Doing data centers the not-dumb way

In this episode, I welcome back my old friend Jigar Shah to discuss the current hullabaloo around explosive electricity demand from new data centers. We dig into why its stupid for tech companies to build their own behind-the-meter natural gas plants, how this approach is wrecking equipment and destabilizing the grid, and a better, smarter, faster path forward.

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David Roberts

Hello everyone, this is Volts for April 15, 2026: “Doing data centers the not dumb way.” I’m your host, David Roberts.

Regular listeners will be aware that I have been somewhat obsessed with two related subjects lately. One is the hullabaloo around data centers and their effects on grids and ratepayers. The other is the rising cost of electricity across the country. A great deal of thought is going into the question of how to accommodate explosive growth in electricity demand without sending electricity bills, or greenhouse gas emissions, through the roof.

As it happens, I know a guy who operates squarely in the center of this world and is deeply involved in all these debates. You know him too, since he has been a Volts guest several times already.

JIgar Shah

I am talking, of course, about our old friend Jigar Shah. It turns out that, since leaving the Department of Energy’s Loan Programs Office at the start of last year, he has been extremely busy.

He co-founded Multiplier, an advisory firm helping clean energy startups with financing and exits. He chairs Deploy Action, a nonprofit focused on state-level grid reform. He co-hosts not one but two podcasts. And he recently published a white paper laying out a near-term roadmap for states trying to bring electricity bills down without waiting for the federal government to do anything useful.

He does not sleep, apparently, but he does share his opinions, and today we are going to dig into all kinds of hot controversies.

With no further ado — Jigar Shah, welcome back to Volts.

Jigar Shah

Thanks. I just slept like a baby last night.

David Roberts

You must have exquisite scheduling powers. You must be good at a disciplined calendar. Is that true?

Jigar Shah

It is true. I also am very good at surrounding myself with extraordinary people.

David Roberts

That’s a good trick. Maybe I shouldn’t be such a misanthropist and I would have an easier time of it. But I don’t want to get into all this stuff you are doing because we could talk about it all day. I do want to ask just quickly about Energy Empire. You have this podcast Open Circuit, which is a revival of the old Energy Gang pod, which goes way back to —

Jigar Shah

2013!

David Roberts

2013. Amazing. And you guys are back. That’s fun. But now you’re doing this other pod called Energy Empire. Just tell us briefly, what’s that all about?

Jigar Shah

Everyone is becoming an expert today about the Straits of Hormuz, and it is shocking to me how big our industry is. We did $2.2 trillion of clean energy finance last year. Only $1.1 trillion of fossil fuel finance last year.

David Roberts

That’s global.

Jigar Shah

Global. But we only talk about startups and venture capital all day.

And I just think that when you think about ExxonMobil as a household name, but are the companies doing $2.2 trillion worth of deployment household names? We have to fix that.

David Roberts

You’re profiling big players in the industry.

Jigar Shah

Yeah. But also profiling politicians who are doing extraordinary stuff in the industry, and profiling the fact that you and I both know that now that we have gotten so big, we are national security, we are energy security. People are not talking about our stuff that way. They constantly talk about A rounds and seed stage financing.

David Roberts

Yes. As though we are eager freshmen. There is a need for the industry to put its chest out a little bit.

Let’s get into all the stuff. Let’s start here. Here’s where I want to start with you. Right now, as we’ve discussed many times on the pod, people are hurrying to build data centers. Everybody wants to build data centers. This is all the rage. And right now, whatever people are saying, it appears that what people are doing by and large is building behind-the-meter natural gas plants.

This seems bad to me for obvious greenhouse gas reasons. You argue that it is also bad for many other reasons, including from the data center’s own perspective. I believe your phrase was “a fairy tale concocted on the back of a napkin.” Tell us why this quest to power big data centers with your own natural gas plants, which is what X is doing, which is what Meta is doing — why is that the wrong approach?

Jigar Shah

We want to start with the fact that data centers are providing us load growth for the first time in 20 years. Load growth is good. When you have load growth, whether it’s from EVs or heat pumps or other things, it allows you to lower electricity bills for everybody. I’m not anti-data centers. I’m anti doing data centers in a dumb way. We want to start there.

The second piece is that data centers have been operating for the AI training illegally on the grid. People don’t understand that since the 1950s we have had standards on how loads operate on the grid. You can’t ramp your load from 20% to 80% loading five times a minute.

David Roberts

Is that law or regulation, or where is that?

Jigar Shah

It’s regulation with the utilities. There are ramp rates, there are all of these things that you’re supposed to do to not screw up the grid. Data centers have been in gross violation of that. When you think about what’s wrong with data centers, they have load volatility, which we just talked about, then they decide to power it with behind-the-meter natural gas generators. These natural gas generators, their shaft is supposed to last for seven years. It’s lasting 10 months because of all the cycling.

David Roberts

This is because they’re designed to run steady and they’re being made to fluctuate?

Jigar Shah

Totally, and when they can’t fluctuate, just so you understand, data centers — when a natural gas turbine fluctuates, it fluctuates in seconds, not milliseconds, or it fluctuates in minutes when it comes to a turbine. And it’s not made for this purpose. Then you say, “Why don’t we just put a battery in the middle of it?” Lithium-ion batteries don’t have unlimited cycling. If you cycle them five times a minute, they degrade and they stop working after five or six months.

Now you’ve got interconnection delays. You’ve got the cooling issues, which we all know about in water. Then they have harmonics and frequency destabilization for the entire grid. If you look at some of the press releases out of Crusoe and Oracle, ERCOT is not happy.

David Roberts

Let me just ask you, physically, how are they doing it? As you say, natural gas — these are jet engines, basically modified jet engines being made to do this, which is insane. But as you say, they cycle in seconds, not milliseconds. How are data centers getting reliability out of them? Are they just overbuilding the crap out of them?

Jigar Shah

They’re breaking them early. I think the average data center that’s trying to run off-grid has 50% extra capacity behind the meter so that one third of the turbines can be broken at any one time so that they can run. It’s literally the dumbest thing that human beings have ever attempted to do.

David Roberts

But obviously, when rich people are doing something so evidently dumb, there must be reasons, there must be forces pushing them in that direction. They are not just deciding that out of the blue. Why do they feel they have to resort to this? What is the constraint?

Jigar Shah

This is the conversation I’d love to have with you and your expertise. You and I both know that there are multiple ways of doing this. We wrote the VPP Liftoff Report while I was at the Loan Programs Office. I know we have a disagreement on the word VPP. Then we wrote the Grid Modernization Liftoff Report and we talked about grid-enhancing technologies and advanced conductors and all that stuff. Then we talked about clean firm power technology — think nuclear, etc. We’ve always wanted to build more transmission on the grid.

When this administration came in, the ANOPR that Chris Wright sent to FERC was, “Hey, I would like for you to let all of these folks connect to the grid with a minor grid connection and a whole bunch of BYOG.”

David Roberts

Wright has been actively pushing this strategy then?

Jigar Shah

Yeah. When you talk to the data center companies, and I don’t mean this in any negative way, I really don’t, because these companies really are 53% of the US stock market. But they were looking to the US Department of Energy when we were serving to be their back office for the technical evaluation.

David Roberts

That’s a bummer.

Jigar Shah

Now, who are they turning to?

David Roberts

If you are surrounding your data center with a bunch of jet engines and ramping them up and down constantly such that they run out in under a year rather than lasting their four years or seven years, are you not then also bringing on a massive maintenance and workforce budget? And does that workforce exist? Aren’t they busy maintaining other gas plants?

Jigar Shah

The first question is, have they even thought that far ahead? Second, when you look at the history of the US gas fleet, we built a whole bunch in the 1990s. There’s a firm named Scott Madden. I hired a guy, Chris Vlahoplus, from Scott Madden, who had retired from there to run a lot of our nuclear work. The way he made his claim to fame was the utilities did not know how to maintain these natural gas plants. He figured out how to maintain them in the early 2000s and then spent 15 years training all of the utilities on how to do this. That’s how long it took for them to become experts at maintaining our current gas fleet. I don’t think Meta has thought about this one iota.

David Roberts

I’ve resisted. I’m a grumpy, populist, communist type. I’m naturally hostile towards rich people, so I’ve tried to keep an open mind because really, the vibe I’m getting, Jigar, is that these guys are galumphing forward without knowing what they’re doing or what’s going to happen two months from now or five months from now. They’re just throwing money at things. Is there a level of thought and analysis that I am missing somehow? Are all these guys just — they seem like kids in a soccer game?

Jigar Shah

Let me put you in their mindset a little bit, because I’m not suggesting they shouldn’t be better. I think they should be better, but just to put in their mindset — a 1,000-megawatt data center with Nvidia chips and all the other stuff that goes into a data center can cost up to $50 billion.

David Roberts

That’s wild.

Jigar Shah

They make about $12 billion a year in revenue from that data center.

I don’t think they give two craps about a $200 million problem over here.

David Roberts

Still not very long term, though. Let’s then talk about what you see as a better model. We had — I don’t know if you heard — Astrid and Jesse on.

Jigar Shah

I did.

David Roberts

A couple of weeks ago. From what I can tell — and tell me if you agree that this is the good model, the way we would like to see people do it — data centers bring some of their own capacity to the table, and then on the utility side, they agree to a flexible interconnection. Basically, 10 hours a year or whatever it turns out to be, the data center has to run itself, has to power itself, and this will hasten getting data centers connected and produce a lot of new capacity. Is that roughly how you would like to see things go?

Jigar Shah

That came out of the work we did at DOE, and then it was popularized by an extraordinary paper that Tyler Norris wrote out of Duke University.

David Roberts

I’ve never heard a single paper discussed more in my entire life in this business.

Jigar Shah

I’m a huge fan of Tyler’s, and what Astrid and Jesse are doing is making that real, which I think is fantastic. The part that everyone is missing, and you know this better than anyone, is that for the better part of 40 years, the people around the governors in our country have decided that they do not want to know a damn thing about how electricity works in our country. They’re just like, “This is complicated. All I need to do is just put somebody on the Public Service Commission.” I don’t want to understand any of this or just occasionally come up with targets and mandates and throw them over the wall. Totally hope that the PUC does the best it can.

Now you’ve got Governor Shapiro who’s saying, “This is becoming a political issue. We’re going to put a cap on the capacity market in Pennsylvania.” Then you’ve got Governor Spanberger and Governor Sherrill in New Jersey who had to run on electricity because it became a number two political issue in their governor’s races.

Now the question is, when they have an expert that they put around them, do they understand any of this stuff and do they know how to put leverage onto the utility companies? The utility companies have been investing in local power building for decades, if not a century. That’s a lot of what I’ve been working on since I left office. Everyone is a product of the way in which they get compensated and their rewards. I get it. But at the same time, the group that’s supposed to solve this problem, I think, are governors.

David Roberts

That’s interesting, because I was going to ask you, I like this model too, and it makes sense to me. It seems it would make sense from a data center’s perspective, but what is the lever you pull to put pressure on them to do this? Is it state law? Is it state PUCs? Is it persuasion and white papers from consultants? What is the lever you pull to put pressure on these people to pay attention to this? Because as you say, all things being equal, the data center guys are just going to hurry as fast as they can. The amounts of money we’re dealing with here are so huge, they don’t care. How do you pressure them to think about this and do it more thoughtfully?

Jigar Shah

The first thing is you have to have a narrative that folks can get behind. We have tried a lot of narratives, as you and I have shadow argued about with VPP. The narrative that everyone has gotten comfortable with is a narrative called grid utilization, which is that we used to use our grid around 70% of the time, and today that number is below 50% of the time.

David Roberts

Just in case you don’t know, today, the day we’re recording this, Wednesday, April 1st, I just released an interview with Ian Magruder, who is running the Utilize Coalition. He is very much trying to articulate this narrative.

Jigar Shah

He’s amazing. The initial group of funders of this campaign — that is amazing and I’m really glad that they decided to make it a campaign. It’s a two-year sprint, not a permanent new organization. Now that you’ve created the grid utilization framework, and it really is technology agnostic. If you can figure out a way to utilize the grid better using natural gas turbines, that’s included. It happens to be that the cheapest way to do it is things like grid-enhancing technologies, advanced conductors, VPPs, batteries, etc.

Now you have a framework by which to put all of these ideas. What the utilities have said to us is they have said, “We get it, but we would like to be forced to do this because going to our shareholders and saying we are going to deploy stuff that is 90% cheaper is not generally the way that we like our shareholder meetings to go.”

David Roberts

I want to get to that for sure. But I want to articulate the basic argument that you’re making here to all parties: rather than building a bunch of big new power plants on site, there’s a bunch of unutilized capacity out in the grid at large. If you, data center, could pay to help us exploit that capacity, then you wouldn’t need to build power plants. Is that the pitch to data centers?

Jigar Shah

That’s exactly right. You’ve heard this pitch in various forms in different places. For instance, when you talk to Rob Gramlich and you talk about transmission, part of the reason we need to build so much transmission is we have a large amount of generation. We just can’t get the power to where it needs to go. That’s why grid-enhancing technologies — advanced conductors — are really good around grid utilization because they unlock generation we’ve already paid for but are being curtailed at certain hours or whatever it is. The same thing is true with figuring out batteries on distribution grids or batteries as transmission.

In New York State, for instance, you have all of these renewables and only so much transmission capacity in New York City. If you could build batteries on the upstate part of the transmission line and then batteries in New York City, then you could transport it when there is excess capacity.

David Roberts

This was one of my questions to Ian, which is, when you scrape away everything else, isn’t this just batteries everywhere, all the time? More batteries all the time, everywhere, no matter what?

Jigar Shah

From your lips. We’ve been working on this for a long time, since Katherine Hamilton called batteries the bacon of the grid.

David Roberts

As far as I know, the only hyperscaler that is taking you guys up on this so far, that is gathering the capacity together and bringing it to the utility with the proposed data center and saying, “Hey, we have a data center we want to build and here’s a bunch of capacity we have to compensate for it,” is Google. Tell me what Google’s doing and how far along they are, is it working, and why is no one else following what they’re doing?

Jigar Shah

Let me give you two stories. About the clean transition tariff that they signed with Nevada Power and Fervo.

David Roberts

Vaguely.

Jigar Shah

Remember way back when? Most recently, they announced that deal with a big Form Energy battery in Minnesota.

David Roberts

I want to talk more closely about the Minnesota thing in a minute.

Jigar Shah

Let’s just skip to the Minnesota story then. In Minnesota, Google came in and said, “We want to put in a data center.” Xcel said, “We think that’s awesome. Here’s a big natural gas plant for us to connect your data center.” The local population said, “Over our dead body.”

David Roberts

Oh, interesting. And it wasn’t Google that said, “Over my dead body.” It was the locals.

Jigar Shah

That’s right. Then Google said, “Okay, let’s get to the drawing board and look at this.” Xcel was just paralyzed. They were like, “We’re not going to do anything differently.” Google went back and said, “What if we double the size of the Form Energy battery and do this and do that and whatever else?” It turned out it worked. Then they went to Xcel and said, “Would this work?” Xcel said, “Yeah, I think this would work.” Then Xcel said, “Okay, great, let’s do this.”

David Roberts

But that’s not a done deal. Isn’t there a hearing?

Jigar Shah

No, that’s the Spark Fund thing. The Google thing is a done deal.

David Roberts

Oh, I see.

Jigar Shah

We can talk about the Spark Fund thing later. But I want to make sure that we understand what just happened here. You’ve got a company in Google who has hired everybody who’s super smart from Tyler Norris, to all the people who used to work with me at the Department of Energy, like Lucy Etienne and Campbell Howe and all the folks who wrote the Liftoff Reports. They basically decided as a customer that they would go and solve the problem for the utility and then present it to the utility for their approval.

David Roberts

“You, utility, can’t find capacity? Fine, we’ll find it.” Let’s just put a bookmark here. Crazy. That is literally supposed to be the utility’s job. Maybe we can return to that in a minute.

Jigar Shah

You tell me if Mark Zuckerberg is going to do that.

David Roberts

Exactly. Utilities have to take it up.

Jigar Shah

Now what’s happened is all these companies have started, Astrid being top of the list, which is Camus Energy, but another company is GridCure. That’s Amit Narayan, who started AutoGrid and sold that to Schneider Electric. He partnered with Arun Majumdar, who used to be the head of ARPA-E and the Deputy Secretary under Ernie Moniz and now runs the Stanford energy effort there. They have taken all of the data from the grid and in that case, the data center company again hires them.

They then work with the utility. They did this with Portland General recently. The utility happens to have three data silos that don’t talk to each other. GridCure looks at their data silos, unlocks all that data, then finds a much cheaper way of accommodating the data center load, which is what the data center is hiring them to do, and then gets to yes. In Portland General’s case, it was a four-year interconnection that Portland General was saying, and GridCure figured out how to get it down in nine months.

David Roberts

Again, that seems like it ought to be squarely inside the utility’s skill set and job. Eventually it will be. Once we get past this period, eventually it’s going to be utilities doing this.

Jigar Shah

This is what I’m trying to get your brain power on. Every time I ask you a question, you’re not answering it.

David Roberts

Let’s remember who’s interviewing who.

Jigar Shah

I’m just saying, I’m tired of the definition of insanity of me having higher expectations of the utilities every single year and expecting different results here. What I’m trying to do is to figure things out. What Deploy Action has done in Virginia is pass a bill that is demanding that Dominion share all of their grid utilization data.

David Roberts

We talked about this with Ian. It just says measure it and publicize the measurements. That’s all. It doesn’t require it to do anything about it.

Jigar Shah

Which Astrid at Camus already does for her 40 utility clients. She doesn’t publish it, but she reveals it for those 40 utility clients that she has. It’s not that she can’t do it. Remember, there has been this lawsuit between Xcel Colorado and the PUC there because the PUC keeps asking for this information and Xcel Colorado doesn’t provide it. I think it’s largely because Xcel Colorado can’t collect it.

David Roberts

That’s crazy. What we’re finding here, and this is the take-home lesson for listeners, is that when you start more thoughtfully and carefully looking around for capacity, what you find generally is that demand-side capacity is cheaper, batteries are cheaper. Building a new natural gas plant is about the most expensive conceivable way you could go about this. There are a million cheaper forms of capacity laying around. Is that accurate?

Jigar Shah

For sure. This is complete and utter lizard brain thought process. Remember when the inauguration happened with Trump 2 and we were all talking about Mark Zuckerberg and masculine energy — the natural gas turbine phase is simply a masculine energy effort.

David Roberts

I’m glad you’re saying this rather than me because I’m the communist and when I say this, people dismiss it. But that sure is what it looks like. Mark Zuckerberg feels like a big natural gas plant is more manly than a spreadsheet full of little bits and pieces of distributed capacity.

Jigar Shah

Totally. I took a lot of flack when I served in the Biden administration, being as pro-nuclear as I was. I’m not anti-nuclear, I’m certainly not anti-gas. We have 500 gigawatts of it operating in the United States. I’m not anti anything, but I am pro us taking the 20 years with the venture capital-backed companies and all of their solutions and deploying it, particularly when we’re in a crisis and everyone wants cheaper solutions and we invented them — why not use them?

David Roberts

For listeners who haven’t heard the 38 pods I’ve done on various forms of this, when we talk about distributed capacity, we’re just talking about — you might have a battery in your home, or you might have an electrical connection that you only use 50% or 70% of. There’s just a little bit of spare capacity in your house and in the next house over and the next house over. All over the place there’s slack capacity.

You can do things like what Base Power is doing in Texas, which is go install capacity —

Jigar Shah

That’s right.

David Roberts

— at the residential level. They just put a big battery in your backyard and use all those batteries together as though it was one big battery. A lot of people say, “Economies of scale. Isn’t it cheaper to build one big battery?” Here we come back to all the regulatory problems. It turns out it’s easier and faster to put them in people’s backyards.

Jigar Shah

It’s also more valuable. In Base Power’s case, what they’re doing is saying in Texas, the cost of hedging electricity is 20% of the total cost that you pay just as the hedge. If they’ve got a battery in your house, they don’t have to pay for the hedge because they’ve got a physical hedge. If electricity prices go haywire in Texas, they’ll just take you off grid — run you off your battery. That’s how they give you such big savings.

David Roberts

If you put one big battery somewhere in a field front of the meter, you get some benefits. But if you spread those batteries out to households, you get the same grid benefit, but also spin out benefits to all those households.

Jigar Shah

Totally.

David Roberts

To all those household owners. This is the central point I have been trying to make for the last two years, which is that the things you would do to develop distributed grid capacity — I have been struggling for the right metaphor, but I think of it as caulk in the cracks. You are just firming up your whole grid. You are making the whole thing sturdier.

This is not, and let’s address this too, this is not an alternative to building more. This is not an alternative to expansion or growth. This is not some undercover degrowth attempt to avoid growth. It is necessary for robust growth. Do you agree?

Jigar Shah

Totally. The analogy I would use is, have you ever gone to Ikea?

David Roberts

Not for a while.

Jigar Shah

Where they have those made-up rooms?

David Roberts

Yeah.

Jigar Shah

You’re like, wow, they have done a lot with 400 square feet. You’re like, wow, I really designed my 400 square feet in a crappy way.

David Roberts

Yes.

Jigar Shah

It’s more like that. I’ll give you an example. In PG&E’s territory, they have a one-year wait list right now for upgrading your pole transformer. If you want to put in a new heat pump and it goes above your 80 amp service.

You have to wait a year to put in that heat pump because they will not update your pole transformer for a year.

David Roberts

Transformer backlog, etc.

Jigar Shah

If you use a Span smart panel with a battery, you can install that heat pump right away. Or better yet, you get that new heat pump from Carrier that comes with a 4-kilowatt battery. PG&E has now said if you buy that heat pump, you don’t have to wait for the pole transformer upgrade.

David Roberts

What you’re doing at the residential level is using a battery to spread your usage out more evenly.

Jigar Shah

That’s right.

David Roberts

You’re reducing your peak and making your load level flatter, which makes you easier to serve. That is in miniature exactly what we’re doing at the macro level or at the regional level, or at the city level or at the national — at every level, that’s the game.

Jigar Shah

That is exactly right. The vast majority of the time — and it all started in the 1980s because of air conditioning. When everyone decided to put in air conditioning, we put in all these natural gas peaker plants.

David Roberts

That’s a huge peak — air conditioning. Because it all comes on at once. It’s very power intensive.

Jigar Shah

Exactly. Our grid utilization has been going down since the 1970s, first because of air conditioning, then because we started deindustrializing as a country. We got rid of a lot of the loads that were 24 by 7 and all that stuff. Now we’ve got this really peaky load, where our off-peaks are even lower than they used to be and our peaks are even higher than they used to be. What we’ve said is, the only way we know how to meet that is by building more and more infrastructure.

As a result, you and I both know — I don’t think most of your listeners know — but you and I both know, that generation has been flat since 2010. For all the talk around solar and wind and all the other stuff, we’re paying the exact same price for generation today that we were paying in 2010. In fact, it was about 20% lower five years ago. Because natural gas prices went up, it went back up. Transmission costs have gone from around 1.2 cents a kilowatt hour to about 2 cents a kilowatt hour. It’s gone up, but that’s inflation and it’s not breaking the bank. We could put more transmission and it wouldn’t break the bank. Distribution has gone from about three and a half cents a kilowatt hour to about eight.

David Roberts

Yes, it’s distribution grids. I feel it’s hard to get people to focus on distribution grids. Maybe it’s that masculine energy again, but something about big power plants and big transmission lines. Everybody wants to talk about those and people don’t want to talk about the distribution, but the distribution grid is where all the action is. It’s where all the slack is. It’s where all the spare capacity is. It’s where all the room for improvement is, or most of it, I think.

Jigar Shah

More importantly to the politics of the moment, if you did it right, you could reduce rates for everybody. It’s not even about arresting increases in costs. We could reduce rates for everybody if we used what we paid for already more efficiently.

David Roberts

The way to do that, it is not mysterious. This is a key thing that is very counterintuitive that a lot of people are saying. I think it is hard for the public to understand. I just saw Chris Wright say it.

Jigar Shah

Come on, Dave.

David Roberts

“I need to get on the utilization train too.” More load on the grid can, if deployed effectively, reduce rates. I think that is very counterintuitive to average people. But it is very important to understand because load gives you a tool. If you use the tool to lower the peak, as we discussed, and flatten the load, then you can get lower per unit costs across average with more load.

Jigar Shah

Leaving it to the utilities to do that is not going to happen.

David Roberts

This segues into something I definitely wanted to hit with you hard because I read through the Utilization Coalition stuff and I read through the Brattle report, and they are a lot of great solutions, but they dance around a little bit the question of fundamental utility incentives, I think because the members of that coalition have to deal with utilities every single day. They are in constant negotiations with utilities and perhaps do not want to call utilities names in their big paper.

But it seems to me that utility incentives are at the root of this. If you come to them and say, “Here’s a tool that will let you avoid building new stuff,” they want to build new stuff. That’s how they make money — building new stuff. On its face, all of this utilization stuff seems just squarely diametrically opposed to IOU incentives. Is that not true?

Jigar Shah

It is true. We had this problem back in 2003, 2004, with renewables, and we passed renewable portfolio standards. Now we’re passing grid utilization requirements.

David Roberts

But only measurement. We haven’t forced anyone to increase utilization yet. I would love to pass utilization portfolio standards.

Jigar Shah

Don’t give away my entire plan, Dave.

David Roberts

I heard about that idea a year ago, and I’ve been trying to keep it to myself for a year, but it’s very exciting. I love that idea. Has anyone even proposed that yet in a state legislature? Do you think that’s realistic? For listeners, this would be just like a renewable portfolio standard says to utility, “You got to raise the percentage of clean on your grid.” The utilization portfolio standard would be, “Your grid utilization is currently 50% . Raise it to 60% by X date.”

Jigar Shah

Yeah. We started thinking about this under the REV when we were doing this in 2013 with Audrey Zibelman and Richard Kaufman in New York. It’s been on the brain for a long time for me. Tesla, frankly, was the one who came up with the whole grid utilization thought process back then. The problem with it is that we haven’t really tested it out. For instance, in Virginia, we have to come up with the metrics. There’s a bunch of people working on it and going to go to the Public Service Commission and get them to do that. Maryland and others want to pass the same bill. I think we’ve got eight or nine bills this year that want to pass —

David Roberts

Along the lines of the Virginia bill. Modeled on the Virginia bill?

Jigar Shah

Exactly. There’s a whole bunch of people who are saying “It won’t work because if we build a bunch of new transmission, won’t the transmission be underutilized until it becomes fully utilized?” I was “Let’s run the math. Run the math and tell me whether it will be or won’t be, because I don’t know.” I think we have to go through that process before I know exactly what the law has to say around utilization and whether it’s five different metrics that roll up to one.

David Roberts

Returning to my question, the reason you would have to pass a law forcing utilities to do this by statute is that they don’t want to and it’s counter to their incentives. I run into this again and again. I know I’m not telling you anything, but how many laws can we pass saying utilities ignore your fundamental incentives in this context and in this specific context and in this specific context? Sooner or later, don’t we have to address that question squarely?

Jigar Shah

We do. Right now we are in a place where we have an ability because Wall Street’s on our side. Wall Street wants the utilities to deploy less stuff.

David Roberts

Really? Why is that? Explain that dynamic.

Jigar Shah

In 2003, the total CapEx budget for the electric utility industry was $20 billion. Last year it was $178 billion.

David Roberts

Geez.

Jigar Shah

Many of the utility companies are going to Wall Street and saying, “Over the next five years we will have to raise more money than we have ever raised in the history of our utility.”

David Roberts

Because they are all just looking at this expansion from data centers and saying, “Hell yeah, we will build, build, build.” It is salad days for them.

Jigar Shah

Wall Street is scared they are not investing that money properly.

David Roberts

What’s the possible downside? What is Wall Street scared of?

Jigar Shah

What if rates go up by another 9% a year every year? At some point, one in five households will have at least one energy bill.

David Roberts

But why does Wall Street care about households behind on energy bills?

Jigar Shah

When they’re behind on energy bills, they don’t pay their energy bill. Then it gets spread amongst the people who are left paying. They always have to get their money.

David Roberts

Political backlash. They’re scared of backlash from rising rates.

Jigar Shah

And whether their product is still affordable. Wall Street wants to see them achieve some balance here. It used to be that investor-owned utilities were the same price per kilowatt hour as public power. Now I think it’s about 30% more expensive than public power.

David Roberts

Yeah. That’s profit. That’s profit for the utility executives. Would you support some law, state law, capping utility ROE? That’s been discussed. That’s out in the atmosphere. How would you feel about — or do you think that that’s more of a political crap show than is worth taking on? Do you think it’s worth directly trying to push ROE back down?

Jigar Shah

ROE in general is this sort of thing to latch onto, but not the fundamental base challenge. The bigger challenge is that they’re 50% equity, 50% debt, and no other form of their — if you look at a project finance deal for solar, we would never be 50% equity, 50% debt.

David Roberts

What do you think about Mark Ellis’s more radical proposal, which is just that this whole apparatus is ridiculous? There are a million financial market tools that we have developed since we invented utilities. They should just go out and raise money on markets the same way everybody else does with the same tools everybody else uses. What do you think about that?

Jigar Shah

Meaning that they are no longer regulated.

David Roberts

Yeah. That they are no longer guaranteed any particular rate of return?

Jigar Shah

This is exactly what we did in 1996 in the Telecom Act. But I want to make sure everyone understands.

David Roberts

It seemed to work out well, didn’t it?

Jigar Shah

It did, but it could have not worked out well. We all need to understand. Reed Hundt is an old friend of mine. When he was running the FCC, everyone wanted him to regulate cell phone bills. He said, “No, let them charge whatever they want to charge, but let’s make sure that there’s competition.” You and I both know that your communist ass was not necessarily on board.

David Roberts

I didn’t know my ass from a hole in the ground back then, but you’re probably —

Jigar Shah

I want to make sure that you and I are simpatico about this. If we decide to go in, you can imagine BlackRock, GIP, all these companies are buying utilities and taking them private. You could imagine them saying, “We would like to take this utility private, but in exchange, we’d like to get rid of all regulation.”

David Roberts

Where does the competition to keep rates down come from then in that context?

Jigar Shah

That’s what I’m saying. Then you would have to structure the rest of it. You’d have to go with our good friend Travis Fisher at Cato and put all the Cato stuff in. “Now you can’t ban me from building my own microgrid. You can’t ban me from working with my homeowners association to create my own little mini utility here.” All the things that the utilities do to make things difficult — you can’t do that anymore. I can self-organize and try to get cheaper rates. Sounds like another podcast.

David Roberts

I know. We’re spinning out podcasts with every little section of this, but let’s talk briefly about what Xcel’s doing. What I have been advocating for and preaching on this pod for a long time is I would like data centers to come to utilities with a bunch of distributed capacity — to gather up distributed capacity. Because I think that’s just faster. That’s the fastest way to find the capacity. I don’t know why they don’t find that more compelling. It’s the fastest, it’s probably the cheapest capacity. Every dollar you spend on capacity at the residential level not only benefits you, it also benefits the resident and the grid. Having these moneybag hyperscalers plowing money into distributed capacity in exchange for being able to get online seems to me like a win — win — win.

The closest thing in the world to that happening is in Minnesota with Xcel. Talk about their distributed capacity proposal and how close is it to what I’m envisioning?

Jigar Shah

It is a distant cousin. I want to make sure we start with — there are two halves of this equation. There is the physics half and then the politics half. I want to make sure we focus on the physics half first and then we can move to the politics half. On the physics side, the reason the DCP program was proposed was because Tim Walz was going out there, like every governor does, and saying, “I want to get a whole bunch of economic development in the state of Minnesota.” He was getting so much economic development in the state of Minnesota that Xcel was starting to give people three-year timelines for interconnection.

Tim Walz said, “Hey buddy, you can’t give people a three-year timeline. I’ve given you a monopoly franchise and you have one job — interconnect them, do your job.” Xcel said, “We think we can do this.” Not unlike the FlexConnect programs in PG&E, in Southern California Edison’s territory, where they’re saying, “We really can service them most of the time, but this amount of time, we can’t.” The way that PG&E and Southern California Edison did it was they said, “We just have the right to turn you off for 100 hours a year.” What Xcel decided to do is say, “Instead of turning you off for 100 hours a year, how about we install a battery front of the meter on our circuit to be able to say yes to you for 8,760 hours a year and we’ll take care of the —”

David Roberts

And you pay for the battery?

Jigar Shah

No, in their case, they’re going to pay for the battery and they’re going to rate-base it. But then they get more electricity sales on the circuit so that those increased electricity sales pay for the battery. More than that, what they found was that that battery also can bid into the Midwest Independent System Operator. That battery can do — there’s five different revenue streams they can get for that battery.

But Xcel said, in this case, we really want to own it and dispatch it so that we can fully integrate it into our grid operations software so that we know for sure that this is going to work.

David Roberts

Then the data center has to say, “Okay, we trust you. We trust that you will operate that battery in such a way that we’ll be okay.”

Jigar Shah

None of this was done for data centers, to be clear. This was all done for warehouses who said, “We’re going to do automation. We need an extra 400 kilowatts worth of capacity.” Or, “We’re going to do electric vehicle charging. We need a 1 megawatt charger.” None of this was done for data centers. Now data centers are coming in. Chelle Izzi over at PG&E was just hired over there to be the head of large loads, and she’s doing a lot of this stuff.

In PG&E’s case, you can imagine they’re not getting a lot of 1,000 megawatt data centers, given their electricity prices, but they’re getting a lot of 5 megawatt and 10 megawatt and 20 megawatt data centers. She’s trying to figure this stuff out now there. I want to make sure we’re being careful about the way we talk about this. When she’s doing her job and she wants to get speed to power for those data centers, she needs to get the physics right. Those batteries have to be on the same exact circuit or a circuit nearby that’s fed by the same transmission line.

David Roberts

This is the heart of the question — whether there is such a way to gather distributed capacity together and present it to the utility that the utility will look at it and say, “Yes, we trust this. Yes, we trust that this will act as actual reliable capacity.”

Jigar Shah

That’s the journey that we’re on.

David Roberts

Is there an example where there was a gathering of distributed capacity presented to a utility, the utility said, “Yes, that looks good and solid and reliable,” and then let a data center on? Has anyone done that yet or are we all just groping in that direction?

Jigar Shah

That has never happened to my knowledge. In the case of a Form Energy battery, they’re saying there is a challenge at this particular substation. By having a Form Energy battery there, we can ride through that challenge at the substation. There are a number of people trying to accomplish what you’re suggesting, but they have not yet accomplished it.

Remember, the Lego blocks to getting there are going in place. I want to make sure that we’re all crystal clear about what we have accomplished. When you look at WeaveGrid — before WeaveGrid and they’re managing EV charging loads and now batteries and some other stuff — before WeaveGrid, there was not a single distribution engineer in the country who believed that software could manage the loading of distribution substations.

David Roberts

No kidding. I don’t know why you would not believe that.

Jigar Shah

They just thought that they needed telemetry and there was a timestamp problem because the way that the clocks worked on the load and the clock worked at the thing, maybe off by a millisecond. They needed everything to be synced. WeaveGrid has now proven that in eight utility territories. The CPUC put out a big report, even though the CPUC generally hates VPPs, and said this works and now have doubled the size of their program. That’s one building block. Now they’re effectively a DERMS platform.

Then you’ve got Spark Fund and what they’re doing in Minnesota.

David Roberts

This is Pier LaFarge who was a guest on Volts last year.

Jigar Shah

That is now moving through and Xcel believes that all of those things will work and hopefully that will get approved here in the next 10 days or so. If that gets approved, then we are off to the races there. They have got eight of the utilities who want to copy that program.

David Roberts

That’s a flag that they’ll be waving saying, “Here is distributed capacity that we trust in.” That will show other utilities that there is such a thing as a basket of distributed capacity that is trustworthy.

Jigar Shah

That’s right. Then you move to a company like Voltus, which is not doing the physics part of it. The local utility has to approve the data center going into that particular location and being fully charged. What they’re doing is giving transmission tags to that data center via PJM or via MISO or via other things. Those transmission tags are shared across an entire region. It’s not just on those circuits. That’s the contract that they’ve got with some of the hyperscalers that they’ve announced.

I want to make sure that we’re all being clear that there are these building blocks. Tesla has all their Powerwalls and they have participated in the DSGS program in California. When there was a crisis and the governor said, “Please dispatch,” they all get paid $2 a kilowatt hour to dispatch.

David Roberts

We all saw the graph of California power that’s flying around social media as we speak. Mostly batteries in the afternoons. Wild. Gigawatts worth of batteries on the California grid.

Jigar Shah

Totally.

David Roberts

All in the last five years.

Jigar Shah

Totally. What we’ve accomplished — most of the people that I just mentioned are part of the Utilize Coalition — is each one of these companies has now proven that their Lego block absolutely works and has certain utilities that are backing that Lego block. Now you can put these Lego blocks together, because it’s one thing to do a 100-kilowatt, 500-kilowatt, 2-megawatt, 5-megawatt thing on a distribution circuit. Now you’re asking me for data centers, which — what I think you mean is not the 5-megawatt data center. I think you mean the 1,000-megawatt data center. That’s a lot of Lego blocks.

David Roberts

Yes.

Jigar Shah

We have to put that together.

David Roberts

Say we got all the procedural and process pieces put in place so that we became good at identifying and rounding up distributed capacity and utilities became comfortable with it, and we really went off to the races on this.

What is the scale that we should have in our heads? I think the hyperscaler people, even the ones that are sympathetic, view this as an emergency kludged bridge that will get them through the next few years until they can start building big power plants. But then if you ask a true distributed fan like me, I would say, “I think there’s a lot there. I think once we start looking at —”

Jigar Shah

What am I, chopped liver?

David Roberts

Much of which I’ve gotten from you. I think once we start exploiting distributed capacity, we’re going to find that there’s tons there and it’s cheaper and easier than we thought and it’s going to be at a scale to rival new infrastructure. Where do you come down on that? What do you think is the ultimate scale? Is this just buying us time until we build big power plants? Or could we really do this instead of building big power plants for a while?

Jigar Shah

I want to preface my comment by saying we need a lot more capacity. We need a lot more power plants. We need a lot more transmission lines. We’re building mostly solar and battery storage and wind on the grid every year. We need to keep doing that. Wood Mackenzie put out a report late last year saying we already have 37.5 gigawatts of VPPs registered into programs or registrable in the US — 37 gigs. Some of them are registered into a company like Renew Home, with the thermostats, but without a program to get paid for it. But they’re registered. They have somebody who could dispatch them.

If you read the VPP Liftoff Report from the Department of Energy, it says very clearly, and there are lots of experts at DOE who looked over this and made sure before I put this number out, that we could get to 160 gigawatts of load, which is 20% of our entire grid, that could participate in a VPP easily, safely, reliably. That is an official US Department of Energy number. I do think that some of that is going to shift over time. Initially it can be thermostats, but pretty soon it will be batteries that are up and down. You have got the battery in one of those copper facilities for induction stoves. You have got a battery in a Carrier heat pump.

David Roberts

I talked to Seth —

Jigar Shah

From EnergyHub.

David Roberts

He says we’re evolving towards multi-device variety, basically multiple devices, multiple kinds of devices participating in a VPP and doing a little bit. Some forms of distributed capacity will only be available sometimes and others will only be available other times. But it’s like anything else. If you can put together a portfolio, you can get a full power plant performance.

Jigar Shah

I’d say it differently. I love Seth and I love his paper, but I don’t like the structure he put forward. In general, the way this stuff works is if you have a dispatchable natural gas power plant, you get paid X. Let’s use the PJM numbers — $333 a kilowatt day. If you have a thermostat, there’s no way you get paid that number. It doesn’t provide enough benefit. It gets paid $30 per kilowatt day.

If you go to a Carrier heat pump with a 4 kilowatt battery, you get paid this bigger amount. If you have a Tesla Powerwall, you get paid this much. If you’re doing a vehicle-to-grid thing, you get paid this much. Then there are these multiplication factors around the effective load carrying capacity. How much — if you were to do V2G, how many cars are plugged in at any one time? It’s important to note that this is really less about Huel’s test and more about what each VPP type is worth in the market.

David Roberts

You think it’s less binary — either you’re passing as a power plant or you’re not — and more that there are levels of value that a VPP can provide.

Jigar Shah

Exactly. I could scrape together five different levels of value for certain VPPs and only one type of value for other VPPs.

David Roberts

Is this the kind of thing where, as you say, these Legos are coming together largely out of sight of most people, unless you’re really obsessively following this the way we are? Is this going to be a very slowly and then all at once thing? Do you think once we get the procedures and processes of identifying distributed capacity, rounding it up, certifying it, or whatever it is utilities have to do, saying they trust it, all of those pieces — do you think once they’re in place, this is going to be a cascade thing, or is it going to be slow and difficult the whole way?

Jigar Shah

No, I think it’s going to be a cascade thing. You need a champion. The fact that Governor Spanberger thought that this is going to be her bill — remember, she made this her bill. It wasn’t a bill she supported. This was her bill.

David Roberts

This is maybe neither here nor there, but what’s her level? Does she get it or is she just hiring good people? I’m curious how much the governors themselves get it.

Jigar Shah

I can’t speak for her per se, but I can say that her transition team energy people get it in spades. They convinced her that this was going to be the best way for her to meet her campaign obligations, and she championed it. It went all the way through. Dominion was like, “We’re not going to go against the governor.” But also Dominion really likes LineVision. They really like some of these other solutions. They were like, “Yeah, this is not a bad idea.” In general, you could have a utility who likes the ideas, whether it’s Xcel Minnesota or PG&E or Baltimore Gas Electric and others who’ve been real leaders in this area and have these structural shareholder problems where they make more money by spending money.

Both things can be true. When the legislation was going through, it got through on the consent agenda. In the House, it was unanimous. In the Senate, I think only six people voted against it.

David Roberts

It was a party line —

Jigar Shah

No, it was the only party line in the committee. That was only because they said, “It didn’t go through this other process.” They were protesting the fact that it didn’t go through this other process. When it went to the full Senate, I think only six people voted against it.

David Roberts

That’s interesting. The white paper you wrote is all about how to bring rates down. Everybody’s talking about this. A big part of the toolbox is this utilization stuff that we have been talking about. There are a couple other tools you mentioned. People are talking about trying to limit utility ROE. People are talking about trying to take some obligations and social spending out of utility bills and put them into the tax base instead. There are a lot of ideas floating around about energy affordability. It is a big center of political discussion and fighting.

Here’s my nightmare scenario: it seems to me there are a lot of structural forces pushing power prices up and that there is a real chance the entire Democratic Party could run on energy affordability, win, implement something, and then power prices keep going up and they just get pilloried for it.

In other words, power prices are going to keep going up no matter what. Almost like whoever wins this fight is winning a Pyrrhic victory because they are not going to be able to bring prices down. That is my nightmare political scenario. Do you worry about that?

Jigar Shah

I am worried about that, but I’m not worried about it from the perspective of the physics. I’m worried about it from the perspective of the politics. I think that’s important. In some cases you could say, “No, Jigar, everything’s going up in cost, and it’s impossible for you to even promise that thing because it’s not possible.” That’s not true.

David Roberts

It’s physically possible.

Jigar Shah

It is physically possible with the solutions that we suggested in the paper to reduce rates for everybody while increasing kilowatt-hour sales and getting speed to power for the data centers and all these other people. That is possible, and I want to make sure that everyone understands that.

Now the question becomes, how do you avoid the political challenge? That requires all of us to educate the people who are in those positions around how these measures work and why they work. Here are the trusted experts that you can rely on. If you ever have a question or somebody else gets pissed off about this or somebody gives you a question you can’t answer, here’s the person you should call to get the answer. It’s on us to give them the tools necessary to be able to implement that.

David Roberts

I know you’re as congenitally forward-looking and optimistic as anyone who works in public life has to be, but do —

Jigar Shah

Are you going to make me get that whiskey out?

David Roberts

Do you not ever think the Department of Energy was playing exactly that role up until pretty recently, and it sure would be handy at this time of turmoil and uncertainty and transition to have a steady, expert hand at the wheel that people could come to for just the advice you’re talking about. Wouldn’t that be great?

Jigar Shah

Yes. If I could deliver that, that’d be better because that would have meant that we didn’t have Donald Trump as president the second time. We have a lot of other challenges that have come from that issue. I want to make sure I answer your question in a different way. We were very intentional about publishing the Liftoff Reports and an update to the Liftoff Report, which had 75 case studies in it. The Secretary was very intentional about putting all of this together into a data center playbook. Those documents still exist.

David Roberts

But it sure seems like all these masculine energy tech guys are not reading the technical documents so much as reading X.

Jigar Shah

That part I’m not worried about, Dave. It’s not that they’re building a brand new coal plant which then is going to run for the next 50 years. They’re building a natural gas plant which is most certainly going to fail in 10 months. The fact that they spent a bunch of play money that they believe they have to do dumb things does not preclude them from eventually doing the right thing and then just running those natural gas generators in the same way that Jesse and Astrid suggested for less than 100 hours a year. I’m okay with that. It’s their money, not my money. As long as it’s not ratepayer money.

David Roberts

This is a point I tried to make in my solo pod also. We hit it with Ian on the Utilize pod. Might as well hit it here too, which is that there is an enormous amount of uncertainty in these projections of data center growth, etc. The benefit of exploiting distributed capacity is that it will be beneficial and good to do whether or not the data centers show up. It is a no regrets —

Jigar Shah

It’s like that cartoon you remember from 2013: “What if we make the world better for no reason?”

David Roberts

All this stuff we’re doing to bolster distributed capacity is good for other reasons. It’s good to do regardless. It’s something we ought to be doing anyway. At the very least that ought to be our first step in responding to this — do things we know we would want to do anyway rather than getting way over our skis and running into another bubble popping, etc.

Jigar Shah

That’s exactly right.

David Roberts

Okay, I want to play a little game with you, a little speed round game, Jigar. Here’s what we’re going to do. I’m going to tell you a constituency that is currently involved in energy debates and you’re going to give me a one-sentence assessment. Are they helping? Are they hurting? Are they just confused? I want you to assess the participation of various groups in this debate. Can we do this? One or two sentences.

Let’s start with hyperscaler CEOs. The tech guys, the tech bros.

Jigar Shah

They are not listening to their experts enough and are generally making poorly thought-out decisions as a result.

David Roberts

Hilarious. I can’t obey my own speed round. But these are the richest guys in the world, Jigar. They can hire anyone in the world.

Jigar Shah

They already have.

David Roberts

And have — are they — I don’t get it. Is it political social forces pushing them away from their own experts?

Jigar Shah

I’ll give you an example. I was talking to a tech bro Monday. He was invited to an invite-only thing with a bunch of famous CEOs, by Bezos. They were talking and he said, “Jigar, we were all talking about you and your thing about how for a trillion dollars we could just buy up all the utilities and why wouldn’t we just do that?” I said, “There’s not a single Public Service Commission in the country that would approve you guys buying their utility. They don’t trust you as far as I can throw you.” He said, “What?” I think the level of self-awareness just isn’t there.

David Roberts

They’re high on their own supply, I guess is one way to put it. What about the big establishment green groups? How do you feel their participation in this set of debates is going?

Jigar Shah

They are very interested in working on changing the entire way that utilities are regulated. The grid utilization and these types of topics are too small ball for them.

David Roberts

Do you find that healthy? Good?

Jigar Shah

I don’t care. My thing is, I think everyone has the right to stake out their own claim. Once I understand it, I can work with you on certain things around you and other things. I think it’s fine.

David Roberts

I’ll ask it more directly then. There is a view among certain people in the tech world and in, I would guess, the centrist D.C. world, that the green groups are the problem here in that they resist growth, they’re degrowthers at heart. All their participation is basically fighting and slowing things down and they’re not participating in a constructive way. Do you agree with that critique?

Jigar Shah

No. The clean tech sector has been so lazy as to outsource these important activities to the green groups in a way that no other industry would ever do, and they should just take full responsibility for their own shit.

David Roberts

That was my very next group. Clean energy executives, what’s your assessment there?

Jigar Shah

The clean energy executives continue to believe that they need to be bipartisan in a completely toxic way. What I keep telling people is this is about building real power with Republicans, with Democrats, with libertarians, with progressives, with centrists. It’s about building real power. It’s not about being bipartisan.

David Roberts

I just love that you articulate these things for me. You know I’m going to say that, but no one cares if I say it.

Jigar Shah

They do care.

David Roberts

What’s a one-sentence recommendation for the clean energy industry? Is it just get your shit together, cooperate, and throw elbows, throw your weight around? Is it that simple?

Jigar Shah

Yeah, it’s that. Whether you’re a Republican — and 40 plus percent of all the CEOs that I know of are Republicans — or whether you’re a Democrat, give money to the politicians that matter. When you have your big 200 megawatt solar farm somewhere, make sure you fund everybody on the county council.

David Roberts

What do you think about this effort by a couple of billionaires to take Chip Roy out? Have you seen that?

Jigar Shah

I’m one of the donors, so I’m totally for it. 100%.

David Roberts

That is to be clear, everyone involved in that knows that if Chip Roy loses, it is going to be another terrible Republican who wins. There is no illusion that there is a good alternative here. This is purely spite. “You F’d us, we are going to F you.”

Jigar Shah

No, it’s not spite.

David Roberts

I’m cheering.

Jigar Shah

But there is nothing wrong with power building.

David Roberts

I cheer the spite.

Jigar Shah

No, but it’s power building. It’s not spite. One of the things that they used to say about the NRA was that they didn’t regularly put a lot of money into elections, but when they did, it caused people in the future to fear them. That’s what it is. It’s strategic.

David Roberts

It’s very basic.

Jigar Shah

What I’m saying is a little bit different. Every single project that we have in every single county in the country, the clean energy sector needs to give money to every one of those people, Republican, Democrat, doesn’t matter. Give them a set of asks for what they want.

David Roberts

What about the abundance people? Do you have a take on that?

Jigar Shah

I certainly agree that America should be able to do big things again. I don’t think America’s best days are behind us, although it’s gotten a lot worse with the Straits of Hormuz. We should be able to send this NASA spacecraft up into space and circle the moon that we’re going to do at 6 o’clock tonight. I do think that we should be able to build nuclear if we want to. Maybe we can’t build AP1000, maybe we have to manufacture nuclear plants, the microreactors. There are so many people who think, “We can’t build enough affordable housing, we can’t do these things, we can’t do this, we can’t do that.” That bothers the crap out of me.

David Roberts

The critique is that government in the US has gotten overly bureaucratic and sclerotic and slow moving. You were right there in the middle of it.

Jigar Shah

And I fixed it.

David Roberts

Is that critique true?

Jigar Shah

It is true, but we fixed it. No one pushed back on me. I had 40 full-time staff in the outreach and business development team. They worked with 2,000 companies that were thinking about applying for LPO. Even if they didn’t apply for LPO, if they had a problem with State, we told State, “Hey, this company has a problem with you, can you fix it?” If they had a problem with Commerce, we told them. If it was Interior or whatever, we told them. People said, “Thank you for letting us know. We didn’t know that we were in the way of that project.”

We facilitated a huge number of projects and those projects move forward because we did it. I don’t think the government is sclerotic. The vast majority of the people that they bring into government are folks who largely have been told, “Check with everybody, and if anyone is disagreeing with you, then don’t move forward.” I obviously never operated that way.

David Roberts

I could cite a lot of examples that would justify people’s fear about getting taken out if they stick their head up. I don’t know how you proved so resilient, but there’s a lot.

Jigar Shah

I had Arnab Pal working for me, who runs Deploy Action, who is my political advisor, and he told me when not to stick my head up.

David Roberts

What about utility executives? Obviously they’re not a monolith, but in general —

Jigar Shah

I met with 80 utility CEOs when I was in office, because we ran the 1706 loan program. Many of them wanted to use the 1706 loan program. Every single one of them sees the world the same way I described it to you, which is that Wall Street does not want them to raise more money in the next five years than they have raised in the history of their company, that they have enormous cultural problems with the company which they themselves created because they told people for 20 years to run up the bill and gold plate everything.

David Roberts

They don’t think. They are under the impression that they can respond to this data center rush by just build, build, build, profit, profit, profit.

Jigar Shah

They know for a fact that they will lose their job in the same way that their mentors in 2004–2007 did when natural gas prices hit $8 a million BTU if rates go up dramatically over the next five years. They are having a hell of a time convincing the people that work for them who have gotten a different instruction set for 25 years to get on board with this new instruction set.

David Roberts

There’s a real issue with the culture down inside of utilities.

Jigar Shah

Utilities are government agencies. That’s why I’m frustrated that these people make $20 million a year. If you go to a utility CEO who’s making $20 million a year and you say, “These four people are in your way and they badmouthed you, and here’s a recording,” it’s like that bunny rabbit in Zootopia with their little carrot recorder — they will not fire them. You have a job for life. Those aren’t union employees. You don’t get fired for standing up to the CEO and saying dumb things and not doing your job right. Why would you get paid $20 million a year?

David Roberts

You think it is within the power of those executives to change that if they wanted to?

Jigar Shah

I think so. They should say, “These people are not on board. We’re going to replace you with people who are on board. I appreciate your service and thank you so much. We are in a crisis, and our industry needs to get through this crisis.”

David Roberts

How do I square that — this idea that all the executives get it — with the fact that literally everyone I talk to who’s got a solution is running into utility friction? Almost literally all of it?

Jigar Shah

It is a shocking thing, Dave. I honestly don’t understand it at all. I will go into a utility boardroom — the way utilities work is there are 17 different VPs. Why do you need so many VPs? Every single one of them will go around the table and say, “Here’s why I support this project.” You’ll leave to go to the bathroom, and then they will have voted it down. How did that happen? It happens all the time.

Or they’ll just destroy something. At Baltimore Gas Electric, one of the most amazing, progressive utilities in the country on VPPs, this guy Devesh Gupta has just been extraordinary. Then they decided one day that they were “Maybe we should give this contract to our favorite contractor who doesn’t know anything about this, but maybe they can implement it.” That is where good ideas go to die.

Sometimes they have those kinds of things that happen, but it’s not because they’re bad people. When I worked in the oil industry, the same thing when I worked for BP — the people who work in the oil industry genuinely believe we’re going to run out of energy. If they don’t find that next oil field, if they don’t get oil out of the ground, you will have the challenges that we’re currently having with the Straits of Hormuz. They believe that.

It’s not that they’re anti-climate change or anti-this or anti-that. It’s more just that they’re “This is what runs things. You’re the one who just flew here to meet with me and you used kerosene.” Someone’s got to go find that stuff. People take a lot of pride in their work, but the culture change is really hard.

David Roberts

Let me ask about the next group then, which is state PUCs. If you ask about who’s got a lever in their hand that could potentially force changes in that utility culture, it’s PUCs. Obviously, again, not a monolith. These are the agencies meant to govern utilities. Are they doing it well? What’s your assessment of the state?

Jigar Shah

Obviously the answer is no, they’re not doing it well. I think you know that. But we should go through it all. In Michigan, they just put down a ruling yesterday that basically said that if consumers submit any distribution projects without a VPP evaluation next to it, they will disallow the funding.

David Roberts

Interesting.

Jigar Shah

That’s because Michigan’s PUC is made up of a bunch of badasses. They’re amazing over there. Remember, Marissa is a badass over in Connecticut. She got pushed out. A lot of the PUC commissioners got paid $62,000 a year in the state legislature and their kid is in high school going to college. The PUC job pays double or triple, so that’s why the governor gave them the job.

I don’t think any of these people are bad people, but I would say all of these PUC commissioners — without exception — need to feel like the governors have their back. I don’t think that they believe that they’re part of the judiciary, which is a separate branch of government. Because the governors in general have not spent five seconds becoming an expert on electricity for 40 years, I don’t think the governors really did even send the signal that they had their back.

David Roberts

You’re teeing me up then. The next group I was going to ask about is state legislators and governors. Again, not a monolith. There are good examples — Spanberger, all praise to her for this bill, on both sides of the aisle. What’s your general sense of the level of sophistication of state legislatures and governors? They’re the ones who, as you say, could change the PUC culture, which could then change the utility culture. In the end, we’re in a democracy, it all comes back to our elected representatives. Do they get it?

Jigar Shah

The vast majority of state legislators and governors are the same as the general population, which is what you would expect. They don’t know the difference between DC and AC. They don’t know the difference between distribution and transmission. They don’t understand the difference between a turbine and a recip engine.

David Roberts

Dire.

Jigar Shah

It’s what you would expect. It is on the industry to go in and educate those people. The oil and gas industry has done an extraordinary job of doing that in all 50 state legislatures and the governors, and the clean tech industry has only popped its head out in the last few years saying, “We should really do that.” For a long time we were borrowing the political rails from the big green groups. The big green groups were the ones educating all those legislators on our behalf, which, frankly, they did an extraordinary job for the fact that we outsourced it to them. The fact that they got a few of these little things wrong is our fault, not their fault.

David Roberts

If I could just throw this in, I think outsourcing this to green groups has made all the policy and regulatory requests that they make environmental-coded. Gives them that vibe when they’re justifiable on their own for purely economic and practical reasons. You don’t need that. But all of them have that vibe and they’re all coded as, “Should we give green groups what they want?” That’s how they’re being greeted. That’s not really how they should be thinking about them.

Jigar Shah

That goes to money and politics and all that stuff. Ultimately, the way the green groups create their political rails is they have the League of Conservation Voters, they have all these other things. The clean tech industry goes in and says, “I’d like to educate you just because. Because this is a great idea.” When they ask you for a campaign contribution, you’re like, “Oh, no, I’m bipartisan. I don’t give any campaign contributions because we don’t believe in that kind of stuff.” What are you doing, man?

David Roberts

I’m watching it right now because supposedly Trump hates renewables, but really he only hates wind. There are a bunch of MAGA people trying to sneak solar in, trying to split solar from wind in the MAGA mind. It’s a real test of how the clean energy industry is going to respond to that. Are they going to hang together? Or are the solar people going to be like, “All right, see you suckers.”

Jigar Shah

When you’re $110 billion a year of CapEx, there should be a level of sophistication. Abby Hopper had to scrape together $2.5 million from a $110 billion industry for her PAC.

I just think it’s important for everyone to recognize that that’s a poor showing and we ought to be better. I think we’re working on that right now.

David Roberts

Politicians see that.

Jigar Shah

They do. Of course, they do.

David Roberts

They see that, they clock that.

Jigar Shah

Of course they do.

David Roberts

They feel no sense of threat, basically.

Jigar Shah

No. In the last election cycle, the oil and gas industry, in all public spending, things that you could pick up through the IRS filings, spent $450 million, and we as an industry spent $15 million.

David Roberts

That’s the whole story.

Jigar Shah

That’s the whole story.

David Roberts

You almost don’t need anything else right there. We’ll get you all the results we are getting.

Jigar Shah

That’s right.

David Roberts

Final group — the investment community. We’ve been following this for a while. There was the big early 2000s rush, and then there was famously a bust as they all discovered that energy is different than software. Then there was allegedly a smarter group that came along, but now it looks like they’re all chasing the shiny bauble of AI and they’ve all forgotten about energy. What’s your take on the moneyed community, the investors?

Jigar Shah

That has been a bright spot of our industry. ACORE has done an extraordinary job of putting together this group. They put together a great report in 2009 and then again in 2011, etc., around tax equity and how everything works. They have that conference at the Waldorf in New York every year, the REF conference, which I don’t think ACORE runs anymore.

In this last OBBB — I won’t out anybody in specific — but the reason why solar and wind ended up getting saved and the reason Scott Bessent ended up being more generous than he needed to be in the evaluation is because the right investor groups talked to them and said, “You’re going to do this in a way that doesn’t destroy this industry.”

They have done a fantastic job. Part of the reason for that, as you can imagine, Dave, is that because we put more money — CapEx $110 billion a year — than the oil and gas industry spends in their CapEx every year, we make more money and pay bigger bonuses to lawyers, accountants, investment bankers than any other energy industry. In general, that has been something that the clean energy industry has done very well.

David Roberts

That’s interesting. You think smart investors are driving a lot of this almost in the face of incompetence in every other area?

Jigar Shah

That community has really done a fantastic job and they genuinely give to Republicans and Democrats.

David Roberts

That’s interesting. We’re out of time. That was supposed to be the final thing, but there’s one final thing I wanted you to go out on. It’s my tradition to have at least five final questions. This is the final, final one and it’s not directly related to data centers and electricity and this whole thing, but I’m interested in your thoughts on it anyway, which is just what is the fallout from Iran from all this happening?

There’s a lot of discussion. It seems to me the intuitive response is this is just making it very viscerally obvious that being addicted to fossil fuels is terrible and you don’t want to do that. But for some reason you can’t just say that in US discourse. There’s a lot of unnecessary complication of the thing. From inside the energy industry, what do you think are going to be the mid- to long-term consequences of this supply crisis?

Jigar Shah

I have hours of thoughts about this and I have covered it with James Gutman on the Energy Empire podcast. We have done two episodes with him already, and we have a third one coming out on Thursday.

David Roberts

There is a lot to say.

Jigar Shah

There’s a lot to say. Just to give you a snapshot, number one, it has been shocking to me how good the Trump administration has been on manipulating the paper markets, but the physical markets don’t lie.

David Roberts

Are they good or are the paper markets full of ninnies?

Jigar Shah

It’s probably both, but the physical markets have been disrupted permanently, at least for the next three to four years. It’s going to be bad. We’re going to have gasoline prices above $4 a gallon for sure in the midterms, maybe even $5 a gallon. On the political side, there’s that. The other piece of this is that it is very obvious that this has been literally the worst possible execution of a war ever. When you think about what Iran’s position was before this occurred —

David Roberts

I know, it’s better in every way.

Jigar Shah

Every single country in the world is going to kiss the ring of Iran to get through the Straits of Hormuz. The fact that they might actually own —

David Roberts

That seems a permanent — as far as I can tell, that’s a new permanent situation. Is there any reason to believe that’s going to end at any point?

Jigar Shah

I don’t know. But the fact that they might own the toll booth on the Straits of Hormuz is a shocking thing.

David Roberts

I almost think that gives them geopolitical power almost equal to what they would get if they did have nuclear bombs. That’s almost a better strategic outcome for them than actually getting a bomb.

Jigar Shah

It is just shocking to me that folks don’t see it that way. The last thing I would say, China is going to make out like a bandit on all this. As you may know, I was born in India and I go regularly back to the village that I was born in. It had no real running water or electricity when I was born. The level of humanitarian devastation globally is honestly shocking. I think we are all talking about the Straits of Hormuz like it is a thought experiment. It is not a thought experiment.

David Roberts

We’re relatively insulated here.

Jigar Shah

Natural gas prices have not gone up at all. There are babies in NICUs that will die because there is no power at that hospital. There are restaurants that are not able to cook their entire menu because they do not have LPG. There are people who are going to start raiding forests for wood again because they cannot find cooking fuels.

David Roberts

I was hearing one expert talk about it. He said, “We have to kill 20% of demand for oil globally. What price would be sufficient for Westerners to cut back 20% on oil?” There is no such price.

Jigar Shah

No.

David Roberts

It’s — it’s going to be poor people going without that soak it up.

Jigar Shah

People use these weird words — rationing or whatever else — when they really mean — energy is life. When you think about Michael Grunwald’s book where he takes a side of big ag, this is a big test. We’re not going to have fertilizer. We’re not going to use fertilizer for this planting season for a lot of stuff. Pretty sure that crop yields are going to be 50% lower.

David Roberts

They’re going to get a bunch of subsidies.

Jigar Shah

Maybe, but we physically don’t have the fertilizer. No matter how much you subsidize it.

David Roberts

And helium, too. I know you, like most people, probably have your eye on helium.

Jigar Shah

I do.

David Roberts

This is going to affect —

Jigar Shah

It’s going to affect my kid’s birthday.

David Roberts

Electronic equipment for sure.

Jigar Shah

Of course it will. It affects fabs and chips.

David Roberts

Will this — it seems obvious, but I just want to hear you say it. Do you think this is going to push emerging economies toward electrification and toward China?

Jigar Shah

I think everyone in the world now has common cause with China. The only thing that’s left — James talks about this — is that the Europeans care deeply about Taiwan and if China takes over Taiwan. Other than that, there are no more friction points between all of these governments around the world. They would rather — the only country that’s aligned with us right now, weirdly, is Russia. It is the most shocking level of incompetence I have ever seen.

David Roberts

It is strategically indistinguishable from a deliberate attempt to improve China’s position relative to us in geopolitics.

Someday, Jigar, I would love to have you back on. Instead of talking about all the dumb stuff that’s happening, we can talk about once this madness is behind us, if that ever happens. There’s smoking rubble. Almost everything that Biden tried so hard to build, honestly, that Democrats have built honestly for decades now, most of it is smoking rubble. Just to talk about rebuilding, talk about —

Jigar Shah

We talk about it.

David Roberts

How to do things better next time.

Jigar Shah

And the fact that it’s not smoking rubble — we are going to have 50 cleantech IPOs on Wall Street this year.

David Roberts

In terms of productive government engagement with the process, let’s say that’s smoking rubble. It’ll be interesting to see whether the Democratic Party just fights to rebuild everything that was or whether there’s some real thinking about new things.

Jigar Shah

There’s going to have to be real thinking.

David Roberts

All right. Thanks, Jigar, it’s always fun.

Jigar Shah

Thank you, my friend.

David Roberts

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

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