The Inflation Reduction Act, the Democrats’ historic climate bill, was signed into law by Joe Biden on August 16, 2022. Several people I know devoted their lives and hearts to the fight for that bill, at no small personal sacrifice, and I covered its many twists and turns closely. At least in my world, there was enormous elation at its passage, a sense that the US was finally doing something serious about climate change after decades of lassitude, that all the years of frustrating work and heartbreak had not been in vain.

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Less than three years, later, on July 4, 2025, Trump signed the One Big Beautiful Bill Act (OBBBA), which seemed to crush the IRA entirely. By then, Trump’s EPA had already reversed many of Biden’s key climate-related regulations, like the Mercury and Air Toxics Standards, and more would fall in 2026, like the tailpipe standards.

All of this violent destruction of their life’s work left many climate advocates in a funk from which they have not entirely recovered.

But a new report that has gotten a lot of attention lately says to turn those frowns upside down. “Glass Half Full: Building a Decarbonized U.S. Power Sector” is a research commentary out of MIT’s Center for Energy and Environmental Policy Research, written by Lily Bermel. She’s currently a visiting fellow at Columbia’s Center on Global Energy Policy; before that, she worked under previous Volts guest Brian Deese at MIT, and before that, worked on John Kerry’s State Department climate team.

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The report uses Energy Innovation’s Energy Policy Simulator to compare what would have happened in the electricity sector under the IRA versus what did happen under the OBBBA. Its basic argument is that things worked out better than many people predicted, that many of the clean energy and emissions gains are on track to be achieved regardless, and further, that there is reason to believe that the incentives Republicans took from renewable energy are not what it most needs to continue growing in present circumstances. Within that argument is a great deal of nuance and some interesting details, so I’m excited to have Lily with me today to dig in. Let’s go.

Timestamps

• 00:00 – The IRA, the OBBBA, and the case for optimism

• 03:25 – OBBBA - Why Bermel ran the analysis

• 05:50 – The headline numbers: 74, 71, 67

• 08:07 – Deconstructing clean: solar and batteries hold, wind takes the hit

• 12:14 – The lag analysis, and the 'glass half full' perspective

• 15:27 – 2.8 gigatons, and losses you can't get back

• 18:01 – The third scenario, and Trump I versus Trump II

• 21:49 – What the model leaves out: manufacturing, LPO, loans

• 23:07 – Interior's permitting campaign against wind and solar

• 27:22 – The demand surge and behind-the-meter gas

• 32:15 – Nuclear restarts, geothermal, and clean firm

• 35:31 – Booms, busts, and the electrification wave

• 42:22– Transmission, interconnection, and the ceiling

• 46:41 – Tax credits versus permitting reform

• 51:46 – Durability, polarization, and preemptive surrender

• 60:01 – Can enough storage make renewables firm?

• 66:48 – Grid utilization versus building new grid

• 70:52 – Final reflections: 2021, and what Bermel would do with a trifecta

Resources

People & Organizations

• David Roberts (Substack - Bluesky LinkedIn)

  • Volts (Apple Podcasts - Spotify - YouTube)

• Lily Bermel (LinkedIn - Columbia CGEP)

  • MIT Center for Energy and Environmental Policy Research (Website)

  • Columbia Center on Global Energy Policy (Website)

• Michael Thomas (Distilled - Cleanview Newsletter)

Company & Industry News

• IRA clean energy gains mostly on track despite OBBBA, says MIT study

• New report says Trump hasn’t squashed Biden’s clean energy buildout

Books & Articles Discussed

• Glass Half Full: Building a Decarbonized U.S. Power Sector (The report)

• How green energy will survive Trump to fight climate change

• Queued Up: 2026 Edition, Berkeley Lab interconnection queue report

Related Volts Episodes

• Doing data centers the not-dumb way

• A fireside chat with Jigar Shah

• Making sense of the data center backlash

Text Transcript

David Roberts: With no further ado, Lily Bermel, welcome to Volts. Thank you so much for coming.

Lily Bermel: Hi, Dave. It’s so great to be here. Longtime listener, so thanks for all that you’ve taught the climate community so far.

David Roberts: Thank you. Thank you. Well, let’s start. Before we get into the report, just tell me what put this bug in your ear? Why, why did you do this? What, what made you want to do this analysis in the first place? What question were you trying to answer?

Lily Bermel: Sure. I think I resonate a little bit with what you said about people who feel like they’ve dedicated their life to climate change. I was, not one of those amazing thought leaders who led to the creation of the IRA, but rather, have just been deeply motivated by climate and emissions reductions throughout my career and in my life. And so as I think with almost everyone in our community, the 2024 election, but really 2025 was a distressing time. There was a lot of debate, a lot of change in policy, and a lot of real, you know, attack on clean energy. And so, not only were there the emotional ups and downs throughout the negotiation process that led to the One Big Beautiful Bill Act, but I felt a little bit confused after the fact, in just trying to grapple with the question of how bad is this really going to be? And therefore, you know, once you one day have clarity on that question, what do you do about it and how do you move beyond this moment? So for me, that was the question that I sought out to answer, really looking at the world we just left, Biden policy really represented by the Inflation Reduction Act and the power plant regulations, and comparing that to what we now inherited, represented by the One Big Beautiful Bill Act, I’ll call it OB3, without those regulations in place. And so-

David Roberts: Oh, is OB, is OB3 the term? Good. I’ve, I’ve been gr- I’ve been grappling around for some non-awkward way to refer to that bill. I’m gonna adopt that.

Lily Bermel: I say OB3. I’ve heard O3BA, O triple BA. I don’t know. I don’t like any of the names, but I, so I do whatever rolls off the tongue, yeah, fastest. Exactly. And so the question that I was asking was, of the clean energy future that the old policy promised in the power sector specifically, how much will still show up over the coming decade? And that decade’s important because that’s, one, the near term impact, but then also where the next policy decisions will have the ability to influence and change. And so what I found is that for clean capacity, 74% will still show up on the grid, and emissions reductions in the power sector, 67% of those will still occur on average over the coming decade.

David Roberts: Yeah. Okay, so this, I wanna be clear upfront about what’s in the model and what isn’t. So right now we’re gonna talk about what’s in the model, and then once we sort of discuss those results a little bit, then we’re gonna talk about some things that didn’t make it in and how they might influence our thinking about all this. So just to be clear, the model compared not just the IRA, but the IRA plus Biden’s key climate regulations. And I’m wondering, like, that included the tailpipe regulations, also the mercury regulations, most of the big ones. Yes?

Lily Bermel: Yep, you’re right. So the two models include the presence or lack thereof of the regulations, and the regulations in scope for this report are the power plant ones. So that’s the mercury and Air Toxics Standards, the Section 111 power plant rules, and the effluent limitations guidelines.

David Roberts: Right, versus a world with the OBBB and none of those regulations.

Lily Bermel: Exactly. Yep.

David Roberts: Since they all, since they all got nuked. I mean, you said this, I said this, but just to underline it, this is just about the electricity sector, not other things outside the electricity sector, which we might touch on in a minute.

Lily Bermel: Exactly, yep. Power sector only, laws plus regulations or lack thereof.

David Roberts: Right. So 74% of the clean capacity, meaning clean energy built and 71% of the clean energy generation from the IRA trajectory still show up in the OBBB trajectory. Yes?

Lily Bermel: Yep.

David Roberts: And then what happened about, emissions?

Lily Bermel: Right. So emissions in the power sector, the math is quite simple. It literally takes the current policy environment divided by the prior policy environment and looks at it as a percent. And so I see that 67% of the emissions reductions will still occur on average over the coming decade. And the analysis dives into, you know, what technologies are preserved at what share, and, and it’s interesting to see that, the fossil fuel plant is really sticky. And to me, a lot of the emissions increase that happens today is because of the retention of coal, without those regulations.

David Roberts: Right. So you, so there are three buckets you compare. There’s clean electricity—

Lily Bermel: Yeah, perfect ...

David Roberts: There’s fossil electricity, and then there’s the emissions.

Lily Bermel: Yeah.

David Roberts: Clean electricity we just covered on, 74%, 71%. Emissions reductions, 67% were preserved. And then on the fossil electricity score, it is, it is interesting. Talk a little bit about what happened there.

Lily Bermel: Sure. And I think this is almost perhaps where I was most surprised in doing the analysis. I saw that the capacity of the fossil fleets did not really change much between scenarios.

David Roberts: Meaning not a lot, not a lot more built.

Lily Bermel: Right. So the capacity in the OB3 scenario is 4% higher than the prior trajectory, but the composition changes, right? So you have more coal and less gas, so it’s more emissions intensive per unit.

David Roberts: Right. 19% more emissions.

Lily Bermel: So then the 19% comes from the generation.

David Roberts: Or sorry, more, more fossil generation, right, than...

Lily Bermel: And so what that speaks to is, you know, fossil power, fossil fuels are dispatchable and can ramp up or down. And so even though the capacity is more or less flat, it will run for more hours of the day to fill in for the less clean energy that’s built.

David Roberts: Right. And briefly, let’s pick apart the clean electricity bucket because the composition there is really interesting. So solar and batteries retain 80, something like 80%, around 80% of their capacity in generation.

Lily Bermel: Yep.

David Roberts: And wind is down around 50% or a little bit below 50%. So the average there of 70 whatever percent sort of hides the fact that solar and batteries survive quite well, and wind gets hurt quite badly. So can you explain why, what in your estimation explains that sort of disjunct there? Why do solar and batteries prove so resilient and wind gets hurt so badly?

Lily Bermel: Sure, yep. So that 74% is an average, and it represents the aggregate clean number. So in it, you can decompose it to all of those different numbers, basically weighted by the technology. So solar, interestingly, you can break it down between utility scale and distributed, and distributed is, is far, far more resilient. About 95% of its capacity is preserved. And I attribute that to thinking about the, the strength of net metering and other state level policies that—

David Roberts: Mm-hmm ...

Lily Bermel: Enable its deployment. And if we’re seeing rising prices in the utility scale sector, that will incentivize folks to keep building on the distributed side. For solar and batteries, I think those are seeing great cost declines, and the battery still retained its tax credit, so it’s able to benefit from that as well. On the wind side, that, again, you can break out into onshore and offshore. Offshore is so tiny of a pipeline that the model shows that it will probably all get built ‘cause it’s so small, so that’s 100% preserved for offshore. But onshore is the biggest casualty of, of everything. It dips below that metaphorical glass half full threshold. And we only see 47% of its capacity preserved, and I attribute that to, it’s a little bit like wind was already struggling. It was already down and yanking the tax credit was kind of beating it on its way down. A lot of its struggles are it’s extremely transmission constrained. It’s only, you know, able to be built and utilized in a specific region. It doesn’t see the same cost declines that we’re seeing because of innovation from on the solar and battery side, and it’s just, like, more CapEx heavy. It’s a hard technology to manage in that so it was already suffering, and now it’s taken a beating.

David Roberts: Right. It’s basically a measurement of how credit, how much these technologies depended on the credits, on the tax credits, ‘cause that’s the main thing. The tax credits go away, which ones we’re most dependent on. It turns out wind really needed them, solar and batteries somewhat less.

Lily Bermel: Yeah, I would say, yeah, the difference shows the impact of the credits, and then what remains shows the market momentum behind it.

David Roberts: Right. And so one of my questions I had about all this is it seems like there’s been a real effort to spin this report as a positive in the most positive way possible. So like for instance, you talk about this 2.5 year time lag for solar and batteries. Talk, first just say what you mean by that.

Lily Bermel: Sure. I think, yeah. One, first thing I’ll say is the report represents a really specific framing, and the result is very positive. So I wouldn’t say that it’s spin, for one. But number two, on the two and a half year lag, what I did there was, was really wanting to figure out how far behind the current trajectory is compared to what the IRA would’ve put forward. So I was trying to think of creative ways to do it, and I thought of this concept of, of what I coined a lag analysis. And basically what that does is it looks at a given year, so say 2031, and it looks at how many gigawatts of energy will be deployed. So for solar, the Energy Innovation model shows about 333 gigawatts of solar will be deployed. At what point, how many years later, will OB3 reach that time period? And it’s, it’s only two and a half years later. And so for me, again, when I was doing this research, that was much smaller than I thought. And so that doesn’t even equal two and a half years worth of capacity or deployment lost because it’s still being deployed at about, you know, 75% of that high level. It’s just looking at the total levels of deployment and at what point in time will you reach that milestone.

David Roberts: Yeah. Well, this gets a little bit at what I mean, which is that 2.5 year number is the, is the per year average over the 10 years. But if you look, like the report says, by 2035, we’ve lost a cumulative 44 deployment years—

Lily Bermel: Mm-hmm

David Roberts: On clean capacity and 56 deployment years on generation. And like if you look at wind, even the per year average on wind is 11.5 years deployment, all of which sounds to me bad. You know what I mean?

Lily Bermel: Yeah.

David Roberts: Like, like another way of looking at this is we got 30% less of the clean energy than we would’ve gotten and 25% or like even more, like 33% less of the emissions losses, and that seems bad to me. Like those seem like big numbers to me, I guess.

Lily Bermel: Yeah. I mean, you’re right. It’s bad. Any energy lost is bad, and that report does not hide that in any way. Page one, it talks about how Trump’s policies are leading to less clean energy, less investment, fewer jobs, canceled projects, all the like. And so on the lag, right? That was, that was my honesty that, and rigor in the analysis that those lags compound and they add up every single year.

David Roberts: Yeah. Yeah. And they get, and they get bigger and bigger over time is the thing.

Lily Bermel: They get bigger. And just as you asked earlier about the 74% number, you know, how, why is that rosy when wind sucks? It’s, it’s the same thing on this side. Like wind is clearly the laggard and the down weight in all of these numbers, and then at the individual technology level, solar and batteries fare far, far better than wind.

David Roberts: Yeah, and it’s also worth saying, I think that when you, there’s 2.8 gigatons of CO2 is the difference between these two cumulative 10-year difference—

Lily Bermel: Yep ...

David Roberts: Between these two scenarios, and that’s also a lot. And that’s... And, and unlike clean energy progress, you can’t, you know, I’m not telling you anything, you can’t get that back. Like, it’s a cumulative, it’s a cumulative measure how much is in the atmosphere. So all of which is just, this is just me arguing for my natural pessimism, arguing for the glass half empty perspective. Like, it just seems to me like ev- your analysis shows, and as you say, it doesn’t hide it, it says it right in the analysis, that these are big, these are big hits, basically. Even if not as bad as some people might have thought or feared, they are big.

Lily Bermel: Yeah, I’m glad you pointed out that 2.8 gigaton number. That’s the amount of emissions that the current policy scenario will see over a 10-year time period. And actually, right before this, I did the math. That’s equal to about two, like, 2024 sized worth of power sector emissions. So that’s just in the power sector. And again, I focus on that, that 10-year window because to me, it, it highlights that urgency of like, this is real. These losses are real. It’s tangible. You, you know, you can calculate it or estimate it. And it’s also the window that policy can do something about it. Like, this is not 2.8 gigatons that automatically happen the moment they signed the piece of paper for OB3.

David Roberts: Right.

Lily Bermel: This is something that right now, you know, permanent reform negotiations can address, and that next Congress will have the opportunity to address, and the next administration will as well.

David Roberts: Right. None of, none of these are locked in. Yeah, we should, we should say that. None of these numbers are locked in. They’re, they’re out to 2035, so-

Lily Bermel: Exactly ...

David Roberts: We could, we could change this reality.

Lily Bermel: Exactly. And I think one more thing I’ll say about the framing is that any person in the climate community know- knew that the IRA was not enough to get us to net zero by 2050, and it put us within a stone’s throw distance of it, which was really exciting and invigorating. And so, you know, when you know that what is this glass that we’re measuring, it’s, it’s the current compared to the prior, what we have now versus what we thought we had and what made us really excited, and the glass is, is pretty full, more full than we thought. You know, of course there is so much more to do. We don’t just wanna fill up the glass. We wanna do way better than that.

David Roberts: Yeah, yeah.

Lily Bermel: And again, I think that’s pretty clear in the report ‘cause a lot of it’s dedicated to talking to, talking about solutions and how to move forward.

David Roberts: Yeah. And, and I meant to ask this before actually.

Lily Bermel: Mm-hmm.

David Roberts: Why not a third scenario that’s neither IRA nor OBBA? In other words, like, I don’t think anybody thought that none of this clean energy build-out would’ve happened absent the IRA. You know what I mean? So I don’t even know. Is it even possible to sort of estimate that kind of... It’d be a lot of kind of guesswork, I guess. But did you think about trying to include that scenario?

Lily Bermel: Oh, yeah. I, I totally did. And I’ll say that, again, this is in the throes of last year, but I, I mean, I’ve heard this recently from some high-level former Biden, you know, DOE officials, like, a real concern that clean energy was kneecapped. And so I think, yeah, it, it would be silly to think it’s all gone, but I think there is a line of thinking that thinks the majority of things were lost. And so again, why I took that, that specific framing. I asked Energy Innovation, who, that team is amazing. They were really kind in giving me their, their modeling, their data. So it’s, it’s all their work, and I just did some extra math on top of it. But I asked them about that pre-2021 scenario because of course that’s, like, the other counterfactual. And one thing that they told me is that it was built with different demand assumptions, so I can’t apples to apples compare it. It’s like, mathematically illegal, you know? But, but you can kind of reason through, like, what’s the difference between Trump I policy and Trump II policy on paper. And Trump I policy also had zero regulations. Trump I policy also had wind and solar tax credits phasing down, and that’s the same in Trump II. Trump II also has the clean firm tax credits and more LPO funding, Loan Programs Office and, and more. And so you can imagine that on paper they’re a little bit similar, but there is better policy this time around. And then we also have higher demand, which is being a demand pull and an incentive to deploy as much energy as fast as possible.

David Roberts: We’re gonna get to that. So I guess—

Lily Bermel: Yeah ...

David Roberts: You could say Trump II policy is better on clean energy than Trump I policy for the simple reason that—

Lily Bermel: Low bar ...

David Roberts: For the simple reason that Democrats passed a bunch, and they were not able to get rid of all of it, basically. So yeah, as you said, and as, as, as Jigar Shah, as previous chair, uh, guest Jigar Shah said—

Lily Bermel: Mm-hmm ...

David Roberts: If we just went from Trump I to the OB, O triple B, it would look pretty good. It would look, it would look like a pretty strong energy bill.

Lily Bermel: Yep, and, and that comment, I mean, I remember him saying that in the fall, and that’s a little bit what perked my ears up to this originally because he was saying, right, if we only had OB3, we’d be shouting from the rooftops and, like, overjoyed. And Jesse Jenkins too was like, “The Republicans on a trifecta, you know, party line vote just agreed to create investments and spend money on zero carbon technology for a decade.” And that’s incredible. That’s great.

David Roberts: Just not wind and solar. They really just-

Lily Bermel: Just not wind and solar.

David Roberts: They really just hate wind and solar.

Lily Bermel: Totally.

David Roberts: Which I, which I think is just gets to sort of the kind of symbolic culture war aspect of, of, of a lot of it. They just-

Lily Bermel: The sacrificial lamb

David Roberts: They, they just wanted to own the libs. They just took enough of the chunk out of it to own the libs, but, you know, they, they didn’t seem that concerned about the policy per se. Okay. So let’s then talk about a variety of things that for various reasons could not make it into these model comparisons, ‘cause they, like, some of them, they weigh in different directions, these, these things that got left out. They’re interesting to, to walk through, I think. So I think the first thing to say, and this gets back to my, to my glass half empty insistence, which is, which is that it left out all the non-electricity sector stuff, which has left out the EVs, which took the biggest hit, I think, probably like policy-wise were hurt worst. A lot of the clean and manufacturing stuff got hit.

Lily Bermel: Yep.

David Roberts: A lot of the LPO stuff, the loan programs office stuff, the grants, loans—

Lily Bermel: Yeah ...

David Roberts: All that stuff, did not-

Lily Bermel: Yeah. Well, on that real f- on that real fast, I mean, the report’s only about the power sector, so—

David Roberts: Yeah, yeah. Yeah ...

Lily Bermel: You know, it, of course it doesn’t include EVs.

David Roberts: And to say the, the, the, the news out, the news outside of the electricity sector—

Lily Bermel: Yeah ...

David Roberts: Is grimmer than the news within it, I guess is what I’d say.

Lily Bermel: Yes, and I think it is actually really valuable. My, my CGEP colleague, Noah Kaufman, has a really great point about how, you know, when you take such a narrow view, like, a strength of the Biden industrial policy for climate was that it was a whole of economy, was that the manufacturing tax credits spoke to the demand, tax credits spoke to the transition funding for fossil fuel communities. And so, you know, when you look at one, one part—

David Roberts: All of which spoke also, as he said, to the international community and the international dynamic, just the signal to the international community that the US had its shit together was in and of itself a, an important thing.

Lily Bermel: Right. And so, I mean, part of that, right, again, on this beat, like I think it’s, it’s helpful to not then wonder what happened or prognosticate or theorize about the future based on vibes. It, it helps to have the data to point us in the right direction.

David Roberts: Yeah. Okay, so another thing this, that you couldn’t get in the report necessarily is that the Trump administration has not just removed the tax credits from wind and solar, they’re also very specifically going after wind and solar permits in a variety of ways. They’ve sort of launched this- You know, it’s like the negative, it’s like the mirror image. It’s like a whole of government effort against wind and solar.

Lily Bermel: It’s creative.

David Roberts: How... yeah, how big… It’s hard to model, for one thing, because it’s just hard to know, like, what exactly is going on and how much of it’s gonna stick. But, like, what’s your sort of assessment of how big of a piece of the pie? How much worse would that make the OBBB scenario look if you could’ve included it, I guess?

Lily Bermel: Yeah. I think first just to start with, you know, why could it not fit in the model? This, again, was an exercise that reminded me that a model is just a camera. It just captures a moment in time of what we think might happen.

David Roberts: Yeah.

Lily Bermel: It’s not a thermometer, and it’s not a live weather forecast. So with that aside, plus it’s just, like, simply hard to figure out, like, how deep and how intense, and how far-reaching are the Trump administration’s efforts on restricting renewables.

David Roberts: And how are the legal cases gonna settle out?

Lily Bermel: Totally. And the investment environment

David Roberts: Yeah ...

Lily Bermel: and like I think about the July 2025 memo from the Department of the Interior right after the law was signed where they said, you know, “Any wind and solar project that wants to get permitted on public land has to get signed by the secretary” with a 69 line item list of things that they had to check off. Like—

David Roberts: Yes ...

Lily Bermel: Egregious. And now that’s been vacated by a judge. It no longer has legal standing. It’s not in place. And but, you know, there still is an impact of that last year.

David Roberts: But does, but does that matter? Are they gonna follow the law that the judge says? Who know like, who knows, you know? The fact that a judge ruled on it doesn’t even settle the question anymore with this administration.

Lily Bermel: I think, yeah, I mean, the whole constitutional law thing is a whole other other question we need to defer to our lawyers about. But I’ve been at least, comforted and, and yes, on a delay, speaking of a lag. I’ve been comforted that the, the judges have come in and tried to stop actions that are overbearing, far-reaching, or outright illegal, ranging from impoundment to the stop work orders to the wind projects, where all five instances a judge came in and said, “you can’t do that.” Yeah.

David Roberts: Right. Speaking of offshore wind, you know, the, the, the model had all that getting built, but they’re, they are doing their best to scuttle those things or buy off those leases or whatever.

Lily Bermel: Yeah. And so to me, those, those countervailing forces does, do matter, but of course, like, it’s hard to measure how chilled is an investment environment and what impact does that have. I think two things that have helped me think about this, that, like, the near term pipeline is very robust. Like, yes, because of the safe harboring of the tax credits, they’re available. Projects are able to benefit from them if you qualify, you know, by all these really technical standards through 2030, and that matters. And so- I wanna point out that the data that I use is pretty validated by the Rhodium Group, by Jesse Jenkins’ REPEAT Lab. And so Rhodium Group finds that, you know, deployment through 2030 is very strong and robust because of that safe harboring.

David Roberts: Right.

Lily Bermel: And the second way that I’ve liked thinking about it is Alfred Johnson, who’s CEO of, of Crux Climate, who does the tax equity, you know, financing platform, he calls the grid something like light years, where what we see today, what gets deployed this year, was because of construction and permitting decisions made years ago

David Roberts: Right. Right, right, right. So all this, all this stuff Trump is doing now is theoretically will show up 5, 10 years from now.

Lily Bermel: Yeah. So it’s a bull for right now, but then it’s a bear for, like, Trump will have a lingering effect, but on, like, discrete concrete projects. Yeah.

David Roberts: Right. Right. Yeah. So we’ll just say that Trump’s executive branch campaign has some nebulous negative effect on the scenario that is difficult to measure, but that will also compound over time.

Lily Bermel: Yeah.

David Roberts: The other thing that was hard to get in is just this extraordinary surge in demand. Talk about that. Talk about why, what d- what the sort of demand numbers were in the model versus what is showing up in real life.

Lily Bermel: Sure. And can I just add one more thing on the, the Trump executive piece, which is I think it’s also just helpful to remember that Trump’s actions that directly affect projects on federal land is relatively small and distinct from just, like, the general investment environment in our country.

David Roberts: Mm-hmm.

Lily Bermel: Because 99% of wind is built on private land, and 80 to 90% of solar is built on private land as well. And so while there’s certainly, like, you need a FAA approval for every single wind project that gets built, so wind’s kind of screwed.

David Roberts: Yes. Now they’re doing national security ‘cause of drones or something.

Lily Bermel: Totally and the whales. I don’t know. Yeah.

David Roberts: They’re trying, they’re trying to go after the private land stuff, but they, I think they have much less, they have much less reach

Lily Bermel: For that. Yeah. So that’s, like, one of those weird comforting things is, like, oh, they sound so scary, but they can only go so far, but then at the same time, like, it’s bad. Like, why isn’t wind and solar being built on federal land? Like, that’s a whole other conversation, you know?

David Roberts: I know.

Lily Bermel: So anyways, that’s on that. Okay, your question on demand. So I intentionally, conducted the analysis, uh... Actually, the analysis had to be conducted using two scenarios with the exact same assumptions across the board. As time has gone on, you know, since the IRA has been passed and every single year since, demand and our projections for it have just skyrocketed, and of course, with that, the uncertainty about it. And so I think Energy Innovation came out this month actually with some of their, their updated OB3 scenario with the higher demand, and I purposely kept my analysis to ratios and percents just because the gigawatts, the specific numbers themselves were less important. So essentially, the analysis is, is robust and correct because it’s kept within that frame, and I didn’t push it beyond what it wasn’t meant to do.

David Roberts: Right. The demand surge would’ve affected both scenarios equally.

Lily Bermel: Exactly

David Roberts: So it wouldn’t have affected the ratio between them necessarily.

Lily Bermel: Exactly

David Roberts: But, but I think maybe we could say that it would have meant more fossil generation for both scenarios, all things considered?

Lily Bermel: Yeah, I think what we see with more demand means more needs to get built. And then there’s, there’s a, I think a helpful discussion in the report that talks about, you know, how is that more demand being met in the real world? And we are seeing that with behind-the-meter, both gas and clean, you know, the work that Google’s doing with their clean energy parks. But really to me, what it crystallizes is that speed to power has a price that companies are willing to pay.

David Roberts: Yes. This is so important about models. These models kind of run on cost optimization. They’re kind of cost optimization exercises. But the real world is not that.

Lily Bermel: Yeah, well said.

David Roberts: In the real world, these hyperscalers care about speed more than optimized cost necessarily, and speed. Yeah, this was actually my next thing that didn’t get included in the analysis for just… ‘cause it couldn’t be, which is the behind-the-meter stuff, which is, to my dismay, mostly right now gas. Some clean, but mostly gas. Seems like a big surge of behind-the-meter gas happening.

Lily Bermel: Yep, and I’m a big fan of Michael Thomas’s work at Cleanview and his newsletter, Distilled, where he has this amazing project database that’s looking at behind-the-meter gas announcements, which ones actually have commitments from manufacturers for turbines.

David Roberts: Yes

Lily Bermel: Only two-thirds do. And then which ones are actually getting built and which ones are delayed or canceled. So even though there’s like, you know, a big scary number of how much behind-the-meter gas has been built, I think it’s 90 gigawatts, only two-thirds of that might actually have turbines, and then only 2 gigawatts have actually been built so far.

David Roberts: Yeah, I’m sort of, of the, of the Jigar Shah school on this question, which is that I think those projections are... There’s a large element of fantasy to that. I think once people start actually building those, they’re gonna find out that building your own energy grid and operating it is a lot harder than it looks on paper. It’s a lot harder than your little model that you’re, that you, that you came up with on Claude, and that, and that there’s a lot of pieces to that puzzle. I think just a lot of that, a lot less of that is gonna get built than is projected. Yeah. But it would nonetheless add to the fossil side of these projections.

Lily Bermel: You’re right. And off-grid stuff can’t compete, and can’t compete with clean, so we of course want to direct all energy to get added to the grid.

David Roberts: Yeah. Yeah, yeah. Another thing that doesn’t show up in the projections is these nuclear restarts. And I, and I would say maybe I would broaden that to, to, like, the model doesn’t show much clean firm getting built, but there’s some reason to believe that there’s gonna be more clean firm than might show up from that number. And that includes nuclear restarts and maybe some geothermal that’s already under contract. So talk a little bit about that and how you think that might have affected the outcomes

Lily Bermel: Sure. And first on the why, I should point out that a model is also built on other data sources, and so Energy Innovation is able to track behind-the-meter and is able to track clean firm, but because their inputs don’t yet capture it, right, then as a result, their output doesn’t capture it. So I could imagine in a couple iterations of their model, all the behind-the-meter stuff will be there. On clean firms specifically, as we discussed, right now they have a series of assumptions that, to be frank, you know, I don’t know what they are, they set them, it’s their model. But that are about cost and performance. And, you know, they’re, they’re pretty stringent, and as a result, they don’t see a lot of clean firm, be it nuclear, geothermal, hydro, you know, fusion like other stuff—

David Roberts: Right ...

Lily Bermel: Get built in the next decade. But per the conversation about hyperscalers having deep pockets for speed to power. That stuff is happening and changes then the economics of these projects. So we have on the nuclear side, we have three projects that are getting restarted that will add gigawatts of capacity within a couple of years. The Palisades Project, Crane, Duane Arnold.

David Roberts: And that’s within the decade horizon of the, of the model, of the projection, right? So

Lily Bermel: Yeah, and even within, like two or three years. It’s, it’s pretty near term

David Roberts: So that would help on both the clean energy generation side, the gene-- the clean energy capacity side, and presumably on the emissions—

Lily Bermel: Exactly ...

David Roberts: Side, ‘cause you’re not gonna need as much coal running—

Lily Bermel: Yep ...

David Roberts: If you’ve got nuclear, if you’ve got more nuclear, right?

Lily Bermel: Yep. So that’s one tangible thing. The second tangible, you know, bonus plus-up on all those categories is nuclear extensions. I think a lot of these projects are running for 60 years, and we’re seeing them revise their contracts to run for 80 years. So that’s good news. And then on geothermal side, I often point to Google’s framework that they have with Fervo Energy to deliver several gigawatts, I think 3 gigawatts of capacity through 2033. So those are all tangible things, and then the expectation that as commercialization timelines get pulled forward, more will precipitate as well.

David Roberts: Right. So, so the behind-the-meter gas thing might make the glass look a little emptier. The nuclear restarts thing might make the glass look a little fuller. There’s a lot of nuance there in, in, in actual current events that are difficult to capture in the model.

Lily Bermel: Yep. And the report, you know, hopefully lays that all out so it’s, it’s clear. It, it thinks through this. And you know, on net, I still think it will, it will run glass half full, given, you know, it is near that three-quarters mark, but, you know, time will tell, which is what is exciting.

David Roberts: Yeah. Yeah. There are some also medium term rather than short term, kind of medium term factors that are difficult to capture in the model, like how much clean firm will get commercialized whether costs on the clean energy side will continue to decline faster than projected—

Lily Bermel: Yep ...

David Roberts: Which they seem to do.

Lily Bermel: Yeah, every time.

David Roberts: Every time.

Lily Bermel: My, one of my favorite graphs of all time is, like, that solar expectation line where—

David Roberts: Yes ...

Lily Bermel: Every single line is more steeper and steeper and beats out expectations every time. It’s so great.

David Roberts: Yes. A very, I’m very familiar with that graph, and makes me wonder why modelers, you know, keep doing it. But, but you know, maybe medium term we can rely on that. There’s intangible, but a real thing is, and this has proven true in the past too, I think, when the clean energy industry goes through a contraction like this or a blow like this, they kind of tighten up. You know, they kind of, like, improve, they get more efficient, they get more resilient, and maybe come out of the other side of that a little better off in terms of just, like, having their stuff in order a little better.

Lily Bermel: Yeah.

David Roberts: I don’t know how you’d measure that.

Lily Bermel: Yeah, I was gonna say, I, um, I was doing some presentations on this work in the spring and, and had a longer section in my presentation about this that I slimmed down for the report, ‘cause I’d rather an economist give me some pretty explicit definitions of booms and busts and whatnot. But my sense is that in, in these capital intensive and cyclical sectors—

David Roberts: Mm-hmm ...

Lily Bermel: Busts are bound to happen at some point.

David Roberts: Yeah, yeah.

Lily Bermel: And, and the boom is always bigger than the last time. And so one perspective that I, I mean, I remind myself is that 2021 was such, like, a euphoric, frothy moment in the clean energy market. Right? Like peak woke, zero interest rate— so much excitement, like, so much investment ready to go into this sector, and then all of a sudden, like, inflation surge, interest rates got super high and stayed high for a long time. And so I think expectations versus reality, there was already a tiny mismatch there. And then when you had Trump come in, like, then you have a series of politically induced headwinds, which, like, are yucky and sticky and gross.

David Roberts: Mm-hmm.

Lily Bermel: And that just, like, makes the bust part feel so much worse. But, like, at some point, a bust was bound to happen, so, you know, at some point the boom is going to happen and, and it will surely be better than the last one.

David Roberts: Yeah. And, and one final medium term thing that’s difficult to quantify is—

Lily Bermel: Yeah ...

David Roberts: There’s some reason to think that this extraordinary demand growth—

Lily Bermel: Mm ...

David Roberts: Could help clean energy, could help boost the ratio of clean energy. Talk a little bit about that maybe, that dynamic.

Lily Bermel: Sure. I think we’re seeing the fastest energy growth since World War II, and this is a really unique moment where all hands on deck, we need as much energy as fast as possible, as cheaply as possible, getting added to the grid. Clean energy right now, the latest Lawrence Berkeley National Laboratory numbers from their 2026 “Queued Up” report is that 90% of what gets added to the grid last year was clean. And so if we have more pull on that demand, like more need for those additions—

David Roberts: Mm-hmm ...

Lily Bermel: That will, that is such a strong incentive for clean to continue happening. And so I think the boom from data centers and from AI, which is the near term stuff that we’re seeing and is all that’s being talked about, is what’s happening right now and causing that demand pull. But what’s really helpful to think about is that the demand from electrification, clean electrification, which we love-

David Roberts: Yes this is such an important point

Lily Bermel: Yeah, from EVs, from heat pumps, from buildings, from all the forms of decarb and electrification, that will end up being just as big, if not bigger, than the demand pull from data centers right now. And so, like, thank God that right now the demand growth that we are seeing is from customers with massive pockets who want to pay and are willing to invest in our grid. Like, literally, thank God.

David Roberts: Yeah.

Lily Bermel: And we can do so much better and, like, really utilize this moment because when the next wave of demand comes, we’ll be in a better place, and we’ll have grown such that we can, you know, run through first base.

David Roberts: Yeah. Yeah, yeah. This is, I, this, it’s a point I make on the pod over and over again. Thank you for making it again. Like, whatever you think about data centers, there’s a giant wave of electrification coming in behind it.

Lily Bermel: Mm-hmm.

David Roberts: We need lots more electricity. We need lots more grid. We need to think about this whole thing a lot more. You know, don’t get obsessed about AI to the point of forgetting, forgetting that this is all, this all matters regardless.

Lily Bermel: Yeah. And I think that’s something also just about, like, the concept of policing load growth, like good versus bad load growth. Like, one could think that the load growth that’s coming later is good. It’s from decarb purposes electrification, but, like, it’s gonna happen regardless, and so let’s welcome it and let’s prepare our grid to be stronger and bigger and build more. Like, that’s a great challenge.

David Roberts: Yeah, I think what maybe not everybody, but I’m sure you and I agree on, is—

Lily Bermel: Yeah ...

David Roberts: The scenario we want eventually is for a big enough and robust enough and abundant enough grid that we can, we can use all, all the energy we want. I know, I know—

Lily Bermel: Love it

David Roberts: A lot of, a lot of my maybe fellows in the environmental movement, uh, don’t necessarily share that perspective, but that’s certainly a perspective I take.

Lily Bermel: I think that’s the American dream right there. We want enough energy to power economic growth and prosperity, and do it in a decarb way. Beautiful.

David Roberts: Yeah, and like, and like even aside from industry and transportation and heating and cooling, you know, maybe we want to like desalinate the oceans. Maybe we want to like rewild the deserts.

Lily Bermel: Yep

David Roberts: Maybe we want to send Elon Musk to Mars, you know?

Lily Bermel: Totally

David Roberts: Like all, all these things.

Lily Bermel: Let’s do it all. Yeah.

David Roberts: Who knows if we have an abundant, abundant power system, I’m sure we’ll find lots of pro-human ways to use that power if we got a bunch of it, you know, that we don’t even know about now. Anyway.

Lily Bermel: Yeah, one, one more plug I’ll put is the report kind of has that through line of building is the answer. Like, we need to build our way through, to decarbonization, to the end state. And when you think about, and sorry if I’m jumping ahead a bit, but if you think about two goals of like we need to build more clean and, and fill that glass all the way up and spill it over, like you need to build more wind and solar and batteries. And if you want to decarbonize and get rid of fossil fuel emissions, you need to build clean firm. And like the only solution is build, build, build.

David Roberts: Yeah, we’re gonna get into that much more in a second. But one, the one final thing which might be an X factor for the results of these models in the next 10 years is transmission and interconnection. Right now, you say, and I think there’s good reason to say this, you know, Jesse Jenkins’ modeling shows this, common sense I think tells this, that there’s some reason to think that even the IRA projection would not actually come true, because for it to come true, you have to build, you have to make permitting easier, right? You can’t block it all, and you gotta build a bunch of transmission to make room for it on the grid.

Lily Bermel: Yep.

David Roberts: So there’s some reason to think that both scenarios should be a little bit more glass half empty given current transmission and interconnection restraints, right? But the flip side is, should we get our shit together and reform those— both scenarios could be higher, right? That the glass could be much fuller if we actually got our stuff together. So just maybe like spell that out a little bit, the sort of like the ceiling, as you call it, for current clean energy deployment.

Lily Bermel: Yep. Um, going, writing this report made me really appreciate like the literal ceiling that exists and how much energy can get added of all types at any given point, and how fast it can be, and that’s due to this like massive gauntlets and all the barriers that it... How long it takes to get permits and find a site and connect to the grid and construct a project. And the model itself actually does include this in its construct. It has a literal cap on how much energy can get added. So the model reflects that, and yes, if you lift the cap, you know, the results would be a lot better. And so Jesse was someone who, right after the IRA was passed, tried to put a number on, on how bad it is, and he found that 80% of the 2030 emissions reductions from the IRA would be totally lost if we could not build transmission any faster. And the sad reality is that we’ve been building it slower ever since that report came out.

David Roberts: God.

Lily Bermel: And then John Bistline, who’s another modeler, he put out this great paper in Nature with a lot of folks, a lot of different groups, and they compared every single IRA model, and what one of the things I found most interesting about that report was that later assessments of the impact of the IRA had dimmer and dimmer outlooks because people began to appreciate this concept of the ceiling and the transmission constraints a lot more.

David Roberts: Yes. But those are not technical restraints. Those are political and regulatory constraints that theoretically policy could ease, theoretically.

Lily Bermel: Yes.

David Roberts: Okay. So, so- Maybe this is difficult to answer, but just like taking into account all the things that were not really modelable, that were sort of exogenous to the model or that are, you know, all the other factors, do you think all those other factors increase or decrease your net, the net level of the glass as long as we’re using that, that metaphor?

Lily Bermel: Sure. Yeah, I mean, in the report I, I take the time to really spell it out across different time horizons, dig into both the good and the bad news and, you know, I come out still glass half full. I think the demand pull that we are seeing is really massive and really important to delivering clean energy. It comes with it the hyperscalers’ deep pockets to pay, it comes with it an urgency to build more and faster. And then, right, there’s literal gigawatts and gigawatts that I enumerate in the report of what will actually get added in the coming years that are plus and, you know, I’m, I’m hoping that that will offset the behind-the-meter gas that we’re seeing. So I still think it’s, it’s glass half full.

David Roberts: All right. Let’s, let’s move on to a couple things that I kinda wanna argue with you about even though I agree with you.

Lily Bermel: Okay.

David Roberts: If that makes any sense. I find myself in this position more and more often. Uh, could just be that I’m getting cranky and old. But first is, um, you argue that Democrats should get their act together and push for permitting reform and push for more transmissi tally agree with that. They should do that. But in the process of making that argument, you argue against pushing to extend the tax credits. And before I say anything about that, why don’t you just say what’s your political economy thinking behind that?

Lily Bermel: Yeah. This is a fun discussion, and I’m glad we’re gonna dive into it. I think first, an important clarification is that the report does not view any, you know, policy scenario as mutually exclusive. Like, if you do one, you can’t do the other. Rather, it’s an attempt to shine light on the different policy levers to figure out what they are, how they work, how effective are they really. And so—

David Roberts:You’re trying to prioritize, I think, which is, which is God’s work. Like, it’s, I think Democrats don’t always do that, so.

Lily Bermel: Thank you. Yeah I think, right, so now’s the time to think about the strengths and the weaknesses of these policies, which encourages conversation about can you design it better, what’s most effective? Like, what is worth spending our money on? Because there will come a point in a few years where, like, the leadership in Congress will meet with the 50th senator once again, and they will say, “How much are we spending? Where and why?” Let’s, you know, have some good conversation now and think it through. But it’s of course not taking things off the table or any of that. And so in the category of, like, how do you build more clean, the clean stuff that’s most at hand right now is that wind, solar, and batteries, ‘cause that’s what’s getting constructed the most. And so the two core levers are permitting reform at the federal level. The two core levers at the federal level are permitting reform, comprehensive bipartisan compromise, and the tax credits that the Republicans put on the chopping block. And so the political economy argument you started there, is both thinking about, like, what is more durable, and how much does it cost, and like, you know, how triggering is it, I suppose. And so on the permitting reform, like, it can only get achieved through bipartisan compromise, and it costs $0. And so permitting reform, I’ve loved thinking about it recently, is, like, free money. Like, it costs no fiscal space, and then it will lower the cost of projects because they will not be delayed as often or canceled, and it will take less time to build. And so, like, that’s free money in some ways that we can pick up versus the wind and solar tax credits have, you know, a sizable bill that comes with it. They’ve existed for almost 50 years, since its inception, and always extended on a bipartisan basis, bipartisan support, which is really cool. And then as we discussed, it was, like, the sacrificial lamb for the Republicans right now. And so to me, like, it’s not just taking that fact in isolation. It’s also recognizing that, like… Right like there’s so much antipathy against renewables that has far predated Trump, but this was like another arrow in their sheath that was like, you know, wind and solar get free handouts from Daddy Biden, and like Democrats are out here saying that clean is the cheapest thing on earth, yet they need to be subsidized. Like they’re pointing out the incoherent politics of it all. And you have Republicans who will acknowledge that they are against transmission because of the slush fund that being able to build more would unlock if you have those tax credits in place. And so recognizing that, but then in conjunction with data that shows like, wow, these technologies are mature. Like there’s 50 years of US policy and then decades of policy in China and Germany that have driven down the cost. Like we’ve done such a good job as a planet and as a country supporting these two technologies that Trump can try to kneecap it and can’t.

David Roberts: Hmm.

Lily Bermel: And like that is so promising to me of their viability that it’s not just some like emissions reducing target that like some people like, that it is something that overwhelmingly is getting added to the grid, even when there was no policy supporting it to do so. And so in that light, it makes me think, I mean, this is at a really high level, and we can jump into the weeds on it. Like, oh, like they do less perhaps than we thought they did a few years ago, and there’s other first order policies that might make a bigger impact, and there’s still like other things we need to invest in and spend our money on. So in terms of prioritization, like maybe other things are worth prioritizing the next time around.

David Roberts: Right. I guess the only thing, and this is, this is just one of my hobby horses.

Lily Bermel: Sure.

David Roberts: Is the only thing that bugs me is this notion which, not necessarily from your, certainly not from the, so much in this report, but I, I hear this a lot in energy circles, which is, “Well, Republicans have polarized this, and if we do it, they’ll just undo it next time they take power, so it’s not worth doing.” And I just find that kind of, sort of like DC brain so poisonous because you are undercover of being savvy and realistic, just more or less explicitly allowing your political opponents to define the space of what’s permissible and what’s allowable. And like we can’t really take that literally, right? Because like if we restore abortion rights, they’ll just try to undo those next time. If we, you know, voting rights, like name it. Like they have shown that they wanna undo most of modernity. Are we just gonna say that like, “Oh, well, if we try to restore modernity, they’re just gonna undo it next time we, they take power, so it’s not resilient or not durable, so we gotta give up on that”? Like it can’t be that we’re formally allowing them to define the space of the possible, right? You see what I’m saying there?

Lily Bermel: I do, and I, and I like your abortion example, and frankly this is something that I think about often. And our country is very burdened, let’s say, by the political pendulum, and we will have, my guess is, you know, a series of one-term administrations back to back to back going forward. And so of course it’s about taking a few steps forward, you know, getting, taking a step back and continuing that process. But I think for me what really stands out is that there are so many reasons to do what you and I think of as climate solutions for non-climate reasons.

David Roberts: Mm-hmm.

Lily Bermel: And honing in on that and, like, exemplifying that and elevating that builds more support and increases durability.

David Roberts: Hmm.

Lily Bermel: And so I think about, like, when the IRA was passed, for example, we were so excited because of the promise that it had, and looking out at a 10-year horizon and all that it could do. But if we knew it would only have lasted a couple of years, you know, its impact is immediately hamstrung by how long it can last.

David Roberts: Mmhmm.

Lily Bermel: And so to me, the best decarbonization, well, the fastest decarbonization is the best. And it happens via what is politically viable in a given moment and has the chance at lasting. And so to me, the strongest climate policy is the one that can last and deliver durable, consistent decarb results instead of, like, a jump forward that, you know, by the time the IRA happened and guidance was out and there was a, a boom in investment and deployment right away, but you only had a year or two of impact, and then it got cut back. And so I would love to see something that is a bigger amount of impact for a longer period of time. And then now we’re in a moment where, like, wind and solar seem to be pretty self-sufficient in a really comforting way, right? Like, that’s not a bad news story. And meanwhile, there’s these other technologies that need to get commercialized that, like, Republicans support. They kept all the policy on the books for them, all the investment. And like—

David Roberts: Well, for now. I mean, well, this is, I mean, this gets to another point, like—

Lily Bermel: Mm-hmm ...

David Roberts: Transmission.

Lily Bermel: Mm-hmm.

David Roberts: Like, what if instead of taking Republicans at their word that they just want economically rational policy, what if instead you look at their actions and you’re like, “Oh, they just hate clean energy and they love fossil fuels,” and if they get wind of the fact that more transmission will net-net benefit clean energy, then they’ll turn against that too, which we, as you say, we’ve already seen some of that happening. Like they can, they might say we’re turning against transmission because clean energy gets all these credits, and it’s just gonna build out a bunch if we build transmission. But then if they find out, if they read your report and they find out, oh, clean energy’s gonna get built out regardless if a bunch of transmission gets built, why wouldn’t they just polarize against that? And then boom, that’s not durable. That’ll get undone next time they take power. So does that, are we gonna take that off the table too? You know, what are they, are we gonna let them define that out of the space of the possible too?

Lily Bermel: Sure. I think two things. One, I would be very impressed with myself if the Republican, uh, machine took my report as the reason to not do wind and solar. I think there’s, there’s other problems if somehow my report does that, number one. Number two is that this shows, like again, wind and solar is 90% of what gets added to the grid. Like, it is not in anybody’s interest to take that 90% off, as one thing. The third is that as we know, we want to fill the glass and do a lot more than that. But I think this whole thing of like transmission helps renewables is not a secret. And I think about, you know, I’ll, I’ll point out explicitly that Travis Fisher, who’s one of the most influential people on grid policy at, uh, on the center right, he testified in front of Congress this year that the phase down of the wind and solar tax credits has made him come around to transmission. And so ironically there we see like the counter polarization is tangible and not just some like conspiracy theory or fear-mongering or like us shooting ourselves in the foot preemptively. And so I think it’s worth thinking through like there’s a deal space, and there are things that are bipartisan, certain technologies, certain policies, and of course like we should still do things on our own that are ambitious in our own unique ways in, in attempt that, you know, three steps forward, one step back. Like it, it’s, it’s a multiple all of the above approach there.

David Roberts: Yeah. And I, and I would just say, and then, and then I, and then I’ll let this point go like—

Lily Bermel: Sure ...

David Roberts: I’ve seen many times over my career the sort of technocratic DC liberal establishment take these think tank right-wing guys at their word that like, “Oh, dude, we just want some technocratic tweaks in this policy so it’s more economically rational.” And you’re like, “Oh, then oh, we can, we can, you know, we can deal with these people. We can compromise with these people.” And then when they take power, they don’t just do the little technocratic tweaks. They, they use a, a sledgehammer, you know, to like crush the whole thing. Like Travis Fisher is not representative of the right-wing coalition now, which is full of like maniacs. He’s, you know, he represents a right-wing think tank. Like what armies does he have? What MAGA politicians are coming to him as opposed to just saying, “How can we hurt the left? How can we hurt what the left likes?” Like that’s how they behave when they get power. They don’t put people like Travis Fisher in charge when they get power. When they get power, they go nuts.

Lily Bermel: Yeah. On that I do think for those technocratic changes are not the recommendations Republicans are touting or purporting that they’ll do on their own in a trifecta for one. But two, I think it just speaks to policy design and how can you do it in a way that makes it harder to undo. And so, right, like I think that all the stats and the math that my report shows and demonstrates, which strengthens the case, but even that aside, like the IRA, there was no sledgehammer taken to it. It was a scalpel, right? Every single tax credit was preserved in duration and in amount except for wind and solar. You applied the FEOC restriction, and then they removed a lot of the grants, and they kept the Office of Energy Dominance Financing office, which does a huge amount of work on the loan side as well. And so they did take a scalpel to it, and it’s in their interest to make it seem like they completely squashed it all.

David Roberts: Well, they squashed the EV parts, they squashed the grants and loans.

Lily Bermel: So back, back, back to the power sector as our, as our scalpel.

David Roberts: Yes, yes. Well, we’ll see. All right. So moving on then.

Lily Bermel: Yeah.

David Roberts: The other point which I agree with you on and wanna argue with you anyway because I’m perverse like that, is your second... One of your recommendations is, and this is the other big one, is we should invest heavily in commercializing clean firm technologies. Which again, I agree with. Hip hip hooray for doing that. But in the process of arguing for that, I feel like you’re a little more pro-gas than I am comfortable with on this score. And one of the things I wanna ask is, like, I see a consensus forming in the DC Borg, the Searchlight people, the Breakthrough people, all these people that, that, that wind and solar and batteries are, like, good for satisfying new demand, but they’re not firm, and furthermore, can’t be firm, that there’s some essential difference between them and firm and clean firm technologies that can never be bridged by renewables and storage. And I guess I just don’t... No one’s ever been able to explain that to me in a way I can understand. I get that renewables with 4-hour batteries specifically can trim peaks, right? And they are trimming peaks. They’re trimming peaks visibly in Texas and in California and South Australia, like, not nothing. They’re reducing the amount of natural gas needed, natural gas generation needed in those places. But we have 8-hour batteries already semi-commercial. We have continued cost declines in batteries that might make further durations viable. We have other chemistries coming online, sodium-ion. We have-- I just did a, I just did a pod, it hasn’t come out yet, about these new anodes made of silicon that boost energy density by 5x. There’s long-term storage coming online, and I guess I just wonder, like, if you get enough storage, why isn’t it firm? Like, what is the firmness of natural gas that sufficient storage can’t get renewable energy to? Does that make sense? Does that question make sense?

Lily Bermel: It does, yep. I mean, I think you outlined some of it right now. What we have on hand is 4-hour batteries, and that’s insufficient to provide around-the-clock reliability. And I think, I mean, I think I’m more bullish on, on 8-hour batteries in terms of their promise. We need to commercialize that. And the thing about batteries is that it, like, shifts the time of generation rather than making it dispatchable. Like, at any time, power can come from it. You have to charge them up first. So there is a distinction between batteries and the storage that it provides and the, like, around the clock, always available stuff.

David Roberts: Well, let me stop you there. Like, why like, if you build enough solar, right, you had this enormous excess—

Lily Bermel: Mm-hmm

David Roberts: During the day, which right now is a lot of it is just getting curtailed all over the place. If you can fill enough batteries up with that, then it will be there whenever you call on it in any way that seems meaningful to me. Like, why wouldn’t it be there whenever you call on it if there’s enough excess and enough is stored?

Lily Bermel: Yeah. I mean, I, I would love to see numbers that show that, like, solar and storage can power everything. And I think some of the constraints are, like, back to the transmission and back to land. Like, do we need to build a solar farm the size of Manhattan to power the data centers? But, oh, yes, that’s possible. You know, you just need the storage to do it. Like, no, you’re constrained by land and other things as well. And I just, I highly doubt that 4- and 8-hour storage will be able to do it. But, like, I mean, per the, like, these aren’t mutually exclusive. Like, clean firm is something that is happening within this decade and is a really rich opportunity. And again, for more than just climate reasons, like, this is a massive American export opportunity. This is a beautiful opportunity to transition fossil fuel communities in a way, uh, toward clean energy. And it’s innovation, it’s exciting, and it’s really great, uh, rich power opportunity. And so, like, there is a difference, I think, between fully getting to supplant or substitute fossil versus just reduce its generation. And that was a theme running through the report is this concept I coined, like, shallow versus deep decarbonization and getting at how that happens.

David Roberts: Yeah, that’s, that’s what I guess I don’t fully get. Like, I just don’t know why there’s some ceiling on storage that makes it intrinsically shallow. You know what I mean? Like, right now it’s only reducing fossil fuel generation, but why not if there’s more and more and more and more of it, won’t it eventually eat into fossil capacity? Like you say, for instance, you say even in 90 percent renewable scenarios, you need some gas. And I’m just like well, yeah, fine. Like okay, but is that what we’re talking about? Are we talking about a 90/10 ratio? Because if that’s true, then I don’t see the impetus for building a bunch more gas. Like if we want, if we’re aiming for a scenario where there’s 10% gas, you’re just gonna have a bunch of gas plants sitting around that don’t run most of the time.

Lily Bermel: Yeah.

David Roberts: It seems like we already have enough gas for that.

Lily Bermel: Yeah, we do have enough gas, which is why the models don’t build more gas, ‘cause, ‘cause it’s able to ramp up and down. But I mean, I’m excited to listen to your podcast with these battery people to learn more. Yeah. And I also think there’s some fantastic academics who do a lot of the like what do stranded assets mean and look like, and how do you get to that point? So that’s kinda stuff that I don’t really dip into at all in this report. Just because solar and storage and wind has the opportunity to power a high percentage of the power grid does not mean that you don’t work on that last percentage and innovate there at the same time. Like—

David Roberts: Sure. Sure.

Lily Bermel: To me, it’s an eggs in basket thing, it’s a timeline thing. Like right, it doesn’t make sense to start on the last 20% only when you reach the 80% threshold line. And I think there’s some... I mean, you can look at data within energy markets and see that variable renewable penetration right now, like the average it sits around 40% across all these grids, and it can surge and spike up to 70 to 90%, but that’s not a sustained level. So right, we’re tackling a whole bunch of stuff at once, like increasing that penetration at a sustained level, innovation to get that last percent over the line.

David Roberts: Transmission obviously a huge—

Lily Bermel: Yeah ...

David Roberts: Piece of lifting that ceiling, as we say.

Lily Bermel: Yeah. Like, there’s so many things to solve at once. And it’s worth doing them all.

David Roberts: Okay. One other thing, which is, that’s been bugging me, is people who are advocating for building a lot more grid, doubling the size of the grid, which again I’m all for, doing that by way of diminishing the contribution of better grid utilization, and this is a very hot topic now that’s, that’s, that a lot of people are talking about.

Lily Bermel: Yeah.

David Roberts: And I think in the report, you call better utilization marginal relative to what we need, and that just raised my hackles slightly. Like, you have, like, Brattle out there with studies saying that there are, like, 200 gigawatts of unused capacity floating out there on the US grid. That seems like a lot to me. That seem, that doesn’t seem marginal to me. And I guess, like, in the spirit of doing everything, why shouldn’t we pursue utilization with all our might even as we are building more grid? Like, why do we, why do we need to dismiss the contribution of, of utilization?

Lily Bermel: Sure. I think while I call it marginal, I also describe it as, again, free money and worth pursuing rapidly and with urgency. When I worked for Brian, we were doing research about policy opportunities to increase the speed and quantity of these grid-enhancing technologies on the grid and in markets and looking at the utility business model and, and all of that jazz.

David Roberts: Mm.

Lily Bermel: So totally worth doing. I’d say that the JPMorgan report by, oh, what was his name? Cembalest, but his first name... Hmm. Oh, Michael.

David Roberts: I could be getting my reports confused. That’s fine. There’s so many reports, Lily. You know this. You know the report profusion.

Lily Bermel: Yes. Yeah. Might be problematic in its own right. But I’ve seen a report that quotes about, like, up to 40 gigawatts of demand flexibility capacity here in the US today, and maybe sure, some, some of that amount more to come. If we need to be growing the grid by, like... A, a doubling of the grid would be 1,300 gigawatts. So if we have... I mean, you’ve cited 200 gigawatts of extra capacity available on the grid. That’s just 15%. For demand flexibility, you know, that’s only a couple percentage points, and so it’s just in scale to what it can contribute and the amount that a building that really needs to happen. So not to diminish what it can do, needs to pursue it at all costs. It just simply can’t replace building, and that’s a fact.

David Roberts: Yeah. Yeah. I get it. It’s just that in the short term— there are these constraints on wind and solar that we are bumbling our way toward trying to lift. And while we’re bumbling—

Lily Bermel: We are bumbling, yeah ...

David Roberts: You’ve got a bunch of tech guys out there pushing and pushing and pushing to build gas in the name of speed to power. So all I’m saying is you got utilization that could do what that short-term gas is doing as you are trying to raise those long-term constraints on wind and solar. I just want to avoid a big short-term gas build out, basically is what I’m, is what I’m about.

Lily Bermel: Yeah. I’m about that, too. And, and I think pushing for utilization and demand flexibility is important and great, and, like, can’t wait to see more fruition of that come to pass, right? It’s still, like, a relatively novel thing and, right? I don’t know where the demand centers are being, data centers are being built versus where that capacity is on the grid and the technicalities of how you reach all that. But I hope it’s happening and, and hope it can come to pass.

David Roberts: Well, talk about difficult to model is utilities getting o- you know, getting over themselves and, and, and getting serious about this. Who knows how to model that? You would’ve thought it would’ve happened by now.

Lily Bermel: Yeah.

David Roberts: Okay. Well, we mostly out of time, but I just wanted to do a couple of final things. One is, pulling the lens back, this is I think a useful frame. You talk a lot about how the IRA was passed in a particular set of circumstances, not just technical circumstances, but political circumstances, political economy circumstances, economic circumstances, and now we face a very different set of circumstances, and that should inform how we approach policy today. So maybe just take the camera back and, and, and talk about that on the, on the sort of broadest level.

Lily Bermel: Sure. I think about both the last six years of climate policy development, but then also, you know, the past 20. And first, uh, the consensus in the climate movement was that you needed to tax carbon. That’s the best policy to do, and we tried that several times, many times, and of course it never came to pass at a federal level.

David Roberts: They’re, they’re still in my inbox, Lily. They’re like the, the soldiers on the Japanese islands that, that didn’t hear about the war ending or whatever. Like they’re, they’re still out there.

Lily Bermel: You know, and I, I respect they’re committed to their principles and their values and their priorities. But then like I mean I think it’s beautiful the conception of like make clean cheap and industrial strategy, and incentivizing innovation and deployment in the demand side and manufacturing. And so there was able to be built a political coalition to make it pass. A lot of people spent years developing the policies, including, uh, the Energy Act of 2020 that happened during the Trump administration, and bipartisan work that, that happened to lead up to the IRA, created a lot of the authorizations that then the Biden Infrastructure Law and IRA was able to appropriate and fund, which is a cool part of the history. But then I look specifically at like 2021 as a window, and it was a Democratic trifecta— interest rates were zero. Like, the administration was prioritizing jobs over inflation, and there wasn’t much room for climate bipartisanship. It was like peak woke era. And with that came a law that was built and sold as, like, man’s greatest climate law, and it, it is on paper. It’s the best climate law America has had. But then it got attacked that way, and now almost all of those conditions are, like, completely inverse, where cost of living and affordability politics is the name of the game. We have a massive demand growth that we did not see at the time. You know, geopolitical competition over this stuff has increased, and interest rates have stayed high. And so... And we’re in a Republican trifecta, more polarized than ever, et cetera. And so I think as a result, like, just simply looking at, like, the color of the room that we walked in in 2021, it’s decorated really, really differently this time around. And so to me, that’s, like, the first obvious sign that the next Democratic president should not try to redesign the room and decorate it, you know, the same way as what we had in 2021. It’s just a different world.

David Roberts: Yeah. The only thing I would add to that, and this is again just grinding my personal axis, which is like I, I have seen so many cycles of this over my life of like Republicans come in, spend all the money, right? Jack up the deficit, break everything, and then Democrats come in and have this reasonable conversation like, “Well, everything’s broken now, so we have to, so we have to, you know, trim our policy ambitions ‘cause they broke everything.” And I’m just like, well, they, they took all the money and gave it to rich people. Democrats could, if they got real ambitious, take it back. You know what I mean? And like they broke all our scientific research and they broke LPO and they broke all these institutions. We could rebuild those things. Like we could remove these barriers that are holding clean energy back. Like I just would like to see a little bit less, “Let’s be reasonable given these constraints they placed on us,” and a little bit more, “F these constraints. Let’s be ambitious. Break the constraints and like try to, try to win rather than just accommodate.” You know what I mean? I just wanna see more ambition, Lily.

Lily Bermel: I, I want ambition too, and I think I, I translate ambition to results. Like I want results more than I want ambition. So to me, it doesn’t matter how colorful or massive or large a climate law is if it’s only gonna last a couple years. So I care about durable, consistent results, but agree that like we should not do performative austerity, like make it a fetish for every bill, or accept the framing that all spending is equivalent, or put ourselves in traps. But it’s possible to design policy in a way that doesn’t cost as much, ranging from permitting reform that literally is, is not a tax policy to just like the methane fee I think is pretty underrated, that it was able to survive because it has revenue sources beyond 10 years and like therefore you can’t just repeal it that easily, and the Republicans had to figure out some other legally creative way to do so. So I think there’s a lot of ways to have ambition, but most importantly, like as someone who cares deeply about climate and about climate mitigation, like to me ambition is are we actually doing it or not?

David Roberts: Okay, final question. Lily is in charge over the next 10 years. Miracle

Lily Bermel: Yeah. Big, big miracle. Just flagging that.

David Roberts: Are just, are just, let’s say, let’s say a miracle happens in 2026 politically, and then again in 2028, there’s a Democratic trifecta, and Lily’s in charge of the Democratic trifecta. A slightly smaller miracle. Still a miracle. What would you... Describe what you want to see over the next 5 to 10 years. What looks to you like good, smart, durable, clean energy policy that’s going to produce results and advance decarbonization and advance clean energy? Just sketch out what you’d like to see.

Lily Bermel: Sure. I think the report is pretty simplistic in that it looks at a couple building blocks of renewables, of gas, and of clean firm. So there is a whole myriad of like FERC technicalities and all this other stuff that maybe one day I’ll be smart enough to dive into. But I’m not right now. I think on permitting reform, to me, that is a 1000% priority to happen this Congress. I do not want to do that next Congress or next administration. Like, that needs to be done now, and I think if it’s not done, the next administration will show up with an embarrassingly empty pantry of tools to use.

David Roberts: Why this Congress and not next one? I mean, obviously, like sooner is better on some marginal way, but what, why the extreme urgency? Why, why, if there’s a better balance of next Congress, wouldn’t there be a better bill?

Lily Bermel: You’re right that there’s urgency, as in the sooner the better. Negotiators are quite close to be coming to a final deal, and that’s exciting. Next Congress, the people, the members who manage the committees and jurisdiction will change, and—

David Roberts: Mm ...

Lily Bermel: It looks like they will be less favorable to a bipartisan deal. And because comprehensive permitting reform requires compromise on both sides, you need that to happen, uh, right now, and right now the conditions are most favorable to making that happen.

David Roberts: Okay. Permitting reform. What else?

Lily Bermel: Permitting reform. I think I would love to direct a lot of... I’d love to direct a lot of attention toward commercializing clean firm. One of my friends did an analysis looking at all of the federal support that has gone to energy technologies and found that solar has received 50 times as much as geothermal, for example. And so we have a long way to go in the amount of respective and adequate support that we can give to these technologies to commercialize them, accelerate their timelines,

David Roberts: But you specifically say in the report that tax credits might not be the best.

Lily Bermel: Yep.

David Roberts: Like tax credits, which are the most familiar and easily reached for and, and you know, like the usual.

Lily Bermel: Yep.

David Roberts: What the closest thing we have to a usual support policy for clean energy might not be best for clean firm. What sort of things would you like to see?

Lily Bermel: Sure. And just a note on that, it’s, it’s interesting because a tax credit works best when the market is mature enough to respond to a price signal. So—

David Roberts: Mm ...

Lily Bermel: Therefore right now you need more patient capital. You need, long-term debts. And so the Office of Energy Dominance Financing is doing a really good job of living up to the promise that was revealed in the Biden administration and is continuing to do really good work. And so I’d really want to supercharge that and really complement it to make sure that the full capital stack across the federal government is represented and is able to contribute to commercialization. I’d wanna spend a lot of time focusing on building out the grid, doing it as fast as possible doing it, making the most of it, of what already exists, and—

David Roberts: You also mentioned some, some gas policies which maybe you could shout out now in terms of—

Lily Bermel: Oh, yeah. ...

David Roberts: Preventing the worst of the damage from gas.

Lily Bermel: Yes. I have a nice list. I just wanna pull that up. Yeah, I think the model highlighted that the fossil fleet is pretty sticky and there are things that we can do. I’m a little bit assuming that the endangerment finding is going to be left for dead in some form or another, and at the very least it’s worth thinking through other regulatory opportunities, to decarbonize fossil fuels and reduce their carbon intensity. And so at least for ideas that by my understanding the oil and gas industry generally supports are to bring back the methane fee, expanding support for carbon credit, reinstating the Greenhouse Gas Reporting Program, which is, you know, making, uh, large emitters actually say how much they’re emitting—

David Roberts: Yeah

Lily Bermel: And all of that, which can be used for a carbon tariff, and it can be used to establish products level carbon intensity standards. And so yeah, there’s a lot of progress or a lot of opportunity to work there. And then of course— my bread and butter and, like, the things that I spend the most time about is international climate policy and competitiveness and export opportunities, and so there’s a whole suite of packages you can do there, both thinking about, like, being able to diffuse American clean tech abroad, but then also looking at tariffs and trade barriers and what can we do to alleviate costs here on Americans, and what tariffs make sense to lift, and how can we make deployment as fast and cheap as possible here in the US.

David Roberts: Well, maybe on a final note then, ‘cause this, this will return us to something we almost began with, which is Noah’s sort of concern about—

Lily Bermel: Yep ...

David Roberts: The signal that the death of, or, or the seeming death, at least the, the optics of America’s comprehensive climate plan getting destroyed send to the international community. You worked on, on Kerry’s—

Lily Bermel: Yeah ...

David Roberts: International climate team. What, what can we say to other countries basically? Like, what... You know, like they, from the outside perspective, I think it looks like America abandoned the fight. As you say and as your report very, very ably shows, that’s not necessarily true. There’s a lot of nuance, there’s a lot still going on, but the optics are terrible. What would you like to see a new Democratic administration do to try to repair that breach? Do you have any ideas on just how to, like, regain the trust and respect of other countries specifically on this fight?

Lily Bermel: Yes, that’s something that I spend a lot of time thinking about, and there’s a whole policy community of people, uh, putting a lot of time and energy into thinking that through. And I think one thing I’ll point out is that other countries are upset with America for reasons far worse than climate and far deeper than climate or the Paris Agreement. Yes. Like, right, like how trustworthy we are is not because we pulled out of the Paris Agreement. It’s because of everything else.

David Roberts: Yes, that’s one tiny…

Lily Bermel: Which would take too long to enumerate,

David Roberts: Yeah one tiny piece of the puzzle.

Lily Bermel: Exactly. So I think, like, it is helpful to show that, like, the American private sector and market momentum in states are still committed to this and, like, the American federal government will one day rejuice our efforts on climate here domestically. But something I think is interesting is that the US positioning to be able to contribute to global climate change is really in our innovation here at home and the potential to diffuse clean energy abroad. And so to give an example again, when the IRA came out, uh, the Rhodium Group released some analysis that showed that the emissions reductions benefits of the IRA would be larger in the rest of the world by 2 to 4x compared to here at home.

David Roberts: Mm-hmm.

Lily Bermel: And that’s because of the power of the United States to commer- to invent, to commercialize, to grow, and then to-

David Roberts: Drive down costs

Lily Bermel: Diffuse technology abroad. Yep. And so while the US is obviously a massive historical emitter, the historical emitter, and there is a lot that we need to do to decarbonize ourselves, we are not in any way hamstrung from still being able to help the rest of the world. And so there is a whole set of policies in the economic statecraft and foreign policy land, ranging from international investment and foreign assistance and trade, and all these other tools that... And, like, finding opportunities for climate and clean energy and normal pillars of foreign policy to be able to, like, get our solutions out in the world, to incentivize innovation and yeah, to accelerate the energy transition abroad. So there’s, there’s a really ripe and big toolkit that is not limited to the UNFCCC and to the Paris Agreement, and that’s really exciting because it means, I think, that the next administration will come in with a lot more creative ideas, a lot more heft behind the international climate fight.

David Roberts: All right. We’ll leave it there. I kept you too long.

Lily Bermel: It was great.

David Roberts: Thank you so much. Really clever, interesting, uh, report. Really, stimulating a lot of interesting discussions. Thank you for doing it, and thank you for walking us through it.

Lily Bermel: Of course. Really fun to talk to you, and glad we got to spend time going through all the wonky stuff.

David Roberts: That’s my jam.

Lily Bermel: Me too.

David Roberts: All right. Thanks, Lily.

The great benefit of cities — the reason they have been engines of progress throughout human history — lies in what social scientists call agglomeration. It’s a fancy way of saying that if you put a lot of people close together, they produce cultural and economic value. That is why urbanists are always going on and on about density — density is how you produce the benefits of agglomeration.

Cars work against agglomeration. Whether they are gas cars, electric cars, autonomous cars, flying cars, it doesn’t matter; you simply can’t get enough people living close enough together to produce the benefits of agglomeration if every one of those people is carried around by their own two-ton vehicle. Individual car ownership inherently reduces the value of cities.

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If you want to move large numbers of people around efficiently, in a tight space, there is simply no substitute for public transit: trains, subways, streetcars, and buses.

In the 19th and early 20th century, the US was a world leader in public transportation, building trains and urban streetcar systems quickly and cheaply in ways that turbocharged its economic growth. But in the modern era, this story has flipped on its head. These days, the US builds the least, takes the longest, for the most money. From planning to permitting to funding to procurement to building, every step of the process has become dysfunctional and sclerotic.

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You’ve probably heard this a million times by now, part of the common lament that “the US can’t build anything.” But what can be done about it? At the think tank Institute for Progress, they recently brought together a group of experts to propose ideas on that subject. Released last month, the Transit Abundance Playbook contains a series of essays and proposals on how to improve the various stages of the process of building transit.

To talk through some of those ideas, I have with me today Will Poff-Webster, the director of infrastructure policy at the Institute for Progress, and Stephanie Pollack, a longtime transit veteran at both the state and federal level who is currently a senior fellow in the MIT Mobility Initiative and a consultant on transportation policy. Both Will and Stephanie have seen firsthand how this process works, or doesn’t work, so I’m excited to talk with them today about how to get it moving again.

Timestamps

• 00:00 – Introduction: why cars work against cities

• 03:25 – Agency culture or federal law: where does the fix come from

• 11:31 – Planning: how federal funding enforces bad habits

• 20:10 – Overdesign: the Green Line stations and the frequency-first test

• 23:40 – Buses: why every agency orders a custom fleet

• 26:53 – Procurement: lowest bid versus best value

• 32:56 – Veto points and Italy’s conference of services

• 39:56 – Permitting: environmental review as a NIMBY tool

• 45:28 – State capacity: why consultant brain took over

• 51:46 – Labor costs, automation, and Section 13(c)

• 56:19 – Is any of this politically achievable?

• 1:03:28 – Final question: one reform each

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

  • Volts (Podcast - Apple Podcasts - Spotify - YouTube)

• Will Poff-Webster (LinkedIn - IFP profile)

  • Institute for Progress (Website)

• Stephanie Pollack (LinkedIn - IFP profile)

  • MIT Mobility Initiative (Website)

• NYU Marron Institute - Transit Costs Project

• Eno Center for Transportation - Project Delivery Initiative

Books & Articles Discussed

• The Transit Abundance Playbook

• Reform Funding to Encourage Early Transit Planning

• Focus Capital Investment Grants on Improved Project Delivery

• Reduce Needless Bus Customization

• Get the Best Value in Transit Procurement

• We Should Know How Much Transit Components Cost

• Transit Projects Need a Single Decision-Maker

• Let Agencies Do Their Own Environmental Review

• Fast-Track Democratically Approved Transit Projects

Related Volts Episodes

• US transit costs and how to tame them

• How is public transit doing in the US?

Text Transcript

David Roberts: With no further ado, Will Poff-Webster, Stephanie Pollack, welcome to Volts. Thank you so much for coming.

Stephanie Pollack: Thanks for having me.

Will Poff-Webster: Yeah, thanks so much, David.

David Roberts: Will, I’ll start with you. Oh, with a couple of broad questions. I read... You sent me this report that NYU, the Marron Institute, put out a couple of years ago about transit costs. In many ways, this, this playbook you have is a response to, to that report.

Will Poff-Webster: Yes.

David Roberts: And one of the things they conclude in that report is that most of the reforms needed are sort of internal to the agencies. They’re about the culture and competence of the agencies themselves, which could be cured without new laws, they say, just with sort of internal reforms. Yet, almost all of the pieces in this Transit Abundance playbook recommend legal changes at the federal level. So I’m sort of curious to hear your thoughts, and, and Stephanie’s, whether this, ultimately is about the agencies themselves, internal reforms to the agencies, or whether we need federal action, whether we need new laws to address this stuff.

Will Poff-Webster: Yeah, what a great question. So I think the first thing to say is that the overarching problem, one of several in, US public transit delivery, is that it’s really disaggregated. No one is empowered to actually build, and that means the transit agency is not empowered. The federal government sees their role mostly as compliance rather than construction. And so what we are trying to do here is empower the transit agency and also take advantage of upcoming opportunities for change. There is going to be a surface transportation reauthorization bill, so there’s an opportunity to reform the way the federal government thinks about transit project delivery. But you’re absolutely right that that is not all of the problem, that there’s a lot transit agencies can do on themselves. There’s even more that state governments can do to clear the way for their own transit agencies in their states to do a better job. So it’s gonna take a lot because we are in a morass right now of constraining the ability of transit projects to be delivered at every level of government and across transit agencies themselves, which have a culture of compliance, the federal government which mandates that culture of compliance rather than actual project delivery, and everything in between. So, our immediate focus on the Federal Surface Reauthorization Bill is because that bill is coming up. And, you know, part of that is that I come to this project as a former congressional staffer, and I tried to write a bill after talking to the NYU Marron folks on fixing transit costs, and I realized it was really hard to do because there was a lot of research out there on why costs were high, and there was not a lot of research out there on how specifically you could amend a bill to fix it. And so we set out to solve that problem, but it’s absolutely correct that that’s not the only problem. Part of what I think about here is that transit agency culture needs to change, but transit agency culture is broken not only for its own... It’s not entirely transit agency’s fault. It’s that they are worried about all the I’s they have to cross, dot and, T’s they have to cross. They are worried about being targeted. They are rewarded for defensive proceduralism, and compliance with every procedure rather than actually delivering something that the public wants. And this is something Stephanie understands better than me having, having actually done it. But, part of what we’re trying to do is, is take advantage of The levers that are available, while acknowledging that there are a number of levers, I would say our number one audience for the transit playbook is federal policymakers in Congress and at the Federal Transit Administration, the FTA, because there are these upcoming opportunities for them. But our number two audience are transit agencies themselves, and number three is state legislators, and number four is actually private standard-setting bodies like the Fire Protection Association or the American Bar Association, which also bears some of the blame for these problems. So because it’s a complicated problem that has a number of solutions, the fact that US transit costs are three times higher than internationally, it requires a set of solutions that different folks all have to act on. Certainly, fixing the FTA and the federal grant process would not fix the entire thing, but it is also true that the FTA funds most major transit project. Most major transit projects get some federal money. And so if we don’t get the right federal strings attached, if we continue to have the wrong federal strings attached that, you know, put projects in, in difficult places, we are not going to get projects built the way we want them to and at the cost and the speed that we want them to. Does that make sense?

Stephanie Pollack: Yeah. And the one thing I would just say, I’ve been able to see at both the state and federal level, how highways and bridges get built by state transportation departments and how transit gets built by transit agencies, and the culture and capacity are very different, but they also live in a completely different world in terms of how they get their money, and how they build things. And, so-

David Roberts: We’re gonna return to that in some detail in a minute.

Stephanie Pollack: So the point is just that the culture and capacity are shaped by these external rules, and the proof of that is that highways and bridges have different and more flexible rules. And don’t get me wrong, there are plenty of cost overruns and schedule delays on big highway projects too, but, I think transit operates under a set of rules, that we would never impose on highways and bridges.

David Roberts: Right. Right. And so this, uh, just to clarifying that this is targeted at that upcoming bill. So another, one other broad question, Will. I noticed that almost all the specific stuff in the transit playbook is about building, is about building transit. There’s a, there’s one exception about, about automation, which we’ll get to, but for the most part, this is about building. And when I talk to transit people, the... what they’ll say is one of the biggest levers you can pull to get tr- to improve transit is just improved frequency. And then there’s also questions about safety, you know, about boarding, about how to board, how to pay. There’s all these sorts of operational questions about transit, but most of this is about building. Curious why that is.

Will Poff-Webster: Yeah. I mean, the, the basic reason is that over the last five or so years, we’ve had a lot of really good evidence come out from NYU, but also the Eno Center for Transportation and Circulate Planning and Policy in California about just the fact that US construction costs for transit are so much higher than other countries. And so our attempt is to translate that into policy. There is not that equivalent evidence about higher US operating costs. We just don’t know how US operating costs compare to countries around the world, other than that there are these difficulties with automating US trains, which we know would reduce operating costs a lot, so we can get to that. But we don’t know if we have an autom- uh, a, an operations crisis in US costs. We certainly have a crisis in funding operations in America, but I think part of what we’re trying to do in this transit playbook is say, as lovers of transit, as advocates for transit, we need to care as much about the costs as we do about funding. But it is not to say that funding for transit isn’t important. And after you build it, you gotta fund the operations too. First, you gotta fund the building of it up front, and then you also have to fund the operations. And we don’t yet have the evidence that there’s, you know, that one simple fix, other than maybe the automating thing, to make operations work better. I think what we do wanna offer is, hey, you could buy a third more to twice as many buses as you can now, and thereby make it much easier and cheaper to operate a bus fleet where the bus comes every 10 minutes instead of every 20 minutes if the cost per bus was $500,000 instead of a million dollars.

David Roberts: Right.

Will Poff-Webster: So those are just conditions that we need to solve in order to make the operations work well. But you’re right that it, you know, we also have to get operations right, and we have to do operations correctly.

David Roberts: All right. Let’s get into... Let’s start getting into some details here. Let’s start with planning. You mentioned this, Will. One thing that really comes across in the report is, and I don’t know if people even really understand this, is that almost all big public transit projects depend on federal funding. This is... So this is why the big focus is on the fed. And the way that the feds fund them almost teaches and enforces bad habits, including around planning. So Will just talk a little bit at a general level. What is it about the way the feds fund these things that makes them difficult to plan well or to plan in a way we’d like them to be planned?

Will Poff-Webster: Yeah. Actually, maybe let me start with a simpler answer to your earlier good question about why federal, which is just that most big transit projects in America are funded, at least in part, by the federal government. And so they have to comply with federal rules, and they have to follow a federal process. And that process, as Stephanie can speak to, is broken. The planning process is the first step, and it’s one of the most broken steps because essentially we require transit agencies to plan on the back of a napkin and submit it, and then do all their planning later. And we know from all sorts of project delivery that early planning is crucial, that if you’re able to do more of the planning upfront, you catch things you might otherwise only catch later, and you’re able to solve them. And so there are great examples of this in other parts of the federal government. One of our authors, Eric Goldwyn, who has also done a lot of the work on high transit costs, identified how the Federal Railway Administration, which does inner city rail, has a corridor ID program where federal government helps you do earlier planning on your project to make sure you get it right. We don’t have anything like that in public transit, mass transit within urban areas. He proposes creating a transit ID program that would do the same thing in transit. Part of what I love about this idea is when you talk to policymakers and you say, “There’s an easy precedent for what we’re doing,” it makes it easier for them to say yes. So that’s a great place to start. There’s also all sorts of permitting and regulatory hurdles that impact planning as well. We don’t let transit agencies buy land while they’re doing their planning. They have to complete all of their federal permitting first before they’re able to buy any land. So guess what? That raises the price of land, that makes transit agencies less willing to buy land. It makes them more likely to build a transit project in the middle of a highway median instead of a place surrounded by dense housing where people actually wanna live. And so you get projects like the Silver Line in Northern Virginia, where any pedestrian has to walk over four lanes of highway in order to get to the train station. So it’s not a great way to do it, and if we fix planning, that would help fix all this. But Stephanie, I think you probably have more, more thoughts on this.

David Roberts: Yes, Stephanie, this is where the, this is where the difference between how we plan highway projects and how we plan, transit projects sort of comes into this. Talk a little bit about talk a little bit about how that plays out in planning.

Stephanie Pollack: Yeah. So, state transportation departments get most of their money through what are called formula funds. They’re big chunks of money, they’re incredibly flexible, and every... And you get five years. You get like a, you know how much money you’re getting in year one, year two, year three, year four, year five. So you can have some projects that you’re doing environmental review on, some projects you’re buying land on, some projects you’re permitting, some projects you’re building, and if something goes wrong and you need more money, you can kind of borrow from a different one. It’s all, the states have incredible flexibility. The flip side of that, very little accountability. I mean accountability to make sure they’re not, you know, committing felonies or fraud, but they’re not, which projects they pick, whether they run over cost, less of an issue. Transit’s the inverse. They, um, they get no flexibility. There is this very dictatorial federal program. There are 60,000 words of guidance, regulations, and statute for this one federal funding program that has to be followed. Um, and-

Will Poff-Webster: And that’s the main federal program, by the way.

Stephanie Pollack: And that’s the biggest federal program. And you get the money as a grant, and you have to put all your money up first to do the environmental review, the permitting, the planning, and you can’t get reimbursed. Even if you then get federal money, you’ve laid it out, so if you have a community or a state that just doesn’t have the resources, they can’t even get through the door. And then the last thing I want to mention, which goes back to your initial opening about agglomeration, one of the reasons you build transit is to make the communities around transit more valuable so that you put more stuff in them, so people can use the transit, and you get riders. So it seems pretty self-evident that as soon as you announce you’re thinking of putting transit somewhere, land costs go up. So we should want transit agencies to buy the land and then announce, right? That they’re gonna do a project, they’ll get the land for less. But they can’t get federal money to buy the land until they’re years into the process, so they’re buying inflated land for the train itself. It’s just backwards.

David Roberts: All right. And so, what would you recommend in terms of recommendations just quickly, Stephanie, on planning? Would you recommend that the highway model be ported over to transit, or is there something more sort of specific that you would recommend, or just fewer requirements? Because, you know, as the, as the kind of playbook makes clear, a lot of... when you set out to do a transit project, in a lot of ways you’re designing toward this rules. You’re designing toward being able to get the grant rather than designing toward what would be best for the, for the project. So is it just less requirements, Stephanie? What was your, what’s your quick recommendation on, on planning?

Stephanie Pollack: So I’d say three quick things. Less requirements matters. The statute should be pared way back, and then the Federal Transit Administration should actually be told, “Don’t add to all the statutory requirements.” We really wanna give flexibility. That’s number one. Number two is that the best project delivery is iterative. You do some work, you buy some land, you get some permits, maybe you do some early construction. If there’s a highway crossing a rail line, you fix that crossing. Um, highway does it that way all the time. Transit is like, if you know the difference between agile and waterfall in software development, right? So highways are agile, transit is waterfall. You work, and you work, and you work for years and years with your own money, and then there’s this big bang called a full-funding grant agreement, and that’s when you finally get federal money. And so you can’t iterate. You can’t do it in steps. Um, and so it, the process should be backed up and made more iterative. That’s the second thing. And then the third thing is that, um, an increasing number of highway projects are built using very creative ways of procuring the contracts to build it and to get the materials, and transit is still living in a world where these transit agencies that have the wrong culture and capacity are, are bringing the projects to 100% design and then putting them out for the private sector to build, and then getting basically walked all over by their contractors. Um, and that is a terrible idea. And so in the, the Federal Highway Administration can actually, um, accelerate innovation in its programs because they can give waivers from procurement rules as long as they make sure that there’s basic accountability and value. And the Federal Transit Administration has no parallel authority, so just giving the Transit Authority the same legal authority that Highway has had for decades to allow transit agencies to be creative in how they do procurement would make a huge difference.

David Roberts: Awesome.

Will Poff-Webster: One general point here, David, that we’ve gotten, since the playbook has come out, we’ve gotten reactions from a lot of people who work at or have worked at transit agencies of the past. And, and one of them, um, Andrew Miller, who actually wrote one of the pieces but also used to run a bus rapid transit development, he said that when he was working on public transit delivery, he was judged every day on did he comply with all the rules. He was not judged on did he deliver the project. And I think if you read Stephanie’s piece in the Transit Playbook, overall she is looking for a cultural shift to judge people on project delivery rather than on compliance.

David Roberts: Got it. Moving on, one of the pieces I found really interesting about this is how the US overdesigns projects. Stephanie, you were sort of instrumental in kind of saving the Boston Green Line extension, and one of the big ways was by attacking this. So by the time you took over the stations they had planned, each one was this sort of gigantic architectural marvel that cost a kajillion dollars, and you paired them down to make them smaller and more standardized. And this, of course, something they do in Europe and in other places where, where they build transit better, is just these sort of smaller, standardized stations that are still nice. So I’m curious, like, did riders lose anything by you paring down these stations? Like, why do, why do they end up bloating like this? And do we lose anything by standardizing the way they do in Europe?

Stephanie Pollack: So the why question has a lot to do with the planning process, because there is this sense that it’s monopoly money, that you’re building this transit project with money from someone nine states away. And so why not have the nicest transit station, right? It’s like if someone would let you renovate your kitchen with your money versus their money- ... you’d get a different kitchen, right? Like, the one you do with your money, gonna be a different kitchen. So there is a lot of pressure, right? But going back to the point you made earlier, the reason you build transit is to operate it frequently and reliably, because that’s what gets people to use it. And so when we had to look at taking a $3 billion cost bid from a contractor, which we could not afford, and getting it back down to closer to 2 billion, which we could afford, we actually made the decision, we’re not touching anything that actually affects the frequency of service or the number of stations. We needed to ride in trains every 10 to 15 minutes to seven stations, and if we needed something, if we needed a maintenance facility, if we needed a certain number of cars, those were off the table for money saving. We held that constant, and the flip side was anything you could do that saved money that didn’t affect the frequency and reliability of service was, was like, a nice to have, not a need to have. And the Green Line in Boston runs from these fairly well-off western suburbs, I live in one of them, and now it’s- runs farther, north of the city to actually the densest community in Massachusetts that didn’t have transit before it, that really was gonna benefit. In my community, where the housing near these transit stations is worth a lot, we stand on a slab of asphalt. If you’re lucky, there’s a covering when it rains. If you’re unlucky, it is literally a slab of asphalt and you wait until the train comes, and yet it is some of the highest value property alongside a transit station. So if you ask me, “Do we need Taj Mahal transit stations in Somerville, Massachusetts to get the benefit of the Green Line?” The answer is no, and in fact, if they’re gonna get them, why, why don’t I get them, right? Because it literally, the other end of the Green Line is decades old, and it’s never gotten them. So, but that’s the... It’s wasn’t so much stations versus not, but like, is it an investment that will make the train frequent and reliable? Yes. Is it an investment that will make it nicer but not more frequent and reliable? Can’t afford it

David Roberts: Got it. Got it. Another piece of this is buses, Will, which is, which it turns out, almost every transit agency that orders a bus fleet has these sort of bespoke requirements about what they want on their buses. And of course, you know, one of the things we’ve learned over and over again on the energy side of things is the technologies that win are, and the programs that win are standardized and repeatable, and this is the opposite of that. So why, why do agencies do this? Again, is it, is it because they’re playing with someone else’s money? And how do we fix that? How do we standardize these buses, and how do we standard- and how do we solve whatever problem that causes agencies to want to do this?

Will Poff-Webster: Yeah, absolutely. Well first, just to talk about the problem, an electric bus unfortunately is more expensive than a diesel bus. And an electric bus in the United States can cost around a million dollars, and a diesel bus can cost around $500,000. And each of those numbers is about 30% more, sometimes double what it is in comparable countries. So we are paying more for electric, and we’re paying more for diesel. You know, personally, I care a lot about electric buses. I care a lot about the climate. I don’t think we should spend a million dollars on each one. The most evocative example of this to me is the vendors who offer to build and customize these buses to agencies. They will say, “We can give you a floor that is so customized that looks... The bus floor will be different than every other bus in the world. You’ll have your own special floor.” I can tell you as someone who commutes on the bus every day, I never look at the floor. I look at the schedule and whether the bus-

David Roberts: Well, this gets back to Stephanie’s point, like what, what affects frequency and reliability, right? And it’s not the aesthetics of the floor.

Will Poff-Webster: Right. I care if the bus is gonna come in five minutes, not whether the DC Metro has a very special floor. So the reason for these special custom floors and every other type of customization, or at least most parts of customization, is actually pretty simple, which is that the federal government reimburses 80 to 85 cents of every dollar spent on a public transit bus. So if you’re a transit agency and you wanna make your bus a gold-plated million-dollar gizmo, you’re actually only spending a small fraction of that amount of money. And our authors, Rohan Aras and Alex Armlovich, have a very simple solution, which is just we should set a benchmark price for a standard uncustomized bus, and we should reimburse for that amount. So if the transit agency buys a bus off the shelf, then they’re gonna get it for almost free. If they want a really customized bus, then they’re gonna be paying for most of the customization. Obviously, there are a few differences you need across the country based on climate or which system they use for GPS or what have you. But guess what? We have school buses all over America that look identical and they work pretty well. So we could do that here, too. And the bus is the unsung hero of transit policy. Many more communities in America have buses than trains, and many, many people across the country, especially low-income people, commute by bus. So it’s really crucial to get this right, and we could have one and a half times as many buses in the United States for the same price if we just bought a bus off the shelf.

David Roberts: Interesting. All right, all right, we got a lot to cover, so I’m gonna move on again to, procurement. This is a slightly technical bit, but really important. Stephanie, then, uh, getting, again getting back to the Green Line Extension, you did something differently on this project. Instead of sort of dictating every little detail of what you want and then going out and asking vendors, “Well, how much would it cost me to get this?” You told bidders, “Here’s the maximum price. Here’s, how much money we’ll pay,” and then had them compete for how much they could offer under that cap. And it worked to get costs down, and again, got all the equipment you needed. So why is that approach so rare? And what is the more typical approach?

Stephanie Pollack: So let’s take a step back, ‘cause I’d actually like to convince some of your listeners that procurement is actually not technical. It’s the most important thing. Because agencies don’t build, right? They oversee others building.

David Roberts: Hmm.

Stephanie Pollack: Procurement is how you buy the team that’s gonna deliver your project. So again, if we do the house renovation thing, procurement is how you would pick your general contractor or your plumber or your electrician.

David Roberts: Mm-hmm.

Stephanie Pollack: And if you were renovating your house and you talked to a couple different companies, you would definitely think about price, right? But you would also, like, check their references, and, like if someone told you they didn’t do what they promised or they took two times as long or they changed the price four times in the middle, even if their initial price was low, you’d never hire them, right? You’d pay a little more upfront, and you’d get what you wanted. In public procurement, in many areas, but particularly in transit, mostly we make them take the low bidder. So even if they-

David Roberts: By law.

Stephanie Pollack: By law, federal and sometimes state. So even if you’re looking at this bid and you know this company and they screwed up the last project they did for you, but they come in $100 less, you have to pick them. Other countries-

David Roberts: And if, and this just creates the obvious incentive for these bidders-

Stephanie Pollack: Companies that are really good at figuring out what the right number is.

David Roberts: Right.

Stephanie Pollack: So, and in other countries and in some states, they actually literally choose not to use federal money because of the procurement rules. They use what’s called value-based procurement. You’re trying to get the best value for your money, and that doesn’t always mean the lowest cost. So we actually had to go to the state legislature in Massachusetts to get permission for the MBTA to use value-based procurement. And just to give a quick example of the difference it makes, and we talked before about how communities care about these projects and they want them to be nicer and they want other things. So with the Green Line, there was a very expensive parallel community path for cyclists and pedestrians, and there were just parts of the Green Line where building it was gonna be really expensive, and we tried and we couldn’t figure out how to do it within this cap, which was set by, honestly, the governor and the board said, “We’re just not gonna spend more than X billion dollars on this project.” So the way we did the procurement was not just that we said, “Tell us how you’re gonna build it,” but we also said, “Here’s the cap. Here’s stuff you have to build, seven stations, a maintenance facility. Here’s three things the community has asked for. Whoever can build the most of those three things and stay under the cap is actually gonna win.” And the winning bidder figured out how to build all three extra community desired amenities within the cap, even though the staff couldn’t do that, right? So you can, you get way more for your money if you switch from a mindset of least cost to a mindset of best value.

Will Poff-Webster: And concretely, most states require lowest bid procurement or something where you’re allowed to consider the expertise of the contractor or the past work of the contractor, but only for a small percentage of the total bid, and most of it still has to be on price. And so our author, Anthony Potts, says anytime the federal government is putting money into a transit project, they should require that the state exempt the transit project from lowest bid procurement and allow best value, like Stephanie was able to do on the Green Line. And then Alon Levy also writes a piece about how we should know how much transit components cost, and we should, have unit-based procurement where you’re able to do procurement based on the cost of each foot of concrete, and you just add up the number of feet of concrete you use rather than having a massive lump sum up front that can be adjusted for reasons that no one can really understand, and then the transit agency is on the hook for some change order coming from the contractor. And the transit agency wants it built, so they just pay them off and, and pay for that change order.

David Roberts: I mean, you’d like to states to change these laws. I mean, ultimately, wouldn’t you, rather than doing exemption after exemption, it’d be nice if states came in and, and reformed this.

Stephanie Pollack: So the good news is that states are actually reforming procurement on highways, on bridges. Colorado has pretty much switched all of its infrastructure bidding to best value instead of low cost. Utah has been a national leader. And they actually have to choose between accepting federal money and then following the federal rule, and using their legal state mechanism for a smarter procurement.

David Roberts: Ah.

Stephanie Pollack: We should never, never penalize a state that is doing innovative things on procurement by making them follow federal law.

David Roberts: Got it. So the, the changing the federal law would probably, help states change their laws

Stephanie Pollack: Well, a lot of states say, “Why should I bother to change my law ‘cause we need the federal money and it won’t make a difference?” So it-- I think it would really unlock... You know, there’s this thing about we should use 50 states to be our laboratories and to learn how to do things smarter, and if this federal rule sort of pushes everybody in one direction, you can’t blame the states, right, for not changing their procurement rules.

David Roberts: Right, right, right

David Roberts: Got it. Let’s move on to the next one, which is, again, very familiar from the energy world, which is every one of these projects has, like, a dozen veto points. Every one involves a bunch of different agencies, a bunch of different parties, all of whom wanna get in and get their little piece, get their little special, get their little special extra, and so things just add up and get out of control. The obvious solution here is to have one controlling person or agency at the, at the top that can coordinate all this stuff. They do it in Italy. But I’m sort of, Will, maybe you can address this, like, I’m a little baffled how we could do this in the US ‘cause, like, you know, like the power company is a, could be a private entity. There could be agencies from city government, county government, state government. Like, you got a lot of cats to herd here. How practically could, in the US, could a big project like this be brought under a single, single agency to make executive decisions?

Stephanie Pollack: So, I’m gonna jump in here because I, this is a problem with all linear infrastructure: transmission lines, water pipes, trains, transit, right? You go through a zillion communities.

David Roberts: Right.

Stephanie Pollack: The United States gives local government... So we’re not even at the state level, right? We’re now at tens of thousands of local government. There was a transit project in Boston, not the Green Line, needed to get wetlands permits from 39 cities and towns. Okay? Not gonna happen. On the other hand, there is a strong aversion to what’s called preemption, which is telling the city and town, “No, you no longer have that authority.”

David Roberts: Yeah.

Stephanie Pollack: So I would actually take advantage of the fact that most large transit projects are built with federal money, and make doing your local and state permitting better a condition of getting the federal money, right?

David Roberts: Mm.

Stephanie Pollack: The carrot is the federal money, and then each state and its communities will have to figure out their solution. But for example, in the Seattle area, which I know you’re familiar with, Sound Transit has been struggling to build what it promised people.

David Roberts: Yep.

Stephanie Pollack: And the City of Seattle has created a special permitting program just for Sound Transit projects to get them their local permits in 120 days. And they did it because they didn’t wanna stand in the way or be asked for more money to get the Sound Transit projects built. So I don’t think there’s a one-size-fits-all answer, but I think if the federal government said, “You’re not gonna get that full funding grant agreement until you have worked out all of the local and state permitting,” we’d get, again, a lot of creative solutions. I do... I love, I love the idea of the Italian system. I’m from New England. I mean, if you think the Pacific Northwest has strong local government in New England, it’s inconceiv- I mean, kudos to the YIMBYs for getting any changes on the housing front, but it’s gonna be really hard to take authority away from the local level, and that’s why I think incentives have to be part of it.

Will Poff-Webster: Well, and part of the, taking a step back here, the overall orientation of “The Transit Playbook” is U.S. costs per mile to build public transit are three times international averages. And those international averages are not primarily informed by China or undemocratic countries. They’re mostly Italy and Spain and, other places in, you know, Asia, Japan, South Korea. So we are way above the costs of low-cost countries, and it’s even worse than that because most of our projects do not have tunneling in them. They are mostly just above ground projects.

David Roberts: Mmhmmm.

Will Poff-Webster: And tunneling projects are even more expensive. So we’re even worse there. New York City Second Avenue Subway is somewhere between 10 and 20 times more expensive than Madrid’s metro system. So we are off the charts more. And so part of what we look at in “The Transit Playbook” is how do these other countries, that are also developed countries with strong union cultures, how do they build so much cheaper than us? And the way they do it in Italy to solve what I think is probably the most important problem, this problem of veto points and coordination and NIMBYism, is they have what they call a conference of services. And there’s one appointed actor who brings together everyone, from all the local governments, all the utilities, all the landowners who want something out of a transit project, and they all get in a room, and they go through a process together. And the one appointed actor, which our author proposes should be someone appointed by that state’s governor, gets to decide who gets what. So rather than it being the way it is right now, which is a long, drawn-out process where anyone gets to sue and stop the project in order to get their own thing funded, there’s one process for everyone to decide what happens. So that one decision maker could say, “Oh yeah, the transit project is going to help pay for that bike ped path right next to the transit station, but they’re not gonna pay for a police kiosk that’s two miles away.” They’re not gonna pay for totally extraneous things. There’s an example from Sound Transit of the transit agency having to pay for, hydroelectric dam quality cement. For the parking garage, just because the local planner did not understand that there were different cement grades, and that was way more expensive than normal cement. Guess what? You don’t need dam-quality cement for a train. So this Italian system really works well, and it’s not straight preemption. It’s a more, discussion-based consensus model. There is a final decision maker and a limitation on lawsuits after that process, but it’s also a process where everyone gets a voice, but no one gets a veto. I think if we were to adopt that in American states, it would make an enormous difference. I don’t disagree with Stephanie that it would be a big change from the way we do things right now, but we need that kind of change so that we don’t have a poor transit agency having to go and beg a local government for a permit to build something that will benefit people once it’s built. But instead, we actually acknowledge that transit is a benefit that we seek and want. I think underlying all this is a sense we sometimes have in the US as transit advocates that people don’t really want transit, and so we have to go to them and beg them to accept it. And the reality is, people all across the country vote for sales tax increases to fund transit projects. They actually do want them.

David Roberts: I mean, in Seattle, in Seattle, we have voted for transit, like, a dozen freaking times. I mean, they keep asking us, and we’re like, “Yes. We said yes. Please, yes.” Like, you know, and then the process grinds on and on and on.

Will Poff-Webster: It’s not a process that empowers majorities. I mean, sorry, just to say one other thing on this. I think the most surprising thing to me about looking at other countries is people from Paris and Istanbul and Italy will say, “Why is your local parks department or your local suburb holding up the transit project? Aren’t they all part of the same government, the government that’s building the transit?” And of course, that’s not the way that it works in the US, and so that’s the, probably the biggest problem that we have to solve.

David Roberts: Yes. Okay, let’s talk about permitting, another nightmare, another familiar nightmare. I mean, a lot of these projects end up having to do these multi-year, multi-million dollar environmental reviews before they even get started, which locks them into some choices that they can’t then go back and change later. You know, this is a big fight now in energy projects, a big fight in housing projects, big fight everywhere. What, what to do about environmental review. I mean, one of the proposals in the playbook is just straight up says, “If the public voted for the project, that counts as environmental review.” And so you do not have to do further environmental review on that project. Of course, I love that idea, since almost by definition, public transit projects are good for the environment. But I’m a little skeptical about that happening in the, in the US culture. Like, do you, does that seem realistic, Will? And, and are there other ideas that are, are less dramatic?

Will Poff-Webster: Yeah. Well, you took the words out of my mouth with just the frustration I have that the things that benefit the climate and the environment most, we make go through years and years and thousands of pages of environmental review. Like, if you look at the environmental review for congestion pricing in New York City, it is so many binders thick, it’s like a bulletproof stack of paper.

David Roberts: And it’s not the environmentalists pushing that. It’s NIMBYs. The NIMBYs are using it. I mean, it’s just so obvious now. The NIMBYs use this as a tool to block things.

Stephanie Pollack: Right. And going back to your culture point, if you’re inside an agency where everybody is threatening to sue and frequently does you like, self-limit yourself, right? Everything you write and do and think about, you overdo it to... ‘cause it’s like, “Well, I’m gonna get sued and I wanna win.” And so it’s not just litigation, it’s the internal fear-

David Roberts: Yes

Stephanie Pollack: Right, of litigation. And, and the other thing, if you take a step back, I’ve sued a lot of people, under the National Environmental Policy Act at an earlier point in my career when I actually worked for an environmental group that sued to stop highways. The major purpose of the National Environmental Policy Act is actually to look at alternatives, right? And then you look at the environmental impacts. But the main thing is alternatives. And so the basis for the recommendation in the playbook that once it’s been voted, you shouldn’t have to do it is, we looked at the alternatives, we picked one, and the public endorsed it. So the irony is, like, I was at Federal Highway… highways, we should look at alternatives, right? We should actually say...

David Roberts: Yes.

Stephanie Pollack: Maybe transit’s an alternative, maybe a narrower highways an alternative, maybe fixing the roads up, maybe diverting trucks to a freight route. Like, there are real alternatives to highway expansion, but somehow NEPA doesn’t actually require state DOTs to take a serious look at highways, and transit agencies do. So again, we’re kind of backwards, and I think the question we should start with on permit reform is: when do you really need to think about alternatives, and when don’t you? And if you don’t, if there’s not, if it’s an... And same thing would apply in my world to transmission lines, right? If it’s an envir- if it’s a net environmentally positive thing, and there’s some form of public endorsement of it, right, in the form of funding or a vote, you’re not really gonna look at alternatives, so then the whole process is a waste, right? Whereas if there really are alternatives and there isn’t a public consensus on the alternative, well, then you need NEPA. So the goal is not to get rid of the National Environmental Policy Act, it’s to only apply it where it makes sense to look at alternatives.

David Roberts: Right.

Will Poff-Webster: And to answer your question more specifically, David, part of our focus in the Transit Playbook is a range of solutions. We’ve been talking about Hayden Clarkin’s proposal for a kind of more wholesale NEPA exemption for environmentally beneficial transit, but we also have more narrow proposals here. One from Jamey Tesler is that transit agencies should get delegated from the federal government authority to do environmental reviews, which, guess what highways already get? So why not give that authority to transit agencies? Another from Hayden was-

David Roberts: To do the a- meaning the agencies can run their own environmental reviews or...

Will Poff-Webster: That’s right.

Stephanie Pollack: Yeah the state of Texas runs the environmental reviews for all the highway expansion projects in Texas.

David Roberts: Hmm.

Stephanie Pollack: But DART could not run the environmental review to build transit in Dallas.

Will Poff-Webster: And, fortunately, both that proposal and the proposal for transit agencies to be able to buy land before they go through all their permitting approvals that Stephanie was talking about earlier, both of those ideas actually got into the House version of the Surface Transportation Reauthorization in some form. So we have already had some wins, from this, but there’s certainly more to do. And as Stephanie will also tell you, a lot of the permitting problems are at the state and local level, not the federal level. So it’s really crucial to solve those permitting challenges caused by a local government that is maybe controlled by the NIMBYs and doesn’t really want transit being able to actually have to serve their constituents that would ride the transit line if it got built, but is currently listening to the 2% of busy bodies that don’t want anything to change.

David Roberts: Fear of lawsuits is still lingering there. It still kind of is gonna constrain... You’re still gonna be constrained. You know, and I don’t know what to do about this sort of like litigiousness and like, constant threat of lawsuits. I mean, to some extent that’s a broader problem in the US than we can solve through these specific reforms, but it’s there. Let’s talk about one of my other favorites, a frequent, a frequent theme here on Volts, state capacity. Yay, state capacity. One of the r researchers has found, and I, and I strongly suspect this is true in more broadly than just in transit projects, but research has found that they come in cheaper and are better when the transit agencies employ their own people to do them, rather than farming it all out to consultants, who, as we’ve discussed prior in this discussion, have all sorts of perverse incentives and are really trying to maximize their own profits as opposed to maximize public value, et cetera. So I guess I would just start by asking, why has consultant brain, why has it so taken over in the US? Is it just that states are broke? Is it just, you know, neoliberalism or whatever you wanna call it, this idea that the private sector is always, always more efficient than the public sector? Why did we get to this point where everything goes out to consultants when it seems obvious to me, even based on my limited experience with consultants, it’s not... That you’re better off developing in-house capacity and expertise. Why did this happen?

Stephanie Pollack: So I would say two things that are specific, one of which is specific to transit and one isn’t. So the biggest difference between agencies that do transit and agencies that do highway is highways are all about building. State transportation departments build stuff. They really don’t operate it unless you count like, I don’t know, plowing or filling potholes. But it’s construction-heavy, operations-light. Transit is actually an industry where the culture in good transit agencies is a culture of operations. “Let’s get the trains out there, let’s keep the buses from piling up.” Like, and you want that. We actually want to keep that. And many transit agencies only build like one big project every few decades, right?

David Roberts: Right. Right, right.

Stephanie Pollack: So it doesn’t, it doesn’t feel like... So the one that’s specific to transit is it doesn’t feel like it’s as important to have in-house capacity if you’re only gonna do a project. Whereas if you’re a highway department, you’re doing them every year. The one that’s more general, and I’ll speak for Massachusetts, but I’ve talked to other states and it’s true. So Massachusetts transportation agencies have two budgets. You have an operating budget and you have a capital budget. Your operating budget is precious. It’s, you have to get the money from the state legislature every time. And states have to balance their budget. They don’t print money like the federal government. They can’t run deficits. So there’s always cuts, and you never have enough money for operations. Capital budgets are much more flexible, but states like Massachusetts ban the use of capital budget money to hire permanent employees, and they allow its use for consultants. So it is always easier to hire a consultant from your capital budget than it is to hire a permanent employee on the operating side. And again, that is a policy choice, but it is not a great policy choice. I think that we need to be able to hire highly qualified construction professionals, project delivery professionals with, as state employees, even if it’s temporary, even if it’s a 10-year contract because then the project’s built and they don’t have another one. But as long as we don’t do that, as long as we make it hard to hire and easier to pay consultants, we’re gonna get too many consultants.

Will Poff-Webster: And that’s one example of a broader phenomenon where it’s, you know, talking to transit agency heads, actually one of their biggest burdens is HR, that HR is just really difficult inside government, and you wanna offer someone a job, and it takes months and months to actually offer to them, and maybe they’ve taken a different job. You wanna pay someone enough to actually attract the best engineering talent, and you’re subject to a state pay scale. That’s actually a little less of a problem in transit because they have sort of a separate agency structure. But, you know, this to me is a core of when people talk about abundance, it’s how do we actually unshackle the government from the rules we’ve used to constrain government that were maybe put in place because we thought it would be a good idea, but then the actual practice of it impedes us from getting the outcomes that we want. So one of our authors has a really specific solution here, which is just, as a rule of thumb, 60% of the staff and all of the most senior staff on any transit project should be in-house. And that means you’re still using consultants for some, components of it, like deciding whether or not you need to freeze the ground because of a soil issue. You know, might be something you bring in consultants from another state that dealt with that in another state. But you don’t have consultants managing other consultants. You have all the senior people are actually in-house, and the majority of the project is done by people in-house. Because at the end of the day, it’s the transit agency that wants to deliver the project, and if they farm that out, then we’re subject to billable hours incentives rather than project delivery incentives.

Stephanie Pollack: Just one more quick thing on this. You gotta be willing to pay them. So I actually called, I called the governor and I said, “I have the perfect project manager for the Green Line, the new, the new revision, and he’s gonna make more money than you do, Governor.” And the governor’s response was, “But will it be more money than the basketball coach at the University of Massachusetts?”

David Roberts: Oh, yeah. That’s the real benchmark.

Will Poff-Webster: I think this is an example of these laws that are put in place for a good reason. Like, for instance, on procurement, we have lowest bid procurement because we wanna eliminate corruption, right? We have these limits on payment of state employees because we don’t want that article in the tabloid that says, “Guess how much these people are making?” But in fact, we pay costs every time we put in place a rule like that because we make people believe that government can’t do big things anymore, that we can’t trust it to happen, that you’re waiting 20 years and, California still has not connected Bakersfield to Merced with rail when in the same time period, China has built something connecting every single city in their entire country. So we pay these costs invisibly, and we need different rules. We need more flexibility for people inside government, for civil servants, so that we can actually deliver the projects that’ll make people trust that infrastructure delivery is even possible.

David Roberts: Well, let me ask about something that’s slightly sensitive and in some sense, the flip side of this previous question, which is about labor costs. Again, like all the research shows that one of the reasons US projects and agencies cost so much more than internationally is unusually high labor costs. And, and for the most part, this playbook doesn’t really get at that. The one place it really approaches it is about automation. So like Paris famously automated its entire system, saved a kajillion dollars. And again, famously, it’s very difficult to do that in the US because the unions fight it and, you know, liberals think they should support the unions and states governments want to stay in good with unions, et cetera, et cetera. So I’m curious if you just... Will, why there wasn’t more in the playbook about this question, if it had something to do with maybe trying to keep your coalition together and trying to, trying to be palatable. I’m just curious what your thoughts are about the labor side of this. Why are US labor costs so much higher and how do we, and how do we deal with them?

Will Poff-Webster: Yeah, I mean, we followed the evidence here and talking to folks at... who are experts in this, it looks like US white-collar labor, the consultant problem, is actually a bigger component of the problem than-

David Roberts: Yeah, actually, we should specify this is not about the guys with wrenches. This is, this, these are the email jobs as they’re, as they’re known.

Will Poff-Webster: And it, and it is true that, you know, certain phases of the New York City subway had too many blue-collar workers, for the amount of work they had to do, but not all of them and it’s not clear that that’s a generalizable problem across the US. So when conservatives say, “US costs are, US construction costs are high because of unions,” I tell them, “Actually, it’s a lot more complicated than that. A lot of it is white-collar labor, et cetera.” That being said, we do have a specific problem in the US, which is that we have a federal law that I would argue is not the best way to help unions, which is called 13(c), and it says you’re not allowed to automate any train, you’re not allowed to say that it can drive without a driver, without going through an extreme veto-prone process called the 13(c) process. And guess what? You go just over the border into Vancouver, and they’ve had an automated train for 40 years.

David Roberts: Mm-hmm.

Will Poff-Webster: Autonomous cars, there are all sorts of questions about them. They’re a new thing. With a train, it’s on the tracks, so it’s actually pretty easy to do, and the research that one of our authors did, contributes to, the conclusion that the New York City subway and the Philadelphia subway and San Francisco and several other cities, their subway systems would actually be revenue generating for the rest of the transit system if they had automated trains instead of human-driven trains. And so obviously, that raises the question of, you know, there are a lot of people who have good jobs driving those systems, right? So we don’t want to put people out of jobs, but we also want to deliver the best possible transit, and automation in addition to saving money, also improves frequency and reliability of transit. You can run more trains at a time. And so our author looks to the Paris model, which is they worked with their union, not against them, and they developed a plan with the union where every single person who was driving a lane on a trained on a specific line could either move to a different line or if they were close to retirement, they could voluntarily decide to retire with a, with a nice pay package. And so they managed to automate some of their train lines without losing any jobs. It was a protect the worker, not protect the position approach.

David Roberts: Mm-hmm.

Will Poff-Webster: And we suggest that that could be adopted in the US, and if you did, we would eliminate this problem where it, we make it essentially impossible to automate an existing transit line. If you build a new transit line, it can be automated, like the Hawaii Metro is being automated. But, when other cities have tried to do this, it’s really hard to do. And guess what? At the same time, we have a huge shortage of bus drivers. So we have this big problem that we don’t have enough workers in transit.
And of course, we need to pay them well. We need these to be great jobs that have great benefits for people. But I can’t tell you how often I get a ghost bus on my morning commute because there just aren’t enough bus drivers employed by my transit agency. So we really do have enough jobs for people in transit. We just need to allocate it effectively, and we need laws that correctly support transit being able to take advantage of innovation. We don’t want transit to be this field that can’t adopt any technology because it’s stuck in the 1960s. We should at least be where Canada was in 1975.

David Roberts: All right, so that’s about labor. So then kinda wrapping up here, I wanna get a sense... You know, another thing, I’m very familiar with from the energy and climate world is grandiose 10-point plans to save the world that go on the shelf next to the other grandiose 10-point plans to save the world in an ever-accumulating library of 10-point plan to save the world, none of which ever save-

Will Poff-Webster: Oh, David, we got 15 points.

David Roberts: None of which ever save the world. So I’d sort of like to kind of like a, get a temperature reading from both of you on how realistic you think these things are, right? As you said, most of this is targeted at the federal government, so there is like a, there’s a defined target here. There’s a defined set of reforms. There’s clearly... And I guess one of my questions is like, I love public transit, you love public transit. As you say, the public, mostly if you ask them to vote, votes for public transit, but my experience of this area is that most politicians are affluent suburbanites who drive everywhere and maybe do not have the same passion for public transportation that you and I do. So I’d just like a sort of temperature reading from both of you on how you, how much impetus you think there is right now for reform, and how realistic you think some of... ‘Cause some of these reforms would be a pretty big deal and w- and would bump up against a lot of, you know, pushback, so would require, you know, some real spine. Just a reading how realistic you think these things are and how much momentum you think there is here.

Stephanie Pollack: I’ll go first. I think there’s two things that make me optimistic. One is that if you hate transit, you should spend less on it, and if you love transit, you should get as much value out of every dollar you spend. So I do think that there’s a middle ground, right, where lowering the cost of delivering the transit works sort of wherever you are on the, your spectrum of loving or hating transit. And the second reason is, I think that a lot of what’s in the playbook for me, having experienced the highway side of the street and the transit side of the street, if we just gave transit the same flexibility and ability to innovate, the, and the ability to use different procurement and different delivery methods and make investments in early works, like, we’re not saying transit should be elevated, right, in some way they get special treatment. We’re actually saying just, you know what? Make the rules so that they work for everybody. Give the transit people the same rules the highway people work. At least that way, if you have a local community or a governor who is supportive of taking federal dollars and investing them in one kind of project versus another, they shouldn’t be choosing which project to invest in based on procurement rules or permitting rules or... You know what I mean? So my argument is always, as a starting place, let’s just level the playing field between transit and highways that use federal dollars, and then let’s see what the states and localities can do, and the transit agencies with that flexibility that they have been denied.

David Roberts: I mean, I will say that I personally would love to elevate transit over highways, but let’s... We can start there.

Stephanie Pollack: Right.

David Roberts: Yes.

Stephanie Pollack: But that’s a politically-

David Roberts: Yes.

Stephanie Pollack: That’s a more politically difficult, so let’s at least try by making it no harder to build transit than it is to build highways.

Will Poff-Webster: And David, I’ll say we sort of have a couple different audiences for this playbook, but one of them is people who love transit and act- advocate for it as much as we do. And for those folks, I think our message is, we have actually done a pretty good job at fighting for funding of transit. There are places all across the country that have voted in money for transit, have voted to tax themselves. Sometimes very car brain places like Los Angeles have voted for this. Sometimes places deep in red states have voted for this. So we are actually, you know, self-confident and should be about that. But as transit lovers, we need to care just as much about how much it costs to build, because the federal government, because there are enough Republicans there, is just never gonna spend more than the few billion dollars that we have every year in grants. But we are gonna maintain those few billion dollars in grants, even though Republicans try to cut them, ‘cause there are enough Democrats on Capitol Hill, like my former boss, that are gonna fight for it. And those few billion dollars could either fund two or three projects a year, or they could fund 10 projects a year if we build at Madrid’s cost. So let’s try to get there. This is an attempt to articulate a range of ideas from the small and weedsy to the big and would change everything, right? And so a couple of the weedsy ones we haven’t talked about yet, like for instance, one of our authors, Brian Potter, talks about how the US fire protection rules that transit agencies tend to adopt require twice as many emergency cross passageways as Europe. And there’s no evidence that these improve safety at all.

David Roberts: Yes. This is one thing that that’s... I was g- I was gonna say this. This is true about a lot of the rules about highways, too. A lot of the rules about, like, state DOTs and city DOTs. The more you dig at these things and dig into these rules and these requirements, and you dig to the bottom, you find there is nothing. There is no there there. There was no study at the bottom that require-- Like, they sort of come into, they come into being almost randomly, and then just like, it’s just like, inertia. You know, and you dig in, you’re like, there’s no reason the code should be this way rather than that way, and the fire codes in the subways is one reason. Like, we have these very closely spaced, you know, as you’re saying, exits, not based on anything.

Will Poff-Webster: Yeah, and in fact, when Cairo was designing its subway system, they looked at the American design and the European design, and they said, “Why would we ever do the American design? It costs $30 million more for each one of these tunnels, and there’s no evidence that it’s better.” So we can learn from the rest of the world, and as transit advocates, we should be laser-focused on cost so that we can get as much transit built as possible in what is sometimes a difficult environment in DC, rather than just taking these costs as built in. I mean, I think, I talk to a lot of folks in transit who just think these are big infrastructure projects, they’re always gonna be expensive. We just gotta grind through them. We gotta fight for more money. And of course, we do need to fight for funding, but we don’t just need to fight for funding. We also need to look under the hood at all these little ways, none of which is a silver bullet, but altogether add up to projects that cost two-thirds less than we spend today. So our overall message here is, if you care about the effective delivery of public dollars, then you should care about improving transit project delivery. And if you care about transit project delivery, then you could, should care about spending those dollars effectively.

David Roberts: And as I always say, if you’re a driver, every single person who takes public transit rather than driving is less traffic for you. Like this, you know, like it’s better for everyone the more people who are on public transit, drivers and riders. Okay, final question, and this is a tough one. I would like to hear from both of you. If you had to pick one of these reforms and you could guarantee that it would pass and be implemented, which one would you pick?

Will Poff-Webster: So one of our pieces is by an anonymous author because it’s someone who currently works at a transit agency, who has a front row seat to how difficult this is. And that person wrote the piece about transit projects having a single decision maker, and state governments copying the Italian conference of services model. Obviously, that there’s some details to work out there, but the piece lays it out in some level of detail, and I think empowering transit agencies to actually deliver the project and empowering pedicle- sorry, empowering politically accountable actors to decide, “We want transit to be built, we’re just gonna get it done. We’re gonna invite everyone into the process, but at the end of the day, we’re gonna make a decision. We’re gonna deliver a project in years rather than decades,” I think that’s really important. You know, it’s hard to pick one of your children, but if I had to, that’s what I would do.

David Roberts: That’s your... Okay, that’s your favorite baby. How about you, Stephanie?

Stephanie Pollack: So I would actually fix lo- least cost procurement and substitute best value, which I talk about in my piece, but so does Anthony Potts. And again, the reason is because they’re never gonna be 100% public employees. There’s always gonna be a team, and it shouldn’t surprise anyone that you’re not gonna get the best projects if you can’t hire the best teams. Procurement is the rules for hiring your team. The rules we currently have are not allowing transit agencies to hire the best team for the best value, and I think that one change could make a huge difference.

David Roberts: Awesome. Awesome. Well, thank you two. This is so fascinating, and I just love to hear about solvable problems. Love to hear about solutions. There are solutions on the table. There’s a vehicle through which to pass them that is coming up, that could, you know... So this is all tangible and possible. So thank you both for coming on and, walking us through all this.

Stephanie Pollack: Thanks, David.

Will Poff-Webster: Thank you, David, and as a longtime Volts listener, it’s very special to be able to be here. So I appreciate it.

David Roberts: Awesome.

Today we have a special treat for you Volts listeners. Many of you, I’m sure, listen to the podcast “Energy Empire,” co-hosted by (many-time Volts guest) Jigar Shah and Jamie Nolan. Jigar and Jamie recently invited me onto the pod, along with Arnab Pal, the head of Deploy Action, a nonprofit working to ease the barriers to clean energy deployment in the US.

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Our subject was the data center backlash: what’s driving it, where it might go, what role utilities play in it, and how hyperscalers should proceed. It was a fun and lively conversation. If you’d like to see the video version, you can go the Energy Empire website, but if you are a sensible person who understands that podcasts are and should always remain an audio medium, here it is for your listening pleasure. Enjoy.

Timestamps

• 00:00 – Intro: a Volts and Energy Empire crossover

• 01:25 – Has the AI case been made? Energy vs. AI as the real revolution

• 04:23 – The backlash by the numbers, and hyperscalers' botched PR

• 08:20 – Animal spirits, low social trust, and the information environment

• 12:46 – Enshittification, lost jobs, and why governors still want data centers

• 15:50 – The local playbook: schools, bioswales, batteries in basements

• 17:18 – Bespoke industrial rates without setting a bad precedent

• 22:33 – How utilities earn: spend-to-earn, the distribution black box, efficiency

• 30:11 – Gendering the grid: gas as firm, renewables as soft

• 37:57 – NERC's level-three alert and the case for more batteries

• 39:29 – Both/and: distributed capacity as serious supply

• 45:33 – Abundance's missing half: state capacity, staffing, NEPA

• 48:55 – The midterms: 36 governors and the politics of affordability

• 53:33 – Hope vs. fear: the Mamdani lesson and the information environment

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

• Volts (Website - Podcast - Apple Podcasts - Spotify - YouTube)

• Jigar Shah (LinkedIn)

  • Energy Empire (Website - Apple Podcasts)

• Arnab Pal (LinkedIn)

  • Deploy Action (Website)

• Searchlight Institute (Website)

• Breakthrough Institute (Website)

Books & Articles Discussed

• Searchlight Institute - Seizing the Data Center Buildout for Grid Modernization

• Grist - Data centers are straining the grid. Can they be forced to pay for it?

• Ezra Klein and Derek Thompson - Abundance

Related Volts Episodes

• Doing data centers the not-dumb way

• Giving clean electricity a political voice of its own

• For data centers, a little flexibility goes a long way

Text Transcript

Jigar Shah: Dave, how are you?

David Roberts: Good. Good, Jigar. Good to talk to you.

Jigar Shah: Good to talk with you. I feel like the episode that we did together on doing data centers the dumb way has set off a fire chain of comments, and now we’re back.

David Roberts: I got a lot of feedback about that episode. A lot of people really liked it.

Jigar Shah: Oh, that’s good. You didn’t get a lot of negative feedback?

David Roberts: No, no, no. People are so desperate just to, to hear someone who knows something about this, and people are, are in a fog. So I think it was very helpful.

Jigar Shah: Well, I wanted to bring in Arnab Pal into this conversation. He runs Deploy Action and was really the energy behind getting the grid utilization stuff passed in Virginia and getting some of the other things done in California. And so like, he’s sort of on the ground working with politicians, but also working with legislators who are trying to pass some of this stuff. ‘Cause I, I feel like some of this is just 101 stuff, which we covered last time, but now we’re moving into like polling data and like governors who are, who are inundated with hate mail. And so…

David Roberts: Public opinion, which involves a, a large measure of ... Animal spirits, let’s say.

Jigar Shah: Well, let’s start by, like, where is your head at in how essential it is that we win the AI race and that AI is gonna change our lives forever? ‘Cause, ‘cause ultimately, all of this comes down to the fact that I think people believe that this is a technology of the future that we need to own, right?

David Roberts: Yes, but I, like I think much of the public, have not really been persuaded of that, mostly because there don’t seem to have been many attempts to persuade as opposed to bang me over the head with a mallet about it. If you ask me, the proximity of cheap, boundless energy says much more about humanity’s bright future than AI. I think that’s the revolution that’s exciting. That’s the revolution I’m excited about. It’s bizarre to me that it’s been shunted to some sort of asterisk, after AI. I, I, I’m much more interested in the energy revolution. And about AI, I just don’t know. I think like most people, I just don’t know. I know that it looks ridiculous to me that every corporate CEO, every university president, every sort of wealthy elite is trying to force this down people’s throats beneath them. I mean, I’m as irritated at that as anybody else, but as to the long-term effects, I have no idea, and I don’t really think anybody else does either. Whereas I know boundless cheap energy is going to be a very good thing.

Arnab Pal: Yeah. So Dave, I, I think the two are, I think you, you could agree with this, are very related in that people’s unknown of AI is, I think, causing their inability to wonder at this energy future that you’re talking about. And I think we’re, we’re seeing that play out with all these data center m- moratoriums, where we’re seeing them across, there’s 120 of them across 38 states. There’s 75 projects that’s worth $130 billion. You’re seeing national legislation from Senator Bernie Sanders and Congresswoman Alexandria Ocasio-Cortez with the federal moratorium. And, and you’ve covered this, you know, energy transition for almost 20 years, and I think we all agree that, you know, the data center revolution could be a part of the next big energy transition. So has any build-out in that time generated this kind of organized opposition this fast? Because two years ago, no one was really talking about this.

David Roberts: I think you can’t understate the, the spectacular incompetence of the, of the communications and the way this has been rolled out. I mean, I think if hyperscalers had said from the beginning “The AI revolution and decarbonization go together, are part of the same revolution, and we’re willing to pay the extra money and take the extra time to ensure that building out these giant data centers is going to strengthen the grid and fund a lot of clean energy”, I think they could have harnessed a lot of goodwill. But instead, they’re in the paper saying, “You have to do our thing, and to do it, you have to abandon your climate goals.” I mean, it said-- I read that explicitly in a UK paper the other day. The data center industry is saying to the UK government, “You gotta abandon your climate goals, because we have to do our thing fast, and we’re not patient enough, and we don’t care enough, and we’re not gonna spend enough to do it in a clean way.” I think it could have been, and still could be if done right, part of the same broad push for an abundant, clean future. But they just have completely botched the PR aspects of this. And it doesn’t help that, like, Elon Musk is out there buying turbines on truck beds and saying, “Screw you,” to the locals and, and, you know, polluting the air, et cetera, et cetera, out of just this unbelievable arrogance about AI that the public has not bought into. I mean, and they have, they have no one to blame but themselves for backlash.

Jigar Shah: Well that, I think that is obvious, and it has been a pattern that’s repeated itself since Bill Gates stepped in it in the late ‘90s, right? They wait until they do it all wrong, and then they’re like, “Oh, what’s all this backlash? We should pay people to help us with this.” I mean, I was interested, there was one Nevada hearing which I thought capsulated it really well, where they basically compared the AI data centers to the 19th century Gold Rush, and they basically stood at the precipice of the new Wild West, right? And it does feel like that. I mean, that is what you’re talking about with Elon Musk in Memphis, right, with unregulated gas turbines. But it’s also the folks in Loudoun County in Virginia where when there is a... You know, the vast majority of diesel generators are only permitted to 100 hours a year worth of runtime. The diesel generators for Loudoun County are permitted for 800 hours a year of runtime and they run the entire month of August such that anybody with any sort of underlying asthma conditions can’t breathe in northern Virginia. Like, it does feel like at some point they are coming at this saying, “We are gonna make so much money that we really just don’t care about your well-being at all.”

David Roberts: And I would add, I mean, I think a huge piece of this, and this is what I think is the central problem for our side, which is full of technocrats, is there is a large element of just sort of animal spirits to this. People feel like rich, powerful people are running rampant. They don’t have to follow any rules. They don’t face any accountability. This feels like they’re betting our future. It might work out, it might not, but none of them will be hurt by it if it doesn’t work out. Just another classic example of, like, they’re not gonna pick up the pieces if this all falls apart, or if the, if the demand doesn’t show up, or if, you know, a bunch of empty warehouses get built. They’re not gonna be hurt. There’s a lot... There’s a huge element of this, of just people feel like the wealthy and the rich and the powerful are just out of control, accountability is dead, and this is something they can grab onto and sh- and control. Like, this is the only piece of that they have any control over, so they’re grabbing onto it and blocking it. I don’t th- I mean, I think a lot of it is not any sort of rational calculation or empirical calculation of the effects or, you know, calculations about decarbonization or anything else. It’s just, like, this is a place where I can throw myself in the gears and stop the wealthy elite from just rolling over us. So, and again, like, that’s their fault that people feel that way.

Arnab Pal: And look, so I 100% agree with that, and I think right now people feel like they can’t control the political system. They, their vote may not matter as much as it did in the past, so their ability to block projects at the local level is their version of a vote. But you guys were talking about this being a communications issue. Like yeah, probably, but I really think it’s just a trust issue. And I think no matter what the tech industry said, like even if they came out and said, “We’re gonna help everyone, we’re gonna build schools, we’re gonna build this 100% clean, and we’re gonna bring down your bills,” which is what I think we all would wanna advocate for, I think the vast majority of the public would be like, “Yeah, I’ll believe it when I see it.” And-

David Roberts: Yeah, I, I, I trace everything, I mean, anybody who’s followed me for any time online knows I trace everything back to low social trust. This is sort of, you know, you talk to social scientists, they say you wanna do anything good collectively, you have to have social trust. The less you have, the less you can do, and it is coupled with our diseased and degraded information environment. So nobody feels like they can get a straight story. Everybody feels like everybody’s talking their own game. Nobody knows what’s really going on, so, like, this is just something concrete. It’s something that they can grab onto and not feel like the world is this impenetrable chaos controlled by forces out of their, you know, beyond them.

Arnab Pal: And the trust issue, I think, is backed up by the numbers. So only 8% of data center opponents actually live near one, and 70% of Americans oppose to a data center near them, which is what Gallup shows, and the Searchlight Institute found that 54% would oppose one within five miles. I, I guess what we’re trying to figure out here is, like, I think our technocratic industry is like, “Well, here’s how we figure out a way to do this without emissions, and here’s how we bring people in.” Like, are we solving for the right problem, or should we be solving for something else?

David Roberts: Well, I mean, maybe, maybe Jigar has a different perspective, but I think they’re trying to solve those problems ‘cause those are the kind of problems they know how to solve. Like, and this is, this goes beyond data centers. This is a larger social and political problem, is how do you solve the degraded information environment? How do you solve low social trust? How do you get your hands around these animal spirits, this vague, free-floating miasma of discontent and anger? I don’t know how to solve that. The tech guys don’t know how to solve that. Like, you know what I mean? Like, it seems like solving that requires many, many years, many fundamental reforms that don’t seem anywhere in evidence. This is not a technocratic problem that you can just solve with a few switches or paying a little extra for this or that. This is a bigger problem in our politics, so, you know, they kind of are trying to solve what they know how to solve.

Jigar Shah: Yeah, I mean, I, I do think that part of the problem with this, I think as you know, is that we sit here today in 2026 and we don’t have universal healthcare, right? We were promised that Obamacare was gonna work. As somebody who was on, like, you know, the exchanges for a while, like, that sucks. It sucks even more now, right? And so, you know, like, things ... What did, what did you call it in your podcast? The enshitification- ... Sort of everything, right?

David Roberts: Yes.

Jigar Shah: And so…

David Roberts: And there, so anybody who loses their job risks ruin, and here comes an industry, comes along saying, “Hey, we’re gonna destroy all your jobs. Let us build these data centers so we can do it.” What did they expect to happen from that?

Jigar Shah: No, I mean, exactly what happened. But I think that when you’re a governor, I mean, every governor I’ve ever met believes that they are the person who’s in charge of economic development for their state, right? So they want these data centers. I mean, they can say whatever they wanna say, right? Governor Abbott’s up there talking tough to data centers now, et cetera. But, like, in general, they’re the economic development person for their state, so they want it in the state, right? And I think my sense is this is not dissimilar to fracking, where everyone’s gonna hate stuff, and then, but we’re still gonna get whatever it is, 15 gigawatts of new data centers that get built every year. Just won’t be in that neighborhood that killed it’ll be in some other neighborhood that didn’t kill it, right? So part of what I’m concerned about in this moment is that the data shows that because we have low social trust, that people will just take free stuff. They’re like, “We’ll support your project if we get a battery in our basement,” right? The battery that I can touch and feel and have the title to, right? Like, that you can’t take away when you go bankrupt, right? And so part of what I’m trying to understand is how do we take this moment and actually, you know, create a third way, right? Because there’s gonna be a group of people who are always gonna believe the data centers are causing cancer and, you know, and I should wear tinfoil, right? Then there’s a group of people who legitimately are like, “The electric utility really is setting this up to screw me,” right? They’re getting a neg- they’re getting an economic development rate. I have a much higher price, et cetera. And oh, by the way, they’ve, like, banned my ability to, like, get data out of my smart meter. I can’t seem to, like, do net metering anymore. Like, I can’t even take advantage of the solutions that might save me money, right? That we’ve all worked so hard to get the cost down by 97% of, right? And so is there a moment in here where you take this and leverage it to get all this other stuff unstuck, right? Permitting reform. Not federal permitting reform. I mean, like, state and local permitting reform so we can match, like, Australia in terms of, like, solar installations.

David Roberts: I mean, I think you have to ... The only way forward I see for the, for the data center industry particularly, is very concretely at the local level. Like, the wild thing is- The amount of money involved in these big data centers, you can make them, like you can plant bioswales around them, you can help the environment, you can dump money into the community, you can build schools, you can put batteries in people’s basements and solar panels on their roofs. You can concretely reduce their energy bills. You can make their community richer. You can make their environment cleaner, and it amounts to a rounding error on the amount of money involved in these things. You can do all that stuff for trivial amounts of money. It’s insane to me that they’re not already doing this. They should have people lining up begging for data centers because I want schools, I want cheaper electricity rates, I want battery, I want microgrids. Like, I want these things, too. They could do all that with so little money. The amount of money they’re losing by having these things blocked dwarfs what it would take to just do it the right way. It’s just these tech guys are so arrogant and they’re so high on their own supply that they, that they just won’t do it the right way. So that’s, I mean, there is a moment, but they have to be willing to do it. And, you know, as you know, utilities have to be willing to work with them and do it the right way. Like one of the things I’m worried about, Jigar, is I want, like on one hand, I’m sort of mixed feelings about this. I’d love to hear your thoughts. On the one hand, I’m all for milking these jerks for all the public money we can get out of them. They have money coming out of their wazoo. Let’s get as much of it as we can for public benefit. I’m all for that. But I’m a little leery about establishing a precedent where large industrial customers, everyone has a bespoke rate, everyone is paying super high rates, everyone et cetera, et cetera, because as there’s a lot of other large industrial customers coming along behind, we want to electrify industry. We don’t want to establish a precedent where every large industrial customer on the grid faces this cripplingly high bill that not all of them are gonna be able to pay. So there’s a, there’s a fine line there, getting public benefit without establishing poor precedence, I think.

Arnab Pal: But Dave, there, there’s precedence of this, what you’re just saying, in other industries. I’m gonna take the real estate industry as a good example, ‘cause I think there’s some overlap. You know, when a big housing developer wants to build, like, a 1,000-home project or a 5,000-home project or expand a city, like, they often build schools as a part of the process, right? They often pick up the tab on some of the roads and that’s sort of how they get this approved. Is there a pathway for these data center companies to still do that? Or do you think the opposition is so strong that it doesn’t matter anymore?

David Roberts: I think they can do that if they go in early and they’re patient and they’re earnest and serious about community engagement, and they’re willing to spend the time. But this is... I think there’s another side to that precedent. Like, just in Seattle right now, there’s this fight about these fees that are charged to developers that are, that are... The money is used for affordable housing, right? And that sounds on paper great. You got these rich developers coming in, we’re gonna milk them for a little money for affordable development. But the practical effect of that is it’s slowing down building, and we desperately need to build more housing. And just building more housing, period, full stop, is better for people who need housing, even on the low end of the scale, than bespoke one-off affordable housing projects. So this is, this is exactly my point. I don’t want to establish a precedent which inadvertently slows the electrification of industry, basically. That’s my worry.

Jigar Shah: Well, I mean, I think that on your tariff issue, I don’t know that I have a problem with 30 and 40 megawatt data centers. I really have a problem with 1,000 megawatt data centers.

David Roberts: Yes.

Jigar Shah: So creating a set of rules for things that are above 100 megawatts, I’m fine with, ‘cause I feel like- ... Everything else that you’re talking about is sub 100 megawatts, and so, like, I’m not overly worried about industrial manufacturing and, you know, lithium processing and all the other stuff that we’re talking about there. I think what I’m more, what I’m more concerned about is that- You’ve got all these governors in the crosshairs right now. They’re all basically forced to be anti-data center and anti-utility, I think-

David Roberts: Mm-hmm ...

Jigar Shah: To run for governor and win this fall. Is that your sense too?

David Roberts: Y-yes. I mean, it’s, th-there’s just nothing easier than identifying a big corporate villain and bashing on them, right? I mean, that is, that is politics at the easiest setting, right? And so, under pressure, people are gonna default to that. So this is what, I mean, this gets back to, this is something you and I have been talking about for I guess years now, Jigar, which is there is a win-win-win here. Like, the utilities can say to their customers, “We let this data center come attached to our grid, but we got a bunch of money out of them to pay for you to have solar panels on your roof and batteries in your basement, and we got them to help fund a transmission line.”

Jigar Shah: But they don’t believe in it.

David Roberts: We, we milked them.” And then the data centers can say, “Hey, we made your community better.” And then the politicians can say, “Hey, we forced the utilities to milk the data centers.” Like, everybody can say, “We-

Jigar Shah: No, but Dave, what they’d rather say instead is that they got the data centers to pay for all of the upgrades to transmission systems, which will reduce your bill by .1 cents per kilowatt hour. And here’s a bunch of fancy math that I’m showing that shows that the 10% rate increase I’m charging you was for someone else’s mistake, not the data center. And oh, by the way, I still hate the fact that you’re putting a battery in your garage and a solar panel on your roof. Like, in that world, where they still hate the fact that you’re taking advantage of your power independence in any way, shape, or form, is it not good practice to hate the utility company?

David Roberts: I mean, you’re not gonna get any resistance from me for hating on utility companies, Jigar. I’m about to record a whole podcast in a week or two about why they won’t do this stuff. But they are in a, between a rock and a hard place now. Like, they’ve got to, they need an out somehow, right? They need some way out of this. And even if they don’t believe in the broad promise of distributed energy like we do, or even if they don’t believe in the scale of distributed capacity could make a difference like we do, even if they think it’s just little trinkets on a Christmas tree, they need a PR win. Like, how are they, how do they not get that by now? They need something concrete to show people.

Arnab Pal: So look, I think you’re right on the PR win, but the reason why I brought up the housing example is ‘cause I think that’s a place where public sentiment shifted over time, and I think the underlying causes was just pricing, right? So if you look at the old guard left, California’s the best example, like the NIMBY environmentalist movement, which has sort of held guard to make sure there isn’t development across the coastline in California, there isn’t development even in the suburbs. They’ve lost those battles to a new movement of folks that are saying, “Hey, we need to build more housing to break down costs.” And if you..

David Roberts: I don’t know if I’m calling that fight over yet

Arnab Pal: No, but but it-

David Roberts: They’re still fighting

Arnab Pal: Compared to where it was 20 years ago,

David Roberts: Yeah

Arnab Pal: it’s a completely different ballgame. And there is a parallel here where if you actually can convince people of the actual real math, not the math that Jigar’s saying, that like, “Hey, this new load growth will actually reduce costs if we hold utilities accountable in that process,” like there is a real sort of hunger for like costs need to come down across the board. And if you can actually bring down someone’s utility costs by 20 or 30%, which is what I think some of this demand side work can actually do, I don’t think people are gonna care. They’re gonna be like, “Yeah, my bills went down,” and that’s the most important thing.

David Roberts: But I think to Jigar’s point, you can’t do that unless utilities cooperate. Like you can in theory do that, but they have to cooperate. They have to be involved in that. You can’t do it over them or past them or through them. They are the gatekeepers. They have to be enthusiastic participants in that, and they’re being... We’re having to drag them every step mo- I mean, most of them, not all utilities, et cetera, et cetera. But like most of them..

Jigar Shah: I mean, I would say the vast ma jority. I mean, you know, municipal utilities, rural electric co-ops, they seem okay with the bargain, right? ‘Cause they’re saying, “We report to the city council. We report to the Kiwanis Club. So like, we’ll like sorta do that,” right? Where the investor-owned utilities always have some sort of like, they always have a private jet that they’re taking to the thing, by the way. And then they take the private jet in, and then they cry about the fact that like, “Ugh, our stuff is so old. You don’t, you wouldn’t imagine how old our stuff is. We need to upgrade it all.” And I was like, “But you were investing 20 billion a year in 2003. You’re now investing 200 billion this year. At what point do I not believe that you’re spending money on repairing old stuff? But instead, I just think I’m paying for your corporate jet.”

David Roberts: Well, as you know, the biggest line item of rising costs right now is distribution spending.

Jigar Shah: Right.

David Roberts: And I just, I just recorded a pod about how distribution spending is done and determined. And I, I don’t know if a lot of people know this, but like if you’re a vertically integrated utility, you wanna do spend on generation or transmission, you have to do a bunch of modeling, a bunch of projections.

Jigar Shah: Right.

David Roberts: You come under intense regulatory scrutiny about whether you’re optimizing that spending. And distribution spending’s just a black box. They just call it all mandatory. They just say, “We have to do this.” And if you open that black box and look inside, lots of times they’re not even tracking the age of their stuff. They’re just replacing it on a schedule. That is where they can, are doing all the gold-plated spending, and they’re not even getting the regulatory scrutiny about that. So I mean, I’m all for exposing them to the light and putting them under tons more discipline, but to do that you need legislatures and you need regulators on board too. Like, you know, anything you blame utilities for, there’s some refracted blame for the regulators for letting them get away with it, and legislators too.

Arnab Pal: But Dave, th- there’s... So I agree with all that, but there’s a bias even amongst the people that wanna hold utilities accountable, and I’ve seen this from energy efficiency from decades ago, where everyone thinks every solution is supply side, meaning, “Oh, we have to build geothermal. The answer is nuclear. The answer is solar.” Nobody wants the answer to be efficiency. And, you know, all the states that put in energy efficiency measures over the last 40 years, they, while even if their kWh rates are higher, their overall bills are lower, it has worked, and there is a similar thing we can do with the distribution system. But why is that bias still there? Why are there people who don’t believe that, you know, utilizing more of the distribution system, putting batteries in, isn’t actually a real solution?

David Roberts: I mean, this is something I started pounding the table about when I wrote for Grist in like 2012, which is once you look into utility regulation, you find this very basic incentive, which is the more they spend, the more they make. The way they make money is by spending money, and energy efficiency, if you do it right, means they need to spend less money, and that is true of virtually every distribution system bit of spending. All these, batteries and solar panels and microgrids, they all are substitutes for a bunch of gold-plated spending on infrastructure. So that very basic perverse incentive is at the core of utility regulation, of investor-owned utility regulation in this country, and I just, we keep talking around it. And you know, efficiency programs are a great example. Like, you know, like a utility will do the amount of efficiency that they are required to do by law and by regulation and not one micron more, because every bit they do means they get to spend less money. So you’re not gonna get utilities enthusiastic about efficiency, pursuing it earnestly and in good faith and with some passion, unless it’s a municipal utility, unless it’s a utility that is just incentivized to reduce cost for its customers. Every investor-owned utility is gonna fight that. They’re gonna fight distribution side spending. They’re gonna fight all of it. And I don’t, I mean, you know, I’ve banged my head on this a million times. I don’t know what to do about it. Like, there are ways around it. You can do performance-based regulation. You know, you can nibble around the edges of it. You can do kludges to get around it. You can do mandates to force them to do it. But ultimately, I feel like- If we’re gonna electrify everything and the whole economy’s gonna be on the grid, and we need to, desperately need to optimize not just for like utility costs, but like for macroeconomic reasons. Like if the whole economy’s on the grid, we’re talking about the macroeconomy now. Like, I don’t know how we get there with that incentive in place. Like, it’s just, that’s just the elephant in the room that I feel like we have to deal with sooner or later.

Jigar Shah: But I think there’s another answer to that question, which is that part of the thing that bothers me, and I wrote about this with Raj Panju back in 2015, is that there is a distinct desire on the part, particularly by the right, but it could be by other people as well, to believe that what we’re pushing is feminine in nature.

David Roberts: *Laughing*

Jigar Shah: Right? Have you heard about this?

David Roberts: Oh, oh yes.

Jigar Shah: You know how, like, there’s this masculine energy and, like, feminine energy?

David Roberts: Pure masculinity… Yes, I’m very familiar.

Jigar Shah: Right? As if solar panels are like-

David Roberts: Everything is gender

Jigar Shah: Like solar panels are like sunflowers blowing in the wind. They’re not, like, hard, like real, manly.

David Roberts: You’re telling me I have to wait, I have to wait on the weather? I can’t just force my way, I can’t just force it to do what I want when I want? Yes, that is a huge piece of it.

Jigar Shah: Right, but the latest version of that is the EIA has now come out with this data showing that we have triple the amount of natural gas that we, you know, they were predicting a year and a half ago getting installed, right? And when you talk to, like, people like Duke Energy, Duke Energy will say, “That’s the only way to run a grid is building CCGTs that happen to be three times more expensive today than they were two years ago.”

David Roberts: It’s firm. Yeah. It’s firm like a muscle Jigar.

Jigar Shah: But I mean, I guess what I’m trying to understand is that, like, I get the fact that the governors were checked out for 40 years. They were like, “We have a public service commission, we have this, we have that. I don’t need to know anything about this.” Now it’s a number two political issue. They have to know something about it. I mean, hell, even Abigail Spanberger was on a entire episode of Politico for their energy podcast talking about her energy agenda for like 26 minutes. Like, no governor ever did that before, right? And so, like, so it does feel like in this moment they have to actually make some big decisions on these things, right? And so if you’re currently in a place where you’re spending all of your available energy just being anti-data centers, what else could you use that passion and, like energy for in this moment to help these governors get a handle on this?

David Roberts: I mean, I wish I knew. Like, I’ve, I, I have listened to people explain to me why capacity that you get out of your already existing grid is somehow inferior or less firm or less manly than new capacity you build with a power plant. Or people explain to me why solar plus batteries plus a big interconnected grid is not firm- in the right way, not as firm, not quite as tumescent as a big, you know, nuclear power plant. And I don’t know why. I don’t know why they think that way, and that attitude is sifting up into the political, I can tell you, into the political class. They all are being convinced all over again that renewable energy is weak and inconstant and unreliable. So I don’t know how you get around that other than just showing them. I mean, at the very basic level, this is what I did a podcast with Steve McBee about this, about just the clean electrification industry’s inability to speak up on its own behalf and to articulate its own case and to get good information to lawmakers. Like, a lot of the legislators, like, a lot, even, like, senators who are in charge of energy committees don’t really understand the revolution that is underway across the world in clean electrification. They think it is, a nice little extra. So part of it is just, is just the industry getting a little swagger, getting a little confidence, and not having its main vehicle for lobbying and communication be half composed of gas. You know, that might help too if it had its own voice-

Jigar Shah: I think that’s exactly right. I mean, I, I certainly think that Chip Roy saw a little swagger.

David Roberts: Yeah. Also the, I mean, finally somebody got whacked on the nose. I mean, you can, you can debate about the practical, you know, the pragmatic, the outcome of that, whether it really mattered.

Jigar Shah: I don’t think you can debate it at all. I think that, I think when you promote stupid ass shit, you should lose your job. Like, I think that’s,

David Roberts: Yes

Jigar Shah: I think that’s pretty clear, right?

David Roberts: We need, we need, we need two or three of those, I think, to really get…

Jigar Shah: We’re gonna have two of those

David Roberts: To really get the full effect. Like they need to see…

Jigar Shah: Yeah, Ralph Norman

David Roberts: That it’s a real steady thing.

Jigar Shah: Yeah, I think we’ll get two or three of those this cycle alone. I, I think in general, one of the things that’s happening right now, like at least on the ground where I’m operating, is that almost everybody in a decision-making role in Texas understands how powerful solar and battery storage are, and that their grid has been saved by solar and battery storage. And I would suggest to you that almost nobody understands it outside of talking points in the PJM. Like, every governor is using the right talking points, but if you ask them what’s being said in a closed-door room, I think they’d rather have more natural gas plants built than 10,000 megawatts of battery storage. We’re at roughly 19% of the peak in Texas being battery storage. It’s 0.2% of the peak in PJM being battery storage.

David Roberts: Yes. And they, and they, you know, pol- politics, the higher you are, the more risk-averse you tend to be. And because this is the information environment they’re surrounded by, to really commit to solar and batteries, to really commit to distributed capacity would be a huge gamble for them. They f- I mean, I think they feel that way. It’d be a huge risk, a huge... They would be going out on a limb, whereas gas plants, they understand, and they are surrounded by gas lobbyists, and now you have clean energy industry groups telling them that gas is firm and that you need firm gas, and that if you build renewables, you just have to build gas back up anyway. Like, that’s what they’re hearing all around them. So, like, it’s, it’s, it... I, I don’t think you can ever look to, like, politicians for bravery, you know? Like, we need to surround them with better information, and the industry’s got to do that for itself.

Jigar Shah: What’s your take, Arnab?

Arnab Pal: I gotta jump in on this energy efficiency and solar is feminine piece, because I, I got a bunch of friends that drive Rivian R2s and Ford Lightning F-150s, and I know some farmers in Pennsylvania that lease their land for solar panels that would disagree. I would say renewables are gender fluid, Jigar.

David Roberts: Well, but, like, like, pardon me for bringing the woke perspective here, but there’s nothing wrong with feminine energy. Like, like, look around at what masculine energy is doing in the world and in the country right now. Don’t you think we could use a little bit more feminine energy? Like, I don’t wanna tr- I don’t wanna try to claim that, like, EVs are tough, too, and they can tow just as much. You know, I don’t wanna, like, compete on that ground. Like, it’s a dumb regressive, you know, dipshitty way to approach this whole subject anyway. Like, tell me it’s feminine, that’s fine. I was like, “Oh, so it’s more practical and more, like, results-focused. Great.”

Arnab Pal: Yeah, no, I, look, I agree with that. I, I just think it can mean different things to different people. I don’t wanna, I don’t wanna box, I don’t wanna box us into one, to one stereotype here. We should be-

David Roberts: I’ll take, I’ll take gender fluid.

Jigar Shah: Oh, my God. All right. So let’s move on to the next phase, right, which is that on May 4th, the NERC, the North American Electric Reliability Corporation, issued a level three essential actions alert. Its highest severity, and one it rarely uses, after multiple incidents where more than a gigawatt of data center load dropped off the grid in seconds, fast enough to threaten frequency stability across whole interconnections, right? And so at some point, right, like, I guess what I’m trying to understand is, are they trying to move fast and break things?

David Roberts: I mean, this is yet another example of a problem that is 100% foreseeable and 100% solvable with a trivial amount of money. Like, they all could’ve just put more batteries in. You know what I mean? As, as, as this is the Volts slogan, everything is batteries. I mean, they could’ve just put more batteries in. They could’ve had more buffer. They could have avoided this ever happening, but they just are arrogant, and they don’t care, and they just think that because they can wave AI around, everybody has to defer, everybody has to get out of their way, everybody has to accommodate to them. Like, that is such a solvable problem. I did a whole podcast on it. And I can summarize the whole podcast in one word, just do more batteries. You know? But they didn’t. Like, it’s, it- it’s wild.

Arnab Pal: I think we talked about this a little bit, but, you know, there’s a consensus forming around groups like the Searchlight Institute and the Breakthrough Institute, and we’ve seen a paper published in March proposing an American grid infrastructure fund where hyperscalers pay into a dedicated fund in exchange for faster connections, and then that money would flow from utilities for large scale transmission and generation. Now, you said this crowd treats distributed capacity as a marginal efficiency play, and this is sort of what we’ve been talking about how it’s really undervalued and not looked at. So make the affirmative case for distributed capacity as serious supply.

David Roberts: Well, I almost don’t, I mean like capacity is capacity. I don’t know how else, I don’t know how else to put it. Like you turn, you flip the switch and something comes on or it doesn’t. Like you don’t know if that capacity is coming from, from distributed energy or a VPP or a new power plant. Like it’s either there or it’s not. And they, I mean, this is very frustrating ‘cause this is just yet another example in the energy world where the obvious answer is both/and. And I think really if you got any of these people in a room and could talk to them, you could get everybody to that page very quickly. Yes, it’s both/and. Yes, obviously we need to maximize distributed capacity because we’re under an incredible time crunch, and we’ve got gigawatts and gigawatts of spare capacity laying around, so of course you want to exploit it. Like what is the argument against exploiting it? Like it’s just mind-boggling to me, so of course you want to do that. And then of course it is also true that behind data centers are coming the electrification of transportation and industry and heating and cooling and the rest of the economy. And so of course we’re gonna have to two X or three X our grid. Like how big it’ll have to get I think we can disagree on. I think I have a lot more faith in distributed capacity than they do. I think these projections for how much more heavy infrastructure we’ll need are overblown, but I know we’re gonna need a lot. So like of course we want to do both. I don’t know why we always end up in this, like it’s hard for me not to see that as a species of those people’s fanatical obsession with lecturing the left, with lecturing hippies, with somehow saying that the existing groups or the existing movement is doing it wrong. Like, for some reason, that is the only way they know how to frame anything. And I get it, because that framing gets you attention in DC. That framing gets... Then you get- then you can get a bunch of conservatives who say, “Oh, you’re bashing the left? I’ll come amplify you.” I don’t know why these people don’t notice that the right comes along and amplifies their criticisms of the left, but then when it comes to their solutions, you know-

Jigar Shah: Yeah. Well, the thing-

David Roberts: The right vanishes. They get used over and over again to bash the left. I don’t know why we can’t all just have a little solidarity. We need it all.

Jigar Shah: The nuanced problem that I have with this entire line of thinking is that you have to assume that the current structure of electric utilities and the regulators is competent. And so, like, you basically have to assume that this money will go into a common pool and be competently spent by the people we’ve just been bashing. And so I would much prefer that money go into a battery in my garage than to go to these people, right? And so, like, I think one of the big challenges that we have in this moment is that- You know, we do clearly have the technology today that we didn’t have 15 years ago when RMI put out that report around, what is it? What, unplugging from the grid or whatever it was called. Like, we have the technology today for me to meet 92% of my electricity needs under a NEM 3.0 structure where I don’t get paid anything to export into the grid, right? Where I just put solar panels on my roof and battery storage, and I just make sure my battery’s empty at 10:00 AM every day, and I fill it up with cheap solar power and then run my house on, on the battery. That whole construct is like 12, 13 cents a kilowatt hour. And so you’re like, “You’re charging me 19. I could just do 92% of what I do for like 12 to 13 cents a kilowatt hour,” right? And so, like I think that it is shocking to me that having worked for 20 years to get the cost of solar down by 97% and to get Wall Street to love doing securitizations and bonds and all this other stuff for solar power, that we’re still trying to figure out how these solutions are marginal.

Arnab Pal: But Jigar, the... Like, you know, I think it’s easy to throw around the term competence. I think there’s plenty of competent people at the utilities. There’s plenty of competent, competent regulators. Their job is to do what the laws tell them to do, and if the laws allow them to rent-seek, they’ll rent-seek. That’s what they’re supposed to do. You know, let me give you a good example of this going back to California. You know how the rate structure is in California. Generation rates have not gone up. They’ve been flat for decades in California now, or at least the last decade or so. That’s because it’s decoupled and they can’t make money off of it, right? It’s our job to change the rules. So if we do do this and we work together with the data centers, the hyperscalers, we have to change the rules so that the utilities are either incentivized or required to use more of their grid and to do what we’re talking about. That is on us, and not just the three of us here, on all of us.

Jigar Shah: Well, it’s kind of on you. I mean, it’s, it’s kind of on Deploy Action

David Roberts: I’ll say amen to that, and I wanted to add one other thing in this discussion. There is a ton of focus now from these same people about permitting reform, about making it easier to build, about removing barriers to building. And again, like in principle, I agree. Like, all that stuff is true. But it’s, but it’s interesting to me that it’s always the solutions on that score that get amplified and that get taken up and that are, quote-unquote, bipartisan are all about cutting this and cutting that, cutting this, deregulating this, deregulating that, cutting this regulation, cutting that regulation. The other side of that, even if you read the original Abundance book, the other side of that is fully staffing the relevant agencies and regulatory agencies and overseeing agencies and government agencies and all these regulatory and governing bodies, fully staffing them and funding them. That’s another way to speed things up, is by spending money on state capacity, is by spending money on government capacity, on creating fully funded, robust, competent government. And for some reason, that side of things, even though it’s like half the Abundance pitch constantly falls out of this discussion, and we’re always left with the slash this and slash that. So, like, I would like to fund, to, you know, to Jigar’s point about I’d like to have competent people in charge of this, I would, you know, you can create competent federal agencies, but they need funding and they need staff. And so if you’re making common cause with people whose mission in life is to slash government and to slash money for government and to funnel taxes, you know, tax cuts to rich people, then maybe you should, like, look in the mirror and think about whether it’s in your best long-term interests to form common cause with these people. Maybe you should couple your calls for greater speed with calls for greater state capacity. I just wanted to make that point.

Arnab Pal: Yeah, and look, I think that point, that’s the most under-talked about, point in this whole process. Like, like, let’s just do some simple math, right? A utility executive makes between half a million and a million dollars a year. The regulator at the Public Utilities Commission is making $150,000. Like, how, wow are we-

Jigar Shah: I don’t know which utility CEO you’re talking about. That’s-

Arnab Pal: No, I said executive. Yeah, yeah, I said executive.

Jigar Shah: Laughing

Arnab Pal: I, I said executive. Utility CEO is making over $10 million.

Jigar Shah: Right

Arnab Pal: I understand that. But, you know, director to VP level executive starts out at between half a million and a million dollars a year, but that’s still five times as much as the regulator’s making. So, like, we’re creating a system where the folks that are doing the regulating aren’t gonna be able to stick around long term, right?

David Roberts: And think about NEPA reviews, too. Like, everybody wants to put these restrictions on NEPA or just put, like, “NEPA review must be done in a year.” But if you don’t fully fund and staff the agencies that are responsible for those reviews, all you’re doing is saying, “We’re not gonna do those reviews,” right? So why is fully funding and staffing the people in- involved in those reviews not part of this discussion? Why is that not as big a part of this discussion?

Jigar Shah: All right. So as we get towards the end of this conversation, I wanna make sure we talk a little bit about the midterms, ‘cause you’ve got 36 governors that are running for reelection or election this fall. This is clearly going to be an issue, right? You’ve got major Republican governors from Texas to Wyoming that have put out pretty harsh press releases saying that they are gonna stand tough against those data centers, right? And so what I’m trying to understand is that if you’re actually running a campaign this fall, right? We sorta know what Mikie Sherrill did last year, right? She really was talking about the rate freeze, right? Which, you know, I’ve got my quibbles with, but that’s fine. I think it worked. I think Spanberger was just like, you know, “I’m gonna be more competent,” and she passed a pretty comprehensive set of bills in Virginia that now she has to actually try to implement, which Dominion is gonna try to thwart her at every move, I’m sure. And so I’m just trying to understand again, like where you channel all of this enthusiasm, anger, conversation. I mean, like we generally operate in this niche. I mean, you don’t find it boring, and I don’t find it boring, but other people find it boring. And, but it has broken through, right, to the point where there’s a lot of our friends who generally find us boring, like who are now interested in these topics when they, when they call us up.

David Roberts: I always joke, I used to... You know, I spent like the first 15 years of my career going, “Ah, I wish more people would talk about this stuff,” and now I’m like, “Oh, God. What, what was, what was I thinking?”

Jigar Shah: So what’s your sense of like what should the pundits be talking about? What are their angles they should be talking about? What should they be, you know, like when they’re pushing th e governors who are running for office in an interview on topics like, you know, like when we’re talking about data centers, like how should all of this be handled this fall?

David Roberts: I mean, I stopped understanding politics at all about 10 years ago and haven’t understood it since, so I’m probably the wrong person to ask. I mean, I’d like to think that a comprehensive package of competent, good policies that... I mean, you can take a whack at utilities. Like I think cutting back on utility ROE is a perfectly legitimate populist policy that also has merit, and like requiring data centers to pay into a fund that’s used for community benefit or used for building out the grid or used for distributing capacity or all three is a populist policy that has merit. I just think there’s a, you want governors with staffing and good information who can navigate this, who can make the populist gestures, who can respond to the populist energy, who can, who can show, who can demonstrate that they get it, they understand the anger, and they’re responding to it without being pushed into dumb shit that’s going to have long-term detriment. Like that’s the trick here. That’s the line to walk, and I don’t know any, you know, I don’t know that there’s a formula for that state to state. Like you just have to, you just have to think of what are ways where I can signal I hear you, I understand the anger, I’m responding to the anger, but let’s not do anything that’s gonna hobble us later. I don’t even mind necessarily if you pass like a one-year moratorium or a six-month moratorium, something like that. Just get through-

Jigar Shah: Bite your tongue, Dave Roberts

David Roberts: Just get through the election. Just, just do a moratorium that lasts through the election, then everybody will tune back out and you can, like, do competent policy. But as long as you know what you’re doing, right, and you have some eye on the long-term needs here and the long-term direction of things. It’s just like, this is always the trick in US government is th- the public is ill informed, most of the people yelling at you are ill informed. You need, in some way, to respond to them in a way that shows that you hear them, but you need to respond in a way that doesn’t inadvertently cripple your state or cripple the future grid or, you know, cripple the growth of the things we want to see grow. And I don’t know that there’s a formula for that. I just like, just be, be careful. Very carefully. That’s the, that’s my answer.

Jigar Shah: Well, Arnab, we had Granholm on and, you know, she gave us a little bit of a playbook. What’s your playbook?

Arnab Pal: Yeah, so I think my playbook is much simpler. I think there’s all of, you know, from what I’ve learned, all of politics, and I’m with Dave, I don’t know how to predict things anymore. I don’t think anyone does. But all of politics really comes down to two emotions, hope and fear. And in the absence of hope, fear always wins, and this is true all across the board. And it’s like, you know, Donald Trump’s president for a lot of reasons I have no idea, but when there’s no one else that’s hopeful, the fearful candidate will win. And in, in our situation where candidates aren’t at play, fear is winning because it’s the fear of AI, it’s the fear of data centers, it’s the fear of the tech companies, and the only way to beat that is to offer genuine hope, which is like if I’m Governor Pritzker, if I’m Governor Shapiro, if I’m Governor Sherrill, if I’m incoming Governor Becerra, and yeah, I’m calling that one right now, Jigar, just so you know.

Jigar Shah: You heard it here first.

Arnab Pal: Yeah, you heard it here first. But I, I wanna go

David Roberts: California’s gonna elect a Democrat? What?

Arnab Pal: Yeah. I will, I want to go to the public and be like, “This is our opportunity to cut you in on the next industrial revolution,” right? “This is our opportunity to bring you in, and here’s how it’s gonna help you.” And not only say that, it’s like, “I will make sure that we are not taken for a ride by these technology companies, because I am confident at what I would do.” And that’s what I would say if I were a governor.

David Roberts: And let me just render myself a cliche by saying, well, let’s look at this Mamdani guy. Like, he struck an incredible balance of personal happiness and joyful warrior energy and hopeful energy, and he had a few headline policies that responded to that populist energy. Not necessarily policies that technocrats loved, like a rent freeze or whatever, or government grocery stores. Like, all the technocrats are lecturing him. But ultimately, those are pretty small ball policies, but they send the right signal, and then behind that, he’s just governing competently. He’s just governing as a competent technocrat. So, like, that’s the mix there. Like, get the right energy, a few high-profile policies that make people happy and think you’re fighting for them, and then behind the scenes, just do government well.

Jigar Shah: It doesn’t hurt that he figured out a way to get the Knicks to win the championship.

David Roberts: Yeah that was a real coup.

Arnab Pal: But Dave, on the Mamdani point, you’re right. And Jigar, I know we’re, we’re, we’re getting to the end here, but they always ask him about Donald Trump, about anything, and his answer is simple. “If it will help bring down costs for New Yorkers, I will work with him.” That is the politics of hope, and everyone leans on the fact that, oh, he’s a Democratic socialist. That’s not his draw. I know so many people in New York City that are not socialists at all that voted for him.

David Roberts: No one knows what that means-

Arnab Pal: Yeah.

David Roberts: No one knows what those words mean outside of political obsessive circles.

Arnab Pal: Yep. Yep. And it’s... Like, that’s the type of frame we have to take to this. It’s not finding a different bad guy. It’s being like, “If it will help you, we will do it.” It’s like, you know, you ask Jigar, like, are we pro data center or anti data center? We’re neither. We’re, if the data centers can help the public around it, we’ll support it. If not, I don’t know why we would support it, right?

Jigar Shah: That’s right. Well, with that Dave

David Roberts: We are all... I’m, and I, and I’ve said this a million times, and I’ll just say, I’ll just say it one more time, but, like, we are all of us who want h ope and competence all fighting against an information environment filled with fear and lies and misinformation and terrible dynamics at every level. And like, sooner or later, somebody’s gotta think about how to address that problem. We can’t just work around it. We can’t just tiptoe around the results of it forever. Sooner or later, like, somebody’s got to engage with improving the information environment. I don’t know who that is. Everybody can play their part, but like, that’s gotta be on the table.

Arnab Pal: I think that’s you and Jigar.

Jigar Shah: Yeah, exactly.

Arnab Pal: Cause you got, you got a job to

David Roberts: Niche podcasts are the future.

Jigar Shah: Exactly. With that, Dave, I feel like every time we talk, I’m driven to drink. And, we’ll need a whiskey at the end of, end of the thing.

David Roberts: It’s five o’clock somewhere.

Jigar Shah: But thanks for joining us and doing with, this with us. I do think this is a super important topic, and I do think that we do have the right people around the table, and I think a lot of the investment that you’ve made in informing people over the last few years has unearthed a lot of solutions that are ready for prime time. And so I think we actually have data centers that are willing to pay for people’s trust, and I think solutions providers that can provide it.

David Roberts: Here’s hoping

Way back in 2016, several lifetimes ago, I wrote an article for Vox called “Electrify everything.” At the time, I was focused on decarbonization, but in the years since, as the idea has caught on and expanded and proven itself, it has become much more. It is now clear that clean electrification is not only the fastest road to decarbonization, it also reduces air pollution and energy costs, creates jobs, and serves as a source for enormous technological and policy innovation.

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I have been gratified over the years to see people taking this idea up and making it their own, although, as regular listeners know, I remain somewhat mystified why the political class in the US still seems either ignorant of, or at least insufficiently impressed by, the economic and technological miracles that clean electrification is producing, both here and around the world.

Apparently I’m not the only one who feels that way. My guest today is Hawaii state Senator Chris Lee. Lee is a longtime champion of environmental causes and a pioneer on climate change — he is the president of the National Caucus of Environmental Legislators and authored Hawaii’s nation-first 100% renewable electricity requirement — but in recent years he has focused in on electrification, specifically.

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Last year, alongside David Hochschild, chair of the California Energy Commission, Lee co-founded the Electric Innovation Initiative, a loose network of politicians, businesses, and advocates devoted to spreading the gospel of electrification. They have set up an awards program to draw attention to states and companies doing good work on electrification, taken lawmakers on tours of innovative electrification projects, and, perhaps most importantly, are trying to spread electrification policies to more states.

Today I’m going to talk with Lee about how he came to love electrification, what his fellow state legislators do and don’t know about it, and what he hopes will come out of this new initiative. Let’s get to it.

Timestamps

• 00:00 - Intro: electrify everything, nine years on

• 03:39 - How electrification clicked: the 2008 iPhone moment

• 06:10 - The education gap: why the initiative exists

• 11:35 - Proxy staff and cross-state validation

• 15:44 - What lands on the tours: eVTOL to the data-center win-win

• 20:51 - Plain 'electrification': the bipartisan framing bet

• 26:28 - Climate hushing and Hawaii's two-track proof

• 30:17 - Policy that spreads: e-buses, heat pumps, RFPs

• 37:37 - Utility business-model reform: Hawaii's PBR law

• 42:03 - Affordability after the federal subsidies

• 45:22 - Hawaii under pressure: LNG and the Lahaina grid

• 51:53 - State power against federal hostility

• 55:19 - The ten-year vision and the closing advice

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

  • Volts (Website - Podcast - Apple Podcasts - Spotify)

• Chris Lee (LinkedIn)

  • Electric Innovation Initiative (Website - LinkedIn)

• National Caucus of Environmental Legislators (Website)

• Rewiring America (Website)

Company & Industry News

• Rewiring America releases Homegrown Energy blueprint to lower costs for households

• Why data center operators should pay for residential electrification upgrades

Books & Articles Discussed

• Rewiring America - Homegrown Energy: How household upgrades can meet 100% of data center demand growth

Related Volts Episodes

• Could we get hyperscalers to buy heat pumps for households?

• What’s the deal with balcony solar?

• Tying utility profits to actually doing a good job

Text Transcript

David Roberts: Alright, Senator Chris Lee, welcome to Volts. Thank you so much for coming.

Chris Lee: Yeah, thanks so much for having me. I’ve been a longtime fan and it is fantastic to have a conversation about this, especially in this moment when it feels like we’re… in spite of everything going on, I think that’s been in the news.

David Roberts: I’m sorry, what are you referring to?

Chris Lee: Nothing in particular. But I feel like we’re at an inflection point, truly. And I’m actually more optimistic now than I think I was you know, a year ago, or even before the last election, that we’re actually moving forward in ways that we never would have had we not gone through this period of real trial and even, you know, outright hostility in some areas and to some of these policies and to some of this path.

David Roberts: Interesting. Well, we’ll get into some of that. Well, I want to start with, I know you are have been longtime environmental advocate. I think most people who come out of Hawaii start there. And I know you’ve been focused on climate change for a while, but I’m sort of curious… I know you’ve always been into the environment. I know you’ve been into climate change for a while. I’m curious when electrification specifically took shape for you, became a focus for you. When was that, when did that sort of come onto your radar as a as a specific area?

Chris Lee: You it’s actually an unlikely moment. It was when I was running for office for the very first time back in 2008.

David Roberts: Eight?!

Chris Lee: Yeah. It’s been a minute. But at the time I had you know, the standard flip phone that everybody had. And I was out campaigning and my family and friends and a lot of the folks trying to trying to help me out were frustrated to no end that I wasn’t as communicative. And they’re like, You gotta text, you gotta do all stuff. And so anyway ended up having somebody buy me an iPhone to use, the very first one. In that moment, I realized like, whoa, look at look at what’s happening here. Like this, this level of technology and connectivity and everything in one device and all the Steve Jobs talking points. But that really started me thinking, like, well, why can’t you sort of ‘applify’ some way so many of the other appliances, technologies, you know, everything else out there? And It got me thinking about the broader grid. And that’s really the moment. I didn’t do much about it. I didn’t think much about it beyond that. But that was the first moment where I realized you can do things differently in ways that are going to really change quality of life and really the way that we operate for the better. And it never occurred to me before.

David Roberts: Mm-hmm. Yeah, it’s taken different people come to it at different times. It’s taken a long time for people, you know, because when I first got into climate change, it was there’s a lot of talk about biofuels and you know, it’s just a lot as a sort of scattered, vague category of solutions. And it’s been just over time that kind of specifically moving from combustion to electricity has kind of become the focus. Different people sort of come to that at different times, I think.

Chris Lee: Absolutely. You know, it’s been good though, because I think for the first time we’re at a point where a lot of the technology, as as you know, as you’ve covered, can actually meet, I think, the expectations we have for where we want to go as a society. So I’ve really picked up on it only in the last, I’d say, four or five years, as we’ve seen that tech and the politics really start to converge. So that’s why I’m talking about this inflection point. I think we’re here.

David Roberts: Well yes. Well speaking of that, so you’re state senator, you’re on the chair of the transportation committee, you’re the president of the National Caucus of Environmental Legislators. You’ve got a lot on your plate. What brought you to start the yet another new thing? What’s what prompted you to start this electric innovation initiative? Why this and why now?

Chris Lee: You know, I think the biggest challenge we face around the country is really just the lack of education. You know, for years we’ve seen different policies from different states. Every state’s got their own set of challenges and their own set of leaders. But having access to what the full realm of potential solutions to those are, whether it’s affordability or it’s getting access to cheaper transportation or electricity or whatever it is, that’s a nonpartisan thing. And you can only make really sound judgments and make long-term investments of what are ultimately, you know, billions of dollars or opening up industry that’s gonna enable people to make those investments if you know what you’re doing. And I think in the years that I’ve spent working with colleagues across the aisle and across state lines, I’d say nine times out of 10, people just don’t know what they don’t know. And especially now in this moment where in the last two election cycles, about half of all the state level elected officials are brand new, just elected in the last couple of years, right? They there’s not that depth of experience and knowledge. And people are coming in wanting to do big stuff, but don’t know where to start. And that’s where I think we want to start this conversation. How do we get people together and connect them with the leading edge technology, innovation, investment so that people can see at least what is possible today and then think about alright, how do I apply what might be applicable for my state going forward?

David Roberts: Well, this segu this segues perfectly into my next question because honestly, the thing I’m most curious about from you, the thing I’m you know, the thing I don’t really have direct visibility or access into is just what is the state of knowledge or the state of education among state legislators generally? Are they like they coming to this just sort of as blank slates? And do you find that there are divisions along partisan lines or age age lines or rural urban lines? Like who knows what? What is the kind of the level of education you’re starting with here when you encounter these people for the first time?

Chris Lee: Yeah, you know, so I’m not here to crap on anybody, but I think across the country fair to say, and I this was me too, when I first got elected, right? You have a ton of people who go through months of campaigning. Sorry, this is like unpacking, you know, peeling back the political skin on this whole thing to take a look at what’s what’s ticking on the inside. First of all, I’ve never met anybody who hasn’t run for office not wanting to do good. Nobody like sacrifices their time and family and personal privacy and probably, you know, 10 times higher paying jobs out in the private sector to do this stuff unless they really care. That said, you go through like, you know, six months or a year of campaigning, trying to get to know everything and then promise the world. And you get elected and you’re like, oh shit, like I don’t actually know what to do. And so I would say there’s a lot of great intention, a lot of great people on both sides of the aisle. But a lot of that gets filtered through, you know, the standard evening news, like sound bites and political polarization, all that stuff. But at its core, people are looking for real solutions. And especially at the subnational level, right? It’s very different than national politics and what you’re seeing on CNN and everything else. People are connected. And so you’re walking door to door in your own communities in most cases, in the states around the country and in the legislatures and at cities and everything. And those folks, unlike you know, the president or Congress, who I think everybody’s mostly been given up on as as real agents of change can actually make a difference at that local level and you’re expected to. You’re expected to fill the potholes, you’re expected to fix the schools, you’re expected to deliver on cheaper power or other things. And so that’s where there’s this desire to do something. And I think when you’re coming in, it, you know, it takes, in my experience, and that with I think a lot of my colleagues who I’ve heard talk about this too across the country, it takes probably five or six years to get up to speed to understand the lay of the land for policy, what’s working, and especially in the energy space, and even transportation space where you have like complex regulatory parameters and investment cycles and all these things that are just not….

David Roberts: It’s all changing really quickly too.

Chris Lee: Yeah, I mean, i the world today, even even you know, since I’ve been around, or even like five years ago, is drastically different than it is today. And so you gotta be on top of that. And that’s where I think there’s a disconnect because you’ve got industry and investors and technology advancing at such a rate that… what’s happening a year ago, right, is in many cases like not even relevant, much less like understood by folks. So we’re trying to close that gap. I think that is the single biggest thing holding back any sort of progress on not only like electrification, but just stuff in general these days.

David Roberts: Yeah. Well, one of the questions I had was people come into these state legislatures, they don’t have a lot of staff. You know, these are not necessarily like super well funded offices. And so I’m wondering how much of what you’re doing here with EII is just kind of serving as kind of proxy staff, just you know, just a source of information and analysis that these people can tap into.

Chris Lee: Yeah, you know, it’s it’s crazy. In some states, I’ll give you a couple of examples. Like I you know, the big ones, right? Texas, California, New York. I mean, they’ve got a lot of staff and everything, but smaller states like Vermont and others where you have folks, the same folks making the same decisions on billions of dollars of budgets and all that stuff, have no staff, no office, no capacity whatsoever. You’re basically elected and you know, you’re handed like a pad of paper, like good luck. And so there’s definitely that need, I think. And so part of what we’re doing is yeah, not only trying to convene lawmakers and other regulators and experts kind of in the field to have these conversations and just get to know one another and to get to know kind of where things are going, but then also be able to follow up. And so not only for electric innovation, but for the National Caucus of Environmental Legislators and a bunch of other partners like that are kind of working the space. It’s follow up to be able to answer basic questions and say, you know what, you know, here’s where the price of electricity and this particular modality or whatever is expected to go next year. So if you’re gonna be investing, you know, here’s who to talk to and figure out what that’s gonna mean. Are utilities gonna be wanting to invest in this? Are others going to gonna have certainty and viability? And ultimately be able to follow up and then reconnect policymakers who are working on the same issues across state lines. Because that’s really important too. I’ll give you a really good example of that. Ray Ward, who has been is a Republican legislator from Utah, has been a champion on balcony solar. And you know, that’s something that Utah was first to lead on. His bill was the first to pass in the country. And we’ve been able to help advance that conversation outside of Utah and other states. And there’s been so much outreach to Utah. Asking about how do we do this? You know, what were the not only the technical aspects of this, but how politically do you message this and what does it mean for people if they can afford to have suddenly a new option to reduce their cost? So all those kinds of things are really important because you need elected officials to more often than not validate to other elected officials that something works or it’s viable and here’s the landmines you gotta watch out for and here’s how the politics works, right? And deal with everything else that anybody on the outside of that elected trench really that you’re in can understand. And so that’s a big part of it for sure.

David Roberts: And I would expect also that if you’re just one of these legislators who’s just got a pad of paper and no particular staff, the people you do tend to hear from are talking their own book. You know what I mean? Like industry lobbyists and people who want you to do things and who are spinning to you constantly. And I imagine trying to find just clear, unbiased information is kind of a desperate thing for those people.

Chris Lee: Yeah. And often, you know, right after the election, there’s probably gonna be about a hundred and fifty people knocking on your door, lobbyists and advocates for this and that and so forth. And especially if you’re brand new, right, you don’t know who’s credible and who’s not. And in this area where everybody and their brothers come in saying, I have the solution to you know, this thing. And you don’t have that technical expertise or anybody to talk to, it’s really hard. And so having, I think, those conversations across state lines where we can say, like, yeah, that that particular technology, they’re saying it’s great over here, but in reality, you know, here’s the deal. That’s so helpful just to get a really quick lay of the land.

David Roberts: I’m so curious. You’ve have been taking state legislators on these tours, showing them stuff, basically. And I’m really curious, sort of like, what technologies or projects, like what gizmos are really making an impression? Like what’s what’s blowing people’s minds? What do people really look at and be like, I didn’t, you know, like the makes people’s you something click in their heads. I’m I’m very curious like what’s working, what’s impressing people?

Chris Lee: Yeah, you know, I mean, everybody’s, I think, generally wowed immediately and drawn to the sexy things. So like electric vertical takeoff and landing craft, right? Companies like like Joby and Archer and a bunch of others that are doing in fact we just launched here in Hawaii our first electric commercial cargo plane that was flying from island to island. That kind of stuff is it’s very back to the future, twenty fifteen or well now what is it, like twenty forty five? I don’t know.

David Roberts: no kidding. Yeah, it I’m sorry, twenty fifteen’s not the future

Chris Lee: I know, I know, I know. It’s showing my age here. But that’s where the thing is, you at the front end, like everyone’s like, wow, that’s that’s new, it’s novel, it’s sexy. But what’s actually I think connecting more is kind of solutions that are actually quite simple, that are in the nexus of the political fray that we’re kinda caught in at the moment, right? On one side you’ve got for example, data center capacity. That is driving the conversation around the country, like a hundred plus gigawatts of new capacity over the next decade that are needed to meet, you know, hyperscaler demand and all that. And that’s directly in conflict with affordability and everybody from your own community who’s like, okay, but are we gonna pay for this? And so right now you’ve got a number of efforts around the country and conversations going on saying, like, alright, do we would we ban data centers? Or do we require them to finance separately or do utilities do something else? But there are a whole bunch of other options. And for example, Rewiring America had come out recently with their homegrown energy report…

David Roberts: Oh I’ve very familiar, I’m very familiar.

Chris Lee: Yeah, yeah. So this basically says in a nutshell, and correct me if I’m wrong here, or if you can sell it in a more sexy way, but this basically says we can do all of these things. We can create new capacity and flexibility on our electric grids all over the place that can provide that additional capacity that’s being desired to let everyone do AI and other stuff. But we can do it while at the same time shifting our investments so that we’re investing in the right technologies at the household and small business and, you know, in people’s end user portfolio to help them be a part of that. And to help them reduce their costs by putting in PV or advanced technology or heat pumps or more efficient appliances or all these different things to be a part of that solution. And so it’s a win-win where suddenly you can go to those people who are knocking on your door, demanding cheaper power and say, okay, we have a potential solution for you. You know, your utilities will be a part of it, you’ll be a part of it. And the hyperscalers on the other end can then do their thing and help invest in jobs and communities around the country and so forth. So that kind of thing is for the first time merging these two competing pressures that policymakers are being pummeled by on both sides, whether you’re Republican or Democrat and everything in between. So now there’s a potential pathway where we can align the political pressure so that there is a fast track in investment and deployment of policy to support these kinds of solutions.

David Roberts: Yeah, I’m so, so, so, so happy to hear you talking about that because this is something stressing every state. And there’s a lot of bad solutions to it floating around. And this, I think, is one where everybody wins. The data center gets online faster. The members of the community get concrete, tangible benefits from that they can touch, that helps them, that help lower their bills, that helps prevent, you know, that helps them through blackouts. Utilities can get their data centers online faster and they can tell the community, hey, we got benefits for you from these data centers. Like everybody can win from that. And it’s like there’s a lot of just sort of like zero sum solutions flying around. And that’s one where I just think your network I think would be great just just for spreading that, just for making people aware that’s out there.

Chris Lee: Yeah, totally. And we know these things are possible already because we’ve seen them, you know, deployed in a number of places. PG&E is doing some great work. Green Mountain Power. Even here in Hawaii, where we are this year, or this is last year actually, we’re at almost fifty percent of our single family homes that now have rooftop solar and a ton of them have battery storage. So we know on electric grids, this kind of investment and this kind of technology is absolutely doable in ways that it simply hasn’t been thought of before.

David Roberts: Here is a question. Let’s I want to ask a few questions about kind of the climate angle. So like when I talk about electrification here on volts, I always say clean electrification because of course I care about where the electricity comes from. You know, I care about that it’s low carbon electricity that we’re talking about. I notice all your materials are just straight electrification, just plain and simple. Is that a conscious decision to leave this more open to bipartisan participation? Was that a conscious messaging messaging decision on your part?

Chris Lee: Yeah. So I mean for myself, right? Like I think like you said, you can’t live in Hawaii and grow up here and not be conscious of climate and our rising seas and increasing hurricanes and all that other stuff. For me that’s huge. But in the broader spectrum of the conversation, it’s frankly irrelevant to what we’re trying to do today. Because what’s driving now is not the climate conversation and all of that. And that may be relevant for some states, and that’s, you know, absolutely great. You do you. But for other states where folks are really hurting on affordability, they’re worried about jobs in communities that have been, you know, seen manufacturing collapse and everything else. I mean, for them it’s it’s that angle. What are the solutions there? And there just happens to be this overlap. We’re now doing things that help advance clean energy and investment in new technologies and innovation also provides for affordability and cheaper rates and new jobs and investment. And that’s really where this is pulling, I think, everybody together, right? Democrats and Republicans alike. And so we want to create the space where we can have a real conversation outside of the talking head polarized politics that, you know, dominates DC and other places, and be able to just talk about like, alright, what are these real world solutions in a way where we can have candid conversations and we can connect real technology and real world on the ground innovation with potential for you know, expansion and solving a lot of these problems that we are all grappling with in urban areas and rural areas, on the coasts in the middle of the country and all over.

David Roberts: Well, you’ve got some real Republican involvement. You got Tim Echols, late of the Georgia Public Service Commission helping to judge your contests. You got Senator Hufstetler, you got Representative Carney, you’ve got some Republicans involved, but like Georgia, for instance, is building gas like crazy right now. So there is a space where you can have electrification driven by gas. Even you know, people are arguing for that gas on the basis of affordability. So there is overlap with decarbonization, but it’s not automatic. And I just wonder like, have you sort of like taken a vow, at least on this initiative, just to bracket that, just to just to just to not talk about that? Or are you behind the scenes, you know, trying to nudge things in the direction of away from gas towards more clean sources?

Chris Lee: No, I think, you know, different states right are gonna have different grids. They’re gonna have different needs. We’re not here to say, don’t do this, but do this instead. We’re here to say here are the options that you’re not looking at right now that are actually working in a lot of places. And so we wanna have that ability to give everybody whatever the toolkit is that works in their state. And you know, I’ve probably talked actually with more Republicans than Democrats lately and our colleagues, as you mentioned, some of them that we pull this together with, I mean, this is a bipartisan effort, right? Is sort of Republicans and Democrats crafting this whole conversation. For the most part, I mean, folks are looking for answers regardless. And yeah, I mean, some states and some technologies are going to be more advanced than others and further along. But I think we all win when we have a shared vision of what’s possible. And yeah, I’ll give you a quick example. I mean, this whole idea came out of I was actually on a tour with a couple other folks and we were on this boat in a harbor and getting getting toured around showing, you know, what they’re doing and everything. And realized very quickly, like this old tugboat from like the seventies was actually silent and there was like no vibration and all that stuff. And I was like, wait a minute, like what is this? And it turns out that it was electric. It was it was an old tugboat that was converted. And I remember talking, I was with David [Hochschild] at the time. And I remember talking with him after, like, did you know about this? He’s like, no, I didn’t either. And for you know, us being sort of in our positions in the midst of all of this conversation in the US and not knowing that this had even happened at the time made me think, like, well, if we don’t know, certainly all these other people don’t know either. And that’s been true across the aisle. And so it’s really been how do we how do we have these conversations with Republic and so, yeah, we’ve had tons of Republicans, tons of Democrats come together and it’s been great because it’s been the non political conversation that’s just really been about the solutions. And frankly, like we need more of that today. Because obviously in politics I think we get enough of everything else. So I’m kind of excited about this future.

David Roberts: Well, final question about the climate angle. If you’re pulling your head out of this particular initiative and out of your role in this initiative and just looking at the broader landscape, there is this sort of consensus among the Democratic Party, seems like right now. You know, people are referring to it as climate hushing, basically. They’re just like, don’t talk about climate, talk about all these other things. Do you worry about that at all? Do you worry that things are gonna get left out? Do you worry that there are pieces of the puzzle that you can’t really justify including unless you are concerned about climate? Do you know what I mean? Or do you think that there’s enough overlap to get a lot of momentum going and that it’s just better strategically to leave climate out of it for now? Do you have any thoughts on that larger strategic conversation?

Chris Lee: Yeah, you know, I think we’re gonna be fine. I’ll tell you why. You know, so this year, for example, here in Hawaii, two of the bills that I was able to with the help of colleagues and everything else, I got written and passed. One of them was conservation sanctuary bill that’s gonna for the first time really like go deep on trying to save our invasive species, our endangered species. Not save our invasive species, save our endangered species. We have more here in Hawaii than the rest of the country put together and they’re dying out at rates that are like, you know, one every few days. And so we’re going hard on that. At the same time, a totally separate bill we passed was creating a clean fuel standard and investment program that will mimic what’s being done in California and Washington and Oregon, other places, and will really catalyze a lot of the investment in the private sector market into better, cheaper, cleaner technologies. And that’s something that, you know, those two things can coexist. They’re totally different conversations, but they’re both ultimately going to have the result that’s gonna address our biggest climate issues. And I’ll just say one other thing about our experience here, because part this is what got me really motivated a few years ago. You know, in 2015, we became the first state to pass our 100% RPS, which was great and all of that, and first of its kind. So we’d never really been through the politics of that before. But because of the way that rolled out, because of these other conversations we’re having where we knew, for example, that we needed to invest and we needed companies to invest in cleaner technologies and renewable resiliency on our grid and all that stuff. We were able to catalyze that. And so over the next few years, people realized on both sides of the aisle and out in the community that, hey, this is actually like viable and worthwhile. And so three years later in 2018, when we passed our law, which also was the first of its kind, making Hawaii the first state to Commit to a carbon negative economy, right? This is like fully climate by 2045. We did that unanimously, right? Democrats and Republicans together. And even and it was okay because even even one of this guy was annoying me to no end, but on the floor, he was giving this floor speech about you know, this is I don’t believe in climate and it’s a hoax, blah, blah, blah. But I’m voting for this because of what it’s gonna mean for our businesses here and it’s gonna mean, you know, potential investment in this, that, and the other thing. And so when we signed the bill, it was the Chamber of Commerce alongside our environmental groups, alongside labor, alongside industry folks, all together, because that was what was really pushing a lot of the new investment potential and economic growth. And I think we’re in the same space now nationally where the economics are and the technology is very obviously just on its numbers and investment gonna push that way. And so if we can clear the barriers, permitting and regulation and all that stuff and really help advance that, I think we win.

David Roberts: Well, I want to get back in a minute to Hawaii and how representative it may be or not be. But another thing about the initiative here that I’m very curious about. So you got these awards, they’re interesting. Yeah, there’s a lot of convening, there’s a lot talking and sharing of information, et cetera. But also one of the explicit goals when you launched was and I quote, commitments, pilots, or legislative proposals in at least three states by the end of the year. So there is an explicit piece of this where you are trying to get policy done at the state level. I’m curious, it’s July. We’re halfway, you know, we’re a little over halfway through the year. Have those legislative commitments come forth yet? And if so, I’m curious what they are or what’s what is the state of sort of specifically the legislative piece of this?

Chris Lee: Yeah, you know, yes is a short answer. But let me clarify the goals here, because the goal is really to get people engaged. It’s not to pass any one specific policy or anything like that. It’s to get our colleagues engaged and educated and then pursuing whatever, you know, the thing is that makes sense for them in their place. And I’ll I’ll give you a couple of examples. You know, we went to the Bay Area last year with a delegation of I don’t know, maybe like twenty-five or thirty different elected officials from around the country, Democrats, Republicans from rural states from urban states and so forth. And one of the places we stopped was the Oakland Unified School District’s bus yard. And they’re the first school district to switch over to electric buses. At the time they’ve had the largest electric bus fleet that’s 74, 75 electric school buses that were in operation. They’re vehicle to grid capable. So, you know, they’re they’re all the all the obvious things, quieter, cleaner, better, better experiences for everybody, as well as some of the cool tech stuff like parents can automatically track and are notified, you know, when kids are dropped off and all that stuff.

David Roberts: Oh interesting, I hadn’t even thought about that angle

Chris Lee: No, yeah. And there’s a whole other angle too, which is blowing our minds because I didn’t even know about this, much less any of our colleagues, where attendance rates are going up at the schools because it’s easier for kids to go and it’s more, you know, incentivized. But moreover, it’s believed right now, I think that parents are more trusting because they can actually have more visibility on this… a lot of benefits.

David Roberts: Interesting. Interesting. Well, and also just let’s let’s not rush past you’re not blowing diesel fumes into the lungs of children. Like that’s you know, that’s that’s obvious here, but that’s I always think that’s such a obvious win win. You know, I just kinda wanna put underline that real quickly. Like the most vulnerable lungs in the country.

Chris Lee: You think that would be the lead. Yeah, yeah, good side benefit, right? But yeah, that too, definitely. And so, you know, we went there and everyone was like, wow. And out of that, we had a few of our colleagues go back and basically start talking with their own school districts and schools in their areas about the same thing. And we had definitely a Republican who had put in a piece of legislation that would have catalyzed that in their space. And we’ve had conversations with district you know, superintendents and all that sort of stuff that have come out of this where these officials who are responsible for education and outcomes in their places are like, this is great. Why aren’t you guys looking at this? Advance that. Right. That’s not something that would have happened otherwise because I didn’t even know about this particular pilot project as it had rolled out. And now here we are today, you know, a year later, and it’s taking off across the country. I mean, you’ve got projects in Pennsylvania and other states and I think San Francisco now across the Bay is doing their whole thing. So there’s a lot of that stuff that’s moving that we just don’t see. And that’s the whole point. How do we connect people and get them aware of this and give them those tools and options that they otherwise didn’t have?

David Roberts: Yeah, well, this was another of my questions, which is like what policies are sort of sparking and catching on and spreading and crossing state lines? You know, because there’s such a… there’s a million things you can do. You can do time of use rates, you can do reach codes for your buildings, EV readiness. I mean, there’s a million electrification policies. Sort of curious, like which ones are kind of taking root and spreading.

Chris Lee: Yeah. Yeah, the most obvious stuff is everything related to well, everything is related to affordability, but the stuff that I think is the low-hanging fruit, you know, simple things like, for example, actually let me back up for one second because you had mentioned the awards. Let me talk about that real quick because that sort of sets the stage for this. But basically part of this whole process, right? We wanna we wanna not only connect policymakers with each other and with the technology, but we wanna connect them with like the leading innovators and tech that’s out there. So we can see what’s possible and see where we’re going kind of collectively. And so part this is, you know, we have a very prestigious group of officials and experts in the field that we’ve pulled from both sides of the political aisle. You mentioned Tim Echols, right? Republican Georgia Utilities Commission member and others like that from around the country who are vetting kind of everything that’s going on out there. And so we have an award ceremony that we do once a year. Just to highlight, lift up and highlight the best examples of most innovative, you know, scalable, deployable tech across all these different areas. And then connect that with all our policymakers and everybody else. And so as we think about this stuff, in some of these tours, one of the folks that was recognized in as like a leading innovator was doing heat pumps. But not just any heat pumps, right? Like really just modular plug and play kind of kind of window heat pumps and stuff like that. Yeah. Yeah. And so we went to go see a demo of that. And folks were kind of blown away because people didn’t realize, right? You don’t need to invest massive amounts of new money into upgrading entire electrical systems and all this other stuff to do this.

David Roberts: Yeah, there’s a lot of misinformation about heat pumps floating around.

Chris Lee: Exactly. And so from that, we’ve had there were there were a couple of mayors, for example, who said, we had no idea this was in existence and we’re about to do you know, tens of millions or hundreds of millions of dollars in investment in new public housing. Maybe we should think about this because we could save a ton of money and save a ton of money for operating costs for the tenants. So stuff like that is just so obvious. And I think you don’t have to do a lot. Now I’ll say this, you know, changing policy is like the last resort, changing the laws, like the last resort. It takes the most heavy lift and all that stuff. There is so much stuff you can do before that to affect enormous outcomes and scale stuff. And this is one of those things, like just being aware, like as you put together, for example, RFPs for new projects going out that you’re going to see billions of dollars invested in all around the country. Maybe you should look at, like, alright, how do we ensure that this kind of technology is a part of that?

David Roberts: A lot of this stuff is, I think, really sexy. Like I think electric school buses, like that’s, you know, how do you not love that? Modular heat pumps that you can hang on your window, love that. There are some nerdier things in the background.

Chris Lee: Oh so, of course this is the line for nerdy, I thought I was way past it

David Roberts: Yeah we have a our own unique line here on Volts. But like Hawaii, for instance, has has done a lot of really innovative work on utility reform on performance-based regulation of their utilities. And this is, of course, like takes some explaining why that is important and why it supports electrif… why it supports electrification in the end. I’m just curious, like, has anyone this is just, you know, a particular love of mine, the utility, the utility space, the utility reform, has anybody been sniffing around that? Is that part of the conversation here?

Chris Lee: It sounds like it’s a love hate relationship you have there. If I had to guess. Yeah, yeah. You know, I mean, so part of this is and in everybody’s district or state or wherever they’re from, right, there’s gonna be a utility of some flavor, whether it’s an IOU or a co-op or whatever. And so I think we’re all familiar with the issues that come up and the frustrations from, you know, customers and everything else. But getting into the regulatory side of that, and this goes back to the start of our conversation. When you’re elected brand new and don’t have an understanding of the whole regulatory framework and compact and all these things, it is really difficult to crack that nut. And I think it’s safe to say that, you know, up until now, or up until last few years, the utility model has been what it has been for the last century. And there’s been enormous resistance to change that. And now for the first time, I think we’re starting to see even larger IOUs. Because they’re they’re right, they’re conservative institutions and when you’re when you’re steering the ship, it’s gonna take time, no matter even if you have a CEO or board or whatever that’s like, we’re gonna do this. It takes a while. But we’re starting to see that change where I think they’re starting to look at alright, wait, we could be the ones that help facilitate investment into a lot of these new solutions and innovations and go behind the meter or do any number of other things. And there’s benefit there, so everybody can win. And part of what makes that possible. I think is them being able to provide assurance to their shareholders, especially in the case of IOUs, that there’s you know, a de-risked path that’s not gonna leave us in the lurch. Or if, you know, technology changes or whatever, we’re not gonna be stranded with all these extra costs and all that stuff. And so part of what you’re talking about, I think, is one of the things that we did here, 2018 to 2020 or so. We passed a law that directed our PUC to go look at a way to change that utility revenue model so that there’s an incentive for the utilities to earn just as much as they did before. Or even more in some cases, while at the same time basing that on their progress to advance, you know, affordability and reduce costs and engage with third-party stakeholders who can, you know, create new programmatic rate models and design and all that stuff and effectuate kind of this, you know, grid 2.0 that we want to see. At the same time advancing renewables and everything else. And, you know, that I think we’re still the first state to do that.

David Roberts: Yeah, I’d love for you to I’d love for you to get some more state legislators in different states on board with that kind of thing. Like although I imagine that takes a longer conversation.

Chris Lee: Is, it is. And it’s gonna take I mean it the tech is evolving faster than I think these conversations on the regulatory side, but I’m optimistic because you know at the end of the day, our utilities are coming out of this, I think with a stronger financial footing and less risky pathway for the future because for the first time they know what they have to invest in. Right. They can still do the traditional CapEx thing and other stuff like that, but that can shift at the same time into all these other strategies that are going to be way more popular with their customers and with the elected officials who are the ones who’s who end up taking all the arrows when the utilities screw up because everybody’s angry and who you gonna yell at. So there’s a win win here, I think, for the future.

David Roberts: As you said, this is all affordability. This is all affordability forward, affordability first. And I think in your materials, you say the average American can save $1,800 a year through electrifying. But of course, that average hides a lot. And of course, you know, a lot of a lot of… the affordability argument, let’s just say, was strengthened when there was a giant federal apparatus and a giant federal bill specifically devoted to making those things more affordable, that has largely gone away. And I wonder, are you still, I mean, with the loss of federal subsidies for like EVs and heat pumps and things like that, are you still as confident in the affordability argument? Like how big of a blow do you think that was?

Chris Lee: I mean, it’s you know, not ideal, but actually I think it’s frankly both almost irrelevant and actually, you know, it might be helpful in some unexpected ways. And so I say that because, you know, even though we’re losing, for example, subsidies for EVs in some cases or for other, you know, renewable energy or whatever. The fact is, and we’re seeing this in real time, the cost of that technology as it scales and continues to improve and innovate, continues to fall faster than anybody could have predicted 10, 15 years ago. And we’ve seen the price of solar and batteries decline by like, what, 80, 90%? EVs with the new battery tech and the new chemistries coming online are also dramatically dropping. We’re about to take a group to China later this year, where we’re going to be seeing an EV that can charge from zero to I think it’s like eighty or eighty five percent in five minutes.

David Roberts: Yeah, Chinese EVs will blow some minds, I think.

Chris Lee: Oh yeah. But I mean across the board here, you know, even in the US where we have stricter regulations and higher safety standards and all that stuff, you know, even seeing vehicles now, right, like Slate and a bunch of other models that are in the twenty, thirty thousand dollar range, cheaper than their equivalent counterparts in a lot of cases. And that’s something that you know, will continue and no one’s gonna fight I think the idea that there’s not going to be consumer demand for this. And those things are not subsidized, you know, now with you know future tax credits, right? Those prices are out the door. And so some states are gonna have additional investment incentives, but not everybody. And I don’t think it’s actually gonna be a barrier to continued widespread adoption because people want better, more innovative tech. And once you discover what that can feel like. You know, when you’re sitting behind the wheel. And I was a car guy and used to build cars. I had like a almost nine hundred horsepower Toyota Supra back in the day. And my base model EV right now, which is which cost me, I think twenty nine or thirty one thousand dollars out the door, feels faster than it. Like there’s no going back.

David Roberts: let’s.. while I’ve got you then I want to talk a little bit about Hawaii. Hawaii is interesting and unique cases in many in many ways. But speaking of the temptation of gas, you know, Hawaii has traditionally had oil-fired electricity, imported oil. Almost anything is gonna be cheaper than that. So you sort of had it somewhat unique circumstances in that you could pitch affordability. You could go affordability first, even in 2015, when you were talking about moving to renewables, because, you know, anything’s better than oil. But now your state’s governor is talking about building an LNG import terminal on the Big Island and bringing in gas. I’m curious how you feel about that and what are the dynamics in Hawaii about it, and whether you are still confident that renewables are the cheapest. Or again, like whether in some sense you gotta kinda bring climate back into this to make this argument. How do you feel about that possibility?

Chris Lee: no, I don’t think it’s a climate argument. I mean it could be, but I don’t think that’s what drives the conversation. I think it is affordability. I think it is cost and you know, financial risk to rate payers.

David Roberts: Well of course like the governor the governor is justifying the terminal on the basis of affordability. He’s making the affordability argument too.

Chris Lee: Yeah, yeah, there’s a big there’s a big conversation you know, brewing in the state about this whole thing. I think what I mean from my view, I look at the numbers and the technology and the comparables and kind of the likely outcomes. I don’t see replacing our dependence on costly oil, which we have to ship in from, you know, overseas to replace that with shipping in another fuel of any type, whatever it is, renewable or not, as as something that’s going to be financially viable for the long term. And I don’t think, you know, as we evaluate whatever the proposals are for this or any other technology coming into the state, that it makes sense when you can invest in something directly today, off-the-shelf technology to increase storage and resiliency and a bunch of other stuff to improve the grid and reduce costs with a guaranteed, you know, flat trajectory for price. Versus.. I think you know obviously Iran this year demonstrates more than anything, versus volatility and an unknown price tag that is outside of our control, not only in Hawaii’s control, but outside of the US’s control in many cases.

David Roberts: It does seem strange to look around the world at this particular moment and think, you know what we need to do is get hooked on gas? What about your utility? I’m you know, the Lahaina, the huge mess, and this has financially sort of wrecked your utility. You’re digging out from a lot of those costs. How is that affecting the policy conversation and the electrification conversation? How are you trying to navigate through that?

Chris Lee: Yeah, you know, that Lahaina, that’s what are we, two, three years out now.

David Roberts: It wasn’t that long ago.

Chris Lee: Yeah, no, I was I was getting on a flight when it happened. I remember seeing the update. There’s a fire in Lahaina, took off, and by the time I landed, a number of hours later, like opening my phone to the news that this entire town is like gone. Which unfortunately killed a hundred and two people. It was the worst wildfire fatality disaster in US history. It was, you know, striking. And I can say this, you know, I think when we talk about the opportunity that comes out of this, I think we to talk about the missed opportunities as well. Because looking back, there is so much we could have done differently over the years to prepare. I mean, these things are gonna happen from time to time, right? You can’t control nature, you can’t control especially these kinds of sudden events like that. They’re gonna happen. But how you prepare for it and deal with and build out your infrastructure and everything to figure out how to best weather that, we could have done so much more. And I don’t have a single colleague, I think, today, who doesn’t regret having not done something more because the technology is there. And when we talk about our grid, right? It was a it was the whole fire was sparked by a downed, like a wind blown, downed line.

David Roberts: Yes. And this is not a not a unique to Hawaii problem. The electricity grid sparking wildfires and then and then the utility sort of getting saddled with enormous costs, which makes other things difficult.

Chris Lee: Right. That’s that’s increased cost for everybody, everybody across the state. And so, you know, there could have been, for example, you know, better transmission planning. There could have been any number of new technologies looking at like, well, do we need these kinds of wires in these places? Can we do more you know, resilient kind of distributed generation in certain areas where you don’t need to have that kind of risk? You can more easily shut off and island different parts of the grid during these kinds of events where you’re expecting to have a lot of downed lines and everything. And on the recovery end, you know, after an event like this happens, could we build things differently so that we do have microgrids that are running critical infrastructure and, you know, like fire stations and hospitals and all that stuff. And or even just resiliency centers for the community where, you know, for days people didn’t have power afterward or weeks. You could you could do that with on-site renewables and storage and other things. And you know, cool stuff that we’re seeing. Like, I mean, the Oakland EV bus, school bus fleet, right? It’s literally rolling batteries on wheels that are vehicle to grid capable. You could just literally drive into a disaster area with a ton of power and be able to immediately provide support in ways that it would take way longer and way more costly attempts to do to haul in generators and all this other stuff. So we know these kinds of things are possible. And I think that’s part of the conversation. Now, how do we rethink the way that we’re making our planning and investment decisions. Not that we have to spend a ton more money, but just spend the money that we’re spending differently. And I think that’s the opportunity for everybody around the country right now.

David Roberts: One of the premise of the initiative is that states are kind of in the lead here, that a lot of the power over this stuff is still at the state level. And that too is like something I think that has long been accepted. But like the federal government now is very specifically going after states. Like it’s very specific, like it’s going after California, the California EV rules and even like more obscure things like you know, other regulatory powers that California has had for a long time that it has used in the name of decarbonization, going after, you know, and denying disaster relief to blue states and just all kinds of stuff that I think a little people wouldn’t even have thought of as kind of a possibility before before this administration. And then and I’m sort of curious, like, do you still feel like state policy is kind of a haven or separate from the feds, or is some of this just kind of a holding pattern as you wait for a better federal administration? How do you feel about the sort of power of states currently?

Chris Lee: No, you I think you only need to look to history on this. Because we’ve been through this before in different moments in our in our past. And, you know, we are not our country, right? We are not just the federal government. We are, in it’s truest kind of, you know, republican sense of the form, a collection of all these smaller communities, and we work together and yeah, the federal government’s there and it drives a lot of the conversation because it’s the most visible part of it. But frankly, like you know, ninety percent of the decisions that affect us day to day, like when you get up in the morning, what kind of streets you’re driving on, what kind of power you’re getting, what kind of schools your kids have, what kind of healthcare you’re accessing, all these things are decided at the state and local level, more than anything else. And so those are decisions being made by people who live down the street from you that you’re electing and you can talk to and literally go meet for a cup of coffee. And so there’s a very different dynamic there. And I would look back to, you know, even during… And I have this conversation with Republicans and Democrats alike, often, even during the first Trump administration, right, when there was some hostility toward a lot of this stuff, states still moved. And even looking at our not electrification, but the RPS and other laws that were put in place at the time, right? That was like Hawaii at the time was the first state to do 100% RPS. And by the time we got to the end of the Trump administration to the Biden admin, almost half the country had adopted some sort of similar policy. And that was all done at the state level. So there is momentum, I think, and there is responsibility that exists for local leaders and local elected officials, regardless of party, who want to deliver for their residents. And when you get past the politics of this, it comes down to what is the right solution that’s gonna address issues of like affordability or other things that works in my place. And so really it’s a question of who is gonna be the one to drive that? And I think inevitably, inevitably around the country, you’re gonna see states be the ones to stand up and say, we’re gonna go do this or that or the other thing and it’s really gonna be a state level bottom up transition because it already has been and that’s been proven.

David Roberts: Hmm. Okay, so the EII, this initiative is set to run through twenty thirty five. It’s a ten year thing. So we’re curious. Like what’s your vision ten years from now? What does success look like to you? What do what would be measurably different in 10 years as a result of this initiative? What do you what would success look like?

Chris Lee: Yeah, you know, I think I tend to be an optimist. I don’t know if you can tell, but

David Roberts: I think to work in politics you kinda have to

Chris Lee: Yeah. Well, I’m also I’m also jaded and cynical, having been in it for a hot minute now, but I’m still an optimist optimist and an optimistic about this. I think, you know, over the next decade, and beyond, frankly, you know, I think we have this opportunity in our country where, in spite of all the chaos and political division and everything else, you know, we look back at our history and we ask ourselves, what made us great to this point? How did we end up dominating the twenty twentieth century in all the ways? And you look at the country and you look back at the leaders of the time and we collectively embraced who we were. We embraced innovation and we said, we’re gonna be bold and we’re gonna do more. And we were able to build this economy and technologies and infrastructure and everything that let us completely dominate the world in many ways, for better or worse sometimes. But we did it. And I think in the twenty first century, a lot of those technologies that we developed here, like photovoltaic panels and other things like that, right, are now being improved upon and scaled way beyond what we’re doing by other countries and even competing economies like China and others especially, who are doing just, you know, massive investments in innovation. And so if we are going to be able to compete, I think, in the 21st century, I think everybody sees that we have the same playbook that we need to follow. We need to embrace innovation. We cannot get stuck in the past. And we need to be able to do it together so we can empower and create a good playing field for all the industry leaders and innovators and developers out there, who are the core of our economy and ultimately who are the people driving American innovation. And so I’ll give you an example. Looks like I think this. About a year ago or two years ago, I was in convening of all… a bunch of transportation elected officials who were responsible for transportation in their states. And we’re all gathered with the auto industry folks having a conversation about where things are going. And it was the typical, you knsaveow, start, the first like 15, 20 minutes. And it was some folks saying, well, you know, like EVs, you got all these like environmental impacts because batteries and all this stuff and gas cars are outdated. It was just this very polarized debate. And I remember one of the guys from the industry piped in and basically, interrupted and said, look, look, look, guys, like, this is not a political conversation. Here’s the facts as we see them from where we sit. If we do not as American automakers innovate and compete with all the new EV and electric and other innovative technologies out there that other foreign automakers are pursuing, we are not going to be able to compete at all after this and that will be the end of the American auto industry as we know it. And that changed the tenor of a conversation. And it went from the normal stuff to, alright, how do we then make the right investments, make the right decisions? How do we help our own American auto industry innovate so that we can remain competitive globally and we can continue to innovate and deliver improved vehicles at cheaper costs for local folks, you know, regardless of what the politics and technology is. And that realization, I think, is where we’re at across the board right now. How do we improve our overall trajectory? Look at innovation in this economy. And that’s why we’re starting this conversation because electrification, I think, as a tool, as a strategy, is probably the single best opportunity we have to position our economy and everybody within it to compete on the global stage in the 21st century and continue to deliver the kinds of economic growth and quality of life that we have come to expect here in America.

David Roberts: Okay, very final question. And maybe you just maybe you just kind of answered it, but very final question. I’m a brand new state legislator. Just got elected in a purple state in a swing district. I have no particular experience in energy. I have no staff. I have a pad of paper. I have a hundred and fifty lobbyists outside my office. I get in touch with your initiative, with your group. What is the first thing you tell me?

Chris Lee: If you’re interested in diving into some great conversations with fellow colleagues who are working on the exact same issues in states around the country and learn from some of their mistakes, learn from some of their successes so that you don’t have to recreate the wheel, come join the conversation because we can all benefit when we learn from each other.

David Roberts: Awesome. Awesome. Alright. Well thank you so much, Senator Chris Lee. Thanks for coming and talking through this and thanks for, you know, spreading spreading the gospel. Thank you. Thank you for joining

Chris Lee: No, thanks so much. Thanks for helping me move my nerd goalpost here a little bit.

David Roberts: Alright. Thanks. See you now.

Chris Lee: Take care.

Have you ever driven through an American city and wondered why so much land near and around the urban core remains either undeveloped or covered in low-value uses like parking lots? Many people point reflexively to zoning — and lord knows I have done many pods over the last few years on the evils of restrictive zoning — but there’s more to it than that. You also need to look in the tax code.

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Property taxes are determined by a mix of two values: the value of the land and the value of the structures on the land. One perverse outcome of this arrangement is that if you own a vacant lot and put a building on it, you raise your property taxes — the higher the value of the building, the more economic activity or community benefit it produces, the higher your taxes. In effect, property taxes, as currently constructed, penalize building and reward leaving land underdeveloped. It’s perverse. That’s why even many cities that have reformed zoning still suffer from this problem.

The obvious solution, which is gaining momentum in cities and states across the country, is to shift the tax burden away from the buildings, to the land. The total property tax bill can remain the same — i.e., the reform can be revenue-neutral — but the resulting land value tax (LVT) will penalize landowners who leave their lots empty and reward those who build. It will incentivize building on the highest value land near urban cores.

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The idea is simple enough, but the details get pretty hairy, pretty quickly. So we’re going to dive into some of those details.

With me today, I have Greg Miller, co-founder and director of the Center for Land Economics and a driving force behind the resurgent discourse around land value taxes, and Kitty Klitzke, a city councilmember who is pushing for adoption of a version of a land value tax in Spokane, Washington. I’m going to talk with Greg about the conceptual rationale behind land value taxes and Kitty about the challenges of getting them implemented on the ground. I’m super excited for this one. Let’s get into it.

Timestamps:

• 00:00 - Introduction

• 03:22 - Henry George and the case for taxing land

• 08:12 - How property taxes work now, and what a split rate changes

• 11:26 - Land value taxes and upzoning as complements

• 15:18 - The Pennsylvania record and the reassessment problem

• 18:51 - Vancouver, and why homeowners outlast the policy

• 24:03 - Estonia, Singapore, and the Scottish Islands

• 26:53 - Washington’s uniformity clause and the building exemption

• 33:18 - Kitty Klitzke on twenty years of Spokane infill

• 43:27 - What Spokane needs from the state legislature

• 45:25 - Single family homeowners and the Division corridor

• 48:34 - The assessor objection

• 52:45 - What the Spokane modeling shows

• 59:31 - The plan for next session

• 1:01:44 - Virginia, Kentucky, and cross-partisan momentum

Resources:

People & Organizations

• David Roberts (Bluesky - Twitter)

  • Volts (Website - YouTube - Instagram - Apple Podcasts - Spotify)

• Greg Miller (LinkedIn - New America)

  • Center for Land Economics (Website - LinkedIn - Substack)

• Kitty Klitzke (Spokane City Council - LinkedIn)

  • Futurewise

Company & Industry News

• Most Spokane homeowners would pay less tax under reform proposal. Here’s who would pay more

• Everybody works but the empty lot: Some Spokane leaders eye property tax reform to promote building

• Yes, a Land Value Tax Is Possible in Washington State

• Two States Pass Land Value Tax Enabling Legislation

Books & Articles Discussed or Related

• Taxing Land, Not Homes: A Revenue-Neutral Path to Unlock Spokane’s Underused Land

• Policy Brief: The Vibrant Cities Act

• Land Value Tax Legislation Tracker

• Tax Land, Not Buildings, to Spur Development

• Non-Glamorous Gains: The Pennsylvania Land Tax Experiment

Related Volts Episodes

• Why climate funders don’t fund housing policy, and why they oughtta

• Why housing is a pass/fail question for climate

• What YIMBYs are learning from their victories across the country

Text Transcript:

David Roberts: With no further ado, Greg Miller, Kitty Klitzke, welcome to Volts. Thank you so much for coming.

Greg Miller: Thank you for having me.

David Roberts: All right, Greg, let’s start with you. In the name of keeping my introduction tractably short, I did not get into Henry George. But why don’t you briefly tell us who Henry George was and what his basic insight was and why that basic insight has come back.

Greg Miller: Yeah, Henry George is a political philosopher, a journalist, whatever you want to frame him as from the nineteenth century. And in the eighteen nineties, he lands down in San Francisco and he’s asking himself this question. It’s the industrial ages. We are producing things faster than ever, and this is supposed to bring about all this progress, all this prosperity. And he’s asking himself, why do I see so many people living in such terrible conditions with so much poverty? And so he writes a book called Progress and Poverty. And what he realized is with the industrial age, we had discovered a new frontier. That frontier is everybody moving to an urban core. There’s all of a sudden agglomeration effects around living near a factory. And because everybody wants to live near a factory, the people who own the land are the people who are able to benefit the most because they can charge increased rents. And as those factories become more productive, as we discover assembly lines and new methods and mechanisms to make factories more productive, so too do the profits and so too do the wages to the workers. And all of that means that the rents can go up even further because now more people want to be near that factory that pays higher. And we see this today, right? We see this in San Francisco and our big cities. That’s where we see the highest agglomeration and the highest value of land and the highest rents that people pay for units that, you know, you could go out into a rural area and have a house eight times the size of. And so Henry George, the political philosopher who understood that land was a big deal, and he invents what he calls the land value tax. Why don’t we tax this value, this locational premium in our cities? And this wasn’t a novel idea necessarily. I mean, Adam Smith, Thomas Paine talked about variations of this policy, but he really popularized it and becomes one of the most notorious figures. He actually runs for mayor in New York City, marches down the streets and has a huge parade. He ends up finishing second. But he’s this figure that has lasted and his ideas have proven themselves throughout the past century and now the resurgence here is his idea around land value tax, that I think we’re seeing right now a huge resurgence of.

David Roberts: Georgism, he’s even got an ism named after him. Yeah. And I think the key thing for people to understand there is if you’re sitting on this piece of land, if you own this piece of land and people develop around it, you know, the factories come in and then the public invests in infrastructure and people invest in schools and libraries, all that stuff raises the value of your land, even though you didn’t do anything. You’re just sitting on it. And so basically that public investment is going to your private profit. I think that was part of his insight.

Greg Miller: Yeah, that’s exactly the way I understand it too, right? Is that land is, people sometimes get confused. What do we mean by land, right? What we really mean is location. And nobody creates location. It’s a natural resource. I mean, we have fifty trillion dollars of land in the United States. That’s our largest natural resource. And nobody created that land. And then when we go to New York City, you don’t create that value. Everybody around you does, the roads, the people, the schools. And so I think that’s where sometimes what we say is land value return. We’re returning the value of land to the community that makes that land valuable. Right. And we use a tax as the mechanism by which to do that. But yeah, I think that’s where you sometimes hear this concept of land value return.

David Roberts: One other thing to say is the reason a lot of economists love this, even conservative economists, is the sort of basic economist insight that when you tax something on the margins, you get less of it. If you tax income on the margins, you get less income. If you tax sales on the margin, you get less sales. If you tax carbon on the margins, you get less carbon. But you can’t get less land, right? You can tax land all you want and you can’t reduce the supply of land. So Milton Friedman was a fan even. He called it the least bad tax. So George wanted all taxes on land. He wanted that to be the sole tax. I don’t think anybody today is proposing that. I mentioned this briefly in the intro, but tell us sort of how property taxes currently work, about this balance of values and how kind of how they’re assessed.

Greg Miller: Yeah, and good news for the United States, we have a property tax system. The European nations, some of them can barely relate, right? We have quite a robust one. And a property tax includes two taxes in one. We add together the value of a land for each parcel and the value of buildings for each parcel. And we add those together and we apply one tax percentage to those. We say, okay, your total market value is five hundred thousand dollars, we’ll tax it at one percent. But this is hiding two taxes in one, and there’s no reason we need to do that. We can split those taxes into a building tax and a land tax. And a lot of our assessment jurisdictions we already value both separately. And we can decrease the building tax at a time when we’re asking how can we get more development? How can we help solve the housing shortage? And then we can increase the land tax at a time when we’re asking how can we have less land speculation, fewer vacant landowners, less surface parking lots in our downtown corridors. And I think that’s the idea that When we’re talking about land value tax nowadays, it’s really important to say we’re talking about shifting taxes from buildings to land. We’re talking about decreasing the building tax. We’re not trying to raise taxes overall. Some people are, some people aren’t. For me, it’s not a question of how much money the government takes in. I’ll let the city government decide that or the county government decide that. It’s a question of how we collect that money. And how we collect that money is an extremely important question for how our urban environments get built. And that’s why I think property taxes are very important for this conversation.

David Roberts: Right. And so like I said, the basic insight is if you shift that ratio, if you reduce the building side of that tax and increase the land side of that tax, you are raising the penalty for sitting on an undeveloped piece of land, basically. And you are reducing the penalty for building. That’s the idea. It is around the margins you’ll get more building.

Greg Miller: Yeah, and to put this tangibly, if you look at a downtown and you go drive through your downtown and you’ll notice that there’s either a vacant lot or a surface parking lot somewhere there. And you’ll notice that there might be an apartment complex and a hotel and a mixed use apartment complex with a storefront right next to it. And if you look at how much taxes the vacant lot pays today under the current property tax system, it’s paying usually 10 times to 20 times less than the apartment complex sitting right next door. So the person who decided to you know, invest in their property and build this downtown is paying 10 to 20 times more in taxes. As we shift that tax burden from buildings to land, we’re saying these sh should be paying pretty similar. We should stop penalizing that development. So the vacant land would pay more compared to our current system. But that’s just because that’s the way that we’ve set up our current system, we’ve penalized that development. And so that’s the ultimate impact of this shift when you look, you know, when you drive through your downtown, that’s what you should be thinking about.

David Roberts: And I guess maybe one other thing to say is that the effect of this would be felt most intensely on the most valuable land. Right. Which which tends to be pretty mechanically the closer you are to an urban core, more or less. So so the natural effect of this would be to push more building toward the core.

Greg Miller: Precisely. This is the infill development we’re looking for.

David Roberts: Right. And so say a brief word. Some of the questions I got, I threw this out online as I tend to do and got a bunch of questions. And one of the questions I got is sort of, how does this relate? What is the sort of a relationship to of land value taxes to kind of the YIMBY zoning, upzoning, all that stuff that, you know, I’ve covered on previous podcasts that the YIMBYs want to do upzoning around transit, all that kind of stuff. Are they Complements? Do they need one another? Can they stand separately? How do you look at that relationship?

Greg Miller: Perfectly complementary. In fact, thank you to the YIMBYs for their past decade of activism. I don’t think we would be seeing all the states considering land value taxes today without that urbanist movement and that grassroots momentum. When we upzone, when we make it easier to develop, land becomes more valuable. There’s good studies on this, you know, when you do transit-oriented development upzoning, you see all of that land become a lot more valuable. And because it becomes more valuable, Folks can still sit on that land. I mean, we’ve seen this out in DC with some of the developments around WMATA. I’m from the DC area and we’ve seen folks just sit on vacant land. Why? Because they can wait 20 years and still double their money on that vacant plot of land. And so when you do this upzoning and when you do this transit investment, the next question is, okay, how do we ensure that this windfall that we’ve created, this huge amount of money that we’ve created for private landowners?

David Roberts: Right. We’ve created value. Again, I just gotta put an exclamation point on that. When you upzone and when you develop land, you’re creating value. Right. And so how do you distribute that value is the question.

Greg Miller: Yes. Yeah. And then how do you both distribute that value while also incentivizing the upzoning to also materialize? And so I think that question is, we’ve raised the land values, but we also want to encourage this person to develop the multifamily house rather than sit on it and wait for their neighbor to develop first because then they can sell for more later, right? And I think this is all about incentives and the questions around incentives. And so I view these as perfectly complementary. We work with a lot of YIMBY chapters, a lot of housing policy, housing abundance folks, and I think there’s a reason why these are policies that go hand in hand.

David Roberts: Is there anything to say about the order of operations or like if you’re a city contemplating these things, is it better to do one before the other or does that matter? Like is there a kind of a sequence? Is there a sequencing? Anything to say about sequencing?

Greg Miller: Yeah, there is. I think some folks would argue, you know, if you implement the split rate right before and upzoning, then that could be good because then you capture some of that windfall you’ve created right away and then are also immediately incentivizing that development. But I also think that you can upzone and then a year later pass some sort of policy of a land value tax shift and still see those good benefits. And so, I think that the housing solution is not a one size fits all solution. And so cities should do what’s politically feasible, but also should be working on this problem from every different angle, right? And a lot of our cities, you know, I believe upzoning is really important in a lot of our cities, but a lot of our cities are asking themselves, you know, we have this surface parking lot downtown that technically could be developed into something, but it’s not. So is zoning really our problem? And zoning still is. If you universally upzoned it, it’s a good thing. But a lot of our cities aren’t San Francisco and aren’t New York City and aren’t going to see all that development right away. And so we also have to ask ourselves the incentives question. So I think, you know, whatever the order is, these are complementary policies, but they’re also policies that can both help to get at the solution independently.

David Roberts: Mm-hmm. There are some examples of this happening in the wild. Not a ton, but some. And so Pennsylvania, for instance, let’s talk just briefly about Pennsylvania. Pennsylvania is one of the rare cases where the state, there’s state law that basically says if cities want to do this split rate, i.e. Increase the land tax, reduce the building tax, they can. So presumably we have some examples on the ground, some experience. What have we learned from Pennsylvania’s record?

Greg Miller: Yeah, Pennsylvania has had twenty plus cities implement what we call split rate tax, again, taxing land more than buildings. And those cities, there’s good economic evidence from those cities. Now, the economic evidence comes from the nineteen eighties to the two thousands. I mean, the economic studies come after, but this is when the implementation is. So take some of this with a grain of salt. But you saw the cities, these post-industrial cities like Pittsburgh, which is the largest city to have implemented one from 1960 to 2000. Really was able to continue to build and survive this post-industrial decline of a lot of neighboring cities a lot better. And so that economic evidence suggests that you saw an increase in housing infill development, more units per acre, you saw more permitting, you saw less vacancy, less vacant land, and you saw an overall increase in property values. So this is the gist of the economic literature from the Pennsylvania experiment. Now, some people ask Well, Pittsburgh got rid of it in 2000. The question is why? And so I always have to preempt this with it’s kind of ironic that Pennsylvania is the one state where this has been done, because Pennsylvania also has some of the worst reassessment policies. Some of their cities right now have assessments dating back to the nineteen sixties.

David Roberts: And when we say assessment, this just means that when we talk about the value of the land and the value of the buildings, somebody’s gotta go in and determine that. That’s not an obvious number. There’s some judgment involved and some expertise involved, and that’s what assessors do. And that is also governed in some ways by law and procedure.

Greg Miller: You know, if you want to be impressed by your local government, drive around and notice how many independent properties there are. And tell yourself, wow, the assessor assesses all of those properties pretty frequently. And that’s a hard task, right? So the assessors have a hard task and they’re oftentimes, you know, very low staffed to do this very, very hard task. But if you’re Pennsylvania, you avoid that by just never doing it. Now Washington State, for instance, does that every year, right? And so Pittsburgh does this huge reassessment. They finally, you know, the first time in twenty, thirty years, they’re like, Okay, what is each property worth now? And of course you saw massive increases. And so there was a huge populist backlash against the reassessment. We’re seeing this today. In Syracuse, New York, they did a reassessment and they voted against their reassessed values because there was a backlash to the increase in tax burden. And the assessor’s not at fault. The assessor’s just telling you what the market tells you. But Pittsburgh got mad, they were wondering why they’re doing this weird split rate system. They said the skyscraper should pay more. Let’s get rid of this weird system we have. And so it is ironic that Pennsylvania is the one state with this, considering they don’t mandate reassessments, while other states do mandate annual, triennial, you know, once every four years, once every three years, once every year, reassessments on all properties.

David Roberts: Yeah, we’re gonna get back to assessment in a bit when we talk about Spokane. But one other example that I want to briefly discuss, which I found really fascinating, is Vancouver, BC. Vancouver, BC, back in the early 20th century, had like a fully Georgist system. Land was the only thing taxed in Vancouver. And what you’ve seen in Vancouver is not This sort of one-off backlash that got rid of it. What you saw in Vancouver, BC is over time the land value tax got kind of whittled away. The building tax grew over time. And then eventually, I think it was in the 80s, it finally went away entirely. And then, ironically, as anyone who lives in Vancouver knows, they proceeded to have a giant affordability crisis. Through lack of building. But as I understand it, and tell me if I’m wrong, what happened in Vancouver is that homeowners, the ones who, you know, get penalized by this over time more and more, as the cycle goes on, are also an incredibly powerful political constituency. And the people who benefit From this policy, as is so often the case with public policies, are sort of diffuse. They don’t really know they benefit from it. Some of them are future renters, so they don’t even know, you know, they’re not organized, et cetera. Is that accurate about what happened in Vancouver? And I guess my question would be: how do you how do you prevent that from happening? How do you prevent sort of the people who see the penalties organizing to fight it and the people who benefit, you know, being diffuse and unorganized.

Greg Miller: That’s my understanding of Vancouver and probably the extent of my understanding of the Vancouver situation is similar to the way you’ve described it. I will say I’ve had people reach out to me from Vancouver recently, trying to revive the land value tax in the same way that people are reaching out in Pittsburgh and you know, even the Pittsburgh Gazette’s editors came out and said we need to revive our land value tax. So it’s curious that these cities are now looking back towards what they once had. Of course there’s winners and losers with these policies. I think one of the things we’ll get into in a second with Spokane is sometimes these shifts are actually beneficial. You see a tax decrease for single family houses because single family houses are sometimes good uses of land in a lot of our cities. In San Francisco, a single family house is not a great use of land. But in other parts of our cities, the single family houses are decent uses of land. Probably not as good as row homes, right? But they’re not as bad as vacant land or surface parking lots. All of this is relative to each other, right? And so I think that there are some ways that you can get rid of some of the boogeymans around this policy. It’s like, of course single family homeowners are going to hate this. And then you do the data analysis and you say, well, they decrease in taxes, so why are they going to hate this? And of course this is a progressive policy, so industry would hate this. But actually this is a pro development policy. So why would you know, development hate this. But then you do have a landed class. You have landowners. And those landowners want to get that money from land, right? And so we see this in Florida with there’s a huge push to abolish property taxes that ended up just being a $250,000 exemption for homeowners. Why? Because homeowners as you said are the class of people who vote and who have political power. And they want more wealth. They want more money. And so the homeowners are going to vote for these types of things to the detriment of renters, at the detriment of commercial businesses, small businesses, who help make the economy work. And so I do think that there’s an aspect of that, but I also think that there’s an appetite to push back on that. And we even saw in Florida, you know, hosts of the Charlie Kirk show come out and talk about how this was a massive wealth transfer from Gen Z to The boomers. How this is just creating a ton of money, right? And so

David Roberts: The land. And there’s an element of like killing the killing the golden goose, right? Like the reason the land is valuable in the first place is I mean, this is something I come back to again and again. Like cities, agglomeration, as you said, creates value. That’s why the value exists. That’s why the land is valuable in the first place. And if you kill agglomeration and you, you know, disincentivize building in urban cores. You’re killing the golden goose that gave your land the value in the first place. It’s long term self destructive.

Greg Miller: Definitely. And so to answer your question, there’s pushback. There are people who don’t want this to happen. But there’s also reasons why a lot of people should support this and there’s a lot of boogeymans around the policy that I think are inaccurate. I think you can get a lot of folks in support of a revenue neutral shift to land.

David Roberts: Final background question is just, is there any other country, are there international examples of this happening or experiences to learn from, or is this a US centric kind of problem?

Greg Miller: No, there are. Estonia has a national land value tax that has been implemented for a while. They just did a massive reassessment at a national scale. And so you know, there’s a German state that just implemented a land value tax. I think that there’s a lot to look towards. But a land value tax is not the only way to do what we’re trying to accomplish. What we’re saying is that the public creates value and should regain and recapture that value and then return it to the community. Singapore does this through owning all of the land. And having variable rate leases. And so these variable rate leases effectively operate as a land value tax. And Singapore has seen tremendous prosperity and pretty good sustainable financing because they own eighty percent of the land and are able to do variable rate leases on top of those lands. And so there are a lot of different examples of the sort that you can look at to realize that this isn’t a crazy system that nobody’s done. There are folks

David Roberts: So you lease the land, it gets built up, it creates public value. That public value goes to the state and the state reinvests it in schools and infrastructure, et cetera, raises the value of the land more, gets more revenue, invests more revenue, you can get a cycle going there, ideally, instead of the state invests, raises the land value, and then a bunch of landowners get get rich.

Greg Miller: Precisely. And one of my favorite examples of this recently, we have a fellow, Elle Griffin, who also does a lot of her own great work. She’s been studying the Scottish Islands. Scottish Islands bought themselves, some of them. And the way they were funded was through the Scottish lottery. The lottery had a provision that a lot of the proceeds would go to a national land bank. And so residents would come together, the island of Stornoway, for instance, they bought the island, but because they own the island and there was a huge, massive land trust. They also had to provide for themselves. They had to provide the businesses, the schools, the infrastructure, their own housing. And so they had this incentive though, because they owned the trust and they benefited from the trust to also make it attractive. So they built a golf course and that golf course is now part of the Scottish Open, I believe. And so you know, you create these good dynamics where cities want to improve, they want to be better. Because the residents all gain from that. The city gains from that. But in this case it’s a trust. But you know, it’s the same principle. I find it funny that a lottery system funded this, but there’s things to take away from that model.

David Roberts: Yeah. Okay, so let’s focus in a little bit on an example in Washington. Let’s talk about Washington State where I live. One of the barriers to this in Washington State, as I understand it, this is true in many state constitutions. The state constitution has what’s called a uniformity clause, which basically says that taxes on property must be uniform and that all real estate is one class, so you have to have one rate, one rate on all classes. So legally you cannot tax the land at one rate and buildings at a separate rate. Legally you cannot do a straightforward land value tax. So then how do you get around that?

Greg Miller: Yeah, the other way of shifting taxes from buildings to land, what if we just exempted all buildings from taxation? The only thing left to tax is land. And so we actually do this in a lot of cities. We have random exemptions for multifamily. Washington State has a multifamily tax exemption. But we’re saying, what if we exempted everyone from their building taxation? What if when you build an ADU in your backyard, you’re not taxed on your improvement? And so the Washington state constitution gives broad authority to the state legislature to determine what property can be exempt from property taxes. And so that also gives the state legislature authority to say cities can choose to exempt portions of every building from taxation. So what this would look like in principle is the state passing this law and then a city like Spokane saying, we want to exempt fifty percent of every building from taxation. And what that does is it decreases the taxable base. If you otherwise had $200 million in property value, now you only have $150 million you could tax. But you need you still need to get $50 million to fund your, you know, your city government. And so you raise your tax rate from 1% to 1.2, 1.3%. Effectively what that’s doing is that 1.3% is now being applied to land. And so this is sort of a goofy way of going about it. But what we’re doing is we’re saying buildings are exempt from taxation or a portion of buildings are. And so we’re gonna raise taxes, the tax rate overall. And that raised tax rate is mostly going to apply to the value of land. And it effectively accomplishes the same thing.

David Roberts: Right. So it’s revenue neutral. You’re still raising the same amount of tax revenue, but less of the taxes applied to the buildings, more of the taxes applied to the land. It’s sort of a backdoor land value tax. One other technical detail in Washington, in our wisdom, we have a rate cap, a cap on the amount you are allowed to charge property taxes. And an increase cap or a cap on the rate that you’re allowed to increase property taxes. Talk just a little bit about how those constrain movement here, constrain what Washington cities can do.

Greg Miller: Yeah, parcels in Washington State, a piece of property cannot be taxed at more than one percent of its full market value by typical means. So a city council can vote among themselves for a property tax. The state has a property tax, the county has a property tax that they vote for among themselves, among the elected leaders. And the constitution caps the total amount of that across all of the different levels, the state, the county, the city, when you add those all together, you can’t go over one percent. And additionally, if the city this year collects fifty million dollars, next year it can’t choose to collect a hundred million dollars. It can only raise its total revenue collected by one percent every year. These are citywide or district wide restrictions. It’s different for listeners who know about Prop 13 in California, where that’s parcel level. That means that each parcel can’t increase in taxes more than one percent. California has it a lot worse, right? Parcel level means that you’ll have two properties sitting next to each other. One will be taxed at $2,000, one will be taxed at $100,000. And you know, they’re both five million dollar homes, not paying their fair share because they’ve been owned for five decades. That’s a different question, but importantly in Washington State, the city can vote for levies. And this happens frequently, oftentimes for school districts. And when they vote for levies, those voted levies do not apply to either of those restrictions. And so there are a lot of voted levies, both in Seattle and in Spokane, that are not restricted by that. And so that just means that the people who are actually residents there need to vote in favor of that levy increase, which does happen. So although it’s unfortunate that you have some of these restrictions, it’s also democratic in a sense. When I talk to conservatives, I say this is the most beautiful tax because you know exactly where your tax is going, right? And in some states like Washington State, you quite literally vote for it. And so if you’re gonna want any tax, this is a great one. But yes, there are restrictions in Washington State, but voted levies get around some of those.

David Roberts: Yeah. And I guess it’s good that we can get around it, but I just have to say for the record that it is crazy. But if you have a city that experiences big rapid growth, you would think, what a good thing. We can now get more tax revenue and invest more in our city and get in that virtuous loop. And instead you have a city that grows really quickly and you are capped in the amount you can raise property taxes. So Almost by definition, you are starving the cities that are growing the fastest. It’s an insane thing to do. But that’s constitutional, I guess, and very difficult to undo. But as you say, if the voters levy it on themselves, they can get around those caps, which is like Not an easy thing necessarily to get voters to vote to raise their own taxes. But if you can talk them into it, you can get around these rate caps. So, Kitty, sorry, Greg and I nerd out a little bit there, but I want to talk to you now. You have a long background in land use work, land use advocacy, worked for Futurewise. Done a lot of transit campaigns, et cetera, et cetera. But as I understand it, you had not really heard about land value taxes until relatively recently, until after you were on the city council. So maybe just tell us briefly about kind of your history with land use and how you came to find out about this and why it appealed to you.

Kitty Klitzke: Yeah, well, that’s not exactly true. It’s been brewing for me for a little over twenty years. About twenty years ago, I, Futurewise is a statewide organization and I was in our Seattle headquarters walking on Capitol Hill with a coworker, and we were walking by this old Scientologist church that was being renovated into condos. And the developer happened to be there and very frustrated and somehow knew who we were. And he came out on the sidewalk and sort of accosted us and said, Look at this. The Seattle tax system is making it very hard for me to develop this beautiful building of lasting value and turn it into something that continues to be lasting value. Meanwhile, you’re making it super easy for people to build these corrugated steel articulated. Crappy multi-family buildings that in 10 or 15 years are gonna you’re gonna look at them and say, these are so 2000s. And they’re not gonna have any like lasting character or value. He said, your tax system is incentivizing this. You wanna know why no one builds with stone or brick anymore. It’s because you make it so expensive for us and so cheap for people to build with crap. And it kind of came out of nowhere. He led us toward the building. It was beautiful, but he was really struggling. We didn’t even know if he was going to be able to complete the project. But it stuck with me. I had no idea what to do with it. And then over the years I had been involved in Spokane and my job in participating in these kind of steering committees that were supposed to figure out infill for Spokane. Because we outsized our urban growth boundary early on, shortly after the passing of the GMA. So we had this enormous urban growth boundary and a sprawl problem and an infrastructure and traffic problem and not the most affluent tax base to address all these problems. So we as a city, they were deciding to try to get it together and strive for infill and try to grow up and not out and be a little more prudent, protect our remaining forests and farmland, all the things. Sounds good. So we tried upzoning. We tried to take advantage of every incentive the state allows us to give. We did a lot of public investment in transit and streetscaping and other things. And it wasn’t always manifesting in the way that we had hoped. We weren’t seeing any redevelopment and we still had a ton of vacant lots.

David Roberts: Yeah, I should say just I’ve been to Spokane and even relative to other big cities you see, there is a striking amount of weirdly underdeveloped land right in the middle of the city. It’s a striking feature of Spokane, I think, to this day.

Kitty Klitzke: Yes, and it’s a thorn in my side. And it has been for a very long time. But I think

David Roberts: This was before you got on the city council? ‘Cause that

Kitty Klitzke: Well before, yes. This was a twenty year process for me. But I think what I started to notice over the years is just like public policy, taxes can be kind of an unintentional source of social engineering. And so when we tax the value of a building, we disincentivize quality, we disincentivize good materials.

David Roberts: Yeah.

Kitty Klitzke: And we disincentivize maintenance.

David Roberts: So that’s why that gets to what the guy said to you before. The reason people now are building with cheaper materials and building cheap tiki tacky buildings rather than nice quality buildings is that they get taxed more the higher the value of the building they build, basically.

Kitty Klitzke: That’s surely a part of it. I think it also affects the way that things are financed. I don’t see raising the land value as the thing that we tax over the building as penalizing. I think what we’re doing is we’re actually changing the stakes. When we upzone and incentivize land, it increases the expectations for speculators, right? So I can’t tell you how many times I’ve gone and You know, an area’s been recently upzoned. A landowner owns this huge piece of land. And I’m coming in and talking to them about why they need a street vacation so they can maximize the use of the lot, all these stories about what they’re doing. And so we do the street vacation, and then the land just still sits there for sale. All they’re trying to do is maximize the value of that lot. They had no intention of developing it because developing things is a lot of work. And so we’re raising the value. And keeping the stakes extremely low for someone who wants to speculate. They’re paying almost nothing in property taxes. But they’re slowly like building the value of this piece of land by us upzoning it, incentivizing it, and then maybe doing a little bit of administrative work. And the land just goes up hugely in value.

David Roberts: Right. So Spokane is raising the value of the land. Yes. And they are benefiting from it.

Kitty Klitzke: With very little risk, right? And meanwhile the neighborhood’s sitting there experiencing this vacant lot, like all the nuisances that come with that, whether it’s raccoons and stray cats or squatters and crime, we experience all those nuisances associated with that vacant lot that is usually in a prime location and it just sits there because they’re waiting for the person to pay the right price and they’re doing the minimal amount of work to get more money out of that. But when you take away the risk of higher property taxes and all of the things from the part of the building, we’re doing what we can to incentivize a higher quality building and make it easier to build that building. They don’t have to consider it in their finances, having their property taxes go up. So I think it’s kind of a virtuous cycle and Like that experience in Capitol Hill, this made it very real for me. These kinds of policy decisions that are very hard to change because they involve taxes. And I feel like there are a lot of boogeymans with taxes. Yep. But if we don’t get serious about what we’re doing wrong and what we’re truly incentivizing and disincentivizing with our tax system, the problem is just gonna continue to fester. I was in Peru the last few weeks and I noticed that There’s a lot of unfinished looking buildings everywhere. There’s rebar sticking out of the beams, tops of buildings and things. And someone on the bus I was on finally asked someone why this is. They don’t tax buildings that are incomplete as highly as complete buildings. And so people just don’t complete the building. You’ll see the two or three story window with rebars sticking out of the top floor. To imply that there’s going to be another floor someday. So please don’t tax me. And I think they were probably trying to make it easy for developers, trying to ease the burden on somebody who’s trying to build their building or their house. But what it’s resulted across the country from Lima to Cusco, these weird-looking, unfinished, substandard-looking housing that might be nice inside, but looks terrible from the street.

David Roberts: Yeah, tax policy is full of unanticipated consequences.

Kitty Klitzke: But I feel like we have gone as far as we can in Spokane with upzoning and incentives. We’re trying to diversify the building types we allow. We’re trying to make our code more flexible. We went to a form-based code a while back, and it’s still not resulting in the type of turnover, but we have some landholders in the community that just sit on land and are happy to do that for decades or generations until the golden goose turns golden enough, I guess. And that’s really just not great for the community. So I’ve been talking about this issue for years under different names. At first we started talking about it as a universal, or no, we first called it highest and best use. And that conversation kind of got shut down. Like, what about the vacant lot next to my house that I might someday want to build for my grandma? Okay, how badly do you need that? And if you’re serious about it, why can’t you pay taxes on it? But then we started talking about land value tax and the constitutional things came up and it wasn’t until I got connected with land economics and Greg and some other folks that we started thinking about this universal building exemption concept, which has been really helpful because it was starting to seem impossible. To get a policy that really reflects the goals and values of our community rather than making it harder for everybody to get there.

David Roberts: So it’s the split value thing that that is somewhat new to you then. So this is a proposal now that you’ve put on the table at the city council level. It didn’t get through this time. What’s the sort of political state of state of play of the proposal specifically?

Kitty Klitzke: We weren’t really able. We don’t have the statutory authority to reform taxes at the city level. For almost everything, we do have to go to the state for permission, even if it’s something we’re going to ask voters for, unless it’s something that the state has already carved out our ability to do, we cannot do it. So

David Roberts: So you’re pushing for a state law, some sort of state reform.

Kitty Klitzke: We are trying to get the authority from the state to be able to do this in our city, either as a pilot project just for Spokane or as we’re finding there are many cities that are interested in this, as either a pilot project or just a permissive legislation for cities who want to opt into this.

David Roberts: And so what is the state of play at the state level then? It didn’t it didn’t get through this session. Is it still I mean

Kitty Klitzke: We’ve had difficulty getting it drafted because we feel that we need some cooperation from the Department of Revenue to do that properly. And the code revisers at the state level don’t necessarily have the confidence to just sit down and draft Department of Revenue laws without the cooperation of the Department of Revenue. So we have a kind of steep learning curve that we need to get folks over to understand the why and the what. Of this and that we’re not trying to raise taxes or create any inequities. We’re trying to increase opportunity and build a tax code that makes more sense for the goals of our cities.

David Roberts: Well, if there’s one thing I have learned about Washington Cities is that single family homeowners have a lot of power. In them. There are a lot of single family homes in them, and single family homeowners have a lot of power and they tend towards NIMBYism. I’ll just say as charitably as possible. So what do you say to single family homeowners who say, look, if you’re gonna incentivize building, that’s means people are gonna build a bunch of big apartment buildings in my neighborhood. This is of course the terror of all single family homeowners in Washington is that someone builds an apartment near them, what do you say to the single family homeowners who are worried that this is going to induce a bunch of development in their neighborhoods?

Kitty Klitzke: Well, first of all, it doesn’t affect the zoning at all. So if you’re not zoned for multifamily, you’re not going to see multifamily just because of a land value tax. In Spokane, we don’t have any single family zoning. So a fourplex could be allowed anywhere. And so that could already be a fear of someone who’s afraid of those types of things in their neighborhood. But what I will say about this is this makes it easier for someone in your neighborhood to build another bathroom, to re-roof their house if they need to, to upgrade their facade, to maintain the homes that they have without fear of their property taxes going up or their next door neighbor’s property tax going up just because they made some improvements. And their property taxes will go down. So there is some benefit to single family homes. It also makes I think a person who has purchased a vacant lot and wants to build a single family home, that’s gonna be easier for them to do because the taxes are not going to go up significantly on that lot when they build a house on it. So it doesn’t do what people think it’s gonna do. It’s there to get rid of the speculation and the very woeful and obvious underdevelopment. We have some huge surface lots where there should be buildings in our downtown. We’re about to make significant investment on our division corridor that goes through the center of the city, our biggest main street. We’re gonna build bus rapid transit there and do station improvements and streetscaping and all of those kinds of things. And that area is just an eyesore. It’s full of vacant lots, cinder block empty buildings. There’s only really one significant multi-story building and it just stands there by itself compared to this kind of depressing single story and vacant lot area. And we don’t want to make that kind of public investment. It’s going to be a quarter of a billion dollars of public investment and then see nothing grow out of that. And that’s what could continue to happen if we continue to make it incredibly cheap for those landowners that own a ton of land on that corridor to do nothing until someone else does and makes it more profitable.

David Roberts: So getting back to the assessment question, it’s kind of technical, but it turns out to be like one of the real barriers here. The county, your county assessor called this proposal crazy because he says then you have to you’re running two different tax rolls, you’re making two separate assessments for every property. The state assessors association were unanimous in opposing this. It seems like that’s a real barrier here. So how do you solve that? I mean, it’s my inclination, obviously, being the way I am, is you just need to fund and staff your assessing departments adequately, but how are you addressing that objection and that bit of resistance? Do you have answers or proposals to help them?

Kitty Klitzke: I think first of all, we’re not asking them to change the way they assess land or home. The value of the home and the land stays the same. It’s just how much of the tax burden we apply to the land part and how much tax burden we apply to the building part. That’s really all that’s changing. We’re not asking to assess lands differently at all. So that’s kind of a misunderstanding. I don’t know if they saw like an early draft that could have implied that, that made them think that that’s where we were going. But our county assessor has been on board at different times and has kind of changed his mind as he hears other voices interpreting this in different ways. But I think this is there’s no insuperable barrier there to getting them on board. I think what they will have to do is work with their local governments and create the algorithm that works for their land base and their goals and then apply that algorithm to each property. So this could be a matter of just programming and not necessarily having to hire new staff.

Greg Miller: And I’ll chime in here as well, because I’ve talked to a lot of these assessors in Washington State on this. And ultimately they already value the land and buildings separately. And across the country this is true too. And the different counties do it differently. Spokane actually does a quite good job of their split between land and buildings. And these counties in Washington already administer the multifamily tax exemption, which is an exemption on improvements. And this is very similar. We’re not asking them to run two split rolls. We’re asking them just to add another exemption to properties. So we don’t think that there’s as large of an administrative barrier as assessors make it out to be. We’re working with them to figure out how we can ensure I used to work for Housing and Urban Development. I care a lot about administration. But I also think that there’s this sentiment among assessors we see nationwide when we talk about this policy. Some are actually very much in favor. Some think really like their land values, but some push back a lot. And I think that this sentiment Imagine if today we didn’t have a property tax system. The idea that you’d go around each city and value each property would sound so absurd. Yes. How how do I know that the granite countertops worth eighty thousand dollars and the building’s a depreciated twenty thousand dollars? I mean

David Roberts: Yes, indeed. It’s something of a mystery to me how they do it how they do it now. I mean it’s

Greg Miller: And it works, right? Granted, people push back nowadays and make this argument that it’s illiquid, you don’t know the value until it sells. But it turns out that our property tax system works pretty well. And so if we were in this alternative universe where we didn’t have one, we would hear the exact same pushback. Now, this is an even less of a step from going from no property tax to a property tax, because we already have all of the infrastructure to value land. We have all the data we need. Now Some assessors might not be paying as much attention to the land values they should be, but they already have all the infrastructure and data they need. And so this to me sometimes feels like a larger argument than it should be, because people just aren’t imagining what the future could look like in terms of land value taxes. And it’s not as crazy. It’s just as crazy as a property tax is. We already do property taxes. So I think it’s possible, it’s entirely possible.

Kitty Klitzke: Mm.

David Roberts: Another question is just about the size of this and the effects it will have. So, and tell me if I’m wrong about this, Kitty. So, under this proposed tax split in Spokane, as I read the report, the median tax bill of a vacant parcel will rise by something like $560 a year. But These improvements you’re making, these investments like the like the investment in bus rapid transit, et cetera, et cetera, this these some of these land values could be appreciating by tens of thousands of dollars a year. So so I’m sort of wondering, like, even if you get this passed, is the scale of it sufficient really to actually induce building? Like what is the what is the modeling show you about whether this is actually going to induce behavioral change?

Kitty Klitzke: Well, I think that’s the question right there. I think it depends on how we’re able to apply it, if we’re able to make it applicable to state and local taxes. There’s a lot of what-ifs there that are going to be worked out through the legislature. I’m obviously hoping for the maximum impact possible, but it is just one tool in our toolbox to try to incentivize infill. We still need good growth containment strategies. We still need economic development plans. We still need to improve our zoning and our building codes, all of which we are working on and Spokane has been a leader on. But this is just one more thing that slightly equitizes our tax base, gives some relief to residential folks while still allowing us to pay for the infrastructure that some of these larger landowners benefit the most from.

David Roberts: Greg, maybe you could tell us briefly. You did a your outfit has done analyses and reports for various cities, just how this would work and what the effects would be. Tell us what the modeling shows in Spokane, like who benefits and who gets who gets penalized. And I was sort of thinking about the about the people in the single family homes. I mean, it just strikes me, and tell me if this is correct or not, that there’s not one answer. For how it’s going affect people in a single family home neighborhood, it obviously depends on the value of the land, which again depends on the proximity to the core, basically. So, like if you are in a single family neighborhood that’s very close to the urban core, it probably will induce a lot more development than it would if you’re in a neighborhood farther from the core. And it seems to me like that’s exactly what you would want to happen. But but Tell me what the modeling kind of shows, like whose bill goes up and down and like who benefits and who gets who gets hurt.

Greg Miller: Yeah. First, this is a lever that the city has and they can press on this lever as much as they want. And so the modeling we do for the city is a version of the policy. You know, the modeling we published was just one version of the policy that we would propose for Spokane. It doesn’t dial it up immediately, but it’s also not completely light. And so in the modeling we did, there is a base exemption and then an exemption on buildings, a percentage exemption on buildings. And that modeling showed that the median single family homeowner is gonna decrease four percent. But importantly to your point, David

David Roberts: Their tax, the median single family homeowners tax burden will decline very slightly.

Greg Miller: property tax burden. Yeah. Very slightly. And”these count that was what I was about to say is most this large majority of single family homes will stay within 10% of their current bill. And so what this is actually doing is really shifting that burden from the multifamily developments, the townhouses, to the vacant and surface parking lots in the downtown corridor. But also for those single family homeowners. This is not dialing up a full land value tax to 100%. We’re, you know, even if we did 100% building exemption, we’re far from 100% land value tax. And so as the downtown develops more, which this policy would do, the single family home, sure, their land values would increase, but you profit off of that increase. And so there’s still profit incentive for these single family homeowners to see their city get better. At least in my vision. But this again comes down to whether this is about profit maximizing or whether this is about just keeping the character of the neighborhood, right? Which is still undefined science. I think a lot of people are starting to think the latter might be guiding this a little bit more than we once previously thought, right? But the other thing I wanted to touch on in terms of projections outwards in terms of what this does to development, I don’t think it’s been talked about. We’re talking about a 1% tax. We’re used to like eight percent sales taxes, 20% income taxes. But that 1% tax applies annually. And so this building tax, this building portion, if I own a plot of land and I build a million dollar apartment on it, I’m taxed 1%, not just this year on that $1 million investment, but every single year thereafter. Five years later, I’m still paying 1% of that million dollars. We take the net present value of that. We sort of amortize that out. We say, how much tax is this really in terms of today’s money? And it can go up to 20, 30% tax burden. And so the building tax although it seems small, is actually a large tax. And I just wanna touch on that because it’s important to say that we’re not talking about a small tax here. This is number one source of revenue for local governments. It’s a huge tax. And it’s not just a one time tax. So this this is a large tax and a large disincentive to develop.

David Roberts: And you very briefly touched on this, but just to sort of pull this out, taxes would go up the most for vacant lots and parking lots, and would decrease the most for multifamily residences, basically.

Greg Miller: Yeah, that’s the modeling in Spokane. And that modeling typically holds true in a lot of the other cities that we model. Now, it’s always true that vacant land doubles, you know, and surface parking lots double in price. And it’s a little bit variable how much single family homes are impacted, how much multifamily is impacted, but typically single families are not really changing much and your multifamilies typically a median ten percent decrease. And that’s true of the Spokane modeling. It’s true of a lot of modeling we do.

David Roberts: All right. And so Kitty, just one more for you. Just what is the plan? What’s the plan of attack here? Are you gonna have another go at trying to push this in the state legislature next session?

Kitty Klitzke: Yes. We’ll be having workshops for legislators before the session starts to try

David Roberts: Do they get this? In your experience, do they intuitively understand this or is there a lot of education required at the at the state legislature level?

Kitty Klitzke: I think what happens is they get the need for it. They get the idea and the concept and then they get spooked when the details come out. And so that’s the point where we have to compete for their attention enough to get them to understand and feel confident that what we’re trying to do is possible and what we’re trying to do is not burdensome to the state or local governments. And then it will be much easier because there’s a ton of interest, there’s a ton of buzz. It’s something that I’ve been talking about for years with certain people and is starting to gain ground in more mainstream circles. Some folks even from counties have been interested in exploring this idea, which I’ve never quite understood, but I’m glad they’re interested.

David Roberts: And specifically are you pushing for a pilot thing for Spokane or are you trying to get a bill akin to what Pennsylvania has, which just says that cities can do this at their discretion?

Kitty Klitzke: I think ideally it would be permissive for any city that wants to do it, but Spokane is always happy to be the test kitchen for the rest of the state. So for me, it would be enough to get it here. I think the problem is pronounced enough. It’s very, very visible and it’s clear that we’ve done everything we can with the other tools that we have, that it would make a lot of sense to be a laboratory here. But I also don’t want to stop other cities from being able to do it if they’re interested.

David Roberts: Interesting. Okay, well, we’re short on time, but just quickly, Greg, tell us a little bit about momentum here. This seems like a concept that was relatively obscure and confined to some committed Georgists not that long ago. And now, you know, I hear it popping up more often. My own mayor of my own city, Katie Wilson here in Seattle, mentioned briefly recently that she is interested in this idea, is interested in possibly pursuing this idea. So it seems like it’s gaining momentum. What is actually happening and where?

Greg Miller: It’s gaining a ton of momentum, and I think it’s all part of this urbanist movement. I think it’s part of people trying to broaden their perspectives. I think three to four years ago there was maybe a couple of states considering legislation to enable cities to implement this policy.

David Roberts: And this is just to clarify, enabling cities to do this split rate, that is the main mechanism we’re talking about. That is the main thing we’re trying to push through state legislatures. Nobody is really contemplating like a full on full on straightforward land value tax, are they? It’s just it’s this is the tool that we have available. Is that is that more or less correct?

Greg Miller: Well, David, if you talk to the right people, you’ll find some people pushing for federal land value tax and constitutional amendments.

David Roberts: Hey, hey oh.

Greg Miller: Yeah, this is the policy. I believe in incrementalism. I think this is, you know, the step in the right direction. And so this is what I’m talking about, is just enabling the split rate. Again, even once it’s enabled for the city, you don’t have to dial it up a hundred percent. The Pennsylvania cities haven’t done that.

David Roberts: You can be as incremental as you want, basically, once this is enabled.

Greg Miller: Precisely. And so yeah, you know, three years ago we were looking at a couple of states. Now we’re looking at twelve, ten with introduced legislation to enable cities. We’re looking at two states that have passed legislation this year for the first time in probably a couple of decades. I think Virginia had one bill in the two thousand tens, and outside of that we really haven’t seen movement on this.

David Roberts: Who passed?

Greg Miller: So Virginia and Kentucky passed bills. Virginia enabled four additional cities. Newport News and Charlottesville are like the sort of main ones and then Kentucky enabled Louisville to implement split rate taxes. And so we think that we’re just at the beginning of this. I think the momentum’s only gonna continue.

David Roberts: Am I making it up, there’s one place where a Republican legislature pushed this through over a Democratic governor’s veto. Is that Kentucky?

Greg Miller: This is Kentucky. Yeah, so Kentucky was doing a

David Roberts: So this is like really intriguingly cross partisan. It’s not a straightforwardly partisan kind of thing.

Greg Miller: Yeah, that’s actually a great point. Virginia, the same month, Virginia and Kentucky pass a bill. Virginia’s blue. They passed a bill, actually pretty bipartisan anyways. Kentucky, the split rate tax was part of a larger governance overhaul. And so it was just one component. And so the Republicans were pushing this through. They wanted to remake the ethics committee to make it more Republican in nature for for the metro councils. And they added this in because they were really interested in this as a pro development strategy, particularly for urban areas.

David Roberts: So we think of Republicans, I mean, I think of Republicans generally as kind of hostile to cities on a general basis. So what is kind of the conservative rationale here? What do Republicans say on behalf of this policy?

Greg Miller: It’s pro development. So this Senator, or former Senator, Pat Toomey was once Allentown, Pennsylvania’s city administrator. And he wrote a letter to all the nearby cities saying, You guys should do split rate land value taxes. This is the best tax, right? This is pro development. And he becomes a Republican senator, running a very conservative, fiscal conservative, or I think he was at one point, I forget what he’s up to now, but In Kentucky it was the same story, right? Milton Friedman loves this tax. This is pro development. And to complete the story, the Republicans are then steamrolling the Democrats on this urban reform to remake the ethics committee, but there’s this land value tax provision. A Democrat stands up and is like, I hate this bill, but I love the land value tax provision, you know? And so really we are seeing bipartisan support. I think that there’s something for everyone to love here. Some policies sound too good to be true. Land value tax, might be too good to be true, but we will find out. I like to believe that it’s too good to be true, but then every time I think about it further, I’m like, this is a great policy and that’s why I focused on it so much, and started the Center for Land Economics to work on it full time. So

David Roberts: Yeah, I mean you have to tax somebody, right? Like somebody’s gotta pay taxes if you want to have public amenities. And like almost any group you can gin up some sympathy for, but almost nobody really loves land speculators. You know, this is not a group of people that have a lot of like explicit defenders in the legislative world.

Kitty Klitzke: Except themselves.

David Roberts: Yes. Yes, to the extent that they are organized, they defend themselves. But if you’re looking for people who, you know and if you’re looking to sort of minimize again the second order, you know, negative effects of taxing, you’re not gonna get any less land, right? Like you can’t get rid of land by taxing it. So like this seems like it ought to be an area of agreement. Okay, well I’ve kept you all long enough. As usual when I dig into something like this, I realize you could do a million pods on this and barely scratch the surface. But I think we sort of captured the basic idea. So thank you, Greg, and thank you, Kitty.

Kitty Klitzke & Greg Miller: Thank you

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Text Transcript

David Roberts

Power utilities are responsible for the three big parts of the electricity system: generation, ie, power plants; transmission, ie, the high-voltage lines that carry electricity over long distances; and distribution, ie, local networks of transformers, power poles, and power lines — the stuff you see around you in your neighborhood.

When it comes to spending money on generation and transmission, utilities’ choices face considerable regulatory scrutiny. They are obliged to carefully model those systems, produce detailed projections, and demonstrate how their plans optimize those systems at least cost to customers.

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Their spending on distribution systems, however, has not traditionally faced the same scrutiny. Distribution systems have been viewed simply as delivery mechanisms. You build enough transformers, poles, and lines to get the power to customers, replace them when they get old, and that’s that. Utilities bucket this as “mandatory” spending and the only scrutiny it receives from regulators is to make sure they’re paying reasonable prices for the equipment.

However! If you’ve been following Volts for a while, you know that distribution systems are where all the action is these days. That’s where all the technologies that we cover here—rooftop solar, batteries, EVs and EV chargers, home energy management systems, and “virtual power plants” that tie all that stuff together—are located. Distribution systems have become much more complex. They can be used as a grid resource, not just a delivery vehicle, and there are many more choices now for exactly how to plan and construct them. What’s more, rising distribution system costs are the biggest portion of Americans’ rising electricity bills.

Many people, including many Volts guests, have been pressuring utilities to think more creatively about distribution systems, to embrace new technologies, and to use the distribution infrastructure they’ve already built more effectively. (If you haven’t yet, you should listen to our episode on grid utilization.)

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But my guests today believe that some of this amounts to putting the cart before the horse. They believe that if utilities are going to get creative with distribution planning and spending, then that planning and spending should come in for the same kind of regulatory scrutiny as their other buckets of spending. Utilities should learn how to better model distribution systems so that regulators can ensure their choices optimize those systems as they grow and evolve. As we’ve said on Volts many times, left to their own devices, utilities tend to prefer concrete and steel—more spending—whereas many of these new technologies can produce the same results for cheaper.

Sydnie Lieb is the assistant commissioner of regulatory analysis at the Minnesota Department of Commerce. Pete Wyckoff was, until recently, that department’s deputy commissioner for energy. (As of a few weeks ago, he is the vice president for policy at Evergreen Action.) They are recommending that Minnesota regulators require much more analysis of distribution systems from their utilities before they sign off on that spending. Today, we’re going to talk about why, what that scrutiny would look like, and what they hope the outcome would be. This is a nerdy one, but it’s important and, honestly, I love this shit. Let’s do it.

All right, let’s do it. So with no further ado, Sydnie Lieb, Pete Wyckoff, welcome to Volts. Thank you so much for coming.

Pete Wyckoff: Thank you so much, Dave.

Sydnie Lieb: Thanks, Dave.

David Roberts: Sydney, let’s start with you. Just by way of background level setting here, I talked about this, I touched on this in the intro, but maybe expand a little. How utilities, we’ll just take Minnesota as an example, how utilities determine their distribution spending and how it is treated differently than generation and transmission spending by regulators. What is the what is the process now and how is distribution different than those other buckets?

Sydnie Lieb: Sure. So I think I want to start with just describing how we do transmission and resource planning. In Minnesota, we’re a vertically integrated state, so our utilities are planning and owning their own generation. And both the transmission and the generation processes are very robust regulatory processes. Transmission is largely planned at the level of the regional ISO, which here is MISO. And it’s a multi-year planning process to look at how much load is going to exist within the region, how much generation there is, where that generation is, where there are constraints on the system. And there’s several scenarios and sensitivities that are looked at to assess, you know, if you have 10% more load in one location, what does that necessitate in terms of transmission build-out that’s needed? And now with some of the federal requirements at FERC, we’re also seeing a lot of consideration of grid enhancing technologies alternatives that might reduce that transmission. And whenever you’re planning transmission, you’re looking at the trade-offs between having a generator closer to load versus having a transmission line there. And it’s a very robust process that involves many stakeholders. So you have consumer advocates coming in, you have environmental groups coming in, you have utilities coming in, you have states coming in. And through a two-year process, they plan out the optimized transmission system. At the same time, at the state level, when we have a resource plan come in, utility comes in, they have a load forecast, they have economic forecasts on how much energy prices are going to be, both in the market and also to procure generation. And they come in with their preferred plan of what they think the economic optimal solution is for that generation. And then Any other intervener can come in and say, we think we should have more of this type of resource. We think your load forecast is overblown and we think you’re actually building out more than you should. We think there should be a mix of distributed energy instead of just grid scale. And all of those decisions go through a clear economic optimization. On the distribution system, utility essentially buckets spending into two types of spending: discretionary spending. And non-discretionary spending. And the discretionary spending is a relatively small amount. These are projects that could or could not be done this year, and they look at some pros and cons there. But on the non-discretionary spending, which is most of what’s driving these significant budget increases, the utility doesn’t look at any sensitivity in their load forecast. They’re not informing what’s happening on their system. They could be informing the load forecast with AMI — advanced meter — data that we have now so that they could better predict whether or not they’re going to see electrification growth in a region or they’re going to see more distributed solar in a specific part of the grid. But none of that goes into the forecast. And even worse, I think, is that there’s no opportunity for any intervener to come in and say, if we think this load forecast is off by 10%. We could save tens to hundreds of millions of dollars depending on the system and the investment. But right now there’s no opportunity to do that because the utility says, we’ve made these decisions, they’re engineering decisions, they’re necessary to maintain reliability of the system. And we’re not having any discussion about whether or not we made the right investment decision on these discretionary spending topics.

Pete Wyckoff: Just this is Pete, just, you know, back it up to a slightly higher view and topics that you’ve covered on this podcast before. We know how much a solar farm out in the country should cost. We know how much a transmission line should cost. The distribution systems, all the wires to everybody’s houses in a metro area and all the other pieces. It’s really hard to get all the data and information which we need to get. To accurately to say how much should that cost. Mm-hmm. And that’s why in in the past it’s been a black box, but as we’ll talk in this conversation, we can’t let it be a black box anymore because things are much more complicated. Things run two ways now.

David Roberts: Well, yeah, I was gonna my next question was why, I mean, pulling the camera back a little bit, talk a little bit about why distribution system spending is more important now than it used to be, why it’s getting more important in terms of both in terms of the complexity and technology, but also in terms of affordability. I think everybody’s aware that electricity bills are going up, everybody’s in a panic about it, there’s this affordability crisis. Lots of people, if you just talk to on the street, assume It’s like your choice of generators that is driving costs or that is transmission driving costs. But in fact it’s mostly distribution. So talk about sort of the rising importance of distribution generally.

Pete Wyckoff: Maybe I’ll start there and then I’ll turn to Sydney for more details, but just in as a general concept, we can give the cynical answer and the non-cynical answer. I think they’re both partly true. The non-cynical answer I can start with is it’s an aging system. It is a system we’re asking more and more of as we have home batteries, as we have home solar arrays, as we have more. Things and kinds of things and two-way flows on the system. So it’s a system that’s both aging and needs upgrading for that reason. It’s a system that is at being asked to do new things. And it’s a system that we are have become, and we’ll talk about this more, less and less tolerant of it being out for any any amounts of time. And we’ll talk about why that’s a really an important question. So that’s the non-cynical answer. The cynical answer, and I used to work at the federal level on electric policy, and then I came to work for Governor Walz four years ago. And one of the things I realized is that the state level with regulated utilities, these are monopoly utilities, they are for-profit utilities. They have a duty to get as much return for their shareholders as possible. And we as regulators have a duty. To make sure they don’t get an unfair return to their shareholders. But they have a lot of political power and there’s political pressure. And by building things, they only get return on equity or or return on equity, return on profit off of the things that are physical. You know, when they buy natural gas, they just pass it through at cost. When they do other things, they pass them through as cost. Their profits

David Roberts: Right.

Pete Wyckoff: Come from building things. When I first got out to the U.S. Senate as a staffer, I had a utility lobbyist come in and said, first thing you got to know, Pete, and I’ll just admit this, is we don’t sell electricity. That’s a loss leader. We we build stuff. And we’re always gonna want to build stuff. So we’re all for the clean energy transition. If it means we have to build things, we can undo the clean energy transition to build more things, whatever. We just want to build stuff.

David Roberts: This is I’m sure you both know a frequent a frequent theme here on Volts. And of course, you know, people who listen to Volts know that lots of these new technologies that are popping up on distribution systems. I mean, not just the new ones, like energy efficiency, for instance, but also a lot of the new ones like home solar, home batteries, software. Virtual power plants, all of these in one way or another have the effect of reducing the amount of stuff that the utility has to build. So there really is a very fundamental conflict between utility incentives and the best technology solutions for distribution grids. And I know, like, I know we’re going to talk about how regulators can sort of ameliorate that and restrain that. And that’s all to the good, but You know, as I frequently say, I just it’s hard for me to imagine the optimal solution to these things in the long term without that basic incentive problem being addressed somehow. And of course, like who knows exactly how, and who knows how to how to proceed doing that. But it’s just like that’s just like a tidal pull underneath all this in the wrong direction.

Pete Wyckoff: Minnesota’s actually an interesting case. Not the only one like this, but a lot of our electric system is regulated by our public utilities commission with the help from us folks at the Department of Commerce, which is where I was until two weeks ago. So these for-profit utilities in a regulated regulated system. But a lot of our electricity comes from not for-profit, municipal and cooperative utilities, and looking at differences in their behavior. Where one has this let’s build stuff because then we get more money versus let’s not build stuff because building stuff costs money. Right. It’s an interesting place to be where you can see both the ups and downs of both systems.

David Roberts: That’s pretty stark. So, Sydney, let’s make this a little concrete. So let’s just take like Xcel as an example. When we talk about Xcel’s distribution system spending, what are we talking about? What are they spending that money on? What falls into that bucket? What kinds of things count as distribution system spending?

Sydnie Lieb: It’s a lot of things. It’s a it’s a diffuse system. It’s things like wires, transformers, substation upgrades. I think all the hardware people think of when they think of the distribution system. It’s also all the things that we do to maintain reliability on that system. So it’s OM budgets for tree trimming.

David Roberts: That’s that’s operation and management for the

Sydnie Lieb: Yes, sorry. Operations and management budget. So as utilities are thinking about their budgets, there’s operations and management, which is basically a direct pass through. So

David Roberts: They don’t make money on that.

Sydnie Lieb: They do not make any profit on that. If they spend fifty million dollars on that, they get fifty million dollars of recovery from ratepayers. Right. And their general preference is to minimize those types of expenses in favor of something that is a physical capital asset because that’s something they will earn a rate of return on. So, you know, and one of the some of the other big budget spending categories we’re seeing in these distribution plans also are undergrounding of wires. And that’s one where I think it’s an interesting, as Pete is pointing out, that we have we have some regulated investor-owned monopolies in the state, but we also have one electric co-op that chooses to be rate regulated. So they have it required to file a distribution plan. And there, there’s a huge difference in what we’re seeing in terms of targeting targeted undergrounding of lines for reliability purposes. And the utility, there’s a trade-off between the amount of tree trimming and maintenance that you’re doing. Versus the cost of undergrounding a line. And the utilities that are investor owned utilities that have a real incentive to invest as much capital as possible, we’re seeing that they are taking existing lines that are still in surface, do not need replacement, and saying, we’re going to underground this line because now they can get the capital investment for the line that was there and an additional capital investment for undergrounding a totally new line before the old line was able to return was ready to retire.

David Roberts: Right. And tree trimming is operations and management. So they don’t get a rate of return on that. They don’t get the profit on that. So they have a obvious preference.

Sydnie Lieb: Right. And if you look at the co-op, the co-op actually brought in an independent consultant to say, where can we do tree trimming and avoid undergrounding and achieve this a same or similar level of reliability on the system? And they’re actually balancing and optimizing really well on those two things. But it’s one of the recommendations we have, which is our utilities are spending hundreds of millions of dollars to underground lines, and they’re not doing any optimization or analysis quantitatively to look at. Could we just be trimming trees and avoid these investments? I think those are the types of things that need to happen.

Pete Wyckoff: It wasn’t obvious, tree trimming’s a lot cheaper than my

David Roberts: Yes, I would imagine Well, this was actually you’re cueing me up perfectly for my next question, which is sort of, you know, Xcel is bucketed all this, is non-discretionary, mandatory, just engineering. Don’t worry about it. Just give us the money. And let’s talk about a few things within that bucket that might be contestable, that might be that where where someone might reasonably argue that it’s not mandatory, that you have other choices. You mentioned Tree trimming versus underground. That’s mainly, I think, about wildfire mitigation, which is a huge, huge thing everywhere. But are there other what are some other examples of stuff they’re saying is mandatory where you might say, actually there are other choices?

Sydnie Lieb: So I think one of the ones that’s probably most relevant to a lot of the discussions you’ve been having is what can we do with some sort of grid load management derms type system?

David Roberts: I’ve pledged recently to my to my listeners to explain all acronyms. So I’m gonna unpack that one. Distributed energy resource management systems. Basically systems to manage all these, you know, sort of residential and commercial solar panels, batteries, EV chargers, managing all that stuff as a resource. That’s what

Pete Wyckoff: Software you need to make the grid look like David Roberts is telling us it should look like we

David Roberts: Yes. Yeah.

Sydnie Lieb: Right. So I think that’s one of the ones again, like this is something that’s been talked about regularly with you and your other guests is that you could be managing all of the stuff that’s interconnecting on the grid as like a well conducted orchestra. And that could avoid these very expensive substation upgrades that we’re having on the system. The challenge here is that when you try to push the utility in that direction, the response you always get. Is and we’ve actually been these are filed every two years and we’ve been marching on this. This is not the first time we’re taking this approach of saying what you really need is to manage the things on the grid, not to just keep overbuilding the capacity. The utility comes back and says, the software doesn’t exist. And even if it did exist, we don’t believe that it can fill the need that is needed by the physical capital investment.

David Roberts: Yes. And if and if people listen to my episode with Jigar Shah, I think people know at this point that that argument just gets less and less plausible with every passing year as more and more utilities in the US and around the world use that software just fine. Like there are, you know, it’s not theoretical anymore. There are utilities out there doing this stuff and it’s working. So this argument that, like, it’s this new thing, we can’t rely on it, we don’t know, like You know, that’s it’s starting to look like a kind of a rear guard action. But just to just to clarify, is it the case that software falls under the operations and management budget or that they don’t make that they don’t get a rate of return for deploying software type stuff?

Sydnie Lieb: So that’s a fun question. And the answer is it depends. It’s state by state. And it even once it gets down to state by state is oftentimes software decision by software decision. And I think our philosophy here at the Department of Commerce as a regulator would be that we would be very happy to allow the utility to capitalize. A modest software investment in exchange for a very significant capital investment. And, you know, philosophically, whether or not there are risks and the asset life of the software is very different than the asset life of something physical in the ground. And so there are some folks that may not feel it is appropriate to capitalize software, but I think getting back to like utility incentives, if we can get them to if we are gonna force them as regulators to make the software investment, I think there’s some space to capitalize that, but the utility would rather capitalize the very large capital investment.

David Roberts: Yeah, I mean, even even if they do get a rate of return on software, it’s not gonna be as big as if you’re building stuff, right?

Pete Wyckoff: I mean, as a regulator, you just have to be constantly aware that their incentive, and it’s not they’re not evil evil. This is how the system is set up, is to do the expensive thing, not the cheap thing, even if the cheap thing is the better way.

David Roberts: Yes, yes. One other case here where there’s some where you’ve said there’s some room for dispute where something might not be as mandatory as they’re trying to make it is these sort of reliability standards. Talk a little bit about kind of how they treat reliability, how they spend on reliability and how that might you know, what are the other options? What could it be? How could it be different?

Sydnie Lieb: Yeah. So I think this really gets to anytime somebody’s coming to me now and talking about, I wanna do a legislative grid utilization standard, or I want to do some sort of policy that is gonna increase utilization of the grid. I’ve been trying to be really clear with folks that if you are gonna increase the utilization of the equipment, you inherently are going to cause some, probably very small, but But existing impact to the reliability of the system. Because the reason that we have overbuilt this system such that it is so poorly utilized is because we are planning it for an extremely low probability event.

David Roberts: Yeah.

Pete Wyckoff: Can I jump in again? I’ll be the thousand-foot view guy. So I think it is really important, and politically it’s going to be really dicey to say and realize that the trend we’ve had is for fewer and fewer outages. We’ve built a more and more reliable system, and that is great, and that is good. But as you go from 95 to 98 to 99 to 99.99 to a hundred percent. Yeah. As you go to Six Sigma. Every little increment brings a huge cost as you get toward towards 100. It is nonlinear. There’s a huge growth there. So I do not want to be portrayed as the guy who says, we should have more power outages. But if you go to if you go to a to no chance of a power outage. You are going to have an electric system that is so expensive that it is great, it’s 100% reliable. No one can afford it. So there is that trade-off and political systems hate trade-offs like that.

David Roberts: Yes, they really do. Nobody wants nobody wants to be the person who says maybe we should tolerate a few outages a year so we don’t have to spend a cajillion dollars to up that percentage.

Pete Wyckoff: That’s a hundred percent. I mean, I can really get myself in trouble and say that a ninety nine point nine percent clean grid is a lot cheaper than a hundred percent clean grid as well.

David Roberts: Yeah. I mean I think I think that’s I think that’s uncontroversial. That’s it’s it’s those last increments. It’s those la but again, like that’s gonna be a tricky argument. And are there other I mean are there other reliability standards that could be used instead? Like what are there concrete recommendations for how to treat this?

Pete Wyckoff: Talking about myself versus Xcel is good here.

Sydnie Lieb: We should talk about the power market, but I want to be really clear too. The question that you are asking is actually our position. Our position is not we should be spending $20 million less and have one more outage hour in a 10-year period. We’re not taking a position on actually making any less investment. What we are saying is Xcel said, or any of the utilities in these dockets have said. We have to spend this much, otherwise the system will be unreliable. And they have defined what unreliable is. And this is like think where the MISO example comes in. Right. And all the Department of Commerce and a lot of other interveners in the docket who are agreeing with us are saying is it’s not up to the utility to make that cost optimization in a black box, not out in the transparent public, which is where. Regulated monopolies are supposed to make these decisions transparently so that their regulator can tell them whether or not they think that’s a reasonable level of investment.

David Roberts: Right. I mean, it is a it is ultimately not an engineering decision. It’s a political decision, how much reliability you want versus how much cost you want to spend. Like that trade-off at the very least should be made in public with public regulators with their eyes on it. Right. I mean, that’s the idea here.

Sydnie Lieb: Right. And with the consumer advocates coming in as well, the there’s a lot of folks. The utility is not the person who speaks for low income ratepayers or small businesses. We have advocates, that’s not even me. I speak for Minnesota’s like as a whole, but there’s plenty of folks that are just concerned with what’s the impact to low income folks of a ten percent rate increase. Right. And those folks have deserve to have a voice in. What are we paying for what level of reliability?

Pete Wyckoff: So what I like to say, and this is what I said to legislators over the last four years, is the price of electricity is going to be the balance of the forces making it cheaper and the forces making it more expensive. And there’s a lot of things that push in both directions. If you force a coal plant, for instance, to stay online when economically it shouldn’t be there, that drives things up. If you start in exporting tremendous amounts of natural gas And make it a global price as opposed to a cheaper, former American price, that drives up the cost. Just as two random examples.

David Roberts: If you d you say, for instance, deny permits to wind and solar plants across the country, you might raise the price of electricity, just pulling things out of the hat here.

Pete Wyckoff: Right. But but there’s a whole huge stack of these things, and some of them matter more than others, and we should focus on the things that matter more. But as you and your guests before have shown, and LBNL and our friends in the in the national labs have shown, you know, one of the huge drivers, and we haven’t even gotten to the actual numbers here, and I think Sydney should give us some of the numbers because they’re shocking. One of the huge drivers is a rapid increase in cost of this black box distribution system. In the name of reliability and at some point, A, we gotta make sure that we’re getting that reliability for the right price. And then at some point we’re gonna have to decide what is the right amount of reliability to pay for before we can’t afford the electricity.

David Roberts: Right, right. We’ll talk about the difference between how MISO MISO of course is the is the sort of grid is the transmission grid governing body that governs Minnesota, a bunch of other states in the region. Talk about the difference between how they calculate reliability and how, say, Xcel does on the distribution level.

Sydnie Lieb: Yeah, and I’m I’m glad you’re asking this because it’s actually an opportunity for me to celebrate my staff. And I have, I tell people all the time, I think I have the best staff in all of state government, possibly the entire country in any space. My staff, one of the things they looked at was the utility was valuing an hour of outage at a certain price. And they said, you know, well, let’s actually look at what the transmission market is valuing an hour of outage at that system on. Because MISO is one of the biggest ISOs in the country. It’s a very diverse footprint politically. It’s a very diverse footprint in terms of sort of because politically, like you have very different resources and you have a lot of industrial load there. And when industrial load loses power, that is a very significant economic impact. And some of our utilities are valuing an hour of lost power on the distribution system. More than fifty percent higher than what the power market is valuing at. And I really loved my team because my team came to me and said, We did this calculation, it can’t possibly be right. There’s no way the utility is valuing the economic impact of a lost hour somewhere on the distribution system where people, you know, their houses are warm for an hour at the same price as the entire MISO footprint is valuing.

Pete Wyckoff: Folks who don’t have the MISO map in their head, this runs from one Canadian province down through the center of the country to the Gulf of Mexico and most of Minnesota is in this regional wholesale electric trading market.

David Roberts: Right. So just to make this kind of vivid for listeners, so MISO is valuing what is what is the value, what is how much would it cost a lost hour of electricity for that entire grid region? Multiple states, which include big industrial customers, et cetera, et cetera, et cetera. They are valuing that. And then you have an individual utility talking about a lost hour of electricity and an individual distribution system. It’s like a neighborhood or or or or a city or something, valuing that 50% higher than MISO values reliability for that entire region. And of course, like to return to our previous topic, why would an individual utility rate value reliability so much more highly than an entire regional transmission system? Perhaps because that justifies them. Spending money out the wazoo prevent that lost hour. Right? I mean, that’s it’s hard to it would be difficult to come up with any explanation for that other than that incentive. Am I am I wrong?

Pete Wyckoff: You are not wrong. I’m stalling while Sydney pulls up the actual numbers on her computer. So But that is exactly right.

Sydnie Lieb: I have to make sure that I actually have the numbers and that they’re not trade secret because I feel like they might be. I think the right answer is this is I like without getting into actual numbers, that the utility is valuing the l the hour of loss load more than 50% higher because that allows them to overbuild the system that much more. And again, this is getting back to again, it’s not their fault. This is the way we built the model. Investor-owned. Regulated utilities make money by building things. So the more they can design their engineering standards, design their planning processes so that they have to build more stuff, the more money profit they will make.

Pete Wyckoff: Numbers you certainly can give, Sydney, because I don’t think we’ve gotten them out there. What was the distribution system budget four years ago versus what is it going forward?

David Roberts: Is it the case that they are increasing the value of reliability over time, or is it just the case that they’ve set it very highly and the system is getting older?

Sydnie Lieb: It’s the case primarily that they’ve set it very highly and the system is getting older. I think that’s an important thing to call out as well, because we have been I think Pete said it at the onset. This some of this level of investment is because the system is getting older. And that is important. And again, like the department’s position is not we shouldn’t make the investment. It’s one. The utility has no idea how old the equipment is. The department has asked every single utility, are you tracking the age of your equipment? And they’ve all said, No, we just have everything on general replacement schedules. Which when the budget was 10 per so and I think that gets that’s one of the numbers I f think is most staggering is that I think people think a lot about the transmission build out that we’re doing, the retirement of fossil and the significant build out of renewables that we’ve been doing for several years now. And we don’t think about the distribution system budget. The distribution system budget used to be about 10% of the utility’s total capital budget. So their total budget of things they were building. It’s now almost 30%. It is on par now with what we’re seeing on transmission and generation investment. And so it’s no longer okay to say, well, we don’t really know how old this equipment is, but in general, this equipment on our system is at replacement age.

Pete Wyckoff: Another way of looking at it is I you know, when I would go up to the legislature in my role, I would show all these, you know, we’re getting generation of electricity because we’re moving towards wind and solar. Look at how much less it’s costing us to get this electricity. And there’d be this pushback. Well, I don’t see it in my bills. And it is true, generation costs and the cost of the actual electricity have been falling and falling, but it’s been countered By the rise particularly of distribution systems and then

David Roberts: More than countered. That’s why the bill that’s why bills are going up. So let me ask about this then. Like my instinct, and you know, I had out this whole podcast with Pier LaFarge, who’s making the sort of case that installing batteries in your distribution systems does increase reliability and it is an alternative to spending a bunch more on substations and transformers and wires, et cetera. These are called In the lingo, non-wires alternatives. This is how they’re discussed in these contexts. In other words, this is something you can do instead of building a bunch more wires. I, of course, am a huge fan of these solutions, but some of the materials you sent me sort of seem a little less enthusiastic about them. Like they’re not really getting built and they don’t really seem to be showing up. Like, what is the status? Of non wires alternatives in Minnesota.

Pete Wyckoff: So this, you know, Pier’s big first experiment is in Minnesota at Xcel. And I will say as one of the many things we accomplished in the time I was there, you know, we pushed into Xcel’s IRP that they needed to be moving in this direction. And integrated. So we reached a settlement with the parties and took it to the PUC and it included

David Roberts: Is their IRP is their resource plan.

Pete Wyckoff: With our pushing, let’s try distribution system batteries as something that that can help us deal with the needs of the distribution system in ways that will be cheaper. The devil’s in the details, so although we are the ones that reached the settlement to push this and are happy that we have this project moving forward, we are also charged with not giving a blank check to anybody. And saying this is this has to work as possible best as possible for Minnesota ratepayers and for the Minnesota system. And so that when you sense like, well, you’re not completely behind this and completely happy with how it’s it’s working, that’s our job is to never be completely happy and they’ll let Sydney

David Roberts: And it g and it gets back to the original point, which is how are you gonna know if it’s working? You need the utility to be modeling and projecting like what would it be without these batteries, so then they can find out what is it with these batteries? Like you need better and more transparent distribution system planning to even know whether these things are succeeding, right?

Sydnie Lieb: Yeah, and to be more specific there, both on this project specifically, because again, we were really excited we brought forward the Capacity Connect program, which is the SparkFund batteries, through on a settlement that we orchestrated on Xcel’s last integrated resource plan. I think on that specifically, the two things that are evolving and need to happen in order for that to be a success are Xcel or any utility that wants to do this needs to do. Robust power flow modeling on their system so that they know where those batteries are going to have the most value to the distribution system as a distribution system asset. So they need to know where they have constrains on their system. And the battery needs to go in that location, not just any specific feeder where they can cite it.

David Roberts: Right. And as I understand it, they’re not yet doing that. That’s sort of like the plan, but they’re not yet doing that.

Sydnie Lieb: It is the role of the regulator to make sure that it gets done in that way. I think the other thing that needs to happen there is that the again, the di the DERM system, we’ve defined that acronym, so we’re allowed to use it. That needs to be built and done well again so that that battery, that battery isn’t doing as much good on the system if it’s just sitting there. It needs to be working with the behind the meter stuff effectively. And the last thing I’ll say on non-wire’s alternatives, because We’re seeing this both on the electric side. We’re also seeing this on the gas side. We have a gas integrated resource planning process where there’s non-pipe alternatives that are happening. The utility is often defining the cost benefit analysis that is done to pick whether non-wire’s alternative will work. And again, utility would much rather put a physical asset in the ground than come up with some alternative.

David Roberts: It’s a n it’s like a non profit alternative t to them. So like you’re allowing the utility to determine whether they should get profits or not profits. So it’s pretty predictable how that’s gonna how that’s gonna turn out.

Pete Wyckoff: We were negotiating back and forth. I kept saying to the folks, so let’s say you’re putting 250 batteries out into the Twin Cities. You could also just put those 250 batteries in a field in the country. It’s cheaper to just dump 250 batteries into a field. So you better justify to me how you’re maximizing the distribution system benefit and the grid benefits of the more expensive, let’s put them all over town. Then let’s put them in one place. Right. And that’s where we’ve been back and forth and pushing, particularly Xcel, dis to take full advantage of these distribution system assets that we are pushing for them to have.

David Roberts: Well, this gets perfectly to my next question, which is you’re asking utilities, well, you’re asking regulators to force utilities to do more homework, basically. And and what concretely are you asking them to do? Like what does this homework look like? What do you want utilities to do regarding their distribution system spending? And then once they’ve done it, what do you want the PUC, the Public Utility Commission, the regulators to do with that homework? What how would how do you envision this a better system working?

Sydnie Lieb: Again, these happen every two years. And the first one was two years ago and it was one of the first things I had since inheriting my team and really like getting everybody running in the same direction on trying to really tighten the screws on this planning process. And it is inherently iterative because it’s complicated and it’s hard and you’re gonna take two steps forward and then come back a little bit and try again. But I think the things that we would like to see in this iteration are the sensitivities in the load forecasts need to be looked at transparently and they need to be f informed by AMI. We made this huge advan investment in advance

Pete Wyckoff: Smart meters that we as ratepayers have paid for, so they exist, now use them.

Sydnie Lieb: They’ve been there for a while.

David Roberts: This is something that is shocking, I think, to listeners who are not familiar with this stuff. We spent a lot of money. This is not just true in Minnesota, but all all over the group. We spent a lot of money putting these advanced smart meters on homes and businesses all over the place. And we’re not using the data they’re producing in any meaningful way. And in a lot of times, the utilities won’t even tell you what that data is. It’s insane. Like we have the intelligence capacity out there. We’re not using it. It’s wild.

Pete Wyckoff: Or not.

Sydnie Lieb: It’s ridiculous. I mean, the way I describe it when I’m talking to people is I could be plugging in two electric vehicles in my garage and the utility would still assume that I was gonna get another one in the next five years based on whatever electrification load forecast they have. Because they’re not choosing to look at the data and go, this person’s already plugging in two EVs. They’re definitely not gonna increase the load at this location. Right. And they have that data and we’ve all paid for that data. And it is not that complicated to use it properly. So better forecasting and also allowing that forecasting to not happen behind a black box. The load forecasting needs to be able to have all kinds of interveners come into the process come into the regulatory space and say, We think your forecast is off by 10%. Or we think, you know, we think you’re going to get that much load, but we think it’s going to take 15 years, not 10. And if we do that, we can delay these investments. That’s the big one. I also think getting again back to the software side of things, the utility needs to do power flow modeling of their system. They need to understand where the constraints are. They need to, again, be bringing in better data from AMI to understand where they have a lot of DERs, where they have a lot of electrification happening, and how they can make all those things work together to better utilize the system. And then lastly, there’s a lot of folks talking about grid utilization and really excited about that. I feel really strongly that those folks are going to run into a brick wall when they try to implement what’s happening at the legislature. I think. Folks think that they’re gonna give the utility a seventy percent utilization target on their system. And then the utility is gonna come back and say, We looked at this, the system can’t be reliable at a 70% utilization factor. Trust us. Trust us. We’re not gonna talk to you about it. We’re not gonna let you talk to our engineers. Our engineers say it can’t be done. And that whole thing needs to happen a lot more transparently. And that needs to happen everywhere in the country where they’re trying to do grid utilization.

Pete Wyckoff: I think that’s our big theme here, or one of our big themes is show us the data. Show us how we as regulators can reproduce what you’re claiming. Right. The other thing that we haven’t really talked about is moving beyond this prudence test. So basically if they want to spend something in a distribution system, they come in to the and say, We put a new transformer here. Here’s the receipts. We got it from a reputable supplier. It works. And the system’s better than if we’d done nothing. So the analog there is most people think, you know, the FDA test to see whether a drug works well. No, they just test to see if a drug works better than nothing. So, so that’s the prudent test. Can you beat a placebo of doing nothing?

David Roberts: That’s a pretty low it’s a pretty low bar, especially in this kind of

Pete Wyckoff: What we really want, and back to the medical analog, and it’s only since Obamacare that that the government’s been looking at this at all is saying, Hey, there’s actually five things we could do for that medical condition. Which of them works better than the others? Right. And that’s what we’re asking. Not just did the thing you do actually happen? Show us the receipts and show us you got it, you know, not from some shady guy at the corner, but from a reputable supplier, right? But also was it The best thing you could have done if there were really five things you could have done.

David Roberts: Right, right, right. One of the questions I’ve had about all this is it just seems to me, not to, you know, I’m not in the habit of expressing sympathy for utilities, but in this case, like it just seems like forecasting distribution demand, distribution system demands has gotten wildly more difficult and complicated really rapidly. Like there’s all these new technologies coming on board in distribution systems as we’re talking about. And then there’s like, Data centers. We really have no, you I mean, you are now having to guess how fast our EV is gonna spread. How many people are gonna be charging at home versus here or there? How many people are gonna get solar panels? How many data centers are they gonna build in this area? How you know, there’s just like it just seems like the whole thing’s gotten a lot more difficult, which I guess goes to your point that like we need to make it more transparent how they’re doing this, but it is kind of like a much more complicated thing these days.

Pete Wyckoff: It’s much more complicated, but you know we have AI now and we have we have, you know, advanced in com computers and we have these smart meters and yes, it is much harder. It is a much more complicated thing, but we also have many more tools that if we decide to deploy and use them for getting on top of that complexity.

David Roberts: Well, let me ask ask this then, because this is one of the things, I mean, one of the big critiques these days of the electricity system overall is that it is not moving at a pace. You know, AI and data centers are coming all over the place, industrial electrification, blah, blah, blah. Things are happening very quickly and the electricity system moves very slowly. And when you describe these systems whereby utilities Determine their generation and transmission spending. I mean, one of the things a critic might respond, those are very slow. Those are very slow, two slow processes. And now you’re asking distribution spending to s to be equally slow. Like, is this not is asking for all this initial analysis not going to slow things down? What about the what about, you know, again, there’s a trade-off always, but like. What about speed?

Pete Wyckoff: So I actually think we can walk and chew gum. But I think what we are asking, pushing for is a distribution system that we can trust costs the right amount. And then we’re gonna lean on that distribution system to actually get us speed to power. You know, you like to talk about demand response, you like to talk about VPPs and virtual power plants and you know, taking advantage of home solar and home batteries and all these other resources out there that we haven’t taken advantage of. I think even with the complexity of how to how to get on top of that, how to do the technology for it and how to regulate it, it’s still going to be a lot faster than building a transmission line across five states. Like I think this still is speed to power. And I think Our utilities need to get very comfortable with this very fast if they are going to do the options that are best for ratepayers. Yeah. It’s uncomfortable for them. And as we’ve said several times in this conversation, they’re not really incentivized to do it because it will probably lead to lower profits. They’re gonna have to do a lot more work to make less money. Yeah. So this is why I mean, I’m not sure. There are, like I said at the beginning earlier on, there are advantages and disadvantages of a regulated for profit monopoly energy system. And we can actually see it in Minnesota at different parts of our electric system where we have munis, co-ops, and these for profit IOUs, investor owned utilities. But sorry, that’s the game. We should do it and it will still be the fastest way to meet the needs of data centers and EVs and do it cleanly too.

David Roberts: Delaware has proposed, I’m told, a kind of spending cap on distribution spending, as in part, I think, as a response to all these affordability arguments. You know, all like r r regulators, legislators, everybody, governors, everybody’s under a ton of pressure to deal with affordability. And that I think can seem like An easy off the shelf response just to cap the amount they’re spending. But you guys think that that is the wrong way to go. Can you say a little bit about why?

Pete Wyckoff: Well, I think spending caps and rate freezes and I’m not saying the wrong plan in the short term, but in the long term, what you really want to say is what is the ideal amount of spending and what do we need to know and probably don’t know yet in terms of inputs and data to determine that ideal amount. And if you’re setting a spending cap now, I guarantee you don’t know what that ideal number is.

David Roberts: Gets back to how complex it is to forecast these things. Like do you want a governor or a legislature guessing at what the optimal spending is f two years from now, five years from now?

Pete Wyckoff: I mean, in the energy system in general, I think it’s just like if you put rent freezes in, you’re probably not gonna get as housing as much housing built. Maybe there’s ways around it. Right. But maybe there are times when you just need to say enough is enough. We people can’t afford this. We have to put a freeze on while we get while we get that knowledge. And I’m not gonna judge that a priori. But I don’t think it’s a long term solution to say Without information we’re gonna decide this is where the price should be.

David Roberts: Yeah, this is a worry I come back to again and again with the affordability stuff is we do want and need to build a bunch more stuff. Like that’s not, you know, s it’s utilities maybe want to build more than is strictly necessary, but we do, but like things are expanding. Electrification is happening even behind data centers. There’s a lot of other electrification happening. We are we do need a bigger and more robust energy. System. So I don’t want affordability solutions that inadvertently right, slow down the building that we do need. That’s the tricky

Pete Wyckoff: I’m gonna say something that I probably wouldn’t have said two weeks ago. And Sydnie’s gonna probably kick me because we’ve reversed roles here. So there are things about the electric system where we’re just gonna have to spend more. Yeah. And I am convinced that the distribution system, we’re gonna have to spend more. Do we need to go from a $250 million annual expense to a billion dollar annual expense?

David Roberts: Yeah.

Pete Wyckoff: I think we should very carefully ask questions and probably we’ll end up reducing that requested increase. But we’re not going to reduce it down to no increase. I was very disappointed in some recent actions by the Minnesota PUC. For one, they rejected our recommendation that they move beyond gas line extension subsidies, which cost ratepayers every year in the tens of millions.

David Roberts: Yeah. Yeah, we did a different pod about that.

Pete Wyckoff: And then we just did a an Xcel rate case where the three Democrats on the and I’m a Democrat on the commission voted to increase Xcel’s ROE. Jeez. Against our recommendation as the Department of Commerce and against how the non Democrats on the split commission voted.

David Roberts: That’s wild. And of course, like the more return on equity they get as a percentage, the higher their incentive to build more, like to build unnecessary stuff. Like all the in the exact incentive we’ve been discussing, their preference for wires over non wires, the more you increase ROE, the more they have that incentive, which is part of the problem.

Pete Wyckoff: I think my broader point is where we can save money and where we can put a downward pressure on prices, we’re gonna need to do it because we just need to increase affordability. And Americans are telling you in polling that we don’t wanna pay so much for our energy. I think a lot of that is not actually electricity, that’s what they’re seeing at the pump. So maybe we should have fewer wars in the Middle East. But but it is a real problem and it’s gonna be a real problem going forward because there are going to be investments we’re gonna have to make that will drive upward pressure on the cost of electricity. So every time we can counter that by let’s say moving more to wind and solar or looking hard at ROE or looking hard at other things, we should do that.

David Roberts: Right. Right. It’s a it’s it’s a both and. So here’s a slightly technical question. We’ve been talking about all this in the context of these vertically integrated utilities that you’ve got in Minnesota that that do generation and transmission and distribution. In restructured areas where you have generation utilities and transmission utilities and then distribution utilities, do you think that all this same basic logic applies to distribution utilities in restructured areas, or is it a kind of a different situation there?

Sydnie Lieb: So Pete should probably give the national context, but as the regulator of the vertically integrated utility, I suspect that this is something that needs to happen regardless of whether or not utilities are owning generation. Right. Because the ones that own distribution, this is their main cash cow on the on the capital side is to put in as much capacity on the distribution system as possible.

David Roberts: Right. Well, if you’re a distribution utility, it’s that’s your only your only cash cow. So it seems like all the same incentives sort of apply.

Sydnie Lieb: That is your Yeah. And and also sort of just pulling us back to where we started, on the question around like, are we going to need to build more stuff? We are absolutely going to need to build more stuff. I think on the transmission and the generation side, we have these very proactive planning processes to optimize the stuff we’re going to build and to allow people to really pressure test that in a transparent way. Now that we are seeing It’s time to replace aging poles, wires, transformers, undersized substations. We need also a proactive planning process there, or we’re just gonna throw away money all over the system and not be really sure that that was the right way to invest.

David Roberts: Right. So Pete, would you say that I mean, this is obviously the Minnesota Department of Commerce is recommending this for Minnesota utilities and Minnesota regulators, but would you say that this applies nationally, applies in other states? Like everybody, everywhere distribution system spending is going up, everywhere they’re getting more complicated, everywhere the planning process is not transparent and et cetera. I mean, do you think this is applicable everywhere basically?

Pete Wyckoff: I do, and I’m no longer at the Department of Commerce, so they’re not responsible for my comments, but I am now in an organization that focuses more nationally. And yes, I’ve only been there two weeks, but yes, I would say from a national perspective, this is all very important. But I think it’s also the flip side to what you talk about all the time on this podcast, that we want to actually ask more from the distribution system and ask more from the ability to go two ways. So if we’re gonna elevate the importance of the distribution system, make it less dumb. And you know, historically it was boring. Historically it was it wasn’t the big cost driver, it was the rounding error and no one paid much attention to. Yeah.

David Roberts: And it got interesting real quick, like in the context of how fast utilities move and how fast they think, it got interesting really quick, like b overnight basically from their perspective.

Pete Wyckoff: But the sort of stuff that Volts listeners tend to get really excited about goes through the distribution system.

David Roberts: So by way of wrapping up here then, I guess I would ask maybe both of you, like, what is the vision here? What is the desired outcome? What would what would it look like if things were working well? If maybe just for Minnesota, Sydney, if like if Minnesota regulators and legislators took your advice, what would a well functioning process look like and what would be the outcomes?

Sydnie Lieb: So the distribution system planning is not something that was legislatively mandated. It is something that was created in the regulatory space. And a lot of where that grew out from was we would get to rate cases. And as Pete was describing for prudency, prudency just asks, did you get a good price for this widget? Right. It does not ask, did you actually buy the widget and did you get it at a competitive market price? It does not ask if you needed the widget to begin with.

David Roberts: Or if there are other widgets you could have gotten instead.

Sydnie Lieb: There’s some other widget. Yeah. So I think that if the distribution plan, and again, it’s an iterative process, we may not get all the way this year, but it should progress into a detailed planning process so that when something is coming for cost recovery in a rate case, we can say this was a cost optimized investment and it was prudent. Because the rate case can only ask, was this prudent? It cannot ask, was it optimized? So there must be a place somewhere, and it should be this place that you plan an optimized system and we really look at was there an alternative that could have been purchased? Did we not need this much overbuild of capacity in this location to begin with? And how are we balancing affordability and reliability? And are we doing that in a transparent way? What

David Roberts: Let me ask, this is all upstream of the rate case. This is all supposed to happen before the rate case, but I’m sort of what is the enforcement mechanism? I mean, sort of like the rate case is where the the rubber hits the road. It’s where the PUC, the public utility regulators, actually can give them the money or not give them the money, as it were. So how would the PUC enforce this? How would it make sure that the utility is doing it well and doing it correctly if rate cases only involve this prudency judgment. Where’s the enforcement mechanism to make sure the utilities are doing distribution system planning well and correctly?

Sydnie Lieb: I think it would actually need to happen in the planning process is the utility would need to have an approved plan and then they would build to that plan. And then if they got to a rate case and they did something else, they would need to very clearly explain why they did something else and prove that that was in the public interest. And, you know, it’s utility regulatory, so it might get a little bit squishy of how much enforcement authority there actually is at the commission. I think that that’s really what it. Would happen is that you’d have an approved plan. And if you’re going to deviate from that plan, you better have a very good, robust analytical explanation when you come for cost recovery.

David Roberts: And am I correct in saying like a prudency review doesn’t ask very much of the regulators? They’re just like, did you, you know, is this a credible vendor or whatever? This type of thing that this type of process that you’re envisioning and encouraging here is also going to ask a lot more of regulators, right? They’re going to have to know a lot more and engage a lot more and have. Again, to return to a Volts theme, the capacity, the staff, the funding, the expertise to make these what are really some pretty complicated judgments about whether utilities are doing this correctly, right? I mean, you need good regulators to make this work.

Pete Wyckoff: I think this is absolutely true and we need to staff up our regulatory agencies. And in Minnesota we’ve done a good job on this. And there will be more needs going forward because it gets more and more complex. But I’ll just go back to the there’s three parts of the electric system. There’s the generation. In Minnesota, we have a very robust integrated resource planning process, which I think is very good. And my understanding is there are states where it isn’t very good. So we are leading there. We have, I think in Northern MISO, in particular, a sort of model transmission planning system in Minnesota’s part of that, I think, is model. So that’s two legs of the stool. The third leg is distribution. We have moved from not doing much there to doing something. But what we are pushing, thanks to Sydney’s brilliance and my brilliance in bringing her on board, was Yeah.

David Roberts: Your reflected brilliance.

Pete Wyckoff: Was we’re pushing, let’s get the distribution planning process up to snuff compared to the things we’re already doing well. And then we have one more step beyond that, that probably a future podcast episode. We would like those three planning processes to talk to each other because we think we think we think that considering the three in isolation may not lead to the optimal solution. So we should have another layer that says, okay, let’s optimize across the three Legs of the stool.

David Roberts: This is another Volts theme. Another this is something that in w in almost every different context, almost every different podcast, sooner or later you pull the string and you get back here. We need better and more holistic planning, which we just don’t do very well in any area, it seems like in the US. It’s like whether you’re talking about municipal stuff, gas stuff. Electricity stuff, it always comes back there. We need to step back and do more holistic planning. And that’s sort of like that’s what you guys are all about here.

Pete Wyckoff: And as a Minnesotan who no longer works in the state enterprise, no longer works for the regulator, but now works for a national group that tries to help take the best solutions out there and bring them to more states and tries to influence federal policy. I think as a Minnesotan, what I would like to see is Minnesota to get better and better and better at this.

David Roberts: And gosh Pete, what if like the states talked to the other states and there was even like national there was national planning?

Pete Wyckoff: Yeah, my new organization. What if give us the tools that we can say, Hey State X, look at State Y, which you think you’re like or better than? Well, maybe they’re better than you on this, so why don’t you get up to speed, right?

David Roberts: Maybe you could build less of this if they built more of that. Maybe we could like plan, you know, nationally ‘cause we can all we can all dream. Well, is there anything else we missed? Anything else you want to say before we wrap up?

Sydnie Lieb: I think we caught it all.

David Roberts: This is beautiful. I love talking about utility regulations. I guess that’s my that’s my kink. Thank you guys for coming on. This is super fascinating. I think this is like this has to kind of been hovering in the background of a million different Volts discussions. And I’m really glad to surface it. Just the general need for better distribution system planning. So thank you both.

Pete Wyckoff: Thank you so much for having us on.

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Text transcript:

David Roberts

All right. Hello, everyone. This is Volts for July 1, 2026: “A key Arizona race will test clean energy’s electoral power.” I’m your host, David Roberts.

This past spring, Turning Point USA — the right-wing group founded by the late Charlie Kirk — poured an extraordinary amount of money and effort into one of the sleepiest elections in the country: a race for the board of an Arizona public power utility called Salt River Project, which serves just over a million people in the Phoenix area. And … they lost. Clean-energy candidates gained a majority on the board for the first time ever.

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If you’re wondering why anyone fights over a utility board, part of the answer is that SRP — which was planning new gas plants, a new gas pipeline, and new fees on rooftop solar — isn’t regulated by anybody but itself. It is unusual in that its elected board is the only check on what it charges and what it builds, and even more unusual in that only landowners can vote in board elections. Votes are weighted by the acre — the more land you have, the more votes you get, and renters don’t vote at all. It is exactly as feudal and anti-democratic as it sounds.

The people who pulled off that win are my guests today. Charlie Fisher ran the Arizona ground operation through his group Arizonans for a Clean Economy; Ning Mosberger-Tang is behind 1.5°Climate, a funder network targeting state-level, climate-significant elections.

Fresh off SRP, they are now going after a bigger prize: the Arizona Corporation Commission, the statewide body that regulates all the other state utilities. It’s a rematch against TPUSA.

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And it’s a much tougher fight. Every one of the five seats is currently Republican, and a Democratic slate that tried to upend that situation (Volts listeners may recall that I interviewed one of those candidates) lost in 2024. Can the SRP playbook scale up to win a bigger fight with a real statewide electorate? Can the affordability and anti-corruption messages overcome partisan headwinds? And can they win races beyond Arizona? That’s what I’m going to get into with Fisher and Mosberger-Tang. Let’s do this.

With no further ado, Charlie Fisher, Ning Mosberger-Tang, welcome to Volts. Thank you so much for coming.

Charlie Fisher

Thank you so much for having us.

David Roberts

Charlie, let’s start with you. I’m curious how you got involved in the Salt River Project election at all. It seems small, obscure, and one of the things I’ve been wondering is, did you get into it and then Turning Point came in to fight you, or did Turning Point get into it and you came in to fight Turning Point? How did you end up getting involved and so involved in this election?

Charlie Fisher

Just to give a little bit of background. I started my career organizing with Arizona PIRG, the Public Interest Research Group in Environment Arizona, and a passion for climate and clean energy issues eventually led me to electoral politics. Prior to co-founding ACCE in early 2023, I was the executive director of the Arizona Democratic Party. I had fairly deep experience in campaigns and elections in Arizona. I had never even heard of SRP elections prior to starting ACCE in 2023, which was wild.

The obscurity is hard to overstate here, but the reality is that the 2024 election was the first time that Arizonans for a Clean Economy, or ACCE, got involved. Turning Point was not involved at all in 2024. We were very surprised to see their significant investment starting in early 2025.

David Roberts

Do you have any idea why they identified this? At least you’re in Arizona and in clean energy in Arizona, so it makes some sense for you. But they’re a national organization. How on earth did this come on their radar, do you know?

Charlie Fisher

It’s a good question and I don’t know for sure. I think one of the reasons given, or one of my theories at least, is that this was an early test of their ground game. Looking ahead to November of 2026, one of their top priorities, certainly in Arizona and nationally, is the governor’s race. They have come in heavily in support of Congressman Andy Biggs, who is in the Republican primary. They went so far as to send canvassers out to talk about SRP wearing shirts that said, “Thank you, Andy Biggs, for saving our utilities,” which is a bizarre strategy, to put it kindly.

I think it could have been some early flexing of the field-organizing muscles as we move towards November 26. The other information that has come to light is that a couple of SRP board members made sizable donations to Turning Point USA prior to their involvement. One $200,000 donation, and I think there was a $20,000 donation from SRP board members. Of course, they say it is unrelated, but I am not sure that passes the smell test for me.

David Roberts

What’s $200,000 among friends? Explain a little bit because I had trouble believing this when I was reading about it. It is flummoxing. I mentioned it in the intro, but explain a little bit about how the SRP election works. It sounds like it is transported from a different, earlier era of history. It’s wild to me that it still exists. Explain how these board members are elected and who gets to vote.

Charlie Fisher

Yes, you are right. It is from a different era. This system was initially established pre-statehood. SRP is unique because it was essentially created by a group of landowners, farmers, ranchers in the early 20th century. They came together, formed an association, and put their land up as collateral to convince the federal government to build Roosevelt Dam, which was our first big dam here in central Arizona. That was the beginning of the system. The fact that we still elect these folks on a system based on the early 1900s is clearly a problem.

The way that it works is there are 14 governing board members. Not to get too in the weeds, but there are two separate governing boards because SRP is technically two separate entities — water and power. For this discussion, we’ll just talk about the power side. The SRP district governing board is 14 members. On top of those 14 members, there’s an elected president and vice president. The president, vice president, and 10 of the 14 board members are elected on an acreage-based voting system, which, you mentioned at the top, means only eligible landowners have the opportunity to vote.

You have to own land in SRP service territory, and there are whole swaths of ineligible voting lands in SRP service territory. Just figuring out whether you are eligible is a challenge in and of itself. They are elected on four-year terms where half of the body is up every other year. The elections are held in April of even-numbered years when no one is thinking about elections.

David Roberts

The whole thing seems designed to absolutely minimize turnout. You don’t even know if you’re eligible to vote. You don’t know when the election is. These must have traditionally been tiny, tiny-turnout elections.

Charlie Fisher

Absolutely. Just to give you a sense, there are around 750,000 people who are eligible to vote in SRP elections. Looking back to 2022, when some grassroots climate and clean energy activists had started running and picking up seats, 6,972 people voted in 2022 out of 750,000 eligible for an entity that delivers water and power for over 2 million people in central Arizona. We knew that was the first problem we needed to solve — we needed to raise awareness and increase turnout.

David Roberts

Let’s talk then about how you do that. This is not a normal election. It’s not a normal voter base. A lot of the voter base doesn’t even know whether it’s the voter base or not. What was your strategy for targeting voters? You can’t just put ads on TV and stuff like that. This seems like a case where you really do have to go find people one by one. What was the strategy for increasing turnout?

Charlie Fisher

This was one of the most difficult questions for us, our team, our coalition to answer because it is so obscure. We did a huge amount of research into all of the eligible voters and did both qualitative and quantitative research to get as much data as we could on these folks: what is their voting history in other elections? We could really get a sense of who these folks are, what makes them tick, and what motivates them.

The other challenge was at what acreage, at what amount of land does your property not just become your home and the place that you live and your single largest asset, but become more of a business and a financial relationship. That very much changes the incentives of how you want to vote for SRP board members.

David Roberts

This is a big question I have. My gut says the more acreage you have, the more likely you are to vote for conservative candidates. But is that true? Does that hold?

Charlie Fisher

I can’t say for sure, but that was our theory as well: if you have 10 or more acres, and we set our threshold at one acre or less for a number of reasons. If you have more than 10 acres, you view your property as an investment, a financial, wealth-building tool rather than a place that you live. That was our first, and there was no hard science behind it, but we ended up deciding that if you have an acre or less than an acre, there’s a high probability that your home is where you live and that you will be persuaded and deeply affected by rising utility prices.

We looked at the districts that were going to be voting, the district board seats that were going to be voting in April, honed in on those ones, set our acreage cap at one, and then we talked to folks that we knew were good voters in other elections and were completely unaware that they even had the opportunity to vote in SRP.

David Roberts

That’s door knocking. That’s going out to their houses and knocking on their doors.

Charlie Fisher

Oh, yeah. We ran a comprehensive campaign. We had five direct mail pieces to this universe. It ended up being about 60,000 people. We did five mail pieces. We ran a whole series of digital ads. We did both paid and volunteer canvassing — door knocking, phone banking, texting. We threw the kitchen sink at this thing to make sure every single one of these folks knew that they get to vote for these people that set their rates. You can request your ballot in the mail, which has been made more difficult in Arizona in all other elections.

But for SRP, to their credit, they do a good job of maintaining a permanent early voter list. That was the goal: make sure people are frustrated with their bills, know that this board is elected and the election is coming up, and all you have to do is request this ballot in the mail and then you have a say in these people who are setting your monthly bills.

David Roberts

Ning, I have the same question for you. First, maybe just tell us briefly a little about what your group is, and then how did this weird, obscure little election come up on your radar? How did you get involved?

Ning Mosberger-Tang

David, first, I want to mention that I’m very excited to be on this call because I am a big fan of your podcast.

David Roberts

Thank you.

Ning Mosberger-Tang

It covers a lot of topics that we are very interested in. My background: I used to work in the tech industry. Back in 2006, because I was so concerned about the climate crisis, I left tech to focus on climate change mitigation work. I have been doing that ever since. The first 10 years, between 2006 and 2016, I focused on conservation work, including some global work and energy efficiency campaigns, education for climate change, environmental issues, and a whole bunch of things on the ground. But the 2016 election changed my strategy.

Maybe I’m late, but I realized that in order to make a real dent, really change something in the climate space, I have to get engaged with policies and politics. I started in Colorado state politics and state policies in 2018, and then in 2020 moved onto the national level, doing more policy and political work at the federal level and in other states. In 2022, I started a 1.5°Climate donor collaborative because I realized that there is only so much one group can do. We have to get more donors on board and through our collective effort we can make a difference.

1.5°Climate was started in March 2022 and since then we have grown our membership from one, which is me, to more than 700. In the past four years we have moved more than $36 million through our collective effort to more than 100 organizations including Charlie’s.

We are very excited about ACCE’s strategy, the way they engage with the voters and get turnout in these low-hanging fruit type of campaigns. Because you just turn out a small number of voters and they will be able to change the majority of that SRP board and make a big difference there in Arizona. These are ideal applications for us at 1.5°Climate Network. We are trying to identify low-hanging fruit, high-impact but under-the-radar strategies and get our donors to pay attention to that and move funds to them.

David Roberts

You were involved in the Georgia PUC elections last year, were you not? Volts listeners will be very familiar with that. I had one of those candidates on. It was a very exciting election that the good clean energy candidate won. You were engaged in that?

Ning Mosberger-Tang

Yes, we were very involved. We brought in Briante McCorkle. She is amazing. She leads the Georgia Conservation Voters. We helped them raise funds to fill their C4 gap. We also had some conversations with Peter Hubbard and Alicia Johnson. They were great candidates.

To win elections you have to have the finance. You also have to have great candidates and I think we had that in that election. I’m very excited that both of them were able to win. We are going to continue to be engaged this November because they are going to have two more races there. Peter needs to get reelected and then Sheila Edwards is running for the open seat. We are hoping that we can help them again through Georgia Conservation Voters. If they win, they will be able to get three-to-two.

David Roberts

Yeah, they’ll have a majority.

Ning Mosberger-Tang

Majority. That’s right. That’ll be so exciting for a red state like Georgia.

David Roberts

I’m curious about the messaging that you used in SRP in this election. If you’re identifying donors who are already inclined toward clean energy, inclined toward Democratic candidates, maybe all you needed to do was just let them know that this was happening and that they could vote in it. Was that the majority of it or was there a specific set of messages that you focused on in this particular race?

Charlie Fisher

It was a combination, to be honest. I will make a quick distinction. AZCE, Arizonans for a Clean Economy, did purely educational work and that was about 80 percent of the total campaign, in coalition with other organizations as well. We did not do this alone. The vast majority of the work, to your point, Dave, was just letting people know that this is an election that happens, that impacts your monthly bills, and you have the opportunity to vote. That did a huge amount of the lifting for us.

We were also incredibly disciplined in our messaging in that we were just letting folks know SRP just voted to raise your rates again. In February of 2025, they voted to raise prices on residential customers for the fifth time in five years. We wanted to make sure that every single eligible voter, particularly the ones in the districts that were going to have seats up for election, knew that fact.

The reality is that SRP has higher favorability than all of the other investor-owned utilities in Arizona, and historically they have had lower rates. We needed to make sure that people knew that the SRP board just voted to raise rates again for the fifth time in five years.

David Roberts

Rates were the central message. That’s the central message.

Charlie Fisher

100%.

David Roberts

Not so much on all the gas incoming, the gas pipeline, all this stuff. Not a dirty versus clean energy thing, more just affordability.

Charlie Fisher

100%. The candidates on the other side, because we were on the independent side and couldn’t coordinate with candidates, were talking about clean energy, they were talking about data centers. That became a big topic towards the closing stage of the campaign. We were really focused on “these folks are raising your rates. Request your ballot today.”

The huge value that Ning and the 1.5 team brought in is we did, because so many of the questions that we got were, “Who should we vote for?” We aren’t able to answer those questions as AZCE, but with Ning’s support —

David Roberts

You’re a C3, so you can’t say, you can’t weigh in on that.

Charlie Fisher

Exactly. We said, “Here are the two websites of the different competing slates of candidates. Check them out.” We wanted to make sure that you vote. With Ning and her team’s support, we were able to raise PAC dollars into Arizona Power PAC, which is our sister PAC organization. In coalition with CHISPA Arizona PAC, we were able in the closing month or so to follow up with all of those same folks and say, “These are the good guys.”

David Roberts

That’s a C4. They’re allowed to do electoral work, the PACs. This is an election analysis question. I’m curious what both of you think about it. Some of the conventional wisdom after the dust settled was that Turning Point’s heavy, high-profile engagement in this kind of ended up backfiring. Even some GOP consultants felt it ended up backfiring. It just drew attention to the race, raised the salience of the race, raised the number of people who voted, and it backfired on them. Do you agree with that assessment?

Charlie Fisher

I agree partially. There is absolutely no doubt that Turning Point’s investment and involvement and the media coverage of their involvement raised the salience and awareness far beyond what we were doing. I do think it backfired. The strategy — like we talked about earlier — whether it was the “Thank you, Andy Biggs, for saving our utilities” T-shirts, the fact that they were supporting the entire status quo slate of candidates that had just voted to raise rates for the fifth time in five years, or the fact that they blanketed the entire county in street signs. Those really large political signs for an election that not even a third of Maricopa County residents are eligible to vote in and no one knows about.

Putting up street signs for an election that no one knows about and very few people are eligible for, and randomly out of nowhere saying, “Keep the Green New Deal out of Arizona” in really liberal neighborhoods. I live in midtown Phoenix, one of the liberal cores here, and on the end of my street was an anti-Green New Deal sign. I think people were just, “What are they talking about? What is going on?” On the other side, we continued to be incredibly disciplined, talking to just those 60,000 people, educating them on this opportunity. It was a combo.

Ning Mosberger-Tang

That’s a really unusual time. In Wisconsin, Elon Musk tried to engage in the Supreme Court race there, and it really backfired. The bottom line is still the affordability message, because the same thing happened in Georgia. When the GCV ran a campaign in Georgia, they focused a lot on the utility rates and affordability and how the current commission was raising the rate many times in a row. That’s the message that resonates with voters.

David Roberts

Arizona has Prop 211 that now forces C4s to disclose their donors. This has been a long time liberal campaign worry about dark money coming in, etc. Do you think that kind of disclosure helps or constrains your group, your C4?

Ning Mosberger-Tang

It does make people more cautious when they want to invest in Arizona because a lot of donors do not necessarily want to be disclosed. On the other hand, we are doing what we believe is the right thing. The candidates we support or the initiatives we support, we are proud to be one of the supporters. It has an impact, but it is not a huge impact. For example, this election with SRP, our donors invested directly in the PAC, so we donate to the PAC, and it is all disclosed.

David Roberts

Let’s pivot. The main thing I wanted to focus on today, the main thing of interest now, is this upcoming election for the Arizona Corporation Commission. This is the Public Utility Commission that regulates all the other utilities in the state in the more normal way. The machine you built up, or this campaign you built up, this group and network you built up, is trying to roll into this next election and win it, too.

The striking thing, the most immediately striking thing, is that this is just a very different kind of election. It’s not this weird feudal landowner thing. It’s a statewide election with a statewide electorate. Charlie, I’m curious what parts of the playbook you think transfer here in terms of turnout, messaging, etc.

Charlie Fisher

You are 1000% right. That is a completely different dynamic. It is a different thing in November.

David Roberts

Not as obscure, but PUC elections are not high on people’s priority list either. It’s still semi-obscure, but not nearly as obscure.

Charlie Fisher

Absolutely. Of course, we have all of our statewides, we have competitive congressional races. There will be tens of millions of dollars spent communicating to voters in the lead-up to November. That was just not the case.

David Roberts

You don’t have a quiet room in which to target these messages. You’re going to be competing with a lot of other messages. They’re going to be getting a lot of direct mail and messages from all over the place. How does the strategy translate?

Charlie Fisher

The first piece is being incredibly disciplined and targeting, really trying to identify who are both our base voters who are likely going to vote or maybe skip midterm elections, but really are unclear about what the Arizona Corporation Commission is, because we have a situation in Arizona where almost every cycle there are over 100,000 people who cast ballots who will vote for the Senate race or the presidential or the governor, and will just skip over the Corporation Commission.

The first job that we need to do is educate those folks specifically that you cannot skip this election and you have two votes. Use both of them and understand this is the only line on your ballot that directly impacts your monthly budget. The targeting and being really disciplined about who we talk to is one thing that absolutely carries over. The education piece is similar. It will be more expensive and certainly a much larger universe of folks we need to talk to, but we need to simply educate them that the Arizona Corporation Commission regulates monopoly utilities in Arizona.

Oftentimes people think that it’s just for business owners. They do paperwork and administrative stuff, which they do as well. But the primary function is utility regulation. The affordability message, to Ning’s point, has to carry through. I would guess that both sides are going to be making that claim that they are the affordability team.

David Roberts

Voters of all kinds across the country are going to be hearing that word out of everyone’s mouth these coming elections. That does muddy the waters a little bit.

Charlie Fisher

I just think it is a much more difficult case to make as an incumbent commissioner who has raised rates consistently over the four years of your service that you are the affordability team.

Really educating folks early on those points, on those facts, is critical. We’re excited. We just launched an education campaign called Follow the Power to help people connect those dots and understand how they can get involved at the ACC, how they can scrutinize their decisions, provide testimony, and then register to vote and commit to vote for ACC in November.

David Roberts

To the extent you’re willing to tell us, I’m curious what the scale of investment required here is for a true statewide race versus the much smaller, much more targeted SRP race. Is it a lot more money?

Ning Mosberger-Tang

Oh yes, I think it is going to cost millions of dollars potentially, but it is going to be a team effort. There are many other races up and down the ticket in Arizona, including the governor’s race and also the state legislature and congressional races as well. I hope the GOTV efforts done by other groups, other funder-pilot donors will be helpful for this ACC election as well.

What Charlie is doing is really important to reduce the down-ballot drop-off for this commissioner vote. All these together, potentially we can make it a really good year in Arizona and finally get the state trifecta in Arizona. That is going to have a pretty big impact down the road for policymaking, not just for clean energy, but for other things as well.

David Roberts

One difference here is that the SRP elections were facially nonpartisan. They are not Democrat versus Republican. There is no D or R next to the candidates’ names on the ballot. In some sense that is helpful because then the only distinguishing feature is affordability. The message is the main thing. The message is up front, the affordability thing. But Charlie, in this election the ACC candidates are partisan. They are Republican or Democrat. They are going to have an R or D next to their name. The basic fact of Arizona is that there are more registered Republicans than there are registered Democrats.

Do you think that hurts or helps here? In a race that they don’t necessarily understand, they don’t necessarily understand the dynamics or who the candidates are, are people just going to revert to partisanship? Is that something that’s on your mind?

Charlie Fisher

Absolutely. It definitely makes it more challenging to make the message be the leading point that sticks with folks. The race is partisan and there are going to be two Democrats versus two Republicans and potentially some third-party candidates as well.

The messaging shouldn’t be, though, because these issues aren’t. It’s why ACCE, I have a background in Democratic politics. ACCE’s mission is to build durable bipartisan support for clean energy leadership in Arizona because clean energy is popular across party issues and rising utility bills are incredibly unpopular regardless of whether you’re a super conservative Republican or a super liberal Democrat.

No pro-high-bills constituency.

Exactly. Very limited constituency for “Yeah, let’s keep raising bills.” I think continuing to focus on that message and just name plainly who the folks are that have been raising bills and who are the folks who are committing to changing that status quo. The registration advantage is real. The reality is that we need to focus on those folks in the middle. The nonpartisan voters in Arizona make up the second largest, and it’s very close with the Republican Party. Those are the critical voters that determine outcomes in generals in Arizona.

David Roberts

It does seem like anti-incumbent — everybody’s pissed off these days about something or other. There’s a lot of anti-incumbent energy.

Charlie Fisher

Backlash election after backlash election these days, it seems.

David Roberts

Which is useful to you if you’re out of power. But the minute you get in, it works against you. It’s troublesome. Turning Point is back. They’re engaged in this election too and they’re backing an insurgent MAGA challenger against the Republican incumbents in the primary of this ACC election. Do you think that is going to split the right or create fissures and conflicts on the right that are going to hurt them in the general election? Or do you think they’re all just going to unite around whoever ends up on the ballot? How much of a threat is that MAGA challenger to the right — unity in this election?

Charlie Fisher

Initially, and Ralph Heap is the gentleman that you’re speaking of. He’s a legislator down in Tucson. Initially when he filed to run for corporation, he was running as a team with another legislator from Northern Arizona named David Marshall. They were very much the Turning Point slate and were working hard to out-MAGA the two Republican incumbents who are in my view pretty staunch conservatives themselves. Every single bill that both Heap and Marshall ran during the legislative session was essentially a clean energy ban.

They did a lot of messaging during the legislative session. About a month ago, David Marshall dropped out of the ACC race because he was appointed, potentially illegally, to be the Navajo County Recorder, the top elections official in Navajo County in northeastern Arizona.

Now that there is not a slate, I am curious to see whether Turning Point really does invest deeply in Ralph Heap’s primary campaign or if the opportunity to wholesale swap out the nominees with two more Turning Point-aligned folks was more motivating to them. We have not seen too much spending from them.

That was definitely the thinking initially with that slate, that it was going to be a nasty, negative primary and that the candidates on the Democratic side who don’t have a competitive primary would be able to start talking to the general election, staying positive, sharing their vision while the others were fighting each other. We will see whether there is a significant investment from Turning Point, given that new dynamic.

David Roberts

Data centers came into the SRP election. They are obviously out of nowhere a huge issue for everybody. Are you messaging around those at all? Do the Democratic candidates versus the Republican candidates have different messages on them? What role are data centers playing in all this?

Charlie Fisher

Certainly a big issue with a huge amount of grassroots opposition, as you have seen across Arizona and across the country. It has not been a top issue that I have seen from any of the candidates yet. The legislature just finally wrapped up last week or the week before. One of the big takeaways was that they removed the tax break, tax credit that has been available to data centers in Arizona for many years. You very quickly saw both sides take victory laps on that win.

I anticipate that trying to talk tough and be seen as tough on data centers is going to be, similarly to affordability, an issue that both sides try to claim high ground on. It is going to be really difficult for the Republicans given the fact that one of the incumbents, Kevin Thompson, is a lobbyist for data centers. He works for EdgeCore and he just announced that publicly at a conference or a panel that he was speaking on a couple of weeks ago. It is going to be real difficult to be the anti-data center guy, given that is how you pay your bills outside of your commission work.

David Roberts

It’s funny that the same messages, the same push, the same messages, everybody wants to grab them. There are no high-profile issues on which the R and D are disagreeing. Everybody’s trying to claim the same ground. It’s an odd dynamic.

Ning Mosberger-Tang

Data centers will be an important issue this year in the election, I believe, because it is so connected with affordability. If you look at the polling, affordability of energy is one of the top priority issues for voters in many states. For example, states like Michigan, this is one of the top issues that voters are concerned about this year. Because of that, our group, 1.5°Climate, has been very interested in state-level policies for data centers. Our donor network hosted an educational call for our members about data center policies just a couple of months ago and then we followed that up with data center policies that will go into the state legislature in three states: Illinois, Colorado, and Virginia.

Our members were very interested in getting engaged, trying to make sure that data center policies ensure that data centers will be clean, bring their own energy, and make sure that the data center customers, meaning the hyperscalers, will be covering the cost for transmission, for adding the load for consumers.

David Roberts

It must be tricky because I think all the populist energy here is just “no data centers.” Data centers are bad. I’m sure you would prefer more nuanced policy than that.

Ning Mosberger-Tang

We have a different view. I don’t think I can represent our entire network of donors because we have 700 members and everybody has a different experience and opinion on that. Mostly our group takes the view that data center buildout may not be preventable. There are a lot of questions about AI, whether it’s going to be good or bad for humanity and what can we do about it, but it’s probably going to happen. If that’s going to happen anyway, let’s make sure that we are directing the development, making sure that it’s going to go in the right direction for consumers, for all of us, and not just for the hyperscalers or for the utilities. That’s our take on that.

We support efforts in state legislatures where they would like to regulate the data center buildout to make sure that it will be beneficial for climate and also for consumers. We look at it as a potential opportunity to increase the availability of clean energy. If the data center buildout gets overbuilt, which is possible, because there are a lot more requests for data centers than what they actually can use right now, potentially it could create energy sources for the future, which will be helpful for electrification of everything.

We look at it as an opportunity, but that needs to be guided and supported in a way that will be beneficial for us.

David Roberts

Charlie, I’ll just ask point blank: affordability has been a worry for a while. Democrats went after the ACC in 2022 when they had a really good year, when they won Governor and Secretary of State and Attorney General. They won a bunch of other really competitive races and they lost all the ACC races in 2022. Then they went after them again in 2024 and lost them all again. There does seem something slightly cursed about this. Why do you think this time will be different? More money, more organization, more concern about affordability? Why do you think this is going to be different than the past two races, which people had high hopes about as well?

Charlie Fisher

The answer is all of the above. We are more organized and have a larger coalition of nonprofits, C3s, C4s, an IE coalition that is very large and robust. We’re working in complete lockstep. Historically, what happens is groups will try to coordinate when they’re working on the same race and at least try to share messaging and talk about who they’re targeting. We are building our entire plan as one coalition. We got in the room in May and wrote one plan. We are using one shared universe —

David Roberts

For all these state races?

Charlie Fisher

No, just for Corporation Commission. This is a coalition that only is focused on Corporation Commission. These different organizations that are a part of it will obviously work on Governor, AG, SOS, Legislature, all the different races. But all these groups have come together and said we are committing all of our resources for ACC. We are working in this shared coalition, using this shared universe, sharing all of the data, shared research and polling to make sure that it is really a comprehensive campaign and not just folks talking to different groups, potentially stepping on each other’s toes. It will be really coordinated from beginning to end.

That’s a coalition that we hope is going to stay together for the long haul — so that we can continue to learn lessons and grow and do that early education work, which was so critical to SRP, that has to be done for ACC too. Our plan is to start ASAP with that education effort and be able to really follow it up with the candidate-specific work later.

Ning Mosberger-Tang

I also believe that this year’s election environment will be different from 2022 or 2024. In 2022, we did not get a red wave that was predicted. In 2024, we did not have a very good election environment. I’m hoping that this year will be different. The ACC election is partisan. That is really important — that we have the right kind of election environment overall for Arizona this year. On top of that, with coalitions that Charlie and others have built and with a collective effort and investments from networks like ours, I hope we can finally get that breakthrough and at least win two seats there.

David Roberts

One notable difference is in 2024 all the ACC candidates did this pledge where they refused to take PAC money. They only took public money, which was noble, but resulted in them getting outspent a gazillion to one. Now it is more of a gloves-off — there are PACs, there is money getting involved, and I think at least it is going to be a lot better funded this year. Possibly a fairer fight, money-wise.

Charlie Fisher

That’s the absolute importance of the work that we and CHISPA and EDF and others are doing in this coalition. The same situation in 2026: it is extremely difficult for Corporation Commission candidates to raise private dollars. Both the Democratic candidates and I believe all three of the Republican candidates are running with our public funding system, clean election system this year too. The bulk of the messaging, organizing, and education really does need to come from outside groups.

David Roberts

They’re privately still committing to that. They’re not personally taking the money. It’s outside groups where the money is being spent.

Charlie Fisher

That’s right. They can raise about $29,000 in $200 increments as seed funding to get their campaign started. After that, it is about $100,000 for the primary and $240,000 for the general, and that is all they can spend.

David Roberts

A lot more money than that will be involved ultimately, outside. One question here is it’s a five-seat commission on the ACC. They’re currently all Republicans. In this election cycle, two of the seats are up. Even if clean energy candidates win both those seats, they’ll still be in the minority. What is the prize here? What does this all get you?

Charlie Fisher

Even one pro-clean, pro-climate commissioner has an enormous impact. We saw that in 2020. Every commissioner has individual subpoena power. The ability to open up the books, to really get access to data from the utilities that they are not always eager to share, is a huge benefit. I don’t believe that all of the Republican commissioners are dyed-in-the-wool anti-clean energy folks. Some of them are. There are coalitions to be made, especially if there are two Democratic commissioners and three Republicans. They are going to have to work together. There are policy priorities that they could come together on and make some positive movement even when pro-clean folks are not in the majority.

The importance of electing two this November is to have a real opportunity going into 2028 with all of this infrastructure built, with all of this knowledge and this list building and these supporters, carry all that education work into 2027. Don’t stop in November. Continue to educate, continue to engage and organize. Rolling into 2028, we have an opportunity to elect a pro-clean majority for the first time in decades.

David Roberts

Conventionally, presidential years are more difficult for you because there is going to be enormous turnout on both sides. But if you have two commissioners in place and there are three races up, you only have to win one more to get a majority.

Charlie Fisher

That’s right.

Ning Mosberger-Tang

It’s similar to the Georgia Public Service Commission race.

Last November we got two, and then this November hold one and then win one more and it’s a two and then we get three-to-two majority. It’s a two-election process.

Charlie Fisher

I don’t want to be Pollyannish here, but I think there’s a real chance that 2028 generates, with two genuinely new presidential nominees from both parties, fingers crossed that’s what happens, that there could really be a significant political realignment and we could potentially move beyond this constant backlash after backlash election roller coaster that we seem to be in. I’m cautiously hopeful that we can get there.

David Roberts

Who knows?

Charlie Fisher

Got to stay positive sometimes.

Ning Mosberger-Tang

We’ve got to take advantage of the environment this year and get us to win as many state-level trifectas as we can. That’s one of our focuses for 1.5°Climate this year: to help win the trifectas in states like Wisconsin, Michigan, Nevada, Arizona. We have this opportunity, could be a historic opportunity to win a trifecta. If we have a state trifecta, it will really be helpful in terms of redistricting, in terms of governing, in terms of protecting free and fair elections because a lot of these states are battleground states for 2028.

David Roberts

Looking beyond Arizona, this is a big fight and I think it is representative of a lot of other fights in that affordability is huge. The race was previously obscure but all of a sudden is very important, and there are big climate and energy stakes involved, and affordability is at the center of all this. I think that is going to be true in a lot of other places too.

Ning, by way of wrapping up, what other races do you have your eye on? Are there any other under-the-radar, high-impact climate-related elections? Are there others that are on your radar that you’d like to share with us either this cycle or in 2028?

Ning Mosberger-Tang

You’re probably familiar with rural co-op board elections. Those are also very much under the radar and the turnout rate is below 10% for sure.

David Roberts

Rural co-ops are notoriously dirty, typically pretty conservative, correct?

Ning Mosberger-Tang

Correct. We just hosted a call with CVIQ to support their rural co-op operations. They are doing some test pilots in Midwestern states to use digital ads, communicate with those voters that they want to educate about the importance of these rural co-op elections. That is one of the many under-the-radar opportunities that we have supported and continue to support.

The other thing will be, as I said, state trifectas are really important this year. They are not necessarily under the radar, but usually state legislature elections get a lot less attention than congressional races. That is one of the things we pay a lot of attention to. I know you also work with groups like Climate Cabinet because they pay a lot of attention to state and local races. Also Jane Fonda, the Jane Climate PAC, and those are the groups that we work closely with as well and supported in the past.

David Roberts

A lot of these under-the-radar races have always had climate implications, but they have been underfunded and slightly scattered and not super organized. From your perspective inside this donor network and doing this work, do you think there is something like a coordinated and powerful clean energy money and electoral machine getting built here? How optimistic should we be about that?

Ning Mosberger-Tang

That’s one of the things that we try to do. The whole purpose that we started this network is we recognize that there are so many opportunities out there, but the donors only have so much time to figure out where to invest to make a difference. We are trying to make it easy for them and we do the vetting and we talk to organizations like Charlie’s and talk about the strategy and make sure that it’s something that we should share with our network and get them supported.

I’m more optimistic this year than in 2024 because I think that eventually we have a lot of issues with the federal government and overreach, but because of that it created a backlash. People are motivated, mobilized. For people who care about climate, we all know that clean energy is also cheap energy.

We also know that voters are very concerned about the affordability of electricity, of energy. It’s almost like things are coming together in a way that will hopefully be beneficial for us to win back the pro-clean energy power this November. I’m feeling pretty hopeful. But hope alone is not enough. We have to fund this work. In 1.5°Climate we are trying to expand our network because even with 700 donors we cannot fund all the projects we have identified which are catalytic, impactful, and under-resourced like Charlie’s. If people are interested, check us out or join us. They can go to our website, 1.5climate.org/join. We will be happy to get some collaboration going and help us win back power and protect climate.

David Roberts

This will be such an interesting test case of so many things. I’ve never been in a more uncertain, chaotic, unprecedented set of circumstances electorally and in terms of not just all the chaos at the national level, but ferment around clean energy and data centers and a lot of unknown and crazy things going on. It will be really interesting to see how this plays out. I think the ACC race will be a bellwether of a lot of other things.

Thank you both for coming on and walking us through the thinking here. I appreciate it.

Ning Mosberger-Tang

Thank you so much, David.

Charlie Fisher

Thank you so much for the opportunity, Dave.

David Roberts

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

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

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Text transcript:

David Roberts

All right, everyone. Hello. This is Volts for June 24, 2026, “How to keep people cool without making the planet even hotter.” I’m your host, David Roberts.

Today, keeping ourselves and our products cool — air conditioning and refrigeration — produces around 7% of global greenhouse gas emissions, as much as global cement production. If the technology doesn’t substantially improve and growth continues, especially in emerging economies where AC ownership is climbing 10-15% a year, that share could nearly double by 2050. The IEA now projects AC electricity demand will grow faster than data center demand between now and 2030.

Cooling heats the climate in two ways. First, the refrigerants leaking out of ACs are powerful greenhouse gases, often thousands of times more potent than CO2. Second, the electricity to run them is already 17% of global power consumption, projected to triple by 2050, and a lamentable amount of that power still comes from fossil fuels.

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In short, more cooling produces more warming, which raises demand for cooling, which produces more warming … it’s a bit of a doom loop.

Unlike many subjects we cover here on Volts, this is not primarily a tech innovation problem. Between more-efficient ACs and electricity decarbonization, we already have the technology to cut cooling emissions by something like 97% — no tech breakthroughs required. The trick is that getting there means a broad array of reforms, everything from rewriting how we test ACs to retooling manufacturing to upgrading buildings to redesigning cities for heat. It’s a lot.

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To walk through it with me, I’m talking today with Ankit Kalanki, who leads RMI’s Global Cooling Efficiency Accelerator. We’re going to get into all of it — why current ACs are underperforming, what reforms could boost efficiency, new tech on the horizon, and the building and urban-design pieces that must be part of the answer. I’ve been meaning to get to this subject for a long time, so I’m excited to jump into it.

All right then, Ankit Kalanki, welcome to Volts. Thank you so much for coming.

Ankit Kalanki

Thank you, Dave. It’s a pleasure.

David Roberts

All right, we’ve got so much ground to cover here. I’m somewhat daunted, but I think the right place to start is just a very quick walkthrough of basic air conditioning technology. I was blown away as I was reading the history of this.

This guy, Willis Carrier — people will recognize that name, continues to be an air conditioning company to this day — patented this basic vapor compression process in 1902. The pieces of it have changed somewhat since then, but the basic architecture of how it works is still the same. We’re still using vapor compression technology. Maybe just start by walking briefly through what vapor compression technology is. How does it work? How do we cool spaces with this today?

Ankit Kalanki

Vapor compression technology works by moving heat from indoor spaces to outdoor spaces. That’s the fundamental of what cooling or air conditioning really is and what an air conditioner does. It’s not about making cold, but about moving the heat.

Air conditioner — think about it as a heat pump where you are moving heat from inside the rooms and dumping it outside. The working fluid that enables this is what we call a refrigerant. That refrigerant takes the heat from indoor spaces, evaporates, absorbs that heat. Then you have a technology called a compressor where that refrigerant gas gets compressed. Then you have the outdoor unit where that heat goes and gets rejected to the outdoor ambient and the cycle gets repeated — it’s a closed loop cycle. That’s how the vapor compression technology works. That’s how the air conditioner moves heat outside and keeps your indoor spaces cool.

David Roberts

That’s air conditioning of spaces for people. That’s refrigeration of coolers. That’s basically all cooling — you take the refrigerant, it evaporates and absorbs heat. Then you compress it, makes it super hot, goes outside and it condenses, which releases the heat. Then you reduce the pressure again, it goes back inside, does it all over again. This, as I said, is basically the same. These pieces — refrigerants have changed, compressors have changed somewhat and gotten more efficient and so on. But that basic cycle is still how air conditioners work today.

As you mentioned, we’re not going to get into this, but just as a side thing for my listeners, I’ve done many podcasts on heat pumps, and this is exactly the same way a heat pump works, just in reverse. A heat pump is just a reverse air conditioner, or an air conditioner is just a reverse heat pump, you could say.

Let’s then talk about the basic levers we can use to improve this process. These pieces — the refrigerant, the compressor, etc. How do you improve these pieces? Maybe we’ll just start with refrigerants because the history of refrigerants is quite interesting. There have been a lot of rounds of angst and replacement and then more angst and more replacements. Tell us a little bit about how refrigerants have evolved.

Ankit Kalanki

You said it. It’s a closed loop with refrigerants, where the full circle is getting completed again. When we first used any form of cooling or mechanical cooling, it was based on natural refrigerants. Carbon dioxide, ammonia were used as refrigerants very early when we wanted cooling and refrigeration. Then we evolved to synthetic refrigerants, which were called chlorofluorocarbons because they were more efficient in doing the same thing or providing cooling and refrigeration. But while doing so, they were causing a very big problem — a hole in the ozone layer.

Because of that, you had the Montreal Protocol treaty that decided to phase down and ultimately phase out all these chlorofluorocarbon refrigerant gases. That made way for hydrofluorochlorocarbons, which we call HFCs, that are widely used today — introduced because they had zero ozone-depleting potential, or ODP. That was a way at that time for solving the problem of the hole in the ozone layer. But as these HFCs became more and more common and widely adopted, we all realized that these are now very high-potent greenhouse gases that have on average 2,000 times more global warming potential than carbon dioxide. If they get released into the environment, it could be a climate catastrophe.

David Roberts

They’re not released into the environment from an air conditioner that’s working properly. They leak in manufacturing, transport, units that aren’t working correctly. These are all leaks we’re talking about. But there are hundreds of millions of these units around. All these small leaks of highly potent greenhouse gases really add up.

Ankit Kalanki

Precisely. I say that refrigerant inside a closed system is totally fine as long as it doesn’t leak, because it’s giving you the cooling that you need and the refrigeration that you need, and it’s allowing you to do it in a very efficient way. But it’s through that operating lifetime when the system gets serviced by a contractor that comes to your place and then they play with the system. Over a period of time, due to the corrosive nature of the environment or other ambient factors, the system might develop some issues — like the coil gets corroded and then you have some leaks in the system.

David Roberts

And disposal too, right?

Ankit Kalanki

Yes, exactly. I was going to come to that. End of life is another problem where, despite — in the United States, for example — refrigerant venting is legally banned, there is very limited refrigerant recovery that happens at the end of life. You end up in a system or in a loop where a lot of that refrigerant ends up getting leaked into the environment at the end of life as well, which is the problem.

David Roberts

Now we’re trying to move past HFCs too.

Ankit Kalanki

Yes, exactly. Now that the world has discovered and understood that the HFCs are also very highly potent greenhouse gases and are contributing to global warming significantly because they are also short-lived and significantly more potent, now we are going back to natural refrigerants. In many parts of the world we are looking at hydrocarbons — one of the refrigerants is propane, which is being used for air conditioning applications, which has a global warming potential of about 3. In industrial applications, ammonia continues to be a refrigerant of choice for many in grocery stores. In many industrial applications, carbon dioxide with a GWP of 1 is increasingly also getting adopted. We are heading towards where it all started — the world of natural refrigerants.

David Roberts

But the reason we moved off those natural refrigerants in the first place is ammonia is quite toxic, propane is quite flammable. There were trade-offs with these that led us away from them in the first place. Those are still problems. We have not yet found a refrigerant that is the magic, does all the things we want with none of the things we don’t want. We are now returning to some that are toxic and/or flammable.

Ankit Kalanki

We have not found any ideal refrigerant to date that checks all our boxes. Depending on the application, you can make what refrigerant works best. If it’s an environment where you have outdoor setups and large access to ambience, you can consider some of these natural refrigerants which have been used in many industrial applications for many decades now. It’s more about getting used to it with the right set of safety practices and adapting it and adopting it at scale.

David Roberts

Let’s also talk briefly about the other pieces then. Compressors — these are driven by electric motors. I guess all Volts listeners know electric motors have gotten more efficient over time. How have compressors improved?

Ankit Kalanki

The compressor, as everyone calls it, is the heart of the air conditioner or a heat pump technology. That is what makes the air conditioner deliver the cooling or the heating.

David Roberts

And that’s what’s consuming the electricity — everything else is plumbing.

Ankit Kalanki

That’s the majority of the power. The compressor dictates how much power, and more particularly peak demand, air conditioning and heat pump contribute. The industry on the compressor technology has evolved significantly over the last few decades. We used to have a lot of fixed-speed compressor technology, which means it’s only either on or off. Once you set a certain temperature on your thermostat or using a remote control on your air conditioner, your system will operate until it reaches that set point and then your technology will cut off. It was the technology that was commonly used for multiple decades.

Over the last decade or so, markets have evolved to what we call inverter technology, or in other terms, variable speed technology, where now you are not in the on and off situation only, but the compressor reduces its speed as you reach closer to your set point or the point that you have set on the threshold. There has been this innovation where you have this variable frequency drive or VFD that gets attached to your compressor and compressor motor technology, and it enables that adjustment of the speed based on how quickly and how much cooling or heating you want from the system.

When you look at that transition — if I give you an example, in India, the fixed speed market was almost 80% in 2015, and in 2025, it’s the opposite. 80% market is now inverter technology in the residential air conditioning sector. Japan is primarily inverter technology. China is again very high on inverter technology, close to 80, 90% as well. Most of the market has evolved and moved on to inverter technology. Now that’s an area where more innovation is needed as to how you can further improve the aspects of the variable speed technology.

David Roberts

The other piece is, I guess, heat exchangers have probably improved over time also. And the controls — talk a little bit about the software controls because as I understand it, that’s also a big piece of this.

Ankit Kalanki

That is, in my view, today’s biggest piece that needs to get solved for — that will significantly improve the efficiency of air conditioners — and it is tied to two pieces. One is what we need air conditioners for in real terms. Controls have a big role to play in that. Controls have a big role to play in how these air conditioners are tested and rated. Controls are the piece that connects both of them. I’ll come to the first part first.

You mentioned Willis Carrier and the history of air conditioning. Let me share this with the audience. Air conditioner technology in the first place was not invented to provide cold temperatures. It was meant to reduce humidity or remove the moisture from the air. Willis Carrier was working back in the day in a Brooklyn-based paper factory and he was constantly noticing the warping of the paper and it was disrupting the quality of the paper. That’s where the idea came from — what can we do to remove moisture from the air so that the paper quality doesn’t get affected?

Over many years, that definition changed. It became about how quickly you can cool the air and how quickly you can reduce the temperature. With climate change and global warming and the pace at which it’s happening, you are seeing the very humid conditions that people are experiencing all around the world. Now it’s going back to how air conditioners can deliver not just lower temperatures, but also reduce humidity and reduce moisture from the air and deliver comfort in the true sense and do that in a very energy-efficient manner and in a way that’s affordable for people to operate it.

Controls are a critical element — they can make the air conditioner smarter in how they assess temperature and humidity and how they optimize the compressor and the refrigerant flow and the fan speed and how all of that comes together to deliver the comfort that people need. Controls have a big role to play there.

David Roberts

One other thing that’s probably worth mentioning just in terms of the AC units themselves is I presume we could get better at reducing these leaks. That’s just more regulations, better training of technicians, better disposal techniques. Is there work underway to reduce the amount of leakage over the course of the lifespan?

Ankit Kalanki

Absolutely. Installing leak detection systems is one intervention where a lot of work is happening. Especially in the commercial sectors where you have several thousands of pounds of refrigerant inside a facility, installing these leak detection systems is a way to assess those leaks as soon as they happen. Then bringing your contractor on site to fix that. At the end of life, there is a lot of attention being given to how we ensure and incentivize contractors and technicians to recover the refrigerant at the end of life and not let it vent, and what are the right practices around it.

A lot of effort is going on and a lot of awareness is being built within the industry, within the communities to stop those leaks in the first place and at the end of life as well.

David Roberts

If you put together — this is the interesting thing to me — if you put together all the things that we already know how to do, RMI has this global cooling prize and prototypes that have won those prizes have been 60 to 75% lower electricity use than typical ACs, just using technologies that we already have.

The question is, why can’t a US consumer walk into a Home Depot and buy one of these super efficient ACs? Oddly, the answer to that question traces back to how they are tested and rated. This is the focus of a lot of your work. Talk us through briefly, what’s wrong with how we test and rate these things today.

Ankit Kalanki

That’s the crux of the problem — if they are technically feasible, then why are they not commercialized? That’s where the commercialization journey is very different from an innovation journey where you develop prototypes. Great, you have proven something. But then the commercialization journey is a long journey. There are iterations on the prototypes. You are looking at different standards for safety and for compliance, and depending on the market they can vary. Then you have to understand the market and what their needs are. That journey is where we are actively spending a lot of time, as you mentioned, through the Global Cooling Efficiency Accelerator.

Standards is one piece, Dave, which is extremely crucial in this commercialization journey. Industry designs products to standards and those standards get referenced everywhere. Whether you are looking at a building code and when they specify equipment and the performance, it all ties back to what standard is used to rate and assess the performance of those air conditioner technologies.

There is nothing wrong. I don’t blame industry there because industry is designing to standards. They have done a good job at making sure that products are compliant. They have been cost optimized to make air conditioners affordable for many millions of people around the world. Where the change needs to happen is how in the first place those ACs are rated and tested, because then industry will do it once the standards change.

David Roberts

This comes down to the difference between latent cooling and sensible cooling.

Ankit Kalanki

Yes.

David Roberts

Tell us briefly what those mean.

Ankit Kalanki

Sensible cooling means, in simple terms, temperature-based cooling. If you have to go down from 80 to 70 degrees Fahrenheit, how quickly and how efficiently your air conditioner can deliver that cooling — that’s sensible cooling. If you have a space where you are feeling very humid because relative humidity is 85% and you want to bring it down to 60%, all that effort that will go into reducing the moisture — that’s the latent cooling part, and you expect air conditioner to do both of them at the same time.

How it happens today is you use temperature as a proxy for managing humidity because air conditioners only have a temperature sensor inside them. You start with a certain temperature set point on your thermostat and when you still feel sticky or you walk into a conference room and it’s feeling cold, but it’s clammy and muggy, you will keep reducing your thermostat until you feel the relatively drier air. The air conditioner is doing that.

David Roberts

This is crucial — even cooler air, if it’s still humid, is not comfortable, and people tend to crank the temperature down further if that happens.

Ankit Kalanki

That wastes energy today. That’s the piece that standards can solve for. Standards today, based on which the air conditioners are designed and tested and rated for performance, use temperature as a way to assess the efficiency, and that’s what goes on the labels that you see on air conditioners today. It’s a purely sensible cooling-based approach to testing today. Humidity management is a byproduct because when you cool the air, there is some level of moisture that gets removed as air reaches its dew point temperature.

However, if we have to deliver better cooling, if we have to deliver cooling that provides comfort to people and does not waste energy and does that in an energy-efficient manner, we have to start thinking about how we can bring latent cooling not as a byproduct, but as a central piece of that testing protocol and the testing method against which air conditioners are designed.

That’s the kind of effort that RMI along with partners are actively working towards — how do we build on one side the awareness that this is missing today and then generate the data and the evidence through field testing that we have done and through engaging with manufacturers to then go to the standard setting bodies and say, “We need to change these standards because that’s the only way we can avoid locking in inefficiencies for multiple decades to come.” Especially when you look at the boom in air conditioning in global south countries.

David Roberts

You’ve done these field tests that show that when it’s humid, air conditioners are using up to 30% more energy than you would think from their ratings, because people are pushing them down farther than what the temperature would suggest. Currently they are wasting a ton of that energy just because that humidity piece is not getting measured.

Reading around about this, it sounds like you are making progress on this. The incoming president of ASHRAE — I’m not even going to attempt to unpack that acronym, but it’s basically the association of Heating and Cooling Engineers — sounds like he’s heard about these field tests and he’s cognizant of the problem. The ISO — everybody knows that’s the International Standards Organization — is working on a new standard and India’s Bureau of Energy Efficiency has updated some of its benchmarks. It does sound like things are moving. I wonder where that process is and what is the distance between what’s currently happening and that bright future when I can walk into a Home Depot and see a standard rating that accurately reflects these things.

Ankit Kalanki

You’re right. There has been a lot of good progress and in the right direction in regards to the standards conversation. The ASHRAE president highlighted the overcooling issue and the energy waste associated with overcooling in his presidential speech globally — he travels and addresses the technical community and the engineers. That has elevated the awareness around it. Those same people then go into the technical meetings and talk about it. That has helped us raise the awareness around it. ISO is already working on a new standard, which is a move in the right direction — it’s going to shift away from a traditional standard capacity-based approach to an approach which recognizes better controls.

With that, you can optimize the performance of your air conditioners. ISO is heading in that direction. We are hopeful that in the next couple of years ISO will come out with a fully published standard along that updated standard process and then it will come down to the countries. Once ISO publishes a certain standard, then the national standard bodies — in India, it’s the Bureau of Indian Standards; in the US it could be the DOE or the AHRI — will look at that or will already start working on it in parallel and think about how we can better acknowledge the aspects of that standard into the national standards.

Every manufacturer will design the products that are sold in the market according to the national standards and the regulations. That process takes its own time because there is a lot of consensus building that needs to happen through the technical committee efforts. This is where organizations like RMI step in, where industry players — we find the players that are really trying to take the first step and are seeing this change and acknowledge that this will happen.

It’s not about if, it’s about when and how soon it will happen. They are noticing it and they are willing to take that first step. We work with them and we work with aspirational buyers and actors on the demand side who are willing to take that step in demonstrating and deploying those technologies that can generate the market confidence that policymakers need to see ultimately to expedite their efforts on the standards front as well.

They are all interconnected. It’s not a sequential process. We have to work on all of those aspects — when one industry player jumps in, it creates FOMO and other industry players also jump in. When they see one buyer doing it, others also want to do it. Then you start creating multiple voices around it, and that’s how you start shaping the market. Ultimately that leads to the day when we walk into a store and see a product that is optimized for humidity, optimized for delivering comfort while delivering energy efficiency in the real world and not just on a label.

David Roberts

There’s also a set of problems — if a new standard drops, manufacturers, OEMs, still need the tools by which to meet those standards, and those aren’t necessarily in place. Is there work starting to build those up in advance? They need their own testing infrastructure, they need their own modeling tools that are optimized to this kind of thing. How long before some mid-tier OEM in, say, Vietnam is capable of producing these even if there is a new standard in place?

Ankit Kalanki

That’s an important question because that’s what dictates the timeline for adoption at the national level, Dave. The readiness of the local labs and the local manufacturers’ testing capabilities determines how soon and to what extent those standards will get adopted. There are efforts happening where RMI, for instance, is engaged in inter-laboratory testing, where we are looking at the different test protocols that exist that are different from what is followed today as an industry practice.

We are trying to work with those research institutions and those labs in different regions to help everyone come on the same page by showing that these new test methods are replicable, they produce consistent results. Whether you do it in Japan, India, or the US, you are expecting to see consistent results. Those are the efforts that allow test labs and industry players to build the confidence that, yes, that evidence helps build their confidence further, which then moves us to the next phase of building the consensus and moving to the adoption of the standards as well.

David Roberts

If you were pushed to guess at some sort of timeline, how long is this going to take to get these — as we say, we’re capable with this current technology of getting 60, 70% better — how long before those 60 to 70% better air conditioners are in stores in, say, emerging economies? Do you have any guess as to that timeline?

Ankit Kalanki

I will answer this question in a slightly different way. We know what and how we can reach that 60 to 70% target of super efficient ACs. How we go about that journey is we start with what is the most practical and the most feasible way to introduce products in the market that have controls capabilities that are making these air conditioners smarter in delivering comfort in the real world. You can do that with existing set of compressors, with existing set of heat exchangers, what exists today. Supply chain readiness is also important when you think about emerging economies and where they are and the policy ecosystem there.

Knowing what exists today and what manufacturers are able to do today, taking that first step of advancing controls by making your air conditioner better respond to both temperature and humidity can instantly deliver 15 to 20% savings right off the bat. I feel confident that could happen in a matter of a couple of years, because you are not looking at establishing a new supply chain or finding a new vendor. You can work with their existing vendors and you can do that.

From there on, the journey goes on to advancing towards that 60 to 70% number where controls is part of that. But now you have to think about compressor technology and you have to think about heat exchanger technology and what exists today and where is the innovation happening —

David Roberts

And the regulatory updates, the standards updates.

Ankit Kalanki

Regulatory updates, yes. Manufacturers are in a tricky business. The air conditioning industry is not a very profit-making industry. The margins are very tight and they rely on commodities — copper, aluminum, plastic. That’s the core of what makes an air conditioner today. When you are thinking about, on one hand, industry is being asked to constantly raise the efficiency benchmarks and the efficiency of their products while keeping the products affordable, while keeping the supply chain domestic, all of that.

It’s a complicated and complex problem and a multivariable problem to solve for. This is why a phased approach is something that we can really make good progress with. These updated products that have existing hardware and use better controls can immediately bring savings to people, to the power grids, to the environment. From there on, we can continue to go towards that ceiling and ultimately achieve that 60, 70% target.

David Roberts

Let’s pull the lens back a little bit from the AC units themselves. Let’s talk about the buildings that these AC units are in. There’s lots you can do with buildings to reduce how much cooling you need in it. Maybe can you just mention a few of those things?

Ankit Kalanki

I like to think about it as you don’t need air conditioning in the first place. Start with thinking about your building and how you can reduce the cooling need inside the building by measures like shades, ventilation, and insulation. Windows, better insulating windows. Paint your roofs with materials that can reflect and radiate the heat into outer space. All of that can have a significant impact on the amount of heat that gets trapped inside the buildings that ultimately gets radiated through the walls and through people.

Once you do that, your heat load that has to be removed to outdoor that we talked about in the very beginning is significantly reduced. You can now reduce your size of the air conditioner or in some cases maybe you don’t even need an air conditioner depending on where in the world you are. It’s very important.

David Roberts

Then of course you’re getting into building codes, construction codes, all that stuff. That’s a whole rabbit hole we could go down. But one thing I did want to take a brief look at just because I’m fascinated by it — I should probably do a separate pod on this — talk briefly about these passive daytime radiative cooling materials. Everybody is familiar with painting roofs white. That reflects a lot of heat away. That alone can do a lot. But then they have these special new paints, these special new materials. Say a word briefly about these things because they seem like magic to me.

Ankit Kalanki

It is fascinating. PDRC, or Passive Daytime Radiative Cooling Products, can take many forms. Paint is one form they can take. The interesting thing about them is that they reflect the heat like a typical white paint would, much more efficiently, but they also radiate the heat. The infrared portion of the sunlight, which is the heat component, and also from the indoors, these PDRC materials can transfer all of that heat to outer space in a very narrow window.

David Roberts

It goes right through the atmosphere.

Ankit Kalanki

Yes. There’s a very narrow window when you think about the science behind it — a very narrow window in the atmosphere of 8 nm to 15 nm between which you have to produce that radiation or that reflection for it to pass to outer space. These PDRC materials have been tuned in a way and have been innovated in a way where they enable that heat to go into outer space through that narrow window. That’s the beauty of it, where you can achieve significant reduction not just on the surface of the roof, but also indoors, because it’s able to radiate the heat also from the roof.

David Roberts

You can actually — it can help your building be below ambient temperature.

Ankit Kalanki

Yes.

David Roberts

Actively cool the building. It’s wild to me. When you think about it, it’s not just reflecting the sunlight away, it’s sending heat out into the atmosphere. In some tiny way, it’s helping with global warming too, in a very marginal way, but absolutely fascinating. Just on white roofs, I constantly have people ask me whenever this comes up, and I’ve had the question myself, which is — that just seems so obvious and easy.

They’ve done studies where if you paint a bunch of roofs white in an urban area, you can reduce this urban heat island effect. Where heat concentrates in urban areas, you can keep buildings cooler. White paint is not expensive. Why isn’t there more of that? Why isn’t that the default? Why haven’t we seen that spread faster and become more ubiquitous? Do you have any theories on that?

Ankit Kalanki

There are some practical aspects of why the scaling has not happened at the pace at which we would like it to be. Similar to air conditioner technology — technology is not the problem, it’s the other elements of it, when you think about commercialization and deployment, that have to be considered as well.

A couple of things that are important to note which impact the adoption at scale: one is the reflection itself and the glare that comes from just painting everything white. That has been raised as a potential concern. There are efforts to solve that. That’s one of the concerns — if you paint everything white, the glare becomes a concern and an issue for people in the surrounding areas or in surrounding buildings.

The second is depending on where you are in dense urban environments, where you have tall buildings, skyscrapers, all that reflected heat might just bounce between the different buildings and it might just remain trapped. It is reflecting from one roof, but then it might get reflected back through other surfaces. It’s not a solution that can be just applied anywhere, but context specific, yes, it can definitely be applied and needs to be applied.

The third more practical thing is the wear and tear — when it rains, if you live in an area where there is a lot of debris or dust, the effectiveness of that traditional white paint also gets impacted. There are more efforts needed to solve some of those practical aspects of the work. While they are great in reflecting the sunlight and in studies we have seen the numbers in terms of how much delta on the temperature standpoint they can get, from a durability standpoint, there is more work needed for them to get really adopted at scale.

David Roberts

The PDRCs, these magic materials that reflect the infrared out into space — are they commercial at any scale yet?

Ankit Kalanki

There is a lot of active testing happening of PDRC materials in different forms, as a film on solar panels, as a paint. There are a lot of startups, including organizations like RMI, that are supporting these startups to test the veracity of the claims of some of these PDRC products to generate more evidence and generate more awareness. That is where we are at this point. We need to do a lot of evidence generation around not just these technical and performance aspects, but also on some of these durability aspects so that they can really build that confidence among the policymakers and among the adopters in different parts of the world.

David Roberts

Interesting. Now briefly, let’s pull the lens back even farther from the building to the city, to urban design. There are also things that city planners can do to provide comfort, because that is ultimately what we’re about — comfort. Talk about a few of the things you can do at the neighborhood and city level to help cool people.

Ankit Kalanki

This work that happens at the city level and urban level is a key part of building resilience. Whatever we talked about until now, everything is inside the buildings or impacts people inside the buildings. But then you have people that are working outdoors. Urban level measures and urban heat mitigation measures are crucial if we are to truly address the need for cooling and tackle this heat issue for people around the world. Some of the ways in which urban heat mitigation happens — greening the spaces, planting more trees. There are efforts happening around that. A lot of policies at the local level, at the municipal level, are encouraging green spaces for people.

Establishing cooling centers is another way where outdoor workers can go to these spaces that have some form of a cooling mechanism, whether it is fans or evaporative or mist-based cooling or air conditioning, where they can get some respite.

The most fundamental part of this is when you think about urban heat — how can we inform people in a timely manner so that they can take the appropriate action? Multiple cities do this in many different ways. You have warning systems and announcements that happen. More and more of that is now becoming a priority for local administrations where they are increasingly using technology and using weather data to inform people about these heat issues in advance so that they can either plan their work properly or they can take breaks accordingly so that they don’t cross a threshold which might impact productivity and, in some cases, maybe even become fatal, given the extent of the heat.

David Roberts

A couple other specific questions about this. One of the things that occurred to me is every city everywhere has tons of pavement, roads, and parking lots. Pavement is of course black or very dark, so it absorbs heat. Anybody who’s been to Phoenix, Arizona or anywhere knows that the pavement itself can become hot enough to genuinely be painful. Is there any way to make lighter colored pavement? Is that a thing?

Ankit Kalanki

It is a thing. RMI has tested that in India, in Palawa City, near Mumbai. We have seen between 3 and 5 degrees Celsius of temperature change with light-colored tiles and reflective blocks. It is a thing and it exists. We have tested them in India as well.

David Roberts

One other piece which is fascinating to me is district cooling. Of course, Volts listeners are familiar or should be with district heating where you make heat centrally and then pipe it to buildings. But there’s also district cooling where you’re doing this same cycle, but on a larger, more industrial scale and then piping the air. Is that common? Is it spreading? Is that a big piece of the puzzle here?

Ankit Kalanki

It is an important piece of the overall solution set. There is no one-size-fits-all solution when it comes to how you provide better cooling to people. It is so context dependent. District cooling is one piece of that broad, big puzzle on how you provide access to cooling to people. Especially if you think about mixed-mode developments where you have a good mix of residential, commercial, industrial, office spaces where the cooling load is fairly consistent on average — those kinds of setups, those kinds of parks which are coming up in many developing countries. District cooling is a good solution for those kinds of setups. In traditional dense urban environments, it is hard to have all that centralized system and piping and delivering cooling.

David Roberts

Especially if you’re trying to retrofit already built environments.

Ankit Kalanki

Correct. But in these new projects that are coming up, if you can plan them properly, and if you can have a cooling load that is averaged in a way where you can meet everyone’s demand, district cooling can offer a good opportunity to reduce the cost for consumers because then you can think about it as the project developer will be incentivized to invest in the most efficient solution instead of a low-efficiency product. They will be getting paid by how much cooling they deliver. The more efficient they are with their systems, the maintenance of their systems, the more incentive they have and the more profitable it is.

It could be a win-win for people where consumers don’t have to own the asset, they don’t have to worry about the upfront cost, they just have to pay for the cooling they use. The developer and the operator are incentivized to invest in the most efficient system and better maintenance because that way they can improve their financing position as well. In that way, district cooling has potential, but it’s context dependent.

David Roberts

We don’t have a ton of time left, but there’s a whole — here we come to a thing we could do a whole pod on — most of what we have talked about, and I think most current effort and most of your hopes for the near and midterm future are around improving the basic vapor compression systems as they exist today, making them work better.

But there are under development here and there among startups and labs some fundamental alternatives emerging. We could just run through a few of those quickly. We could start with desiccants because those are the closest and are even being integrated into vapor compression. Talk a little bit about that first.

Ankit Kalanki

It comes back to humidity where we started. Desiccants are a solution to manage that humidity in an effective way. We are seeing a lot of innovation from startups. Multiple of them are also supported by RMI through our Third Derivative program. They have developed desiccant materials and innovation in that desiccant material space where they integrate or attach onto an existing vapor compression system and they can independently and separately manage the sensible cooling or the temperature and latent cooling or the humidity. That way your air conditioner doesn’t have to overcool the air to remove the moisture.

Now the desiccant takes care of that humidity and the moisture removal, it sucks the moisture out of the air, makes the air dry. Your vapor compression system is only doing enough to reach the temperature that you feel comfortable at. That’s one area of innovation which has a lot of potential and a lot of startup activity.

David Roberts

Desiccants are materials that absorb moisture, more or less?

Ankit Kalanki

Correct. But they can be in liquid form and solid form. There are varieties of it. Fundamentally they are the ones that suck the moisture out of the air.

David Roberts

You suck the moisture out and then the dry air goes into the traditional vapor-compression system. But it has to do less work.

Ankit Kalanki

Correct. The innovation piece in the desiccant solution set is how do you regenerate that desiccant. That’s the piece which often gets missed. While you are solving one problem, you don’t want to create another problem where you are now spending energy to regenerate that desiccant because that desiccant material, like any other moisture absorbing or water absorbing material, will get saturated as it absorbs more and more moisture. How effectively and efficiently can you regenerate that desiccant so that it’s ready to work efficiently?

David Roberts

When you say regenerate, are you squeezing the moisture back out of it or are you replacing it with new desiccant?

Ankit Kalanki

Squeezing the moisture back out of it. You need typically a heat source to do that process. How efficiently and innovatively you do that is what will determine the overall efficiency of the system when those desiccants are integrated into the solution set.

David Roberts

Those are actually — Amazon, I read, is deploying systems that involve those desiccants commercially now. Those are pretty close.

Ankit Kalanki

That was exciting news from two weeks ago. Amazon partnering with a startup, Transera, to deploy their product was exciting to see.

David Roberts

Then there’s solid-state thermoelectric cooling. What the heck is that?

Ankit Kalanki

You mentioned one way of solid state cooling. There are more terms like that. There is barocaloric and there is magnetocaloric, thermoelectric. What solid state cooling is — you use solid materials to produce the heating or the cooling effect by applying some force. That force can be a pressure, a magnetic field, or an electric field. When you do that with that solid material, it undergoes a phase change. The crystals in the solid, their alignment changes. As a result of that, there is a phase change that happens and you can generate heating and cooling.

This is an exciting area of innovation where a lot of startups are working on all these kinds of caloric solutions — barocaloric, magnetocaloric, thermoelectric solutions. A lot of good activity and a lot of potential. Also because of two reasons. You don’t need a compressor, because you don’t have a refrigerant gas. That’s what makes it exciting and compelling in the context of the current refrigerant transition that we are in.

David Roberts

Because we still don’t have that perfect refrigerant. You eliminate refrigerants, you eliminate the compressor — which is the vast bulk of the electricity demand.

Ankit Kalanki

Yeah.

David Roberts

Are those installed anywhere or is this all lab and prototype stuff?

Ankit Kalanki

I don’t know about the commercial installation, but I know that one company which is supported by RMI’s Third Derivative called Magnotherm, from Germany, has developed a beverage cooler or a wine cooler using magnetocaloric technology.

David Roberts

Where you’re applying a magnetic field to this solid material?

Ankit Kalanki

Yes.

David Roberts

It’s wild. I’m assuming that similarly to solid-state batteries, it’s a lot less maintenance because you have a chunk of solid material. You don’t have as many moving parts.

Ankit Kalanki

It’s early to comment on that because of the nascent nature of these technologies, because you still need pumps and mechanisms to move the fluid. The material can produce the heat and the cool, but then you have to move that heat and cool to wherever you need it. You still need some of those pieces and the parts of heat exchange — heat exchanger and valves and the pumps and the fan — to ultimately deliver that cooling. There is much more to be learned and discovered about these from an overall maintenance standpoint as these units start to get into the field in the coming future.

David Roberts

I’m curious about your long-term view about the relative effort and hope we should be putting into improving vapor compression units like we have been talking about for most of our time, versus improving and scaling up some of these very promising alternatives. Which do you place more hope in in the mid term and long term?

Ankit Kalanki

I will answer that question slightly differently because I think we should be really looking at better cooling and whatever it takes to deliver that better cooling. If urban heat mitigation measures are required to address the needs of certain aspects of society and community, those solutions need to happen at the right scale. All efforts need to happen to build that resilience and mitigate that urban heat.

Wherever there is new construction happening, let’s make sure that our buildings are designed in a way that reduce that heat trap inside the building so that we can reduce the need for that mechanical cooling in the first place and deliver better cooling to people inside the spaces.

We have to do everything we can to avoid locking inefficiencies in our systems and making our grids stress during the hottest days by significantly improving the efficiency of the products. It’s not about stopping people from buying air conditioners. When people cross a certain threshold, they will buy an air conditioner. We have to think about how to make it more efficient.

In that context, in the short to medium term, there is a huge opportunity and a lot of effort should be put towards improving the existing vapor compression technology because the entire ecosystem is designed around it — from an industry awareness standpoint, from a consumer awareness standpoint, from a policy and standards standpoint. We should put all our heads and minds to solve that problem of how do we get vapor compression technology to its ceiling and not just focus on raising the floor, but how can we really start pushing the overall efficiency of the air conditioners towards that ceiling that we have demonstrated through projects like Global Cooling Prize.

In parallel, we have to start thinking about what application requires what kind of cooling. Do we need vapor compression-based technology everywhere or for a product like a wine cooler or a vending machine which is just sitting in a shopping mall in a corner, can we use a more novel and sophisticated technology? We need venture capital partners, we need innovators, we need adopters to come together to support these upcoming technologies so that we can start creating a market for these solutions as well. We do need a buckshot of solutions — not just one silver bullet of solutions.

David Roberts

You don’t worry at all that the traditional vapor compression dominating the standards development and all that stuff — you’re not worried about that process boxing out new disruptive entrants? You think these can peacefully live together and proceed alongside one another?

Ankit Kalanki

It’s an interesting question. There is an opportunity to build partnerships here because while the industry is doing its part of pushing the ceiling through, we are helping them to continue to do that. They’re doing that. They’re also looking out for other opportunities.

Let’s be honest, industry has the scale, industry has the capability to test products. Industry has the capability and the network and the voice to get the products certified. Startups should think about how they can collaborate and partner with these manufacturers and create value for the community and for the ecosystem. They will need each other to ultimately solve the cooling problem and scale these exciting, innovative products that are needed to solve the access to cooling issue.

David Roberts

Final question — I’ll ask you to speculate a little bit, look down the road a little bit. If you listen to these IEA projections, you just look at the current trajectory, it’s pretty dire. It’s pretty dire. Maybe I should have emphasized this more at the beginning, but this is not about luxury. This is about survival for a lot of people. The earth is getting hotter. No one involved in any of this wants to deny the best cooling technology to people who are going to be living in these hot and humid environments that are coming.

This is not something we cannot do. But if you look at the projections of the impacts of doing it, it’s pretty dire. It’s going to be an enormous chunk of global greenhouse gases. What is your — are you bullish on progress here? Do you think those projections are going to be overstated? Do you think we’re going to manage to pull this off and to hit that ceiling and to reduce the need and what do you worry about in terms of blockers or problems — what’s the knottiest part of this problem to you and how optimistic are you about getting through it?

Ankit Kalanki

I do think that we have all the solutions that we need to bend the curve. We have a good understanding of what it takes to mitigate urban heat. We have solutions for that. We have solutions that can reduce the heat trapped inside the buildings or prevent heat gains inside the buildings through passive measures. We have solutions for that and we know what it will take for others to adopt it also. We know from a technology standpoint what solutions can bend the curve from an energy and emissions and peak demand standpoint.

I agree with you that it should not be treated as a luxury anymore. Cooling access is critical for health and safety. The goal is not about less cooling. We have to deliver better cooling. Where people need more access to cooling, we have to make and find ways to deliver better access to cooling where we can avoid the waste, where we have to avoid that waste in all forms, whether it is refrigerants, whether it is electricity consumption. We have to ensure that air conditioners and any aspect of the cooling technology and cooling solutions can really support the power systems that often get stressed during the hottest parts.

To the second part of your question — the knottiest part?

David Roberts

What keeps you awake at night?

Ankit Kalanki

What keeps me awake at night is when I see the projections of cooling electricity consumption tripling from 5,000 terawatt hours, which is the same as what the US consumes today, entirely, to 18,000 terawatt hours by 2050, which is the entire electricity consumption of the US, China, India, Japan, and Germany — five major economies of the world. That keeps me awake. At the same time, the potential that we have demonstrated — that RMI, through its Global Cooling Prize Initiative and the Global Cooling Efficiency Accelerator Initiative, has demonstrated what’s possible — that keeps me hopeful, motivated, and also awake that we can solve this problem.

David Roberts

Awesome. That sounds like a great place to wrap up. Ankit, thank you so much. This has been extraordinarily illuminating. I appreciate it.

Ankit Kalanki

Thanks, Dave. It was great to chat with you.

David Roberts

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

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

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David Roberts

Hello everybody. This is Volts for June 19, 2026: “America’s flagship automaker enters the home energy market.” I’m your host, David Roberts.

Last week, General Motors — America’s top automaker, and its No. 2 seller of electric vehicles, behind Tesla — made a series of announcements that are of great interest to Volts listeners.

The first is the debut of Energy Pass, a collaboration between GM and EV-charging providers that will offer a single account for owners of any GM brand EV (including Cadillac, Chevrolet, etc.) that can access an array of fast chargers from Tesla, Electrify America, IONNA, and more. (Energy Pass currently covers about 70% of existing fast chargers, with more being added soon.) The goal is to simplify the EV-charging experience so that EV owners no longer have to juggle multiple apps and accounts to find a charger when they’re on the road. It’s a big step toward that much-hoped-for future when EV owners can simply stop at any fast charger they want and begin charging without fuss.

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The second is about a new collaboration between GM and Peak Energy, which provides sodium-ion batteries for grid-scale energy storage. Regular Volts listeners are, of course, familiar with Peak Energy and with sodium-ion batteries, as I interviewed Peak CEO Landon Mossberg on the pod last year. This is a huge boost for the sodium-ion market, which is very cool because sodium-ion batteries contain cheaper and less-toxic materials than conventional lithium-based batteries, work over a wider array of temperatures, and generally last longer, with less need for cooling and maintenance. It is also a battery market that China does not yet dominate and the US still has a chance to compete in. This is part of a broader shift we’re seeing as several US automakers pivot into the grid battery space, which is going to be a huge boon to the grid.

And finally, the announcement that is the subject of today’s podcast: GM is investing heavily in bidirectional EV chargers that will enable vehicle-to-home (V2H) and vehicle-to-grid (V2G) integration. GM already has several hundred thousand EVs on the road that are capable of bidirectional charging, but of course, getting it to actually work requires homeowners to buy and install home chargers, inverters, and batteries, and for utilities to enable V2G by establishing the right kinds of tariffs and programs.

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That is a complicated thicket of challenges, and that is what I flew to San Francisco to discuss with GM Energy’s Chief Revenue Officer, Aseem Kapur. Kapur comes out of the utility space — he spent over 18 years with Con Edison, working on information technology and distribution system planning — and is now playing a key role in GM Energy’s efforts to integrate its EVs with the grid, to provide EV owners with new streams of value and the grid with new sources of flexible demand and stability. We got into all those issues in our conversation, which I very much enjoyed and hope you do too.

Aseem Kapur, welcome to Volts. Thank you so much for coming.

Let’s start with what the product is. When I think about the home energy ecosystem, a lot of things are potentially involved in that: solar panels, inverters, smart appliances, home energy management systems, batteries, EV chargers, EVs, etc. What chunk of that are you biting off? What is the home energy product that you’re starting out selling?

Aseem Kapur

Our home energy management ecosystem has the EV at the heart. It starts with the EV that connects with a bidirectional charger, that then connects with an off-board inverter. We have a smart panel that allows the customer to configure what circuits they want to back up from their EV. Those are the three basic components that you need with an EV in order to have a vehicle-to-home capable technology or system that allows your EV to serve as a backup generator. You can then optionally add what we call our stationary storage system, what we call the power bank product.

You can add that on. It comes in different configurations starting at 11.5 kilowatt-hours, all the way to 35.2 kilowatt-hours. That gives you the flexibility. In the event that you don’t have an EV, you can use your stationary storage system to back up your home. Depending on whether you are an existing solar customer or considering solar, the system is compatible with both AC solar systems as well as DC solar systems. The system is configured to design.

To your point earlier, the ecosystem extends to smart appliances, smart panels. All of that is outside the purview of what we’re doing. We’re leading with that EV experience because the true capability that we are unlocking for our customers is the flexibility. You can pull electrons from the EV, you can pull electrons from your stationary storage system. You can do either or you can do both. You can stack them. That is what we are offering that’s unmatched by any other OEM that’s out in the industry today. And you heard about it today at the event. We have 12 EVs that are capable of this technology. Today we have a car park of about 250,000 EVs on the road that are capable of this tech.

David Roberts

If you’re going to use it for backup, that means you need to be able to island from the grid.

Aseem Kapur

That’s correct.

David Roberts

Which is not an automatic feature. A lot of people get solar systems and think that they’re going to be able to do that, and then it turns out you have to have the right kind of inverter to do that. This is what your inverter can do. That just trips automatically if grid power stops coming in?

Aseem Kapur

Yes. The inverter is designed; it satisfies the UL standard that is required, 1741, that is necessary to be compliant with islanding requirements with the grid. That serves two purposes. One, it allows you to island from the grid itself. The second aspect is it works hand in hand with the smart panel in terms of controlling the circuits that you’re powering from the vehicle itself. That is the configuration, the way the system is designed. It’s designed to be modular because in many cases customers get into the EV and the bidirectional charger first, and then they decide later that they want to upgrade, and from there they invest in our inverter and the smart panel. That’s the technology that protects the home from the grid, ensuring that we satisfy the islanding requirement.

David Roberts

Do you have to get the utility involved in any way? If you’re islanding from the grid, my understanding is that you have to at least get sign-off from the utility. If you’re going to install one of these things in your garage, what permissions do you need?

Aseem Kapur

The answer varies. It varies on where you live. There are 4,000 utilities in the United States. They all have their own requirements. In most cases, the answer is they just need to be notified; they do not have to approve the installation of the system. That is true for the majority of the cases. However, there are scenarios where the utility does approve the drawings, does sign off on the installation, and confirms that there is no backup power that can get into the system.

One of the upfront requirements that we’re satisfying is that we’re getting our hardware qualified with all utility programs. We’re ensuring that our inverter, the smart panel, and the EV or the battery, the utility is indifferent to it. But we’re ensuring that both the panel and the inverter are certified as approved products by the utility companies because that’s a big step in ensuring that the customer doesn’t have to go through additional approvals.

David Roberts

One of the things I’m curious about with all this is how you’re selling it, how you’re marketing it. I follow this stuff all the time, I’m geeked out about home energy, etc. But I’m assuming that most — especially if you want to scale this stuff up — most of your customers are just going to be people out shopping for a car who know nothing about anything. Is there a home energy package that you’re offering that bundles these things together? How are you pitching this to the customer? Where does the customer encounter this? Is it at a GM dealership or what’s the customer interface and packaging?

Aseem Kapur

Yeah, it’s a very astute observation. Our go-to-market strategy is dependent on our dealer network. We are a B2B2C company. We have 4,000 dealers and 90% of the US population is within 10 miles of a GM dealership. We have the benefit of the scale and the reach. Typically, the customer’s journey starts with an EV. It’s about educating the customer on all the features the EV has, which includes the energy features — like bidirectional capability — and then qualifying the customer at the point of sale with the dealership on whether they’re interested in additional capabilities like home energy management or backup power.

Typically, we rely on the dealer to get the customer into the charger, get the charger installed in the customer’s garage, and then offer them two options. They can buy a unidirectional charger or they can buy a bidirectional charger, depending on whether they’re a homeowner, how informed they are about local utility incentives, how passionate they are about clean energy or sustainability generally.

Typically, the dealer network helps us qualify the customer, and if there is interest, we then follow up, we call the customer, we put a proposal in front of them that is very unique and specific to where they live based on the energy prices in the grid, the reliability metrics. We pull all of that data in to put a proposal in front of the customer. We also aggregate all the incentives and then we tell them, “Customer, if you make an investment and purchase a home energy bundle, this is what the ROI of that investment looks like.” It is a high-touch sales experience, but it fast follows from the conversation after the dealership.

David Roberts

One thing I often hear from EV owners or prospective EV owners is that dealers themselves are not super familiar with EVs, and I’m sure you have heard these complaints. For as many EVs as GM sells, it is still a small percentage of the total sales. I hear from people all the time who go to dealerships and the dealers do not even know the basic features of EVs, much less home energy management systems. How big of a piece is dealership education and training? Is that part of all this?

Aseem Kapur

Yeah, absolutely. That is one of the largest areas where we invest, and as part of our go-to-market strategy, it’s about how do we enable that channel. We support the dealers with marketing, we support the dealers with running campaigns that generate traffic into the dealerships. As part of that campaign, we also educate them on how to talk about the product. That goes back to the core EV. We have some very intensive training requirements.

I’m new to the industry, I’ve only been with GM for about four years because I was in the energy sector. I’ve been floored by the amount of investment GM makes in training the dealers and also investing in helping them load the product. Most of these people are car enthusiasts. They’re very passionate about the technology. They love cars. The key is then how to get them to talk about energy.

David Roberts

It’s not necessarily natural. I think of the two as very overlapping, but I’m not sure it comes naturally to a car enthusiast.

Aseem Kapur

I’m in the same camp as you. I feel they’re interchangeable. In most cases, what we find is that we want to keep things simple. We start at the basics, which is around charging. Let’s help the customer get comfortable with charging. EV lifestyle involves having accessible charging, whether it’s your home or public. That’s where we invest our resources with the dealer network and we get them comfortable with how to make the product, how to offer the chargers or the adapters, how to help them finance or lease them. We educate them on the public charging network, Energy Pass, for instance. We do a lot of that onboard training. Anything related to energy today, we fast follow with the high-touch sales experience. Just the nature of how we’re unlocking the market.

I will add, to your earlier observation, dealers have different degrees of interest. We have dealers in parts of the country where EV adoption consistently remains high that have figured out the entire installation network. They have looked at the customer journey, what it takes to get the customer into a car, what type of charger they need, how to get the charger installed. These are entrepreneurial, very progressive business people and they are driven to ensure that they deliver the best customer experience.

One of the key metrics that they are driving towards that they share with us is NPS, which is the net promoter score. Specifically, how a customer who leaves the dealership rates the dealership on that overall purchase experience. Early on, yes, there were marked different NPS scores between buying a gas vehicle versus an EV vehicle. But we’ve seen in states where there is highest adoption that the NPS for EV customers is higher — order of magnitude higher — than gas customers. There is a tide that is turning. It is slower than we all expected, but it is turning and there is light at the end of the tunnel.

David Roberts

Is GM viewing this as a way to sell more cars, as almost a loss leader to increase EV adoption, attaching this to EVs, or does it view the home energy business as something that might take on a life of its own and become a serious revenue generator and even be sold to people who own different kinds of EVs, non-GM EVs? How attached is the home energy business to the car business?

Aseem Kapur

At a corporate level, it is one of our top strategic KPIs that is measured at the senior-most leadership level, and we report those metrics up to the board. GM Energy is one of those business units that is measured on its performance. To answer your question, it’s all of the above. What it means for the consumers today is how do you get them comfortable with charging that EV lifestyle, and then if they’re interested, how do we get them into a home energy management system?

The reality is, and a lot of the discussion we had today with the panels, what Kurt talked about and what Wade talked about, the future of the grid is mobility and energy converge. EVs are a flexible energy resource. Whether it is flexible supply or flexible demand, they are going to continue to have a solution to support affordable grid expansion. That is the way we look at it. If we do not actively lean in and have a role to play, we are not going to be able to differentiate our core product, which is the EV. We have got the battery technology, we have got the industrialization and scale, but most importantly, where the rubber really meets the road is with consumer experience. What we are really good at and where we can lean in with scale is how to solve for the tough problems.

You asked the question earlier, what permission do you need with the utility? The answer varies. You can’t expect the customer to know this, you can’t expect the dealer to know this. That’s where we come in. We come in to say, “We’re going to thread that ecosystem. We’re going to take this from a consumer standpoint to understand.” Today it’s all about how do you get the customer comfortable with an EV. In the very near future, it’s all about how do you reposition the customer to think of an EV as an energy asset. We are solving for all those pain points step by step to ensure that it’s a consistent, repeatable experience across all our 4,000 dealerships.

That will take threading that problem statement across multiple utilities. That’s the reason why we’re investing, because it’s good for the customer, it’s good for the grid. As Sterling said, and I loved his comment at the end, it’s probably the first time in history when all of the incentives are getting aligned across energy companies, OEMs, battery manufacturers, because there is an unprecedented demand that the grid is facing and you need all solutions to come to market. It’s in our collective interest to solve for the consumer pain point, because you can’t drive adoption without solving for the complexity the customer is going to face. Our core motto as a corporation is keep things simple.

David Roberts

In terms of the customer experience, if I buy my EV, say I know nothing about any of this, I go to the dealership, they sell me an EV, they sell me the home energy package with it, GM comes and installs it, an electrician comes and installs it. Who comes and installs it? What’s that touch point look like?

Aseem Kapur

I’ll be brief in terms of just walking us through the journey. Typically, a dealer qualifies the customer for us. We have a home energy consultant team, which are highly specialized energy consultants who will call the customer, put the offer in front of the consumer, and if the consumer expresses interest, they’ll handle their payment and financing, all of the rest. The product gets directly shipped to the consumer’s home in parallel. We also give the consumer the option to either work with our certified installer network and receive a quote for their installation, which allows us to manage both the quality and the price of the installation, and ensure that the customer is aware of the timing and the cost before they make the final decision to purchase the hardware. That is a really important point of the journey.

We also give the customer the choice to go out and get their own electrician. What we find is that in most cases that experience is inferior because the electricians are not familiar with the technology. It’s new. We have an internal metric that drives both the sales teams and our delivery teams to incentivize the consumer to work through our install network and be transparent on the price, be transparent on the timing. Today we’re building out an installation network. Much like how some of the other industries I’ve worked in, whether it’s the solar industry, it all comes down to the distribution network and the installation network. We are building that installer network.

The good thing is that we have the opportunity to do it in some states first, where we see the highest adoption, and that is allowing us to refine that experience, learn from it, build a network. More importantly, just in the last nine months since we have been selling the system, we have seen a 30% drop in installation prices. The way we have been able to achieve that is we are improving the product to take price out, to make it easier to install.

Second, we’re training the installers. Something that they would read through a manual and probably take them three days to figure out, we’re saying, “Here’s a video, here’s how you can do it and reduce the amount of installation.” We measure ourselves on total time to commissioning. We measure ourselves on what percentage of all the sales are going through our installer network. We know in the end the NPS score that we’re going to get through a transaction that flows end to end through our network is a lot higher than when the customer has to handle that on their own.

David Roberts

Once it’s installed, does it just work? How much fiddling does a customer have to do with it on an ongoing basis? Can you just install it, set it, and forget it, or are there settings, are there interventions that the customer has to make? How much of it is self-running?

Aseem Kapur

I’d love to sit here and tell you that everything runs 100% of the time, wholeheartedly. The first step in the process is you get it commissioned. Once the system is commissioned, up and running, it’s visible in our backend systems. We have what we call the energy cloud platform. We can see the asset. At that point in time, we have monitoring capability. It also allows us to do over-the-air firmware updates. We’re continuously enhancing the product, we’re adding features, and in some cases we’re removing features that add complexity to the installation.

As the product is dynamically evolving, it allows us to do over-the-air updates. That is a very key capability. The third piece is we are learning. This is the first version of the product. In order for us to truly improve the next generation of the product, early customers who adopted the technology today are giving us a lot of feedback. We go out and do customer testimonials, we are doing our research, focus group studies.

It’s not only about how to sell and install it. We’re saying, “How do you use it?” What is it that you find the most valuable? Is it the fact that it keeps your lights on? Is it the fact that you’re saving money based on energy rates? As we learn those preferences for consumers, we want to take that feedback loop into our product life cycles and continue to improve that.

David Roberts

Do the customers have to do anything to it?

Aseem Kapur

They don’t have to do anything to it once it’s configured and set up. I can’t tell you how many customers, when we’ve gone out and done interviews, have told us they slept through outages without even knowing that their car powered their home.

David Roberts

Every string you pull in decarbonization these days, or affordability or resilience, name it, you end up with batteries. This is the way to think about EVs now: just mobile batteries. That is the unlock, but that is not necessarily how consumers currently think about them.

It sounds like the immediate pitch — the systems that are being sold today — is based on backup power. That’s the value proposition. Are you targeting presumably states or areas where blackouts are more common and frequent? There are a few reliable grids in the US where people don’t necessarily have to worry about this. Where is that a sufficient value proposition?

Aseem Kapur

Everything is batteries. The focus area for us is really in states where we see the highest adoption of EVs. I’ll explain how and why we focus there. In most cases, when customers are entering into an EV lifestyle, they are worried about what they are going to charge. Is it the home, is it the public? Public charging infrastructure is gradually becoming more common, mainstream, and more reliable. That is going to take time.

Our first value proposition is, “Let’s get the charger installed in the home.” The lion’s share of charging happens at home, and in order to improve the TCO or the total cost of ownership is when we offer the home energy bundle to say, “You can save money, especially if you live in a state where you have tariffs that support that structure, whether it’s free nighttime charging or you have lower price for charging.” That’s typically the entry point.

We’ve also seen that after major weather events, like we had a tough winter out in the East Coast, out in the Southeast as well, when we’ve run targeted campaigns in those states, we’ve gotten a lot of interest. People have reached out to us. Going back to the point around decarbonization, now some states have mandates around new natural gas connections. They can’t go out and get a backup gas generator because it takes a lot more time and money to get that. They’re either left with using a diesel backup generator, and those are available in the market. But then they realize that they’re noisy, they’re costly. In most cases, our biggest opportunity is awareness. Most people don’t know about our hidden secret that all our EVs are capable of bidirectional generation.

David Roberts

They are backup generators.

Aseem Kapur

Yes.

David Roberts

This is the beauty of batteries. They are everything. On the tariff question, that’s also different utility to utility. Only some utilities have these time-of-use tariffs. If I’m a customer and I am in one of those areas, and arbitrage, moving the timing of my charging back and forth to take advantage of that — is that all done behind the scenes too? Do you pitch that to the customer, saying, “We’ll do this arbitraging for you and we’ll save you some money”? But again, you don’t have to fiddle with anything. You don’t have to be aware of the tariffs or know anything about the tariffs, etc.

Aseem Kapur

Today what we do is we expose the tariffs to the consumer. It’s an education. Most of us don’t even look at our electric bills to really understand what we pay for energy. We don’t care about it unless the bill is higher than what we paid last month or our lights are out. That’s the beauty of the monopolistic utility business model. For us, it comes down to giving customers the choice to be able to configure the vehicle and making them aware.

We say, “You can set up your charging schedule in your infotainment system in the car, or you can do it on your app.” Where we have partnerships with energy companies, where we’re running managed charging programs, we give the customer the option to opt in. We actively enroll the customer into a program that’s offered by the local utility. It’s not available in every state, it’s not available in every utility. Those programs are growing. As those programs are growing, we have an entire team that’s focused on ensuring that our customers have access to those programs because it drives confidence in our product and the experience. They can lower their energy costs. That’s the second step in the journey.

In the future, and I would say in the very near future, what we’re trying to do with companies like PG&E out in San Francisco, our vision is that we want to enroll the consumer at the point of sale. When they leave the dealership, they’ve opted in to a program. Their settings in their vehicle and in their app are preconfigured in order to support and manage that experience that’s conducive to the grid where they live. If they are going to save money on it or make money on it, like through arbitrage, then it can directly impact their EV ownership experience. If we move these incentives forward and lower the monthly lease payment for EV car buyers—

David Roberts

Folding the utility savings into the price of the EV lease.

Aseem Kapur

That’s correct. Now it’s a very sticky transaction. It’s a very sticky ecosystem that allows the customer to appropriate that value with the investment that they’ve made in the EV. That’s the net benefit. We are trying that and testing this actively in San Francisco. We’ve got four or five dealerships that are lined up to support that.

The reason why we’re so bullish about it is that it just takes away all the complexity. None of us want to sit here and read our bills, understand tariffs, figure out how to configure our car. Some of us who are tech enthusiasts will jump in, but my mother is not going to do it. She just wants set and forget. To get there, when you buy the car, it should already come preconfigured with that capability and I should see the value either immediately or in something that I associate with my car purchase. That’s the vision.

David Roberts

This is slightly esoteric, but I’ve wondered about it before: if you are selling these cars as batteries — that’s what all this is about — your car is a big battery. Big batteries can do a lot of things other than drive you around. What’s the value proposition for then also having a home battery? The study that you all sent me says that in terms of just the value to the grid, the economics are generally better for home batteries just because they don’t detach and drive to the store periodically. Why would an average customer want both their EV and a home battery? Since they’re both batteries.

Aseem Kapur

Today the choice is frankly driven by price point. Can I afford to have both? Because I have the flexibility in the event that the car’s not home and I want to keep the lights on, I can use the backup battery. We sell about the same number of systems — full home energy management systems — as we do vehicle-to-home systems. The distribution of the product mix is about 50/50. In the future, and you have seen the E3 study, we need to have product parity with stationary storage.

For a customer to consider an EV and a grid operator — and I worked in the energy industry for two decades, worked as a utility operator and I worked in those control rooms — as a former operator, to be able to dispatch that resource, that needs to be firm capacity. You need to be able to call on it and it needs to respond within eight cycles, or else you’re going to trip all the circuits upstream. That has significant impact on reliability.

For us, it comes down to: we’ve launched the first generation of technology. As technology improves over time, whether it’s onboard inverters on the vehicle, the battery, the energy density both on the EV and the stationary battery, the unit cost for that available capacity or the flexible demand, as Patti talked about earlier, continues to drop on a per kilowatt-hour basis. At that point, there’ll be a trade-off where the difference between a mobile battery per unit cost versus a stationary battery — in some markets the customer will be indifferent. We’re not there today yet. Where we are today is where the market is unlocking. All the incentives are tied to stationary storage and specifically stationary storage paired with solar. That’s what’s most impactful to the grid. If you don’t do it in an organized way, it can be fairly harmful to the grid. That’s the key.

David Roberts

One more question about the vehicle-to-home, the basic system, which I think the home energy package is something like around $7,000, which is a decent chunk of money. Have you thought about financing tools? You mentioned that you might be able to fold the utility incentives in and bring that down a little bit. I’m wondering how daunting that price point is for customers.

Aseem Kapur

It is not for everyone at that price point. In order for us to lower the barrier for entry, we are in the process of offering a leasing program. I don’t have a date for that yet. Leasing the home energy system, specifically leasing the home energy systems. One of the biggest drivers for that is the change in the legislation that happened last year. The investment tax credit for batteries, for residential batteries specifically, has been extended through leasing offers. It’s advantageous.

It’s not available in all states. However, the states that allow for third-party operated leases or TPO leases specifically allow customers to take advantage of the tax credit as well, in addition to lowering their monthly payment. You can buy it on payments versus paying it all upfront. Both of which we are actively working our way through. It’s a new asset class for us. As we work through the regulatory requirements, as we work through the details around getting approvals to offer leases to consumers directly, we are going to launch that offering soon.

David Roberts

The vehicle-to-home stuff is in some sense pretty straightforward. I think an average consumer can get it. It’s a battery, it can be my generator. They have a mental category for that. Once you get into the vehicle-to-grid stuff, then you’re in more complicated territory. From what I can tell, I’m trying to get a sense of how far along that is. The systems are capable of it, but how many of these systems are actually being used that way, that the grid operators are aware of them and coordinating them in some sense and using them as demand response? As far as I can tell, that’s not happening on a commercial basis anywhere yet.

Everything seems like it’s testing and pilot programs. What is the state of the vehicle-to-grid side of this?

Aseem Kapur

The way I think about the state of the vehicle-to-grid technology is that it’s emerging and it’s accelerating at a pretty fast pace.

David Roberts

People have been talking about this for a long time, and it hasn’t amounted to much to date. Do you think it’s reaching a threshold?

Aseem Kapur

Yeah, it is. What has changed — absolutely, people have been talking about it for about a decade now. What’s different now, in this moment in history, is the fact that for the first time utilities are facing unprecedented demand. They can’t build their way out to serve all this capacity, and they need flexible grid resources.

As we heard Patti talk about this today, and she’s one of the most emphatic proponents, adding flexible demand to the grid improves grid utilization and is good for the customer, the grid, and lowers cost for everybody. It’s the most affordable way to add grid expansion by adding flexible electrons in the grid. That is, by far, probably has always existed, but the need for it is now as all AI-driven demand is coming on and autonomous vehicles, as electrification generally is happening. That trend has accelerated just over the course of the last year.

Plus, as AI technology is evolving very quickly and the frontier large language models are moving towards now small language models, a lot of the inference is moving to the grid edge, or what we call the edge compute. That is going to become increasingly more important. Each of us is going to have more compute that’s available on our laptops, on our phones. As that per capita for energy consumption increases, what it does for the grid is now you have all that grid congestion that moves to the last mile.

We talked about queues this morning, around the fact that PG&E territory has 8 to 10 year queues to connect this gigawatt-scale supply. You have to solve for that, definitely, you have to work towards solving for that. More importantly, you can’t ignore the fact that the last mile is far more expensive to upgrade and replace because you have to do it one by one. Especially in cities like San Francisco or New York, where the cost of infrastructure upgrade is significant or it can be very prohibitive. The flexible capacity becomes more important.

What gives me confidence on why we are here now and why we haven’t been here for the last decade is the fact that the emerging need and, more importantly, the consumer behavior. We’re adopting this technology in our day-to-day lives. My own recollection is from the time when iPhone first came out and we were all excited about the apps and we threw away the physical maps and started using the map app on the phone. That’s the closest analogy I can think of in my life on how agents are changing the way we use AI.

As more dependence increases and consumer behavior is changing, this is going to become mainstream for us. Grid planners and technology drivers for the first time are now saying, “We have to think through programs that drive or incentivize customers to bring these flexible resources to the grid.” Time-of-use tariffs — there was a study just in the E3 study that was the basis and one of the things they talked about — it is the first time in the US regulatory framework when you have more time-of-use rates than you have ever had in any other utility.

David Roberts

It does seem that it’s becoming the default. Every utility is eventually heading in that direction for various reasons. One of the ways I’ve always seen this framed by companies that are out doing this stuff on the edge is every house is a pre-approved Internet connection. There’s no interconnection queue. The residences are already there, approved. Why not exploit every one of those already existing interconnections as much as you can? Why not get as much out of it as you can?

Aseem Kapur

The way I think about this is, and without totally geeking out on this topic —

David Roberts

Feel free to geek out.

Aseem Kapur

Flexible interconnections have to be the common standard. You can’t expect a customer to have to upgrade your panel every time you have to go out and buy a new car or buy a new laptop. That’s just ridiculous. You cannot live in a world where the physical grid constraint holds you up from having access to innovation. To that end, flexible grid interconnections are really important. How do you get to that flexibility? You need to be able to call on those flexible resources, you need to be able to dispatch them and optimize them.

That is where our technology investments unlock that platform. GM is investing in that technology with GM Energy that has the software layer with this virtual power plant. You have millions of these batteries on wheels that become a virtual power plant. Now they can interconnect with the grid. I don’t have to upgrade my service, I don’t have to upgrade my panel.

David Roberts

What if I have a 120-volt panel? Do I have to upgrade to 240? Even a Level 2 charger — a lot of people, this is a barrier to them. If they have an old panel, I assume you at least have to have a 240-volt connection to have all this equipment, all this home energy equipment.

Aseem Kapur

You need to have an 80-amp. 80-amp is the maximum that you do. In fact, if you want to keep it under 40 amps, we allow for the charger to be derated and to keep it under 11.5 kilowatt-hours. We give the option because the charger is designed, because it’s an AC/DC charger coupled. You charge on AC and you can have two different speeds. You can charge at 11.5 kilowatt-hours or 19.2. The constraint there is whether or not you need a panel upgrade. We allow the customer to derate it.

On the discharge capacity, it’s the same 9.6 kilowatt-hours. The amount of energy that you draw out of the battery in the vehicle is the same in either configuration. We’ve thought through that and how to make it cheaper to install. In the long run, meter collars are going to become more prevalent because they’re going to allow for bypassing. One of the biggest challenges that electricians face with connecting this equipment is the smart panels. The smart panels are going to also become mainstream. All new homes come equipped with smart panels that allow for that flexible interconnection capability. You don’t have to upgrade your service every time.

David Roberts

Span, the smart panel people, now have a little edge compute box that you can put on there. They’re doing — speaking of edge computing — all this stuff is, everything’s converging. What do utilities need? They need time-of-use tariffs. It seems like GM is doing the management of the system and the awareness of the system. Is it as simple as the utility just coming to GM and saying, “Provide us flexible capacity”? Is that the extent that the utility needs to be involved? The utility doesn’t need to manage these systems itself or technological capability; any utility could do this?

Aseem Kapur

Yeah. The utility doesn’t have to worry about what happens with the resources at the end of the last mile. We take care of that. That’s our promise to the consumer. We’re responsible for deploying the asset, maintaining the asset. That is the brand promise that we’re delivering to the consumer.

What we are partnering with the utility companies on is what they need to have is two things in place. One, they need to have market mechanisms that allow them to run these programs at scale. Most of the programs today are proof of value pilots. They’re not being offered at scale because the regulators have to approve and authorize that they can add these investments into their —

David Roberts

And you just mean variable rates, time-of-use rates.

Aseem Kapur

Tariffs is a piece of it. Another key aspect is if you have to truly incentivize flexible demand, then there’s no better way of doing it than to pay the consumer. Pay the customer for getting into that technology. Now, instead of upgrading the grid, I can call on that asset that I have incentivized the consumers. We are a big proponent that regulation should allow the vehicle-to-home and the home energy management systems to be treated as a regulated asset. Let the utilities add it to their books like they do. In many cases, they have storage systems being added to their books so the utilities can earn. It’s a win- win. The consumer benefits, the grid benefits, and it’s the most affordable way to add grid capacity. That’s one.

David Roberts

But you need them to have confidence in it too. This is what I hear from utilities.

Aseem Kapur

That’s right.

David Roberts

They want it to be as reliable as a power plant. I don’t know that a lot of them are convinced yet.

Aseem Kapur

We’re there. We’re working very closely with them. It’s only a matter of time when all of this testing comes out, and then once one company gets behind it, all the other companies get behind it. Just the nature of how the utility industry works.

The second thing, I just also want to go back to your original question: what must be true for energy companies or utility companies? Interoperability is also key. OEMs like GM are really taking the charge. We’re leaning in, we’re all in with our EVs, but we have to have standardized standards that drive bidirectional charging because that drives interoperability. Right now, the customer can buy a GM Energy home management system. Today it only works with a GM EV, but in the future it should be able to work with any EV or vice versa. That is what drives adoption and scale as well.

Utilities don’t want to be in a position where they say, “We’re only going to issue a flexible capacity contract to General Motors.” They want to be agnostic to technology, they want to be market makers. What we are doing is, and we recognize the opportunity because it’s the right thing to do for our consumers as we did with the NACS port. We agreed that this is in the best interest of the consumer. We’re leaning all in. Similarly, we’re working with the SAE, the IEEE to lean in on these, including partnership with our other automakers to unlock these new bidirectional charging standards.

David Roberts

If I’m a consumer, one worry I might have about this is am I getting locked into a walled garden? If I have one piece of GM equipment, am I then stuck only being able to buy other pieces of GM equipment? Could my battery come from a different manufacturer? Could I use a different EV with your inverter, etc.? To what extent are those standards in place now and this technology agnostic versus that being a future destination?

Aseem Kapur

Let me answer the question on the top. First, I’ll answer it in the context of where the maturity of the standards is. Then I want to answer your question around consumers and how they think about it. There are three standards that must be true. It’s the IEEE standard that’s related around the 1547-2018, which is the inverter technology — how do we make sure every vehicle is capable of inversion either onboard or off-board to the same standard? Today we design our inverter that’s off-board on the wall that satisfies that requirement.

The second is around ISO 15118-20, which is the emerging standard for bidirectional charging. Today our EVs communicate with our home energy management system on a proprietary protocol. In the future, everything that we are going to design — Sterling talked about this in his talk earlier. With model year 28, all of those vehicles will be ISO 15118-20.

The third piece is around the IEEE, the 2030.5 or the OCPP 2.0.1. These are emerging global standards around how charging and discharging happens, how settlement of payments happens, the transaction cost transparency.

All of these standards are — IEEE standard has been finalized, the ISO standard is near finalization, and the ISO standard is probably six months away from becoming the formal source. The product life cycles for the OEMs are going to fast follow. We expect we are going to be the first one out the gate that is going to have all these standards adopted in our vehicle-to-grid technology and vehicle-to-home technology. That is the first part.

Going back to your original question about consumers being locked into the walled garden. The way we think about this is slightly different. Yes, you can have a choice to be able to lock into a walled garden. But there is a reason why people buy Apple devices. It is the same reason why people buy GM vehicles. We have by far the highest brand loyalty of any automaker. Once the customer gets into our brand of products, they trust us with that ownership. It is across the portfolio. We have a vehicle at every price point and we have customers who through generations just buy GM vehicles. We have seen that brand loyalty increases with EV propulsion systems. It is a higher brand loyalty.

We’re not concerned about the fact that today customers are making an investment in a vehicle-to-home or home energy management system. We’re so confident in our EVs that we know that they’re going to come back into another EV from us and trust us with that experience as well.

David Roberts

One thing I hear when I talk to experts about this is that most of the benefits of the grid communicating with EVs, most of the benefits you want in terms of flexibility, you can get through just managed charging, that is, timing when you’re putting electricity into the battery. I saw even on the PG&E pilot there is not yet energy going from the EV to the grid, leaving the home — basically export of energy. Do you think that’s going to be a big piece? Do you think we’re going to get most of the way there on flexibility just with timing, or do you think export into the grid is going to be a big piece of this at some point?

Aseem Kapur

Let me turn that question over to you, Dave. How many outages have you experienced, say, just in the last year?

David Roberts

Probably two, and usually pretty short, usually on the scale of hours.

Aseem Kapur

Would you say they’re increasing or about consistently the same?

David Roberts

I don’t know. I don’t know over time.

Aseem Kapur

The way I would answer the question is in most cases the average US consumer is experiencing more outages than they have over the last decade.

David Roberts

That’s vehicle-to-home. That’s your vehicle in your home.

Aseem Kapur

That’s correct. That’s the first entry point on how the customer gets into the technology. What is also happening is that in many cases, there are short duration outages in many parts of the country, but when there are major weather events, those outages are typically prolonged. They are three to five to seven days.

In most cases, utilities are not equipped to energize communities or neighborhoods at scale and what they’re looking for typically — and in my prior life I worked at Con Ed, I was responsible for at one point in my career powering all of the grid north of Times Square. Every heat wave in the summer we would deploy backup diesel generators because the grid would go out of power. Now imagine there’s a parking garage in every corner in Manhattan. If we have all those EVs that are parked in that garage, that become our vehicle-to-grid enabled technology, that can now become a grid resource that can be dispatched.

David Roberts

But then you need something like a microgrid. You can’t just pour that energy into the whole grid area. You need some sort of isolated —

Aseem Kapur

That’s correct. Where the technology is, again, going back to what we talked about earlier, as the last-mile congestion increases, the frequency of the outages increases and the impact increases. What the utility planners are going to look into is how do we design these circuits to have flexible interconnection with distributed energy resources. It’s already happening with batteries, it’s happening with community solar, it’s happening with community storage. Now utilities in many cases, they’re regulated to do that. The reason why they’re doing that is that they’re purposely reconfiguring portions of the grid to adopt these technologies on a permanent basis.

Why they do that is because they see value, it’s cheaper, and this is a big portion of what the distribution study that we shared with you about how you manage for the distributed energy grid expansion or deferral in capacity. It’s going to come down to: in the past, the technology has not been there. You can have a flexible interconnection point, but then how do you monitor the asset? You are absolutely right. We have to earn the utility operator’s confidence. We are laser focused on doing that. We are making such a large investment in our labs, in our technology, we are running these pilots.

The reason why we’re doing that is because we want to get that confidence, we want to get that approval from the utility operator that your technology is good to go. Beyond that, the tech stack exists right now. It’s a function of what we bring to the table — the consumer we bring to the table. We can do the customer acquisition, we can deliver the most unified experience to them. When an event happens, yes, there is a good probability that between the three of us, not all of us are going to make our vehicle available.

Given the amount of data and information that we have around consumers’ behavior on their driving, behavior on their energy consumption at home, we can forecast with a very high degree of confidence what is the likelihood that one out of three EVs is going to respond at a given circuit, at a given proof point. Once utility operators and utility planners have access to that information, that just changes the game.

Our perspective today is all about how we have designed the grid for 100-plus years. It is unidirectional flow of energy. You have to have an islanded system. I can think of 100 reasons why this will not work. I have been on the other side. The need for change has never been higher and tech is moving at a much faster pace than all of us imagined, even five years ago. That really gives me confidence.

As a utility former planner, I didn’t have the tools to even do the analysis to say when can I project overload in a certain specific circuit? I had to run studies after studies, load flow models, and run a probabilistic scenario for all different load curves, 8760 analysis that we had to do, which is every load curve for every hour in the day. Now you plug that in and Claude could run it for you in a matter of seconds.

David Roberts

Final question. Theoretically, five years from now, ten years from now, you, GM, are going to be running VPPs all across the country. Theoretically, you’re going to be a big power company, you’re going to be a large-scale energy company. I’m curious how deep you all want to go into the VPP or could you see handing that off to someone else? There are all these VPPs popping up, there is a lot of ferment in that market. Do you anticipate eventually managing hundreds of megawatts, gigawatts of power across the country? That would make you a large-scale energy company. Is that the destination here?

Aseem Kapur

Absolutely. There’s no reason for us not to do it if it’s the right thing for the customer. Is that our core competence and expertise today? Absolutely not. What we’re doing is investing in gradually building and learning it step by step. What’s more important is we’re threading an ecosystem. We don’t want to go it all alone. We want to bring the utility companies, we’ll bring the aggregators. The way we see it is if there are certain markets where an aggregator can do that, we’ll partner with them.

If there are other markets where we have to step in and do it, we may do it. The intention is what brings the time to value. How do you energize that capacity and bring that to value? We are laser focused on the core outcome for the customer. We’re not moving forward with the direction that we want to be the largest power company in the world. We are looking at this problem statement in the context of how do we create value for the consumer that gives them confidence in the propulsion system, in the energy technology, in our battery technology, and we continue to scale that.

David Roberts

Thank you. It’s very illuminating. Super interesting stuff. It’s been fascinating to watch as everything becomes batteries — transportation, grid management, home, customer — everything is becoming one. Everything comes on the grid, everything becomes one big thing. It’s muddling all these previous business categories, all these previous silos of different business models are all getting mushed together. It’s fascinating to watch how things are going to fall out of that. What do the businesses look like when they’re managing all these batteries and all these different kinds of categories and all these different — it’s fun to watch. It’s a fun time to be involved.

Aseem Kapur

Exciting time.

David Roberts

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

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

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David Roberts

Hello everyone. This is Volts for June 17, 2026: “Can the UK stay the course with its climate plans?” I’m your host, David Roberts.

By many measures, the UK is a genuine global leader on decarbonization. It passed an extremely ambitious climate change law in 2008 and has largely stuck with it since. It shut its last coal plant in 2024, making it the first G7 nation to leave coal behind entirely. It has cut its greenhouse gas emissions by almost 50 percent from 1990 levels, well ahead of, ahem, some other countries one could mention.

But its decarbonization push has recently hit some turbulence. The cross-party consensus that held for 15 years seems to have come apart: with the Labour party running the government, the Conservatives now want to repeal the very climate law they once championed, and Reform UK, which is leading in many national polls, is promising to scrap “net stupid zero.”

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To make matters worse, America’s ill-conceived Iran war has gas prices spiking and household bills heading back up — an awkward backdrop for a government elected partly on a pledge to cut household bills by £300 by 2030.

All of this agita will be on display later this month when Parliament votes on the UK’s seventh carbon budget, which will give the government guidance on how and how fast to continue cutting emissions. As proposed by the Labor government, it maintains course, but increasing concerns about industrial competitiveness and the costs of heat pumps and transport mandates will make this a spicier affair than past budgets.

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Can the government produce a credible policy package that meets the targets laid out in that budget? Now that the easiest reductions in the electricity sector are behind it, can it make similarly ambitious cuts in heating, transportation, and aviation? Can it restitch its climate consensus and restore its global leadership?

Much of this effort will fall to Katie White. For two decades, she has been a leading climate campaigner, working at prominent NGOs to establish the UK’s climate law and its basic policy architecture. Then, in July 2024, she became a member of Parliament, and in September of last year, she was appointed the UK’s climate minister. It’s a rather dizzying ascent into the higher reaches of government. I can’t wait to talk to her about how the climate effort looks from the inside and how she intends to keep the country on track.

Katie White, welcome to Volts. Thank you so much for coming.

Katie White

Thank you for having me, David.

David Roberts

Let’s start here. The most striking thing about UK climate politics at the moment, from the outside perspective, is that you were instrumental — after working for years with NGOs — in passing the Climate Change Act way back in 2008, which passed on a cross-partisan basis and has had majority cross-partisan support ever since, up until it looks like right around 2023, when it looks like the consensus fractured. Reform obviously is now out promising to repeal the whole thing. Conservatives are now following up, saying they want to repeal the whole thing. It really looks like that consensus flew apart pretty abruptly starting in 2023. I’m just curious, why do you think that happened? What is your diagnosis for what happened?

Katie White

Thanks, David, that’s a great question. In terms of where we are and why do I think it’s happened, I don’t think it’s quite as broken as you might think or hear. Undoubtedly, there has been some fracturing and you’re right that in 2008 it was the Conservatives under David Cameron. David Cameron’s leadership campaign was to call for a climate change bill and then the Labour government introduced it and they continued to deliver. In the last few years, there’s been some questioning about that and I have been taking a step back and asking what is the questioning, what do we agree on, what do we disagree on, and what’s the problem with that?

I think we are at a place in terms of a few bits. One is our energy bills. That’s probably the main thing and it’s certainly the number one issue for voters in the UK and the number one priority for our department. Secondly is energy security. Thirdly is climate change, and it’s probably in that order that people care at the moment. It’s not to say they don’t care about these things because I think the British public, the numbers who support action on climate change, is incredibly high.

At the same time, most humans want to have low bills and energy security and tackle climate change. We’re trying to deal with that. I think the case was made around climate change years ago. I’m not sure we’ve made the case particularly well. But also, energy bills have continued to rise and people have made an equation there of “hold on a second, are these costs directly comparable?”

Now, David, you’re an expert on this. It’s a very complicated picture. In the UK, we’re moving from a system where we’ve almost been renting energy, but it’s been a commodity-based system. We’re buying off, we have a certain amount ourselves, but broadly we’re buying off other people, be it the US or Norway or other countries, we’re buying oil and gas. We’re now moving to an infrastructure model. We’re almost buying our own house and there is a down payment cost on that. We have invested in terms of having wind turbines and actually the last government, due credit to them, set a lot of this in train.

The challenge is they also didn’t do the grid infrastructure, which meant that we haven’t been able to take advantage of some of those costs. We are at that tricky point in the transition. We need to be honest about that. There’s also politics all involved in it and obviously this is even more so in the States. It’s very much a binary, has been left and right. I’ve never really agreed with that and I’m happy to call things out on the left, on the right. People want to have an argument about whether things have got a label or whatever. I don’t really care about the labels, frankly. I just want to make sure that we’ve got clean energy that is cheap, good for the UK, and good for the planet.

The other point, and you might have some reflections in terms of why you think it is from where you’re sitting, but I was with a group of leaders yesterday and some business leaders and some of them have been working on this for a while as well, and they were saying a lot of this is cyclical and there are generally cycles of support and lack of support and we are for sure at a lower ebb. They were reassuring me that it was going to go up. We’ll see. They did say that the troughs of those peaks, the trough is getting higher as the trend is going up.

Finally, I would just say there’s quite a lot we do agree on. There’s been a lot of debate in the UK recently politically and energy has been a part of that debate. But electrification, you’d be hard pressed to find anybody across the whole political spectrum who doesn’t agree that electrification is the way forward for the UK. I’m like, if we agree on that basis, let’s build on that, let’s keep going, because that is great for our prices, for energy security, and for the planet.

David Roberts

The one thing I wanted to say, as I was looking at these charts, is political support has split rather abruptly, but that’s not reflected in public support. If you poll the public, they’re not as intense in their support as they used to be, but still majorities are in support. It’s really an elite political phenomenon that’s happening. But you raised the main issue. Let’s talk about the main issue. You believe, I believe, I’m sure most people listening to this podcast believe that if you make these big investments in renewable energy, infrastructure and resilience, Britons will be better off in the long term, maybe even in the medium term.

But politics lives in the short term and people are facing high prices in the short term. Originally, I think Labour was promising “we’re going to lower your household bills,” I think specifically by 300 pounds by 2030. That, for a variety of reasons, is looking quite implausible, not all of which are in your control, of course. Some of that is the Iran war, pushing gas prices up, etc. But the question I would just put to you is what are you going to do in the short term? How do you propose to restrain costs between now and 2030?

Katie White

You’re absolutely right. We’ve committed to bring bills down and the bills were lower in 2025 than they were in 2024, so we were heading in the right direction. But you’re absolutely right, I think everybody can see the international crisis we face and the challenges. We’ve done a couple of things. One is we have done targeted Warm Homes Discount for people who need energy support most. We did that over the winter and we increased the distribution of that so there were more people getting access to Warm Homes Discount.

We also took some of the costs of the renewables obligation we had on bills and we’ve taken those in house to the Treasury. Yes, the taxpayer is paying, but for families and businesses that is having a reduction in cost and that’s why the price cap was lower in April. It has gone up because of the Iran war, but it hasn’t gone up as much. We were working from a lower base. We’ve already made a couple of interventions.

I’ll also give you a story. I was out knocking on doors because that’s what we as politicians do out in the northwest the other day and came across a guy in a very modest house in a not hugely affluent area who was explaining how he’d been in energy debt and he was in a thousand pounds worth of energy debt. He’d got a couple of solar panels and within a year to 18 months he got that debt down to 170 pounds.

The more we can do, as you say, to meet that short term need, because I totally agree with you. In the long term we’re going to be in a better place and that’s what we should be doing as politicians and leaders, setting up the country for the long term. But we also need to meet that short term need and we’re acutely aware of that. We’re looking at all options now, particularly because of the Middle East crisis, of how we can accelerate any of that. Getting solar panels on roofs. We’re trying to get the, we said we’re going to introduce these plug-in solar that you get in Germany, that you can get in the middle aisle of our discount supermarkets.

We’ve just got to get the regulation through. We’re trying to do that as quickly as possible because it is a way that people can insulate themselves from bills. That’s the number one thing I’m concerned about, how do we support consumers and use this time that we have wisely. It’s pretty hot here at the moment. Energy demand is lower, demand in terms of heating etc. is lower. But we will head into a winter where prices look like they’re going to rise. How do we do everything now to be protecting consumers for that next winter?

David Roberts

A slightly nerdy question related to that, and this is something Ed Miliband has referenced frequently. One of the reasons that household bills are going up is that gas prices are going up. In the UK, the way the energy market is structured, gas is still the price maker. The price of energy is still pegged to gas. In a sense, you’re very stuck on this roller coaster with everybody else.

I’m curious, in terms of energy markets, how are you going to break that link? How are you going to stop allowing gas to establish the price of electricity in the UK? I know there are market reforms in the works. How do you want to break that link and when might it be broken?

Katie White

There’s two things to say here. You’re absolutely right. We’ve announced we’re looking at how to break that link and how structurally we can do that. There’s a review going on at the moment in terms of breaking that link. We’ll be able to tell you more in hopefully not too long a time because we’re operating within the framework where energy costs are causing a lot of challenges.

The other thing is the more we move everybody onto that electrification piece, every single solar farm, offshore wind turbine that we are pulling onto the grid as quickly as we can, and we might come on to Clean Power 2030, the mission that the Secretary of State brought in, allows us to be less exposed to those fossil fuel prices. We looked already, and again I give credit to the last government because their investment, the fact that we have got so much wind on our system, means that the prices are less than they were. We were protecting and insulating. We want to do more of that, which again is a bit baffling as to why people don’t support what A) they did and B) when it’s coming to fruition. But humans can be a little baffling at times, can’t they, David?

David Roberts

We don’t get any of that in the US. I’m not sure what you’re talking about, we’re approaching things rationally over here. The seventh carbon budget was just released yesterday. We’re talking on June 3rd. It was released on June 2nd. It’s about the period from 2038 to 2042. It would represent an 87% cut from 1990 levels. This is what the Climate Change Committee recommended. It is a statement of ambition, it is a statement that you are staying on course.

But the same Climate Change Committee also says that around 39% of the cuts needed to hit the 2030 target, which is much closer, are at risk because the grid connection queues are clogged, supply chains are backed up, and most of all you don’t have the transmission you need. There’s lots of on-the-ground local public opposition to building new transmission. It seems like if you want investors and others to put credibility in that long-term target, what are you going to do to make sure you hit the short-term target, the 2030 target, especially since you’re so far behind on transmission and transmission just takes a long time to build? How are you getting back on track for 2030?

Katie White

The Climate Change Act, which we brought in in 2008, is for those five-yearly budgets. We are currently in carbon budget four and we set yesterday for carbon budget seven. We can have that long-term trajectory for a couple of reasons. One, because it meets the climate change challenge, which is what we’re suffering today is what happened from our grandparents and their grandparents. What we’re laying down today is affecting our grandchildren. It meets that, we used to call it the “not in my term of office” challenge, which is “why would I care as a politician if it’s not going to affect my term of office?” You need to create an incentive structure to do that.

That was the point of the Climate Change Act. It was also stating legal ambition, but without a straitjacket. The 2030 target is actually beyond. We met carbon budget 1, 2, 3. We’re in carbon budget 4. The Clean Power 2030 mission is not a legally binding target. That is part of a way to accelerate our mission, which will help meet those budgets. It was something that came in with the Labour government and the Secretary of State wanted to have ambition and be really clear because he cares about the things we talk about: energy security, bills, and climate change at the same time.

It was a case of how do you manage each of those? We’ve done a few things. Day two of us being in office, he scrapped the onshore wind ban. That was gone. There was a backlog of things on his desk in terms of planning decisions, which he’s just gone through. Yay or nay, let’s move them on. He set up a control mission with a brilliant guy called Chris Stark, who has mission control of this and he looks up everything that is going on. As you say, we had this problem with the grid queue and with the connections where property speculators were putting projects online which were just speculation, which were actually zombie projects, never going to work.

You could see how that had happened. It was just a fault in the system. Government had to intervene because the citizens need to make sure we’re getting that queue sorted. We’ve reordered the whole queue, took everybody out, which you can imagine not everybody was thrilled about. But we need to get the system working. That is our job. We’ve reordered the queue. Things are moving a lot faster. We can take advantage of that. We’ve got a planning bill that has gone through the House of Commons and we’re looking at whether we should do anything on top of that in terms of national infrastructure projects.

I don’t think anybody, whether they’re a supporter or not a supporter, would say that the Energy Secretary didn’t hit the ground running with, excuse the pun, a huge amount of energy for this agenda. We have been going at it to make sure that we are moving forward and getting things done on this. The Committee on Climate Change brilliantly, rightly comes back and marks our homework and says on different areas which bits we’re doing. In terms of the grid, you’re right. It’s a big challenge. We’re looking at big investments and also how we can manage that more effectively, whether it’s through AI or whether if there’s more battery-based systems, will that take some of the peak load and some of the demand off.

We’re open to all that, looking at all our options and Chris Stark, who’s been doing the 2030, is now looking at that, how we make sure that is delivered most effectively. Supply chains have been a challenge across the world. We know that since pre-Covid and at each level we’re moving this whole transition and people are always going, “there’s not enough this and there’s not enough that.” I do more visits than any other minister because I love going out and hearing from real people what they’re doing and what’s happening and also what’s their story, where’s the gaps?

I go to heat pump manufacturers and they’re saying, “I’ve got more capacity if demand goes up here, these are my extra lines.” I go to apprenticeships and they’re absolutely stacked out because they’ve got people who are wanting those jobs, the future. There are challenges. It’s great for them to point that out. That’s inevitable when we’ve got such a big systems change. I feel we’re totally on it and I’m really grateful for anybody pointing out any gaps in our plan because we want to fill them.

David Roberts

Let me briefly hit an issue that’s very hot in the US right now. Tony Blair recently came out with a big op-ed and a couple of interviews saying that Labour should scrap the net zero goal, etc. I think he was roundly mocked for that.

One of the reasons he was saying that is he’s now very big into AI and he’s part of a group of companies and corporations and a lot of big investors who want to build a lot of data centers in the UK. Of course, those data centers are massively power intensive. To the extent they’re sucking up power, that’s less power for everyone else. The more of those you put online, the more difficult it is going to be to hit that 2030 target. A lot of people just read that as “we should prefer data centers and AI over our 2030 target.” I wonder if you see any conflict between data centers and your short-term goals.

Katie White

There’s been a lot of commentary going on in the UK and in broad terms, I welcome the opportunity to have a great conversation about energy, the target, and there’s two targets. There’s a 2030 clean power and then we’ve got a 2050 net zero. I’ve been in this for a long time. Up until 10 years ago, I’d never even heard of net zero. It wasn’t even a term we were talking about. Where the real excitement is, is where’s the electrification, where’s the grid, what’s the demand, how do we manage this? Therefore, what’s the job and the investment opportunities?

The clean power transition, call it what you want. I think we’re getting caught up on something that is almost in Act 7 of our story when we’ve got all of these other bits to go at. I’m happy to have the conversation, it’s not really where the action is and it doesn’t mean to say that we don’t need investment in our energy system, be it you are climate skeptical or not, you want energy. I think they’re missing the point of having that argument.

I listened and Tony Blair is a great thinker, he’s a great strategic thinker and I enjoyed reading the article. I listened to one of his podcasts and he said, “we do need to meet net zero. I’m just not sure about the level of transition.” Is it 2048 or 2052? I’m going to crack on with what I’m doing today and it’s not going to make that much difference to me in terms of the transition.

On your wider point around the data centers. We want to be in the game on AI, 100%. The UK wants to be in the game on AI. We see it as a big opportunity in terms of productivity and you’re right, it’s a big energy demand. We’re lucky enough to have great scientists here and in the department we have Patrick Valance, who you might not know, but certainly in Covid here was one of our national rock star heroes because he led the science. I sat down with him and asked him about it and said, “AI, are you excited? Are you worried in the context of climate and energy?”

He said, “there’s as many opportunities in terms of AI using and helping us with the grid in terms of reduction as there is in terms of demand.” I’m definitely an optimist, but I do think we want to go in and see how can we support this industry. We now have much more capacity and capacity challenges because we’ve got a lot of overcapacity in some areas of the country. Is there a way of working those two things together to have a holistic energy system which allows us to stay on track for that clean energy?

Climate change is real, is happening and there are implications happening in the UK and overseas. We want to play our full role in that. At the same time, we want our economy to grow. I do think there is a way of managing that effectively. That’s the thing about the carbon budget, why it’s so great, is choices. It’s the same with a fiscal budget.

A politician or any person could find any which way of things they want to spend money on. Of course they can. It’s about choices, isn’t it? You make those choices and if you’re going to go big on one thing, then you’ve got to squeeze back on the other. It just allows you to have a sensible, practical way to do that.

David Roberts

Let’s turn to another subject that a lot of people were pushing me to ask about. Labour’s plan has this sort of a national fund now which is going to invest a lot and put a lot of money and energy into nuclear power and hydrogen and carbon capture and sequestration. There are a lot of people in my world who view all of those as very expensive, very slow distractions.

There’s some recent experience in the UK that would give them some evidence. The Sizewell C nuclear reactor ended up costing double what you thought it would. The SMRs that you’re ordering are, best case scenario, coming in mid-2030s. The hydrogen for heating thing has kind of fallen apart. Those pilots kind of fell apart. I don’t think anybody’s still pursuing that. CCS, there’s not really any up and running. If you’re behind and if you need short-term fast reductions in cost and in emissions, why not reorient toward the things that move quickly, which is mostly electrification and batteries? Why are you still chasing these white whales, I guess is the non-flattering way to put it?

Katie White

Let’s take each one because they’re very different, aren’t they? They’re very different entities. I am genuinely excited about our nuclear program. We have a problem in this country in terms of building things on time and on budget. We have a problem with that.

David Roberts

I can’t relate. I don’t know what you’re talking about.

Katie White

That is something that our countries need to get a lot better at because there are places that can build things much more effectively and for various different reasons. We could do a whole other podcast on this. We’re not great at building things on time and on budget and making choices that are fiscally driven for the best return on our investment. That is a separate thing and we definitely need to be concerned about that and I am concerned about that.

However, I think our nuclear industry is something I am excited that we are investing in because we need baseload and it does capacity in a way that our renewables doesn’t do capacity and we want to have that diversification of our energy system, but it gives us that baseload. We have some technology and capability that nobody else has, which is why we’re working with the US. I’m very keen to take the competitive advantage angle here. I’m not ashamed to say I want Britain to do well out of this. I want us to look at where we can do best and invest in that capability and double down on it. That’s good for our country, for our economy.

Nuclear is an area where we do have capacity and capability that I think we should be investing in. The SMR project is one of those. You’re right, David, but it’s not that far in terms of we’re just talking about a budget 2042, 2038–2042. If that budget allows us that long-term framework. The only frustration in nuclear is that we haven’t cracked on with this sooner. The excitement around SMRs particularly and that baseload and having that is right.

Your wider point on should we be doing things quicker and on budget, 100%, and that should be trialed through the SMR. We’re excited to work with Rolls Royce as our chosen company for the first one, but we’re working with other countries across Europe on how we can work together on this in terms of supply chains and how we make that as effective as possible for everybody. I think the nuclear story is absolutely the right one and we need to make sure we do that safely, almost for economic reasons as well as for energy reasons and for our capability.

David Roberts

What about hydrogen? There’s a lot of people, and I’m sure you’ve heard from them, who think that the whole hydrogen thing is a dead end. There’s still lots of money in the budget for it. Do you still have hopes for hydrogen?

Katie White

We’re about to publish a hydrogen strategy, so I shouldn’t really talk. There is more to come on hydrogen from the UK and where we see the best role for hydrogen, in terms of making sure we are investing wisely. We’ve got a Treasury that is very keen to make sure, understandably, that every one of our pounds is invested wisely. I think there are some opportunities and particularly we’ve also invested in communities, as it will come on CCS, where could hydrogen fill the gap that other technologies couldn’t do? We will keep each of this and that’s why we also have the long-term plan, which allows us to see how each of these things are performing and how much we invest and where the support is needed, etc.

CCS again is, the Committee on Climate Change would say to us each scenario requires CCS, but also we do have a geological capacity because we’ve used a lot of our North Sea oil and gas. We have that geological capacity that if we can crack it and make it work at commercial scale, it does look like we are going to have to look for options like that in the longer term. We will always keep things under review, but at the moment we think those are the right choices.

David Roberts

Let’s talk about what is arguably one of the most difficult. This is very much in your brief and one of the most difficult nuts to crack in the whole decarbonization thing. I’ve done a million pods on people’s various frustrations and difficulties, which is the retrofitting existing homes. That just turns out to be quite a riddle for everyone, especially in the UK, because I think heat pumps at this point have like 1% penetration. It’s almost all gas boilers.

Right now it’s cheaper, just straight up cheaper to heat your home in the UK with gas than it is a heat pump. It’s like a 4 to 1 ratio. You have the difficulty of just the fact that all these residences and homes, it’s just a high touch, home by home. It’s very difficult. You have to deal with every homeowner, every homeowner has very strong feelings about their home, and then you have this cost imbalance. This is just a difficult thing. I’m curious how you’re thinking about that part of your brief?

Katie White

I was in Sweden a few months ago and the Swedes, a much colder country than Britain, and I think they’ve got 70% of their homes have got heat pumps. I said to the minister, “how on earth did you do it? How did you switch everyone?” This guy, very straightforward, direct, said, “it was in the 1973 oil crisis and my grandmother came home and said, ‘that’s it. We will never use another drop of oil on heating again.’” As if the whole country just switched. I love that level of rationality.

David Roberts

That level of rationality we can all envy.

Katie White

I know. I was like, flipping it, as you say. People are like, “hold on a second, it’s going to be a bit of a mess.” We definitely haven’t had that level of rationality to shift towards it. We are looking at a lot. We’ve done lots of things in terms of heat pumps and there is more to do.

As it stands at the moment, given we are in the Middle East crisis, there are a lot of people looking and you’ll see our EV sales have gone up, solar panel sales have gone up. People are starting to ask about batteries and in terms of heat pumps as well, slightly less sexy than an EV probably, but still people are starting to go, “hold on a second, how do I do this?” Once you’ve started on that, you can move forward. We’ve got a boiler upgrade scheme so we’re trying to incentivize people to do that.

A lot of this is around misinformation and then also hitting some kind of tipping point. In terms of the misinformation, there was lots of things going around. “Does it really work? Will I get a hot bath?” Every time I was like, “I assure you, you get a very hot bath.” It’s things like that that people care about. At the end of the day, it’s their home, as you say, it’s their personal space and they want to make sure that they’re going to feel comfortable. A lot of what we’re moving towards should be an upgraded experience.

That’s what consumers want on a day-to-day basis. We can’t deny as humans that is what we want. We want an upgraded experience. If you think your house is going to feel, yes, cheaper is great but if it’s going to feel better as well, that’s even better. It’s got to be that twin thing and then, a bit like solar panels and EVs, the more people have them and the more your neighbors have got them, the more you have this cascade effect.

We were reflecting as we’ve done carbon budget seven that when we introduced the act in 2008 we had 156 electric vehicles on UK roads, like 1, 5, 6. Now we’ve got over 2 million. We’ve got figures like that on offshore wind and on solar. The shift that happens over that time. We want to do everything we can to try and get it to be easier for people to do it, encouraging people to do it. Some of this is going to be a case of other actors within society and neighbors doing it.

I was talking to someone today from the industry and they’re in touch with their customers all the time. I said, “where are your blockages?” They said, “at the moment, unless every single room can be heated to a perfect temperature, then people are saying, ‘oh, my heat pump’s not for you.’” Whereas actually the status quo is there’s not that expectation for gas.

The other thing, and David, you might have more of this, I was talking to someone the other day, people saying in the States there’s been a lot of shift because people don’t want methane within their homes. There’s that shift as well, that people are moving for other reasons because they don’t want methane in their homes. We’ve done our future home standards, so we’re looking as well. I think that’s a big opportunity for us of how to make sure that new homes are built in the right place. Because we’ve, when we lowered our future homes on.

David Roberts

Labour did have in place a mandate that no new boilers could be installed even in existing homes and they dialed back on that mandate. Clearly there’s some political pressure around all this. There’s some adjustments being made.

Katie White

We’ve got to make sure we’re meeting people where we’re at. We’re trying to encourage everybody because it’s an upgraded experience and it’s good for the UK for all the reasons I’ve said: price, energy security, and climate. At the same time, Brits, probably the same way as Americans, do not want to be forced to do anything. We’re trying to take a carrot approach as opposed to a stick.

David Roberts

Another big part of your brief is what’s called local net zero, which is a lot of these decarbonization dynamics and things that need to happen play out at the local level, at the local council level and housing and transportation waste. But it requires money to do this kind of thing. Local councils are legendarily at the moment quite broke. If they’re going to be prioritizing things, they’re going to prioritize the basic necessities above these more long-term things.

One question is where does the money for these local councils to do local action come from? The second question is a bunch of these local councils have been taken over by Reform and Reform people are just like, “we don’t care about the mandates, we don’t care. We’re dismantling our targets, we’re rescinding these climate emergency declarations.” Trying to deliver big decarbonization through a local level that is one, broke, and two, in many areas occupied by your opponents. How does that work? How are you navigating these local struggles? What are you telling local people who are just telling you, “we don’t have the money to do this”?

Katie White

I don’t think it’s quite as bleak as that. You’re absolutely right that local authorities had a 90% reduction in places under the last government. A lot of them were hollowed out and services. My council, where I’m from, was running a deficit and it’s the first time ever they’ve not had to make cuts this year because we have done the biggest settlement they’ve had in 15 years. We’re starting to build that back up. We are starting to reinvest because we see the local councils are hugely important at the front line and actually the places where we can get a lot of this done are in responsible social housing, some of the poorest people within our communities.

We’ve already started to replenish that money. There’s no magic wand, it will take time and there is a lot of investment needs to happen: roads, houses, schools, hospitals, etc. We are also working a lot more with mayors and we’ll come on to the mayors of different colors. We’re working with mayors who are looking at that much more strategically. It’s really interesting because some of them have managed to go a lot further because they’re working on bigger areas, but still managed to have that accessibility. They’ve managed and they are managing and we’re looking at actually they’ve got bigger low carbon funds.

How can they work together to get economies of scale? Is it that they can be doing local heat networks, those elements that are happening across Northern England? We’ve got Great British Energy, which we’ve introduced and that is doing investments in schools and hospitals. The other thing it’s doing is people can apply for local community energy and you can come together as a cricket club or whatever and say, “we want to have a wind turbine and we’re all going to invest and we get the money back” That is open now. People are applying.

In terms of people owning their own energy, it is a real game changer. You then asked about, “if you’re going to climate skeptics, you might get this vibe.” I am a pretty positive person and I look for where we have things in common. I’m not really bothered about statements, things that people are signing up to, it’s sort of helpful, but it’s sort of virtue signaling in some way. It’s not going to change what actually happens on the ground.

What I’ve seen is, it’s interesting in Hull, in East Yorkshire, we’ve got a Reform mayor and they’re very much like, “I don’t want this climate emergency statement and I don’t want that net zero thing, but I do want all these wind turbines and jobs that are behind me because that’s massive investment.” By the way, I was at a factory this week, a wind turbine factory. I was at Siemens Gamesa and Orsted and they had, I think, 75% of their jobs within 45 minutes of the factory. They’re local people.It’s not just people coming in, it’s local people’s jobs. All of a sudden you’re not going to rip that out.

I actually think, and as I say, we go back to, most people agree on electrification, most people agree on that. We have to be clear about why this is the right choice. We’re not doing this because we want to make some statement. We’re doing this because it’s the right thing for our country. It’s the right thing for the world as well, but it’s the right thing for our country in terms of our consumer bills, in terms of energy security, and in terms of the planet in the longer term.

David Roberts

You talk about people owning their own energy, local energy. You have this public participation program called Energizing Britain. You’ve said we’re only going to succeed in this larger effort if we bring people along. We need people to be involved and engaged and people to play a role. This usually takes the form of what’s called distributed energy, rooftop solar panels, batteries, etc. This is a real bright light in Australia, for instance, they get a huge amount of their energy from that now and it is bringing, people are participating, it’s bringing people along.

As I was looking at your larger plans, it looks like most of the flexibility, the grid flexibility you’re looking into is coming from these big grid-scale batteries. I don’t see any household batteries or targets or anything like that. It seems like the distributed energy piece is a little bit of an add-on and not a center of focus. It kind of looks like you’re mostly leaving that up to Octopus, which is doing amazing things. I’m just, I wonder about that. Why is there not a greater focus on trying to get batteries and solar panels and microgrids, all these things that are bottom up, local first, in part as a solution for the previous problem?

Katie White

It’s great and there’s so much to that and you’re getting me excited, David, because there’s so many different bits to this and this is a bit where you’re like, this is such a great area, isn’t it? There’s so many different elements and so many different ways and also so many different actors involved in this transition. There is a role for everybody if they want it. The public participation plan was actually a recommendation of the Climate Change Committee who said, “if you want people to come with you, you need to work with them.”

When I came into this job I was like, “what are we doing? What are we actually doing? Just talking to people?” I don’t want to sit in a room and just talk. I like to talk but I want to get something done. People don’t really want to listen to politicians all the time. There might be some engaged, but sadly we’re not the most trusted voices. I think we come after estate agents in the UK.

It was a case of we ended up meeting all over the country, these incredible people who were doing amazing things. A lot of it is shining a light on those people. I’m really interested in actually practically what people can be doing and what is the best way of doing that and what is the way of making people feel involved but also their practical outcome of reducing their bills and then hopefully the same thing but might be different.

It’s almost like — what’s the gateway drug for people to get involved into this? I’ve had one side, people say to me that batteries are the gateway drug for people to get involved. I was like, I don’t know whether if you look at the different demographics it’s different sorts of, is this a dad thing, are they into the batteries?

Then I’ve also been told that it’s EVs is the way in to have that gateway drug. We are looking at all of that because in a way the complexity and the beauty of this system with all different areas is exciting to me but it can also be confusing and overwhelming for individuals. Where do I start here? It’s how to make sure it’s really clear that people can get involved either as an individual getting an EV and ultimately we’ve got a vehicle-to-grid infrastructure that will help in taking off some of those pieces or we’re doing this plug-in solar panel. That would be another thing people can do for themselves. They also might want to get involved in a community project as we just said, through this power plan which is backed up by Great British Energy. They will be able to do that.

We’re not opposed, we’re trying to go as a government with all this array of opportunity, where do we need to focus our time and do that? We’re trying to make sure we make those right choices. We’ve not got as much space as Australia, but we’re certainly not opposed to any of that. I’m really lucky to work with a great team and they are intellectually curious about how any of this can work and how in different areas and where there might be microgrids.

At the moment we do have a big challenge with our grid and that is not least because we’ve got a lot of offshore wind up in Scotland and we want to be able to use that in different places. We do need to think, and the context when it changes, like you say about AI, how do we use that most effectively, how do we make sure it’s getting to the place, how do we make sure we’re remunerating that and if there’s opportunities, like with a lot more EVs on the road that makes different opportunities, with AI, that makes different opportunities. Again, how do you bring people with you? Yes, great, if we’ve got some big players in the market who are doing fantastic things, but how are we bringing communities on and giving them space to thrive?

One of my first meetings here was with an MP in the Scottish Isles who was saying, “look, they’ve got a massive big wind farm project, but they’ve got a really tiny community wind farm that can’t get onto the grid. If you don’t let us have this little bit, they’re not going to support this.” Sometimes you’ve got to make sure that you’re listening because that tiny connection might not make a massive impact in terms of prices and the planet, but it might make in terms of how people feel and their pride and that’s important.

David Roberts

Just before we leave this, I’m curious, you said that there’s some public skepticism about heat pumps, in part fueled by some misinformation. The UK is not the sunniest place in Europe. I’m curious what people think about rooftop solar and if that is catching on and whether it works, whether it’s a good investment in the UK and what the public thinks about that. As you say, these things tend to be viral, they tend to be peer to peer. You tend to see your neighbor doing it and then you do it. There have been studies about this, particularly about rooftop solar, about it being viral in that way. I’m curious if that’s happening with rooftop solar in particular. What is the public mood around rooftop solar, I would say?

Katie White

David, the public mood around rooftop solar is really positive, really positive and it is catching on. Absolutely, you get it at all times. Of course when it’s super sunny, but you can pretty much, it’s only a percentage off when it’s cloudy, you’re still getting a lot of the energy. I was at a school the other week, we were on their rooftop and all of the kids were up and it was in Oldham on the west coast, which is a pretty rainy place.

The weather kept changing and they were looking at, monitoring the impact of that inside, which was a great educational thing as well. They’d taken primarily a lot off their bills, which was great. There’s definitely a lot of support. We’ve moved as well with Great British Energy. We’re doing investments in hospital car parks. I’ve got one in my hospital car park in my constituency. It’s great because everyone’s like, it’s just a no-brainer. A roof, everybody’s happy if there’s a roof on their car park and then you just plaster it with solar panels.At factories that we’ve got, plaster them with solar panels.

As the price of solar has fallen so much, it definitely makes sense and people are a lot more on board. We also had a policy, before I was in office, where it did have a start of investment when it was more expensive and you ended up having a lot of people get on board with it. We definitely had chunks and there is a lot more support for rooftop solar. I’m excited for when we get the plug-in solar for how many people get on board with that and how we can move that on. When you look at the companies who are involved, they’re giving great statistics that increase sales over the last few months and that’s great. I’m really on board with that.

David Roberts

Just to clarify, there’s a law now being discussed to legalize plug-in solar because you can’t currently do it. That’s under works because there’s like, I think there’s like 40 US states now where something like that is under discussion. We can expect that soon.

Katie White

Very soon, David. We are breathing down the necks of our officials because it’s such a great thing. I was in Germany and you’re literally walking off the street and you just buy a thing. I was like, “can I carry this out?” It’s a bit like carrying out a mirror, you don’t want to, you want to go steady. It’s not like you’ve got to arrange a delivery or anything. You could literally go pick it up, take it in the back of your van or your car or whatever and plug it in. It’s obviously been happening in loads of other countries. We have health and safety regulation like everybody and we want to make sure that’s right. We are very keen that we get that green light so that people can start investing. My number one concern is making sure that we’re protecting consumers in the run up to next winter.

David Roberts

Another part of your brief is climate diplomacy. The current Labour government is saying, “we’re back as an international climate leader, as a good partner.” You’ve got these pledges, these climate budgets going far out now. You’re playing a productive role in the COPs again. One question is how are, and this is the irony of someone from the US asking this question, believe me, I’m intensely aware of it. How are your international partners supposed to be able to trust that you are in it for the long term when you’ve got the other party saying, “if we get power, we’re going to scrap all this”?

All of international climate diplomacy depends on these long-term commitments and they all depend on staying steady in the long term, being able to trust one another, that we’re in it for the long term. When you’ve got this political division at home and when, if the wrong party gets in power, they might scrap the whole thing. As we’ve seen here at home, no one trusts the US anymore. On the international stage, no one trusts that the US is in it for the long term anymore because we’ve got this massive swing back and forth in politics that makes long-term commitments almost impossible here.It looks worryingly like the UK is entering a similar situation. How do you think about that aspect of international leadership and engagement?

Katie White

There is a certain amount of volatility within the world, within political parties, within societies, across the whole world. That presents a number of challenges for everybody. That’s not to say that’s you or I or this particular. We have a lot of volatility going on and social media, there are multiple layers to what that is, our attention, our frustration, there are multiple as to what’s going on with that. I hold that, and I’m not going to deny the challenge of volatility.

However, I started this off and I’ve been back to this theme again, that a lot of the basis of this, the grounding, the core of this makes long-term economic sense. If someone calls it a different label, I don’t really care. The long-term trend on electrification and on the shift to clean energy is pretty unstoppable and I’m really keen to rebuild that consensus. The Internet allows people to say something outrageous and get loads of attention and that is not representative of the vast majority. Public support for this agenda is huge. When we introduced the Climate Change Act in 2008, we had the support of the Confederation of British Industry, all of the church, and the Conservative Party.

We’ve still got the support of the Confederation of British Industry, the church, and actually I think the faith leaders, by the way, have and will play a really important role. A lot of the Conservatives, I speak to a lot of them, some of them don’t want to come out as much, which I understand, but behind the scenes, Theresa May, ex-Prime Minister, Lord Deben who is head of the Climate Change Committee, there’s a lot of esteemed Conservative ex-ministers, ex-Prime Ministers who are saying, “this is really important and this is part of our legacy,” and they would make a different argument, a different political argument that small-c Conservative is around conserving the planet.

In fact, there are amazing quotes from Margaret Thatcher, who talks about climate change being, she was actually really progressive on this. If you believe in science, if you believe in growth, if you believe in the economy, these aren’t left-wing ideology things, they’re just sensible common sense. I don’t want to be blind to the fact that volatility isn’t helpful. I think the system that we have created and the geology in the UK means that the transition to a clean economy is pretty inevitable. I’d love that to go as fast as possible because I think it’s the best thing for bills, security, and the planet.

I hope that anybody who comes after me at any point will follow on that path because when you get into the nuts and bolts of it, it’s the best decision for our country. It’s great to be back on the international stage and having those conversations and working with people who want to practically make progress. We are in a different era but it’s great to be working and we’re working closely with Spain and you look at their deployment of renewables and their growth rates. For all the people who were in the treasuries —

David Roberts

10 years ago, I heard so much skepticism about Spain’s direction. Five years, 10 years ago, and wow, look at their bets, their bets are paying off. It’s a real illustration.

Katie White

Exactly. I don’t want to be blinded to the challenges. There are challenges. But in terms of a win-win, in terms of an exciting transition, in terms of regenerating our countries, our economies, our communities, this is a brilliant way to do it.

David Roberts

I’ll tee up a final question and I know you’re a positive person so I suspect I know how you’re going to answer this. One thing that’s galvanizing all this, making everybody at least think about this, putting this on the front burner in political news is the Iran war. This misbegotten, ill-considered war that our country has started that is sending the price of gas and oil up. It is forcing a lot of decisions.

You could see the UK going two different ways. One way is, “we need to double down on the transition, transition faster, do all the things we were saying we want to do even faster and more.” The other side is saying, “this shows that we need to drill in the North Sea more, we need to dig up more of our own oil, we need to import more gas, we need to secure more fossil fuels.” Which way do you think that’s going to fall, which way do you think that’s going to play out in the public mind and in politicians’ minds?

Katie White

It’s been a big discussion. Oil and gas has played an important role. It will continue because at the moment we don’t have replacement for some things in terms of oil and gas. It will continue to play an important role going forward. What we actually did was we issued these tie-backs, so we’ve got these tie-back licenses. It allows further exploration within the existing well. You’re really making the most of it.

People want to make it a binary thing of “you’re against oil and gas or you’re for electricity.” We want it all in that, we want a tie-back, we’ve said we want to do that, but at the same time there is a declining basin in the North Sea. I can’t say specifically around those planning decisions that got quashed because it’s a live thing and we have specific legal requirements. I can’t talk about those requirements, but what I’ll say is we’ve always said it will play a role, but electrification is where the big opportunity is because that’s going to take over so much more of our energy economy. The fossil fuel price is not going to change the fossil fuel price.

My number one issue is making sure that this winter we’re protecting consumers. That’s our number one issue and that’s not going to make any difference because we’re on the international market.

David Roberts

Can I stop you there? This is to me as someone who is immersed in energy world just an obvious glaring fact that seems peculiarly to not penetrate the public dialogue, which is no matter how much you drill in the North Sea, it doesn’t matter how much oil you do. You’re not going to affect the global price. It’s a global market. The global price of oil is going to be what it’s going to be. You’re not going to bring down your own oil prices by drilling in your own country. That’s just physics. Yet you cannot get that information out. People seem weirdly resistant to acknowledging that.

Katie White

You’re right. If you find a way. I had a really good conversation. They were like, “but hold on a second. Wouldn’t it be,” with somebody the other day. Then it was like, 20 minutes in they’re like, “all right, I see.” I was like, “but they’re not going to sell it to us at a cheaper price. Why would they? They could sell it to somebody else. Why would they sell it for cheaper?”

It’s not that we have a state-owned energy company. We don’t. We are working on a great potential, but we don’t own that. If that would have been, we would have been in a different position, but we’re not in that position. The geology is, in the long term, the most important thing is electrification. It will form part of our mix. They’re a really important community and where we’re really lucky is if you go around any wind turbine, wind farm in the UK, you pretty much always hear a Scottish accent, which is because they have come from Aberdeen and from our oil and gas.

We’re working really hard on that transition in terms of jobs and skills. That is a lot of a similar. We are grateful that we have that expertise and we need to make sure we support it over to the new industries, which in large part is, as I say, we are hearing it and happening, but we need to make sure we do that.

David Roberts

If you want to just go out on — I forgot this. Also, alongside the new carbon budget, this report came out about the effect of net zero on jobs and the economy and everything. Was that also the Climate Change Committee that produced that report? I’m not sure who produced that report, but it’s a big report. This gets into the jobs and training stuff. Maybe if you just want to take us out with a little touch on that report.

Katie White

The Confederation of British Industry, which I talked about, which represents lots of business in the UK, commissioned a report on what jobs were attached to the net zero economy. Call it green, call it whatever you want. They were saying in the UK that’s around a million jobs now. In the US those numbers are higher, but given our population that’s a pretty significant amount of jobs and they say about a third directly and two thirds through supply chain. Those are a significant number of jobs as well as, and these jobs are also really well paid, they’re way above the competition for getting into these industries now is great.

Each company I’ve been to, the enthusiasm you get and also the fact that people are just not leaving, you can see that it’s their great job, well-paid jobs, and often in communities like the one I was in this week in Hull in East Yorkshire, where they haven’t had as many economic opportunities over the last few decades. On that, have a read, it’s great.

David Roberts

All right, I will leave you there. I’ll let you go catch your train. Thank you so much for doing this. It’s been really fascinating.

Katie White

It’s great to talk to you. I really enjoyed it. Thank you, David.

David Roberts

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

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David Roberts

Hello everyone. Greetings. This is Volts for June 10, 2026: “Why is NERC so worried about data centers?” I am your host, David Roberts.

Traditionally, the grid planners and regulators charged with maintaining the reliability of the wholesale power grid concerned themselves with the behavior of generators, ensuring that power plants did not ramp up too quickly, trip off too suddenly, or create unmanageable frequency or voltage disturbances. Loads, even large industrial loads, were presumed to be relatively safe as they tended to behave quite predictably.

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That has changed with the introduction of giant, gargantuan data centers that can ramp extremely quickly, trip offline suddenly, or induce oscillations that mess with grid voltage. They are big enough and unpredictable enough to cause problems that can cascade and cause widespread blackouts. Grid regulators are taking notice.

Last month, the North American Electric Reliability Corporation, or NERC — the nonprofit regulatory authority assigned with maintaining the reliability of the US wholesale electricity grid — issued a “level three” warning about data centers, which in the typically boring regulatory world amounted to a flashing, blaring siren. It called out the increasing threats that data centers pose to the grid and issued, alongside the warning, a set of recommendations for grid planners, transmission organizations, and hyperscalers to address those dangers.

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This amounts to a historic structural shift in how grid reliability is conceived. For the first time, there are loads big and powerful enough that they simply must be drawn into the world of grid planning and reliability. It’s going to require updating all kinds of regulations and assumptions — and hyperscalers aren’t necessarily going to be happy about it.

To discuss the warning, the recommendations, and the many associated implications, I have with me today Colin McCormick and Doug Bryan, respectively the chief science innovation officer and senior energy modeling expert at Carbon Direct, a firm that provides advice and guidance to utilities, tech giants, and investors pursuing clean energy. We’re going to talk about what triggered NERC’s fears, what they want the industry to do, and how this might change the pace of data center build-out.

With no further ado, Colin McCormick and Doug Bryan. Welcome to Volts. Thank you so much for coming.

Doug Bryan

Thank you, David. Pleasure to be here.

Colin McCormick

Great to be here, David. Thanks.

David Roberts

There’s so much to chew on here, guys. Colin, I’ll start with you. There have been big loads on the grid before. There are lots of big industrial loads out there. Think of steel plants, things that draw a lot of power. But there’s something new and different about what NERC calls computational loads, which is, I think, mostly data centers, but it’s also the crypto guys, big computational loads. Let’s just start with, what is it that these big computational loads are doing that is different, and that has NERC worried?

Colin McCormick

You are correct that we have had big loads on the grid before, industrial loads. Although it is worth noting that even the largest industrial facilities historically have not drawn power at the scale that some of the frontier data centers are doing. There is a scale issue, but the more important issue is the nature of that load. You referred to it as big and weird. It’s that weird piece that is important to get your head around. The way a data center looks to the grid is a lot different than the way an industrial load that has a lot of rotating machinery, motors, etc., looks to the grid.

The data center interfaces with the grid using power electronics, using active electronic equipment, uninterruptible power supplies, essentially, that are doing a couple things. They’re active. They are sensing in real time the voltage and the frequency of the power that’s coming from the grid. Their job is to protect the expensive, sensitive computing equipment that they are passing that power through to. They are designed to be very proactive in protecting that expensive equipment. They’re designed to react to very minor fluctuations, what a lot of grid planners would think of as very minor fluctuations to voltage and frequency.

If they detect those, they follow a particular standard. We can get into the nerdy exact standards later, if you’d like. But they follow a particular standard that essentially has them trip offline, disconnect from the grid, and serve their computational load using backup power or storage. That tripping offline happens in an incredibly fast, incredibly brief period of time — 20 milliseconds or something like that. That’s extremely different from the way a conventional industrial load would respond to any fluctuations.

David Roberts

As you were saying, some of these loads are gigantic. It’s 100 megawatts or whatever. That’s 100 megawatts of load just vanishing, in the blink of an eye.

Colin McCormick

That’s right. That’s a big number. Doug can get into this in a minute, but the grid is designed to handle a certain amount of load tripping off. 100 megawatts, big as it sounds, is actually not outside the realm of what many grids can respond to. But we’re talking not only about single data centers tripping off. We’re also talking about the possibility of multiple data centers tripping offline to the same event.

David Roberts

Because if they’re all on the same grid, they’re all sensing the same fluctuations and they’re all responding the same way.

Colin McCormick

Exactly. Doug, you can get in a bit to how the grid is supposed to handle this, but then we can think about how the scale is really very different.

Doug Bryan

The grid operators have tools at their disposal to handle these sorts of fluctuations. We don’t have a static load profile throughout the day, let alone over the course of a year. These sorts of fluctuations are something that the grid operators are designed to handle.

David Roberts

Generators have been known to fail and trip offline, which is the inverse problem, but similar.

Doug Bryan

There are what we call ancillary service markets that are essentially designed to respond to those large events. Why this is different is the scale of the drop. You mentioned 100 megawatts, David. We’re talking —

David Roberts

That was way too low. That was a way too low number. It did not sufficiently impress the audience. Let’s call it a gigawatt at least.

Doug Bryan

That’s what NERC are responding to with the Level 3 alert — gigawatt plus scale drops off the grid. It is that scale that is a challenge. You’re also correct that because it’s a load drop rather than generator drop, there’s some nuance to how these ancillary service markets are designed to respond. They aren’t as well set up to deal with the load dropping as much as the generators, as you mentioned.

David Roberts

The sudden disconnect of one or even multiple data centers is the main thing here. But there are some other things too, some of which I don’t fully understand. Let’s talk about some of these terms. The one you’re referring to is correlated simultaneous disconnection, which is a bunch of data centers going offline all at once. But there are also concerns about ride through and clustering, training bursts, low inertia. Maybe we could just mention some of these other weird features.

Doug Bryan

I would categorize them — if we were to use an umbrella term — as still related to the ramp up and down of load on the grid system.

David Roberts

They are all about that.

Doug Bryan

For example, the training bursts — that’s a function of AI training loads and the various stages that they hit through the training process. Sometimes they ramp up the GPU use as a function of the part of the problem that they’re looking to solve. Sometimes they ramp down at a similar extent. That’s part of it — the scale or the ramp rate, as we call it, the scale of the load change.

What we were talking about at the beginning is these tripping off the grid altogether. The load is maintained, but it’s actually moved behind the meter. It’s moved to these uninterruptible power supplies, shifting that load in order to protect the very expensive GPUs and other IT equipment. The argument there is that they’re tripping off too easily and that NERC is saying there needs to be a standard or there need to be processes in place that allow for that ride through, as you mentioned. Maintaining connection to the grid, even during these sorts of events, up until a point — there will be a point at which they allow for it, but they think it’s happening too easily at the moment.

David Roberts

We’ve already said this, but I’ll just emphasize it one more time, which is that you can have multiple data centers. They’re all being coordinated by the cloud, kind of. It’s like one’s ramping up. They could all be ramping up really quickly, and they could all be disconnecting really suddenly. It’s not even just one big data center as the threat. It’s these clusters of data centers. You get a cluster of gigawatt data centers, then you’re at 2 gigawatts, 3 gigawatts. All of a sudden you’re beyond anything ever contemplated.

Doug Bryan

With similar sensitivities to dropping off and located in a similar part of the grid. That spells trouble.

Colin McCormick

It’s worth noting that this isn’t even necessarily data centers being coordinated in the cloud. They’re sensing the same electrical grid conditions. They don’t need to be coordinated in the cloud. They’re responding to the physics of electricity flow on the same physical grid. The synchronization has to do with the fact that they’re all programmed to respond the same way to those grid conditions.

David Roberts

This is not, we should say, theoretical. This is not a theoretical concern about things that might happen. Just talk a little bit about what has happened that has caused NERC to panic like this. These dangers have come to pass in various places. Tell us, what are some of the examples that NERC is responding to?

Doug Bryan

You don’t get a Level 3 alert from NERC from a theoretical problem. The direct response is — the incident that’s often referenced is in Virginia, of course, data center alley, ground zero. In the summer of 2024, a minor equipment failure on a transmission line led to a very brief series of voltage dips on the transmission grid. These were so minor that it wasn’t particularly noticeable. The lights didn’t flicker or anything. You or I wouldn’t have noticed it. But the data center UPS — the uninterruptible power supply systems — noticed and took that automated action that we’ve been talking about, and they did it at a gigawatt scale.

We’re talking 60 data centers, I think it was around one and a half gigawatts, effectively simultaneously dropped off the grid in response to that single transmission fault and switched to on-site generators. That mass reaction was triggered by these mechanisms that we’ve referred to. It forced PJM, the grid operator, as well as Dominion, to scale back the output from power plants in order to protect the grid infrastructure, which was essentially to avoid a worst-case scenario of what could have been cascading power outages in the region.

David Roberts

We’ve talked before on the pod about inertia, about these large spinning masses that are there to absorb these brief fluctuations, but you are not going to have enough spinning masses to absorb a gigawatt and a half. Even trying to ramp back power plants — how quickly can PJM ramp back a gig and a half of power plant output? How long does that take?

Colin McCormick

That is definitely not happening on a seconds timescale. It’s worth noting that the generators, for a long time, as you mentioned earlier, had to develop the ability to ride through some of these disturbances and continue to generate power. They’re subject to a very specific different standard that requires them to be robust against some voltage and frequency fluctuations.

Part of the way to think about this is the mismatch in tolerances right now between the generator side and these large data centers. The large data centers basically trip off at the first sign of trouble. The generators ride through and I’ve got a pretty severe instantaneous imbalance between generation and load. I really need to align those ride through conditions better between the generation side and the large load side.

David Roberts

Which means regulators, the people in charge of reliability, have to start dealing with these large loads, which they’ve more or less not really had to pull into this whole world before. That’s the shift we’re talking about.

I do want to clarify one thing. Would you characterize this as the people in charge of computational load doing something wrong, behaving irresponsibly, or is this just something that’s happened, inherent to the technology? In other words, is there blame to be apportioned here?

Doug Bryan

The deployment of the data centers and how they’re responding is going to be a function of the processes and procedures that they are exposed to as regulated entities. What was interesting in what triggered the Level 3 alert on the regulation side — obviously we’ve got the challenge on the grid — on the regulation side, NERC, as part of the previous alert, there was a Level 2 industry recommendation.

They did a survey to look at the grid operators, transmission owners, distribution providers — do they have sufficient processes, procedures, or methods to address the risks associated with computational loads? The results were fairly robust. On the whole, the answer is no. I think it was 87% of transmission owners and distribution providers don’t have clear facility design, modeling, and performance criteria for large loads in their interconnection requirements. The change in the grid is so rapid and at such a scale that the regulation is trying to meet the moment.

David Roberts

A familiar story here on Volts, which is these really massive, huge, rapid changes in an industry and a regulatory world that was accustomed to moving at a rather sleepy pace. That’s yet another mismatch. Everybody in this world is having to move a lot faster than they are accustomed to moving.

Doug Bryan

I don’t want to say that the regulators are sleeping at the wheel. What is done in the grid operator room is wizardry to ensure that the grids continue to be reliable. But it’s a real step change in what they’re being asked to deal with.

David Roberts

This is a little bit of a side question, but you teed me up a little bit there. The whole problem here is that these things are happening faster than operators can respond to. I’ve been wondering, is there any prospect that if operation of the grid becomes more software-based and digital and faster, if there’s any prospect of them catching up and being able to move faster, or is this all going to, for the foreseeable future, be about trying to slow down the changes on the load side? Is there a prospect on the horizon of faster, more digitized operator responses?

Doug Bryan

There are groups looking to answer that exact question with this exact problem with technology solutions, and it’s largely through what we would traditionally call load flexibility or demand side response. It’s about ensuring that there is greater communication between the data center operator or whatever the computational load is with the grid operator and the utilities. That was one of the direct recommendations or the essential actions from NERC — having a direct line of communication between the grid operator and the data center operator.

David Roberts

But nobody’s going to make a phone call in seconds. You’re not going to have a human being who’s ever going to be able to react within milliseconds. Only software could possibly do that.

Colin McCormick

This points a little bit to the push for more ride through capability, trying to say, “Hey data center loads, maybe you do need to be more tolerant, maybe you need to slow down that instantaneous trip off to be a little bit more compatible with response time that’s feasible on the grid.” That’s the spirit of that direction of solution.

David Roberts

I want to talk a little bit later about how the data center people feel about that. But one other question which I was not, reading through all these PDFs, totally able to wrap my head around is how do inverter-based generators play into all this? Last year NERC issued another Level 3 alert. Poor NERC has become quite neurotic.

Last year NERC issued a Level 3 alert about inverter-based generators, which, for listeners’ benefit, is just solar and batteries and some wind — effectively renewable energy. I know they issued a warning about them and I know somehow all this stuff about computational load interacts with concerns about inverter-based generators. But what is the relationship there?

Doug Bryan

The relationship is that, in a similar fashion to how the computational loads don’t provide this synchronous and inertia-based interaction with the grid, the inverter-based resources aren’t the same as your traditional synchronous generators — your gas, coal, nuclear — that have physical inertia, the rotating mass of the turbine resisting frequency changes. If a large load suddenly disconnects or a generator trips, inertia buys the system a few seconds to respond. In the same way that computational loads don’t have that, these inverter-based resources — your solar, wind, and batteries — don’t have that by default.

It is somewhat analogous in some ways to the challenge here. There are threads that you can pull on that make it relevant to the Level 3 alert for the inverter-based resources that NERC put out. We’ve flagged some of them already — the scale and the speed at which these things can drop off.

David Roberts

We did a pod last year at some point about grid-forming inverters, about the ways that inverters can be programmed to provide inertia. They call it synthetic inertia. It seems to me like the scale of this is — you’re either going to have to build a lot more spinning masses, or it seems like a more practical and viable solution, especially given there are more and more inverter-based generators coming online, to make sure all those inverters are programmed to respond to this with synthetic inertia.

In other words, although they are a worry now because they don’t provide as much inertia and all of a sudden we need tons of inertia, in the long term, inverter-based inertia is going to be a better solution. Does that ring true to you?

Colin McCormick

I do think that’s true. There are some interesting lessons from history here. About a decade ago in Germany, there was an interesting problem called the 50.2 Hz problem — 50 Hz being the European grid.

David Roberts

Ours is 60, theirs is 50.

Colin McCormick

Exactly. On the German grid, a lot of rooftop residential solar power systems were being installed and they had inverters to convert that DC power to AC. Those inverters had initially been programmed with a very hard cutoff when they detected the frequency of the grid that they were trying to send power to. When they detected that rising above 50.2000 Hz, they tripped offline, they stopped sending power to the grid. Nobody cared about this in the first couple of years because there weren’t very many of them and it didn’t really matter. But the problem began to snowball and grid managers realized that since every single one of them was programmed exactly the same way to trip off at exactly the same — You unintentionally created the synchronized trip off effect which really could have cascaded.

The point for our conversation here is there was a solution — to reprogram those inverters to have a little bit of randomization on the exact number, so they weren’t all perfectly synchronized. That was a software push, more or less. When you’re looking at trying to deploy big changes to the grid, I would take a software update over some sort of hardware install any day of the week.

David Roberts

It is a mirror image problem and has been, is being solved on the inverter side, is being solved on the supply side, and we need to have a similar solution on the load side.

Colin McCormick

It’s worth mentioning that there are some grid regions that have implemented these voltage ride through requirements for large loads. Not very many of them, but there are some early adopters here — Southwest Power Pool, you’re seeing German, FinGrid. The problem is that those are scattered. There are not very many of them and they’re not the same. They’ve set up different ride through and different reconnect requirements. They’re not following a consolidated standard across the industry.

David Roberts

This brings us quite smoothly into what NERC wants people to do. There are seven core recommendations. Maybe we could just walk through. They’re really — everybody involved gets some of these recommendations. Nobody escapes NERC’s eye. These are transmission planners and utilities regulators.

Doug Bryan

There’s about a dozen acronyms at the top.

David Roberts

This was a real acronym soup. Everybody involved in this world is being asked to do something. Maybe just walk through some of those recommendations, like who’s being asked to do what here.

Doug Bryan

The seven essential actions are kind of bucketed into communication and modeling and then actual operational implementation. On the communication piece, the first essential action is that planners need to collect the right data from data centers. They need to define exactly what technical information they need from computational loads and require transmission owners to collect it as a condition of interconnection. That’s right out the gate. In some jurisdictions this is being done, but it’s a prerequisite to all the rest of them.

David Roberts

Presumably you’re going to want to standardize what that information is. You’re going to want computational load to have a standardized set of data that they provide, ISOs and the like.

Doug Bryan

This is an interesting one and I want to get Colin’s take on this, because as we were just discussing it a bit earlier, there’s a baseline here — for example, the types of grid stability studies that they expect to be done and they provide a recommendation of the type of modeling. But the language isn’t fully prescriptive. It’s not saying, “Here is exactly the process that needs to be done.” Some of the language leaves it up to interpretation to the extent that we may end up with more data points to what Colin was talking about around the ride through approaches, but they won’t necessarily be homogeneous.

David Roberts

When you’re talking about who’s developing these standards, is this the wholesale grid operators, the ISOs and the TSOs? That’s who we’re talking about?

Doug Bryan

Yes. They would be in charge of developing those approaches. They’re regulated under FERC other than ERCOT. Actually, ERCOT would be for this particular thing because it’s a NERC reliability standard.

David Roberts

That’s one of them — better information from computational loads.

Doug Bryan

The second one is running grid stability studies — simulating these exact instances and asking, “Do we have the mechanisms in place to deal with it?” and helping identify where the grid is vulnerable. Planners have to model what happens to the grid if a large amount of computational load suddenly disconnects. A trial run for what we are actively seeing, so that they can hopefully mitigate it.

David Roberts

That’s also the ISOs and TSOs being asked to do that.

Doug Bryan

That would be right.

David Roberts

Another one is commissioning. What’s that all about?

Colin McCormick

This is a very interesting one. Commissioning is a concept you get with a lot of construction projects. When you’re finished with a commercial building, you need to run through a commissioning process before you actually deliver it. That’s not necessarily in place or standardized for data centers connecting to the grid. This commissioning recommendation is saying that you need to be evaluating the as-built data center, the electrical characteristics and how it will actually respond to grid disturbances, not purely in a modeled sense. Also actually as-built, and you need to iterate or refine your model based on what’s actually in the facility.

One fascinating thing I find in this is there’s a push to do this, where possible, full facility load and no-load test should be done with all the compute equipment in place. Interestingly, we often see data centers built in phases.

David Roberts

That’s what I was going to ask. Do they have all that together in one place before they connect?

Colin McCormick

No, I think this opens a really interesting set of questions. Does that create this issue where grid operators are going to have to continuously commission or revisit commission as new computational load is installed? You could argue that’s a very good thing to do from a grid stability point of view, but it’s a complete pain from the data center operator point of view.

Doug Bryan

That’s a distinction that I would make between what the NERC alert recommends and what — in ERCOT, there’s a proposal in place for grid ride through and it’s only for new interconnections. Whereas this is saying at the very top there’s a line that identifies it that says this is for both new and existing computational loads. One of the essential tasks is actually redefining what counts as a change and it’s broadening that definition so that more things count as a change and so would be required to be reviewed through this process.

David Roberts

It seems like you’re going to get into fuzzy territory here. If you’re just adding, you can imagine a data center adding just one rack at a time. You can imagine these incremental changes — how big of an incremental change triggers a new commissioning requirement? That just seems tricky, very tricky to me. Those are the informational, the communication, the modeling ones. The next one on my list is protection. I’ll just throw that out. What does that mean?

Doug Bryan

That’s evaluating and addressing the ride through gaps. Planners have to identify where data centers would trip off during a routine fault and work on fixes to prevent unnecessary disconnection. More operationalizing the grid stability studies that is done in one of the previous stages.

David Roberts

What’s fault recording?

Colin McCormick

This gets to the point of how complex some of these UPS, these uninterruptible power supplies, potentially can be. They’re highly active devices. They can not only sense frequency and voltage, but they’ll include smarts like incident counters. They may not trip off the first time they see a voltage fluctuation, but they may count up — “I saw three, I saw four within two seconds. Now I’m out.” That kind of behavior is very complex to model if you aren’t aware of the very specific logic in the UPS.

To really trace the root cause of events, you would like to have very high time resolution data on what was actually happening during that dynamic fault event. You’d like to have granular time-based information on that. That’s the spirit of this recommendation — install equipment that can really record that data to be used in root cause analysis after the fact.

David Roberts

All of these so far sound like informational — better modeling, better communication. What are they recommending physically for computational loads to do?

Colin McCormick

This is a bit of what Doug and I were talking about earlier. If you look at the language here, you might think, coming to this, “NERC should have said voltage ride through sounds really important for large loads. We’re going to be a little bit more aggressive about saying that voltage ride through is either mandatory or strongly encouraged. Large loads shouldn’t be allowed to interconnect to the grid until they demonstrate they can perform voltage ride through in certain conditions.”

That’s not where the language has landed. It’s a lot more gentle — coordination with computational load customers where possible to maximize the ability to ride through.

There are a lot of reasons for that. Doug mentioned earlier the concerns from the data center industry, large load industry, about how feasible this is in the short term. There is also the lack of a centrally recognized standard that everyone can consolidate around. You might look to IEEE or some other credible organization to get that in place before you try to lock in or mandate something. We’re seeing a little bit of trying to be sensitive to that issue, push a little bit now, but not lock in a hard mandate without the remainder of that ecosystem in place.

Doug Bryan

It’s probably also a function of where in the process this alert falls. Grid entities of many shapes and sizes have until August to respond to this. Following that there will be new reliability standards drafted. Unfortunately with these processes it will take a couple of years for this to be enforced. You wouldn’t expect it to be in force until — I’ll put myself on the spot — but 2027, 2028 is probably a realistic time frame.

David Roberts

These are gentle recommendations, but presumably this is part of a process that is evolving in the direction eventually of requirements, real requirements. This brings me to FERC. What is FERC’s involvement in all this? Is it the case that once some of this gets worked out a little bit, FERC is going to be the entity to implement these requirements?

Doug Bryan

That’s the NERC to FERC pipeline. NERC develops reliability standards through these processes and then has to submit them to FERC for approval. Once FERC approves a NERC standard, it becomes mandatory and there might be financial penalties for not subscribing, etc. This current guideline is a voluntary guideline, a signal for what the mandatory standard will look like before it actually arrives in force.

David Roberts

Relatedly, what is the large load working group? Is that FERC related or is that pre-FERC in the NERC to FERC pipeline?

Doug Bryan

It’s a NERC initiative. I can’t remember exactly when they started, but I think they were the Large Loads Task Force and now they’re Large Loads Working Group. They’ve been publishing white papers and guidelines — they were in charge of the associated reliability guidelines that came with this. That talks not only about these super short-term events, but also how you bake in these computational loads into long-term resource planning. They had lots to say about load forecasting and NERC has been generally quite vocal. They’ve had a lot to say about how the approaches to load forecasting are not sufficient going forward because of the event we find ourselves in.

David Roberts

I want to return to that in a minute because that’s a super interesting question, but one of the questions is raised and I guess this would be a good time to ask it, which is a lot of this sounds like the hyperscalers who have just been out cowboying up and throwing these giant loads on the grid and throwing gas generators all around them. There’s been a real wild west vibe to all this going on. Here comes the dreaded nanny state coming to tell these cowboys, “Get your shit in order.”

I wonder what is the hyperscaler’s attitude toward all this? Because I don’t see how this is going to avoid ending up in a situation where, as a data center developer, as a data center operator, you’re going to have a lot more work on your plate. You’re going to have to do a lot more data gathering, data reporting, etc. Are they, what’s their disposition toward all this?

Doug Bryan

The case in the states that is furthest along on this file is that ERCOT proposal, that ride through proposal. It’s in its second or third iteration now. The first proposal, the Data Center Coalition — that’s the kind of groups that you’re referring to — filed formal objections to the original proposal and it largely centered on the hardware damage argument.

David Roberts

Presumably there’s a reason that they trip off so easily — they’re protecting extremely expensive and valuable equipment. Can you ride through and ensure that that equipment is not damaged? Presumably they’re a little sensitive about that.

Doug Bryan

Certainly. Whether or not the equipment is expensive, it’s what the equipment is doing that is part of the arms race we live in, which is ensuring that you’re serving the AI loads that are coming through your system, be it inference or training. It’s a similar reason why there’s been challenges in getting typical demand side response mechanisms which are price based. You’re dealing with entities that set a very high value on the power because it’s delivering these services that are the apple of the market’s eye at the moment.

Colin McCormick

It’s entirely feasible to design these systems to ride through better. It’s not impossible to design UPS systems to do more ride through, accept a wider tolerance band. They’ve just always been governed with a different design principle in mind. They’ve been built according to something called the ITIC curve, which specifies a conservative view about when to trip off. From an electrical engineering point of view, it’s not impossible to build more protection and to allow longer ride through.

It’s more of a question from the hyperscaler point of view about the availability and the validation of those devices. “Thanks a lot, ERCOT or whoever. You told me I have to go do this. Who can I buy them from? Have you qualified them?” That’s a supply chain headache I don’t want. You need to look more to that than any fundamental electrical engineering limitations.

David Roberts

This tees up my next question, which is what physical or electrical engineering changes can hyperscalers make to be better grid citizens? Here on Volts, one of our slogans is “it’s all really just batteries in the end.” Is this also in the end just more batteries? What do we want computational loads to do in electrical engineering terms to be better grid citizens?

Colin McCormick

It is in many ways all batteries in the end. We could talk rectifiers and inverters as well. There are, first of all, software updates. For example, the idea of these event counters I mentioned earlier in the UPS logic — “I saw three or four events within the same four seconds. I’m taking that as a sign something large is wrong. I’m tripping off.” You can just change that in software. You can just not have an event counter or not include that as one of your trip off. That’s a software update. That would be one contribution to being a better grid citizen.

What you’re otherwise talking about is putting more stress on the battery component of the UPS, banging on that a little bit harder or at least accepting a little bit higher risk that that’s going to have to absorb voltages, frequencies outside of a current comfort range. That can involve equipment updates, that may involve somewhat modified designs in the electrical engineering. Those are two sides of the software update and hardware update that would apply.

David Roberts

Is anyone talking about trying to make the compute itself more flexible?

Colin McCormick

At a macro level, absolutely. Lots of interesting ideas about, and we’re seeing them implemented, about scheduling big compute jobs and there’s a lot you can do on that. It’s terrific to see some work on that that involves planned flexibility — not responding to unexpected events.

David Roberts

Just like you were saying, they were asking inverters to randomize a little bit, not do all the same thing at the same time. You could see a similar thing on this side — randomize your compute loads a little bit so that they’re all not doing the same thing at the same time.

Colin McCormick

That randomization would apply more in these UPS systems that are facing the grid. Some percentage of them would trip off at minor voltage or there would be a scatter of their thresholds to trip off. Another challenge that we didn’t even mention earlier — there’s equipment damage, but compute loads that are in the middle of some complicated computation and have a lot of sensitive data in active memory. If power goes down, that data’s all gone. It wasn’t written to drive.

You get data corruption. Even if the physical system isn’t damaged, you get data corruption. You get loss of service if these are cloud servers. There’s a range of concerns that have motivated the data center design to be very conservative.

Doug Bryan

It’s like playing a video game and you have to go back to the previous checkpoint and you realize that it’s very far.

Colin McCormick

I lost all my progress.

David Roberts

That’s right.

I’m not sure if this is the time to raise this or if this is even relevant here, but there’s a lot of talk about the distinction between colocation and behind the meter power responses. What is that distinction and how does that play into all this?

Colin McCormick

The behind the meter concept is having generation on site, but on site in such a way that it’s electrically connected directly to the load. It’s not going out to the grid and then back. In the extreme case of that, what we might call a fully islanded system where the data center has literally zero connection to the grid, then this problem essentially goes away because the data center —

David Roberts

Nobody’s really doing that.

Colin McCormick

Nobody is going to really do that. That’s exactly right. That’s an extreme case. That’s silly to think too much about. What we’re looking at more are these hybrid arrangements where you’ve got on-site behind the meter generation, but you also have a grid tie. There’s reason to believe this could actually make it a little bit more problematic because that’s an even more active system in cases where that behind the meter facility is providing part of the load and the grid tie is providing part of the load. That mitigates the problem because the data center is using less grid tie power than it would in another context. But it makes it a more complex problem because you’ve got more pieces of the puzzle there to balance out.

David Roberts

All these regulations that apply to generators to try to make them good grid citizens — are they applying to these generators behind the meter?

Doug Bryan

That’s an aspect of the NERC alert that we haven’t fully touched on. They want to see the full apparatus. They want to understand in your campus, what is everything going on there, including any co-located generation. That has dual purpose. One is, if you have sufficient backup generation, are you therefore more likely to trip off and have more sensitive tolerance to that? Also, to Colin’s point, what is then the interaction between the generator that is behind the meter and the load that we are servicing as the grid operator?

David Roberts

As I understand it, they’re insistent on the difference between behind the meter and co-located, which is one of the things I’m groping for. What does co-location mean in this context?

Doug Bryan

I would view it as the data center is physically sited at a power plant, or vice versa, and it takes power directly without it flowing through the transmission system.

David Roberts

But not behind the meter. Not behind the data center’s meter. Just literally physically located next to a power plant, which is also — but the power plant is hooked up to the larger transmission system.

Doug Bryan

You’re correct.

David Roberts

And so is the data center.

Doug Bryan

Yes. The case I gave is the full behind the meter case. The colocation case, which is relevant for the FERC directive to PJM to develop these colocation tariffs — obviously, I’m sure you’ve done another pod on this, on the PJM tariff discussion — but that is more about, how do we then interact the co-located resource, the load, and the service firm or otherwise that I will receive from the grid? That’s how I would view them slightly separately.

David Roberts

At some point in one of these PDFs, sorry, I can’t keep them all —

Colin McCormick

Big syllabus of reading there.

David Roberts

I can’t keep them all distinct in my head, but somewhere I saw demand response brought up and referred to in this context as a ghost battery, which I thought was fun. What is —

Doug Bryan

I think that was my term, so I’ll take credit for that.

David Roberts

Nice work. I love a good new term. What is the operational relevance here? How is demand response — Volts listeners are very familiar with demand response, which is just demand ramping up and down in response to grid conditions, as opposed to just generators ramping up and down. How does that interact with this, with the data center mess specifically?

Doug Bryan

It’s definitely under the umbrella. This whole conversation is related to data center flexibility. You are either flexibly interrupting the power supply and going behind the meter, or you’re flexibly responding to grid constraints, prices, what have you. The distinction I would make is that most of the conversation around demand response is occurring in these planned responses. Whereas this is flexibility of a different type. By dropping off the grid, which is what you want in some of the planned cases, you’re creating problems.

They’re under the same umbrella. There are various initiatives going on, like the EPRI DC Flex initiative. They look at both, they’re considering the array of this challenge and not excluding one for the other, but they are certainly different.

David Roberts

Is there such a thing today as demand response of any scale that is capable of responding at the level of milliseconds and seconds? Is that even a thing that computational loads could procure if they wanted?

Doug Bryan

Without going back over this, I would argue that that is what the uninterruptible power supplies are doing. That is their demand response in a way — responding to an issue in these sub-second or second intervals.

David Roberts

What I had in mind is you could say as a computational load, “If we drop off, if we have this other demand response out there — demand response is not just demand decreasing.” You could potentially say, “We’ll ramp up demand elsewhere to compensate for this.” I just wonder if that is even a possibility.

Colin McCormick

I would frame that as the current frequency stability ancillary services market where some very fast responding asset like a battery or like a flywheel is on a very short timescale ready to ramp up or down to respond — seconds to respond to small mismatches.

David Roberts

One way of putting this is ancillary services are, in my understanding, mostly out there doing relatively small scale work. If you’re involving gigs, all of a sudden ancillary services, you need a lot more of them.

Doug Bryan

That’s right. The ancillary services market is growing — it’s growing in volume and price. The type of resources on the grid might be saturating that. Batteries, for example.

David Roberts

One of the critiques about the economics of batteries — people are saying, “Oh, batteries are value stacking. They have multiple values. One of the things they can do is play in these ancillary markets.” The response to that has always been, “You put a few batteries on the grid and you basically saturate the ancillary services market and then it’s not a value for any batteries beyond that.” But if all of a sudden ancillary services markets are booming in volume, lots more batteries — you’re back to lots more batteries as your answer.

Colin McCormick

I’ll put my more engineering than economist hat on, but I think trying to build a gigawatt scale ancillary services market to protect against this possible load trip issue is probably the wrong direction. Unscalable. This is what motivates the look at the ride through requirements and the engineering solutions at the data center rather than trying to stand up separate.

David Roberts

That was my question. Realistically you’re not going to get gigawatt scale ancillary services that can respond in seconds.

Colin McCormick

And wildly uneconomic to pay them to sit around, in case.

David Roberts

Sit around for completely unpredictable, sporadic events. Mostly going to be solved at the computational load level.

Colin McCormick

I did want to touch on one mirror image aspect of this which Doug mentioned earlier, but we should expand on a bit — the reconnection problem. Here you’ve got a data center that’s tripped offline because of a problem and maybe it was justified, maybe not. It’s going to come back. There’s a big issue. Is it coming online as soon as the internal logic in that UPS says, “I’m good,” it just 100% back online? If that happens in a synchronized way across a gigawatt, that’s just as big of a problem as tripping off.

David Roberts

Then you have grid operators telling a gigawatt’s worth of generators, “Come online quickly,” and then seconds to minutes later saying, “Go back offline quickly.”

Colin McCormick

You have to smooth that out somehow. The problem is there aren’t broadly accepted standards of exactly what that looks like. You do want to get them back online, but you’ve got to think carefully about how to do that in a smooth way that doesn’t put you right back in the hole. We see in this discussion as well, the ride through, but then the reconnection piece is less intuitive but just as important. Or else you’re recreating — it’s the mirror image of the trip off problem.

David Roberts

These are not even ramps really. These are cliffs.

Colin McCormick

They could be ramps. That’s part of the thinking — maybe there’s a maximum ramp rate that the UPS is allowed to do and then that’s a potential solution.

Doug Bryan

That’s a problem that is actively in these discussions. We focus the conversation on ride through and that full tripping. But what I mentioned earlier around the training loads and how they spike and dip — it’s exactly that, those ramp rates. There are guidelines for how fast load should ramp up and down. In some cases they’re outside of those regulations.

David Roberts

Generators are supposed to ramp up. These generators are already under a lot of regulations and they are not allowed to do these giant cliffs.

Speaking of what people are doing about this, you mentioned that ERCOT has some regs in the works. Presumably state legislators and regulators — everybody in the world is freaking out about data centers, freaking out about computational load. What are states doing about all this? There are all these bills about data centers in every state legislature at this point. Is this part of what’s in those bills? What are state legislators and regulators doing right now?

Colin McCormick

We’ve taken a look at this to some extent and largely these reliability issues are not in the purview of state legislators. They’re not necessarily front of mind. Maybe in the last week or two, given the NERC alert, that’s begun to change. The focus of the legislation has really been around environmental impacts of data centers, power price, consumer power price impacts. On the flip side, you see plenty of efforts at the state legislative level through tax credits or other things to attract data centers to the state.

These reliability issues are really out of sight for many policymakers. Maybe we’re going to see some motion on that. At the same time, NERC is doing its job. These are highly technical issues and they probably should be largely addressed at the existing level of NERC.

David Roberts

From the state perspective, it seems like one of the things, if you had godlike powers over all this, you would do to increase safety is not cluster these loads geographically, so that they’re all on the same grid. You might want to geographically disperse them. I have no idea what regulatory lever you would pull to do that, but is that even on the table?

Colin McCormick

A couple thoughts on that. There’s an engineering reason for that. Voltage disturbances tend to be more limited as scale of the grid, whereas frequency disturbances affect the entire balancing area. If you can get outside of that radius. On the other hand, many jurisdictions want to attract data centers. Data center alley in Virginia is the grandfather of them all. That’s the exact opposite. You have a collision of the economic arguments around wanting a tax base, wanting whatever it is to cluster, and then these grid engineering arguments of, “No, please keep these a little farther apart for these stability issues.” Those are unfortunately in tension.

David Roberts

Just maybe listeners have this question on their mind. Isn’t this a podcast about decarbonization? This has been mostly just about electrical engineering and about data centers and their effects on the grid. But this is —

Doug Bryan

On the contrary, David, it’s called Volts and we are talking about voltage.

David Roberts

We are very much talking about volts here. But is there a decarb angle to all this? Lots of data centers seem to be lunging for gas. In ERCOT, the number of gas entries into the interconnection queue is up 150%. Some renewables are withdrawing from the interconnection queue and it seems like at least the hyperscalers are looking at gas as a reliability solution that they need. That is distressing. As a general matter, how can we respond to these issues and regulate in such a way as to include decarbonization in the conversation, to steer things toward renewables and batteries rather than gas plants?

Colin McCormick

This needs some more thinking and the economics are a piece of this. We are going to see that the renewables and batteries side in the long term is winning out on costs and hopefully that’ll drive some thinking.

David Roberts

I hope that’s true because I say it 50 times a pod, but that doesn’t seem like what they’re doing right now.

Colin McCormick

A lot in the queue. We’ll see what’s completed, what supply chains for turbine equipment enable. We’ve taken a look at the projections for new gas production. 10 or 11 BCF a day is what you’re seeing. That’s a lot. There’s a lot of upstream methane leaks to think about there. On the other hand, delivering that requires gas transmission, pipeline, distribution infrastructure that doesn’t necessarily exist. It’s hard to project a real completion rate. I do wonder how much there’s a world of zombie gas projects or partially completed ones where the economics don’t make sense, one or two years in, three years in.

David Roberts

Can you explain what is going through the hyperscalers’ minds that they are going for gas? What are they thinking?

Colin McCormick

You mentioned reliability from the perspective of the data center. I’m not worried about the rest of the grid. I’m worried about enough power for me. The solution of having my own on-site generation seems good at first and I can see the appeal in the near term.

David Roberts

To some extent it seems to free you from some of this nanny state regulation of the grid.

Colin McCormick

I think that’s a mirage though. You do still have to get the gas on site and that involves working with pipeline permitting and construction potentially. If you want to use the nanny state metaphor, I don’t think you’re necessarily getting away from that fully.

Doug Bryan

At the end of the day, firm power is hard to procure and that’s largely the reason for going all in on gas. My take on the decarbonization angle is that, back to what Colin said when we were talking about — and David, you prefaced this, you were like, “Is the solution batteries? It always seems to be.” We are making leaps and bounds in long duration energy storage technologies. They are having a big moment.

David Roberts

Upcoming pod on that, by the way — the role of long duration energy storage in this data center mess.

Doug Bryan

Perfect. I’m sure you’ll discuss on that. They can do a job in firming up renewables and providing that firm power and potentially play a dual role like the uninterruptible power supplies. It is switching to batteries that is often the means of switching. There are links to decarbonization solutions that are burgeoning at the moment that could play a role here beyond what we’re seeing today.

David Roberts

I always wonder, these hyperscaler guys talk about firmness as though it’s some magical quality. I just don’t know what firmness you’re getting from gas that you don’t get from storage. The electrons are the same. If you can call on it and it provides you the electrons, then it’s firm. It’s hard not to see an element of masculine energy involved in preferring gas or nuclear for your firmness over batteries. But operationally they’re both firm.

Doug Bryan

I’m sure the folks at Form Energy would fully agree with you. The challenge up to now has been the duration and the cycling and we’re potentially finding solutions to that.

Colin McCormick

As we think about these questions of how inverter-based resources can be reliable on the grid and how these similarly power electronics-based loads can be reliable on the grid, working through those engineering issues and showing that an inverter-based renewable resource and large loads behind power electronics can work reliably as long as standards are aligned and we solve some of it — that’s an important piece of getting towards that decarbonized grid, of giving engineering confidence that we can do this, we just have to work through the problems.

Doug Bryan

The long view is that this challenge is acute and it’s here today, but it is something that long-term decarbonization requires us to figure out because much of the solution to decarbonization is to electrify. We are receiving the load and it is at a scale and speed that we did not expect, but they are challenges that we’re going to have to resolve. That’s how I would take it as a reason to pursue and why you can link this back to still being a somewhat related decarbonization episode.

David Roberts

Let’s move into the final cluster of questions which have to do with — if you are requiring all this of hyperscalers, a bunch of new reporting, maybe some new electrical engineering requirements, maybe more batteries on site, there’s no way around the fact that however this settles out, there’s going to be more requirements and obligations put on the back of hyperscalers. The inevitable result of that is going to be that it’s going to be a little bit slower. If the ISOs and the utilities all have these new reporting requirements, they’re all communicating more, they’re all doing more modeling and better modeling, etc., it seems inevitable that that’s going to slow stuff down.

You might think, these projections people have of massive data center demand coming online — maybe these projections need to be scaled back a little bit. Then you get in this weird recursive thing because modeling future demand is part of this now, but the requirement to model it is in some sense affecting how fast it’s going to happen. Is it fair to say that all of these requirements, if put into place, are going to slow the rush to data centers and thus that some of these wilder projections are probably not going to come to pass?

Doug Bryan

Who would be an energy system modeler? Especially a long-term forecaster. That sounds like a terrible occupation.

David Roberts

This is your job, Doug. I want a firm and clear answer on this.

Doug Bryan

It’s a very difficult thing to foresee. What I liked about the NERC alert is that they paired it with these reliability guidelines that had a playbook for how they think we should be thinking about load forecasting approaches when it comes to data center load. We’ve talked about this, Colin and I internally, that there’s a few ways you can forecast this. You can look at hyperscaler CapEx announcements and SEC filings, you can look at the GPU and chip shipment data, and you can also look at the interconnection queue, although typically you have to provide a significant haircut to that. I’m inclined to agree with you that it creates more obligations and challenges to getting interconnection such that it makes that job even more difficult to do.

Colin McCormick

I’ll give a contrarian perspective — I actually think the incremental effort here is pretty minuscule, especially compared to the other challenges that rapid data center buildout already faces. Getting sufficient switchgear and transformers.

David Roberts

There are all these supply chain challenges. Especially if you want to run your thing on gas too, that’s a huge supply chain constraint.

Colin McCormick

I would argue that the headaches that these requirements create are pretty far down the list of stuff that would slow a project down. The way it could turn into a headache is if a mandate were put in place prior to a clear standard and compliant equipment being broadly available on the market. If the regulators get it wrong and get ahead of where feasible solutions are available, then yes, it can turn into a headache. But in and of itself, if compliant voltage ride through UPSs are available, a data center project developer can probably get by by specifying what they are, providing a little bit more data to the grid operator. That’s actually a relatively minor lift compared to all the other headaches high up on the list of that project.

David Roberts

But Carbon Direct, your firm — one of the white papers you sent me says flat out that a majority of the data centers in the queue are probably not going to get built. Why is that?

Colin McCormick

That’s a whole podcast of itself.

David Roberts

Are there other hassles outside of that?

Colin McCormick

Those are heavily other hassles driving that. Grid reliability is an important thing to think about and we see it growing and that’s why it’s great that NERC is applying here. But the compliance requirements, compared to securing sufficient bulk power at all sites, securing switchgear and transformer equipment, other equipment shortages — those are slowing down projects today in ways that are far more substantial. The ask being made of the hyperscalers, while there’s a pain in the ass factor, is not that severe here. There’s a lot of benefit to grid stability that can be done with a pretty light lift.

David Roberts

But it is the position of Carbon Direct that the wilder projections of data center load are overheated?

Colin McCormick

It’s a position. Our analysis shows that there’s a lot of load being added. But if you took the outside numbers, those are pretty far off base. We’re going to see a lot of load. If it’s a 40% completion rate, that’s still an enormous amount of load compared to historical. Getting too wrapped around the axle on this is not merited. There’s a huge planning challenge to be met here. But the outside numbers — our analysis — don’t take those to the bank.

David Roberts

Final question — we’ve done pods on EV charging and the TLDR on large scale EV charging is if you do it in an uncontrolled manner, it could screw up the grid badly. But if you do it in a planned and rational manner, not only could it not be a detriment to the grid, it could prove an active help to the grid. It can be a tool for grid stability and reliability. Is the same true of computational load?

Is it the case that if we get this right and the right requirements are in place, that computational load could be an active help for grid stability and reliability? Or is that too optimistic?

Colin McCormick

I’ll start and let Doug wrap up. I agree strongly with that. Computational load sitting behind power electronics, if done right, can absolutely be a positive contribution to grid stability. That involves shifting some of the design basis so that it’s not purely about extremely conservative protection of sensitive computer equipment, it’s about also taking into account riding through faults and potentially some active grid stability support through frequency regulation or other similar kinds of things.

David Roberts

If you could make a gigawatt scale data center into a demand response tool, that’s a giant demand response tool.

Colin McCormick

Absolutely.

Doug Bryan

The stack there is almost a VPP. You’ve got on-site generator, you’ve got battery backup systems, you’ve got, in some cases, controllable flexible load. Then you’ve also got fast responding power electronics. I know you’ve done pods on VPPs, but that’s a decent recipe for being a grid asset. I concur with Colin on that.

David Roberts

That seems like a good optimistic note to end on. My audience does not always respond well to optimistic takes on data centers. Whatever else you can say about hyperscalers, they have not done very good PR for themselves. They’ve not told their story very well. But if you can get multiple gigawatts of new load to be responsive and responsible, it could have a happy ending.

Colin McCormick

I think so. The details are so nerdy here and trying to even grasp why this matters. Doug and I were talking about this fun analogy, the bicycle analogy, about when you were a kid, you might have ridden one of these bikes with no gears and pedal brakes. When you got going on those bikes blazing downhill and those pedals are whipping around, if you take your feet off the pedals, the bike speeds up, the frequency speeds up because it’s not having to carry the load. If you want to put your feet back on, you better be sure you’re synchronized with those pedals or it’s going to really slam into you and hurt you. That’s what’s going on here on the frequency side about connecting and disconnecting from the grid. This is often not very physically intuitive to people about why any of this matters. It’s just about total megawatts, and conveying that a little bit might help open up that.

David Roberts

You need gears.

And more sensitive brakes.

Colin McCormick

Something like that.

David Roberts

We have family injuries to attest to just the problem you’re talking about.

Colin McCormick

That’s right.

David Roberts

This is so fascinating. Thank you so much for coming on and talking through all this with us.

Doug Bryan

Thanks so much, David.

Colin McCormick

Really appreciate it.

David Roberts

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

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

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David Roberts

Hello everyone. Greetings and salutations. This is Volts for June 3, 2026: “Are plug-in DERs going to spark a grid revolution?” I’m your host, David Roberts.

As Volts listeners have heard many times now, large utility-scale renewable energy and battery projects are being slowed to a crawl by a tangle of red tape, from glacial interconnection queues to permitting hassles to environmental review, and on and on.

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Smaller-scale customer-side renewable energy and battery projects, collectively known as distributed energy resources, or DERs, move somewhat more quickly … but, unfortunately, not by much. They too have interconnection and permitting hassles, alongside the various and sundry soft costs that have been discussed on this pod so many times.

But there’s a new class of DERs emerging that are even smaller and that you can simply plug into a normal wall outlet without getting any kind of permit, interconnection, or regulatory approval. This includes so-called “plug-in solar,” which we covered on a previous Volts pod, but also small-scale batteries.

Plug-in DERs might seem, at first blush, like a kind of cute novelty item, fun but irrelevant to the larger energy picture. But my guest today — James McGinnis, CEO of David Energy and co-founder of the DER Task Force community and podcast — believes that take is wrong. Dramatically, fatefully wrong. He believes that plug-in DERs are eventually going to scale to a cumulative size larger than bigger DERs, that they are going to put a rocket boost under the small-d democratic revolution in energy that DERs have long promised.

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McGinnis has been selling plug-in batteries to small businesses in New York City, who are using them not for any high-minded green reasons, not even for resilience like the more expensive home batteries, but simply to reduce their electricity rates. And business is booming. We’re going to talk all about the merits of plug-in DERs, the market for them, and why he thinks they are going to spark a grid revolution.

With no further ado, James McGinniss, welcome to Volts. Thank you so much for coming.

James McGinniss

Thanks so much for having me. I’m super excited to be here.

David Roberts

I listen to your podcast, I’ve heard a lot of your talks, and you are deep in DER world. DERs, as you affectionately refer to DERs. That’s right, yes, DER world, DER-pilled, etc. For those in the audience who are not fully DER-pilled and who are not totally familiar with distributed energy resources, let’s just do some definitions. As I understand it, there’s DERs, and then within that there’s a smaller class of what we call permissionless DERs, and then within that there’s a smaller class of plug-in DERs, which is what we’re talking about today.

Let’s start by defining our terms. Start by defining what DERs are. This is, I think, a deceptively complicated question. What is your personal definition of DERs?

James McGinniss

I’m going to attempt to give you a definition. I also think as time has gone on, I’ve continued to get surprised about what a DER is. I reserve the right to change my mind later. It’s a bit of “you know it when you see it.” Most famously, Kiran from Arcadia told me an induction stove was a DER and I laughed him out of the room. Then I learned about Impulse Labs and copper and battery-embedded devices, which kicked off this whole permissionless conversation. I ended up eating my words that that was in fact a DER.

But I would just say that the property or the principle that is true across DERs, or most exciting, is that you are essentially siting supply or capacity next to demand. That capacity could even be the demand itself. You could have a programmable thermostat or electric vehicles that you shift load with. At the end of the day, it is supply or capacity located where the customer is consuming power. That property of locating supply next to demand is what I think makes DER so powerful.

David Roberts

In your mind, whether it is behind the meter or in front of the meter, there are DERs in both cases. You’re not a behind-the-meter guy?

James McGinniss

No, I think if you look at a lot of what some of the current frameworks have started to do, like VDER or avoided costs or non-wires alternatives, placing solar and storage on distribution feeders, like community solar, it could be a 5-megawatt system — that’s a DER because it’s helping reduce transmission and distribution costs, or could potentially if you deploy them in the right way.

On the other side of things, you can have gigawatt-scale DERs. You have large data center-sited solar, storage, and gas primarily. Duncan on the DER Task Force wrote that awesome off-grid white paper, which isn’t only about being off-grid. You can have fully off-grid, you can have grid-connected systems. You can have them front of the meter, located next to a data center, all that stuff. If you’re augmenting how you’re distributing power on the grid, those are DERs in our mind. We look at DERs as everything from one of these small 400-watt plug-in solar systems that we may talk about all the way up to a gigawatt-scale system behind the meter at a data center.

David Roberts

Interesting. It’s mainly about locations, which makes sense since the word distributed —

James McGinniss

Colocation. That’s the sort of property that excited me a decade ago. I would say, though, that I love all DERs. I get more and more bullish on distributed solar and storage every year and think that the lion’s share of what we think of as distributed capacity and supply will be solar and storage.

David Roberts

Amen, brother. That is the thesis of this podcast. Within DERs, there’s this class of permissionless DERs, which is distributed energy resources that you can just install without getting permission from any sort of regulatory body. What is included in that class? What all falls in there?

James McGinniss

It’s funny, I think Duncan coined permissionless on one of our podcasts a few years ago. At the time, we were thinking about two applications in particular. One was Impulse Labs’ battery-embedded stove, where that is a plug-in DER. Then Electric Era’s DC fast chargers that have batteries that keep you from needing to upsize an interconnection to site a DC fast charger — that’s Quincy at Electric Era. We said, “Oh cool, you can deploy more DC fast chargers without interconnection upgrades or permission to interconnect.” You may need an interconnection there. I’m not entirely sure, but at the time, in the early days of this, we thought anything that skirted the need for complex, expensive, and permissioned utility upgrades was permissionless.

David Roberts

Along the lines of the Impulse stove, what Jigar Shah is very excited about is Carrier is going to start embedding batteries in air conditioning units.

James McGinniss

That’s right.

David Roberts

And they sell kajillions of those a year.

James McGinniss

Yeah.

David Roberts

And you do not need a permit to plug your AC in.

James McGinniss

That’s right.

David Roberts

I think you could add some of this off-grid, like for data centers, but not just for data centers — like a microgrid or whatever. You can put more and more batteries on your microgrid and as long as your interconnection point stays stable, you don’t need additional permission to do that.

James McGinniss

That’s right. I was going to joke that I even think xAI, their data center was maybe, as I’ve read about it since, maybe too permissionless but —

David Roberts

You can also just do it even if you’re supposed to get permission. You could just do it illegally. I suppose that is a subcategory.

James McGinniss

I appreciate the impulse to just build something more than waiting six years for an interconnection. As long as it is being done safely and it makes sense ultimately.

David Roberts

I like the wild and woolly approach. It would just be nice if it were being done in service of renewables and batteries instead of a bunch of —

James McGinniss

Yes, I definitely agree with that.

David Roberts

— jet engines on tractor-trailer beds.

James McGinniss

Yeah.

David Roberts

That’s permissionless. Within permissionless there’s plug-in, which is what we’re talking about today. Plug-in solar — we covered that pretty extensively on the pod the other day. It’s just these small-scale, usually single panel or two. Then there’s also plug-in batteries, which is what you are mainly doing. What counts as a plug-in battery? If you’re going to put a Tesla Powerwall in, you have to get permission for that. That’s a scale of battery that triggers some regulatory oversight. How small of a battery do you have to get before you are avoiding these regulations — when you can just do it? What size of battery can you just plug in at will?

James McGinniss

It’s interesting because during your intro I wanted to make an objection to calling plug-in small. I would have said the same months ago, but I don’t think plug-in is small necessarily. I’ll expand on that in a moment. Plug-in to me is just you plug it directly into a 120 or 240-volt outlet or any type of outlet. But it’s using existing grid infrastructure and interconnection points we have, which is most commonly the 120-volt outlet.

David Roberts

The insight here, which I guess is controversial but is the core insight — all this agita about finding usable interconnection points. The point here with plug-in stuff is we’re surrounded by already permitted interconnection points. They are called outlets.

James McGinniss

That’s right. Through this plug-in journey over the last year, I’ve had multiple points during it that have blown my mind or re-DER-pilled me to an extent, gotten me even more bullish on this stuff. The first one was just that idea that outlets are preexisting bidirectional interconnection points. Bidirectional is the key here. You can push power back into a circuit. That is totally allowed. That’s some placement point to the grid.

David Roberts

It’s allowed in some places. We’re going to get to that in a minute. Before we get too far in, let’s back up a little bit and just tell us what David Energy is. Tell us what your company does. Tell us what you’ve been doing since 2020 and what is different that you’re doing since January of this year. January of this year, you launched this plug-in part of things pretty recently. Just give us a smidge of background on what David Energy does.

James McGinniss

Maybe I’ll give you the overarching — what the mission has been from day one, which is to run the grid 24/7 on clean energy. By that we mean we are a licensed electricity provider. We can choose our own sources of supply. Our goal is to prove that it’s possible to run our book 100% on clean energy in real time, physically time-aligning supply and demand, not offsets or anything like that. The reason for that is we think clean electrons are the cheapest electrons by far. If we can do that, we’re going to be the cheapest commodity supplier. If you’re the cheapest commodity supplier, you can grow incredibly fast and build a big business.

David Roberts

You’re a retail energy provider, in other words. A home or a business in a place that has retail competition, which is not everywhere, but in a place that has retail competition and people can choose their energy suppliers, you are an energy supplier and your distinction is you’re the clean one and the cheap one — or that’s the idea.

James McGinniss

Something confounded me early on in the journey, which is solar and storage were becoming the cheapest electrons. If you go and buy a “green product,” which is basically a REC product, it was a premium product. We’re like, why is this the cheapest source of power? If you want to buy it from a supplier, it’s more expensive than the alternative.

We think clean is cheap if you’re not doing offsets, if you’re doing it on the real-time demand-supply matching basis day in and day out. This is where the problem that has fascinated me since 2015 probably is everyone talking about intermittency and how do you manage lots of solar and storage or wind on grids? How do you actually run grids with very high penetration to these? That problem has been what we want to solve through just doing it as a licensed supplier.

David Roberts

Are all your offerings 100% clean? All your customers are getting 100% clean power today?

James McGinniss

Today, no. That’s the goal. We could talk about what we’re doing now. Over the last few years, we launched a software product to our customer base, which is small businesses, which we’ve viewed as very underserved in this market. Think multi-locations, restaurants, gyms, cafes, laundromats, stuff like that, whereby they get access to great features — like thermostat management and bill auditing and community solar. That product is free to them if they’re buying their energy through us. The reason we did this is as early as we started, there was not a lot of solar and storage to go out and get. The path to powering our entire book on clean supply was daunting.

David Roberts

Because in some sense you’re buying wholesale power and selling it to customers. You’re dependent on who’s producing the wholesale power, for the most part, right?

James McGinniss

We get to choose who we go and buy that power from. What has changed recently is we see a much stronger path in the near term to get to very meaningful penetrations of clean energy supply within our own book over even the next year because of our ability to deploy plug-in batteries and the proliferation of solar and community solar. You can think of it as up until last year all of our supply was not clean. This year we’re starting to get some clean, and every year that goes on, our percentage is going to increase towards 100.

That’s our goal. The more solar and storage we get under management, the cheaper our power is going to be and the more we’re going to be able to grow. The way that expresses itself, and you mentioned this, what we’re doing today is we go to customers and we say, because there’s so much value in these plug-in batteries, if you let us install plug-in batteries and take over your energy supply, we guarantee that we will beat the utility month over month — you will pay less to, in this case, Con Edison than you would have without David Energy, where we’re taking over the supply side of that bill.

David Roberts

And they’re not paying for the batteries? The batteries are effectively free for the customer?

James McGinniss

Yes. There’s no CapEx for them. There’s not even long-term lockup, which is one of those other “aha” moments, remarkable properties for us, which is you can unplug the battery and move it very easily, meaning you don’t need to get the customer to agree to a 20-year mortgage-like lease on their home or the land they own or something like that. There’s not even a long-term lockup for this. If we come in and install these plug-in batteries, you’re going to save money every month relative to what you would have paid the utility.

David Roberts

I have a bunch of questions about that, a bunch of questions about the economics and various other things. Let’s start with the batteries that you’re selling today. How big are they and what do they look like?

James McGinniss

We’ll work backward to my small objection at some point.

David Roberts

Yeah, we’ll get there.

James McGinniss

The batteries we are deploying right now you could classify as small. They’re just under 2 kilowatt-hours. You can configure them as a 2-hour battery. We can do multiple of those in sequence. Our standard install will put a few of those in series and sum up to something closer to a Powerwall.

David Roberts

I was looking at the pictures — they look like a toaster. The size of a big toaster.

James McGinniss

That’s right.

David Roberts

We’re heading toward big here. Let’s not dis on small. Which means that you can tuck them anywhere in a business. You can put them in a basement, you can put them on the bottom shelf, you can tuck them up above the cabinet. Almost any business will have room for a couple of these, right?

James McGinniss

Yeah. The first objection we always hear from a New York City restaurateur is, “There’s no way I’m going to have space for that.” We have a 98% success rate on installs. You can always find space, which is great. That’s something that’s nice about the current form factor.

David Roberts

It’s interesting in particular that you’re doing this in New York City because New York City is legendarily highly regulated. You can’t even install a Tesla Powerwall in New York City, can you? Because of the fire risk. There are regulations on energy storage systems in New York City right now. It seems like your batteries are too small to trigger those regulations. But I was looking into this and it looks like New York City has issued some new rules that lower the threshold down to 1 kilowatt-hour and yours are bigger than that. I’m curious, how are you sneaking past regulations here in New York City?

James McGinniss

It’s interesting. One thing that’s important to recognize is that it’s not that you can’t install, it’s that there is so much red tape often in even getting something approved that a lot of folks have chosen not to do that and just take their efforts elsewhere. There are a few different companies out there, from Every Electric or Copper Stoves, that are doing batteries in this way.

There are a few aspects to it. One is that UL9540 and 9540A historically were not certifications that these consumer-level batteries were going after. That is the gold standard that FDNY and other jurisdictions take as what is necessary in order to be able to get a COA and do these installations. The other thing, and you had a recent podcast with Cora from Bright Saver, I think that’s what you were mentioning before, is that the way that rules are being written in many parts of the country, it’s clear that a lot of these use cases are not even being contemplated and that there’s a certain amount of gray area in what can and cannot be done.

David Roberts

That’s what I was trying to get at. This is a “let’s do it and if we have to, ask forgiveness later rather than ask permission up front.” There’s a bit of “let’s just put a bunch of these out there and get them working” rather than waiting for these regulations to resolve themselves completely.

James McGinniss

We don’t think the regulations here or in a lot of places are clear for this type of application in particular. On top of that, the gold standard that these jurisdictions care about are UL9540 and 9540A, which the products we’re using do have. What we focus on above all else is that what we’re doing is compliant with NEC, UL-certified products. It’s completely safe the way that we’re doing it. We think as those gray areas are worked through, the intent behind the rules is driving towards that over time.

David Roberts

These batteries that you’re putting in small businesses — it doesn’t seem like they’re big enough that if the power went out you could run your business on them. That’s not the pitch here. The pitch is mainly reducing peak demand charges. Maybe just explain briefly, what is the peak demand charge and why is it helpful to shave a restaurant’s peak in order to avoid it?

James McGinniss

There are certainly some customers that we get into that level of detail. Primarily, customers don’t get into that level of detail. The pitch is, “We are going to save you money against Con Ed,” and that’s enough.

David Roberts

The pitch to me, a podcaster — yes, great,

James McGinniss

But we do get into the demand and supply side of the bill, where on the demand side or the delivery side, they’re still being billed by Con Edison. They’re assessed a charge by their 15-minute interval peak every month — the single 15-minute interval where they have their highest instantaneous draw from the grid. We predict those peaks and we discharge the batteries during those. That allows us to say, “If you didn’t have us, your peak demand would have been 12 kilowatts instead of 10 kilowatts,” or something like that.

The other side of it is a little more complicated. Because we’re the energy supplier, there is responding to real-time prices, there is responding to peak capacity tag events, which is a whole other can of worms that we can get into, but sets how much they have to pay into the capacity market. There are demand response programs at the utility level and at the ISO level and the customer does not need to think about any of that. We take care of all that complexity on the back end and just say, “This is the supply rate you would have paid Con Edison and it’s lower because of some aggregate pool of money that we’ve generated with the battery and are giving them a discount on the supply rate to do that.”

David Roberts

In a sense, lots of batteries are doing this and I think this is a familiar concept to listeners. It’s just arbitrage. You charge the battery when power’s cheap and you discharge the battery when power is expensive. You’re doing that arbitrage on a micro scale within the premises, within the business. It’s micro arbitrage. The principle is the same. You’re shaving peaks, you’re responding to demand charges, you’re enrolling in demand response programs. It’s all the same thing bigger batteries do, just on a micro scale within the premises of a customer business. Is that fair?

James McGinniss

Yeah, and by micro I just take it to mean — I’m going to continue talking about small and micro stuff. I take it to mean that we’re doing it through the demand. An important note here is we are not exporting through these batteries at all.

David Roberts

We’re going to get to that for sure.

James McGinniss

You could, and that is a lot of the great work that BrightSaver is doing, and I think it is particularly relevant for the smaller consumer applications in which they are talking about.

David Roberts

But you’re not currently exporting any power into the grid. All this arbitrage is within the premises itself, just moving power around within the customer side?

James McGinniss

That’s right. Because we’re the supplier, we pay that customer’s energy obligation on their behalf. If we lower that energy obligation during high prices, we can generate savings by doing that, which you can only do if you are the energy retailer.

David Roberts

There is some CapEx involved. You’re buying these batteries. How long does a customer relationship need to last for you to pay off that CapEx of buying the battery yourself and eating the cost of the battery yourself?

James McGinniss

We think about it as the non-CapEx expenses — traditional CAC, or even there are some minor setup costs for the installations that we’re doing, but they’re only 10% of system costs instead of 50-plus percent, which is what you typically see. That doesn’t necessarily have to be true. We do send a licensed electrician on site and create our own dedicated outlets for the batteries, which is the gold standard of doing this very safely, which is the main focus that we have in doing this.

David Roberts

That’s some cost and the batteries themselves are some cost. Then there are savings over time. Is this a loss leader in order to acquire customers or do those costs get paid back to you? If so, how long does that take?

James McGinniss

Without ITC or anything or providing any savings to the customers? Just the raw value of the battery is something like three years and as we optimize that, we think that drops even more. The cost that we want to recover are the cost of acquiring that customer and the minor cost of installation, which may be a much shorter amount of time — like a year. If that customer were to churn, we can go pick that battery up and move it to the next location.

David Roberts

It’s your battery?

James McGinniss

That’s right. We could do that in a day. Think of the density in metropolitan areas. I unplug it, I pick it up at one restaurant and then I move it to our next interior installation, of which we have a big queue. Then you start running the meter on that side of things. The cost that we focus on recovering — there are even contractual things you can do around this — is the initial setup cost and the cost of customer acquisition. We only need a customer for a couple of years for that to make sense, which would be the life of a traditional software or SaaS customer.

Because we’re able to move the battery, we have the full useful life — it’s reported as 15 years, but it could be even longer — to recover the costs, to pay off the CapEx of that battery. It’s just an asset that we own that we can place where we want.

David Roberts

One of the really cool, maybe even one of the coolest aspects of all this is that you can strike these deals with tenants rather than landlords. You don’t have to get the owner of the building involved in this. It is a tenant relationship, which is cool because, as you say, that’s an underserved — this is a problem in multifamily housing too, which we will touch on in a minute. But what if landlords do butt in? Do they ever object to having batteries on site? People are very paranoid about batteries for a lot of different reasons.

Or if there is a fire in the business, even if the batteries are not involved, is insurance going to come in and see a battery and freak out? The tenant can do this, but are there risks from landlords and insurance companies and that kind of thing?

James McGinniss

Yeah, and I think this even goes back to your question around regulations. We don’t think as much about the regulatory framework that BrightSaver does because we don’t export and are not currently. When I said you’re allowed to do this currently under code, I’m thinking NEC, UL, not requiring an interconnection agreement, things like that, because you’re not exporting. Certainly, yes, batteries — the most likely scenario is they could become a scapegoat for other problems that happen on site, which we expect to happen over time. Any new technology is going to encounter that.

David Roberts

New York City has had some negative experiences with battery fires. Some paranoia is not completely unfounded.

James McGinniss

But if you’re going to buy a non-UL-certified product from China and then plug 20 different e-bikes into it with 40 surge protectors, that can probably be an issue. That’s what we mean about this application not being contemplated really and how safe it truly is. We think deploying in the way we are is incredibly safe. It’s possible that a local jurisdiction or a landlord says, “Hey, not in my building or not in this region,” or something. But when you look at the broad scope of where this stuff is headed over time, I think of those as minor speed bumps because —

David Roberts

Have you run into that yet? Has anyone?

James McGinniss

We have not, no. All that said, I want to emphasize your point that this being accessible to tenants is one of those other “aha” moments — a remarkable property of plug-in technologies. It also gets into the tenure thing I mentioned. You can equipment finance this stuff. You don’t need a 20-year asset-backed securitized loan with a creditworthy offtaker. You can look more at, “Hey, what is this unit? Can it be redeployable? What is the resale value of this?” That property, on top of not needing a permit, on top of not needing landlord approval, is what removes all the friction from deploying these.

David Roberts

Yeah, and vastly expands the customer pool. Another thing — I was trying to think about risks to the unit economics here. As you say, this is not customer-facing. All you’re really telling the customer is you’ll save money. But this is dependent on arbitrage behind the scenes. If Con Ed changes its tariff structure or reduces peak demand charges, is that going to hurt you? How dependent are your economics on the existing tariff structure?

James McGinniss

Not on the supply side because that would be a much more substantial change — deregulation at the state level, at the PSC level. What deregulation means is we are allowed to enroll that meter. It is our meter with the New York ISO and the interval data financially settles to the ISO data and we have that financial obligation. There is nothing on the supply side that you could change the tariff or something. Con Ed can offer their own tariff for their own supply products.

In our minds, they would simply compete with the products that we’re able to offer. They typically don’t spend much time on it because they’re not allowed to make money on it. They can only make money on deploying infrastructure.

We do benefit from peak demand charges. I suppose it’s conceivable that could always change. It’s so far flung that it’s not really a risk that we think about. In residential customer classes, for example, they’ll have volumetric delivery charges, not peak demand delivery charges. That can impact your ability to recover it. If you have solar, though, it can enhance it because it means if you’re pushing volume in, you’re avoiding those charges.

All of this is — there are more elegant designs around tariffs and prices than others. We think the base level framework in all the major ISOs like PJM, New England, New York, ERCOT, where we’re focused over time, give us the framework to deploy and have really solid unit economics.

David Roberts

You think you’ll be able to beat Con Ed for the indefinite future?

James McGinniss

Yes, and we should beat it more and more over time because as we get closer to 100% clean. One thing we didn’t talk about in the unit economics is we are starting now to deploy our own solar or aiming to this year.

David Roberts

The plug-in variety?

James McGinniss

That’s something that we’re starting to explore, but we would also do the traditional front-of-the-meter stuff as well as our own supply source. As we get more and more of that, we beat the utility by more and more, and that can lead to more savings for customers or more margin for us.

David Roberts

Another question about the cleanliness of all this. You’re just shifting around. The cleanliness of it to some extent depends on what’s on the grid, what’s available on the wholesale level. As I understand it, most of the nighttime power in New York is gas. Is this necessarily cleaner — it’s cheaper, for the reasons we’ve discussed. But is it necessarily cleaner? In some sense you’re dependent on what’s on the grid, are you not? Less so over time as you install more of your own, say, community solar or whatever, but currently.

James McGinniss

I would say two things. One is the point you just hit, which is deploying storage gives us an ability to manage solar in our book — manage the exposure that the intermittency brings.

Even if the solar is not on site, we’re effectively storing our own solar in our on-site batteries. At the end of the day, ISOs are just big financial markets. You have pluses and minuses. You have sources and sinks exporting power or pulling power, producing or consuming. That’s one big piece of it — this storage will allow us to deploy solar.

The other part of it is that we use some very dirty peak sources in New York. We use fuel oil, we use nasty stuff when things get really bad. If we’re discharging during these peak times, we’re avoiding some of the dirtiest and most expensive resources out there.

David Roberts

Almost always the customer will be getting cheaper power than they would on Con Ed’s plan, but also cleaner power.

James McGinniss

That’s right. We don’t talk a ton about the clean now because how clean it’s getting is going to strengthen over time.

David Roberts

This is a good place to pause and emphasize this because I’m not sure we emphasize it enough up front. You’re just going to a customer and saying, “Hey, I’ll give you cheaper power. From the day you sign up, you’ll get cheaper power.” That is a pitch that is sufficient unto itself and requires no additional motivations. You don’t have to be green, you don’t have to care about anything else. This is why this is intriguing to me — for a long time trying to sell DERs, you need people who care about cleanness. You need people to care about resilience. You need these other motivations to overcome the financial premium. Here it’s just a pure cost play. Cheaper power, period, full stop.

James McGinniss

Yes. You don’t even have to mention that it’s going to get even cheaper the cleaner you get, which is what we’re doing. Psyched about that. I would love to emphasize that resilience and sustainability have been marketed as premium products and that has been where DERs have had the most success.

Of course there are savings pitches out there, but it’s unclear in many cases whether those customers did save money because it’s a 20-year agreement they’re signing to and there’s some forward projection of power and you have to believe in inflation, escalators, and all this stuff. We just say, “In a single month, if we do not save you money, you can leave and we will come pick up these batteries.” I think that’s something very new as well.

David Roberts

Let’s now talk about feeding back into the grid. You are not feeding power into the grid through these outlets because although you say it is possible, it is in fact illegal to do so in most places. In the plug-in solar pod, we discussed how Utah has pioneered allowing a little bit of feedback into the grid. How much of a restriction is it on you — on the size and number of batteries that you can install on one of these premises — that you can’t currently legally feed back into the grid?

Were you allowed to feed back into the grid, how much would that improve the systems that you are able to install? How much of a restriction is it that you cannot currently?

James McGinniss

We think more about the AHJ — like DOB or FDNY or those types of regulations — more so than the exporting one. The reality is, our customer peak demands are quite large as commercial. They range from 10 kilowatts if you’re a small cafe up to north of 100 kilowatts, and you’d have to deploy a lot of storage in order to be exporting. Even with no constraints at all, that physical reality — it’s unlikely that we’ll export unless we’re doing something to your point earlier about plug-in solar, which also does not need to be small. We can talk about that in a bit.

What we’ve found is — this is another mind-blown moment for me — when you look at the National Electric Code and UL certification and how, outside of whatever jurisdiction that you’re in, just what is safe physically to do, you can do hundreds of kilowatt-hours in buildings because there’ll be multiple 200- to 400-amp panels. Each of those — there’s the 120 rule — and you can push a lot more power into them than you think, not just these little batteries. We’re keeping things small because of the current environment that we live in.

The physical, safe way to do it — I see paths to having, imagine in every panel on a commercial building you have a stack of these batteries like a server rack, and they are all plug-in based. You are not just doing one giant system on the roof, which has totally different safety and weight considerations and needs permits, etc. When you think about these metropolitan areas, you could imagine solar on every balcony, solar on the roof, storage on every panel, and they are all plugged in.

You’re talking about megawatt-scale deployments. From that perspective, I don’t think it’s small, but we’re not doing that right now. The bigger constraint is not necessarily the exporting because the peak demand on these buildings can be quite large.

David Roberts

You’re saying you don’t need to export back into the grid to scale these systems up a lot?

James McGinniss

For this commercial application that we’re focused on, that’s right. Obviously the original — you think back to Impulse, they were like, “Okay, let’s plug a battery into a stove and now I don’t need electrical work.” Now we’re looking at this whole balcony solar movement. David Energy is in this new category of commercial plug-in deployments. This is also where you start bleeding into plug-in versus permissionless — it may not be a 120 or 240-volt outlet, but the idea of deploying solar and storage, we don’t understand all the form factors yet.

The reason I’ve been harping on this small thing is you can do pretty large installations that are not exporting and are plug-in.

David Roberts

In a big customer? In a large size customer?

James McGinniss

Yes. Big customers — plug-in can be a superior means of deploying storage than a traditional system from the techno-economic physical layer and what is currently allowed under National Electric Code and the UL certifications.

David Roberts

When you say big, you think for an individual customer you can reach the same scale that they would get by having a full-on permitted rooftop solar installation and a full-on permitted large-scale battery. You think you can reach that same scale with plug-in legos?

James McGinniss

The solar one seems a little more unlikely. At some point you should just do a proper install and make sure it’s wind-rated and interconnected and all this stuff. Solar is producing so much during the day, it’s probably going to be exporting too. The point of the plug-in rule is if you’re only exporting a little, you don’t need an interconnection agreement. If you’re exporting a lot, you should probably have an interconnection agreement. I think there’s a limit there. When I think of floors on buildings and how many panels are currently available and these preexisting interconnection agreements, I think it’s very possible you get to a bigger installation doing that.

All regulatory questions aside, physically that’s better than a rooftop or ground-mount storage system. If not bigger than the traditional way, certainly quite big. I think that’s even true of the solar side. Raya Power out there is doing really cool stuff where it’s not quite balcony — it’s its own self-ballasted system that could be a couple kW and I could totally see that being on New York City roofs.

David Roberts

I find the subject slightly vexing because when I talk to Cora, when I talk to the plug-in solar people, talk to you, everybody’s a little, “Backfeed into the grid is no big deal. Let’s just permit this.” I know there are people out there crusading to change state laws on this to allow this. But then I hear from electricians, master electricians, and they’re like, “Hold on now. There are all these risks from backfeed.” I’m sure you’ve heard the whole litany of risks. How are we, electromechanically ignorant onlookers, to assess this question?

Who’s got the right of that? How do you think about the safety of backfeeding?

James McGinniss

I’d say there are two components and I’m not an expert on this. I would definitely defer to the BrightSaver folks. One real concern I’ve heard from utilities is that if there’s a grid outage and there’s a line worker out working and because of backfeeding, a line is energized that they don’t know or expect because from the utility’s perspective, that line is down. That’s a danger. I think that’s quite manageable. For example, even in the batteries we deploy, if the grid goes down, they trip off. There are ways you can do this with any sort of — the way you’re configuring these systems.

The other one would be, I understand the utility desire to understand how much supply and capacity is being deployed on a given feeder, for example. If you were to raise that limit from 1.2 kW up to 50 per home, and everyone was doing it, you could be pushing a lot of power onto a distribution feeder just in normal operation. I think that’s a reasonable concern as well. That gets into, up to a certain amount of capacity deployed, do we need interconnection per system or could it be more of an application where you’re like, “Hey, just so you know, I’m doing this thing.”

We’re just starting to ask those questions. There are folks out there who know a lot more than I do, but those are the two big ones, as I understand, legitimate safety concerns. There might be others.

David Roberts

This is a bit of a crude heuristic, but they have run this experiment in Germany. There were a lot of concerns up front. A lot of electricians objecting to this, a lot of apocalyptic predictions, but they have legalized a little bit of feed-in with their plug-in solar and they have installed now gigawatts and gigawatts of these plug-in solar systems. As far as I know, there has been no problem. The fears have not come to pass in Germany at least.

James McGinniss

Yeah, and again I think that comes down to — when I say allowed, I mean at the physical electrical code, what are we actually doing to the grid? Safety is very important and these systems are very safe. That’s why that has played out. Interestingly enough, the bridge between those two things, at least as I understand it, is the choice to say 1.2 kW is mostly so that hobbyists and consumers who are going to self-install these systems don’t overload at the circuit level. 1.2 kilowatts or 1.9 kilowatts even points at the 120 rule of a 20-amp breaker, for example, or I think 1.2 may be how much power you can push onto a 15-amp circuit potentially.

If you made the rule 20 kilowatts, someone may just start plugging tons and tons of solar into their home and overloading at the circuit level. The bridge between how much you can export without an interconnection agreement ties back to circuit level — physically what’s safe, what do we want to make allowed so that when customers are self-deploying and when products are being offered, they’re being done so in a way that is safe naturally at the physical level.

David Roberts

I’ll wave my hands at this to say that I think in the future these distribution-level circuits are going to be much smarter. Lots more sensors, lots more software-governed, lots more ability to see where power is and distribute it as you need it, rather than relying on physical circuit breakers and that type of thing. I’m guessing it will get safer and you will be able to do more over time.

James McGinniss

This is such a good point and why I think that having real conversations between people in the industry and utility folks and regulators is so important. When you think back, a lot of the safety standards of the utility, and rightfully so, are very mechanical in nature. It’s literally metal flipping. In talking at DERvos, I won’t name names, with a utility exec, I was like, “Hey, if we could demonstrably prove that we were incapable of exporting not through a mechanical switch, but through software in a way that was demonstrated, you believed that this was safe?”

He said, “Yes, that would not require an interconnection agreement because of the export limit, like when the grid is down and things like that, if it handled the safety concern.” I would just put it this way. I think as an industry we need to ask the question, what is interconnection? We have all of these feeders — they’re bidirectional physically, you could export safely physically, under certain conditions, the same amount as you’re drawing in. Why do you need an interconnection to push out? I could put batteries behind the meter and discharge and take that whole home offline.

That doesn’t need an interconnection — or does it? There are different opinions around this, around the industry, of what does and does not require an interconnection at all.

David Roberts

It’s all going to get smarter.

James McGinniss

Yes.

David Roberts

The pieces are all coming together. You are in New York City selling to small businesses, franchises, laundromats, and similar. Who is next? What is the potential customer base here? What other customer classes or types are you going to expand to as time goes on? Where is this possible? You require retail competition, at least. What is the potential customer base and geography base here?

James McGinniss

We haven’t gone too deep on other geos, but based on what we know, we can expand across PJM and New England for the most part. You can think of really any storefront or even direct-metered commercial tenant space, an office, potentially, a legal office or something like that.

David Roberts

What about multifamily? If I just have a condo, can I do some version of this? Do I even have enough power? Am I even using enough power? Have you thought at all about multifamily, or is that not a potential?

James McGinniss

Yes, we have. We definitely aspire to launch a product — a retail energy product — that would cater to the type of people who are going out and will be buying and self-installing solar and batteries because of all the awesome work that BrightSaver is doing. We’re just starting in this lane of self-deploying for now. Once solar and batteries are getting connected, there are ways to optimize them where, without a counterparty like David Energy aggregating them up, offering them into grid services, doing arbitrage, all that stuff, your average multifamily renter is not going to be doing.

We don’t have any near-term plans to do that, but we certainly aspire to over time. I would say we definitely have our hands full now on the storefront perspective. We’ve been in cafes, restaurants, gyms for a while, but we’re starting to get laundromats and salons and grocery stores. You can think of that whole commercial space — commercial tenants across all the major states in PJM, New England, and New York — as areas that we want to expand into in the coming years, standalone. Then separately there’s new products like multifamily renters.

David Roberts

You’re installing all these batteries and you’re the provider for all these — you’re the retail provider for all these businesses. Are you doing any aggregation into VPPs? Is that part of the play? Aggregating to provide grid services, all the VPP stuff? Are you into that?

James McGinniss

Yeah. We aggregate our customers and dispatch them as an aggregation.

David Roberts

How big of a piece of the revenue is that?

James McGinniss

The VPP side? I would say it’s a meaningful amount. In New York you can drive a lot of value just through peak shaving on the delivery side. That’s all value that goes to the customer. All of our revenue is the VPP side. We dispatch it as one thing. Against our demand obligation with the New York ISO and at the grid services program level, all of that we think of as an aggregation and that is where all of our value comes from. It expands over time.

As you start layering in things like solar, the whole becomes greater than the sum of the parts.

David Roberts

I heard you talking with Shayle Kann on his pod, and you were — one of the hot subjects these days, which I’ve covered on the pod many times, everybody’s talking about is these data centers desperately need capacity. The fastest way to get capacity is DERs, in my opinion. Do you think that these — I know you’re going to yell at me for saying small, but relative to data center needs, any one of these installations is tiny. Are you going to be able to aggregate to a meaningful scale that it would matter to a data center? You think you’re going to get big enough to play in that pool?

James McGinniss

I think the white paper that you discussed with Cora is great — looking at Germany, how much of this stuff is going to get deployed in the coming years. I think that’s because we’re only just beginning to understand that’s the one form factor of this stuff. If, again, and I’m talking theoretically about these larger-scale plug-in installations, imagine something like that would be allowed under the varying regulatory environments — that could lead to far greater numbers of this stuff than we could imagine currently. What I would say, and again, I’ve not done the analysis or made a real projection here, but I think in terms of gigawatts and tens of gigawatts in the near term, and I don’t see anything stopping us and other players in the market from doing that.

Let me say it again. In contrast to the current way we’re deploying DERs, there’s too much friction for the current permitted, interconnected way to scale to something meaningful enough in my mind. Plug-in at least offers a path. Imagine if every time you bought an iPhone or went and bought a laptop, you needed a permit and an interconnection and an inspection. The Internet never would have scaled. In order for this thing to really happen, people need to be able to go out and buy and deploy these things without as much friction as there is today.

When I look at that property and knowing that we are probably quite naive right now and not understanding all the ways in which this stuff is going to express itself, I think plug-in, at least on a first-principles level, offers the DERs industry the promise that got me excited about DERs 10 years ago. I do not think that promise has been able to deliver until now. I really do see this as the dawn of a totally different way of deploying that I am incredibly excited about. That is the worst way to answer this, I know.

David Roberts

Let me nail you down on one thing.

James McGinniss

Yes, please.

David Roberts

Just take New York State. Do you think that plug-in capacity cumulatively will exceed traditional DER capacity? If so, when? I know there is a level of arbitrariness to this. Approximately how are you thinking about this?

James McGinniss

I think, definitely for storage. When I look at the whole commercial landscape, plug-in batteries just seem to make more sense to me. In multifamily buildings, I don’t know the extent to which balcony solar versus a traditional system — we’re still in the early innings of exploring that, but I would say 100% yes for storage.

David Roberts

Do you ever worry that the reason this is all going off so smoothly is that it has not yet reached a scale where people are noticing and that if you start to get to really substantial scale, the US’s red tape-prone regulators and legislators are going to start biting at your ankles and trying to get in and regulate this more? Are you trying to race to a certain scale before you draw the eye of Sauron, as it were? Is that how you think about it?

James McGinniss

Yes and no. In the long arc of things, I trust that if our system is working, this stuff makes sense, it is safe, it is cheaper to deploy, it is good in many ways. There are real safety questions and real aspects of deployment that are unanswered but certainly answerable and that we will answer over time. It is not that there should not be regulations. We should create the right frameworks around this radically new technology and I trust we will grind through the mechanics of that over time.

David Roberts

You are creating constituents, right? Every one of these little businesses who are getting cheaper power now are, in some sense, a constituent for this.

James McGinniss

Yes. It’s safe to do so. What are we going to say? “No, they shouldn’t get access to this new technology,” which would be a very politically challenging position to hold, I think. Clean, cheap energy for renters and tenants — that seems like anyone on either side of the aisle will support.

David Roberts

We do lots of dumb stuff, though.

James McGinniss

Yes. The short answer is, certainly with anything new, there will be jurisdictions or certain regulators or certain utility members that don’t like this and some of their concerns are even going to be valid. The best way to have those conversations is to show that it can scale and that it’s something that must be contended with because people are going to go out and do this. It’s good to do, and we should catch the ball as a system — as a society — not try and close Pandora’s box, which I don’t think is going to happen. That’s the myth. It can’t happen. It’s open. Here we are. We have to deal with it now.

David Roberts

We’ve been talking about your business and David Energy. Talk a little bit about who else is in this plug-in — it is nascent, it is early, as you say, early days in this. Who are the others — and what are they doing?

James McGinniss

Impulse Labs has the battery-embedded stove so that you don’t need to upgrade your standard 120-volt outlet, which I think is awesome. Copper —

David Roberts

I interviewed them three years ago. I was hyped about those battery-embedded stoves early on.

James McGinniss

That’s another one. EcoFlow is currently the battery that we’re using, which is making some really incredible products in this category. Pela is another newer startup. BrightSaver, Every Electric is here in New York City, who I mentioned.

David Roberts

I just saw someone trying to raise funds on Kickstarter for something they’re pitching as a fridge battery. It’s literally a battery you put next to your refrigerator to ensure that if the power goes out, your refrigerator stays on. My first thought was, how long until refrigerator manufacturers just integrate that? Just put the battery in the fridge?

James McGinniss

Impulse and Copper may be at the front end of a whole wave of battery-embedded products — like the heat pump or the fridge. I don’t know that company in particular, but Pela, a big part of their value prop upfront is resilience for something like a fridge.

David Roberts

Speaking of the legality, I’ve seen probably a half dozen products like this just floating by on Kickstarter. Little batteries for various things. You can feel people groping around, around just the right way to market them, just the right way to present them to customers. Is it backup? Is it cheaper power? Is it keeping your fridge on? It’s interesting to watch this take shape.

James McGinniss

I’ll admit that we don’t fully understand that yet. People love savings. One thing I was going to mention before that has really warmed my DERs-loving heart is how much just the average customer thinks batteries are cool. If you went to a customer — and a lot of retailers have done this — and said, “I’m going to save you 5% on your power bill,” you’re going to get a lot of skepticism. But you say, “I’m going to do it with a battery,” they immediately are like, “Oh, that makes sense. And that’s cool and I want it.”

David Roberts

You’re not running into, “Oh, battery fires and leaching chemicals into this,” all this misinformation about batteries flying around these days. You’re not running into any of that?

James McGinniss

No. I think people are smarter than that. How many hours have they walked around with a phone in their pocket and a laptop and not had any?

David Roberts

People are pretty familiar with batteries.

James McGinniss

All of these things are myths from a prior era. We literally scoured the Internet trying to find — there are people out there who literally try to start fires with these batteries and cannot. They’re using power drills, they’re using water, all sorts of crazy setups, and they can’t do it. Obviously there are still safety concerns. We care a lot about safety, but I think we’re in this era, especially with LFP, where we know that they’re safe. I think the average person does too.

David Roberts

I really think you can’t understate how much the spread of electric vehicles has got people thinking about batteries, just foregrounded batteries in general.

As I said, the reason you can offer customers cheaper power is that you’re doing a little arbitrage. In some future scenario, say in PJM they install a lot of utility-scale battery installations or they do a ton of what Minnesota is doing, which is putting these mid-scale batteries on commercial and industrial land. The grid in general gets a lot more batteries on it.

That is perforce going to flatten things out and reduce the amount of arbitrage available, which will diminish the appeal of your current economic pitch, will it not? Is that something that you worry about? We’d love to have that problem. Is that something you think about?

James McGinniss

It’s not for two reasons. One is our whole purpose for vertically integrating across supply and demand is the same as in any market environment or any commodity player — if we are self-supplying the consumption of our customers, we are not exposed to price. We can earn stable margins in many different market environments. If prices are low, we’re still just buying from our own solar and storage. If they’re high, there may be some upside there. Our goal on running 100% on clean energy is also a statement of what is viable about the business — if you look at NRG and Vistra, they own all the gen and that gives them their market power.

The second reason is that what I love about distributed energy is that because of that colocation element that we talked about, distributed outcompetes utility scale. There’s a remarkable property of DERs that I think originally DER-pilled me 10 years ago, which is it’s the same cost to build on a small scale as on a large scale. That’s increasingly becoming true with plug-in because you don’t need thermodynamic efficiencies of scale. If I want to go build a coal plant, I should go build a big gigawatt.

David Roberts

Same with nuclear.

James McGinniss

Same with nuclear. If I’m deploying utility-scale solar, it’s all the same components. There are some efficiencies but not as much as you think. The panels may even be similarly sized as a rooftop install. When you’re manufacturing these things off the line, that’s where your efficiencies of scale come from. What that means is if I place a battery or solar on the grid, the closer I place it to demand, the less I need to rely on wires and the more there’s an economic benefit of doing so. If the cost is equivalent roughly and there’s a greater benefit from being connected to demand, it’s going to connect to demand.

You also get resilience benefit and stuff like that. I’ll throw out this one stat that I always come back to — in Australia, utility-scale solar is $1,100 a kilowatt and rooftop is $1,200. In California, utility-scale is $1,200 a kilowatt and rooftop is $4,200. The difference is soft costs. It’s not the physical properties of this stuff. I always come back to that.

What that means is, if anything, the grid edge stuff — and this is also why I’m going to continue harping on small. When you place that next to demand, I’d worry about the wholesale stuff being outcompeted. Because their only value is wholesale, they don’t have a T&D benefit there. They lose all their revenue potential. At the end of the day, when you think about — on the smallness point — every meter, every home, building should have some amount of solar and storage.

David Roberts

Amen.

James McGinniss

That’s the most economic place to put it. That will sum up to a lot over time.

David Roberts

You’re not in the manufacturing, you’re not designing your own batteries, I presume you’re probably not going to get into that. In some sense you’re dependent on the form factor of batteries that other people are producing. Is there any form factor you’d like to see that you’re not seeing now? Are there — literally just the shape and size of these small batteries that you’re leggoing into installations — is there a form factor you would like some manufacturer to get into?

James McGinniss

100%. We are already in conversation with a variety of suppliers about that form factor. The rule in these partnerships is that they have their competencies, which is building this stuff, we have ours, which is doing all the commodity and energy market stuff. If we’re buying in sufficient volumes, we have seen suppliers be very open to creating a form factor, not just for us, but that they think if we’re deploying them in a given way that someone else will come along and want to do it, so there will be some other customer for them.

David Roberts

But what form factor — taller, skinnier, lighter? What would you like to see?

James McGinniss

I would say more stackable. Not just how they stand up. The batteries we’re currently using, I think a higher energy-to-power ratio, so you don’t need so many of them. We haven’t really gotten into the other voltages stuff, but that is something we may want to do — 240 or 208 or something — but right now it just means we’re using a few plugs if we want to do a bigger install. There are ways to consolidate the number of plugs you need and also how many inverters that means you need. You can get much more efficient over time.

David Roberts

And you’re using LFP — less fire prone, slightly less energy dense, but safer is supposed to be the tradeoff with lithium-ion. Is there a chemistry that would help? Do you think about that at all? Are there any other chemistries on the horizon that you think would be good for these applications, or is LFP just fine?

James McGinniss

I think it’s great. I’ve been thinking a lot about spectrum boxes. You don’t think about your spectrum box as this expensive CapEx or something. There may be a $100 charge if you don’t return it or something. I don’t think batteries ever get there.

David Roberts

This is your cable box, right?

James McGinniss

That’s right. I think plug-in batteries will approach something closer to that than we can imagine right now. Just on the lithium-ion and lithium iron phosphate cost curve, why would I not have batteries plugged in at the grid edge and my provider help facilitate that for me?

David Roberts

If they’re embedded in every appliance, you’re going to be doing it whether you want to or even know you’re doing it at all.

James McGinniss

That’s right.

David Roberts

Final question, real final question. If I’m a state legislator listening to all this, I’m intrigued, I’m excited. God knows New York City, New York in particular, has a lot of congestion problems, a lot of cost problems with deploying their clean energy. They’re rolling back their laws now and their regulations. If I’m a state legislator hearing this, do you need or want any particular regulatory or legislative help, or do you just want them to leave you alone while you cook? Is there anything that would be helpful?

James McGinniss

The work BrightSaver is doing is incredible. Those laws are incredibly important for the particular class of deployments that — for the multifamily renter, for example. In this plug-in conversation, what we are doing, our application is not really being contemplated necessarily from a regulatory standpoint. For our case, it leans closer to let us cook because we have the National Electric Code and UL certification and these things are incredibly safe. There are interesting questions around interconnection and how much should be exported, but I think what BrightSaver is doing is all you need to do there for now, at least until we understand more.

I would speak directly to them and say the customers that now have DERs available to them, like multifamily renters and small businesses, are not happy about rising electric prices and these are tools that they now have access to that we should help them get access to however we can. Especially if you’re a clean energy advocate. The two things that everyone has always used is one is “only rich people buy these,” which honestly is true to a lot of degree — they’re creditworthy offtakers — and two, you need incentives like the ITC or what have you. If you just look at it from a “we’re getting access to people who are feeling the pain and who need more affordable solutions and you don’t really need any complicated incentives or regulatory regimes to do that,” it’s kind of a no-brainer to support it however we can. In our application I don’t think there is that much support that we actually need.

David Roberts

Let you cook!

James McGinniss

Yeah, I’ll take it.

David Roberts

Super interesting, James. T hank you so much for coming on. This is really super intriguing stuff. I can’t wait to see where all this goes. Thanks for coming on and walking us through it.

James McGinniss

Thanks so much, David. It was a lot of fun.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out especially to my super-producer Kyle McDonald who makes me and my guests sound smart every week. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

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

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David Roberts

Greetings, salutations. This is Volts for May 29, 2026: “Giving clean electricity a political voice of its own.” I’m your host, David Roberts.

If you are the kind of person who listens to Volts, you know that we are living through an industrial miracle. Over and over and over again, clean electrification technologies have outstripped even the most optimistic predictions. Solar sets new records every year. Solar and wind comprise the vast majority of what is being built today in power systems worldwide, and almost the entirety of what developers want to build in the future. Virtually every country is moving toward clean electrification, even petrostates like Saudi Arabia. Every day the technologies involved become cheaper and more sophisticated, opening up even larger potential horizons.

It is wild — and if you simply trace the projections forward a decade or two, the implications are so enormous and overwhelming as to defy understanding.

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This ought to be political dynamite. It’s economic growth! It’s lower costs for consumers! It’s cleaner air! It’s geopolitical advantage! It’s a win-win-win in an age where everything around us feels like losing.

And yet most Americans don’t know about it. Most economic and cultural elites don’t know about it. Most politicians don’t really know about it. Even the most powerful politicians, the ones most directly involved with these subjects, do not really get it, not the full extent of it.

Why is that? There are lots of things you could point to, including a diseased information environment, but the core reason, in my opinion, is that the clean electrification industry has simply amounted to less than the sum of its parts, politically and culturally. It has miserably failed to tell its own story. It has failed to wield political power to protect its interests. The main trade group representing it — the American Clean Power Association — has a membership almost half composed of fossil gas and spends its time scolding environmentalists and simpering about “all of the above.”

It’s pathetic. Clean electrification, the most dynamic and optimistic thing happening in the world today—and yes, I’ve heard about AI—is somehow a 98-pound weakling in the great American high school when it ought to be prom king.

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I was recently approached by some folks who say they want to build something better. It is called Amped, and it is a somewhat disparate set of efforts designed to improve clean electricity’s ability to tell its story, improve relations with lawmakers, and speed deployment. After looking at what they sent me, I have my doubts about whether it is what I wish it were — but I feel pretty confident that it will be better than the status quo.

Today I'm talking with the guy at the center of it, Steve McBee. Currently he runs Huck Capital, a clean energy investment platform. But he has also managed large-scale clean energy businesses and served as a legislative aide in D.C., so he has a pretty broad view of this landscape and has witnessed clean energy’s political failures up close. I can’t wait to get into it with him.

With no further ado, Steve McBee, welcome to Volts. Thank you so much for coming.

Steve McBee

Dave, thank you so much for having me. And I look forward to quelling all your doubts.

David Roberts

That would be a first. Truly, truly a first.

Steve McBee

We have to be ambitious.

David Roberts

I think you might underestimate the vast universe of doubts with which I struggle. Before we get into what you’re doing, let’s start with a little diagnosis here. Tell us in your own words. Describe to us as you see it the failure of this industry to, I guess I don’t even want to say punch above its weight, to even punch at its weight. It is punching well below its weight. Tell us why.

Steve McBee

Look, I thought the way that you opened up this podcast, you ran a perfect marketing and commercial message for where the industry is and where the industry is going. I’ve been in the industry for 12 years as a company CEO, as an organizer of capital, and it’s a difficult moment. I am more optimistic about the energy transition and these markets than I have been at any time since I came into the market.

Our products and technologies, they’re awesome and they’re getting cheaper every day. They’re flying down the cost curve. We have incredible talent that has come into this industry doing capital formation and business building. There’s tons of innovation in this sector happening not just in the US but globally. And while there has been capital that has rotated out of this sector primarily because of the volatility and uncertainty, politically, there is plenty of capital in this space to do what needs to be done to get to the next phase of the energy transition. From a commercial perspective, I’m incredibly optimistic.

That optimism is tempered by the fact that I think we have not done a very good job as an industry of taking care of a couple of really important non-commercial responsibilities.

Responsibility number one is we are obviously not organized for power. I think the limits of our political infrastructure as an industry, particularly in Washington, have been badly exposed over the past year plus. Connected to that, Dave, given how important our industry is to the US economy, given how important it is to meeting power demand, not to mention how important it is to the planet, our social license should be locked in, but it’s not.

Our cultural identity is wobbly. And I think that is a function of us not doing a good job as an industry in talking to the people that we most need to be with us in ways that are landing. We talk down to people, we talk around people, we don’t speak to people based on their own lived experience or around a common set of values. As a result, we have really allowed the fossil fuel industry to easily appropriate the energy narrative in the United States.

David Roberts

Let me just insert here. They did have a century head start, and all the good news we’re talking about has really flourished in the last three years, five years. You can forgive us, you can forgive them for having more infrastructure in place.

Steve McBee

That’s a fair point. It’s also an excuse. We need to be excellent and we need to be urgent about it. We have not built infrastructure that has made their job very difficult. In fact, they have pushed us outside the cultural zeitgeist and we’re on the outside looking in, which is not a place where you want to be in a world where the number one most important political signal is cultural, and the most important market signals, unfortunately, are political.

I think it’s not enough as an industry to say, “Hey, we’re just going to keep our head down, we’re going to build great companies, we’re going to build great products, and we’re going to shut the noise off.” That’s not how it works. The way it works is you have to be commercially excellent, you have to organize and take care of your political power, and you have to fight it out every day for narrative and for your identity.

In a perfect world, we’d not only be excellent at those three things, but we would organize them in a cohesive way to create a flywheel for the industry. But we have not done that. I think this topic that we’re discussing today is so important.

In fact, I think the most important priority, the very top priority of our industry, needs to be being fiercely urgent about getting our political power organized and getting our cultural identity reestablished. If we do those things, these energy markets are going to transition themselves. For all the reasons that you talked about at the top of the show. The fundamentals are great, but if we don’t take care of those things, it is going to be lumpy.

David Roberts

I have my own thoughts about this. Obviously, before we started, I took a solemn vow to myself to remain calm throughout this, as from our previous discussions.

Steve McBee

Let’s see how that works.

David Roberts

I get worked up about this stuff. Tell us from your inside view, what lesson do you think these industries, the clean electrification industry — and I just want to, I should have clarified this up front, but I also want to say this. People have in their head energy as a big lump. I would like to distinguish from that. Clean energy, but that’s also a big lump. I would like to further distinguish from that. Clean electrification. Electrons, not molecules. Solar, wind, batteries, EVs, etc. That’s what I’m talking about. That is the industry that I would like to have a distinct voice of its own in that industry. What lesson do you think it took from the 2024 election and how has it chosen to respond?

Steve McBee

I would go back to your opening comments at the top of the podcast. You talked about electrification exactly the way we should be talking about it. That is a way to talk about it that happens to represent the facts of where the industry is today. It also is a way to talk about it that will allow us to reach a broader cross section of people. When I think about people —

David Roberts

Before we get to how we should talk, I want to hear about what the industry is doing, what people are saying as a response to the 2024 election, what they learned in these back rooms, what strategies they are adopting?

Steve McBee

I think you might be giving the back rooms too much credit. One of the things that I have found surprising and that I’m very frustrated by is we obviously have a capabilities deficit in the clean energy influence ecosystem. The scoreboard would tell you, we’re down 53 to zip. We’re getting smoked. But we also have a cultural problem, I believe, in that ecosystem. The lessons that have been taken seem to be that we just need to keep doing what we’re doing and maybe do it a little better or spend a little more money or whatever.

I don’t see any — there is no meaningful conversation within the incumbent group of trade associations and associated firms in Washington about the need for a reboot, about a really critical look back. There is a lot of time spent resisting new ideas. There is a lot of time spent being territorial to new ideas. There is a huge amount of time spent by the people who have been charged with protecting and promoting the interests of the industry trying to convince, I guess, first themselves, but also the rest of it that the situation is much better than people like me and I think people like you think it is. I think survival, relevance, digging in, that’s what I’m seeing.

David Roberts

Here’s how I would put it, Steve. The election was Trump smacking the industry on the nose with a rolled-up newspaper. The response has been to whine and cringe and beg for scraps. “Let’s keep our head down, let’s be safe, let’s not fight, let’s see if we can chisel away a little bit of extras on the side here. Let’s see if we can sneak our way onto the wagon with the rest of everybody.” I never see any self-confidence, any bravado. It just strikes me as an industry that’s so used to being on the rump that it has just accepted it and now decided to beg for table scraps. That is the much less flattering way that I would put it.

Steve McBee

That’s exactly what it is. When we talk about the cultural problem that this industry has, we have an identity problem. When I was trying to figure out after the IRA wipeout, what’s happening, what can I do, who can I help be better?

What I found, number one, is I couldn’t find anybody that I thought had the potential to be significantly better. The way that they were structured or the way they were being led or the way that they had identified their mission.

The other thing, equally alarming, getting to the point that you just made, is whether you’re talking to lawmakers, congressional staff, industry leaders, people in the capital markets, people in climate influence, there’s this defeatist attitude, this idea that we’re used to losing, we’re used to taking table scraps. We show up prepared to lose. When we do lose, we really talk about how unfair it is that the fossil fuel industry spends so much money and tells so many lies and they just don’t play fair and whatever. And we still show up and talk about ourselves like alternative energy —

David Roberts

Yes, it is so characteristic of our side to talk as though there is a referee listening who is going to blow his whistle and intervene. There is no referee.

Steve McBee

Nobody’s coming to help us. We have to help ourselves. The thing about it is we are the — when we talk about being the future, the alternative energy that will power the future — the future is fucking here — and we are the power source that’s going to power the US economy and hopefully a whole bunch of the world going forward. We need to show —

David Roberts

Yes, not 2050.

Steve McBee

No.

David Roberts

Not 2030.

Steve McBee

No.

David Roberts

It’s happening now.

Steve McBee

Yeah. Where is our swagger? Where is our presumptuousness? We need to figure out what we need to do politically, and we need to do whatever it takes to go take it, and we need to stop asking for permission to do that.

David Roberts

Yes. Here’s a point I would make just about human psychology. If you want to attract people to your side, there are two ways you can do it. You can go to them and flatter whatever it is they already think and try to weasel your way into that and get a little bit on the side. Or you can have some swagger, have some charisma, and attract them — make them come to you because you’re the thing. “Make them have to come to you because you’ve got all the rizz, you’ve got the aura, they want to come be part of your thing.”

No one in the industry, no one on our side, that doesn’t even seem to occur to them that that is a possibility, that that is even out there in the universe, that you could just swagger a little bit and then people would be attracted to someone who thinks they’re hot shit. That’s kind of how it works.

Steve McBee

That’s how it goes.

David Roberts

It’s something you said I want to follow up on. The space is full of groups. There are many acronyms. There’s the ACP, there’s SEIA, the Solar Trade Association, there’s ACORE, I forget what that stands for, there’s SEEC. There are an alphabet soup of groups in this space. You say you couldn’t find any of them that had the swagger that you’re looking for. What hole are you trying to fill here? What’s missing from all that alphabet soup?

Steve McBee

I think there are two things that need to be done. There are the things that we’re doing right now that need to be done way better, and then there are the things we’re not doing at all. What I’ve tried to do is focus on the gaps, the things that we’re not doing at all. Every day that goes by that we don’t start doing them, we’re taking deeper losses. We can talk more about that in this conversation. My priorities are better digital communication infrastructure and way better communication narrative and way more cohesion around how we do that.

Number two is your point on all this great stuff that’s happening in the clean energy industry. Nobody knows about it in Washington. What I see every day as an operator in the commercial marketplace and the perspectives that members of Congress have and senators have, even the ones that are way forward on our issues, there’s a huge gap in information and knowledge and context about what’s actually going on in the commercial market.

Third, very practically, we got to get more political money in the system because I spent a lot of time in Washington. Washington has always been very transactional. I’ve been gone for 12 years. I’m dipping my toe back in. One of the things —

David Roberts

It hasn’t gotten less transactional, Steve.

Steve McBee

So much more transactional. We’re not playing that game at all. Those are things that aren’t being meaningfully done in any kind of aggressive, disruptive, or intentional way. We also have to do the basic things that we are doing, that the trade associations are doing, that the green groups are doing. We gotta be better. But there’s so much that is not being done. There’s plenty of work to do there as a starting point. I hope that by bringing better solutions to those gaps in the market, we actually can help the trade associations and those other firms that you mentioned be better because we’re creating a better on-the-ground environment for them to do the things they do.

David Roberts

You make a point that I think is good to establish here at the outset too, which is that for all the investment that is flooding into this space, there is a lot more out there that is hesitant or waiting or uncertain about entering. Talk a little bit about that dynamic. What is out there and why is it waiting?

Steve McBee

I’m glad you brought that up. This is a thing that I get up in the middle of the night thinking about, unfortunately. Speaking from an investor perspective, there are hundreds of billions of dollars of capital that want to come into this space that is not coming into this space because it cannot price political volatility, it cannot price electoral uncertainty. That capital does not feel like the policy signals that are in place at any given time are going to be reliably in place through the hold period of their invested assets.

As a result, that money is just stranded. One of the things that we need to do is we need not just better policies, but we need to make sure that when these rules get written, they stay written. If that happens, a lot of capital is going to come into this space. We are close, per your comments at the top of this podcast, to real domination in this industry. If we get a massive new infusion of capital that is deployed against a set of rules that can be counted on, we’re going to rip.

David Roberts

I try not to dwell on this, but I do think periodically about that capital and about what it would have done if the IRA had been in place for four more years. We would have seen wonders, I think. There’s a bunch of pieces of this, and I want to take them on one at a time, but I want to start — maybe one of the things you want to set up is a rapid response kind of media operation.

Before we talk about what that would look like, I want to talk about what it would say. I want to talk about the messaging and the polling, because this, I think, is where my doubts are concentrated.

Steve McBee

Okay, we go number one.

David Roberts

This is where I sometimes feel I’m going crazy because I rarely see my perspective on this reflected out there in the world. Let’s talk about it. You have this polling, some polling you’ve done about these issues. Before I shut up, just tell us what the polling says about the message, about what people are hearing, about what they want to hear, about their preferences, that kind of thing.

Steve McBee

You and I might disagree with the findings of this work that we’ve done. The way I read the research is that people are not against clean energy. People are quite a bit more supportive of clean energy than even I expected. But what people don’t like are binary choices put in front of them where they’re being forced to pick one thing versus the other thing or forced to take a side. That’s thing number one.

Thing number two is I wake up every morning and work as hard as I can on the things I’m working on because I am existentially concerned about a climate crisis. That is my motivation, and that is my North Star. I learned that that is not true of a lot of people. This research bears that out. People are not — it would be too severe to say that they are indifferent to climate change, but it just isn’t something that ever hits the top 10 things they wake up every day thinking about.

The way we talk about this, it was interesting. I was having dinner about a month and a half ago with four US Senators who are really awesome on these issues, and we were having this conversation, exactly what’s our message? In the room, there was a little bit of a different view between certain members who felt we should be climate forward and we should not give up talking about the moral imperative of climate change and the need to build this industry out to address that.

Then there were members who were saying, “We should never talk about climate again. It’s all about affordability.” This is a debate that is being had here inside the climate influence ecosystem. I think it’s a false choice. We have all of a sudden so many ways to talk about this issue separate from climate that can appeal to lots of different people.

Talk about it on the basis of price, talk about it on the basis of affordability, talk about it on the basis of reliability. Talk about it in terms of, “Hey, clean energy isn’t getting blocked, barricaded, or embargoed in the Middle East.”

David Roberts

Or how about as a solution to inflation?

Steve McBee

As a solution to inflation and high energy prices, 100%. As an industry and maybe as a movement, the facts on the ground have not caught up to the messages that we are communicating. I’ll be honest with you here. When I came into this industry 12 years ago, I came in as CEO of a company called NRG Home. It’s a big company, $6 billion company. We had 3 million customers, all on the residential side. About 2.5 million of those customers were retail energy customers. The other half of those customers were buying some combination of our green growth products.

As we were looking about how to drive out market share, how to build a customer funnel that could actually convert, the thing we were really left with 12 years ago is we gotta go target climate-forward homeowners who care about climate change and who are willing to pay a premium for our products because at the time they weren’t cheaper for the most part. They also didn’t always work as well as we wish that they would. There was really limited grid services and VPP programs in place that would allow you to go to a customer and say, “We can install these products in your home, we can flex those with grid operators and we create a shared savings model for you.” None of that stuff really existed then, so we went after climate-forward homeowners.

We are in a totally different place today where we have an abundance — almost an embarrassment — of riches about how we can talk about this industry. We should be able to touch every single human in the United States with a message that lands. Whether that human is sitting in the commercial marketplace as a consumer or sitting in the public square as a voter. We have something for everyone that is a feature. That’s not a bug, that’s an opportunity, that’s not a problem.

David Roberts

I think you have misidentified the source of my doubts, as many people do. I don’t give a damn whether anyone says the word climate or not. It’s absolutely not my thing. I’m not one of these people who insist on putting climate forward. I think this is quite obviously true that if your superiority as a product, as a solution is overdetermined — it’s economic superiority, it’s security superiority, it’s clean air superiority, it’s inflation —obviously you use whichever one of those arguments is compelling to the current audience you’re talking to. That seems obvious to me.

What bugs me is this idea that we poll and we find out that if you pose this as a choice, “Do you want these technologies to replace fossil fuels?” people get nervous because they aren’t certain whether these technologies are strong enough, big enough, manly enough to really do the full job. They like addition, they don’t like replacement. That’s what they tell you on polls. That’s the lesson.

The question is what you do with that, what you do with that fact. As someone who has followed issue polls for decades now, I feel people really misuse them. I’m fine using them for political purposes, but once you start taking them too seriously, I think you get misled because on any issue, if you just ask people, “Do you want more stuff?” they’ll say yes. If you say, “Do you want fewer things?” they’ll say no. They don’t know anything about anything. They don’t know any of the details, any of the technologies. They don’t have any idea. They’re just intuitively — more sounds better than less. More choices sound better than fewer choices. That’s what you’re going to get, but that is just puddle deep.

The question is, what do you do with that information? This is the analogy I was thinking about before we got on the call. If you work for Coca-Cola and you do polling and you find out, “Oh, the public thinks that both Pepsi and Coke are part of a balanced diet,” that’s fine. But you’re advertising Coke. Your job is to sell Coke. You don’t go out and in your commercial for Coke, start by saying, “Don’t worry, we’re not replacing Pepsi. Don’t worry, you can still have your Pepsi.”

Even if that’s true, that’s not your job to say that. Your job is to brag about how good Coke is. You’re supposed to make people want to come to Coke and leave Pepsi behind, not because they have to, but because they want to. To take this messaging and take the lesson to be, “We need to talk about all of the above. We need to be sure not to threaten fossil fuels. We need to say, ‘We can all fit on this wagon.’” That comes off as weak. I don’t think it cuts through. I don’t think it creates the kind of conflict that draws attention these days. I just don’t think it is effective. This, “Let us be a junior partner on your bandwagon” message. Never mind whether it’s accurate. I just don’t think it works. I don’t think it’s a good way of interpreting these findings.

Steve McBee

That’s a great analogy. We want to be Coke, right? At least I want to be Coke. I don’t want to be Pepsi.

David Roberts

Amen.

Steve McBee

First of all, I want to say one thing to the point you made at the top of this question. It’s obvious to you that we should be organizing our message to match certain audience cohorts. It may be obvious, but we’re not doing it. We’re not doing it. That’s thing number one. On your point, here’s how I look at the research. I look at the research saying that public sentiment doesn’t want to have binary choices, doesn’t want to be forced to choose between this versus that, doesn’t want to be doing things to demonize one side versus the other. They just want it to be easy, they want it to be cheap, they want it to be reliable, whatever.

The other thing that you see in that research and some other research that we have done, which specifically targeted consumers of energy, is they do not have a lot of information about our industry and about our products and why they are in fact cheaper, more reliable, and create more energy security for them and their families. The public opinion right now is not in a great place for clean energy and that is on us.

David Roberts

Again, fossil fuels have been spending billions of dollars for many decades, quite sophisticated operation, convincing people that fossil fuels are strong, manly, tough, steady, reliable, and that clean energy is flittery, kind of nice, kind of cute. “Sure, we’ll let some in, sure, we’ll put some on the edge, but it can’t be the main thing.” I guess what I would just say is you either accommodate your message to that or you try to change that. The way to change that is by convincing people that clean energy is strong and is reliable and is powerful and can do the job.

You don’t accommodate yourself to their misconceptions, you try to change their opinion. This is what never seems to occur to the whole Democratic side of the aisle, including the clean energy industry. Why don’t you try to change this? Rather than accommodating yourself to this current state of public opinion, why don’t you try to change it?

Steve McBee

Exactly right. One of the things I want to make sure as I try to quell your doubts is that you understand how I read this research. Our job is, in my view, not to look at where public sentiment is and just say, “Well, there’s only a certain level of tolerance for our stuff or whatever, so we just have to accept that and do the best we can.” Our job is to change the composition of public sentiment.

What the research tried to do was to say, “Where are people right now? Where are the opportunities and where are the barriers?” Because I see this as a two-step. On the Coke, Pepsi thing, I think step number one is we need to talk about Coke and its reliability and its affordability and the fact that it can get hooked up to the grid faster and the fact that it can allow consumers to have more agency over their power. We need to talk about Coke over and over every single day on these terms.

Once we have level set public sentiment, then we need to start drawing a really stark contrast with Pepsi and we need to be throwing them under the bus every single day in a very intentional, coordinated, cohesive way. The only thing maybe we differ about is I think we have to define Coke before we can define Coke versus Pepsi. We have not done a good job on that.

David Roberts

Yeah, I totally get that. Totally understand that. The reason my hackles are always up about this is because I have heard this, “Do XYZ and then we’ll fight,” message from this industry, from the political — and the fight never seems to come.

Steve McBee

We need some new leadership here because the people who are paid to fight have not fought.

David Roberts

They seem to define fighting — not just that they won’t fight, it’s that they are constantly filling the newspapers with scoldy op-eds telling everybody else not to fight. They seem to treat fighting as though it’s “you’re farting at the cocktail party” or something. It’s gauche, it’s in D.C. it’s just not done, it’s wild to me.

Steve McBee

That is 100% true in our industry and in the climate influence space. It’s true across the whole progressive movement. Not to be too obnoxious about this, but the people I’m working with on this and the way I’m thinking about it, not only do I hope that we can build a better playbook to go and take the fight to the fossil fuel industry and take the message to the people in ways that are going to land, but I hope that by doing that maybe we can hand that playbook over to some different parts of the progressive movement that could probably take a couple pages out of a more aggressive, intentional, and tenacious strategy to take on all the bullshit coming from the other side.

David Roberts

I would just like to see a plan that doesn’t have step one, publicly talk about your own weaknesses and shortcomings, acknowledge all your, concede all your opponents’ arguments, step one, step two, beg for scraps. Let’s talk about then one of the initiatives that’s coming out of this, called Signal — which is rapid response media. Anybody who listens to Volts or has ever read anything I’ve written for 20 plus years now knows that this is my personal obsession. The media imbalance, the toxic information environment, and the absolute passivity about it on the progressive side, on the side of clean energy, just this refusal to acknowledge the centrality of media in the information space in all of this.

I can’t tell you how many — give me a billion dollars and I’m just going to hire — never mind that, give me $100,000, I can hire an army of young people to go out on TikTok and YouTube and just say, “Clean electricity fricking rules. Look at this, look at how awesome this is.” That would be like a buck fifty for any of these philanthropists, any of these green groups, any of these investors. As you say, there’s money all over the place in this area, but they’re not spending on media. It drives me crazy. I was very happy to see this. What do you envision here?

Steve McBee

The only thing I would quarrel with is to say we are spending money on media, but we are spending money on the wrong media. You mentioned a scolding op-ed in the New York Times. There should be no op-ed in the New York Times. All of this centralized TV buying that the existing groups are doing — this is not — we are not talking to people in the places that they increasingly get their information in. We are not talking through the voices they trust to deliver it.

The thing that inspired this idea initially was — we could probably do a whole separate podcast on this. I have spent 10 years trying to blow up the residential clean energy model, which solar proxies for, which I think has been a disaster for consumers and trust and the industry and all the rest. In looking at different ways to reorganize those markets, one of the things in our research that we see is that, first of all, if you’re going to sell somebody solar, you shouldn’t be knocking on their door during dinner to sell it. But that’s how we sell it. When you knock on the door of most people, they are not even showing up open and neutral. That’s the best case scenario.

David Roberts

If I hear a knock on my door and I see somebody I don’t know at it, immediately I’m angry, resentful, and I want them to go away. It is unfathomable to me that this is not just a way of selling solar. It’s the way — the primary, the only way we have of selling solar. It’s like the 1950s called.

Steve McBee

It’s frustrating. That’s a whole separate topic. The point I was making to your question was when consumers are engaged in a selling moment with our industry, they either show up with no information, but more typically they show up with biases against our products.

Part of that is on us. We have made a difficult product to sell more difficult by the way that we have organized the market. The other thing, we started doing some more work on why people are showing up with all this misinformation about what this is.

What we realized is that there are at least — this was about 15 months ago — there are at least three, I call them air wars, being financed and prosecuted by the fossil fuel industry and their allies that are getting way up the funnel with customers into their digital and social channels with subtle and not so subtle messages about clean energy being weird and expensive and dangerous and unreliable.

David Roberts

And the chemicals, Steve. The chemicals and the spyware.

Steve McBee

Yeah. The panels are Chinese spyware. The fossil fuel industry, you have to give them credit because they are getting it done.

David Roberts

Yeah.

Steve McBee

Nobody is showing up going, “I’m really glad you’re at my door because I’ve heard solar is this incredible price and reliability driver and I’m really interested in talking about how I can put these on my home.” Said almost nobody that answers the door ever. The fossil fuel industry is playing the game.

I find it ironic and despairing that we are the cool kids in the energy industry, we’re the tech-forward part of the energy industry. Somehow the fossil fuel industry is smoking us in the new media environment and they’re smoking us as it relates to incepting consumers and they’re smoking us as it relates to incepting voters. We got to go take that on. Now we have no presence, not as an industry and not really as a climate movement in the digital space.

David Roberts

Concretely then, what does it look like to build this? Is it literally just giving money to people and telling them to go out and fight these? Practically, how do you build this?

Steve McBee

What I’m trying to do with this is fill gaps. I think there are three gaps here that Signal is trying to fill. Gap number one is the gap we’ve been talking about. We have no position in the digital and social media ecosystem. Number two, the industry voice is not meaningfully in the contest for narrative and facts anywhere. It’s not unified in any meaningful way when it does engage. Number three, the industry efforts to communicate its story, to the extent that they exist, are siloed from the messages and communications being run by our political allies about the policy advantages or the policy choices or the policy ideas to advance the industry. We’re not in the game, we’re not in the game digitally, and we’re not coordinating with our best allies.

What I’m trying to do — my partner on this, maybe a lot of your listeners know this group, it’s a C3 called Good Power. When I was looking for an execution partner for this, I looked at all the for-profit and all the nonprofit entities and I thought, Good Power is really getting it done. What I was most impressed by with them is the way they’ve used their portfolio of influencers to go into rural red parts of the United States where renewables projects were being held up because there was no community support for those projects or there was a lot of disinformation in those communities that was making it hard to get those projects approved.

They went out and they put influencers into those markets that looked like and sounded like and felt authentic to those communities. Teachers, priests, farmers, moms, whatever. They have really moved the needle. The way this is going to work — I won’t geek out too much on this — but we’re using an AI-enabled technology platform which, the best way to think about it is a little micro network that’s being dropped into this campaign. That network unifies and connects all of its participants on a common platform.

At the beginning of every week we’re going to find one or two things where we’re like, that’s a defining moment and we need to show up and show up on time and show up unified or this is a thing we’d like to make a defining moment, whatever.

David Roberts

Let me just emphasize both those — being opportunistic. This is the thing. I remember when I first heard about this, I was like, I’ve heard about these communications efforts. You remember, We Can Solve It. That was, I think, Al Gore’s, or Climate Power. We’ve had these narrative efforts before, but they tend to be so technocratic and top down and, as you say, mainstream media centered and just feel like they’re from a previous century. The main thing they’re missing is just being opportunistic, being there when things happen. That is what the right is really good at. Anything that happens, they can twist it and put it into their narrative overnight, everywhere, overnight. That’s the main thing.

The other thing is creating opportunities. This is to get back to our previous discussion. What many people in our world are nervous and frightened and timid about is creating conflict that draws attention. That is the coin of the realm these days. That is how you get attention. To have as a premise of your effort, “We’re not going to offend anybody or bother anybody or counteract or contradict anyone,” no one cares, no one listens, no one pays attention. On both those sides, the rapid response and the, “Where can we create fruitful conflict that will serve an educational purpose?” Both those we have been falling so far down on.

Steve McBee

Yeah. This is another one of those things that wakes me up and pisses me off in the middle of the night. The way we booted the IRA fight. We deserve to be in Siberia for 10 years. It could not have been executed any worse. Here we are with a huge do-over in the form of these defining opportunities that seem to show up every single week —

David Roberts

I know.

Steve McBee

— to message around. Yet, all our messaging is, again, to the extent it exists, siloed. It’s disparate. We take forever to pull it together —

David Roberts

And it’s cringy and it’s “ all of the above” and it’s “please give us table scraps.”

Steve McBee

Right?

David Roberts

Here’s another analogy. I had the Coke-Pepsi analogy, Steve. Then I had one other one I thought that I’m going to run by you. On immigration, Trump gets elected, all the elites on the left conclude, “Oh, no, immigration’s bad. Now we got to retreat, retreat, retreat.” On immigration, the public is not with us on immigration. Run, run. Let’s chase the right. We’ll be tough, too. We’ll be tough on the border, too. Chase, chase, chase. Instead of looking forward, just look up a little bit at the horizon. Look forward a few years to the very, very predictable thermostatic public opinion backlash against Trump.

Now, sure enough, immigration is polling better than it has in years. Support for immigration is higher than it has been in years. Our side could have gone to where the puck was going. We could have just stuck to our guns and then think how good we’d look now. We are serious about our values. We stuck with them. Now here you are, public, coming back to us, and we look good. Instead, we look like chiseling little weenies who have no courage of our convictions. We chase the right — and now we’re going to what, chase back left again? Now we just look like we have no spine.

I see the analogy here, too, which is Trump got elected. “Oh, no, climate and clean energy is bad. Now we got to cringe, we got to run away. We got to talk about all of the above. We got to talk about anything but what we are and our value advantages.” Here comes the Iran war, very predictably, Trump’s messing it all up and the public is, especially in other countries, but even here is like, “Gosh, it seems like fossil fuels cause lots of problems,” and they’re coming back our way.

If we had just stood here and not moved in the first place, we would be here to meet them. But instead, we’re chasing public opinion every time we get a new poll. It’s framed by DC consultants and the DC types and think tank types as that’s savvy. That’s smart politics. “You hippies have your head in the clouds. We’re the smart, savvy politics knowers.” But instead, if you follow their advice, you just constantly look like a weakling. You constantly look like you have no center, you have no spine. We should have just stuck with our guns in the first place, because, as you say, the world is now serving up one example after another that is telling our story for us.

Where are we? Where are we out spiking the ball? Where are we out saying, “We told you so.” Thank you for coming back. Here we are, we’re ready to go. That’s what worries me about the poll chasing. Always.

Steve McBee

Yeah.

David Roberts

It’s not even that savvy.

Steve McBee

We’re not spiking the ball. We’re not even getting to the line of scrimmage. I think it really hurts when you think about the jillions of words that have been written about Iran since this thing started, how few of those words have been devoted to crystallizing a choice. “We’re about to dial up a trillion and a half dollar defense budget. A 40% increase over last year’s defense budget, riding alongside a $200 billion supplemental to protect our interests in the Middle East, which is energy.”

Has anybody thought about taking 15% of that money and investing it in domestically sourced, low-cost, reliable energy that will allow us to compete against China? It’s not even in the conversation and that’s on us. I think your point is a really — I think you and I share snowboarding as a thing we do. You say you gotta go to where the puck is. When you’re snowboarding, you gotta pick a line. You pick a line, and then you go and you rip your line. You don’t come off of it because you hit a mogul or whatever. You hit your line.

David Roberts

I think that’s way better, that’s way cooler.

Steve McBee

At some point, we have to decide as an industry, what do we believe about ourselves and what do we stand for? We have to go out and articulate that. We need to do that. Again, I think we have to understand public opinion and understand the fight we are in and understand where our strengths and weaknesses are. We have to maneuver through that in the right way. I don’t see a difference between being smart and sophisticated about how we do that and being assertive in making the case for our stuff.

David Roberts

Let me ask a concrete question then about just that. Say you have this digital rapid response Signal, you’re calling it, set up. It’s running, and an IOU comes along, utility comes along and announces it’s building 2 gigawatts of new gas to serve data centers in its territory. Does Signal —

We dial it up.

— go for it, does it go after that? Does it fight against gas in that instance?

Steve McBee

Yeah, we dial it up. The thing about Signal that’s cool is it’s going to unite a bunch of different industry leaders onto this micro network and practically get to the speed and agility and velocity comments you made about how the digital media ecosystem works. This platform generates content for its users and, in the voice of their social media narratives, pushes it onto their channels. We push all that out in a unified way around the same message, and then we dip into an influencer pool of about 8,500 creators and validators, and we pick the validators and creators that are best suited to amplify that message, and they amplify it outside the media audiences of the participants. That’s how this works.

Not every industry in the scenario that you just laid out, not everybody on the channel is going to be down for a fight on gas. Part of what we’re doing, and look, everybody should just — what do you stand for? What do you believe? On the one hand, I’ve been a CEO. I understand fiduciary obligation. We don’t want these companies that are great to put them in a situation unnecessarily where they’re exposing themselves to a bunch of political bullshit.

But in any given messaging opportunity, I’m expecting we’ll get 70% participation from the industry participants on the platform. What we’re also going to do is we’re going to coordinate what we’re doing with what our elected representatives are doing separately. We’re going to try to both amplify their messages and also try to surround what they’re doing with our messages. It’s more cohesive because, right now, if we ever are in the game on a narrative contest or a defining moment, it’s like we have just cats and dogs running around all over the place doing little bits and bites. It doesn’t add up to anything.

The fossil fuel industry, those guys know how to line up and go get it done. We got to build permanent institutional capability that is equal to what we’re up against. We’re not going to build that in six months. This isn’t a Mars landing. We can build this in 18 months. We can build this so that it’s scaling and accelerating way before the next presidential election. Way before.

David Roberts

This is a good segue to the next thing I want to talk about, which is the capital table — the going after elites version of this. Here’s how I would preface this. I was debating where to say this, but I’ll just say it here. The fact of the matter is that fossil gas and clean electrification are alternatives to one another. If you are going to cleanly electrify everything, you are going to drive gas out of heating and cooling, you are going to drive gas out of industry, you are going to drive gas out of electricity generation. It is, in the end, a choice. You got to do one or the other.

The idea that the main trade association of which these companies are part is half gas causes me to lose consciousness when I think about it too much. It is the most ludicrous — I can’t believe it’s real. It is unbelievable to me that when we go approach lawmakers, when we go send people to testify before Congress, they can’t present that alternative. They are prevented by their own trade association, by their own institutional commitments. They’re prevented from saying, “Coke rules and it’s better than Pepsi, choose it instead of Pepsi.”

They literally can’t say that. In fact, they’re writing scoldy op-eds telling us not to say it. Talk about the capital table. Just the idea that clean electrification can just go speak for itself for once is, I think, a huge piece of this. Talk about how that’s structured and what it is.

Steve McBee

Yeah, man. First of all, I think it’s probably worth a minute on what you just raised. It’s very dispiriting. This isn’t personal against anybody. There’s a lot of people who are working really hard and trying to get things done. But there are structural challenges with some of the most important infrastructure we have in place that is prohibiting them from delivering and from getting what we need to get done, done.

I think there are two things. There’s the thing you raised, which is, look, ACP decided that — and look, I said this at the top of the podcast. One thing I am really focused on is building a broader base of support for our products and for our policy agenda so that we have the durability, particularly when it comes to the regulatory signals that we need to draw in the capital that’s required to scale these markets. I’m 100% for, I think it’s essential, building bipartisan support for the industry.

One of the really exciting things that I found over the past six months is there are some groups on the center-right that are really doing good work, that are really practical and that are really on it. I think that there is a moment here where we might be able to take the political toxicity out of this issue.

But I don’t believe the way to get bipartisan support is by adding a bunch of utilities and legacy energy companies so that you can get access to those members. The way you do it is by changing the way you talk about your product so that it draws those members and their constituents in. A really big challenge we have is the Trump administration. They have established a playing field where it’s a knife fight in a phone booth between gas and renewables, and the outcomes are binary. You have to pick a jersey. A reversible jersey does not work in this environment. The strategic and structural choices that have been made have compromised our ability to go pick the fights we need to pick and win the fights we need to win, and we have to deal with that.

The second thing is, trade associations — and this is not unique to ours necessarily, although I think ours certainly are not, we are not at an A plus, even relative to —

David Roberts

Steve, SEIA just elected Tim Pawlenty as their president. A paste, boring Republican who is not going to ruffle any feathers, not going to sell Coke, is going to lead with an “I’m friendly to Pepsi. I’m here from Coke, and I want to say, first of all, that I’m friendly to Pepsi.” It is unbelievably pathetic to me, our trade associations. I know you don’t want to say this and won’t say it and maybe even don’t think about it, but I just think they are pathetic. It is unbelievable how pathetic they are, failing the people in these companies. They’re failing the people who are on the ground fighting for this stuff.

Steve McBee

I think there is a structural problem we talked about in how you build your membership. But there is also a business model problem, which is, these trade associations generate most of their revenue from conferences. They hold a lot of conferences and white papers.

David Roberts

Maybe one more white paper?

Steve McBee

They put out a lot of white papers. They do fly-ins. It’s not that these things aren’t important, but putting all of the juice of your organization into holding conferences where you invite members out to sit on panels where they talk to each other and tell everybody that’s already converted what a great job we’re all doing and then go post it on their socials and go home and feel great about that. The conferences are valuable, the white papers can be valuable. The fly-ins can help. But those are things that are distinct and different from building political power.

David Roberts

Yes.

Steve McBee

And establishing cultural identity. In fact, I would say, and this is why I’m in the gaps here, I’m focused on political power and cultural identity. I think if we make those things better, all the things that those trade associations are trying to do will be easier for them because their success depends on our political power and our cultural buy-in.

David Roberts

But it would be helpful if they didn’t lead with the message, “Don’t worry, don’t be alarmed at us. We’re not trying to build any political power. We’re no threat to you. Everybody just calm down. We’re no threat.” That just, again, misreads what works, I think.

Steve McBee

Yeah. We can have an honest conversation here within this community about what’s working and what’s not working. We don’t have to make it personal, but we need to be honest about what’s working and what’s not working. We need to be urgent about disrupting or replacing the things that aren’t working with solutions that will work. We need not only some different organizations, but we need different business models, we need different revenue models, we need a different set of parameters that are tied to building our power, locking in our cultural identity.

That’s what needs to be done. I think we’re struggling to have that conversation because I think people aren’t being real about what we need to do here. Our goal as an industry, at least my goal as a person in the industry, is to replace fossil fuels with renewable power, if not entirely, heavy majority within 10 years. That is a really ambitious goal. That is one of the most ambitious things you could possibly dream up to do. It’s doable. But if we’re going to do that, we need to have the tools and capabilities in place that are equal to that objective.

If we’re not going to be willing to build what needs to be built to enable that goal, we should change it because we’re not going to hit it with what we have now. We’re not.

David Roberts

Okay, this capital table, the problem that you’ve diagnosed is that lawmakers, even the lawmakers who are friendly, are getting their information about what’s happening in this space via intermediaries who are not doing a very good job. One of those intermediaries, while we’re throwing elbows all over the place, is the big green groups. The default, I think, for a US Senator, if they’re saying, “What’s going on with solar and batteries these days?” is they call one of the big green groups or they call one of these weak-kneed trade associations. You want to solve that problem by getting them information direct. Talk about how that’s going to work.

Steve McBee

On the green groups, I’m sure there are things they could do better. There are things I’m sure they think they can do better. But I don’t really fault the green groups. I fault us, the industry, for forcing the green groups to pick up slack that really should be our responsibility.

David Roberts

Yes. They’re supposed to solve climate change, they’re supposed to advance this industry, they’re supposed to change public opinion. Maybe we could just let them just defend the environment and maybe have other groups do the other stuff.

Steve McBee

I think the green groups have a hugely important role to play here. There is a ton of stuff that they do that they just are excellent at. But in the IRA fight, we had green groups running around and talking to members of Congress about why batteries and solar and PJM make — that should not be their job. Because we have not done our job, they have had to pick it up.

What I am trying to do here with Amped is to say, “Hey, we as an industry need to own our lane.” We need to own it. We need to own the responsibility. We need to be excellent at it. We need to let the green groups go back into their lane where they’re excellent. Then these two lanes can coordinate and they can run concurrently and merge onto a superhighway that’ll propel the industry forward. I really don’t fault the green groups for this. I really put that on us, on the industry, on the people that represent the industry. We have to do better. The capital table is one way to do that.

The thing that motivated this is I had a group of investors, 10 or 12 investors or so, in New York at Climate Week with half a dozen members of Congress. It was a one-hour meeting. No intermediaries, no Washington people, no lobbyists. It was just principals talking to principals in an off-the-record Chatham House rules conversation.

I opened up the meeting and said, “We’ve got the people in this room that are setting the policy signals and we have the people in this room that are underwriting investments and allocating capital against those rules. We’re all trying to achieve the same thing here, which is a fast and orderly energy transition, but we’re in different lanes and we need to understand each other better so that we can work together more efficiently.” I just let the conversation roll. First of all, it was a one-hour meeting that went almost three hours —

David Roberts

Which is not — speaking of principals, these are busy people. They do not sit around for three-hour meetings unless they care.

Steve McBee

Yeah. Honestly, a lot of my investment friends I brought into this, I had to drag them in and then I had to drag them out, because it was rich. The thing that kept happening in that discussion was members kept saying, “I had no idea about that,” or “I did not know that. If I had known that, maybe we would have done this,” or “Maybe now knowing that I might go do that.” At one point one of the members of Congress who will go unnamed stood up and said, “Guys, where the fuck has all this information been?” He wasn’t critical, he was like, “We’re not getting this.”

David Roberts

That’s when the investors said, “Sir, have you heard of Volts?”

Steve McBee

That’s exactly right. That’s exactly right. Why aren’t you listening to Volts? It’s a bit of a light bulb moment. This is, again, on us. We have not done — and look, I spent 10 years on Capitol Hill. I started and built one of the biggest lobbying firms in Washington. I understand as a person who has made policy and influenced policy that policy gets made all the time with insufficient information. That is, that’s how it goes —

David Roberts

To say the least.

Steve McBee

But I have been really alarmed at how thin the intelligence layer is, particularly in Washington when it comes to on-the-ground commercial dynamics in a marketplace, in our industry.

David Roberts

You know what I think is evidence of that. I wanted to make this point too. I think we’ve got a bunch of Democrats to say the words now that clean energy is cheaper. They’ll say the words. But as you say, their level of understanding and depth of knowledge is so shallow that if they run into any political backlash or any barrier, they immediately resort to stuff like freezing the gas tax or freezing electricity rates or just these sort of gimmicky, sloppy solutions that clearly reveal that they don’t really believe it. They don’t really know it in their gut. They don’t really believe it in their gut because they can be scared off it at the slightest rustle in the bushes.

Steve McBee

Part of that is because they’re not getting consistent, complete, comprehensive, data-driven information on the regular that can build that conviction in their gut. Maybe I’m just Pollyanna-ish about this. I know Washington is a very cynical place. It’s a very transactional place. But I believe ideas still matter and information still matters and has currency. It is not okay for us to complain about members being squishy on our issues or being opposed to our issues or whatever if we haven’t supplied them with the full complement of information. If we give them all the information and they look the other way, then we should be going after them in a very muscular way.

But until we have provided them with all of the data, it’s not fair to criticize them for not being with us. We gotta help them be with us by giving them the data and the information that builds conviction. We’re not doing that right now. This capital table, it’s designed to do that and it’s going to be bipartisan. We’re going to meet with both sides of the aisle. We’re going to meet with members of the House and the Senate. This is not lobbying. This will not be registered to lobby. There will be no lobbying done in these meetings.

This is about filling up the information bucket and getting the right framework and the right supporting information into the hands of the people that have to make these calls, policy-wise.

David Roberts

Who’s in that room? Is it CEOs, is it investors? Who’s at this table?

Steve McBee

It’s a mix, but I’m organizing it in a way that over-indexes to the capital markets, to the investors. I think the investor perspective here is really valuable and I think it’s been missing from the conversation. An investor who’s investing across the clean energy economy is going to have one — if you’re investing big green pools of capital, you’re investing in residential solar and you’re investing in green steel and you’re investing in climate SaaS. You have the benefit of looking across the whole market and it gives you incredible pattern recognition that allows you to provide a perspective that is different from a company CEO who’s sitting in one lane of one market.

Similarly, that CEO in one lane of one market, they’re going to come to Washington and they’re going to talk to members of Congress about the thing that impacts their business because that’s their job. If you’re an investor, back to what we talked about, what you really want is stability, predictability, consistency so that you can allocate capital and feel like you’ve got the political volatility and the regulatory variability properly risk-managed. That perspective is something that can be very enriching to this conversation. That voice has not really shown up so far.

We’re going to try to make sure we have a lot of that represented in the room, but we are going to have company CEOs as well.

David Roberts

I think you could probably understand how some people on the grassroots level, some clean energy activists, etc., can look slightly askance at the notion that capital is going to lead the communication effort with lawmakers because they can obviously give market information to lawmakers, but there are a lot of perspectives that they are not going to share.

One question is who gets in this room and are they paying to do so? Are there membership fees? Who is funding all this?

Steve McBee

Right now we’re just trying to open up the conversation. This isn’t the only conversation on these topics that are going to be held. Again, I’m looking at gaps. I just see a gap in the market. Investors and private equity guys are not the most sympathetic figures right now for really good reasons.

The people I work with in the capital markets who are building the energy transition marketplace, they’re trying to put a lot of capital to work. They’re trying to have conversations that get things structured in a way where they can deploy a lot of capital. We should be doing everything we can to make that as achievable for them as possible. It’s not a — maybe this is where it’s, to use the term you hate so much, all of the above. It’s all of the above. We need all the voices from the different parts of the market in the conversation. That’s business people, that’s investors, that’s Washington people. We all need to be supplying information and making sure people have what they need to make good decisions. This is really just designed to do that and to try to do that better.

David Roberts

Having gotten a little bit of a close-up look, as you say, the background level of knowledge among lawmakers about the burgeoning clean electrification market’s efforts is pretty low. Is it high anywhere? Is there anyone up there who is listening to Volts or the equivalent, who is tapped in to the day-to-day, who is communicating with their peers maybe in a helpful way? Are there champions?

Steve McBee

Yeah, there are. I’m not trying to —

David Roberts

Do you want to name some names?

Steve McBee

I know that you know Sean Casten very well and Sean Casten is excellent. I think Senator Heinrich is excellent. I think Senators Schatz and Whitehouse are excellent. I think Pete Welch is excellent. These are people who are very forward on our issues and they’re very tuned in. The thing about it is though, they have a lot of knowledge. They have more knowledge than most. They want more knowledge and more information.

That’s why I think there’s a gap here. As an industry, we have to play the cards that are available to us. We’re not going to build political power like crypto does because we don’t have $200 million to go drop into political races. We don’t have that and we’re not going to have that for a while.

David Roberts

But do we spend the money we do have —

Steve McBee

No, we don’t.

David Roberts

- on races? We could do more than we’re doing.

Steve McBee

We don’t need as much, but we just need enough. The point I was making is let’s lead with our strengths. One of our strengths is we can’t control the fact that we’re going to get outspent 30 to 1 or whatever. We can control how we spend the 1, but we can’t control what they’re going to spend. We can’t control what the other side’s going to say and the lies they’re going to tell and the distortions they’re going to put out there. But we can control how we respond to them and we can control being excellent at the things that we have big advantages on.

Going all the way back to the top of this conversation, one of our advantages is the facts.

David Roberts

Reality.

Steve McBee

Yes. The opportunities and the facts and the way our stuff solves for a lot of things that are politically vexing, like affordability, that are important for our country from a competitive perspective. We should be 100% A students in supplying those facts, that information, that perspective, that data to the people who we need to have it. We’re not 100%, we’re like 62%, so we should go be excellent at that. That’s the thing that we have a big advantage on and we’re not optimizing it.

David Roberts

There’s still one bucket we haven’t even touched on yet. This is the bucket — it raised my eyebrow a little bit. Don’t totally get how this fits with everything else, but maybe you can explain it. This is the finance play, the finance piece of this. Maybe I’ll just let you explain. What is that?

Steve McBee

One of the things that is frustrating to me, as an industry we have about a trillion dollars of capacity that’s either installed or that’s sitting in the queue waiting to be installed. That’s a lot of capacity, but we are not leveraging, we’re not organizing and leveraging the throw weight of our industry in ways that not only could be better deployed to build our political power, but I think could be brought in to solve market bottlenecks that are holding back the energy transition. One thing I’m trying — I’m really trying to think about, again, I don’t mean to keep coming back to our trade associations. They have a lot of members in those trade associations, they’re organizing them for their conferences and their fly-ins.

I think we could organize the industry on a whole range of public-private initiatives that happen outside of Washington that could really help speed things up. Transmission is the first area I’m starting on this. Everybody wants to build more transmission and everybody knows we’re not building transmission nearly fast enough. I’ve tried to do a lot of those deals and there are lots of problems with them. A common problem in every one of these projects is that the borrowing costs for transmission developers are super high because utilities cannot buy transmission capacity until those lines are energized.

It’s not like going and buying a 20-year PPA on a utility-scale solar project or whatever. The lines have to be energized before utilities can purchase the capacity on them. For developers, you’re holding all that merchant risk through the period of building those lines. Your borrowing costs are really high and it’s hard to make the cost of capital work through the project period.

David Roberts

There’s the risk — not to tell you something you already know and the audience probably already knows too — but there’s also the risk that there are 5,000 veto points. Every community, every state, every utility, anybody practically can sink the whole thing. That’s just an enormous amount of risk if you are deploying large amounts of capital.

Steve McBee

Yeah, that’s — it’s funny. I’m out here in Washington today. Just before I jumped on this podcast, I did a panel with Citi and Macquarie Capital and some other folks at the CRES annual conference on this exact topic. We were all just up there pleading for certainty and a fixed set of rules so that those things that you just mentioned wouldn’t happen. What I think is there are some cool things that could be done to help mitigate some of this. I have talked to some large green infrastructure funds about this idea.

We could go to a state that’s trying to build transmission and we could sit down with the governor and we could sit down with the utility leaders and we could bring in the capital providers and the transmission developer and say, “This capital provider is going to buy a billion dollars of capacity and it’s going to hold that capacity while the lines are being built and then it will sell that capacity at a markup to the hyperscalers and the utilities that want to buy it once the project is concluded,” which will allow you to get a cost of capital that makes these projects work and we can start building this stuff, really.

David Roberts

That sounds a little bit like the advanced market commitment that everybody’s —

Steve McBee

Yeah, Jane Flegal has a derivative of this idea that I think is really cool. At least my derivative of this idea is you say to those local officials, “The capital wants to do this, but holding that merchant risk starts to strain their investment parameters from a risk perspective. Help us just offset that risk a little bit.” The state could take 20% of the first-loss exposure.

The utilities could say, “All of the wires that are financed by this pool of capital, we’re going to give it a fast-track approval process so these projects get built as quickly as possible.” The utilities could also say, “We can’t contractually obligate ourselves to buying this capacity, but we can put an option on it that shows intent.” Then you start squeezing the risk down to a place where those infrastructure funds can play. If you did that, you’d lower the borrowing cost for the developers. The stuff would get built. The hyperscalers and the utilities that need it would get their power. You would create a new asset class for green infrastructure because you could replicate that across the country. For the local political leaders that helped cut that deal, they’re printing political equity because they’ve got fast, cheap, reliable green power flowing through the state or flowing through that region.

I think these are things — we have to get creative about how we put policy structures in place that can help this stuff move faster. Getting the industry organized to post up, because you could only cut that deal — and the reason I think Amped could cut that deal is it’s a nonprofit.

David Roberts

Yeah, I was going to ask, what’s — there are green infrastructure funds all over the place. There’s a lot of entities around in this space, what is the value add for —

Steve McBee

It’s hard to do the deal. I couldn’t go in there as Huck Capital. I could convene everybody. But because Huck Capital has a profit motive, it would be hard to do the deal. If you don’t have a profit motive and you’re just trying to get the deal done, you can get the deal done. In addition to having the right structure, you also need to have the industry standing behind you.

If I were to build a trade association, the models I would use? I like the NFL’s commissioner’s office, which until six or seven years ago was a C6 trade association. Those 32 NFL teams, they organized behind the commissioner’s office. Roger Goodell had the throw weight to sit down across the table and cut those TV deals, cut the branding and licensing deals. You look at AARP, an amazingly effective trade association. They have a commercial arm called AARP Commercial Services, which cuts all the deals for all those services that their members get at a discount. It generates billions of dollars for that trade association and it funds most of their operating capital.

There are really cool and innovative things that you can do if you can get the industry consolidated in a way that provides you a viable counterparty to make things like the transmission example happen. I’m excited about that. I think those are real opportunities. Given how dysfunctional the policymaking process is in Washington and how uncertain it is, we have to try to find ways to be more creative outside of Washington to use public mechanisms to get rid of some of these bottlenecks. I think there are a lot of different things you could do. The transmission example is just one of them.

David Roberts

Okay, those are the main pieces. There’s digital rapid response, there’s this elite-to-elite play, this capital table so that lawmakers can get intel directly from the source. Then there’s this effort to structure public-private partnerships to de-risk some of these big investments so that capital can get cheaper and more capital can come in. Is that the landscape thus far? That’s what Amped is doing thus far?

Steve McBee

Yeah, I think you’re not only a great marketer for the clean energy industry, but you’ve got the Amped talking points down here. That’s exactly right. That’s what it is. Those are the three areas we’re starting. Amped is — we have an LLC, we have a C3, we have a C6, we’re waiting on a C4. One of the things that I think is challenging about the way things are structured currently is, you lock into one of those things or the other and those are the things you can do or the things you want to do, you have to do in the construct of what one structure versus another allows. I think we need to be mission-forward, problem-solving focused first and then make sure that we have a structure that works best to go solve that problem as fast as possible.

David Roberts

Yes, I think what you’re implying here, but I’ll just surface, is that the standard here in the advocacy community is C3, which creates all kinds of, I think, perverse incentives and limitations, among other things. Among the things C3 can’t do is lawmaker comes along and says, “Screw you, clean electrification industry. I’m voting against you.” A C3 can’t then say, “All right, we’re going to come take your head off, we’re going to come beat you in a primary, we’re going to come make an example of you and scare the crap out of the other lawmakers.”

That very basic piece of political power and influence is just utterly missing from this space. I don’t think any lawmaker in any state, or federally, is scared of this industry.

Steve McBee

Yeah.

David Roberts

Are you going to try to make them scared? That’s what I’m —

Steve McBee

No fear is no respect, no respect is no leverage, and no leverage is no outcome. That’s another thing that is not being done well. To the point of what you were saying about the C3 and the limitations, I think you need the right tool. There are a lot of jobs, and you need the right tool for the job. You don’t want to be job-limited because you only have one tool.

One of the things that the fossil fuel industry does well, unfortunately, is they operate with an incredible amount of cohesion. They dial in their communications, they dial in their politics and their political power. They make themselves commercially felt, and then they organize those things in a way that is so well coordinated that you just feel like you’re sitting in surround sound from all the stuff that they’re doing. We need — the reason I’m building Amped this way is we need those kinds of flywheels that can coordinate across activities and get the leverage that comes from a more integrated approach to these things. That’s really missing from the market. I hope we have a better mousetrap here because we definitely need some better mousetraps.

David Roberts

Your model is, we need to build support for Coke before we explicitly go out and try to kill Pepsi. I guess I just want to know, when? Because this fight between clean electrification and gas, I feel like the ACP is out selling the notion that there is no such conflict. We can all win. We can all win together. It’s all growth, it’s all extra. No one has to fight, no one has to choose. But if you look at the physics of it, if you look at the market of it, if you want to decarbonize, yes, you do eventually have to choose.

Maybe it is the case that clean electrification does not currently have the political juice to take that fight on directly. But when will it? If you want to replace most gas in 10 years, 10 years is not a long time. When will we be able to really join that fight?

Steve McBee

I’ll answer that question and then ask you one back because I’d be interested when you think about this. This is a non-consensus view, I’m sure, and it could be wrong. I’m wrong all the time. What I feel here, in talking to lots of people in Washington, including, like I said at the top, some groups that are doing really good work from the center-right, what I feel is that at a moment that feels on the one hand like the most hyper-partisan and political moment ever on energy and where we’ve got the administration doing everything they can to wreck this industry and bury it, outside of the administration, I feel like there is maybe the best chance we’ve had in a decade.

David Roberts

As you say, the world is —

Steve McBee

Yeah.

David Roberts

— We’re not trying to tell our story, but the world is trying to do it for us.

Steve McBee

These members, they’re going home and they’re getting beaten on affordability and they’re getting beaten on affordability the grid being backed up. They’re getting beaten on Iran and all this stuff. The point I would make here is I think it would be a mistake to squander a moment, if we think that moment exists, to establish a center political coalition for these issues. I think the best way to do that, to take that shot, is to really hammer the benefits of Coke. If we come out and we start just talking about Coke versus Pepsi, people that want to come home, we might make it really hard for them to come home.

I’d like to leave a lot of green grass to bring conservatives to us on this issue. I think talking about Coke is the way to do that. If we are successful in doing that, Pepsi is going to flip out and they’re going to do the things they do. They’re going to spend money, they’re going to tell lies, they’re going to distort and all the rest, and we will have to really be on our shit if that happens, because that’s where the fight will be.

I really think we have such a great story to tell about this industry. I think it can appeal to a broader cross section of people who currently support this industry. If we could achieve that, it would be the most important thing we could do because we could get policies in place where the rules are fixed, they transcend our electoral volatility, we get the capital off the sidelines and we build the shit out of the energy transition. If we see a window to do that, I think we should take it. I see that window. I said, I could be wrong. I’d love to know what you think about that. But I think we get there by talking about Coke and then once we’ve got a broader coalition, we drop the Pepsi hammer.

David Roberts

I love that we’ve taken my analogy this far. I think that’s probably right. As much as the denizens of D.C. would like to dismiss all clean energy partisans like me as woolly-headed, unrealistic, unsavvy hippies, I’m not dumb. I get that most lawmakers, most centers of power currently do not get this, do not have confidence that clean electrification can do the job on its own. Not only that it could be as powerful and reliable, but that this is an upgrade to the grid. That’s the story. This is better, it is more reliable, it is cheaper. It’s better on every metric.

I do think, yes, we need swagger, we need people to want — instead of clutching their Pepsi to their chest out of fear that someone is going to take it from them, we need people to be voluntarily setting down the Pepsi and going to pick up a Coke because, “Damn, look how good Coke looks.”

Steve McBee

That was my — you articulated it much better than I could. That was my question. I was going to ask you, I have this view that we can widen the coalition. I have this view that we can do that by talking about our products on the basis of the facts about them and their price advantage, the reliability.

David Roberts

But I would say, we need to also be able — the things they’re doing on energy, this Iran war, even critics of the administration, I don’t think — it is genuinely difficult to wrap your head around how stupid it is. Even establishment Democrats, I think on some level are trying to generate justifications for this because they can’t wrap their head around how arbitrary and stupid it is. All the way down. It’s all negative effects all the way down. No one’s winning this except China. No one is benefiting from this.

But they are not paying the price they ought to be paying for that. They’re not. They’re still out on TV talking about — Doug Burgum’s still in front of Congress talking about — somebody, it’s a lawmaker challenged him, “China’s building 500 gigawatts of this, this and this.” He’s saying, “Well, baseload or variable?” It’s still the sun goes down at night stuff. Just the crudest sort of — they ought to be paying a price for that. They ought to be mocked in public.

People ought to be making the point that they are violating their own goals, they’re making things less reliable, more expensive, etc. They’re just not paying that price. In addition to boasting about Coke, somebody needs to be out with a shiv hurting people who do stuff like this. There’s got to be an enforcement arm. We need some thugs. We need some people who are going out and whacking people over the head. I don’t know if it’s all got to be the same group of people, but we need that side of things.

Steve McBee

Yeah. Maybe this is just too precious. You can call me on it, but I think you can do that 100%. This situation in Iran is a huge opportunity for us to redefine the stakes, and we’re not doing it. What was in that big, beautiful bill? It was the inverse of the policies that you would put in place if you were trying to achieve the goals the administration had laid out for it.

We were taking all of the cheapest, most ready power that’s sitting in the queue, ready to go. Instead of hooking that up, we took all the incentives away. We gave all these new incentives to gas and fossil fuels. We pushed that stuff to the back of the line. We cut the line with gas and, I guess, coal. All of a sudden, you’re not getting power that’s cheap or reliable or ready. There needs to be accountability for those choices. I think you can enforce accountability by contextualizing the case for Coke and not get it into a situation where it’s so overtly — it’s just the facts. The goals are not aligned to the policies.

We have an alternative with the policy. We all agree with the goals — more energy, faster energy, cheaper energy, energy for AI, energy to beat China — but we have to have policies that are synchronized to the goals and we don’t. That is not only something that is fair game, I think it is pretty essential that we just make the case. In the IRA fight, the thing that was really frustrating to me, we have three times as many batteries in the queue as we do gas projects.

David Roberts

I know, it’s wild.

Steve McBee

If we were organized, what we should have said, what we would have done in the IRA battle is to say, “Hey, this isn’t a tax — we’re not making tax policy, we’re making energy policy. We are resetting energy policy in ways that are going to make it harder to get cheap, reliable, and fast power onto the grid by these choices.” We never made that case. We never forced people to have a real choice there on, “Geez, do we really want policies that do this?” Maybe we need to think about this in a different way. We never presented an alternative. Never.

David Roberts

Okay, as I said, we could talk forever, but I should probably wrap it up. Think we tested people’s patience, maybe just — is this effort the kind of thing that the public can engage with at all? Or is this mostly an elite play? Which I don’t mean negatively at all, we desperately need elite plays. But I just wonder, is there a public participation? Can people follow along? Is there a public-facing part?

Steve McBee

There’s going to be. One of the things that I’m really aware of is back to what we talked about at the beginning, there’s a lot of resistance to new things. If you’re going to bring something new in, you need to make sure you can rock it. You got to make sure that you can prove it. I want to do things that get traction, to get proof points that create confidence. Then we’re going to — we have a very ambitious plan to scale this platform into something that I think can stand up and be heads up to API and the fossil fuel industry juggernaut. We’re going to do that in a linear way and not come in and get totally over our skis on day one and open ourselves up to all kinds of crazy criticism.

These things we’re doing on communications, on market making, on strengthening the intelligence layer — these things to me are super critical. We had our hands full doing that for the next four or five months. Yeah, there’s going to be a way for the public to engage on this in lots of different ways going forward. We’re going to try to start out here and try to be successful on the things that we think are really important right now and where we can do something about, and then we’ll go from there.

David Roberts

All right. Above all, thank you for recognizing the smoldering, embarrassing failure around you and not blowing smoke. If I hear another clean energy person try to tell me that the OBBB wasn’t really so bad because there’s this one tax credit on page 12 that didn’t totally get nuked, I’m just like, “Let’s be real with ourselves.” Thank you for being real and thank you for trying to build something and maybe we’ll reconvene in a year or two and see how it’s going.

Steve McBee

I hope so. I hope I quelled some of your doubts and I would just say, because you got a lot of really influential people that listen to your podcast, I want people to feel like we can be excellent and not settle. We can’t settle for a C. We need an A. We have everything we need to go do that. Let’s go be great. Let’s go be great.

David Roberts

Yeah, that’s when I’ll call my dad — if you go do it. All right.

Steve McBee

Thanks for having me on. I really appreciate it and I would say thanks to you. This is such a killer podcast. You do just a ton of good on this podcast and it’s really a privilege to be on, I appreciate you having me.

David Roberts

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

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

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Text transcript:

David Roberts

Hello and greetings, everyone. This is Volts for May 27, 2026: “A limited defense of Biden’s Everything Bagel Industrial Policy.” I’m your host, David Roberts.

Last year, in their book Abundance, Ezra Klein and Derek Thompson popularized an argument about the Biden administration’s industrial policy that has since become something like conventional wisdom. It goes like this: by attaching so many well-meaning progressive requirements to every tax break or grant—labor standards, community benefit standards, local hiring standards, domestic content standards—they overburdened the policy and made it slow and bureaucratic. Consequently, the money didn’t get out the door fast enough, so voters’ lives were not changed quickly enough, so Biden did not get any public or electoral credit for his policies, so Trump won. That’s the official line.

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Betony Jones ran labor and jobs policy at the Department of Energy under Biden and was responsible for developing those labor standards, which applied to thousands of projects totaling over $100 billion. You will not be surprised to hear that she has a rather different take on the subject.

And she’s not just drawing from her personal experience. She has spent the past year interviewing executives at a dozen-plus companies that received federal clean energy funding to find out what happened. What really did slow things down? What she found was that the labor and community conditions were more welcomed than burdensome. The real bottlenecks were in implementation — permitting delays and contracting timelines.

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She wrote up her findings in a report called “The Receipts,” which I find very amusing. I am excited to talk with her today about what we should and shouldn’t be learning from the Biden industrial policy experience.

With no further ado, Betony Jones, welcome back to Volts. Thank you so much for coming.

Betony Jones

Thank you. It’s great to be here.

David Roberts

I want to start with the abundance critique. Despite my somewhat provocative title for this episode, you are not here to defend the whole bagel, the whole everything bagel. We’re mainly here to focus on labor standards and community benefit standards, the workforce side of things. The question is whether these and other workforce standards are getting in the way of the speed and scale of industrial policy that we want.

There are two questions you could ask about these standards. One is the empirical question: do they in fact slow things down? Did they in fact slow things down? Are they in fact burdensome? Then there is the political question: does attaching these kinds of standards make the policy, make the bill look more explicitly progressive, thereby polarizing it, thereby making it more difficult to pass? There is a substantive critique and a political critique. I want to take those one at a time.

But before we jump into any of that, maybe let’s just back up and I want to ask you, what was Biden’s approach on workforce issues? This general family of issues goes way back in the Democratic coalition. Obama spent a bunch of money and talked about green jobs all the time and had policies that he called green jobs policies. I’m curious, what was Biden’s innovation? What was new about the Biden administration’s approach to workforce issues? How would you characterize that approach?

Betony Jones

We can talk about Biden’s approach to workforce issues. I tend to see these things through the lens of climate policy. We tried for decades — I’ve been working on climate policy since the Clinton administration — and there have been many efforts to advance climate policy through regulation, through Waxman-Markey, a lot of different efforts, a lot of thoughts around carbon taxes. Nothing got across the finish line until we had a climate policy that had a broad agenda and a broad political coalition advancing it that included left-behind communities, environmental justice communities, the labor movement, and climate advocates.

By design, this climate policy — the set of policies, the Inflation Reduction Act, the Bipartisan Infrastructure Law, and the CHIPS and Science Act, a suite of three policies to address the climate crisis — was intended to deliver to those constituents who lent their political muscle to getting that across the finish line. In some ways, to go back and critique those very things that were baked in by design and the whole reason that we have these policies to implement in the first place as responsible for some failure never made sense to me.

David Roberts

When the green movement tried to be surgical and clean and only go after carbon emissions in the way that was approved by economists and didn’t have any of this everything bagel stuff, it failed. Everybody yelled at the green movement: “What’s this technocratic blah blah? What about the movement? What about the people? What about all these co-benefits?” Then greens go back and, as always, they’re A students, they say, “Okay, we’ll work up a big elaborate policy that has all that stuff.” It involves everybody, it includes everybody. Then people say, “Why did you include all this stuff? Why don’t you be surgical and just go?” There’s a real “you just can’t win” vibe around all this.

Betony Jones

People pretend that politics don’t exist. A lot of people aren’t in the weeds or paying attention to power or what moves it or how it plays out in how policies get crafted. The Biden administration was implementing what was passed. We were implementing what there was political will to execute on. It doesn’t make sense to say, “All of those efforts slowed down this one aspect of the goal.” First of all, the arguments saying that aren’t backed up by any reporting or data, they’re just ideas. That’s what I was trying to correct for.

Second, what was the assignment? Let’s grade ourselves based on the assignment, not based on some other idea of what we think the world should be like.

David Roberts

We should say, and I wanted to say this too, the critique that greens are woolly-headed and naive and want paradise and all these goodies, and we, the level-headed, reasonable centrists, need to come in and discipline them and tell them how silly they are — any critique that fits that basic mold, people love it, people buy it. They don’t ask for any reporting, they don’t ask for any data. They don’t say, “Prove it.” They’re just like, “Oh yeah, that sounds right.” That sounds right to me. That’s the kind of critique that in D.C. just sounds right to everyone.

Betony Jones

It’s unfortunately a bit deeper than that. It’s a critique that aligns with a particular paradigm. It happens to align with this kind of deregulation, let’s drive lowest-cost solutions, this free trade globalization wherever we can get the markets to move — neoliberal paradigm, it fits into that. That’s something that people are very comfortable with. Then they like it. You see that with abundance. Not necessarily exactly what the authors intended, but certainly the people who’ve picked it up and run with it and redefined it or co-opted it in some cases to push for deregulation.

David Roberts

Let’s get back to Biden’s... how did you try to accomplish the assignment?

Betony Jones

You were asking what was different about Biden, because certainly Obama had a green jobs strategy. What was fundamentally different about Biden’s approach is that it was more by design and by necessity. It was more a demand-driven approach to pulling workers into jobs. In the Obama administration, there was a lot of funding for training, workforce education and training to push workers into jobs that we hoped would manifest. The train-and-pray model: “Let’s train everybody in solar and hope they find their way into the industry.”

That just didn’t work out. In the Biden administration, the proposals around investing in workforce development and Build Back Better were gutted. What we finally got across the finish line were investments in projects, and we had to then ensure that those projects were making the investments in workforce development and labor standards and had the strategies to attract, retain, and train the workers they needed to get the job done.

David Roberts

Can I briefly ask, what were some of the tools that got stripped out? People critique the way you do it and say, “We had tons of better ways.” Talk to Joe Manchin. “We had all kinds of ideas about how to do this better.”

Betony Jones

All of those social infrastructure things — childcare, money for training, expanding registered apprenticeships and pre-apprenticeships, on-the-job training. All of the funding for the supportive services, barrier reduction side of the workforce equation, side of the labor market, those things were stripped out —

David Roberts

Which meant that the only tool, the only lever you had to implement the things they were telling you to do was on the project side. That was the reason these things got attached to project agreements — because that is what ended up in the legislation.

Betony Jones

It’s a good model. It happened because it happened. But it’s also a good model because it ensured that the workers who were trained were trained to work on actual projects. They weren’t just engaging in training to pull them out of the labor market.

David Roberts

It’s a long-standing critique of job training programs going back decades. Aside from clean energy, people have always had this idea of job training as an answer to economic woes. They’ve never really worked out the way people want. The main critique has always been you’re just training them and sending them out into the wilderness. What you need is a complementary demand-side policy that creates the jobs, that pulls them in so that when they get trained, they have jobs. That was what you were trying to do.

Betony Jones

That’s what we did, both with the grants and loans. That’s also how the IRA was designed — through the prevailing wage and apprenticeship tax credit. You got a much larger tax credit if you were using registered apprentices. That means you got a larger tax credit if your project was investing in training the next generation. There was an incentive to tie those things together.

David Roberts

Maybe it’s worth detailing the family of tools we’re talking about here — these workforce standards — because they do all get lumped together. It’s worth distinguishing. There’s Davis-Bacon, which we’ll talk about a little later, which is old, goes way back, which just says you have to pay prevailing wages. Then there’s the IRA tax credit stuff, where you get a bigger tax credit, as you say, if you do prevailing wage and apprenticeship stuff. Then there was the Department of Energy community benefits plans, which was a separate thing. That was unique to the Biden administration. It’s not all the same thing.

Betony Jones

I love talking to you because you’re such a good reader. I did break it down. We had these different levers that we were using to advance these goals, and I was looking at what those different levers accomplished. You said, the base, the standard on all federally supported construction is Davis-Bacon, which sets a wage floor so that federally funded money isn’t undercutting local labor markets. That’s important because it helps support stability in a volatile and seasonal industry. It helps retain workers.

David Roberts

That goes back to the 30s.

Betony Jones

It’s a century old, and it’s worked very effectively. People complain quite a lot about compliance. One of my goals at DOE was to streamline that to make that a lot less painful, and we were really successful in doing that.

David Roberts

I want to return to that whole subject in a minute and talk about that in more depth.

Betony Jones

Just as a further summary, with the tax credits you got five times more. Your tax credit went up from 6% to 30% if you paid prevailing wage and you registered. It’s so big, and it’s so much more than any cost of paying more or cost of managing the record keeping. It was really treated as a requirement because nobody wants to give up that level of increase. These are $100 million, multiple hundred billion dollar projects. It’s a lot of money. The cost of prevailing wage relative to market wages in a tight labor market isn’t that game changing.

The community benefits plan was a real policy innovation. Huge thanks to not just the colleagues that I, we put our heads together, but also Secretary Granholm who saw the value of doing this. We were trying to get this money out quickly and deploy these first-of-a-kind and large demonstration projects and scale this market at a time when the labor market was really constrained. Unemployment was at some of the lowest levels we have ever seen. Workforce constraints, labor strife, community opposition — these are real execution risks.

There were the policy priorities of the administration, but there were also the practical on-the-ground constraints of getting these projects built quickly. The community benefits plan was designed to get firms to think practically up front about how they were going to think about those execution risks and mitigate them, and aligned around labor standards and benefits to communities.

Also DEI, which got politicized, is really just a critical strategy for getting the workers you need in a tight labor market. That approach of requiring these community benefits plans on all of the projects seeking funding from DOE, both grants and loans, was really novel. It’s conditions on federal funding intended to distribute benefits of these taxpayer dollars more broadly, but also designed to advance projects.

David Roberts

To spell it out for people who may not be familiar with this stuff, community benefits just means if you’re a big developer and you want to build a big new project, instead of just saying you’re going to do it and then stirring up community opposition and then fighting the community and having the lawsuits, etc., you go in early, you talk to community leaders, you work out some way that the community will benefit from the project. You send some money to schools, you help pay for some infrastructure, or you promise to employ within the community, all these kinds of things.

The idea with this — and this is something I want to ask you about a little bit later too — the theory of the case on this stuff is that that does not slow things down, but in fact speeds things up. If you go in early and work out a community agreement, you skip the whole community fight part of things and thus get faster. That was explicitly an effort to make things faster, not to slow things down.

Betony Jones

One caveat to that, because what you’re saying is true. It’s about community opposition. It’s also about securing a workforce that you need. That’s a little bit different — saying, “What are we going to need to build this project on time and on budget? Who can we work with to make sure that we have those workers and that we’re investing in the training early, or that they’re investing in the trainings, so that in two years when we’re ready to break ground, we have the workers we need?”

Collective bargaining agreements, project labor agreements help provide that assurance — they reduce that particular risk. That’s not just about mitigating community backlash or opposition. It’s also a critical supply chain issue to build your project.

David Roberts

You developed these standards, you implemented this stuff. It all got wiped away with OBBB. Since then there has been this abundance critique, etc. You did what I think of as a very characteristically Democratic thing, which is, “I’m going to go study this, I’m going to go figure it out, I’m going to go ask people.” Very A student behavior. I love it.

You went and talked to the companies in question, the ones who are receiving the grants and loans, to ask them from the horse’s mouth what happened. What did and didn’t slow things down? It’s a little maddening to me that you, sitting at a think tank, did this, and none of the dozens of journalists who dutifully replicated this abundance critique went to talk to the people who got the money to find out from the horse’s mouth. They all just passed it on.

Here you go, you’re obliged to go do the reporting, which is crazy to me. Anyway, you went and talked to these people. I would love to hear what they told you. What are their impressions? I rarely hear from them. It’s all punditry.

Betony Jones

I was genuinely curious. In the interest of learning to do better next time, I was interested in what the other side was experiencing. When I was at DOE, I heard many comments in passing that were appreciative and thankful, even from unexpected entities. I was with some southern utilities and they were raving about the community benefits plan and how it changed how they were thinking about community engagement to make it more upfront and less of a tack-on exercise, and how that completely made their project implementation more efficient.

I was hearing those kinds of comments all the time. I was surprised by this critique. It’s not to say that you can’t find people to say the opposite, but it wasn’t just the chorus of people who have already been implementing some of these practices who were appreciative that some of their efforts mattered or were scored favorably, the things they have been doing all along. There were also a lot of converts and people who were saying, “I was really skeptical about working with the steelworkers, but they have improved our productivity and our production efficiency so much. The next location I open, I’m going to work with them from the beginning.”

A lot of comments, especially around working with labor, where firms initially were saying “I don’t know why I’m supposed to avoid unions at all costs. That’s just always what I’ve been told. But you’re telling me maybe there’s some benefits of those partnerships, so let’s explore it.”

David Roberts

You said a lot of them were “labor curious,” which is a phrase I love.

Betony Jones

Not everybody, but there was a lot of that. When we went out to more formally interview people, I wasn’t going to the companies that have always been supportive. It was really trying to capture some of the other firms that I hadn’t heard from and just understand their experience generally. What were the pain points? What could we have done better? A lot of what I heard was how damaging the volatility is with the second Trump administration and how costly that is. A lot of people wanted to talk about that, but when we went back and —

David Roberts

It is on a lot of people’s minds.

Betony Jones

That’s the big thing. But when we went back and I said, “What about these community benefits plans?” it was either, “We had no idea how to do that. That was a steep learning curve, but we figured it out. That made a lot of sense and it wasn’t a problem. We brought in some people who knew how to do that kind of thing. It was interesting.” Or, “That upfront engagement and thinking about the risks and the workforce we needed up front, that was so helpful. We’re doing that on all of these other projects.”

Nobody said anything about it being an insurmountable obstacle that slowed them down. In some cases it was, “Our project is stalled now because we don’t know what the Trump administration is doing to renegotiate it. We’ll see how much those things get implemented.” Many said, “The Trump administration has told us we don’t have to do this stuff anymore, but it’s baked into our project. We’re going to keep doing it. That’s why we don’t want to be on the record. We don’t want to get ourselves into trouble, but these are just smart, practical things to do, so we’re doing them anyway.”

David Roberts

You’re talking specifically about the community benefits stuff. They just go to a community beforehand and do the work. That’s what you’re saying. They found that helped and they’re going to keep doing it.

Betony Jones

Under that umbrella, I include the labor partnerships and the labor agreements. At DOE, it was all part of the same umbrella, but it was those community partnerships. At DOE, what we were really pushing for is not just ideas, but real plans leading to real partnerships formalized by enforceable agreements — community benefits agreements or collective bargaining agreements — things that would really ensure that the plan was implemented as designed with those community partners. A lot of those partnerships are intact.

David Roberts

You say a lot of these companies told you this community benefit approach worked for them and they are going to keep doing it even though they no longer have to.

Betony Jones

We’ve seen that. It’s not just the projects that we touched. There’s spillover. They’re saying they’re going to do it on other projects. States have adopted similar conditions on funding opportunities. The system that we designed was pragmatic. It made sense. It reduced project risks, it ensures some distribution of benefits to beneficiaries beyond the companies and their investors. There’s nothing else to say. It just is working.

David Roberts

What did they complain about that you all did? What did they say? Obviously, Trump messed everything up. Republicans have messed everything up since then. But before that, where were they finding friction, what was slowing them down, what did they have to complain about?

Betony Jones

The inside and the outside have such different perspectives. The laws didn’t pass early enough in the administration. To put out hundreds of billions of dollars in competitive grants across nearly 100 different programs, many of which had to be set up through new offices that had to be set up. DOE had to hire some 3,000 staff. The execution on the inside felt like a race. When the infrastructure law was passed in 2021, the IRA in 2022, in any case, two and a half years or less to execute this. We were trying to follow the law, designing the terms, getting public input.

David Roberts

But this idea that you were slow and pokey was not your experience.

Betony Jones

The idea that we were obsessed with process instead of execution doesn’t resonate with anything that I saw on the inside. I’ve heard Jigar Shah say this, I’ve heard other people say this: the federal government was much faster, more nimble, and less bureaucratic than any of us could have anticipated or anything we’ve experienced in any other sector. That critique just doesn’t match the experience on the inside. It was less bureaucratic than my son’s preschool co-op.

David Roberts

That’s not a fair comparison. There’s very little that is more bureaucratic than that.

Betony Jones

That’s true.

David Roberts

This is what I meant earlier when I said this notion that it’s slow, process-obsessed bureaucrats just resonates with people’s priors so much that they don’t really ask for evidence. They don’t need it. They’re just like, “That sounds...” Because that just resonates with cliches that have been bouncing around in our society since Reagan. Everybody’s like, “Yeah, that makes sense.” But really, nobody I’ve talked to on the inside who is trying to implement these things ever felt anything like sanguine or slow or content. Everybody I’ve ever talked to felt like they were at a full sprint from the minute they entered the federal bureaucracy to the minute they exited. No one. I’ve never talked to anyone who fits the cliche.

There are other parts of the abundance critique. I don’t want to throw the whole abundance critique overboard here. There’s a lot in there and a lot to say about it. Some of the problems in implementation, like with permitting, really are problems and really did slow some of these projects down. In the implementation side, those critiques do land. There is a lot of friction on that side. Do you agree?

Betony Jones

I found it interesting talking to these people about, in a bigger context than just the community benefits plans, because a lot of these are multinational corporations. They do business in a lot of countries and they had perspectives of how things work in Germany — for example, how Germany invests in the commercialization of technology and how it is bureaucratic and politically durable. It is not subject to these political winds.

Some commentary was we had this big industrial policy, in a lot of ways it was comprehensive in this whole-of-government, integrated approach. On the other hand, it wasn’t integrated enough to deploy as quickly as we could have. Things that companies thought would have worked better: if you get through the due diligence for a grant or a loan, can you automatically get fast-tracked permitting? That’s a whole different agency. There wasn’t a big pot of workforce development dollars, but it would have worked better if you got funding for your project — then there’s other funding to support some of the workforce development. Especially things like on-the-job training or new apprenticeship programs, things that companies haven’t had experience with before, a little bit of funding to help them do that.

There is a way you could imagine an even more comprehensive and even more all-of-government approach to unstick some of these things or move them forward. Another thing was around the domestic content and it is this chicken-and-egg thing. You have these requirements even if the supply chain isn’t there. The process for getting an exemption was necessary because if you don’t set the standard, then you don’t have that signal that drives the development of the domestic supply chains.

I understand that this waiver process is necessary, but that was head-scratching for a lot of firms where the timelines were so aggressive in meeting these domestic content standards and not every product even knows what its inputs are. There is a lot of infrastructure needed to make that kind of thing work that just wasn’t yet in place. But again, if you don’t have this signal, you never get there. How do you build the infrastructure as you are also trying to support the productive capacity of the US for these supply chains?

David Roberts

Every conversation I have about this, about IRA, about trying to pull things together and implement IRA, brings me back to the heartbreaking thought of how much could have gotten done in the subsequent four years. The people implementing it had their eyes on these choke points. They knew what was slowing things down. You could have taken more legislative action, more regulatory action to ease these barriers, could have done permitting reform. The whole thing could have gotten running so quickly.

This is what bugs me a little bit about the critique. I don’t think the critique is totally wrong, but it’s more complicated than it’s made out to be. This thing really was, relative to big federal programs passed, moving quickly. There really were a lot of people moving quickly. There were a lot of things just about to happen.

Betony Jones

We all had our 2025 strategies.

David Roberts

Let me ask you about a specific question. You’ve had this exchange going with Mike Schmidt. He was running the CHIPS program at the Department of Commerce, trying to get chips factories built. He writes this Substack called Factory Settings — really interesting, worth checking out. He has said that Davis-Bacon slowed him down. He has complained about Davis-Bacon, which is, he’d approach these chip makers, try to lure them to the US to build factories, and then suddenly they were confronted with complicated US construction requirements and laws, and it baffled them, and it took them time to do compliance, it slowed the whole thing down, etc.

Your response to this was, over at the Department of Energy, we also faced Davis-Bacon requirements, but they didn’t slow us down. Tell us why they didn’t slow you down. You built a system to do it. Tell us a little about the specifics of that system.

Betony Jones

I felt bad for Mike. There was a point when the White House chief of staff called us both in for me to school him on how DOE was doing it. He was saying, “But we didn’t set any of this.” I know Davis-Bacon is a challenge to implement, and I knew that it was going to be part of these bills, so I was proactive. But that was insight that I have.

David Roberts

Just to be clear, it’s been on the books since 1930. No one did not know that they were going to be subject to these requirements. Nothing stopping everybody else in every other department from preparing in advance. Not a surprise to anyone.

Betony Jones

That’s true. Except that I’m a real wonk. I had unique insight into exactly what could work better. When I went to DOE, when I decided to take the job, I had five goals that I thought were audacious. One of them was to streamline and simplify Davis-Bacon compliance. I thought it was probably the most audacious.

David Roberts

What did you do? Tell us.

Betony Jones

It was hard, and I’ll tell you what I did, but I felt for CHIPS, just because they didn’t have that foresight, which was this unicorn foresight, it was challenging to implement. I’m not critical of them. What I was hoping at DOE is that we could demonstrate how to do better, and if we could demonstrate it at DOE, that going forward, other federal agencies implementing Davis-Bacon could also do that. It’s easier to do something when a different agency pioneered it. That was my goal. But that wasn’t in place at the time of CHIPS.

David Roberts

Yes, but again, on the books since 1930. Why is it only after this thing has been on the books for a century that it has occurred to someone to find a way to do it more quickly and easily? Maybe not the other Biden appointees. They just inherited what they inherited. But it is a little crazy that this thing has been around for a century and the federal government has still not accommodated itself to it.

Betony Jones

There’s an interesting story there. The private sector has figured out ways to help firms meet the requirements. There are tools out there that we ended up contracting with. The federal government was also trying to develop — GSA was trying to develop a more streamlined inside-of-government system. They finally, after wanting money to do that for a long time, in partnership with DOL, finally, in this period, either through BIL or IRA or something else, got funding to develop that. It’s not that there wasn’t the will or the interest or the talent to do it. It’s just that it’s one of those super wonky, boring bureaucratic things that is never going to look like a win — nobody cares.

David Roberts

Tell us the system you made in a way that non-deep-inside-the-bureaucracy wonks can understand.

Betony Jones

What Davis-Bacon requires is, and this has been in the books for 95 years, a couple things. One, there is a wage requirement, but it is not a single wage. There are thousands of different wage determinations based on geography, based on craft and classification of the worker. You have to first figure out what is the correct wage determination. The Department of Labor publishes these, but on different timelines and they are published in PDFs. That is the definitive wage determination — PDFs in SAM.gov that are binary text that are — it is tedious.

First you have to figure out the right wage determination. The other thing that it requires is that you have to pay workers weekly. That’s in the law. You have to pay them on a weekly cadence. The third thing is that you have to report those weekly payroll records weekly to the funding agency, to the compliance agency, and in our case, DOE is responsible for making sure that all of that is correct, even in some cases doing site visits to make sure every worker is getting reported and their wage classification is correct.

It’s onerous. As a researcher, what I’ve always wanted is that weekly payroll data, because you have this data that has to be reported every single week for every single hour worked on a federally funded construction project.

That gives you real-time access to job creation. What jobs are we creating? Where are they going? Who’s getting them? The problem is that data has never been usable because it comes in by mail, by email, by PDF, by Excel. It comes in every different way to every different person managing a grant or a contract.

That data is coming in, it’s compliance data, but it’s completely unusable in terms of metrics or tracking what’s going on. My interest was how can we get this data in a usable format to both help us with compliance, but also give us a running sense of how we’re doing on project implementation. The data part was Betony’s interest, that doesn’t have anything to do with reducing the compliance burden. But if we could get the data in one centralized electronic system that integrates with payroll systems, then it’s reducing the burden on the outside for people to figure out what is the right wage classification and hiring their own Davis-Bacon compliance entity to help them track it, because DOE is procuring that tool on their behalf.

It helps on the inside because instead of charging thousands of staff who are managing these grants or these contracts with Davis-Bacon compliance — something they have no idea how to do or what it is — it would allow us to centralize that compliance and have real experts reviewing the data and ensuring that workers are actually paid what they’re due. What worked on the inside, because this required a massive collaboration across all of the program offices and agencies at DOE to all chip in to create this centralized system and centralized staffing. The value proposition was that it would relieve them of staff burnout or more FTEs. It’s just more efficient.

Once they realized how much it would help them on the inside, they were sold. In terms of our efforts to streamline, we are sensitive to the burden of doing business with the federal government. We were all sensitive to that. Anything that we could do to make it less painful on the other side for the firms that we were working with to comply and comply effectively, we were always trying to do that. It was a real win — win.

It’s not that there weren’t other issues that arose with Davis-Bacon. One of them, for example, was with our grid grants, a lot of which went to utilities. Some utilities have bespoke payroll systems and they pay on a biweekly basis. Paying a certain set of workers on a weekly basis is a huge change management undertaking, or so they said. That’s written into the law, it’s just a requirement. Navigating those things and trying to figure out ways to deal with those, we spent time on that. It’s not that it was, but that’s the only thing we had to spend time on. We didn’t have to spend time on the supposed burden of reporting.

David Roberts

I want to pound the table about this because this is a very important, illustrative example of a broader point that I wanted to make in our discussion, which is how much burden a particular requirement, a particular bit of everything bagel, will place on the government and the private sector is not a fixed quantity. You can make it less of a burden for the federal government with thoughtful, well-funded administrative capacity. You can build the administrative capacity to do it well, such that it is not a burden, or you can do it in a dumb way where it is a burden.

There’s not one fixed answer to that question. It’s not inherent to the requirements that they are burdensome. You can do them in a way such that they aren’t. You implicitly made the same point on the side of the private sector with these community benefit agreements. To a big firm who hasn’t done it, it might be awkward and slow the first couple of times, but again, they can figure out how to do it, set up the capacity, set up the systems, and then it’s not a burden anymore. It’s just a routine part of business.

All of which is just to make the point that you can have better or worse federal agency performance. It’s not a fixed quantity. Tell me if this resonates with you because I know you’ve been arguing with the abundance people. If you read the original Abundance book, to me, the heart of the critique had two halves. One was about some of these excessive rules, but then the other half, the book was all about making government work better. That was the thrust of the book.

Part of that is getting rid of silly or unnecessary rules, but the other half is bulking up your administrative capacity so that you have the muscles to do the things you want to do. That half of abundance, which is implicit in the whole thing and is in the book, has dropped out of the discussion. Half of it is supposed to be fund and adequately staff your federal government.

Betony Jones

You look at something like permitting that everybody complains about, and some of it is overlapping and sometimes contradictory requirements from different permitting agencies. That we should fix. Some of it is just the backlog and the understaffing of people to review it. Why is that not part of the solution here? To augment government, to support government, to do its job more effectively, more efficiently, more innovatively.

David Roberts

I would love to hear more of the abundance people making that point a little more often. “Let’s fund. Let’s celebrate and fund the administrators we’re asking to do this competent governance.” Let’s boost that half of the abundance thing. One other quick thing about Davis-Bacon is it applies to construction workers. If the federal government gives a grant to a developer who is going to construct something, they have to use it. It doesn’t cover factory workers. In some cases you had these problematic instances where you’re paying the people who construct the factory really well and then the people who end up staffing and running it not as well. How do you think about that?

Betony Jones

There was a parallel to Davis-Bacon, Walsh-Healey, that was never repealed. It’s still in the books, but it could be reinvigorated. The wages — eventually federal minimum wage just exceeded the wages that were in there and it was eroded by the courts. There were proposals again that didn’t make it into the final versions of the bills that passed to have some labor standards and wage standards on the manufacturing side. The analysis that some of my friends and colleagues have looked at, back of the envelope, is that the tax credits — take the battery production tax credit — are so generous that more union pattern upper quintile wages could have been accommodated and would have spread the wealth of these really generous incentives to the workers building this.

Whatever happens behind closed doors in the final negotiation of these bills, that did not make the final cut. It’s too bad. I’m proud of the work at DOE to think about those ongoing operations and manufacturing jobs and build that into this community benefits plan framework where firms were asked not just how are you going to secure and retain the workers you need for the construction project, but also what is your long-term plan for operations and what is the quality of jobs that you’re creating there? How are you going to ensure that there is advancement opportunity for workers there?

With some grants, we suggested this upper quartile based on BLS, not just average but above average wages for the industry and occupation to try to nudge wages up because the labor market’s competitive and a lot of these manufacturing companies are paying less than Starbucks in a lot of cases. Then they’re saying, “We have 30, 40% turnover, but we’ll just go back to the fast food industry and see who else we can find.” That’s not a way to build a successful, globally relevant, innovative industry, which is what we need to do. We need firms thinking about their workforce strategy and how to retain workers, give workers a reason to make a career in these nascent and emerging industries like batteries and battery supply chains. Thirty percent turnover isn’t going to get us there.

We need a plan to improve job quality in manufacturing and make sure that this is something that workers and parents see as opportunities for their kids and that we can reinvigorate that workforce. The other thing is we got a lot of firms committing to either neutrality agreements or collective bargaining agreements on the production side.

For a policy that was agency discretion and tied to implementation, we got remarkable results in terms of advancing job quality not just on construction, but also in the long-term operations, because we were asking about it and because we were asking firms to think about it up front.

David Roberts

Out there in the American public and even among politically engaged people, there’s still this lingering idea that the business community is full of ruthless self-interest maximizers and rationalists. If you believe that, then anything the government comes in and tells them to do almost by definition is going to make things worse, because they’ve already optimized — and this is the basic conservative critique. But what you find in practice, what you’re describing, is business people are human like everybody else. There’s a lot of inertia, a lot of old thinking, a lot of path dependence, a lot of busyness, don’t have time to think about stuff. Someone coming in and nudging you to do things better can be helpful and then you can change and do things better enduringly. These things are not all optimized. They can get better and government can help them get better.

Betony Jones

They can get better and the government can help. Just to give one other anecdote in the battery space, we developed at DOE this battery workforce initiative. The idea was, look, there are all of these investments in battery manufacturing in the US, there is no coherent, developed pathway into those jobs. It’s each company for themselves. They’re competing on many things. They’re racing to get these tax credits. They’re not thinking about their medium-term workforce needs. Let’s bring them all together, let’s leverage our convening power to bring all the industry players in this space together to figure out what is the common 85% of skills that they all need.

Not the specialized trade secrets, but how do we capture the 85% of the skills that they are going to need so that we can develop some standardized training and credentials to support this industry where we want to develop some U.S. competitiveness, want to and need to for security purposes, develop this industry. That is a role that is unique to government — the convening power.

Industries were at first tepid because they’re like, “Our thing is special and we don’t want anybody to know what our technology is.” Once they realize a lot of the skills are transferable across the industry, there’s benefit to a more cooperative approach, thinking about workforce development and standardizing that in the US or the federal government, state government. We’re uniquely qualified. We have the technical expertise and the convening power to lean in and help there. It’s one of those things that helps everybody and helps our country and helps develop this productive capacity that we need.

David Roberts

Two political questions coming at this from different sides. One of the critiques you sometimes hear is the phrase you’ve used to describe Biden’s approach is “industry-led, government-enabled,” which really captures the vibe here — that the private companies are out front doing the things, government is doing things to help them structure their workforce, boost their workforce, subsidize their production, whatever. Almost all of that is behind the scenes. Consequently, to the public, it doesn’t look like there’s much government happening at all. This just looks like the market and consequently all these good things you’re doing, which I feel that I and eight other people in the world know about, just didn’t get out and didn’t have any political effect.

Do you think that’s a — because it seems that substantively that works pretty well. But politically there are questions about whether it worked. Do you have an opinion on that?

Betony Jones

By design, our industrial policy in the US depends on relationships with the private sector. It goes back to the forming of the Manhattan Project and the establishment of the national labs, which are public-private partnerships to enlist the innovation and nimbleness of the private sector and maintain our competitive edge as a country, mostly for initially military dominance, but to drive continuous R&D. We have this dependence on the private sector and we need them to be engaged and we need them to be part of the solutions. It’s how our system is set up.

I think we go too far in making government invisible. Part of that might be by political necessity, but then it’s this self-sustaining cycle. In the Biden administration, the attribution, the failure of getting credit for this stuff is the big lesson learned. I think there are a lot of people who are responsible for that. Maybe we didn’t do a good enough job. Maybe we should have sent letters with Biden’s signature to everybody who was working on these projects. Maybe require workplace signage: “Thanks to the Inflation Reduction Act, that’s why we’re here.”

David Roberts

One thing Trump has shown us is you can’t be too crude about it. There’s nothing too crude and obvious. It works.

Betony Jones

The onus is on companies to share the credit. At so many ribbon cuttings they’ll say in private, “This is such a game changer,” but they won’t go up and say it at the podium. All of this work was happening. At the beginning of this call, you talked about how voters’ lives didn’t change. That’s not true. Voters’ lives did change. People were employed at record numbers, wages were up. There are lots of indicators, real valid data that shows that people’s lives were better in communities all across the country. But it wasn’t adding up to something coherent that was part of a coherent federal presidential strategy. That message didn’t get through.

David Roberts

People are fond of blaming Biden for that. They’re like, “He was old, he was weak, he didn’t talk to the press enough, he didn’t give enough speeches.”

He gave speeches. No one paid attention. People in the administration talked about this all the time. No one paid attention. At a certain point, the media has to take some responsibility. You’re asking the government to deliver you a story with a bow tied on it. You’re supposed to be the media. You’re supposed to be out figuring out what’s happening. You’re supposed to tell people what’s happening. You can’t just sit back and say, “Biden didn’t come to me and personally tell me and make me write this story.” Other people need to take some responsibility. A lot of that is pushed on to Biden as a person, as opposed to structural problems.

Betony Jones

The media environment is tough. Even if reporters did cover it more in the New York Times or the Washington Post, that is not where people are getting their news. The lived reality does not necessarily match the headline.

David Roberts

The other political question is from the other side, which is the idea that attaching these well-meaning progressive requirements to what are otherwise fairly bipartisan policies has the effect of coding them as more liberal, polarizing them, destroying the bipartisan, and then thereby — and this is the substance of the critique — making them more vulnerable to being overturned by the next person. This critique also bugs me a little bit. There’s not nothing to it, but I think there’s less to it than is generally made out. Why don’t you tell me your opinion first of this durability critique.

Betony Jones

How did the left lose the billionaires and the working class? Who do we want back?

David Roberts

I would refer us to our previous discussion about the media. That would be my first answer. But apparently I’m alone in that. I’m the only one who wants to talk about that.

Betony Jones

Here’s one thing: with the IRA and the OBBB, the thing that stuck with bipartisan support was the prevailing wage and apprenticeship standards. The underlying credits, the solar tax credits, changed, went away. But the prevailing wage and apprenticeship credits were not repealed. That’s still there. Where is their political support? I don’t think it’s for just climate. I think it’s for economic equity and policies that support that. Can climate fit into that? That’s probably the winning argument. Maybe we have to turn it on its head and look at climate benefits as ancillary and the economic benefits that people feel in their lives as the thing that’s primary.

David Roberts

That is the typical Dem response. Let’s take the critique as though it is made in good faith and come up with a good faith response to the critique. I just don’t think it’s made in good faith. This is the question I would pose to people making this critique: What does it look like to make a policy that is resilient to a nihilist, authoritarian group of morons? Look at that party. What political, what magical policy instrument are you imagining that they would not destroy? Where is this big bipartisan path?

Look at the other side of the bipartisan aisle and tell me what can stop them from destroying things? They destroyed lots of things that they weren’t legally allowed to destroy. They just destroyed them anyway. What could people have done to make those things durable? They were protected by law and they still got destroyed. What do you mean, durability? Look at these people. I’m sure you’re not allowed to say that, but I’m —

Betony Jones

I think a lot about durability and one is the boring bureaucratic fixes are durable. They’re too boring for anybody to care. Look at Davis-Bacon. It’s so boring and it’s been around for 95 years, but it also has power behind it. Some of the problems we run into is we think of these policy solutions — we’re all the A students, like you said, we’re crafting these policies — but they’re detached from any theory of power or how to shift power or how to sustain power or what new political coalitions look like.

I see this in the affordability of, yes, the price of things is too high — affordability is a crisis. Some of the policy responses to affordability are decoupled completely from any path to power. If it is hard to get attribution for direct spending on projects that are improving people’s lives in communities, how on earth do we capture credit for reducing the cost of milk by 10 cents?

David Roberts

Some of the responses to the affordability critique are not only politically inert, some of them are actively politically counterproductive. They concede the premise to their opponents. You see Democratic governors now rolling back energy efficiency programs. We have been arguing for decades that those things lower prices for ratepayers. Now you are conceding that point and rolling them back. If rolling back climate policy is how you do affordability, why bother voting for Democrats? You have got a whole party devoted to rolling back climate policy.

They’re rolling back climate policy, they’re rolling back efficiency policy. The way they want to respond to these critiques is by conceding their opponents’ arguments up front, which will never not drive me insane. I can’t figure this party out.

Betony Jones

It’s this relentless focus on the cost of things and not the equation that affordability is between the cost of things and income to be able to pay for things. That’s short-sighted and dangerous as well, especially for the politics.

David Roberts

A final question: you now have been in the trenches of industrial policy making. The point of your report is to defend a lot of what was done inside the government around Biden industrial policy. But presumably you also saw the problems and the frictions. What advice would you give in the event a friendly administration comes into power and there is a friendly Congress and Democrats work up the will to take another pass at industrial policy? All of those are very large ifs. But if all those ifs line up, what advice would you give them to improve what you did? What did you learn from your experience?

Betony Jones

I hope that we don’t reject this outright. This narrative that it didn’t work is just the foundation for inventing something totally new. We don’t need to invent something totally new. A lot of this is working. The fixes are in, the tweaks.

David Roberts

At this point we’ve tried everything. They keep telling us to try new things and we try the new thing they say to try and it doesn’t work either. If you abandon industrial policy, go back to what —

Betony Jones

The thing is — this did work. We got firms to make irreversible investments in building clean energy supply chains in the US. They did that with hundreds of billions of dollars. Those projects, the vast majority, are moving forward. It did work. We created jobs, we raised wages. Think about climate. We are much better off today than we were six years ago. Still, even with all of the changes, solar is cheaper, clean energy is the norm. The trajectory is more solidified. It did work. Whatever issue you care about, it worked. We can make it work better. But let’s stick with the thing that was working.

It’s not just at this stage, it’s not just for the sake of climate, but also our energy security and our national security, which people are waking up to. We need US industrial policy. The energy system is changing from subsurface molecule combustion to one that is highly manufactured. We need to manufacture those things and get the resources that go into them in the US and with our friends, and secure these supply chains. That is an answer for our economy. It’s an answer for our security, it’s an answer for the climate.

David Roberts

I agree. I understand why liberals are so prone to self-criticism, sometimes edging over into unproductive self-loathing. Of course, when this happened, when the OBBB happened, everybody’s first thought is, “What did we do wrong? God, we screwed up again, we suck,” etc. But maybe the real flaw was they didn’t fight hard enough for themselves and they let Trump win. Maybe the magic policy key to making the industrial policy work was not letting Trump get elected.

That seems the most direct route to making this all work. You don’t need to redo the policy from the ground up. Just don’t let the guy get elected who wants to destroy it all. It seems a much simpler answer, and the way to do that is to be prouder of yourself, to fight harder, to brag more about what you’re doing. Liberals have this idea that if we just lash ourselves and flagellate ourselves in public long enough, we’ll win some sort of sympathy or — what’s the theory?

Betony Jones

It’d be fun to have a whole weekend to just rant, to just continue these rants.

David Roberts

We could go on.

Betony Jones

I’m getting fired up too. Let’s just —

David Roberts

All right, I’ll stop ranting. I wanted to do this pod mainly to make the point that you made eloquently just now, which is that on most fronts, in most respects, the industrial policy of the Biden administration was working. The projects were going in, they were getting built, the workforce was being created, the supply chain was getting stood up. It was working. We shouldn’t just be little scared fawns in the forest who heard gunfire in the distance and are going to go sprint the other direction. Have the courage of your convictions a little bit.

Betony Jones

Hear, hear! Yes. Love it. Thank you.

David Roberts

Thank you for coming on and joining me in this opportunity to rant. I appreciate hearing from the inside and I admire you being like, “Let’s figure out what did happen. Let’s go find out what did happen. Let’s go ask people.” For everyone listening in government or private industry, you should be inspired by this. Go out and find out what’s really happening. Go ask people before you do takes. Go ask. I’ll end there.

Betony Jones

Thank you for doing this, for reading the papers. Love it.

David Roberts

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

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

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Text Transcript:

David Roberts

Hello. Hi. Greetings, everyone. This is Volts for May 22, 2026: “How to phase out natural gas equitably.” I’m your host, David Roberts.

Some US homeowners might be surprised to learn that approximately two-thirds of the average residential gas bill now goes, not to gas, but to infrastructure costs, ie, maintaining and replacing bits of the sprawling network of pipes that serves natural gas in the US.

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Those costs have tripled over the last decade, despite the fact that the total customer base grew just 8.5 percent, per-customer consumption is falling, and heat pumps have outsold gas furnaces for four years running now. All that new infrastructure is designed to last for decades, long past the point by which many states aim to be decarbonized. We’ll either use all those repaired and replaced pipelines for their lifetime or strand them, both of which seem like bad options.

Utilities are — stop me if you’ve heard this one before — incentivized to do more of this kind of spending, since every dollar they spend comes with a guaranteed return. But if electrification really takes hold and affluent homeowners begin defecting from the gas system in numbers, those infrastructure costs will be shared over a shrinking base of the customers who can afford it least.

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This is — shout out to Volts guest Emily Grubert — a classic “mid-transition” problem. As electrification grows and the gas network peaks and declines, how can we prevent a stumbling, expensive, and unjust handoff?

My guests today have given that subject a great deal of thought. Kristin George Bagdanov and Panama Bartholomy work for the Building Decarbonization Coalition, an alliance of utilities, businesses, and nonprofits working to get fossil fuels out of American buildings. They have spent the last several years doing the research and policy groundwork, figuring out what a managed transition requires. We’re going to talk all about it.

With no further ado: Kristin George Bagdanov and Panama Bartholomy, welcome to Volts. Thank you so much for coming.

Kristin George Bagdanov

Hey David, it’s great to be here.

Panama Bartholomy

Great to be here, David. Good to see you.

David Roberts

Welcome back, technically, Panama. Kristin, I’ve got a bunch of nerdy specific questions for you, but I want to start with Panama with a bit of a broader framing question, because I want to question the premise of this whole thing that we’re doing here, which is all of this work and guidance is about how to do this transition — how to do it well.

We’re going to talk about the details, some of the details of that, but that presumes that there is a transition — that we’re doing a transition. I look around at the evidence, and I don’t see a ton of evidence that we’re doing that. There is some movement on new construction. That’s why the heat pump numbers are starting to look good.

But the 70 million houses or so that already have gas in them — I don’t see that number changing. Furthermore, politically, insofar as anybody’s tried to get at this issue, it blew up in everyone’s collective face with the gas bans — were not popular. I could imagine if you are, say, a natural gas executive or someone who works at a natural gas utility saying, “Sure, if we do a transition, I will take your counsel into advisement, but no thanks, we don’t want to do one and we’re not doing one.” Convince us that this is actually happening.

Panama Bartholomy

If only major transitions were linear, it would be wonderful. Indeed, we are seeing evidence that a transition is underway. If you look at it from a market perspective, as you said in the introduction, heat pumps have been outselling furnaces for the last four years. We’re seeing heat pump water heaters really accelerate. If you look at things like Forbes magazine — they recently did a survey with kitchen and bath experts looking at what they expect from induction stoves, and it’s the leading technology they expect to be sold over the next few years. Increasingly, the market is showing signs that a transition is underway.

You mentioned politics. We would have expected after the election in 2024, we would have seen a drop-off in pieces of legislation around building decarbonization. But in fact, in 2025, we saw the same number of pieces of legislation introduced at the state level around building decarbonization standards, incentive programs, education programs, as we did in 2024. We now have 14 states that have instituted future-of-gas proceedings at their public utilities commissions or their public service commissions.

These are proceedings where you are designing the energy system of the future. You are trying to balance a state’s climate law with how they manage a gas system. They are trying to align with their electricity system as well. Those 14 states — you have just about 47%. Just under half of all residential gas customers in the country are in those 14 states.

David Roberts

I think this all sounds like we’re gearing up for a transition.

Panama Bartholomy

We are early in the mid — I would say if you look at Dr. Emily Grubert —

Kristin George Bagdanov

The messy middle.

Panama Bartholomy

Signs are pointing in the right direction. The question now is, are we going to continue the momentum and is there the political will to carry out these future of gas proceedings, to continue this program work? Is the market going to continue at the rate that it has been?

David Roberts

Kristin, you’ve been leading this research, been writing these reports. Tell us a little bit about how we got here. Two-thirds of the average gas bill is going to these repair and replace programs. That’s unusually high, as I understand it, in recent history, maybe in all of history. I mentioned the perverse incentives of utilities, a very familiar subject on this show. But those utilities have always had these same perverse incentives, and yet this kind of spending seems to be on a real uptick. What is going on? How did we get to this place where two-thirds of our bill is going to this?

Kristin George Bagdanov

Compared to historical proportions, we look back at the 80s and it’s more like the reverse, where about two-thirds is going to the commodity cost and one-third is going to the infrastructure. If you look at the AGA — the American Gas Association — if you look at their own numbers, which they’re very proud of, they show this uptick in infrastructure building capital expenditures. It’s around 2010 that you see it really take off. Previous to that, it’s pretty stagnant — what I would consider a business-as-usual infrastructure period. We’re in this accelerated spending era where, as you said in your intro, that spending has tripled since 2010.

We’re at about $49 billion a year that gas utilities are spending on their systems, and about $28 billion of that is just on the distribution side system — the pipes, services, and meters essentially. This is an unsustainable trajectory because gas demand is declining in buildings and it’s forecasted to continue to decline.

David Roberts

Let me pause you before we go into the future. Why is it rising? Is it because all this infrastructure is reaching end of life, like with electricity? Same deal?

Kristin George Bagdanov

Yeah. There are a lot of different potential causes. There’s no single reason. One reason that people look to is around that same era when spending took off. We have some high-profile gas incidents such as in San Bruno. Soon after, you have PHMSA, which is the federal entity responsible for monitoring pipeline safety. They put out this call to action a year after that, telling utilities to step it up with checking the safety of their pipes. This gave birth to 44 different programs across the US where utilities were allowed to accelerate their spending and accelerate their cost recovery on pipeline replacements if it was for a safety reason.

This has meant that rather than doing these investments and then getting them checked out at the rate case a few years later and getting those costs approved, utilities can spend and recover costs along the way, typically through surcharges on customer bills. This is at least my leading theory on one of the primary reasons that we saw this uptick.

I also think it’s an interesting coincidence that we also have a lot of climate activity and climate laws and executive orders around that same time. It’s making hay while the sun shines and the ice caps melt. That’s my working theory as one of the primary drivers, as well as what you said — just the stock of turnover of pipelines needing to be replaced at end of life.

David Roberts

Now tell us why it’s unsustainable. This gets to my question, as I was trying to get at with Panama: why couldn’t, if you’re a gas utility executive, just say, “I’m fine with the way things are”? Are there forcing mechanisms that are going to push this into crisis? Because climate concern obviously isn’t going to do it. Why is it that this is unsustainable?

Kristin George Bagdanov

It’s already a crisis for gas customers. Electric bills are grabbing headlines, but if you look at the consumer price index from 2025, we see that gas bills outpaced electric bills by 60%. As noted, most of that is infrastructure. It already is a crisis — and it already is unsustainable.

What we have right now is this top-heavy system. It’s like this spinning top that has started to wobble and it’s the inertia of the past that’s keeping it going. But we have too much investment up top and not enough utilization at the bottom. That’s going to continue to wobble. Once the momentum runs out, the costs aren’t going to disappear. Instead, the people left on the system the longest are going to be shouldering those accelerating costs. That’s the importance of managing the transition so it doesn’t happen that way.

David Roberts

Is there evidence — is it true that, because as I said, we looked into it and the customer base is still growing slowly. As of recently, it grew 8.5% over the last decade. That’s slow, stagnant growth. What evidence do we have that there’s actual shrinkage on the horizon?

Kristin George Bagdanov

The EIA does show that demand — actual use of gas — is declining and forecasted to decline. There is slow customer growth, but the actual use is declining. You are paying more for the pipes, but you are using the product less. It is all packaging, which nobody likes. That is the problem we are trying to solve. It is a basic math problem: people call it gold plating.

They’re gold plating these pipes by making them cost more, but you’re getting the same amount of use out of them and, in fact, people are utilizing them less. The reason that we see customer growth in the residential sector is largely because we still have a lot of incentives — gas utilities can essentially pay people to join the gas system by giving them free gas hookups and charging it to the existing customers.

David Roberts

We’re going to get into those details in a minute. I’m just trying to establish that there is some forcing mechanism here — that gas utilities or gas companies don’t have the option of simply resisting change altogether.

Kristin George Bagdanov

That’s why we regulate them, because monopolies don’t do anything out of the goodness of their hearts, nor do corporations. Most of our over a thousand gas utilities are investor-owned utilities. Every dollar they spend in capital expenditures yields $2 to $3 in customer costs because of those shareholder returns and financing costs. That’s why we have this regulatory framework — which does need to be revised to keep them in check and to force them in the places where they don’t want to act out of the goodness of their hearts.

David Roberts

How much easier is all of this with gas and electric utilities that at least have the option of shifting existing customers from one product to another versus exclusively gas utilities, which are — at least I think from their perspective — just facing being told to shrink and die? Do we see progress faster in places where there are those combined utilities?

Panama Bartholomy

We do. As you would imagine, it is much easier on executives and also the unions that work for those utilities to be able to think about, okay, internally, how do we start to transition more and more of our customers off of our gas system and onto our electric system? How do we start to bring in more electrical workers and fewer pipeline workers over time as well? That makes it easier on the politicians within those states.

For gas-only utilities, it’s a bit more existential. It’s not out of the question. We have conversations with gas utilities about, “Come on, let’s be frank. We all see where this is going. What’s the long-term future for you here?” When we ask them that, they talk about, “We think there are still going to be hard-to-electrify sectors that we’re going to be able to provide fuel for through different kinds of pipes, different kinds of fuels. We think there will still be need for resiliency within certain microgrid opportunities into the future, and we think we’ll still be there for power generation.” It seems like there is some planning. Just by having that conversation, we see that there’s some planning going on in gas-only utilities about what a future could look like.

David Roberts

But they’re not deluded about the macro direction of travel toward electrification, generally speaking? I’m trying to figure out to what extent are they convinced that electrification is an inevitable macro trend.

Panama Bartholomy

The political activity that you described in your intro as far as the backlash to phase-outs of gas in new construction is a good indication of their belief in the danger of this movement and the types of activity that they’re seeing from it. When you talk to the manufacturers of gas appliances, universally, they say this transition is inevitable. If you have such a key part of the gas system — the actual appliances at the end of the pipe — saying that, you know that goes up through the gas companies as well in that sense of inevitability.

David Roberts

Is there an example yet of a gas utility that is planning to become a thermal utility — in other words, an exclusively gas utility that actually has plans or prospects of becoming the manager of a different kind of thermal system? Is there such a case?

Kristin George Bagdanov

I don’t know if any gas utility has yet signed their soul over to the thermal utilities, but we do have a lot of legislation that is helping gas utilities get comfortable with that idea. The way that they get comfortable with that is through thermal energy networks, which I know you have talked about on this show. There are quite a few pilots that are getting off the ground in New York. Obviously, there are some in Massachusetts. California is looking at neighborhood-scale pilots, and one in four states have legislation that is related to thermal energy networks.

David Roberts

Are those existing thermal energy networks happening in places governed by gas-only utilities and being put in the hands of a gas-only utility?

Kristin George Bagdanov

Some definitely are. I think Colorado and Washington — I have to check for sure — have legislation that is having these gas utilities try out thermal energy networks. Some of the utilities in New York, through the Utility Thermal Energy Network and JOBS Act, are developing pilots that are going through the regulatory process, and some of those are gas-only.

David Roberts

This gets to another political economy question. Technologically speaking, if you’re running on gas and you’re contemplating a transition, you have two basic choices. You can go all-electric with air source heat pumps and electric appliances, or you can do these thermal energy networks, which are sort of geothermal. If you’re in an area with a gas-only utility, they might have a strong preference for the latter over the former, since the latter means they still have a job and things to do and the former means they’re going away entirely. Could you end up in a political scenario where gas utilities become advocates for thermal energy networks, or is that too hopeful?

Panama Bartholomy

That is what we’d love to see. I love how so much of your conversation is centered in 2040 right now, as opposed to the late 2020s, where so much of what we are trying to do is begin to really prove out these models. If you look at the full suite of stakeholders here — utilities, unions, customers, ratepayers, politicians, installers — everybody needs it to be proven right now: this neighborhood-scale thermal energy network, prove that it’s cost-effective, prove that it’s functional, prove that it’s safe, all these different proof points. I think we all, particularly as we get older and get deeper and closer to retirement, want this to be done, this transition to be over.

We also have to sit in the reality of where we’re at in the transition and play our role in it. Right now, where the politics are and where the proof points are, we need to have a few hundred really successful projects over the next five years in a bunch of different climate zones and a bunch of different service territories to be able to prove out this model so that as, unfortunately, climate change gets worse into the early 2030s, we’re able to point to this new model to be able to say, “Let’s go to scale. We’ve proved it. The political weight has now come back due to the direness of the climate situation.” Let’s go with it to scale.

David Roberts

One more thing on the death spiral, Kristin — the so-called death spiral, where people defect from the gas system, the costs are shared in a smaller group, that cost pressure then causes more people to defect, etc. One thing I wanted to emphasize, and I picked this up from watching the webinar: I’m not sure people appreciate this. It doesn’t take a high level of defection to trigger this. It does not have to be a mass — it doesn’t have to be a majority. One of the people on the webinar said in her model, about a 2% defection rate causes prices to rise by 50% over a decade.

Kristin George Bagdanov

We have this scattered landscape of utilities and laws and regulations, and we don’t want these utilities to be moving at different paces. If you live in one state, your gas bill is going to be astronomical, while in another state, maybe it’s manageable. That’s part of the need for not only this state regulator-led managed gas transition, but it really needs to be a national effort. That’s the exciting thing that we — I said national, not federal. No, that would be great. We’re not in 2040 right now, as panelists said.

David Roberts

But you guys are awfully optimistic about 2040, I’ll say.

Kristin George Bagdanov

I know. It’s when everyone wrote their climate laws for 2030 and now we’re almost there.

David Roberts

I know. What year is it?

Kristin George Bagdanov

The point I’m trying to make is that a lot of our regulators are looking to each other at different states. That’s what’s cool about the future of gas proceeding. I remember when Illinois opened theirs a couple years ago, they had done their homework. They had checked what was in scope in all the other states and then they had come up with a great scope for themselves. Same with Maryland, which just opened last year. It shows that these regulators and policymakers and communities and advocates are paying attention to what’s happening. We’re not starting at zero in every state. We’re leapfrogging.

David Roberts

Yeah. The way we have tried to decarbonize US residences to date is basically house-by-house. It’s not working very well for a bunch of reasons. Maybe one of you or both of you can get into all of the many reasons it doesn’t work. I’m particularly interested in the experience in California, where they really plowed a bunch of money into this and put a lot of work into this and still are way behind their goals just because persuading one homeowner at a time is not great. Talk about the house-by-house model that’s reigned so far.

Panama Bartholomy

What we’ve done with building decarbonization in this country is we put our values around why we want to decarbonize — clean energy, clean air, dealing with climate — on the back of 200-year-old-plus industries of plumbing and HVAC installations and said, “Please save us, please adopt all of our values and do everything in line with what we as environmental advocates would do as well.” As you can imagine, there are challenges to that. We don’t need to go into a lot of detail about the challenges of getting a heat pump or getting a water heater. There are all sorts of characters out there in that industry.

From a climate perspective, because we’re here on Volts, it’s incredibly hard to plan for reaching your climate goals if you’re just basing it off an appliance-by-appliance or a building-by-building approach. How will you ever know if a neighborhood is ready to be taken off a gas system if you have no visibility into any of the appliances and any of the buildings within that neighborhood at all? You need to have a better way to be able to see inside those buildings, be able to understand, “Okay, this whole neighborhood is ready. We’ve gotten this neighborhood ready to leave the gas system.”

It’s also really expensive the way that we’re doing it right now because of that lack of visibility. When a pipeline’s coming up for replacement, if a utility doesn’t know and a regulator doesn’t know anything about that neighborhood or any of the appliances from a safety perspective, they’re compelled to go ahead and the regulator approve it and the utility would be happy to put it in. As we’re trying to really expand the electric system and upgrade it, we’re also gold-plating the gas system in a seven-year investment in a system we want to be off of in 20 years.

From a societal perspective, it’s one of the most expensive ways we can do building decarbonization. I would push back on your assertion that it’s not going well. Five years ago, America was number three in heat pump sales in the world. We’re now the top market for heat pump sales in the world. Some of it is new construction.

When we started this movement eight years ago with a bunch of others, you had New York Times doing articles about “What’s a heat pump?” Now you have articles from them, AP, and others about how to choose the right heat pump for your house. The vibes have really changed. You look at what’s happened over the last few years — the election, the IRA — you have a whole bunch of headwinds and yet you continue to see the market trends heading in the right direction.

David Roberts

As you alluded to just there, the key move in doing this in a more rational and cost-effective way is some kind of chunking. You need to take groups of buildings off the gas system at roughly the same time, just for all kinds of cost reasons. That should be sort of obvious — for your workforce, for your, you know, on and on.

What does that mean? Who chunks? Who decides the size of the chunk? Who manages that process? What is the entity? Is it the utility? Is it the PUC? Is it the legislature? Who decides the size of the chunk? Who locates and chooses the chunk? Walk us through how this is supposed to work.

Panama Bartholomy

Absolutely. You coined a new term to add into the lexicon: chunky decarbonization. We’ll see if it sticks. This is being called a number of different things right now. You may hear it called zonal electrification, you may hear it called intentional electrification. At our organization, we like to call it neighborhood-scale building decarbonization because it suggests — whether it’s a small neighborhood or a large neighborhood — you’re taking a whole bunch of buildings off of the gas grid at the same time. It provides climate planning, ratepayer protection, and equity protections that just aren’t there from a building-by-building approach.

It allows you to prioritize lower-income or vulnerable communities at the front end of the transition rather than leaving them as some of the last buildings on the gas grid. It also has a real benefit for what you brought up before around educated consumers. The last thing that a consumer wants is to become an expert in air conditioning. When their air conditioner breaks, they just want their air conditioner back. They don’t want to become an expert in efficiency levels and rebates. They just want somebody to come and help them out with it.

They also want to make sure that there’s a good contractor that’s going to make a good installation. This neighborhood-scale approach — besides the climate, equity, and ratepayer backstop — also ensures that we’re going to be able to bring good contractors to provide just enough education to consumers and get them a really good product put in their house. Because you’re taking a programmatic approach, you’re going to have good quality control on the back end and commissioning of all these units. You don’t have a bad HVAC company coming in, making an installation, and then taking off, leaving a customer suffering through it.

David Roberts

Panama, you keep saying “you.” Who is “you”? Is “you” the city government, is “you” the gas utility?

Kristin George Bagdanov

With regard to who chunks and how chunky it is, there are a lot of options. The impetus could even be organic and grassroots. A neighborhood can take themselves off of the gas system, raise their hands, and just do it — cap your gas line. That is the harder route because it requires you to be fronting all the costs.

The way we see this happening right now, and the way that it makes the most rational sense in terms of declining and decommissioning the gas system at the same rate as we’re scaling clean alternatives, is you look at the map of the gas system, which is very hard to do. A lot of commissions don’t even have basic access to the mapping of the gas lines. California just got it, and you need to sign an NDA to see the full set of plans anyway. You need that map. Then you need to know which pipes are set to be retired just according to their age in 10, 15, 20 years.

Then you look at those neighborhoods, you start to educate them about switching off gas to electric alternatives. Instead of paying $2 to $7 million to put in that new gas pipeline, which is the range that we see across the US, you are going to buy everyone the appliances they need with that money and cap that gas main. That is the utility-led approach. That is what is going to be piloted in California, which is required to do 30 of these neighborhood-scale pilots in the near-term future.

David Roberts

To be clear, the utility is buying and installing the electrified equipment in the houses necessary to pull this off?

Kristin George Bagdanov

That’s what’s being discussed and proposed in these pilots. The details are getting ironed out. If you have $50 per customer that would otherwise be going into a new pipeline, that should be used for the transition for this project.

Panama Bartholomy

You asked, “Who? Who’s doing this? Who’s overseeing it?” This should be done at the regulator of a utility. A regulator utility is looking at the overall system in front of them. They know what laws are governing that state — the climate laws, the other energy laws, and other things that they have to take into consideration. They’re the ones that should be setting up the rules for this: what’s the rate of return on a project like this, what kind of labor should be used, should this be union labor, should this be non-union labor, what types of efficiency levels, what sort of consumer protections are going to be put into this as well. This should be done at the regulator level.

Unfortunately, right now in a lot of America, regulators are really afraid to step out without legislative direction. You need legislatures a lot of times to be able to provide direction and provide some of this detail broadly and then give direction to the public service commissions, the public utilities commissions, to then provide the detail to the utilities to then go ahead and carry it out.

David Roberts

Let me ask a direct question about that because this is what breaks my brain over and over again. The logic of chunking, I totally get. But either you persuade everyone — and I’m trying to imagine in America a large chunk of people who come to a unanimous decision and I’m struggling — or someone somewhere has some power to force someone to do it. I can’t imagine in America who is going to come force a homeowner to change their HVAC system without producing weeks of Fox News headlines. How do you get around that dilemma? You either have to push and force some people or you have to wait for unanimity. Both those seem difficult for me, Kristin.

Panama Bartholomy

You want to talk about obligation to spend or obligation to serve? I can talk about some of our experiences in California where this is happening.

Kristin George Bagdanov

For sure. I can zoom out a little bit with the history. We wrote a report on this a few years ago. What you’re referring to, David, is that we have in every state, every public utility code, a law that essentially says “Every public utility shall provide just and reasonable service.”

David Roberts

That’s not what I’m referring to, although I do want to discuss that. I’m saying even if there was no legal obligation to serve —

Kristin George Bagdanov

Yeah?

David Roberts

— going and telling them they have to do it — never mind legally, just PR-wise, optics-wise, every right-wing journalist in the country interviewing that person the next day — that’s the problem. We’ll get to the legal thing in a minute. How do you get around that problem, where you ultimately have to make someone do this?

Panama Bartholomy

At this point in the transition, this is one of the bigger challenges and one of the things that you’re seeing a lot of experimentation around. From a utility perspective, particularly a dual-fuel utility in a state that has climate laws, they’re seeing the writing on the wall. That’s why you have experimentation happening around a bunch of these utilities trying to pilot these projects.

Some of the early ones you’re seeing are outreach that looks like, “Hi there, we have a pipeline replacement coming up in your neighborhood. It’s going to cost this amount of money. We prefer to not do that and instead give you a $35,000 check to make upgrades to your house. Haven’t you ever got a better deal from your utility than a $35,000 offer? As long as you and all your neighbors can agree to take this check, then we’ll be shutting off the gas to this neighborhood in two, three years once we get this done.”

David Roberts

I would feel better if I had a live example of that working to look at.

Panama Bartholomy

It’s happening right now.

David Roberts

You’re getting neighborhood-level unanimity in real-life examples today?

Panama Bartholomy

Yes. Pacific Gas and Electric has the Zonal Electrification Equity Pilot Program. It’s the first public RFP that’s been released by a utility to bring in consultants to help them across their entire service territory go out and do neighborhood-scale electrification. You have individuals doing digital outreach, mailer outreach, and door-to-door knocking to recruit people. You then have analysis of every single home being done, checks being cut out. The very first ones are just going in this month because you had neighborhoods that agreed to have it happen.

Those are the first public ones we know of. This has been happening for years now behind the scenes in PG&E territory as they have been doing onesie-twosies, learning about this and studying it to eventually be ready to release an RFP to expand it across their service territory. I’m not here telling you this is easy. You are dealing with a group of humans. You can imagine. That is why one of the laws that passed in California to set up this pilot program reduced the threshold for approval for a project like this from 100% of building owners down to only two-thirds of building owners within that neighborhood in order to allow it to go forward.

David Roberts

Interesting.

Panama Bartholomy

That’ll make for very interesting Nextdoor conversations.

David Roberts

No kidding. I’m trying to imagine the Nextdoor conversations about jackbooted thugs coming and jamming heat pumps in your house. Damn it, Janet!

Panama Bartholomy

Exactly.

David Roberts

Kristin, let’s talk about the legal stuff. There are two regulatory concepts that are highly relevant here. First is this obligation to serve. That, as I understand it, is just in exchange for getting a monopoly over a territory, the gas utility is obliged to provide service to anyone who wants it, which makes sense on the surface. But then when you’re talking about phasing out gas, you’re imagining, “Oh, there’s one gas user left in the neighborhood, but the utility is legally obligated to maintain the entire gas network to provide for that one.”

You get into weird paradoxical stuff. How do you get around this or how do you address it? How do you reform it? What do you do about it?

Kristin George Bagdanov

The caveat with the obligation to serve is they’re required to provide service if it makes sense economically for them, which is why you don’t have gas lines necessarily going deep into rural areas and why rural customers are on propane.

David Roberts

That seems like a pretty important proviso that you can squeeze a lot through.

Kristin George Bagdanov

They have a backdoor out of it. What’s interesting, as I said, some of these statutes are one short sentence. Some, like California, are four paragraphs. The legal scholars I’ve spoken with about the obligation to serve say, in a lot of these states, the way it’s written, it isn’t saying you have to continue providing gas service, it’s saying you need to provide the service for the end uses that the building wants to use. We know that every residential and commercial building end use can be served now by electricity.

What we have is a regulation written for non-competing monopolies. In reality, what we have are competing monopolies. That’s an issue that we need to address by updating that regulation and making it fuel-neutral — obligation to have all of the energy sources you need to power your iPad and your pool heater.

David Roberts

Do you think in places where it’s already written — maybe accidentally — but already written neutrally, already written without the word “gas” in it, that you could legally get away with just interpreting it as fuel-neutral already?

Kristin George Bagdanov

This is where I want to tell regulators, “You’ve got it, you go regulator, you can do it, I believe in you,” because, as I said, the legal scholars I talked to said there’s nothing legally stopping this other than the fear of litigation.

David Roberts

There would be litigation, you know there would be.

Kristin George Bagdanov

Obviously, you don’t want to be ripping out someone’s gas water heater overnight. But there should already be a pathway. We live in the world we live in. What a lot of states are doing is passing even more legislation to be even more directive. We see this in Massachusetts — they thought that they passed a bill that solved this issue, and now there’s a debate in the —

David Roberts

What did they say? This is the stuff I love. Tell me, what did they put in the bill?

Kristin George Bagdanov

I don’t know the exact language in the bill, but basically it was interpreted as, “This allows the utility to do that swap of gas for electric to serve the end use.” There’s a proceeding open right now debating whether it actually said that. Utilities are pushing back on the supposed clarification. We’re really at a sticking point right now with that.

David Roberts

Ideally, you’d get a state legislature to just say unequivocally, “There’s a fuel-neutral obligation to serve.” That would be the easiest solution.

Panama Bartholomy

That’s what most regulators need nowadays. They need the backing of the legislature to move forward on it.

David Roberts

Is there a real-world case where the obligation to serve in particular is the actual sticking point, is the thing in the way, or is this just a problem we anticipate?

Kristin George Bagdanov

It’s not like customers are citing this statute, but as Panama said, I’m sure with PG&E’s attempts on their own to do this work in California, if they knocked on a house and someone was like, “Get off my lawn, I love my gas stove,” that’s the end of that conversation.

Panama Bartholomy

We just had a series of filings last week at the California Public Utilities Commission around some of these early pilots under this program that was approved by the legislature. A gas-only utility in Southern California very clearly said the obligation to serve needs to be preserved and protected and respected within this program. It is absolutely real-world around the country, continually brought up.

David Roberts

You need clarity on that. That’s one of the two big things. The other is these line extension allowances. I love this because it’s this obscure, wonky little footnotey thing in the regs, but it’s a lever that can change things quite a bit. Kristin, what is a line extension allowance?

Kristin George Bagdanov

A line extension allowance is allowing new customers to join the system for free and charging existing customers for that new gas line.

David Roberts

That means if I don’t have gas service in my house and they come and install a pipe from the main line to my house, that costs money, I don’t have to pay that.

Kristin George Bagdanov

Yeah, the idea is you’re going to pay back that loan that the existing customers gave you over time through your use of the system. That was true at a certain point when the system was growing. What we have is a mature system that is stagnant or declining. There have been a lot of deliberations about the economics of this. Every utility uses a different little formula. Some of them calculate it by feet. New York just got rid of their hundred-foot rule, which was fairly arbitrary — you can get 100 feet of service line for free when you come on.

David Roberts

That’s very arbitrary.

Kristin George Bagdanov

It’s a nice round number. Others use complex formulas to calculate what the payback period and all that is. The point is, why are we luring people onto the sinking ship? Instead, just show them where the other ship is that’s not sinking. It’s making everyone’s gas bills go up that are already on the system. It’s aggravating that cost escalation.

David Roberts

The obvious alternative here is if you want gas service, you have to pay for it. What does that translate to? What is the typical cost — how much would it raise the cost for me to get gas to my house?

Kristin George Bagdanov

Utility math is special and unique to every single utility. I want to say it’s in the thousands, but we looked at how much ratepayers would save if every state in the US stopped giving gas line extension allowances. The range was from $3 to $7 billion a year. It’s such a range because there’s such a lack of transparency about these costs that you have to use a very small data pool and then extrapolate from that. In bulk, it is significant and it varies widely.

David Roberts

I was trying to figure out what level of disincentive we are talking about here.

Kristin George Bagdanov

Enough for a builder to think “Why am I running gas to this new development?” California has gone one step further where they have removed electric line extension allowances. The electric side has these too. They have removed them if it is to a mixed-fuel building. If you say, “I am going to pay for that gas line,” and you are obviously running your electric line as well, then the state of California is going to say, “You do not get the incentive for the electric line because it is a mixed-fuel development.” They really hit it on both sides to disincentivize.

David Roberts

You only get the electric line extension paid if you are doing all-electric development.

Kristin George Bagdanov

Yeah, it’s a carrot —

David Roberts

This is mostly about new build. I would guess this is mostly about trying to nudge developers away from gas for new build.

Kristin George Bagdanov

Yeah. It’s right-sizing the economics. Why are we pretending that we’re still living in the 50s where growth was abundant and sprawling? Instead, let’s contend with the fact that we’ve met the saturation point and we need to start to think about what’s next.

David Roberts

This is not some new thing, and this is not really against gas. You should pay for whatever you get. Whatever service you want, you should pay for it.

Kristin George Bagdanov

People can still have gas. You just have to pay your share properly.

David Roberts

Let’s talk about the political economy of this, because as fair and obvious as it seems to us, for the person who wants new gas, it is going to be a bunch of new costs. New York is a case in point. They got rid of their 100-foot rule, but then a couple months later suspended implementation of that rule through the end of 2027 because they were beset by a giant torrent of industry opposition. Are the gas people aware of this and on it and against it?

Kristin George Bagdanov

Yes. My favorite report to read is by the American Gas Association on line extension allowances. They called the act of removing gas line extension allowances “an act of government-imposed inequality” because it was making it harder for new customers to join the gas system. They’re saying, “Oh, it’s inequitable to remove these incentives,” when we’re saying, “No, it’s more equitable because you’re protecting people from these accelerating costs by not letting them walk down that path.”

David Roberts

If you’re going to say getting rid of a subsidy to customers is unfair because we gave the subsidy to previous customers, that is just an argument for all subsidies to customers being permanent. You could never get rid of any subsidy to customers by that logic.

Panama Bartholomy

Election years are tough on candidates and all sorts of decisions are made in election years that suddenly get reversed as soon as the election is over.

It was a torrent of opposition, but it was also a lawsuit that was filed and the delay was in reaction to the lawsuit to let the lawsuit play out before the implementation of it took place. It happened to coincide with an election year, and we will see if anything changes after November.

David Roberts

Kristin, would you say that this line service allowance — is this what you would choose as a first foray, a first shot fired in this battle? It seems a sneaky way because when they did this in California, it really showed up in new builds when they got rid of these line service allowances, it shifted new builds markedly in the direction of electrification. It’s a pretty potent reform. Is this what you would advise people to go after first?

Kristin George Bagdanov

Yeah, I think of it as pretty low-hanging fruit for regulators because it’s well within their purview of debating which costs are prudent and which costs should be recovered. That’s their bread and butter. They don’t have to talk about climate for it. It’s just the formula that the utility is using. It’s punishing existing customers and rewarding new customers. We need to adjust it so the economic signals match across the board.

David Roberts

At least we shouldn’t be actively subsidizing the expansion of the gas system. Seems like a baseline argument there. This is another political economy question. I notice in a lot of the materials you all refer to the thermal workforce, which I think is very clever terminology, trying to convince all these gas workers that they are part of a larger family than they might think. Are they buying it? What is the valence of the workforce — the utilities — toward this stuff? I know we have at least one or two concrete examples of unions supporting these thermal energy networks when they happen, but I don’t know how bespoke or individual that is. What is the larger mood or disposition of labor toward this transition?

Kristin George Bagdanov

I can speak to a couple aspects of that and Panama can as well. We started using this term “thermal workforce” because we got tired of that binary of fossil fuel workers and clean energy workers, which I don’t think is doing anyone any favors. We also were learning from the implementation of things like thermal energy networks that someone today who is spending 90% of their time laying gas pipes, maybe in 2040 or beyond, might spend 90% of their time laying water pipes for a thermal energy network. Why categorize them as one or the other?

When we talk about the workforce, we’re typically thinking of two categories: independent businesses or contractors, and union workers. It varies a lot by state and by local union chapter where their mood is. We wrote a book about the transition with a couple locals in California who were very excited about the possibilities of the transition and wanted to think about where their union showed up in the neighborhood-scale decarb scene. I think there is a lot of goodwill there.

David Roberts

One thing that occurs, and I gestured at this earlier, is that transitioning from laying gas pipe to laying water pipe — plausible. Transitioning from laying gas pipe to being an electrician or installing a heat pump — not really plausible. It seems to really matter what transition you are talking about, where you are transitioning to, in terms of the labor piece of the equation.

Panama Bartholomy

A managed approach to this would be that you change the goals of the gas system. Right now, our entire regulatory structure for these managed monopolies is built on growth and perpetual growth into the future. Once you change that, once you have the political will to follow through with what we need for our climate future, you look at a managed decline. That’s not going to happen in five years. It’s not going to happen in 10 years. This is going to be a process, and many of the current workers that are working on the gas system are going to be going through retirements — just natural retirements — over the next 20 years.

What this should be is really a management of how many people you need to bring in, what is the minimum viable workforce that you need to be able to manage the wind-down of the system, and then you are bringing in folks and training folks based on that approach.

David Roberts

A question a bunch of people have: when people find out that gas companies are coming in and replacing these pipes with new pipes that are built and designed to last for decades, often in a state that explicitly says it is going to decarbonize before that — either you are going to use that through your lifetime and blow through your carbon target or it is going to be stranded. It seems like we are doing this all over the place right now. It seems like we are building up a lot of assets that are going to be stranded.

Part of my question is, right now it seems gas customers — insofar as anyone pays the cost of all those stranded assets — it’s gas customers. Maybe one thing we could do to discourage the building of destined-to-be-stranded assets is putting a little more of the consequence and accountability on executives or shareholders or investors, not customers. Is anybody talking about that?

Panama Bartholomy

They are. There’s a piece of legislation just introduced in the past few weeks in California, again by Senator Stern, that would put in place a retirement fund paid for by shareholders of the utilities in order to force this conversation forward. I think you’re going to see a lot more advocates and legislators across the country looking at this scenario and making shareholders more responsible for the end of life of these systems rather than ratepayers.

David Roberts

If you want to make a bunch of profit off building these things, you also need to know that you are going to pay when we shut them down. It seems a sensible thing to tell people.

We’re near the end of time, I wanted to finish with all these future of gas proceedings that are going on. As we were saying, we’re gearing up for a transition. Fourteen states, I think, or something like that, have these things going on. Are you watching them? What’s happening in them? Is there any consensus, alignment, convergence among the different PUCs about how to do this? Are any of them getting genuinely ambitious, contemplating big things? Are there any spicy future of gas proceedings? Give us a little — what’s going on out there?

Kristin George Bagdanov

Let’s see. How many chili peppers would you rank Massachusetts? I know you had Jamie Van Nostrand on the pod and he told you quite a bit about theirs. It continues to be pretty spicy in terms of — they’re having these debates about obligation to serve, they’re an inch away from hopefully removing gas line extension allowances officially. The closer they get to doing that, you see more pushback.

David Roberts

That’s always the thing about these meetings. Everyone loves a meeting, but this is what I want to know — who is moving into action?

Kristin George Bagdanov

I have faith that a lot is going to happen this year. There are quite a few where line extension allowances are up for debate. Maryland is getting close as well. Minnesota is looking at it, Illinois is looking at it. I think there are about six states and DC that are currently deliberating line extension allowances through these proceedings. We are hopeful there. California is focusing more on this neighborhood-scale solution side in what is their part two of their future of gas proceeding. They have just identified over 150 priority zones — places where the utilities could be piloting these neighborhood-scale projects.

David Roberts

Is that the only state that’s actively chunking, actively currently chunking?

Kristin George Bagdanov

New York is chunking as well. They have, I think right now, 10 thermal energy network pilots led by utilities that are getting close to being greenlit for that construction phase. The engineering plans are still being looked at by regulators and others. They have gone really far in these neighborhood-scale projects there. I think it’s eight states in total working on utility-led thermal energy networks right now. There is a lot of activity there.

In future of gas, we had two new proceedings open last year — Maryland and Maine. Maryland — they had been trying to open it for over two years. They had been petitioning and they are going to hit the ground running because they have been scoping this for a long time and the advocates are ready. That is definitely one to watch in terms of spiciness.

Panama Bartholomy

You can’t run for president on the Democratic ticket without a future of gas proceeding in your pocket.

David Roberts

We declare it so.

In how many of these future of gas proceedings is a state saying explicitly, “Gas is going away, we’re moving off of gas”? I see everybody edging, holding hands and backing slowly to it, looking over their shoulder nervously. Has anyone turned and faced the actual thing and said, “Yes, world, we’re doing this”? Is that part of any of these?

Kristin George Bagdanov

I feel like in regulator speak that looks something like what happened in Massachusetts, which was, they were like, “Okay, when you’re going to evaluate new gas pipeline projects, you have to also evaluate non-pipeline alternatives to see which is the better option, which is the most cost-effective.” That to me is basically saying, “Hey, you can’t just default to the status quo of expansion. You actually have to look at alternatives.”

David Roberts

“You can’t default to the status quo” is still a far cry from, “We’re explicitly —” I just want someone to say it out loud.

Kristin George Bagdanov

Poor regulators.

David Roberts

Everybody knows it.

Kristin George Bagdanov

Maybe if the legislature says that, then the regulators will feel empowered to say it.

David Roberts

Just say it and take the heat. Because it’s always — my pod with Emily Grubert, half the pods I do come back to the basic conclusion that we should plan this and do it on purpose rather than stumbling backward into it. But you can’t do that if you won’t admit what you’re doing, if you won’t acknowledge that that is what you’re doing. Once again, maybe I’m hoping for 2040 here.

Panama Bartholomy

It gets back to — we’re big lovers of Donella Meadows over here, the systems thinker. When you look at her leverage points, it’s the goals of the system. What are the goals of the system? That’s what you’re talking about right there. It’s one of the most powerful leverage points. Until we change that goal by these regulators, we can’t expect to see the wholesale change that we need in order to meet our climate targets.

I would say the hardest and the most important job in this energy transition is that of the Public Utilities Commissioner — what they are going to have to do over the next few years. They are responsible for all of it. They have no precedent and quite often they do not even have the backing of their boss. It is going to take them to really step up for the rest of us to be able to make this possible.

David Roberts

Panama, half of them are just randos that are cousins of the gas exec or whatever.

Panama Bartholomy

That’s also random.

David Roberts

These are not — it is not necessarily the army that one would recruit if one were starting from a blank sheet of paper, but —

Panama Bartholomy

Hey, they get $160,000 a year. What more do you want?

David Roberts

All right, we gotta wrap up. I thought I would just finish since in my mind, this task — specifically getting the 70 million American homes that are heated with natural gas to electrify — is one of the most difficult and thorny: logistically thorny, technologically thorny, politically thorny, regulatorily thorny. Pick your poison. This is some of the hardest work and I love that you guys are out doing it. I thought I’d end on a positive note. Maybe each of you could tell me, in this world of endless struggle, of your Sisyphean struggles, where are you finding optimism? What is surprising you? What do you think is going faster? What’s better? What’s giving you hope?

Panama Bartholomy

We as an industry — I mentioned it before — we’re now the global leader for heat pump sales in the world. There’s not a lot of sectors where America can stand up and say we’re leading on clean energy or the clean energy transition. It’s not happening in electric vehicles. It’s not happening in batteries. It’s not happening in renewable energy. It’s not happening in carbon capture and sequestration. This is an area where it’s not just 51%, we’re talking 63% market share, where we can proudly stand up and say we were third place five years ago, we’re now number one and continuing to move forward. That’s a market transition that you just haven’t seen from many technologies ever. It’s incredibly encouraging, and I think we’re going to see it continue.

David Roberts

Cool.

Kristin George Bagdanov

On the social side of things, we see that people are learning about the threats to their health caused by combusting fuels in your house. Who would have thought? It seems like it’s clicking on a large scale that people are realizing life doesn’t have to be this way. It could be better. It’s like when the pandemic hit and you didn’t have to commute two hours to your job, and you’re saying, “Oh, wait, my life could be different.” It’s “Okay, I could pay less and I could not be aggravating my asthma, and my community could be healthier.”

I see that showing up in different parts of whether it’s pop culture or communities showing up to public utility commission proceedings — these tiny little rooms that are getting packed with people with signs. We’re hitting a level of awareness socially where people want this, a lot of people do, and we just need to make sure it’s accessible to the people who need it most.

David Roberts

Amen to that. Thank you both so much. This has been delightful. I love hearing about this. I love that all this work is going on. Maybe we’ll have you back in 2040 and we’ll check back in and see if all our —

Kristin George Bagdanov

We’ll have nothing to talk about. It’ll be done.

David Roberts

Boring. Electrification got done.

Kristin George Bagdanov

Done and dusted.

David Roberts

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

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

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David Roberts

Greetings, salutations everyone. This is Volts for May 20, 2026: “Sooner than you think, electricity is going to be cheap, abundant, and boring.” I’m your host, David Roberts.

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Late last year, up in Minnesota, the power utility Xcel Energy proposed a new program called Capacity*Connect that would have it deploy 200 megawatts of battery storage — not in the form of large utility-scale installations, but in smaller chunks distributed throughout the grid, placed atop commercial and industrial buildings like big box stores. It didn’t draw much attention outside the energy world, but my guest today believes that it augurs a fundamentally new chapter in the history of the US electricity grid, and for the US economy more broadly.

Back in 2024, I talked with Pier LaFarge, the founder and CEO of Sparkfund, about his vision of a utility-led distributed energy expansion. Now he’s back to make an even stronger version of the case: what Minnesota foretells is that utilities are going to start deploying distributed batteries under conventional utility cost-of-service rules and those batteries are going to solve all our grid problems.

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They will help utilities better utilize their currently wildly underutilized grids, which will in turn enable the addition of data center load that will reduce, rather than raise, electricity prices. Over time, with the addition of these and other batteries to the system, US electricity will become cheap, abundant, and boringly reliable.

It is, to say the least, a provocative case. Lots of people object strenuously to the notion of utilities owning distributed energy. Lots of people are skeptical that storage can really, in practice, substitute for more long-distance transmission and more generation. Lots of folks think raw materials or geopolitics will impose limitations on the number of batteries we can access. Lots of people think all kinds of things, and I’m going to talk with Pier about all of them today. I’ve been looking forward to this.

With no further ado, Pier LaFarge, welcome back to Volts.

Pier LaFarge

David Roberts, thanks for having me. Great to be here.

David Roberts

I’ve been thinking about this episode for a while, thinking about how to structure it, and I think in my mildly neurodivergent adjacent way, I have come up with a structure for this episode that makes sense to me, may or may not make sense to anyone else, but I’m going to lay it out for you and then we are going to do it.

Pier LaFarge

I can’t wait.

David Roberts

We’re going to start with just the facts of Minnesota, what’s happening in Minnesota, just the structure of it, and then from there we’re going to vault all the way up into the stratosphere and talk about batteries on the grid. What are the benefits of having a crap ton of batteries on the grid during a time of load growth and electrification?

Then I want to back out from that. What are the benefits specifically of distributed batteries? Why might we want those batteries to be distributed throughout distribution networks rather than clumped up in large utility-scale transmission-based facilities?

Thirdly, insofar as we do have some preference for distributed batteries, why is the way Minnesota is doing it the way to do it as opposed to other alternatives? For all of those out there who have objections and complaints about this Minnesota program, we are going to get to them at the end, but I want to work my way backward to it so we understand what we are aiming at. Let us start with Minnesota. Tell us, what is the Capacity*Connect program?

Pier LaFarge

In Minnesota, the largest utility there is Xcel Energy, as many of your listeners know, and what Capacity*Connect was, was a program brought forth by Xcel and filed as part of their Integrated Resource Plan, which is their plan for how they’re going to grow the grid in response to load growth and grid needs. They put an item in there called Capacity*Connect. It’s an idea that Sparkfund helped develop and bring to market broadly as a distributed capacity procurement, which is pretty straightforward. It’s just what it sounds like.

It’s a procurement of a bunch of distributed capacity because in Xcel and the commission’s view, the grid can benefit from several hundred megawatts of batteries that can charge up when there is plenty of energy on the grid, dispatch when there is peak and constraint, and in doing so help operate the grid more efficiently, sell more electrons over that grid, and make the grid stronger, more reliable, more capable of handling intermittent renewables, and also make power cheaper if there is someone to buy it.

Minnesota Capacity*Connect was a 200 megawatt regulatory filing that was approved in a historic 5-0 vote several weeks ago at a commission hearing.

David Roberts

That’s significant. We should pause on that. That’s not taken for granted at all. This was a long discussion and contentious.

Pier LaFarge

No question, and received quite a bit of pushback from, in particular, the distributed solar industry. But at the end of the day, it was exciting to see a commission ultimately evaluate a proposal to make batteries — again, to use your word — a relatively boring part as the next generation of distribution grid infrastructure. They said, “Look, batteries have these properties that the grid really wants. We can use them to benefit every ratepayer. Let Xcel invest in them, operate them to the benefit of the grid.”

Ultimately, that’s no different than transformers or substations or capacity banks. It’s just the next type of distribution grid infrastructure.

David Roberts

This, I think, is a key feature to understand here: these are not Genco. Xcel is a restructured utility. It is only a distribution utility. It does not own generation assets. This filing treats batteries as distribution infrastructure, the same as if they were building transformers or power lines. Xcel is going to own the batteries. This is crucial. Talk about the financial arrangement.

Pier LaFarge

One correction. Xcel is vertically integrated and they source their power through competitive RFPs from the market. They’re part of MISO, which is the regional operator and power market. They are vertically integrated. But it doesn’t change the importance. The reason that this decision is historic is regardless of the regulatory structure or market structure of Minnesota, this is a commission saying, quite simply, that batteries fix many of the problems on the grid. It helps us utilize it better. It makes it more reliable. It makes it better at handling and delivering intermittent renewable power. It makes it cleaner.

Most importantly, this is a commission saying, “Look, putting batteries all over the grid, hosting them at customer locations, paying those customers to rent their land.” There’s another interesting element of Capacity*Connect, which is that instead of a complicated bill savings or a customer taking out debt, this is a model that lets customers and community groups all over Minnesota benefit from the wealth of infrastructure build that’s used to support a growing grid.

David Roberts

To clarify, the utility owns these batteries, so it goes to a facility, a big box store, and says, “Can we rent your roof?” Just treating the roof as a piece of land, just as if it went and put a field of batteries in some greenfield outside of town somewhere. The financial structure is basically the same. You’re just renting a piece of land.

Pier LaFarge

That’s right.

David Roberts

The only financial deal that the big box store owner is involved in is he just gets a check every month, a rent check. He is not involved with the energy, does not own it, does not operate it, does not mess with the batteries. The batteries are owned, operated, and maintained by the utility.

Pier LaFarge

That’s right. We’re renting sides of parking lots, back fields, unused land. It’s a few thousand square feet. Think about a church. One of our first hosts in Minnesota is going to be a local church. That church is going to get real money every month for 20 years to help them run their community programs and operations. Participating in infrastructure wealth is best when it’s unburdened by asking that customer who — look, this is a church. Yes, they do a lot of things well in their community, but they don’t have to think about it.

David Roberts

They probably don’t have an energy division.

Pier LaFarge

They’re not meant to be taking complicated bets on long-term energy arbitrage or regulatory structures or making sure that their price of debt is covered by their revenue. These are people who wake up every day and participate in their community and go to their jobs and focus on what they do best. The utility in this case shows up, rents land, gives them money that improves their core business, and then the grid gets stronger and more capable of supporting growth.

David Roberts

When we talk about chunks of batteries, give the audience some sense of scale here. How big is a typical utility-scale battery field? Where is the line as you go down where you cross into “distributed”? Is there a line? Is there an accepted threshold?

Pier LaFarge

Most utility-scale batteries which are connected to the transmission system and help smooth out the timing of power are, call it, 150 megawatts to 300 megawatts. But even those big utility installations are built out of a lot of the same sized one- to two-megawatt batteries. They’re in shipping containers.

David Roberts

It’s all Legos.

Pier LaFarge

Stacking little Legos in a field and then they inject all at once and they look like a power plant from the perspective of the grid. Utility-scale batteries are fantastic. They are absolutely part of why batteries are going to transform the grid. Utility-scale batteries are the first to scale and a critical part of what I think you’re framing in that. But these distributed batteries, they are one to three megawatts per location as filed. They are shipping container batteries. They are prepackaged, they are engineering templatized, they’re standardized. You get a lot of the critical cost efficiencies that you get from a utility-scale battery. You’ve just broken it into little pieces.

Two hundred megawatts is a substantial utility-scale contribution in aggregate. But it’s put exactly where the grid needs it most at the local level. The utility and Sparkfund are working to determine where on the grid these batteries will provide the best value to ratepayers. When you incorporate them into the grid and operate them 100% for the benefit of the grid, that is just the same as a utility investing in a new substation or transformer that ultimately delivers that value to society. That’s why this commission decision is so historic.

This is the first moment that hundreds of megawatts of distributed batteries are going to be incorporated on the distribution grid as normal grid infrastructure. We believe it’s the largest such deployment and largest such approval. It really is a big step in the entire United States. Last year in 2025, the country installed just shy of 200 megawatts of these middle-sized commercial industrial battery installations, call it 191 megawatts in the entire country. To see one state put a 200 megawatt deployment into play is a huge victory for what batteries can bring to the grid.

David Roberts

That’s Minnesota. There are lots of questions about the model and about different models, but for now we’re going to leave that there and we’re going to rocket up into the stratosphere and then we’ll slowly parachute back down here to Minnesota.

Pier LaFarge

I’m ready.

David Roberts

Let’s jump to the big question, because this is why this all matters. Let’s talk about our shared vision of a grid with crap tons of batteries on it. Let’s put aside for now the question of where the batteries are located, how big the batteries are. Let’s just talk about a grid with cumulatively a crap ton of batteries on it. Why do we want to get there?

Pier LaFarge

The simplest way to put it is batteries are electron time machines. Why does that matter? Why do you need an electron time machine? We built our grid to peak, which means we built the grid to be big enough to handle the tightest, highest demand, 50 to 100 hours of the year. That wasn’t a mistake. A lot of people hear that and they say, “Oh, you overbuilt the grid.” No, you built the grid to be the size that gives us the economy and the society. We have the reliable power, the cheap power. We built the grid to peak.

It’s worth noting that America has the cheapest, most reliable power in the world. It’s easy to forget in these discussions that this thing works on a delivered basis and a reliability basis and a cost basis. We built the grid to peak and by necessity of the technology available. Big centralized generation, transmission, distribution. That meant that for most of the hours of the year you were almost by definition not using much of the grid you just built.

David Roberts

A familiar problem. Same with cars. Same with a lot of big systems. It’s something that you don’t really notice until you start noticing. With cars, you just look around, you’re like, “Oh, most cars are sitting most of the time. Most roads are unoccupied most of the time.”

Pier LaFarge

Exactly. People buy cars so that they can go to the grocery store, but they don’t go to the grocery store every hour. It is very important that when you need to get somewhere, you have effective transportation.

David Roberts

I’ve been thinking about it. It’s interesting. We built electricity to the peak, meaning we have made a social contract saying, “You can use as much as you want and we will provide it, period, full stop.” We don’t do that with highways or healthcare. With highways, we do restrict capacity. There are going to be times when there’s congestion and you can’t get to your destination in your preferred amount of time. We do restrict supply in almost every other system in our society.

This is a unique and interesting and different kind of system where we’ve just pledged, “Use as much as you want whenever you want, and we’ll build a system big enough to make sure it’s there when you want it.” That’s a remarkable thing.

Pier LaFarge

It’s a historic triumph, and I think it’s core to this discussion.

David Roberts

And a populist thing. I think this is what you’re getting at, but an incredibly egalitarian and populist thing.

Pier LaFarge

Absolutely. I think it’s one of the great triumphs of American infrastructure. There are several things in our society that we deem to be, to put it formally, inelastic, which means people deserve to use as much of them as they need and not be limited in that quantity. Water is one of those things. You wouldn’t have a water system that said, “Oh, sorry, it’s hard for you to have drinking water now or you just can’t take showers this time of day, sorry, let’s do pricing to make sure only rich people get the water.” That would be terrible. We would see that as a real political —

David Roberts

Although that is the way it works in many places —

Pier LaFarge

In many places —

David Roberts

Egalitarian, that we don’t do it that way.

Pier LaFarge

Yes, sir. This is again why I count it as a uniquely American infrastructure triumph. We live on a big abundant continent with a lot of resources, and we have, as a society, made some dramatic choices. You can code them however you want, but they are egalitarian choices to say we are going to have enough power, enough water, clean air. We are going to make investments as a society with a cost to deliver things that help human flourishing and keep people safe, happy, and productive so that we can achieve that national goal.

Power was one of the early — it was before we invested nationally in our water system — we did this in the 30s. Even more than the commitment to have enough power for society’s needs and growth to build a great nation, we also made an incredible decision of rural electrification that said you have an obligation to serve. If you build a house or a cabin anywhere in the territory of a US electric utility, that utility is obligated by law, chartered in public purpose, to deliver power to that cabin, string a line, cut down trees, get up the driveway. That is just a staggering and now taken-for-granted part of this conversation that shapes every aspect.

David Roberts

One of the things I always say to people is try to imagine if we had a similar social compact around driving. If you want to drive, you should be able to drive straight to your destination without slowing down whenever you want to go, wherever you want to go. Imagine the scale of highways and roads that we would have to build to accommodate that. If we just told people, “You can do it whenever you want,” and then if you did that, people would immediately start thinking, “Maybe we should figure out ways of persuading people to drive at different times so that we don’t have this enormous peak and we don’t have to build this elaborate roadway structure.”

Segueing back to electricity, we’ve promised everyone electricity whenever they want it. Consequently, we have built a system that will provide the peak — as you say — the most anyone could want at any moment. Within a year, we’ve built that much infrastructure, and now we have a bunch of infrastructure that’s not being utilized. This gets back to the grid utilization discussion. We’re utilizing our grid at a rate of about 50%. Fifty percent of all this money and investment we’ve plowed into this infrastructure is sitting idle because of this social compact. This is where batteries come in.

Pier LaFarge

That’s right. We’ve deemed electricity to be an inelastic good, a natural monopoly, something that we want as much as we need for the purposes of our society. We’ve regulated it to make sure that the way in which that’s done is balancing all of the real tensions between cost and availability as you described.

The job of a utility regulator is to determine, in your metaphor, how many highways are enough to let society have the quantity of this good it wants. One further digression you can remove if you want is driving is in the category of elastic goods. We think it’s okay politically and societally to limit how much people drive. It is not okay to limit how much water they can get out of their faucet or how much electricity they can put into their house.

David Roberts

One final note, this social compact about electricity is incredibly significant and important, but is only going to get more significant and more important as more and more of the services we use in our day-to-day life are run on electricity. Eventually, as our entire economy is run on electricity, then all of a sudden you can have as much as you want, whenever you want. It really starts to seem like a much bigger and more consequential pledge. Then you really have to start worrying about overbuilding. If everything is electric, the amount of overbuilding that you would have to do if you didn’t care about peaks would just be insane. We have to start caring about peaks again. This is where batteries come in.

Pier LaFarge

That’s right. From our daily lives to national security to critical infrastructure, the grid is going to be one of the great foundational inputs of this next chapter of our economy, as it was in the last.

Batteries have this unique superpower which, as I said before, they’re electron time machines, which has one simple function: charge up when there’s plenty. In those periods of underutilization, when the grid is not being stressed, you can charge a battery, you fill it with electrons, and then you can wait and move them in time until the grid cries out for relief and you discharge that battery.

When that battery is in the right place, it, at a physics level, relieves the constraint on that grid. It meets the peak in a more dynamic and locationally valuable way. There you go, you can sell more electrons over the same wires.

David Roberts

Let’s talk about that, because this is something that people break their brains on. It’s really important to understand. With — this is an important caveat — with sufficient batteries in place, added load can reduce rather than raise prices. Furthermore, and I’ll make it more specific and more provocative, we could accommodate all these data centers and they could lower rates. That is a possible world. Explain how and why.

Pier LaFarge

This is why the whole debate, which is now so politically hot around electricity, is going to end up being pretty boring. Cheap batteries and data center demand happening at the same time, plus some normal building out of new transmission and generation — we’re going to need some of that too — but those two things happening at the same time pretty much solve the grid. The cost of electricity is downstream of a pretty simple formula in most places, which is, how much did you spend on your wires to get the power to people? In most cases, that’s 60, 70, or even 80-plus percent of all the cost of power. Generation is just a smaller piece.

It’s the wires. Simply put, you spend money on the wires and then the price of electricity is how many units of your product can you sell across those wires? If you can invest in a technology like batteries that fundamentally at a physics level lets you sell more over the grid, then the only other thing you need, David, is someone to buy those electrons. Which is why data center demand and demand from electric cars and home electrification are such good news. The more we buy over the same wires, the cheaper power gets for everyone.

David Roberts

The premise here is, and I think it’s important to surface this: additional load can bring down average prices, as long as adding the additional load does not require you to add a ton of new infrastructure. If you’re adding more load but using the same fixed infrastructure, you’re spreading the cost out over a wider customer base and thus per-unit costs are lower.

Pier LaFarge

Exactly.

David Roberts

If you add load, and in order to meet that load, you have to build a bunch of new wires and transmission and generators, then you don’t get that effect. This effect only is in places if you’re adding load, but without having to add new infrastructure to carry the load.

Pier LaFarge

Or at least while you are having to, you have to do both.

David Roberts

You’re adding batteries, which are technically the infrastructure, but they’re much cheaper than wires and generators that they’re almost different in kind.

Pier LaFarge

They have the effect of letting you sell more over the grid you have. I think that ultimately we are going to need new transmission, new generation.

David Roberts

I wanted to ask about that. This effect, adding load reduces prices, presumes slack capacity on your system, right? You’re adding load to soak up that slack capacity. That’s what the batteries allow you to do. Whenever you have generation capacity, you just put it in the batteries and then absorb it whenever you need it. New load absorbing slack capacity means that you can add new load and bring down prices, right?

Pier LaFarge

That’s correct.

David Roberts

The question then becomes how much of that slack capacity. I want to give people a sense of scale. How long can you do that before you eventually have squeezed out the slack capacity and are forced to build more generators and more transmission lines? Because you need fundamentally more capacity. How much runway do we have before we need to build new stuff anyway?

Pier LaFarge

It’s an important question to ask for two reasons. To level set, we have a grid that’s about 1,200 gigawatts of nameplate. There are a lot of different ways to approach this and we’ve done some studies on it. Utilize Coalition has done some studies on it, which Sparkfund’s a part of. Horseshoes and hand grenades, it’s 200 to 400 gigawatts that you could get from increased utilization and you’d end up putting a couple hundred billion dollars of downward pressure on rates. It’s significant. It’s more than the very near-term demand from data center growth, but it’s not as much as the long-term growth of electrification, which is now becoming fundamental to every aspect of our daily lives, our economy, our data infrastructure.

David Roberts

This gives us, call it 10 years, call it a decade of runway where we can accommodate all this data center rush and lower prices without building a gigantic amount of brand new infrastructure, which we can’t do in the short term anyway, as we know. But the larger electrification of the economy — never mind data centers, as you say, everything’s coming onto the electrical grid — we are eventually going to squeeze out that slack capacity and we are eventually going to have to build more, more, more. We are going to have to expand.

The reason I’m making this so explicit is that, as you probably are following, there’s a weird very dumb fight happening in the green community between the utilization people and the permitting reform people. The people who say, “Hey, we need to squeeze out this slack capacity,” and the people who say, “Hey, no, we need to build more, more, more.” If you get anyone in a room and sit them down and talk to them reasonably, everyone’s going to agree. You need both. I just want to frame this.

You acknowledge we need both and you’re mostly pushing this as a short- to midterm strategy, right?

Pier LaFarge

That’s right. It’s not just eventually we’ll need to build more. It’s starting right now. We need to build as much transmission and as much new generation from gas to wind to solar to industrial — geothermal. We need as much as we can. The reason we should do that is because, exactly as you said, it is hard and slow to build large centralized infrastructure projects. It takes five, seven, sometimes 10 years or longer for transmission. Utilization is a way to maximize the total energy abundance of the US electric infrastructure today to deliver on near-term growth and to do that in a way that specifically puts downward pressure on rates and makes power cheaper.

Oh, and by the way, invest in a bunch of machines — like batteries and grid flexibility, demand response, grid-enhancing technologies that help the grid be stronger, more reliable, better able to resist weather, and better able to deliver intermittent resources. It’s a good thing to do now, it’s a good thing to do as much of it as we can. But we need to be in parallel building as much new American power infrastructure as we can to win the future.

I’d also like to point out that the standards by which utilities determine the engineering, safety, and requirements of the grid do matter. We do not want the grid to melt. I often say to people, before you cast shade on the safety requirements of our public infrastructure, imagine you’re a parent and you have a car parked under a transformer or you have a house in a neighborhood. If that transformer melts because those standards were not robust enough and that thing turns into liquid metal and drops on a car or on your neighborhood and you hurt people, you start fires. What if your kid was in that car?

Think like a parent, not an energy nerd, and take a breath on this endless optimization of infrastructure. Remember that some of the reasons we build these systems the way we do is because we want to keep people safe and we want a big economy that can grow and invent the future. Energy is for society. It is not just an optimization challenge of a bunch of very bright nerds.

David Roberts

I want to emphasize this point one more time. I know there are people who are concerned that the current focus on affordability among Dems is pushing them toward —

Pier LaFarge

Degrowth and scarcity?

David Roberts

Degrowth and scarcity-coded solutions.

Pier LaFarge

Yeah.

David Roberts

It’s important to surface what you’re saying here: you can shovel all the data centers on the grid you want and bring down rates and serve affordability. These are not in tension as long as you have a crap-ton of batteries.

Pier LaFarge

That’s right, that’s it. Batteries and data center demand solve it. The tragedy, David, is not only that politics of degrowth and scarcity are toxic and tragic, it’s also just wrong on the merits. You have this opportunity to have more and make things cheaper, and we need to take it. It’s responsibly managed growth.

David Roberts

The thing is, the Democratic Party, Pier, it causes me such — they are on the right side of history here, if they would just argue for their side. But you look out at the landscape and everything they are doing is everything they are doing in the name of affordability begins by conceding the premise of Republican attacks. They are rolling back energy efficiency programs now. We have been arguing for decades that those things lower rates and now you are going to concede to Republicans that they are raising consumer prices? That is your savvy affordability play? It just drives me mad.

Pier LaFarge

I can’t get pulled down that road.

David Roberts

To summarize the point you’re making here, when you have a crap ton of batteries on your grid, it solves the affordability problem, allows you to bring in new load in a way that uses slack capacity, doesn’t require a bunch more building, and reduces per unit costs, reduces rates for everyone. This is the future that you’re looking toward: a future where the grid is filled with batteries and consequently it’s boring.

It just works. It’s cheap. You get electricity for pretty cheap. You get as much as you want, it works, it’s reliable. Then, hallelujah, you can stop thinking about it and start thinking about other things you want to do with your life.

Pier LaFarge

Welcome to the age of boring. Cheap batteries, data center demand, and a few other good investments in the US electric grid will bring us back to where we have been for much of the last hundred years, which is the grid is public infrastructure we don’t have to think that much about. We can go about our lives, build our economies, have our infrastructure, and win the future in a way that I think is really compelling.

David Roberts

This is the vision of a grid with a lot of batteries on it, a grid that goes from no storage to a lot of storage. Fundamental change allows accommodation of a new load without raising prices, allows you to bring prices down, solves these reliability issues. With smart inverters, you get your ancillary services, you get your black start, you get your frequency regulation, you have a very safe, electronically software-controlled, stable grid when you have a crapload of batteries.

The second question I want to address then is, are batteries batteries? Is any battery on the grid as good as any other battery on the grid? Or is there any reason to prefer distributed batteries over utility-scale batteries?

Pier LaFarge

That’s a great question and I’ll answer it in two ways. One, it’s important to make the point that my view is that we are going to put batteries everywhere and of all sizes. Big ones in fields, medium-sized ones — which is what Sparkfund does for a living — in parking lots and in fields near churches and Walmarts and stuff like that. Then you’re also going to have residential batteries in the home and garages. You’re going to have embedded batteries in heating and air conditioning, like what Carrier’s working on and others.

David Roberts

Let me put an exclamation point on that because it’s huge and I think a lot of people don’t see it coming, which is that ACs are going to start embedding batteries and there are a lot of AC units out there in the world. Once your HVAC has a battery in it, your stove has a battery in it, your water heater will probably have a battery, and you’re going to have batteries in every device, in every appliance, in every house, in every garage, in every car, in every field, in every parking lot, whatever.

Pier LaFarge

I would point out, David, we already have them in every pocket and on every desk. It’s not like the battery revolution we’re pointing to is some science fiction future. We’re carrying them around.

David Roberts

Let me ask you, why do that? Why not just put them all in utility-scale installations in a big field somewhere and not mess with the rest of it? What performance or social advantage do you get from the distribution of them?

Pier LaFarge

There are two big groups of batteries. One are batteries that are big enough and have specialized telemetry that utilities can see and operate in their control room today as true grid assets. Utilities have an incredible amount of data about power plants, what a power plant is doing every second. Same with utility-scale batteries. Batteries that are, call it, one megawatt and bigger, you can afford to build that telemetry onto them and you can show it and connect it into a utility — they can operate it in their normal course today.

That is a big part of Capacity*Connect in Minnesota. These are utility-controlled assets because they have the data quality and telemetry that allows a utility to integrate them into their control room. When a utility can see a battery that clearly, it can dispatch it and it can accredit it, give it credit for the capacity it is creating on both the distribution and transmission system. It knows that it is not going to trip any thermal limits or voltage.

David Roberts

You can plan around it, you can rely on it.

Pier LaFarge

Yeah.

David Roberts

Because it’s yours.

Pier LaFarge

If you can’t see something, you can’t use it in high critical environments like the grid. Stuff melts, fires get created. That accreditation allows utility-scale batteries and the distributed capacity components — the missing middle — that Sparkfund is helping fill with these distributed capacity procurements. Those batteries will go first because they’re the easiest to bring into the core of grid operations as they stand today.

But the batteries we’re putting near buildings have a particular characteristic. They can be sited on the distribution grid closer to the infrastructure that needs it most. The closer the battery is to the load that it’s serving and the infrastructure it’s using, the more it can directly benefit that customer and that infrastructure. If you have a residential neighborhood filled with houses that have EVs, electric cars, and a bunch of air conditioners that are now Toyota Priuses, they’re hybrids. As they spin up and it gets cold in your house, it’s coming from a battery that charged up while there was plenty.

It’s the same metaphor. They charged up when there was plenty, when no one was using their electric appliances in that neighborhood. When everyone turns them on at once, they all self-serve. The proximity of a battery to load is, in some ways, a direct relationship to the value it has to alleviate that load on the grid. That’s why air conditioners are a great way to think about this because it’s like, put the battery inside the air conditioner and it can directly alleviate the peak stress that that air conditioner puts on the grid.

Same with the Capacity*Connect batteries. You put them in a commercial industrial feeder or a part of the grid that has a bunch of coincident load and needs that stress relief. You put a battery there and when the grid gets crowded and congested, you turn the battery on and alleviate that stress at the level of that distribution node or feeder.

David Roberts

To rephrase this, people talk about the battery stack, the value stack of batteries, the different values they bring, the different benefits they bring.

You could say that utility-scale battery installation in a field somewhere has certain benefits, but if you break them apart and put them on the distribution grid, you get the same benefits and then more benefits stacked on top. You get performance benefits, resilience benefits on top of the basic battery benefits.

Pier LaFarge

That’s right. Something I think our industry needs to get more disciplined about doing, and something we’re working on broadly at Sparkfund, is mapping out the distinct revenue streams or value streams — not all of them are revenue — but value streams that batteries and things like demand response and grid flexibility can provide. There are, depending on how you splice it, seven or eight of them. We need to make a list and just stack up which ones each company or each type of battery thinks they provide.

David Roberts

You’d think that would have been somewhat formalized already.

Pier LaFarge

Even worse, David, I think we’re really suffering from a bunch of companies whose equipment does one, two, three, or four of those things, coming in and just talking about all of them. Then utilities and regulators and legislators get a little confused and sometimes feel a little annoyed when they realize, “Wait, we’ve been spending a year talking about this and it doesn’t do the thing that I need it to do.” They’re like, “Well, no, of course it doesn’t. But if we changed a bunch of variables and had a ton of new software, then it could in the future do it.” People are just disappointed because they’re like, “I have a very urgent problem.”

David Roberts

I did a pod a couple of weeks ago about an attempt to do something like that for VPPs, a rating system — like how close to an actual power plant is it? I think something like that for batteries too. Of the stackable value streams that batteries could potentially bring, how many are manifest in this installation?

Let me ask you then, because Southern Company — listeners will be familiar — big utility down in Georgia, notoriously vertically integrated, jealous of its territory, unenthused by climate activism, etc. They have gotten religion on batteries, but they are not distributing them. They are clumping them up in giant utility-scale installations. But it sounds like they’re getting a lot of the benefits out of them.

As you mentioned, you now can’t sell one of your distributed capacity procurements to Southern because the amount of batteries they’ve already installed has reduced that arbitrage opportunity to the point that you can’t squeeze a lot more out with distributed batteries. Talk a little bit about Southern Company, their experience, and then just tell me, if I’m an IOU executive, a Duke executive or something, and I’m looking at Southern Company and I was like, “Well, they just are building and owning large-scale battery facilities and seem to be getting all the benefits they want out of that. Why should I futz about with distribution when I could just do that?”

Pier LaFarge

To put some numbers to it, in one of their integrated resource plans, they had something like 50, 60 megawatts of batteries over the next bunch of years coming onto their grid.

David Roberts

That was just a few years ago.

Pier LaFarge

In this latest update, they signed a bunch of contracts with large load customers and data centers which will put billions of dollars of downward pressure on rates for everyone who lives in Georgia. They are making power cheaper every time they sign a new data center. That’s the thing. If you just take one thing away from this podcast, every utility, every state who signs a big data center will end up with cheaper power if that load is managed correctly.

David Roberts

If they’ve got a bunch of batteries and they manage the load correctly, which is a substantial if.

Pier LaFarge

To your point, that’s why this example with Southern is so compelling, which is this is a utility who is chartered in the public interest to spend money to invest in the grid to deliver the lowest cost, most reliable way to meet growth. Growth shows up, data center asks for power, utility planners go to work and it turns out right now, based on cost and value, the answer is batteries. The reason they’re all utility-scale is that the grid in the Southeast is most constrained by transmission. It is not very constrained by distribution.

They put the batteries closest to the problem they have and the customer they want to serve. Batteries are just as good at charging up when there is underutilization and charging from a gas plant or a coal plant as they are from wind and solar. Batteries just smooth out electricity and time. That is why I call them time machines. You end up getting more out of the grid you have, dividing the cost of the wires, and you sell it to a data center and everything gets cheaper and better per our age of boring framing. Southern Company is a great example of a utility, a large IOU that basically did this overnight.

David Roberts

Wait, you forgot to give us the numbers. They had a few. I think it was like 2020. They had like 50 megawatts of batteries in their IRP. What is the latest?

Pier LaFarge

It’s 6,500. It’s 6,800 — thousands. 6.8 gigawatts of batteries or so. I forget the exact number.

David Roberts

Not a small — that bespeaks someone inside that utility having a revelation of sorts. You don’t go from 50 to 6,000 with somebody inside the —

Pier LaFarge

Yeah, it’s 100x. We spend so much time in this industry, David, talking about how utility incentives are broken. The thing that was missing is load growth. Utilities have been sitting there the whole time saying, “Thank you very much, I’m incentivized to spend money to build infrastructure for America. My incentive is build things society needs that the regulator says is the lowest cost, most reliable way to do that.” When these machines get cheap enough and when load growth comes back and creates the need, a utility simply does the math and delivers the outcome.

David Roberts

A utility, not all utilities, I guess. Southern Company is the iconic — if people come up with examples of who’s going to be the last to get on something clean or something progressive or whatever, they cite Southern Company. The fact that this revelation has happened inside Southern Company is quite significant. Should we assume that other utilities are going to be like, “Well, if Southern...” This is not Xcel. This is not California. If Southern is doing this, surely it must be the obvious thing to do. Is this going to unlock a similar 10x in other utilities?

Pier LaFarge

Age of boring, David. There are other examples — Indiana Michigan AEP just announced that with data centers and a bunch of flexibility and batteries, they’re going to lower rates for everyone. PG&E said every time we get a new gigawatt of data center load, we’re going to drop power prices by 1 to 2%. The ones we’ve already signed are making power 11% cheaper than it would have been. Now, California, you’ve got a lot of wildfires to pay for, so it may not get actually cheaper, but California’s got its own problems.

David Roberts

Yes, but the data centers are pushing down prices because of the batteries. We can’t say that often enough because it bounces against people’s instincts.

Pier LaFarge

That’s right. We’re getting the politics and the grid discussion of data centers’ impact 100% wrong. We’re getting it backwards. Every state that does not get data center growth is going to have an aging grid they have to pay to replace. The cost of the wires is going to rise. They’re going to be divided over too little new growth and power will get more expensive.

Power prices have been going up mostly because of distribution costs for the last bunch of years. People say that all the time, but they don’t then subset what are the inputs into that distribution cost. A big chunk of it is that some of this stuff was installed in the 60s and 70s and entropy always wins the argument. You got to replace it. It’s old, it’s breaking.

The second piece is that we’ve had a bunch of renewables come onto the grid that are cheap to generate but require the grid to take the shock of intermittent power when it gets very windy or very sunny. We’ve made some investments in things — like capacity banks — to handle that.

David Roberts

Affordable batteries at scale are a new thing.

Pier LaFarge

That’s right.

David Roberts

That is a new category of distribution infrastructure that is now available to utilities.

Pier LaFarge

Batteries, because they are products, because you can put them in shipping containers and standardize the design and build millions of inverters and cathodes and anodes and power electronics and factories, you can drive the cost way, way down. Just like solar panels, the cost of a battery since 1999 has gone down by 99.5%. In the last five years, they have come down another 85%.

David Roberts

Here we are looking at this future of massive load growth. Forget data centers. Beyond that, load growth to the horizon. Transportation, heating and cooling, industry load growth. Load growth, load growth, load growth. Here we have in our hands a tool that renders load growth a mechanism of reducing rates. Here we have load growth and batteries in hand — abundant energy for cheaper.

Pier LaFarge

Amen.

David Roberts

Just going to emphasize that one more time. We’ve discussed the virtues of having a crap ton of batteries on the grid and discussed when and where there are merits in distributing them versus clumping them. Is your congestion problem on your transmission grid or is it in your distribution grids? You want to clump the batteries near the problem, and in many places the problem is distributed and you’ll clump the batteries in a distributed way. Assuming then we want some distributed batteries, let’s talk about the merits of the way it’s happening in Minnesota specifically.

The first thing I’d ask is how committed is Xcel to this approach? I know the PUC told Xcel, “Hey, you should also study the VPP model that they’re doing in Colorado.” This is one approach still, among others. A lot of questions about this, maybe the first one is just compare this to a VPP. Why might this be preferable to a VPP? How do you view this in relation to VPPs?

Just the distinction for anybody who is not following it: these batteries that we are talking about in Minnesota are owned and operated purely by the utility, purely for grid benefit. They are not operated for the benefit of the customer who is hosting them, except insofar as everybody on the grid benefits from grid stability, but they get no specific benefit.

Whereas a VPP is taking behind-the-meter, not in front of the meter, but behind-the-meter resources, and doing this dance where they’re primarily operated for the benefit of the building owner and then secondarily operated for the benefit of the grid. That’s what a VPP is. I’m curious your thoughts about how these two relate and the relative merits in the world we’re talking about.

Pier LaFarge

The best distinction is there are true grid assets that are 100% operated for system benefit. Every value dollar that’s created for the grid gets socialized to everyone. Then there are assets that are paid for by customers, and therefore the customers have a right to get benefit from them. Those assets primarily serve the customer value. But then also if they can be used for the grid, the grid should pay them. That’s the difference between the VPP program in Colorado and the Capacity*Connect program in Minnesota. In both cases, this is Xcel bringing an innovative proposal to their regulator and saying, “Here’s a thing we could try to make the grid more flexible, better utilized.”

David Roberts

It’s Xcel in Colorado too? Somehow I hadn’t put together that it was the same.

Pier LaFarge

Same utility. They’re trying different models to learn which one delivers the best benefit. When utilities — this industry is very quick to point out when utilities don’t do things that they like, but when they do things that are innovative and forward-leaning, they end up attacking them anyway for it. Xcel was attacked in both states for both of these proposals. Then they were attacked, comparing the two to each other, and it just, it’s so bad and everything is broken and people say monopoly and forget to say public purpose, regulated monopoly.

Are utilities perfect? No. But the regulated compact in which they are allowed to invest private capital for public purpose to grow a grid that supports our economy is a pretty good system that really does matter. This is a system operator coming to their regulator in Minnesota’s case and saying, “We now believe that batteries have the price dynamics and technical capabilities at this scale, put in these places to be the lowest cost, most reliable way for us to handle part of our grid’s growth.” Two hundred megawatts is big for distributed batteries, David, but it’s tiny compared to the gigawatts and gigawatts.

David Roberts

That’s a fifth of one giant data center.

Pier LaFarge

Just tiny. We have to remember the scale of the grid. This is a landscape-scale machine. The advantage of the Capacity*Connect program is that it’s asking the question — and hopefully if we in Xcel do our job, it’ll prove the point — that batteries are just the next boring generation of distribution grid infrastructure. They’re no different than substations, transformers, capacity banks. They just have this new superpower which is that they can move electrons through space and time and you can put them next to the problem and deliver the value.

David Roberts

The central objection that people have had to the Capacity*Connect program is that it puts utilities in charge. Utilities own and have a monopoly over these battery installations. That excludes the private model that currently rules where private providers go house to house, sell these things to homeowners, etc. There is a real question about democracy here, about energy democracy, which I would like you to address. I know because we have known each other for a bit I know you to be committed to local community and local democracy specifically.

I know that you value local democracy. A lot of people are coming to this with energy democracy, with local energy democracy in their minds, saying, “Why shouldn’t people own these things? Why shouldn’t communities own these things? Why should we let utilities have a monopoly over these things?” How do you think about the energy democracy question?

Pier LaFarge

Absolutely. It’s a funny part of my life. I spend much of my personal and political time advocating for locally led decentralization solutions in the abundance movement. In energy, I’m advocating for decentralized batteries and people are like, “This guy likes monopolies.” There’s a difference between civic infrastructure for public purpose and just a generic monopoly. At the end of the day, the reality of a grid is that it is public infrastructure in Minnesota. This was very specific to the decision that the commission came down with, David. In this 5-0 vote, they put this intentionally and with great legal specificity. I encourage those among your listeners who are truly the most wonderful nerds to go and look at the transcript, look at the hearing. This is public record. It’s a civic process.

The commission said very particularly, legally speaking, the grid is owned by the ratepayers. Grid operators just take private money, Wall Street’s money, they build the grid and then are given a guaranteed or partially guaranteed return so that everyone can use it. They use it by paying for power.

The legal status of the grid is it is owned by the ratepayers. When a battery is installed on it, the utility compact says if it is used entirely for the benefit of the grid, if it is owned and operated only for that purpose, then the utility should own it. It is also hard to own things that you cannot control. Ultimately, it is just a normal part of the public infrastructure that drives the grid forward.

David Roberts

The word infrastructure or the concept of infrastructure is key here because we have been — the conventional model to date is to treat distributed energy resources as a consumer item, as a consumer market item. We sell to the consumers who want them. That is not how we treat infrastructure financially.

Pier LaFarge

And to your point, I very much support and I think Xcel supports and has a range of programs that are specific to allow third-party ownership. There is a program called Battery Connect where third parties can bring and own batteries and get paid for the value they give to the grid.

But remember, all those batteries are splitting their value between the customer and the grid. This program says these batteries are just 100% dedicated to the grid. Batteries are now so valuable to the grid in the way that we have been talking about on this episode.

The transition you’re seeing is when batteries were more expensive and there was no load growth, customers had to pay into them to have batteries exist at all and the grid could pay for a portion of the value based on its need. That should never stop. This is America. People should be allowed to own things, they should be allowed to invest in things. They should be allowed to participate with their money and time.

David Roberts

To pause here in Minnesota, private distributed energy resource developers still exist, can still sell their wares to customers. The PUC, the utility is not preventing them from doing anything in particular.

Pier LaFarge

No, there are many existing programs that explicitly allow, and not only allow, but are only for third-party ownership and participation. There is a huge community solar industry and law in Minnesota, with almost a gigawatt of third-party owned community solar.

Frankly, one of the opposition points that I found surprising and somewhat disingenuous was that this one program which is designed to test and validate the idea that batteries can become a core part of normal grid operating infrastructure — the boring stuff on the grid — was attacked on that ground by a group of advocates who I think have gotten a little bit lost in whether or not the grid exists to let them invest in and privately profit from the ownership of their assets or whether it’s public infrastructure that under certain conditions of mutual value and coincident need, those private owners can and should be allowed to apply to own assets and take some value if they can provide some value.

I’m all for third-party ownership and I think the trade of value is often good for the grid and good for the private owner. But it is not the point of the grid.

David Roberts

Another objection is if we allow private actors to make these investments, private investors take on the risk. If the demand forecast or the economics business model, whatever it is, doesn’t work out, it’s private investors who lose the money. In this model, the utility takes the risks, but it’s ratepayers who pay if things go poorly. This is another common criticism. How do you think about that?

Pier LaFarge

It comes down to value and risk. When private investors build assets and apply to participate in the grid, they take risk and they also take their opportunity for profit and upside, which is appropriate. The upside they create, they keep. The grid is operated by a regulated system — a civic compact that finds other private owners. The other weird thing about this is utilities are also private owners. It’s always strange when one side says to the other, “You have a capital incentive to deploy more money or have a shareholder incentive to give returns to your shareholders.” Do all companies not have shareholders and an incentive to grow their business? I’ve never quite understood why that’s a ground for debate.

One private owner, the utility, is the regulated grid operator who gets a fixed return. Every dollar of value created above that return is socialized to the benefit of all ratepayers, because, again, legally the ratepayers own the grid that the operator is chartered to deliver. That distinction, I think, is neither one is better or worse. Both should be allowed, both should be celebrated. Think about the beginning of our conversation when we were talking about how one of the foundational inputs into the future of America’s success as a nation is, from our daily lives to our national defense, to have more electric power for more purposes.

We want all of it. This is the grid growth version of all of the above. Let’s go, let’s get this stuff out there.

David Roberts

What about the idea if you’re a private actor, you’re somewhat disciplined by this risk of loss. Whereas if you have a guaranteed high return on investment, as the utilities do, the criticism goes, you’re not going to get spending discipline, you’re going to spend ratepayers’ money profligately and without proper analysis because you’re not disciplined the way the private market is. Do you think that high guaranteed return on investment removes discipline? Do you buy that critique?

Pier LaFarge

The thing it misses is that the regulator exists. Something that bums me out about this is there is this whole group of civic servants and a bunch of staff who spend their whole day with legal power and charter from the state making sure that the way in which these procurements are built and delivered meets a reasonable standard of prudency.

David Roberts

But we know that PUCs are of varying quality, varying levels of knowledge, varying levels of friendliness to industry. These are long-standing critiques of the regulators, too.

Pier LaFarge

They are. One of my other political beliefs is the next chapter of American politics needs to fall back in love with civic engagement and civic compacts. We need to pay regulators more, we need to have more staff.

David Roberts

Administrative capacity! Wish I had a little sound effect machine so I could play some sort of... [plays horn sound]

Pier LaFarge

I’m not just pro-utility, I’m pro-utility regulated compact. That system, you can debate the history and its individual decisions. The point I wanted to make, which is more specific to your challenge of does a regulated system incorporate the dynamics of competitiveness and innovation? The answer is yes. Not because the regulator is perfect or all-knowing or all-powerful, but because the regulator can simply require, as it did in this procurement, that the way in which these assets are procured includes competition.

Sparkfund’s job in this Capacity*Connect program is to build and manage on behalf of Xcel a local competitive ecosystem of vendors, civil, mechanical contractors, including union labor and local contractors. We bid out. This is right in the filing, this is public information. Every time, 80% of the value of this procurement of distributed batteries will be bid competitively in Minnesota. Eighty percent of the value of this procurement will be bid competitively to local businesses in Minnesota.

The reason for that is that regulators and utilities build in market-based competition into these procurements. They do it for utility-scale power with all-source RFPs when they procure wind and solar and gas. You end up with constant rolling market-based competitive price discovery when a utility is incorporating distributed batteries onto its grid for public purpose.

David Roberts

If you’re in the DER business, they’re probably going to yell at me for saying this, but you still get to bid on the job, but what you don’t get to do is go out and find and sign up customers and structure financial deals with them. That just sounds to me like the worst part of the job. The worst and hardest and least rewarding part of the job. It seems like if you’re a DER person and you just get to skip straight to the part where you’re doing the job, it seems better.

Pier LaFarge

A lot of the opposition in Minnesota was downstream of that. Protecting a finance business model that requires that part of your business model. This is again alongside other programs in Minnesota that allow for exactly that.

The exciting part of Capacity*Connect, it is a major utility doing a forward-looking, innovative filing that says we’re going to make these machines part of the normal course of the distribution operations plan of our utility and we’re going to do that because we think everything we said in the first half of this episode is true. They’ll charge up when there’s plenty, they’ll dispatch. They agree that batteries are going to be valuable.

David Roberts

If this model, utility-owned distributed batteries, takes off, works, they like it, they spread it, they expand it, other utilities grab onto it, it will have the effect of squeezing out business models that rely on third parties in between the utility and the customer. That includes VPP aggregators, it includes solar finance people such as Sunrun, and I think it includes Sparkfund.

Do you not think that to the extent this model catches on and becomes standardized and becomes boring, all these third-party business models, all these middleman business models, are going to get squeezed out over time, maybe including your own?

Pier LaFarge

Maybe when things go to scale and become normal. Of course, in big public systems they tend to commodify and the value chain that delivers them changes. I think that’s just true in economic history. Part of what we’re debating here is not really about utilities or this filing or that filing. It’s just about batteries and distributed energy having a moment where they’re going to become a fundamental pillar of how we grow and manage our grid, because our nation needs it.

Will there be change? Absolutely. In particular, consumer finance-based models that initially were about helping customers buy these machines versus the public grid are probably more at risk.

David Roberts

Let’s not rush past that. Sunrun is very large and that is its core business model. I know they were among the entities that opposed this in Minnesota and I will assume they are going to fight you all the way down the line on this, are they not?

Pier LaFarge

They will. They spent more money than anyone fighting this in Minnesota. We were a bit surprised in some ways, but when a grid has more batteries, it is better at handling and delivering solar energy. People defend their business.

David Roberts

They’re pivoting to batteries. They’ve said it a couple of times now. They’re pivoting to batteries and they’re doing this finance model, this finance model of selling batteries is now their core thing. This model that Xcel has adopted, if it became the default, would shrink or eliminate that business model.

Pier LaFarge

That’s right and I think that’s why they oppose it. It is a competition of business models, one in private financing and one in public infrastructure. I also like to come back to VPP as you made an important point. I also don’t want to dodge the question about whether Sparkfund will be necessary to the future of this.

David Roberts

We’ll talk about VPPs first. I’m curious what role you see them playing in this battery-filled future.

Pier LaFarge

Much more durable, because I think most VPPs, as you defined it, which is largely behind-the-meter resources that in one moment serve customer value, in another serve the grid. That is really broadly speaking demand response. I do not mean that dismissively. Demand response assets are critical parts of relieving pressure on the grid in aggregate. Demand response is absolutely one of — we have been talking about batteries today with a lot of focus, but batteries are on a short list of grid flexibility-creating assets, including demand response and grid-enhancing technologies that really drive the future that we are talking about.

David Roberts

I have a pod running. I think it’ll be out by the time people hear this, wherein someone argues that what we ought to be doing is making price-responsive appliances, everything electric. All these embedded batteries, all these electric devices you’re talking about ought to just be price responsive. There ought to be a competitive retail price that is updated every five minutes and is time and location dependent and broadcast such that every device can receive and know the retail price at every moment. Then the devices respond to the price on their own.

The benefit of this is that then all the value of the flexibility is captured automatically by the homeowner, by the owner of the devices, rather than split 50-50 with a VPP, which is just a middleman doing the same function in a slightly cruder way. It’s interesting that there are other ways that you might eliminate the VPP model. If then all the devices are immediately price responsive, then you don’t need a VPP in the middle and they become much more directly grid assets, I think.

Pier LaFarge

What you’re talking about there is really how much does an aggregator get paid as a share of revenue? That sounds like one plausible way that an aggregator could get paid less as the middleman. The more important question, though, is will demand response be a service the grid wants and will it reach into customer devices to do that? Will there be benefits for the customer and the owner and the grid? The answer is yes. Nothing about deploying a bunch of big batteries changes that. They’re just both filling two different parts.

David Roberts

But why not though? If you’ve got enough of these 1, 2, 5 megawatt chunks scattered around your distribution grid, you get your stability, you get your boringness. Why then do you need to go on and tackle the complexity of trying to coordinate consumer-side devices? Is there not some possibility that this could prove so cheap and easy for utilities and so effective that it really just slightly moots the need for consumer-side coordination?

Pier LaFarge

I think there is. The question is how much does it moot it and is it 100% gone? Remember we talked about the value of batteries at every scale and every size being how close you can put them to the problem, and batteries in the home and flexibility devices in the home are closer to and easier to put in and pay for at homes.

David Roberts

But I guess the question is, is the distribution level close enough?

Pier LaFarge

It may be. Someone very wise in this industry once said to me, the reason the centralized planned grid has lasted for 100 years is that many of these questions have been posed. This happened with postwar industrialization, it happened with HVAC and air conditioning. It turns out that often the lowest cost, most reliable way to deliver these solutions is through more centralized assets than not. What we’re talking about is batteries that are slightly less centralized than 200 megawatts in a field, but are still shipping containers filled with batteries that are far beyond the scale of the home.

We have to remember that the grid is not built for individual value to come off of it. In the world in which every homeowner can perfectly participate in these dynamic real-time pricing markets, think about who the citizens are who are likely to buy those smart-enabled devices and get that value. They are going to be richer, they are going to have more time after work to think about that.

One of the reasons we built the grid, going back to our very first history point on this conversation, David, is that there is an egalitarian sort of American infrastructure compact vibe to the US electric grid, which is that you want to plan things to be lowest cost, most reliable, so that you can share the benefits with everyone, whether or not they have the time or money to think about it or not.

I’m not against wealthy, educated people participating in the grid. It’s how we’ve invented some of these devices and scaled them — that is a critical part of an innovation economy. It should never be disallowed, banned, or limited. I don’t want to ban third-party ownership at all, but it is not the point of the grid. We did not build public infrastructure so that enthusiasts can take rents from it.

David Roberts

This brings me back to another point I wanted to make about the energy democracy thing. I understand and am compelled by the merits of local ownership of energy assets, and I’m compelled by them in terms of energy democracy and in terms of local empowerment. But I think if you are measuring that against the benefits of the same community having reliable, cheap, ubiquitous electricity, even on the metric of local empowerment, the latter wins.

Putting cheap, abundant electricity in people’s hands is the most effective economic development tool on the planet. Every bit that you make a community’s electricity cheaper and more ubiquitous and more boring and more cheap, that is economic development, that is local empowerment. That’s not an alternative.

Pier LaFarge

It’s human flourishing. I love that, David, I really do. That’s a beautiful way to say that and I think it needs to be said more. It’s in this important and under-discussed category in our tribe of nerds, which is what is energy for, what is infrastructure for? I think you just articulated exactly what it’s for.

David Roberts

It is for flourishing. Let me ask you about this. One of the things — I had Lorenzo Kristov on the pod, love him. He’s a big fan of local democracy, local action, local community, local resilience, self-sufficiency, all that kind of stuff in electricity too. One of the cases he makes, which I’ve always found compelling, is that there are benefits to local communities being able to plan their power alongside planning local transportation policy and local building policy and local economic development policy. Power should be of a piece with that and should be integrated in that.

There’s something artificial about all that planning being up at the utility level, while all the other planning is happening at the local level. Are you not at all moved by the idea that local community ownership of local energy assets carries some benefits?

Pier LaFarge

First of all, Lorenzo is brilliant and he and I have had some wonderful conversations about this and I think we share a real passion for localism, broadly as a basic idea of subsidiarity, which is — push the planning and the decision making down to the lowest competent level that also can efficiently deliver the outcome.

His point, I think, I’d break between two things: where it’s planned and where it’s owned, which are two different but related questions. Ownership is important, but really about who receives the rents versus the risk. The regulated compact was designed to smooth or socialize both the risk and the rents to all participants at all scales of planning.

The next question is, when you go smaller with infrastructure, do you have the equivalent vehicles of debt financing and capital that allow you to do that at that level of aggregation efficiently?

David Roberts

Let me put a finer point on that. One of the things Lorenzo has envisioned, and I think they have them in the UK now, is what’s called DSOs — the distribution grid equivalent of the transmission system operators, the TSOs at the transmission level. A smaller entity devoted particularly to that community. You get closer touch with the community, you get better knowledge of the community, you get perhaps greater investment in the community. As you, I think, are getting at here, you might lose some of the financing benefits of size and scale.

Pier LaFarge

If you don’t, then I think there’s a lot to like about that model. Lorenzo has an incredible — again, I really like and admire how he talks about this stuff. The question really is that if you zoom back, the utility regulatory compact was designed to pull off a magic trick, which is take Wall Street’s money, private money, give them a 3.5% net dividend every year, every 100 bucks they put in, they get three or four bucks. Let a private operator who has some profit incentive build the grid, which is the foundation for our economy and human flourishing, as we’ve just discussed, and then submit to a civically accountable regulator to control every one of its decisions, actions, and profits.

It’s Wall Street’s money building public infrastructure. That’s easy to say. The reason that’s important, David, is that you don’t have to choose in a public budget, a general fund or a town’s budget between building the next rural hospital or paying teachers or repaving roads and building a substation or a new transmission line.

David Roberts

Because you got the Wall Street money.

Pier LaFarge

We did it. We got private money for public purpose, regulated as best as can be done. Is that system perfect? No. Does that system have flaws and imbalanced incentives? Yes. Can you name me a landscape-scale, public regulated compact and institution that doesn’t? What’s amazing about the utility compact is that it delivers its outcome pretty much 100% of the time. There are grids where the grid is only off 80 or 100 minutes a year.

In most of our state’s economies, at the level of aggregation of debt and planning, the power is pretty cheap, the capital is super efficient. What comes out the other side of that is that in a lot of states, the percentage of the economy that goes to pay for the infrastructure that lets us have as much power as we want, anywhere we want it, all the time, is 3 or 4% of the total state’s economy.

David Roberts

To return to a point I made earlier, you could compare that 3 or 4% to the market value of the assets it has purchased and is deploying. I think that will look pretty favorable.

Pier LaFarge

Incredibly favorable.

David Roberts

But again, the market value of the assets is a small sliver of the value you get from having ubiquitous, reliable, unlimited, cheap power. The second- and third-order benefits of that are vast. They are not captured by the value of the transformers.

Pier LaFarge

Not just vast, they’re the rest of the economy. I think it’s easier to just assume. I’m sure you could do some dumb research paper which is, “What percent of GDP is not enabled by electricity?” Who cares?

David Roberts

That’s growing and growing and growing, as we said.

Pier LaFarge

All of it and more, uncaptured GDP. That’s exactly right. That is what energy is for. The compact we have delivers it with private capital and it powers a whole economy with most people not having to think about it.

David Roberts

Could a CCA do this in California or wherever there are CCAs? I know there are several other states where they —

Pier LaFarge

In terms of distributed batteries?

David Roberts

Yeah, and just implement an Xcel-style program.

Pier LaFarge

Absolutely. We’re having conversations with grid operators across municipal utilities, co-ops.

David Roberts

Munis could do it. Co-ops could do it. If a muni was doing it, you moot some of the energy democracy complaints, at least because then it really is still locally owned. It’s still local.

Pier LaFarge

Batteries are going to win the future and we’re going to put them everywhere because they are time machines for electrons and it’s what the grid needs. What we saw in Minnesota is a simple case of a threatened business model paying money to advocate to protect its business model in a moment of real transition when these assets that used to be in their protected market camp start to become a core part of grid infrastructure, and it freaked them out.

David Roberts

You could also flip that around. People have objections to this that are not just generic, not just business model exceptions, but Xcel specifically. People have reasons specifically not to trust Xcel. There are people who say Xcel has had these distribution resources for a long time. They don’t use them for public benefit. There have been a lot of price events where they could have used them for public benefit and they didn’t. They’ve been dragging their feet on distributed energy resources. They got fined by the PUC for dragging their feet on distributed energy resources.

There are reasons to distrust the utility and why should we believe that this, when they have betrayed the public trust in the past, why should we believe that this program will genuinely be run for public benefit?

Pier LaFarge

Definitely true. We’re in an age of distrust of institutions and the public institution of utilities and the regulators is no exception. The only solution to that is to deliver the value and hope that the future we’re describing, the age of boring, comes true. Cheap batteries and data center demand happening at the same time make power cheaper, the grid more reliable, and we can go on our merry way and work on other things.

David Roberts

That’s not an answer to the question. “I hope they do this right,” I guess, but you can imagine why people who have been burned by Xcel or have been fighting Xcel for years do not just say, “Well, let’s see what happens.” They do not find that particularly adequate. They also say that this first tranche of these distributed batteries are not going to churches and hospitals and civic facilities. They are not being assessed and chosen based on community resilience benefits, at least yet. Right now they are just being placed purely for grid benefit.

Why shouldn’t locals, why shouldn’t they be suspicious, and why shouldn’t they look at what’s happening and say it looks like Xcel is just making the macro grid better and is not doing what we would do with distributed energy — which is specifically local benefits?

Pier LaFarge

Something I think is important to know about this one filing is it did and does have a robust energy justice portion. There is targeting of those resources, categorized by EJ zones. That’s why we got a lot of support from that community and from a bunch of local groups advocating, including advocates like Fresh Energy and CEE and others that really engaged constructively in making sure we got that portion of the filing right. They were part of the hearing, they spoke at length, they offered decision options that were accepted by the commission. They got to directly modify so that the — literally, just to put a point on this — social justice and the energy justice community was at the table helping to write those requirements to their standard.

That’s a commitment that Xcel has, that Sparkfund has, and that the commission required. Maybe we’re going around a little bit in circles here, but the fact that that has been such a common talking point about this and it’s right in the order and the whole section is a bummer.

I don’t know how else to say it. Politics is a dirty game. There’s some real misinformation that has come out around this and it has been a surprising journey. I think it landed in the right place and I think, frankly, the commission and its members — it was genuinely impressive to watch Chair Sieben operate a civic compact under that type of duress and really ask questions and get stuff on the record and challenge Xcel and Sparkfund and advocates to explain and defend their positions and to provide evidence. No civic process is perfect. Minnesota is, Minneapolis is like Norway on the prairie. That civic compact is as strong and robust and chock full of civic nerds as I’ve ever seen.

David Roberts

We’ve all had occasion to celebrate Minnesota recently. You have said, I think maybe being slightly deliberately provocative, but you have said to me, and I think maybe in writing, that you think it is possible that the old-fashioned, vertically integrated utilities might move faster on this and reach that exalted, cheap, abundant, and boring plateau before restructured areas. Why do you think that?

Pier LaFarge

There is a U curve of utility operator and market success. At one end, there are things that are closer to pure markets — like ERCOT in Texas. They work really well. ERCOT added a whole New York worth of electric load in just the last four years.

David Roberts

Right now Basepower is down there in ERCOT operating on the retail energy model. They’re a retail energy provider, but they’re going now to vertically integrated utilities knocking on the door saying, “Hey look, we figured out how to get batteries on the grid faster than any other model. Wouldn’t you like some of this juju?”

Pier LaFarge

That’s right.

David Roberts

Very interesting to see that happen.

Pier LaFarge

What makes Base such an interesting company is that they’re not wedded to one business model. There are put-batteries-everywhere companies —

David Roberts

Put batteries everywhere!

Pier LaFarge

That makes them a durable part of this story and they should bring it to other markets. They’re like a residential version of what we’re doing in the larger batteries. I think it’s great. The answer to your question though is that IOUs, if you’re not going to have a full connect and manage market that also — and this is really critical — Texas’ superpower is very, very permissive local permitting. You can build things really fast.

There are so many details about this, David, that you know better than I do. When you talk about PJM design, all this stuff, if you have bad local permitting that makes it hard to build stuff, it almost doesn’t matter what your ISO rules are. You just can’t build big power plants or even small ones or even batteries. If you are at the bottom of the U curve, a restructured market that has a weird mix of esoteric rules that make it hard to participate in your market and allow rent seeking, auctions that guarantee capacity because not enough people can participate and no one can build things anyway and are also still highly regulated and have lots of rules and lots of laws from states that want a bunch of things — that is the thicket.

David Roberts

Kind of a worst of both worlds.

Pier LaFarge

That’s the worst of both worlds. The heart of the U curve. The thicket of PJM’s discontent, which I should make T-shirts that say, but you’d really know who the nerds in the airport are if you walked through a terminal. IOUs are not perfect. They have this basic advantage in moments of great infrastructure need and build: they can organize capital and conduct their planning at the level of generation, transmission, and distribution as one integrated system.

A lot of the advocacy that you and I and many people in our tribe have been on about for years is ultimately that thinking of the grid as a system, that seeing distributed assets as part in that system will ultimately be a key part of growing the grid.

What we’re seeing in Capacity*Connect and others is that large vertically integrated utilities are doing the math and they’re agreeing. That is not because this was the absolute first moment they could have done that. But it is pretty recent that these batteries got cheaper. I’m not going to pretend that big utilities aren’t slow and for some good reasons in terms of safety, reliability, critical function, also some reasons of bureaucratic inertia and scale and slow regulated proceedings. Good and bad. But it is not very many years ago that batteries were not the cheapest way to do this. I would argue that they’re just barely becoming the cheapest now.

I think we’ve crossed that line permanently, irrevocably. That’s sort of the thesis of this pod. Welcome to the age of boring, because that has happened. But it only — as the Dude said, new shit has come to light.

David Roberts

Are you — this is orthogonal to our whole point here, but I just want to get you on record — are you among those people who predict a return to vertical integration in the US in part or in whole?

Pier LaFarge

Yes.

David Roberts

What time frame? Let’s get a date here — ish. A date range.

Pier LaFarge

It’s important to clarify what vertical integration is today. Most vertically integrated utilities procure generation competitively through big all-source RFPs from private owners and IPPs. This is not your grandfather’s vertical integration where a utility hires a crew and builds a power plant directly and operates it with its own union and its own pension. This is still, like I said, tucking market price discovery, competitive delivered advantage, innovative designs and scaled private capital into a relationship with a public purpose infrastructure compact. There’s a little bit of a distinction without a difference.

Do I think that vertical integration is important to allow for the proper planning of society’s needs over time to deliver infrastructure that is, as we’ve discussed, the critical input into a nation’s success into human flourishing — from our daily lives to our national defense? Yes, I think there are advantages that that type of civic compact has in a planning level that allow us to go faster, go further, and make the sort of leap you saw a Southern Company make with those batteries when those conditions merit.

The rapid scaled adoption of gigawatts and gigawatts of effective utility-scale batteries is a good example of how to meet the moment when the nation needs to build data center infrastructure to fundamentally power the next chapter of the American economy. I don’t think that vertical integration has to be universal.

I think ISOs and interoperable markets that expand the pools. I think IPPs will be a durable and critical part of competitively procuring supply, supplying, and operating power. That private capital is the whole point of the utility compact. It’s Wall Street’s money for public purpose. There is no market in the United States today where a political and societal judgment does not set the rules for how electric power infrastructure forms the foundation of that state’s economy — not Texas — ERCOT has a critical regulatory role. PJM has a critical regulatory and rulemaking role. Every state in PJM has commissions.

We have not thrown societal caution to the wind and just said let markets eat the world boom or bust on electric power. No one would suggest —

David Roberts

No one has ever said that. No one would suggest in any region, in any market, anywhere in the world. I love talking about this for a bunch of reasons. One of them is there are so many things, new possibilities, new opportunities around the world of clean energy where I find myself on the edge of my seat white-knuckling it, thinking, “God, we’ve got to do this right. It would be so easy to do this wrong and screw it up generationally.”

But when it comes to this — batteries — if you put a battery on the grid, it helps. It almost doesn’t matter who puts it or where or why or how they pay for it. It’s almost impossible to do this wrong. Just put the batteries on the effing grid and they’re going to improve the grid. We don’t have to do this exactly right. We just need to do it at scale. We just need to do it big. We don’t have to be precise about it. Every bit of battery helps. You almost can’t screw it up.

Pier LaFarge

Welcome to the age of boring.

David Roberts

The age of boring. Final question then is: right now, I think probably conventional wisdom in our world is that we are currently facing a bit of a gauntlet. A bunch of new demand is showing up on the grid. We’ve got these old sleepy institutions, these old sleepy, not fit for purpose social and financial and political and regulatory arrangements. We’ve got 20 years of no growth that has lulled everybody into hypnosis. We face this gauntlet where prices are going to go up and everything’s going to be shaky and not really work. Then, 20, 30, 40, 50 years from now, once we’ve made it through the gauntlet and we’re able to start building the big transmission lines, we’re able to build whatever big geothermal plants, then we’re going to recover and bring prices back down.

I think you disagree. I think you think — and tell me if I’m right, I want to get a date, another date range from you — I think you think that batteries are going to solve these problems sooner than people think they will and that the grid will get boring and reliable and abundant sooner than people think it will. How soon?

Pier LaFarge

The best way to answer that question is you are already seeing data center announcements, particularly in IOU territory, but not exclusively, directly result in rate cases where the divided cost of energy goes down because you have divided the fixed cost of the wires by more sales and power gets cheaper.

David Roberts

For example, give us a concrete example.

Pier LaFarge

PG&E, in California, one of the hardest places to operate a grid anywhere with wildfires and stuff, said that for every gigawatt of data center load, you get 1 or 2% cheaper power for everyone in their territory. To date, 11% cheaper rates because of the data centers that have come.

David Roberts

Maybe not visible to the people in California because wildfire costs are simultaneously pushing rates up.

Pier LaFarge

Indiana Michigan, AEP, has actually made power cheaper. Southern Company, I believe, has actually made power cheaper. I believe about $100 a year per ratepayer was their public filing number, or maybe it was 80 or something. That’s billions of dollars of cheaper power. All of that was related to exactly this effect of managing the growth of large load customers to public benefit.

It’s also important to say that data centers are the hero of the story. It doesn’t matter how much you invest in batteries or anything else if you can’t sell the extra power. If you don’t have electrification and load growth and data centers, you’re just spending money and you can utilize the grid better, but no one is going to buy the power, so it doesn’t matter.

David Roberts

What about people who would say, “AI is terrible and we should be electrifying transport faster, we should be getting that boost of demand from somewhere else. In some sense, by data centers eating up all the available new capacity, we’re delaying further electrification.” You don’t buy that at all?

Pier LaFarge

I’ll go once more to the Dude and say, “That’s your opinion, man.” That’s way outside the scope. That’s way outside the normative scope and frankly, something I don’t love. There’s a lot of things I think that are wonderful about the community of climate energy nerds that we’re both lucky enough to be a part of. These are system-oriented, normatively engaged, philosophically interesting people. We care and we’ve organized our careers around that. That’s fantastic and it’s a great thing to be a part of.

One of our faults is sometimes we breach the walls of the energy discussion and we imagine the grid is this portal to unlimited social control and power. We’re saying, “Let’s use energy policy to determine, should we have more electric cars or more data centers.” That’s not a job for this. Take a breath. This is me back to my genuine, localist, decentralized, slightly grumpy — make fewer rules and trust that people can figure stuff out. There’s a real chance for an abundant America.

David Roberts

You think this phenomenon whereby data centers are going to create the new load that takes the batteries’ new capacity and thereby reduces rates, all of that is going to happen automatically if they get on the grid. In other words, you don’t need the extra step that a lot of people are talking about of making them pay extra, some extra fee to get on the grid, making them pay for some specific capacity. Maybe you still think that is a good idea, but the effect you are talking about doesn’t depend on that.

Pier LaFarge

That’s right. It’s very important. Brian Janous cleverly beautifully said this in a LinkedIn post around the announcement of, “All data centers will pay their fair way,” which is great. It’s good politics. It’s good to make sure that we’re saying that out loud. It is proper regulation and political governance to say out loud in one of the largest capital events in human history, by the way, that the participants and beneficiaries of that investment must pay into a public system appropriately. That is good and true.

The basic Bonbright principles — took us this long to say Bonbright, by the way — is inherent to utility rate making: all participants should pay their fair share. Is that always perfectly arbitrated? No, it’s also complicated to get right and how you judge which cost was caused by what type of stuff, system growth and then there’s a storm or a fire and then there’s —

David Roberts

What about the idea that a lot of people have, that we need a bunch of spending on the grid, we have a bunch of needs, the public’s grumpy, power prices are high, they don’t want to cough up for it. Along come these wildly wealthy companies that desperately need to hook up quickly. Why not extract more than their fair share? They’ve got money coming out their ears. We need money. Why not extract a little out of them in the process of letting them hook up?

Pier LaFarge

Because it’s no more fair to them than if they didn’t pay their fair share. Fair share means cover the costs. If you manage growth well with batteries and grid flexibility and other stuff, you’ll spread the benefit of their participation to everyone. Just the fact that they’re willing to buy gigawatts and gigawatts of new power over public infrastructure and participate in the grid as good grid citizens is the contribution. You do not need to penalize them, you do not need to tax them.

This is a broader philosophical point, but we’re in this moment politically between moments. We don’t have a political order to guide our shared agreement. Neoliberalism is gone. Before we figure out what the next political order is, there’s this real chaotic risk of villain politics. People are searching for villains. What we’re getting wrong with data centers and utilities is we’re casting them as these satisfying villain characters for the technocratic left. We’re missing the forest for the trees in it. We’re getting the story wrong.

David Roberts

At the least, I think we should separate out. The problem with these villain politics is that once someone gets the scarlet V, people just displace all their complaints onto the villain. We need to distinguish the effects on the grid — the physical, energetic, and economic effects on the grid. We need to be able to separate that in our heads from whatever you think the social impact of AI may or may not be. Those are, at the very least, separable questions.

Pier LaFarge

The T-shirt I’d like to make or the sign I’d like to bring to a town hall where the community is determining whether a data center is right for them — and not all communities want or need a data center, it’s not right, there should be local control and local voices — but the sign I would bring is, “This building is not a witch.” Let’s not create a parasocial category that’s hard to disprove and then imagine all of your worst fears flow through this one thing. Villain politics sucks.

As Americans, we should challenge ourselves to build a politics of abundance. Be curious and kind and empathetic about how — look, society is hard and participation isn’t easy, but we can get this right. We can build American infrastructure, we can grow the grid, we can make it more reliable, more clean, and we can make it cheaper. Maybe it’s the opposite of boring. Maybe we’ve gotten it all wrong. Maybe that’s a really exciting place to end.

David Roberts

Give me my date then. When is US electricity cheap, abundant, and boring? When am I going to look up and say, “I need to figure out something else to pod about?”

Pier LaFarge

2030. Just a few years. I think the narrative will be clear enough by 2030.

David Roberts

Wow!

Pier LaFarge

That this trend is permanent and structural and inside the existing systems and incentives that data centers are driving most of the near-term electrification that makes it possible, that electric vehicles and heat pumps and broader electrification are coming behind it. New manufacturing.

David Roberts

Will average electricity rates in the US be visibly falling by 2030?

Pier LaFarge

Yes, I think so in the states that have substantial data center growth. I will make that my hottest of takes. I think by 2030 in the states where there is substantial data center growth and other electrification, power will become cheaper on a nominal basis. If you have a lot of wildfires, if you have terrible storms, there are other things that can make a landscape-scale machine expensive for unrelated reasons. I’ll give myself one type of contextual hedge. But I do think that in many markets, in many states that can get this growth moment right, power will be cheaper, the grid will be stronger, and we’ll be on our way to a new chapter.

David Roberts

That’s a perfect place to leave it then. That’s a prediction that’s going to come up soon enough that we’ll probably be able to talk about it on my pod.

Pier LaFarge

Ten-year predictions are so boring too, right? It’s like ten years.

David Roberts

I know. Everything’s possible.

Pier LaFarge

The death of accountability bores me in predictions. I want to be clear. I have no particular information. I’m almost certainly wrong in countless ways. But it’s much more fun to say. At least by 2030 we’ll be —

David Roberts

2030 it is. Thank you. As always, Pier. This has been fascinating. Fascinating to see, with all the dysfunction around us in so many other areas, I really think it is important for listeners to absorb and take heart in the fact that electricity does really seem to be on a good path heading to a good place, so at least not 100% of things are awful.

Pier LaFarge

Let it be abundance then. Thanks, David.

David Roberts

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

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

1. It feels weird not to share this with Volts listeners, so I’m sharing:

I’m down in Virginia this week for his funeral. (You are not obliged to email your condolences; if you do, I might not be able to thank you individually, so I will just pre-thank you all, here, for your thoughts and prayers. I appreciate all of you.)

The only thing that’s felt weirder than working is not working, so I’m going to send the email below anyway.

2. 🎤 I apologize that there was no community thread last month, but April was kind of crazy here at Volts: 10 episodes, with 11.5 hours of talking. I think that is a record. Is anyone actually listening to all these pods? Is it even possible to do so? Should I make fewer?

3. 🥂 Some of you may remember a 2023 episode with Maryland Delegate Lorig Charkoudian, on the subject of offshore wind. It turns out she remains a listener and a fan, and she recently emailed me with great news:

I appreciate your obsession with data centers using VPP’s as the way to meet their capacity obligation. I wanted to let you know that my bill on data center clean capacity was integrated into the Speaker’s Utility Relief Act and passed this Session. It creates a fast track for data centers that bring their own clean capacity, including VPPs in the load deliverability area. I think we may be the first or second state to put this into statute. I hope others follow.

Thank you to Delegate Charkoudian for her leadership on this issue.

And thank you, subscribers, for supporting this work. Volts is entirely community-funded and I think we’re making a difference.

4. 🔋 Want something to feel optimistic about? In Queensland, Australia, fossil gas power plants have long been kept alive and solvent by the fact that they provide almost all of the energy peaks. Thing is, though, alongside the rapid growth of renewables in the state has come rapid growth in batteries. Now batteries are more cheaply and reliably providing that peak power and gas is on the decline. Look at this amazing graphic:

This change occurred over two years. The same changes are coming to grids everywhere, including ours. The faster we install batteries everywhere, the faster it will happen.

5. ✅ Community comment(s) of the month: Prompted by the retail pricing episode with Bruce Nordman, Don Jackson developed a CA price server that some energy nerds may be interested in:

Monthly Thread — How It Works

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

• CLIMATE JOBS & OPPORTUNITIES: Share climate jobs/opportunities

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

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

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

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

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

📌 …

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Text transcript:

David Roberts

Hello everyone. Greetings. This is Volts for May 13, 2026: “Electrifying industrial steam with heat pumps.” I am your host, David Roberts.

Here on Volts, we have discussed many innovative solutions for decarbonizing high-temperature industrial processes like steel and cement production, which require temperatures of 1500°C and higher. Hot rocks. Liquid tin. Heat so hot it becomes light.

However, as I discussed with Teresa Cheng and Richard Hart last year, the much more common industrial process — used in pharmaceuticals, paper, beer brewing, and hundreds of other workaday industrial applications — is plain old boiling water for steam, which requires only 150°C.

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Making steam for industry has not changed much since before the Civil War: you burn something (usually natural gas these days), boil water, and pipe the steam where it needs to go. About 8 percent of all the primary energy used on earth goes to this purpose, producing over two gigatons of greenhouse gases a year. And for the most part, we’ve left it alone.

You might think that “boiling water” would be among the lesser challenges for electrification, but transition has been stubbornly slow in this area, mainly because the economics of the most common alternatives have not yet penciled out.

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My guest today, Addison Stark, thinks they never will, which is why he set about to make something new. AtmosZero, the Colorado company he co-founded and runs, makes what he calls Boiler 2.0: an air-source industrial heat pump that drops into an existing boiler room in a matter of days, produces zero on-site emissions, and runs at roughly twice the efficiency of a standard electric boiler.

We are going to talk about why other electric solutions won’t work in this area, what technological advances enabled this new heat pump, whether it really competes with natural gas, and the prospects for finally electrifying the oldest process in the book.

With no further ado, Addison Stark, welcome to Volts. Thank you so much for coming.

Addison Stark

David, I appreciate you having me on.

David Roberts

Addison, you came up as a policy wonk through policy wonk channels. You worked at ARPA-E for many years, worked at the Bipartisan Policy Center for years. You wrote in 2020 a pretty influential paper about the need to electrify heat, which is a beloved topic here on Volts. And then in 2022, you finally pulled the trigger, left academia, and started something of your own. What was it, as you were writing about electrifying heat, that finally pulled you out of academia and into the world of entrepreneurship?

Addison Stark

That’s a good tee up for me. The way that I think back on all of this is back in 2020 I was doing two things. I was baking sourdough, and I was grinding my axe against the idea that industry is hard to decarbonize. When I was at ARPA-E, which was about a decade ago now, I was working in manufacturing efficiency. We didn’t even have the term industrial decarbonization yet. We were focusing on how do we improve efficiency across traditional processes in the industrial facility. At that time, people started to really imagine, “What does it take to go after industry as this last third of climate solutions?”

It gets people thinking about, as you noted already, steel, cement, refining, chemicals, some of these major verticals where you can imagine the necessity to reinvent processes. However, that left me unsatisfied because as you started to look beyond that into food and beverage, into pharmaceuticals, into other materials, you can’t start to imagine being able to find a way to reinvent every single synthesis process in a vertical way.

Once we started to carve and slice the data — and that led to that Joule article that you referenced that I published with my former ARPA-E colleague Greg Thiel, who now leads technology diligence at Energy Impact Partners — we saw that industrial heat, as you noted, is 3/4 of industrial emissions. When you start to slice that a little deeper, you start to see that it’s a question of the scale of what you need to solve. Not everything is as big as a refinery. Not everything’s a 100 megawatt plus installation. It’s the question of the temperature ranges, which you’ve started to explore on this show already.

One of our core insights at that time was it’s also a function of the working fluid by which that heat is delivered — flue gas coming off of combustion, hot air for drying. But the centrality of steam is really what I saw as the kernel of an opportunity to go after the boiler. Half of all industrial heat is steam. That’s really led me to go from this concept of, “Here’s a broader R&D roadmap that we published for the world to start to grapple with industrial heat as an opportunity,” to, “Well, crap, I have an idea, and I might need to quit my job and start a company.”

David Roberts

Low temperature is a different challenge than high temperature in a lot of ways. One of the ways is high temperature are these big giant industries, which means that they can potentially at least grapple with giant solutions. There is a lot of money floating around. Any given steel maker is relatively wealthy and has a lot of money to invest in technology. But these low temperature processes, as you note, just scale in a different way. It’s scale in being a lot of little things, a bunch of little things. No paper manufacturer or whatever has a ton of money to do R&D.

This is a weird different kind of scale. It’s ubiquitous small things rather than a few big things you are going after, which is a different kind of challenge. In a lot of ways, I feel almost more difficult because each one of these industries to some extent has its own internal dynamics and there are dozens and dozens of them.

Addison Stark

Picking up on your train of thought there. One of the core insights that led to what we’re doing here at AtmosZero — focusing on the boiler itself — is recognition that in 1867, Babcock and Wilcox did something fundamental. They productized the boiler. They went from stick-built, brick-by-brick built boilers being built in the early industrial facilities of the beginning of the Industrial Revolution, and then started to build it in a factory and built factory-built standardized boilers that really catalyzed the growth of the Industrial Revolution. What happened then was steam heat became ubiquitous not just for heat application, but also for motive power in industrial facilities.

What has occurred then over the past 160 years is that every other unit operation in the industrial and manufacturing facility has been designed around the availability and ubiquity of centralized steam production. The way we think about that is yes, when you look at all these other smaller manufacturing facilities, distributed light and medium duty industry is the way that I think about it, they still have something in common, which is a centralized boiler room that each of them use built around a common product.

That’s where we really started to see the productization of an electrified solution, of a heat pump solution, could be the thing to help unlock this in a common way that is ubiquitous across all these industries. If you walk into a brewery or you walk into a pharmaceutical facility, or you walk into a paper mill, you’re going to see the same boiler manufacturer’s boilers on site.

David Roberts

It’s just worth emphasizing that you are describing why it’s difficult to uproot this. Because it’s had over a century of scale and modularization and standardization and bringing all the costs down. This is as standardized and modularized and off the shelf a product as exists anywhere. That is precisely why it’s difficult to get rid of them, because they’re cheap and easy and standard now for everyone.

Addison Stark

Yeah. I think that’s why we’ve seen so far in the market that the thing that has gained market traction, ironically, is straight-up resistive or electrode boilers, which have been growing year over year in the mid-teens, 15 to 16% year-over-year growth, because they are productized and easy to integrate in a CapEx-efficient way. However, there is that ongoing OpEx challenge in electrification with direct resistive solutions. But it does point us to what we really need to be thinking about in terms of steam — you do need to replace the boiler and it needs to operate in the same way that these facilities have always wanted. It would be very difficult to go in and try and replace the heat on a unit operation by unit operation basis because it removes the central operating and control paradigm of all manufacturing facilities.

David Roberts

You’re not going to redesign all these processes. The only other option is to focus on the boiler. We’ve established that boilers are very productized, very standard, and extremely ubiquitous — more so than I think people really appreciate. These things are all over the place. When we talk about trying to decarbonize them, electrify them, before we get to your solution, let’s talk about the two alternatives that have been around for a while and fighting for market share and not really getting much of it. The two other electric alternatives. One is the one you just raised, which is just an old-fashioned electric resistance boiler, which I assume from the term electric resistance we’re just talking about a toaster — heating up coils with electricity that then heat up water. Is that what an electric resistance boiler is?

Addison Stark

Yeah, I would think it’s analogous to your hot water heater at home, if you’re running an electric one or an electric tea kettle, that you have a direct resistive element in contact with water or in terms of an electrode boiler, where the resistance through the water of an electric current is what directly heats it. In both ways, what we’re talking about here is one unit of electricity and one unit of steam out. You’re really focusing on turning electrical energy into thermal energy.

David Roberts

That’s one alternative to the standard boiler. The other alternative to the standard boiler is a heat pump, but it is a heat pump that attempts to make use of the waste heat produced by the manufacturing process itself to run the heat pump. I want to address both those and why you think ultimately they’re not going to be sufficient. The electric resistance boiler has the advantage of being productized and standardized and can just sub directly out. What is the drawback then with an electric resistive boiler?

Addison Stark

The drawback there is on the ongoing fuel economics. When you look at the levelized cost of steam, the LCOS, in general what you’re going to see is with a resistive unit, the CapEx over a 20-year lifetime or something like that is going to be small, it’s going to be in the single digits of percentage, but your fuel costs are going to be tremendous. 80 to 90% of the total levelized cost is going to be driven by the electricity price that you’re paying to be able to generate that heat. Traditionally, the manufacturers are operating with low-cost natural gas that’s being delivered directly to their facility. You run into essentially a spark spread issue there — the spark gap.

David Roberts

Just for every listener. This is a great term for everybody to know — the spark gap, which is the gap between natural gas and electricity prices for electricity.

Addison Stark

It’s unique in the industrial setting. Industrial electricity and gas tariffs are usually defined differently than what you might see at your home. It is a difficult thing to bridge. However, the one thing that technology — the resistive or E boiler technology — has going for it is that it is very low CapEx, very easy to install, and operationally simple.

David Roberts

You can sub that out relatively quickly, straightforwardly. It’s not going to mess with your operations, it’s not going to pause your operations or anything. But you’re going to be paying more on an ongoing basis for electricity than you would have been for the natural gas, mainly because these things use tons of electricity. They’re very power-intensive.

Let’s talk about the other alternative then, which is what if we built a heat pump? Every manufacturing process, as listeners know, generates waste heat. Almost any process generates waste heat. The thought here is, what if you could capture the waste heat and use that to power your heat pump? Then your fuel’s free in theory. Why not do that? You wrote another paper in Joule just last year slandering the name of waste heat in this context, to great outrage among an extremely tiny group of people. Explain to us then, what are the drawbacks of the heat pump powered by waste heat in this setting?

Addison Stark

Yes, I’ve been known to be called a heretic. I have openly and loudly at times claimed that waste heat is a waste of time.

David Roberts

Can I ask you, do you think that’s true just in this specific application, or do you think that’s more general — was your argument more across the board?

Addison Stark

Obviously it’s really hard to have a generality done in seven words or five words. What I think of is generally it’s very difficult to extract value from waste heat at temperatures below 100 Celsius for application in either upgrading through an industrial heat pump or capture and reutilization to generate power. I think that there are certain temperature ranges that it gets down into the second law of thermodynamics. I think that it gets down to, most importantly, the economics of returning capital for these kinds of installations, which are necessarily bespoke. Ultimately, it’s an economic challenge.

David Roberts

The key thing, and this is really the central insight, one of the things that was exciting me as I was reading about this is that we’ve, on Volts, covered learning curves, we’ve talked to people about learning curves, and we’ve talked a lot about what kinds of technologies get on learning curves.

Among other things, it all comes back to this: Is it standardized, productized, built in a factory, modular, the same every time — versus these waste heat recovery projects, which almost by definition are different every time, very bespoke to the facility.

Addison Stark

That gets back to another point where I would put some context or limits on my statement. For large-scale installations — think about 100 megawatt plus refineries, where project finance and optimization across the entire plant is very common — that’s a place for waste heat integration. Makes a lot of sense where you can look at a longer time horizon. You have big sources of it.

But when you’re talking about the small, light, and medium duty manufacturer, and I think one of the core things is most manufacturing facilities have thermal loads below 10 megawatts. That’s where if you’re running bespoke engineering projects, it doesn’t scale down in cost to be able to do all the engineering hours necessary. It just becomes harder to return that.

In the paper that you’re referring to, where I did qualify my statement to “waste heat is mostly a waste of time,” I wanted to point out that what really matters is the incremental value of that waste heat. As you look at the payback period versus a resistive boiler of an air source heat pump that’s been standardized and using ambient air to be able to source heat. Our efficiency is necessarily lower than what a waste heat driven one would be.

David Roberts

Let me emphasize that quickly because that is the question I want you to answer. The disadvantage, as we say, of the waste heat capture is this bespoke engineering often for relatively small amounts of payback. But the heat you are thereby capturing is already relatively hot and thus the work you have to do to upheat it is lower. Your advantage with just the ambient air source heat pump is it’s real easy to find ambient air and it’s a standardized technology, but you’re starting with room temperature air and you have to heat the air up much more. I’d love to hear about that trade-off.

Addison Stark

Exactly. I think the core question then for an end user is by doing a waste heat capture project, does that incremental increase in CapEx get paid back fast enough by your incremental decrease in OpEx? What we have found is, relatively speaking, no. That’s because the sensitivity to the value of the energy in the waste heat is relatively low and the OpEx savings don’t hit the hurdle rates that most industrial customers would think of wanting to achieve — sub five-year payback periods for doing that. Ultimately, that’s the finding.

For us, it brings us back to the question of what is expected of a boiler in an industrial facility anyway. There are additional complexities introduced when you introduce a waste heat capture project — you create circular control dependencies within the facility and it can create other unanticipated challenges and more reasons for an end user to say “no.”

David Roberts

Isn’t one of the other points also that to do this kind of bespoke engineering requires shutting the process down for longer? It turns out those costs are a big chunk too.

Addison Stark

Lost revenue can be a big issue with any industrial facility upgrade. It’s something we’re highly sensitive to in making sure that we have a solution that can be integrated during scheduled downtimes or integrated in the same way that the commissioning of a new combustion boiler would be done. One of the things we were successful in doing in our pilot deployment last year is to be able to validate that we’re able to install and deploy with zero downtime of the facility.

Now, if you are going into a specific manufacturing train and capturing waste heat from a unit operation reactor itself, that oftentimes necessarily requires the integration of a new heat exchanger in the main fluid flow lines and increases the number of touch points into the manufacturing lines and increases the potential of multiple day downtimes, which is direct loss of revenue. That can be a big penalty against your overall return.

David Roberts

That’s the two that are common on the market now: electric resistive heaters, which are easy to buy and install but increase your OpEx generally too much, and waste heat capture-driven heat pumps, which have low fuel costs since you’re using captured heat, but high touch points and generally don’t pencil out.

This brings us to your third alternative, which is just an air source heat pump, which is very familiar to Volts listeners from the residential application that they are all very familiar with. Is this just a big air source heat pump? What is special about this that makes it useful specifically in industrial processes?

Addison Stark

That’s a great way to frame it. We took another approach too, and I think it’s just as worthwhile, based on the conversation we’ve had so far. We didn’t pre-select heat pump technology necessarily. What I looked at is we need to think about the most cost-effective way to replace the combustor inside of a boiler. The rest of the balance of plant of the boiler — having a pressure vessel, having a control that is integrated and controlled by the pressure of the steam header, that centralized distribution of steam throughout a manufacturing facility. That’s what manufacturers buy — a boiler. They’re not buying heat.

It was really thinking about what can cost-effectively provide both a minimized OpEx and a minimized CapEx solution. Or the way we think about it is minimizing the total cost of ownership of an electrified steam boiler over the planned 20-year life cycle. It turns out that a heat pump technology is necessary there. I think that’s why we’ve seen the industrial heat pump, while it still continues to be a nascent industry, 30 years in, is still something that, through what we believe productization, can enable a scaled and manufactured approach.

In order to replace a combustor and to be able to boil water and deliver it at pressures that are industrially relevant, it’s more than just what we see in our residential heat pump at home. I think in Celsius, so I’m going to use that here. Your heat pump at home, if you want to keep your indoor temperature, call it around 25 C room temperature. On average, your heat pump is probably reaching a peak temperature about 10, 15 degrees higher than that. Call it 40 Celsius is what your heat pump needs to be capable of delivering heat at. For industrial processes, it’s 100 degrees higher.

David Roberts

But also we should emphasize it’s the gap — the amount that a residential heat pump has to increase the temperature. If it’s bringing in air at 15 degrees and it has to put it out at 40 degrees, it has to raise the temperature of the air 25 degrees.

Addison Stark

We call that the lift.

David Roberts

Your unit has a much higher lift — same temperature of ambient air, but you have to raise the temperature of the air, as you say, by over 100 degrees. How do you do that?

Addison Stark