I'm joined by “Texas Doug” Lewin to unpack the fascinating contradictions of a state that inadvertently became the nation's renewable energy powerhouse through a free market electricity system that its politicians now seem bent on strangling. Bills before the legislature would require solar and wind developers to also build gas plants, impose extreme setback requirements only on renewables, and potentially cripple the state's economy just as data centers drive unprecedented demand growth.

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David Roberts

Hello, everyone, this is Volts for April 16, 2025, "What in tarnation is going on in Texas?" I'm your host, David Roberts. Texas is an endlessly fascinating energy transition story. Years ago, its conservative legislators put in place the closest thing to a free market in electricity in the US, which they have proudly shielded from federal interference. And it has worked to keep prices low and production booming.

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Lately, what that market is producing is gigawatts and gigawatts of clean energy. Together, wind, solar, and batteries constitute about 90% of the new electricity capacity installed in Texas over the last several years. Without any particular intention to do so, it has become America's renewable energy pacesetter.

But Texas conservative legislators, having created this miraculous market, are now souring on its results. For ideological reasons, they remain committed to fossil fuels — more so, it seems, than to the free markets they used to talk so much about. As we speak, they are debating several bills that would intervene in the market and have the effect of sharply curtailing clean energy development.

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Is Texas going to embrace its electrified future or cling to the fuels of the past and let all that economic growth go elsewhere? To discuss that, I am joined by Doug Lewin, widely known in the clean energy world as Texas Doug. He's been closely tracking energy trends in Texas for decades, including some work in the legislature and with several private companies. He is now a consultant and runs the excellent Texas Energy and Power Newsletter and the Energy Capital podcast, to which I have become an enthusiastic subscriber. Can't wait to talk to him.

All right then, with no further ado, Doug Lewin. Welcome to Volts. Thank you so much for coming, David.

Doug Lewin

Thanks so much for having me.

David Roberts

This is overdue, Doug. We've let Texas news build up.

Doug Lewin

There's a lot of Texas news.

David Roberts

And now, we've got a giant reservoir of Texas news to get through. I thought a good place to start for people who have not been — call it like the last five years post-2020, there's just been a lot of stuff happening in Texas in the Texas energy sector. And, you know, I'm not sure everybody's paying close attention or tracking it. So maybe I thought we could just start with some scene setting, just sort of tell us the story of the last five years.

What's been happening on the Texas grid in the last five years?

Doug Lewin

I mean, first of all, Dave, I'm exhausted. There's been a lot over the last five years. Too much. And again, thanks so much for having me. I am a big fan of Volts and a subscriber there and really appreciate your work. I've learned so much from listening to the podcast, listening to you on Grist, et cetera. Yeah, look, five years, the last five years, that's an interesting time period to pick. Like most of us who work on Texas things, we mark time by Winter Storm Uri, which was just about four years ago, a little over four years ago.

That happened within that five-year period you picked. And that really has changed quite a bit and what's happened here. But I think we could talk about Winter Storm Uri. I think we probably should at some point. But yeah, over the last five years, we have gone from effectively having no battery energy storage on the grid to having over 10,000, actually today right about 11,000 megawatts of storage. At the time of Winter Storm Uri, we were at 200, four years later at 11,000 megawatts. Yeah. Solar at the time of Winter Storm Uri. You know, five years, you're talking like — I'm doing this from memory — but like 3 or 4,000 megawatts, we're now up to 30,000. So a 10x increase in solar in the last five years.

Wind has grown, but not at nearly that kind of rate. Five years ago, we were already at somewhere around 30,000 megawatts.

David Roberts

Yeah, wind's been pretty healthy in Texas for a while, right?

Doug Lewin

Yeah, yeah, yeah. Big growth in like the mid-2010s, even early 2010s, but in the 2020s, much less growth of wind. So basically, where we are right now is an easy way to think about it while it lasts — it'll be different in a few months — but right now it's about 40, 30, 10. 40 gigawatts of wind, 30 gigawatts of solar, 10 gigawatts of storage, a little bit more. So like 80 or so combined, which is, you know, if you had said to me, Dave, five years ago, "Hey, in 2025, you're going to be at 80 gigawatts of combined renewables and storage," I would have said, "I love your optimism, but I think you're a little crazy." But here we are.

David Roberts

I mean, I guess what people would want to know though is like, did they do that on purpose?

Doug Lewin

No, I don't think so. Well, let me be clear. Actually, I think what was done on purpose is, you know, 25 years ago — and I think it's important to give credit where credit is due here — the legislature at the time, 1999, and Senate Bill 7 that opened the system to competition. Some will say deregulation, but there's actually quite a bit of regulation on the system. And we should talk about —

David Roberts

I prefer restructuring.

Doug Lewin

Restructuring is exactly where I was going to go. It's exactly right. There was a decision made that the lowest cost resources in Texas would win and that we would pay only for resources that actually generate. We weren't going to have a capacity market where we'd pay for a bunch of plants to sit around idle. So that was a policy choice. And I don't think anybody — the only policy choice for renewables was made in 1999 in that restructuring bill when a very modest renewable portfolio standard was established. I believe the original number was 2,000 megawatts.

David Roberts

Wasn't that under Governor Bush, as I recall?

Doug Lewin

It sure was.

David Roberts

Crazy.

Doug Lewin

Yep, yep, it absolutely was. And Governor Bush was a supporter of that at the time. Texas, at that time, was still a mixed government. There was a Democratic speaker of the House, Pete Laney.

David Roberts

Wild.

Doug Lewin

Yeah, and a Republican Lieutenant Governor at that time. It was Rick Perry who then ascended to the governorship when Bush was elected president. And so that's when that bill passed in 1999. And really, it was partly because there was a Democratic House and they really wanted to build as wide a coalition as possible for Senate Bill 7. So there was not only a renewable portfolio standard, but there were some really important consumer protections. There was an energy efficiency resource standard, which was one of the very first in the country. And so that was a policy choice.

But, Texas far exceeded that goal. In 2005, they increased the renewable portfolio standard up to about 5,000 megawatts, again with like a 10-year period to achieve it, just like with 1999. And then we raced past that as well.

David Roberts

Yeah, I think it's fair to say, looking back, that it was the market structure that encouraged the low-cost power rather than the RPS that did most of the work here. Right. You think that's fair?

Doug Lewin

I think that is fair. I think the RPS was kind of a first mover, but once that first movement happened, then yes, market dynamics and what is called in ERCOT economic dispatch. Right. There's no preference. Like in some states, you have environmental dispatch, you give a preference to a lower emitting source. We do not have that in Texas. It is only the lowest cost that is dispatched first and that as renewables — you asked about five years ago, what's changed in the last five years? The lines kind of cross. Right. Where renewables, particularly solar and storage, became cheaper, and they've really started to win out.

David Roberts

That explains, I think, the shift from building out a ton of gas to building out a ton of renewables. But what explains just the speed, the quantity? You've written that Texas has added over 44,000 megawatts of power in the last few years, which is like a 35% increase over its base. It's adding a gigawatt a month to the grid. What explains that speed? Is that just the market, too? Is that just market dynamics, too?

Doug Lewin

I think it's market dynamics coupled with the fact that it is Texas and load growth here — you know, the load growth story is everywhere, right?

We're going to get to that. But, like again, you asked about the last five years. You know, even before you get to data centers, and what is AI going to do to the grid? Texas has seen an increase in electricity relative to the United States, something like 15 to 20% more energy growth here than in the rest. In other words, if you take both of them at like zero, five years ago, Texas is like 15, 20% more electricity used now. The rest of the country is basically flat over the last five years with some small amount of growth.

David Roberts

What on earth, what explains that?

Doug Lewin

Well, I would explain it a couple of ways. Number one, and I think this is really the place to start, is industrial load growth, much of it from the electrification of industry.

David Roberts

Interesting.

Doug Lewin

So, yeah, as a matter of fact, the first podcast episode I did of the Energy Capital Podcast was with former Commissioner Will McAdams. He was a PUC commissioner, the first appointee by Governor Abbott after Winter Storm Uri. The other three commissioners had all resigned. He was the first one appointed. And I asked him on that first episode, "What was something that was surprising to you coming out of Winter Storm Uri?" And he said, and I'm paraphrasing here, you can go back and hear his exact words. But basically something like: We were surprised by the amount of industrial electrification that had already happened.

So, you're already starting to see industries that are looking at the grid and going, "Man, there's a lot of hours out of the year where prices are like zero or ten dollars a megawatt, right? Like basically a penny a kilowatt hour. Why do we want to keep burning gas on site if we could connect to the grid?"

David Roberts

Let's highlight this a little bit. Those industrials are directly comparing gas and electricity onsite combustion of gas versus grid electricity. And electricity is winning on price, purely on price.

Doug Lewin

Well, and I think what happens for a lot of these folks, it's kind of like you remember the early days of when Walmart started talking about sustainability. It's like at first it was kind of greenwashing, and then they get into it and they're like, "Wait a minute, oh my goodness. Like there's a lot of benefits to the bottom line here. This is incredible!" And I think that's a lot of what happened with industry. So we now have a steel mill in Texas that's grid-connected. We have, Dave, an LNG export plant that is entirely powered off of the grid.

It is a 700-megawatt load. It is roughly the load of Waco or Lubbock, you know, mid-sized cities in Texas. So yeah, I would say that that is one of the major ones. As a matter of fact, the utilities, you know, a lot of people will say here, well, there's so many people moving to the state, our population is growing. And that is true. We get about 1,000 people a day roughly net in migration over the last couple of years. But you know, what we have seen in the data, and the utilities do publish this data annually, what we're seeing is that the residential numbers as far as power demand are not actually going up that much.

And I attribute a lot of that to federal standards. Right. It's really hard to buy an incandescent light bulb anymore. HVAC 14.5 SEER or whatever the exact numbers, right. So, I think even though there's more people moving here, residential load is basically flat. But industrial load, of all that load growth I was talking about a little while ago, something like 80 to 90% of it is large commercial and industrial load.

David Roberts

Interesting. So, really, this is like meat and potatoes, economic development stuff. So briefly, we've got a lot of bills to discuss. But briefly, I want to discuss Uri. These freezes are not unknown in Texas, but they're, I guess, getting relatively more likely. And as listeners probably vaguely remember, this winter storm, Uri, caused a bunch of brownouts and blackouts in Texas. As I recall, the Texas grid was quite close to completely shutting down, which would have required like black start type stuff, which would have been like an exponentially larger economic blow, etc.

So, maybe just tell us, because if you listen to your sort of off-the-shelf Republican Texas legislator, he'll say, "Look, we're building out all these renewables and then the next thing you know we're having a crisis. Voila. What we need is more gas." I think that's what they're trying to do. So, what is the real story there? What is the right lesson from Uri? And, you know, haven't there even been like a subsequent cold snap since then? Or am I, am I making that up?

Doug Lewin

Let's start with what happened during Winter Storm Uri. Why did the lights go out? Every generating resource, except for solar, interestingly, was below its targeted output level in extreme weather conditions. And gas and coal were actually the worst performers at like 50% of where they thought they were going to be. Gas plants had several problems. One was they were freezing. A lot of them were offline for freezing, but many of them that didn't freeze and were able to operate could not get fuel.

David Roberts

The coal piles were freezing, as I understand it. Right.

Doug Lewin

And coal piles as well. Yeah, yeah. Coal's performance was also very problematic. And of course, there were problems with wind turbines. And while solar exceeded where they thought it was going to be, they thought it was going to be quite low. So it cleared a very low bar. The state has four nuclear units, one of those went down as well. So you lost 25% of your nuclear output. So literally, every —

David Roberts

Was that from freezing?

Doug Lewin

It was freezing.

David Roberts

And the turbines, just out of curiosity here, turbines going down, extreme cold. Is that them freezing up, or is it something... There's just not a lot of wind when it's that cold? What's the, what went wrong with wind?

Doug Lewin

Yeah, I mean, ice is the big problem.

David Roberts

Ice, right.

Doug Lewin

Yeah, icing is really — and they can do some de-icing and there's all sorts of things that can be done to wind turbines for that. Like if you're in North Dakota, you're going to do — I mean, this is, this is part of the problem, right? This is again, not just about wind, not just about any generating resource. The same with gas. If you're in a northern climate, you're generally going to have structures around a lot of the infrastructure. But in Texas, we don't. Because if you put structures around it, then you got to cool it when it's 105 degrees outside.

So, they leave it to the open air. And that, of course, causes problems in the winter. So, it's a system that was built for summer. I mean, it's always been a summer peaking system. That is now kind of in doubt. Right. As to whether or not we're an actual summer peaking system or winter peaking system. So, this is the other key thing during Winter Storm Uri that's not talked about enough: gas supply freezing was a major, major problem. And that problem really hasn't been fixed. And we can talk more about that if you want.

And then, you have power plant freezing. There have been major improvements made there because ERCOT now inspects every single power plant in the state every three years. We have seen in subsequent winter storms, none of which have been as powerful as Winter Storm Uri. Average like, you know, the worst ones were around like 13 to 15 degrees average statewide low temperature, Uri was 6. The average statewide low was 6. And then, the third main thing that caused Uri was excessively high demand caused by inefficient heat in poorly insulated homes. It's a problem in Texas, but it's a problem throughout the south is that you have resistance heat.

It's basically a toaster oven or hair dryer technology, sized to heat the entire home or apartment. This is really a problem in apartments where, generally, apartment developers will, just as a standard practice to this day, Dave, like even in 2025, we're still building apartments with resistance heat. This means that every little apartment, 600, 800 square feet, is a 5 kilowatt load. That means they're basically the same as a 3,000 square foot home up in the suburbs of Dallas on a 100-degree day, that they're using the same amount of power on a winter day. So, demand was another really, really big problem with Winter Storm Uri.

And that has also not been addressed.

David Roberts

What did they just, really briefly, like, what did they do? What came out of it tangibly? What changed?

Doug Lewin

Two major things, I'd say there's certainly more. Well, let's say three. One, the power plant winterization I was just talking about. I think that that is extremely significant. They did do this thing where they did this whole power supply chain mapping exercise because part of what happened was — so first the gas fields froze. This started happening on February 9th, 10th, 11th, like three, four, five days before the power went out. Steady, steady increase in gas going offline or I should say decrease in gas production and output. And then once the power started to go out, then you started to have gas infrastructure like compressors and things like that.

They started getting cut off when the power was cut off. So, we ended up in a downward spiral. Now, a lot of the oil and gas folks said that there was no gas problem until the power went out. That is empirically false. And that's in the NERC and FERC report, in the UT Energy Institute report. They show there were 40% reductions in gas output before the power went out. Then once the power went out, we got down to where at the depth of the problem, around February 16th, at the worst moment, we were down 85% of the gas output out of the Permian was reduced.

So, yeah, I mean, just like really, really extreme. And then I would say the other big thing that came out of there was the legislature decided in their infinite wisdom that they would subsidize heavily new natural gas plants.

David Roberts

And this is the fund that we're going to get back to later.

Doug Lewin

Exactly, exactly. So that's a pretty big change. And I will say there was one really good thing in the Texas Energy Fund, and it was a constitutional amendment. I did not vote for it. I voted against it. But like 65% of Texans voted for it. I actually had to think about it for a minute because there was $1.8 billion in there for microgrids, or what they call the Texas Backup Power Package at critical facilities. Yeah, it's $1.8 billion. Not a small amount of money for hospitals, water treatment facilities, nursing homes, police stations.

And unfortunately, two years later, that still has not been implemented.

David Roberts

But why, why did you vote against it?

Doug Lewin

What I voted against was, it was a $10 billion fund. $7.2 billion was for gas plants. And I'm not — look, I actually think we're going to build gas plants in the state. And if they're peaker plants, the emissions aren't that huge a deal. I'm not generally for building new gas infrastructure, but I think with this load growth story, we're going to get some. Whether we like it or not. The bigger issue is just, should the state act as a bank? You know, what happens to the energy-only market if now you have the state subsidizing gas to this degree?

And if you're a gas plant developer, are you ever going to build in Texas unless the legislature gives you more money? Like, probably not, right? So, I just thought it was too distortive. But that $1.8 billion in there was really attractive and I almost voted for it.

David Roberts

Interesting. So, okay, one more piece of scene setting which we've segued into quite well here, which is demand projections. They're crazy everywhere.

Doug Lewin

Yes.

David Roberts

Particularly crazy in Texas.

Doug Lewin

Yes.

David Roberts

So, tell us a little bit about what they expect. And is it mostly data centers?

Doug Lewin

So, the answer to the last question is yes, mostly data centers, but there's quite a lot of other loads in Texas that are looking to connect to the grid, including, by the way, oil and gas loads because the oil and gas drillers want to connect to the grid for the same reason we were talking about industrial electrification. Right. Just think of it as another industrial source. And right now, if you're out in the Permian putting a rig, you know, and drilling, you're going to be using generally diesel generation, one of the most expensive ways to produce power.

David Roberts

Yeah.

Doug Lewin

So, there's a real push to build transmission in Texas, and that push is mostly coming from the oil and gas industry.

David Roberts

Electrify oil and gas.

Doug Lewin

Electrify fracking operations, yeah. Look, I mean, look what's happening right now, right where you're just now we're recording obviously on April 7th, so like, you know, when this comes out in a week, this should generally be the same, but things change so fast. I just want to say that because I don't want to look totally stupid when it comes out. But right, like this week we're seeing projections of oil for 2026 in the $60 range. The Federal Reserve Bank of Dallas does this survey of oil and gas drillers and the break-even point in the Permian is right around 63, 64 bucks for a new rig.

So, if the price of oil globally goes down to $60, people in Texas are going to be hurting. Local government, state government, like that, is a big part of the economy. And if you can actually connect your oil and gas drilling to the grid, that lowers your cost, that might get you below that break-even. So, it's really, this is really like, I think, Dave, like the main story about Texas right now is that like the reality of renewables are starting slowly to catch up to the business class, the political class. People are starting to get their heads around like, "Oh, maybe this isn't a cage match of oil and gas versus renewables. Like maybe renewables actually are super important for economic growth."

Like you said earlier, we've added 44 gigawatts over the last four years, and 90% of that is from renewables. Where would our economy be if we didn't have solar storage? Where would we have been last summer, 2024, which was the sixth hottest summer in Texas history? Where would we have been in 2023, the second hottest summer in Texas history, without all that solar and storage on the grid?

David Roberts

Some people are making this leap. Some people, the business community, let's say, will discuss whether that revelation has reached the legislature yet.

Doug Lewin

Yeah, I think it's reached a lot of legislators. There are some that are laggards and are not quite there yet. But let's come back to the load growth question because I think it's really, really fascinating what's happening right now. So, in April of last year, ERCOT, in a sort of, it's super watched by stakeholders, but not by like the popular press or the general public. It's a group called the RPG (Regional Planning Group), and they put together these transmission plans and I got texts from a few different people that day like, "Hey, are you watching this?"

So, I tuned in and ERCOT is projecting their April last year. So, just about a year ago, that load in 2030 will reach 152 gigawatts. Now, our peak at that point was right at and it still is right at about 85 gigawatts. So, going to 152 in five years. At that point, it's six years. Just extraordinary, extraordinary.

David Roberts

Almost doubling.

Doug Lewin

Yeah, almost a doubling. Now, they have just almost literally today, the end of last week, and there's an ERCOT board meeting going on later today and they've started to revise those and now they're saying something like 137 by 2029. But here's the key to this, though, and how to put all these numbers in some context. There's some like, history in context behind these numbers. During the 2023 legislative session, the oil and gas industry pushed for a bill that was House Bill 5066 and this was the bill that started the planning around those transmission lines going out to the Permian Basin, which the commission is actively considering right now in May and hopefully will result in the first 765 kilovolt transmission lines ever built in the state of Texas.

That decision is coming, but not here yet. And again, the oil and gas industry kind of wanted that. So they put into law some requirements for ERCOT to start really considering new loads. This included this process they call officer letters. So if you're considering connecting to a utility's infrastructure, then you would tell the utility that. And then the utility, through an officer letter, an officer of that utility would sign something to ERCOT saying, we're getting this much load considered. Well, what they didn't know in the 2023 session was that this whole data center boom was about to happen.

Or maybe not the boom, but the speculative boom. Whether it happens or not, we don't know yet. I think for the record, it probably will. So then you get to the point where these officer letters are just pouring in and ERCOT is taking all of those and counting them in that number for 150. So what they put out today is if 50% of those officer letters come true, we would be somewhere around 121 gigawatts at the end of the decade. If 25% of them come true, we'd be at 113. So I think 113 to 121 is probably where we're going to be in five years.

David Roberts

Which is still crazy pants.

Doug Lewin

It would put us in the range of the kinds of growth we haven't seen in the state since the 1960s, when air conditioners were finally hitting the grid.

David Roberts

And the hyperscalers, are they particularly attracted to Texas for the market, the climate, the energy mix? Why do they love Texas so much?

Doug Lewin

All of the above. Right. I think first and foremost. Well, let's say 1A, 1B: I mean, availability of renewables is a huge draw to a lot of these folks. Right. I mean, it's just, it's cheap power. Now, does that mean they're gonna be 100% wind and solar? Of course not. They're going to have batteries. They'll probably have some gas. We've already seen, I mean, Project Stargate. Which President Trump talked about in his very first day in office. Like, what did he spend his first full day in office doing? Talking about Stargate, which is this, what, OpenAI and Oracle, SoftBank thing.

And where's the first site? Abilene, Texas. Right now, they're probably going to have some gas there. They're also going to have a lot of renewables because. And this is again, where I —

David Roberts

A lot of them have, like, promises and pledges, like your Google and your Microsoft and your Amazon. I mean, they've — who knows how firm those commitments will be when it comes to it. But at least they say they're trying to do this with all renewables.

Doug Lewin

Yeah, and if you're going to do it anywhere, you're going to do it in Texas. All renewables are going to be very tough for these kinds of projects. I think there will be some gas integrated there, and I think particularly if you're doing it in areas where otherwise that gas probably would have been flared or vented. Like Crusoe is one of the projects, one of the companies that is involved with that Stargate project, and that's one of the things they've been working on originally for Bitcoin, you know, that now they're primarily working on data centers. And so yeah, I think the ability to procure cheap power and that also means renewable power, because like gas, you don't know what the fuel cost is going to be next month, next year, or five years from now.

You don't know. You know what the fuel cost is going to be for solar and wind, right? You know exactly what it's going to be, right? So that's number one. But I would say like 1B, right there along with it, is the market structure. Because if you're trying to go to Georgia or North Carolina, for instance, you've got to cut a deal with Southern or Duke, you've got to deal with the regulators and a special tariff.

David Roberts

The interconnection queues are slower. Much slower.

Doug Lewin

Much slower. Exactly. So, I think the market structure, the speed to market, the ability to sign a bilateral deal without having to go through all the "Mother May I's" associated with most of the other states. And look, I mean, just — yeah, the ability to build here. Right. I mean, and that's a lot of what is at stake in this legislative session — a lot of legislators want to take that away. But assuming that's not taken away, which is a big assumption, the ability to actually build quickly in Texas is pretty much unparalleled anywhere else in the US.

David Roberts

Okay, so this is more scene setting than I intended, but it's good. So, Texas is in the midst of a renewables building boom. Unprecedented. Also on the verge of unprecedented load growth. Also struggling with its gas system even as wind, solar, and batteries race ahead. So, this is the situation today. Into this situation comes the Texas legislature, the least hard-working legislature in the country. What, do they meet every two, is it every two years?

Doug Lewin

They're also the least paid, in fairness. They get paid $600 a month. That's what legislators get paid.

David Roberts

And they meet every two years for like three months?

Doug Lewin

It's a biennial legislature, right? The constitution goes back to 1876 at the end of Reconstruction. So, extremely, you know, people that were very suspicious of government and put a very weak governor into the constitution and a legislature that could only meet every two years.

David Roberts

And now, it's like one of the top 10 economies of the world.

Doug Lewin

8th.

David Roberts

Let's discuss a few of these bills that are going on. I swear to God, Doug, I've been reading your newsletter — which by the way, is just excellent, really reminds me of the old blog days. Just the joy of: Here's a dude who's obsessed with a thing and is going to explain it to you. I love that model. So, let's discuss some of these bills. I was reading about them in your work and all the stuff you sent, and I swear at several points I thought I had my head around it. And then some part of my brain is like, "No, that can't be it. That can't be right."

Like, I just kept reading over and over again. But apparently, it's all as crazy as it looks. So, let's talk about some of the bills. First, let's talk about some bills where they're just clearly taking a shot at renewables. There's this Senate Bill 819, which basically would impose these regulations on the siting of renewable energy that are, I think it's fair to say, exponentially tighter, more restrictive than anything that's ever been put on oil and gas in the state. So, tell us about 819. What does it do?

And, is there even on paper, a coherent rationale for this, or is it just, "Frigging hippie energy, we hate it. Let's try to get it."

Doug Lewin

Yeah, I think mostly it's some landowners, very, very wealthy landowners that really don't like looking at wind turbines and have just kind of gone on this crusade against renewables. You know, a lot of times this is framed as oil and gas industry against renewables. You have not seen the oil and gas industry come out for those kinds of bills. Again, they want the low power from renewables. You know, so it's hard for me to give the rationale for it. I don't understand it. I work very hard to understand different points of view and to understand what people think very differently.

I've done podcasts on this. For example, I interviewed former Governor Perry for my podcast. I've interviewed Congressman Casar. I talked to people all over the political spectrum. I try to understand people's views, views that are very different from my own. And I just — I can't get my head around this. It is a major infringement on private property rights. Texas has held private property rights sacred for as long as it's been a state and before that, when it was its own country for 10 years.

I mean, that impulse runs very, very deep. It would absolutely hurt rural counties.

David Roberts

Say what it would do first.

Doug Lewin

Yeah, okay. So, it would put into place a requirement that there be permitting for renewables so the PUC could approve or deny any solar or wind project. It has setbacks that would be bigger than just about any other state. I know in the original bill it was 3,000ft for wind, like more than half a mile. The author of the bill, in discussing her own bill, asked by another member of the committee, she said, "It seems strident to me."

David Roberts

Like, yeah, in her head, she's like, "Wait, which lobbyist put that in?"

Doug Lewin

I guess I don't. I can't understand the thought process here.

David Roberts

And just to note, like, you can build a fracking field, like, right next to a church or a playground or whatever, but a wind turbine, you have to be half a mile away.

Doug Lewin

So famously, Texas, in 2015, there was a community, Denton. The University of North Texas is up there. It's just north of the Dallas Fort Worth area. It's in the Dallas Fort Worth area, but a little bit north of that. Denton County is north of Tarrant County, which is where Fort Worth is, a pretty large county now. But it was kind of just really in its high growth phase at that time. And a lot of folks in that community, through the city council, passed an ordinance like, "Hey, we'd like some setbacks on oil and gas drilling."

The Barnett Shale, you still had a lot of drilling up there and, like, right next to nursing homes and daycare centers and schools, and they passed an ordinance with some setbacks. And the legislature said, "You can't do that." House Bill 40 in 2015 passed overwhelmingly with strong bipartisan support and said, "No, no, you cannot do that." They took away the ability of local governments.

David Roberts

Can't do that to oil and gas.

Doug Lewin

Correct. And now, and frankly, you can't do it to renewables right now. But that's what she wants to put in place, Senator Kolkhorst. Only for renewables.

David Roberts

Hilarious.

Doug Lewin

The bill does not address anything like a petrochemical facility, an oil and gas drilling rig, anything like that. The wind setbacks would be far more, I think, like, 15 times what any setback is for oil and gas drilling. Right. As if wind was more dangerous to somebody than oil and gas drilling. It's just —

David Roberts

We should just, maybe, make a note here that fracking fields and petrochemical facilities actually do produce pollution.

Doug Lewin

Yeah.

David Roberts

And wind turbines actually don't.

Doug Lewin

Yeah, and so here's the other thing I want to say about this, Dave, that I think is super, super important. And I will have out in my podcast feed and we'll put it on YouTube as well. I think it's almost done. I've got this little compilation of clips from the hearing. I have never seen an energy hearing like this. I've been watching the legislature on energy for more than 20 years. I've never seen a bill with even close to half as many people testify against the bill. Fifty people testified in person against this bill.

David Roberts

Interesting.

Doug Lewin

A hundred registered for it, including folks you wouldn't necessarily suspect. Tech Association of Business, Association of Electric Companies, etc . Like just a wide, wide variety of different folks opposed to the bill. But what really struck me were three particular witnesses. One from Armstrong County, population like 2,000 or 3,000. And the gentleman from there said, "Look, we don't have oil and gas. This is a place that's just southeast of Amarillo, way up in the Panhandle. We don't have oil and gas up here. We do have wind and sun." And he's, you know, he didn't testify to this.

But you can look up the numbers on txrenewables.net. You can go county by county and see how many tax payments and payments to landowners were made. There are $50 million in payments to landowners and local governments from the wind farms they have there now over the life of the project. And they're planning to build another one up there that would add another 60 million to a county of 2,000 or 3,000 people. That is like the lifeblood of that community. Why would a Republican legislator want to hurt rural Texas? And so that was Armstrong. He had a guy from Schleicher County near San Angelo in West Texas, a guy from Nacogdoches County in East Texas who said he had solar on his land and now he's able to pay for his kids' college.

And he's like, "I don't want people in Austin telling me I can't build solar on my land." They went ahead and passed it out of committee seven to three on a party line vote anyway, so.

David Roberts

Right, well, so this brings me to my question, Doug, which is like, here's a bill with no rationale that you can even retrofit from the bill. The bill's own sponsor doesn't seem totally clued into what it does or why. Everyone seems to hate it. It's got this enormous public opposition. It's economically utterly daft. It's, you know, just like — so surely it won't pass, right?

Doug Lewin

It may. We don't know, obviously. I'm certainly hopeful it won't pass. A very similar bill, it was called Senate Bill 624 in 2023, passed the Senate and did not pass the House. And like we were talking about earlier, I think there is a growing awareness even among some of these people that are voting for it in the Senate, particularly those that sat there and listened to testimony from people in their district. I mean, the senator who represents that man from Nacogdoches, Senator Nichols, was sitting there during the hearing, listening to him, and I presume voted for it anyway.

I think he must have, because I think it's seven to four, Republican and Democrats, so he must have voted for it, you know. But I think there's a growing awareness that renewables are really important for economic development in rural areas. I had testimony from the San Angelo Chamber of Commerce out in West Texas saying, "You know, we need this for our business development." I think there's an increased awareness, particularly with solar and storage, that we absolutely have to have it for the summertime. The ERCOT CEO, the chairman of the PUC, have been saying publicly for quite a while now that we almost certainly would have had energy emergencies last summer without solar and storage.

It's good for grid reliability. We also know that renewables have lowered costs for consumers by $20 billion over the last decade. There was a study out of the University of Texas done by Josh Rhodes that shows that there's over $20 billion of savings so far from renewables. So, you know what would happen to consumers without them. I am certainly hopeful that cooler heads will prevail, but you never know. Legislative sessions are crazy things and anything can happen.

David Roberts

Well, let's throw another one in there while we're talking about it. Senate Bill 715 made me laugh. It would require individual wind and solar resources to, as far as I can tell, "firm," i.e., buy some natural gas. And not only does each individual project have to do this, but it's retroactive. So all the existing wind and solar projects have to go buy some natural gas. Like, am I misreading that? Anybody who understands grids, I think, I hope, understands that like firming is a grid-wide — you know, it's the level of the grid where you get firmness or lack of firmness.

The idea that an individual solar field needs to firm itself is very peculiar. Am I missing something, or is that what it looks like?

Doug Lewin

No, that is what it looks like. I mean, this bill has been... Yes, this bill has been pushed by the Texas Public Policy Foundation for a long time. They pushed a version of it in the last session as well. And yes, you know, even the organization for the thermal generators called Powering Texas, they testified against the bill. The bill actually would require firming of all resources. I mean, the cost of a bill like that, Dave, would be astronomical because, as one witness at the hearing put it, you're basically creating like a thousand little mini ERCOTs.

Like every power plant, it has to be its own little grid.

David Roberts

Right?

Doug Lewin

You get no economy of scale. That's... It's insane. It's not the way it's supposed to work.

David Roberts

The whole point of a grid, literally the point of a grid, is to share that. It's literally why we build grids.

Doug Lewin

Yeah, they didn't say it this time, but testifying on a very similar bill two years ago, ERCOT CEO Pablo Vegas literally said this would represent a tax on consumers, which is exactly correct and a massive one at that. So again, hopefully, cooler heads will prevail. You know, I can't imagine... You know, look, everybody just kind of knows in Texas, like the Senate is just going to pass really, really bad bills. And it's unfortunate.

David Roberts

So, the House is where you go for sanity?

Doug Lewin

Look, the Senate is where the idea for that microgrid, you know, for critical facilities, came out of two years ago. I want to give credit where credit is due. Like most things in life, right, it's nuanced, it's complicated. They passed a really good energy efficiency bill out of the Senate last session. The House didn't pass it. I think for the Senate, the main thing is, I hope they get to a point where they recognize that punching down at renewables — this is like the article I wrote called "A Time for Choosing," you know, which is like, which way do you want to go?

Do you want to try to destroy, destroy and push down and suppress, or do you want to build up? Do you want to spend your time figuring out how to build a nuclear industry in Texas, how to build a geothermal industry, how to get high voltage transmission, how to reduce energy waste?

David Roberts

There's a lot to do, and every one of these wastes time that you could, especially when you only have a few months every two years.

Doug Lewin

Exactly.

David Roberts

Time is at a premium. So, either one of those bills we just mentioned, if they passed as written, would just be devastating to the renewables industry in Texas. And yet, neither is the craziest bill on offer here. Now we're coming to the main course of crazy, which again, I had to read like 10 times because I literally didn't believe it. So, Senate Bill 388 mandates that new additions to the Texas grid have to be at least 50% dispatchable, which basically means gas, because they wrote batteries out of it, which I'd like to return to, which basically means gas, meaning that for every megawatt of wind or solar or batteries that you install, you have to by law also install a megawatt of gas.

It has to be 50/50. Is that as crazy as it sounds?

Doug Lewin

Yeah, it's every bit as crazy as it sounds. Yeah, how you can define the word dispatchable to not include batteries is beyond me.

David Roberts

Can you explain that? What on earth? Batteries are like the quintessential, like...

Doug Lewin

Yeah, I can explain it by like, somebody thinks, the author of the bill, Senator Phil King, thinks that gas is needed on the grid. And so, he's defined dispatchable to exclude battery storage because the point of his bill is trying to get gas. The problem, of course, with this is, and hopefully the House will realize this, is that you can't actually get gas fast enough to meet — you know, we were talking about load growth earlier in that 113 to 121, which is like the lower end of the range. You are not building 40 gigawatts of gas in the next five years.

That is an impossibility. GE Vernova is only producing 20 gigawatts of gas turbines globally annually. Right. So, this is an impossibility. So, what you were doing, if you pass Senate Bill 388, or frankly 819 or 715, is you are imposing a cap on the Texas economy. You are saying, "This is the limit of growth." I mean, it basically turns the Texas legislature into degrowthers. Right. Which is wild. Right.

David Roberts

Kind of a trend in MAGA world, honestly, as we're seeing.

Doug Lewin

I guess they could reduce emissions that way by killing the Texas economy.

David Roberts

They're going to be secret climate heroes.

Doug Lewin

Right. Seems like a wild way to go about doing it to me.

David Roberts

You said this, but we should emphasize: it's not that you can't build enough gas plants that fast because you don't have enough money or political will. There just isn't the supply chain for it. Like, physically, you can't do it no matter how much will you have.

Doug Lewin

Yeah, exactly right. Exactly right. And they did... So now, it's every megawatt of solar or wind must have a megawatt of thermal gas, coal, nuclear.

David Roberts

How would you even enforce that? Like, who, who, who is the enforcement mechanism here? Who does this apply to? Like, if I'm a solar developer, do I literally have to also be a natural gas developer? Like, how is this supposed to work?

Doug Lewin

Yeah, I mean, that is like a weedier problem with the grid. There's just like the basic, like "this is impossible," which is the main problem with the bill. But when you get down into the weeds of the bill, like the mechanism of it, there was a proposal years ago, right after Uri, something called "dispatchable energy credits," which of course was conceptualized to include batteries because they're very, very dispatchable. And what you would do for a credit program like that, it would work like Renewable Energy Certificates and you would put the requirement on load-serving entities.

Right, like retail electric providers, munis, co-ops, things like that. This, it appears from the bill, the credit's supposed to be placed on generators. So, you would have generators paying other generators, which is again part of the reason why no generators really like it because they're all like, "We don't really want to pay each other. We compete against each other." Like, it's just bizarre. And I, as far as I could tell, the bill didn't really have an alternative compliance payment. Like, what if credits aren't available, could you pay into a fund so you could still develop?

This bill was kind of silent. What's happening in the Senate, unfortunately, is they just aren't taking the time to really work with people that disagree with them and actually try to come up with — because if you want to get more dispatchable power on the grid, like you can do that, there are mechanisms to make it work.

David Roberts

Batteries are flooding onto the grid at historic rates. Like hallelujah, it's happening. What's the problem?

Doug Lewin

We added 5 gigawatts of battery storage in 2024. We will probably add more than that in 2025. And they are having a fantastic impact on the grid. They are helping grid reliability.

David Roberts

Precisely because they are dispatchable, precisely because.

Doug Lewin

Let me just say this. In the summer of 2023 — and it was hotter in 2023 than 2024. But 2024 again was the sixth hottest summer we'd ever had. So, it wasn't like it was a mild summer. We had 11 conservation alerts in the summer of 2023 and one energy emergency where frequency dropped to 59.77. We bypassed EEA 1, went straight to Energy Emergency Alert Level 2, which is very, very rare. I don't know if it's unprecedented, but it might be. It's at least very, very rare. 2024 again, sixth hottest summer. Not only did we not have an energy emergency, no conservation alerts all summer long.

David Roberts

Amazing.

Doug Lewin

Like solar and storage, they are so well-suited to Texas summers.

David Roberts

This is happening in California too. I feel like I should probably do a pod just on this. I feel like it's an under-told story. Like, batteries are coming and they are doing what people promised they would do faster and better and bigger than even anticipated. Like, they're helping grids on a mass scale today.

Doug Lewin

And, by the way, this is really where Texas, I think, really needs some focus. We've made some strides, but we've started to lag. That's where the progress has slowed down, on the demand side, on the distributed side.

David Roberts

Well, you're segueing, Doug. It's like you're setting me up here — you're tossing me lobs. So, just to wrap up 388, it would require 50% dispatchable. It's crazy. And as you say, like the take-home message here is, if it were passed, it would effectively cap the growth of the Texas economy at the level of gas growth, which is very slow right now. So, it would really be like shooting one of the most vibrant economies in the country in the leg for zero reason, for absolutely no reason. Okay, so done with that.

So, let's turn to, like, if I have massive load growth coming and I know it, and gas is slow, very slow to come online and, like, even at a historic pace of building wind and solar, there's almost no prospect that you could keep up with that ludicrous level of load growth. So, all of that points to the demand side. If we can't keep up on the supply side, let's turn to the demand side. That's energy efficiency and demand response. So, I think Texas is sort of legendarily not very good on energy efficiency. Is that also true on demand response?

Is there anything happening on the demand side in the legislature?

Doug Lewin

Well, not necessarily in the legislature. There's a little bit in the legislature this week. There'll be some hearings on an energy efficiency council and some moves to rein in resistance heat. Some really good bills are being heard this week, and maybe something will pass. But there are some good things happening in Texas, Dave. So, like, number one, Texas established the Aggregated Distributed Energy Resource Task Force and a pilot associated with that a couple of years ago. That pilot moved at a very, very rapid speed to the point where now you actually can sell battery storage. Or they're getting to the point where even other aggregated distributed resources can sell into the grid and actually earn ancillary service revenues.

David Roberts

Yeah, I had Base Power on the pod. People may recall they're basically just like giving batteries away to residential customers in exchange for the ability to use those, aggregate those batteries, and sell the capacity.

Doug Lewin

And that's also, by the way, another advantage of having a competitive market. Right. They're set up as a retail electric provider. Low barrier to entry. To become a retail electric provider, you really don't have to ask for permission. If you've got capital, a business plan, and motivation, you can get into the market and start signing up customers, which I think is a huge attribute for Texas. So this is really where I think things need to go. We need to get those retail electric providers working with policymakers in the state, PUC, ERCOT, the legislature, to create some kind of a vision for the demand side that really takes into account all of the different things that are there.

Because, for the wintertime, you really got to go after resistance heat. There are two different studies now, American Council for Energy Efficient Economy and Texas A&M University, the second of which was a study commissioned by ERCOT. Both of those found that there are 12 to 23 gigawatts of economic reductions available from just replacing resistance heat with heat pumps.

David Roberts

You know, it's interesting, in most places where they're talking about electrifying heat, the danger is that you're creating a giant winter peak, right? Because mostly in most places, when you're moving to heat pumps, you're moving from natural gas to heat pumps or fuel oil to heat pumps. But here, if you're moving from resistance heating to heat pumps, you're actually going to have the effect of lowering the winter peak. So, like, that's not something that heat pumps usually do.

Doug Lewin

No, but we are already a pretty electrified state. It's 61% of homes in Texas are electric only, you know, about 35, 36% are gas. So, really focusing on that electric to electric, making it more efficient is really where it's at. And then when you do that, you're getting in heat pumps that usually have inverter compressors and can receive a signal. So now you've enabled more demand response. Right. So, demand response is particularly great for the summer. And this is a conversation I've tried to have with ERCOT and anybody who will listen, frankly, of just like, residential demand response, because ERCOT is proposing, at the board meeting happening today, they're proposing a new residential demand response program.

And that's great. We should have more residential demand response.

David Roberts

But does this mean, just let me pause you, is this the style of demand response that they're talking about that they have today, is that where they sort of, like, send a note to a bunch of ratepayers and say, "Hey, can you turn off your stuff at X hour?" Like, is this all, like, voluntary? It's not automated, in other words?

Doug Lewin

There are no details associated with what ERCOT has proposed yet. They've only said they want to do something on residential demand response, but haven't said what yet. And I think that in the mind of ERCOT, though, it's not a conservation alert. They want to get away from conservation alerts. I think they want to be able to press a button and reduce demand. But my point is, if you look at Winter Storm Uri, the hour that the power first went out, the hour when the first rolling outages were ordered by ERCOT to the distribution utilities, it was 1:20 in the morning.

What residential demand response are you going to use? When it is negative two in Dallas Fort Worth and it's 1:20 in the morning, what load are you going to move? Right. You have to have energy efficiency. Right. You've got to reduce the energy waste that is causing you the biggest problem, and that's inefficient heat. Now, that having been said, residential demand response is fantastic. And most of the problems on the grid aren't Winter Storm Uri. Right. Most of the problems on the grid are one or two hours. Batteries help a lot. Residential demand response can help a lot.

And then, you get into again, the batteries, not just on the grid, but the batteries in people's garages. The batteries that, I think, pretty sure it was your podcast where you had the guys who were doing the batteries with the electric cooktops. I think it was you, right?

David Roberts

Yeah, yeah, I had Copper on a long time ago. Impulse is also doing it.

Doug Lewin

The price of batteries is getting so low right now that you could have a battery associated with your refrigerator or your electric cooktop. Right. And they may not be huge, big batteries, but even a small amount times millions of homes can make a huge difference on the grid. The problem with this right now in Texas, Dave, is that there is no vision for this. So, NERC in its December 2024 report, their long-term system assessment, forecasted that ERCOT will go from 3 or 4 gigawatts of distributed solar today to 12 to 24 gigawatts of solar by 2034.

They didn't have a number in there for storage. And I did a podcast — you did too — with Mary Powell of Sun Run. We're starting to see more and more storage associated with solar. And we have sort of two routes here: chaos or integration. Right. Is everybody going to do their own thing and it's just kind of everybody on their own, or are we going to integrate all of these small resources for the good of the system, for the good of all the consumers in the state, for the good of grid reliability? Right now, I would argue we're more on the path of chaos because the utilities are trying to slow it down.

They don't want to make it easy for people to connect DERs to the grid.

David Roberts

Well, this is aggregation. This is VPPs you need, right? Are they talking about VPPs?

Doug Lewin

They are talking about VPPs and there is a pilot that is open over at ERCOT right now that has signed up. I think we're in the range of — this is what you were talking about with Base Power. There's like 30 to 40 megawatts in there right now and that could grow. There's a cap on there, I think, of 160 megawatts, but we really should see this at gigawatt scale. And as a matter of fact, NRG, the very big gentailer in the state, they own generation and retail, signed a deal with Renew Home, which used to be Google Nest, right, and Home Connect to do a gigawatt of VPPs in Texas.

David Roberts

I had Renew Home on the pod, too.

Doug Lewin

There you go. And so, like, I think that these kinds of things are going to grow. I just think they will grow not only less rapidly, but also in a way that is less beneficial for grid reliability and resilience, unless there's some kind of vision around this. And then, you know, we were talking about the Backup Power Package earlier. It's like there's all these different things happening on the distribution grid and there's a lot of even policy initiatives. There just isn't anything that's kind of bringing all that together and creating some kind of a market mechanism.

I really think that's what's missing, right, is like, how do you define the energy attributes — whether it's energy efficiency or demand response — what hour was it delivered, where was it delivered so that we can actually put a value on it? That is hard to do. If any place can do it, I think it's ERCOT in Texas.

David Roberts

Right. And you know, you've made the point many times, many people have made the point that there's demand response and all this sort of fancy automated stuff and VPPs, but then there's also just old school energy efficiency, better insulation, you know, all the old block and tackle stuff, which has the effect of lowering the difficulty level of everything else. Right. Just makes everything else easier. And on VPPs, I sort of wonder how the conversation is going because the way I look at it is like there's these hyperscalers showing up. They got a lot of money, they're really forcing the issue.

They cannot be ignored. You need lots of power really quickly. Coal's uneconomic. Gas, the supply chain is tied up, as you say, it's literally difficult to get gas. Renewables are fast, but the fastest way to get new power is just to exploit existing distributed capacity of residences and stuff. Do you know what I mean? It's just to exploit VPPs. You cannot get power faster than that. That is literally the fastest way you can get new capacity on the grid is just gather up into your hands existing residences and coordinate them. I just feel like that logic is impeccable and inexorable and in some sense, they're all going to end up there eventually.

There's just no physical way around it. If you want lots of power fast, that's the big pool of fast power that you have available. That's it. Like, you can't get around it. So, like, how far away are they from this sort of inevitable conclusion?

Doug Lewin

I mean, the other beautiful thing it does, I don't know how far away they are. I think we're still, unfortunately, kind of far. I think people are getting there. ERCOT saying, "Hey, we want to do more residential demand response," is a recognition of exactly what you just said. I think they intellectually and theoretically understand that. What is the mechanism to bring it about? And in fairness to them, that is difficult. Right, because you are, you know, measuring negawatts, right. You're trying to measure something that is reduced, but it can be done, right? I mean, like we have great software, we have ubiquitous smart meters, we know how much energy is used.

We have baselines for a decade or more.

David Roberts

And there are other states, there are other states doing it better. Like, there are better examples out there if you want to go figure out.

Doug Lewin

Yeah, one more thing on this. I think that because you talk about the data centers and the money they're bringing, it is very important to remember — and this probably isn't lost on any of your listeners — but I want to say it anyway because it's so important. And this is especially true in Texas. If you look at those load duration curves, 95% of the hours of the year we have so much capacity, right? We have so much extra capacity. There's, on a tough year, a couple of hundred hours a year. On most years, less than 100 hours a year.

And so, if you can really look at what are those hours, when are they occurring? And usually, it's like winter mornings. Now it's summer evenings. Used to be summer — five years ago, let's go back to where we started. You asked about five years ago, five years ago, in the summer of 2019, in August of 2019, anybody watching the grid — and there weren't that many people watching because Winter Storm Uri hadn't happened yet, but I was — there were energy emergencies in August of 2019 at 4pm. We no longer have energy emergencies at 4pm.

If they're going to happen, they're going to happen at 6 or 7. Right? And then you have springtime, which is often sort of looked past, but you have an aging gas generation fleet. A lot of the plants are very, very old. Even the "newer ones" are 20, 25 years old. Think of the upkeep you've got to do to a 20, 25-year-old car. Right? So they have to come offline for a month or two at a time. So we see these moments in the spring and the fall where with a lot of thermal outages, if you get a day with lower wind and higher demand.

Right, climate change is happening, and you might, in April, like in March, we had a day in Austin in early March, it was 94 degrees. Right. So those kinds of things start to happen more and more, and you can have a few hours in the spring. So now you look at, "Okay, what do those points have in common?" It's almost always extreme temperature. Let's look at HVAC, let's look at insulation, let's look at thermostats. Let's do the things that have the biggest impact on the times that are tightest on the grid, and that then enables more economic growth that allows space for these industrial loads of whatever kind to come onto the grid.

David Roberts

Well, can we talk about Senate Bill 6 real quick? Because it's related to this data center question. So, as I understand it, Senate Bill 6 sort of started good and promising and has lost a lot of the features that made it good and promising. But maybe just tell us what Senate Bill 6 is, what it was intended to do, and its current state.

Doug Lewin

Basically, Senate Bill 6 was laid out as a bill to deal with these large loads coming to Texas. So again, like April, ERCOT makes the presentation in June, there's a hearing in Senate Business and Commerce. Senate Business and Commerce is the relevant committee that oversees ERCOT PUC. They kind of freak out, okay, all this is coming, they start working towards some kind of a large load bill. There's a couple of different things in there that I still think are okay. One of which is in Texas, one of the forms of demand response, it's one of the crudest forms, but it's still valuable, is what's called emergency response service.

We have a 10 minute and a 30 minute, things are going really bad. There's a signal sent and half of it is like load reducing and half of it is sort of emergency generation spun up. Now, they're looking to create a 24-hour product because especially in the wintertime, these winter storms don't just catch you by surprise. You can see them coming a week away. Right. And certainly three to four days ahead. You know, like, "Okay, this one's going to be really bad." So, this would create a perfect program where industrials — because basically what happens whenever it gets cold is, you know, there are calls made and people call each other.

ERCOT, PUC, various policymakers call around, "Could you turn off?" This would kind of organize that. That's a good thing.

David Roberts

It's incredibly analog.

Doug Lewin

It's incredibly analog. But, like, at least this would put some order to it and create some kind of a market around it. What I was more hopeful that the bill would do was actually start to create some incentives like, like a speed to interconnect because that is the incentive that they want the most. Like, there's bills floating out there right now that give tax breaks to data centers. These folks don't want tax breaks. They've got money falling out of their pockets.

David Roberts

I know. This is not like sports stadiums. You don't need to seduce them. They're desperate.

Doug Lewin

Exactly. And so, I think it makes sense to give them a speed to interconnect if they sign a PPA for incremental new megawatts, bring new megawatts to the grid, have backup power on site. And what's the duration of that backup power you get? If you put a 1-hour battery, that's worth some amount of credit. If you put a 4-hour battery, or an 8-hour battery, or a 12-hour battery, that's worth more. Right.

David Roberts

And Doug, let me tell you the cool new acronym for this, "Bring Your Own New Clean Energy."

Doug Lewin

It's named after a Texan.

David Roberts

BEYONCE!

Doug Lewin

Yeah, she's from Houston, baby.

David Roberts

Yeah, yeah, I got that from the Vote Solar people. I can't claim it.

Doug Lewin

I heard that acronym for the first time last week. And I was on a Zoom call and I literally came off mute and stopped the Zoom call. And I was like, "How have I never heard this acronym before? That is amazing."

David Roberts

This is something everybody's struggling with these data centers, right? Are they obliged to put power equal to their demand on the grid when they come on?

Doug Lewin

Well, in line with the Texas way. Like, I think the way to do this is not to oblige them but to say, "Hey, if you want to interconnect, we'll interconnect you faster —" It's a "yes, if" right. It's not "you're required." But you know, we are going to recognize that some of the — now you have to be careful there because you also have these more like — this is the other thing I think is eventually going to happen, this may take years and years but I think eventually we're going to have different rate classes for these different large load customers.

Because I think that there definitely is something to that speed to interconnect for data centers. And then, you have to think a little bit differently about say, like we're getting big investments from Samsung for chip manufacturing. Right. I don't think you want to set them up against a data center like for who's going to get interconnected first. That wouldn't be fair because their energy cost, it's a huge portion and they're so sensitive to hundredths of a penny a kilowatt hour.

David Roberts

Data centers are unique, I think, is like the bottom line here. They're not like other loads. They're very different than anything that has shown up on the grid in the past.

Doug Lewin

And Dave, let me throw out just one more thing about this BEYONCE and speed to interconnect. Another possibility for the speed to interconnect would be for these data centers to create a fund to pay for reductions on the residential side. Right. Because one of the things we're worried about are equity impacts. Like our, you know, residential rates have gone up 20% in Texas in the last three years.

David Roberts

And there's some talk among Texas legislators about, like, "We should stop this." You know what I mean? Like, closing the door to new data centers. Precisely. Like, why should we be immiserating our everyday rate payers for these giant corporates? Which is not a crazy thing to think.

Doug Lewin

There's a lot of discussion around that. And again, I think that comes out of a place of fear where people are like, "Wait a minute, our grid is already struggling. Now we're going to add all these big loads." Your grid is struggling only a few hours out of the year. If these loads pay into a fund to reduce scarcity during those hours to reduce the risk of grid outages, then that is a good thing for them. And you could actually, by taking data centers, make the grid stronger, less fragile, more reliable, more resilient if they're bringing their own power, putting backup power on site, helping reduce residential demand. All of this is possible.

David Roberts

Yes, and just to nod to Tyler Norris here and his team, which did this paper recently, which I probably should do a whole lot on. But basically, like if demand centers, the headline is always that demand center demand is inflexible, they need constant high supply. But if they can be flexible, just like 3 to 5% of the year, you open up enormous new capacity. So that's another thing, like if you want to connect to our grid, A, pay into this fund, B, pledge some degree of flexibility and C, bring your own power.

Right. To me, that's the perfect data center bill.

Doug Lewin

Yeah, and help the residential customers in the area that you're moving into. I think that's the right formula. And yeah, I actually just interviewed Tyler last week. We haven't posted this pod yet, but in ERCOT, the number was half of 1%.

David Roberts

I was doing it from memory, smaller than I remembered.

Doug Lewin

Yes, that would free up 10 gigawatts in ERCOT, half of 1% from the data center. So, small amounts of hours yield huge benefits on the power grid. So, you know, I really do think, and you know, demand response really is a valuable resource. And ERCOT and the PUC and the legislature, they should all go after it. It needs to be coupled with energy efficiency. It's like chocolate and peanut butter or peanut butter and jelly or whatever. They just go so nicely together.

David Roberts

We've gone through several crazy things that the Texas Senate is currently contemplating. Is there anything good going on? I know there's lots of geothermal potential in Texas. I know there's lots of talk about trying to spin up a new nuclear industry. Are there laudable things happening in the legislature right now that we should know about?

Doug Lewin

Yeah, and let me also say, one of my all-time favorite Volts podcasts is the one you did with Jigar Shah about nuclear. I learned so much from that podcast. I was really very confused, honestly, about like what the hell was going on with nuclear? And I think you called it something like that, your episode.

David Roberts

What the hell's going on with nuclear?

Doug Lewin

So, it was perfect. And it hit right at the right moment. The clouds kind of parted and I understood better. So, thanks for that. I interviewed Rusty Towell and Doug Robinson. Rusty is at Abilene Christian University in Texas. Doug Robinson is CEO of Natura Resources. They're developing a test reactor. They got, I think, only the second license for an SMR in the United States. It's going to be built at Abilene Christian University.

David Roberts

They're actually going to build one of those things, huh?

Doug Lewin

They are. They've got their permit from the NRC. It is, as a matter of fact, and I think I put it on the post, but you can go to Abilene Christian. I think it's called NEXT Lab, I think is what their lab is called. And they've got a little time lapse of them actually building the facility where the nuclear plants — yeah, they are constructing it. It's a one megawatt. Right. So like it's the test reactor. And this is going to take time. It is going to take time. But the state, both the House and the Senate, are looking at nuclear incentive bills.

And the big bill is House Bill 14 by Chairman Cody Harris in the House. But there's companion legislation in the Senate, Senator Parker, et cetera, that are working on these. And yeah, I don't want to be overly negative. There are really good things happening in the state. The governor had put together the Advanced Nuclear Reactor Working Group. It was chaired by then Commissioner Jimmy Glotfelty. They put out a report that I think is significant not just because it recommended Texas should be a leader in nuclear and we should deploy nuclear energy. They said that Texas's energy leadership over the last several generations positions us, if we do this right, to actually lead the nuclear renaissance with manufacturing in the state.

That, if we can really, you know, what Jigar said, I think, on your podcast was that "Small modular reactors are neither small nor modular," like really making them modular. And if you think of all the industry in Texas around the oil and gas industry, right. And how it's been built up over time, modularizing components, fabricating components, we could do that here on nuclear. This is where I just sometimes feel crazy. It's like legislature. Why do you want to spend your time trying to destroy the solar industry when you could be doing this instead? It just drives me crazy.

And then, by the way, on geothermal, there's been broad bipartisan support. There's a great organization now, the Texas Geothermal Association, definitely look them up. Led by Jade Doss and by former Railroad Commission chair and PUC chair Barry Smitherman, they are working on geothermal. And that is absolutely directly using the skills of the oil and gas industry. You interviewed Tim Latimer for your podcast. Another great episode, former oil and gas employee Cindy Taff from Sage Geosystems, a 35-year veteran of the oil and gas industry, is now leading a geothermal company. You're seeing SLB, formerly Schlumberger, and Baker Hughes, all these oil field service companies, getting into it.

David Roberts

Hey, it's dispatchable. Unless they arbitrarily define it out of that category.

Doug Lewin

Oh, my God, right? Yeah. I mean, they might, but hopefully they won't. So look, I think things are happening there with nuclear, with geothermal. There are some good things also happening around energy efficiency. Again, the Senate, to their credit, passed an energy efficiency bill last session. Hopefully, they'll do that again. Both the House and Senate-based budgets had that $1.8 billion for the Backup Power Packages, which will save lives during the next year. If we would have had those —

David Roberts

And those are like behind the meter microgrids?

Doug Lewin

They could be. It kind of depends on how it's rolled out. I think they are thought of right now as something a little bit less than that, sort of more of these, like modularized, standardized backup power packages. But yes, I mean, effectively you could think of the places they go, depending on the application, as an energy park. But I think the main point is whether it ends up being a bespoke energy park kind of thing or whether it ends up being something very standardized for every nursing home. Hurricane Beryl last summer was a Category 1 where Houstonians were without power; a couple hundred thousand of them for one week.

So, God forbid they get a category 4 or 5. These backup power systems will save lives if they're deployed. And the inverse is true. I hate to state it negatively, but we will lose lives. We know the next major hurricane will come. It's just a question of when, not if. So, we really need to get those deployed. And again, to their credit, the legislature has put those into their base budget. So, there's a lot of great stuff happening in Texas. And again, the market is very dynamic. We're seeing a lot of renewables, a lot of storage.

This ADR pilot, it really does kind of feel a little bit to be cliche, but best of times, worst of times. I told you at the beginning, I'm exhausted.

David Roberts

Yeah, well, speaking of worst of times and speaking of your exhaustion, tariffs come down, apparently.

Doug Lewin

Yep.

David Roberts

And even in the absence of any of these crazy bills passing, they're going to do some damage. Have you even had time or mental space to try to wrap your head around what tariffs might do to the growth of all this clean power in Texas?

Doug Lewin

Well, I did listen to your podcast just from last week. I forget the gentleman's name you had on speaking about tariffs, but it was fantastic. One of the things he said was, "Are we going to actually be able to build out these data centers that President Trump wants so badly if we're not able to get the components for the electric infrastructure to build them?" So, I mean, it's a real problem. Today, as we're recording, the ERCOT board is going to meet later this afternoon and they've got a presentation from the Federal Reserve Bank of Dallas. The Federal Reserve Bank of Dallas' estimate on the 25% tariffs on Canada and Mexico alone is that it would cost Texas' gross state product 1.5%, and it would cost 109,000 Texas jobs just from the Canada and Mexico tariffs.

ERCOT CEO, Pablo Vegas, told the Public Utility Commission, I don't know if he's told the legislature this yet, that he thinks there would be impacts to grid reliability from tariffs because so many of the components on the grid come from overseas. So, yeah, I mean, it obviously would be — the Texas Association of Business, the statewide chamber, is just sort of beside itself right now. Their CEO has been posting things on LinkedIn that I think the last one was called "tariffs are taxes." People are freaking out down here. I mean, every state would be harmed by tariffs. Texas is uniquely vulnerable to high tariffs.

David Roberts

Interesting. The gentleman who is discussing supply chains is Antoine Vagneur-Jones of Bloomberg NEF. I just want to give good credit. Okay, so I guess the final question, if we're wrapping up, I kind of wonder has watching things play out at the federal level. I think a lot of people, both inside and outside the business world and the political world, had in their heads, "Somebody somewhere in a back room has their hands on the reins here. They're not going to do anything too crazy." And now they are doing very crazy things. Lots of people in the business and political world are like, "They can't be serious. They're not really going to shoot the whole country in the foot like this. Like, it's crazy!"

"But, they're doing it. Has that experience increased your appreciation for the possibility that the Texas legislature might really do this, despite its manifestly obvious negative consequences? Like, are you more scared than you used to be? Or, in some senses, the national craziness, do you think, maybe going to push Texas the other way? This is unanswerable, but what's your sense of how the national, the federal craziness is going to affect all this?"

Doug Lewin

I mean, it is to a certain extent unanswerable. But I will say this: I am very worried about what the legislature might do with any of the bills that we've talked about. 819, 715, 388 and Dave, I can't tell you how many other wild and crazy — I mean, there's a bill to put a moratorium on solar and wind for two years. I mean, there's a long list of really damaging bills. And again, damaging not just to renewable energy in Texas, but just damaging to Texas. They're just anti-energy, anti-growth, anti-whatever you want to say, bills.

And yeah, I mean, it's terrifying. I mean, you know, I mean there's obviously been a lot of bad bills that have passed the legislature in recent sessions and who knows what's going to happen. And you also have some, you know, significant involvement of very high dollar ideological donors. Russell Gold, the great energy writer, if you never had, I don't know if you don't think you've ever had Russell Gold on, he wrote "Superpower," he wrote "Boom" on the shale boom in North Dakota. Great energy writer, writes for Texas Monthly, did a cover story on Tim Dunn, a man who made his fortune in the oil and gas industry, sold his business for $2 billion and is funding candidates at an insane rate, just like a bottomless pit of money.

And he is very much on this warpath against renewable energy for ideological reasons, again, not because he's an oil and gas person. There are lots of oil and gas people that support renewables and see opportunities, even if not directly, just to power their operations. All this stuff we've been talking about, but that's not what this is. So, there is absolutely a chance that this session, terrible things will pass. That chance just probably keeps going up from here. Who knows? But yes, I take it extremely seriously and the sort of analogy used with the federal government of like, is somebody sort of like reining this in?

I don't know. I like to think that people are looking at these numbers and going, "Yeah, I'd really like to not have outages in the summertime when it's 105 degrees."

David Roberts

Should we formally cap our state's economic growth?

Doug Lewin

It seems like a terrible policy to me, but, like, you know, I'm not in charge, so who knows what will happen. And yeah, you know, I would think people wouldn't want to have outages when it's 105 and lose their air conditioning. But, like, apparently some people do.

David Roberts

Well, it's white-knuckle time for everybody.

Doug Lewin

Yeah, I'm not resting super easy, and no one involved in any of this stuff will be until June 2nd, which would be what we call sine die, the last day of session.

David Roberts

So, maybe we'll check back in when everything's settled out and see. Would love to. Good Lord, what happened? All right, well, thank you so much, Doug Lewin. Love your work, love your newsletter. What a fascinating time to be alive in Texas for you. So, I hope you're, I hope you're enjoying this on some level.

Doug Lewin

It is exciting. Never a dull moment. So, we got that going for us. Thanks so much, Dave. I really appreciate it. Thanks for all you do.

David Roberts

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

David’s Notes

1. There’s no mailbag this month — I’ll be doing another edition of “What the F is happening” instead, despite still not knowing what the F is happening — but please feel free to leave questions for next month below.

📌 Reminder that 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. I'll make anyone reading this a bet. Remember last week's pod about trends in global electricity, referencing the big annual report from Ember? In ten years, when Ember issues that report, and we look at the US numbers, stuff like this …

… won’t even be visible. You won't even be able to point to a spot and say, “here's where Trump tried to save coal,” because the stuff he’s doing won’t even have enough effect to squiggle the lines.

3. 🌎 Things are pretty grim here in the US, but there's lots of interesting decarbonization work going on overseas. In recent pods I’ve covered China, Australia, Iceland, Finland, and Pakistan. What other countries are you curious about?

4. If you are online at all, I'm sure you've seen or heard something about “abundance,” the new book and general ideological push from Ezra Klein and Derek Thompson. On his podcast, Chris Hayes interviews Klein about it and I think it’s the best and most sympathetic presentation yet of the concept. Hayes specifically cites me on the subject of energy abundance. This is something I’ve been thinking about a ton — how to introduce it to people, how it relates to the political abundance stuff, who to talk to about it. What do you think when you hear “energy abundance”?

5. ✅ Community comment of the month: thank you to James and Lauren for posting climate opportunities in the last community thread. I’d love to see more of this! Hire one another.

Monthly Thread — How It Works

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

• CLIMATE JOBS & OPPORTUNITIES: Share climate jobs/opportunities

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

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

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

• 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.

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

In this episode, I'm joined by Helena Sarén to discover how Finland achieved a nearly 95% carbon-neutral electricity mix and set the ambitious goal of carbon neutrality by 2035. We dig into the country's pragmatic approach to nuclear power, how its relationship with neighboring Russia has shaped its energy independence and security strategies, and how Finnish industry is actively pushing for more aggressive climate targets rather than resisting them.

(PDF transcript)
(Active transcript)

Text transcript:

David Roberts

Hello, everyone. This is Volts for April 11th, 2025, "What's up with clean energy in Finland?" I'm your host, David Roberts. Finland is a Nordic country in the very north of Europe, with Sweden to its west and Russia to its east. Were it a US state, it would rank fifth in size (just behind Montana), 23rd in population (just behind Minnesota), and 27th in GDP (just behind Louisiana). It is on roughly the same latitude as Alaska.

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Quietly, without getting nearly the attention of some other countries one could name, Finland has become a global leader in decarbonization. Already, nearly 95% of its electricity comes from carbon-neutral sources, led by nuclear power. In 2023, Finland opened its fifth nuclear power plant; nuclear now provides close to 40% of the country's electricity. Wind, hydro, and biomass provide most of the rest.

The country's government has adopted the extremely ambitious goal of full carbon neutrality by 2035, followed by carbon negativity; in 2022, it released a detailed climate and energy strategy. It was, not surprisingly, colored by concern over Russian aggression; Russia invaded Ukraine in February 2022 and Russian-Finnish relations remain fraught.

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Finland has got one of the most reliable energy grids in Europe, its own nuclear waste repository, and a whole bunch of district heating, all of which sounds very cool to me.

So, to dig in and hear more about what's going on up there, I have with me today Helena Sarén, head of the Zero Carbon Future Mission at Business Finland and a longtime player in the clean energy scene there. We're going to get into all the country's successes on energy, what remains to be done, and what other countries might learn from the Finnish model. Without any further ado, Helena Sarén. Welcome to Volts. Thank you so much for coming.

Helena Sarén

Thank you, David. It's a great pleasure to be here today with you.

David Roberts

So, I'm looking here at this graph of Finnish electricity sources. Got nuclear around 38%, wind around 24%, hydro 17%, biomass 11%. That's an extremely clean mix relative to a lot of other countries. And so, I thought we could start with just a little history. How long has all that nuclear power been around and how long has all that wind been around and what was powering Finland before all that stuff? Maybe give us just a little history of the kind of sustainable energy in Finland so far.

Helena Sarén

Finland is — we are not very rich in natural resources, so we do not have any oil, gas, or coal of our own. We have plenty of forests, plenty of clean water, quite nice wind conditions, plenty of solar in the summertime — much less during the wintertime — and so that's about it. We are very pragmatic, I would say, as a country and a people. And we have recognized very early on that we have to build on the resources we do have and also be capable to have that kind of resilience no matter what happens in the world.

And that has led us to have a very diverse energy mix decades and decades ago. It started pretty much with biomass and hydro energy and that kind of stuff. Gradually, we built nuclear power plants. Then, during, I would say, the last 10-15 years, much more focus has been on renewables, namely especially wind energy and solar. In wind energy, the situation shows that it's mainly onshore at the moment, with a couple of turbines in the sea, but offshore is coming strongly into the picture. We also have an increase in solar. As you stated, CO2 neutral electricity production is about 95% at the moment, which is pretty high.

A major increase has taken place in wind energy. At the moment, there is a pipeline of new wind energy projects, whether onshore or offshore, that could generate more electricity than the whole consumption in Finland at the moment.

David Roberts

Oh really? It's interesting because, you know, Finland, much like a lot of other countries, is trying to decarbonize and has realized that decarbonization comes mostly from electrification. So the actual electricity demand in Finland is going up as it is, as it will be in many countries electrifying. So, you have this legislation that passed that set this goal of carbon neutrality by 2035. You have this strategy that comes out in 2022. Really fascinating strategy document. I read through most of it, I mean, it's quite extensive, but it really —

Helena Sarén

It is extensive. Yes.

David Roberts

You really get the sense of — you know, like here in the US, I guess everything that the government does is so controversial. Like in the US, you know, you could propose cute puppies and 50% of the country would instantly hate cute puppies. But like, this just has, the document has the feeling to me of like, "We're not arguing about this anymore, we're just being practical." Like "We all agree we need to do this. How should we do it?" You know, the pragmatism really comes through. It's quite refreshing. So maybe talk a little bit about what this legislation does and all the kind of sectoral roadmaps, like how are those coming along?

Helena Sarén

Yeah, this is maybe a little bit longer story then. So, as you stated, there are really, really ambitious targets. So, carbon neutrality by 2035 and carbon negative by 2050 and we have also stated that we will phase out coal altogether by 2029.

David Roberts

Coal is now 1.5% of your mix. Got to squeeze that last bit out.

Helena Sarén

Yeah, and most of the energy utilities actually are phasing, or have actually already phased out the coal, are going to do it well in advance, not waiting until 2029, but they are doing it now. So that is also something I think is phenomenal there, what is happening. So what our targets mean, all in all, is that when we are thinking about CO2 emissions, we should reduce the emissions by 2030, about 60%, and for 2040, 80% when we compare to the figures in 1990. So, huge, huge reductions.

David Roberts

Yeah, 2030 is not that far away.

Helena Sarén

No, it's not that far away. No, no, not really. And I would say that the reasoning there behind why we have reached such nice figures already by now and such nice reductions is mainly because our energy industry has invested a lot and they have done their share. Also, our industries are very committed. I'll get back to this soon. And there where we have challenges, which is pretty much the same in many other countries as well, is the transport and mobility that is so closely connected to our everyday lives, or how I take my kids to their hobbies and how I drive to the office, etc.

So, that is a very, very difficult question in every country, also politically. And then another story which is also challenging is this agricultural and forest sector. So, this kind of land use sector. But I would say that the energy sector and industry sector, they have done a remarkable job already by now. One typical feature in Finland is that we are not a hierarchical country. So, I could say that in a grocery store I could bump into a minister buying his or her groceries, I could go and talk with him or her, I could give a call to the ministries or even ministers if I have a telephone number, and probably they would even pick up the call.

So, in that way, it's easier to collaborate when we share the same target. And that means that all the bits and pieces in our authorities and ministries and so forth are running towards the same targets. So, that's easier.

David Roberts

Would you say that across kind of politics, different parties and everything, are people mostly on board with this? Is this pretty popular? Is there any substantial political opposition to this?

Helena Sarén

I'll get back to you soon about this, but I want to say a couple of things still about our industry. You asked us about the roadmaps and one good example of our collaboration, and really all of us driving towards this same ambitious target, is that 14 of our main industries created their low carbon roadmaps in 2020 and last year they renewed them. And that shows that all the industries in our society are very committed to this low carbon transition. And what was very late news was that about a couple of weeks ago, 200 Finnish companies signed the Finlandia Declaration and it was supported by our main industrial associations.

And they had a delegation and met with our Prime Minister and said, "Please keep our ambitious targets alive."

David Roberts

Oh, interesting.

Helena Sarén

Yes, and we are committed to doing our share and making the investments. There were some very international companies which signed the declaration, like ABB, Wärtsilä, Veolia, Valmet, Kone. They are making the elevators and that kind of people movement equipment. So, I mean, I would say that our industries and businesses see that this is the only way for Finland to renew and make new business out of decarbonization. And when we go back to these political questions, and of course, there are always debates here and there, probably not to the same extent that you are having — a little bit milder.

David Roberts

Well, you're not cursed with a giant fossil fuel industry, so that does make things somewhat easier.

Helena Sarén

Yeah, that might be. That might be. So, like our present government, even though they probably had some different kind of opinions early on, they are all now committed that this is now in the law and we are going to stick to that one. And I would say that the many parties also in the opposition, they are also supporting the targets because they were in a previous government which really put this law in force. So, I would say it's pretty unanimous. But of course, there are when we're talking about windmills, it's "Not in my backyard" effects.

David Roberts

Oh, you have that too.

Helena Sarén

Yes, it's everywhere, you know. Probably, people don't want to have the windmills in front of their summer cottage when they are having the sauna and go to swim in the lake or the sea. So, that's about it. But it is doable.

David Roberts

And I wonder, while we're on politics, let's just touch on it. Is the threat of Russia, is Russia being right next door and Russia being so dominant in gas, that obviously shapes Finland's politics. And I wonder if that's part of the reason why there is so much agreement about this. Do you know what I mean? Like, it's such an obvious national security issue. I wonder if that is part of the reason why everyone agrees.

Helena Sarén

Yeah, it's a huge national security issue. And from my personal point of view, if I may bring that to the table, please, it's about how we got our independence in 1917 and then during the Second World War we had a couple of wars with Russia. And from my personal family history, my mother's family had to flee. So we lost everything. So our home and everything and the part of the country now belongs to Russia. And I have also three children and two boys. And they just were in the army because it's a must to do in Finland.

All males have to go to the army.

David Roberts

Right, right. Everybody does a year.

Helena Sarén

Yeah, it depends. It can be a minimum of six months. But most serve about 11 months, yes.

David Roberts

Interesting.

Helena Sarén

Yes. So, that kind of family history. But I want to emphasize here also that we don't have that kind of wish that we want to get that land back. So, we think that's history, that's gone. And we have lived with that one and have great memories about earlier times. So, that is something. But Russia, yes. And like I said in the beginning, we have very pragmatic people. So, we have learned to live with our — we call them the Big Bear. They're next door. So, we have learned, but we have always been prepared.

That's something that we have always been doing. That's the reason why we joined the European Union. That's why we have been very much intensifying the collaboration with other Nordic countries. And that was one of the reasons we also joined NATO.

David Roberts

Yeah, Finland spends more per capita on its military, I think, than any other European country.

Helena Sarén

Yes, that's true. And we have the largest artillery in the whole of Western Europe. Just one tiny note here. But about Russian gas. When the aggression towards Ukraine and the war in Ukraine started, we ended all the imports of Russian gas. We have a Russian — the pipeline is still existing. There was gas flowing directly from Russia to especially the southern part of Finland. But we ended that pretty much after the war started.

David Roberts

And so that must involve then building some LNG import facilities if you're going to get it elsewhere?

Helena Sarén

Yeah, as an example, we are now importing LNG from the USA. Then, we also have the kind of floating storage which we share with Estonia and that kind of reserves also and other sources of hydrocarbons.

David Roberts

And just to clarify, in the US, we use a lot of gas for electricity, but you guys do not. Gas is mostly an industry feedstock.

Helena Sarén

For industrial purposes, yes. And also, what makes a huge difference when we compare Finland to, for instance, Central Europe on this gas topic, I would say that it has much larger effects with the Central European countries. As there are many households, they are heated by gas and they are using this gas in households. But in Finland, it was very minimal. If I remember right, it was something only about 8,000 households.

David Roberts

Interesting.

Helena Sarén

So, I mean, it's just, it was a minority.

David Roberts

So, if there's any impact, it's an impact on industry. It's just industry getting a feedstock from somewhere else.

Helena Sarén

Yes, but then, on the other hand, it was probably easier to replace, and many of those industries were not based along the gas pipeline. Instead, they were, for instance, somewhere on the western coast where they anyway had to take them to Finland by ships and so forth.

David Roberts

Interesting. So, I want to get back to heating later, but first, I want to talk a little bit about the grid. I am, this podcast and me personally, very devoted to grids, very in love with grids, clean grids and much to my sort of delight when I started researching this, Finland has an extremely advanced, resilient, secure, and strong electricity grid. So, very few brownouts or blackouts, anything like that. Like, very good grid. So, let's talk a little bit about how you run your grid. It is very much market-based. There's an energy — pretty advanced — energy market.

Tell me a little bit about some other features of how you've built that grid up.

Helena Sarén

Yes, we have a national grid operator, surprisingly called Fingrid. And I really highly value the work that they are doing as they are constantly looking to the future as if there is a huge amount of new renewables that need to be linked to the grid. It might take six, seven, eight years with the licensing when it's constructed. So, they have already been very much advanced, something like 10 years ago, started to build that kind of capacities and had all that kind of construction work in the pipeline. So then, our grid was ready when new wind turbines became operational.

So, that is one thing to look into the future and have different kinds of scenarios and so forth.

David Roberts

Smart.

Helena Sarén

Yes. And then an additional thing is that we have been for decades connected with other Nordics and we are part of the electricity market called Nord Pool. Obviously, that has been one of the backbones for our industrial, I would say, electrification and also our society to electrify and also to develop because we have been able to utilize also Norwegian hydropower and sometimes when we have also excess electricity, we could sell it to Sweden or Norway or even Denmark. And now we have also another connection to the Baltic states. So, I would say that has been a very, very good move.

David Roberts

And this is a market with spot pricing that varies by time and location. You know, just the sort of location and time-sensitive pricing that we're struggling to get over here; it's fully in place there. There's lots of models for distributed energy sources feeding into the grid. There's a lot of advanced thinking about that. But then also, these energy communities, I was very intrigued by that. Tell me a little bit about the thinking there.

Helena Sarén

Yeah, if I may still go back a little bit about this grid, there are a couple of features there and, like you very nicely said, it's spot priced and it has gone so far that I, as a consumer, for instance, am buying spot priced electricity. So it varies on an hourly basis. And we have had in Finland, in every household, smart meters for about 20 years. So every household has had a smart meter and probably now already the fourth or fifth generation of smart meters, which has been the rollout, and in a couple of years' time, it's going to be like in 15-minute intervals.

David Roberts

Interesting.

Helena Sarén

Yes, smart metering. So, that means that we can optimize the network and the consumption all the time. That is one of the reasons, I would say, that the market prices for consumers and of course then from other industries as well, has been one of the lowest within Europe.

David Roberts

Yeah, yeah. I meant to mention that not only is this a very sophisticated grid and a very reliable grid, but you have cheap electricity, some of the cheapest electricity in the EU.

Helena Sarén

Yeah, yeah, yeah, that's true. And as an example, in my own house, it's kind of a one-family house with five bedrooms just to give the scale, last year the electricity bill was about €1,500, which is about the same thing in US dollars. And that includes the electricity as such, but also electricity for the heating. And take into account that we have a pretty cold five, six months here. So, I think it's very reasonable pricing, I would say.

David Roberts

Well, also, you know, when you have all that wind down the coast and all the wind is blowing at once, you get something we get, you know, in some individual states here sometimes, which is basically free electricity.

Helena Sarén

Oh yeah, that's true.

David Roberts

Electricity is zero or even lower.

Helena Sarén

Yeah, yeah. And it was this Saturday, so now this is Monday, so last Saturday we had a negative price. So actually, when I was consuming electricity, I got paid for that.

David Roberts

So tell me about these these energy communities, what's the sort of idea, thinking behind them?

Helena Sarén

Energy communities, I find a very fascinating concept, as you mentioned as well. So, a couple of them with what I'm more familiar, I would say, it's like an individual energy grid or, in other words, a kind of community.

David Roberts

Microgrid is the —

Helena Sarén

Microgrid might be the right wording for that one. And there are like energy generators, there might be like a solar panel field, there might be then storage solutions there, there might be some kind of hydrogen solutions there. And then you combine it also with the heating and cooling. So some of these energy communities are located for instance closely to shopping malls where there is excess heat and they can just put the excess heat then and it can be utilized somewhere else for instance in the process industry or heating the greenhouses or something like that one.

So, it's like a community where the generators, the producers, the off-takers, they have jointly created that kind of a microgrid. And it includes quite often electricity and the heating as well.

David Roberts

Yeah, and I think the idea here is that these communities are, to some degree, self-sufficient, can be islanded off from the larger grid. So this is like, this is a grid architecture, cool grid architecture thing that I've done many, many pods on. Like a bottom up, a bottom-up grid. Finland's at work on that.

Helena Sarén

Yes, and many of them also have connections to this Fingrid net, just in case. But like you said, self-sufficient, and some of the new residential areas, if they are not very closely linked to the main grid lines, they might have an opportunity. I want to go and take this kind of energy community viewpoint.

David Roberts

Cool, love that stuff. So let's talk now about nuclear power. So it's sort of funny, I didn't know before going into this that Finland had so much nuclear power. And it's sort of like anytime in the US context you hear about nuclear power, it is a) an incredibly loud, angry controversy and b) very little nuclear power results from it. It's mostly controversy and very little actual power. And it looks like in Finland, you've gone the opposite way. Lots of power, not that much controversy. I mean, in the US, this question of how to build nuclear power plants on time and on budget is apparently a problem that we just cannot solve.

And it sounds like it works in Finland. So, I'm just like, "Is it what it looks like from the outside?" Are these popular? Are these... is there any controversy around nuclear power and how are you building them on budget? Because we can't seem to figure that out.

Helena Sarén

Oh, the budget. Right question, that is a tricky one. Yeah. But if I go back some decades, maybe I would say '70s, '80s and this is a good example as at the time, especially the Green Party, like there was a huge green movement also in other parts of Europe. They were opposing heavily the nuclear power. But some years back here in Finland, the Green Party said that they are supporting the nuclear power because it's clean.

David Roberts

Oh, interesting. So, you took a very different path than Germany, for instance.

Helena Sarén

Yes, they had the "Energiewende," and yeah, they have had some challenges now, I would put it that way because of the Russian gas and everything there. So, its industry definitely needs lots of electricity. So yeah, that's a little bit different kind of attitude and that probably comes back to this pragmatic viewpoint. We see it very strongly that it's clean energy and in order to make the decarbonization before all the other technologies and solutions are going, we have to ensure that we have enough of them there. So, during this time, we probably need nuclear power.

And, as an example in Europe, for instance, France is sharing the same kind of viewpoint, and so other countries are doing things a little bit differently.

David Roberts

So, one fascinating aspect of this. You just had this new nuclear plant open up, was it last year, the year before, which was actually the third reactor on that site.

Helena Sarén

Yes.

David Roberts

Which is all on this one little island. And now you're in a situation where this one little island is providing 30% of Finland's electricity because it's got these three nuclear reactors on it. Pretty amazing. And on that island, and I'd love to hear a little bit about this, you have onsite waste management. This is something else that is like endlessly controversial. In the US, we can't seem to find a place to put our waste permanently. So it's just being stored onsite and we fight and fight and fight about it. So on this island though, you have something sort of self-contained, you know, all the waste just gets buried onsite. Talk a little bit about how that came about.

Helena Sarén

Oh yeah, of course, when we are talking about nuclear power, then the burning question is about what to do with the nuclear waste because it's radioactive for a pretty long time. And we started to plan and build a deep cave. I might say that might be the right, right wording. It's in Finnish, we say Onkalo, which means that — the wording means like a deep cave might be a right, right translation for that one goes several hundred meters, I'm not quite sure, in depth there. And have different kinds of holes there.

So, I mean, you can have the radioactive waste then, and securely and safely be deposited forever then. But one of the good points here is that our ground, it's mainly granite so it's very stable. We don't have any earthquakes and so forth. So it's safe to put it there because in some parts of the world, you cannot put it. So, we have a very safe earth crust here so you can have it. And that was already started, the planning, when we had our first nuclear power plants. So already, we had to start and find out what would be technological solutions for depositing them for us then, till the end.

So, that was one of them.

David Roberts

Nuclear is now up to about 40% of power. I know there's a lot of research going on around SMRs, around small modular reactors. Is there a big push for more nuclear? Like, is that sector still expanding, would you say?

Helena Sarén

I would say that it is. And even though there was a time in the world, maybe it was Fukushima and others, so nuclear power was not that popular. During these decades, we still kept in Finland the research and development running. So, we didn't close that track of research and development. Some of the largest energy companies in Finland have recently stated that they are doing the calculations about whether there should be some new nuclear power plants. And now we are talking about this large-sized because after a decade or so, some of them will be closed down because they are at the end of their life cycle.

So, what will happen then? They are there making the calculation, but obviously, it's a huge investment so they need to make the calculations for that one. But the SMRs are very interesting and energy utilities, some of them have stated also in Finland, they want to have a ready to invest in those to also produce the heat for our district heating network. So, that is a highly, highly interesting area not only in Finland but more largely also in the European Union. And by the way, we have also the memorandum of understanding with the USA about the nuclear collaboration.

David Roberts

Oh, interesting. Yeah, we've been talking about SMRs forever in the US, but maybe pragmatic Finland can actually build some. Let's talk about wood then. This is a bit of a controversial subject in a lot of places. So, Finland is sort of legendarily covered with forest, uses a lot of wood in electricity via biomass for electricity, and these district energy systems, which are all over Finland mostly, as I understand it, run on wood chips, also run on wood. So, you know, in a lot and, certainly in the US, the whole question of whether wood forestry is actually zero carbon is very controversial.

So I wonder, is it also controversial there in Finland? Like how is wood largely viewed as a sustainable source there? Or are there fights about forestry and about how to calculate carbon uptake and all this kind of stuff? Are forests controversial there too?

Helena Sarén

Yeah, the calculation has been quite a lot on the table recently, as it seems to be that, for instance, we are calculating in a different way than Sweden is. So, I think that personally, we should have a unanimous way of calculating within the European Union in order to be able to compare the situation in different countries.

David Roberts

Well, you are in a shared carbon market, right? So, you should have shared measurements of wood.

Helena Sarén

Yeah, yeah, yeah. But all in all, I would say that we see it as very sustainable and we also take very seriously the forestry and how we take care of our forests because it has been pretty much the bread and butter, the forest-related industries for Finland for already from our independence beginning of our independence time. So it's something that's very, very close to our hearts and it's pretty much international DNA, I would say. I would put it also in that way. But the principle is that we are always taking less from the forests than the annual growth.

That is principle number one, I would say. And then, for what purpose we want to use it, it's mostly on value-added products. So it could be like a construction of houses or something else, but use the wood for more value-added products. And when we are using it as bioenergy, we are mainly using forest residuals, stumps from the forest, etc., which don't have other value.

David Roberts

Right.

Helena Sarén

So, we are not like putting the finest logs in the oven, so to say.

David Roberts

And is. I saw an article that said recent measurements show that Finland's forest has actually become a net carbon producer.

Helena Sarén

Yes.

David Roberts

Recently, I think that has something to do with increased logging. But also, your electricity sector is growing, your population is growing. So, it looks like there's going to be more wood needed in the future, especially if you're going to try to get away from all fossil fuels. So, how are you thinking about that? Because already the forests are obviously in a tender state and you're going to need more wood going forward.

Helena Sarén

Yeah, and now I go back a little bit about this calculation and differences here. How do you calculate? And that's been quite a lot of debate about how you should calculate or whether you should do this and that and so forth. So yes, the most recent calculations show that they are not carbon sinks but they are actually releasing more CO2 than they are taking. But let's leave the research to researchers to take care of the calculations. But one of the reasons why we have now utilized more forests now is that we don't have any imports from Russia because they were used to, used to import a lot of forest products and, and logs and everything from Russia and obviously not now.

But still, I would emphasize here that we are taking care of the forest and we are still taking less than they are annually growing. So that is very, very crucial. And I think we are the most forested country in Western Europe. So that's really, really something, yeah.

David Roberts

Are there any efforts underway to move district energy systems to different heat sources?

Helena Sarén

Oh yeah, that was the other part of the question. I already forgot that one. Yeah.

David Roberts

And if so what, like what are the alternate heat sources?

Helena Sarén

Yeah, under the electrification. So, there are like huge water boilers where the energy companies have invested in. So, when the prices are low for the electricity, they heat the water. So, that is something they are doing, different kinds of energy storage solutions. Very interesting. There's a new company which has studied and made research and has developed a sand battery. So, there are new kinds of solutions coming. And then, as a very interesting piece of information, is that in Helsinki, under Helsinki, as we have this very, very solid ground there, there are these huge large caves where some of them are filled with water and when we have excess heat, they drive the excess heat there and then you can utilize it later on.

So, there are different kinds of solutions. But I would say that utilizing the electricity, for instance, these large water boilers as such, those are going on. So, some investments, yes, are related to bioenergy. But I would say that we see more and more of these new kinds of solutions where you can store the heat or then you can utilize the electricity.

David Roberts

Well, one thing I didn't see come up at all, which puzzled me a little bit, was geothermal. So, in the US, you know, there's both deep geothermal that can do electricity, which is now, you know, very far technologically developed from what it used to be. You can do it now in areas that don't have natural volcanic activity with enhanced geothermal. And then there's also in the US, popping up in more and more places, this sort of these district energy systems that are just using boreholes, just these sort of, you know, it's kind of shallow boreholes to get the shallow heat from the earth. Is there any talk about geothermal in Finland?

Helena Sarén

Yes. Oh yes. Oh yes.

David Roberts

Good. We love, we love geothermal. Everybody loves geothermal.

Helena Sarén

Yeah, yeah, yeah, yeah, yeah, yeah, yeah. They will say one test drill hole, something going down to some 5km or so, and they tested it for some years, but it wasn't too successful then. Now they've closed it down. But anyway, I think it shows that such good development is going on and research is going on. Many houses are utilizing this geothermal for their own purposes. So then it's drilled to something like 100 meters or 200 meters or something like that. But there is more and more development and also the energy utilities are utilizing this kind of mid-sized geothermal which is then maybe some kilometers but not going to 5km or so. So yes, it is part of the mix as well.

David Roberts

Let's talk about one of the things I did a pod on recently, which is the sort of role that urban design plays in decarbonization. So that's everything from the buildings themselves to roads and transportation, walkability, bikeability, you know, all this kind of stuff. Is that playing a big role here in Finland? Does that get a lot of attention? Just this kind of urban fabric itself? I mean, you only have one big city, so...

Helena Sarén

Oh well, that's true, that's true. And it's not that big either. But yes, the urban planning, I would say, has been for decades an integral part of the cities and municipalities when they are planning these kinds of development plans, what they are doing. And in Finland, it includes a lot of activation of the public and people who are living in the area. So, because the kind of public acceptance is very crucial. Another phenomenon here, I think, is that they try to integrate different parts of the society when they are doing the urban planning, for instance, having enough of these kinds of recreational areas and forests and parks, etc.

So, people can spend their free time. For instance, in this capital area, they are jointly planning transportation and mobility solutions not only in Helsinki, which is the capital, but the surrounding cities. So, they are not making only their individual solutions, but trying to think about how we as people are moving around because we are going cross city. I mean this kind of from city to another city to another city.

David Roberts

Is there a big push for more public transit? Because, you know, when it comes to transportation decarbonization, there's basically two big levers. One is you can electrify your vehicles, which I know is underway in Finland. And the other way is just to get people to drive less.

Helena Sarén

Yeah, yeah, yeah, yeah. Public transportation is something that has been, it has been, I could say, always here. And that's why probably I didn't bring it up because I thought it was so self-evident that it is existing, but now I'm thinking about my perspective, it's probably not.

David Roberts

Yes, I know. We do not take it for granted, let's just say.

Helena Sarén

Yes, so we take it very much for granted. So, like in the capital area, there are buses going, there are trains going, and they are all the time thinking about some logistical point of view. So, "Okay, if I take the bus and then I have to take the train." So, all these logistics are working smoothly and I would say also that it's very nicely priced. So, it's also good from that perspective.

David Roberts

It's popular. And there, you know, it's cold there, as I'm sure you're well aware. Is there a big push to retrofit existing buildings to improve their performance, or were they built well in the first place?

Helena Sarén

Many were built. I would say that all the houses, like we have three glasses.

David Roberts

Triple pane glass.

Helena Sarén

Yeah, yes, that's the right wording, that one. But yes, there are these kinds of rules, legislations, have become stricter and stricter. It has developed in that direction and also like new buildings, official buildings, you should have, for instance, solar panels on the rooftops. That kind of things, they are proceeding. Now gradually, houses are retrofitted, yes. But I would say that all in all, they are built already quite nicely.

Already, from decades back. But whenever there is a kind of retrofitting taking place, so naturally, they put extra insulation to the walls and to the roof. Especially, the roof is very important. So that takes place, yes.

David Roberts

And then, actually, you mentioned solar. I meant to discuss solar earlier. So, right now, solar is a pretty tiny sliver of the electricity mix: it's 1.4%. I think probably people who don't know anything about Finland would just guess from its latitude that it's not that sunny. Is there big potential for solar there? Is there a big push to put solar on, you know, not just solar fields, but solar rooftops? Like, is that growing? Is the solar piece of the pie growing?

Helena Sarén

Right now, it is growing not only the solar plants as you mentioned, but individual households are investing a lot in solar panels. And I would say that roughly, at least in southern Finland, you get electricity nicely for about eight months a year at least.

David Roberts

How long is that dark winter?

Helena Sarén

Yeah, yeah, yeah, yeah. Gradually, after the darkest months, you start to get some solar. But then during the summertime, I mean, it's like 22 hours a day sunny.

David Roberts

Yeah, true.

Helena Sarén

So, it depends. And then, also, people can sell the excess electricity back to the grid. So, that is one additional point here. But yes, it's growing fast. Some years back, there was governmental support or aid when people were putting their solar panels or they were exchanging their oil-driven heating systems, so you could get minor support for that one. But it was minor.

David Roberts

So, I wanted to ask about data centers. This is an interesting — as I'm sure you're aware, the whole situation around data centers has changed quite rapidly in recent years. They want lots more of them. There's a big push on to build them all over the US. And I know you have a couple of big data centers in Finland that you're proud of. They're hooked up to — they're using their excess heat for district heating systems. All very cool, very well integrated. So, I'm wondering, given Finland's stability, particularly the stability of its grid and the cleanness of its grid, it seems like all these big companies that want data centers would be knocking down your door to get in there.

Is there a big push to build more data centers in Finland?

Helena Sarén

Yes, there's a big push, I would say.

David Roberts

And, like, is there such a thing as too much of a — you know what I mean? Some states in the US are worried about, like, is there such a thing as too much of a good thing? You know, are you worried at all that you're going to get too many data centers, they're going to dominate the electricity system, et cetera. Like, how do you think about data centers?

Helena Sarén

Yeah, that's a discussion that's going on. And like you mentioned, a couple of big players, large players like Google and Microsoft, have already invested here and Google is making additional investments. So yes, they have been here quite a long time and see this as I would say the grid is good, cool climate is good for the data centers, and also they can do this kind of societal good also when they are, they can get rid of nicely of this excess heat for the district heating cooling. It could be also utilized in, for instance, in sawmills, in drying wood or somewhere in greenhouses.

But yes, there's a discussion going on about how, for instance, flexible the data centers are. They should probably become more flexible. And I would see an interesting development that maybe, jointly, we could develop something related to AI, some kind of competence development around the data center. So it would not just be — sorry for using the word "just" — be a data center, but building some additional components and competencies around that one. So that might be an interesting thing to do. But yes, there is a push and lots of interest towards Finland about the data centers.

But, like you said, probably there is some kind of balancing. I would love to see, yes, we need to have, and it's good that we have the data centers, but I would love to see also other industrial renewable investments taking place which are then a different kind of business and then we wouldn't be too biased on and solely on one area of expertise and would then from that perspective be more competitive as a country.

David Roberts

You still need that balance. Let's talk briefly about hydrogen. I was a little puzzled reading around about this. Like when I look at your energy system, I don't totally see where you need hydrogen. And yet, there's tons and tons of hype about it and activity and research and development projects. So, why all this enthusiasm for hydrogen?

Helena Sarén

Yeah, there are several end usages where you can actually use it, or you can also use it there in between as an intermediate. But it's a very crucial source, for instance, for the steel industry when they want to get in the processes, get rid of some fossil fuel. So, you can also use hydrogen there. And there are a couple of large steel factories in Finland and Sweden, and if they change into hydrogen, it's a huge, huge emission reduction. So, that is one end source that you can use it.

Then, obviously, the hydrogen could also be one form of energy storage as such. But where I would like to see much more emphasis and collaboration and development is how we could utilize hydrogen together, for instance, with nitrogen or together with carbon. And you could take the carbon capture, for instance, from the industries and make new fuels. So, practically the same kind of hydrocarbons that you are now taking, having as a natural gas, you can use it, they make it from other sources as well. So, new kind of fuel. So, whether we're talking about methanol, whether we are talking about ammonia, which is also a good source for fertilizers and at the moment quite a lot of fertilizers come, for instance, from Russia.

And fertilizers are also very expensive at the moment. So, that would be also one additional end product. But then, when we think even more, I would love to see this hydrogen economy evolve to that kind of producing new kind, kind of a non-fossil based chemicals, materials, and even food. And now, I want to mention one very great and exciting example, and it's called Solar Foods.

It makes actually food out of thin air. So, carbon capturing and so forth. And actually, they are shortlisted and they have connections and an agreement with NASA because when you are sending the astronauts somewhere to Mars, you have to produce food and then you could produce it, right, for instance when people are producing CO2. So, I mean really, you could make food out of that one as well.

David Roberts

Interesting. So, this is more of a play to just be part of the international hydrogen economy more than just specifically making it for yourself?

Helena Sarén

Yes, yes. And I see it as one crucial ingredient for our industry of renewables. And I would like us to build new industries with partners based on a hydrogen economy and more value-added products. And not to be like, like you mentioned, like a solo H2 producer, because it's then more like a pulp and paper producer. It's like a basic and somebody else makes the real business out of that one.

David Roberts

Higher up the value chain, yeah, yeah. Speaking of that, the last thing I wanted to ask you about is what I really had no idea about and was really fascinated to learn is that in terms of natural, speaking of natural resources, Finland has all the materials for batteries. These are, you know, this is becoming a bigger and bigger subject where you source the sort of materials for batteries. There's a lot of sources that are, you know, socially or economically not that great. And this is potentially, you know, I don't have to tell you, the battery, the whole battery world, the whole battery market is rapidly, rapidly expanding.

So, but then again, you're, you know, when you're just mining materials, you're there on the low end of that value chain. So, how do you think about Finland's role in the battery world? Battery industry?

Helena Sarén

Yeah, yeah, we are actually a mining country of the European Union, and we have especially nickel and cobalt here, a little bit of gold and something else, but especially nickel and cobalt, which are obviously important in the battery.

David Roberts

And wasn't there a big lithium deposit discovered last summer?

Helena Sarén

Yes, yes, sorry, yeah, I forgot that one. Yeah, sure, yeah, that's true. And I would like us to have here also the industrial plants which are processing these raw materials at least a little bit further. And there are now new announcements, some investments about some cathode material or some kind of things, what they are needing in the battery industry. So definitely that is an area, not just to dig out these valuable earth minerals and then ship them somewhere else. So definitely that is an area. And there we need collaboration and, and we also need foreign investors.

David Roberts

Do you have any battery manufacturers yet or is that all just kind of coming together?

Helena Sarén

Not the whole package. Not the whole package. Parts.

David Roberts

This has all been super fascinating, Helena. There's just so much to learn, so much I didn't know about Finland and it's really, from an energy perspective, fascinating. Oh, the one other fact I learned about Finland that I wanted to get in here somewhere, I didn't even know where to put it. But lots of countries are worried about rising sea levels. I found out that in Finland, the opposite is happening. Finland is rising out of the sea because, you know, it spent centuries underneath these heavy glaciers.

Helena Sarén

Yeah.

David Roberts

And now, it's literally rising up out of the sea. So, you know, that's at least one thing you don't have to worry about.

Helena Sarén

Yeah. But the ground is rising there a little bit north of the middle central of Finland. But the capital area has a little bit of challenges with the rising sea levels, but not that bad. Not as bad as in many other areas. Yes.

David Roberts

All right. Well, Helena, thank you for coming on. Thank you for all your time and this has been really fascinating.

Helena Sarén

Thank you 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 dig into the just-released Global Electricity Review from the think tank Ember, with founder Bryony Worthington and lead author Nicolas Fulghum. Clean electricity surpassed 40 percent of global generation in 2024, driven by record solar deployment. We explore solar's rapid doubling, the pace of demand growth, and the way China's clean energy decisions shape global trends.

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Text transcript:

David Roberts

Okay, hello everyone, this is Volts for April 9th, 2025, "How is clean electricity doing globally?" I'm your host, David Roberts. Every year for six years now, the UK-based energy think tank Ember has released a Global Electricity Review, which gathers data from every country around the world to show who is generating electricity, where, from what sources, and how those numbers have changed year over year.

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It's a great way to check and make sure that your sense of industry trends is rooted in data. And speaking of data, Ember also makes their dataset public so that anyone else can use it for their own analysis.

Very cool. Anyway, the Global Electricity Review for 2025 is out. So, what's happening? What are the trends? How fast is clean energy growing? Why is coal still hanging on? Is gas growing or shrinking in the power sector? And how do we make sense of what's happening in China?

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To discuss a little bit of all of this, I have with me today Bryony Worthington, Ember's founder and director, and Nicolas Fulghum, a lead author on this year's review. We're going to talk all about what the data says and what it suggests may happen next.

With no further ado, Bryony Worthington, Nicolas Fulghum, welcome to Volts. Thank you for coming.

Bryony Worthington

Thank you, David. Good to be on here.

Nicolas Fulghum

Thanks for having us.

David Roberts

Lots to discuss in the specifics, but I thought before we jumped in, maybe Bryony, you could just give us a little bit of background about the data. We're data nerds around here; we love some data. And just tell us a little bit about how you gather this dataset. Is anyone else, to your knowledge, assembling all this information in one place?

Bryony Worthington

Well, actually, to be fair, I think Nick is better placed to actually discuss how the data is gathered because I take a bit more of a kind of high-level view. But I can certainly explain. Ember's ethos is that we want to be the leading source of open data with full transparency that helps people understand what's actually happening in the electricity system. And as you said, the data is made completely public so people can interrogate it themselves. But we also provide our own interpretation for people in these very accessible Global Electricity Reports, which we've been doing for a number of years.

And, as you say, the latest one is out for 2024, and it's a compilation of the electricity data of virtually all the countries in the world. It certainly makes up a huge percentage of the amount of electricity. But, Nick can tell you more precisely where that data comes from and exactly what the coverage is.

David Roberts

I know, in your big developed countries, obviously, this stuff is public and published, but I'm sure there are some countries where it's more difficult than others. How difficult is it to get all this data in one place?

Nicolas Fulghum

Yeah, there are essentially two challenges that we're coming up against. So, as you said, a lot of advanced economies, the EU, the US, they all publish this data pretty frequently. It's all up to date, sometimes up to the hour. And the challenge there is that they all love to publish their data in different formats. So, one of the big tasks that we have is bringing this together into a coherent format so that when we're saying, "Oh, solar generation did this, coal generation did this," that we're actually talking about the same things. And then, yeah, you already identified the second problem, and it's global coverage.

But for these reports, we try to go as deep as possible and as wide as possible. So, in this year's review, we have 2024 data for 88 countries, and that covers about 93% of global electricity demand. So, that really gives us a good view of the trends in the global power sector as a whole.

David Roberts

And so, I guess there are just some countries that are, I imagine, they're small, but they just are opaque. There's just no way to pull data out.

Nicolas Fulghum

Yeah, oftentimes, we just can't give a direct look at what happened in the last few months or the last year for a few of those countries. So, we might be talking about countries in Africa, Southeast Asia, where data reporting just isn't up to the same standard yet. But those countries are making progress as well. I mean, over the years, we've certainly added more and more to our coverage, and our expectation is very much that this will get better as systems in those countries catch up as well. But it's a big task. Luckily, there's a big community of these organizations as well.

So, we're all working with other organizations in the field that do similar work. But we're glad to always be among the first to put a really detailed dataset out there that other people can really dig into as well.

David Roberts

Let's talk a little bit about what we found this year. So, the headline of the report is that low carbon sources, by which we mean renewables plus nuclear, have now reached 40.9% of the world's total electricity generation — which I think, you know, I just want to pause on. I feel like a lot of people out there in the public still have the sense that clean energy is marginal, you know, nibbling away on the margins, still a long way off. 40% is not small. 40% is like almost halfway there. I think that's just kind of a bracing headline.

How fast is that headline number rising? Is that creeping up or is that starting to get on an S-curve too?

Nicolas Fulghum

Yeah, we're talking about a very, very long-term trend and a short-term trend here. So the very long-term trend, to put this 40% into perspective that we've crossed again, is the last time this happened wasn't 20 years ago or 30 years ago. It was in the 1940s. So back then, it was basically coal and hydropower. And that's the last time we've had 40% low carbon power. And the trend had been sort of wobbling along over the years, recently dipping down as more and more electricity was met by coal in emerging economies in China and India.

And the short-term trend that is really turning this around now is wind and solar. So, in the last 10 years, more slowly at the beginning, but now faster and faster, we see wind and solar coming online really at scale. And that's what's pushed low carbon power back up to these levels that we haven't seen for nearly a century.

David Roberts

So would you venture a guess on what that'll be like next year or two years from now? Like a percent a year? Or are we going to start jumping faster than that?

Nicolas Fulghum

I mean, luckily, we're starting to jump on the faster side of that. So there's a good chance that we'll get about 1 to 2% a year. And then as we go closer to 2030, we'll certainly approach 50% as well, which luckily will give us a lovely headline for one of these iterations of the report.

David Roberts

Yeah, look forward to that one. All right, so I just sort of structured our conversation around the three big megatrends that are identified in the report. One is solar: booming. Hard to miss that one. The second is electricity demand growth. And the third is what are China and India doing? So, I want to talk about all those. Let's start with solar. So, the cool thing that I had not realized, you know, everybody's seen, I think, the kind of Moore's Law or whatever they call it for solar, the cost curve of the cost of solar coming down in a very kind of regular and predictable way.

But what I had not realized is that deployment is doubling on a relatively regular schedule. Talk a little bit about that, like where solar is relative to last year and the year before.

Bryony Worthington

Can I just put that in context? So, as Nick said, you know, there's been this long-term slug of clean power that's been there since the 40s, which is made up of hydropower and nuclear, and you know, they've made up like 25. It's varied, but pretty steady. But what we've seen is this now massive surge in wind and solar in recent years. And the statistic that really stands out for me is that, you know, it took a couple of decades for terawatt hours to reach, you know, 1 terawatt hour of solar and it hit there in 2022, but then it only took two more years for it to hit the next terawatt hour.

So, it doubled in two years. That's where you're starting to see the S-curve of solar starting to impact. And now, Solar's up at 7% of global electricity and it's rising fast and it's a really fast technology to deploy. So, that's where you're going to see the growth.

David Roberts

One of the interesting charts is, it sort of shows once an electricity source hits 100 terawatts, how long until it hits 1,000 and then 2,000. And solar looks to me as the fastest source ever by that measure.

Bryony Worthington

Yeah, it's a really lovely little chart, and it shows wind and the speed of wind and solar, but also interestingly shows the speed of nuclear. Right, that wasn't a rapid rise over a couple of decades as well. So yeah, full of interesting charts like that.

David Roberts

Nick, maybe this is for you. To what extent are your solar numbers capturing distributed solar?

Nicolas Fulghum

Yeah, it's a really good question and one that we spend a lot of time on. So, with solar more so than with other sources like you mentioned, you have a problem that there is not just your utility scale, large hydro dams, large coal plants, you do have those distributed systems that sit on rooftops that are installed by businesses, you know, private individuals. And not all of those are a) registered and b) feed data anywhere. But, countries have gotten better at estimating the generation and reporting on this. And then on top of that, we do some additional work to try to estimate what's behind this.

So, there are countries where if you look on the surface and sort of the government reported data, you might not see a large change. But then if you dig a little bit deeper, and Pakistan is the big example that's made the rounds in the energy industry a little bit in recent months where there's a huge influx of businesses and individuals installing solar power without really any government involvement. And yeah, it's really important that we capture this growth as well. And we've captured as much as possible. So all of the numbers in here, we estimate as much of that missing generation as possible.

But if anything, we think that the solar growth that we're describing is probably still a slight underestimate.

David Roberts

You think there's probably just more distributed sneaking out there than you can get a grip on? Because I did a pod on the Pakistan phenomenon, which is really quite remarkable. And basically, they're measuring it by the level of imports, which is not a perfect one-to-one way to measure, but at least they have a handle on how much is coming into the country.

Bryony Worthington

Yeah, I mean, in reality, rooftop solar, embedded solar shows up as negative demand usually. So as long as you're not kind of double counting, if you're missing stuff, it's probably showing up in your demand curve. Your curve is softer than it would be otherwise. But what Nick's describing is quite an intricate process of making sure that we're trying to estimate what's out there and then not double counting. So, taking into account, you'd have to add that onto your growth as well and your demand.

David Roberts

Speaking of distributed and speaking of China, you know, one of the things we learned from that Pakistan pod is that China is in the midst of a sort of multi-year overproduction of solar. This massive production is massively out ahead of demand, which is creating a glut, which is creating these incredibly cheap panels which are then — you know, like we're, and I think the EU are tariffing the heck out of them. But like Pakistan isn't, Saudi Arabia isn't and they're just like absorbing all that at a huge rate. So I wonder how much of this leap in solar power that we saw in the last couple of years — because it's really striking, the graph of solar deployment really jumps up in 2023 and 2024 — how much of that is Chinese overcapacity? A temporary thing that is going to work itself out versus structural growth?

Bryony Worthington

I mean, China is not just producing solar panels for export, it's also deploying them at scale domestically. So, the growth of clean energy in China accounts for more than half of the global increase.

David Roberts

Yes, we're going to return to that.

Bryony Worthington

Yes, but your point about their effect on their neighbors is huge. Right. The fact that they've brought the cost down to such a degree now that Pakistan can take those imports and use it to get to a place where they're innovating, new businesses are being formed, they're training, their skills are growing. As your podcast covered, it's kind of a win-win. China gets to increase its balance of trade and Pakistan is starting to develop a whole new industry around this very cheap technology. So that's happening across Southeast Asia, but as you say, Pakistan is one of the most noticeable.

David Roberts

And Nick, is that going to — is China going to rein that in? Are the numbers going to ever go down or do we expect this is all just going to keep moving in one direction?

Nicolas Fulghum

Yeah, I mean, historically, if I had to bet on one of the two options, I would definitely bet on it continuing to move upwards.

David Roberts

So that's a pretty safe bet so far.

Nicolas Fulghum

Yeah. Historically, there have been estimates by various organizations that have generally every year predicted, "Oh, this is kind of the year where the S-curve goes the other way." And it's just really not happened yet. And every single time, it goes the other way. Just kind of to put that into perspective, usually when we have technological advancements, so when we're talking about an industry really emerging because of underlying technological changes, what you expect is that as it reaches scale, you not only see the growth kind of stabilize, but you see the growth rates coming down. So your percentage increase every year usually comes down. With solar, we've seen such consistent growth. So it's doubling every three years very consistently for the last 15, 16 years.

David Roberts

Yeah, that's just wild to me. This is one of these regularities we find in the data that it's just like magic. Like, why is that happening? What is the structure of the universe that is somehow manifesting in this very regular two-year doubling cycle that is so regular, it's been going on for 15 years. It's just weird that it's so predictable, I guess. I don't totally wrap my head around it.

Nicolas Fulghum

Especially because it's driven by all of these parallel and sometimes crossing, both political and technological developments. And it kind of results in the same thing.

David Roberts

Right. It's somehow averaging out to the exact same number year after year. It's crazy.

Nicolas Fulghum

Yeah, and 2024 is kind of extra special here because we saw this huge jump in manufacturing of solar panels, in installations of solar panels, solar generation. But if you just look at the solar generation number, the increase was 29% compared to the previous year. And that's the highest growth rate we've seen in six years.

David Roberts

Right. So, the growth rate is accelerating, not falling.

Nicolas Fulghum

Exactly. And that's not really something you typically see when technologies reach sort of this global economy-changing scale, that you still have these growth rates that you'd usually associate with a technology that's in an earlier development cycle.

David Roberts

Yeah, I mean, there really is something genuinely miraculous about what is going on with solar. It sort of defies some of it, defies rational analysis.

Bryony Worthington

Isn't it symptomatic of the fact that electricity is ubiquitous? We need it for everything. And if you have the ability to put in small scale, well, any scale, right? That's the thing: it's scalable, but it's modular. And so the manufacturing process, we're talking of an era now of manufactured electricity rather than fuel-based electricity, which just means it's a completely different game. And that's, I mean, it's delightful to see, but it's much more similar to an electronics boom or some other aspect of modernity than, you know, just an energy story.

David Roberts

Yeah, the way I tell that story is like with fossil fuels, you have two contrasting forces. You have technology pushing the price down, but then you have scarcity pushing the price up. Right. It gets harder and harder to find new deposits. But with renewables, it's only the former, not the latter. Right. It's only going down. It's only technology costs and it's only going in one direction.

Nicolas Fulghum

I wanted to add one point on the question of, you could call it reliance on China for the manufacturing side, does that mean it's going to go down at some point?

David Roberts

That's my question.

Nicolas Fulghum

We have a lot of overcapacity relative to what's being installed even, so there's still a lot of headroom even if manufacturing capacity doesn't expand at the same rate. And on the other side, we don't just see this trend in China or in countries that buy solar panels from China. So, the US has a very similar recent acceleration of solar deployment and is historically very allergic to imports of Chinese solar panels. So, it's a technology-driven transition and that's not something that can be reversed by an individual government, really. That technology exists and it's out there and it's being built.

David Roberts

Good note, good note at the moment. One really cool thing is, as we noted, cheap solar flooding into a lot of these emerging economies. This sort of harkens me back to a hype cycle I remember from earlier in my career about emerging economies leapfrogging. Right. There's all this talk about, you know, just like phones, they never did landlines, they skipped straight to cell phones. They're going to skip giant heavy fossil fuel power infrastructure and skip straight to clean energy. That talk kind of faded away for a while, but now is it back?

Is the dream of leapfrogging real because of cheap solar? How big of an effect do you think all this cheap solar is going to have on these new solar markets?

Bryony Worthington

I would say the leapfrogging is happening in many sectors, and it all leads back to China ultimately. But you've got, not just solar, you've got batteries and you've got electric vehicles. And what's super interesting is watching what happens in Southeast Asia, Africa, and India in relation to transport. Right. In Europe and the US, we've always thought, "Well, first you decarbonize your electricity and then you do transport." They're doing it the other way around. They're just like, "Okay, we don't have access to cheap oil or reliable oil. We want to decarbonize transport first." So the leapfrog in transport is really exciting and happening in ways that the European and perhaps North American commentators didn't see coming.

Because it's all two- and three-wheeler vehicles that are electrifying.

David Roberts

It's not cars.

Bryony Worthington

Yeah, not cars. It's and cars. That's the thing. It's everything.

David Roberts

It's fascinating to see that come back. As you mentioned, you can't really talk about solar these days without talking about batteries. Battery installations are, I mean, they appear to be on the same S-curve. Like there was enough installed in 2024 to almost, almost double total global capacity. So like storage is, you know, if solar is doubling every three years, storage is coming close to doubling almost every year. So, is there any reason not to think that batteries are just on that same S-curve as solar? Like, are there any troubled seas ahead or should we just expect batteries to get cheap fast, just like solar did, or even cheaper faster, as far as I can tell?

Nicolas Fulghum

Yeah, I think we're very much in the cheaper, faster side of things here. So, what's slightly different to solar power is that solar was really competing with an existing market. So, in the early days of solar, you had these very government-focused programs that made sure that these technologies are really taking off. So, Germany kind of, I mean, in retrospect, you could say sacrificed part of its transition early on to really popularize solar power and deploy a lot more than any other country on a per capita basis.

David Roberts

And gets nothing but grief for it. So, let's just pause here and say, "Thank you, Germany."

Nicolas Fulghum

I should disclose that I'm also German, so that is probably part of my grief here. So, there was a competition with an existing entire electricity sector that was producing, you know, historically relatively low prices if you look at gas, etc., which is no longer the case. Whereas batteries are coming into this with a very clear task. They have a very clear use case. They're economically already viable at this point. Obviously, there is a technology trajectory here as well. So, we've seen battery installations really since 2014, but that's only, in the grand scheme of things, that's really only 10 years ago.

And now we're hitting scale where, on a utility scale level, batteries are really making a difference. The number that we have in the report that is really, I think, drawing us out the best is that in California, which is one of the US states with the fastest battery storage deployment, you now have very regularly 20% — and in the more recent month, actually over 20% of the evening peak — so when there's a lot of electricity being used, it is being met by batteries.

David Roberts

Yes, this is the duck curve. We conquered the duck curve and we didn't properly celebrate it. Everybody was freaked out about that duck curve not very long ago, three or four years ago.

Nicolas Fulghum

Yeah, and the predictions for the sort of doom cycle of more solar and it would ruin it were all predictions out to 2030 and were not involving a lot of battery deployment. And now the numbers are far beyond what commentators would have expected even two or three years ago. So we're really on an almost faster trajectory than we've seen with solar because the use case is just so apparent and the economics are very much on the side of batteries.

David Roberts

And I think a cool thing about batteries, and I suppose this is true of power generation too, but especially for batteries, the cheaper they get, it's not just that they have that obvious use case you're talking about. The cheaper they get, the more use cases there are. Like, it just turns out there's all kinds of things you can do with batteries that just wouldn't have occurred to people earlier because they were too expensive. I think they're going to — like the different ways people are going to use batteries in the future, I think is going to be mind-blowing.

Bryony Worthington

And also, the range of types of batteries will start to expand as well. The sort of lithium-ion story is fascinating because it actually kind of emerged out of the mobile phone and laptop kind of boom that meant that we could crack these battery types. And then electric vehicles come along and start to scale and then bring the cost down and then suddenly it's starting to play this really important role, balancing. But there may be lots of other forms of storage that we might use. Or indeed, we might see more interconnection and more transmission.

So now that we've reached this kind of 40% clean, of which 15% is variable, is wind and solar, there's going to be this growing market in balancing the grid and moving electrons around both in time and space, which is a hugely big growth market.

David Roberts

Yeah. Here's a very big and difficult-to-answer question for both of you. I mean, a lot of people going back decades, people would say, "The grid can only handle X percent of variable energy, solar and wind." And of course, that X percent has crept up and crept up and crept up. People were woefully wrong about that early on, but people still make those predictions. You know, it's like 30%, 40%, maybe it's 60%. Do you anticipate variability actually slowing deployment at some point? Like, do you think these balancing technologies are going to be a choke point that is going to slow things down?

Bryony Worthington

I mean, Nick, if you've got some data on who's got the highest penetration of variable renewables, that would be super interesting. I don't know off the top of my head, but I do know that there are certain European countries who, you know, are really into the high percentages. But I guess the answer to the question is "it depends." You can get to high percentages if you've got an interconnected market and lots of reliable transmission. And the more diverse your transmission connections are, the more secure you are. So in Europe, it's been really possible. It's not the same in Southeast Asia where most countries, they struggle to have a grid, let alone interconnected grids into different markets.

So, it may well be slower there, but that might just drive more innovation into using electrons in other ways and storing electrons in other ways. So, I think there are scenarios which — geography is a big determinant and infrastructure is a big determinant, but human innovation, if you have cheap power and you want access to it, I think I wouldn't bet against that winning out.

Nicolas Fulghum

Yeah, like Bryony says, on the European side, we do have these markets specifically that have a lot of wind power that have pushed a share higher and higher. So, Denmark is close to the 70% mark now, but obviously very interconnected. If you're talking solar, which obviously is a very steady kind of day-night cycle, we have Greece and Hungary in Europe which are leading. Hungary is actually very close to or at a quarter. So, 25%.

David Roberts

No kidding? In Hungary, I had no idea. Who knew?

Nicolas Fulghum

And these are really fast transitions. So, it happens over two to three years. Brazil is one of those that has just exploded onto the scene as a clean power leader over the last sort of three to five years, is in the top five for solar generation in the world now, and is one of those examples where the rest of the power system, even though it's interconnected to its neighbors, but not on a large scale like a lot of European countries are, but there are other ways to integrate huge amounts of solar. So, they're at 10% solar now.

There's a lot of headroom there still to grow, and that's the case for a lot of countries. China still isn't at 10%, so there's still a lot of room. But Brazil, for example, has a lot of reservoir hydropower.

David Roberts

Right, hydro.

Nicolas Fulghum

And what reservoir hydro specifically allows you to do is, you can choose to run it, it's dispatchable, you can choose not to run it when there's a lot of solar on the grid and you basically use your reservoir hydro as a battery, so to speak. You just hold back some of that generation for a time period where either you might be in a situation where there's a drought, you can even compensate for that by having more wind and solar. So, there's a lot of complementary ways in which you can integrate a lot more wind and solar into the grid. And we're nowhere near the point where we're maxing out that deployment.

And as other technologies like batteries come in, as we're deploying more, that threshold where it becomes really difficult is also moving up. And if anything, the last few years have shown us that that threshold might be moving up faster than we could catch up.

David Roberts

Yes, this has always been my prediction, but people used to point and laugh when I said that 20 years ago, but that was true. I always think that that number is always going to be on the horizon.

Bryony Worthington

Yeah, just to round out the US situation as well, I should say — a plug for Ember's reports. It doesn't just produce a global report, it does a European deep dive, and this year did the first deep dive into the USA. And there, two states have got more than 30% penetration from solar, and that's California and Nevada, but there's a whole lot of other states that got similar geography and similar access to solar resources that could catch up. So it's really quite a remarkable story everywhere.

David Roberts

Yeah, yeah. Again, solar miracle. Quickly, on the supply thing, before we get to it, I want to talk about demand. But on wind, you know, solar is such a fun, good story. So gratifying in so many ways. Like the line just moves in one direction, has for decades now. It's just nothing but good news out of that sector. But wind lately has been kind of like flailing around a little bit, up and down. You know, if you squint from a distance, you could imagine it hitting a plateau. Are wind's current troubles structural? Is there some reason it's not going to continue moving up?

Or do we think these are temporary headwinds that wind is facing? Pardon the pun, I guess.

Nicolas Fulghum

I mean, there's definitely some temporary headwinds, but it's maybe accidentally showing up in generation data. So, wind power was still the second largest growing source of any power source in 2024. So, it's a lot more than coal and gas still. So, what happened this year is basically a condition story. It was less windy than it was in 2023. And as your stock of wind power grows, conditions can actually make a difference. So, if globally your wind conditions are just 2% worse, then you lose 2% of your entire stock. But that's not necessarily an issue. Like, we see bigger swings in other sources of power as well.

What really matters are those underlying installations, and they are still really strong. China had a new record for wind capacity installations. The EU has a legislative agenda and reality on the ground that is very much pointing to larger installations in the coming years as well. So, we're still in a good place. There are some headwinds to pick up on that in the US, obviously. I mean, there's very strong rhetoric from the administration that there shouldn't be any wind turbines going up. You have some echoing on the other side of the Atlantic where politicians in the right wing are even suggesting tearing wind turbines down.

I mean, a lot of this is rhetoric. There's no economic viability to any of this, and constituencies wouldn't really go along with that. As much as some constituencies are sometimes against building wind turbines, once they exist, people hate it a lot more when that cheap power disappears.

David Roberts

People hate change. So, once the thing is built, tearing it down is the change. Right. So, big picture wise, you don't see any kind of plateauing happening, broadly speaking, with wind? You think wind is going to keep marching up?

Nicolas Fulghum

Yeah, I think the safe bet here is, as well, if you look at the curve that we've seen over the last decade, is that it will continue to grow. It doesn't have the same rate of growth as solar just because it's not as much of a commodity. Certainly, China is trying its best and succeeding in parts in making it a commodity and building it at a mass scale. Again, it's a manufacturing question as well, and that will continue to happen. But as Bryony mentioned earlier, solar is so modular that it really becomes like a commodity and is traded as such and installed as one as well.

Bryony Worthington

And it's more distributed, so it doesn't get so much organized opposition. Right. If you want to put in large-scale wind farms, even if they're offshore, you see this kind of — sometimes it's genuine, sometimes I think it's a manufactured kind of local response against something going into a landscape that wasn't there before. And so, yeah, that just creates friction in the system, slows things down.

David Roberts

But it's so modular, it's like water. Right. It finds the cracks.

Bryony Worthington

Oh, yeah. Solar is just so different. Yeah, it's tiny. It's like insects crawling out into a landscape as opposed to elephants you can see coming.

David Roberts

Final supply question, just on hydro. The demand story, which we're about to get into, is very much affected by weather, by yearly weather trends. Hydro is too, like, it kind of had a little mini boom in 2024, mainly because it was suppressed somewhat in 2023 by droughts. I wonder, long term, with climate change getting worse, presumably temperatures getting higher, presumably droughts getting more frequent, should we worry about hydro? I mean, hydro, as we've said, has been just like steady there, you know, for decades now. Is it going to get substantially less reliable because of climate?

Like how, how big of an effect can we expect weather to have on the reliability of that steady hydro?

Nicolas Fulghum

Yeah, I mean, historically, there have always been droughts, but certainly, climate change creates conditions where droughts can be more severe, that can be longer as well. But my reading of the situation changes very frequently on hydro. So we have the sort of IPCC view which looks at a very long-term outlook of rainfall volumes, et cetera. And they also did an assessment on the effects on energy supply, including electricity supply. And for some regions, there are expectations that that could actually increase. So in Latin America, it could increase rainfall volumes, but there are two different trends that are going against each other here.

So, you might have a total volume increase in rainfall, which can come from higher temperatures, more precipitation, etc. But on the other hand, obviously, hydro infrastructure is fixed in location and it's a built-up process over decades and decades, so you can't really move them around. So obviously, if you have shifting rainfall patterns, even just on a small regional basis, that can affect your river catchment. How much volume is really flowing into your hydro dam. And that can be quite an upsetting experience. This year we had some really poor drought conditions, even though hydro generation on the global level is up.

You had some really horrendous situations in Ecuador and in Zambia, Uganda, quite a few of those stories going on. But those sorts of events have also happened frequently as long as hydropower has been a part of the system. So, it's really difficult to predict. But the most important thing is that even though there are fluctuations from year to year and they can make or break, let's say, a headline that we're writing for a report, the existing stock of hydropower and how much it generates in the system is an incredibly important part of our electricity system.

So, for some countries, it is the entire electricity generation and an export product as well. Countries like Laos are exporting a huge amount of electricity, and it's a big part of their economy. So, hydropower in and of itself shouldn't be demonized as a result of it being affected by weather conditions. But it is certainly a trend that we'll have to be aware of and have to keep track of as we go into the future. But again, like we know, wind and solar are coming online at a much faster rate. And I'm not worried that even if there's a long-term decrease in hydropower, even if that materializes, the efficiency of hydropower, I don't think it'll make or break the energy transition as a whole.

Bryony Worthington

There are a few other factors which make it hard to predict. One is the fact that as we get into a changed climate, we're going to have to introduce more water management because you've got a lot of rivers that are just fed by melt waters from snowpacks. And that's going to become increasingly difficult and you're likely to need to see more water management infrastructure being put in place. And if that's coupled with electricity generation, then that's going to provide you with a win-win in terms of how we're looking at water flows throughout this now changed climate.

The other thing I think that's really important is the upgrading and the repowering of some of these hydro facilities, which is often overlooked. But technology moves on, you can get more out of the same amount of water. You can fit pumped storage into certain reservoirs where the conditions are there. So you're seeing reinvestment into hydro. And I can't stress enough how important it is that we hold onto the clean sources that we have because they are providing the bulk of the clean electricity today. And if they stay in place, this rise in wind and solar will kick out fossil.

If they decline, we're just pedalling really fast to go to a standstill.

David Roberts

Yes, another shout out to Germany here for maybe going the wrong way on that. Okay, so I could talk about supply all day, but we're already behind schedule. Let's talk about demand. The big demand story for this year is that it was a hot year, which pushed up demand for AC, which sort of made demand rise unusually fast, faster than clean energy could keep up with this year. This meant that fossil electricity actually rose in China, India, and the US. But what the report says is if the temperature goes back to, you know, the average projected temperature, demand will settle back a few percentage points and from that point on, clean energy will be able to keep up with all the new demand.

That's kind of the story. So, aside from the year-to-year fluctuations, weather-based fluctuations, one of the things I'm interested in which the report spends some time talking about is, you know, the big picture here is everybody's electrifying. Electrification is the thing. It is the way to solve climate change. It is the key to the kingdom. Everybody's doing it. Which means, you know, as the report notes, there's data centers coming online, there's EVs coming online, there's home heating in the form of heat pumps coming online. So, I would expect from all of that an enduring secular rise in electricity demand — like that is what I would expect to see.

So when are we going to see that? When are we going to see that? And how big is it going to be? And are you still confident that wind and solar are going to keep up, even given this, all this new incoming electricity demand?

Nicolas Fulghum

Yeah, absolutely. So, as you pointed out, we have this temperature — what we call like a temperature effect this year — where we have had a relatively mild 2023. So, obviously, if you look at the top line numbers, you get temperature records and the effects of climate change are very noticeable there as well. So, you have temperature records in 2023, but what's relevant for electricity generation is specifically how often you have high temperatures in and around population centers. So, 2023 for that was a relatively mild year, especially in the summer. It was also mild here in the winter.

So, we had not as much heating demand in the winter. But 2024, specifically for cooling, was a completely different story. So, it was especially in the US, India, China, we had prolonged intense heat waves that have really contributed to electricity demand growth. And while we have that underlying temperature effect from climate change as well, this story of 2024 is really about that fluctuation between the years and that's why demand growth was so high in 2024. But if we peel that back, so we've looked at this and have adjusted for this fluctuation from year to year and we're still left with demand growth that is substantially higher than the last decade.

David Roberts

Even taking the weather effect out of it?

Nicolas Fulghum

Yeah, exactly. Even if you take it out. So just to put some numbers on that, we had 4% was the actual recorded demand growth in 2024. Then when you take the weather effect out, so you're left with the sort of non-temperature related, or you could call it structural demand growth. You had 3.3%. Now that's a lot lower. But your 10-year average before that is 2.5%.

David Roberts

So, we are seeing this start to happen then.

Nicolas Fulghum

Yeah, exactly.

Bryony Worthington

Yeah, it's kind of as you said, as we talked about, electrification is the thing that everybody now realizes has got so many multiple wins and is now becoming affordable, that yes, the demand is likely to rise. But what Ember's going to be increasingly looking at is then it's not just a story then about electricity markets decarbonizing, it's about electricity decarbonizing other sectors. So, you've got carbon savings and efficiency gains in the transport sector, in the industrial and heat sectors that are being delivered by this electrification. So, we might still be reporting on rising demand in electricity sectors and we might still see limited fossil growth to meet that demand, but it will be displacing fossils in other markets.

And that's the most important thing to bear in mind if you care about climate change. Then, I think the second thing to say is, if you've got rising demand for electricity, what happens is investors show up and projects get built and you don't need to sit around waiting for government interventions or carrots and sticks, whatever. It's just going to be a boom market where people are making money.

David Roberts

It is forcing the issue. That's how I put it. Same in the US. Every clean energy conversation that utilities had been sort of like dodging or slow-walking. They can't avoid it anymore. It's right up in their faces.

Bryony Worthington

Exactly.

David Roberts

But do we have any sense of — so it's like 3.1% — subtract the weather, you get 3.1% — which is above the whatever, 2 point, whatever average.

Nicolas Fulghum

Yeah, 4% is the recorded growth in demand. And then 3.3% is what's left over.

David Roberts

Right, 3.3. So, do you have any predictions? I mean, one of the points, one of the really striking points, one of the really striking charts in your report is you show the range of predictions about data center deployment. And the point you make is the gap between the highest projection and the lowest projection is as big as the entire electricity demand of Australia. So, there's like a giant developed country's worth of uncertainty just in the data center projections, which is just to say that demand projections are just notoriously difficult. But that said, I'm going to force you to make one.

You know, the secular rise in demand. What do you expect to see? Do you expect to see that 3.3 grow up to 4 or 5 or beyond? Like, how fast of a rate of demand rise can we expect to see in like two years, three years, four years?

Nicolas Fulghum

Yeah, so the 3.3 is already pretty much perfectly in line with what the IEA has said for the growth until 2030. So, if you go two years back in the World Energy Outlook, they gave a forecast of 2.7% growth. Then, last year, that was changed to 3.3%. And from our perspective, we're then obviously saying, "Okay, what does this actually mean for fossil generation?" And what we found is that all of the projections for the build-out of clean electricity are actually putting us on a path to meet 4.1% growth. So, a lot more than even the forecasted growth by the IEA.

So, and this is the gap that you're looking at when you're asking yourself, "Is fossil generation structurally —" obviously, you have year to year fluctuations. You know, if you have the right weather conditions or the wrong weather conditions, it can go either way, especially in the short term. But structurally and long term, we are still, even at higher demand growth rates, we're still looking at falls in fossil generation. And that's, I mean, first of all, that's a good sign. We're happy to see that.

David Roberts

So, you don't think there's any chance that demand could be substantially faster than predictions? Faster. So much faster that it outstrips clean energy? You just don't think that's likely?

Nicolas Fulghum

It is possible. But, I think this is where Bryony's point becomes really important. So, if we see electricity demand really grow much faster than 3.3%, if we are going up to 4.1 or higher, so even faster than clean electricity will grow, that will likely be caused by an even faster rate of electrification. So, demand growth in and of itself is not a bad thing at all.

David Roberts

No, it's a great sign. That's what we want to happen, right?

Nicolas Fulghum

Exactly. If it's for the right reasons. And EVs, heat pumps definitely count as those right reasons. Data centers are certainly one of the more difficult conversations within us.

David Roberts

Indeed.

Nicolas Fulghum

Just because the range is so large, as well as you pointed out, this uncertainty of like an Australia worth of electricity. That's just in the US over a four-year time frame.

David Roberts

Oh, I thought that was global. Oh geez, that's even crazier than I thought.

Nicolas Fulghum

Yeah, so it's a huge, it's a huge number.

Bryony Worthington

And the data is really poor, right? It's really hard to get the data. And also, I mean, we're talking about data centers, but we shouldn't skip over cryptocurrency mining, right? Had we not had that add to our demand over the last X years, what would we have been facing? So, you know, it's, I mean, it feels as if this is necessarily going to involve more projects being built. And will they all be clean? Perhaps not, but they will be the fastest, by and large. And the fastest tends to correlate with clean at the moment.

So that's another factor to take into account.

David Roberts

Indeed. So, as you sort of mentioned, Nick, the point everyone's really eagerly waiting for and really hoping for, because you make the case in the report that even with this sort of secular growth in demand, this sort of enduring, probably permanent growth in demand happening with all these new sectors basically electrifying, clean energy will still stay ahead of that, which means clean energy will satisfy all the growth, which is like, good, fine. But what everybody really wants is for us to top that hill and head down the other side. That is, start eating into the installed base of fossil fuels.

Like, when will fossil fuel electricity start declining year on year? I mean, again, it's impossible to predict, but go ahead and predict anyway.

Nicolas Fulghum

Yeah, I mean, this year, when you do that temperature adjustment, we already met 96% of the demand growth with growth in clean electricity. 96%, you might as well call it the whole thing.

David Roberts

Yeah.

Nicolas Fulghum

So structurally, we're there. Like, we're right at that tipping point. And annoyingly, tipping points make predictions really difficult. Especially if you're in a system that has some fluctuations, temperature, other questions about demand and supply, you do get years — like, even next year, if the conditions are wrong, we might see an increase in fossil generation.

David Roberts

Right. A bumpy plateau is what they call them.

Nicolas Fulghum

Exactly, a very bumpy plateau. But we have underlying drivers that are really hard to ignore. So the countries that are really driving — or have historically, let's say, over the last two decades, driven — this increase in fossil generation were emerging economies and kind of spearheaded by China and by India. And that's where we see the dynamic that we've already seen in Europe and in the US really play out of clean electricity coming in. But the different story in China and India is that what they're trying to do is they're trying to meet and satisfy rapidly growing demand, but they're doing that by building clean electricity faster than anyone else. So the two trajectories do match each other.

David Roberts

Yeah, I mean, I've been hearing about a peak in Chinese coal use, just tantalizing. People have been talking about it like, "Maybe this is the year, maybe next year is the year." As you say, it's bumpy, keeps not quite being the year. It would sure be satisfying to get like two or three years in a row of that happening just so we could feel that it's really underway.

Bryony Worthington

There might be some surprising new S-curves that emerge out of China with regard to storage, which they've been putting in huge amounts of capacity, but there's still a reasonable amount of curtailment. Lots of concerns about grid capacity. But even there, they've done huge amounts on high voltage DC cabling, which has moved the electrons around. But this next wave of investment into storage might see the coal burn come down because a lot of the coal in China is used for CHP, right? It's not just providing power, it's also providing heat. And if they start to invest in thermal stores as well as other forms of storage, that would be a big game changer in terms of then pulling down the coal burn and making more use of the electrons they have.

I think, as with everything energy-related, the future is probably going to be dictated by China. And that's certainly true of the global peak in emissions from the power sector.

David Roberts

Yeah, well, this is a perfect segue to my next question. The analogy I thought of when I was reading this is like when you discuss public transit in the US. When you squint at the numbers, what you realize is that something like 75 to 80% of transit riders in the US are just in New York City. So, when you talk about transit in the US, you are sort of, whether you like it or not, by proxy, just kind of talking about New York City for the most part. And I think of a similar thing with clean energy and China, like we're calling these global secular trends.

But if you look, China installed, I mean, just in this report, just in this last year, China installed the most solar, the most wind, the most hydrogen, the most coal. The most nuclear, only gas, literally only gas US took that crown. Gas is the only source that China did not build the most of. So, it's like, how much are we just kind of talking about China here? Like, how much of this is global trends versus just like decisions that Chinese politicians are making? Like, what would this supposed global solar revolution even look like if you subtracted China out of it?

Do you know what I mean?

Nicolas Fulghum

Yeah, I mean, it would certainly be a lot slower, but there's a different side to it as well. Because on the demand side, China also makes up a huge amount of global electricity demand. So, I don't have the specific number, but it's almost around a third, a little bit less than a third of global demand. So naturally, we do expect an electricity system of that size to outweigh the contributions from others. But you're right that it's not just outweighing them.

David Roberts

It's dwarfing everything.

Nicolas Fulghum

It's dwarfing everything. So, we didn't just have the largest solar increase, both capacity and generation, in China. It was more than the rest of the world combined. So, it's really a completely different scale. And it's both a combination of very specific government directives. The policies behind this are obviously over a longer time period. They have a very clear goal for installations. But even if you just read the text that comes out for targets, that transition has happened a lot faster. The underlying technology, both on the solar side and the wind side, has moved a lot faster than even the Chinese government had expected.

So, they've already achieved their targets for 2030, so they're moving faster than even they thought they would move. And I think that should be a very positive sign for other countries that are in a similar position. So, Brazil is sometimes the example that we pull out there because on a smaller scale it kind of is like China or India, it's growing at a relatively steady but rapid pace. So, we have pretty high electricity demand growth knocking on kind of 5% per year. And it's satisfying all of that with wind and solar generation. So, new wind and solar coming online is meeting all of that demand.

And China is just doing the same thing on a much, much larger scale. But it's looking very similar, like this year, similar experience to the world as a whole. We had a very temperature-driven, heat-wave-driven, high demand growth. But underneath that, we've met this structural underlying demand growth, almost all of that was met by increases in wind generation, solar generation, hydro, and nuclear. So we're really seeing this dynamic play out. And if China hits that tipping point and India is getting closer to that tipping point, we know the EU and the US are already at that point, then it's really hard for the world as a whole to not also go beyond that tipping point and see some falls in fossil generation.

Bryony Worthington

Yeah, when you think about China, the single most important thing to think about is their geology, which just doesn't have oil and gas.

David Roberts

Yes, I was going to bring that up.

Bryony Worthington

So naturally, then they look to the world and think, "Electricity is the way that we will power our economy." And that's in distinct difference from say, Russia, which is entirely reliant on its massive fossil fuel reserves. And now the big question is, where does the US align itself? Is the US going to stay with fossil fuels because it's also hugely endowed with fossil fuels? It'll probably have to ride both horses. But the China direction is very clear and China has an active overseas investment program. It has south to south collaborations all over the world. The relationship between Brazil and China is very strong, you name it.

And there's a south-to-south conversation happening about these win-win situations where China's providing the technology that allows people to generate their own secure sources of clean power. And they are a big force in the world right now.

David Roberts

Yes, and worryingly, we seem to be aligning ourselves with Russia in that broad movement. It just doesn't seem like a great long-term bet to me. So, let's briefly talk about India. I mean, I think in the, let's just say in the clean energy mind in the US, you know, we're not legendary for our detailed knowledge of other countries. In the US clean energy mind, I sort of think about India as like a slightly smaller China on the same trajectory a ways behind. Is that roughly accurate in energy terms? I mean, they're trying to do the same thing.

Right. They'll move straight from coal to renewables. They don't have the same penetration yet, but they're trying to catch up. Is the situation substantially different in India and China? Like, what's your sort of take on India's situation?

Nicolas Fulghum

So, the similarities are that they are kind of beholden to exactly the same logic that any country that's growing their electricity demand is subject to. So, if your demand goes up and you don't build clean electricity, you're going to have to meet demand with fossil generation. But if you do build a lot of clean electricity, then you don't need as much fossil generation. Those rules apply to both countries. The difference is that China is obviously now turning this tide where they're reaching the tipping point. They're meeting almost all of the electricity demand growth with clean electricity.

So, they're already approaching the bumpy plateau, as we call it earlier. India is in a situation where they've reached this point later. So, they're now what we in the report call "decoupling." So, they're decoupling the growth of electricity demand and the growth of fossil power. Specifically for China and India, when we say fossil power, it's almost entirely coal power. So, they're decoupling this. And India is obviously now doing this at a point in time where the economics for clean electricity are really favorable. When China decoupled, it was almost a bit more than a decade ago already because they built a lot of hydro and then a lot of wind and now a lot, a lot of solar.

The economics weren't quite as favorable, but that's why they're already further ahead. But India has a chance to do this turnaround even faster because they have access to cheap, affordable, and flexible solar power and batteries. So we're obviously, like you said, we're on a different point in our journey, but we will see a lot smaller increases in fossil generation than historically while electricity demand will continue to grow. And this is sort of the question of is it going to be rising electricity demand that's met by all of the above, or is it going to be rising electricity demand that's met by solar power, wind power, and other clean power?

Bryony Worthington

Just to add to that, I think the difference, though, of course, is the politics where you do not have a command and control planned economy and you have a very agrarian population. So, the country is hugely densely populated and the land is very intensively used. Couple that with very powerful states and a fairly weak federal government, and it's a bit of a messy picture. And that part explains why it's been slower and it might act as a brake on the pace. But that said, distributed solar, rooftop solar has got a huge way to go.

David Roberts

The conditions you're describing are precisely what make it fertile for distributed solar. Right. Like poor planning, poor tracking, you know, a poor grid, like poor grid reliability.

Bryony Worthington

Yeah, and also this, you know, you're seeing these battery swapping technologies being deployed in countries like India because you can't rely on the grid. Batteries are your friend. And so, you can imagine there's just huge potential in that manufactured battery plus solar sense. But waiting for large-scale investments in large wind farms and even nuclear, or certainly with regard to more big infrastructure, that just might be slower than China can do. Utility-scale anything, China's been brilliant at. But we'll see.

Nicolas Fulghum

We do have some positive news, even on the utility side there. So, on a planning perspective, like Bryony said, it's obvious we're not talking about the same scale as China, but India also has a relatively ambitious target for 500 gigawatts of renewable capacity installed or clean power capacity installed by 2030. And they have done an increasingly better job at tracking their own capacity deployment. In those numbers, what we can see is that they have a lot of projects already under construction. And those projects, specifically for wind and solar capacity that are currently being built and are kind of slated to be installed by 2028, are going to double India's wind and solar capacity. And that's only — by 2028, we're only talking three, four years into the future.

So, this is obviously not; it's a really fast rate of growth. It's not quite the rate of growth that we've seen in China, but especially when there's less state capacity to direct some of this build-out and roll-out. The question falls even more to economics and as we've gone over before, like economics are just pointing in the right direction as well.

David Roberts

Yeah, I really like distributed energy in India. I think it is one of the really interesting global topics right now. Can we talk a little bit about gas? The role of coal, I think, is pretty straightforward. It's somewhat shocking. The top line number is that coal is still providing more than a third of global electricity. That's just straightforwardly bad. That's the climate problem. If you're targeting the climate problem, step one is getting rid of that. Gas is a little bit more complicated. Some countries, notably the US, a lot of the decarbonization it's done so far has been via gas.

And now, the US is trying very hard to liquefy its gas and export it to places. And so right now, like China for instance, is stuck in this dilemma. We don't have any gas, so if we're going to get off coal, it's got to be clean energy, which is like, you know, a bracing choice. But if you flood a bunch of clean gas into that equation, is it going to slow that down? Like, are you worried about LNG blunting any of this momentum?

Bryony Worthington

Nick, I don't know if you want to take this first. I mean, it's true though, right? What you said is true that if you look at Europe and you look at the North American story, a large part of what we did was switch from coal to gas as we discovered our own resources. In the UK's example, it was the North Sea gas, in America it was the fracking boom. And that's definitely helped pull down the carbon intensity of our power. It's had other problems associated with it, not least the methane associated with that. But the shift now, of course, is that it's not that cheap.

Even if we see the US bringing on board lots of LNG export capabilities, that will increase the cost of gas domestically. And how popular will that be for US citizens? Right at the root of this is that it's not free and cheap to get gas out of the ground and to get it to your customer; it's pretty hard. So, there are some fixed costs. There's lots of talk about whether it needs to be $80 a barrel or can you survive on $50 a barrel. But at some point, you can't allow it to go too cheap because that will then start to see supply come off because then no one makes any money.

So, it's just this — I just think that this is a big, century-long paradigm shift away from fuels. And gas, at the moment, is the fuel that we're at, the margin that we're trying to displace, but it will lose because it's less ubiquitous and it's more expensive. And so, I think this idea that you can't run an economy without fossil fuels is a nice lie you can tell yourself for a certain amount of time until the evidence becomes overwhelming that you can. And we're getting close to that point now, I think.

David Roberts

I don't know. We here in the US can tell ourselves lies for a long time.

Bryony Worthington

That's your choice.

David Roberts

We're doubling down on that whole strategy.

Nicolas Fulghum

Yeah, I kind of wanted to pick up on something that you said about the outlier role that the US plays here with gas as well. So, in 2024, the increase in gas in the US was more than half of the global increase. So, just the US alone.

David Roberts

Slower than solar, but faster than wind in the US.

Nicolas Fulghum

Slower than solar, but faster than wind. That's exactly right. But if we just look at the very recent trend in the US, so this is the first three months of 2025, this is kind of getting into slightly breaking news territory because we basically only looked at those numbers today, more or less. And what we're seeing is exactly that dynamic that Bryony pointed out play out. So, gas usage was relatively high. It was a cold winter. The storage for gas was depleted much quicker than energy analysts expected. Gas prices rose up. So, a lot of that gas was used for heating.

That also makes it more expensive for gas power. And as a result, we actually had the first quarter of falling gas generation in three years.

David Roberts

Interesting.

Nicolas Fulghum

And that is, it's the first time really in a long time that we've seen a switch from gas to coal. Obviously, at the same time, increases in wind, increases in solar are dampening a lot of this. But underneath, there's a really interesting dynamic and one that the US will have to grapple with more and more if you connect yourself to global markets. And I think you had a really interesting conversation with a US congressman about this as well, where he pointed out that, "Yeah, this is going to be really unpopular." And there was a really neat line there that I think applies not just to the US but "If you do the math right, there are a lot more consumers in the US that are dependent on low utility bills than there are gas producers that are profiting from this."

David Roberts

There are a lot of gas producers, but not that many.

Bryony Worthington

Yeah, there are a lot. It's true. It's almost a form of distributed energy in the US, really.

David Roberts

I know. One other thing about gas. You've been doing this for six years now. Can you see in the data Russia's invasion of Ukraine and the sort of, you know, because that just dominated energy discussion for a long time. Have you seen that show up in the data and exactly how, what did that cause?

Nicolas Fulghum

Yeah, there's the very immediate effect of just a massive fall in electricity demand in Ukraine specifically. Obviously, that's the direct effect of the invasion and the destruction that has happened in the country. But sort of, if you go more to the regional level, especially if you look at the EU, you've seen a very swift response and also a response that started to tackle topics that were really unpopular before. So obviously, the EU relied on cheap gas. Specifically, Germany relied on cheap gas imports from Russia for a lot of its economic activity. And if anyone had said four or five years ago that the EU could largely wean itself off Russian gas within like a three-year time frame, then that would have probably been seen as a completely ridiculous assertion.

But a lot has happened in that time and there are legislative reasons that the EU has moved to wind and solar faster than they've ever done before. The EU Green Deal is a big part of this. So, it's five years since that's been passed, but a lot of it was also that reaction. And you can again see this role of the distributed versatile nature of solar, because what we really saw is a massive boom in rooftop solar installations in Europe as a response. Utility bills were really high.

David Roberts

Yeah, Germany's electricity costs are super high now, aren't they? I mean, in part as a result of some of this.

Nicolas Fulghum

Yeah, it's come down a little bit since the peak, but the energy crisis was felt in the EU. As a result, it's a global market specifically for gas and coal. The EU imports a lot of this, but so does South Korea, so does Japan, so do a lot of countries in Southeast Asia. They all felt the increase of coal prices and increase of gas prices. We've recently also published our European Electricity Review, which we always do at the beginning of the year, talking about Europe and just the wind and solar installations that we've seen over the last five years have avoided around 59 billion Euros of fossil fuel imports.

So, just for American audiences, it's US$64 billion roughly. So, it's a huge amount of saved money. This is roughly equivalent to the nominal GDP of a country the size of Slovenia. And that's in savings. That's just in savings. So, it's a very unfortunate event that has led to some fortunate turns within energy policy in Europe.

David Roberts

And permanent, you think, like not something that can be switched back once this dies down?

Bryony Worthington

It's unlikely because you've got market forces, but you've also got policy packages which are long negotiated and once they're in place, they tend to stick around. Of course, there's populist opposition to it, but basically, Europe, I think, is going to stay the course. And the reason I say that is I just came back from Poland and there's a country that felt that "We couldn't afford to follow Germany's path."

David Roberts

And that's the most coal-intensive EU plus state, as I recall?

Bryony Worthington

Still, by far and away, the most coal-intensive. But if you look at their recent data, the big growth has been in wind and solar. And they're starting that transition at a time when the costs have come down to the point where it makes economic sense for them and it's seen as secure. For Poland, energy security is far and away more important than anything. You can imagine exactly where they are on that eastern fringe of Europe. And so the fact that that wind and solar is their own, it's similar to coal in that way that they can control it, they're not exposed to international markets.

So, you're starting to see this benefit both in terms of — there's a side benefit which is environmental, but mainly it's about security and cost.

David Roberts

A sort of parallel point to the one we were making earlier, which is there are a lot more fossil fuel importing countries than there are fossil fuel exporting countries. So, there's a lot more countries for whom security means domestic renewables. Right. Getting off those imports. I mean, that's kind of like — it's interesting that renewables and national security are kind of converging here and there. Final question, which you just kind of touched on briefly in passing. There are two ways of looking at the current political situation. On the one hand, it seems like there is something like a global populist backlash happening.

It's showing up a little bit in the EU, it's obviously over the top happening in the US, glimmers of it in Canada, et cetera. And part of that backlash, you know, part of that political backlash is a backlash against green energy. You know, like the Conservative Party in the UK used to be sort of like rhetorically supportive of the energy transition. Now they're saying net zero by 2050 is impossible. So a dim view could say a lot of this progress is going to be pulled back in coming years through policy backlash. The other way to look at it is if you look at the sort of deployment numbers of wind and solar over the last several decades, they just go up and up and you can't really see political — you know what I mean?

Like, you can't find bad political periods in there. They just go up regardless. So, maybe it doesn't matter. So, like, I guess, are you worried that this political backlash is going to show up in the numbers? Is it going to temper these numbers at all, these growth numbers?

Nicolas Fulghum

So, I think there is an aspect here where this is a technological transition. It's a transition based on changes in the underlying technology. And that's not something that you can kind of put back into the bottle. And like we said, I think at the beginning of this conversation, it can't be done by one government either, by one government changing its policies. Obviously, there are short-term effects that can hamper the build-out of wind power in the US or can, on the opposite side, accelerate it. But it's going to be increasingly harder to go against the economics of renewables.

And we know that the energy system is really changing away from one where you're shipping billions of tons of fossil fuels around the globe. Some of this political backlash might be around messaging, but whether it's a climate question, like a net zero 2050 target, or an energy security question, luckily the solution for both is exactly the same thing. It is that transformation of the energy system away from fossil fuels to a more reliable and efficient system. Those power sources are homegrown wind and solar produced at home. You don't have to have an import terminal; there are no licensing issues around who can sell you liquefied natural gas.

So, wind and solar are really the fastest way to cut your dependence on volatile global fossil markets. Whether it's the US, whether it's Japan, whether it's Germany, they're all subject to this. And it's just not a question of energy security on one hand or climate policy on the other hand. It's the same answer so the two really go hand in hand.

David Roberts

That's the beautiful development that's happened over the course of my career is that now, no matter what the question is, the answer is more solar and batteries. Okay, well, this is a fascinating overview of what's happening. Any sort of concluding comments, any other...?

Bryony Worthington

I guess my thoughts about this next era we're going into is this: it is never going to be necessarily an easy transition. You're moving from one energy system dominated by a fuel-based energy system into a completely different paradigm. And it could take us the best part of a century. And it's going to be choppy, but the direction of travel is pretty obvious, and that's because of the things we talked about. It'll be better environmentally, better in terms of energy security, and certainly better in terms of cost and efficiency. So this is just going to happen. The headwinds we're facing, some of them are just coincidence, but some of them are not.

We're basically seeing a new world order being written through energy, which is going to change how countries operate. It's going to change the wealth of different nations, and it's certainly going to affect the people who've currently made a huge amount of money from fossil fuels. So, I think the headwinds actually are a sign that we're winning, that this transition has not gone unnoticed, that people can see that the way that the world used to work is moving away from them. And there's going to be reactions, but ultimately just physics and technology progress will win. It's just a question of when.

And we can do it the slow way and the painful way, or we can speed it up and get to the cleaner, better system faster. And that's partly through providing reports like this that Ember produces. We're showing that the speed is already pretty impressive and people might be underestimating it. But we're also explaining the scale of the challenge ahead and it will move forward. Ultimately, more people are building more things and they're increasingly clean. So that's what gives me hope.

David Roberts

Awesome. Nick, do you want to add anything?

Nicolas Fulghum

I mean, I'd do well, if I could top that in any way. So, I'm going to... I'm going to leave that as it was.

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 talk with Antoine Vagneur-Jones, head of clean energy, trade, and supply chains for BloombergNEF, about the messy world of global clean energy supply chains. We explore China's manufacturing dominance, the faltering quest to "onshore" production in Western countries, and why blanket tariffs often undermine the very goals they're supposed to achieve.

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David Roberts

Hello everyone. Welcome to Volts for April 4th, 2025, "What's up with clean energy supply chains and global trade?" I'm your host, David Roberts. In the US, and to some degree in other developed countries, there has been a substantial recent pivot away from the neoliberal free trade consensus of the past several decades toward... well, something else. It is now widely acknowledged that trade policy and industrial policy are part and parcel of national security policy, and governments are taking a much more active role in shaping industrial development.

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On top of that, the global shift to clean energy has thrown the spotlight of public attention on supply chains — where the materials for a clean energy transition might come from, and how those shifting trade flows might affect geopolitics.

Finally, there's the arrival of Trump, who views trade-impeding tariffs as his primary tool of foreign policy and has already thrown global trade into a state of chaos with his on-again, off-again tariff threats.

Add it all together, and you get a situation in which global trade is more important to the decarbonization conversation than it has been in years.

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Antoine Vagneur-Jones thinks about and researches these issues every day as the head of clean energy, trade, and supply chains for BloombergNEF. He was kind enough to say yes to my extremely vague request that we "talk about trade stuff." So, he is joining me today for a conversation about who is manufacturing clean energy and who is importing it, the (faltering) quest to "onshore" manufacturing, the many ill effects of thoughtless tariffs, and much more.

This is a less focused topic than I normally take on, and the conversation is necessarily going to be a little digressive, jumping here and there, but I hope you will come out of it with a greater understanding and appreciation for the role of trade in decarbonization.

Antoine Vagneur-Jones, welcome to Volts. Thank you so much for coming.

Antoine Vagneur-Jones

David, it's a pleasure to be here. Thanks for having me on.

David Roberts

As I said in the intro, I've been sort of interested, you know — global trade in clean energy has just been a big topic lately. It was a big topic under Biden, and now, of course, Trump has come in, and it's a whole different kind of big topic. So, I just feel like I personally don't have as good a handle on the sort of state of global clean energy trade as I want. Obviously, that's your whole job. Obviously, you know, it is a farce to try to cover that entire subject in a one-hour pod, but we're just going to sort of like wander around, take a glimpse here and there, maybe try to connect a few things, try to just sort of get a sense of like, what's the deal with global trade and clean energy?

Antoine Vagneur-Jones

That sounds like fun. Let's do it.

David Roberts

So, maybe the way to start is, let's just put Trump out of our minds for a second. Let's imagine ourselves back, you know, a year ago under Biden, sort of the pre-Trump state of affairs, sort of what was going on in clean energy trade before Trump — because obviously, Trump is coming in and being very disruptive. There's a lot to talk about, but just sort of the trends prior. So, my, you know, half-educated take on global clean energy trade is basically just like China subsidized its manufacturers out the wazoo, more or less came to dominate almost every link of the supply chain.

And so, to a first approximation, global trade in clean energy is just China exporting things and other people importing them. But like, there are reasons to think China is going to divert from that. There are reasons to think the US is going to divert from that. So, talk about what was the state of global energy trade before Trump came in, like? One of the things you call out is that there was overcapacity. So, like, what does that mean? How did that happen?

Antoine Vagneur-Jones

Starting with overcapacity makes a lot of sense. It's one of the real defining trends that we've seen over the last few years. And I say few years because if you're defining overcapacity as there being too much manufacturing capacity, too much in the way of factories to meet global demand — I mean, "more than enough" is another way of looking at it. But we're basically in a state where at the end of last year, we had on average about twice as much in the way of factory capacity on a nameplate basis to meet demand for wind nacelles, to meet every bit of the solar value chain, from polysilicon all the way to modules to meet battery manufacturing and its various components.

And that is the product of, as you've said, a product of sustained investment that originated from subsidization, from a pretty concerted effort to build out market share in strategic industries that were perceived to be alternatives to existing dominance in traditional carmaking. For example, the Chinese government had tried to develop its own automaking and really focused and doubled down on doing EVs. And that led to an industry that grew out of subsidies, but also grew because it was exposed to a tremendous amount of competition. And that's really one of the defining trends that we're seeing now.

David Roberts

Well, let me ask then, because I guess this is like an incredibly naive question, but like Economics 101 tells us that in capitalism, in market societies, supply and demand converge. Right? That's sort of the whole thing. So if there's this massive, not just overcapacity, but a 2x overcapacity, it's not primarily market forces doing that. Is that a situation that the Chinese government deliberately set about to create? Did they know this was going to happen? Is this something that they anticipated?

Antoine Vagneur-Jones

Yeah, it's baffling from the outset because you would just think that these cycles, demand is growing quite fast, things tend to be cyclical in most markets, this would solve itself. But what we've seen is that in 2022, there was overcapacity across most of the solar value chain. And then 2023 saw an absolutely insane level of investment in Chinese manufacturing, which just shot up capacity just across the board. And that didn't really, when you're looking at things, you sort of think, "Okay, so what's the story there? Why is this required if we don't really need any marginal additions to meet global demand?"

And the question is, "Okay, is it just subsidies?" And the answer is, "It's a complex picture." Actually, there are subsidies that are clearly being given out at a local level by lots of different provinces within China to subsidize manufacturing of various solar components. But at the same time, we're in an industry where technology cycles are incredibly fast. So if you're a solar manufacturer, right now there's a real shift that we're seeing, an umpteenth sort of shift to the next new big thing in solar manufacturing. And that basically means retrofitting your factories every two, three years.

It's pretty unbelievable as a state of affairs.

David Roberts

Yeah, it's wild.

Antoine Vagneur-Jones

And it's also a state of affairs where economies of scale are incredibly important. If you aren't constantly keeping up with the rest, you are just squeezed out because margins have been so compressed. I mean, we're seeing prices that have sunk to the levels where, sort of around $0.09 per watt, which is what we think might well be below production costs in many cases.

David Roberts

Yeah, you don't really want to say it's too low, but like...

Antoine Vagneur-Jones

No, you don't. But if you're in the solar industry, it's pretty bad news. So, there's a degree of this incredible industry where you're just seeing capital that's funneled into something that isn't particularly great in terms of the returns on your investment that you get. And if you don't keep doing that constantly, if you blink, you're just rendered irrelevant pretty much overnight.

David Roberts

Now, is that because of the technology cycles or is that also partially because China is willing to sort of absorb the pain of over-investing in this in order to crush everybody else?

Antoine Vagneur-Jones

Right. So, I mean, I think historically we saw a tremendous amount of subsidization happen in many clear ways on the supply side, on the demand side as well. And that's something that's definitely tapered off pretty fast, actually. If we look at the wind sector or even the EV sector on the supply side of the equation and in terms of demand, we are still seeing subsidization happen in sort of discrete cases that we can point to. There's a lot of implicit subsidies happening with sort of concessional rates being given out, sort of below-market loans from state-owned banks, etc.

Tracking all of that is really difficult, but it's not just that simple. And actually, what we're seeing now is something very different happening where towards the end of last year something really interesting happened at the sort of jamborees, the association get-togethers for the Chinese solar industry and the Chinese wind industry. We actually saw manufacturers come together and agree on coordinating to "solve overcapacity" and basically coordinate on pricing and try and wean and get rid of the older facilities that are still operational, but sort of strip those out and basically try and move towards some seemingly cartel-like behavior.

David Roberts

Yeah, I was going to say that sounds like stuff that, I mean, would be straightforwardly illegal in the US, right? Like, you're not supposed to coordinate with your competitors.

Antoine Vagneur-Jones

Right. And that's pointing to there being some top-down pressure where basically the government has seen this as a concern. This is in many of the actual official documents and official declarations that we're seeing out of the Chinese government over the last year. This is very clearly something that the Chinese government wants to deal with in the same way as it's deployed efforts to sort of deal with this in the steel sector, for example. It's a complex picture where yes, there's some subsidization going on, but in a very clear way, the Chinese government wants to sort of recognize that this might not be the best thing for the sector's long-term health and is trying to solve for this.

And I mean, in terms of price coordination, it's very complicated. We actually don't really think that it's very easy when you've got a sector as dispersed as the solar sector to actually engage in any kind of collaboration. So, we don't really think that's going to bear out and have any meaningful impact on the industry as a whole. But it is telling, and it does show that this is recognized as something that needs to be solved for. And the whole narrative that is just about the Chinese government subsidizing things to an insane extent, which is just leading it to then flood the world in some kind of malignant bid to take over the industry, is something that's a little bit more nuanced. And that's also very much linked to another story which we're seeing in many other sectors, which is consumption and is the fact that actually right now, China, following the implosion of its property market, is seeing lower levels of growth than it would like and seeing far lower levels of consumption than it would like.

And that is reversing some of the priors that these manufacturers had made their big investments on.

David Roberts

This was exactly going to be my next question, whether there's also a role here for the sort of general turn in China away from this monomaniacal focus on production, manufacturing, and export to more consumption and quality of life. Is that going to affect the global trade situation?

Antoine Vagneur-Jones

Well, it's actually fascinating because if you look at the Malaysian government, for example, it's also framing this very clearly because it's seeing an influx of Chinese imports even beyond clean tech of all sorts. And it's very clearly framing this as a consumption issue and they're being quite nuanced in their take. They're saying that it's because of this slackening of consumption in China that they're seeing this spike in low-priced imports. There are efforts that are being made in China to sort of perk up consumption and to encourage the trade-in of older vehicles to increase EV sales and prop them up.

But again, these things take time and if we learn anything from the steel sector, it's that you can't solve for this level of capital just being dumped into a sector overnight. It takes a while.

David Roberts

I mean, like again, 2x. It's one of the things, "We're slightly over capacity," but double the world's demand capacity — it seems like at the very least, that's going to take a few years to settle out, right?

Antoine Vagneur-Jones

Right. And that would be if things were standing still. And that would be if we weren't still seeing vast volumes of investment being channeled into this year after year. And guess what, David, we are. We are continuing to see investment, at lower levels.

David Roberts

Adam Smith is rolling over in his grave. Why is this?

Antoine Vagneur-Jones

He's not having a good time. And it's because of the dynamics that I mentioned earlier. It's just this momentum that's built up. And this industry, which really is incredibly hard to stay alive in to begin with, the solar industry, for example, and an industry which is seemingly experiencing a bust before it ever really had a boom, which is the battery industry, for example, these are really tough spaces to make a living in and to grow a company within. And there are expectations around demand, which are very different across those sectors. But what's really similar is the fact that just keeping up and spending a lot on R&D and upgrading your factories and retrofitting and expanding, maintaining economies of scale are just completely vital to staying alive.

And we're seeing these sort of seemingly dominant companies like BYD and CATL, the world's leading EV manufacturer and battery manufacturer, respectively, both headquartered in China, who are really, when you look at how they're behaving, behaving more like sort of scrappy startups than the hegemons that they seemingly are. And that's what's really fascinating about this whole picture.

David Roberts

Yeah, that's interesting. I mean, I don't know if you're familiar with the sort of Brett Christopher's general critique of clean energy, which is just that there's not enough profit in it to fuel the pace of growth we need. Do you think there's something to that? I mean, it kind of sounds like a little bit of what's going on here.

Antoine Vagneur-Jones

I mean, yeah, it's a take. I mean, if you look at the energy transition, we're saying, you know, you need something around 4 or 5 trillion of spending just across the energy transition to get us anywhere near on track to net zero. And we're seeing a fraction of that. And that needs to improve. The supply side of the equation is the one part that we've solved for, that is the one part where we have more than enough investment that's been funneled into this. And that's why we're seeing this overcapacity. That wouldn't be the case if we hadn't invested to levels that are sufficient to meet global demand.

So actually, when it comes to manufacturing, it might be an industry where things are tough, margins are pretty tight. We've seen real compression over the last few quarters, a couple of years, and yet we're still seeing companies enter the space, try to expand, and incumbents continue to invest in new facilities. It's an interesting one for sure. But I think that critique has its limits when it comes to talking about manufacturing.

David Roberts

So, that makes it sound like this overhang of overcapacity is just going to hang around then. Is this just how it is in clean energy?

Antoine Vagneur-Jones

I mean, listen, you can look at these — we've got these pipelines of announced factories, and we tend not to take them too seriously. And, you know, there's a lot of talk around the pipeline of factories in the US that's been announced and in Europe and in India and in China as well. And you can look at those and sort of take them at face value, or you can say, "Hey, well, we're in a market where the conditions are pretty tricky, margins are low, some of these manufacturers are less experienced than others." And what we've done is taken a pretty skeptical look at that pipeline.

And we've done, you know, we've tried to adjust it for risk. Even with that risk adjustment, even if we assume that a pretty large share of what's being planned in China isn't going to be built, which is what we've done, we're still seeing a sort of plateauing of this overcapacity in the battery and solar space over the next few years. It's not going anywhere terribly soon, which is bad news if you're in manufacturing and you're trying to grow it, especially in markets where it's costlier to do so and the supply chains just haven't developed to the same extent. But equally, there's always a flip side.

And the flip side of the equation is this: good news if you're trying to build a battery project, an EV, or a solar plant.

David Roberts

Like if you're in Pakistan and you want to run your light bulb at night.

Antoine Vagneur-Jones

Last year, we were still pouring over the trade data from last year, because it was a fascinating one where we basically had these unexpected spikes in imports. Pakistan, in the first few months of last year, imported something like 11 gigawatts of solar modules, and Brazil dramatically ramped up its imports of EVs, all of which was coming from China. All of that is linked to this idea of extreme competition, massive investment. There's a nuance to this, too, because it's also — if we talk about the defining trends and circle back to your initial kickoff to this, this episode is linked to the other defining trend, which is trade barriers going up, seemingly not in lockstep, in very different ways.

If you're looking at different geographies, but across the developing world as well as the Western economies.

David Roberts

Let me frame this question because that was — you tee me right up here. This was my next question. So, one thing I've noticed in recent years is that just as a descriptive matter, it seems like the heads of developed countries have kind of turned against what's called neoliberalism, the sort of free trade, the whole sort of notion, the notion that free trade is a good in and of itself and that lowering trade barriers is almost always a good thing, et cetera, et cetera. That consensus which held — like was like biblical for most of my life in America, just kind of seemed to vanish.

And now, as you say, people are talking about tariffs and trade barriers and trying to pull supply chains back and onshore. So, my question to you is, is that consensus? Is that intellectual consensus reflected in an actual, measurable decline in global trade flows?

Antoine Vagneur-Jones

So, the fascinating thing is that the answer is no. If you look at trade flows, they're not decreasing year on year. And here, I'm just talking about if you take everything that I've sort of put in this clean energy bucket. We have all kinds of dashboards and databases, and let's say we look across clean tech, loosely defined, across renewable energy, EVs, heat pumps, all of that. We take grid equipment, transformers, cables, and then we also take all the battery metals, whether as ores or in their refined forms, and we add them all up. Then, we're seeing year on year growth and we've seen more than a doubling since 2020 in terms of the value in dollar terms that that trade represents.

And we expect that growth to continue. That's really significant because prices have gone all over the place. But right now, they're in free fall in many of those sectors. Yet, if you're looking at that trade in value terms, which is kind of necessary when you're talking across different sectors, then that volume is increasing. That is despite the erection of trade barriers, despite this quite hyperbolic talk of onshoring, nearshoring, friendshoring, and all the different types of shoring. We're still seeing this yearly march upwards in terms of the sheer volume of this stuff.

David Roberts

So what should we take from that? Should we take from that that the trade barriers are, are ineffective or that there's just more talk than there are actual trade barriers or that trade barriers don't matter? What should we learn from them?

Antoine Vagneur-Jones

Well, it's a tricky one. I mean, if you look at the US, there's been tariffs on solar since 2012. That's dramatically inflated the cost of solar in the US to something like three times what it is elsewhere, if you're looking at the module prices we're seeing in the United States. And what that hasn't led to is the instantaneous development of a localized supply chain. There are companies like First Solar that have done quite well out of this and have created a business case for their modules and sold them domestically. But we've still seen a reliance on imports. It's just that the source of those imports has sort of tracked the various ebbs and flows of those trade barriers, situating itself in Southeast Asia, with many of the same Chinese companies exporting to the United States.

And now, we're seeing further uncertainty expansion of some of those tariffs, which will have knock-on effects and lead to that shifting again. But it really took the Inflation Reduction Act and its subsidies that were afforded to manufacturers, whether as grants or loans or tax credits, to really start to see that onshoring happen. So, this is a brilliant case study because it gives us pretty high levels of very inflationary tariffs that haven't really done much in terms of completely removing imports from the picture. And that's just one case study. And every industry is very different. And last year is a bit of a litmus test because what we did see last year was this pretty unprecedented increase in tariffs across the board.

Previously, it had been very focused on solar, some wind tariffs. But what we saw last year was a segment of the overall trade volume for clean energy trade, which has really grown rapidly, which is batteries and EVs. They are really pushing solar out of the picture in terms of the overall volumes and dollar terms, they represent about 60% of the total now. Whereas solar, which used to be completely dominant, is around 20%. Because planning cost of modules is really part of the picture. The actual volume of traded modules has gone up. But batteries and EVs are really front and center and they've been hit by very, in some cases, high tariffs by the likes of Canada, by the likes of the US, even by the likes of the EU, which made sort of a roundabout turn on its previous aversion to putting in place trade tariffs on renewables and clean energy and EVs.

And now, we suddenly have a variety of tariffs that are tailored for different electric vehicle manufacturers, but are imposed, sort of upwards of 30% in some cases. And that's pretty significant. So, we'll see whether or not that has an impact. I mean, we're still looking through, we've just got the end-of-year global trade figures are just in, and we're looking through them and we'll try and see if there's any real impact. But just, I don't think that's going to lead to a reduction in trade flows in any kind of net sense year-on-year.

David Roberts

Well, one of the documents you sent did say that clean energy trade growth has slowed. It's 13% year on year now. And I think it was something up in the 20s. So it's not reversed. Flows aren't declining, but there is at least some diminution in the pace of growth of it.

Antoine Vagneur-Jones

That's right. But then, what happened during that period, 2023 to 2024, we saw a dramatic decline in the cost of batteries, price of batteries, of lithium-ion batteries. And if you account for that, actually, the volumes that are being traded are greater.

David Roberts

Oh, I see the value decline because the prices decline, but the volume is still up.

Antoine Vagneur-Jones

Exactly. And we've had pretty clear declining prices just across the board. Meanwhile, volumes of overall trade into their dollar value have increased and that growth might be slowing, but it's as much a product of declining prices as it is of any kind of decline in terms of overall volumes of things being traded. Super low prices for battery metals, solar, even turbine prices are going down. And all of this stuff should be really thought about when we look at these overall trade statistics.

David Roberts

Yeah. One of the sort of domestic stories, certainly the story that the Democrats were trying to tell in this previous presidential election, is that the IRA, the Inflation Reduction Act, and all those subsidies had in fact successfully sparked a kind of manufacturing renaissance in the US. They were pointed to factories being built, factories being planned, people talking about factories, etc. But then BloombergNEF comes out with this research and says that in fact half of those planned factories might not come to fruition. Is that some shortcoming in the IRA subsidies, or is that just a change in global economic circumstances?

Why such a flood of plans and so many that seem like they're not going to go anywhere?

Antoine Vagneur-Jones

Right. So, we said that about half of the factories in the United States that were planned to come online this year, we think that at least half of them, if we're looking across batteries and EVs and solar and wind as well as electrolyzers, we think that more than half of what's been announced in value terms of the investment that they represent, we think that that's going to get delayed or paused or put on hold, but it won't come online this year.

David Roberts

So maybe not canceled, maybe just delayed.

Antoine Vagneur-Jones

So, maybe not cancelled, but it's not looking good. And I think we've also been quite optimistic. It's been about 31 months since, at the time of recording, which is in March, the IRA passed and there's a pretty sizable amount of subsidies that are being deployed. You know, we counted about 183 billion in US subsidies and many of those are now under threat. But still, tax credits, when they're manufacturing tax credits, are quite hard to get rid of for various reasons. And we think even with that policy uncertainty on the subsidy side, we're still going to be seeing subsidies play a big role.

So, I think this is less about the Trump presidency, this uncertainty, and this is more just these intrinsically difficult issues that we're seeing when it comes to growing manufacturing. And it's just the overall picture is that market conditions are tough, prices are low. That makes it hard to build manufacturing where it didn't exist before, where there isn't really any — where you have to create a comparative advantage because these are infant industries in the United States. There's no local supply chain. There's uncertainty around demand now with EV demand, which has slowed somewhat compared to some of the expectations that we had.

And that really racks up. Right now, we're doing a big project to look in depth and at an asset level, and phone up all of these different factory owners and try to understand the reasons that are being cited, at least at face value, for some of these changes to some of these plans. Because we really wanted to get a bit more of an in-depth sense. But it's a real mixture of factors and it's something that really is qualifying some of this enthusiasm. When we updated our overall manufacturing shares for all of these different clean energy sectors last year and you looked at the year-on-year change, everything actually became even more concentrated in China.

We are seeing, we are seeing stuff happen. There are meaningful investments that are taking place. There is a 110 billion-plus in dollar terms pipeline of cleantech factories that are coming on in the US. It's just that many of those projects are going to get delayed/not happen.

David Roberts

So, if you were summarizing this, this is sort of one of my questions: is onshoring happening? You know, onshoring is all the rage, all the talk — I'm just curious. It sounds like there's some of that happening, but not enough to reverse the broader trend of concentration in China.

Antoine Vagneur-Jones

Right. That's my sense. And the answer is "kind of." It is kind of happening, and it is happening for certain sectors in a bigger way than it is for others. So, for battery cell manufacturing, we are seeing pretty meaningful volumes in gigawatt-hours of this downstream part of the value chain for battery cells being built out in Europe, in the United States. Scaling that is difficult. It's not just local manufacturers. There's a heavy reliance on South Korean firms, for example, like LG. So, that's part of the picture. But then when you go upstream, when you look at cathodes and anodes and the US's reliance on graphite and all these different things, then that remains quite concentrated in one place.

And that place is China. And that doesn't look like it's going to change right now because we've basically reached the year where I feel, and again, I've said 31 months since the IRA, this is a pretty good time to take stock, and that's what we're doing, of whether or not onshoring is really going to be a thing for these sectors or not. Because this is enough time to really come to a view.

David Roberts

Yeah, this was my next question. Like, if you're trying to, you know, there's a little bit of, like, crystal ball here, but, like, do you think that onshoring is like an engine that's just slowly cranking up and going to, you know what I mean, increase momentum in coming years? Or do you think it was just like, it's a little bit of an intellectual fad and basically the current situation is going to stay the way it is? What do you think of the future of onshoring?

Antoine Vagneur-Jones

Well, I think rhetorically, it's going to remain a policy priority. It's just that I think it's tricky to come to the conclusion that it's going to start ramping up rapidly at a time when it doesn't seem like, at a federal level at least, we're going to see much more in the way of funding. We're going to see the opposite happen over the coming months in the United States and even in Europe. In Europe, we were supposed to be experiencing — there's this answer in many ways to the IRA, which was the Net Zero Industry Act that was released in the wake of the IRA and had all of these fantastically ambitious targets for local manufacturing, which are very hard in some cases to take seriously at present, at a time when the EU isn't really in a big sense putting the money on the table.

It isn't really providing clarity about where to go for that funding that is needed. Actually, there's much more of a focus now on pivoting somewhat towards finding money for defense at a time when the EU is really making that its focus. There's a much more dynamic and serious approach that is being taken to deploying capital in that area. If you compare it to the efforts that have been made over the last few years when it comes to scaling clean-tech manufacturing, which is, again, just like the US, remained a huge visible priority of the European Commission.

But we've just had these structural issues within the European Union that have really held things back and really meant that it's been difficult to get things going in a big way. Even though I will qualify this with the fact that there will be battery making, there will be EV manufacturing, there will be some of this happening within Europe. It's just that overall, the picture is one of leaving someone slightly underwhelmed, if you compare it to the rhetoric that was being deployed a few years ago.

David Roberts

It sounds like, despite a lot of big talk, the basic structural situation of China dominating clean energy supply chains is likely to persist, at least for a while. What I want to talk about, and what I want to kind of ask you about, is it became conventional wisdom, it seems like almost overnight, that like, China dominating the supply chain for clean energy is a bad thing. We've got to do something about that. Like, we've got to stop importing from them, we've got to onshore. We've got to do all this. Like, everybody became very exercised by the threat. And it sounds like despite everyone getting very exercised about it and talking about it a lot and passing a lot of legislation, that the threat, insofar as it is a threat, is going to stay around.

And this is true — like, you know, it's the nature of supply chains that, if they have eight links in them and you manage to claw back or onshore seven of them and China still dominates link eight, then it still basically has leverage over your whole product. You know, I mean, they can still screw you. So whatever power China has over supply chains, it's probably going to have for a while. So what I want to ask about is, and I've asked this to a couple of people before, like, as I said, overnight, everybody decided "this is a huge threat."

And when I read articles about it, you know, in like, Foreign Policy magazine, about this new industrial policy and the threat of how trade and national security are sort of merging, etc., and we're addressing the threat of China, but when they get to the part where they describe the actual threat, what might actually happen, there's just a lot of hand waving. Like, intuitively, the fact that, like, China's dumping a bunch of subsidies into making the things we need cheaper and therefore the world is being flooded with cheap things that we need. Like, great. That seems like a great thing.

So, like, to be convinced that we should slow or reverse that because of this threat, I want to know, well, what is that threat? Because the good of being flooded with cheap solar and batteries is very obvious and evident to me. The threat of China dominating supply chains is much fuzzier. So maybe you could just say a little word about, like, what are we scared of? What will or has China done or what do we think China might do that would make this threat into an actual harm?

Antoine Vagneur-Jones

Right. So, I think one of the issues is that it was never really clear why onshoring was a priority to begin with. There was a number of different, very valid arguments that were being made around supply chain concentration or the creation of local value or selling this whole energy transition thing to voters — in inverted commas.

David Roberts

Yeah, the political argument I get a little bit more than the economic one.

Antoine Vagneur-Jones

And what we've learned from the whole experience and how it's played out is that it's pretty tough to do everything at once. Even if you deploy a bunch of tax credits that are quite generous and targeting a real panoply of different technologies under the 45X tax credit that is funding this manufacturing in the US, it's not just at the press of a button that you're going to have something emerge. So, you have to start to have a bit of a hierarchy of priorities. And you have to have a hierarchy of, if you're viewing this as a risk, a hierarchy of threats, and choose accordingly.

And that's been where there's a lot of soul-searching that's sort of happening in various senses. I mean, there's a big argument that is happening right now in Germany where the German government has made noises about concerns of using Chinese wind turbines, which happen to be bigger and in many cases cheaper than locally made alternatives. Turbine makers in the west have been having a pretty rough time recently, whereas RWE, Europe's biggest generator when it comes to power, is basically arguing that "No, this should not trump the pressing need that the energy transition represents."

David Roberts

Right. We need clean energy. That's supposed to be the overriding thing here.

Antoine Vagneur-Jones

Examples abound. I mean, there's the Draghi report. Mario Draghi, who used to be the head of the European Central Bank and was the prime minister of Italy, was asked by Ursula von der Leyen, who's the head of the European Commission, to draft a report. She was assuming her second stint as the head of the European Commission and asked him to do a big report on European competitiveness. Some of his conclusions were that you need to come up with a hierarchy. When it comes to solar power, the EU should probably pivot away from trying to have this rhetorical commitment to getting to 40% local content across the solar value chain by 2030, which is the stated target still, but is one that is not taken very seriously by pretty much anyone, and refocus on industries that it deems important, whether for political reasons or for security reasons.

And what's interesting is we started to see this take shape. One of the parting shots of the Biden administration was an act on connected cars. So, a new rule that effectively bans EVs if they have Chinese software or Chinese hardware comes in. There's a bit of a delay in terms of it coming into force, but it comes on top. It's amazing that this comes in because it's on top of foreign currency of concern rules that limit access to subsidies for cars that use Chinese parts. It comes on top of extremely high tariffs that are put on at over 100% for Chinese EVs.

And even on top of that, you've got this connected cars rule because of this fear about the interconnectedness of Chinese software and what that represents. We're starting to see the European Commission use the same language. A couple of weeks ago, there was an action plan for the EU automotive industry, which has signaled a real protectionist pivot for the EU, where it's starting to talk about local content, which was a big "no, no" as far as the European Union's competitiveness laws, competition laws were concerned. It's also starting to talk about investigating the expansion of tariffs to potentially things like batteries, and also starting to use exactly the same language as was used by the Biden administration in that piece of legislation I just mentioned, which could, at the flick of a switch, suddenly make it very difficult to have anything Chinese on the roads.

Again, this is hyperbolic at this stage when it comes to the EU. Things are at very early stages, very vague in terms of how this is going to be implemented. The EU doesn't necessarily do things extremely fast, so there's going to be some time before we get an idea of what this really means. But we are seeing what the US does being picked up by Canada, which has a similar rule in place, and then starting to percolate through further afield. We're starting to see it shape you.

David Roberts

And so, like the position all these countries are coming to, is we're willing to accept higher prices for EVs, batteries, and solar panels, slower adoption, you know, less emission reductions because of this threat, because of the severity of the threat. We're willing to accept those drawbacks because of the threat. And so, this is why I come back to like, well, if you're willing to accept all those drawbacks, it must be a really big and obvious threat. So, what is it? Like, when you talk to people who are supportive of this, what are they scared of?

What is in theory, what would China do that would make this threat real?

Antoine Vagneur-Jones

And that's something that we're not really seeing clarity from policymakers on. There obviously is a very different way of treating something like a heat pump compared to a solar panel, compared to an EV, compared to an inverter, for example. These are all things which work in very different ways and are connected to the grid or what have you in very distinct forms. This isn't just the clean tech space. We've seen this play out in telecommunications where the British government was basically forced to do an incredibly expensive exercise in ripping out all of the Huawei tech that they had installed.

Incredibly expensive exercise just on the pressure from the US administration. And that was their choice. And it incurs costs and it makes things — and what it means for us is it means that it becomes sort of interesting to start to use some of our least cost sort of modeling exercises. We've got our New Energy Outlook which solves for net zero, it solves for the least cost energy system. And we've begun playing around with it and we've begun introducing various premiums because that seems like it's the direction of travel. And that premium can be a tariff, that premium can be a premium for local manufacturing, for local content.

And you can start to see different industries react in different ways; different sectors have different degrees of sensitivity. So, the solar sector, solar is so cheap that you can make it much more expensive and it still gets built under least cost modeling exercise, even if you're just looking at utility scale solar. And it's really fascinating to see that play out. Whereas the economics of a stationary storage battery system are more of a knife edge and it's a lot more tenuous. And if costs go up, then that could feasibly have a bigger impact on build.

But that's when it's worth again taking a further step back. I was just speaking to a US solar battery system developer and just highlighting the fact that actually, right now, we're seeing extremely long lead times for the next best option, which is a peaker gas turbine. And right now, we're seeing massive shortages in gas turbines. We're seeing waiting times that are going out to 2031, 2032 for the US and you've got to bear that in mind too. So this is all pretty complicated stuff and it's stuff that we're not used to thinking about because we've really taken it for granted that the energy transition has these learning rates, these cost curves that have this pleasing sort of downward slope.

We're seeing a sort of logarithmic growth in many cases, and we're seeing deployments sort of just run itself on economics alone. Now, we're starting to have to solve for these other things. There are areas where, you know, solar is still being built in the US despite the fact that it is three times more expensive than in Europe. So, it doesn't necessarily grind things to a halt. But what is really needed and what is really lacking in terms of the policy-making side of the spectrum is any kind of convincing analysis or any kind of convincing proof that they've done this homework and they've actually sat down and tried to work out what happens if they pull on this lever.

Because they're pulling on those levers and they're deploying a lot of public money, they're raising trade tariffs seemingly at whim. However, what we're not seeing is any kind of thought or modeling of the impact that that has on the competitiveness or the relative competitiveness of different sources of energy.

David Roberts

Or the impact on clean energy deployment and emissions.

Antoine Vagneur-Jones

Exactly. Yep. And that's the corridor.

David Roberts

It would be crazy if we got to the point where the economics were solved and like they're going down the learning curve and they're spreading all over the world, and we intervened with policy deliberately to slow that down and make it more expensive. This is kind of what seems crazy to me about this whole thing. Like, if all these tariffs, all these trade barriers, all this paranoia and this new paranoia, this anti-China paranoia and this idea of onshoring, all of it is just like, scared of what? Like I keep saying, it must be a really substantial threat to go through all of this to slow the spread of clean energy and all, etcetera, etcetera, etcetera.

And I just can't get anyone to tell me, sort of like, you know, like in 2027, China will do XYZ. Like, is China going to cut off the flow of graphite to the US? I mean, the thing about capitalism is like, they're our big supplier, but conversely, we're their big customer. So, like, they would be cutting, you know what I mean? Like, they would be hurting themselves to do that. Why would they do that? Like, under what circumstances would they do that?

Antoine Vagneur-Jones

And there are different aspects to consider as well. I mean, there's the fact that, okay, if we are going back to this regional state of affairs, which by the way, you know, historically the automotive industry operated on a very regional basis when it came to trade throughout much of the 19th century. There is precedent for this happening. Cars still carried on growing pretty fast. But if that is the case, I mean, how are you going to do it? And are you going to accept if you're deciding to, in the case of the United States, attract a lot of foreign capital to your domestic market and grow out your manufacturing base, what kind of companies are you going to be allowing in?

And as far as I'm concerned, it's quite tough to do that if you aren't learning from the best. And that's something that we saw in the East Asian industrial experience, where there was this incredible series of success stories from South Korea to Taiwan to mainland China, where we basically saw a pretty concerted effort to attract leading manufacturers of things, force them into JVs to partner up, to invest locally, and then leading to technology transfer. And now what we're seeing is another really interesting aspect of this, which is where it's suddenly becoming less clear to Chinese manufacturers that they can actually set up shop and manufacture from the United States, from Canada, from Europe.

The Trump administration was sort of widely expected, or not widely expected, but Trump had made some noises on the campaign trail that he would be willing to impose a 200% tariff on EVs manufactured in Mexico if they were by a Chinese firm. But as a counterpart, he would be completely happy for Chinese manufacturers to come and set up in the US. So there was this sort of expectation, which was taken seriously, well, to various levels of seriousness, that this would then lead to him being suddenly much more open to Chinese investment than had even been the case under the previous administration. But what we've seen with an America First investment policy that was released again just a few weeks ago, is that that is not the hill he's willing to die on. And he will absolutely follow the Republican consensus in making things quite tough for Chinese manufacturing.

And that is also the case, by the way, in the EU. I mentioned this action plan for the EU auto industry, which again is starting to make hints that there might be use of this foreign subsidy regulation, which is a new piece of legislation, relatively, to be used to investigate various investments that are being made or mergers if a company that is being involved, that is using EU public funds, can be found to have "distortive subsidies" in their home market. And that's clearly being used to target Chinese manufacturers. And it's again a chilling effect on investments.

And it means that a lot of these manufacturers are going to hold off.

David Roberts

Let's pivot a bit to this then, because the US has these tariffs on batteries and might even get higher. The EU is considering tariffs on batteries. In response, Chinese EV manufacturers are shifting to exporting more to emerging countries that aren't China. So, let's talk a little bit about the role of these countries in the trade mix and in the future. What is the political and economic significance of China kind of turning away from the US and EU to, you know, like Vietnam and Pakistan and all these other countries?

Antoine Vagneur-Jones

The arithmetic is really simple. It's overcapacity, low margins at home, there's this need to export. Trade barriers are going up across the big demand centers. And if you look at demand for EVs, solar batteries, and you strip out China, you strip out North America, and you take out the EU and then India, which has also been quite keen on putting in place protectionist barriers of its own, you take those markets out, you're left with a small nub of demand. And those are countries that historically weren't really targeted by exporters. And that's changing. We're starting to see where we look at low to middle-income countries as defined by the World Bank, for example, we're seeing them take a larger and larger share of imports which are growing net, but we're seeing them take a larger share of the pie every year.

And that accounts for the trade of wind turbines and components, electric vehicles, batteries and associated components, solar modules, solar cells even. We're really seeing that happen across the board. And it's getting to the point where for many of those sectors, there's sort of a third to half of what China's exporting is going to countries that sit at that middle income band or are below that level.

David Roberts

Right.

Antoine Vagneur-Jones

And that's a real change.

David Roberts

And I'm guessing for those countries, there are none of these scruples about onshoring or whatever. Like for these countries, getting access to high volumes of extremely cheap clean energy material just seems like an unqualified good. Like, is there any reason they wouldn't welcome this?

Antoine Vagneur-Jones

Well, you say that, but Indonesia has a ministry that has the word "downstreaming" in its title. Brazil has just released a big industrial plan.

David Roberts

Oh really?

Antoine Vagneur-Jones

Yeah, Turkey is using tariffs, explicitly using tariffs to encourage Chinese manufacturers to set up assembly lines — I mean, the degree to which those are going to be superficial sort of screwdriver assembly shops or, you know, involve some sort of integrated manufacturing, is sort of uncertain — but to attract Chinese manufacturing in Turkey. So even there, I think there's a real shift of leverage because of the fact that the big historical demand centers in the west are becoming a bit harder to sell into. The prospects there are much less certain than they were before. And that means that there are these trickier markets that are starting to have a bit more wiggle room when it comes to trying to put in place policies that could then actually lead to investment from Chinese manufacturers into those markets, too.

And we're seeing, you know, the Lula administration is very close to — it has no aversion to developing good relations with China, has been extremely keen to promote foreign direct investment, for example, in the battery electric space. I mean, we've seen BYD take up an old Ford factory to establish an EV manufacturing plant in the state of Bahia. And that's a trend that we are starting to see across the board. I mean, there's a reason why BYD is sort of investing in manufacturing in upwards of 10 countries worldwide, despite the fact that doing that in parallel is really tough.

You're having to hedge all of this foreign currency risk you are having to deal with. You're going to have to manage all of these localization requirements, which are really tough. And that's because of the fact that these markets are growing and they represent an opportunity. But it's also because these governments are also recognizing the fact that they are quite keen to use this as an opportunity to grow their manufacturing bases. Because it's been quite hard the last few years to develop as a country when it comes to manufacturing. And I am skeptical about the extent to which this will become macroeconomically significant for these different countries.

But they'll have a go, and they'll be much more open to Chinese investment than is typically the case across much of the countries we've been talking about to this point.

David Roberts

Interesting. Well, let's talk about tariffs. Let's talk about what's going on. So, BloombergNEF came out with this big report. I mean, it's sort of like one of the funny features of our time that, like, Trump sees some news segment, has indigestion from a Big Mac, fires off a tweet, and then, like, the next thing, you know, 200 BloombergNEF analysts have descended to try to, like, make sense of it. You know, and then, like, by the time they're done, he's burped up something else completely different. These are maddening times to be an analyst.

Antoine Vagneur-Jones

Yeah, we're having to do some tweaks with our workflow. And being efficient is not always rewarded when it comes to coming out with reactions when pivoting is becoming such a feature of the —

David Roberts

Yes, yes, I kind of want to ask about that. So, BNEF came out with this report saying, you know, the proposed tariffs that Trump is going to impose on Mexico and Canada are going to hurt several segments, in particular, clean energy. So maybe, just, maybe just go through. If he actually does it, if he actually imposes the tariffs that he says he's going to impose and actually keeps them on, why will clean energy be disproportionately hit?

Antoine Vagneur-Jones

Well, not necessarily, actually. It's one of the interesting things around blanket tariffs that they really do affect everything. And you can start to try and do some pretty speculative calculus about the impact on different industries and what we — for example, I mean, there's an example in the automotive industry. And there's been lots of ink that's been spilled in recent weeks about the fact that you've got this giant factory called North America and you've got the big three, which have these operations and different suppliers and different Tier 3, Tier 2 suppliers that straddle the borders and parts that will, throughout their lifetimes, get to visit Mexico many, many times until they actually make their way into a final vehicle.

I mean, there's a report that's cited which sort of says something like eight to nine times is typical for—

David Roberts

Right. And getting tariffed every time.

Antoine Vagneur-Jones

And potentially, I think the jury is still out in terms of the legal consensus on, you know, we're moving away from this USMCA directed status quo and we're trying to figure out what happens next. And there's the potential that you could be tariffed every time. It seems like there's still a bit of fuzziness into how exactly that would work. But then that means that it starts to be quite interesting because you are imposing a tariff on a very integrated industry. You are also imposing tariffs on crude coming from Canada, coming from Europe. So, that will push up pump prices.

So, you're making cars and driving more expensive. Meanwhile, EVs, I mean, still, you know, EV manufacturing has a long way to go in the United States, but it is much more concentrated in terms of, you know, there are imported batteries and some imported parts. But in terms of North America, for all of the Biden administration's efforts to bake in near-shoring provisions or incentives in some of these tax credits that it's been deploying to spur demand, it still hasn't led to much in the way of integration across those three countries. And actually, manufacturing and production are much more concentrated in the United States.

So, that's a long-winded way of saying that conceivably, these tax credits could run against one of the mainstays of the Trump administration, which is to prioritize the sale of thermal vehicles, traditional ICE vehicles over EVs. And there's all kinds of ways you can sort of look at this. You can also look at this from the fact that, you know, another big pillar, another big policy that was signed early on was this commitment to building out data centers. And building out data centers, well, requires building out the grid. And that's not just for integrating renewables.

It's also for just the sheer capacity that you're going to have to be loading on. And that requires some pretty big pieces of equipment. One of those is transformers and lots of the large power transformers — about half of what the US gets comes from Canada and Mexico. So that starts to make that grid build out more expensive. And that starts to seemingly run contrary to this central objective, which is to plow loads of money into data centers. And I mean to say, you can go on about this, you can talk about what does this mean for manufacturing?

You're making inputs more expensive. What does that mean for your manufacturing base? Sure, like tariffs, cannot be used selectively.

David Roberts

One of the things reading your report kind of clicked for me is that if we're trying to onshore manufacturing, these tariffs could actually work against that because they could make US manufacturing more expensive because so much of the parts for US manufacturing come from Canada or Mexico.

Antoine Vagneur-Jones

Well, a) volatility is not great for making business decisions that have very long cycles for their return on investment. And b) selective use of tariffs is not uncommon when you're trying to develop an industry and a manufacturing base from its infancy, or when you're selectively trying to ring-fence a given industry that you're deeming valuable enough for all kinds of political, economic, or social reasons to protect. When you're applying blanket tariffs across the board to countries that are providing a lot of the inputs, parts, equipment, and machinery for the factories that would be built to sort of make good on these objectives, then that's when things start to get tricky.

And that's when it starts to seem like a bit of an own goal. And again, just similar to this bizarre automotive story, similar to this state of affairs when it comes to data centers, this is another area where you've got this real rhetorical commitment to building out manufacturing in the US, but it's unclear how that would be encouraged by new tariffs. And this is also at a time when we're starting to see some of the central incentives for building out semiconductor manufacturing, to say nothing of the Inflation Reduction Act incentives for clean manufacturing, being directly challenged by the current administration. So, the outlook for manufacturing in the US is one that is slightly murky at this point, and the picture is quite fluid.

David Roberts

You put that very politely. By way of my final question, and this gets fuzzier and harder to quantify, but there's the first, second, and third-order effects of tariffs themselves, you know, which are at least somewhat calculable, to some extent. But then, sort of beyond that, there's the effect of uncertainty about tariffs, which is, as we've seen thus far — I mean, I honestly think if you're looking around at tangible economic effects, the uncertainty itself, the flipping back and forth, the chaos is almost having more substantial effects than any of the policies themselves. Is that fair?

Like, what is the, you know, what is the sort of proximate effect on global trade of just this absolute fog of uncertainty? And you can't even like assume rational actors here. You know what I mean? You can't even assume that, like, if these guys say they want X, they will act rationally in pursuit of X. You can't even assume that. You can't really assume anything. So, how's that going to affect global trade flows?

Antoine Vagneur-Jones

It means that there's a lot of hedging of bets that has to happen, and it's a real boon to those manufacturers, for example, who can afford to make a variety of bets by setting up manufacturing facilities in lots of different places. The uncertainty is so high right now that it really is very difficult to just sort of begin and just focus on one target market and try to build things up. I mean, the US is obviously the central focal point of this uncertainty. And April 2nd is the date that is looming for this announcement of these "reciprocal tariffs" that are set to —

We're at least supposed to get some clarity on them, and markets are bracing for that, and that will have some pretty important outcomes. But yeah, it means that in a very concrete way, it makes things tricky. I mean, Mexico has been talking about near-shoring and onshoring manufacturing throughout the AMLO presidency and now with Claudia Sheinbaum Pardo, that was set to remain one of her focus areas. And that's very difficult to make good on if you've got this looming threat of crippling tariffs in this market, which was supposed to buy all of the stuff you were going to make.

I mean, already there's a lot of manufacturing that happens on the border, and Nuevo Leon is a big automaking center where a lot of what is being produced, again, as we've talked about, sort of zigzags across the northern border. But it makes things difficult in terms of making new investment decisions where those tariffs could have a bearing. But even in the EU, for example, there's not much clarity about the next step. We've seen this first initial firing, this first initial shot of EV tariffs being implemented last year. What happens next? We think it's likely for there to be some kind of investigation mitigation in battery tariffs.

That's something that isn't really — where tariffs are minimal, just as they were under much of the Biden administration until there was a reversal of that and Biden brought in tariffs on lithium-ion batteries. But in the EU, there's an expectation that they could follow suit, that the European Commission could do that as well. And that means that, well, that is again, a huge amount of uncertainty for Chinese manufacturers who are currently seeing the EU as one of their growth markets, who are currently increasing their exports to the continent, to the region as a whole.

And it means that they're going to have to really think hard about their prospects and whether or not they're willing to bear the risk of local manufacturing and investing there. Again, when we're seeing the expansion of Chinese manufacturers to the emerging world, to developing markets, to the west where they're able to set up shop, that's not just because those markets have a particular advantage to be gained from proximity. In many cases, there isn't a real comparative advantage. It's just about trying to navigate what is an increasingly difficult world, what are increasingly choppy waters as far as geopolitics go.

And that is hard to do if you're a small company, if you're a medium-sized enterprise. That means that some of these bigger players who are able to expand are going to be doing so at the expense of many of those smaller players.

David Roberts

Interesting. Are there sort of in-market mechanisms that serve to price in some of this uncertainty? Like, somebody online was mentioning provisions in PPAs that basically say, "If some tariff comes out of nowhere, you have to pay it." Do you know what I mean? Like pass-through provisions, they're called. Are markets capable of pricing this in any meaningful way?

Antoine Vagneur-Jones

I mean, it's hard to know what happens in contracts. There were some manufacturing projects where seemingly the plug was pulled on them on the day that the election result was announced. So seemingly, there are some provisions that are baked in, in all kinds of ways. I think it's slightly too early to make a definitive call on how those provisions are going to be structured in renewable energy contracts, for example. But I guess it's reasonable to expect that tariff risks are going to influence contract negotiations and pricing dynamics in some form.

David Roberts

Yeah. Speaking of uncertainty and trust and everything. So, like we've now had two rounds of Trump, two rounds of policy, trade policy just flailing in different directions going this way and that. You know, tariffs, no tariffs. Like NATO, yes, NATO, no. I mean everything's so — I'm wondering, like even if Trump loses in 2028, whatever Dems take back over, there is once again something that the world recognizes as kind of a normal administration with normal, you know what I mean? Even if that happens, do you think there's going to be permanent effects on global trade of the kind of like, do you know what I mean?

Are people going to be able to go back to trusting the US and making... Like you say, manufacturing is a big industry. Ten-year horizon investments, these are long-term investments, big pots of money. Is the loss of trust in the US going to persist and shape global trade, do you think?

Antoine Vagneur-Jones

I think when decisions are made to invest or contracts are signed, there will be a looming thought at the back of people's minds about the fact that knee-jerk reactions in trade, I mean, they've always been par for the course. But we're living in a world where there will be some scarring as a result of what we're seeing right now. And we are going to be living with the consequences of that for some time. There's talk of deglobalization and globalization. We're not really seeing that in the overall trade statistics, to be honest.

We are seeing all kinds of ructions and jitters and ups and downs, but we are also seeing a steady rise in overall volumes that are being traded across the world. And that's something to really remember and to have in mind when we sort of discuss this.

David Roberts

Is it going to help at all that Gavin Newsom is stepping in and sort of signing these memoranda with Mexican states like can sub-national entities have any meaningful effect here?

Antoine Vagneur-Jones

If you rephrase the question as that, then sure. Yes, I think there's going to be inevitably some scarring from the kind of protectionist shift that we're seeing from the fact that we're moving away from a world that really had free trade to a large extent, something that was reasonably expected. That's no longer the case. It's not just no longer the case with the United States. It's no longer the case with paragons of free markets and free trade such as the EU.

David Roberts

It seems global.

Antoine Vagneur-Jones

It is global to a large extent. However, I mean, it is premature to start to talk about deglobalization, and sort of this is being mentioned in slightly exaggerated terms. But it is not unreasonable to expect that this will have a bearing in the future and on trade dynamics and how people think about and how decision makers, policymakers, manufacturers, investors think about signing contracts and investing and where they want to invest in their manufacturing, in manufacturing facilities. Does it lead to a shift to the sub-national level? I mean, we've seen this happen in the past.

I guess there's very little prospect of a federal carbon price in the US, even under a Democratic administration, but we still saw collaboration in setting up a carbon price that links Quebec and California. So, there are some examples of this. The investments that were announced between California, the MOU that was signed with Sonora in Mexico, I mean, in many ways, that's just signed with the Mexican government. The Sonora plan has been a mainstay of the AMLO administration and is now being taken on this sort of, this idea to develop this region of Mexico which is supposedly going to turn into a big lithium mining, refining, battery making, EV producing hub.

But, I think a lot of the barriers that existed then will still exist, and the capital-intensive nature of a lot of these industries and of whether you're talking about building out a manufacturing base, whether you're talking about the nudge that is required to decarbonize many of the industries that we focus on is such that when it comes to onshoring and shifting things around, having support at a national level will remain incredibly important. And I don't think that this can just sort of happen with, you know, even though, you know, California is a pretty large country-level economy if you compare it to many other places, I still see that as an exception and not really the beginning of anything.

David Roberts

We are cursed to live in interesting times, as they say. So, Antoine Vagneur-Jones, thank you so much for coming and going on this ramble with me through various trade questions.

Antoine Vagneur-Jones

I enjoyed meandering with you. That was a lot of fun.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out, especially, to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. 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 sit down with my old friend Sean Casten for a frank insider's take on the precarious state of clean energy policy amid our ongoing constitutional meltdown. We dive into the political knife fight over IRA tax credits (some Republicans support them), why transmission reform remains frustratingly partisan despite economic logic, and the fossil industry's fear of competition. Despite the dire political landscape, Casten makes a compelling case for why clean energy developers should keep building through the storm.

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(Active transcript)

Text transcript:

David Roberts

Hello, my lovelies. This is Volts for April 2, 2025, “The View from Inside DC with Representative Sean Casten." I'm your host, David Roberts. As I previewed here on the site a while back, on March 27th, Canary Media held a live event in Chicago. At that event, I interviewed Sean Casten, who has represented Illinois' 6th district, which is lower Chicago and some of the suburbs, in Congress since 2018.

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Sean and I have known each other for a long time, and it was fascinating to get a frank insider's take on what's happening in DC right now. I think you will find it stimulating and provocative.

Two quick notes about the event. First, gosh, Chicago is gorgeous! As a lover of good architecture, my neck practically hurt from all the gawking. Second, a dozen paid Volts subscribers got free tickets to this event and I got to meet several of them — that's always a highlight for me. Great to see y'all there.

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If you would like to get free tickets to events, along with other perks like access to mailbags and my undying gratitude, sign up as a paid subscriber to Volts over on volts.wtf. This pod is 100% listener-supported; I couldn't do any of it without y'all.

Now, on to the interview.

Thanks, everybody. Thanks for coming. So, Sean, we have been friends for a while, many, many years. Since before you were elected to Congress. And since you have been elected to Congress, not a single time have you texted me a single state secret. So, I thought we were buds. Now, I realize the bar is much higher for — anyway, of course, I had to make a Signal joke. All right, I want to start with some semi-specifics and then pull the camera out a little bit. So, let's just start here. Republicans in Congress are trying to hash out a budget bill, their first reconciliation bill.

Anybody who remembers the fights of the previous few years knows that a reconciliation bill has to be budget relevant and it has to balance out over the 10-year time horizon, meaning it has to raise as much money as it spends over the 10-year budget horizon. So, there's this question about the IRA tax credits. I think in the clean energy space, there has been a kind of fragile optimism about them because, as everyone surely knows by now, most of that money is going to red states. It's producing an enormous amount of economic activity in red states.

Any sane accounting of political incentives would mean that the Republicans in question would defend the IRA tax credits. But Trump wants to extend his mega tax cuts to the wealthy, and he's promised all sorts of Christmas tree nonsense, you know, no taxes on tips, et cetera, et cetera. So, he's promised a lot of money. So, they are going to be desperate for revenue. And a lot of people, I think, close to those circles believe that that crushing need for revenue, you know, there's $850 billion sitting there of IRA credits, that going after them is going to be inevitable, and they're going to have to do it.

So what's your take on that? Do you think the IRA credits will survive? And what is the political logic governing that decision?

Rep. Sean Casten

So, thank you for having me. For those of you who don't know, David and I first met when my cousin, who was working for Grist, said, "Would you consider writing for this place?" I said, "I'm not really a writer." He's like, "Yeah, we got a knitter for you." So, David polished up my prose for a number of years in a past life. So, it's really hard to predict because the Republican Party doesn't like itself. And so, you've got to understand that right now we're at a — we have not passed an appropriations bill, a full appropriations bill in the House, since Nancy Pelosi was the speaker.

So, we're basically funding at levels that were set. McCarthy couldn't get it done. He tried to use the debt ceiling as leverage. Biden masterfully outplayed McCarthy. Once it became clear that he was outplayed, the Republicans fired him. They brought in Johnson. Johnson then had to do the same thing with his continuing CR. So, they haven't passed anything because within their caucus, they don't have the votes. And all they've been able to do is with us. And of course, now they have a thinner margin. What's changed right now is that there were — I don't think I'm speaking out of turn to say — there are no Republicans in the House who respect or fear Mike Johnson.

There are many Republicans who respect, and all of them fear, Donald Trump. And so, when Trump starts calling and says, "I need you to do this," they were able to get votes on that last CR. The theory of the IRA, when we put it together, was that if we made sure that this was long on carrots and short on sticks, we'd have a political constituency to keep it. And that by structuring this to say we're going to provide differentially larger tax credits to people who are in energy transition communities, we didn't do that to be political.

We did it because shifting to clean energy is a huge wealth transfer from producers to consumers. Producers tend to be in red states, consumers tend to be in blue states. It's not universal, but we wanted to make sure that everybody felt like they were getting a win. And so, you've now got this — you would know the numbers, like a dozen House members who have said, "Don't take away the IRA credits —"

David Roberts

21.

Rep. Sean Casten

21. All right. Whether they stand strong or not remains to be seen. The way that I've been describing this whole budget process to people is, you sort of have to think of it like you've got a friend who says, "I've been spending too much on shoes. So, I decided to cut off one leg."

And you're like, "It's true. That's a way to save money on shoes. It's also insane." And so they're starting from this proposition that, like, "I want to give a $4.5 trillion tax cut and therefore I have to find a bunch of pay-fors." And so, like, you know, that's the Medicaid noise and everything else. What I would say that you all can do that's helpful is make noise in Republican districts because I've had some of my Republican colleagues who have come back and said, "We're really pushing the Republican senators not to pass something as bad as what we passed in the House because we're getting so much heat at home."

And so, you know, that heat has been breaking through. It's been mostly on Medicaid. The other place where I think the clean energy industry can be useful is that the IRA credits themselves have some bipartisan popularity. The things in the IRA that paid for the tax credits are very partisan. Funding the police, specifically the IRS, is a very partisan thing that generates a lot of money. So, when they defund the IRS, that creates a bigger hole. Giving Medicare the obligation to negotiate for pharmaceuticals so that we all save money on drugs. That's also very partisan.

And so, if they take that away, all of a sudden, it makes these holes bigger. So, I think the more — and these were the big pay-fors in the IRA. So, I think we help keep those clean energy credits there by making clear that we would also like to have competition in the pharmaceutical industry and we would like people to pay their fair share of taxes. So, push on all those fronts. They're helpful.

David Roberts

Yeah, and another thing that they're talking about, again, I never know how seriously to take anything these days, but another thing they're talking about doing is changing the baseline against which the budget is to make that $4.1 trillion vanish into thin air, and thus the hole is gone.

Rep. Sean Casten

This is what we refer to as "Craponomics" because Mike Crapo is the author of this idea. What Crapo is saying, I mean, this is so monumentally stupid. What he's saying is like — normally, when we score bills, you pass a law and the law says, "This law lasts for two years, this lasts for five years, for 10 years." The CBO says, "Okay, we're going to assume no change in law except the incremental law you're asking us to score. And then we go through and we calculate what the fiscal impact of that is." The Trump tax cuts are about to expire.

What Crapo is saying is we should assume that they're always there because that way, if we extend them, they don't have a positive score. It's insane, right? I mean, what I would encourage you to do is to call Mike Crapo, call Mike Johnson, and say, "How about we fire you and then you budget for your holidays next year on the assumption you still have a salary?" Because that's essentially what they're doing. I'm hoping the Parliamentarian says, "This is nonsense," but that game is going on in the Senate right now to create this entire fiction that you can blow holes in the economy and be scored as not hurting the economy.

David Roberts

I'll tell you, if the Parliamentarian says no, and they say, "Screw you, Parliamentarian, we're doing it anyway," there's going to be a lot of Democrats really mad about the stuff that the Parliamentarian stopped Democrats from doing.

Rep. Sean Casten

Well, yeah, I mean, there's also a weird thing that there are, I think, the bastion of Republicans who are truest to their principles and not bending are also the weirdest Republicans and they're the die-hard libertarians. The Thomas Massie's of the world, who has some really strange ideas, but he is uniquely amongst his caucus, he holds fast to those ideas. He has an intellectually coherent worldview, even if some of the ideas are weird. And so, some of those really strong — whatever you want to call them — libertarian fiscal hawks may prevent this from happening because they're smart enough to know that this is craponomics.

David Roberts

Right. So, slightly broader question. If this were a normal political moment and a Republican administration had taken over all three branches and you're in the minority, I would be sort of asking you like you're in the minority in the House. Being in the minority in the US House is like a uniquely thankless, kind of powerless position. But, I would be asking you like, you know, they have a very narrow majority. So, are there areas of cooperation where you can imagine sort of extracting something good out of this on, say, you know, people bring up permitting a lot or reforms to NEPA or stuff like that?

So, like, are you thinking that way, like, in the next two or four years? Are you thinking about coalitions you could put together? Are you thinking about things you could actually accomplish? It also feels a little weird thinking that way while there's a constitutional crisis unfolding around you, and it's like the dog in the fire — whatever the meme is. So, like, how do you split your brain like that? Is this just like panic, resist, fight, period, or are you still thinking about how to?

Rep. Sean Casten

So, you know, at the highest level, the reason I ran for Congress was energy and climate policy, and then there's the oath I took to defend the Constitution against all enemies, foreign and domestic, which is consuming most of my time of late. You know, we've still got to break legislation. I just introduced a cap and trade bill last week that, you know, we don't expect to go somewhere, but we want to keep the marker and keep working with the outside groups and bring that legislation forward. I just brought in a bill on feebates for electric vehicles.

So, yes, we keep bringing these forward. But I think the area that should exist for bipartisanship, and historically has. If you ignore that the climate crisis is urgent but you want to work directionally, there are things you can do. You know, we did a Voluntary Apparel Labeling Act with Congresswoman Salazar from Florida that was like, could we get, like, a good government seal of approval that if you want to buy clothes that are sourced from low environmental impact chains that, like, you can go through and, like, address the issues of fast fashion. We've got a similar one on food.

It's voluntary, so we get Republicans on board. Maybe it creates a good housekeeping seal of approval. It's a good idea. It's very small bore. R&D generally is pretty bipartisan. The science committee works pretty well together, and that's good. We certainly need R&D. I sometimes get concerned that the deployment of clean energy is such a threat to the fossil industry world because it outcompetes it. That R&D sometimes is like, well, "I can say I'm doing something as long as I'm not deploying." And you want to make sure that you're not just doing R&D to put more stuff on a pipeline that isn't moving forward.

David Roberts

And they are laying waste to the scientific and R&D architecture.

Rep. Sean Casten

Now, you're getting partisan with your science talk. Physics...

David Roberts

I hate to drag physics into this.

Rep. Sean Casten

I mean, on the permitting side, not that you're asking to be my therapist here, but David Cicilline, who's no longer a member, gave me this great advice at the end of two terms ago. He said, "When you're in the majority, you love what you pass on the floor, but you have very little ability to influence it" because it's these big bills that have been moving for a while. And even if you have something you want to improve on, it's been led for a long time by someone who's a friend of yours and they're the chair of the committee and it's a little daintier. He said, "In the minority, the opposite of both of those are true and take advantage of it," you can work on big things, but you're going to hate what you pass on the floor. With that advice, Mike Levin and I took it on ourselves to do this huge transmission permitting reform bill that's become sort of the Democratic, I think we're up to like, I don't know, 100 Democratic co-sponsors that's become like the Democratic permitting package.

And I think it got referred to like five committees. And if we were in the minority, I'd be having to make sure that Frank Pallone on Energy and Commerce was okay, make sure Jared Huffman on Natural Resources was okay. I've got a little bit that's referred to our committee on Financial Services. When you're in the minority, it's like, well, this is just good things. And you know, Frank and Jared and Maxine are all delighted that we're putting this together so that we've got the vehicle. And so intellectually that's been, I think, kind of fun. What was hard when we brought that forward last term was because we'd really started that because at the end of the 117th Congress, we knew we had to do permitting reform.

And the only package we had was what Manchin was working on. And if you define, I know you have opinions on Mr. Manchin, if you define success by what the rightmost Democrat in the Senate will allow, you're way to the right of where the American people are because of the structure of the Senate. And so, that vehicle never really had any legs in the representative body in Congress. And so, we were like, we need a package that can move. The first bill that the Republicans introduced when they took the majority was their H.R. 1, which was substantially like the fossil provisions of the Manchin package, but with all the transmission taken out.

And you sort of had this immediate recognition that transmission is a partisan thing. Gas permitting is also a partisan thing going the other way. And there's this tension that because pushing for clean energy is pushing for cheap energy, and because the leadership of the Republican Party is almost entirely from the oil patch, it's really hard to get Republicans to support transmission reform. Even though you look at Iowa, the Iowa delegation should be — I mean, it's wind and ethanol, right? I mean, they should be loving this stuff. But Iowa bounces back and forth Democratic, Republican, which means that other than Grassley, there's not a lot of seniority in the Iowa delegation.

And so, they haven't been able to push back on that. And I'd like to believe someday that's not true. But at least for now, it's been big and meaty, but we've not been able to get Republicans really embracing transmission reform.

David Roberts

Well, this gets to another question I have, which is, as you say, the 21 Republicans signed this letter in support of the IRA. And there's always this sort of — I've always been told by various people over the years that, like, "Oh, there's actually, like, this sort of pool of support for good clean energy policy in the Republican caucus. They just can't poke their heads up. They just can't say anything. But, like, there's enough to work with over there." So I'm just like, "Well, where are they? Show me the votes." So, like, do you think their majority is narrow enough now that a block of clean energy supporting Republicans plus a block of clean energy supporting Democrats can actually push something over the finish line? Or is it like, Trump, can Trump just come in and, you know...

Rep. Sean Casten

So, you'll get different answers if you talk to different members. And, you know, I'd encourage you to talk to Scott Peters about this, because Scott Peters is very much of the opinion that he thinks there's a zone there. I'm not persuaded. Scott's a friend. I think it's one of these things where, like, because all of the push on the Republican side is saying, "We want to gut NEPA, we want to make it easier to build oil and gas assets," not because the US is demanding oil and gas.

Like, oil use in the US is the same now as it was 10 years ago. They want to build export terminals. That's a really different kind of conversation. Because if you build a gas export terminal, that means there's less gas in the United States, which means the price of natural gas goes up, which is really good if you're Chris Wright, Secretary of Energy, who's a gas producer. It's not good if you're an American consumer. And I've done the math; there are a lot more energy consumers in the United States than there are natural gas well developers. But that's sort of where the math sits.

And so, I think, like, the zone for bipartisanship isn't, "Well, let's figure out, like, what are the technologies that work in my district and yours?" It's like, "I'll give you a little bit of this if you say something mean about the gays." I don't know. I mean, this is a horrible metaphor, but I think it's the only way to understand it. Like, if I give you a dog turd and I coat it in chocolate, if I put enough chocolate on it, it tastes like chocolate.

We can have the conversation about how we might make a meal of dog turds and chocolate. But if you don't want to eat a turd, it's hard to find the zone to do that in energy policy.

David Roberts

Well, I'm going to remember that. In the normal world, Congress has the power of the purse, can decide where money goes and where it doesn't.

Rep. Sean Casten

We have for almost 250 years.

David Roberts

Yeah, it's a known thing. But now, for instance, a couple of days ago, I read a story that there's a memo circulating around the Energy Department encouraging the Energy Department to cut off funding specifically for the four hydrogen hubs in Democratic states, while maintaining the funding for the three in red states, which is just completely mask off, you know, illegal, unconstitutional. But also, just like, "The federal government is red and for red people and for red states and against —" You know what I mean? Which has always kind of been their deal, but it's just out in the open now.

But again, it's just, like, illegal and unconstitutional. And, you know, at a certain point, what do you do? What does anybody do? You know, like, the courts are going to probably rule that illegal. Like, they've ruled several of these things illegal, but we have not seen, to my knowledge, the Trump administration say, "Well, then, okay, we won't do that because the court says it's illegal." So, you know, I mean, there's no answer to this question, but, like, what do you do if they just don't obey the courts, if they just don't heed the court ruling?

Rep. Sean Casten

So, the first thing, and I don't want to be too historical and constitutional, but I think you have to understand this a little bit in the sense that we have always had a tension in our country of are we the United States or a united group of states? Read Thomas Paine, who said, "Our great title is Americans. Our lesser title varies with our place of origin. It's by our great title we're known abroad, and by our lesser title we're known at home." And he was saying that to try to get people to agree to ratify the Constitution because people were debating, "Am I an American or am I a Virginian or a New Yorker?"

That tension has always been there. And I say that because I think we need to bend over backwards for those of us who are in blue states who care about this stuff, to not fall into the same trap of saying, "Well, it's those backwards red staters, and I saw the sign in your yard, so I don't trust you." Like, we just have to resist that because it's so tempting to go down that path right now. What the Trump administration is doing is a violation of the Constitution because Congress has the power of the purse. It's a violation of the Impoundment Control Act that says that the executive branch cannot impound funds, which essentially ratifies that Congress has the power of the purse, but was passed in the wake of the Watergate scandals and Nixon to provide some very narrow exceptions.

It's a violation of the Rescission Control Act that says that you can't take congressionally approved funds and then choose to use them in ways other than Congress approved. We are the legislative branch because we legislate. They are the executive branch because they execute the laws we pass. And when they don't, we have an oversight function. On the other hand, every subpoena we apply, like Johnson and Thune, are refusing to do any oversight. And so, we are having to depend exclusively on the courts. We're winning, and I think we have won every court case that's been run where a decision has come, typically a temporary restraining order, and they'll be appealed and what have you.

Some cases have been deferred, some don't have standing. There will be a lot more coming as long as they keep going down this path. We in Congress are working both to use our outside voice to educate people on this. I just announced I'm going to go to a town hall in Dixon, Illinois, home of Ronald Reagan, which is going to be fun. Ronald Reagan's farewell speech: "The day we stop welcoming immigrants to our shores is the day we stop being Americans." Also a partisan dude. We've been working with a lot of outside groups because the legislative branch generally does not have standing in courts, because the Article I branch is not supposed to use the Article III branch to gang up on the Article II branch.

And that's appropriate. We shouldn't be able to do that, but so we have very limited ability to litigate this from Congress, but we are working with outside groups. If any of you have projects canceled, please contact our office or other offices, because we can connect you to who these outside groups are to make sure that you have your status there and can push through. Also, make some fights. And if there's any lawyers in the room, one of my big requests is we really need the bar associations to start flexing on this, because the fact that there are lawyers in Trumpland who are writing executive orders that clearly violate the Constitution, that clearly break the law, and then defending those actions in court, the judges are laughing them out.

But, I think there's really a role for the Bar Association to say, "This is disbarable." Like, "You don't get to just make up law. Yes, you work for your client, but you are to be constrained by the law as it's written." Why is there still a working lawyer who said that we're just going to invalidate birthright citizenship? That is insane. It's the plain text of the Constitution. I think all of us in civil society have a role to step up, because we are all in a constitutional crisis right now. And if all of us rise up, we're going to kick their ass.

If all of us sit around waiting for someone else to do it, we're going to get our ass kicked.

David Roberts

I mean, arguably, among the lawyers who have said straightforwardly unconstitutional things are Supreme Court justices, which are a little bit more difficult to get at.

Rep. Sean Casten

They were the ones who gutted Section 3 of the Fourteenth Amendment. If you recall, that was the Colorado case that said that if you engage in an act of insurrection against the United States, you cannot run for president.

David Roberts

I remember that one. I want to ask you some stuff about clean energy, but first, I feel obliged. I have a member of Congress on stage, and I just want to speak for the masses. A couple of questions, a specific one and then a general one. But I feel like there's an enormous amount of rage out there now, and I don't think it's only on the left or the base. Do you know what I mean? Like, this is how people are framing things. It's like the base is mad at Schumer. I don't think it's just the base.

I think there's enormous, widespread anger that these guys are stomping all over our system, destroying a country that took 250 years to build, and they're just meeting so little resistance. So, the specific question is, do you feel like Democrats in Congress, do you feel like their response to all this has been adequate?

Rep. Sean Casten

Until we are through this crisis? No. Like, by definition, right? I mean, adequate would suggest that our work is done. I think some are doing a better job rising to the moment than others. We are Democrats, which means that we don't march to a single drum very well. I actually think the rage is good in the sense that in 50 days, we've gone from apathy to fear to rage. Apathy doesn't lead to action. Fear doesn't lead to action. Rage leads to action.

David Roberts

Five stages of autocracy.

Rep. Sean Casten

The action is sort of shooting in all directions right now. I joked with a group the other week. They were saying they were very upset with Schumer. I was upset with Schumer. And I reminded them that in 2017, 2018, when everyone was marching for women and marching for our lives, do you all remember how inspired you were by Chuck Schumer?

David Roberts

Remember that time Chuck Schumer inspired you?

Rep. Sean Casten

Don't get angry at him for changing, is all I'm saying. I think all of us, and I say this for myself, I have no political experience before running for Congress. In the course of three terms in Congress, just starting my fourth, I have been involved in half of the impeachments that have ever happened in our country, half of the attacks on the Capitol that have ever happened in our country, 100% of the evicted speakers that have ever happened in our country, and 20% of the evicted members of Congress that have ever happened in our country. You don't read a book that prepares you for this.

Right? There isn't a playbook that you go out to. You try to read history. You try to see what is the right way to respond to this. And at least, I find that the colleagues of mine who I think are getting the moment right are the ones who realize that this is sort of a Churchillian moment where you need to be standing up and saying, "Let's be very clear about what the stakes are. Let's be very clear about what the consequences are if we lose. And let's be very clear-eyed that I make no promises that if we fight, we will win. I only promise that if we don't fight, we will lose."

And like you've seen, I think our governor here has done a really good job of that sort of messaging, has been exceptional. It's a little harder to do that from the legislative branch because your profile's a little lower. You also don't have executive authority. Like, the governors can go out and say, "This is what we're going to do. And I've just passed a rule to do it, an executive order." The legislators say, "This is what I'm going to do. And if only I had the votes, I would do it."

So, it becomes we depend on our outside voice. But I think you're seeing some. I think Hakeem is getting better and better by the day at making it clear where this goes. And leaders are going to be forged in this moment. But it's scary. And that same sort of spectrum between fear and anger that you all feel here, we feel in our caucus every day. Some of our members are petrified, some of our members are violently angry. Some go back and forth from day to day, moment to moment. I mean, it's gotten to the point where none of us quite know how to say hello to each other anymore.

People walk up and say, "How are you doing?" — and so we'll have these conversations. People are like, "I really want to know how you're doing and let's sit down and talk," or "Let's just say something else, because we all know that that conversation is too long."

David Roberts

Well, this is a broader version of the same question. And I know I've known you long enough to know that you, like me, love a good grand theory. So, I would say it's not just Congress. I feel like there's a broader feeling that I have, and a lot of people have, that from the beginning of the Trump thing, it has been a continual shock how hollow and weak our elites are, our institutions, our norms, all this stuff we had faith in. All Trump had to do was come kick it and it just all fell down. There was no —

Just like, I don't even know how to capture it in words exactly. But it all was vapor. And so, there's just like this failure of courage, failure of will. Not just in Congress, but in the business community, you know what I mean? Like, local politicians. I would have thought when Trump first popped up that we would have stood up as, not as Democrats, but as America, as civil society, to say, "No, we don't do that." But we never did. There's just bending knee after bending knee. Hardly anyone. You know, we're seeing it in universities now.

And I mean, I don't even need to go down the list. Everybody knows. But just like, why was America so hollow? Did we like what happened? What is your grand theory of why there was so little resistance to all this?

Rep. Sean Casten

So, here's my grand theory. And most of this room's not going to like this. Just looking around. We have an executive branch that is violating the laws of the United States and ignoring the Constitution. They are selectively applying those laws in favor of their allies and against their adversaries. There's way too much apathy in society. Everybody who feels like they have something to lose if they stand up is sitting down, hoping that eventually someone with nothing left to lose will stand up and show them what leadership looks like. And I think all of us can recognize that everything I just said is true.

The only people in America who find that shocking and unprecedented are white people, right? And if you want to look at, like, what we need to do in these moments, and some of you have heard me tell this story before, but good stories deserve repeating. When I went down with the last trip across the Selma bridge with John Lewis before he died, and everybody knew this was going to be his last time. So all of these people came out of the woodwork. Jim Lawson was there, Bernie Lafayette, Ruby Bridges was out. And you're just with all these icons.

And I was sitting with Chuck Neblett, who was one of the Freedom Singers one morning, and we were sort of hearing all these stories. And I said, "So what gave the Martin Luther Kings and Rosa Parks the courage to stand up when they knew, they knew people who had been lynched for doing exactly what they just did? And what was it about their leadership skills that got people to follow them when they knew that they all knew people who had been lynched for doing what they were being asked to do?" And Chuck sort of paused and he goes — he was on a first-name basis with these people, so I'm just telling you what he said, and he goes, "Martin and Rosa were great people, but they didn't create this. The movement existed. And then you needed a leader. And there has never been a time in history when we have needed to create social change that the movement didn't come first. Once you have a movement, you need someone with a bullhorn but the movement comes first." And I said to him, "All right, so what created the movement?" And he said, "Look around this room with all these gray heads in here. Every one of us is Emmett Till's age."

And he said, "What created the movement was Mamie Till. And the fact that that was created at a point where a bunch of us who were young enough and foolish enough to think we can change the world, and I'm just going to go do this, and all of a sudden you had a movement." So we know what the playbook is, right? We saw what those giants in our history did and how they got it done. We saw that they never stopped fighting for America. They didn't move to their second house in Portugal. They kept fighting to make this country better.

They initiated action, and when that action got a result contrary to what they wanted, they changed the action. They didn't double down on it. There wasn't a grand strategy. There were a lot of tactics. And when a tactic worked, they applied that tactic in other places. And what's sad about your criticism of the elites is that it's not the first time that people with something to lose haven't stood up. It always works that way, right? It's a letter from a Birmingham jail kind of stuff, right? Silence of our friends.

David Roberts

The white moderate.

Rep. Sean Casten

Yeah, exactly. And, you know, I'm deeply sympathetic. I've met with university presidents who are saying, "Look, if I don't change the DEI rules on my webpage, then I'm going to have research grants cut off. And if we have those research grants cut off, I'm not going to be able to provide education to anybody. And so, better that I ride this through." And I get it, right? And how different is that from, like, you know, members of Congress saying, "I could stand up, but the Proud Boys just got released from jail and Liz Cheney's security detail got cut back. And if I stand up, I could lose, and I'm going to bring this on my family."

Like, I get all of that stuff, but why, as a society, do we always have to wait for someone like Mamie Till to say, "I just lost everything that I care about in this world and I'm sick of it. And goddammit, I'm going to stand up and fight." And then the rest of us say, "Well, thank you for your leadership. Let me follow you so I can call myself a leader." Right? And you have to go back to the civil rights era, right? The Parkland students. We had to have teenagers see kids next to them get shot before we had a serious conversation about gun control in this country.

Why did they have to lead that? Why did we desegregate schools with 6-year-old girls? Right. And it's beautiful that we did. Right. That's not in any way a criticism, but I think I would love this to be the first time that our elites lead the way. But we shouldn't pretend that there's a long history of that.

David Roberts

Yeah, yeah. Well, a similar question looking longer term, I mean, if that's even possible these days, but sort of like, I think there's a common feeling in the Democratic Party that aside from the sort of immediate crisis, Democrats are in kind of a longer-term problem. So, I think the way it's usually phrased is they sort of captured the managerial class, the educated upper class, and they're losing, in the last election, they're losing, they shifted their own way in a lot of blue urban areas. Black people, Hispanic people, minorities are moving away. And I think there's this larger sort of identity crisis.

I mean, I don't know that I've ever been alive when the Democrats were not in some form of identity crisis, but they're back in it. And, sort of, as far as I can tell, the conventional wisdom in the caucus, at least among the sort of caucus moderates, is the way out of this is to tamp down what we say about social issues and talk more about freaking egg prices, talk more about kitchen table issues. Which is why you have the surreal sort of spectacle of Chuck Schumer, like the "everything is fine" dog, tweeting about egg prices as people are being disappeared off the street. So, that's not satisfying. But what is, what is the way back for Democrats?

Rep. Sean Casten

Have you ever seen the American people so aroused? Got got to stop making fun of our leader... So, I don't want to sound Pollyannish, but let me be a little bit more optimistic about the moment we're in. Every single democracy in the world that had elections in 2024, the incumbent party was voted out. This was because we had global inflation. I think that is a pithier explanation of what happened in 2024 than anything else, in part because that explains in the United States why the Republicans lost seats in the House as the majority party and we lost the White House and the Senate.

The people voted against the party in power in every single case. And the Democrats in the United States lost less vote share than every other incumbent party in every other country in the world that had elections in 2024. We did way better than the Tories. If you're angry about inflation, blame the Tories. And I say that because I think a part of the groups that Democrats historically did well with, we lost some vote share. It wasn't highly educated, rich white college people who were doing fine. It tended to be groups that are sort of more economically vulnerable and the inflation pinched harder.

And that's not saying we should take anything for granted. Those are real issues. But, I do think we ought to not over-connect a very anomalous global inflationary moment to that. To your point about where the moderates are, I just point out that in 2018, which wasn't that long ago, the average House seat moved almost 10 points to the left. We had the biggest freshman class since Watergate. Yours truly came in, was part of this group that flipped seats. Of those of us who flipped seats in that cycle, the average person we beat had won by 15 points two years earlier.

That was 40 seats. So, like, that was only six years ago. Right? I mean, there's an ability to move quickly.

David Roberts

And there was a special election just last week, which Dems won.

Rep. Sean Casten

But I would also point out that in 2018, every vulnerable Democrat, the Kurt Schraders of the world in Washington, the Collin Petersons in Minnesota, they all won. But we didn't run on traitorism. And I think you have to have a motivated base that does the work to persuade the middle, because it never works the other way. The last thing that I think a lot of us are really struggling with is one of the most interesting polling things that I saw recently was among people who get their news from conventional news sources, including Fox — Fox, New York Times, CNN, MSNBC.

People who want to get their news from people who are in the news business in some fashion, that cohort overwhelmingly voted for Democrats. Among people who get their news from non-conventional sources, YouTube, TikTok, Joe Rogan, that group overwhelmingly voted for Republicans. There's a debate going on: does that mean we should be going out and doing Barstool Sports or whatever else and doing those things? Or is that really something more about the moment we're in? Because if you're getting your news from YouTube, you're not actually looking for news, you're just stumbling on it. And trying to flood that zone with content is hard.

And I think it's a larger story about, what do you do with a — how do we survive in a society where we've just become very atomized and in many ways disenchanted? I mean, I think there's a fascinating conversation which is wildly off topic, but like, you know, the Deaton stuff about, you know, what happens to young men who are not seeing their prospects growing. And I'm not trying to say like, let's all, you know, "Woe is me, you know, white men." But like white men are getting left behind. I'm like, what is the — setting aside whether or not society owes them something?

Somebody who is disconnected from society is hard to grab back. Right? And how do we bring back sort of the — I love that line in the Atlantic recently about like, "Families teach us love, tribes teach us loyalty, and the village teaches us tolerance." We're losing those village moments.

David Roberts

Yeah, we're losing villages. Like, hardly anybody's a part of a village anymore. Just a little factoid to reinforce what you just said. Boomers. The biggest swing leftward among any demographic was among boomers, the much-maligned boomers, because they're the ones still reading newspapers. They're the only ones still reading newspapers.

Rep. Sean Casten

And also, as a cohort, they were less vulnerable to inflation.

David Roberts

Yeah, true, true. Okay, well, let's talk about, let's shift back to clean energy. So, I mean, investors, entrepreneurs, people who are involved in this space at all are, I think, everybody's just confused by what's happening, what's going to do like clearly a lot of grants are going to vanish. Maybe the IRA credits are going to vanish. Maybe there's going to be a giant recession, a tariff-driven recession. And I've seen a lot of talk about people just sort of pulling out of this area and banks are throwing their net zero commitments overboard and everybody's taking the whole — again, back to the elites.

They just seem to be sort of like trying to do the Homer-into-the-bushes thing on climate. Obviously, we don't want that, but how should people who are in this space think about the next two years, the next four years, think about how to navigate this environment?

Rep. Sean Casten

Here's my hope. And I say this as a guy who spent more time as an energy developer than I ever spent as a member of Congress. Energy markets always bounce up and down. The regulatory environment waxes and wanes over time. And if you're developing a clean energy project, you have, in the best of times, a one to two-year period to get your permits, get your construction in place, get all your site plans done, have your engineering, a one to two-year period to build, and another six months to 12 months after that to get everything commissioned and ironed out.

Which means that the course of that project is going to run through a couple of political cycles. That means that everybody who has ever tried to develop a project when markets were really good has gone before an investment committee. And the investment committee has said, "You're assuming the current conditions are going to last forever. That's not right. Put in a more normalized scenario and then we'll decide whether to approve this project." My suggestion is, if the investment committee can do the opposite side of that right now, because these conditions will not last forever. I'm not saying to go do charity, right?

"But how many people are sitting there saying, "I have a private equity fund that wants a 15% return and I can only do 10% projects?" There are a lot of people who love getting a 10% return on their money, especially when Trump is tanking the stock market. That would be a pretty good thing. But it doesn't work in the structure of year three of a private equity fund that's looking for a liquidity event and doesn't know where their opportunities are. I'm not saying that's not hard, but I think particularly for the LPs upstream, finding some ways to get some capital that's got sort of patience appropriate for the moment, still like good diligence and all the rest of that stuff, but a little bit more of a risk appetite."

My pitch, if I was wearing my developer hat, is that everything that the Trump administration is doing is designed to raise the price of energy, and they're not putting it that way. But you have to understand that coal use in the United States is down 50% in the last decade. Oil use is flat. Natural gas used to grow with GDP. Now it's only growing about half the rate of GDP. All of those industries would be dead but for the fact that they've pivoted to exports. They've lost market share because you all have done so well. The fastest-growing vehicle class is electric vehicles.

Efficiency has come through. The surge in solar, the surge in wind. We now generate more power on any given day from non-hydro renewables than we do from coal, which is insane. That coal was 50% of the mix a decade ago. Right. So, what you've got within the people, the Doug Burgums, the Chris Wrights, within the Trump White House, is people saying, "I can't compete in this market. Markets scare me because I am so mediocre as an individual. It's the same reason DEI scares me. I don't want to compete in a deep talent pool." I think I stole that from you.

"So, what we want to do is make sure that you raise the price of gas, which you can do by building more LNG export terminals. So, we suck it out of the United States. Don't approve transmission because if you approve transmission, then we'll connect cheap wind from Iowa into more expensive power markets. And I don't want to not be able to run my gas power plant if all of a sudden the market's flooded with $30 power." It's going to be a very anti-competitive period that's going to push up the price of power and it's going to suck.

But, if at the end of that period, you're sitting there saying, "I own assets that are always going to be cash flow positive and they're now the assets that are sitting there and ready to run." I just think there's a huge put option that you could have if you deploy the capital now. And if you deploy the capital now, none of that crap they want to build is going to get built because none of that stuff would be built in a competitive market. There is not a single solar developer who goes to bed every night saying, "I better check and see what the power price is tomorrow because it might not make sense for me to run." Every single coal plant in America, every single gas plant in America has a full-time employee who is sitting at that plant, if they're playing spot markets saying, "I'm looking at my gas, I'm looking at my power, I'm trying to figure out whether to dispatch tomorrow." Right? So we know how to kick their ass. Just deploy.

David Roberts

Deploy, deploy, deploy. Yes, the big issue in the energy world right now, or there's a bunch of big issues, but one of the most fundamental changes I think in the last couple of years, one that is I think serving as a forcing mechanism to push a lot of change, maybe good and bad, are these data centers. You know, the rise of AI, etc., all these data centers are coming online. And you know, so people are now like the projections are just, there's a lot of wild-haired projections, 2x, 3x total grid capacity we're going to need. There are some areas, some regions where these data centers are already the majority of a utility's load which is a weird inversion of any historical relationship between utilities and their loads.

And so, in a sense, it seems good because they want electricity, they mostly want clean electricity, and they have giant sacks of money. So, you know, never mind climate, there's a lot of money flooding into building more energy infrastructure. But then there's also a lot of shenanigans whereby data centers can trick other customers into paying for the infrastructure they need. There's a lot of potential for shenanigans just because they're so big and powerful. So, I just wonder if you have a thought on how legislators and how utilities ought to be thinking about data centers, ought to be thinking about that whole thing.

Rep. Sean Casten

So, I'd sort of expand beyond data centers. You've got, like, I think, three big macro trends that are pushing up electric load. The electrification of vehicles is real. Like, the total fuel we use for transportation is, to a first approximation, about the same as the amount of energy we use for power generation, order of magnitude. They're pretty close. So, vehicle electrification is a huge pull. The data centers, and Trump may stop this, but at least under Biden, there was a huge rush of reshoring of manufacturing that was bringing a lot of this back. You had these three trends that were pushing load up.

Every utility is out there right now with big load forecasts, data centers being part of the driver for that. Keep in mind that regulated utilities make money by getting capital installed in their rate base. And they make big money by having load growth that exceeds what was in their forecast because they got a rate that was set on an assumption of a certain load, and if they get above that. If a utility says they're looking at 6% load growth, they've got more in the forecast if they're looking out for their shareholders. So when they're all saying that, assume there's a lot of load growth coming. I think there's a real challenge that is starting to happen among the state utility regulators when you've got this huge slug of capital. What was it?

When were we scared about the utility death spiral? Remember all the utility load? That was like a decade ago. It wasn't that long ago. Right. That load was going to fall and it was all running away. And there was no growth after the 2008 recession. It's gone, like night and day from there. But because we had such flat load for a long time, we had downward pressure on prices because all these old plants were being amortized and could limp along and you didn't have to pay for the capital anymore, no matter what you build now. If you're building it in a regulated context, if you're shutting down a plant where all the capital was amortized, whether you're building a new solar plant or a new nuclear plant or a new gas plant.

There's a bunch of capital that's going to go in. I think there's going to be a real political problem for a lot of state utility regulators who are elected, who are saying, "I don't want to be the person who approved all these rate increases," but they don't really have a lot of choice because otherwise it's a reliability play. Again, if I was still in my developer shoes, I'd be running around to a lot of NARUC meetings and saying, "How about if you guys start doing some competitive solicitations for power purchase agreements from the clean guys?" It may be more than what you'd pay with the regulated utility, but you'll cover your butts and say, "I went out to market, I got three bids. This was the lowest bid."

I think there could be some interesting development opportunities within a state-regulated context. If you're going out and building a clean energy project, saying, "Look, Trump's not going to give us good markets, but if you can get me a nice, attractive long-term PPA, I can build a lot of good stuff."

David Roberts

There's a similar worry about big hydrogen projects coming online. Similar in that they would, even if they use clean energy, just take huge swaths of clean energy from other people. So then, they're, you know, that would be compensated for by dirty energy. So, the way we solved for that in the hydrogen subsidies was we told the hydrogen projects that they had to bring their own, they had to build their own clean energy, they had to supply their own. Bring your own new clean energy, Beyonce.

Do you think something like that would be right for data centers? Or is that kind of too extreme? Would that slow things down too much or is that a reasonable ask?

Rep. Sean Casten

Look, I think the idea that anybody who needs electricity as an input would like to sacrifice the 3, 4, 5 nines reliability of the grid for an on-site power plant and not still have the grid as a backup, that to me, I just don't see industrials wanting to make that trade. I think it's an interesting theory, but I've tried to make that sale. It never goes well. I mean, the most reliable power plant in the world has two weeks of scheduled maintenance every year. That ain't 5 nines.

David Roberts

Behind the meter energy parks where they're satisfying all their own needs, all that? You don't buy that trend?

Rep. Sean Casten

Just as a statistical matter, there's no way you're going to build enough generators with enough independent failure modes to have a source of power that's as reliable as the thousands of generators we have on the grid around the country and the thousands of redundant wires. I mean, the US electric grid is an amazing, remarkable thing. And can you do things internally to supplement that? Absolutely. But when you're trying to drive up reliability for your facility, you put in UPS battery backup systems, you put in on-site generation that can run when the grid goes down and black start and ride through and all that stuff.

But you don't cut your tie to the grid, right?

David Roberts

All right. Well, we're supposed to stop and take questions, but I just wanted to throw out one final question. Are you going to take a run at Dick Durbin's seat next year?

Rep. Sean Casten

Dick Durbin has not announced his retirement. I find myself, and maybe it's often been said, that the battles between Democrats and Republicans in Congress pale next to the battles between the House and the Senate. And I would love to see a Senate that is committed to fixing itself. But the Senate as an institution is just totally broken.

David Roberts

Amen.

Rep. Sean Casten

I mean, can anybody name a time that a bill left the House and got better in the Senate? Right. Like, we sent them the Affordable Care Act, and then they stripped out the, you know, they made it non-universal because we only had 59 of 100 votes.

David Roberts

Curse Joe Lieberman's name now and forever.

Rep. Sean Casten

Yes, yes. We had Build Back Better, and it became the IRA. Crazy, insane statistic that should make you violently angry: In 2022, we passed the Emmett Till Anti-Lynching Act that made lynching a federal crime. Bobby Rush from Illinois had been carrying that bill for his whole career. Bobby Rush did not write the first draft of that bill. He picked it up from one of his predecessors. So, I went back and looked at the history. The first time the House passed a bill to make lynching a federal crime was in 1922. Emmett Till had to be born, lynched, die, create the civil rights era before the Senate could break cloture and decide it was worth taking the time to vote on whether or not lynching is bad.

And I'm not ducking your question. I'm just saying I find myself thinking about the Senate saying, "I wish that someone in the Senate would say, 'We have to fix these damn rules.'" I'm not sure I want to be that person, but I would like someone to do that. And if someone wants to say to me, "Go run for Senate and in exchange we will put you in charge of our rules," I will run through that door.

David Roberts

Yes, if your answer otherwise is like, "Who would want to be in that institution?" I totally get that. But let's take questions.

First Audience Question

Yeah, Dave Kraft, Nuclear Energy Information Service. I'm glad you brought the transmission up because that's what I wanted to talk about tonight. But before that, I want to thank you for six years of climate advocacy. You have just been stellar, and I appreciate that very much. I've been following H.R.6747, and as you pointed out, it didn't go anywhere. But my follow-up to that is, how do you keep it visible until sanity returns to Congress? And are there things that could be done, let's say, at the state level or in other arenas that would keep it elevated and maybe move it along, for example, governor's associations?

There's a plethora of transmission bills at the state levels. Are there pieces of that bill that you put out that could be incorporated into the state-level actions to keep it moving?

Rep. Sean Casten

Yes, to some degree. I think the challenge in general with transmission is that we have this bizarre federal states rights issue where, in many cases, I think the states actually can do a lot more than the Feds can do until they get into things that are ISO/RTO jurisdictional. Like most of the ideas we've got in that bill, the things that are really the bottlenecks are how do we deal with interregional planning. The regions are fine. The states have done an okay job of that. Order 1000 did that. But the interregional stuff, which is really a federal question, has to get resolved.

States have done a great job. I think more states could do it, performance-based rate making to get the incentives right. Because I think a lot of the challenge with transmission is that too often the party who has the right to block the project has an economic disincentive to allow the project. States, I think, have oftentimes more tools than the Feds do to craft rates and rate of return calculations in ways that can align the interests, the economic, economic interests of the parties in better ways. But the interregional, the cross-state stuff really has to be done at the federal level.

Second Audience Question

Thank you so much. My name is Ann. I do geothermal policy advocacy. You both have done incredible work on geothermal. So, thank you for your leadership. My question is around the political context we've been discussing. There's still a huge need to move innovation forward because the climate timeline does not change based on the political timeline. And, I'd love to hear your thoughts on how we can build and maintain bipartisan support for emerging energy innovations like geothermal or other similar technologies.

Rep. Sean Casten

This is going to sound like a cop-out of an answer. Just go be successful. And I say that because no one has as much power in Washington as someone who has something to lose. It's really hard to build a constituency around a regulatory reform that's going to make the world safer for entrepreneurs who haven't had their entrepreneurial idea yet. It's also really hard to put a rule in place that's going to expose incumbents to entrepreneurial competition. And I think you've seen with the surge in solar and wind, those technologies were ready for primetime a decade before they really started being deployed.

But, you needed to get them out there, you needed the business models. And now, all of a sudden, you've got people in all these communities who depend on the manufacturing, who depend on the jobs, who depend on all these various bits and pieces, and they're now jealously defending that they don't want to lose what they've got. Right? So, I realize it's a cop-out of an answer, but having spent a lot of time trying to persuade people to do this. And I guess I've had some successes, not had as many as I deserve, certainly.

David Roberts

Who among us?

Rep. Sean Casten

I know, I know. But it's just much easier when people say, "Well, there's a bunch of people who are in my district who are making noise about this and they just took me to a ribbon cutting." Then, "There's this interesting person in a lab who I think you'd like to meet." Right. And when you do succeed, don't turn your back on the entrepreneurs who are going to come up and kick your ass because they got a better idea than you had too. Because we need all that to keep happening.

David Roberts

And I would just throw in once again, these big data centers, these big hyperscalers need, need more electricity, want more electricity. They want it to be clean, they need it to be steady, always on. So, geothermal is right in their sweet spot and they have a lot to lose. They have big sacks of money. So, you know what I mean? So again, that's like a forcing mechanism that if you can draft on some of that momentum, you know, do it.

Rep. Sean Casten

I'll say, look at things like Europe is so often so far ahead of us. I was in Denmark last year and they had all of these little district energy off in coal plants that they're retrofitting to either geothermal where they can, or they still want to do the district energies. They need something that's got a good thermal source and take a trip to Denmark. The people are lovely, the country's beautiful. But also, I think giving you a sense of things that expanding your zone of what's actually possible with a little bit of organization.

David Roberts

Yeah, sorry to keep answering this question over and over again. You said geothermal, what did you expect? Another, I think, push, another forcing mechanism is a lot of communities want to electrify. Cold climate communities, if they just electrify through heat pumps, are going to end up with mind-boggling winter peaks that are very difficult to meet. One way to solve that equation is shallow geothermal district heating and ground source heat pumps. So again, there are interested parties ready to go for this. I can't promise that we'll answer every question four times.

Third Audience Question

Hi there, Melanie Nutter. Thank you for the conversation and insights tonight. Really interesting. I'm curious what you think cities and counties can be doing right now to continue to advance clean energy and climate action, considering what's happening at the federal level and now that there's going to be a lot less resources for cities to take action. So, I'm curious what they can be doing right now.

Rep. Sean Casten

So, the first thing is going on my highfalutin civil rights era fight. No, I'm serious. There are a lot of cities and towns that have contracts with the federal government for payments from the IRA where you're meeting milestones. And if the federal government breaks the law, take them to court, sue them, just don't give up. They are counting on people being afraid of being individually picked off. And if we all stand up collectively, they can't pick us all off. So that's my first thing of just like fight to keep what you've got and fight for US law and keep pushing forward.

And beyond that, I don't know. David, you may have some. You probably think more about the city side of these equations than I do.

David Roberts

Yes, I feel contractually obligated to do my little — I mean, one of the most powerful tools is reducing the amount of driving that people do. And the way to do that is density and bike paths and amenities and public transit. All that stuff is in state and city hands. And I think the climate community in general, as I've said on the pod many times, has sort of neglected that as a climate solution, probably because it's mostly composed of wealthy, elite suburbanites who drive everywhere. Right. So, like, yeah, pay attention to — there's tons you can do locally on local heat and local transportation policy.

Like, there's a ton to do locally. But I would start with that, like join the war on cars.

Rep. Sean Casten

I would also like to give a shout out to David, City of Seattle, Power and Light. The Bullitt Foundation has, I believe, the most efficient building in the world. When they did it, part of what they did was their mandate from their investors was they had to make it replicable. And so, they got Seattle Power and Light to change rules so that anybody who invests in end-use efficiency gets paid the same amount that the utility gets per megawatt of load generation, but they get on the reduction side multiplied by a line loss factor for all the cost that takes it to bring into cities.

For cities that have some control over municipal utilities, do some fun stuff with rates to really drive end-use efficiency up. Your citizens will love it because it saves them money, it helps them deploy technology, and there's plenty of precedent to do that in cities that have leaned in.

Forth Audience Question

Well, I now definitely want to ask you about the E-bike rebate, but I'm not going to. One of the things with the IRA, I work locally in helping connect people to electrification rebates. One of the things that we see is in Chicago, there's a lot of renters. There's not a lot of incentives for landlords to electrify. What do you think the federal government, state government, city government could do to change that math for landlords who really generally don't love spending money on making their tenants' lives better?

Rep. Sean Casten

We really struggled with that. And I would love to see a thoughtful lessons learned from the electrification incentives. A lot of the electrification centers were actually in the Infrastructure Bill, not the IRA. But we knew that this is a technology that works really well for people who own their own house and have an attached garage and can put a charger in. We put a lot of money and a lot of incentives to try to build out more chargers. The Biden administration got beat up because that money didn't go up. But it's also really hard to figure out where do those networks go?

How do you put them in? There's always the landlord split incentive problem is always out there. And I wouldn't say we throw up your hands, but I'm not sure I've seen — I don't know if you've seen, David, anybody who's really done a good sociological, political analysis of how do you break... I mean, we built gas stations, so somehow we did figure that out once upon a time. But what's the incentive to build the first gas station? Or what was the incentive for a gas station to start adding diesel if there weren't enough diesel cars on the road, but now all of a sudden people aren't going to drive.

How do you make those transitions at scale quickly? And I don't know that we've figured it out.

David Roberts

The one thing I would say on the question of multifamily dwellings, I think in some ways we overthink things because of this sort of like, I guess I'd call it the neoliberal hangover. We're all looking for the market tweak, right, that would make that happen. But another thing governments could do is just say that you have to do it. And that's what New York did. That's what New York City did. They said, "Big buildings, you have to reduce your energy use by law or you just get a bunch of big fines." And they did.

Like, that law has been wildly successful. It's sponsored thousands of big building retrofits in New York City. So, you know what I mean? Like, if you want it to happen, say, "We make laws, do it."

Rep. Sean Casten

Because we do have building codes.

David Roberts

Yeah, and there are building codes. All right, one more last question.

Fifth Audience Question

Thank you. So, given the bipartisan, generally speaking, nature of nuclear energy, is there appetite, room, possibility to advance the ball on that, given the current administration's stance on energy in general?

Rep. Sean Casten

All right, so now I'm going to — I've done a good job of being like the neoliberal centrist Dem. And you're the hippie here. I'm going to be the hippie now.

David Roberts

All hippies now.

Rep. Sean Casten

The countries that have successfully and consistently deployed nuclear are really, really socialist countries: China, Russia, France, because no one has ever managed to build nuclear plants on time or on budget. The United States was a big deployer of nuclear up until — there's this really interesting data that I was looking at for a hearing we were in a couple weeks ago. From the first nuclear plant in the US to Three Mile Island, it was about 10 years in terms of the first nuclear plant deployed. And we built about 50 gigawatts of nuclear in that decade. In the decade after Three Mile Island, we built another 50 gigawatts.

There was no slowdown in the rate of nuclear construction after that point. Almost 10 years later, it was like 12 years later, Public Service New Hampshire went bankrupt because their utility regulator said, "You can't keep passing along all the cost overruns from Seabrook." And the electric utility industry said, "I'm not building nuclear anymore because I could only build this when I knew that I could always pass the cost along to my customers. But if I have to compete, I'm not going to do it." That is not to say we shouldn't build nuclear, but I had this very funny conversation.

We had this bipartisan dinner one night of the Bipartisan Climate Caucus. Equal mix of Dems and R's. And we're all sitting there. And one of my colleagues came to me at the end. She said, "I had no idea. I'm so happy to hear that there are Democrats who support nuclear." And I said, "Well, you got me on your side. I said, I had no idea there were Republicans who support socialism." And I'm not saying that as a dirty word. I'm just saying that practically the thing that we did in the IRA to try to bring nuclear forward was not to mandate companies act against their interest, but to hugely juice the loan program office because the LPO had the potential to say, "Let's put some government money towards, whether it's SMRs or some other technology."

Because if we can put government money and bring a couple of these things forward and if, in fact, the theory is right, that we now have some technologies that can scale on time, on budget, then potentially five, 10 years down the road, you could see some private sector pull. But I just don't — I don't think we're in a moment right now where you're going to see any significant private sector pull. We'll have the odd Vogtle, but those are the exceptions that prove the rule. There's no appetite to build these projects that are not coming in on time or on budget right now.

David Roberts

Everybody knows Vogtle. The Georgia nuclear plant that shockingly went way over time, way over budget, like 8 billion to the tune of some enormous number of billions of dollars, all of which went straight to the ratepayers. So, Tim Echols, the head of the PUC in Georgia, has basically said publicly numerous times, like, "Incentives, whatever, we will never do this again unless the federal government guarantees it will cover the cost overruns, period, full stop." And, like, he's gone back and forth with Jigar Shah a few times. Jigar's like, "Well, what about all these incentives?" And Tim's like, "Nope, I want guarantees."

And it's basically like, you "go socialist or go home" with nuclear. They come together, as you're saying. You gotta have the one with the other. Any final words of wisdom for our clean energy?

Rep. Sean Casten

Go deploy, go win, build a bunch of stuff. And I'll take credit for it, but you gotta do the work.

David Roberts

Thanks. Thanks so much, Sean.

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 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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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.

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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.

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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.

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Text 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!

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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.

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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.

David’s Notes

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:

6. 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!

Monthly Thread — How It Works

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

• CLIMATE JOBS & OPPORTUNITIES: Share climate jobs/opportunities

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

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

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

• 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.

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

In this episode, 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)

Text 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?

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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.

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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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Text 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.

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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.

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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.

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Text 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.

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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.

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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.

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Text 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.

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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.

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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.

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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.

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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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Text 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.

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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."

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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.

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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.

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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.

David’s Notes

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:

Construction Physics

What Learning by Doing Looks Like

On Construction Physics, we’ve talked frequently about the importance of learning curves as a mechanism by which things get less expensive over time. Learning curves, also known as experience curves or Wright’s Law, track the relationship between cumulative production volume and cost. Specifically, goods tend to show a constant rate …

Read more

4 months ago · 131 likes · 12 comments · Brian Potter

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.

Monthly Thread — How It Works

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

• CLIMATE JOBS & OPPORTUNITIES: Share climate jobs/opportunities

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

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

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

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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)

Text 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!

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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.

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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.