Speaker 1: Hello, and welcome to the Texas Tribune trip Cast for Tuesday,
Speaker 1: September thirtieth, twenty twenty five. I'm Matthew Watkins, editor in
Speaker 1: chief of the Texas Tribune, and joined as usual by
Speaker 1: Eleanor Klibanoff Lawn politics reporter.
Speaker 2: Hello Eleanor, Hello Matthew. I have no banter for you today.
Speaker 3: Well, I think September thirtieth could be government shutdown day.
Speaker 3: That's right, you know, we'll wait and see end of
Speaker 3: Also the end.
Speaker 1: Of Q three, Yes, yeah, there you go.
Speaker 3: Do you have any goals for Q four?
Speaker 1: Just no legislative sessions.
Speaker 3: No legislative sessions. Yeah, that's my goal too. So let's
Speaker 3: hope it's our good lawmaker's goal, our governor's goal.
Speaker 1: Yes, exactly, exactly. All right, Well, today we are going
Speaker 1: to talk talk about renewable energy and the grid in Texas,
Speaker 1: and we are joined by Eric Goff, a Austin based
Speaker 1: the founder of GoF Policy and Austin based advocacy and
Speaker 1: advisory firm focused on energy and infrastructure policy. Welcome, Eric,
Speaker 1: thank you so much for having me. Thank you for
Speaker 1: being here. Okay, so I want to set this up
Speaker 1: just a little bit. We of course, all know, all
Speaker 1: our listeners know that Texas is the fossil fuels powerhouse
Speaker 1: in the US, and our state leaders for have a
Speaker 1: long time been pretty publicly skeptical, if not aggressively opposed
Speaker 1: to the idea of a transition toward cleaner sources of energy.
Speaker 1: But a funny thing has happened in the past half
Speaker 1: decade or so, which is amid all that opposition, Texas
Speaker 1: has sort of become a renewable energy powerhouse as well,
Speaker 1: at least for the United States. A statistic since twenty
Speaker 1: twenty one, ninety two percent of the power supply capacity
Speaker 1: that's been added to the grid has come from wind, solar,
Speaker 1: or batteries, And in twenty twenty four, Texas produced about
Speaker 1: fifty percent more renewable energy than California, a state that
Speaker 1: you know, obviously its leaders are much more excited about
Speaker 1: renewables than Texas. That growth has helped shore up our
Speaker 1: power grid. You know, energy demand continues to climb in
Speaker 1: Texas six percent per year since Winterstorm earned Uri. But
Speaker 1: it is also you know, you know, the state. It
Speaker 1: has basically essentially helped the state avoid having this summer
Speaker 1: a single power conservation notice, which you know, is somewhat
Speaker 1: rare these days. Of course, a somewhat mild summer helped
Speaker 1: with that too, but it's been an interesting summer. The
Speaker 1: legislative session kicked off with a lot of lawmakers filing
Speaker 1: bills targeting the renewable industry. The people in the industry
Speaker 1: breathed a sigh of relief when those bills bills did
Speaker 1: not pass, and then a couple of weeks later, the
Speaker 1: big beautiful bill in Congress passed and wiped out a
Speaker 1: lot of clean energy tax credits and things like that.
Speaker 1: And so we're going to discuss today the growth of
Speaker 1: that industry and also what's going to happen to it beyond.
Speaker 1: And Eric going to start with you, and I want
Speaker 1: to look backward before we start forward. Can you just
Speaker 1: talk a little bit, tell us a little bit about
Speaker 1: how this renewable industry has grown so much in Texas
Speaker 1: despite the fact that there's been, you know, some vocal
Speaker 1: opposition from from the political power in the.
Speaker 4: State happy to do that. And it's a long history.
Speaker 4: It starts with Governor George W. Bush and he pushed
Speaker 4: for inclusion of some sort of wind credit or requirement,
Speaker 4: and the original restructuring bill you know that opened this up,
Speaker 4: you know, twenty five thirty years ago, and that initially
Speaker 4: led to some investment and when but pretty soon federal
Speaker 4: tax credits came in and made the much bigger difference
Speaker 4: than the state program, and that led to an enormous
Speaker 4: boom uh in which led to costs of the construction
Speaker 4: and the components coming down pretty dramatically, solar battery when
Speaker 4: price costs all came down, and and now the most
Speaker 4: economically rational investment to make in many cases is solar
Speaker 4: plus storage.
Speaker 1: Is that is that largely you know, early Biden infrastructure
Speaker 1: bills that really kicked started it, or or.
Speaker 4: It went back even further than that. There's been a
Speaker 4: long history, uh until recently of having federal tax credits
Speaker 4: for production or investment in.
Speaker 2: And clean energy.
Speaker 1: Do you agree with sort of my assessment that I
Speaker 1: made up front, that that a lot of that growth
Speaker 1: has really helped put Argrid in a better position than
Speaker 1: it was four or five years ago.
Speaker 2: For sure, solar keeps costs down.
Speaker 4: As you know, the fuel cost of the sun is
Speaker 4: pretty low, and the cost of the equipment is also
Speaker 4: coming down dramatically. It's fairly predictable, so you can plan
Speaker 4: around it.
Speaker 2: The sun. We know what time the sun will set,
Speaker 2: you know, seven.
Speaker 4: Years from now, and there is you know, variability, but
Speaker 4: that can be accounted for pretty easily.
Speaker 2: What it does do.
Speaker 4: Is it pushes some of the issues around balancing the
Speaker 4: grid until after the sunsets when that resource is not available,
Speaker 4: and so as demand for electricity goes up after sunset,
Speaker 4: that's still something that Arcot has to manage, and so
Speaker 4: farther doing that with natural gas and batteries.
Speaker 1: Right, So let's let's talk about this because, like we said,
Speaker 1: there's been you know, even as this growth has happened,
Speaker 1: there's been a considerable amount of skepticism in our state
Speaker 1: government around whether this is a good thing, you know,
Speaker 1: whether it's sort of pricing out more fossil fuel backed
Speaker 1: power that you know, some would argue is more reliable.
Speaker 1: It feels to me like the two sort of criticisms
Speaker 1: of this, and I'd be interested in hearing your perspective
Speaker 1: on both, the first one being sort of what you
Speaker 1: talked about. It's actually less reliable. Right, you have a
Speaker 1: winter storm, the wind stops blowing, you know, not as
Speaker 1: much sun during the day and all of a sudden,
Speaker 1: we're in trouble. You can't turn the sun on at
Speaker 1: three am if you're having this crisis. It seems as
Speaker 1: though maybe batteries have helped with that a little bit.
Speaker 1: But talk about that concern and is that still a
Speaker 1: concern in twenty twenty five.
Speaker 4: For sure, it's still something that has to be actively managed.
Speaker 4: But we have a choice of do we manage it
Speaker 4: through like or you know control, command and control of
Speaker 4: exactly what's happening, or.
Speaker 2: Do we manage it through market forces.
Speaker 4: And that's a key question that drives outcomes. Since when
Speaker 4: a storm ury, we've been managing it with you know,
Speaker 4: urcot command and control. But in principle, if solar is
Speaker 4: not available when you need it, then it doesn't get
Speaker 4: paid to the very high prices that happen when you
Speaker 4: have a shortage of power, and so on average it
Speaker 4: gets paid less than a dispatchable power plant that is
Speaker 4: available during those high priced hours. So this, in my opinion,
Speaker 4: there's not a need to fix anything. If solar wants
Speaker 4: to earn money during those high priced hours, then they
Speaker 4: add storage. There's a natural market incentive to do.
Speaker 1: That, and this idea basically is building big batteries, connecting
Speaker 1: them to the grid, charging those batteries during this sunny,
Speaker 1: you know, hot or whatever windy times, and then waiting
Speaker 1: until you're in a situation where there's not as much
Speaker 1: supply in the system, where the prices will go up,
Speaker 1: and then you can make more money by right searching it.
Speaker 4: And that can be you know, tens of dollars per
Speaker 4: making what hour on a you know, a normal day
Speaker 4: or on a tight day, can be hundreds or thousands
Speaker 4: of dollars per make what hour, which can make you know,
Speaker 4: an investors whole year.
Speaker 1: It just very briefly, let's take a step back and
Speaker 1: explain sort of the ERCOT system here. It's you know,
Speaker 1: the the deregulated system, the system where you know, basically,
Speaker 1: right power suppliers are paid to feed the grid and
Speaker 1: they are paid based on how much demand and supply
Speaker 1: there is at the time. So when say you're in
Speaker 1: a winter storm and you know half the natural gas
Speaker 1: plants are out of line, you're making tons of money,
Speaker 1: right if you're able to supply that grid. Whereas if
Speaker 1: it's a three o'clock on a windy day, in a
Speaker 1: sunny day and there's all this you know, renewable energy
Speaker 1: being fed in the amount that you're getting paid for
Speaker 1: suplying that grid is significantly right.
Speaker 4: And I would argue that adds up to benefits to
Speaker 4: consumers because there's this intense competition that drives costs down.
Speaker 4: And the other side of that coin, when you said,
Speaker 4: if you're available during the high priced hours and winners
Speaker 4: from ury or some similar hour, you make a bunch
Speaker 4: of money. If you had sold your power in advance,
Speaker 4: which many power plants do, you were losing a bunch
Speaker 4: of money because you sold and now you have to
Speaker 4: fill in a gap that you don't have and you
Speaker 4: have to buy it back for thousands of dollars. So
Speaker 4: that risk of having to buy back that power also
Speaker 4: creates a strong incentive to try to make sure your
Speaker 4: power plants are reliable.
Speaker 1: It's basically the idea here is the invisible hand of
Speaker 1: the market is.
Speaker 4: Yeah, and we see it happening. I know there's you
Speaker 4: know a lot of people that here you know markets
Speaker 4: and kind of get skeptical, but like, we have real
Speaker 4: world evidence of it working in the power markets.
Speaker 1: Okay, So the other argument here has been essentially this
Speaker 1: isn't a free market system because there has been so
Speaker 1: much government government support for solar and wind and everything
Speaker 1: like that, and that basically the government, the federal government
Speaker 1: in particular, should sort of get its foot off the scale,
Speaker 1: which would make it more cost effective for natural gas plants,
Speaker 1: which they argue are more reliable because you can turn
Speaker 1: them on in the middle of the night to create
Speaker 1: a better system for Texas. What do you think about
Speaker 1: that sort of argument.
Speaker 4: So there's something to it. When you subptionalize something, you
Speaker 4: get more of that thing, But it doesn't change the
Speaker 4: fact that, you know, when things actually get tight and
Speaker 4: prices get high, it doesn't matter matter if you are
Speaker 4: subsidized to exist. It matters if at that moment you're available.
Speaker 4: If you're available at that moment, you can get paid
Speaker 4: those high prices, and if you're broken down, you don't
Speaker 4: get paid those high prices.
Speaker 2: So there.
Speaker 4: How you earn money in in that what's called the
Speaker 4: real time market, which when those prices can get high,
Speaker 4: directly contributes to whether or not you're willing to invest
Speaker 4: in UH solar or storage or natural gas. And frankly,
Speaker 4: it's been difficult lately for those prices to materialize for
Speaker 4: a natural gas in part because there are more expensive
Speaker 4: resource than solar and storage. We are seeing some new
Speaker 4: natural gas now with all the enormous load growth we've had,
Speaker 4: and so it's you know, policymakers that are looking for that,
Speaker 4: you know, should you know, be happy to see it happening.
Speaker 3: Finally, I mean when you talk about these like the
Speaker 3: foot on the gas idea of the federal subsidies. I
Speaker 3: spent some time this summer on an unrelated story out
Speaker 3: in parts of West Texas that are being just like
Speaker 3: entirely sort of remade in some ways with these giant
Speaker 3: wind farms and the batteries and and all of that.
Speaker 3: And it is like there is obviously like a political
Speaker 3: underpinning to this that people feel like there is a
Speaker 3: part like generally, I feel like they feel like, oh,
Speaker 3: the Democrats are more likely to subsidize, you know, these
Speaker 3: sort of things. They want more subsidies for these renewable energy,
Speaker 3: and in Texas that is often seen as a bad thing.
Speaker 3: But I do feel like a lot for a lot
Speaker 3: of you know, people in the industry, they're sort of like, well,
Speaker 3: what's gonna what's going to get me paid a little bit?
Speaker 4: You know, Like yeah, and it's not just in the
Speaker 4: industry about what's going to get me paid. But you
Speaker 4: know these investments are you know, creating an enormous tax
Speaker 4: space and rural counties that didn't have it previously.
Speaker 3: Right, it's like if it you know, it's ultimately good
Speaker 3: for the consumer, you know, like benefits the consumer, benefits
Speaker 3: some of these landowners, and if it's people working in
Speaker 3: these industries, how much of that resistance is Do you
Speaker 3: think it's like it's sticky and or just sort of
Speaker 3: goes away if the money starts making sense, so.
Speaker 4: You know that, you know, maybe it's a good way
Speaker 4: to transition to what happened last session where there were
Speaker 4: bills that were filed that would change the way some
Speaker 4: prior law that was going to increase costs for clean
Speaker 4: energy would have worked. It was called firming, and firming
Speaker 4: basically came out of HB fifteen hundred two sessions ago,
Speaker 4: and it's.
Speaker 2: Really vaguely written.
Speaker 4: It's not totally clear what it means, but it essentially
Speaker 4: means that they expect generators to perform above average during
Speaker 4: times of low reserves. But the way it was written,
Speaker 4: it was only for new generation for existing generation, and
Speaker 4: so it would be a new requirement for new investors,
Speaker 4: and generally that's a good way to do thing. Investors
Speaker 4: don't trust you if you impose new costs on their
Speaker 4: existing assets. They start to question whether or not you're
Speaker 4: a reliable place to invest. Anyway, there was a proposal
Speaker 4: the past session to make it retroactive, and that got
Speaker 4: through you know, the relevant House committee. And the fact
Speaker 4: that it you know, advanced, you know, surprise a lot
Speaker 4: of people because there had just been a compromise two
Speaker 4: years before. So it led to pretty much the whole
Speaker 4: Texas economy coming out and saying, please don't pass this bill.
Speaker 4: It would raise costs, it would not help reliability, we.
Speaker 2: Don't need it.
Speaker 4: And it was an enormous effort where you know, almost
Speaker 4: every industry came out, you know, to express concerns about
Speaker 4: the proposal. It ended up not advancing after you know
Speaker 4: a lot of back and forth, but it forced people
Speaker 4: to kind of go on the record because it almost passed,
Speaker 4: so you know, that was interesting, and it also didn't pass,
Speaker 4: and that's an important story.
Speaker 1: So yeah, and it's it's an interesting situation, right because
Speaker 1: I think one of the things maybe we felt like
Speaker 1: we learned about that whole process is that it might
Speaker 1: make good politics to sort of bash the idea of
Speaker 1: the Green New Deal or targeting fossil fuels in Texas
Speaker 1: or you know, the hardcore environmental right, I mean sorry left.
Speaker 1: But then when you get down to evaluating what is
Speaker 1: the actual impact of these renewables where you know, once
Speaker 1: you build them, once you build the solar panels, once
Speaker 1: you are put in the wind farms, they're quite cheap
Speaker 1: to you know, at generating electricity. And also there is
Speaker 1: a major there are major concerns as data centers come online,
Speaker 1: as bitcoin mining comes into the state, and also just
Speaker 1: the state grows in general, that there's going to be massive,
Speaker 1: massive needs for power over the coming years, and that
Speaker 1: wind and solar might be the solution to this. And so,
Speaker 1: you know, I think you had a lot of folks thinking,
Speaker 1: you know, I might get a short term benefit for
Speaker 1: saying we stuck it to those like liberal environmentalists, but
Speaker 1: I also might face the long term frustration of my
Speaker 1: constituents who are paying more for electricity, or worrying about
Speaker 1: another twenty twenty one winter storm from happening.
Speaker 3: Or like had a chance to sell their land to
Speaker 3: wind farm, or it's like seeing a you know the text,
Speaker 3: you know, benefits from a big battery plant or something.
Speaker 2: Yeah.
Speaker 4: Yeah, when it came down to it, there's an opportunity
Speaker 4: to pass you know, this bill that would have been damaging,
Speaker 4: and the legislature, in a bipartisan fashion, chose not to.
Speaker 4: But then yeah, so then then Congress happened, and so
Speaker 4: there have been you know, one of the things that
Speaker 4: President Trump said he would do is, you know, reverse
Speaker 4: all of the Biden policies around you know, the Inflation
Speaker 4: Reduction Act and has said, you know, the Green New
Speaker 4: Deal is you know, not good for anybody, and you
Speaker 4: know other things along those lines. And you know, one
Speaker 4: of the things I've learned recently is you know, when
Speaker 4: the president says you're going to do something, you should
Speaker 4: believe him.
Speaker 2: And so the bill passed.
Speaker 4: You know, Democrats were hopeful that the way that Biden
Speaker 4: structured it, by having a lot of the benefits to
Speaker 4: crew in red congressional districts, would you know, inoculate it
Speaker 4: against being overturned. That didn't happen, And there's now the
Speaker 4: remaining tax credits. There's a scramble towards construction because in
Speaker 4: order to get them, you have to have to demonstrate
Speaker 4: the under construction in almost every case. The exception is
Speaker 4: I think if you're under one point five megawatts, you
Speaker 4: don't have to do that. That's small, and so the
Speaker 4: other thing people doing is maybe doing more small projects
Speaker 4: because that's easier. But in my opinion, what's happening is
Speaker 4: there's actually a rush to qualify for the remaining credits.
Speaker 2: When did those expire? Gosh, that's a good question.
Speaker 3: Okay, soon soon, soon Again the fast approaching deadline.
Speaker 4: Yeah, the very fast approaching deadline, and the once they expire,
Speaker 4: then we're going to be in a new world. Historically,
Speaker 4: they've been set for expiration and then extended and extended
Speaker 4: and extended, and I'm really curious to see what happens.
Speaker 4: I still think we'll still see investment in solar and storage,
Speaker 4: especially in places with load growth, because it's just a
Speaker 4: fact that you can't consume a megawatt unless someone makes
Speaker 4: a mega wat, and so that means that in order
Speaker 4: to keep up the demand, we have to build new
Speaker 4: facilities and solar and storage. Because the impacts that we've
Speaker 4: had of those costs coming down for many years are
Speaker 4: still in the money. It's going to raise the cost
Speaker 4: of buying those because they won't be subsidized, But especially
Speaker 4: in areas with load growth, I think we'll still see purchases,
Speaker 4: maybe not to the same level, but at least enough
Speaker 4: to keep up a load growth.
Speaker 1: This is maybe too complicated of a question to answer
Speaker 1: in a quick but I'm curious whether you have any
Speaker 1: insight on you know, once these credits expire, does it
Speaker 1: flip the equation of whether it's more efficient economically efficient
Speaker 1: to build a solar farm or a wind farm compared
Speaker 1: to a natural gas plant.
Speaker 4: So it's not a black and white question like that.
Speaker 4: We're seeing right now investment in both solar and storage
Speaker 4: and natural gas as it relates to all of load growth.
Speaker 2: And that's because.
Speaker 4: In the wholesale market, the people that are responsible for
Speaker 4: covering that load growth need to cover the possiabilities. So
Speaker 4: solar and storage can take you a long way and
Speaker 4: it's cheap, but you need to be able to physically
Speaker 4: have enough energy to get you through whatever conditions you
Speaker 4: know might arise. And so we're seeing investment in everything.
Speaker 2: Right now that makes sense.
Speaker 1: So one of the questions then, I have is what
Speaker 1: does this mean for the reliability of our ur cut
Speaker 1: grid moving forward.
Speaker 2: Right, So.
Speaker 4: Air Cut is kind of actively managing the problem of
Speaker 4: how do we deal with data center growth that get
Speaker 4: technical pretty quickly.
Speaker 2: So I'm going to set that aside.
Speaker 4: But they're doing a bunch of studies that will be done,
Speaker 4: you know, later this year, and then they'll react to
Speaker 4: whatever those studies say.
Speaker 2: But beyond that, there's.
Speaker 4: A question of whether or not Urkott lets the market participants,
Speaker 4: you know, follow incentives and see what comes out of
Speaker 4: that and just trust, you know that markets will lead
Speaker 4: to the right mix, or for them to be heavy
Speaker 4: handed and lean in. And ever since wenters from URI,
Speaker 4: they have kind of had their hands on the reins.
Speaker 4: And recently at an Urkott board meeting, the chairman of
Speaker 4: the Public Utility Commission, Thomas Gleeson, said that it's time
Speaker 4: to reconsider whether or not we kind of control the
Speaker 4: market as tightly as we have, and that's called they've
Speaker 4: been calling it conservative operations, and he said, maybe it's
Speaker 4: time to reevaluate that. I'm excited by that because I
Speaker 4: think it will lead to more investment and you know,
Speaker 4: all kinds of capacity.
Speaker 1: Because one of the things that conservative operations has one
Speaker 1: of the causes of that, or one of the effects
Speaker 1: of it is it makes prices go up for the
Speaker 1: average consumer.
Speaker 2: Well they not necessarily.
Speaker 4: They buy more reserves and so costs go up, but
Speaker 4: prices don't necessarily go up.
Speaker 2: It's just a quantity issue, right.
Speaker 4: But what investors want to see is higher prices occasionally,
Speaker 4: so that way they can earn those higher prices by
Speaker 4: being available during those conditions. So by buying fewer reserves,
Speaker 4: you're buying the total quantity and the bill goes down.
Speaker 4: Plus this is the opportunity for these higher prices to
Speaker 4: materialize that investors can earn. So it could, if they
Speaker 4: do it right, result in lower costs and more investment.
Speaker 3: Are we moving off of conservative operations because like we
Speaker 3: have strengthened the systems and we've learned our lessons and
Speaker 3: things are better, or just because when the winter storm
Speaker 3: is so far in the rear view mirror that you know.
Speaker 2: Yeah, it's a little bit of both.
Speaker 4: But the state has made significant progress on responding to
Speaker 4: Winterstorm Muri. There was some real low hanging fruit on
Speaker 4: what to fix weatherization of generators in the natural gas system.
Speaker 4: There is a procedure to shut down consumers to match
Speaker 4: apply and demand, there's not enough generation. That's called rotating outages,
Speaker 4: and unfortunately, some of the outages that they rotated were
Speaker 4: onto natural gas systems, and so it led to unintentionally
Speaker 4: cutting off natural gas going into the power plants. We're
Speaker 4: never going to do that again because we're like, oh,
Speaker 4: that was a mistake, let's fix it. And so that
Speaker 4: was that's a real easy thing to fix. Plus there's
Speaker 4: been a number of new market design changes. I think
Speaker 4: we're in a better place.
Speaker 2: Interesting. Interesting.
Speaker 1: One other thing that did happen during the legislative session
Speaker 1: was the state putting I believe five billion more dollars
Speaker 1: into the Texas Energy Fund RIGHT, which is a fund
Speaker 1: that is specifically designed to give low interest loans to
Speaker 1: natural gas plants, right, not renewable plants and things like that.
Speaker 1: I think the total now is ten billion dollars of
Speaker 1: the legislature has put in there in recent years. And
Speaker 1: one of the criticisms of that was that just not
Speaker 1: many companies are accessing that. At the time, there had
Speaker 1: only been two I believe now there's been a third.
Speaker 1: Right that happened this week or sorry, last week. There
Speaker 1: was also an announcement separately from that and it was
Speaker 1: the biggest loan ever, right, it was five hundred and
Speaker 1: sixty two million dollars approved by for Energy to be
Speaker 1: a plant. You also had Vistra Energy announcing I think
Speaker 1: maybe yesterday that it was going to be build to
Speaker 1: new advanced natural gas power units totally and I think
Speaker 1: eight hundred and sixty megawatts, which is a major, major investment.
Speaker 1: How much of that is the market responding and swinging
Speaker 1: back to natural gas and how much of it is
Speaker 1: just development that would have happened anyways.
Speaker 4: So one of the things that you know, in my opinion,
Speaker 4: is interesting about the Texas Energy Fund is I've been
Speaker 4: talking about incentives and it's you know, it's a lot
Speaker 4: to take in, and the politicians realized that and needed
Speaker 4: to be able to explain to you know, every day
Speaker 4: voters that were doing something. And I think that's why
Speaker 4: they created the find to say, here's this money, it's
Speaker 4: going to new investment that's easy to understand, and it
Speaker 4: makes sense because you know, they want to be able
Speaker 4: to clearly explain the voters that they accomplish something. The
Speaker 4: investment in natural gas and whether it's happening in the
Speaker 4: Texas Energy Fund is interesting. There have been a number
Speaker 4: of canceled projects and the Texas don't do fund you know,
Speaker 4: where the applicant said that you know, they didn't have
Speaker 4: a turbine available or it, you know, didn't you know,
Speaker 4: make sense for one reason or another. But we what
Speaker 4: the power plant investment in natural as we are seeing
Speaker 4: not all of it, especially with this Vistra stuff, but
Speaker 4: a lot of it is going co located at new
Speaker 4: data centers. And you know that's because what those data
Speaker 4: centers need is the physical ability to consume electricity. And
Speaker 4: it doesn't matter about market design or incentives or whatever.
Speaker 4: They just need enough megawatts in one location to you know,
Speaker 4: do their business model. And so for that reason, it's
Speaker 4: worth it to you know, install solar storage, natural gas
Speaker 4: uh installed, you know, pay for you know, giant new
Speaker 4: transmission lines because they have an infrastructure problem, not a
Speaker 4: market's problem, and if they can consume a lot of electricity,
Speaker 4: they're happy and they're willing to pay for the cost
Speaker 4: of that.
Speaker 3: I mean, there was a like we've talked about sort
Speaker 3: of the criticism on the right of you know, putting
Speaker 3: your thumb on the scale or subsidizing renewable energy. This
Speaker 3: obviously is like pouring money, a ton of money directly
Speaker 3: into natural gas. I mean, do you see sort of
Speaker 3: a conflict there in those two or is it just
Speaker 3: sort of this as hell?
Speaker 5: Yeah, in many other markets, uh, you know, a market
Speaker 5: for apples or t shirts.
Speaker 4: You know, it's not there's not a need for politicians
Speaker 4: to weigh in and say, I think we should do
Speaker 4: the T shirt market differently. But electricity is just so
Speaker 4: fundamental to our daily existence that and this Historically it
Speaker 4: was regulated very differently where it was, you know, very
Speaker 4: much like all the decisions were made by the government,
Speaker 4: and so it it makes sense why people you know,
Speaker 4: went away and make sure that people get the lights on,
Speaker 4: especially after the experience that we had. I would love
Speaker 4: for the politics electricity to get boring again.
Speaker 3: Yeah, make electricity boring.
Speaker 2: Yeah, Yeah, it's funny.
Speaker 1: Just I think about like how many people didn't know
Speaker 1: what urkot was in twenty eighteen or whatever. Now.
Speaker 2: Yeah, you know, it's like we didn't.
Speaker 1: Even have to explain it on this podcast because we've
Speaker 1: all been talking about it for so long, right, Yeah,
Speaker 1: one thing I wanted to ask, I mean, the other
Speaker 1: thing driving this we've hinted out a little bit. Is
Speaker 1: just this idea that all this massive amount of demand
Speaker 1: coming on to the grid in the coming years in
Speaker 1: order to power the you know, economy of the future,
Speaker 1: the expected economy of the future. It's very complicated though,
Speaker 1: right because we have this massive queue of data center
Speaker 1: and bitcoin miners who want to join the grid, but
Speaker 1: they're also you know, applying to join grids in other
Speaker 1: states or other places around the states, and it's very
Speaker 1: unclear how that's being built. Is that making it difficult
Speaker 1: for regulators to know what to what they need to
Speaker 1: be doing, and what they need to be accomplishing in
Speaker 1: order to shore up the power.
Speaker 2: In the state. Yes and no.
Speaker 4: The yes is to know exactly what to do. But
Speaker 4: the no is like they know, we need more investment
Speaker 4: and transmission and we're going to need more generation.
Speaker 2: Right. The way it gets complicated is.
Speaker 4: There are only a certain number of companies that are
Speaker 4: going to pay for these hyperscalar data centers, you know,
Speaker 4: companies like Google and Meta and open Ai. And it's
Speaker 4: not you know, going to be you know, a bank
Speaker 4: that's running you know, their system, they don't need something
Speaker 4: of that scale. They can use traditional data centers for
Speaker 4: their business model, and a lot of people would love
Speaker 4: to sell an enormous data center site to these giant companies,
Speaker 4: and so there's a significant amount of speculation. One of
Speaker 4: the things that SB six did last session is require
Speaker 4: that data center developers demonstrate that they control the site
Speaker 4: and also require them to post what will probably be
Speaker 4: a substantial amount of money before the utility or acut
Speaker 4: does any planning for them, and that prepayment will hopefully
Speaker 4: filter out you know, some number of speculators, so it'll
Speaker 4: be an easier problem to solve.
Speaker 1: I want to ask long term, I mean the numbers
Speaker 1: I read at the start of this. You know, two
Speaker 1: of the power supply capacity that's been added to the
Speaker 1: grid has come from wind, solar, or battery since twenty
Speaker 1: twenty one. And the trend line seems clear here of
Speaker 1: what direction we're heading. Do you think that the actions
Speaker 1: of Congress this summer will in the long term substantially
Speaker 1: change the direction of that trend line? Like, is there
Speaker 1: any is there putting? Can the toothpaste be put back
Speaker 1: in the tube here? Or are we ultimately heading toward
Speaker 1: a solar, wind and renewable future for a grid?
Speaker 4: In my opinion, the solar and storage is going to
Speaker 4: be a key part of our future. No matter what
Speaker 4: we will see changes, there's constant you know, invention that's
Speaker 4: happening and the battery space and the solar panel space
Speaker 4: to make them more efficient or longer duration for the batteries.
Speaker 4: There's different kinds of batteries that are coming out all
Speaker 4: the time. A lot of people are excited by clean
Speaker 4: firm power, so that's you know, not necessarily natural gas,
Speaker 4: but maybe natural gas with combon capture and storage, or
Speaker 4: nuclear power, geothermal power, or you know, longer duration storage.
Speaker 4: There's a lot of investors that are trying to make
Speaker 4: all those things happen. Historically, the government you know, had
Speaker 4: industrial policy around let's do what we can to reduce
Speaker 4: those costs. And we might still be doing that for nuclear,
Speaker 4: but but for nuclear that's not really happening.
Speaker 2: And so if.
Speaker 4: People want those to happen, then there's going to have
Speaker 4: to be some sort of you know, risk sharing or
Speaker 4: you know, other mechanism in order to make sure that
Speaker 4: those first movers don't have huge cost overruns. And I
Speaker 4: think there's gonna be active evident that space because people
Speaker 4: want to see there's other technologies, see other technologies succeed
Speaker 4: as well.
Speaker 1: So okay, let me this is a question that I've
Speaker 1: been wanting to ask someone smart enough to have an
Speaker 1: opinion on it for a while. So I'm going to
Speaker 1: veer into the realm of fantasy and uh, pure speculator,
Speaker 1: here we go. Yeah, here we go. So you know again,
Speaker 1: I'll repeat it again. One of the big drivers of
Speaker 1: this is AI, right, data centers, crypto to a certain
Speaker 1: extent as well. Right, there is this massive rush by
Speaker 1: companies to build as many data centers as possible in
Speaker 1: order to power our AI future. Right, whatever you want
Speaker 1: to call it, right, But something we know about technology
Speaker 1: is that it gets more efficient over time. It You
Speaker 1: know that the computer that took up a whole you know,
Speaker 1: floor of a building, you know, seventy five years ago
Speaker 1: fits in our watch today.
Speaker 2: Right.
Speaker 1: Is there a world where we're rushing to fill all
Speaker 1: these this power demand? This technology will get more efficient
Speaker 1: in the future, and then the super cheap to maintain
Speaker 1: wind and solar and batteries will sort of be what's
Speaker 1: left standing as demand drops elsewhere and we're suddenly looking
Speaker 1: whether it's fifty years down the road or twenty five
Speaker 1: years down the road, or whatever on a much much cleaner,
Speaker 1: less fossil fuel dependent power supply, just because the demand
Speaker 1: has changed so much. And these things we built in
Speaker 1: this decade were are the ones that are going to
Speaker 1: be the easiest to run into the future.
Speaker 4: So I think AI is going to change every job
Speaker 4: and every industry. And because of that, there's substantial demand
Speaker 4: and for the capabilities to make that happen. So we
Speaker 4: are not anywhere close to the amount of data center
Speaker 4: development we need to make that happen. It won't happen
Speaker 4: all at once, but you know, that's that takes a
Speaker 4: substance amount of electricity. It's possible that you know, the
Speaker 4: next generation of that will result in like more efficient chips,
Speaker 4: but what that could mean potentially it's just more chips
Speaker 4: at one site too, right, And you know it's also changing,
Speaker 4: you know, the way we think about national security. You know,
Speaker 4: we've seen you know, the horrible videos in you know,
Speaker 4: Ukraine where you know, drone strikes against people. You know, unfortunately,
Speaker 4: you know, that's easier to do when you have when
Speaker 4: you automate it, and and from even just from a
Speaker 4: defense perspective, if the other guys have it, you wouldn't
Speaker 4: have it too. That's also AI. So as we make
Speaker 4: all these new investments, you know, even if AI drops
Speaker 4: off or or if it doesn't, I don't think it matters.
Speaker 2: In my mind. There's a continual loop of.
Speaker 4: New load from new industry coming because they see cheap electricity,
Speaker 4: which was made possible by solar and storage, because that's
Speaker 4: how it gets cheap.
Speaker 2: That new.
Speaker 4: Demand increases prices, which increases the incentive for new solar
Speaker 4: and storage.
Speaker 2: And that's the virtuous cycle.
Speaker 4: And I don't know what the next thing after AI
Speaker 4: is going to be, but the access to enormous amounts
Speaker 4: of cheap electricity will enable all kinds of potential.
Speaker 1: Yeah, that makes sense, all right, My techno utopian theories
Speaker 1: might be a little optimistic there.
Speaker 3: It is just funny, like these are the things that
Speaker 3: for all the politics we talk about and all the
Speaker 3: like culture war stuff like, this is the stuff that
Speaker 3: our elected officials really I think should be an often
Speaker 3: are grappling with of like what is the future of our.
Speaker 2: World going to be?
Speaker 1: But also just like the power of partisan politics and
Speaker 1: like fighting like might not have as much power over
Speaker 1: you know, technological changes in the future we're going as
Speaker 1: to as we think right, Sometimes the market is going
Speaker 1: to push you in a direction whether you like it
Speaker 1: or not. And sometimes a place like Texas, which you
Speaker 1: know claims to be suspicious of this, will find itself
Speaker 1: the market leader in the country.
Speaker 4: Well, and you know that happened just because Texas got
Speaker 4: out of the way and let investors do what they wanted.
Speaker 1: To do right, right, And you know, the it's been
Speaker 1: so funny to watch, you know, folks like the Abundance
Speaker 1: people talk about how you know, these these sort of
Speaker 1: liberal thinkers saying, California, you're doing it wrong. Look at Texas. Right,
Speaker 1: It's so much easier to get the permitting. It's so
Speaker 1: easier to much easier to get these projects off the
Speaker 1: ground because they stay out of people's way and let
Speaker 1: these things build up. You know, it's an interesting world
Speaker 1: we live in right now.
Speaker 3: Yeah, it does remind me of the conversation we had
Speaker 3: on this podcast about housing and things like that right
Speaker 3: where it's like you know, things credit where credits do
Speaker 3: some stuff is working here?
Speaker 1: Yeah, all right, Eric, thank you for walking us through this.
Speaker 1: It's been a very interesting discussion. Thank you, Eleanor, and
Speaker 1: thank you to our producers Rob and Chris, that's it
Speaker 1: for it today.
Speaker 2: Talk to y'all next week.