Clean energy's yearly report card

In this episode, Lisa Jacobson, president of the Business Council for Sustainable Energy, discusses the council’s most recent assessment of where the clean energy industry is now and what the future holds.

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David Roberts

Every year, the Business Council for Sustainable Energy partners with BloombergNEF to produce the Sustainable Energy in America Factbook, a compilation of charts, graphs, and statistics about the clean-energy industry and where it's headed.

The 2023 edition is out and it shows a record year for investment in clean energy and installations of renewables — alongside record demand for natural gas and record investment in gas infrastructure.

Lisa Jacobson

To chat about some of the numbers, I contacted Lisa Jacobson, president of BCSE. We talked about the momentum behind clean energy, the enormous investments uncorked by the Inflation Reduction Act, the supply-chain difficulties that plagued the industry this year, the backlash to ESG investing, and the surge in energy storage.

Alright, Lisa Jacobson, welcome to Volts. Thank you so much for coming.

Lisa Jacobson

Thanks for having me. This is a real honor.

David Roberts

There is a ton of facts in your factbook. Let's just start digging into some of them. First, one of the sort of top line things you talk about in the report is investment. And I always have a little bit of a difficulty with these investment numbers because every time I see investment numbers, I feel like I see the same thing, which is, "We broke records, but we're also nowhere near where we need to be." That over and over again. Is that the story again? What do you see in investment trends in clean energy?

Lisa Jacobson

I have to admit, I suffer from the same kind of dual existence. On one hand, we've been doing this factbook, and I should say the Business Council for Sustainable Energy. I'm proud to serve as the President there. We produce this in partnership with Bloomberg New Energy Finance, and this is our 11th year. And maybe later we'll get a chance to talk a little bit about the origination of the project. But, yeah, no, I agree with you. We see year after year in many areas, record-breaking fact here, record-breaking fact there, and we can see big picture that we are making a difference. But when you look at where we need to go, it can be very disheartening.

David Roberts

How far are we from the investment trajectory we need to be on? What is the scale by which we are falling short?

Lisa Jacobson

One thing just to say, if we're talking about the Sustainable Energy in America Factbook, it is not a forecast. It is historical, though it is very up-to-date. So we're definitely giving very close to real-time data as we can in many areas. And then that again, is thanks to Bloomberg New Energy Finance. But we certainly look out and see what Bloomberg New Energy Finance and what our members are saying is needed. It could be a quadrupling of where we are now.

David Roberts

Oh my goodness.

Lisa Jacobson

So, there is a lot to do on the deployment side and the investment side. We have a critical decade to take it, not even to the next level. It has to go way, way, way up in many areas.

David Roberts

Quadrupling is quite a next level.

Lisa Jacobson

Yes.

David Roberts

One thing I saw is that the backlash to ESG — environmental, social and governance stuff from corporations — listeners may be familiar with the sort of controversy over ESG that's going on right now. It's a big movement among corporations to start trying to do this more responsible stuff. And now there's a giant backlash being led by Republicans, who are, in some cases, in Republican states, making it illegal for people like pension managers to consider the environmental impact of their investments. I know a lot of people in the sort of investment game or pension funds, things like that, do not necessarily relish or want to be controversial political figures and I wonder if this is scaring them off.

I wonder if you're seeing an impact in investment levels in response to this ESG backlash.

Lisa Jacobson

Well, the factbook this year does discuss this topic and does have some commentary that implies that yes, in fact, it is slowing investment in this area. And I look at ... we had a recent vote in Congress that passed that would reinstate restrictions on the Department of Labor, which oversees a lot of these pension programs and some of the regulations there seeking to restrict the option for ESG investment to be part of these programs, which to me, the council didn't take a public position on it. It's just not in our portfolio of advocacy work. But why would you restrict the option of something like this to be considered?

I think it's very disturbing. It did pass both the House and Senate, and it got votes on a bipartisan basis. I understand that President Biden will veto this, but we need to be able to be free to assess risk and put investment dollars in the most sound way, given the conditions that we are in. And it's not just environment, right? We have social and governance factors too. So ESG is, of course environment, but it is also other things. I don't think those policies make a whole lot of sense. I think we should be flexible. I think we should allow for innovation and a full accounting of risk management.

But I think, as you'll also see discussed in the factbook, there are opportunities to provide clarity in the marketplace that might make it more attractive for some that are skeptical about ESG investing. Some don't have enough confidence in the data behind it, perhaps. And we have a process underway at the Securities and Exchange Commission where here in the United States there will be, hopefully this spring, a release of some climate risk-related disclosure policies. There's a lot that potentially could be in this final rule. Groups like the Business Council for Sustainable Energy did intervene and provide comments.

So we are hopeful that something will be released and that it will provide some very much needed clarity. And it's not just happening here in the US. This is happening in Europe, it's happening in Japan, it's happening in other countries.

David Roberts

Wait, you mean the fight over ESG generally?

Lisa Jacobson

The attempt to provide more clarity for climate disclosure. I can't speak to whether other countries are experiencing some of these types of policies that we call out in the factbook. But I think there is, overall, what I hear from our members and global companies is there is a need to provide clarity to make relevant disclosures to investors.

David Roberts

I'm pretty sure, at least from what I've heard, the backlash against ESG is unique to our lovely Republican Party here in the US. I think if you went somewhere else in the world and said, "Hey, we want to make it illegal to consider social responsibility in your investing," you would probably get laughed at. I guess what I'm wondering is just what's your sense of whether this fight is going to have a material effect on investment flows into these areas, or do you think it's kind of just kind of a political fuss that will pass?

Lisa Jacobson

Obviously, you laid out two very different views. Of course, I'm going to say it's somewhere in the middle. I would argue that the data on clean energy or energy transition investment, however we want to title it, that is the direction of investment. And it's increasing each year, and ESG is certainly a part of that, but it's not all of it. So whether this questioning will linger in the years to come and whether it has the possibility of dampening ESG investment over time, I can't say. But I feel strongly that there are market signals into the portfolio of decarbonizing technologies.

But then the question becomes, well, will it be enough? And will it be fast enough?

David Roberts

Yes. Speaking of the sort of rising tide of investment, let's talk a little bit about corporate procurement. Whenever I see these numbers, my head gets blown back. I'm not sure average people appreciate the scale of corporate procurement and how fast it's going up. So talk a little bit about how that shows up in the last few years.

Lisa Jacobson

Yeah, I mean, it is remarkable, especially given everything that companies have had to deal with during the COVID pandemic and the business conditions around it. And I certainly point to this in my top three, is like, is the clean energy transition hardwired into the economy? I say yes, it is. And that was kind of our theme for this year. This is one of those top line metrics. If you look at what was accomplished or a record-breaking year in 2022, looking at corporate PPAs signed, we were looking at about 20 gigawatts of those signed.

Now, obviously, you sign a corporate PPA. That doesn't mean that the new build happens or that the projects are happening in sync with the pledge, but it's a really strong, forward looking signal. And when you compare that to how renewable energy has been deployed and the scale of deployment, you can see a big chunk of that forward signal realized. Looking at the renewable energy deployment in 2022, we estimate it at about 32 gigawatts. So, okay, they're not year on year again going to materialize in the same way, but it is a really strong signal and it shows you that in the out years we're going to, especially from the private sector, have increased demand for zero carbon and zero emissions power.

David Roberts

One thing that's wild about the graph you show is how big of a chunk Amazon is. Like, Amazon alone is close to half that 20 gigawatts. And I noticed in a footnote it says "Amazon alone has signed more clean energy PPAs than all corporate PPAs in Europe combined in 2022."

Lisa Jacobson

It's a big set of numbers, that's for sure. But every year we do try, not because we are trying to cherry pick, but we do try to show the diversity of players and how this market is changing. Yes, we certainly have the tech companies making very leading, forward leaning movement here, but we also have McDonald's. This year we called out Ford and General Motors. So I mean, it's a bigger field than just tech. And again, I think that goes back to what are investors and customers looking for, and what do these companies themselves want in terms of reliable, affordable, and clean energy that they use as part of their businesses?

David Roberts

This is a little bit of a side question, but it just sort of occurred to me, and I have often wondered about it. I mean, there are the practical benefits of getting cheap energy, right, in terms of procurement, but how big a deal is the signal it sends to employees? Like, I never know how seriously take this. You see some companies who are big into this saying our employees want to work somewhere that is active in this, that is doing something good on the environment, on climate, and it's a competitive advantage to us to be spending money on this stuff. It attracts employees. Do you hear that when you talk to business owners?

Lisa Jacobson

I do. Both from the provider side and I hear that from the energy user side that I talk to. I also think there's a range of other things that are a part of it. Energy security, energy reliability, energy predictability. I think that's something else that was really important that was highlighted when we shared the data on corporate PPAs. Why do they continue to be attractive? Well, you can lock in your prices, and by doing that you can avoid some of the volatility that we've experienced, whether that be from economic conditions. This horrible situation we have right now with the war in Ukraine, or a natural disaster in your community, or extreme weather like these storms we've been having this year.

So I mean, there's any number of reasons why. But I remember going to some of my first conferences when I got into this industry, and this is going back, I'm going to date myself, but probably about 20 years ago. And you would have a discussion about this emerging field of corporate procurement for renewable energy and the companies would get up there and they'd have their slide and they'd say, "Why are we doing this?" And one of the top things was employee retention. So I believe that it is true and it endures, but I also think there are other reasons why they're doing it, but 20 years ago may not have been as evident, right?

Certainly the prices have come down so much more, the business models have matured, so more companies can actually do this at a larger scale. So, I mean, the world has changed in 20 years, but that clearly employee interest and employee retention was a big part of why they were considering it and moving forward.

David Roberts

And we have had some quite visceral recent lessons about volatility, a real case study these past few years. One other question about investment, and this was ... I knew this would happen and yet every time I read about it happening, it just gratifies me to no end. I love it. Although IRA, the Inflation Reduction Act passed relatively late in the year, its effect on investment is already quite visible. So what did you find in terms of response to the IRA?

Lisa Jacobson

We, like others, are trying to track the impact. And we picked a few data sets. We did different manufacturing announcements, some for lithium-ion batteries. We tried to map it around the country. We're looking across the board at where these hydrogen hub applications are going to land. Now, those didn't come from the Inflation Reduction Act, they came from the Infrastructure Investment and Jobs Act that passed at the end of the year in 2021. But, however, now we have in the works enacted but still to be completely defined, hydrogen production, tax credit. So it's just the economics of this is shifting quite dramatically.

So we're trying to track as many announcements as we can, and I know you know this, but others may not. A lot of the financial incentives through the tax code are dependent on shifting more domestic manufacturing here in the United States and for many technologies, not just for one. So this is across the board. So to qualify fully for these credits, they'll need to be more onshoring, hardening up and expanding our domestic supply chains.

Now, I say those words, it sounds really easy. It is not easy, and it is going to be very challenging over the next five years. But, at least we have a long term policy that shows those that are willing to make those investments that they'll have time to kind of get to the next level of market penetration. I think back — dating myself again — I think back to around 2007 and 2008, and the Production Tax Credit, which is for many technologies, but I'm talking mostly about the wind industry at this time. Since the early 90s, Production Tax credit largely was a one-year or two-year opportunity. Often would lapse and get retroactively instated. But we had a period of time where there was a lot of market confidence.

And I remember going to one of the US — then it was the American Wind Energy Association, now American Clean Power Association — but I went to one of their ... this was one of their largest wind conferences they've ever had, and the enthusiasm and walking the floor, and it was just amazing. And they talked about the domestic manufacturing jobs and all of this. Well, we ran into a period of time where that tax credit was not extended, and it wasn't extended in a predictable way. And we shed so much of that. I mean, it's really sad.

David Roberts

Yes, you can see it in the graphs, in the deployment graphs. They really rise and fall with the credit coming and going.

Lisa Jacobson

Yeah. And when we had a longer term extension for the investment tax credit, which largely people think of for just solar, it's really clear in the data. It's a dramatic, progressive increase over a five-year period because we had a five-year extension of the investment tax credit for a number of years. So, yeah, it really is meaningful, and we don't want to get into a situation where we're having unpredictable investment conditions. So that's, like for me, the two things about the Inflation Reduction Act that are the most significant is the timeline that we have and the breadth and scope of the technologies that are included in the range of tax measures they have.

That's something my organization has been arguing for on both sides for many, many years, because it's not just one or two technologies that are going to get us there. We need the full portfolio, and we need for them to somewhat interact. You said, what's the investment reaction? I remember in August and September fielding a lot of phone calls from people and companies saying, "We are rethinking what we can offer our customers because of the Inflation Reduction Act, because it offers this opportunity or this tax policy." That's what you hope for, right? You hope for innovation and integration. So anyway, I'm going on. But there's a lot to think about when we think about the Inflation Reduction Act.

David Roberts

In terms of the investment response to the IRA, I know there have been ... the EV tax credits, in particular, are linked to domestic supply considerations, and so there's been several announcements from various manufacturers in the battery supply chain. But maybe this is a side question and you can take it or not take it as you want, but I wonder the goal, Manchin's goal, in tying the EV tax credits that way was to sort of recreate the full supply chain here in the US. Which is not just battery manufacturing, which everyone loves, and EV manufacturing, which everyone loves, but also mining raw materials, which is not that pretty, and processing those raw materials, which is not that pretty. I wonder, do you see in terms of who's announced investments in domestic manufacturing in response to IRA, do you see trends in what those investments are in?

David Roberts

Are they across the full supply chain or are there some areas that are getting more investment than others?

Lisa Jacobson

Well, I can say what we've pointed to, which you've already addressed, which those are the most visible. But I guess in response, I would point to the conversation going on in the leading committees on these topics in Congress and in particular in the House of Representatives, where they feel there are opportunities for mining or for other aspects of the supply chain, which, as you said, sometimes can be controversial or subject to very long approval processes being put forward. And saying, "If we want the energy transition and we want secure supply chains," kind of almost irrespective of the Inflation Reduction Act, for a moment, "we need to be really thinking about who we're going to be getting the raw materials from and under what conditions." And we've already kind of had a lot of conversation about labor issues and these topics as it relates to the solar industry.

Right. And I think there's a real commitment there and has already been demonstrated to address those labor concerns, which are very real, and also to think about having a more reliable supply chain. And does it all have to be in North America? I mean, I think there's a lot of conversation about how our trade policy can help us build larger markets for raw materials, to help us progress in the energy transmission in kind of our allied countries. I mean, a lot of that's still to be worked out. But where we're starting from is a very challenging base right now.

David Roberts

It's starting from almost nothing. I mean, that's what's wild about it. That's why the next five years are going to be so fascinating. Right? I mean, I can't recall anything in my political memory that's kind of just so audacious, very audacious thing to say we're going to start from almost zero and build an entire supply chain for a major industry like this. It's wild.

Lisa Jacobson

I mean, again, going back into the past, in my early career, I remember sitting in ... and the Business Council, we do work on sustainable transportation, but at the time not so much. So I'm thinking about 10-15 years ago and the Council participates in the International Climate Negotiations. And I remember being in events on electric transportation and California was there and several different entities from China and others, like, who were the leaders at the time and where was this market originating and who was really pushing it 15-20 years ago. It was not being led on the supply chain basis by the US. So we are playing catch up.

But I think what's different is I think there is a private sector-led commitment to this. Whether they will meet that vision, I don't know. But what we didn't have then was the private sector in the US marketplace willing to really try, right. And there are going to be a lot of roadblocks because, as you said, the whole issue with critical minerals and how we're going to address that in North America or in other countries is going to be ... I certainly don't have the crystal ball to know how that's all going to play out, but people are seriously talking about how we could do it.

And I'm an optimist. You have to be right, because the business community is much more involved and on board that we will see more progress than we would have seen under other circumstances.

David Roberts

Well, let's talk about minerals for a minute because one of the trends illustrated in the factbook this year is that it's been a bit of a wild year for pricing of several key minerals that are involved in the clean energy transition. This is a huge topic of discussion now, the total availability of those minerals, where they're produced, whether they can be produced fast enough to satisfy demand, all this kind of stuff. But at least this past year that you're looking back on in the factbook, prices went haywire in a couple of these minerals. So calling on you for the crystal ball again, but do you have any sense, talking to your members, whether people are settling in for this being the new normal for a while, that we're just going to have crazy swings in these mineral prices because of rising demand? Or do they view it as kind of a bump in the road that will sort itself out quickly? Or somewhere in between?

Lisa Jacobson

I'm sure there are some people that have a very particular view, but I don't know if I've heard that. I mean I think it's more of like a near-term reality thinking about the rockiness of last year and in particular, again, as you mentioned, a number of things that contributed to it but the kind of the shipping constraints, the supply chain issues that were in part because of the year before and COVID. Then there were issues with different components coming and different products coming into the US again in some parts due to needing to certify appropriate labor conditions.

Then there's just the global circumstance that we were in with the war in Ukraine and what that's doing to the economy and the energy markets at large. So there's a lot going in here. Then there is the trade policy. We also talk about that for the solar industry, and it shows you the policy and how it can quickly change what was a generally predictable marketplace. That policy kind of stopped everything in the water when it came out.

David Roberts

Yeah, I did do a pod on this. They're all starting to run together now. But what we're talking about here is these tariffs on solar panels or solar modules that come from China, basically. And the dispute was because the industry had turned to buying modules and panels from Vietnam, in countries like that. And the sort of question was, are parts from China simply being kind of laundered through Vietnam, et cetera. So in other words, are we importing from China after all? And there was the threat that there were going to be tariffs put on these parts from Vietnam and South Korea and things like this. And that was a big hit, even though it ended up ... what did they do?

Lisa Jacobson

They gave it a reprieve.

David Roberts

They kicked the can down the road.

Lisa Jacobson

Right. But now there's still some questions. I mean, basically the reprieve that came said, "We're going to put this on hold for two years. You won't be subject to tariffs. We're going to look at this more as the Department of Commerce goes through its process." So it's not fully resolved, and there could be other things that come up. I mean, I think that's also, like the last five years for any business you've seen unpredictability due to COVID, due to maybe local impacts, hopefully no natural disasters, but maybe something in your community or where you're manufacturing or operating.

And then you see high inflation and high pricing environment. Some of that in the transportation sector, clearly due to global markets for energy commodities. In other cases, it may be more localized. So, I mean, it's just a lot going on. And I think that also even though you can't be completely insulated from it if you do more onshoring or domestic manufacturing, but you might have much more control. I think it's attractive to businesses, so I think that's another reason why ... I mean, obviously the legislation points in that direction, but I also think there's a recognition that we're out of whack, right? I don't know what the right whack needs to be, what the balance is, but we are not in balance right now. And it's a risk.

David Roberts

Yeah, it's a chaotic time to be in this business. Let's talk about energy generation. It's obviously one of the big trends that the factbook is tracking. And here again, you see a story that, to me, causes mixed feelings, a very familiar story, which is basically in the US electricity system in the last, whatever, five to ten years, you see the dual rise of renewables and natural gas. So, like, together, coal is dying. Together, I think, combined they went from 40 something percent to 60 something percent of electricity now. And of course, everybody loves renewables, but natural gas is fossil fuel and has got to go at some point.

But everything that I can find in this report, every piece of data, looks to me like natural gas is on the rise, even though prices went up this year, still it's on the rise, demand went up, investment in natural gas infrastructure was up. Is there any sign anywhere in the data that natural gas is going to peak or that we're going to turn away from it, or that we're going to start trying to rein it in or at least stop growing it? Or what's your take on the trajectory of natural gas?

Lisa Jacobson

Well, again, I'm not at the privilege of forecasting, but I can share some of my points of view on this. Number one, let's look at what renewables did, okay. And renewables, we broke the record. We're finally like, alright, we said we were 21% last year, but now we're 23. So we're clearly over 20% of generation here. That is an important breakthrough. Obviously, as we already talked about, that needs to double, triple, quadruple ...

David Roberts

And that's renewables with hydro.

Lisa Jacobson

... including hydro power. So that's good. Nuclear has kind of remained steady state, and with the added policy support, I imagine that will stay the same. I'm not sure if it will increase in years, but I don't see it in the short term at least decreasing. We're seeing declines in coal. And really what's making that up, as you said, natural gas and renewable energy. When I talk to ... so our membership, our part of the market are gas utilities, some independent power producers, those in the marketplace that either develop microgrids or combined heat, and power projects like very efficient uses of natural gas, sometimes for power generation, some in the fuel cell industry. So natural gas, and as you can see in some of the data, is kind of in all parts of our economy.

But going back to the power sector, when I talk to our members, they talk about decarbonization, and they have plans to decarbonize these facilities. So whether it be carbon capture and storage, carbon capture storage utilization, or it be blending with renewable natural gas or switching to hydrogen over time, my members are aware that they need to decarbonize, our economy needs to decarbonize, and that the power sector needs to decarbonize. I can't tell you what the next 10-20 years are going to be, but the data is out there, the science is out there, the goals are being set, and now we have some more supportive policies. So I'm looking forward to seeing what gets realized in the next five to ten years, put it that way.

But I think it is very transparent where we need to go and what the power sector will do. And the power sector continues to lead on decarbonization, and in a large part it's because of fuel switching from coal to natural gas. So we have to recognize where we've been. Is that where we need to stay and where we need to go? I don't think any of our members are sitting down when they look at this. They're moving forward and they're trying to figure out how to work with their communities to decarbonize.

David Roberts

Yeah, I guess I'm just impatient for some of that to show up in the numbers because the numbers are just rising use, rising exports, rising investment, rising infrastructure. All the trends are going in the wrong direction, it looks to me, at least currently. Investment in renewable energy in the US has declined year on year since 2019. What is the right degree of freak out in response to that trend? Do you think that's a sign of something bigger and ongoing, or is this just a normal fluctuation?

Lisa Jacobson

Well, I mean, I look at the things that we discussed, right? We looked at deployment trends, we looked at corporate demand. We look at the policies that were just enacted that have long-term policies. I mean, some of this, as I understood it in the last few years, was because of the uncertainty of extending some of these policies in the tax code. So it was impacting project pipelines and timing of things. And we had COVID where you just couldn't get pricing right, you couldn't get the product. It's just very hard to sign contracts in that situation, given the delays and challenges we had in the COVID period.

So I see us continuing to deploy. I can see demand strong. I see public private partnership now on the investment side to catalyze more private sector investment. So I feel much more favorable looking out in the years ahead. Again, I think we're really going to benefit from a long-term policy foundation.

David Roberts

Maybe you have the same answer to this question then, too, because also, when I look at the levelized cost of energy charts that you have in here, one of the sort of catechisms, one of the things that's very fundamental to clean energy folks like me is this notion that wind and solar are getting cheaper and cheaper and cheaper, right? Like, this is the basis of a great deal of our optimism about the future. But if you look at the chart, the LCOE of wind and of solar have kind of evened out for several years. They were falling quite quickly in around like 2015 or so, but have kind of leveled out.

And again, this is a crystal ball question, but how much should we think of that as the new normal state of affairs versus a weird outgrowth of the chaos of the last few years?

Lisa Jacobson

Well, I think all the technologies highlighted in the LCOE went up, right?

David Roberts

Yeah, they all nudge up this past year. It's funny.

Lisa Jacobson

Right. And if you look at them comparatively, as the data shows, they still are lower on a levelized cost basis than the alternatives. And you can see, this one chart I'm looking at from the factbook goes back to 2014. I mean, dramatic LCOE reductions. And these are again based on projects, real projects, at least according to the Bloomberg New Energy Finance methodology. The way I hear them talk about it is, "Look, we were in a high price environment, everything went up, but renewables kind of proportionally didn't go up as much." So that's what I hear them say.

David Roberts

It'll be so interesting to get a few years past the Ukraine stuff, COVID settles out a little bit more. It'll be interesting to see what kind of sort of new normal emerges out of all this. Or who knows, Lisa, if we ever see anything that resembles "normal" ever again. Wind and solar are the big beasts in this forest. If you look at the chart, they completely dominate it with battery installations now on the rise. But do you see anything in the data that makes you excited about any of these smaller players? So I'm thinking about like geothermal or biomass or maybe SMRs or any of these sort of these kind of things that get swept into the category "other." Is there anything in the data that makes you think any of those are going to do anything?

Lisa Jacobson

Yes, and I'm really glad you asked that question because yes, I mean, clearly dominating the renewables marketplace from capacity coming online, build is wind and solar. And that's the way it has been for many, many years. But you have to really kind of look closely. But if you look in our recent year data, like, you really have to look, but you see some other colors, okay? And that's before the Inflation Reduction Act. So renewables that you might not think of first, but have real potential and from a broader kind of circular economy perspective, things like waste to energy, renewable fuels.

We're talking about electricity, so I'll stay in the electricity world. They had not had the type of policy support that wind and solar have had, largely because of the very short-term nature of these policies. These other technologies take a much longer time to go through their approval processes, and they couldn't take advantage of a two-year investment tax credit or production tax credit. So now they are treated largely on a level playing field and they can potentially — because we're still waiting for some of this guidance to come out, so I can't speak with complete authority — but the intention is that all renewables technologies will be able to participate and they'll have a ten-year window.

So that's a game changer for a lot of these technologies. Also, I would say pumped hydropower, which is the current storage technology that dominates 60 plus percent, the rest, largely battery storage, can benefit from the Inflation Reduction Act too. So, I mean, there's just going to be a lot changing in terms of the technology mix. I think that's really healthy. And I also think the co-benefits of a lot of these technologies that might have been overlooked will come more to light.

David Roberts

Yeah. And storage is, I guess, one of the other big stories in terms of investment, just this absolute stampede of investment towards storage. I was asking on Twitter the other day, if you look at the graphs of installed storage in the US, as you say, it's just pumped storage is almost all of it. And then in the last three or four years, you see on top of this tower of pumped storage, just these little bars of other storage starting to grow. And I was sort of asking people to predict, like, "When do you think that bar of 'other' is going to get as big as the pumped hydro bar?" That will be an interesting milestone.

Lisa Jacobson

What did they say? How long?

David Roberts

Guesses rage all over the place. I mean, if you just project out based on current trajectory, it's like two, three, four years. It's not that far out. It depends on whether the sort of rate of growth of investment in batteries and stuff maintains or what happens to it. But a super interesting area to watch.

Lisa Jacobson

And what happens with pumped hydro, right. Because as I said, they can benefit from the Inflation Reduction Act. I mean, obviously we need more storage. We need all kinds of storage. So I'm curious about ... now you piqued my interest too.

David Roberts

Yeah, I'm going to have someone on to discuss hydro soon, and we're going to discuss pumped hydro storage. I'm curious whether there's a lot more of that to be had or how that all stands. One of the most exciting things in this factbook is the very recent surge of investment into electrolyzers, i.e. green hydrogen. What are you seeing? What's your take on that?

Lisa Jacobson

I know, as I said before, how much interest in helping to grow a hydrogen economy there is in my own membership, but also expanding to my members' customers. And this year, unlike other years, we really wanted to try to ... we wanted to in other years, but this year we did it, put it that way. We put in some kind of background information on the industrial sector. And when we presented the 2023 factbook for the first time last week, Ethan Zindler, who is really the lead on helping to put this project together for Bloomberg New Energy Finance, he really put a pin in the fact that industrial emissions really hasn't changed.

And how important that is. So we put data in here to show, okay, what do we mean by that? What are the sectors? What kind of fuels do they use? How hard is it for them to decarbonize? So it's some educational, factual information about our industrial sectors. And you hear this a lot: well, here, hydrogen, it's the key that unlocks things because it can be put in so many places.

David Roberts

It slices, it dices.

Lisa Jacobson

Yes. I don't really like that analogy so much. I shouldn't have said it. But basically the point is that it has a lot of potential applications, and many of those are hard to envision electrifying. So we need to get this done. We need to build hydrogen economies that are viable and we need to decarbonize them, right. And I think that's where industry is, it's not going to happen overnight, but there's a commitment there and the opportunities provided by the Infrastructure Investment and Jobs Act and these regional hydrogen hub projects and now supported by tax policy is going to be really important. So what do we track as a benchmark to see where the hydrogen economy is going? One of those metrics is electrolyzer prices, right, and electrolyzer production. So, yeah, we're seeing costs coming down, but they need to come down a lot more.

And a lot of these policy and market penetration goals look at targets for electrolyzer pricing. So we see the cost coming down, but we haven't really gotten to the point where we've seen that pivot yet because maybe in a couple of years we'll be able to see more of a dramatic impact as there's more hydrogen production and obviously more utilization of electrolyzers.

David Roberts

Yeah, it's definitely underway. And the amount of money being dumped on green hydrogen in the IRA is wild. It's like $20 billion or something like that, getting ready to rain down on this sector. So it'll be interesting to see the factbook next year and see what happens to electrolyzer investment number. I suspect it's going to be a hot area.

Lisa Jacobson

Well, I look forward to talking to you about it next year.

David Roberts

Yeah. And one thing, you sort of mentioned this in passing, but I think it's worth putting a pin in because to me it's quite symbolically important. As the report says, as recently as 2015, I think, the power sector was the number one emitting sector in the US economy. And then a few years after that, transport passed it and it became number two. And now, because it's continuing to fall, it is tied with industry for number two. And it wouldn't be surprising at all if next year or the year after that, industry is squarely number two.

Lisa Jacobson

Yeah, I mean, right now, initially, looking at our chart, they're together. And if you follow the trends that we've seen in the power sector, even in this really unusual few years, the power sector continues to decarbonize. That's kind of what we were talking about at the beginning. Some of this is structural now. When you look at the chart that shows what we've been building over the last 10-20 years, and you see that transition, which now is dominated by renewable energy. And in the last couple of years we see storage in there too, which we didn't see before.

So what is being built is going to last and it's going to last at least 20 years, maybe more. So we really are seeing a transformation. So for the power sector yeah, I think that could be really interesting next year.

David Roberts

Yeah. And then maybe industry will finally get the attention everybody keeps saying it deserves. Because you look at that line, the reason the power is passing is because power is going down, and industry is just not. It's steady as she goes. So that'll be an interesting area to watch for the next few years.

Lisa Jacobson

Yeah, obviously we talked about electric vehicles and sustainable transportation, but transportation, we just got to keep going. It's going to be a very interesting few years there too.

David Roberts

Yes. A couple of final questions. You say a few things in the factbook about what kinds of policies might help. Because, as you say, as everyone says, every time anyone puts out a report in this area, "We're going faster than ever, but not nearly fast enough." It's always the same story. So you recommend some policies to help things move along and move faster. And specifically talk about permitting reform, which is a hot subject these days. I wonder what you hear from your members. How big of a deal is that for them? Because if you listen to the renewable energy crowd these days, they're very hyped up about it.

But then of course, like the oil and gas people are also super hyped up about it. How much of that is hype, and are you hearing that from your actual businesses?

Lisa Jacobson

Well, I mean, I don't think it's hype. I think it's very real. If we go back to what we would like to see in the energy transition and then we think about it in the context of climate change, we need to be dramatically scaling up. But when we take a step back, even for renewable energy projects, it could take ... so we did a thorough assessment of all the data we could find on this topic and obviously it ranges, but we're talking, I think we cite like four to six years, but the range is bigger than that.

So there's things we can do here from a federal level to provide more certainty, predictability, and streamline the timelines for these approvals. I mean, that should just be done and it should be done for all projects that are subject to these requirements. We're not talking about removing environmental safeguards. We're talking about just making a clearer process. That's what I'm talking about. I mean, people are talking about lots of things, but that's what I'm going to start with. We need to do that.

David Roberts

Are you talking about legislation because ... ?

Lisa Jacobson

Yeah, Congress needs to act so we can improve those processes.

David Roberts

Do you have any sense, based on interacting with people in Washington, whether there's — this is a big question going forward — whether there's enough bipartisan support for something like this to get it over the line?

Lisa Jacobson

I think the recognition is there that this needs to be done, but I'm not sure what the timeline is, because right now we're at a critical ... we're recording this in March, and the House of Representatives is about to move forward its vision for this topic. Then we're going to have an opportunity to see a revised vision of what the Senate might want to do and they're going to have to come together. And I think what's changed though is that there is this recognition that this is not just parts of Congress or parts of the federal government that recognize this is a problem or parts of the private sector that realize this is a problem. Everybody experiences it.

But I think the point I'd like to make though is it's not just about what happens here in Washington and changing the federal process, which clearly needs to be changed. It's really a local conversation. I mean it's a local, state, and regional conversation. We're having a lot of difficulty moving forward with many different types of clean energy projects because at the local level there might not be support or sufficient support to move quickly. And so it's really across the board where our industries need to work in partnership with communities to make it clear and attractive and comfortable for them to move forward with any number of kinds of infrastructure investments that we need to make. And we need to do it fast.

David Roberts

We need to do everything fast. Color me skeptical about whether we're going to get sane legislation out of this coming Congress fast or any other way. So final questions to wrap up, you know, where the rubber hits the road on all this is CO2 emissions, and the factbook shows that emissions actually nudged slightly up this year, which seems bad. And even if you average out this year and look at recent trajectory — once again we're back to the familiar story of not moving fast enough. I guess, once again, I'm asking what the right level of freak out about is about this. Are you worried about emissions nudging up or are you comfortable that we're on a firm downward trajectory in the long term?

Lisa Jacobson

No, I'm not comfortable. I mean, having to look at the data and be comfortable. We have so far to go, and look how long it took us to get where we are, and then we had unpredictable events happening globally as well as in our own country. So I mean, no one should feel comfortable. This is for us to realize we, collectively, wherever we sit, whether we're in the sector or not in the sector, have to get involved, right? It goes back to what I said at the community level. This energy transition, whether we're focused on industrial customers or the transportation sector in a community or the electricity that a community provides to its households and businesses, like this has got to be a collective effort for a massive change in the way things are done, and we can't rest.

So, no, I'm not comfortable with it. I'm also not pessimistic because we've never had the kind of policy support that we have now. And again we don't have all the answers to how it will be implemented. But this is massive for us, and it's going to have an impact. So the last thing I would say, because we didn't talk about it at all, and that is something I should have raised earlier. We talk a lot about the supply side, but energy efficiency. We need to do so much more with energy efficiency. And unlike these other things, we know it may not be easy to accomplish for many reasons, which I'd love to be on a podcast with you to talk about energy efficiency markets, but but we know it performs and it performs year in, year out.

And if you look at buildings, we have so much that we can do. And again, we're not waiting for a permit here. We're not waiting for these big, massive infrastructure investment. We can do this on a smaller scale right now. At a building level, at a campus level, at a community level, and we have economic drivers through the Inflation Reduction Act, also through the private sector. But we just don't talk about it enough. And I think that is, in part, a missed opportunity. We need to be talking about this. And then there's so many other benefits we get with energy efficiency.

So, I think, what I am hopeful for that will help us turn the tide here with this data on our emissions is a renewed focus on elevating energy efficiency and looking at the demand side and creating market structures that take that to the quadrupled level, right.

David Roberts

Well, hallelujah to that. We love the demand side here at Volts and agree that it is under ...

Lisa Jacobson

Appreciated.

David Roberts

... underappreciated, under-resourced. Yeah, with digitization of, with buildings getting smarter there's just so many opportunities now. There's so much running room to just make buildings assets rather than consumers. Okay, this is wonderful. A dizzying overview of a lot of different data. I encourage everyone to go look at the factbook it's almost all nice charts and graphs, so all the you chart and graph lovers will want to check it out. And Lisa Jacobson, thank you so much for coming on the pod.

Lisa Jacobson

Thank you. First of all, I think you're brave. This is a lot of data to comb through, but you're obviously committed. You're a committed connoisseur here, and your attention to this means a great deal. So thank you for diving in. Thank you for talking to me, and on behalf of the Council and Bloomberg New Energy Finance, again, appreciate your listeners' time and attention.

David Roberts

Thank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf, so that I can continue doing this work. Thank you so much, and I'll see you next time.