of the more interesting and dystopian facets of all this. When you start thinking, "Well, okay, attention is the primary commodity. It's what everybody wants." Intuitively, it's finite. Like you say, we're only awake for so long. But then you start thinking about the details. You make a point of saying, "People have been predicting shortages of resources for capitalism for decades." And the sort of signal feature of capitalism is that it is extremely creative at finding more of those resources. So, you start thinking in concrete terms, "Well, how could capitalism find more attention?"
And you just follow that string a while, and it gets dystopian real quick. The first place my mind goes, and I'm curious whether you have thought of this too, is self-driving cars. What is that going to do?
Chris Hayes
Such a good point.
David Roberts
What that's going to do is free up a giant swath of attention, right?
Chris Hayes
That's such a good point. I hadn't even thought.
David Roberts
We are going to swarm on those things. Like, pretty soon, you're going to get in a car and you are going to be wrapped by advertising. This is my favorite dystopian scenario because it just feels inevitable to me.
Chris Hayes
That's great. I don't even make that point in the book. That is a very smart insight, and I totally agree. That's a place that they will unlock a whole bunch of attention that was locked up. Right. Because you had to keep your eyes on the road at some level. I mean, I say in the book when I talk about that, it's more plastic than you would think. Is that like when cars were first introduced, the idea that you'd be listening to the radio while doing it? It's like now, it's like you gotta be listening to something.
David Roberts
I know people get their phones out at stop signs, at stoplights.
Chris Hayes
Every stop sign.
David Roberts
Yeah, it's wild. So, there's that attention. There's less sleep. There are things that you used to do, you know, like leaving the house. The more you think about it, the more you realize, "Oh, there is a lot of attention left to mine."
And boy, is it ugly to think about what that's going to look like.
Chris Hayes
Yeah, it is. And I do think that you also see an increasing rebellion against it.
David Roberts
Well, we're going to get to that later, but I want to do a couple of other points before we talk about what the rebellion might look like. So, one of the, I thought, really interesting discussions in the book is this parallel you draw. So, Marx has this whole theory of the commodification of labor. Right. So, you have this thing, labor, that used to be part of my life. Right. It was just mine. I did it for my own purposes, and I got the immediate rewards of it. It was integrated into my life. It would never have occurred to sort of a pre-, you know, pre-agrarian, whatever, human to think of that as a commodity.
Chris Hayes
Yeah.
David Roberts
And what capitalism did is sort of take that from you and make it into a timed, quantifiable commodity, and thus you become alienated from it. And of course, anyone who's read their Marx knows that this is like, this goes all kinds of places. A very deep part of his theory is the alienation of modern life, of humans from their own labor. And the parallel you draw is that what's happening now is that capitalism is in the process of commodifying attention, thus producing a similar form of alienation. So, just spin that out a little bit.
Chris Hayes
Yeah, I think that the signature feature of alienation, and that word can mean a lot of things and can sometimes be amorphous, is a feeling that something that should be internal to us is outside of us, and that we're a stranger to some part of ourselves because of it. And, you know, with labor, it was very material. Like, again, you know, it's not like it was awesome before capitalism, like in feudal systems, just the local lord owned your labor. Right. It's like there's no wage because they just owned you. Everything you did was for them.
But, you know, if you were a shoemaker, you made a shoe, and at the end of that process where you're doing a whole bunch of different things, you have a shoe. Then you sell that shoe and you're transferring the ownership of the shoe from yourself to someone else in a market exchange, and they give you money. If you spend 12 hours a day stamping soles on shoes, which is a thing that right now, as I speak to you, people are doing in this world, to be clear. That's a pretty alienating experience.
David Roberts
Yeah. No pride of ownership.
Chris Hayes
No progression, no telos.
David Roberts
No narrative, no continuity.
Chris Hayes
You don't start at the beginning and then have a middle and an end and then you're finishing the shoe. And Marx recognized something profound about this. You know, he had a whole sort of material theory of it as well as a sort of psychological experience of it. And I think with attention it's the same thing. You know, Karl Polanyi, who's a sort of Marx-influenced economist, uses this term "fictitious commodity."
David Roberts
Yeah, yeah.
Chris Hayes
Where he identifies that a word is useful. Like, you know, if you take rubber out of a tree and rubber is commoditized, which means standardized, every amount of it is equal to every other. Every barrel of oil is the same as every other barrel of oil. Like, that's very different when you do it to someone's labor. It's the thing they're doing. Or their attention, which is where they're putting their mind. When you extract from within us a market commodity, we feel alienation from it. And the other similarity, I think, is this one of the paradoxes of the industrial wage revolution that Marx is putting his finger on is labor is the most important resource in some senses to make the whole thing work.
If you don't have the workers, you can't have industrial capitalism. And yet, each individual's labor is essentially valueless. So, it's like from your perspective, I'm in the factory 12 hours a day, six or seven days a week, and I'm poor. In the aggregate, all of those man hours add up to the industrial revolution. And in the same way, the individual amount that's paid for our attention every day is nothing, but the aggregate of it is incredibly valuable and makes fortunes and drives the entire Internet.
David Roberts
Similarly, I think from the boss's perspective, when it comes to labor, an individual worker's idiosyncrasies or life history, right, or personality, all of those are at best sort of a distraction and kind of an impediment, right? They're complications.
Chris Hayes
They're obstacles.
David Roberts
What you want is a nice, smooth, standard, tradable quantity. So, in a sense, like everything that makes people human is an inconvenience to a boss who's after labor. I think it's similar with attention. Like, this is part of what platforms to me are, is a way of trying to make a standardized unit of attention, right? That becomes tradable, that becomes fungible.
Chris Hayes
It's funny because there's something counterintuitive there. There's an interesting, deep tension here, right? Because you're right, it's trying to do the standardization. And it is on the back end, like whatever second of eyeball looking.
David Roberts
Time spent on site.
Chris Hayes
Right. Time spent on site. But it's also sort of the opposite of the standardization in the degree of individuation of the kind of algorithmic feed, which is bespoke in a certain way. Right. Like, it's the thing they're trying to get from you is very specific to you. Part of the alienation, I think, is we sort of lost more and more aspects of shared attention.
David Roberts
Yeah, the loss of this feeling that you're attending to something that other people are attending to also, right?
Chris Hayes
And I think, honestly, the Super Bowl is one of the last things of this. And I will say this: I have come to like the Super Bowl more over time simply because it is one of the last vestiges of something we all pay attention to.
David Roberts
Yeah. Mass culture. I mean, this is why I think people are so powerfully sentimental about the 90s in a way that I think is a little bit more than just standard nostalgia. Like, there was still a mass culture in the 90s, you know what I mean? Like, there was still something about which you could meaningfully say you were counterculture. Right. Like, there was something to rebel against. There was, you know, a shared something. But now, like, if you wanted to be rebellious, nobody's trying to make you do anything, like, you know what I mean? There's nothing to rebel against anymore.
There's no culture as such anymore, really, it feels like.
Chris Hayes
Yeah, I mean, I think culture finds a way is one thing I will say. Like, it is interesting to me how intensely, rabidly social we are as creatures and how we find ways to create culture under all conditions, you know? But I do think that part of the experience of alienation, which is this thing that should be internal to us, being extracted from us, and also the individuation and the aloneness, all those things sort of go together.
David Roberts
I'll quote your own book: "It's hard not to conclude that there is a relationship between the rise of solitude in modern life and this process of ever more specific individuation of our attention." So, in a sense, like, our attention is constantly being captured. But creating culture — I think this is an interesting point — creating culture right now, I think about this a lot through the eyes of my kids. Like, for me growing up in the 90s, if I wanted to create music, there was a narrative of, like, what music had been popular, what music was currently popular, and a place for me to go.
Like, "I'll go tweak this bit." It just, like, I felt like I was part of some tradition. Some ongoing, you know, some ongoing narrative. Whereas now, everything is everywhere. Everything is on the surface. So, like, music, my kids, they don't... There's no distinction for my kids between Steely Dan and, you know, Kanye. And, like, it's all just music. It's all just there. It's all just there for the taking.
Chris Hayes
Right. Because they could listen to it at any time. And this is the other thing about —
David Roberts
Like, just everything's everywhere. Everything's all the time. So, like, how do you decide? On what basis do you decide, "This rather than this. I will make this kind of music rather than this kind of music."
Chris Hayes
This is the funny thing and a place that I think we are kind of coming to a 360 degrees, which is gatekeeping. And I do think that one of the things, the problem that the algorithm solves, which actually is real, is just being overwhelmed by choice.
David Roberts
Yeah, well, that coupled with the loss of trust in any particular human or institution to do that for us. We're letting the algorithms do it instead of people. And, like, so much follows from that. So, let's talk then. Let's pivot toward, like, solutions. You know, like, you know, I say this from love. Every book like yours is required by some law or other to include the solutions chapter.
Chris Hayes
I think this is one of my best of three. I just want to say, personally, I think this is my best of the three books I've written.
David Roberts
Well, I will say I think it's a completely unreasonable expectation to ask analysts to have solutions to the problems they identify in their back pocket. It's kind of goofy anyway. So, you sort of nod at some solutions. But I got to say, I was not filled with, like, I did not come away happy or uplifted. But let me read a couple of quotes to you, if you'll indulge me quoting your book at you again. Here's a couple that I think really get at this. We're talking about the sort of implications for culture. We're talking about the implications for personal psychology.
But then, there's also, I think, just the implications for public life, society, politics. So, "The reality of the attention age is that everywhere you look, both formal and substantive attentional regimes have collapsed. And where there is no attentional regime, no formal set of institutions to force public attention on a topic, no basic rules for who will speak when and who will listen, the need for attention becomes exclusive. It swallows debate, it swallows persuasion, it swallows discourse whole." And then a little bit later, "We have a country full of megaphones, a crushing wall of sound, the swirling lights of a 24/7 casino blinking at us.
All part of a system minutely engineered to take our attention away from us for profit. Under these conditions, anything resembling democratic deliberation seems not only impossible but increasingly absurd. Like trying to meditate in a strip club." And that, to me, captured something that I haven't really been able to capture yet, which is just not only is there nothing that I can identify as sort of rational debate or exchange of views happening anymore, I don't even really know where to look, where it would happen. Like, as you say, everybody and every institution and everybody who certainly is involved in the content game is under this same compulsion.
They need attention. That's how they make money. And to get attention, you grab it, grab it, grab it, grab it, grab it. Which, by definition, means not sitting on one thing for a while and considering different angles of it and considering other perspectives on it. So, it seems like what we have here is an equation, the nature of attention, the nature of the attention economy that just leaves no remainder for democratic deliberation, for sort of self-intelligent, self-governance. So, what, like —
Chris Hayes
How do we solve it?
David Roberts
Yeah, I feel doomed. It feels, it feels doomed. Like, what is the way out of this?
Chris Hayes
I think you've identified to me that on the sort of what authors will sometimes call the "last chapter problem," like to me, I think you've identified the hardest one to solve. So, I think you're like, that's the one that feels the hardest, which is understanding this as a collective breakdown of the ability to focus in the same way that an individual who can't focus is going to have a hard time sustaining thought or accomplishing tasks. A society that is incapable of focusing in a democracy, incapable of focusing, is also going to have that, you know, writ large at scale.
David Roberts
Add this to your description, which just goes to me, and this is where I bring capitalism back in, is just that capitalism is constantly trying to satisfy those id, those lizard brain level wants, want, want, want, want, want. And by definition, sustained contemplation requires some bits of frustration. You will know this like any attempt to become good at anything, and that includes arguing and deliberating or playing guitar or woodworking or whatever, requires being willing to work through frustration and live with that frustration. It seems like capitalism is devoted to eliminating any type of frustration like that, thereby eliminating any possibility of sustained anything.
So anyway, go ahead.
Chris Hayes
Yeah, so I think that's the hardest problem, and I think it's one of the biggest problems we face. And I'm not going to sugarcoat it. It's really bad. And you know, even as you're describing, like yourself, about how you, you know, I think a great example of this, you know, I see people always sort of talking about the legacy media and like, how much it sucks. And particularly people who are now like, in the content creator game. And one of the ironies is if you have your position as an independent creator, you're actually much more tied to the, like, financial incentives of what you do than people in traditional legacy media.
Like, you know, someone who's a reporter at The Washington Post, their livelihood, their mortgage didn't depend on how many views they were getting. They had assignments, they did stories, they got written. And you were actually fairly insulated from these attention imperatives. Your job was — and there's all sorts of problems with that model and all kinds of issues.
David Roberts
Well, it used to be the point of that institution to protect people from those attentional imperatives. That was, indeed, that is what journalism is.
Chris Hayes
Exactly. Because, as I say in the book, attention is not a moral faculty. And that really is what it all comes down to. When you have this breakdown of attentional regimes, this war of all against all, this sort of hyper-distractibility, this inability to focus where attention swallows everything, what gets attention is not what's most important.
David Roberts
Or what's true.
Chris Hayes
Or what's true. Exactly. It's not what's most important, and it's not what's true.
David Roberts
As a matter of fact, truth, as you and I know to our great chagrin —
Chris Hayes
Is kind of boring sometimes.
David Roberts
Kind of boring, kind of frustrating. Kind of more complicated than you thought it was before you took a look.
Chris Hayes
Yeah, exactly. Like, people going around Los Angeles secretly lighting fires for some sinister motive is actually more interesting than just like, there were winds and they picked up embers.
David Roberts
I mean, Jewish space lasers, whatever else you might say about that, are quite interesting. You're going to pay attention if somebody brings them up.
Chris Hayes
So, I don't have a solution to that. But here's where I do actually feel genuine, not like forced, but genuine optimism. I think the feeling of claustrophobia that we're in a corridor and dissatisfaction around the specific form of attention capitalism right now is getting so ubiquitous and so intense and acute that I do think it's hitting some breaking point.
David Roberts
But, do people, I mean, the question I have about that is, are people accurately identifying the source of the angst they feel? Do you know what I mean? Like, to solve the problem, you've got to identify the real problem.
Chris Hayes
I don't know if they are yet. But I do think I have a kind of thousand flowers will bloom version of this where I think people are going to increasingly drop out of social media. And actually, you're seeing this in the numbers which are going down. I think that people are going to sort of hit some wall. I think that as the Internet gets less pleasant to be part of, and then like they're populating it with AI bots, which is the funniest thing I've ever seen. It's so funny to look at the modern Internet and be like, "The problem is we got too many people."
David Roberts
Yeah, like, what is the most denuded form of social attention that you could possibly imagine? Is it a robot saying your name? And yet, it works. People are falling in love with these things. People are having relationships with these things. It takes so little to activate that.
Chris Hayes
But I do think the rebellion is percolating, and there's a bunch of different ways it'll happen. Like at an individual level, I think in, you know, group levels. Like the sort of way that the Jonathan Haidt book has taken off in schools in terms of school and phone policy.
David Roberts
Yeah.
Chris Hayes
Which I think is just — it's crazy to me that some of this stuff wasn't being done before. Like, take the kids' phones so they don't have them in class, obviously.
David Roberts
But then, just to give some color to our dystopia, you get parents saying, "But what about when school shootings start?"
Chris Hayes
Yeah, I know that's...
David Roberts
"We need to be able to text one another for the school shootings." Oh, God.
Chris Hayes
But, but, but, I will say that there's been success there. To go back to a metaphor I used before, which I actually think is really useful. Well, there's two. Let me give two sources of hope. One is that there are these meme accounts that exist of like recipe books from the 70s and 80s that are like the grossest things you've ever seen.
David Roberts
Jello salads.
Chris Hayes
Jello salads, processed food casseroles. Right. And the reason they work is because they're kind of identifying a kind of low point dead end in the total takeover of all of American cuisine by the most like industrial, corporatized slop. People did start to rebel against it and a bunch of weirdos and freaks — and I say that with love — started farms and back to the land and opened natural food stores and green markets and farm-to-table dining and basically did completely alter the trajectory of American cuisine and American food culture. And that's not to say that we still don't have a million problems with it and sky-high rates of obesity and unbelievable amounts of processed industrial food.
But there was a resistance rebellion that created this entire alternate universe that then kind of moved into the mainstream.
David Roberts
Yeah, the food revolution in our lifetime has been wild. It's incredible. It's everywhere. Every small town now has a little coffee shop, whatever.
Chris Hayes
Totally. And the other example I think that's really useful is that we already in our lifetime have seen a corporate Internet defeated by an open Internet once. And people forget this, but the first version of the mass Internet were the walled gardens of AOL, CompuServe, and Prodigy. And the reason that AOL was able to buy Time Warner is that it was the most valued media company in the world at a certain point. And what happened was that model, which was completely corporate-controlled and you moved around where they wanted you to go, was destroyed by the open Internet.
You know, hilariously, partly because of Marc Andreessen creating a graphical user interface web browser called Netscape, that then made it possible that anyone could start a blog and you could fill in the little URL box. Anyone could be on the Internet and people could exchange. And that open Internet defeated, it genuinely defeated the corporate Internet. We have now gone through a consolidation when we're back in the period of the corporate.
David Roberts
Yes, we won that battle and then gave it back.
Chris Hayes
Won it and lost it, absolutely. But it doesn't mean it can't be won again. I really think that, like, that's another thing. Is that part of the rebellion you're seeing? Part of — I mean, even just something as silly as Bluesky, which is growing at a totally astronomical rate and is not like a nonprofit. It's, you know, it's also a corporation but it has the values of the open Internet in it. That is because people are actually seeking this out and voting with their feet a bit. And again, how does that accrete to a democratic republic and a public that's not so malformed as the one we have?
That, I genuinely do not know. But I do, to my core, think that we're at a kind of, like, nadir. We're at the, like, jello salad period of the Internet? I really do think that.
David Roberts
It's hard for me — I mean, I didn't come into this intending to sound like a DSA guy, but, you know, I come back to capitalism. Like, just if it were just the dynamics of attention playing out, like, that's how I think of the Old Internet. It's just like the quirkiest little weirdest things you could come across because they didn't need to maximize attention.
Chris Hayes
Yep.
David Roberts
Just needed to get a little bit. Like, you could attend to things that were sort of obscurely popular among groups. Like, that was what was so great about it. There's so much creativity and like —
Chris Hayes
Yes.
David Roberts
Part of what was beautiful about the early Internet is, you could just be like, "Oh, like, people are so clever. There's so many different kinds of people, and they are so clever."
Chris Hayes
And it made me think higher. It made me think, like, I was always blown away by how smart people are.
David Roberts
Yeah, and how funny they are.
Chris Hayes
How funny they are, how creative they are, what their skills and talents are, the things they can make. Like, I love that part of the Internet. I still to this day do.
David Roberts
They commodified it. Like, this is where I come back to capitalism. Once you commodify it, then you have to maximize it. Then you have to direct all your attention toward what gets the most. Not just some, right, a little bit. What gets the most attention. And what gets the most attention is shouting. Right. Like, what gets the most attention is just negativity and bitterness. And so, like, the Internet has become, like, so nasty. I don't know if you've been. I don't know if you've been back to Twitter recently or been back to X.
I mean, if you're out of it for a while and then you go back in, you're just like, "My God, what would it do to you to be in this day after day? Like, I used to live here. I can't believe it."
Chris Hayes
You know, one thought I had was I was thinking about this last election, and I was thinking about three elections. 1964, landslide for the incumbent. That's LBJ beating Goldwater. 1972, landslide for the incumbent. That's Nixon beating McGovern. 84, landslide for the incumbent. That's Reagan beating Mondale. And then you could also add 96, which is not a landslide, but Clinton basically cruises to victory in 96. Like, it's never really in doubt.
You know, and in all four of those, basically, they were. You know, people talk about "change versus more of the same" elections. People were just like, "Yeah, things are going well. Like, let's keep this going. This is going well." I just think it's impossible to produce a public right now that would feel that way. Totally impossible. And that's not even an — I'm not making an ideological point. I'm saying the information environment we live in, the attentional environment we live in is one of negativity.
David Roberts
And it cannot spread good news.
Chris Hayes
It cannot be the case that people are like, "You know what, things are going well."
David Roberts
Can't just say, "Biden set out to do X and he did it. Good job, Biden." Like, no one is allowed to say anything good about anybody. Michael Podhorzer made this point in one of his analyses last week. It's like, no political party in the US is capable of winning elections anymore. The other one loses, right? Like, people get more pissed off at the other one. So, as a final question before I let you go here, it seems to me like the signal malady of our modern life, from which all these others derive, is the loss of trust.
And you and I know we've talked about social trust and how important social trust is for a society to persist, to stay, much less stay healthy. And it seems like what's happened is we've lost trust in all our institutions, right? This is in all the data. We've lost trust in one institution after another. We've lost trust in any gatekeepers. So, what we have in place of gatekeepers now are algorithms run on capitalist logic. And that's what we're trusting in place of gatekeepers. Like, as you say, because information is infinite and attention is finite by definition, all human beings in that context are dependent on filters of some kind.
You have to have some kind. You're trusting some filter, whether you know it or not. And if you decided that "The MSM is full of crap and politicians are all lying and blah, blah, blah," you're going to trust instead some algorithm written by Silicon Valley bros. It's not like you're not trusting someone. You've just put your trust in what seems to me the worst possible place for it. So, I wonder a) like, do you think the attention dilemma is connected to the trust dilemma? And I guess my second question, which is too big to answer on any podcast, it's just like, do you see any, like, I can see people like you say, finding their attentional farmers markets, as you put it right there, little respites I can imagine, especially affluent people, right?
Like, finding shelter from this. But what I have trouble envisioning is the redevelopment of some kind of social trust, redeveloping institutions that we charge with the task of separating what's true from what's not true. You know, like science, journalism. Do you, is it just an individualist, everybody on their own world from now on?
Chris Hayes
No, I think we're going to find each other again, I really do. I know that sounds a little hippie, but I do. And I think partly that's because the non-commercial Internet defeated the commercial Internet once and is going to do it again. Partly because I think that actually I have a view of the possibility of human cooperation that's informed by my upbringing in the left. That is, even if battered and bruised, sort of undeterred. Which is that I think people can collectively do amazing things. And I think that that's going to involve activism.
Like, there's people, you know, it's going to have to be a thing that people mobilize for and really view as an issue, as something they are committed to. There's this thing called the Strother School of Radical Attention, some really interesting people coming out—
David Roberts
Don't you worry, though, that like young people raised in this environment, which makes it so difficult to sustain attention, and which makes this. That feeling of ease is everywhere. That's what I think about my kids. Like, yeah, they've just never run into any kind of friction ever, anywhere. But like, doing anything worthwhile, making any friendship that's worthwhile, creating anything that's worth doing requires tolerating some friction. And it just seems like that's what we've designed out of lives now.
Chris Hayes
Yeah, and I think that people, I don't know where this will end up, but I do think that people are going to find their way back to it or invent some new version of it. And I also think ultimately we are going to regulate this one way or the other. It could be good or bad. I think a lot of these companies need to be broken up. I think they're too big. I think they control too much. But like, you know, we've gone from oligarchy as a kind of metaphor we all use to like the literal version, like the genuine literal version where it's like there's half a dozen billionaires and they're close to the like personalist leader.
David Roberts
Yeah, we went from Soros as a metaphor to like a literal dude literally doing all the things that they ever said George Soros was doing.
Chris Hayes
So, I think there's going to be mobilization and activism, and political pressure on this. And I think people are going to do it in a million different ways. Voting with their feet, as consumers, as political actors, in groups of other people, as civic actors creating civic non-commercial spaces, and also as citizens working on their government. But I do think, like, it feels like a breaking point to me and that's the only good news I have because everyone feels it. Everyone feels it. They really do. Like, in the same way that, when you read accounts of people walking around London in 1890, and they're like, "Oh, my God, this is unbearable."
Literally, it's like, soot, black skies, and cholera in the water, and sewage everywhere. This is the most disgusting place on Earth. Something must be done.
David Roberts
I thought your comparison of pollution to spam, or your sort of analogy, is very good. Like, spam is basically the newest form of pollution, and we've not yet really developed a regime to control it.
Chris Hayes
And so I think when you, yeah, when you go back and you. You think about the conditions that brought about so much that altered the trajectory of industrial capitalism, its worst excesses, I feel like the attentional capitalism we're living right now, like, it feels to me a little like that person writing there about visiting London in the 1890s. You know, we're just like, this is a disgusting place to be. Like, how long can this go on? And I think we're there, and I think that's the first step to, like, creating something new.
David Roberts
Yeah, I mean, I guess at some point people are gonna start thinking, "You know, it's cool that I'm allowed to think whatever's happening is whatever I want to happen, but it would also be cool to know what's really happening."
You know, I'm just waiting for, like, a new generation to be like, "You know what? Like, what's really going on, though?" Like, I'm tired of feeling like I'm getting a — like, being on the Internet is like getting a handjob in a back alley, you know, like someone who's just, like, "Giving you whatever you want," like, at the immediate. Like, you get nothing, you know, you come away feeling kind of dirty. I keep waiting for people to be like, I want, I miss developing knowledge over time and developing skills over time and valuing skills and knowledge that were developed over time.
And just the — I keep coming back to Buddhism, as you did in the book, as a sort of corrective to all this. But we could talk about this forever. Fascinating book. I appreciate you. I appreciate your work. I appreciate you somehow keeping open eyes and strong values despite the insane contexts in which you work. So thanks for coming on and thanks for the book.
Chris Hayes
Thanks, man. I really had a great time.
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.
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