In this episode, recorded live back in May, I'm joined by the one and only Jigar Shah to discuss Washington state climate policy and post-IRA policy in general. Jigar argues that to build political durability, the climate movement must shift its focus from shiny tech to solving everyday cost-of-living problems and that smart finance is the real key to scaling the energy transition for everyone.
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Text transcript:
David Roberts
Greetings, my lovelies. This is Volts for August 1, 2025, "A fireside chat with Jigar Shah." I'm your host, David Roberts. Last month, Jigar Shah — who needs no introduction on Volts, having been a guest twice previously (here, here) — was in Seattle for a fundraiser. The folks at the 9Zero Climate Innovation Hub, which organized a live podcast recording with me a few months ago, thought it might be fun to do another one with Shah. So we did!
He came to the Climate Hub, and we talked in front of a hundred or so guests.
The rather loosely defined topic was Washington state climate policy and some of its flaws, particularly its overreliance on grants relative to other financial tools. But the conversation ended up wandering all over the place, including to some surprising places.
It is never boring to listen to Jigar talk. So, please enjoy.
Incredible turnout. I feel like I keep wanting to look over my shoulder and see if there's an exciting act behind me. All right, so we're here to talk a little bit about Washington state climate policy and its discontents and related issues. But I want to start by taking a little step back further. So if you've seen the House Republican Reconciliation bill, the Big Beautiful Bill, literally called the Big Beautiful Bill that came out, you will know that they are going to nuke the Inflation Reduction Act and the Bipartisan Infrastructure Law.
They're nuking everything they can get their hands on. No one's quite sure what the final outcome of that is going to be, but it sure looks a lot like wiping the slate clean. So, you know, I'm not necessarily sanguine that we're going to get another chance anytime soon. So there's an element of kind of La La Land to all these discussions — lol, nothing matters.
But should another opportunity come along, how would you tweak what they did? Big picture terms, what do you think IRA missed? And something I'd really like to hear you comment on: one of the sort of premises of IRA was that it is going to create its own political durability by flooding red districts with federal money. That didn't work. So I wonder if you think there is some other way of designing a bill that would have more political durability, or is that even the way we should be thinking about it at all? Should we just make the best bill possible?
What would be your approach if you got another run at it?
Jigar Shah
Well, first, it's so great to see everybody. And Brian, can you find scotch for this man's drink? Look, I think right now we are witnessing Republican-on-Republican violence, and so the moderates basically want to keep all the IRA incentives and the Freedom Caucus wants to get rid of them as fast as possible. So my sense is that, I think Sun Tzu says that when that's happening, you stay out of the way. You don't stop them from attacking each other. So, and then separately, you've got the Senate saying, "We don't like any of your work and we're going to start all over."
So I wouldn't cry in your beer just yet. Like, I would wait to see where this goes because I don't think it's going in the direction of the first draft of the House bill. Right. And remember on Friday —
David Roberts
Isn't it sort of a law of US politics? Like, who was it that... I think it was like a US Senator who said this to me that nothing gets... Oh no, it was Sean Casten. He said, "Nothing gets better in the Senate." So, like, this bill could get better in the Senate, but is there precedent for that?
Jigar Shah
Well, look, I think it's your definition of better, but certainly I think that there are two big challenges with this bill. One is the way that it sunsets Renewable Energy Certificates at an absolute basis in 2029 instead of the construction start language that was in there before. My sense is they'll go back to construction start. And so I think that would be a huge improvement. I think the second is the Foreign Entities of Concern definition. My sense is that gets fixed, too. If those two things get fixed, I think the vast majority of the solar and wind and battery storage people I've talked to are fine because they can put stuff into safe harbor by the end of '26.
They got four years to build, which is the end of 2030. But the Freedom Caucus gets to say, "We killed it in '26 instead of '29, so we got to kill it earlier." And so they get a win. These guys get a win. And so, like, I wouldn't be so despondent about it. I think to your broader question, remember that the IRA started off as Build Back Better, and Build Back Better was supposed to include, you know, childcare, elder care, and all these other things that, you know, I think folks care about. And so the IRA that we ended up with beefed up existing programs like low-income housing, energy assistance programs, or weatherization programs, or that kind of stuff, and then had some consumer tax credits in it.
But I would say the vast majority of Americans didn't believe that we had a structural way to make their lives less expensive. Right. And I think that that is something that we could be intentional about, right? Whether it's manufactured housing or appliance financing or, you know, getting rid of subprime auto, like there are a lot of little indignations that hurt people on a day-to-day basis that we could be helpful on. And my sense is, is that that conversation is one that got lost in the move towards the commercialization of technology, which sort of like drove a lot of the narrative, which was like, "Let's get direct air carbon working and air capture working and sustainable aviation fuels. Let's figure out how to get electrolyzers and clean hydrogen and all this other stuff across the bridge to bankability."
All of which I'm proud of the work that we did, don't get me wrong, but I can imagine that a lot of Americans across the country that voted for Obama and then voted for Trump and then voted for Biden and then voted for Trump again felt like no one was actually listening to their concerns.
David Roberts
I guess then what I'd ask is, like, that approach to focus on commercialization makes more sense if it is coming as part of a larger package, a larger Build Back Better package where the cost of living stuff is being addressed by other, arguably bigger and more efficacious policies like child care, elder care, et cetera. So I guess how would you describe the room within energy policy to address cost of living? Do you know what I mean? Like, if we have to do it all in energy policy, what are the elements of energy policy that you think would address that for people?
And not just address it, but address it in such a visibly obvious way that it gets through the haze of nonsense and reaches voters?
Jigar Shah
Yeah, it's a good question and one that I think we all should have a collective conversation about, right? I think when you go to Germany or Denmark or Sweden, everyone lives in a manufactured home. Like even mansions are manufactured homes, right? They come in, whatever, 20 distinct pieces and then you build it on site in 20 days, right? Like, I don't understand why we are insistent on building things the way our grandparents taught us to build things. It's like we have missed all technology sort of like waves in this country on housing. Now we have a new wave that came out of the auxiliary dwelling unit, you know, sort of craze out of California.
So you now have like 10 startup companies, all of which are awesome, that can sell you a house that could literally just go onto your property within 24 hours, right — from LA wildfires or whatever — that are made in Nevada or made in, you know, one of them, ZenniHome, I think is made on Navajo land at the Navajo Generating Station. Right. And so, so there are these extraordinary things and the problems with them are minor. Like things like there are many places where they say, "Well, we have to inspect the home once it gets here in Washington state."
What?! Like, it's a manufactured home. Once you've inspected the manufacturing facility and it makes a good home, each inspector doesn't have to then get trained on how to inspect a manufactured home. These are state policies that need to be fixed to, like, keep up with the times of, you know, manufactured homes. So now you don't have to live in a double wide. You can actually live in a really great house. It's net zero because it costs literally no money. So when you think about how Australia and Germany are already at a dollar a watt for residential solar, so is a manufactured home manufacturing facility.
They're also at a dollar a watt already, right? And it comes like pre-wired and shipped to your house or shipped to your property, right? So that is something we could do right now, right? I think the same thing is true when you think about electric vehicles. You're in this place right now where you have a huge number of Tesla Model 3s that are available for dirt cheap on cars.com.
David Roberts
Lots of Cybertrucks available.
Jigar Shah
A lot of Cybertrucks stacking up, right? And so you have this ability now to go to subprime auto folks and say, "We're just gonna give you a car for $99 a week, right? Prepay on your credit card, it's $99 a week. If there's ever anything wrong with it, give us the car back, we'll fix it." And the fleet methodology so we're not screwing anybody over on maintenance, and you just take another car, right? But as long as you pay for it, it's your car. You can store your golf clubs in the back, you can do whatever it is you want to do, it's your car. Right. And so you're now in this place where electric vehicles are actually cheaper than a used internal combustion engine car because you have thousands and thousands of these cars available.
And Washington state has a program around helping people into affordable cars, right? Electric vehicles. And so the question is, how do you match that with business model innovation so that we can move away from personal car ownership for the people who don't want personal car ownership? There's a lot of people who just go from car debt to car debt and they're like, "Well, I own the car." Do you own the car? It's sort of like the bank owns the car, right? And then you like traded it in before you paid off the loan and now you take on another loan, right? It's maddening, right? And when you think about like what happens to poor people, like, it is amazing to me how many philanthropies and others are like obsessed with getting them solar power when they're going to save $8.43 a month on that.
And you know, if you get them an affordable car, then your car payment goes from $800 a month to like $300 a month, right? That's $500 a month of savings, not $8.43. But everyone's obsessed with the $8.43. I'm like, "Stop it already." You know, it's crazy, right? And so we're in this weird spot where we have done amazing things, right? Solar panels, battery storage, wind farms, right? Like electric vehicles, heat pumps, all of these things are now mature technologies. We did that, right? It's policy that did that. We're there now. And it's cheaper than making your distribution grid larger, right?
It's cheaper than all these other things that people do. But we basically are not focused on winning the win, right? We're focused on the next big shiny new object over here, whether it's nuclear power or something else. And you know, like, I'm not against anything, but there's some stuff over here we've already figured out, and we've got a 6% penetration. Can we get that to 60% penetration?
David Roberts
Yeah. So when I think about, like, you know, from the lawmaker's perspective, in a sense, shoveling money at nascent technologies is kind of low-hanging fruit. It's easy, it's good, it works, it's laudable. Whereas, like, if you want to make rooftop solar cheap, you know, you and I have — everyone, I think, in this room has probably lamented at some point that rooftop solar costs like three or four or five times as much to install here as it does in Australia. But if I'm a lawmaker trying to fix that, that's like local permitting, state permitting, customer acquisition, labor stuff, you know what I mean?
It's like 10 different areas of policy, only some of which I have any levers of control over. I mean, you know, the whole thing is, it's this thicket mess. And a lot of the issues I think you're getting around, which is like how to connect people with these cheap things that we've... a lot of that is a similar thicket. Like, how do you... are there tools that can cut through those Gordian knots? Or do you just have to, like, go utility to utility, like permitting board to permitting board? You know what I mean? Like, there's a reason policy gets channeled into the easier wins.
Jigar Shah
Well, I mean, you've seen the emissions numbers. I don't think they're easier wins. I mean, look, I think that, you know, the part that I struggle with is the sheer laziness of our community. I mean, when you think about the United States of America, we have 19,000 cities, towns in the country total. That's all the cities and towns we have that have elected sort of officials. I'm not counting the folks with 50 families. And so that's it. There's more people that work in the environmental movement than that. There's more people that work in the environmental movement who live in D.C. than that. And they're all basically lobbying EPA. Now that they're out of a job, maybe we need to get them to move across the country and actually help fix these Gordian knots with their law degrees.
Like, I just think that we don't want to do the hard stuff, right? The hard stuff is like, which city council member matters to get solar and wind approved in this county? That person. Let's go fund Caroline Spears to get Climate Cabinet the money to get that person $5,000. Instead, you want to give $50 million to what's his name in Texas who has no chance of winning any races. And you're like, "What are we doing?" Like, why is everyone so obsessed with like the hot new thing over here instead of the hard work over here?
Our neighbors are not evil. They're not bad people. They're not like, you know, just because they voted for Trump or whatever it is. Like, it's not like they're, like, you know, not good people in their lives. They still run the scouting troop, they still like coach the T-ball league. They do these things. What we need to do is engage in the same way that other folks have engaged. Like, you don't think, like, banning books is not easy. That's like a ten-year effort. Like, those guys worked hard to get on that school board and like ban those books, right?
And so we gotta work just as hard to figure out our stuff, right? And go to the local level and get elected into those jobs. And it's thankless work, all of it is.
David Roberts
And it took them like 50, 60 years to really win. So all we need is 56 years. So let's talk about Washington then.
Jigar Shah
Where's the scotch? Dave needs a couple shots.
David Roberts
The big critique: Washington has, I think policy-wise, one of the best policy packages of any state in the country. Arguably has more available subsidy per capita than any other state, but is spending the vast majority of its money on grants, which are, to get back to a previous subject, shiny objects for politicians. Fun and easy for politicians. You have a very distinct group constituency that loves you, you get to cut a ribbon, whatever, but it's not doing the job. We've got more and better policies than almost any other state, and yet we're not doing it.
We're not building the stuff. We have become like the perfect liberal state. It's green in everything but practice.
Jigar Shah
Oh, gosh. Oh, gosh, bring a whole bottle over here.
David Roberts
So clearly part of that problem is grants. There is no prospect of having enough money to grant your way into scale energy transition. So what is the alternative, and how, with all this in place, do we tweak some of it to allow those alternatives?
Jigar Shah
Well, I mean, I think that part of this is just recognizing that people do get stuff every single day. When refrigerators break, people get new refrigerators. When water heaters break, they get new water heaters. Right. If there's a grant program, they might take advantage of it. If there's no grant program, they put it on their credit card. Right. So it's not like folks are going without working stoves or without... I mean, there always are people who are. I'm not suggesting otherwise, but the vast majority of the population are replacing things as they break. And at that moment, it's always an emergency. At that moment, someone's yelling at you and going, why is my shower not hot?
Or why am I losing $87.43 of food that's in my refrigerator? Which is really important to me, and I need a new refrigerator right now. And so at that moment, Energy Star is not like what you're optimizing for. You're not optimizing for this or that. You're trying to figure out a way to get something that's in stock. You put it on a credit card. In that moment, the question is, what can public policy do to be more helpful in that moment? First of all, the 27% or so of appliances, we buy about $10 billion of appliances a month in this country. And so $2.7 billion of that generally is low and moderate income consumers who are buying that at, like, I think it's like 200% of the poverty rate or below. And for those people, the question is like, you know, should we be okay with them using credit card debt to buy that stuff?
My sense is there are ways to interject yourself to make sure that those loans are based on the data. Without any subsidies at all, it's probably like an 11% interest debt such that with the losses, you get to 5% returns for the investors. Right. Which is sort of the way the math works. And then if you decide to use some of that grant money to do first loss or to pay for some of the, you know, like friction costs etcetera. Because I know in Washington state you have this, like, weird... What is it called, like, taking or like the constitution is against using public dollars for private gain or whatever it is. I don't quite understand it. When you've got all these trillion-dollar companies... Whatever that is. Like some constitutional amendment is required to, like, help people. But like, so whatever that is, you could imagine just separating the scope of work and saying the customer acquisition cost is paid for by the grant dollars.
Educating consumers, making sure they know that they can, when something breaks, use this thing that can be paid for with grant dollars. And then the actual, like, equipment can be done with loan dollars. Right. That's legal. Whatever it is, like, you know, Apollo 13 it, stick it all on the table and then figure out how to do it. But we're in this weird spot where the grant dollars are currently being used as lottery tickets. And 5% of the people who are interested in that grant get the grant. And the other 95%, it's like, "Try next year." And you're like, "What?"
Like, that's the best we could do. In Washington state, we have like two of the trillion-dollar companies pursuing AI here. You'd think that there was some other way to actually construct a program to do this in a more equitable fashion, but that's what we do. But the other challenge is, like, when you think about ferries, Washington state has more ferries than any other place in the country. And Norway, all these other places have already electrified their ferries. But here we're like, "That's really hard."
David Roberts
We have a hybrid that just started. Does anybody know what I'm talking about? A hybrid, like literally just...
Jigar Shah
Yeah, it's like 13 million bucks to make.
David Roberts
It is very American in that it is hyper-expensive and not really totally green. It's like extremely expensive, half solution. We love those. So what are, like, what are some of the vehicles? Like, grants — not great for the reasons you say, it's a little bit like a lottery. What are some of the mechanisms that states can use? There's a bunch that make sense to me at the federal level, but what do you see working at the state level? Just the green bank?
Jigar Shah
Yeah. So you've got a bunch of financial institutions, right? CDFIs, credit unions, local banks, national banks who are here. And the question to them is, how do we solve this problem for customers? And what they might say is, "The cost of customer acquisition is too high." You know, like, "We can't advertise and we can't tell everybody like these things are available. We keep telling everyone, 'Don't trust the dealer when they're offering you financing. Get stuff from us.' But people just don't take the extra step to do it."
So there's an education program that the grant programs can solve. The other challenge is for people who, like, we have 30 years of DOE data that shows from New York and from NYSERDA, from Michigan Saves, from all these other programs, that poor people, when they run out of money at the end of the month, still pay their appliance bill. They, like, may short some other bill, but they pay their appliance bill because they know that someone could come in and take their appliance away if they don't pay it.
So the repayment rates of appliances are actually far higher than their FICO score or other thing would say, right? So actually it's a much lower risk. So, you know, the state of Washington could help educate all these financial institutions with that data. And that's a lot of what we did when I was at the Loan Programs Office on the loans that we did for residential solar was we showed Wall Street that the repayment rates were much higher than they were modeling. So you can imagine doing that kind of stuff. And then, you know, if you got this constitutional amendment or whatever it is that you need to pass, then you could actually do what most people do and actually create a green bank and actually fund it and actually use the money from the GGRF (Greenhouse Gas Reduction Fund), which Washington state really hasn't asked for, and, you know, I don't know if we'll get it at this point. And then, you know, and then you can use that money to do that work.
And so... And you can provide first-loss capital. Right? So if you put 5% of the total loan amount into a first-loss pool, which means that, you know, any shortfalls you get, you fill with that money first, you can dramatically reduce the interest rate and actually serve all the people in the state, right, no matter their FICO score, et cetera. And so there's a lot of different models that work. But there has to be a level of intentionality that we start with the goal, which is 100% of the people in need are going to get something that's better than credit card debt.
And now here are the tools that we have within the state that we've created, right? And how do we best use those tools to help the most people? But that doesn't seem to be the plan. The plan is like, here are the tools we want to use now. Like, you know, how many people can we help with the tools we want to use? And I was like, that's backassward.
David Roberts
Is there a state green bank? Because there are a bunch of them.
Jigar Shah
They created it, but there's no money in it.
David Roberts
No, I mean there's one in Washington, but like, is there another state green bank in another state? Because these things have been around for a while, do you think, is there another institution you can point to that you think is doing good, creative work making this happen at state level?
Jigar Shah
The state of California has a really good program that's actually a partnership between the IBank, which is their state green bank, and the treasurer's office. So the IBank actually provides the debt for consumers, and then the treasurer's office provides the first-loss capital. And they also do on-bill financing through the utilities, which is remarkably low in terms of loss rates. Right. People pay their utility bills, and so doing on-bill financing is a very low loss rate. So that's another way to solve this problem. And then you've got New York Green Bank has done programs like this with smaller companies, sort of in the $10 or $20 million range.
Connecticut Green Bank has done programs like this. So there are examples. Michigan Saves obviously does programs like this. The New York State Energy Research and Development Authority does this. And so there are, I think, case studies that people could copy. But I think the bigger challenge is setting forth the goal of like, we need to stop having people... Yes, Barbara Ehrenreich had talked about in her book Nickel and Dimed. It should not be expensive to be poor. Those are things that we should be able to solve in a state like Washington.
David Roberts
You know, I think people, a lot of people, especially people on the left, I think are leery of finance, leery of financialization.
Jigar Shah
For good reason.
David Roberts
Leery of the financialization of the economy for a lot of, I think, good reasons and somewhat suspicious of finance. And there are certainly examples. You can imagine finance schemes going wrong in various ways. So, like, to do it well, it seems like one of the things you need is state capacity, as people who know and understand this stuff well, which we don't necessarily have in the government. Just because we haven't been doing it in the government.
Jigar Shah
Well, you haven't been optimizing for hiring those people.
David Roberts
Yeah. So, like, what sort of state capacity do you think you need? And, like, where should it be housed? Or is that too arcane a question to get into?
Jigar Shah
I think, like I said, California has the IBank, New York has NYSERDA as well as the New York Green Bank. I mean, there are institutions that then feature people with finance backgrounds in states. And so Washington has been slow to put those institutions in place. But I think, you know, it's small but mighty and, you know, I think it's trying to catch up there. But I think the bigger thing is to suggest that there are lots of ways to do this work.
So if you don't believe in for-profit companies that provide these financial solutions because you think that they're inherently bad and trying to, like, take advantage of consumers, well, then you could have utilities do the on-bill financing piece. If you think that's bad, you could say we want to do credit unions and have them do the work.
Or do other things. So, like, I don't think that I need to solve the entire cultural issue in every state. Like, each state will have their own preferred provider of these things. And they also will solve for different things. So, for instance, you know, there's a very good critique around the fact that Energy Star appliances, you know, have too much fancy tech in them and so they break too quickly and they don't last 25 years like your old Kenmore, you know, refrigerator did. Okay, great. Well then, you know, we can get Consumer Reports to come in and say, okay, of all the Energy Star appliances, which ones are the easiest to fix and which ones work within the right to repair and which ones work within this thing?
And we can do our own calculation that's not Energy Star, which is just on energy, but it's actually on total cost of ownership. And you could have your own data and Washington state could play a big role in that. Right. So I don't think this financialization thing has to lead to bad outcomes. It's more just saying that people are financializing this already, right? They don't have the cash sitting in their checking account, and so they put it on a credit card. That is a source of financialization, just not a very affordable one.
David Roberts
You know, right now, a lot of states are flush with money. There's been a lot of federal money pumping out into the states in the past few years. I guess it's an open question how long, whether they're going to get all the money that they were promised, but at least some substantial portion of it is moving out the door.
Jigar Shah
Block grant money is coming out. I mean, that's happening.
David Roberts
So I guess what I'm getting at is, like, there's sort of two challenges for states chronologically. One is how to use all this federal money to maximum effect, as you say, to touch as many lives as possible, shift as much as possible. But then the next question is, like, what to do when the federal money runs out, which it looks like it will. Not only are the grants and et cetera, some of which were already promised, going to get cut off, there's going to be no new money, and then there very well may be stagflation or a horrible recession on the way.
Lots of people seem to think so. So the first question is, how do they maximize all this federal money they have? The second question is, what do states do once they're broke again, once they once again have no money? Because it seems like the entire climate conversation, policy conversation, has sort of moved en masse in the last five to ten years to this notion of investment, direct government investment or at least financial assistance, which I think is, like, all to the good, but like that's premised on having money to spend. And so once you're broke again, what then?
Like, are there ways to achieve the cost of living stuff you're talking about without just having a big pot of money to throw at it?
Jigar Shah
So let me start in a slightly different place than your question — because then I'll need a bottle of something. I think that, in general, when we look back on this period of time, no one will remember Donald Trump, right?
David Roberts
That's bold.
Jigar Shah
Like, well, because I think that what's happening in front of us right now is so just extraordinary that I don't think people who are living through it are really looking at it, even though it's right in front of their face. I mean, you know, the AI tools that we're using right now are clearly like alpha and beta versions of something, right? But it is very obvious that within three years' time, every employer is going to spend $300 a month per employee, if not $1,000 a month per employee, to outfit them with productivity-enhancing tools that allow them to double and triple their output. Like, that is definitely happening, right? I mean, like, when I talked to Stephen Lacey at Latitude, he already pays $300 a month for all of his employees for AI-related tools. And I'm not even sure they work.
Like, when you think about what a $50 a month thing that everyone is doing with cell phones did to transform the economy, right? Or broadband, right. This is like 5x that amount of money that every single employer is going to pay. Second of all, the CPUC just approved this week, Waymo to be fully approved across the South Bay. And so, like, by the LA Olympics, it'll be very obvious that every major city in the country will have Waymo. Right. And now think about it. 40% of Seattle has been donated to cars. When you think about roads, parking lots donated to cars. Here you go. That hasn't been calculated in our cost of ownership of a car. That is just free money coming from the Department of Transportation at the US government and 10% matching from the state of Washington.
And so when you think about the worst asset class in the entire world, it's cars, right? You drive that thing 4 to 5% of the entire year, and the rest of the time it's parked. These Waymo cars could easily do 200,000 miles a year. The capital efficiency of that is extraordinary. We're not going to replace all internal combustion engine cars with EVs. We're going to have one quarter that number of cars, and it's going to stretch a lot farther. And a lot of people won't tie into this. I get it. A lot of people won't do this.
David Roberts
I'm just skeptical. Like, if you make getting around in a car a hundred times easier and more pleasant, why won't people just spend 100 times more time getting around places in cars? Do you know what I mean? It's Jevons paradox thing here. Why won't people just travel more if traveling becomes so easy and cheap and frictionless?
Jigar Shah
Well, I don't know that that's the future I see in the sense that, like, you know, if you're at 57 cents a mile now, or 67 cents a mile, or whatever the reimbursement rate is for the IRS. Like, my sense is that goes down by half. Maybe it goes down by two thirds. I don't think it goes to three cents a mile. And so, the variable cost of running a car is still pretty high. But I hear you.
And so there might be people who decide to, you know, live whatever it is an hour away now and just like Waymo in every day.
David Roberts
I think the fear is that you just end up with everything choked with cars and no one's even fighting it anymore. 'Cause they're in their little pods surrounded by advertisements and dog videos, and they're just being carried around. So the geometry problem of cars and cities does not get solved at all by far.
Jigar Shah
It could absolutely be dystopian. But like I choose... I choose to believe that it is a sign of the next stage. Because, you know, like, when you enter your car right now, people want to do everything but drive their car, right? They want to eat breakfast, they want to put on makeup, they want to figure out how to, like, choose a podcast to listen to. They want to, like, do whatever it is that they do other than actually drive the damn thing. So it's already getting, like, less and less safe. It'd be great to me to, like, go this way. But my point is really just that when you think about all of this stuff that's occurring now, the question becomes when people are investing huge sums of money into AI because of the productivity or into Waymo because of productivity, et cetera, at that moment, you have this ability to do things in the laziest possible way.
Build natural gas combined cycle gas turbines, or to do things in a more interesting way. Do distributed capacity procurement. We're using, like, distributed generation sources, building new nuclear, figuring out how to do advanced geothermal, doing all these things. We have this moment in time where Washington state can say, "If you're going to do all this crazy stuff, do it in a way that actually, like, protects the land and the water and the people who live here, instead of doing it the old way when we didn't know any better." And so that whole revolution in my mind gives you this opportunity to do things in a far better way. And I think that as a result of that, I think there is this moment in time where you could get an extraordinary sort of step change in the way in which technology is financed and deployed to the good.
David Roberts
That's awfully optimistic. So what are some things utilities specifically could do? Specifically on this cost of living thing — you mentioned VPPs, you have some critiques of Seattle City Light. What are things utilities can do purely focused on cost of living and cost of energy? Because one of the big problems going on right now, and maybe you have something broader to say about this, but right now we are simultaneously trying to electrify the whole country. And electricity rates are going up everywhere. They're going up, like, they're becoming crippling in California. And those are highly at odds. So utilities are in that mix and can do something about that. So what do you think utilities should do about that?
Jigar Shah
Well, first I think we have to figure out why they're going up. I think if you look at generation costs in this country, they are basically flat.
David Roberts
Yeah, it's T&D. It's mostly D, right?
Jigar Shah
But I don't think that most people in this room, let alone most people in this country, know that. I think a lot of people who say, "Well, it's renewable energy that's causing the expensive..." And so, first of all, generation costs have basically been flat to down, certainly on a real basis. Then you've got the T part, which has gone up a little bit, but not much.
So the T part's basically been pretty flat, a little bit up because we've got lower asset utilizations, which is the fault of renewable energy, to be clear, right? Like, I mean, the reason why when you replace a coal plant at 55% capacity factor with something that's 25% capacity factor, you use it less efficiently, right? And so that's why we need to move to a place where we're probably mandating four hours of battery storage at the generation site with solar so that they can operate at 50% capacity factor.
David Roberts
I saw a proposal that we just take all those Cybertrucks and park one next to every substation and just use it as battery distributed.
Jigar Shah
It's not dumb. It's not dumb.
David Roberts
It's a great plan.
Jigar Shah
I mean, like, it even looks more like infrastructure than it looks like a vehicle. You know, I like...
I mean, the craziest thing about this is if you talk to a battery company, their cost installed is about $246 a kilowatt hour, right? To, like, get these, like, sort of 50 megawatt battery farms put in place. If you look at a Rivian or whatever else, and you just make the math easy, right? 100 kilowatt hours, right? For the battery. If you take $246, right? And then, like, add, like, 100 kilowatt hours to it, that's like $25,000, right? And, like, for a lot of these vehicles, you can get them for basically that price or cheaper, right?
And so, like, it doesn't make any sense to get a Tesla Powerwall or a home battery. Just get one of these damn trucks, and then if they're out of favor, like the Tesla Model 3 is right now, then you could probably buy this thing for $100 a kilowatt hour, right? And then, yeah, absolutely. You just stick them next to a substation and you drive it there, you know, it's great, right? And so, like, I'm not, you know, like, it is kind of funny, but it's kind of not. Like, when you think about what we funded out of the Loan Programs Office, right?
We're on track by the end of 2026 to get 400 gigawatt hours of battery manufacturing facilities built and operating in this country.
David Roberts
Is that still on track? How much has Trump...
Jigar Shah
Stellantis has built theirs and Ford has built theirs and GM has built theirs. They've got two plants left, one in Lansing and one in Kentucky that need to get built. And they might convert those, actually, into utility-scale battery plants instead of vehicle battery plants. But 400 gigawatt hours per year. And so that's a lot.
David Roberts
I mean, this is a side question, but we're rambling all over the place anyway, so I wanted to ask you, when you addressed the vast technological changes that are coming, your mind went straight to AI, and that is a very common thing now, sort of. It's become almost conflated with technology advance. But my protest here is that it looks to me like we are very close to something like energy abundance. The cost curve on solar has been moving in the same direction and at the same pace and the same slope for decades now. And if it just keeps doing that for another 10 years, trivially cheap solar and batteries, as you all know, are falling even faster.
They're on an even faster curve. So it looks to me like we are at least as close to energy abundance as we are to AGI, as to some sort of artificial generalized intelligence. And it seems to me like energy abundance would be as fundamentally transformative to human life as anything ever, including AGI. But no one ever talks about it. Even you. It doesn't even come to your mind. So, am I wrong that that's coming? Why is no one talking about it? What's your thought on...
Jigar Shah
I do think you're wrong.
David Roberts
The one happy thing I come into this room with.
Jigar Shah
I live to kill your dream.
David Roberts
There are so few left, it's like you need a sniper scope.
Jigar Shah
I think if you look at solar power in and of itself, it is definitely getting remarkably cheap. And I completely agree with you on that. I think that when you think about the system costs to accommodate what it is, that is some people's wet dream around, like, 100% solar and spilling it and putting in batteries and having 3x the transmission grid and all those things, that is not cheap, right? So the vision of the system that is 100% solar powered with a little bit of wind and a little bit of hydro and a little bit of whatever, whatever, like, that is not a cheap system.
And so I just think that people need to be a little bit more, I think, appreciative of the value of diversification. I'll give you just a thought experiment: if we were to build systems that had 75% capacity utilization, which is what we had in the 1970s, our grid could double right now, like, without building any more grid. Like, we could transport more power and do all this stuff without actually building more grid. Right. Because we so underutilize our grid.
David Roberts
And we can reconductor. Did you see the TS Conductor? Just their first real world...
Jigar Shah
I love it. I love it.
David Roberts
80% more capacity through the line.
Jigar Shah
Totally. I totally agree. And so in order to accomplish that goal, right, you would just have to add 8 hours to 12 hours of battery storage at every single solar farm to then fully utilize the transmission lines. And so if you do that, well, then you have to charge the solar for the batteries, right? And then that system cost comes in at $95 a megawatt-hour, which is not like the super cheap $20 a megawatt-hour. It's $95 a megawatt-hour. And the reason it's $95 a megawatt-hour is because only the first hour of that battery or two hours of that battery gets paid by ancillary services markets. And all these markets that get paid every day.
The rest of that is just time shifting. It's just a cost, right, to the system. And so I just want to make sure, like, I'm a huge fan of solar. I mean, like, I know I get accused otherwise right now, but like, I'm a huge fan of solar, but I just think that, like, we're going to need a diversification of, like, nuclear, geothermal, hydro, wind, solar — not tidal.
David Roberts
Please let me pin you down then. Let me pin you down because this is everybody's... To me, this is the most interesting question now, which is in 2050, 2060, 2070, what is going to be the final percentage of variable renewables on the grid?
Jigar Shah
Less than 60%.
David Roberts
Really?
Jigar Shah
Yeah, less than 60.
David Roberts
I think you're wrong about that. We need to make some bets.
Jigar Shah
Well, I mean, I'm happy to bet. I'm definitely going to live until then. But no, I mean, and the reason is that when you look at all the modeling work, everyone agrees that you can go much higher, but the system costs end up also being higher once the variable renewable energy costs get above that number. Because you just need to add so many more batteries at the point of generation. Because I think we're going to add batteries at the point of load for sure. Just because I think it just makes everyone's life better.
Like, Katherine Hamilton just calls it the bacon of the grid. And so, you know, it's one of those things where people are like, "I just want, I want a battery in my house" and "I want a Cybertruck," or not. And, like, whatever it is. And you have batteries at the nodes. But that doesn't use transmission efficiently. To use transmission efficiently, you'd have to put a lot of batteries at the point of generation.
David Roberts
Yeah, but that is, like, on the grand scale, a one-time investment that pays back infinitely over.
Jigar Shah
That's why we're going to put a bet on Longbets.org, $100. Let's do it.
David Roberts
Well, this brings me to VPPs then. This is virtual power plants. So, I think everybody is starting to come to the realization.
Jigar Shah
Used the word VPP because DPP is a bad one.
David Roberts
You don't like DPP?
Jigar Shah
I mean, have you googled DPP?
David Roberts
Oh, right, good point. I thought of that.
Jigar Shah
Yeah. Your kids are not going to be... Your kids are old enough now.
David Roberts
VPP. That's a very good point. All right, so I mean, just so everybody's familiar, every residence basically has spare capacity, spare grid capacity that they're not using. And the idea of a virtual power plant is if you just give some central aggregator control over that spare capacity, when you add it all up, it adds up to a power plant's worth, and you can... It can behave like a power plant, a super power plant really, can store energy. It can do all kinds of things. So I have two questions about that. One is, to me this seems very obvious that if you're a hyperscaler and you're building data centers and you want as much power as possible quickly, the quickest way to get it is just to organize the spare capacity that's out there already. There is no faster.
Jigar Shah
That's right.
David Roberts
You're not gonna build any kind of power plant faster than you can just coordinate existing capacity.
Jigar Shah
And we're so close. I mean, honestly, we're so close, like...
David Roberts
Being able to do it. I mean, people are doing it.
Jigar Shah
No, no, no. We can definitely do it. Technically, the problem is you can't do it contractually. So the problem that we have right now is if you said —
David Roberts
Problems at LPO trying to get this off the ground?
Jigar Shah
We were so, we were so, so close. So the hyperscalers are basically going to, like, whatever, Renew Home or Voltus or all these other people and saying, "We're going to pay..." Because remember, all of the capacity auctions across the country have gone up 10x, right? So PJM was at $27 a unit. Now it's $270 a unit. They're probably gonna hit $400 a unit, which is their cap, right, that they negotiate with Josh Shapiro, interestingly enough, anyway. And so you have all this stuff. And so now, like, the data center companies have to pay that capacity payment, right, for their data centers in that ISO.
So they're saying, well, "I'll pay you a 40% discount of that number for five years so that I can do this." The risk that the provider is taking is that PJM is going to change the rules on them, right? And change the effective load-carrying capacity of what they negotiated such that they can't meet the requirements that Microsoft, Google provided. Because they're not going to take regulatory risk, right? They're saying, "You guys take regulatory risk. My bill just needs to be 40% lower than what I would have paid for the capacity in the auction."
And so that part of it is the last piece that we need to solve.
David Roberts
The regulatory risk?
Jigar Shah
We're not going to solve it. We just need to figure out a way to get it to be understood and put into a box, right? Like, it's always going to be a range of outcomes. Everyone gets that. But what range of outcomes is it? And, like, what does that mean to their cost of capital, right? Do they have to use, you know, 40% return equity to fund those contracts, or can they use a little bit of debt in there to, like, you know, make the cost of capital lower?
David Roberts
Do you think it would make any difference if it were utilities rather than third-party aggregators who had their hands on this spare capacity and were doing the aggregating? Does that increase confidence?
Jigar Shah
That is exactly the fight that we don't need to have. But Lord almighty, everybody wants to... Like, I am completely indifferent to whether the utilities own this or third-party aggregators own it. But you know that all the philanthropies and all the nonprofits are like, "I will die on the hill of utilities owning DERs. They cannot own DERs." I was like, "Who cares?" You know, but they care. So we're going to have that fight next. But I do think that the one group that could solve this problem next week is the state of Pennsylvania or the state of Maryland.
So when the PJM was invented by, like, Pat Wood and Rob Gramlich and all those people at the FERC, right, the whole point of it was you were going to have long-term contracts in their side, and the three-year contracts were the emergency vehicle, but everyone's just using the emergency vehicle. They're just doing three-year contracts. But the state of Maryland or the state of Pennsylvania could come in and say we're going to basically do a 10-year offtake on all of these DERs and all this other stuff because they pay capacity too for the state procurement.
And then if you look at the city of Cincinnati, what the city of Cincinnati has done is said everybody who lives here can also get the same deal that we're negotiating for ourselves. So half the population of Cincinnati is now aggregated in the same buying pool as the city of Cincinnati.
And so the state can do the same thing. And remember what Maryland did in this vein is they're the offtaker of their offshore wind project. Right. The government did that. So you know that they can be flexible on this. They can do that. So now the question is, now that they've done the back-to-back contracts with Renew Home or Voltus, they can separately say, "We want to make sure that you actually give 50% of that revenue to poor people and make sure that they are actually not boxed out of this opportunity and you're not just giving it to Walmart stores." They can put one, you know, shipping container in a parking space and solve the entire problem. And so, like, you can imagine the state again having this role to play. If we can get those out-of-work lawyers out of D.C. to move back to their states, they could use their legal degree to do this.
David Roberts
Another big picture question then. How similarly, in the grid of the future, what portion do you think will be occupied by VPPs? What scale of a solution is that? On the 20-year, 30-year time horizon.
Jigar Shah
We put down a marker in the VPP Liftoff Report, which is that we wanted the entire peak load of the US grid, for 20% of it to be flexible. And we believe that that is achievable by 2030, which is literally right around the corner. And I believe that things are hitting the fan so hard because of the incompetence of our sitting government that, like, the only way that we're going to solve this problem is through VPPs. There is literally no other way for you to provide the reserve margins to get us out from underneath the capacity auctions and all the other stuff.
Which is why it bothers me to no end that Seattle City Light isn't leading the way.
David Roberts
Yeah. Why aren't they doing that? Any Seattle City Light representatives want to take on the thankless task? I think we're almost done. We could do a question, maybe a question or two.
First Audience Question
So the Infrastructure Jobs Act had $7.5 billion for EV charging, signed in late 2021, and last time I heard it had resulted in about 60 charging stations. What happened?
Jigar Shah
Yeah, it is the perennial problem of doing your job too well. So we added 1,000 chargers a week while we were in office during the Biden administration, just to be crystal clear. So it's not 60 chargers, right? We added 1,000 chargers a week as our country. Then what NEVI said was, "Those chargers are only going to help the people that some software program says are going to be profitable," right?
So this corner, that corner, this thing, that thing, right? And so now what we wanted to make sure of is that we could actually solve the, like, sort of, you know, nerves part of this. And so we wanted to make sure that there was a charger every 50 miles on highways, right? So that people didn't have to go like, "Oh wait, the next charger is 125 miles away. Damn it, I gotta, like, go back 20 minutes, the wrong direction, come back, whatever." And I've done this. 'Cause I visit national parks every spring break and we only do it in electric vehicles.
And so my wife is like, "Why do you make me do this?" But I do it because I have to eat my own dog food, and it's great. And so some of those chargers are not profitable, right? And so NEVI is supposed to be used for that, right?
And then separately, there's rural communities, poor communities where people's algorithms don't choose those spots. And so what we did was we gave planning grants to the states and said, "Figure out where you want to put these chargers every 50 miles and figure out where you want to put these rural chargers and figure out all these things and do it by 2029."
And so everyone was like, but "Why didn't you build all of the chargers next week?" Well, we could have. We could have just subsidized the ones that were going in every week. We were building a thousand a week that were profitable. And we could just say, "Well, why don't you just take some free money so we can make some ill-informed senators happy?" And we didn't. We said, "No, do the planning properly." And then go to the private sector and say, "Who wants to bid on those sites? Because we want to have universal coverage so that people don't have this nervousness when they drive electric vehicles." And that takes time. And we're still going to get all of those chargers and all that money spent by 2029.
But, like, you know, it's the problem with politics, right? You spin things in, like, some weird universe and, you know, folks think that you only build 60 chargers.
David Roberts
Yes. And we might ask ourselves why that hostile talking point traveled from right-wing media to become conventional wisdom among everybody, including the people in this room with almost no resistance. And we might think about what would resistance look like in that context. One more. I'm just waiting for someone to shut me down. So, I'm going to keep doing that.
Second Audience Question
So, I mean, like, a lot of this talk was, from my understanding, going to be about financing. And if LPO is effectively shutting down, then what do you see as the future of, like, how are we going to pay for this stuff? Like, is it state action, corporation? Like, what's the bright future for actually getting this stuff paid for?
Jigar Shah
Yeah, it's a great question. I don't think LPO is getting shut down. I do think that LPO is unfortunately a victim of the craziness that was doggy or whatever we call it. And so we're in this place where a lot of people were told that if they didn't leave right now, that they might get riffed with a reduction in force.
And if they left now, they'd get paid through September. And if they didn't leave, then they might get paid, like, two weeks' notice. So there's a lot of people who were frightened and took the leave. And so now we're down to, I think, 80 or 90 people at LPO when we were at 255 for feds, and we still have 150 or so contractors. So thank goodness for that. But, like, there's no way, and they know it, that they can build nuclear or geothermal or critical minerals projects without a functioning LPO. So I think they are fighting this thing where Chris Wright's trying to make Trump happy by just cutting, cutting, cutting, and then he's not really making Trump happy because we're heading into rolling blackouts, and Trump's not going to be happy when rolling blackouts come.
And so we're in this weird spot where the LPO is, I think, caught within this whole framework of "We're reevaluating the loans and reevaluating the grants or whatever." But I do think it'll be back up and running, and I think a lot of these programs will persist. I think the bigger thing, though, is that we taught a lot of people how to think about this. When you think about the Loan Programs Office, we are, you know, obviously often accused of taking a lot of risk.
Even though our track record now is so long that, you know, you can actually start making conclusions. And we have less than a 3% loss rate. In fact, I think out of this new batch, I think the loss rate probably would be less than 1.5%. The banking community has a 3% loss rate.
We're less than the banking community, but took on all this extra risk. So you could imagine that there are a lot of private sector institutions that'll take some of the best practices that we did, albeit at a higher interest rate, right, because they don't have the federal treasury behind them, and go off and do that. And you see that with, like, Chris Creed and Suresh Wasan, who left LPO and joined Galvanize, and they're, you know, putting a big fund together that's doing this, and, you know, Generate Capital, which I started beforehand, is doing some of this and others.
And so I do think that the legacy that we're leaving is one of getting the entrepreneurs to think a lot bigger than they were willing to think before, educating a lot of the governors who still remain good friends of mine from Oklahoma to Kansas to Nebraska to even Arkansas, and others all chose to use LPO as really an extension of their economic development arm.
To the banks and the financing institutions. I mean, we raised $100 billion of equity every year in 2023 and 2024 to match our grants and loans. Right. So I don't think that education work and all that work was lost. I think it's unfortunately not moving at the same velocity as it was before.
David Roberts
Larger irony there, too, that this administration came in saying "We love nuclear and CCS and blue hydrogen," but this bill they've put forward would be absolutely catastrophic for those industries. It would absolutely crush any nascent nuclear renaissance. I mean, it's...
Jigar Shah
Don't get me started on the tariffs.
David Roberts
I mean, I wonder how that'll... I wonder how that'll settle out.
Third Audience Question
Per your comment about the grid being on the rolling blackout extreme, how do you think about industrial decarbonization that's already struggling with energy loads when that energy is now getting harder and harder to procure?
Jigar Shah
Meaning that it was dependent upon cheap power? Yeah. So it's not me saying that we're gonna have rolling blackouts, to be clear. It's the North American Electric Reliability Corporation, which we put in place in the 1970s to tell us whether we were hitting rolling blackouts. And the Federal Energy Regulatory Commission, who's having a meeting, I think on resource adequacy June 3rd through the 5th or whatever, and their pre-read material says that in 10 states we're likely to have rolling blackouts over the next three or four years. So it's not me and my independent analysis, it's extraordinarily smart people at the Department of Energy and the NERC and the FERC who are saying that, and I think trying to think of how to say it exactly.
The notion that we were going to use spilled solar and wind to solve industrial decarb was always a dumb idea. And so, to the extent that you have things that are like thermal batteries, for instance, I could see that working. Like, some of that stuff is actually remarkably cheap. Like, some of the materials are so cheap that it can run at a 40% capacity utilization. So that makes sense to me. But to the extent that, like, you're going to make clean steel or clean cement and you were like, "Oh, we just need cheap power 85% of the time," like, that was always dumb, right?
I mean, and not because of data centers. It's dumb because of electric vehicles. I mean, we sold 300,000 electric vehicles last quarter, right? If each one of them is charging at 10 kilowatts, like, that's a lot of power. And I just think people don't understand, like, that most of this 3% growth rate that we're having every single year is not AI data centers. Most of it is us being extraordinarily successful at electric vehicles, on, like, heat pumps, on all of this stuff. And it's one of those things where I just think that there were a lot of people who, you know, just didn't use their head properly.
David Roberts
One more.
Jigar Shah
It's about time.
David Roberts
It's about time.
Fourth Audience Question (Kelly Jiang)
I'm glad, I'm glad Dave got his scotch. Okay, so Jigar, I actually want to push back on something you said earlier about, you know, "All the lawyers from EPA should come to the states," and, you know, make policy. Because I think one of actually the biggest challenges in our society is that too many of our laws are written by people who are lawyers whose professional training is all, it's all rule following, right? So you clearly, you do not have a lawyer's mind. You're the mind of, like, an entrepreneur, an innovator who wants to, like, get things done.
And you're like, there's...
Jigar Shah
I do pay very good lawyers, though, to, like, paper it up.
Fourth Audience Question (Kelly Jiang)
Yeah, yeah, yeah. But my question is, how can we encourage more, you know, entrepreneurs, innovators to get involved in the public sector, in government? And for context, I'm a city council member in Issaquah, so... Hey, so to your comment, I am actually running for reelection this fall. So please, accepting any and all donations.
Jigar Shah
Give this woman some money.
Fourth Audience Question (Kelly Jiang)
Thank you.
Jigar Shah
Tell them your name once more.
Fourth Audience Question (Kelly Jiang)
Kelly Jiang. My website's kellyjiang.com. I'm having my campaign kickoff on June 5, which is a Thursday.
Jigar Shah
We need to elect more clean tech people. So, thank you.
Fourth Audience Question (Kelly Jiang)
Yeah, I promise I didn't ask a question just to self-promote.
Jigar Shah
I love it because I... Look, I love lawyers and I live in D.C., so I have a lot of friends who are lawyers and they do the Lord's work. So I am not criticizing them. But I do think that, in general, as we started the conversation here, there is a feeling on the part of many people in the environmental movement that after we passed the 1990 Clean Air Act amendments, it was easier for us to just hire everybody from the environmental movement into D.C. and just run roughshod through EPA. And before then, you had a lot of people who worked at the local level to kill deals, right?
To kill projects that they didn't want to see. And I think that we got complacent, and I don't think that we should do that anymore. We certainly can't do it any more than I could tell, because I think EPA is going to be eviscerated out of this process. But I think we need to go back to our roots and get elected into the city council, right? And get onto unpaid boards at the county level and at the city level and bring our expertise to those places. Because I do think that you have a lot of expertise to offer.
And one thing I think that I struggle with is that you're never going to have enough money at the state level to pay everybody a living wage to, like, provide their expertise locally. So a lot of what you're going to do is to find, you know, folks who've had a tremendous career and figure out a way to get them to give back to their community and provide their expertise. But even that is hard. Even, like, as somebody who tries to volunteer in Montgomery County, which is, you know, the wealthiest county in Maryland, it's impossible.
Like, you have to go through 17 rounds of paperwork just to, like, volunteer, then there's, like, a Survivor series to get picked, and you're like, "I'm just trying to be helpful."
And so I think all of us need to, like, work harder to, yes, run for office because our infrastructure matters and your expertise matters, but also to figure out how we take advantage of all of the great talent that wants to volunteer to help their community to, like, do good things in a way that I think makes all of our lives better. That is some extraordinary whiskey.
David Roberts
Good stuff.
Jigar Shah
That should not be, like, drank, like, a shot.
David Roberts
That's made me happier. Thank you, everyone. Thanks for coming. See you next time.
Jigar Shah
Thank you, 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. And it is all supported entirely by listeners like you. So, if you value conversations like this, please consider joining our community of paid subscribers at volts.wtf. Or, leaving a nice review, or telling a friend about Volts. Or all three. Thanks so much, and I'll see you next time.
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