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US electric utilities are caught between a rock and a hard place. On one side, electricity demand in the US is rising for the first time since the 1970s, partially but not entirely due to data centers, and utilities are responding with record capital spending. However, on the other side, residential electricity rates have risen around 40% since 2021 and, as you might have noticed if you’ve watched the news recently, the public is extremely pissed off about it. There is very little political patience for further rate increases.

In short, utilities are being asked to build lots more, lots faster, while raising bills lots less, or even reducing them. There is simply no version of that math that works out at their current levels of productivity. The only solution is, in a word, innovation: rapidly deploy new technologies, new methods of planning and interconnection, and new types of partnerships in order to provide more and better electricity service at lower cost.

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But that need has been visible on the horizon for well over a decade, and the record is not encouraging. American utilities spend about 0.2% of their revenue on research and development, lower than any other major sector of the economy. In 1992, NARUC, the utility regulators’ association, recommended they get to 1%. That was 34 years ago and they’re still nowhere close.

Why is an industry about to spend a quarter-trillion dollars a year in a political volatile environment so uninterested in figuring out how to spend more effectively? Is the technology not as ready as the start-ups claim? Is the utility business model fundamentally broken? Are regulators too hidebound and risk averse? Are the people and organizational processes inside utilities outdated and overly conservative or all of the above?

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To hash through these questions, I have with me today two longtime veterans of this space. Quinn Nakayama (a previous Volts guest) runs the innovation shop at California utility PG&E, so he has seen the problem from the inside. With him is Hanna Grene, who spent years at a grid software company trying, and largely failing, to sell utilities new tools, and who now leads energy go-to-market at Microsoft. I’m eager to hear their perspectives on this question, which has never been more urgent.

Chapters

• 00:00 – Introduction

• 03:44 – Why grid-enhancing technologies stall in the US

• 07:54 – Selling grid software into utilities: what goes wrong

• 11:08 – From a pipes-and-wires company to a technology company

• 12:38 – Pilot program hell and the last 30 percent

• 15:04 – Innovation as a bolt-on, and the three muscles

• 17:47 – The digital spine, data quality, and smart meters

• 23:56 – Org chart versus work chart

• 25:09 – Strategy, structure, people, process, technology

• 29:24 – Build, buy, and the ecosystem skill set

• 36:15 – Data leakage, shadow AI, and paying twice

• 41:12 – Why utility product cycles run five to seven years

• 46:27 – Human in the loop, and EPRI's SAFERai.power

• 49:06 – Advanced market commitments and the kingmaker problem

• 53:22 – EPIC, and whether software counts as infrastructure

• 01:00:05 – The CapEx incentive problem and final advice

• 1:04:34 – Digital Infrastructure as Capital Spend

• 1:06:53 – Final Advice

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Quinn Nakayama (LinkedIn)

  • PG&E Research & Development (Website - LinkedIn)

• Hanna Grene (LinkedIn)

  • Microsoft Energy and Resources (Website - LinkedIn)

• Other Orgs Mentioned

  • Electric Power Research Institute (Website - LinkedIn)

  • California Public Utilities Commission (Website)

  • California Energy Commission (Website)

  • National Association of Regulatory Utility Commissioners (Website)

  • Schneider Electric (Website)

  • Yokogawa PXiSE (Website)

Company & Industry News

• EPRI Launches Effort to Reduce Risk in AI Power Sector Deployment

• SAFERai.power

• PG&E Announces Finalists for 2025 Innovation Pitch Fest

• Microsoft’s Grene on Why People Are Key to Utility AI Integration

Books & Articles Discussed

• Electric Program Investment Charge Program

• California Policy and Innovation Coordination Group - EPIC 5

• Grid Catalyst study

• A Primer on R&D in the Energy Utility Sector

• Yokogawa Acquires PXiSE

Related Volts Episodes

• PG&E tries to prove that a big utility can innovate

• Using more of the grid we’ve already built

• One easy way to boost the grid: upgrade the power lines

• Getting more out of the grid we’ve already built

• Why is NERC so worried about data centers

Related Volts Posts

• Free the smart-meter data!

• Transmission month: how to make the existing grid work better

Transcript

David Roberts: With no further ado, Quinn Nakayama, Hanna Grene, welcome to Volts. Thank you so much for coming.

Quinn Nakayama: Thanks for having us.

Hanna Grene: Thanks for having us.

David Roberts: Cool. So let’s start here, Quinn, let’s start with you. So here on Volts, I cover all kinds of cool new technologies to help the grid, grid-enhancing technologies, dynamic line ratings, advanced conductors, power flow controllers, grid-forming inverters, VPPs, all sorts of AI control systems, on and on, et cetera, down the line. Many of these technologies have been deployed for a long time and at some considerable scale in other places, like in Europe. Why in the US are they still a rounding error? Why are US utilities not deploying them at scale? I’ll just start with the simplest form of this question.

Quinn Nakayama: Thanks for asking a really interesting question regarding what Europeans are doing versus the United States, and I would say, well, part of it is some of those systems that they operate, especially in the kind of the DER-related space, operates in a completely different regulatory market. It’s not that these systems don’t work. The applications are fairly basic in what their capabilities are. In the DER-related world, the issue isn’t necessarily the technology itself.

It’s more of how does each regulatory market perceive the value of distributed energy resources across its entire sector, from the system view versus transmission view versus distribution view. You have to actually get to something that works, that actually reduces rates. If you put together a DER strategy that just compensates customers, but you don’t get the actual value from the utility side of the house, then rates just rise, you know? And we’ve seen that in various other type of DER-related programs like net energy metering, and so on and so forth. You can’t do that, right? So you know, I don’t think it’s really necessarily a technology issue.

For other type of technologies such as like dynamic line rating, such as other type of GET-related technologies, we are seeing a significant increase in adoption in the California utilities. What I would say is that, you know, we want-

David Roberts: Can I cut in? Just for listeners’ benefit, GETs, G-E-T-s Grid-Enhancing Technologies. I’m trying to explain all our acronyms as we go here.

Quinn Nakayama: Oh, yeah, I’m tracking, yeah. Grid-enhancing technologies, like advanced conductors, new types of conductor-related technologies. You have dynamic line rating. You have advanced power flow controllers. The one that really comes to the top of the mind where the Europeans use much more predominantly than maybe in the United States is probably dynamic line rating, and I think the California utilities and the United States utilities in general, first off, didn’t really have a major need five, seven years ago, data center things were interesting, but not really need. Most United States utilities across the board had flat, in some areas negative load growth.

David Roberts: Yeah.

Quinn Nakayama: And so, you know, being able to pivot extraordinarily quickly into a technology is really difficult for utilities to do. In California, I think we’re a little bit more ahead of the area. We already have ambient adjusted ratings. So dynamic line rating from our perspective just is a wind measurement tool and a much more granular temperature measurement tool.

Hanna Grene: Mm.

Quinn Nakayama: We feel like we’ve already been able to do some of the things that technologies such as dynamic line rating can do, which measures temperature and wind and other factors on a transmission line and enables you to push more energy through than maybe what the common ratings of those assets are. And so I would say that the need has really progressed very quickly for the utilities and much faster than a lot of utilities are able to react to. And so you’re not seeing that type of adoption as fast as, you know, the industry might hope.

David Roberts: Yeah. Yeah. I think this is a theme we’re gonna come back to, is just that the speed of demand rising and the speed of new technologies developing is much faster than the speed of utilities operating, which is sort of kind of what we’re getting at throughout here. Hanna, I wanna talk about your current role, but before we get there, previously you were at a company called PXiSE trying to sell these grid controlling software to utilities, and of course, like they desperately need that stuff and yet it was a frustrating thing many times. And I’m sort of curious about, I wanna kinda start with a story of failure.

Like, when you tried to sell these things to utilities that would help them manage distribution grids better, Why did it fail? What did they say when they didn’t buy it? Why aren’t they buying these things? What sort of things would you hear?

Hanna Grene: Well, I’ll give you a slightly different perspective. I don’t know that a gigawatt of global projects is failure.

David Roberts: Well, I mean, at the scale of the US utility sector, they’re not doing it on anything like the scale I think we would want them to, let’s say. Like, your company can succeed, but the sector is not, I would say, succeeding on this.

Hanna Grene: I think more broadly, if you open up and you look at digital grid controls, the retail sector globally has matured it much, much faster than say, you know, traditional T&D utilities. And there’s good reasons behind that. You know, as you integrate more and more hybrid power plants, just larger solar sites, more complex, you know, natural gas tied to batteries and connected to solar, we’ve needed on the generation side, both retail and integrated utility, we’ve needed more advanced controls faster than you have necessarily downstream in the distribution space.

Some of that has just come from market maturity, market need. Some of the most productive places in the world that have advanced DERMS systems and that have been early to market are places like California. I had the great privilege of partnering with Quinn, the PG&E team, and our partners at Schneider Electric to work on their DERMS system.

Hanna Grene: Distributed energy resource management system.

But places like California, places like Australia, we have more DERs. We’ve had more volatility and push to interconnect more devices within the distribution system, and so we’ve had a market need there. And so, you know, coming back to what Quinn said, I don’t know that this is a technology problem. Some of it has been more what is the problem we’re solving in the market, and does the market really need or demand this level of technology?

And, but I think anybody in grid controls, it’s been slow-going or bumpy at different times in the market. I mean, my goodness, if you’re sitting where we’re all sitting right now, the market is fast and chugging.

David Roberts: Mm-hmm.

Hanna Grene: And, you know, there’s a lot of capabilities that, you know, I might have heard like, “Well, we don’t need a Ferrari controller.” I might have heard that 10 years ago in parts of North America because, you know, we’re not California. We don’t have solar on every rooftop-

David Roberts: Right.

Hanna Grene: a Tesla in every driveway. But let me tell you, with data center demand, with reindustrialization, you know, even just with EV growth across middle America, I would sort of challenge the industry, like find me a grid that doesn’t need more advanced real-time controls than what we have today. Sometimes this all comes down to market maturity and market need, and we’re in a moment of market need. We’re trying to do hard things a lot faster than we’ve done them before.

Quinn Nakayama: Yeah, and I think if we’re to double down on that, right, Dave? Like, for example, we haven’t had to do a lot of changes to our applications or system softwares for the past, like, 100 years, right? Like, the utility industry has been fairly stable. So, you know, think about what a utility industry is. It’s a pipes and wires company. Yes, we transmit electricity, and we do, you know, it depends on the type of regulated or non-regulated type of utility, unregulated utility you are. Predominantly, you are a infrastructure company.

David Roberts: Yeah.

Quinn Nakayama: And so you put wires up in the air, and you dig trenches, and you put pipeline in the ground. And if you think about the type of skill sets that a utility really needs to excel at, it’s project management and engineering, right?

David Roberts: Yeah.

Quinn Nakayama: That’s what you need. You need to be able to design these suckers from an engineering perspective and make sure that they operate reliably and effectively, and then you need to have the project management capability to construct these things. And, you know, utilities are very similar to, like, a road construction or any type of infrastructure construction-related company. And now, you know, we are quickly needing to become a technology company.

David Roberts: Mm.

Quinn Nakayama: Those type of skill sets are completely different. How do you move from a project management and engineering over to having, for example, a chief technology officer or a chief product officer and then hiring people who have product backgrounds? That’s a complete mind shift and skill shift.

David Roberts: Well, relatedly, what you often hear, what I often hear from people, especially people who are in the business of trying to sell cool new advanced technologies to utilities is that they get trapped in pilot program hell, basically. Like, a remarkably high, like I was looking at this study, something like 70% of the startups they surveyed said, “Yeah, we were able to get a pilot from out of utilities.”

But very often that’s just where things stay. So talk a little bit about the dynamics of pilot projects, and who’s running those and why aren’t they… you know, you would think what you would want is for pilot programs to be a pipeline of things that then become programs, that then become integrated, but that very frequently doesn’t happen. Tell us a little bit about the pilot dynamic.

Quinn Nakayama: Yeah, and I’d love to hear from Hanna, who’s seen a lot of other utilities around, but I can give you my own personal perspective is that there is no world where a technologist comes to us and says, “Hey, listen, here’s a technology that works exactly in the ways that you need to do. It is 100% baked. All you need to do is click the install button or put this onto your assets, and boom, magically it resolves all of your related issues, and makes you a cup of coffee, washes your car, and takes your kids to school at the same time.” That doesn’t exist.

And so, you know, throughout my entire experiences, what I’ve found is that technologies typically are around 70%, 60%, 70% baked, and what is required is the utility subject matter expertise and our data to be able to then work with these companies to modify their products or customize their products,

David Roberts: Mm.

Quinn Nakayama: whatever you might wanna call it, to fit our needs. And so this is where the product development skill set really comes into play, Dave, where you’re not just testing something and saying, “Oh, here’s the reason why is it doesn’t work. Thank you very much. We’ll talk to you in four years when you can get it done.”

David Roberts: Mm-hmm.

Quinn Nakayama: A product development mindset would be, “Hey, listen, we’re gonna commit to you as a technology, and we’re going to expose all of our data and our subject matter expertise into your product technology, and we’re gonna get it to 100%.” That’s a different mindset.

David Roberts: But isn’t that what the pilot program is supposed to do? I mean, isn’t that what a pilot is?

Hanna Grene: Yeah, I wanna challenge the mindset a little bit because I think where we’re at today with technology broadly, but I work for an AI-leading company, so I will lean a little bit more into what we’re seeing with AI here. I think the trap you fall into when you talk about pilots or when you talk about even just, you know, sort of having a dedicated AI strategy, is you fall into a trap that becomes a self-fulfilling prophecy of making it a bolt-on.

David Roberts: Hmm.

Hanna Grene: Well, we’ll try that thing over there. And, you know, I think we’ll hear more from Quinn about some of this innovation muscle and, you know, you do have to create safe spaces to fail in a utility, and sandboxing and trying things before you scale them is important. But how do you create a process that brings it back into your core strategy as a company? And do you-

Quinn Nakayama: Mm...

Hanna Grene: have technology and innovation as a core strategy in your company? That’s a really important foundation to have, because otherwise you could sort of treat these things like side projects, and that’s where you end up into trouble. And so there’s three big things that I see in companies across not just utilities, but retail power providers. My team works directly with oil and gas companies as well that play in this space, and we get to co-innovate and sit with them and work on their strategy and help deliver AI outcomes with them.

And so there are three big things that I’ve seen that really are the differentiator between a company that sort of treats technology like a bolt-on and those who make technology part of their culture and part of their core strategy and make innovation part of their culture and core strategy. The first is really obvious. They’ve invested in and have a strong digital spine. Do they have a mature data strategy? Do they have a strong IT and data information organization? Like, have you put down some good foundations to the house that you’re gonna build on it? So you do have to have that strong digital spine.

David Roberts: How common is that in utilities, right? Like, I think intuitively you’d like to think they would have that.

Hanna Grene: More common than not, but everybody’s foundation needs some work.

David Roberts: Mm-hmm.

Hanna Grene: So you are in this, we are right now as an industry in a big upgrade and refresh cycle for core systems. You know, I would sort of say find me a utility that’s not going through some sort of modernization

David Roberts: Yeah

Hanna Grene: Whether it’s in their customer system, their supply chain system, their geospatial system, their grid, and that’s healthy and that’s normal. But modernizing those and building up that good spine is key, and it’s part of being ready for this future and delivering affordably, I would say.

Quinn Nakayama: Yeah. I would also say, like, you know, the digital spine is one thing, but, like, your data quality on that digital spine is a whole nother ball of wax. So, like, utilities writ large may have that digital spine available, but either the data that they have in their systems doesn’t exist because they never had to collect it before, or it’s poor, right?

So Dave, like, one of the things that I think about is, as a utility, we never really had to care whether you were on what phase of our secondary and our primary system. No utility had to really record that because you could get things to balance generally on the system and you were fine. Now, with all the solar, with all this EV, with all of this two-way power flow, that becomes really needed in order to operate your grid well and effectively and efficiently, but you don’t have any of that data recorded or it’s poor. And so, you know, the digital spine is one thing, but-

David Roberts: Well, one of the things people complain about precisely in this area is the smart meter thing, ‘cause this was sort of a wave of, like, supposed innovation a few years ago. Everybody was pushing smart meters. They got installed all over the place. But then, like precisely to what Hanna’s saying, that smart meter data never really got integrated, it seems like, or used particularly well, or like integrated into operations particularly well. I mean, you can buy private products now that make use of that smart meter data to do really sophisticated things at the household microgrid level, and still utilities don’t seem to be using that information. Like, isn’t that information out there? Isn’t the data out there from all those smart meters?

Quinn Nakayama: I would say yes and no. I would say a lot of the smart meters that are out there are your, what I would consider your flip phone type of smart meters, right? And so you wanna browse the internet on a flip phone, good luck with that. I remember back in my day when I was doing this, I could play Snake maybe, if you were lucky. Right? These AMI 1.0 meters basically read your meter.

Some of them might read voltages. Some of them might send that back. It really just depends on where you are on that journey. And to be able to go to an AMI 2.0, which is exactly your smartphone built into a smart meter, I think that you have those type of capabilities. PG&E does, for example. We are rolling out AMI 2.0 that really measures voltage at a second layer, 32 kilohertz type of resolution, and enables you to build apps onto that. But name me how many utilities have wide scale rollout of AMI 2.0, and I can count them on my hand.

David Roberts: Mm.

Quinn Nakayama: So, you know, you can’t program a flip phone to run massive apps that enable you to do all the things that you wanna do and you’re talking about on your podcast, Dave, until you get to that related infrastructure. I’m sorry, Hanna, I know I cut you off from-

Hanna Grene: No, it’s all good. I’m gonna come back to this. But it’s-

David Roberts: Yeah, Hanna, we interrupted, but how much of that data layer that you’re talking about here, you got two more on your list, but that data layer that you’re talking about, how much of that, in your experience, do they have that data to work with?

Hanna Grene: I sort of laughed when you said the AMI work we did a few years ago. AMI 1.0 rollout was like 22 years ago now.

David Roberts: Yeah, it’s all a blur. It’s all a blur. So,

Hanna Grene: you know, to Quinn’s point, it’s like, it’s time for the refresh, and the new meters are totally, totally different capability and very, very exciting to actually deliver more useful data in our low voltage networks and support customers. So we as an industry have more data than nearly any other peer industry. I think healthcare might hit higher than us.

David Roberts: Mm-hmm.

Hanna Grene: But we throw off so much data, this phenomenally engineered system that we all get to be a part of in the grid is the richest data resource. Our opportunity is to put it to work, and-

David Roberts: Mm.

Hanna Grene: this is really the, the gift that AI is gonna be able to give us in energy, is there’s not a utility out there that necessarily needs more data, but do we have that data in a clean and usable format? AI helps with that too.

David Roberts: Mm-hmm.

Hanna Grene: And then are we able to turn data into insights? If you go into any control room anywhere, you’re drowning in alarms, you’re drowning in data, but-

David Roberts: Mm.

Hanna Grene: you know, is that data usable? Is it insightful? Does it help you act? That’s a different proposition. So I think that’s really the opportunity in front of us. But yeah, do you have that digital spine? Is your data useful? Do you have a clear point of view on what you’re migrating and modernizing, and have you integrated AI into that vision? That, that’s the step one. The step two piece, to get through these quickly, the step two piece is people. The technology capabilities we have at our fingertips now are truly, truly incredible, and they can lift up and enable our industry to do more, faster, more affordably, which is the moderately crazy mandate we’ve been handed, right?

To go out and in some cases, some companies are talking about tripling the size of their generation capabilities in a very short number of years. I don’t waste a single second worrying about us losing jobs in energy. I spend a lot more time thinking about how do we empower people with this technology to do more in the really difficult and fun and fast-moving jobs that they have right now.

So what that looks like functionally is have you rolled out the tools to your people? Have you trained your people in AI capabilities? I’ll pick on Copilot ‘cause that’s what I live and work with. Have you skilled people up and, you know, given them the time and the capability to learn and to get familiar with tools like AI?

And then are you supporting it as a strategy? And some of that comes from tone at the top, from the executive level. Some of it comes from managers and team leaders who create space and have the mandate and the culture around them to be able to bring their team together and say, “Well, actually, how would we completely reinvent our residential interconnect process now that we have these tools? So are you creating those spaces, and do you have that culture?

David Roberts: Let me ask about this. There’s sort of giving tools to the teams and organization as currently constituted, but how much of this, the internal sort of the org chart, you know what I mean? Like, how much of this-

Hanna Grene: Yeah.

David Roberts: is how utilities are organized? Do they need to rethink the buckets or rethink the teams themselves? How much are they internally organized to innovate, I guess it would be the question.

Hanna Grene: I’d love to hear from Quinn’s perspective on this as well, but I will just say we at Microsoft, we already talk about org chart versus work chart.

David Roberts: Hmm.

Hanna Grene: And there’s a big difference between the people who report to me and the people that I and my team partner with on projects. And I think I sit at a big tech company, it’s not a utility, but I think you’re gonna see that more and more and more and more, and already in some companies, in energy you already are. Do you bring the right people together across disciplines to sit in a room and solve a problem, one team, one problem, one focus, versus sort of spend time in silos? In order to integrate technology and use AI effectively in an organization, you have to be cross-functional, so I think we’re gonna see this shift. But Quinn, are you already seeing it today?

Quinn Nakayama: Yeah, I would say structure is just a small piece of the overall issue for innovating quickly. You know-

David Roberts: Hmm.

Quinn Nakayama: there’s a couple of things that I think about. You need five things, or at least four things predominantly to make innovation work, the fifth thing being given. The first one is strategy. So let me go through the five. You need to have strategy, structure, people, process, and technology. If you don’t have those five things lined up, things are never gonna work. The strategy is usually the top-level strategy of the company or the utility that you’re talking with. Do you have the right KPIs at the very top that you can then attach your innovation to and saying, “We’re gonna make a difference on the following KPIs and move it from this to this”? And that is the-

David Roberts: What are KPIs, Quinn?

Quinn Nakayama: Key Performance Indicators. So, like, whether it’s your reliability Key Performance Indicator, whether it’s your affordability Key Performance Indicator, whatever it might be. You have maybe, like, a three to five-year trajectory that’s set at the very top of the company that says, “We’re looking to target between now and 2030 the following trajectory of our top-level metrics, and that’s our strategy.”

So if you can attach your innovation to those top-level metrics, you’ll have a more chance of succeeding because it’s really, really important to the company. And if it’s really important to the company, people will pay attention and they’ll invest. The second portion is what you’re talking about, Dave, which is your structure. Are you structured correctly to be able to take technology and roll it out quickly? There’s a question regarding whether you go centralized versus decentralized, and what’s the best way to do that, and we can spend a whole podcast arguing about organizational structure on centralized, decentralized.

You have Skunk Works. That’s the epitome of the examples of a centralized R&D, and then you have companies that just leave it up to their functional areas and do what you want. Hanna touched upon the people side. You know, I touched upon that a little bit on, like, what are the people that you have and how are they skilled to be able to adopt technology fast?

Then you just have process, and there’s actually a, there’s a process for innovation and product development. Venture companies use it all the time. Startups use it all the time. But, you know, a utility doesn’t have an innovation process.

David Roberts: You mean process just, like, iterating, assessing, et cetera, just a process for development?

Quinn Nakayama: You have the ideate, incubate, accelerate, and scale. There’s different words depending upon what consultant you talk to, right? They all brand it a little bit differently. But, like, you know, you wanna take all these ideas, you might have hundreds of them, and whittle it down to 10. Your no rate should be at least 90% or greater of every single idea that comes across your desk, ‘cause you don’t have the capacity to do all this related stuff.

David Roberts: Hmm.

Quinn Nakayama: Then you have the incubate process, where you really wanna get down to, what is this going to achieve for my business? Do I have an operating model? Do I have a business plan? Do I have the go-to-market strategy? These are all terms that a utility never really has to deal with, but if you’re a startup, you’re all about these three or four real big things. And unless you have that, you’re never gonna make it. The accelerate function is like, okay, I’m gonna take by quarter, what am I trying to achieve? And if it doesn’t hit those particular success metrics, we’re gonna fail it, and we’re just gonna move on to the next thing. Too many times do you sink too much time and effort into a technology, and then you burn away all this, like, people and capital, and it doesn’t work, and you should fail things fast, and you have very clear dictated ways to go through and accelerate.

And then scale, the scale portion is probably the hardest for utilities because every single functional area is, feels like they’re 30% to 50% underfunded. And so you’re gonna be asking them to take an additional haircut to be able to scale a technology. Like, if it doesn’t have a payoff within year, those VPs and those directors that are owning those budgets are not gonna give you more money to scale.

But if you can demonstrate that these technologies, through your accelerate phase, does pay off within year of a financial year, they’d be much more willing to fund it within their already constrained budgets that they feel like they don’t have. So, you know, you gotta have the process too. You can’t just deal with this on structure alone.

Hanna Grene: And I think kinda coming up a meta level, even on top of process, this is where I would land my number three on my like, you know, big three muscles that we see companies-

David Roberts: Mm-hmm.

Hanna Grene: exercising to effectively integrate innovation and digital technology. The third one for me is do you know how to build and use your ecosystem? And so your own internal process is part of that. This is a real skill set, and there are varying maturities of this across different companies in the industry. Do you know how to build and use your ecosystem? Do you know what you wanna buy that is not worth your time to innovate, it is not worth your time to rethink, you just wanna go buy it? Do you know what you wanna build? That is probably a pretty thin list-

David Roberts: Mm...

Hanna Grene: even though it is much, much, much easier to build new product and build new capability than ever before with AI. Writing code is no longer a problem. It’s really easy to build stuff. But what do you wanna be in charge of the care and feeding of long term, and what do you wanna own-

David Roberts: Mmm.

Hanna Grene: the enterprise scale behind? Enterprise scale is a very real skill set in development, and there’s a big difference between vibe coding something and rolling it out to 45,000 people-

David Roberts: Mm.

Hanna Grene: securely over time. And so what do you want to build, and then what do you wanna buy and build with? And I think this is the fastest changing part of the industry, and Quinn touched on it earlier too. What do you wanna look at the market and see and then build on top of? Some of that might be partnering with a company who has most of a solution, but I think even more it’s gonna be working with this is what my team does every day, so working with teams like mine to come in and build the capabilities that you need with AI to move you forward.

And that doesn’t mean you start from scratch. We have lots of blueprints. We have lots of capabilities. We work with a lot of partners. But do you have a core group of strategic partners who can innovate with you? They’re not just, you know, hawking you a $10,000 contract, but they understand intimately your strategy, and they’re part of your success team, and that’s a muscle.

David Roberts: Let me surface what might be a slight disagreement maybe between the two of you, or just flesh it out a little bit, ‘cause Quinn, one of the things you were saying, you said in an email to me, and I think you mentioned before, that when technologies get delivered to the utilities, they’re, like, 50 to 70% what the utility needs, and there’s that extra work of integrating them into the actual utility operations and flows.

You have said that utilities need to hire people to do that, who are good at that, engineers who are good at that final bit. But basically, like, Hanna’s business model at this point, I mean, I don’t know if she’d agree with this characterization, but it kinda seems like Microsoft is like, “Fine, we’ll do it.” You know, like, “If you won’t develop that internal expertise, just rent our engineers. They will come sit in your rooms and do that final 30% of development for you.”

Is there a tension between how much in-house expertise utilities need to develop on this stuff and how much they can rent from a partner like Microsoft, and is there any risk in renting from a partner that you get lock-in or if the vendor disappears or if something happens to the vendor, you’re, you’re bereft? Is there a tension there? Both of you.

Hanna Grene: Let me reframe a little bit first, ‘cause I wanna be clear on where I see the market need. You’re going to have a big, robust ecosystem of partners. Every utility does. A subset of them are gonna run your core systems. A subset of them are gonna be, you know, big technology platform providers who might sell you some core systems, but you also use a lot of their development tools.

I think we would sit in that space as Microsoft. And then there’s a subset of them that you’re gonna do innovation and, you know, create the future together work, and those aren’t mutually exclusive. You could have the same logos in the same buckets, but you’re gonna have different flavors of relationships. I don’t think any part of that ecosystem reduces the need for you to have a great set of in-house technology and innovation talent.

David Roberts: Mm.

Hanna Grene: So I don’t see them as duplicative. When my team gets to do what we get to do best, which is come in and develop with and accelerate with and partner with the utility, we are partnering with the phenomenal group of technology and innovation leaders on the other side of the fence.

Quinn Nakayama: Yeah.

Hanna Grene: And so it’s definitely not a replacement of, it’s high five and let’s go faster together.

Quinn Nakayama: Yeah, I don’t think Hanna and I are saying things that are actually conflicting with each other. Like when I talk about product development, I’m not saying that we are going to be doing all the build on our side, right? We don’t have that type of capability, and I don’t think we even are looking to do a significant amount of that related work, but we do have a lot of subject matter expertise when it comes to our engineering and how we do planning and how do we do construction and all that other type of stuff. We also have a all of our data.

So it’s about, like, working with a vendor partner to utilize all that subject matter expertise and data to be able to product develop their product so it gets it to 100%. And I think Hanna and I are saying the same things here. Here’s what I would tell you, though, is that this whole build by partner thing, you just have to be careful in the fact that, like, I can hear my CIO and CIOs across the entire country out there saying, like, “If you start to have a thousand applications that you’re working with on all these related startups, you have data flying everywhere.”

David Roberts: Yeah.

Quinn Nakayama: You have all these APIs that you need to maintain.

David Roberts: Yes.

Quinn Nakayama: And, like, the cost structure just becomes insurmountable. And so we have to weigh, do I wanna work with a startup or even a small technology company, versus do I wanna build this with the partners that I already have, the big partners like Schneider, SAP, Oracle, you know, and build it through there? Or is there, like, a matchmaking opportunity where these big companies can then do the B2B, right, the business to business transaction between them and a small startup, so that I don’t have to take all the integration risk, and they can create it like a module? Again, that might even be a strategy for a lot of these startups.

So some of this is us playing like a matchmaker related, and Microsoft does this really well, of trying to say, “Hey, listen, you know, these big utilities, they use these massive systems that they’ve invested a ton of money for. Instead of trying to go to them directly, maybe it might make sense if you try to work with them through GE Vernova, or work with them through Schneider, or work with them through SAP or Oracle. You might have a better chance of success.” And so that’s the balance.

David Roberts: Well, in addition to the sprawl and the budget sprawl, presumably there’s security questions, too. I mean, everybody-

Hanna Grene: Yes.

David Roberts: you know, is always mocking utilities for being so slow, but there’s a reason they’re slow, is that there’s a lot at stake, and they don’t have a lot, of a very big margin for error. And the more interfaces you open up, the more APIs you have, the more kind of things you have going on, the more attack surfaces you have, the more errors are possible, et cetera, et cetera.

Hanna Grene: Dave, I wanna punctuate this because it’s even more, We’ve always talked about attack surface area and endpoints and APIs, and then that’s all still true, but it’s the velocity of this has changed with AI. And there is a business model out there where you give company X a bunch of your data and they ship you back AI-driven insights on it.

And that is data leakage. That is not just your IP leaking, that’s not just your PII leaking, but that is a security risk. And I see this in a few different forms in companies a lot. The first is, this comes back to my people point, if you have not enabled your people with AI tools within your governed enterprise data environment, your people are super smart, and they’re gonna go use the best tools out there to get their job done. And we have a ton of survey data on this, and the number of people using AI at work keeps going up. The number of people using unsanctioned AI at work is, like, stayed the same because people are doing it. And so you do-

David Roberts: Well, this is a nightmare when you think about utilities. If you’re building a widget, but if you’re running a grid and your people are using LLMs on the side without telling you. That just gives me chills.

Hanna Grene: You’ve gotta give your people the structured enterprise environments and the training so that they can be successful with AI. And, you know, just one more point on this, and I wanna come back to the cybersecurity piece. I sort of feel like the way we’ve rolled out, some companies have rolled out AI tooling, where they’re like, “We’re a 40,000-person company, but we’ll give it to 200 people.” It would be like if you gave email to HR and legal- and a couple of people in C-suite, and you were like, “Let’s test the efficacy of email.” Like, it’s just not the right way to do this.

And so democratize the access to the AI tools, train people, set them up for success so that you don’t have this data leakage, and so that you get the broader benefits of people using this technology inside your company. But the other part of it is we talk about it as people paying twice. You’ve paid a company to give you some insight or capability back, but you’ve also paid them with your data.

David Roberts: Mm.

Hanna Grene: And this carries a cybersecurity risk, it carries IP risk, it carries legal risk. And so where we really want to encourage companies to think about, you know, building in protected enterprise environments. Like, your data is your data, is your data. Let me shout it again from the rooftops. Your data is your data. Like, we don’t backhaul it for our AI models. You know, we think you should be very critical of companies that do.

And so, you know, then you come back to this premise of do I have the right companies in the boat with me to go on this hyper-accelerated journey that I need to go on over the next three years to do things that we’ve never done at this speed and scale in this industry before? And that’s where, you know, it comes to do you have the smaller set of close partners who understand your strategy, can run with you, and can innovate alongside you and add those capabilities to you?

Quinn Nakayama: Yeah, I would say, like, I’m not trying to... Well, let’s say I’m not gonna defend the slowness of innovations adopting technology by any means. I will say that we do need to be faster. We do need to come with a product mindset. We do need to have, like, utilities need to start thinking about whether they need to have a chief technology officer to sit aside, to sit besides a chief information officer. Like, these are things that I think utilities need to think about. But the higher that you go on the innovation scale of your system, the larger your risks are. So-

David Roberts: Yeah...

Quinn Nakayama: as we innovate on, like, data centers and transmission, I’m not talking about 4,000 people losing power. I’m now talking about 300,000 people losing power. And so I can’t just be like, “Well Dave Roberts or these other podcasters are telling me that I’m not innovating fast enough. And so therefore, it’s their fault that I had this 300,000 customer outage because, you know, this technology didn’t do exactly what we need it to do.

And so I would say that, yes, we do need to innovate faster, but you’re right, there are risks involved with as we move higher up the energy supply chain, right? Or the energy transmission chain, the amount of risks that we carry that if we get this wrong could result in massive number of customers outages, and not to say that’s the reason why we shouldn’t do some things, but it’s just something just to consider as we’re going through how fast we can adopt these technologies and ensuring that those risks don’t happen as we adopt those technologies.

Hanna Grene: Totally, and I think for me, one of the mindsets that I, um, being at a tech company for the last five years and going through and living through AI projects the way we are right now, I think we’re gonna see some more shift on that process front that Quinn talked about. Traditionally, you know, as an industry, we will, like, plan a project for two years. You know, it’s sort of a planning phase, and then you get this hard ramp when you go into deployment phase, and then there’s a run rate phase and, you know, if you were plotting it on a chart-

David Roberts: Well, Hanna, you told me in an email, you said that these sort of, like, product development cycles at utilities, this is something that was kind of a revelation to you, are, like, five to seven years, and you just back that out and do that math, and you’re like, “If it’s five to seven years for everything, we’re doomed. We’re never gonna get there as fast as we need to get.” So I’m, I was wanting to ask you, like, what is going on during those five to seven years? As you say, at this point, you can build these AI tools and agentic systems and whatever, you know, on, like, months cycles. What is taking up those five to seven years? What is taking so long?

Hanna Grene: Well, we’re living in between, you know, a bridge between two worlds. And the world we’re coming from are these sort of big chunky core system implementations where, you know, if you were to chart it on a something that was like a graph, they would look like big blocks, right? That you were standing up a big block, running a big block, ramping down a big block, starting a new big block. And where we’re seeing this shift with AI, it’s going to look a lot more like a bunch of little loops.

David Roberts: Hmm.

Hanna Grene: Because the market is moving really fast, the capabilities are moving very fast. Future that I’m seeing is every company is gonna use multiple AI models. You need that strong data foundation, but you’re gonna use different AI models to do different things. You continue to need those strong systems at the base, but you’re gonna have different agents in different parts of your company, and so you need visibility into those agents. You need a very clear control plane to be able to see how people are using AI within your enterprise.

And then more and more for, you know, big things you do, meter to cash, like supply chain ordering, like interconnection, like planning, you are gonna have these more agentic systems that integrate AI into different parts of a big chunky process. But instead of that being a monolith of one big project that you undertake, you’re gonna be building and iterating, and building and iterating in a much faster manner. And that’s just the nature of how the technology is changing and how much easier it is to build and adapt with AI technology.

And so Agile has so much pre-existing culture around it as a software development capability, so I struggle not to use Agile. But the the activity will require more agility. And this interesting and extremely important intersection is gonna be how do you balance between that rigor and that safety culture that is essential to everything we do in energy, period, and the recognition that technology is moving a lot faster. And developing the process between the two is, I think, where a lot of the really productive and interesting work is happening right now.

David Roberts: I can tell you right now that there are listeners out there listening to you talk about integrating AI into this system and that system quickly, and just the hairs on their arms are going up. You know, a lot of people have a lot of leeriness about AI. You know, some of it informed, some of it not, but, like-

Hanna Grene: It’s true

David Roberts: there’s a lot of fright out there, and the idea of just rapidly integrating it into infrastructure I’m sure just makes a lot of people extremely nervous inside and outside of utilities.

Hanna Grene: Well, and that’s an important point to make. This is always a good point to remind everybody that our industry’s been using AI for 20 years. I think the part that’s rapid is the speed that the technology is evolving, not necessarily the speed that you’re integrating it into core infrastructure. So that’s the important part. It’s how do we as an industry stay up to breast and stay current with this technology that’s evolving?

How do we get the best from it? And then how do we very thoughtfully integrate it into the parts of our business where it makes sense? Companies have moved very quickly in some spaces, using it to improve customer experience, using it to improve things like billing, supply chain, safety for field workers. But you know, there will be more a methodology and a higher standard for anything that’s about core infrastructure and core operations.

And I should say, too, you know, my personal perspective, but the perspective of the team that I’m a part of, is human-led. And so you are using AI in cases to augment human capacity, to support automation of a process with human oversight, but we are very much AI-enabled, human-led operator-led, and I do think that’s an important distinction.

Quinn Nakayama: Yeah, and I think this is really important. Like, understands false positives, false negatives, and hallucinations so that they can find and catch those and identify those and feed those back into the system to make it smarter. But having automated decision-making is a whole nother ball of wax.

David Roberts: Yeah, you want somebody accountable at the end of the, especially on infrastructure.

Quinn Nakayama: That’s right. And-

David Roberts: If something goes wrong, you want a human accountable.

Quinn Nakayama: Yeah, and there’s like, for example, if you start to do AI-informed asset health ‘cause you have all these sensors out there, and they’re telling you, you know, how the pole’s doing or how the wires are doing, and if you have a whole bunch of false positives, your maintenance program is gonna be underwater. If you have a whole bunch of false negatives, you’re not aware of potential asset failures that may be occurring.

So having that type of human in the loop, taking a look at how that AI matures is gonna be really important. Now, one day, you may find yourself in a position where that type of dynamic doesn’t require human in the loop because the technology has matured, but I think you can’t just start there. You have to always have that type of human in the loop, make sure that it’s running, not hallucinating, not creating that positive negative value, and then just continue feeding it until it gets to that position.

And you’re right, Dave, the higher you go, the more consequences there are, the more careful you need to be, and that may lead to what may be considered slowness from the utility’s perspective on adopting some of these technologies.

Hanna Grene: And this is an area I spent some time recently with EPRI, which of course plays a big role in disseminating innovation out across our industry globally and helping us innovate together.

David Roberts: This is the utility trade group.

Hanna Grene: Yes, I, you know, I think of them as a lab for the industry. You know, less of a trade group, more of an innovation center that helps disseminate and hold R&D for our global industry, the Electric Power Research Institute. And something that we’ve sponsored and have been an early supporter to is what they announced just this week with SAFERai.power.

This is an initiative to actually work through AI use cases that might be more sensitive and to help drive some industry consensus on how you’d approach them, how you’d apply, you know, well thought out. We’ve been doing responsible AI work at Microsoft for over 10 years, and so, you know, just as one example, like how do you take things that companies have been doing for a long time to de-risk and be very thoughtful about where you use AI, and then build on top of them for the very specific critical infrastructure needs of our industry so that we’re not all having to individually make those calls as companies and as leaders.

David Roberts: Mm.

Hanna Grene: But you could go to a framework and say, you know, “This would be the way that I, the methodology by which I would assess this risk, and also the risk that it’s been assessed, and here’s how I can think about it.” So, you know, this is an area where the beauty of our industry and how we share and how we collaborate allows us to partner up and work together so that you don’t have to think about these things alone in a box.

Quinn Nakayama: I wanna double down on that. Like, Dave, one of the things that you’ll hear is the sales cycle in a utility is super long, and it crushes some of these startups, right? Like, or crushes some of these companies. It’s like, all right, even if I work with a utility, it’s like a three-year sales cycle, and then I get one utility, and then I get-

David Roberts: Yeah.

Quinn Nakayama: you know, I have to go to another utility, and the sales cycle is three to five years, and it’s just super slow. I think, you know, organizations like EPRI could be really helpful in doing, you know, I love the concept of advanced market commitments. Like, there could be a king maker-

David Roberts: Yeah.

Quinn Nakayama: out there. Like PG&E for example, we have to innovate on things like wildfire faster than the rest of the utilities, or maybe it’s drone-related technologies, or maybe it’s computer vision. Either way, whatever it might be.

David Roberts: Well, on all of these things, I mean, one of the big problems is that none of the utilities want to be the first to go, well, or even the second to go, really. All the utilities want to be the third to go. All the utilities want someone else to do the first thing. But, like, somebody’s got to do the first thing.

Quinn Nakayama: Right. And so let’s say PG&E is gonna be the first one, right? Just because in the West Coast you have wildfires, you have electrification, you have data centers, you have all this type of stuff all happening at the same time. Fine. We’ll be the kingmaker. That’s fine. What we would love to do is work with an organization like EPRI, as an example, and say, “Okay, fine. If I build it, can you do an advanced market commitment with seven different other utilities? And if we build it, they buy it too.” They’ll put up, let’s say, $10 million. I don’t know.

We’ll just throw that out there as a rough number of sales that says, “Hey, if PG&E can build it, builds it to these specifications, can prove that it works on their system and requires very minimal adjustments on theirs, yeah, I’ll buy $10 million year one.” You put, I don’t know, seven, 10 utilities together for that, you get a 70 million to 100 million dollar type of advanced market commitment. Sure, maybe it’s non-binding.

Fine. But, like, it sends a signal to the VCs out there, it sends a signal to any of the investor community out there, and they’re like, “Oh, well, you already have seven to 10 customers already lined up after the kingmaker does whatever they need to do to product develop into this space with their subject matter experts, with their data, and now there’s seven to 10 utilities waiting to just buy this once it gets done.” Like, there’s a lot of value there. There’s a value for the startup, and there’s a value for the VC community that gets that direction.

If we’re gonna be the kingmaker or the first mover in some of these technologies, then we want some of that value too, whether it’s, like, really low cost and a procurement agreement for the next five years. Maybe we’ll do a warrant. Maybe, you know, there’s other things that we can think about from a joint IP. There has to be something in it for us to be the kingmaker.

But if we can figure out how to create, you know, these type of coalitions of utilities together to say, “Hey, listen, we’ll let Duke, or we’ll let, you know, some of these other East Coast utilities be the kingmaker on maybe some technologies on transmission because they went first on data centers. We’ll do drones and wildfire-related technologies and computer vision, and this other utility over here will do, be the kingmaker on something else,” we could probably create really strong signals to the market that enables even faster product development happening on some of these type of technology companies, which would be really cool.

David Roberts: Well, quickly, we’re running out of time, and there’s a couple of key questions left I wanted to ask, and this gets at one of them, which is one of the things that we’ve not really talked about yet is funding. It’s just money. You know, utilities need to spend on this stuff. And as you know, Volts listeners know, the way utilities spend and make money is rather peculiar. A lot of this, I think R&D stuff gets put in the operations and management budget.

Then you need a rate case to make the money back. There are some utilities that are innovating in ways of putting stable pots of money aside to devote to these faster cycle innovation cycles. Quinn, how, how much is just the way utility budgets are structured in the way here, and what are some ways they can just spend better?

Quinn Nakayama: Yeah. I would say that a lot of this is talk to some of my peers and those, and they’re using the little tin can, and they’re going out everywhere trying to get small dollars from everywhere, and that’s the best they can do, and that really stifles innovation within their organization. I would say that California has been unique, right? We have something called EPIC, which is the Electric Program Investment Charge. It appears on your bill as a public purpose program, but if you were to dive underneath that, it has really enabled utilities in California to invest in R&D.

That has been a commission-led effort to say, to your point, commission utilities aren’t investing in R&D and innovation, so we’re just gonna force them to do so by forcing them to gather money, allocating it only for this related purpose under these type of priorities that the commission dictates. You go do the innovation and you de-risk these technologies.

And so since 2011, we’ve had four cycles of this. We’re about to go into our fifth cycle, and that has been the real catalyst for California utilities to innovate. Like, the biggest thing for us is we have to demonstrate its value. So if I can demonstrate that there is a per kilowatt hour cent reduction on customers’ bills as we think about the savings that are attributed to, you know, hey, if I get $50 million, can I turn it into $150, $200 million worth of savings? Like, that’s a pretty good, you know, worthwhile investment.

And so as long as you’re able to prove that and you’re not just working on things to work on things and doing research projects to write white papers, as long as it’s applied innovation that’s gonna move the needle, especially in areas of affordability these days-

David Roberts: Yeah.

Quinn Nakayama: which is like PG&E’s real sole view, right? How do we get our rates more affordable? And as long as you can show that type of payoff, then these type of R&D efforts that a commission can stand up and give to their utilities as a mechanism enables them to achieve some of the objectives that they might have as a regulator in their system.

David Roberts: California is somewhat unique in that, though. Hanna, do you find that a barrier when you’re working with utilities, just the pots of money that they have to draw from and the way money is allocated? Are you able to find funding for what you need?

Hanna Grene: Two pieces on this. The first is that a lot of the utility ratemaking mechanism is about CapEx versus OpEx, and I do think we are in-

David Roberts: Yes

Hanna Grene: it’s really important, certainly not just because of AI, but because of how we started this conversation with GETs and digital grid infrastructure, we actually need to reframe a lot of this investment in terms of digital infrastructure. Infrastructure is no longer- the best spend of a capital dollar may not be a pole or a wire or a sensor.

David Roberts: Yes.

Hanna Grene: It may be the digital infrastructure that enables that greater affordability and that greater customer outcome. And so I do think that there’s much more maturity in the market of that understanding now than there was five years ago. I’ve seen that evolution, but that’s really, really important for us to just recognize that software broadly is a massive component to how we’re going to optimize this grid and how we’re going to accelerate capital delivery and deliver it affordably, and we all need to get our heads adjusted to the idea of spending more on digital and about it being digital infrastructure.

That’s one piece. I think the other piece, and this comes back to where we started the conversation. When you start to sort of go like, “Well, R&D is a nice to have. Innovation is a nice to have. Technology is something that IT does for us over there in IT.” Those are traps.

David Roberts: Mm-hmm.

Hanna Grene: And I think the evolution I really wanna encourage us to think about broadly, all of us in energy, is to think about how technology is more and more and more, and certainly AI unleashes this, it is a tool for how you are going to deliver the future of your business across your people and attracting and retaining and growing talent, across your core strategy and how you deliver it into the market and for your communities, and in how you have, you know, a secure, healthy ecosystem across your hardware, your software, and the infrastructure that you operate.

And so technology must, and innovation therefore must be embedded in your core strategy. It can’t be a nice to have. It can’t be a bolt-on. And as wonderful as it is that we have these innovation and R&D funds in California, like you can’t wait for that cavalry to show up in your state. It needs to become a muscle and become part of how you deliver against your metrics.

David Roberts: Well, this brings me to my final question. Quinn, maybe this is where you’re going, but this is probably the question that my listeners have been waiting for me to ask this whole hour, which is, if the utility spends a capital dollar on a pole and a wire, they spend a large chunk of money, and they get a guaranteed rate of return on it, they make money that way. Whereas if you come in with some digital solution and you say, “Here’s a super cheap software-based solution that can help you avoid the need for that pole and that wire. Look, you can save money,” a normal business would be like, “Oh, good. I get to save money.”

But a utility business, if they save that money, makes less money. You know, this is something we come back to again and again and again on this pod. The utility wants to spend money. That’s how they make money. And almost everything we’re talking about under the heading of innovation is, one way or another, something that avoids the need to spend a bunch of CapEx on big infrastructure, i.e. something that is going to reduce an investor-owned utility’s profits.

And I just don’t know, it just seems to me like the very basic business model we’re talking about here, the very basic regulatory structure of these utilities is working against innovation almost intrinsically. How do you get around that? I guess is my question. Like, how do you work around that very basic mismatch of incentives?

Quinn Nakayama: I would say there’s a couple of things here. One is that used to be the case, and I would say that, well, if you take a look at a lot of the utilities that had 0 to 2% flat growth in their utility sector, and they weren’t building a lot of infrastructure, and all of them would be like, “Yeah, let’s do more capital. We need to figure out how to get our rate of return.” That may have been the case in a lot of utilities in the past.

Now, all these utilities, including ourselves, are like, “We need to get rid of some of this capital ‘cause we can’t spend it all without really ballooning rates.” Like, if there are ways that we can defer capital spend, if there are ways that we can have alternative ways.

David Roberts: It may be in California, Quinn, but look out at the country. Like, I see utility executives just, like, drunk on this. They’re like, “Heck yeah. Like, you want us to build a lot? We’re gonna build all we can build. We’re super excited to spend CapEx. We’re super to spend more and more.” Like, And I’m not sure that the political blowback has fully reached them yet, or, like, changed their mindset yet.

Quinn Nakayama: I would say there was a swing where all of these data centers happened very quickly that caused all this infrastructure to build, that be built out, that then caused this lag on the generation side. And, you know, more broadly, it was just, it just happened a lot faster than a lot of folks could react to. But if you think that this whole politics on raising rates and the blowout that’s happening on rates side isn’t on the top of executives’ minds across the entire nation, I think that’s just not true.

And I think the reason why is that, listen, you know, utilities actually don’t want legislation coming into their area. I don’t think that they actually, utilities writ large, because you have everybody commenting into areas that maybe people are not as well informed into. And the utility space is very complicated. It’s an engineering nightmare. It’s, you gotta think about protection, you gotta think about a whole bunch of other type of things.

And so I would say that most utilities out there, most utility executives are very concerned about customer affordability. They just need to figure out how exactly do they incorporate all of this AI data center-related large growth that’s happening super fast without coming across as being obstructionist toward that growth, and at the same time figuring out how to do this with less capital. I feel like, you know, that pendulum is vastly swinging the other direction now.

David Roberts: Hmm.

Quinn Nakayama: We have way too much capital everywhere. And wildfire, by the way, is not just a California problem. I don’t know if you’ve seen, but there’s wildfires happening everywhere.

David Roberts: Yes, I noticed.

Quinn Nakayama: So, like, hardening infrastructure for capital, everybody’s gonna be coming out of their ears with capital. Now it’s gonna be about how do you do, how do you meet these objectives that you have on these really big ambitions that the state has on load growth, the state might have on wildfire-related risk or whatever other catastrophes that they’re having with the changed climate that’s already out there, and then trying to do all of that with less money because the rate blowback is just gonna be too big. I think that in order for us to do this effectively, though I think we need to figure out how to take some of these O&M-related expenses-

David Roberts: Operation and management.

Quinn Nakayama: operation and management-related expenses and figure out how to peanut butter them a little bit more across a broader range of time, which smells like capital, but what I’m just trying to say is that when you have an operations and maintenance-related expense, it hits the ratepayer the next year, right?

David Roberts: Yeah.

Quinn Nakayama: A capital project that’s $300 million that’s spread over 40 years hits the ratepayer much less over a long period of time. That’s why I think even in a utility such as California, we don’t want a lot of O&M expenses on our books just because next year that’s gonna hit your rates. And a capital project can spend a lot more money, but hit the ratepayers very fractionally as ratemaking occurs in all of our areas. So that’s just something to consider. It doesn’t really necessarily have to do with a rate of return.

David Roberts: Hanna, how about you? Are you finding the utility, the basic incentive structures of utilities a barrier at all? Because you are selling solutions that reduce capital spending ultimately. Like, is that a problem for you?

Hanna Grene: It depends. I think depending on the management, the leadership, what part of the world we’re talking about, there are certainly leadership teams that have had the aha moment and said, “If I’m buying software to help me run the grid, it is digital infrastructure, not IT back office.” And so for me, I think I would encourage folks to think more about the evolution of we’re using technology to run a lot more of the core systems of how power and utilities companies deliver power to communities. And so technology is a lot, lot more on the CapEx side of the equation.

David Roberts: Hmm.

Hanna Grene: Technology’s playing a bigger role. Period. And that expands the tent beyond just an internal IT function, much more into a critical system that helps operate at all parts of the value chain. And so I do think when you click into that mindset and you’re like, whether it’s digital controls or AI or sensor that we’re pulling AI on top of, technology is gonna be a bigger and bigger and bigger part of how we optimize, how we operate, and how we do this with the resilience and safety that we need to deliver on as an industry.

And so if you accept that, and challenge you to find somebody who doesn’t see that as the road we’re all going down, we need to start thinking about software and AI as part of that core delivery and as part of that capital side of the equation. I’m an optimist. I think optimism helps you jump out of bed in the morning and go do hard things, and I love this industry, and I am an optimist about it.

And I have a lot more conversations about how we’re gonna use technology to support affordability and to help restore power faster from a storm, how we’re going to prevent the spread of a spark and identify fires before they spread, about how we’re gonna maintain affordability over the long run. I have a lot more conversations about how we use technology for that than I seen folks move pennies around.

It’s not to say it doesn’t happen, but we’ve got a lot to do in this industry, and I think the focus is on how we get it done.

David Roberts: All right, Quinn, any final words, any final advice to utility executives out there before we wrap this up on how to innovate faster and better?

Quinn Nakayama: Yeah. I wanted to reiterate what Hanna said earlier around, you have these ambitions that utilities have that will show itself up into the top-level metrics of how they are judging their performance over a multiple spans of years, and you’re gonna have gaps to those targets where, you know, a CEO or chief operating officer or the board of directors may say, “Okay, well, here’s your targets for the next five years.” And when you take a look at your budgets to be able to execute that, they just won’t be large enough to be able to hit some of those metrics, and so you’re gonna have gaps to targets. Great.

That is where innovation and technology lives, and that creates a beautiful conversation with all of the executives within your company. If you have this big gap to target, innovation and technology let us do the projects and the innovation required to be able to bridge that gap. And they’ll be very interested in that because, you know, they are looking at their targets that may be red or they may be amber for the next three years, and they’re scratching their heads and thinking, “Well, how do I do this by process alone?” And the answer is, well, technology is going to be the new process for you, so let us come in and let us do our thing.

Let us use our product development capabilities, let us use, you know, our startup mentality, our VC mentality, our venture process to be able to do this for you, and we can do it very fast. Let’s not do this in 5 to 7 years. Let’s do this in a year, less than a year. Can we come to market and get these really, really important areas for your business to be go back to green?

I think that’s where the beautiful internal partnerships can be had in creating a product development mentality and a chief technology type of capability within each one of the utilities. So that’s what I would say.

David Roberts: All right, Hanna, any final words?

Hanna Grene: If you own a process in your company and you aren’t stepping back and saying, “How would I totally rethink this considering the world has moved in three years since the launch of AI?” If you aren’t stepping back, and I mean, for me, this is so fun. It’s really an invitation. Engage with the smart people in your team, get in a room, grab a whiteboard, and think about how you would fundamentally rethink and re-run the part of the business that you operate. Because what we can do today, what is at our fingertips with AI, with the ecosystem of partners, it has changed really, really quickly, and that makes it exciting. So get creative and think about what you could do.

David Roberts: All right, well, we’ll wrap it there. We could talk about this forever. It is a hot topic, I’m sure, and will remain so for many years to come. So thank you two for coming on and sharing your perspectives.

Quinn Nakayama: Thank you. Appreciate it.

Hanna Grene: Thank you.

In the early 2000s, Ramón Méndez Galain was a particle physicist teaching at the Universidad de la República in Montevideo, Uruguay. At the time, the country was in a bit of an energy crisis — its plentiful hydropower was plagued by droughts, imported oil was $150 a barrel, and there were rolling blackouts — so it was considering building a nuclear power plant.

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Galain took a look at the proposal and concluded it was the wrong way to go — that renewables were a better option for the country. He wrote a proposal to that effect. The country’s president, Tabaré Vázquez, heard about the proposal and called him to offer him the job of energy secretary.

Galain took the job, and over the next seven years, Uruguay became one of the first countries in the world to almost completely decarbonize its power system, regularly running on 98 or 99% clean electricity. What’s more, the country retained public ownership of its power utility and its grid, while private capital funded the changes — something the big institutions like IMF and the World Bank predicted could not be done.

Galain went on to become Uruguay’s national director of climate change and its chief negotiator for the Paris Agreement before founding Asociación Ivy, a nonprofit that advises governments in the global south on how to redesign their electricity systems. Until recently, Ivy was working with one country at a time on a project-by-project basis, but in September 2025, Galain won a $4 million Climate Breakthrough award, which will allow Ivy to spread out and work with many countries simultaneously. His stated ambition is to reach at least 50 countries by 2035 and avoid on the order of two gigatons of emissions.

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It’s difficult to find another single individual who has had a greater influence on the spread of clean energy in the global south, so, I can’t wait to talk to him about Uruguay’s experience, what does and doesn’t transfer to other countries, how he tries to frame and sell decarbonization to other governments, and the role the global south plays in the larger decarbonization fight.

Chapters

• 00:00 – Introduction

• 03:09 – From particle physics to a nuclear proposal

• 05:46 – Taking the job as energy secretary

• 07:00 – The 2008 crisis: drought, expensive oil, blackouts

• 09:26 – Getting every party to sign the same plan

• 12:51 – Why climate was not the lead argument

• 15:42 – Attracting private capital without privatizing

• 20:22 – What a public utility made possible

• 23:06 – Planning a grid where wind and solar are the base load

• 29:26 – Thermal plants as insurance, and the last 2 percent

• 32:36 – EVs, smart meters, and building an electrostate

• 37:33 – Why bills fell less than generation costs

• 39:46 – What transfers to other countries

• 44:15 – Optimum curtailment, Colombia, and Haiti

• 50:51 – The political work, and the argument against the dominant narrative

• 56:36 – The Global South and the NDC as development catalyst

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Ramón Méndez Galain (Ivy profile - Climate Breakthrough)

  • Ivy (Website)

• International Monetary Fund - Energy Subsidies

Company & Industry News

• Ivy - Climate Breakthrough Award 2025

• Ramón Méndez Galain elected REN21 President

• Uruguay’s Solar Decade: UTE’s Big Plan and EV Boom Explained

• Uruguay EV Sales Report: BEVs Surpass 40% Share

Related Volts Episodes

• Time to stop taking hydropower for granted?

• What’s going on with hydropower?

• EV charging for those without a garage

• What’s going on in electricity world?

Text Transcript

David Roberts: All right then. With no further ado, Ramón Méndez Galain, welcome to Volts. Thank you so much for coming.

Ramon Galain: Thank you so much for inviting me, David. It’s a big pleasure to be with you and with your audience.

David Roberts: Awesome. So let’s start with a story I’m sure at this point you’ve told a million times, but I thought, I’m guessing most of my listeners are not familiar with it. You were a professor teaching back in 2008. Tell us the story of how this sort of proposal for a nuclear plant came across your desk and kind of what happened next, how you ended up where you ended up.

Ramon Galain: Hmm. It’s a fantastic story, in fact, that yes, I told it many times, but every time I remember that and I’m really excited about what happened. I never imagined, you know, 20 years ago that I was going to be in the position I am right now. I never imagined that in life. Yes, I was just a university professor, a researcher, in fact, working in particle physics, working in subject that are far, far away from real world, people life.

David Roberts: Mm-hmm.

Ramon Galain: Because I work in trying to understand what happened in the first microsecond of the universe after the Big Bang.

David Roberts: Yeah. Right.

Ramon Galain: So because at that time, at the early time, universe was completely different than the one we know today. So I was really trying to understand the physics with many other colleagues all over the world. And yes, as you were saying in the introduction, I was perhaps the closest thing as a nuclear engineer and something like that because we don’t have nuclear engineers in Uruguay. We don’t because we didn’t and we don’t have nuclear power plants. But at that time, this was the first years of this century, and it was a kind of reborning of the nuclear industry because-

David Roberts: Mm...

Ramon Galain: more than 20 years passed after Chernobyl, and a global understanding that in principle we have learned from the Chernobyl lessons. Now we were ready in order to increase the participation of nuclear power all over the world. So yes, it was many people in my country, the president himself, were thinking about the possibility of going to nuclear. And so as a university professor and somewhere close to the subject- I understand that I can have to contribute to the discussion.

So I began to study the issue, to bring into my country experts from abroad, expert from nuclear countries. And then I rapidly understood that it was not that simple, that there is just one solution that solves all problems that you can have in a power sector, in the energy sector.

David Roberts: Mm-hmm.

Ramon Galain: So that’s why I began a journey in trying to understand all the issues in which are involved in a power sector, in energy business. And so in a way, I concluded I make up with different conclusions

David Roberts: And so I wonder, I mean, you drew those different conclusions, and then the president responded by offering you the job of energy secretary, which I’m sure must have come as somewhat of a surprise. Were you-

Ramon Galain: Big surprise...

David Roberts: scared, nervous to make that leap?

Ramon Galain: Yeah. I did something that no one has the right to do, that I took 2 weeks thinking what the answer should be, but they waited for me. And after these 2 weeks, I understood that, yes, it was possible for me to leave the... You know, these, when you’re in the academy sector, everything is very simple. I mean, in the sense that-

David Roberts: Yes.

Ramon Galain: you can dress whatever you, which way you want, you have a lot of freedom, you can think whatever you want to think, you can mistake, and this is the role of a scientist, to mistake and to think that, to try to find where different options exist. But if I was going to enter into the policy framework and the political sector, that things were going to change a lot of, for me. But in fact, I believed in the proposal I have written, and I had this tremendous appetite, you know, to try- what could happen, and I eventually accepted.

David Roberts: Okay, so at the time, just to give listeners kind of a little bit of context, at the time, Uruguay had a bunch of hydropower, which, as I understand it, depending on sort of the weather and the year, could swing anywhere from something like 40% to, like, 60 or 70% of the year’s electricity.

And then the balance was provided by imported oil, oil-fired electricity, which is just about the most expensive kind you can have. And so you had this combination of a drought, which had your hydro very low, and then historically expensive oil at the time. People might remember back then there was a little bit of an oil crisis. And so this was a crisis situation, and I’m wondering did that sense of crisis, is that part of why you were successful? Why you were able to do the dramatic things you were doing? Like, what was the sort of level of kind of panic at the time?

Ramon Galain: Yeah, absolutely. We’re living at the perfect storm because as you were saying, you were historically believing in our hydropower plant, but it was delivering less and less, and we are very sensitive to what is called the El Niño phenomenon. And when we have dry years, I mean, the hydropower generation can be less than half of the usual years. And yes, we are using oil because we’re trying to depend on gas, but we just had one single provider, which was Argentina. Argentina was having tremendous difficulty to supply their own-

David Roberts: Mm...

Ramon Galain: domestic demand, so it was not possible for them to sell us gas. And so we didn’t have that much options. We’re importing more oil, which was becoming more and more expensive. And so we were experiencing not only tremendous instabilities in the system, but also we’re experiencing lack of electricity at some moment and more and more expensive electricity.

David Roberts: Mm.

Ramon Galain: So it was really the perfect storm. And at the top of that, you know, the country economy was growing very rapidly. We’re growing at that time at 6, 7, even 8 percent per year.

David Roberts: Oh, wow.

Ramon Galain: And there was a very successful governments where the poverty was decreasing very sharply. Also, we were ended with not more than 8 percent of poverty in the country. The energy demand was growing and growing-

David Roberts: Mm...

Ramon Galain: with a very difficult energy mix.

David Roberts: Well, one of the most sort of fascinating, at least from where I’m standing here in the United States, sort of baffling aspects of all this is you came in a majority government. You had a political majority, but the president pushed you to basically generate political unity on this, to create a plan that every political party would sign off on, basically, so that these changes would be enduring and steady over time. And of course, I’m sure any country would love to have political unity to make their plans enduring over time. But how in the world did you get everyone from every side of politics to sign off on these very ambitious plans?

Ramon Galain: Well, this was one of the two or three most important issues that allows us to make this transition, because, yes, what is happening for the last 20 years in our Western democracies is that we’re going from one government to another government, and things change dramatically.

David Roberts: Yes.

Ramon Galain: And even, it’s even worse because the energy sector is, in a way, politicized and ideologized, which means that you put the ideology in that which is a technical and economical environmental discussion-

David Roberts: Mm...

Ramon Galain: which in fact has no meaning at all. So what I did is when the president asked me to lead a technical and political committee trying to figure out a long-term solution or long-term transition or a new framework for the energy sector in the country, my proposal was, let’s try to discuss what the benefits are for our constituencies, no matter if they vote right or left or center or whatever. I mean, what are the benefits of going to one direction or the other? And the crucial point was, let us not begin discussing about what we should do today, not even next year, not even during this government. Let’s try to imagine how we can think the country should be in 30 years from now.

David Roberts: Mm.

Ramon Galain: So we are thinking about 30 years in the future, everything becomes much more simple when we’re discussing. Because if you’re asking about what we should do now or next year, the o- your first thoughts are, and what am I gaining or losing in this direction? Should I have more and less power? Should I have more and less votes? Should I have more and less money?

But if you’re discussing about the future, the real future, you don’t imagine yourself 30 years in the future. I mean, it’s simple to discuss how you can imagine the country if you’re not in this imagination. So it was not that difficult to imagine the country that we would like to have 30 years in the future concerning the power sector, and then we make a kind of reverse engineering. So if we have to be in 30, you have to be in this point, where should we be in 25 years?

And when in 20, and when in 15? And then when we’re going back and back, it was becoming a little bit more difficult. But at the end of the day, if we have bo- want to face on this imagined future, then we have to take decision now. And this was the way that we built an overall agreement. But once again, the most important thing was that we build it according to the benefits of the new system we bring to our citizens, and this was the crucial issue.

David Roberts: Well, speaking of that, I’m curious what role, if any, climate change played in that discussion. Was that a big part of the puzzle, or were you focused more on just basic financial and security benefits. What was the sort of discussion like?

Ramon Galain: It was one of the most important point, but not the most important one.

David Roberts: Mm.

Ramon Galain: The point at that time, and now it’s much, much simpler, but at that time the point is that for any country, but particularly for a country, oil imported country, a gas import country, the most important was try to have the basis of our system based on our own national resources. Because if you have your own national resources, you don’t have to depend on fluctuation of energy commodity prices-

David Roberts: Right.

Ramon Galain: on decision of wars or whatever decision that you cannot take, but other takes for you, and you have to pay for the consequences of that. And renewables for us was for sure the best option, because renewables, you are not dependent on an energy commodity price. You are much less vulnerable to these geopolitical events all over the world and are your own national resources. So you are much more sovereign and much more independent, much more stabilized as an energy system. So when we build this agreement, in fact, we put together a lot of ingredients. One of them was climate, one of them, yes, was environment in general, but it was also economical issues, geopolitical issues, social issues-

David Roberts: Mm.

Ramon Galain: ethical issues even, and technological one. What we’re understanding in that moment, that renewables were ready to have their part in their share. We ended up with a much larger share than we’re expecting at the beginning. But in fact, we were based in a optimization of the power system according to our national characteristics. We had to prove, first of all, that renewables are the cheapest option. Today is very simple because today there’s no cheaper option than producing electricity with wind and solar. But at that time it was not that simple. It was not that clear at all. And of course we have to prove that it was possible to manage a system with a high share of variability, of variable sources like wind and solar.

David Roberts: Right.

Ramon Galain: Once again, today it’s absolutely proved that yes, we can do it, and we are the real proof because we have been doing this for the last 10 year. But at that time it was not that simple. So we had a lot of economical challenges, very difficult technical challenges, but also regulatory challenges and market design challenges. How to build a market which is appropriate for the characteristics of these new technologies that were emerging at that time, and now they are absolutely mature.

David Roberts: It gets into my next question, which is another fascinating aspect of all this, is how you financed this. Obviously, any big plan like this requires a lot of financing, a lot of money. And as I understand it, there was a lot of pressure from this, you know, s- international institutions, your IMF, your World Bank, privatized. You had one state utility, publicly owned utility, that ran the country’s grid, and as I understand it, there was quite a bit of pressure to privatize that utility and privatize the whole thing. You did not do that, and I think you had to push back to not do that. So talk about how you structured things so that you could attract private capital without privatizing.

Ramon Galain: Well, in fact, it was, we have a lot of challenges, of course. We were designing from the scratch. We had no experience to copy or to try to adapt, to try to understand from them. We were really, really invited. I mean, making a function that didn’t exist in the world, and in fact, we make a kind of agreement, and this was crucial. I mean, the agreement was not only in the political sector, it was also with the private sector, and the governance of the whole process was absolutely crucial because we share our vision, we share our benefits with the private sector, and we invited to have a public partnership with our public utility and bring in not only capitals, but bring in also knowledge, and bring in experiences, and bring in international contacts.

And we build a ecosystem, a transformative ecosystem where everybody was gaining, and it was crucial. It was kind of adaptive governance in the way we were all the time discussing, all the time having interaction, learning from each other, mistaken both from the public and private sector, and doing learning curves and trying to correct mistakes, and trying to discuss… because we built an option that was, in principle, the best for all of us.

And so we had all this overall national commitment in order to make this as a possible solution. And yes, I mean, we created something that was very interesting because something that you didn’t say so far, David, is that in fact, yes, we invested a lot of money. Yes, it was a lot of private and public investment, but the final cost was negative.

What do I mean by the final cost negative? I mean that the cost of electricity in Uruguay decreased by a factor of two after the transition. So it was real business, not a single subsidy in order to make it possible, not a single subsidy. Just created the appropriate investment conditions that were the most adequate in order to introduce the new renewable sources, which those conditions are completely different than the traditional one from the traditional that exist in all over the world power system.

And if you create these conditions, we made the proof that wind and solar are the cheapest option that we have today. And so the final cost of the electricity for the consumers decreased, and there were real option for investor to come. We received in total something like $6 billion investment in only 4 years, and 6 billion for Uruguay, which is one of the smaller economy in South America-

David Roberts: Yeah.

Ramon Galain: was 12% of the GDP. Now imagine-

David Roberts: Wow...

Ramon Galain: how much is the 12% of the GDP of United States. It has a lot of zeros, believe me. And so this was the amount of money that we got just proposing real business, no subsidized business, just making win-win solutions, and we proved it was possible. So that’s why this was a clue in order to attract a lot of investment.

Real business, real benefits, and talk, talk, talk, and talk, discussing and discussing, understanding each other, understanding how to build win-win-win-win solution for all the stakeholders, and having open ears, but at the same time, leadership. Because at the end of the day, we have to understand what everybody’s saying, we understand what everybody needs, but then you have to take decision.

And for that, public policies are crucial. The present power systems are not the ones we need in order to go through a transition, in order to take profit for the benefits, real benefits of renewables today. But if you make the appropriate changes, then there is an absolute explosion for the benefits for this new system that we can build today.

David Roberts: Do you think having the public utility was an important part? Do you think that was crucial to being able to succeed at making everyone succeed, everyone benefit? You think having the public utility in your hands was a crucial part?

Ramon Galain: It’s not mandatory. I mean, you can do the same with it in Uruguay in a system which is absolute and totally privatized. This is possible. But when you have a public utility, it’s much simpler because once there is a political decision that this is the direction to take, I mean, just discussing with the authorities of the public utility and making them to understand that it was the best for the country, it was just strategic decision.

It was not a competition of different stakeholders, each of them looking at their own pocket if there were more and less benefits. It was just at the end of the day, a political decision. And so, yes, it was simpler because we had new way of planning a system with high share of renewables. It’s much more complicated and much different than the traditional ones, and we needed long-term contracts. We tr- to transform completely the market design. The basis is that the public utility has long-term contracts with independent energy providers, and those contracts are coming from bids processes, very open bid processes with very open information.

David Roberts: Hmm.

Ramon Galain: So in this public to private partnership, in fact, private partners is competed to be in the market. They’re not competed in the market all the time, but they compete for the market. So they compete in order to have long-term contracts with the public utility, and this sharply decrease the risk perception by investors, so the cost of the money was sharply reduced. At the end of the day, this was the most important thing in order to decrease the cost because, you know, renewables, they don’t have as traditional energy production, they don’t have a fuel behind.

So the cost of electricity is just the cost of the money. The operation and maintaining costs are very low. There’s no fuel, so you just have to pay back the investment. And you have to pay back investment and practice a financial business, nothing more than that, then the most important is the risk perception for the capital cost.

And as we sharply decrease risk perception, having these long-term contracts with very clear understanding, very clear framework, very clear political agreement, long-term agreement, so this was the panacea for investors. And so that’s why they came a lot with a lot of money, but also they came with very low capital costs, and this was the most important key in order to decrease the cost of electricity.

David Roberts: Interesting. So my audience is full of grid geeks. We love the grid. We love talking about how the grid works. So as you say, a grid with a bunch of variable renewables looks and operates very different than one with traditional fueled power plants. But you did have, I mean, if you’re going to implement a bunch of renewables, I think it is very useful to have a giant amount of hydropower, right, to basically firm up that renewable energy. So I’m curious how you thought about structuring the grid from a technical perspective, and I’m curious how close the mix you ended up with was to the mix you imagined when you started out.

Ramon Galain: It was quite the one we imagined, but in fact, we didn’t know be- we were expected to be successful because we have to prove a lot of things that were not proven so far when we began on that.

Today, it’s very simple because today there are a lot of things that have already been proved. We have to prove that it was possible to manage not only the stability, the variability of wind and solar, but also the dynamic stability of the grid, which means some technical issues like maintaining the control of the frequency, of the tension. There were a lot of technical issues that wasn’t unsolved at that time. Today, they are solved, but at that time they were unsolved. So we have to imagine the thing we wanted, but we didn’t know if we were able to do it. So it was not a surprise, but it was something that we didn’t know from the beginning it was really possible to achieve.

So yes, the way you plan the system when you have this new technology, this new cheaper and more mature technology, which are wind and solar, the way we plan the system, the way you understand the system is completely different than the traditional one. In the traditional one, you have thermal power plants that you can put on and off as you will. I mean, perhaps not a nuclear power plant, perhaps not a coal plant. That has to be there for days or months because they have no flexibility, just a small flexibility. But the rest, you can put it on and off according to the demand. If the demand peaks, then you have to put more power plants, which are more and more expensive.

When the demand goes down, then you take out those power plant, but it’s just a human decision. It’s simpler. And if you have hydro, it’s fantastic. But then when there’s water, instead of using- paying for fuels, you just use water, which is free. Then it’s a perfect mix of hydro power with thermal power, what are called hydrothermal systems, as are beast that complicated, but they’re easy to manage in a way.

But when you have the variability of wind and solar, and if they are the cheapest one as they are today, then you have to rethink everything. In our case, our base load in Uruguay is that… is not hydro, is not thermal. Base load in Uruguay is wind and solar. And when I say that-

David Roberts: Hmm...

Ramon Galain: the base load is wind and solar, what I mean is that the total installed capacity of wind plus solar equal the peak demand of the country. So this means that when there is enough wind and enough sun in the country, and this is a nature decision, it’s not our decision, but when this happens, then 100% of electricity is just wind and sun, nothing more than that. And on that time, of course, we don’t use thermal power plant, but we don’t even use hydro because hydro, the role is not as base load, the role is not as peaker, the role of hydro is to follow the variability of wind and solar.

David Roberts: Mm.

Ramon Galain: So it’s a completely different role that the way we use hydro power plants all over the world. So hydro are there to provide a big storage, a big battery in the system-

David Roberts: Mm...

Ramon Galain: and to follow the variability of wind and solar. So this is a completely different issue. And what happened about thermal power plant, do have thermal power plant? And the answer is yes, we do have thermal power plant, but we have them in the way that you have the insurance for your car. When you have a car-

David Roberts: Mm...

Ramon Galain: you pay for the insurance, but you pay the insurance in order not to use it. You just pray not to have to use the insurance, but you know that you have to pay it just in case.

So this is exactly the role of thermal power plant in our system. We pay for them to be ready all the time just in case, but we pray for not use them. So and when I say pray, in fact it’s just one of the most important words in this new kind of system, which is planning. Planning is crucial. We have developed a new planning, completely new power planning platform in which not only we plan the expansion according to the lowest CapEx and OpEx of the new technologies within the- in order to decrease the cost, but at the same time that we expand or- and we found the optimum complementation of technologies, we also at the same time make a simulation of the operation.

At this time step of the evolution of the system, we make a s- uh, simulation of the operation of the system. So there is some technology which is missing for some reason, then we prove to add this technology and once again to simulate the operation of the system in order to understand if we need more grid forming or compensator or more spinning reserve or whatever. So at the same time, we are building the lowest cost system which is operable. You can operate at any kind of weather conditions or water condition or rain condition. So it’s a pure stochastic model, which is based on the probability of occurrence of different probabilistic scenarios for the future of your system.

And then you define which is the best complementarity of this technology. And so this planning is the one which is defined. You know what is the best solution today? The best solution is let’s try to put as much as wind and solar as possible because they are the cheapest option. And all the rest of the system, beginning with hydropower, if you have the chance to have them, or batteries or as the last resource thermal power plant, all the rest which are more expensive, their role is just to follow the variability of wind and solar. They are the queen-

David Roberts: Well, as you say, you have these thermal plants that are sort of mostly insurance, but when you have a low hydro year, say, or low wind and solar year, those thermal plants do ramp up a bit. Really, so like the clean energy percentage on some years is down to, you know, 93% or 92%. Sometimes it’s up to 99%. I’m curious, 2 questions about that. One is, have you replaced all your oil-fired plants with gas plants at this point? And two, is there any prospect or plan to eliminate that last bit of fossil? Is there anything else that you can imagine playing that role that won’t produce greenhouse gases? Is there any way to eliminate that last bit?

Ramon Galain: Absolutely. So the 2 questions are absolutely fantastic, David. First of all, when you are using 1% or 2% of electricity produced by some kind of fuel, it doesn’t matter what the fuel is, because-

David Roberts: Yeah...

Ramon Galain: at the end of the day, it’s only 2%, or 2% not only of the emissions, but only 2% of the cost.

David Roberts: Mm.

Ramon Galain: So yes, we are still having now the 2 possibility because we have diversified our providers. So we have gas, we have oil. But no matter what we use, I mean, it’s just a very small amount of the total cost of electricity. So the goal is just to use fuels as less as possible. If you use fuel as less as possible, no matter what the fuels are.

And so if you’re talking about emissions, what I can tell you is that in fact, our per capita emission, our per kilowatt hour emissions are something like 40 times smaller than the world average. I mean, I can give you 2 answers to your question. The first answer would be when the rest of the world is going to be 40 times smaller, then let’s talk about our last 1, 2%. But this-

David Roberts: Yeah, it’s a good problem to have.

Ramon Galain: Yes, of course. But in fact, this is one possible answer to your question. The other possible answer is that in fact today, what we are having in Uruguay is the less cost system. This means that could we be 100% renewable? The answer is immediately yes.

David Roberts: Hmm.

Ramon Galain: We could be 100% renewable, for example, adding batteries. But adding batteries, instead of having this last chance of having the last 1, 2, 3% of thermal power in the system would be more expensive.

David Roberts: Hmm.

Ramon Galain: So it is better just to have the old thermal power plant because we never had to build more power plants. In fact, we have decommissioned thermal power plants because we didn’t need them anymore.

David Roberts: Hmm.

Ramon Galain: So we have a few of them just there as this last insurance recourse. And so in fact, we could replace them by batteries, but as we have already paid back all this investment of thermal power plants-

David Roberts: Oh, right, right.

Ramon Galain: it’s better just to use them, you know? So yes, perhaps our plans shows that in 5 years from now we could be 100% renewable. But once again, it’s a kind of combination of different measures of emissions, of geopolitics, of different visions, and one of them is also cost

David Roberts: Right. Well, speaking of that, speaking of batteries, Uruguay is also, I think, setting itself apart from the Global South for the speed of its adoption of EVs.

Ramon Galain: Yeah.

David Roberts: It’s frequently being called the Norway of the South because it’s ramping up EVs really quickly, and I’m wondering if one of the opportunities posed by EVs is an EV fleet is a giant distributed battery, among other things. If you can hook it up to the grid and manage it correctly, I wonder if that might help you squeeze out some of those last bits of fossil fuel.

Ramon Galain: It will. No sure that it will. I mean, when you are an fossil fuel importer, as we are in Uruguay, and you have a 98, 99, 97% grid in your system based just on your own autochthonous resources, then you have all the benefits in order to go to EVs because-

David Roberts: Yeah...

Ramon Galain: this is the best for your sovereignty, for your economy. I made a calculation once, and I put that to my student university, which is a very simple calculation. What if, magically, 100% of our fleet would go from combustion engines to EVs? What if? And if this would happen, then we would decrease by a factor of 8 the cost of the energy to everything in the country because we will go, yes, about a factor of 8 if we replace imported derivatives oil with nationally produced green electricity.

So it is a huge amount of possibility that you’re having and huge impact in your economy. In our case, it will be a decrease of about 3 points of the GDP if we were able to go magically from 100% of our fleet from combustion engine to EVs. Yes. That’s why, for example, last month, we sold more EVs than gasoline cars.

David Roberts: Huh.

Ramon Galain: Yes. EVs were something like 43%, more or less, in total in the last month, and gasoline was about 41 or something like that. The rest being the diesel and other things. So there’s an exponential growth. So this is the new sold car, but in the total fleet we’re still not less than 4 to 5%, which is increasing very rapidly, but we are still at 4 to 5%. So yes, if we are able to have more than 15 to 20% of EVs in the fleet, then things will change dramatically. Because another interesting thing in Uruguay is that 100% of our consumer have intelligent meters.

David Roberts: Ah.

Ramon Galain: With intelligent meters, we invested heavily because when you have- trying to build an electrostate. There are many petrostate, but we are trying to build an electrostate. An electrostate means that you have a lot of other possibilities. One of them is the one that you are saying, is that yes, for example, I can give a very, very quick example. I have an EV for the last 3 years now, and I charge it during night because during night there is much more wind-

David Roberts: Mm...

Ramon Galain: than during day. And of course, during night there is less consumption. So during night, the electricity cost is much lower than during the rest of the day. So I charge my car from midnight to 7:00 AM, and so the cost in order to charge fully my car is only $4. And with $4 I made 500 kilometers, 300 miles. Okay? So this is what you can do when you take profit of fully renewable power system.

And so the future I could do it now, but it’s not ready yet in the country, that I can charge my car during the night, during the mid- during the whole night. Then I go to work, whatever I want to do, and when I go back at my place at 6:00 PM, 7:00 PM, which is the peak on demand in many m- with the high air conditioners and different things, then I plug the car in order to sell electricity to the grid.

This is absolutely perfect, and this is the kind of things that you can do if we have these intelligent meters. There are much other things that you can do when you have intelligent meters. Just to give you an example, if you have to irrigate a field, if you are a food producer and have to irrigate a field, you have to bring your plants a certain amount of water in a week, let’s say.

But you can-

David Roberts: Right...

Ramon Galain: irrigate and you need to irrigate, let’s say 40 hours during a week. But which 40 hours-

David Roberts: Right...

Ramon Galain: you have to irrigate? So let the utility to decide which are the, those 40 hours that you’re going to irrigate, and let’s connect automatically, and that’s when utility are having excess of renewable electricity, of uncontrolled electricity, and with less demand. So this is the moment that you are going to irrigate your field. And this you can do it automatically using intelligent grids and intelligent meters. So this is the kind of things that you can begin doing when you have such kind of new systems.

David Roberts: Okay. I have one more question about Uruguay, and then I wanna talk about your work with other countries. But final question, which is, as you say, you cut the electricity generation costs by 50%, over 50% at this point, which is remarkable, but electricity bills to consumers only fell by about 20%. So what’s happening to that money? Where’s that money going?

Ramon Galain: What happened in Uruguay is that in fact, differently what happened in other countries, is that the government and the finance minister uses the power grid and the power utility as an ATM. This means that there is indirect subsidy going from the electricity consumer to the rest of the economy.

David Roberts: Ah.

Ramon Galain: Because the minister used these efficiency increase of the corporate of the utility in order to have more money for public policy. At the end of the day, you know, it’s a public utility, so the owner is the government at the end.

David Roberts: Right.

Ramon Galain: The shareholders are the citizens. So the owner of utility uses this as source of incomes for public policy. So in fact, this has nothing to do with energy decision. It has to do with a economy decision in the country, and we need a redefinition of the fiscal platform, the fiscal structure of the country, and this is a decision that’s...

I used to say that one of the worst, my worst day, I’ve been Secretary of Energy for 2 consecutive presidents during 8 years, and one of my worst day was when I was about to finish the job and my colleague, the Minister of Finance, will say, “Fantastic job, you, Ramon, you did a fantastic job. Thank you so much. But then we need to leave you only part of the win you got.” “I’m going to take 80% of that.” So this was a very bad day for me. Then I understood that at the end of the day, what, this was the best for the country because at the end of the day, the most important point is the cost decrease.

What the country makes, the economy makes with this money is just as soon as it begins in the national economy, well, that’s good. There’s nothing to bury.

David Roberts: Right, right, right, right. You’re, have been pivoting recently to trying to basically help other countries in the Global South follow this path. And I know you’ve had this question a million times too, but in a lot of ways, Uruguay was just perfectly set up to make this transition.

It had a lot of hydro to use as that big battery, and the competitor to renewables was $150 a barrel imported oil, which is about the best enemy you could pick. You know, a lot of other countries that I know you’re talking to might not necessarily have that much hydro or any hydro to serve as that battery, and they might be- the competitor might be cheap gas rather than expensive oil.

So a lot of other countries are not gonna have those sort of natural advantages starting out. So I’m sort of curious, like, what parts of the Uruguay model transfer to other countries? What is it exactly you’re trying to encourage other countries to do? It can’t be exactly what Uruguay did. So what is it that you’re trying to sell them on?

Ramon Galain: Thank you so, so much for that question because, in fact, one important thing is that you have new technologies. Thanks to climate change, we have developed new technology. But then the new technology are there. We cannot avoid the fact that we have now wind and solar which are much cheaper than all the rest in all markets, not just in Uruguay, but in all markets. They’re the cheapest option today all over the world, and that they have the matur- technology maturities in order to make it possible. So this is worldwide. It’s not just for one single country.

And now let me, in a way, correct you if you allow me to say that, one thing that you say. When I’m saying that we decrease by a factor of 2 the cost of electricity, it’s not compared to 150-dollar barrels. It’s compared to 80-dollar barrel, and even compared to a much cheaper gas. If we, if I compare to the 150-dollar barrel, then I decrease the cost by a factor of 5.

Perhaps the most interesting point is the absolute point and not the comparison. The absolute point is that today we produce electricity by only 5 dollar cents per kilowatt hour. This is the cost, the average cost of all of the electricity we produce in the country. Not the bill, the cost to produce electricity.

David Roberts: Mm-hmm.

Ramon Galain: And this is a very low cost no matter where you are all over the world.

David Roberts: Mm-hmm.

Ramon Galain: So this is just one specific position I wanted to make. But yes, if we compare a country with hydro with a country with no hydro, some things are different, but not the most important point.

And precisely not now that we have batteries. The battery cost has decreased by a factor of 10 in only 12 years. This is a dramatic change, and you c- have seen, for example, what is having many, many system today in many power system that including batteries even with cost of last year or 2024 cost are already cost, make sense from the cost point of view.

So today the point is that we have different options, and I can tell you what we’re doing today. I created a nonprofit which is just financed by philanthropic funds, nothing more than that. We don’t have any hidden agenda or whatever. We are just financed by philanthropic funds that understand that is the Uruguayan experience is very interesting for the rest of the world, so we’re trying to share this experience. It’s a very competitive team which has a lot of technical knowledge, but also-

David Roberts: Yes...

Ramon Galain: the political expertise on how to deal with these kind of changes.

David Roberts: Mm-hmm.

Ramon Galain: And all of this based on a success story, which is Uruguayan case. So it’s a small team. We are not more than 30, but we are working now very heavily bringing, first of all, information to decision-makers and to the private sector in many countries in the Global South, trying first of all to simulate for them what will be the consequences for them if they go to the optimum definition of the system, not just based on political climate decision or goals, just on the optimal cost of the country using in a wide way, in a smart way, what the present technologies are right now.

David Roberts: ‘Cause as you said in Uruguay, the basis is to use wind and solar, the cheapest sources, as kind of the base load, and then everything else is about how to compensate for the rest.

Ramon Galain: And one of most important thing is that we’re trying to show in other countries that everything depends on a very heavy planning technology or planning definition, then in Uruguay is that we have the optimum curtailment.

Yes, there is curtailment because it’s better sometimes we have more wind and solar than we need because in order not to have less in other moments, and in order not to have to turn on a thermal power plant, which are more expensive. So there is that trade-off between having more and less curtailment, and what we have is the optimum curtailment. So the man pays for this curtailment because they know that this is the optimum to optimize or to minimize the total cost of the system. So with this in mind, we optimize system, and in large majority of the system, we are obtaining more than 80% of renewables in the mix as the optimum definition.

And if we made long-term intel of what is going to be the decrease of the cost of the technologies, and then we can go for much beyond 90%, even in a country without hydro. But many countries have at least 20% of hydro. And just a small hydro without a small battery, I mean, without a small dam, without a small power, water reserve, even this is just enough because the ramps that you have to manage are not month ramps. You don’t have to storage water for months, not even for days. You have to store water for hours. Because if you want to follow the variability of wind and solar, you just need to storage water for hours, for 12 hours, nothing more than that. And so it’s not that big hydropower plants neither. It’s just simple hydropower plants, and that-

David Roberts: Mm-hmm.

Ramon Galain: you have in many countries. For example, now we have worked heavily in Colombia. For Colombia, the optimum system, it was 95 to 96% of renewables in the mix because they have hydro. If you go to other countries, perhaps it’s not 95, 96, or 99, it’s perhaps 80%. But everything rests in the way you use the system.

So even if just one country is going to have its unique way of going, not to the transition, but just to optimizing the system according to the new technologies that are available in the market, though even if every country is going to have a different solution, a different optimum, there is a recipe which is the Uruguayan recipe, if you allow me to put it in this way, which can be repeated in any country all over the world. And the most important thing is how you plan the system, how you operate the system, how you remunerate the system. So this is the big difference with the traditional power system. So what the first thing to do is the planning. When you have a plan, you define which is the optimum combination of each technology needed in order to decrease cost and to have resource adequacy.

So you bid, no matter if it’s a public utility, a private utility, it’s a pool of utilities, it will no matter how the offtaker organize themself, but the offtaker, they bid not to have a short-term energy market, but they bid long-term contract. So the recipe is going from short-term energy market to a long-term capacity market. And so with that, you have long-term contracts, and this is the way to decrease risk perception by investors. And if you decrease risk perception in this system, which are mainly based in paying back money because there is no fuel behind, so this is the recipe in order to decrease cost. And this recipe, you can share it in any country, no matter if they have hydro, no matter of anything else, so.

David Roberts: And you’ve said that, I just wanna underline it, you think that any of these countries you’re dealing with, any country in the Global South can get to at least 80% renewables with proper planning and long-term commitment?

Ramon Galain: I say that any country in the world if they have today more or less reasonable wind and solar, and in the future with the advancement of the technology, any country in the world, if they make the appropriate system, can be, yes, at least 80% renewable.

David Roberts: I know you’re still relatively early in this work, but do you have another success story, another country that’s sort of taken you up on this that’s-

Ramon Galain: No. I can tell you 2 very completely different markets. Colombia is one of them, which they have hydro, so in there is, I would say is simpler. And I can tell you another example where we made a simulation, which is Haiti.

Haiti, it’s a very poor country, but they have wind. Mostly they have sun. They have a fantastic sun, and for them thermal power is expensive because they have to import everything, and so this is expensive. And for them, with the present cost of batteries, it’s better for them to have as much solar as possible with batteries, and with that, they have the lowest cost today. With that, they can have even 90% of renewables in the mix, and this is the optimum cost for them. So this is an example of a country with a very interesting sun, with very solar radiation. And so yes, present cost of technology, if you put them, if you combine them in the appropriate way, then it worked.

This is the most important. And once again, it’s not only the fact of cost, it’s the cost stability. It’s the economy stability.

David Roberts: Yes.

Ramon Galain: Remember what happened in your country when there was the Ukrainian war, the beginning of the Ukrainian war, 10% of inflation. So in Uruguay, I can tell you which is the cost of electricity today, tomorrow, in a year, in 10 years from now, because we don’t depend on any kind of wars or invasion or whatever. Just paying back an investment. So I can tell you from day zero, which is going to be the cost, because I just have to pay back an investment. Nothing more than that.

David Roberts: As you say, you can do these simulations for other countries, and you can advise other countries technically on their optimum systems.

Ramon Galain: And politically.

David Roberts: Well, this is my question. Like, I’m guessing in many cases, the reason there hasn’t been more progress in other countries is not technical doubt, it’s politics. In a sense, the political unity you generated in Uruguay is kind of the magic sauce here that’s missing in other places. Are you also advising on that? I mean, I don’t even know what that would look like, but how do you try to generate political unanimity in another country?

Ramon Galain: Absolutely. Absolutely. Because the first point is that just to simulate which is the optimum, and then to show that not only to the authority, but also to the private sector and to stakeholders, et cetera. But then the real work begins. Then-

David Roberts: Yeah...

Ramon Galain: the question is, and what can we do with this? And now we have this information, so what are you going to do? And so the second point is that your regulatory framework, your market design is not the most appropriate in order to take advantage of this new possibility of the new technology. Because of course, the old power system all over the world has been built according to the characteristic of thermal power plant.

David Roberts: Yeah.

Ramon Galain: And that’s fine, because till a few years ago, they were the best solution we have. So I’m not at all against thermal power plants or fossil fuels, but the point is that now we have new technologies.

So what can we do? We have to face it. So after bringing information, we help them understand what are the regulatory and the market design change they need to make. And after that, we help them in order to make this change possible. Of course, we have to deal with different stakeholders, and we have the incumbents, and we have to show the incumbents that there are national interests that are perhaps greater than theirs, and we have to create coalitions in order to make it possible. And then at the end of the day, the most important is for decision makers to make the political and social cost of doing nothing becoming unacceptable. And so this is the point. And so this is the way that you create, when the political system understand that this is the will for the constituencies, that’s it.

David Roberts: If you had to identify one country that you think is most likely to follow Uruguay’s example, the soonest, what country do you have most hope for at the moment?

Ramon Galain: We are just beginning. I mean, the first stages, I can tell you that there are at least 20 countries that want to work with us. We are just beginning the work in many of them.

And so I still cannot tell you, for example, that yes, Colombia could be the next Uruguay for sure. I can tell you that a small state island could also be crucial. For example, Jamaica, we’re beginning to work in Jamaica because in a s- for an island country, I mean, the cost of thermal power plants is so heavy for them because they have to import everything that that’s... Well, not Trinidad and Tobago, they’re safe. But the regular state island where they don’t have fossil fuels, the cost of fuels are very expensive. So there are now with the present cost of renewables and batteries and the new technologies, they are perfect example to be at least 90% renewables, and this will be the best for them.

But the point, of course, is that we still have a dominant narrative denying the truth, denying, saying, “Oh, is that possible to deal with the variability of wind and solar? Oh, but if you put batteries, it’s more expensive. Oh, but what happened with the spinning reserve and what happened with the stability of the dynamic stability of the system? We don’t have to manage that.” And what I used to say is that the human engineering has put a man in the moon. You, America, has put a man in the moon 50 years ago, and you are trying to convince that this human engineering is not capable to dealing with variability of wind and solar. I mean, we’re crazy.

But this is the point. The point is that we have a dominant narrative, and we are living in an era of different truth. And to separate what is the truth or is not the truth, this is something which is different even for decision makers.

And one last point, I’m not at all against the oil and gas industry at all, but we have to accept something which is very important, is that subsidies to fuel oil and gas industry is as high as $1.4 trillion per year. And this is not me which is saying that, is not the International Renewable Energy Agency is not Greenpeace. This is the International Monetary Fund, which year after year sending a report saying which is the amount of the subsidy, direct and indirect subsidy to the fossil fuel industry. And so this is something we have to take into account, that we have built an economy which is more and more based in subsidies to the incumbent system.

If you want to take profit of the new possibility, of the new technologies, of the new costs, of the new maturity of the new technologies, then you have to make changes. And this is on the profit of all of us because we are going to avoid all the heavy subsidies that we’re having today for the old fossil fuel industry.

And this is something that we have to understand also. We have to change many variables in the system. We have to change powers in the system, in the old system, I mean. And this, of course, takes some time. It’s a cultural change at the end of the day. But well, at the end of the day, as you were saying in America, it’s the economy, stupid. So at some time the economy will win. And now, once again, the driver for the transition, even if I’m a climate guy, the driver for the transition is no longer climate. It’s the economy. That’s it.

David Roberts: As a final question, this sets me up well for my very final question, which is sort of how you think about the role of the Global South in all this. I mean, in some sense, if you’re just look at it through a climate change lens, the total climate emissions from the Global South is still relatively small. I mean, it’s a rounding error compared to what you get from the US and China. So in a purely climate way, if you wanna just reduce emissions, it makes sense to go after the US and China.

But I wonder it seems like what you’re also offering these countries in the Global South is not just reduced emissions, but something like greater sovereignty and energy independence, and a kind of resistance, resilience against an energy colonialism, something like greater independence. Is that what’s most motivating you here? I’m curious about your mix of motives in working with the Global South specifically.

Ramon Galain: It’s exactly my claim. This is exactly my claim. My claim is that for Global South country today, except for a few big oil producers, but even Colombia produce oil, gas, and coal, but even for them it’s better to go to renewable because they increasingly shifting to a new economy that doesn’t exist in their country.

Look, in Uruguay, we created 50,000 new jobs. 50,000 new job for a country with only 3 million people is something like 3% of the total labor force of the country. So once again, you know, which is the labor force of the United States? So imagine what is 3%, it’s more than a million people. Okay? So this is the size of the impact for your economy of take- giving a place for this new economy. So yes, today this new power system are not just because of climate change. Climate change is the consequence of that mitigating climate change is the consequences of using the benefits of having lower energy, more independence, more human natural resources, more labor force, more work developing the country, more development.

When we voted, when we created those NDCs, nation determined contribution, was the base of the Paris Agreement, the C was commitment. 11 years ago, we have to commit, it was an obligation in order to avoid fossil fuels, in order to go to renewables. Today, to be NDC means national development catalyst. Making an NDC is making a catalyst for the development of your country. I mean, at the end of the day, we used to talk about developed and developing countries. Today we are all developing countries. We have to, all have to develop a new economy. The new economy is there, but we have to develop it, and there are huge opportunities in this renewable-based economy.

But you have to understand that. And yes, of course, I work in the Global South because I understand that there are a lot of much more improvement that we have to some way, quote, “suffer” decision taken in the Global North. So yes, for us, it’s having much more independence, has much more sovereignty, much more possibilities of developing.

David Roberts: Awesome. Awesome. Well, that sounds like a great place to wrap up. This was exactly as fascinating as I expected, Ramon. Thank you so much for coming on and walking us through it.

Ramon Galain: It was really a big, big pleasure, and please keep in touch, keep in contact.

Charging an electric vehicle at home is incredibly easy and convenient. Charging an EV almost anywhere else is … less so. If you live in a multi-family building, if you’re in a rental car, if you’re on a longer trip away from home, you’re in a bit of a crapshoot. More public chargers actually work these days than in the dark days of five years ago, but there are still plenty of duds, and even success remains a somewhat grim and dutiful affair. Chargers are often plopped on the edge of big parking lots, exposed to weather. Best case, there’s some kind of strip mall across that parking lot.

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If you fuel up a gasoline car, you can, at a minimum expect to find a working pump that is sheltered from the elements and attended by a place to kill a few minutes and get a snack or go to the bathroom.

Could EV charging stations be the same? That’s the bet IONNA is making. IONNA is a joint venture owned by eight major automakers — BMW, GM, Honda, Hyundai, Kia, Mercedes-Benz, Stellantis, and Toyota — that builds and operates public DC fast chargers. The idea is to pair high-powered, reliable, accessible chargers with amenities like canopies, restrooms, food, and lounges. At least in aspiration, it’s a modern version of the gas station.

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Today I’m going to talk with CEO Seth Cutler about the economics of charging EVs during a market slowdown, in a shaky economy, and what it might mean to actually enjoy charging an EV in public.

Chapters

• 00:00 – Introduction: can public EV charging be as reliable as a gas station?

• 02:30 – Public charging’s four phases, and IONNA’s phase-four bet

• 08:17 – IONNA’s origin story

• 09:55 – Scale, footprint & site strategy

• 11:52 – Rechargery @ vs. freestanding: the two site formats

• 18:45 – Can DC fast charging make money? Unit economics

• 21:29 – Demand charges & why fast charging is expensive

• 23:57 – Getting power: permitting, interconnection & utilities

• 29:18 – Site design, amenities & the monetization question

• 34:14 – Regional site customization: the gas station turned bakery

• 36:35 – The charging experience: apps & Plug&Charge

• 39:03 – Reliability strategy & metrics

• 42:47 – Headwinds: the EV market downturn & policy risk

• 46:54 – Business model, profitability & the IONITY comparison

• 50:09 – Geographic rollout: the chicken-and-egg problem

• 54:07 – Competitive position vs. Tesla

• 56:37 – Closing: vision, fears & timeline

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Seth Cutler (IONNA Leadership Bio)

  • IONNA (Website - LinkedIn)

• Other Orgs & Programs Mentioned

  • NEVI, the National Electric Vehicle Infrastructure Program (FHWA Fact Sheet)

  • IONITY (Website)

  • Electrify America (Website)

  • PG&E Flex Connect (Program Fact Sheet)

  • Tesla Supercharger Network (Website)

  • IRS - Alternative Fuel Vehicle Refueling Property Credit

Company & Industry News

• Ionna accelerates U.S. EV charging buildout

• IONNA expands in Florida, brings gas station reliability to EV charging

• A new way to fix grid bottlenecks for EV charging: flexible connection

• Why grid flexibility is now essential, and how PG&E is delivering it

• GM - IONNA opens its first Rechargery in Apex, North Carolina

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Text Transcript

David Roberts: All right then. With no further ado, Seth Cutler, welcome to Volts. Thank you so much for coming.

Seth Cutler: Yeah, thanks for having me. Looking forward to talking with you.

David Roberts: All right. So before we get to what you’re calling public charging 2.0, let’s talk briefly about public charging 1.0. You were the chief engineer for Electrify America, which was Volkswagen’s sort of big bid to build a nationwide network of EV chargers. This was in 2018, 2019. Not to blame you for all this, but I think it’s safe to say when a lot of EV owners think about their negative experiences at public DC chargers, Electrify America is kind of towards the top of that list. A lot of those just ended up not working or working inconsistently or being a pain in the butt.

So maybe just tell us to begin with, what went wrong with public charging 1.0? What are the problems we’re trying to fix here?

Seth Cutler: Yeah, I look at public charging as actually four phases. And so I’ve been in the industry going on quite some time. Started my career with General Electric, ran GE’s charging business back in 2012 to 2017. We were focused on home charging and, and public L2 charging at the time. To your point, I was with Electrify America, I was with EV Connect, and now with IONNA. And if you look at where charging infrastructure started, you know, back in the launch of the Nissan Leaf, there was a need to put out, you know, public DC fast charging back in, you know, 2010 even, to support a vehicle that could only go 70 to 80 miles on a single charge.

David Roberts: Right.

Seth Cutler: And so at that time, it was about how do you just put chargers in the ground, irrespective of where they might go, put a single node in a single parking lot, irrespective of the amenity or whatever might be adjacent to it. So that was what I would define as phase one, was really the advent of public fast charging and just getting them in the ground. Phase two was really around, to your point, the build-out of networks. And I think, you know, Tesla obviously was first to market to go do that.

David Roberts: Mm.

Seth Cutler: EVgo was, you know, heavily focused at the time inside of cities, but we really wasn’t looking at connecting the cities. And Electrify America, which I was a part of early on, was really looking to be the answer to Tesla at the time back in, you know, the 2017 timeline.

And obviously, Electrify America brought, you know, high-powered charging, even higher powered charging than Tesla had done at the time, liquid-cooled cables, 800-volt architecture. So, you know, early technology into the market, which was then followed by what I refer to as phase three. Phase three was really around reliability and uptime. And when you look at, you know, kinda the post-COVID world, people driving again, electric EV adoption rates picking up.

David Roberts: Mm-hmm.

Seth Cutler: All of a sudden, now you had all this infrastructure out there that had been proliferated over, you know, almost 10 years at that point. And people found that at high utilizations, you had a lot of queuing.

A lot of queuing meant that the reliability and uptime that maybe, have been acceptable in 2017, 2018, was no longer acceptable when people needed to charge and a six-bay site became a two-bay site at that time. And folks, you know, either didn’t have the supply chain to support it or had never built out the operational processes in terms of being able to support that level of uptime to meet the needs of drivers.

And I think by and far, I’d say the industry has come a long way in 2026, 2025, than where it was in 2020 and 2022. And that brings us to kind of this current phase that I look at it as phase four of the market, and this is really where IONNA is playing, which is how do you think about the experience beyond just reliability?

You know, and the analogy I always give is… You know, folks typically don’t look to see which restaurants will cause food poisoning. They— It’s kinda taken as a, uh... kinda like the table stakes of, like, if I go here, I’m not gonna get sick.

But what they’re looking for at that point to judge where they eat is what’s on the menu, what’s the price—

David Roberts: Right

Seth Cutler: what’s the ambiance, what’s the experience I’m gonna have at that restaurant? And that’s really what we’re trying to do, is say, “Listen, the chargers have to work every time, all the time, on the first try.” That’s what we’re focused on. But we wanna make sure that the experience that they have beyond that is bar none a really great experience. Canopies, trash cans, squeegees, access to bathrooms, access to amenities, unique experiences. You know, we partner with Amazon in certain locations. So that’s how I look at the last, honestly, 16 years of charging in the United States and where, and where we are, and where IONNA is trying to play.

David Roberts: I’m sort of curious, has anyone, has you, IONNA, or anyone done any kind of sort of systematic polling or surveying of EV owners and asked them what they most want or expect out of these things? Like, I mean, obviously reliability, I think, but I wonder, like, what else do people want or are they asking for or are they complaining about? Do we know with any certainty?

Seth Cutler: Yeah, we’ve done a, we’ve done a lot of market research and market studies early on, and we continue to poll our customers. You know, in fact, we just finished June with, I think, five or six what we call customer clinics, where we went out and interacted with drivers at our sites.

David Roberts: Hmm.

Seth Cutler: ‘cause it’s one thing to interview drivers before you’ve deployed assets and talk to them of what would be interesting.

David Roberts: Right.

Seth Cutler: It’s another thing to do it in a parking lot with your equipment on site. And so, you know, we’ve gotten, we’ve gotten just from that activity alone, you know, I think nearly 1,000 responses from direct interaction with our employees and drivers. But look, I think it’s, there’s a lot of common themes, right? You know, so beyond reliability, it’s gotta be affordable. They’re looking for safety, you know, good lighting at night. They’re looking for canopy coverage where possible. They’re looking for what we refer to as car care, trash cans, squeegees, other things.

David Roberts: Hmm.

Seth Cutler: And they’re looking for amenities. And so, you know, that’s where we’ve been really focused is how do we make sure we can deliver all those things where possible? You can’t always provide a canopy at every site—

David Roberts: Hmm...

Seth Cutler: for lots of different reasons, but right now, 30% of our sites roughly have canopies on them, the ones that are deployed, and there’s more coming, right? We try to have this do loop of deploy, learn, test, deploy, learn, test over and over again with our drivers.

David Roberts: Well, talk about just IONNA a little bit then. Sort of like how did it come about? I guess, like whose idea was it? What’s the idea behind it? And then what’s kind of the vision? What’s the big idea?

Seth Cutler: Yeah, so look, the O- the OEMs founded the company. I think there was, there were talks back in 2015, 2016 about developing a joint venture in the US.

David Roberts: Hmm.

Seth Cutler: Obviously a Volkswagen, launched Electrify America as part of their needs in the market with things that were happening regulatorily, which I think at that time basically took away the need to have a joint venture launch in North America, particularly in the United States.

But you did see a joint venture launch in Europe, which was known as IONITY at the time. Back in, I think 2021, 2022, I think the OEMs recognized that charging was still not fixed in the US and with, you know, I think forward-looking perspective that electrification and eMobility was a real thing that was gonna happen at scale. The biggest issue today in the mar— or even back then was infrastructure, reliability, charging anxiety. Not range anxiety necessarily, but charging anxiety. Will the charger work when I get there? And so—

David Roberts: Mm....

Seth Cutler: the OEMs took it upon themselves to say, “Listen, we need to go do what we did in Europe, but do it here in the US.” In July of 2023, they publicly announced the formation of IONNA. I started in as employee number one in February of 2024 to take the vision and build a team and take that team and make a reality out of that vision, right?

And so what the vision was how do we remove the obstacle of charging being the reason why we can’t seem to move electrification forward from a transportation perspective. And we’ve taken that, the team has taken that into their own in terms of the type of experiences that we put out there, the types of sites that we deploy, and where we deploy these sites.

David Roberts: Well, what’s the sort of concretely, I know you have this 30,000 goal, but as I’ve been reading around, it’s hard to get a bead on 30,000 what exactly because there are, there’s chargers, there’s stalls, there’s sites, there’s, you know, there’s different ways of counting this. What is, what is your short-term goal like by 2030, say?

Seth Cutler: Yeah. So we talk about 30,000 charging bays. I think the industry sometimes call them stalls. We call them bays.

David Roberts: That’s like a parking spot basically. That’s where you park.

Seth Cutler: Exactly. Yeah. Yep, exactly. So like every one of our chargers we deploy today can charge two cars at a time. And so one charger serves two charging bays, and each site is made up of anywhere from, you know, on average roughly 10 bays. That’s how a site breaks out. A Rechargery for us is 10 bays on average. You’ll see some smaller, you’ll see some bigger, but that’s the average.

David Roberts: And how, and where, yeah… like where are you at? Like what’s been, what’s been built?

Seth Cutler: Yeah, it’s a good question. So we just turned on site number 143 last Friday. We’ll be approaching, you know, site 150 by next Friday. And so, you know, that’s roughly, just over 1,300, 1,300 bays that are live to the public right now across, just over 30 states. And so for, you know, for us going back, you know, company started February 24, one employee. We built it from there. Today, we’re just under 100 people, based in Durham, Raleigh, North Carolina, or Raleigh, Durham, North Carolina. And so really 2024 was setting up the company. We built this business essentially from zero, right? There was no—

David Roberts: Mm-hmm.

Seth Cutler: We’re not part of a bigger company. We’re not part of a division.

David Roberts: Mm-hmm.

Seth Cutler: Everything is separate from the OEMs. They’re equal stake owners inside of IONNA. And so ‘24 was go build a company, build an organization, and launch the first sites, the proto- what I call the prototype sites. And so you saw a mix of sites that we built, in different locations, some that were full-scale “Rechargeries” with 24/7 access to bathrooms where we built the amenity. Others where we built them as Sheetz.

David Roberts: Most of them so far are attached to s- are not the full Rechargeries, right? I mean, just by number. Most of them so far are not the full gas station vision yet. They’re attached to something else. Is that right?

Seth Cutler: Yeah, so we, you know, from a product, what we call a product archetype perspective, the majority of what we will build will be attached to an amenity. Over 70% will be attached to what we call a Rechargery. And we have two types of Rechargeries. One is called a Rechargery @. Those are partners with marquee partners such as a Wawa, a Sheetz, a Wally’s, a Hy-Vee, et cetera.

David Roberts: Mmmm.

Seth Cutler: And then the other part of the Rechargeries are ones where we’re building the amenity from the ground up. Now, we’ve got, I think half a dozen of those launched right now, and we have dozens more, dozens more that are working their way through permitting. Those obviously take longer because you can imagine—

David Roberts: Mm-hmm...

Seth Cutler: you know, permitting, et cetera, is a different process when you have to go through zoning to build a building or to operate a building.

David Roberts: So when one is attached, say, to a Wawa, we’re just talking about it would look like a bay, like one of the, like one of the pumps, you know, like a gas station pump. It would just be a version of that attached to a Wawa, you know, convenience store. Is that the kind of the idea there?

Seth Cutler: That is. And, you know, we just, we just launched our first Wawa with a canopy in Indiana. We’ve launched a canopy with Sheetz. We’ve done the same thing at Wally’s. So, what we’re trying to do, to your point, is provide a fueling experience at a location where you can get amenities that make sense for a fueling environment. And so that’s why a lot of what we, what we’ve built are co-located with those types of marquee partners.

David Roberts: Mm-hmm. And that’s gonna be— And the idea is the majority is going to be a bay sort of attached to someone else’s convenience store, and then you say 30%-ish are gonna be your own freestanding Rechargeries.

Seth Cutler: Yeah, so in the 70% of in the Rechargeries, there’s two types of Rechargeries: Rechargery @s, and then Rechargeries, full Rechargeries where we’re building the amenity. The 30% left over will be ones that potentially will be adjacent to a larger shopping complex or other types of amenities that might be nearby.

David Roberts: Mm, I see. I see. But just to be clear about this, you’ve built 1,300 or so far. Your target is 30,000 by 2030. So you’re gonna have to ramp up the pace. Like, the pace is gonna have to be ramped up substantially to get to that target, right?

Seth Cutler: Yeah. No, you’re do- you’re doing the math right. You’re right. Again, for us, it’s about coverage, and so we talked about 30,000 bays. We’ll figure out exactly how many sites that is and what that works out into. But right now, we have just under 600 sites that are contracted across the United States today—

David Roberts: Mm-hmm...

Seth Cutler: of which 200 are in construction or live to customers, which means there’s another 400 sites right now that are essentially in permitting working their way through.

David Roberts: Mmmm.

Seth Cutler: And so, and then we’re growing that pipeline as well. So, you know, in the two and a half years that we’ve been a company, a year and a half that we’ve been operational as a business in terms of sites live to the public, we’ve grown from, you know, zero essentially to, you know, just under 600 sites contracted that are, that are working their way to becoming operational.

David Roberts: And give me some sense of the proportion, I mean, insofar as you know yet, how many of those are gonna be located on, like, a convenience store that’s off the highway for long-distance travelers versus something in a city or something in a suburb? Like, do we know roughly the distribution where they’re gonna be?

Seth Cutler: Yeah, we know, I know a lot ‘cause, ‘cause we’ve got so many contracted. You know, what I can tell you is, going back to the 70%, I think we like the number 70. So 70% of our investment are inside of cities, 30% -

David Roberts: Inside cities? Interesting.

Seth Cutler: Yeah. Now, what I would tell you is what we, what we’ve tried to do, tried to do inside of cities is to build the sites next to interstates even if they’re in a city.

David Roberts: Mm.

Seth Cutler: So, you know, one of our, one of our most popular from a utilization perspective sites is in Houston, Texas.

David Roberts: Mm-hmm.

Seth Cutler: It’s probably, you know, 10 minutes out of downtown. It’s about a quarter mile, I think, off of I-10. That’s a Rechargery, full-scale Rechargery that we’ve built in Houston to serve the Houston market, but it also serves folks that are driving through the Houston market to the next town over.

David Roberts: Mm, got it. Interesting. So, you know, most of people, I think when they hear about this fast recharging, DC fast recharging, they kind of think about road trips, they think about interstates, they think about long distance, but mostly in cities. Like, who’s using in-city? You know, like, what is the customer for the in-city charger? Is it just people who live in apartments, don’t have their own home charging? Is it people who are passing through the cities? Do you have a sense of your sort of average customer to one of these things?

Seth Cutler: Yeah. So there’s four customer groups that we look at. You know, obviously to your point, we’ll start with the one that is probably that makes the most sense to fo- or the most obvious to folks, I would say is, you know, folks that are doing, you know, long distance travel for vacations.

David Roberts: Mm.

Seth Cutler: For sure that is a need. And, you know, right now, again, even in our early days, we already have, you know, national coverage across all of I-70, you know, all the way from California to Raleigh. Folks have already done that trip coast to coast. We’ve got coverage all the way up from, you know, New York City, essentially, down to Florida on I-95.

And then I-5 is being built out right now. We’ve got pretty good density all the way from Seattle all the way down towards LA and filling in. So we’ve got na- we’ve got coverage on all in these interstates. That’s your first customer group. Second customer group are gonna be your daily commuters. And th- and these are folks, to your point, that are gonna charge mainly at home.

But there are times, and I, and I’m in that situation, where you drove more than you thought you would, you didn’t charge at home, you’re gonna need a public charger, and it ha- it happens to the best of us when we try to charge at home. The sec- the second group are gonna be your daily commuters that are folks that live in an apartment building or an older home.

You know, I had a home I remember back in New England that I— there was no way I’d be able to put an L2 charger there, so I had to survive off L1.

David Roberts: Mm.

Seth Cutler: And honestly, it’s gonna be difficult to survive off of L1 or no charging at home. And so that’s where you’re looking for some sort of hub, charging hub inside of a city to serve your needs. And then the last group are really, is really fleet. And fleet breaks out into, you know—

David Roberts: Oh, right

Seth Cutler: into like Uber drivers and rideshare drivers, but also in terms of you know, fleet with a business, whether it’s, you know, some sort of service business, et cetera. So we look at all four of those groups and then figure out how to build sites that where we can, what we call stack use cases for all those customers to use, the same location.

David Roberts: So let’s talk a little bit about the economics just of the charging, just of the charging part itself.

Seth Cutler: Sure.

David Roberts: So I saw, you know, this study that says that a DC fast charging port generally needs about 15 to 25% percent utilization just to cover its costs. And once you fall below that, you get 10 to 15 or below, they’re losing money. And industry-wide utilization is hovering right around 15%.

So barely, basically like does not look like a good business, basically in terms of charging, especially with typical utility rates where they charge these demand charges, which we’ll get back to in a second. You know, the more power you’re running through it, the higher your demand charges and the worse the economics.

So you are both using the highest powered chargers out there, 400 kilo-kilowatts, and also charging a flat 39 cents per kilowatt hour, which is I think lower than the industry average. So how do you expect to make money on the electrons themselves?

Seth Cutler: Yeah, so one I would tell you is we’re building out a network, right? So there’s gonna be, there’s gonna be some sites that outperform other sites and some sites that underperform other sites. But at the end of the day, it’s a full network we’re building to provide customers with, honestly, the network that they can rely on for their everyday travel and vacation travel, right? And cognizant of the fact that it’ll all work out from a network effect perspective. Yes, secondarily, what I would tell you is I think you gotta take a little bit of a longer view on where the market’s at.

You know today there’s a charging gap, but we know vehicle sales are not gonna go to zero. So we know more cars will get sold this year, next year, the year after. We know that the types of cars coming to market are vastly superior to the cars that have been on the market. Longer ranges—

David Roberts: Mm...

Seth Cutler: faster charging, that’s going to lend itself to higher adoption rates. So, you know, if this was a baseball game, we’re probably still in the second inning, honestly, in terms of where the market’s gonna be and—

David Roberts: Mm-hmm

Seth Cutler: adoption is gonna be. And as more cars are sold, there’s more demand. As more demand gets there, obviously that bodes well for the charging world. And then lastly, you know, I think to your point about what the averages are, there’s probably some sites that in general, competitors and folks in the industry that that outperform and/or underperform other locations because again, in this next phase of infrastructure build-out, customers have choice, and with choice they’re looking for what is a great experience and what’s affordable. And that’s really what IONNA is focused on, is to make sure that we’re there for— we’re meeting customers on the road to where they’re trying to go. So that, that’s how we view it.

David Roberts: So let’s talk about the demand charges then. So just for listeners who aren’t familiar with this is sort of like, this is where the utility charges you not a flat fee for every kilowatt hour, but specific charges based on your highest use. And so DC chargers run into these demand charges wherever they go because you get these sort of like fast, intense draws of power. I wonder how you’re thinking about that.

I mean, well, the obvious question here is, the obvious way to avoid this is to have a little solar and battery on site so you’re can, you know, spread out your, spread out your usage, spread out your draw from the utility to avoid those spikes. Are you thinking about that? And otherwise, how are you trying to get around these demand charges?

Seth Cutler: Yeah. I’ll start with, you know, we— when we started the company early on, and part of what’s allowed us to scale so fast has been extreme focus, like this urgency and focus on getting the quality right and getting sites built fast. So we had opportunities to put batteries in place early on, and we made conscious decisions not to go do that because it’s very easy to get distracted and lose out on what the mission was and the mission continues to be, which is put the driver first and deliver the best experience to that driver from a charging perspective. So putting batteries in doesn’t help the driver. It does help IONNA potentially, if you can make the financials pencil—

David Roberts: Mm-hmm...

Seth Cutler: but it doesn’t help the drivers, and that’s where a lot of companies get lost, I think, in terms of what they’re working on. I think as we get into, you know, future years, as the network gets built, as we feel that we’re in a good spot and we think we can add benefit to drivers on the economics, we’ll look to put batteries in or do other things from a demand mitigation standpoint, demand charge mitigation standpoint.

But for right now, it’s not a focus of what we’re trying to do. And what I would tell you also, though, is, you know, a lot of the economics tie back to how well and efficient the company’s run. Because if you have a lot of, you know, G&A costs or, you know, general and administrative costs in terms of, you know, marketing expenses and development expenses and what it costs to run the business, you obviously need to charge more at the charging bay to cover those base costs.

David Roberts: Right.

Seth Cutler: And we have been hyper-focused on how do we remain efficient and agile, to ensure that we can, you know, run the business efficiently while ma- while achieving our goals for our customers and being an affordable option to drivers on the road.

David Roberts: How difficult is just getting the power? I guess maybe if you’re attaching to an existing site, like a Wawa or whatever, I don’t know why I keep coming back to Wawa, I just like saying Wawa. Presumably they have an interconnection agreement and power available. But a new site, like how big of a barrier is interconnection and like u- kind of utility hold ups and just getting a hold of the level of power you need, which is a, you know, a lot of power, especially get to higher utilizations, you know, it’s a lot of electricity. How big of a challenge is that?

Seth Cutler: Yeah, so actually, irrespective of Wawa or whether we build our own site or we build it on a corridor without a gas station nearby, we always get it on meter and transformer from the utility. So it’s the same problem irrespective of where we build. But yeah, I mean, the biggest problem for infrastructure is getting permits and getting power. The actual cycle time to build a site honestly is very fast. You know, we can build a site. We built— we have one site, this is internal to IONNA, legendary Tucumcari, New Mexico. We built the site in six days... um, and energized on the seventh, which I guess sounds funny as I say it, but that’s literally what happened.

David Roberts: Laughing… I’m guessing it takes longer than six days to get a permit for anything to do anything anywhere.

Seth Cutler: Exactly. And so that is the biggest challenge in infrastructure is how fast can you get a permit, how fast can you get power. I think some parts of the country are faster than others. Some parts of the country are slower than others. And so that’s what we’ve been working through, but that’s also why we’ve been growing our site pipeline and site funnel so fast because it allows the ones that move faster to kind of be your short cycle sites that you can build a network out. We got our Kansas sites on first.

It allows the longer, the longer lead sites that might take into the year timelines to measure, time to fill in and be your long cycle sites as we build out the network overall.

David Roberts: Yeah, you mentioned how you need to work with utilities and you view utilities as partners, and I know you probably have to say that, you have to be nice to utilities. But they are... They’re the ones that make the money on these demand charges, you know, and they make more money the more, the higher the demand charges that they charge you. And there are also some utilities that run their own competing charging networks, like in Florida. I guess I just wonder, like, how much of an alignment is there between your interests and the utilities’ interests? What is that relationship like?

Seth Cutler: Yeah, I mean, utilities are in the business of selling electricity to businesses. We’re in the business of selling electricity to consumers and buying electricity from utilities. So it is a very much a symbiotic relationship between IONNA and the utilities. You know, I think, I think like every, you know, large organization, there’s processes that they followed, and so we’ve done a lot of work to, as I’ve said in other podcasts, other interviews, to partner with them to say, “Okay, what is the process, and how do we help in that way?” Right? Yeah.

And so there are some utilities where, you know, we do some of the utility construction, portion. We’ve worked the utilities in terms of you know, we worked— PG&E is a great example of that. We work with them on their Flex Connect program of how do we make sure that we can, you know, mitigate demand during certain peak hours and peak days of the year.

David Roberts: Yeah.

Seth Cutler: There’s other utilities where we’ve undersized transformers and do, you know, whole site, energy management, to be able to meet the, whatever the requirements are for upstream power. So, you know, we’re— IONNA’s born out of partnerships. You know, we have eight OEMs we work for that are, that are staunch competitors but have to work together to drive the business forward. We try to treat it the same way with working with utilities to make sure we’re partnered with them to get these sites turned on as fast as possible.

David Roberts: Yeah. Yeah, I wonder, like, to the extent you can tell us, like, do utilities— do you find generally that utilities want one of these things? Like, you know, I always find utilities’ incentives and desires it’s somewhat mysterious. Like, have you found that they welcome and want one of these things and are trying to work with you, or is this like, “Oh, no, a burden, a big, spiky, unpredictable consumer,” you know, “This is a drag. Let’s make them jump through a bunch of hoops.” Like, what are the utility incentives here to the extent you can explain them?

Seth Cutler: Yeah, I have personally, and I’ve talked to quite a few utilities, not just in the last two and a half years being at IONNA, but, you know, in the course of my career-

David Roberts: Yeah...

Seth Cutler: I’ve never met a utility that has said, “We’ve— we hate EVs, we hate electrification.”

David Roberts: Mm.

Seth Cutler: “We don’t want your charging hubs.” That doesn’t happen, at least not in my experience. What does happen is they might say, “Hey, listen, you’re trying to put a charger on this city block, and the feeder feeding this charging or the block you wanna go do—

David Roberts: Right...

Seth Cutler: doesn’t have the, you know, existing power, so you can’t build it here.” Like, you can build it here, but it’s probably gonna take three to five years. And we’ve walked away from sites because of that.

David Roberts: Mm.

Seth Cutler: We’ve also, we’ve also kept sites. I’ve got a site right now in California where we bought the land, found out after the fact that there’s not enough power. And we’ll build it in 2028, and that’s okay, right? That’s okay because we’re taking a long-term view of how we’re building up the network and we need sites in 2028. It’s not just what we need now. So again, this goes back to, like, how do you make sure that you’re working with the utilities early on in terms of these are sites we’re evaluating, where does it fit with where you’ve got, capacity needs?

David Roberts: Right. This idea of these freestanding sites, I’m sort of vaguely fascinated by this. Like, is there, a template, like, that you’ll be following? Like, will they look the same wherever I encounter them? Are they gonna be, like, customized to different sites? And also, a second question about those is one of the sort of notorious things about gas stations is they don’t make a lot of money on gas. They make most of their money on selling you snacks and whatnot in the gas stations, in the, you know, in the stores. Are you gonna, do you view the sort of sales of amenities and stuff that are attached to your chargers as a serious revenue generator?

Or are they mostly just to lure people to the power and you make money on the power? Like, what’s the sort of revenue balance of selling stuff alongside them?

Seth Cutler: It’s a great question that we don’t know the answer to yet. Um—

David Roberts: Mmm.

Seth Cutler: But I’ll answer it this way, and I’ll give— And I think this is where some of the conversation gets more interesting in terms of what we’re doing and where we’re experimenting. You know, I think a lot of companies forget why they’re, why they’re there, right? And I think as I tell, as we talk internally at IONNA and we tell the team, like, this is a very simple business. We’re in the business of selling electrons. That’s what the business is.

David Roberts: Mm.

Seth Cutler: It doesn’t mean that there might not be other ways to monetize what I call the platform or the network later on, but if we try to get fancy and get cute and think of all the ways we could monetize it right now, we forget that there’s a driver, a mom, a dad, a grandparent, someone’s kid who’s trying to charge their car, who’s looking for a reliable, safe, affordable charging experience. And so we need to be hyper-focused on that.

David Roberts: Y-yes, but while they’re charging, they’re sitting around for 20 minutes. That’s, you know, like, t that’s a... No way you’re not gonna view that as some kind of revenue opportunity, these people sitting around for 20 minutes. I mean, a gas station, you’re sitting around for, like, five minutes, but max, you know. You have people sitting around for longer than at gas stations. They want something to do. What are you know, so what are you gonna give them?

Seth Cutler: Well, so we give them stuff today, right? We give them stuff today with our partners, with Wawa, with Sheetz, with Casey’s, et cetera, or they come to one of our sites where we built out an amenity. Apex, North Carolina, Houston, Texas.

David Roberts: Yeah, like, what does that look like? What does it— give us a, give us a visual.

Seth Cutler: Yes, it’s fair, right? So for those sites, let me answer your first question before, which was, are they gonna all look the same? And the answer is no. And that’s kind of something that’s really unique about how we built this out, and I can tell you why. We go deeper there. And then in terms of what we provide them, you know, typically, it’s driver lounge, 24/7 access, couches, chairs, seating, bathrooms, vending, or really what I would call full c-store with Amazon Just Walk Out technology, where they can go buy snacks, drinks, et cetera.

David Roberts: Mm.

Seth Cutler: And so each of those, each of those full-scale Rechargeries, and I think we’ve got just about six of them open right now with dozens more coming, that’s what it provides, is basically a, an IONNA base experience, 24/7 safe access, clean access to these facilities.

David Roberts: Do you require, I wonder how much human, you know, the charging— The chargers themselves do not require human attendance, but what about the amenities? What about selling the food? What about, you know, security? Like, are there human employees at these things?

Seth Cutler: There are not human employees based here 24/7. We have a lot of security built in terms of how you can access them, so you have to scan a QR code. We have other restrictions that we, that we, that we put in place. We’ve got security cameras built in.

David Roberts: Scan a code to get in the lounge thing.

Seth Cutler: Yeah, correct. A QR code. They scan, they scan a QR code and, you know, in some cases you have to actually be in a charge session before you can scan the QR code so that we’re restricting access to those folks who are charging.

You know, in some ca- depending on, in some cases, you know, we might, we might contract with local security that might, that might, you know, come by every so often. And even for sites, you know, honestly, even for sites where, we don’t have the amenity, you know, we put in certain cases 24/7 cameras and lighting, again, to provide safety and provide, to provide, you know, a field of vision at these locations.

So we’re constantly looking at beyond just the charging, what needs to take place. And, but just, but David, just going back to your other question before about providing someone an experience and how you monetize it are two different things, and that was where I was driving before, which is we’re hyper-focused on experience.

So that’s why we provide all these amenities. But it’s not like I have teams of people running around trying to figure out how to monetize drivers and how to how to make money off of them when they get there. What I’m trying to make sure is when they get there, it’s clean and it works.

David Roberts: Mm. And are the— Final question about the sort of like amenities thing is, are these customized at all regionally or like based on whether it’s in a city or on a highway somewhere? Like, I guess how much work is going into sort of customizing the experience on a location-based way?

Seth Cutler: Yeah, I mean, I think that’s actually the fun part. So, you know early on we said, we said, “Listen, we know we wanna do things differently. We wanna buy land. We wanna build our own amenities.” And in some cases, we went and bought a green field piece of land. It was a, you know, a piece of dirt or grass, right? And we, and we built... And our Houston, our Houston Rechargery is just that, where we built from the ground up an amenity, and we customized it for that location.

What could we fit there? We wanted to build no less than eight charging bays. What could we fit?

David Roberts: Right

Seth Cutler: Well, what could all we could fit was two bathrooms, outdoor seating, vending machines. That’s what we could fit, and we, and it’s a great site, and we know that ‘cause of how much people, how many people come on a daily basis.

But then we went and we found other sites. Hey, this is a, you know, we found in our Apex, North Carolina location, which is just outside Raleigh, the suburb to Raleigh. We cut our first ribbon there. That was a 100-year-old gas station. We thought, “Well, that’d be real, that’d be really cool, right? Let’s take a 100-year-old gas station and make it the service station of the future,” right?

David Roberts: It was closed down?

Seth Cutler: It was, yeah, it was clo— I mean, it was a service station that was opened in the early 1900s, shut down in the ‘60s or ‘70s, and became a I think they were selling kitchen granite top... right, and when we took it over.

So that was, that was unique ‘cause we made, we made that into an experience. That one has a local entrepreneur that sells baked goods out of that site. Right? And the reason for that was because the zoning requirements meant that you couldn’t have a refueling center, but you could have a local restaurant or bakery. So that’s, so it’s classified as just that. And—

David Roberts: Oh, so it’s technically a bakery with chargers attached.

Seth Cutler: Exactly. Yep, 100%, right? So that, so what, we’ve been very flexible as we work with cities and towns, and very flexible with the types of sites that we’re buying or leasing to, again, bring really great charging to customers. And we’ve done that in, you know, there’s like, there’s a list of sites I can give you. Each one has a story of an old gas station of an old natural gas station, of an old car dealership of an old Subway’s restaurant that we’ve taken over, and we’ve converted it to an IONNA Rechargery.

David Roberts: Interesting. The chargers themselves, you’re working with eight automakers. I’m sure they all have their own apps. They all have their own gizmos. How do you make the, like, the literally the plugging in and charging itself, how do you make that consistent across all those apps, across all those different kinds of vehicles, across the two basic kinds of hookups? What does the charger look like, and what does the software look like, and what is the experience like? Am I scanning a card? Am I tapping a card? Am I... You know, is it, is this something where it recognizes the car when I pull up and I don’t have to do anything? What is the experience of charging itself like?

Seth Cutler: Yeah. Well, I’ll start with the one thing you don’t do is download an IONNA app because there is no IONNA app.

David Roberts: Oh, really? There’s no separate app.

Seth Cutler: There’s no app, you know, and there’s, and there’s no intention to make a mobile app. And the reason for that is because, to your point, every OEM, every automaker has an app today. ChargePoint has an app. Presto has an app. EV Connect has... I can go on and on. So we actually have 14 different apps that you can use at IONNA, but none of them are IONNA.

David Roberts: Hmm.

Seth Cutler: And on top of that, every charging station has a credit card reader on it. And we’ve got, you know, Plug&Charge and AutoCharge with, you know, a significant number of OEMs, even beyond just our eight, right? So we have the eight investors that we’ve turned on Plug&Charge for most of them, the rest coming very soon. But we’ve also turned on—

David Roberts: So that means— So just to, just to clarify for listeners, that means I can drive up, grab the charger, stick it in my car, and it recognizes my car and will charge it to my account without my scanning anything or tapping any, or doing anything.

Seth Cutler: Exactly. A frictionless experience for drivers.

David Roberts: And that’s for some OEMs, but not others.

Seth Cutler: Yeah. So on our eight OEMs today, the majority of it has have it activated, and the rest are, the rest are getting ready to launch this year. But we’ve also turned it on for Ford drivers, Rivian drivers, and Volvo drivers as well. So again, we’re looking for ways to reduce friction in the charging world for all drivers that drive EVs.

David Roberts: Do you think that’s gonna... Do you think the sort of momentum is everything’s gonna end up there? Like, just Plug&Charge is gonna be kind of the default within a few years?

Seth Cutler: I think so. I mean, I think it’s a, I think it’s a great experience, right? You’re not, you’re not fumbling with key cards or credit cards, et cetera. So I do think so. I think it just takes time.

David Roberts: And how do you ensure reliability? Like, I’m sure all the other previous makers of chargers wanted reliability as well and probably boasted a lot about it, and then they, you know, still today you show up to a lot of these and they just don’t work. Like, what are you doing to ensure high reliability?

Seth Cutler: I think there’s three, there’s three ingredients that go into making this reliability cake, we’ll call it. Number one is, you know, really around alerting, monitoring and diagnostics, and we’ve built a lot of in-house tools in terms of our ability to monitor and to detect when there’s an issue at a location or on the network as a whole or at a site. And so that then leads to operationally how we’ve built our processes and how we respond to things. So if there’s an issue, how fast can we respond to the detection? Do we have parts on site? Are we storing parts in hubs near sites? And do we have labor nearby?

David Roberts: Right. Yeah, and do you, are you sending an IONNA employee, or do you have, like, contractors? Like, if there is a problem, who are you sending and what— and whose equipment are they using to fix it?

Seth Cutler: It’s both. So we have, we have IONNA employees, and we’re staffing up more in terms of IONNA employees going out to sites, and we have third-party vendors that we also rely on for labor. So it’s, so it’s a combination of both, and it’s dependent upon how fast we can get someone to that site. Which is, which is really that third pillar I was gonna tell you was, is really culturally how we built the organization.

You know, we have this idea of driver first, and it lends itself to how do we get biased towards action of, you know, if we... So I’ll give you an example. If we see an issue or a perceived issue at a site, customer calls in and says they had a problem charging, we do what’s called a health check. We automatically roll a truck within less than 24 hours with some parts on hand. We have a Pelican case of parts that we go to the site with to validate was it a real issue or was it something that happened with that particular customer?

Because what we don’t wanna do is get a call in or see some sort, some sort of feedback on social media and assume it was probably the driver or it was a one-off situation. We wanna get eyes on the site as fast as possible and validate that the next driver won’t have a problem.

David Roberts: Got it. And what are you, and is the promise here. Yeah, like, is there a, is there a percentage reliability? Is there some sort of target or cutoff here? Like, what can you realistically promise? I mean, I assume 100%. I mean, the thing is, like, gas stations, people don’t think about it, but you basically get 100% reliability at gas stations. Like, you know, every gas, every gas pump works to a, you know, maybe with, like, a .001 remainder. Is that kind of what— Is that the goal here? Basically, like, it all, it all works all the time. Like, what is s- is there a metric you’re shooting for?

Seth Cutler: Yeah, we have several metrics that we, that we shoot for internally. You know, it kinda goes back to, like, our utilization. There’s certain things we don’t share externally in terms of the actual statistics and numbers. But what we are looking for is to ensure that drivers can always get a charge on their first try. And, like, things do break. I mean, I think I if you go to a gas, a gas station, there’s lots of data actually on gas station performance that if you looked up, you might be surprised at how low the numbers are in terms of what numbers they hit.

David Roberts: Hmm.

Seth Cutler: But, like, if you go to a gas station, and it’s been a while, but, like, you know, you might see yellow bags... over the handle, right? Because—

David Roberts: Right. Yeah...

Seth Cutler: they are broken but and things do break. These are mechanical devices. They’re electromechanical devices. Things break. So it’s really a question of when they break, how fast can you action it? And the only way you can action it fast is did you detect it? Did you have parts nearby, and did you have labor to go fix it? And that’s where we’re hyper-focused on is all three of those.

David Roberts: Mm-hmm. A broader question, which is, you know, I’d like, I don’t know if you just saw the article that was just out in The New York Times a couple of days ago, basically about the US EV market is not in good shape, you know, unlike EV markets almost everywhere else, which are booming right now for obvious reasons. EV sales are slowing down in the US. The consumer credit is gone as of this month. The credit for building chargers, I think, is going away next year. These NEVI grants from the, from the DOE, from the Department of Energy, have been clawed back or eliminated by the Trump administration. And like, it’s grim. It’s a grim time.

Are you worried at all? I mean, and not only is it a grim time, but some of the automakers are US automakers. I think even some of the ones involved in your, in your consortium there are explicitly pulling back on EVs, canceling EVs, canceling models and such.

So are you worried about launching during this, what is clearly a downturn? And I’m not sure anybody knows exactly how long it will last. Are you worried about launching in this environment?

Seth Cutler: No, actually. And the reason, the reason I say it like that is because— I think, I think EVs are a really great product, in terms of their performance, in terms of their acceleration, in terms of, you know, how quiet it is to drive it. And when you look at, you know, where battery prices are going—

David Roberts: Mm.

Seth Cutler: Charging speeds are going—

David Roberts: Mm.

Seth Cutler: The range that they’re going, it’s a great product. And great products always win out. You know? Like, you know, there’s lots of examples throughout the, you know, course of human history about industries that were never gonna go away until they went away because the new incumbent, device or technology was just a better solution.

And I think that’s honestly where we are with electrification. It’s taking time to get there, but I have no doubt. And I think— look, I think to add to that, I mean, I think, look, right now charging is still a problem in the US. It’s got a lot better.

But we know that we’ve added sites this year, and we see a really great turnout of drivers coming to our sites, and we’re learning from them. And we also know that more EVs are gonna be sold this year and next year, without a doubt.

And so to me, that tells me that there’s a really good market today that’s gonna be even bigger in the future that we’re gonna go serve.

David Roberts: How much is your business or your business plans or your business projections, your revenue projections, et cetera, sensitive to government policy, sensitive to sort of incentives and regulations at the, at the government level? Are you trying to build something that can operate independently of those?

Seth Cutler: I think we went after NEVI for one or two sites, but didn’t actually collect it or spend it. You know, we are not looking to build out a NEVI-funded network. We’re not, we’re not actively going out there and trying to go find grants.

David Roberts: We should say what NEVI is. I didn’t write down what it stands for. What... National-

Seth Cutler: Yeah. National Electric Vehicle Infrastructure.

David Roberts: Yeah. These are grants from the DOE for charging infrastructure.

Seth Cutler: Right, that they push out to the st-ates. And it was a way to, you know, if you think back before IONNA was here, was it was a way to try to get the market moving, to get infrastructure out there, particularly on corridors. And so we’re not looking for federal or state grants to go build out this network. We’re moving at a speed to really unlock electrification in partnership with the OEMs.

David Roberts: So you think that even the OEMs that are pulling back on selling EV vehicles are going to remain committed-

Seth Cutler: Yeah.

David Roberts: To building out charging infrastructure?

Seth Cutler: I think the future is electric. I think there’s probably a debate as to whether it’s 30%, 20%, 50%, but I think the future’s electric, and I think that’s why, that is why IONNA exists today with eight OEMs, because that’s where the future’s going. And it’s not just going that way in the US, it’s going that way globally.

David Roberts: Yeah. And part of this, I guess, you know, and I was trying to get around this with the sort of economics questions, but, like, already this, you know, the DC charging is not a great- business just purely in terms of revenue, and you’re sort of like, in some sense, doing it in the most expensive possible way. You’re owning your own land. You’re building amenities. You’re investing a lot of CapEx.

I wonder to what extent. Is this whole enterprise kind of a loss leader for the OEMs to help them sell more cars, to help them sell more EVs? You know, like, not that there’s anything wrong with that, but, like, is this meant to be a money-making play, or is this meant to be, let’s make it easier to sell more cars, sell more EVs, and that’s where the profit will be made?

Seth Cutler: No, IONNA needs to be- IONNA is financially independent, or financially independent, it’s a separate entity, right? And so we have to be profitable over time. Infrastructure as a whole needs to be profitable over time, because if electric infrastructure charging is not profitable, electrification won’t work.

David Roberts: Hmm.

Seth Cutler: But again, I think you see around the world where it can work. It requires, obviously, a higher density of vehicles being sold, which is where the market is going in the US.

David Roberts: Mm-hmm.

Seth Cutler: But yeah, we are working to become, you know, profitable over time, for sure.

David Roberts: Yeah, and speaking of which, IONITY, you mentioned this earlier, it’s kind of a parallel similar venture in Europe, a bunch of automakers getting together, investing in charging stations. It’s been up and running longer than you. It’s had a lot more investment than you. And IONITY now is reaching to the point where they don’t need to be funded by the automakers anymore. They have reached a point now where they’re getting, like, infrastructure funds, and, like, banks will come finance it because it’s stability and a sort of ubiquity now that they’re getting the access to big institutional capital.

How far away is IONNA from that? ’Cause that’s, you know, IONITY is operating in a market where EV sales are growing at, like, 30-plus percent, whereas they’re shrinking here. So I wonder, how far away are you from being able to access bigger, cheaper capital?

Seth Cutler: Yeah, so right now we are well-capitalized to achieve our goals and the mission that we’re on. So I’m not really worried about, you know, outside capital or about, you know, what that timeline looks like before we go even talk about that.

I think for us, you know, it was always go demonstrate that you can build sites and deliver a different experience. We’ve done that. Demonstrate you could build something across the country that you would start to drive customers to a, from a network approach. We did that last year. This year’s really around giving, scale and density in key geographic markets, which is what we’re currently working on.

So I think we’re well on our way in terms of what our, what the goals are that we laid out, you know, two and a half years ago, and we’ve got what we call this multi-wave strategy that we’re on in terms of how we think about each year and what gate we’re trying to pass as we move at this IONNA speed to get sites live for customers.

David Roberts: And, speaking of the geography, one question here is like the obvious sort of like, I guess, capitalistic incentive is to go with your chargers to where the EVs are, you know. So like go to California or go to, mainly go to cities, you know, like that’s kind of where most EV owners are. How does this, and maybe this just isn’t your business and you don’t care, but, like, how do more rural or sparsely populated or just, like, unsaturated markets where there aren’t a lot of EVs yet, how are they gonna get charging?

There’s always this chicken and egg thing, right? Are you willing to go sort of invest in a place that doesn’t have much EVs yet, assuming they will come if you invest? Or, like, what’s- how do you think about that chicken and egg, problem?

Seth Cutler: Yeah, so I mean, we just opened a site in Gary, Indiana. It’s three days old or four days old, and it’s doing really well. So that is not California, and it’s not the first place-

David Roberts: Yeah...

Seth Cutler: you’d go think to go put chargers. But honestly-

David Roberts: Yeah...

Seth Cutler: it’s outpacing some of our utilization in California sites that have been open six to nine months. And, you know, again, we went out and said from early on, “We’re gonna build a network.” Some of that’ll be California, some of it will be Florida. Today in Florida, I think we’re up to about 20 sites across the state. We’re one of the largest networks now, high-powered charging networks in the state of Florida as a whole. And so, to your point, there’s demand, there’s supply. California has a lot of demand, but also has a lot of supply, and we’re still building there.

David Roberts: Mm.

Seth Cutler: But there’s also places like Gary that have demand but don’t have enough supply, and so we go put a charger there, and all of a sudden you see that demand get sucked, soaked up by a new IONNA Rechargery. So we’re trying to meet the needs of both. I would say we’re trying to meet the needs right now wherever there’s demand, today, and then we have a big pipeline of sites where we think there’ll be increased demand in the future.

David Roberts: Mm. So I’m guessing to some extent, like, the sites that can guarantee high utilization can, at least in some timeframe, help subsidize the sites that do not yet have high utilization. Is that kind of how you’re thinking about it? To get back to the sort of network point.

Seth Cutler: Exactly. It’s a network. It’s a network, right? And I think, like, you think back to, like, the telecom world, you know, if you bought a cell phone back in the early ’90s and I said to you, “You can only use it in this town,” it would be very useless to you if you’re trying to go across the country. But it doesn’t mean that you’d have a ton of activity as you were driving.

So it’s a similar situation with the network effect. There’s some sites right now that are lower than other sites in the network. But as a whole, the network is performing, or is on track to perform to where we want it to be for the year and going forward. So we recognize that.

We also recognize that, you know, we’ve seen this as, you know, if we built one site on a corridor, it may not perform great. But when you start opening the other sites in that same corridor and you can provide a full network to that driver on that interstate-

David Roberts: Mm...

Seth Cutler: you start to see the network effect take place, along all those sites now.

David Roberts: Yeah, I mean, there is gonna be some element of build it and they will come here. You know, like, there is some truth to that. There is, like, people will wait to buy until they are confident that there’s a network around them. I don’t know if that’s, like, measurable or quantifiable, but there is, that dynamic definitely exists.

Seth Cutler: Well, exactly. And, you know, to that point, which we didn’t talk about is, you know, as part of our relationship and partnership with the OEMs, we’ve launched discounts, charging discounts with our OEM partners, right? And so that was kinda step one of this. Step two will be you’ll start to see us, much more prevalent in dealerships now, partnering with the OEM to talk about the benefit of IONNA, which is not just reliable infrastructure, but from an affordability standpoint, there’s now, you know, potential charging packages coming and discounts that we’re offering, et cetera. So this is definitely, a network in partnership with the OEMs in every way possible, including unlocking future sales of EVs.

David Roberts: Right. So you go into a dealership and you s- and part of the benefit of buying this EV versus that one is you get access to a reliable network at a set relatively cheap price for electricity. That’s gonna be, like, a sales incentive at some point. Let me ask briefly, quickly about Tesla. They are the, kind of the 800-pound gorilla here in this space. I think they have something like half the ports in the country. They already have, I think, or at least they boast 99% uptime. They’ve opened their network now where I think everybody can hook up to them, almost everybody. What is your value proposition relative to Tesla?

Seth Cutler: Honestly, Tesla’s done a great job building out their network. They were one of the early ones, and they’ve done a great job in terms of the integration between, you know, the vehicles, and their charging network.

I think IONNA has a real opportunity to deliver the same value, to all eight of our investors, our me- what we call our member OEMs, and beyond. And so we’re hyper-focused on, you know, what is that end-to-end experience that you can have with any one of the OEMs that are invested into IONNA, everything from, you know, navigation and routing and searching and search optimization because, that’s that entire ecosystem and approach. And I think that’s what we can go deliver, not just for one manufacturer, but for all eight and beyond.

David Roberts: So kinda the idea is any EV you buy among these eight OEMs, you’ll have the same ease of experience and uptime that Tesla is now providing to Teslas.

Seth Cutler: Exactly.

David Roberts: And I think they’ve kind of slowed down their investment. I mean, didn’t they pull back on the, on their whole charging network and their whole charging team? Am I making that up? They s- are kind of taking their foot off the accelerator on that part, aren’t they?

Seth Cutler: Yeah, I mean, I can’t really comment on what they’re doing. I’m too hyper-focused on what we’re doing and taking care of drivers. So I... You’d have to ask Tesla what Tesla’s doing on that front. But I mean, they- look, they’ve done a great job, there’s no doubt about it, early on in building out reliable infrastructure and really, I’d say blazing a trail. But yeah, what we’re focused on is really thinking about that entire driver experience beyond just charging, in terms of what happens at that site from, you know, lighting, canopies, trash cans, amenities, et cetera.

David Roberts: All right, final question as we wrap up. So a two-part question. Sort of as you look ahead five years, call it, five years, 10 years, I’d like to hear, A, your sort of fondest hope. Like, what will it look like if you succeed? And then also I’d like to hear, like, what keeps you awake at night? Like, is it access to power? Is it competition from other chargers? Is it getting a return on your CapEx? Like, what is your greatest challenge or fear also?

Seth Cutler: Yeah, those are good questions, David. You know, I think- Look, I think there’s... On the what success looks like, there’s two things I look at for that.

One is people still talk about charging reliability, and I think when people stop talking about it, then I know, like, the industry as a whole has been successful, right? Like you think about the old Verizon commercials, they’d walk around saying, “Can you hear me now?”

David Roberts: Yes. Right, right, right.

Seth Cutler: No one talks about that anymore. Do I have enough coverage?

David Roberts: Right, right, right.

Seth Cutler: Cell phones are so ubiquitous in everything we do in terms of that, right? So that’s number one.

And then I think the other thing too is that we’ve unlocked electrification in this country where charging is not the reason why people don’t buy cars. So that’s, that would be the first pillar.

And then in terms of my biggest fear, you know, look, I think the business, and I’ve seen... It’s been interesting being at IONNA for two and a half years because of how fast we’re moving to build sites and grow the business.

You know, in a typical startup world, you take time to go plan things out and have a product, an idea, and then launch your product and get iterations on it. And we’ve been moving so fast that two and a half years at IONNA, and honestly, in some ways feels like we’ve been here five to seven years in a normal startup venture, right? And so we’ve had to grow up from building a business, hiring people, launching our first site, which is our product, to having, you know, honestly, we’ll have 150 sites open by end of next week.

David Roberts: Yeah, those transitions are notoriously difficult from like the 15-person company to the 100-person company, et cetera. These are sort of notoriously just in terms of execution.

Seth Cutler: Exactly, and so that’s what keeps me up at night is, you know, making sure that we mature, fast enough to make sure that we never compromise on that driver. ’Cause as I was saying, you know, earlier in the podcast with you is like there’s real people tied to the charging at all hours of the night, and I just wanna make sure that we’re never compromising on that. But that takes us making sure that we’re maturing and growing up and scaling to the needs of the drivers out there.

David Roberts: All right. All right. Well, super interesting. Super interesting. And in your success world, this world where people no longer are talking about charging anxiety, where charging anxiety is gone, can- is that by 2030? Is that the idea here, or do you think that’s a longer-term thing? Or is this something that, like, people listening to this pod can anticipate, you know, having in a reasonable timeframe?

Seth Cutler: I’m honestly hoping it’s next year. I mean, I think that’s where I know I wanna be from an IONNA perspective, and I, and I’m hopeful that the whole industry gets there as well.

David Roberts: Well, all right. Your lips to God’s ears, I guess. All right, Seth. Thanks for coming and talking us through this. Super interesting. I’m always, you know, the charging experience is on the minds of every EV owner, so thanks for coming and talking through it with us.

Seth Cutler: Absolutely. Thanks for having me, David. Great conversation.

Roughly a year ago, I did an episode on the Montana housing “miracle,” a burst of bipartisan pro-housing bills out of a red state where you wouldn’t necessarily expect them. Turns out I wasn’t the only one paying attention.

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Next door in Idaho, they were facing many of the same problems: a rapidly growing population, an influx of wealthy out-of-staters, suburbs sprawling out into the wilderness, and rising housing costs locking out the locals. Inspired by their neighbor’s example, in 2025 the legislature convened a Land Use and Housing Study Committee composed of state legislators, developers, industry representatives, and city administrators. The committee was charged to meet between the 2025 and 2026 legislative sessions to scour land-use laws, housing codes, and other regulations to find ways to cut constructions costs, speed building, and keep costs down.

That committee’s recommendations yielded several bills this past session, many of which passed, a few of which didn’t. The reasons for both the successes and the failures are quite interesting and do not fall along conventional partisan lines. We’re going to get into all of that with my guests today.

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Ben Toews is a Republican state senator who represents north Idaho’s district 4, which includes Coeur d’Alene. He is the sponsor of the core Senate bills and the lead Senate champion of the whole package. Megan Egbert is a Democratic state representative out of Boise; she was a member of the interim study committee. Needless to say, they come at the housing issue from very different perspectives, but, remarkably, have ended up on the same side in the housing fight. I can’t wait to talk to them all about it.

Chapters

• 00:00 – Introduction and the Idaho housing package

• 02:43 – How each guest came to the housing issue

• 06:39 – Inside the interim housing study committee

• 09:05 – SB 1354, ADUs by right, and Dillon’s Rule

• 12:52 – The 5,000 to 10,000 compromise, and HOAs

• 15:03 – SB 1352 starter homes, manufactured homes, lot splits

• 16:28 – HB 706 and single-stair buildings

• 18:11 – The permitting shot clock and the 6-day rule

• 19:48 – Living with the compromises, and why counties were left out

• 22:54 – The two bills that died: duplexes and YIGBY

• 28:41 – HB 389, the property tax cap, and the growth undertow

• 34:41 – What the public understands about growth

• 37:23 – Regulatory reform on supply side vs. incentives for housing

• 43:59 – The February deadline and city resistance

• 48:52 – Horizontal vs. vertical density

• 56:03 – What comes next for the committee & Idaho housing

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Ben Toews (Idaho Legislature) & Megan Egbert (Idaho Legislature)

  • Idaho Land Use and Housing Study Committee

  • Idaho House Business Committee

• Other Orgs Mentioned:

  • Idaho Freedom Foundation (mobilized to kill property tax cap loosening)

Company & Industry News

• Governor Little signs two bills cutting local zoning rules

• Lawmakers approve bills to expand starter homes and ADUs in Idaho

• Set of bills overriding local zoning rules on denser housing clears the Senate

• Infrastructure, zoning, incentives: Idaho housing study committee homes in on recommendations

Bills Discussed

• Idaho Senate Bill 1354, Accessory Dwelling Units

• Idaho Senate Bill 1352, Starter Home Subdivisions

• Idaho House Bill 706, Single Stairway Building Exceptions

• Idaho House Bill 389 (2021), Property Taxes

• Idaho Freedom Foundation - House Bill 842, Taxing Districts, Budget Limits

• Idaho Freedom Foundation - Senate Bill 1354, Accessory Dwelling Units

Related Volts Episodes

• A closer look at Montana’s housing “miracle”

• What YIMBYs are learning from their victories across the country

• Why housing is a pass/fail question for climate

• Want less sprawl and more urban infill? Try a land value tax!

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

Text Transcript

David Roberts: All right then, so with no further ado, Ben Toews, Megan Egbert, welcome to Volts. Thank you so much for coming.

Megan Egbert: Yeah, thank you for having us.

Ben Toews: Thanks for having us on.

David Roberts: Awesome. Ben, let’s start with you. You are a longtime business owner in the state, and I’m curious just to hear briefly how you sort of came to the housing issue. I understand it had something to do with you trying to build something. Nothing radicalizes people about housing in America more than trying to build something. Tell us how you sort of came to be engaged on this issue.

Ben Toews: Yeah, certainly. We recognized that there’s a serious issue with affordable housing, especially for the next generation to own their own home. The cost in our area is around $550,000 on average for a single family dwelling. And so, back in 2020, we purchased, a small piece of land. It had a PUD, so it had, 20 units already set up to be built on it, and, it was gonna be small homes, probably average 1,000 square feet. The range would be 700 to 1,200 square feet, and it was on small lots, and I was like, “We can sell these. We’re hoping to sell these in the $300,000 range,” open the door for the next generation to be able to get into a house. And, partway through the process, the city came back to us and we went to renew the PUD, and they said, “Sorry, you can’t do that. There’s new green space requirements, and your plans don’t, match those requirements.” And so they shut the whole project down. And so it was very frustrating. I wasn’t in the legislature at the time, but I saw it as a real issue back then, and I... and it just became more and more of an issue.

David Roberts: Awesome. And Megan, same question to you. You were a librarian for many years and then became a lawyer, an employment lawyer, and were appointed to the legislature a few years ago and then ran and won your seat. What brought you to the housing issue specifically?

Megan Egbert: Yeah, it was actually during the pandemic, myself, like many other Idahoans, were faced with no childcare while we were still trying to work. Which was a very frustrating experience that I know many can relate to. And, I have the, you know, fortunate ability of having a mother-in-law, father-in-law who live out of state, who are retired, who were willing to look for a home here to help with childcare during this time. And I think that that was the first eye-opening experience for me was, you know, they were moving from Chicago, or in theory, were willing to move from Chicago- to Idaho to be close to family. And there was just no options. It was not even a possibility to move here during that time. And then, you know, the second thing that has happened is I have older children. My oldest is 20 years old. She works in the medical field. She works at a hospital that’s about, you know, a 20-minute drive from our house, and she recently, she’s still living at home, started looking for a studio apartment, you know, in a, in a suburb of our capital city here, Boise, and cannot find a studio apartment, that costs less than my mortgage for a 4-bedroom house. And so I think there’s just 2 examples of why this, you know, became so important to me. And then mostly it’s just because this is the most important issue facing Idahoans right now. We know this from multiple surveys and just from our own conversations with people, is that Idahoans are getting priced out of living in Idaho.

David Roberts: Mm-hmm. Well, let me stick with you for a second, Megan. I wanna hear a little bit about this committee, this interim housing study committee, you were on. This was modeled on a similar committee they set up in Montana. I’m sort of curious, you had this room, you have these free market North Idaho Republicans, you got Boise Democrats, you got realtors, home builders, a developer, and the apartment association, the city of Boise. It kinda sounds like the setup for a joke. I’m sort of... I’m very curious how that went down in the room, how that felt in the room, and sort of like what you learned through that experience that you didn’t know going in.

Megan Egbert: Yeah. It was an amazing experience. I will say, though, I came to it late. I took somebody’s spot on the committee, when they stepped down from the legislature, so I was trying to do double duty of catching up. I think the beauty of the committee comes in… is exactly though, what you were just explaining of, you know, how different the perspectives were that were on it. And you know, I myself, although, am technically a Boise Democrat, I probably find myself agreeing more with the free market North Idahoans- uh, on many, many issues, this being one of them probably. And I was mentioning before we started here, I grew up in North Idaho. And it was eye-opening for me, I think, that we got to travel the state with this one perspective that we were looking at, right? So we have industry folks, we have legislators, we have cities, counties, we have representatives from everywhere, and we got to travel the state and look at this one problem. And I think the most eye-opening part for me was that it became very clear that this is not a Boise problem. This is not a Coeur d’Alene problem. This is a statewide problem, and I think anybody who participated in that committee would have to say the same thing. We can talk about local control all we want. Local control makes a lot of sense when something is simply a local problem. This is not. This was impacting the entire state, and there was these common themes that kept coming through in the process.

David Roberts: Interesting. Interesting. All right, Ben, I want to do, a little work here just going through the bills. So there’s a, there was a lot of bills involved. I think there were, like, 8 bills involved totally. I think 6 of them ended up passing, 2 didn’t. I wanna start with the 6 that passed. I think what’s kind of interesting here is you introduced a bunch of these bills early in the session. They ended up getting stuck in committee, basically. Didn’t make it out of committee. So you kind of had to go back, regroup, do some discussion and some compromise with some of the opposition forces, do some rewriting, and then came back later in the session and then ended up passing a bunch of them. So I kind of want to go through the bills and talk about what happened and talk about some of these compromises that you had to make to get them through. So let’s just walk through the bills. We’ll start with SB 1354, the ADU bill, ‘cause I think that’s one of the big ones. Just talk about what that does.

Ben Toews: Yeah, so first of all, Idaho operates based on something called Dillon’s Rule. Essentially any local municipality, whatever power they have is actually granted to them by the state. There’s some states that have a home- that’s a home rule, and, the cities probably in their constitution actually have certain, powers that are granted to them. But Idaho is different than that, and with that means that there’s no reason why at the state level we can’t make some of these decisions, especially when they have to do with property rights. That specific bill gives homeowners or property owners the ability to build an ADU on their property by right, and stops the cities from stopping, from stopping those builds. The importance of ADUs, can’t really be overstated. It opens up the possibility for, you know... Traditionally, they’re called mother-in-law’s quarters. But, right now I have, 2 college-aged daughters living in my home and one’s building-

David Roberts: Same. Same, Ben. Same.

Ben Toews: And one of them’s building out a van to live in because she has zero ability to see a path to homeownership. And even like Megan was saying, even renting is difficult. So she’s building out a van and planning to live in it, and I’m like... I mentioned it in hearings a few times, I’m like, “Hopefully the cities aren’t listening, but my daughter’s probably gonna be living in her van against some city code.” And that’s the reality of what we’ve come to. But that bill, yeah, it’s just meant to open up the doors for families to live or live together on the same property. It allows, maybe retired people to downsize and live on the same property as their grown children. What does that do? It opens up inventory in the, you know, in the larger homes for people to buy. And when inventory gets opened up, it can drive the price down. So really important bill. I- what I- some of the things I love about it can create supplemental income for homeowners, so it could open the door for them to be able to, afford to buy a house if there’s an ADU on it. I had a neighbor a few doors up from me. She was, a stay-at-home mom, and she was able to stay home with her 2 daughters, because she had a vacation rental and an ADU on her property. Up until the city came and shut that down. And then she went to work, and, one of her daughters was essentially a latchkey kid from having Mom at home to, you know, coming home from school without her mom there. That’s the stuff that drives me crazy and makes, these types of bills so important.

David Roberts: And, so one of the, one of the sort of compromises, not just on this bill, but on almost all the bills, is originally they were supposed to apply to cities with 5,000 or more residents, and that got bumped up to 10,000 or more. Does that bother you at all? Why did that come about?

Ben Toews: Yeah. Really we’re talking about rural communities, smaller cities, and, this is really probably gonna impact places where there’s populate- more population density, more so than rural community anyway. So we didn’t feel like that was a major concession, and it kinda... Obviously for political reasons, you have representatives and senators that are, that are in communities where their district might not even have anything over 10,000, people in it, so suddenly they don’t really care about it. So it, opens up the possibility for them to vote and not have to worry about their cities being upset.

David Roberts: Right. Right. And one other thing about that bill is the homeowner association, this is... HOAs of course are sort of a, you know, a fraught topic when it comes to housing. And I think the where you ended up on this bill is a new HOA can prohibit these ADUs, but an existing HOA can’t remove the right to build ADUs without, through the unanimous consent of the HOA. Is that, is that roughly right?

Ben Toews: Correct. That’s exactly right. Yeah. Essentially you can’t change the rules once people, sign into an agreement, and whatever they signed onto should be what it stays at. The idea of letting, an HOA change the rules, I think it’s wrong really. And the sad thing is, I mean, we had to make those concessions to get this through. The frustrating thing is people would say, “Well, if you don’t, if you don’t want the HOA rules, then don’t buy a house in an HOA.” Well, somebody told me that around 90% of the homes that are being built are in HOAs. So I think that’s really not an honest argument, because if you don’t have any other options, if there’s only 10% of the inventory is not in an HOA, you really don’t have that option.

David Roberts: All right. So other bills. There’s SB 1352 about starter homes. Just quickly tell us what that one does.

Ben Toews: Yeah. So it allows, it allows starter home subdivisions to be built, on lots 4 acres or more. A starter home subdivision can be something that has smaller lot sizes. The idea there is to, a lot of the cities will block smaller builds, and obviously the dirt is, like, one of the biggest costs of a, of a single family residence. So restricting the cities from having minimum lot sizes that are larger than 1,500 square feet actually allows some of these smaller homes to pencil and the developers to be able to build them.

David Roberts: Right. And that’s gonna, that’s gonna allow up to 12 homes an acre, so just allow smaller homes to be built. Then there’s a bill on manufactured homes

Ben Toews: Yeah, the manufactured homes. I mean, manufactured homes are not the same as what we envision. I lived in manufactured homes 3 times, 3 different manufactured homes in my childhood, and the manufactured homes today are completely different than they were back then. They look a lot like, a stick-built home, something that you’d see in a regular neighborhood. And so that bill allows by right for, manufactured homes to be put in a single family, zoned area.

David Roberts: Interesting. Interesting. And then here’s a bill that’s really interesting to me ‘cause this is a hot topic. They’re the hot topic everywhere where housing comes up. HB 706 is about single-stair buildings. Talk briefly about what that does.

Ben Toews: Yeah, so, it’s really requiring double, 2 stairways, in these smaller apartment buildings. Really makes it cost-prohibitive to build those. So the single stair... And I didn’t actually champion this one, it was Senator Rabe that championed it. But, it allowed for just one stairway as long as you had, a variety of things like sprinkler systems. It’s a really common sense bill. The idea of having to have, 2 stairways when you have all these other safety mechanisms, was pretty ridiculous, but it was a battle anyway. It got passed by one vote.

David Roberts: Just quickly, who... A battle with... Who’s out there trying to insist on 2 stairs, 2 staircases?

Ben Toews: That would be mostly the firefighters.

David Roberts: Ah, yes. This is... Yeah, that’s always... I mean, I don’t wanna get stuck on this, but that’s peculiar to me ‘cause in Europe, you know, if anybody goes to Europe, these are... these single-stair buildings are absolutely ubiquitous there. And they, and they enable design that’s much more friendly and costs that are much lower. And they’re not... They don’t have any, like, epidemic of apartment buildings burning down in Europe.

Ben Toews: No, the studies, the studies show that there’s, like, I think it was zero fatalities, but - Ali had all the information.

David Roberts: There’s a big fight in Seattle right now too. They’re gonna have some real single-stair champions out there in Seattle right now. Okay. Then there’s... This is also an interesting one. This one is about permitting shot clock, basically like a time limit on permitting, you know, ‘cause everybody knows when it comes to building things, permitting is a huge gateway you have to pass through. What does this one say?

Ben Toews: you know what, I have... I don’t have that information right in front of me, but the idea is, the details of it, but the idea is just to make sure that these projects can be approved in a timely manner. A lot of times they’re getting stopped up and sometimes they’re getting blocked completely just by kind of, you know, delay, delay, delay. Around 25%. They’re estimating around 25% of homes now are... the cost is in, you know, the whole process with the cities.

David Roberts: Yeah. Well, just for the record, it’s 6 days. There’s a 6-day-

Ben Toews: 6 days,

David Roberts: yep ... It says the city has to give you a permit within 6 days, and if it doesn’t, then you can bring in a third-party inspector, do the inspection yourself, and the city has to give you your fee back, your permitting fee back. So... And that one passed unanimously. Everybody seems in favor of that one. And then finally, the final one that passed is about lot splits. I don’t know if you have anything in particular to say about this one real quick.

Ben Toews: Yeah, it’s really, it’s really meant for... It’s a financing mechanism to allow a lot split to, make it easier to finance like an ADU on your property. So allowing it to be 2 separate pieces of property so that banks can loan on them separately.

David Roberts: All right. 6 bills that passed, and that is, a lot. That’s a that’s a, that’s a lot of, that’s a lot of reform. That’s a lot of legislating, thus the, thus the miracle. I wonder, how do you feel about the compromises you make, you had to make and the opposition you ran into, do you feel like there was just a lot of fear? Was there a lot of sensible opposition, or is it mostly just people scared of change? And how do you feel about the compromises you ended up having to make? Do you feel pretty good about how things came out?

Ben Toews: it’s a little bit mixed. I think that they had some realistic concerns. And I lis- I sat down and had conversations and listened to the concerns and incorporated amendment after amendment. But here’s the here’s the really frustrating thing, is I would take all of their amendments, like, I took every amendment they asked for on the twin home duplex bill, and I expected them to go neutral or to support it, and they still opposed it. And so after I dealt with that a little bit, I was just like, you know, it’s tough to negotiate with someone when it doesn’t seem like you can ever satisfy their demands. So, but I mean, I think we incorporated some good changes. We definitely narrowed the impact of the bills, but, the way... I’m totally an incrementalist. I believe that, moving things forward, we can maybe allay some of their fears about what might happen. To me, most of them were irrational fears, and so I tried to deal with the ones that were reasonable and try to narrow it enough to get the votes to get it through. But, I mean, the na- the natural next step when you’re doing incremental, legislation is you narrow it to what, will get it done, and then you just expand it. So we’ll look at areas of impact as a way to expand the legislation in the next session.

David Roberts: Okay. And one other question about the compromises is these are cities of 10,000 and more, but counties are excluded from the scope of these bills. I’m just curious about that because isn’t... aren’t the sort of unincorporated areas in counties, isn’t that where a lot of the sort of exurban sprawl is happening? Do you worry about excluding counties? How do you feel about that?

Ben Toews: It took one major organization off the fight. So it was very, it was very helpful. That was my comment on areas of impact. Those are county areas that the cities are growing into. Most of, like, a starter home subdivision, you’re not gonna see that put out in the middle of a county ‘cause it’s gonna hook to city sewer and water.

David Roberts: Mm-hmm.

Ben Toews: And so, the concept is that the natural area to move to is the area of impact that’s inside the county and the most likely place to actually build, those starter home subdivisions. The ADUs on the other hand, there’s no reason why we shouldn’t move those into the counties right away.

David Roberts: Hmm. All right. There were 2 bills, 2, I think, significant bills that ended up not passing, and they both didn’t pass because of the House. They both kind of died in the House Business Committee On a 7 to 7 tie vote, and I guess it, if you get a tie vote it doesn’t pass.

Megan Egbert: Correct.

David Roberts: I wonder if you have any insight into those. One of those, Ben referenced it briefly, is this duplex bill. Talk a little, just talk briefly about what that said and what your diagnosis is for why, for why for why this one got stuck.

Megan Egbert: Yeah. So the duplex bill would’ve created a new section of code that would’ve prevented HOAs, cities or counties from banning the construction of duplexes in residential areas where single family homes were already allowed. This is something that, like, in my own city, in the city of Boise, they’ve already allowed this, for decades actually. This, it passed strongly on the Senate side. I suspect that if we would’ve had more time here towards the end, we could’ve gotten it through the House side as well. I am, you know, very hopeful that this is one that we will see come back this session. Um- you know, to me it’s very similar to the ADU bill. You know, the first-

David Roberts: Yeah. This, well, this was my question. Like, if they’re, if they’re okay with ADUs and they’re okay with small lots with starter homes, and they’re okay with all this other stuff, why would duplexes be a red line? I don’t, I wouldn’t totally get it.

Megan Egbert: Yeah. It’s perplexing to me. You know, what, the first place I rented out of, you know, moving out of my parents’ house, because back then we could move out of our parents’ house. I w- You know, I join you both in having 2 college-age, you know, students, who live at home. But the first place I moved into was a duplex where it was an older couple on one half of it and then they rented out the other half, you know, to compensate for some of their mortgage on the property. It makes a lot of sense. The only argument I heard about this one, which I do not agree with actually at all, but, you know, somebody said that duplexes, you know, decrease your property value if there’s duplexes in your neighborhood. I think that’s pretty absurd. We’re literally just talking about, you know, the same type of dwelling as a house. It just has, like, a wall in between it.

David Roberts: Yeah.

Megan Egbert: It actually saves on infrastructure. You know, there’s a lot of reasons that duplexes make sense. So I’m very hopeful that we can bring that one back with a little bit more time. And then the other one was what we referred to as kinda the Yes In God’s Backyard.

David Roberts: Um- Yes, YIGBY.

Megan Egbert: YIGBY!

David Roberts: This was, there was one of these in Montana too. I think that these have popped up in several places.

Megan Egbert: Yeah. I think this is also a really important one. So this would permit the development of mixed use and multifamily development on land that’s owned or leased by a religious organization. So as an allowable use without any special approval from elected officials. And there’s some exceptions in there of course. But it would also ban, you know, them from restricting the building height, like arbitrarily. It would put some sideboards on what they could declare for the setbacks, and like parking minimum requirements. All the ways that we sometimes see people try and get around these things to begin with. But this one is so important in Idaho I think because, you know, we’re... We have a lot of religious entities in our state, and they actually own a lot of land.

David Roberts: Yeah.

Megan Egbert: Like I did a, an internship before for the city looking at this specific issue, was part of what I was tasked with doing, because there’s a lot of faith-based communities out there that want to do something about housing. Of course, it’s the biggest issue facing our state right now. Why would they not want to help? And they are so restricted from being able to help. So this one-

David Roberts: Wasn’t there a big fight in Boise specifically about there was a church that was gonna build a bunch of homes for homeless people? There’s a record of this happening-

Megan Egbert: Yeah, we’ve had a few different things, right? There was a church that was going to use its land, to build some housing, and I believe that it got denied. That might be the one that you are talking about. And unfortunately, sometimes in this process, we think by having this process, whether it’s planning and zoning or city council, these hearings, you know, that we can, somehow hear from the majority of stakeholders. But I think that’s not oftentimes what happens. We just hear from a very vocal minority group.

David Roberts: Yes. A notorious feature of housing politics-

Megan Egbert: Correct ...

David Roberts: is that the people who show up don’t necessarily represent, you know-

Megan Egbert: Correct ...

David Roberts: the broader polity, let’s just say.

Megan Egbert: Yeah. So to me, this bill is really just extending some of, you know, our other ADU type ones about, you know, the rights that you should have when you own property, and really just extending those to religious organizations as well.

David Roberts: And do you think that one, is coming back? Both these you’re gonna, you’re gonna push for next session?

Megan Egbert: Yeah, I’m very hopeful this one will come back as well. I think there was just a lot of misunderstandings around this one, specifically around people thinking that this would, you know, allow them to open, homeless shelters, which is not the intent of this piece of legislation. So I think that there’s some education work for us to do with the committees, but I am hopeful this one will come back as well.

David Roberts: Interesting. Interesting. Okay, that’s the concrete legislation that was on the table this session, and as listeners can tell, that’s, it’s a lot. There’s a lot involved. It’s a very, active session. Ben, I wanna come back to you and talk about what I think is a sticky and sensitive issue there in Idaho specifically. So without getting too deep into the details, basically, Idaho has this law that caps the amount of property tax that cities are allowed to gather, and it caps the growth of property tax. And it’s a little bit complicated in practice, but the upshot is, basically, as I understand it, like, if a city approves a big new subdivision, the infrastructure costs that they have to pay to support that subdivision show up immediately. But the property tax that they would use to pay those infrastructure costs doesn’t show up immediately. It shows up later, and it shows up in sort of, a cut-off limited form. And so this kind of sets up a dynamic where rapid growth hurts city budgets, which is supposed to be sort of an inversion, I think, of what you would want. Like, cities are supposed to benefit from growth, and this sort of makes them kind of averse to growth. And so this was, I think, by common agreement in the legislature off the table during these, during these sessions for all this housing bill. But I wonder, like, do you not view this as kind of an undertow pulling against all these reforms, like making cities averse to growth in some way? And one other thing before I turn it over to you. All these bills have provisions in them, loopholes, I guess you would say, or provisions basically saying cities can opt out of these laws, obeying these laws if they can show that they can’t support the infrastructure needed to build the new housing. But if you have this property tax provision in place, it almost seems like, by definition, mathematically, they can’t support the infrastructure because they can’t raise the property taxes. So I just wonder, like, do you worry that this provision is going to undercut almost all your reforms? And I guess I just wonder how you think about that whole issue.

Ben Toews: Yeah, definitely. I’m very familiar with House Bill 389 that was passed in 2021, before my time in the legislature. I wasn’t a part of the debates, so I don’t know all the rationale. I think the concept was probably not thinking about how quickly Idaho would be growing. And the idea was just to try to make sure that, you know, the local property taxes weren’t going up really quickly. I think it doesn’t make sense at all in the, in the case where an area is growing quickly, and I think that the philosophy that growth should pay for itself is something that’s, pretty well understood, and, you know, I think most people agree that growth should pay for itself, and this kinda... This definitely stops that. So I’d love to see us, do something to reverse that, or at least, at least change it for areas that are growing quickly, because I think it is a, I think it’s a pretty serious problem. I definitely think it can have a negative impact, ‘cause the exact places that we need these homes built, are the places that are running into those caps, right?

David Roberts: Mm-hmm. Politically speaking, do you see any prospect? I mean, 2 bills to loosen, not even remove the cap, but just loosen the cap a little bit, died this session in the legislature. Do you see any prospect politically for that change? I mean, the Idaho Freedom Foundation, the sort of anti-tax group, basically mobilized and killed both those attempts. Do you see politically any prospect for that changing in the future?

Ben Toews: I actually, I believe there’s an appetite for it in the Senate. I don’t remember where those ones died, but I think there’s more likely an appetite in the Senate. My perception is that there’s, House leadership has actually, been opposed to changing that and had maybe championed the original legislation. Maybe Megan can speak to that.

David Roberts: Yeah, Megan, what’s your take on the, on the pro- on the whole property tax mess?

Megan Egbert: Yeah, it’s definitely a problem. I think there’s no arguing that. It, I’m pretty sure it did die on the House side. Or one of the fixes at least. The House Bill 842, which was proposing basically doubling the ceiling, died on the House side. I will just say though, you know, this is an election year, and, you know, what we’ve seen in Idaho is, elections can drastically change the appetite, of one of the bodies, so I’m hopeful that we are going to continue talking about some solutions, ‘cause it’s a huge problem. It’s a huge problem for, like, our ambulance districts, our fire districts. And, so I’m hopeful that we might get some new ideas and some new votes on the House side that could, increase the appetite for it this year.

Ben Toews: Yeah, and I sit on the local government tax committee, and it was like there was Band-Aids being set, sent over to us to try to fix all of the issues, and it’s like a, it’s a bigger issue than a Band-Aid’s gonna fix. So we passed a few pieces of legislation to try to stop the bleeding a little bit, but there needs to be some major reform.

David Roberts: Interesting. And Megan, you traveled around with this committee and talked to a lot of diverse people on the committee. Do you know if the public makes the connection? You know, like, obviously if you go to the public and say, “Hey, we wanna cut your taxes or limit the rise in your taxes,” all things being equal, people are gonna be like, “Yeah, that sounds great.” Do you know if they make the connection between that issue and the housing issue, if people understand this?

Megan Egbert: No, I think as a, as a general idea, people understand, like, personal property rights and those type of things. I think the thing that’s really hard, really complex about housing is the knee-jerk reaction that we see from some municipalities actually make the situation worse, right? So people think that their, you know, city is being overcrowded, and so they might want to set a higher density for lot requirements, right? Like, really high, like 8,500 square feet or something like that. And they think that that is going to help, and in reality what happens is the opposite, right? Because all that means is that now you’re pushing people out to areas where there is no infrastructure.

David Roberts: Mm-hmm.

Megan Egbert: Because, you know, our college-aged kids can’t afford a 8,500 square foot lot. We’re really just limiting then who can live there, and then it just becomes a bigger and bigger problem. And I found that that’s one of the hardest things to explain to this about, for a lot of people. That they’re feeling it, right? They’re feeling it in their taxes, they’re feeling it in the demands on the streets, you know, on the roads around their houses. They’re feeling it just in terms of the p- our population is growing. The thing that I think we have to do a better job of connecting is we can’t just stop growth. It’s not possible. We can’t just tell people- And sometimes the ways that we’re trying to curb it are actually making it worse for everyone in many of these scenarios.

David Roberts: Yeah. Well, I think more to the point, you can’t stop growth and still have all the amenities and nice quality of life you want. Like, you can point to cities where growth stopped- and it did not turn out well for them-

Megan Egbert: Correct.

David Roberts: For those cities.

Megan Egbert: Correct. But then your children can never live there. So if you’re wanting them, you know, to stay here and, you know, they will have to go somewhere else. So yes, it’s... You can do it. Everything will stop, and, you know, the age will stop as well.

David Roberts: Yeah. Here’s a question I wanna ask both of you. I’ll start with you, Megan. So, the interim committees, this committee’s recommendations, the ones that ended up getting kind of taken up, made into bills, and passing were almost all regulatory reforms on the supply side, which sort of kind of by definition cost the state nothing to implement. They’re just reforms of regulations. Then there was a sort, you know, the other recommendations which have to do with subsidies or financial incentives for certain types of housing or maybe in certain places. None of those made it. And I, and I think that probably just has to do with the sort of, sort of ideological balance of the, of the legislature. You know, regulatory reforms appeal more in a red state. But I wonder, Megan, do you think that regulatory reforms are gonna be enough, or do you think for certain, you know, maybe smaller homes or low-income homes, et cetera, that at a certain point you’re gonna need financial incentives. You’re gonna need the state to spend some money to get things rolling.

Megan Egbert: Yeah. I think it’s a definitely a yes and question. So part of it, I think you nailed it, was just like what is the appetite of the legislature right now? Most of that certainly focused around regulatory measures. We actually broke into some kind of interim committees or some smaller committees within the full housing committee. And I was the lead on one that dealt with finance.

David Roberts: Mm-hmm.

Megan Egbert: And part of the other thing is that last year we were really facing a budget situation in our state as well, where we had to make some pretty drastic cuts to our statewide budget in the middle of the fiscal year even. And so that wa- it was also off the table for that reason as well, right? So we have made, you know, workforce housing type investments in the past. I am of the belief that, you know, when I first joined the committee, housing policy wasn’t completely new to me, but thinking about it through a statewide lens was. And, you know, within the first few hours of reading reports and getting information, I was like, “Okay, this is one of those really sticky problems where there is not going to be a solution.” It’s not going to be we pass this piece of legislation and we are going to fix, you know, the housing situation in Idaho. It’s gonna take everything. It’s gonna take everything for multiple years trying different things, adapting it as we learn more. So I am hopeful that in the future we might be able to talk about some financial incentives again. I think it’s really important. But I don’t think we were there for the last session, and I don’t know that we’ll be there for this session.

David Roberts: Ben, I’m curious about your take on this same, on the same question. Do you think that just regulatory reform sort of just like kind of unleashing, un-inhibiting the market is going to be enough? Can you see yourself ever coming around to the need for more sort of direct state funding or intervention in this way?

Ben Toews: I’m definitely more, looking at lowering regulatory barriers and letting the market fix the problem. I think it’s obvious based on, more of my ideology. And I am encouraged. Like, I literally this morning, went through a housing development. These are kit-built homes. They literally drive a semi with everything to build a house. They can build it in 21 days. And, they’re selling for in the $300,000 range, and, they’re perfect starter homes. I do think that there’s a, there’s a huge demand. I was told over and over again, that from the cities and from different people, if there’s really demand, you know, it would be taken care of. Well, no, it’s, that’s not the case. And I’m already seeing how the market can solve the problem. I also, I love there’s some actually, some local nonprofits that are, been pooling money and helping with, down payment, helping pay the down payment, and then, when somebody sells the, if they sell the property in the future, it replenishes that fund. And, I love, more private solutions to that, obviously. And I do think that when people care about their community and they’re, they care about the next generation, we can have more and more of those, having a big impact.

Megan Egbert: Yeah. No, I actually agree with a lot of that. And, you know, in talking about kinda the private-public partnership thing too, I think when we, when we think about money, you know, we always jump to the conclusion that if we’re going to somehow financially help affordable housing in Idaho, that we’re looking at, like, you know, free giveaways, you know, the government intervening. But I think some of the more creative ideas that we discussed too is maybe that’s not what’s right for Idaho, but is there a way that we can incentivize through, you know, tax breaks or something else, people who are using their land in that way where they are ensuring that there’s going to be, an affordable cost for any housing that’s built on it, in the future. So those type of things too I think are more likely what we might see in the future, from Idaho.

Ben Toews: Yeah, I love the idea of incentivizing developers, and if they’re willing, um- To make it based on income level or to have, you know, some restricted deeds where it’s for homeowners. Those are the things I believe that it’s so, SO important. It can’t be overstated how important it is that people own homes where they can put down roots and become a part of the community. And I mean, I’ve lived in apartments, I’ve lived in a lot of different situations, and I just believe that it’s really important. I know it’s not always possible, but as much as we can, I’d love to see more and more people being able to own their homes. Usually it’s the, you know, the most common, wealth creation for the average person is, owning a home and building equity in that home, and then they use that equity to either, you know, get a bigger home or to start a small business. You know, that’s really what drives a lot of what makes our, Idaho so special.

David Roberts: I wanna return to that in a second, but real quick, Ben, cities have until February, sometime in February, to bring their codes into compliance with this law. Some cities are more enthusiastic about that than others. I think there has actually been quite a bit of resistance in Coeur d’Alene, your district, to this. And you, as you said, you’re on the, sort of the city committee, the local, you know, the local, control committee. I’m curious, you know, we’re coming back to this issue of local control versus sort of state control. What are the mechanisms the state has to force compliance on this stuff, basically? What do, what does the state do if cities push back or resist or drag their feet? Are there enforcement mechanisms? How do you navigate that?

Ben Toews: The, I mean, the hope would be that the cities would follow the law. Uh- Yes. And I think that-

David Roberts: Well I don’t know if you’ve seen California’s experience on this.

Ben Toews: Yeah. I think there’s obviously, they have some liability they have to look at when, they’re not following the law, and a developer can, you know, can go and sue the city and say, “You have to follow the law.” So that’s one, and that’s comes from the private sector. I mean, there are other mechanisms we have. I really would hope that we wouldn’t get there, but, there are, there are tax funds that are flowing to the cities. There’s a lot of different ways, levers we can pull, but I’m hoping that we don’t get to that point, and it’s February 1st when they have to have it incorporated. I’m actually not as concerned that they’ll ignore it completely, as they’ll find other loopholes that they can use to block it. I think that’s more likely.

David Roberts: Yeah. Mm, that’s just... Yeah, and that also makes enforcement trickier too because, you know, some of the loopholes are of dubious legality, and then you get into legal s- you know, legal disputes, and it gets tricky

Megan Egbert: Well, and I would just add too though, you know, 2 things. One, I think there’s always gonna be, you know, some potential bad actors out there, but I also feel like we are hearing from a lot of cities right now who are actually really thankful for this. Like, they recognize that this was necessary. They did not know if they were going to be able to do it at that local level, because of that very vocal minority that we’re talking about.

David Roberts: Right. And so I think that there’s a lot of people who know that this is going to benefit the state, even at the city level. And then the other thing that I think we’re dealing with a little bit is just some misinformation. Like some cities not fully recognizing yet, you know, the, you know, I’ve heard people, for example, with the starter homes talking about, you know, infill. This isn’t about infill, right? So, like, there’s still some misinformation out there too about the legislation that was passed. So I think once, you know, again, hoping everybody is just operating in good faith, once they get it in place, once they see, you know, that it’s actually very workable for Idaho, it’s going to feel a lot better. It’s just change is hard for everybody, and we just have to work through that part.

Ben Toews: Yeah, I agree, and I think there is political pressure at some point for the local city council and the mayors, you know, because even though they’re that really loud vocal group that tries to stop it, there’s probably 10 people for every one of those. And there is definitely an appetite for change. I mean, all the polls show that it polls very highly for us to figure out how to help, people get into homes and deal with housing issues. So I think that there, at some point, the political pressure, knowing that there’s solutions on the table and they’re not, implementing them, that should help as well. But I just wanna point out that those small number, the people that are out there working hard, raising families, those are the people that often aren’t gonna be having the time to go to the city council meetings and, you know, weigh in. And so I think that they’re gonna have to weigh in at the voting booth since they’re not at the city council meetings.

David Roberts: Well, also, like, someone who might be able to buy one of these ADUs doesn’t necessarily know that they’re in that constituency, you know what I mean? That’s sort of like a they’re not gonna go mobilize for something that might happen in the future that they might be eligible for, you know? They don’t have the same direct kind of involvement.

Ben Toews: Right

David Roberts: Quickly on this philosophical issue. Ben, you have this op-ed where you sort of distinguish what you call horizontal density from vertical density. Horizontal, I think, refers to getting more people in homes, home ownership, versus vertical, which means building up and more rental basically. And you express a pretty clear preference for the former over the latter. I’m just curious, I mean, there are a couple of bills here, the single-stair bill, the YIGBY bill, you know, would mostly be about, subsidized rental housing. I’m just curious of what’s behind that distinction and why you think, you know, renting is inferior in some way.

Ben Toews: Certainly. Yeah. I mean, and like I said, I rented my first house. I lived in multiple apartment buildings growing up, so, I don’t... I mean, I understand that you just have to find a place to live and if the situation doesn’t allow, then you know, you might not be able to. But the clear preference from the vast majority of people is to own their own home. And the difference is that, obviously, with rent, you’re perpetually, you know, you’re not building any wealth and you’re just perpetually working and paying the rent. The rent can go up. It’s outside of your control. You think about the stability that comes from owning a home, building equity, having a monthly payment that you know what it’s gonna be for 30 years. That creates stability and it, allows people to build wealth, and that’s really important, I think, for our society. I also think that, there’s a, there’s more... Like when I was in, when I was younger and we were living in apartments, I mean, I might live in one city one year and then another city the next year. And so I like the stability and the way that it allows you to put down roots and become more a part of the community when you’re able to own your own home, and that’s why I’m such a proponent of what I call horizontal density. Like, I’m like, if we have to build houses closer together, fine, but people need a way to put down roots. And so, yeah, that’s the long and the short of it.

David Roberts: Do you worry though that the fact that in America, I think maybe more so than a lot of other developed countries, that most people’s wealth is in their home is part of what’s driving homeowners’ resistance to some of that horizontal density? Do you know what I mean? Like, if your property value is your wealth- You know, that’s what... Then you’re gonna fight off anything that you worry might lower your property value, like more homes or whatever. I mean, there’s, to some extent-

Ben Toews: Yeah, if you add supply, if you sup- add supply, then you’re potentially, your house is worth less. I can, I can kinda see that. I think a lot of them are not well-founded fears. Like a starter home subit- subdivision has to be on 4 acres. It’s not infill. It’s not putting tiny homes in your backyard in a, in a fancy neighborhood. So I think that a lotta times pe- it comes down to people, you know, not reading the legislation, not understanding what it actually does and kind of projecting fears, into their specific situation. But I would say that it’s a very interesting cross-section in both chambers of who voted for it and against it, and I couldn’t help but think that people were mostly thinking about their own house instead of thinking about their constituents that were voting against it. You know, because, if you’re thinking about your constituents, the average age when somebody buys their first house now is over 40 years old.

David Roberts: Oh, geez.

Ben Toews: I bought mine when I was 20, I think I was 24 when I bought my first house. And I think about what that has, done for me. I still live in that house right now, and how much of a blessing that’s been, and I really want that for the next generation.

David Roberts: Megan, I wonder if you have any, or you wanna weigh in on this sort of distinction between homeowners and renters. I know that equity was a big part of what drew you to the housing issue in the first place, the sort of, the equity issues involved in the way we’ve zoned traditionally and stuff like that. Do you have any thoughts on this question?

Megan Egbert: Yeah. I mean, like most things, I would say I don’t disagree at all, with what Ben is saying. But, you know, because my district is a little bit different, I might just approach it a little bit differently. I get asked all the time, “Well, what are you doing for renters,” right? There’s always going to be some renters who, regardless, who just aren’t at that place yet where they can buy a house. And, you know, I am kind of a purist when it comes to supply and demand here. I actually believe that building more affordable housing, starter homes, you know, that people can begin purchasing, is going to drastically help renters because it’s just going to mean that there is more and more, you know, supply out there. So I don’t think it’s like an either/or. I am, because my district is a little bit, you know, different, sometimes I do think that we need some vertical, compression here as well. But I think the most important thing is that we are creating opportunities at different price points for a variety of Idahoans, because that’s what we need right now.

David Roberts: Well, in a city like Boise, don’t you think we do need some infill? I mean, just-

Megan Egbert: I absolutely do. It’s the only choice really when you’re talking about a city this big. You can build up or you can build out, in Boise, right? And the consequence of building out is that you are eating into ag land. And so that’s not an option that I think our state is, should be interested in at all. And so for a place-

David Roberts: And you’re jacking up those infrastructure costs every time you build out.

Megan Egbert: Correct. Correct, because then people are further away from the infrastructure, right? And then you’re jacking up the costs for transportation and everything else, because then they’re having to commute to where their jobs are, right? So yeah, in my city, you absolutely, we need to be able to build up. We need to be able to build up a lot easier, but that’s not necessarily the case for everywhere. But I do think for a place like the capital of the state... that’s really important, because the alternative is just not an option, right? We can’t eat into ag land. We have a huge amount of public lands in this state. And, you know, we have historic neighborhoods here. We, any pre-war city in Idaho already has, you know, high-density neighborhoods in it. We know that it can work here. So we might be a little bit different than some places, though.

David Roberts: All right. We’re almost out of time, so I guess I would like to wrap up with a look at the future. Megan, is this committee-- is the committee done, or is it gonna, is it gonna reconvene? Is it still doing, is it still making more recommendations? What’s the status there?

Megan Egbert: Yeah, I mean, my understanding is it’s not necessarily done, but it’s also not necessarily, you know, meeting regularly right now either. I think we still have some work to do from our initial investigation, and some of the lessons learned last year. And we still need to see, you know, how the implementation of the bills that did pass, how that goes. You’re always gonna need to do some tweaking, I think- um, based on what you learn. So I’m hopeful that it was just the beginning, but that we’re probably gonna pause a little bit just to take some time and reflect on what has happened and how it’s working. But I would suspect that we’re gonna see some more bills based on the work that we did, in this upcoming session.

David Roberts: Hmm. Ben, I know you are gonna have another go at the duplex bill, and I, and I know that this YIGBY bill will probably come up again. Gonna try to push that through. Are there other... Like, what’s left on the legislative-- Are there big pieces of a legislative agenda that you think are still outstanding? Are there other bills, other areas you want to cover in coming sessions, or do you think maybe, like, it’s time to pause and see what happens?

Ben Toews: Well, anytime you have a suite of legislation like we did go through, there’s gonna be areas that you need to go back and do, you know, kinda look and see if there’s cleanup areas. So there’ll be a few cleanup bills just to, um... And it’s actually really, it works really well that the February 1st is that deadline, because we’ll be back in session and, we’ll take care of any questions that are out there. We’ll close any loopholes is my goal. And then, there’s actually a lot of opportunity for just natural expansion with incremental expansion with the existing legislation. So, I’d see that incremental expansion on the starter home subdivision. I’d see the twin home duplex bill coming back. YIGBY for sure. We’ll look further at shot clocks and things to lower regulatory barriers as far as the timing of permitting. And the cost of permitting. Sometimes it’s a constraint that has to do with, just they don’t s- don’t have enough, manpower to get that done. So there’s potential for saying, “Well, why can’t we have some type of private parties, as a relief valve if things are getting, you know, getting extended out too long for permitting?”

David Roberts: But, you know, cleaning up the existing bills, passing those 2 outstanding bills, there’s not any big, new bill that you think covers something that really should’ve been covered this time that you, that you have top of mind?

Ben Toews: No, I think it’s just building on our successes right now.

David Roberts: All right. All right. Any final words, Ben? Any final words, Megan, you wanna do, before we wrap up?

Megan Egbert: Just thanks for having us. It was a great conversation.

Ben Toews: Yeah, I really appreciate it. Yeah, I appreciate being able to get the word out. Like you said, if people don’t know about the opportunities for housing, they can’t make their voices heard because they don’t know that, you know, that the possibility’s even there. So I think that it’s important to, what you’re doing to get the word out.

David Roberts: Awesome. All right. Well, thank you both for coming on and walking us through it. Yeah.

Ben Toews: Thank you.

Megan Egbert: Thanks.

As clean electrification proceeds, more and more of the US economy is going to be dependent on the electricity grid, and the electricity grid is going to be more and more dependent on power electronics, software, and computing.

If there’s one thing we all know about computers these days, it is that they can be hacked — accessed and controlled from the outside by bad actors.

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Fears about the vulnerability of the electricity grid to hacking and manipulation have been steadily rising in recent years. Most of the power electronics — the inverters, transformers, and controllers — used to build the electricity grid come from China. If you listen to the doomsayers, they’ll tell you that China is embedding malware on all these devices, with the goal of creating some sort of apocalyptic kill switch that could take out the entire US grid at a stroke.

How much of that cybersecurity threat is real, and how much is hype?

I’ve been meaning to get to this subject for years and I’m excited that I have the perfect guest with me today. Patrick Miller helped write the original cybersecurity rules for the US bulk power grid—the NERC Critical Infrastructure Protection standards—in the 2000s. Then he became the first person in the country with delegated federal authority to enforce them, auditing utilities on the government’s behalf. Since then, he has founded a nonprofit, run a Department of Energy program, and built a consulting firm, all to advise and educate utilities and regulators worldwide on cybersecurity threats.

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It’s an unusually broad range of experience and it has made him a prized voice in the field, a level head in an area filled with uncertainty and fear. I’m eager to talk to him about how cybersecurity threats might manifest in our increasingly distributed grid and how grid engineers and regulators should be managing those threats.

Timestamps

• 00:00 – Introduction

• 02:47 – What state utility commissioners get wrong about cyber risk

• 04:50 – Real attacks on the grid so far: Ukraine, Poland, and the US

• 06:57 – IT versus OT, and why grid devices are hard to protect

• 10:30 – The NERC CIP standards: scope, requirements, enforcement

• 17:40 – Distributed resources outside the CIP perimeter

• 20:54 – Dropping the threshold to 20 MVA, and federal jurisdiction

• 29:12 – Chinese inverters and the commodity board

• 36:09 – Volt Typhoon, Salt Typhoon, and China's intent

• 39:26 – Data centers as a new attack surface

• 43:19 – The trade-off between security and speed

• 47:44 – Cyber-informed engineering and analog safeguards

• 54:05 – AI on offense and defense

• 1:02:21 – Squirrels, balloons, and physical threats

• 1:04:24 – CISA cuts, CIRCIA, and harmonizing the rules

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Patrick Miller (LinkedIn - Personal Site)

  • Ampyx Cyber (Website - Blog)

• Additional Orgs Mentioned:

  • NARUC Cybersecurity for Utility Regulators

  • CISA CI Fortify

Company & Industry News

• NERC inverter-based resource registration initiative enters final stretch for asset owners

• CISA tells critical organizations to prepare for cyber outages

• Rogue communication devices found in Chinese inverters

Books & Articles Discussed

• NARUC and DOE - Cybersecurity Baselines for Electric Distribution Systems and DER

• NERC - Petition to Revise the Rules of Procedure for Inverter-Based Resource Registration

• Patrick C. Miller - Written Testimony before the US-China Economic and Security Review Commission

• CISA - Known Exploited Vulnerabilities Catalog

• CISA - Cyber Incident Reporting for Critical Infrastructure Act

Related Volts Episodes

• The cybersecurity implications of a clean-energy grid

• Why is NERC so worried about data centers?

• Let’s dig a little deeper into virtual power plants (VPPs)

• Are plug-in DERs going to spark a grid revolution?

• Making sense of the data center backlash

• What’s going on in electricity world?

Text Transcript

David Roberts: All right then. With no further ado, Patrick Miller, welcome to Volts. Thank you so much for coming.

Patrick Miller: You bet, David. Thank you so much for having me on the show.

David Roberts: Really excited for this. This is, something I’ve been circling around for a long time, as I said, and I’m excited to dig in. So you, among other things on your extensive resume, you run a program for NARUC, the National Association of Regulatory Utility Commissioners, a training that brings state utility commissioners up to speed on cybersecurity. I guess where I’d wanna start is when those commissioners come in, I suspect that they, like me, like I suspect most of my audience, are... don’t know much, and have all kinds of weird preconceptions. So I’m curious, sort of like, what’s the first thing you kinda tell them to get grounded, and what sort of misconceptions are they carrying around with them?

Patrick Miller: A great place to start. Yeah, I do a lot of work with NARUC to help the state commissioners. As you know, where the federal regulations don’t reach, it’s pretty much left to the states, and in a lot of cases, you can end up with like, you know, 50 different directions.

David Roberts: Yeah, we’re gonna get into that later.

Patrick Miller: Okay. So, typically where I start with them is they come from varied backgrounds. They’re almost always a legal background- or in some cases they may have some infrastructure. They may have been a-- I’ve seen CFOs and other, like even general counsel from various utilities, whether it’s, you know, telecom, water, gas, electric. You start with the fact that they probably don’t understand all the technical things, and the typical questions they come with, they usually sit on one side or the other of a pretty, you know, wide divide. They either think that, you know, everything’s fine, nothing is hackable, this is all a bunch of hype- or they think, oh my God, everything is hackable and China is here to eat your children. You know it’s just, you know. So it’s kinda one or the other. There’s a few that are in the middle, but it’s a slim few.

David Roberts: That’s funny. That’s funny. Well, hopefully we can find some, chart some course in between, in between those.

Patrick Miller: That’s my goal.

David Roberts: Yeah. Yeah. So before we get into some of the details, maybe just to level set, I kinda wanna know- Are we talking about something that might happen or something that has happened? Like, have there been notable cybersecurity attacks on grids that have had negative effects, or is this mostly something that people are worried could happen?

Patrick Miller: Well, there’s a bit of nuance in the answer. There have been attacks on grid companies. We do know that. There’s public evidence of that. Most of these have been situations where the attacker is broken into the system and hasn’t done any damage yet. They just pre-position themselves. They’re holding that access. So in theory, they would use it for something, you know, bad or nefarious later on. What we don’t have is, direct examples in the US where, you know, actors have broken in and actually directly caused damage. We do have evidence of this in Ukraine, more than once, so at least a couple of extra- uh, exercises there, and then one in Poland recently. And when I talked to my contacts in Poland, they say they’ve got a long list of things they just haven’t published yet. So there are some threat actors that are definitely breaking into power systems and definitely causing direct damage, direct harm, blackouts, that kind of thing, just not in the US.

David Roberts: Just curious, in Ukraine, is that, are those state actors? Is that Russia doing that or do we know?

Patrick Miller: Yeah. No, it’s definitely Russia. Yeah, and same with Poland.

David Roberts: So this is s- this is something that’s being used as a warf- a proxy for warfare kind of thing.

Patrick Miller: it is. It’s a proxy for warfare. It’s also a proxy for influence. So, you know, Poland is the major channel that Ukraine gets supplied through, so-

David Roberts: Hmm...

Patrick Miller: Poland’s also been under heavy attack from Russia as well, with basically the same system, same type of attacks.

David Roberts: Okay. So for the US, though, we’ve documented access, but we’ve not yet had anyone, like ‘cause a blackout, say, or something like that.

Patrick Miller: Right. Right.

David Roberts: Okay. So I thought I’d start with a basic distinction here. I think a lot of people, when they hear the word cybersecurity, they think about IT. They think about information technology, protecting passwords, protecting data, preventing identity theft, that kind of thing. But a key distinction here is that, is that cybersecurity in the way that you are dealing with it is mostly about OT, operational technology, physical processes, and those are different. That’s a different approach. So talk a little bit about that distinction and how it, how it’s meaningful for cybersecurity.

Patrick Miller: Sure. Sure. I mean, IT still plays a role. I mean, information technology is how any company runs these days. You pretty much can’t work without your email and your corporate systems and your data. You know, all your customers are in there, all of your billing is in there. In the OT world, in the operational technology world, it’s the actual interface to the physical world. So, like the sensors that take things like fan speed or oil viscosity or temperature. So this is like, you know, think of how much voltage is on the wire, for example. That’s sensed by a digital component now. And the OT is what directly touches the physical world. Like, it’s the last line. So you would click on a screen somewhere, like a picture of a breaker, you click on it, and it will open an actual breaker out in the field. And that travels from someone’s IT system, like a, you know, standard workstation. It’s a Windows machine with a program on it that runs a, kind of an operational window into what they’ve got in their field. So they’ve got transformers and breakers and all the things they use to operate their power system. They can operate those from, like, a control center, through this kind of IT/OT partnership versus send someone out in the field to actually go open that breaker, right? So that’s the automation that we get with this OT. But these systems are not like, um... The OT systems are not like, you know, Windows or Unix or a database or a web server. They’re literally purpose-built devices. They do one thing. They, like they open the breaker. They sense the voltage. They don’t have, like, a, an operating system. They’re not... You know, they’re basically just what’s called firmware and a configuration file. You just turn it on, and it reads a configuration, and it does its thing. So they’re very interesting. And, um-

David Roberts: It seems like on, it seems intuitively like that would be a little simpler and maybe a little easier to protect. Is that right or wrong?

Patrick Miller: it’s easier to hack as well, so, because there’s not a lot of... I mean, they weren’t really built... I mean, think about this. When we first built this out, they were never really connected to anything, right? They were just by themselves. So now that we’ve networked everything and we’ve made control centers that can control, you know, everything in the field, so you know, generation assets, transmission assets, distribution assets, with all of that connectivity, you end up with devices that were never really meant to be connected that have some kind of connection to them. So they weren’t designed, to be protected in the same way. So we have to come up with really unique and interesting, you know, ways to isolate them and limit access and that kind of thing because I mean, realistically, you know, to update them, you have to reboot them in almost all cases. If this thing is required for the grid to run, you don’t just reboot it because you get a blackout.

David Roberts: Right.

Patrick Miller: So you end up with, you know, you gotta wait for the right moment. So you have these, this kinda mishmash of various things. So our main protection is just to isolate the heck out of ‘em and architect it so that it’s very difficult to get to them unless you know what you’re doing.

David Roberts: Hmm. Okay, talk a little bit about these, we’re gonna start with the bulk transmission grid. We’ll get to the distribution stuff later, which is really my true interest. But let’s talk a little bit about the NERC CIP standards, the Critical Infrastructure Protection standards. So you were instrumental in developing these and then in enforcing them. They’re about the bulk transmission grid. Just give us a little texture of like what do they involve? Like what do they require of people? And they’re sort of unusual. I mean, the grid world, the electricity world is full of all kinds of standards that are mostly voluntary. These are not voluntary. They are mandatory and enforceable. So talk a little bit about what they consist in, what they ask people to do, and how they are enforced.

Patrick Miller: Sure. Let’s start with who is required to follow the law ‘cause everyone thinks, “Oh, it’s the whole US power grid.” There is no distribution in scope at all, and it’s only some generation and some transmission. So there’s a handful of exclusions for transmission, so it covers a pretty big, you know, area of the transmission system. Generation, if it breaks a certain threshold, which, you know, to give out some numbers, it’s 75 MVA aggregate behind a single point of interconnection, they have to register with NERC, and they’re required to follow the laws. There’s a lot of generators out there that aren’t 75-MVA, so, and a lot of the times they would even generate facilities to be 74.5 so they could get right under the threshold. But that’s changing. We’re taking that threshold down. It’s gonna go down to 20 MVA and connected to actual distribution environment. So that’s-- the threshold’s getting lower because a lot of those smaller generators have actually had an impact. So that’s who’s gotta participate. The rules they have to follow, it basically, they have to declare, which systems are critical, and these are systems that if for some reason they were, there was a problem, whether you needed it or it got hacked, if it would cause an impact to that system within 15 minutes, that’s a critical system. You gotta protect those. And protecting them means you gotta have security policies in place. You gotta background screen your people and train your people. You gotta restrict who has access to those systems, and you gotta remove their access when they leave. You have to put ‘em inside of a, what, it’s called an electronic perimeter. It’s a firewall, really, and most people understand what a firewall is. It’s kind of a way to protect the systems from other dangerous networks. Then you have to have a physical boundary, so you gotta lock the systems up. You can’t just, you know, let anybody have access, and track who has access to ‘em and-- ‘cause honestly, if I can get my hands on it, I can hack it. Then you do the systems themselves, so you secure each individual system with everything from, like, password security to anti-malware to logging and tracking and monitoring and then of course you have to have incident response plans. You have to test your plans. You have to have backup plans in case you need to restore a system and test those. And then you gotta res- you restrict their configuration, so if you wanna make a change to the systems, you gotta track ‘em all, approve ‘em all. And then there’s the information about the systems that if hackers got it would be really bad. You have to protect that information. And then there’s supply chain security, so you don’t wanna buy from, like, North Korea or China or-- So you gotta, like, “Well, do we really wanna buy from these people? We’re taking a big risk here.” The next piece is the, communication between control centers. There was a Chinese hack recently on-- They basically hacked all the different telecoms. So control center to control center, you have to encrypt that so if someone were to somehow get in the middle of that communication, they couldn’t see what’s happening.

David Roberts: Hmm.

Patrick Miller: And then the last piece is, what, there’s some physical security, additional stuff for, like, really big, sort of transmission substations. The last one that just got adopted is. The monitoring the traffic between those critical systems as they talk to each other so we can see what they’re saying to each other, and that’s the last piece. That pretty much covers the, what the requirements are for the body of the standards.

David Roberts: That seems like a pretty... That’s a lot. That seems like a lot.

Patrick Miller: It is a lot.

David Roberts: So these are like, so these are mostly large entities being asked to do this, right? Large power companies, transmission-

Patrick Miller: Even some smaller ones. I mean, if you have transmission, like if you break 100 kV, and you’ve got transmission, there’s a chance you’re in scope.

David Roberts: Hmmm

Patrick Miller: And if you’re a generator above 75, then you are in scope. So it actually covers a fair number, of the utilities. It’s just which systems, fall into what they call, you know, high, medium, and low ‘cause there’s some categorization in CIP. Most of the systems are in the low impact space.

David Roberts: Hmm.

Patrick Miller: So they don’t have to go through all of those things. They gotta go through some of those things, but if they’re medium or high, they gotta do all that.

David Roberts: This is, and this is a little bit of a subjective question, but like how big of a pain in the arse is that? I mean, if they’re building systems that are 74.5 MVA, this probably indicates that they’d rather not take all this on. Is this something that you can like hire a guy-

Patrick Miller: Yeah...

David Roberts: who will do this for you? Or is, I mean, like how elaborative a process is this? How much time does it take for them to do this?

Patrick Miller: It’s pretty elaborate and what they really expect is they really expect kind of a level of diligence and the reality is if you wanna participate in the, you know, grid critical infrastructure ride, you have to be this tall to ride the ride. And it’s, the expectation is high for a reason and you know, when I was, you know, auditing it and, you know, writing violations and enforcing, we took it very seriously in the fact that no, this is the North American power system. Right. You have to keep the lights on.

David Roberts: Right. Right. Right...

Patrick Miller: So yeah, you’ve gotta have a real program with real people doing real things, and you gotta take it seriously.

David Roberts: And presumably these fines are big enough to really, these are not just things that they could absorb and brush off.

Patrick Miller: The number that gets thrown around is $1 million per day per violation. That’s actually gone up with inflation. It’s over 1.8 million per day per violation. That’s never been seen though. So what they typically do is they’ll write the penalty, and if the utility is like, “Oh, okay, what if we put all this stuff in place and we fix these things and we put this money toward improvements, can we take that cost down?” Usually that’s how the settlements work out so that it’s less of a, you know, go spend a bunch of money on the penalty and then go spend a bunch of money on, you know, fixing it. They try to get them to incentivize the fixes instead. So it works out in a pretty good way where it drives the incentive to do better.

David Roberts: And who is this we that is doing the enforcing? Is this the federal government? Is it some department of the federal government? Who’s the enforcement arm?

Patrick Miller: It’s a branch. So, it, the authority comes out of FERC, the Federal Energy Regulatory Commission. They have basically delegated this down to NERC, which is the North American Electric Reliability Corporation. They’re now called the ERO or Electric Reliability Organization. So they do the enforcement stuff, for FERC. And there are six regions of NERC, so whatever region you’re in, your region audits you.

David Roberts: Hmm.

Patrick Miller: And if you’re in a bunch of regions or all regions, there are some com- uh, utilities that are big enough to actually cover all regions, you get audited. They kinda take turns, and one of them will lead, but the rest of them participate. So yeah, you get, you get audited by your region, and then that goes upstream to NERC and to FERC, and then the penalties come back down.

David Roberts: Okay, interesting. Okay, so here’s the, here’s the bit I’m really fascinated by, which is the CIP standards were designed for the bulk power system, but, you know as listeners of this podcast are very aware, all the action these days is out on distribution systems. All the stuff that we cover every day here, rooftop solar, batteries, EV chargers, virtual power plants, sit outside that sort of regulatory perimeter and are, and in states, as you say, beyond FERC jurisdiction. And so, you know, you get something like a virtual power plant, you get the size and scale of a power plant that might have come under the bulk, the bulk standards. But instead of a single point of, you know, regulation or access or physical whatever, a VPP consists of thousands of devices scattered all over thither and yon, which just, like, intuitively to me sounds like a cybersecurity nightmare. Like you have, your attack surface, as they say, is, has become, you know, exponentially larger. So I’m just curious, like, what are grid s- what are the s- what’s the cybersecurity community thinking about this? How do you reach these distribution grids? What sort of standards do they need, and who’s gonna enforce them? Like, how do you standardize an approach when you have 50 different regulatory bodies involved?

Patrick Miller: Yeah. This one has been a really interesting challenge. So you’ve got some examples where those smaller assets, whether they’re, you know, run by VPPs or in some markets like in Texas where it’s kind of a QSE market, and the-- what we now have just lumped them into a big term called inverter-based resources because it kinda captures all of them, under this umbrella term. So there have been inverter-based resource, we’ll say challenges, disturbances, you know, also known as blackouts, in Texas a few times as a result of these. So, they’re one of the good examples. There’s been some other disturbances and things in the California area. It’s caused some strain in some other ones. We’ve got a pretty good-

David Roberts: Now, are we talking about accidents, or are we talking about attacks?

Patrick Miller: No, these are just, like, grid physics problems.

David Roberts: Right. Right. Right

Patrick Miller: Yeah, so not attacks, let’s be clear. So what they did, just because those grid physics problems, manifested, they were like: Well, what if someone, like, caused this to happen with a hack?

David Roberts: Mm-hmm.

Patrick Miller: That would be even worse. So those two things converged, and basically NERC went out and did lots of studying and invited lots of different participants and stakeholders to the mix, and they came back with this inverter-based resource study. And as part of that, they took that threshold that we were talking about, that 75, MVA for generators down to, 20 MVA. So, and they-- It used to be 75 MVA connected to a 100 kV system, which is basically transmission.

David Roberts: Mm-hmm.

Patrick Miller: They took that down, and now it’s 20 MVA connected to a 60 kV system, which is distribution.

David Roberts: So give a, give us a system. What is 20-- Like, what, would that, would that include, like, a residential rooftop solar generator? Like, how big is that?

Patrick Miller: It wouldn’t include s- this is like a small scale, uh... Like if, like if a whole, a small neighborhood, for example, or a, it’s mostly commercial operations. It’s not likely gonna be rooftop. That it’s, it was mostly generated for people that maybe had some battery storage that they were feeding back in, for example, and they were on the market as a result of that. So it was trying to capture those that are big enough to matter, and they looked at all the way down to rooftop, like, “Where do we draw the line?” So they took it up to 20 MVA because they figured this is big enough in aggregate, if someone were able to control it could cause problems. So based on both the grid physics and the security aspects, they’ve drew this line for what’s called inverter-based resources. They now have to register. They have to do some things. They don’t have to do security things yet, but that’s likely gonna be coming in the future. But we’re starting down the path of roping them into those federal regulations so that there’s less of a state-by-state mix, because there, as you’ve s- probably covered, various states have their own rules about how things are done.

David Roberts: Yeah. How does that work? I mean, how does the f- how do the feds even have jurisdiction here? Doesn’t, isn’t that violating sort of the kind of state federal boundary that everybody cares about so much in this, in the grid?

Patrick Miller: Oh yeah. This has been, it’s been hotly contested. I mean, it’s, I mean, nothing short of a bar fight, really. But what the result of this was, and FERC has, pretty much put their foot down and agreed with it, is that in these situations, it’s affecting an interstate transmission system-

David Roberts: Mm...

Patrick Miller: as a result of their ability to influence it with those smaller resources. So the aggregate possibility has, they’ve -- And they’ve actually done a pretty good job of proving it with physics. It’s not just a speculation. They can, they can show their math.

David Roberts: Yeah. This is, that line has become more arbitrary, every day, just around the physics, just around the technology of everything, and I’ve been wondering. I’m sure this is a species of problem that is gonna pop up more and more, that line between what is and isn’t interstate, what is and isn’t, bulk, is fuzzy at best.

Patrick Miller: Yeah. Yeah, and we haven’t even talked about, like, VPPs that could control assets all over the country.

David Roberts: Yeah, right. I mean, a VPP that’s aggregating resources across multiple states. So you say right now it’s about physics. What would, I mean, I guess the sort of the nightmare scenario here is like you gain, you know, a hacker or whoever, you know, and I, and I again speaking here from a very low base of knowledge, but like a hacker gets access to one battery through an inverter and like via that creeps into the other batteries it’s connected to and creeps its way. Do you know what I mean? Like, it gets in a back door through one thing and then accesses the whole system through that thing, which makes me think then that like you have to ensure that every one of those batteries has protections. Like, is that the threat here?

Patrick Miller: Y- y- yes. To be short and sweet about it, yeah. Well, we did some work with, NARUC, as we mentioned earlier. We did what’s called the cybersecurity baselines for distribution and DER aggregators. Because those DER aggregators are a lot like a VPP in a lot of cases. They aggregate at a point much like a VPP does. So when you’ve got virtual power plants and distributed energy resource aggregation points, you have at your fingertips a very large amount of potential to affect- you know, regional problems, just because you could say, well, you know, if you did it across the whole board, yes, that would cause problems. But if you wanna focus in a certain area and cause a problem at the right time to cascade things, you could, you could do that. So we wrote some standards, and it was basically some very lightweight things. You know, like have passwords, don’t connect these things to the internet directly without a firewall. Really simple stuff, kind of basic things like, you know, if you’re gonna have remote access, put some multi-factor.

David Roberts: Mm.

Patrick Miller: Give them a one-time, you know, phone code to actually log in so that you can’t just like log in with default credentials.

David Roberts: Are there, are there any of the-- ‘cause one of the things that pricked my ear about the bulk, about the bulk standards is, that I hadn’t really occurred to me, ‘cause, you know, I was just thinking about kind of the technology angle of it, but the personnel angle is also obviously a thing? Are there any of those personnel-based standards gonna be applied down at the VPP level, the aggregator level?

Patrick Miller: So far it hasn’t gotten to that stage. And states can certainly go do this on their own, right? And that’s kinda what it was designed for. When we wrote these, what we call the baselines, we based them on, a DHS work called the Cyber Performance Goals, and it was just lightly tailored to fit the distribution environment and for DER aggregators. But it was designed so that states could use it as a model to actually go write their own regulation, and it would give them something to work from. A blank page is always the hardest place to start.

David Roberts: Yeah, right.

Patrick Miller: And the ones that wanna go further and do, you know, go their own route and do their own thing, they’re gonna do that anyway. But there’s a bunch of them that don’t really have anything to work with, so that was designed to give them something, and hopefully, honestly, get some degree of uniformity in the approach.

David Roberts: Yeah. So it’s like a floor, a floor then, a federal floor that states can build on if they want to.

Patrick Miller: At this point it’s just a suggestion. It’s a nice-to-have.

David Roberts: Interesting. And this is another just sort of intuition of mine, which is that once you’re down to, like, 20, that 20 MVA level, you know, you’re not talking about individual residences, but you are talking about some pretty relatively small operations. Like if I’m a, you know, I could have a warehouse, you know, with a bunch of solar panels on my roof and a stack of batteries, I could break that threshold.

Patrick Miller: Yes.

David Roberts: So you’re-- I just feel like there’s a limited amount you’re gonna be able to demand from like a mom and pop, like somebody who owns a warehouse. Like these people are not going to be... You’re never gonna get them to be cybersecurity experts. You’re never gonna get them to hire dedicated personnel or employees just to focus on this. Like I’m just wondering like how far can you get? I- d- don’t eventually you need to start building the safety into the devices themselves? Is that not sort of like where this needs to go eventually?

Patrick Miller: Yes, and we’re also trying to do that at the same time because the way the system is designed, as you’ve already well articulated, there’s not an easy way to do this. You can’t just make all the warehouses out there with rooftop solar and, you know, warehouse-level rooftop solar and batteries, which most of them kind of will break that threshold. You can’t make them become like cybersecure and follow these federal guidelines and get audited, for example.

David Roberts: I mean there’s too many of them

Patrick Miller: And there’s not enough people to do the audits, right? So, you know, on the reverse side of that. So what we’re also trying to do is to actually, you know, do this at the supply chain level. So I’ve testified to Congress on this and some of my other counterparts have. Dr. Stewart is another really smart one, Emma Stewart. She’s brilliant on this subject. Probably the, I would say the global expert on this really. We’ve taken a strong push to get the device-level security to a place where you don’t have to be a cybersecurity expert. And this is not an easy thing to do because we buy a lot of our equipment that, you know, not from the US. So imposing rules on China is a little challenging.

David Roberts: Yes. Yes. And I-- and also I would imagine that like for every barrier you put up to hackers or bad actors, you’re making some incremental trouble just for the people who are just trying to use the device. You know what I mean? Like one more little gateway for the, for normal everyday use of the device, which I’m sure like the people using the devices are gonna resist somewhat and the manufacturers are gonna resist somewhat. So this does seem like a really sticky wicket.

Patrick Miller: Yeah. It’s not an easy one, but, I mean, we have to try all fronts, and if we get an inch out of all the fronts, we actually can cover a larger amount of territory. So it just takes a, you know, takes a whole village of effort to try to make the needle move really.

David Roberts: Well, you’ve set me up for my next question, which is, as I think people probably know, most inverters, you know, we’re talking about inverter-based resources. Most inverters come from China right now. There was this big Reuters investigation in 2025 which said that inspectors found all kinds of little undocumented communication devices inside solar inverters and batteries, and I guess, like, t-two questions. A, what do you do about what I imagine are now hundreds of thousands, if not millions, of those Chinese inverters that are already installed somewhere and running? Like, you can’t yank them all out. You c- there’s no practical way to audit them all. What do you do about those? And then what do you do about the new ones? You c- as you say, we have no jurisdiction over China. Like, how do we exercise any control over what China puts in those inverters?

Patrick Miller: Yeah. I’m gonna keep this at a non-technical level ‘cause it gets really technical really fast. So in general, you’re absolutely right. There’s a, there’s millions of these things out there, and they do have a lot of undocumented communications components in them. But I wanna make sure we’re really understanding what that means without any hype whatsoever. When China manufacturers a lot of this equipment, they literally do it on what’s called a commodity board. So you can imagine in your mind like a motherboard, right? It’s a- you know, it’s a, it’s a computer component where the chips and the memory and all those things sit, and they’ll buy literally millions of these at once. Mm-hmm. And they’ll buy them, you know, from a commodity manufacturer that just makes, you know, boards, literally, like generic board. And on that board, it’ll have all the things just in case you need them, whether you use them or not. They don’t buy specific boards with just these components. So when they g- uh, I mean, 99% of the ones I’ve seen that they’ve gone out and found stuff, it’s just been the commodity board. Yes, it came with a radio, it came with a modem, it came with a place for a SIM card. There wasn’t a SIM card inserted, but it has all those components on there in case the buyer of these commodity boards wants to use that functionality.

David Roberts: I see. I see. So not nefarious inclusion of these, right?

Patrick Miller: Not necessarily. So whenever you see those, you kinda have to take that with a grain of salt and think, well if there’s millions of these things out there, did they just use commodity gear and they’re just not, you know this is just part of the board that maybe it’s used, maybe it’s not. Now, they have found some of these things phoning home and, you know, the routing traffic through China, so that’s a different discussion. That’s at the software level, you know, up where the applications that you’re using, to manage these devices and that kind of stuff. So those are, those are different components, and we, there’s some supply chain there that we can impose because it’s software, right? We can inspect code. We can enforce certain rules, on how code is developed and what’s, you know, certain, like, transparency of the code. We need to look at the code before we’re willing to allow it, these kinds of things. And we’re not just gonna let updates from China happen without someone taking a look at it before it goes in, those kind of things. Well, yeah, I mean, you- So there are some gates we can put in place...

David Roberts: Well, yeah, I mean, you say there might be these elements on the boards just because the boards are sort of generic and created for maybe lots of different purposes. Could those, could those components of the board that aren’t being used be activated later? Do you know what I mean? Sort of remotely activated. Like that’s, I guess, is the worry.

Patrick Miller: Yeah. They’re there, and they could be activated. But they’d have to have... I mean, you could activate them, but you’d also have to configure them. Like, it’s hard to explain, but when you, when, just because you turn something on doesn’t mean it’s ready to be used. Like even a phone, you can turn a phone on, but you have to give it a SIM card that’s got an activation code, that’s got, you know, all these things have to happen before it’ll actually work on a cell network. I mean, you could get a phone out of the box and turn it on and it just doesn’t do anything. So those pieces of gear are there. That doesn’t mean even if you did enable it, that it would automatically work. So it does, it ups the ante in terms of just like flipping a switch and getting this like rogue network of these things to go do stuff.

David Roberts: Right. So are we currently trying to impose standards on these imported inverters? Like, is that, is that something that’s happened, is gonna happen, is in the works?

Patrick Miller: Yeah. States like Texas and Florida have, like, banned certain Chinese gear. The feds have banned certain Chinese communications gear. What we’re trying to do, at least myself and some of my friends that are pushing this, we’re trying to get a place where we can actually just get transparency into what they’re selling. It doesn’t make sense to go rip and replace all this gear. They actually make quality stuff. I mean, we used to have... A long time ago, China made, you know, garbage, and we... It would break, and you’d have to go buy new stuff. They actually make some pretty, you know, fairly high-quality gear now.

David Roberts: Yeah, I’m familiar from the EV space that that story is no longer that story no longer applies.

Patrick Miller: Yeah. So but if, by and large, a lot of the stuff we have out there, it’s gonna work. It’s gonna work as designed. It’s got, you know, it’s gonna fit within, like, the engineering specs that it says it’ll do. So with that, is there a way to basically live on a diet of poison fruit? And that’s really kind of the approach we’re gonna have to take is what if we needed to, I don’t know, repurpose this, you know, so we can take out some of the Chinese com- you know, software components or firmware components and put our own on it? That’s an option we’ve got where we could just basically just say thank you for the equipment. We’re gonna repurpose it to our own needs and we’re gonna put our own software and firmware on it and run it that way. Or we can force anything sold wherever it comes from to just have certain degrees of transparency. We can, we can inspect it, and that way we can sample batches and say, okay, you know, X number of them to a high degree of certainty we think are not tainted with some sort of bad code. So there’s different avenues that we’re trying to push. None of them are, you know, like a switch. None of them are easy. None of them just, you know, roll out and make everything, make the problem go away.

David Roberts: Well, hasn’t the Trump administration discussed a, discussed a wholesale ban of these, which I assume is like—

Patrick Miller: absolutely a bad idea...

David Roberts: not a good idea.

Patrick Miller: Yeah, not a good idea, no. W-we, I mean, what we typically do now is when we buy this gear and we don’t have these assurances, we just isolate the heck out of it so that it just can’t talk to anything. Like it doesn’t get to talk to anything except through this very slim channel, and we inspect every single thing that it does, says. You over-monitor it so that just in case something did go wrong, you’d know. So you can’t prevent it from happening, but you can certainly detect it. I mean you can prevent a lot. You just can’t prevent everything. But what you can limit it down to, and then you just detect on that narrow band of what’s actually allowed, and it gets you a little bit more assurance that things are gonna be okay.

David Roberts: I guess I’d just ask flat out, like, do we have reason to think that China wants to or is trying to do anything nefarious with these inverters? Like, just flat out. Like, is there-- do we have evidence, not just sort of vague suspicions, but do we have evidence that they are-- want to do or trying to get away with something?

Patrick Miller: Uh yeah, short answer is yes. There’s a campaign called Volt Typhoon. And the one I mentioned earlier where they broke into the communications network is called Salt Typhoon, so this is the Typhoon series of actors. Volt Typhoon was, um... And it’s still ongoing, and it’s not like it was, you know, like one group and then we, you know, sent them home and they went away. It’s an active campaign that is still ongoing, and they are trying to f- And they’ve-- we’ve actually found them, and there’s documented evidence of this, it’s public record, where we found them embedded in utilities and various different systems, and they ha- Like I said, they haven’t done anything bad. What they do is they don’t break in and come in the front door with, like, a marching band behind them. They don’t announce their presence. They don’t do-- They don’t drop ransomware. They sneak, they come in very quietly, and they immediately hide. And they don’t even drop, like, malware, so they’re not using-- Once they’re inside, they’re not using malware. They’re using the tools that already exist, so we call it living off the land. They’re very good at this, and it’s extremely hard to detect, but we’ve found a few cases where we can see what they’ve done. It shocked everybody because we were quite surprised at how good they were first, but also how deep they’d gotten embedded. But yeah, so there’s documented evidence that they’re actively trying to do this. They have done it. They’re still trying.

David Roberts: But do we know why? Like, what are they up to? What do they envision doing with that access?

Patrick Miller: They haven’t openly communicated this to us, so we-

David Roberts: I would, I would imagine...

Patrick Miller: all we can say is our best guess is ostensibly it is to exert influence over us, whether there is a particular trade situation, whether there is a particular Taiwan situation, you know, those kinds of things. So it is, they’ve got us in a very tight spot, if we ever, you know, decide to take action against them in some way where they needed to leverage that.

David Roberts: But it does seem like if they came out and said, “Hey, guess what? We have access to a bunch of your energy resources, and we’re gonna shut them down if you don’t do XYZ,” that would amount to something like a declaration of warfare. Like, that would cause the US to freak the hell out, I would imagine, and do all kinds of crazy things. That would not be a small step to take. It’s not like a trade, you know, that would not be... That would be more than a trade dispute.

Patrick Miller: Yeah. One would think. So far we’ve found them, like, in our communications n- like literally almost every single communications backbone, all the major telecom providers, and they, like, they admitted it. They didn’t just, like, shy away from it and act like they didn’t do it. No, they openly admitted it, and we didn’t do an act of war then. So I mean, the, so the, you would think the answer to that question is yes, but maybe is probably the response. I’m not really sure.

David Roberts: Wild. Wild. I guess it would look very different if they actually did something, right? I mean, the fact that they haven’t done anything sort of, I guess, lets all this kind of simmer in the background. Let’s talk about data centers. This is something I did a, I did a, an episode recently, you know, NERC, the Reliability Corporation put out some alerts about data centers. Just because the way data centers are built, they’re very sensitive to perturbations, they’re very sensitive to grid conditions, and they are prone to just switching off and dropping off the grid all of a sudden, which if you’re a, you know, gigawatt data center, you know, gigawatt of demand disappearing all of a sudden can destabilize the grid quite badly. And so that was, those worries were mainly about just the normal operation of these things, like the way they operate is somewhat of a threat, somewhat of a, you know, potential threat to the grid. But then it occurs to me as I’m researching this, like, what if you caused that to happen on purpose? Like, what, you know, what if you got access to those systems and made that happen on purpose? You could destabilize grids via data centers. So is the profusion of large data centers, is this yet another sort of attack surface, and is anyone doing anything about it?

Patrick Miller: Yes. That, what’s called a Level 3 NERC alert, for those that wanna look it up, it was for what’s called the computational load entity. And we’ve looked at these things, and this has been an issue in some areas. Texas is another example again. They have a lot of Bitcoin farms, and they would basically automatically shut off, so they would just absolutely draw enormous amounts of power until, you know, Bitcoin prices or whatever coin they were mining, whatever thing they’re doing, whatever crypto situation they’re in, would hit a certain price threshold, and they would just drop, and it would just swing their grid hard. So they’ve put some rules in place there. And then we saw some other situations that, I mean, recently was the one in PJM. A data center dropped 3 gigawatts-

David Roberts: Good Lord...

Patrick Miller: of power at once and swung. They can typically stabilize these things. I mean, most disturbances, we can stabilize them within seconds to m- you know, a few minutes at best. This took 10 minutes to stabilize, which is a very long time in power curves.

David Roberts: Yes, this is unprecedented. This is not something that has happened in history. This is a new th- a new thing in the world.

Patrick Miller: Yeah. So when we look at these things, as I mentioned, the IBRs, we look at it not just from a-- We start with the grid physics components, and we look at this from an all hazards perspective. So cyber threat, backhoe, whatever the threat is, if that system drops or comes back online and starts drawing and we didn’t expect it- Um, those things can cause grid, you know, problems. So we take a look at this from an all-hazards perspective, and cyber is one of those hazards, and we’re looking right now at how do these computational load entities affect the grid, and what do we need to do to figure out how to balance this? ‘Cause typically you have to have some sort of reserve capability or ride-through capability. Other, like, grid physics components, whether it’s, like, static VAR compensators, and they’re larger grid components that can absorb these swings, and, you know, kinda help us ride it out without, like, lopping off a big area just because you’re having a disturbance.

David Roberts: Right. Didn’t Texas just pass some ride-throughs standards re-re-just recently?

Patrick Miller: Yeah, they did. And we’re looking at a bunch of ride-through stuff for the NERC standards as well.

David Roberts: So those would also guard against a deliberate malicious taking those things off the, off the grid, like-

Patrick Miller: Yeah. Intentionally by design. Like I say, when we’re-- I’ve been on the standards writing process with NERC for 20-something years now. We look at it from, we call it all hazards, whether it’s a cyber threat, whether it’s a squirrel, whether it’s a backhoe... you name it. Or earthquake, flood. What happens to the grid physics, and how do we actually stop that from being a problem?

David Roberts: Interesting. Interesting. Here’s sort of like a broader question. One of the other things I was worried about as I sort of approached this whole subject, and I contemplate the sort of, as I said, the sort of incredibly distributed attack surface we are developing on the grid- which is that there’s got to be, just intuitively, there’s got to be some trade-off here between sort of security and speed. Like we, you know, we want to decarbonize the grid quickly. We want to electro-we want to electrify quickly. There’s a great deal of urgency behind doing that as quickly as possible, and I just think intuitively, like the more standards you put in place, the more requirements you put in place, the more personnel are involved, the more audits are involved, et cetera, et cetera, that is inevitably going to slow things down somewhat. How do you think about that trade-off?

Patrick Miller: I also, speaking as a recovering regulator, I’m a big fan of regulating only absolutely the bare minimum that you have to regulate- and then let other forces operate above that threshold. So you will see things like, business agreements. If you’re an unreliable partner, you’re probably not gonna get a lot of business. If you’re trying to grow, a bunch of, you know, build a bunch of assets and grow a bunch of business, your insurance company is not gonna wanna do business with you, and you’re not gonna get insurance for your plans if you can’t show that you’ve got some degree of responsibility in the mix. So there’s other forces that push the, these components around a bit, too.

David Roberts: So just sunlight, just exposing who’s doing what you think is, does some of the work?

Patrick Miller: Well, it’s gonna be hard to hide ‘cause you know, if a disturbance happens, we typically know where it came from. Um- uh, like in the Spain blackout, for example, one of the bigger problems they had, they were able to come to a fairly rock solid conclusion, but there were still little gaps here and there because some entities just said, “No, we’re not gonna give you our data,” and some entities just said, “We don’t have the data. We don’t log it.” But in the US, you’re kinda required to keep a lot of data and, you know, we use a lot of data on our, just our operations, and we even, like, resell a lot of our data to third parties and that kind of thing for being a data broker, an operational data broker. So we have a lot of data. If something happens, we’re gonna be able to reconstruct that, and honestly, if a disturbance or a blackout happens, FERC is gonna show up, and it’s not gonna matter. You’re gonna have to prove it and show what you did, and you’re gonna get, you know, you’re gonna get that black eye or you’re gonna get the stigma, for operating, you know, rogue, or, you know, irresponsibly. So there are some things that will help. Are they perfect solutions? No. Does it prevent it from happening? No. But every time we’ve tried to prevent a problem through regulation before it happens, there’s a lot of rightful pushback that says, “Prove it. Show me that this is a real problem.” So until we have, unfortunately, it’s a, it’s always a rear view mirror approach.

David Roberts: Yeah. And when you say you’re gonna find who’s responsible, are we talking about- The entity running the power plant, the manufacturer who sent the equipment, the software company that wrote the software or some of, some of each? Like who’s typically, who are you gonna find that was at fault if you, if something goes wrong?

Patrick Miller: The answer to that is yes. And for different reasons, right? Like if you caused a problem where my insurance company is trying to prove that it wasn’t us, but it was somebody else, they’re likely gonna send in some forensics teams to go figure out what happened. And if there’s software liability or hardware liability, they’re gonna chase that liability chain as far as they possibly can because, you know, hell hath no fury like an insurance company that’s been scorned. So you know, that’ll happen. FERC will come in. They’ll wanna do typically like a 1B investigation, especially if it causes a blackout, they send in a blackout investigation team, and those are some solid engineers that go do that work. They’re good. It’s like an NTSB investigation. So, you know, from all different angles, there will be sunlight on that event.

David Roberts: Mm. Okay. Well, this again sets me up for my next question really well, which is I think one of the sort of like disaster movie scenarios that people have in their head is that you get access in one little spot, and then, and then there’s some sort of cascade and, you know, next thing you know, the whole East Coast is out or the whole country’s out or whatever. And so, I know a lot of your work and a lot of focus has gone into thinking about just how would you contain an event if it happened. Like how do you... And you call this cyber informed engineering.

Patrick Miller: Engineering. Yeah.

David Roberts: So just that, that’s like what, how do you build your devices and your systems so that things don’t cascade, basically, I think is the simple way to put it. So talk a little bit about what that means. Who’s responsible for that, and what does it look like?

Patrick Miller: Sure. This is putting in some, we’ll call them analog safeguards. So we put in some things that just aren’t digital. They’re just literally an electromechanical thing, and we used to have, like, electromechanical relays and protection systems, and we’re looking at putting those things back in.

David Roberts: Interesting.

Patrick Miller: Now, they don’t, they don’t operate with the same level of, like, precision that we can do with digital stuff, like a PMU or a phasor measurement unit, unbelievable precision in terms of what it can protect. An old electromechanical one, eh, not nearly close to that. But, you know, it sure does come in handy if someone hacked the system, right? So-

David Roberts: If that’s all you’ve got, it’s better than nothing, I would imagine.

Patrick Miller: Right. So we’re looking at those kind of things, and a lot of other just kind of really physics-based behaviors. So, like, one of the best examples, I go back to, like, a water system ‘cause it’s easy to visualize, where electrons just aren’t as easy. So, like, if the concern is, too much chlorine getting dumped into the water, because someone hacked the system and said, you know, “Put all the chlorine in right now,” what we’ve done is let’s make the pipe that delivers the chlorine super tiny. So even if you set the, you know, 5 billion parts per million, it just couldn’t do it. Let’s make the pump a little tiny pump that can only deliver so much at once. Let’s make the battery supply for that pump only operate at a certain amount, right? So the pump just can’t over, you know, can’t over pump for example, and the reservoir that feeds it, let’s make it really super small. So there’s ways to do this, you know. Now correlate that to the grid physics size, side. There’s ways to put in these analog gates and checkpoints where, you know, key areas are key, whether it’s, you know, generation resources or large transmission through, throughput. We can do this on that scale and just... And it’s relatively inexpensive to put these things in, and it gives us a lot, kind of a safety underpinning. So think of, like, a float valve that operates based on pressure versus a digital sensor. So we’ve got-- We’re looking at those approaches. But, you know, you have to remember, we don’t have one grid. We’ve got four.

David Roberts: Yes. Yes, and each distribution grid, in some sense, is its own little thing.

Patrick Miller: Is its own, right? So, I mean, we got the HVDC, A- sorry, AC/DC ties that break up all the grids, so you couldn’t just black out the whole country at once or all of North America at once. That’s just not a reality despite movies. And then the, I mean, when I get the conversation around could they just hack all the things, and I’m like, if you really went out and did, like, an asset inventory of just all the things that are out there on the grid right now, even the really important ones, and you just got those, the number of different devices would absolutely blow your mind. Like, it’s an incomprehensible number. Their ability to hack that diversity of systems is just, it’s impossible. Well, it’s astronomically improbable. I won’t call it impossible. Even with AI, it’s just improbable. So could they do key points and cause regional problems? Yeah, that, that’s a concern, but nationwide or continent-scale blackouts are just not a realistic thing.

David Roberts: And so when you talk about these physical, these analog sort of gate limiters and type things, is that something that’s a manufacturer responsibility? Is that at the device level, or is that at the system level? Is the utility the one doing that? Who’s overseeing that?

Patrick Miller: Yeah, this is typically the utility. Yeah, this is typically the utility that puts this in so that they can basically protect parts of their system that are very difficult to replace. Because reality, one of the bigger concerns we’ve got is, I’ll keep it simple, the, what are called protection systems relays, they’re designed to keep the grid from burning down, basically. Like, no uncertain terms, like literally burning down. So, and this is keep transformers from exploding, all this kind of stuff. If we can, if we can put those re- you know, like a, like a, for example, an electromechanical or dumb relay- on some of these really expensive transformers, another really expensive piece of equipment, even if they did hack it, this piece of equipment’s gonna keep it protected. So those are the kind of things that we’re looking at. Really big generators, for example, obviously you could, there’s ways to desync and resync a really big generator, and you can actually torque the shaft and, there’s even some that have modeled like actually getting the generator to go boom. That’s a problem. Yeah. So you put these kinds of pla- these, devices placed in the right spot there to keep the generator safe as well. So this is to keep our big components that take a long lead time to build, that are really difficult to replace or fix, we’re protecting those critical components with this kind of protection.

David Roberts: Got it. So even if someone got in, caused some event, we have some reasonable confidence that it would remain reasonably localized.

Patrick Miller: Yes. I mean, now, like I say, is there still a chance for problems? Sure. And is every big utility doing this for their critical stuff? Eh, some are some aren’t. So, you know, it- there’s no rule to do this, no requirement to do this yet, but it’s those that I think most of them are doing it out of the financial incentive to if replacing that transformer is gonna cost us, you know, how many hundreds of millions of dollars and a minimum of a two- to three-year lead time- and now we’re up against, you know, Google and Facebook and Amazon supply chain... who are buying the equipment out in front of us, so we can’t even get in the front of the line if we wanted to. So yeah, they’re-- I think most of them are realizing this is just a good business decision, too.

David Roberts: Right. Well, once again, you’ve teed me up for my next question, which is about AI, and of course, when everybody th- when anybody thinks about computing these days, that comes up, which is, which is that, you know, maybe the number and diversity, of devices would be daunting for any sort of human hacker, but of course, now we’ve got these giant super intelligent robots who can just go at it without pause. So in your mind, does AI heighten the threat here? And then conversely, on the other side, are, is anyone putting AI to the task of building better defenses? What is the current role of AI in all this?

Patrick Miller: That’s another podcast in and of itself really.

David Roberts: I bet.

I’ll keep it to the two key things. AI is really good at finding vulnerabilities. So we are concerned about its ability to find vulnerabilities in key equipment that we’re concerned about. So yes, it will definitely accelerate that arms race. At the same time, we’re using AI to patch those vulnerabilities. So the manufacturers can, well, they’ll see there’s a problem, and they’ll write a patch for it, and we can... The challenge is this is, like, grid equipment, so we may have to do things like, “Okay, general public, are you okay if we have, like, a blackout window and we schedule it? Because we gotta patch stuff.” Because most of the time you can’t just, like, take these systems offline.

David Roberts: Yeah, like a operating system update.

Patrick Miller: Yeah you know. Yeah, gotta reboot.

David Roberts: It’s, a it’s enough of a pain in the butt on your, on your personal computer, but if the whole, if the whole grid has to do it.

Patrick Miller: Yeah. If you gotta reboot a section of the grid, that’s a problem. So we’re looking at ways to try to work this into operations. Some of it’s gonna be redundancy or, you know, moving the grid, the power over to a certain line while you know, restart those systems and try to get, build this into our operations and our behavior practice, ‘cause we haven’t done this yet, right? We gotta figure out how to make this work. So we’re in the process of that as an industry, and obviously the manufacturers have definitely, the light bulb has gone off, and they’re reacting, and they’re using AI to write patches for the vulnerabilities that the bad guys are finding. Now, the next piece is, one of the bigger concerns that is not, we don’t have an answer for yet. It’s the ability to model the grid was pretty difficult in the past. It took a lot of computing horsepower. AI is actually really good at this, and you can model large sections of grid, if not the whole grid. You can overlay other infrastructures like transportation and communications and gas and-

David Roberts: Mm.

Patrick Miller: the ability to cause a multi-infrastructure cascade by key component attacks in just the right number and frequency of basically like the sequence of infrastructure is to cause a larger problem. So we’re worried about that. It’s being discussed. It hasn’t really... Like we’re trying to model it ourselves and figure out, oh, you know, if they’re doing it, we should probably be looking at these same kind of key weaknesses and how do you get these cascading interdependencies down, this kind of stuff. So the thing that started is DHS CISA, C-I-S-A, put out what’s called CI Fortify.

David Roberts: This is the, Cybersecurity and Infrastructure Security Agency. I wrote that down so that I wouldn’t have to remember.

Patrick Miller: I love how it’s got security in its name twice. That’s really secure. Yeah. But they put out one called CI Fortify. The goal is at least if there’s a problem to get these, and it’s not a requirement yet, this is still a suggestion, but to have these environments disconnect. Just what does it take for you to island yourself off and we, you know, we, in the business we call it turtle mode. How do you how do you like clamp down the shell until the danger passes and you peek open and you see that things are okay and then you can, you know, pop your arms and legs out and keep going. So it’s trying to get, owners and operators of all the different infrastructures to go do an exercise on what’s a day without connectivity look like, what’s a week look like. Can you, can you lock down in turtle mode and still operate and keep essential services running even if not everything is working but enough is? So we’re at least trying some approaches.

David Roberts: So these are like water systems, transportation systems-

Patrick Miller: Gas, electric...

David Roberts: whatever, all the, all the d- gas systems. Man, that’s a whole, that’s a whole new Pandora’s box right there.

Patrick Miller: Yeah.

David Roberts: Trying to get multiple infrastructures to coordinate their behaviors just seems like it’s a whole new layer.

Patrick Miller: Well, if they can even do it on their own, great. Well, let’s just start with them, figure this out, what it looks like in your own little environment. And then we’ll look at what it does when, in terms of the interdependencies, that cascade out. But, yeah, I mean, think of, like, the dependence of electricity on the gas, right? We have a lot of gas generators, especially now for AI. There’s almost all of them are gonna be gas generators. So, it’s amazing to try to think about this and wrap your head around it. But like I say, that, that’s something we are at least discussing. We’re starting with, you know, at the asset owner level, could you do this? Could you operate? And then we’ll figure out what is-- Well, now, when you’re doing it, what are the interconnectivity, what’s the interdependency issues? And then we’ll take, kinda take it out from there. But, it’s on our minds.

David Roberts: It’s interesting. It’s hard not to, you know... It’s hard to hear about this stuff and not get a little sci-fi dystopian about it, about a future where sort of like our massive super intelligent AIs are just battling their massive super intelligent AIs. And at some point, like, it’s gonna be hard for any human to even really know what’s going on anymore, to wrap their head around any of it. You know? Like, eventually it’s just gonna be the robots the robots battling over our infrastructure.

Patrick Miller: That’s why we’re trying to put in a lot of that cyber informed engineering, underpinning so that, you know, even if the cyber causes problems, physics is still physics, you know?

David Roberts: A couple of final, couple of final questions. One, that I’m just curious about. One is, and maybe this is naive to even ask it, but like, are we trying to sneak-you know, are we trying to sneak stuff into China’s systems too? I mean, I kind of assume we are.

Patrick Miller: I mean, if we’re not, then shame on us. I mean, and I really think those are kinda table stakes for nation states at this point, so.

David Roberts: Geez.

Patrick Miller: And we’re remarkably capable at what we do. I mean, we’re arguably the best in the world at cyber anything, so one would have to believe that that’s a reality. Yeah.

David Roberts: It’s just gonna seem like the, all the, all these forces are pushing toward, you know, kind of reversing the trend of the last century almost towards greater trade and greater independence or interdependence. Like, it seems like this is gonna wanna cause countries to want to domestically manufacture everything so that they can keep an eye on everything. You know what I mean?

Patrick Miller: Yeah. I think there’s, there is a push for that right now. There’s a lot of balkanization of manufacturing, of you know, sovereignty of various things. What we’ve seen in most cases that actually solves the problem, and I’m working on various different channels. I’ve got operations in Europe as well. It’s about, it’s transparency so that there are open frameworks, and everyone operates against the framework, and everyone can see what’s in there, and transparency. Think about what happened with encryption. There used to be, like, you know, export rules on certain types of encryption. Well, now we just make it so that it’s you know, it’s open. Everyone can see it, and it gets all the transparency that’s needed, and it still works. So there are ways to do this where you have transparency into how it’s done, what’s being done, and everyone can agree upon kinda what the standards are. And then once... And there’s, you know, IEEE. There’s IEC. There are bodies that do this already and do it very well. So yeah, I think it’s gonna... We’ll have a push where everyone goes into their little hole for a while and realizes-... “Okay, we can’t do this. We just can’t s- we just can’t survive like this.” So the pendulum will swing, and then it will have to swing back, and all of us that are pushing the pendulum back the other direction, we’re all going, “Look, you know the solution to this is transparency, so let’s just start there now.”

David Roberts: Interesting. Another question is, when you read, or at least when I’ve read about attacks on the grid that actually do damage, it’s squirrels or, like, rednecks with rifles shooting- shooting at transformers. Like, how do you, how do you rate the physical threats to the grid relative to the cybersecurity stuff?

Patrick Miller: Orders of magnitude worse than the cyber. Orders of magnitude, without question. Yeah, absolutely. It’s been, it’s largely squirrels, raccoons, snakes-... uh, scorpions. I’ve seen a whole bunch of different things. Mylar balloons, believe it or not, are actually a bigger threat than cyber. Um- You know, so, you know.

David Roberts: Has anybody weaponized Mylar balloons yet?

Patrick Miller: No. But there was, there was, like, a Twitter account called, like, Mylar Squirrel, and it would track all the, attacks on, well, just things that happened to the grid from, like, squirrels to balloons to raccoons to... Yeah, I think it’s, it stopped, but, it’s far bigger issue. I mean, and it causes a lot more damage, than cyber.

David Roberts: And you think the vulnerability is greater? Like, I mean, that’s what’s-

Patrick Miller: From the physical standpoint? Oh, absolutely, yeah. I mean, you can physically dam- Well, that’s what’s I mentioned earlier, the physical protections for big transmission in the CIP standards, there’s a specific standard for that. Like, you actually have to protect the transformers from gunshots. Like, you have to put up ballistic protection for the transformers. Yeah, because they’re, I mean, that’s, it’s a bigger threat.

David Roberts: Yeah. I wonder, that’s another one that just seems like as the grid distributes, as, you know, everything moves outward, again, you’re just like, you’re not gonna get every warehouse to hire armed guards and you know, put up, put up ballistic fences. Like again, your just, your attack surface is so huge.

Patrick Miller: It is. One of the good things about that is if you distribute the attack surface to a much, you know, more diffuse, set of assets, you actually take the threat away in a lot of cases ‘cause they physically can’t get everywhere.

David Roberts: Right. Right. Any single attack will be, it’ll have smaller consequences, I guess. Okay, so let’s wrap up with this question. Right now the aforementioned CISA, the Cyber Security and Infrastructure Security Agency, is getting cut much like much of the rest of the federal government is getting slashed its budget and staff. I’m just curious your sort of overall assessment. You’ve written an essay actually saying that critical infrastructure cyber regulation is headed in the wrong direction. I’m sort of curious your overall assessment, like are we doing this correctly and what is, if not, sort of broadly speaking, what is the course correction you would like to see?

Patrick Miller: Oof.

David Roberts: Again, a whole other pod if we- if we fell into that.

Patrick Miller: That is a whole other pod. I’ll keep it short. I do lament the cuts to CISA. It is-- American infrastructure needs this desperately. We’ve got a mix of things. The regulators are all different. We need something that is a centralized and a harmonized effort that helps all of them, and most of what they’ve done so far has been fantastic outreach. They’ve done some really good information products that have helped a lot of people. They raised the floor for a lot of those- those asset owners that you mentioned that just don’t-- They can’t whole-- They can’t hire a security team.

David Roberts: Mm-hmm. Right.

Patrick Miller: But they can take this template and apply it- because it’s free from CISA, and CISA did the work for you, and you don’t have to wonder, “Is this gonna work?” You’ve got an authoritary, authoritative source to get good stuff that helps you and raises the floor. So I would love to see more funding in CISA. I would love to see more activity from CISA. I don’t want them to become a regulatory agency, but I love what they do with, you know, their known exploited vulnerabilities list, which this is a different thing. When you hear of a vulnerability that happens like, you know, Microsoft says, “Oh, we have a problem. Go do something,” what CISA does is if no one is exploiting this, okay, probably lower priority. But the minute someone’s actually, like attackers are actually using this, it goes on this special list that CISA maintains. That gives us the priority and ‘cause when you’ve got 100 vulnerabilities to deal with- well, which ones matter? This tells you. So that kind of work is absolutely useful, and they need to be doing more of that. Now, the follow on of kinda where should we go and what would-- if I had one rule that I could change, and I get this question as a former regulator and someone who writes a lot of regulation all around the world at this point. I like the CIRCIA. It is C-I-R-C-I-A. It’s an incident response reporting act that was put out. It’s gotten a lot of negative attention ‘cause people don’t wanna report their incidents, and I get it. No one wants to air their dirty laundry.

David Roberts: Right. Right. Yeah, I guess it’s embarrassing and it-it-

Patrick Miller: It’s embarrassing, right? And in some cases, you gotta put it on your 10-K right now, and you gotta report to the SEC. But people get around that, and their lawyers step in and they, you know, they water it down. My issue with this is we don’t know what is working. We don’t know what the attackers are doing. We don’t have any actuarial data without this kind of reporting. We need something there. And I’m not saying like, you know, make them divulge everything, but we should have a at least some data that we get that’s useful, like a handful of things. Because the corollary is if, you know, we know that if I, you know, eat bacon cheeseburgers every day and I smoke and I never exercise and I never move, you know, Patrick’s likely to die at age 45 of these conditions because we have, you know, hundreds of years of actuarial health data. We don’t have anything like-- We’re basically guessing. So without this what is happening, what’s working, we don’t know where to put our money and our protections. I think this would actually really benefit us. If we could do one thing, we need to see what’s actually happening.

David Roberts: And is that a federal-

Patrick Miller: Because it helps us make regulations. It would be-- It’s a federal law.

David Roberts: Is that a federal rule?

Patrick Miller: Yeah, it’s a, it’s a federal rule for critical infrastructures and there’s, you know, a handful of them, that get roped in first, that kind of thing. But we don’t... Right now it could happen and, you know, if it wasn’t a big enough issue, they could just hide it and which, you know, I get companies may wanna do that, but the rest of the industry and the rest of the populace, we need this data to know where we’re, where, what’s working and what’s not. It helps regulators, it helps insurance, it just helps everybody all around.

David Roberts: And when you say that cyber regulation is headed in the wrong direction, what do you think we’re... What do you mean by that? What do you think we’re doing wrong?

Patrick Miller: I think we are, we need to harmonize a lot of our regulations. Like, each individual infrastructure has their own, you know, authoritative body and they’re all going in different directions. They’ve all got different penalty structures. They’ve all got- If you are a company that owns a gas infrastructure and an electric infrastructure or an electric and a water infrastructure, you got different, an entirely different compliance organizations and different experts. The software companies have to write different versions of the software. I mean, we could standardize a lot of this stuff because realistically, I mean, this is all the same stuff. It’s flow control, whether it’s gas, electric, water, transportation, it’s all flow control. So we’re kinda doing the same things. The technologies are all roughly the same. We could make this a lot easier for a lot more organizations, and then we could even introduce easier guidance. So we wouldn’t have guidance for just, like, the gas operators or the electric operators. We’d have guidance. So we need to get to a place where we’re not doing this in such weird silos. And I get there are differences, don’t get me wrong, but there’s a core component of this outside of those, you know, fairly small number of differences that could be done in a uniform way with a lot less wasted time and effort and money.

David Roberts: Interesting. All right. Well, this has been so fascinating. Thank you so much. Thank you so much, Patrick. I feel like 100%-

Patrick Miller: Absolutely...

David Roberts: 100% better grounded at this point. Thanks for walking us through it.

Patrick Miller: Sure. Anytime.

State policymakers are under enormous pressure when it comes to data centers. There are dozens of them banging on the door, demanding to be hooked up to grids. Utilities and the PUCs that regulate them are responding inconsistently at best, often allowing ordinary ratepayers to bear the financial risks, and the public is furious about all of it.

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What should polcymakers do? Many in the environmental community are pushing for an outright ban, but most states don’t want to do that, at least not permanently. They want the investment and tax revenue that come with data center development. But they need a response, a strategy that protects their ratepayers and their communities from exploitation and abuse.

To address that need, Climate Cabinet recently released a series of papers called “Taming Data Center Turmoil,” recounting the rise of the hyperscalers, describing why giant data centers pose unprecedented risks, and outlining a detailed set of recommendations for how state policymakers should manage those risks. This is not pure, wonky technical analysis from a think tank — Climate Cabinet is an advocacy group, and the thrust of these recommendations is very much about consumer protection.

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Nonetheless, this is the first time I’ve seen a comprehensive strategy laid out in one place, so I thought I would have one of the key authors of those papers, Saleem Chapman, join me to discuss them. Chapman is a longtime sustainability and environmental justice administrator who has worked for the Clean Air Council, the Philadelphia Office of Sustainability, and the Pennsylvania Department of Environmental Protection. He’s now leading electricity affordability policy at Climate Cabinet. We’re going to discuss the threats and the promise of data centers and the tools state policymakers have in their toolbox to manage the risks and maximize the benefits.

Timestamps

• 00:00 – Introduction

• 02:49 – How Climate Cabinet came to the data center fight

• 03:58 – Three things that make hyperscalers unlike past industrial loads

• 07:51 – Warning signals: forecast opacity, gas dependency, unconditional subsidies

• 13:44 – Siting near overburdened communities and the Memphis case

• 15:34 – State preemption versus local control

• 18:31 – The same failure pattern in Georgia, PJM, and ERCOT

• 23:52 – Why not just ban data centers outright

• 28:07 – The framework, and what to require before approval

• 34:54 – While operating: real cost pricing and on-call load flexibility

• 37:39 – Scenario-based planning and the utility incentive problem

• 39:37 – After the deal: new and matched clean energy

• 43:48 – Siting standards and performance-tied incentives

• 50:27 – Existing facilities and the threat to build elsewhere

• 55:41 – Which states are ahead, and step one for lawmakers

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Saleem Chapman

  • Climate Cabinet (Website - LinkedIn)

• PJM Interconnection

• ERCOT

Company & Industry News

• Pennsylvania data centers face increased oversight under new law

• New Jersey lawmakers send data center tariff bill to governor

• POWER Act, lawmakers seek to regulate new data centers’ power and water usage

• NAACP sues xAI for illegal pollution from data center power plant

Books & Articles Discussed

• Climate Cabinet Education - Taming Data Center Turmoil

• Southern Environmental Law Center - xAI built an illegal power plant to power its data center

Related Volts Episodes

• Making sense of the data center backlash

• Doing data centers the not-dumb way

• Spreading the good news about electrification

• What’s going on in electricity world?

Text Transcript

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

Saleem Chapman: Thank you for having me.

David Roberts: Excited to get into this, but maybe before we just jump in, tell me quickly how you came to this or how Climate Cabinet came to this. Why did you guys feel like this was a needed intervention, and how did you come to be heading this work for them?

Saleem Chapman: Yeah, thank you for that question. So it really starts on drawing on my experience as a former executive in state and local government. I know from that time what it feels like to sit behind a desk as a public servant and feel the weight of expectations to solve deep structural problems. And you quickly realize that the hardest challenges aren’t necessarily finding the right ideas. It’s about having the information and tools to make good decisions in a complex and rapidly changing environment. And so I think that that’s one of the most unappreciated aspects of the data center debate is the governance challenges. You know, most of the conversations focus on the outcomes people want, but less attention is really paid to, the institutions that actually have to make the decisions.

David Roberts: So before we get into recommendations, I wanted to talk about data centers just for a minute. One of the, the first paper, you know, we’ve had large industrial users hook up to grids before. That’s not a new thing. There are aluminum foundries, there are manufacturing facilities, there are large customers, but what the first paper argues is that data centers are not like those previous large industrial customers. So maybe just say, you know, they say there are three things that make the hyperscalers unique. Maybe just go through why this is a unique phenomenon that requires a unique response.

Saleem Chapman: Yeah. So there’s, as you alluded to, there are three dynamics that are really shaping the entire data center conversation. The first is what I call the timing mismatch. So, hyperscalers operate on a completely different timeline than our electricity grid. They can plan and build massive campuses in one to three years, but the generation and transmission infrastructure needed to serve that load often takes five to 15, sometimes even longer. And so from the grid perspective, demand can show up almost overnight, but infrastructure to support it can take years to catch up. Then there’s the scale and geography. So a simple... A single hyperscale campus can request as much electricity as a small city in one interconnection request. And we also know that those loads are clustering in places like Northern Virginia, Pennsylvania, Texas, and Georgia. There’s this really good stat that in 2023, only 15 states accounted for 80 percent of data center electricity demand. And so if you look at this from a national perspective, you can certainly miss the very real constraints that utilities, governments, and communities are facing in those specific regions. Which brings me to the third dynamic that I think is really important to this conversation-

David Roberts: Hmm ...

Saleem Chapman: And that’s uncertainty, because you have utilities, regulators, and developers who are making these billion-dollar investment decisions without knowing exactly how much demand will actually materialize, when it will arrive, or how advances in computing efficiency will change that outlook. And then we also know that hyperscalers are remarkably mobile compared to some of those other traditional examples you pointed to. They tend to sort of build wherever power is available, permitting and economics are most favorable, and they can certainly shift future investment just as quickly. And so it makes, those planning dynamics even more difficult because you actually don’t know what the projected load will actually materialize into tomorrow.

David Roberts: Yeah, I always think of it, I don’t know what the right analogy is, but I think of it like as like a bee or something buzzing around an elephant. Like, these, these hyperscalers are, they’re making these incredibly fast decisions, flitting here and there geographically, and like the electricity grid and electricity regulators are just slow, this slow lumbering beast that’s like can’t even keep track, much less like move fast enough. Okay, so speed, they’re building faster than grids can catch up. There’s scale. They’re just enormous single uses. And then this geography thing. They can build anywhere, basically anywhere there’s power. They’re not tied to particular communities. They’re not tied to particular economies or geographic features. All of that is, I think, new in the world. And so, and so it’s not so much... I mean, I, I think one of the good things you emphasize in the paper, it’s not so much that people aren’t using the existing regulatory tools properly. It’s just that the existing regulatory tools were not built for, they’re not built for this. Okay. The second paper gets into the specific risks that data centers pose to communities, to states, and I would kinda wanna go through these ‘cause some of the, some of them I think are obvious, but some of them are not obvious, and some of them, in particular, don’t really show up from the typical risk analysis, you know, procedures that grids undergo. So let’s go through some of those. There are eight risks. If you wanna just start where you think is best.

Saleem Chapman: Yeah. And, you know, there’s one way of thinking about these as risk, which is certainly how we frame it in the paper, but I also like to think of them-

David Roberts: Mm ...

Saleem Chapman: As warning signals, right? So how do we actually be able to have dynamics which allow us to, with some degree of reasonable certainty, be able to predict the outcomes that we can expect? And so the three of those sort of warning signals or risks that keep coming up, time and time again for me, the first is forecast opacity, and it’s that, you know, those demand numbers that we often see that’s characterizing news headlines-

David Roberts: Yeah ...

Saleem Chapman: Often comes from the developer themselves and are unverified, which certainly implicates how much we actually know about what demand will actually ultimately reach the grid.

David Roberts: Yes. And developers, of course, have their own incentives regarding how they want to pitch those forecasts. They’re not necessarily objective analysts in this matter.

Saleem Chapman: That’s absolutely correct, and what we also have to understand is that different players have different motivations. You know, there’s the separating of sort of the major tech companies, the Googles, the Metas of the world from sort of the speculative developers who are sort of oriented toward, you know, build it and then they will come. And so you have to sort of understand, as you were just saying, the different motivations of those actors and respond accordingly.

David Roberts: All right, so that’s one is just the uncertainty of the demand. We just-- Like, there’s a lot of big projections of demand coming, but we don’t know how much weight to place on those forecasts.

Saleem Chapman: Exactly, which brings me to the second, because the demand is ultimately what’s leading to what we’re building out. And so the next, sort of warning signal I’ll call attention to is gas dependency, that a lot of these deals are locking in new fossil capacity, uh for 30 years when the contracts by which are leading to them needing to be built are operating on much shorter time horizons.

David Roberts: Right. So a hyperscaler sign, like a five to 10-year contract. Build some gas. Again, we don’t know for certain if they’ll be there after 10 years. But if you build a big gas plant to provide them, the gas plant will definitely be there for 30 years. Once again, a timing mismatch.

Saleem Chapman: Exactly. Which brings me to the third warning signal, and that’s unconditional subsidies, right? We’re seeing, states and local jurisdictions hand over pretty significant incentives, with really no clawbacks and no conditions if the project ultimately under-delivers. And so that’s really critical because it plays into part as to how much value the public is seeing from these development projects.

David Roberts: Right. And we’ll get to, we’ll get to how to add conditions to those. But again, this is like, this gets to the mismatch with the past too. Like, certainly big local or state subsidies for giant industrial customers are nothing new. But like, if you give a, you know, if you give an aluminum foundry or whatever a bunch of incentives to build, you’re pretty certain they’re gonna build, and it’s gonna be there for a long time. But again, like, give these big subsidies to data centers, and we don’t really know if they’ll fully build out what they say they will or how long they’ll be there.

Saleem Chapman: Yeah, no, I just wanna point to, ‘cause you keep alluding to something that I really wanna call attention to, ‘cause I think a, the core issue around data center debate is really that our energy institutions were designed for a really different era. They were built around a world of slow, predictable growth, where demand changed gradually and infrastructure could be planned over decades. And we know today’s economy does not look like that anymore. So whether you’re talking about AI, advanced manufacturing, or even electrification, which I think a lot of your audience would be supportive of, they’re all moving on faster timelines, than the institutions that’s responsible for managing the grid.

David Roberts: Yeah. And this, and you mentioned, you know, the time mismatch between gas plants and data center building, but I think that same time mismatch is true of other infrastructure too, as you say. Like, if a giant hyperscaler says, “We’re coming to X in your state,” and then the utility starts building, you know, power lines or substations or whatever. That infrastructure takes a long time to build, and it lasts a very long time, and if you’re building it for a particular data center and the data center doesn’t show up, who ends up paying for that, right? That’s one of the key things going on. Who ends up paying for that infrastructure?

Saleem Chapman: Exactly, which is why our policy series, Taming Data Center Turmoil doesn’t-- looks beyond just the question of whether a community is to say yes or no to a data center. It’s really looking at how do we identify the pathways, policies, and actions to enable responsible growth. And ultimately, it just comes down to what does it look like for these projects to earn a general social license to operate?

David Roberts: Yeah. Yeah. One other risk I did wanna mention on your list here is, and this again is a familiar one from-- We have a long history of this, which is citing these things near vulnerable communities, basically near communities that are already burdened. Talk a little bit about that risk.

Saleem Chapman: Yeah, really important one to elevate and certainly one near and dear to my heart. You mentioned in my, overview of my background that, you know, sort of I came to age in this field of working on environmental justice issues. And so we have seen data centers certainly operate without a genuine social license. The project that immediately comes to mind to me, is the one in Memphis, the xAI project Colossus. And that’s exposing a few different things. And certainly we can get into the conversation as to whether or not, you know, gas behind the meter should be banned, or should we be incentivizing other fuel technologies, and that’s a worthy conversation to have. But there’s also another issue here that I think gets less attention and, you know, is what does it look like when these actors are subverting our permitting processes? What does it look like when they’re failing to engage affected communities? And as you just alluded to, what does it look like when they’re increasing cumulative pollution burden in these communities? And those are all things that are needing to be wrestled with, and I’m really encouraged, that there are really thoughtful organizations like, the NAACP and other environmental justice organizations who’ve really taken that issue head on. Certainly we want to sort of do our best to make sure that we’re elevating attention to it, and really taking their lead on this work who sort of are more best positioned to work with, the communities that are most exposed to these issues.

David Roberts: Yeah, and, and one other one that I wanted to mention too is that some states, I think some state governments are so eager to have these things to the point that they’re passing laws that override local authorities, basically, that prevent local authorities from exercising, citing, and permitting oversight. And, you know, I’m so, I’m so am-- Uh, you know, I have such mixed feelings about this one because, like, on the... You know, I do a lot of stuff about housing on this pod and NIMBYs. In that, in the housing world, I think there are good, there are often good arguments to move authority to the state level and remove some of the ability of local NIMBYs to block things. I think there’s a robust argument in that. But then something like this, a giant industrial customer, it’s a different, a different thing. So do you- Are there examples there or talk a little bit about this, where the authority should lie?

Saleem Chapman: Yeah, I think that, how I often tease it out is, you know, you have to think about at what avenue are you trying to engage with this issue. So if you’re talking, as we were just discussing around sort of the land use implications and the implications of that that has on neighboring communities, certainly that is a local issue. If you’re talking about sort of the energy implications and how that impacts ratepayers and affordability, that’s sort of more within the state purview. And so that goes back to sort of where I opened, which is our approach as Climate Cabinet really has been how do we solve the real governance challenges around these issue? There are a lot of significant trade-offs, that policymakers and leaders are gonna have to evaluate, and so we just are trying to provide them with the framework and the right decision-making and analytical capacity to make sound, durable choices.

David Roberts: Right. And so there are all these risks and as we said at the beginning, like, the conventional regulations and the conventional approach here don’t always see all those risks. Those risks are not really codified to show up in those, in those processes. Like, the risk of just a single customer being, you know, 15 to 20% of a utility’s demand in a whole demand, you know, in a whole utility area, like that’s never-- We never contemplated that before. The timeline thing, saying the dedicated infrastructure, all of that is sort of new. So some of this is just gonna have to be state policymakers updating those regulations to take account of those things. One point that I think is important in the paper, and that is interesting to me, is that these risks, they’re not necessarily unique to a particular kind of market design. You know, as Volts listeners know, there are vertically integrated utilities some places. There’s what are called restructured markets. There’s ERCOT, whatever ERCOT is. One of the points you make in the paper is that people are making kind of mistakes. There’s this kind of the same failure pattern shows up in all kinds of market designs. Can you walk through that a little bit? Maybe some examples of, like, the different places that are, that are messing this up.

Saleem Chapman: Sure, yeah. So we, in this part of our paper, we looked at three different markets, that operate within three different states. And so if you start with, Georgia, which is the example of a regulated energy market-

David Roberts: Right. Old school, vertically, old school, vertically integrated ...

Saleem Chapman: Old school, vertically integrated, I think those of which most people would sort of be most familiar with and think about when they think about, utility structure. And so what we saw in Georgia is that the, Public Utility Commission approved a major gas expansion really built on justification that was derived from developer supply forecasts. And so in that instance, the process worked exactly as it should. There was nothing sort of bad faith about it, but it still, created a situation where ratepayers had significantly exposure, cost exposure, if those demand projections ultimately fell short.

David Roberts: Right. So the ratepayers are paying for the gas, the gas plant build-out, and if the demand doesn’t show up to absorb all that gas build-out, it’s the ratepayers who are paying for the stranded assets, basically.

Saleem Chapman: Exactly.

David Roberts: And then PJM though, PJM is a, is a competitive market, restructured market. Talk through that one a little bit.

Saleem Chapman: Yeah, so what we are seeing in a state like PJM is that you can have a single hyperscale, campus being brought online. At the cases that we looked at, it was 30% of local peak, demand within that particular region. And that triggered a capacity market event which ultimately resulted in, as you’ve-- if people have been following the PJM sort of issue, that you’re seeing sort of historical capacity prices year over year. And so what we are seeing there is that similar, the process worked exactly as it should, but by triggering that capacity market event, you had states all across the 13-state footprint that PJM covers having to take on some of the cost, that was associated with bringing that new facility online when they had no say in actual the decision-making around whether or not that facility would be approved.

David Roberts: Mm-hmm. Yeah. Who pays? This comes up again and again. And then there’s finally ERCOT, which people, you know, I think which people think of intuitively as, like, sort of the most free market, closest thing to a free market type of system. And they might think, well, in that kind of market, surely, you know, it’s the developer who takes the risk if it’s, you know, really working like a free market. But it’s, turns out there’s failures there too. Talk about that one real quick.

Saleem Chapman: Yeah, exactly. I mean, what we also know is as we are confronting this new period of technological innovation, we are also operating within a much more volatile climate than what we have historically had. And so in the ERCOT case, we saw hyperscale growth, colliding with extreme weather events. And so some of the emergency programs and gas dispatching that had to be put in place to meet that emergency event added billions in surplus charges that really surfaced as price volatility, but wasn’t actually visible as a line item on any individual ratepayer’s bills that said, you know, “This was driven by hyperscale growth.”

David Roberts: Right. Right. It shows up as price volatility in the market, which is absorbed by everybody who’s involved in the market.

Saleem Chapman: Exactly.

David Roberts: And so all these kinda come down to who is taking the risk and who is paying the price. So in all these cases, you take data centers’ demand forecasts, these developer demand forecasts, translate them into a bunch of costs, right, to anticipate meeting that need, and it is the ratepayers ultimately who are paying those costs to prepare. And so in other words, it’s the ratepayers who are taking on that risk. It’s the ratepayers who are paying. And then if the developer forecasts don’t pan out, the ratepayers are stuck with it. That’s like, that’s kind of the core theme through all those market, despite the market structures.

Saleem Chapman: That is the core theme, that ultimately this comes down to who’s taking on the risk and who’s capturing the value.

David Roberts: And so before we get into specific recommendations, I guess one question, which I bet a lot of people in the audience have, which is given all these extraordinary and unprecedented risks, all the downsides here, all the risks of sort of ratepayers being stuck with stranded assets, with having to pay for this, you know, long-term infrastructure, et cetera, et cetera, et cetera, why not just ban these things? That is... I mean, that’s certainly on the table. There’s a lot of groups out there advocating for this. Why not just a ban?

Saleem Chapman: Yeah, really good question. And I think it really comes to where we thought as Climate Cabinet, we could offer most value in this space. And so for us, what we were hoping to do is understanding that many state lawmakers are relatively under-resourced, compared to the complexity and pace of this issue that they’re being asked to navigate, that we really have to work to strengthen the capacity of state policymakers because each jurisdiction is gonna have to evaluate their trade-offs, right? Like, yes, these are causing really complex issues that are having burdens on ordinary households and ratepayers, but at the same time, some of these jurisdictions are wrestling with some really significant revenue generation issues and problems as well. And so there is no one-size-fit-all solution. I think what we wanna do is to make sure that we’re laying out, all of these clearly, so that there can be transparency in the decision-making and that state lawmakers ultimately have that analytical capacity to make those decisions. Now, with that being said, we are also looking at this issue as sort of what we believe is the underlying dynamic, and that’s what I keep coming back to, is that whether our legacy energy systems can adapt to a rapidly changing technological world. And so what we’re seeing on the data center side is revealing some of the same underlying challenges that we see when we talk about clean energy solutions deployment, right? Because on one side, you have distributed energy resources like rooftop solar, batteries, microgrids, and so forth, are challenging a system that was built around large centralized power plants and one-way electricity flows. And then on the other side of the equation, you have hyperscale data centers that are creating unprecedented concentrations of demand and pushing the grid to respond faster than it has historically has. And so we’re ultimately gonna come back to the conversation. It’s bigger than any single technology. Really what we’re talking about here is our energy systems and governance frameworks and whether they can adapt to the speed of change.

David Roberts: Yeah. I like that way of putting it, sort of like supply is disaggregating and spreading out even as demand is hyper concentrating in unprecedented ways. Both on, both sides of those are kind of confusing the traditional, the traditional process.

Saleem Chapman: Yes. And so we have to continue to make sure that the public interest is protected as our energy landscape continues to evolve, and I think that’s really the crux of this issue.

David Roberts: Yeah. And I did just wanna say here, on the ban question, ‘cause I don’t know that in the circles where bans are popular that this always gets as much visibility, but it is really true that these facilities produce a lot of investment and a lot of tax revenue. And as you say, lots of communities and lots of states need and welcome investment and tax revenue. There is an upside here that can be captured. There is value to be captured here for the communities. It’s not all risks and downsides.

Saleem Chapman: Exactly. And I think it’s also important too to really make sure that we’re highlighting how do we create the right accountability structure around these things so that way if they aren’t-

David Roberts: Right

Saleem Chapman: Generating those, that value that we ultimately project, that we’re actually able to make a change that is aligned with that.

David Roberts: Right. All right. So let’s go through then, you have this sort of pretty elaborate structure where you’re recommending for state policymakers how to approach this and specific policies, and they’re broken down. There are nine elements in three tests, and the, and the way the tests are broken down is what to do before one of these big things, these big data centers, before it’s approved, then there’s a whole set that are recommended while it’s operating, and then there’s another set after the deal is done. So I wanna go, I kinda wanna walk through those, but let’s start with what should policymakers be doing and thinking about before they approve one of these things? You have three, you have three recommendations there.

Saleem Chapman: Yeah. So what it ultimately boils down to, our first test is really about has the developer or the company demonstrated that the demand is real, and has put its own meaningful capital behind that commitment? And so given the uncertainty around future data center growth, policymakers have to be careful about building infrastructure based on speculative demand, projections that may not materialize. And so all the sort of three, policy elements that are included underneath that first test is in alignment with that goal.

David Roberts: Yeah, and so one of them is verified forecasting. I’m not totally sure how that’s gonna work. Like, I, I see that you don’t want to just accept what the developers say, you know, because as we say, as we, as we mentioned, they have their own incentives. But where do policymakers look for better demand forecasting? Are there, are there available like outfits, independent analysts? Where do they go to sort of stress test or vet these projections?

Saleem Chapman: Yeah, I think that, you know, there’s a various array of opportunities available to different jurisdictions. The sort of practice example that we call out is that we believe that there’s opportunity within a PUC or some other uh, independent state entity that hasn’t necessarily been, borderline formed yet to basically do that independent analysis.

David Roberts: So like a state, some sort of state agency?

Saleem Chapman: A state an- a state agency or some sort of quasi, government entity that has enough independence, that can actually provide a reasonable analysis that isn’t connected to a developer.

David Roberts: Yeah. I mean, I, I know there are people who would question in some cases whether the state PUCs actually have that independence, whether they’re not also captured by these giant hyperscalers. I mean, at a certain point you have to trust somebody, but-

Saleem Chapman: Which it-- I mean, you bring up the good point, and I know I’m probably perhaps sounding like a broken record, but I think that’s why it’s really clear-eyed to keep this conversation focused on the governance and institutional piece of it. So there are some really key questions that you’re raising and I’m continuing to raise about whether or not our energy, public institutions are actually up to the task. And I agree, that, that is a realm of where a lot of these conversations and solutions are gonna be found.

David Roberts: And then you also say the committed capital here, requiring some committed capital. What does that, what does that look like? Is the idea that developers put up money up front such that if they don’t do what they say they’re gonna do, it’s their money on the line? Is it that simple?

Saleem Chapman: Absolutely. And this isn’t a unprecedented or novel concept. There are other sectors within the economy where, project developers are asked to sort of put together bonding requirements or a letter of credit to basically state that there’s, that they are financially, responsible if their project doesn’t materialize as they had described.

David Roberts: And this also uniquely has to do with grid upgrades. You recommend what’s called cause and pay interconnection, meaning that if the hyperscaler, if the data center is the cause of a grid upgrade, if the grid upgrade is made for the data center, then the data center should commit to up front before they’re allowed to, before they’re allowed to, before they’re approved, they should commit up front, “We will use a minimum amount of that upgraded infrastructure, or if we don’t, we’ll pay for it. We’ll pay penalties,” basically, just so that we avoid this thing where the ratepayers get stuck with the infrastructure costs. Is that accurate?

Saleem Chapman: That is, incredibly accurate. And sort of what we’re trying to get at there is this idea, as I spoke to earlier, that different players within this space are needing different tools to sort of attack how they’re looking at the issue. And so we think sort of the cause and pay interconnection will do a good job as sort of, creating more thoughtful speculative development, so that if those developers don’t, aren’t able to attract the customers that they’re looking for, that ratepayers aren’t stuck with, that energy demand.

David Roberts: Right. And presumably this would give developers an incentive, as you say, to be less speculative, to not just go around throwing demand forecasts here and there, you know, with no downside. Like, if they’re on the hook for if they throw a big projection and then they, a bunch of infrastructure is built in response, they’re on the hook for paying for it, that gives them an incentive to lock down their operations too, to make sure that their projections are more accurate in some sense.

Saleem Chapman: Yeah, you’re picking up on sort of our thinking around this, is that how could we find integrated intersectional solutions to these issues? And so we’re hoping that within that first test that those three will sort of come together and be mutually reinforcing.

David Roberts: All right, so that’s before approval. Make sure you got, you got verified demand projections. Make sure that the, that the hyperscalers and developers are putting capital up front so that if whatever they say is gonna happen doesn’t happen, they are the ones paying for it in terms of bonds and stuff like that, but also in terms of infrastructure commitments. That’s beforehand. And then there’s a set of recommendations for while these facilities are operating. One is real cost pricing. Tell us a little bit what that means. That’s gonna be a utility thing, right?

Saleem Chapman: Yeah, so essentially what we’re asking for here is that, is the project paying the full cost, and accounts for the burdens it creates? And so essentially here is we wanna make sure that depending on the time of usage during the day, that that’s actually reflecting the actual stress that that facility is putting on the grid.

David Roberts: And this is something Volts listeners have heard a lot about over the years. This is just instead of a flat volumetric rate, pricing that reflects locational and time-sensitive factors, because when you have a single facility that’s 20% of your load, it matters a lot when it’s drawing power, right?

Saleem Chapman: Yeah, and the goal here is really to leverage the unique characteristics of these facilities, as we talked about toward the earlier parts of this conversation, is their mobility. And so what we’re hoping here is that this will sort of function as an incentive, to grid these hyperscale campuses to actually move to where there’s headroom on the grid, given that there was sort of the less cost implications associated with those places.

David Roberts: Right. Right. Right. So if rates reflect the locational and time-sensitive factors, that will in some sense guide them to put the facilities not just where land is cheapest, but where there’s power, where there’s power overhead. Another one is, what you call on-call load flexibility, which I think is really interesting. There’s a lot of talk about this, about making data centers more flexible, but what do you mean in terms of, like, a requirement for data centers?

Saleem Chapman: Yeah. So I think anyone who is accustomed or knowledgeable about demand response, this will sort of mirror that. Essentially what we’re asking for is that when the grid is underneath a high-stress event, which, you know, we’re in summer now, and so we’re encountering a lot of those, to make sure they actually have the flexibility on hand to be able to sort of reduce the amount of energy they’re drawing off of the grid. And this idea is really just about how do we make these facilities more of an asset to the grid rather than a liability.

David Roberts: Right. Right. And specifically, like, they should be called on to ramp down before residential customers are asked to sacrifice.

Saleem Chapman: Absolutely. Absolutely.

David Roberts: And then the third one here is scenario-based planning, which is, um... Talk a little bit about that. In contrast to just, the developer forecast.

Saleem Chapman: Yeah. So I think again, we, we’re getting-- we’re looking at this from an institutional lens and understanding that in a lot of cases, utilities are incentivized to build as much as possible, right? To build capital. And so what we ultimately want to do is to make sure that when they’re making those capital planning decisions, that they aren’t necessarily just solely based on the most optimistic projections, but they actually are also accounting for the potential downside risk if those projects don’t materialize as they expect them to.

David Roberts: Yeah, it’s a, I mean, one of the kinda, one of the awkward facts here is that developers have incentives to be very rosy in their projections, and then kind of the utilities also do. The utilities also are incentivized to accept those rosy projections because, like, that just means the utility needs to build more, and of course, they wanna do that anyway. Just an incentive mismatch we come back to on this podcast quite frequently.

Saleem Chapman: Absolutely. You know, the example that always sticks out to me is that, some utilities have as much of a 11% guaranteed rate of return on the capital that they’re building and tell me another business-

David Roberts: Yeah

Saleem Chapman: Where just doing the thing, guarantees you 11% return.

David Roberts: Yes, and so if a developer comes along and says, “Hey, you need to build a gazillion things,” you know, who at the utility is gonna be the one to be like, “No, maybe not.” It, you know. So, like, state lawmakers are gonna have to do something to impose that kind of discipline on utilities via their PUCs, I think, like, ‘cause utilities are not gonna do that on their own.

Saleem Chapman: And that’s what we’re trying to get at on the scenario-based planning.

David Roberts: And then after the deal is done, there’s three more, and these I think are really interesting, and in some sense, these are some of the most kind of ambitious recommendations. One is new and matched clean energy. I was a little disappointed you didn’t use the Beyoncé acronym, Bring Your Own New Clean Energy. But talk a little, talk a little bit about what new and matched clean energy means.

Saleem Chapman: Yeah, no. I- we love the acronym too here at Climate Academy, so we’re right there with you, Dave. The idea that we wanted there was to have something that really emphasized the hourly aspect of it. Because ultimately, a lot of these projects, you know, are buying renewable energy credits that aren’t necessarily within the region, that they’re operating within, and also isn’t necessarily matched hour by hour with their energy usage patterns.

David Roberts: Right.

Saleem Chapman: And so what we wanna avoid is that, you know, during a hot summer day when the grid is experiencing peak demand and a hyperscaler is drawing a significant amount of load off of the grid, that that actually isn’t fossil fuel-based energy, that they actually are offsetting that hour by hour with additive clean energy. So we love the acronym. We just wanted to make sure we were emphasizing more nuance in the debate.

David Roberts: Yeah. But I wanna poke at this one a little bit because if you are serious about, I mean, if you’re gonna tell a data center all the additional energy you’re gonna, all the additional demand you’re gonna add has to be met hourly by clean energy, that’s a big demand, and it’s a big change from the present circumstances because as you know, like as you mentioned in the Georgia case, a lot of this demand is being met by new gas, either in front of the meter or behind the meter. So I guess, are you, are you guys serious that you want state policymakers to say, “No, this can’t be met with gas. You have to use clean energy”? Like how strict do you imagine this being?

Saleem Chapman: Well, I think the key issue here is really to make sure that the public is getting a fair rate of return from these major infrastructure investments. And, you know, certainly it is an ambitious vision, but ultimately we also know that that’s where we need to be moving toward if we’re actually gonna be responding to climate crisis with the same velocity that it’s currently onsetting. And so for us, what this debate is about how do we set a challenge for some of the most innovative, companies in our economy right now to try to meet. You know, five years ago, well, certainly we weren’t talking about AI to any significant of a degree that we are today. So we know that technological change is possible, and so that we wanna make sure that we are, setting the imagination and vision for where we ultimately know we needed to go, and I feel very confident that, these actors can respond to that.

David Roberts: And this is like, this is one of the things where I wanted to emphasize some upside because, you know, we’re talking so much about risks and downside. Like, these entities have lots of money, and they’re, and they’re highly incentivized to get on the grid. And so, like, it would just be crazy not to use this opportunity to get them to fund, you know, the clean energy that we all need and want.

Saleem Chapman: Yeah, which, which I wanna highlight on something here ‘cause I think you bring up a good point. You know, when we were talking about the massive amount of capital that was gonna flow into clean energy development through the Inflation Reduction Act, a lot of the conversation was how could that stimulate private capital, into this space. And so obviously, that as a policy mechanism is no longer available to us, but this one is, and I certainly think it’s behooving on policymakers, at the states to take advantage of it.

David Roberts: In some sense, like, much more incentive for the private sector than almost anything the IRA could have done. Like they’re-- It’s, and it’s they feel it’s not being imposed on them. They feel the incentive. It’s their own, you know, their own goals rely on it. The second one here is siting standards. This I think is important, and this is the kind of thing that I imagine that just like, the, your average person on the street sort of imagines they’re already doing, but they’re not, but they’re not necessarily. Like, about where you put one of these things in terms of communities. So just talk a little bit about the kind of siting standards you’re referring to.

Saleem Chapman: Yeah. So I think it gets back at what we were talking about earlier in the conversation about making sure that we are preserving the flexibility and authority of local governments to make those land use decisions um, given that they’re, can be most responsive to the dynamics that they are seeing. And for us, you know, this is about that it’s really hard at the state level to really be able to understand when these infrastructure developments are gonna have system-wide consequences. And you see to a certain type of way that states are really kind of struggling to figure that out, right? Like, if you look at some of these policies that’s been recently, proposed or adopted, you know, they’re doing size thresholds at 50 megawatts in some cases at 75 in other. And ultimately at the core of what they’re trying to do is really understand when are they having these massive significant consequences. Because ultimately that’s how communities experience these projects, right? Like, they’re experiencing them through their electricity demand, the water use, the noise, the truck traffic, and the land use. And so we just wanna make sure that, one, that those decisions are reserved for the level of government that can be most responsive to it, and second, that we ultimately have the frameworks in place to be able to assess those cumulative impacts. I mean, I think what we saw, again, from, the illustrative example in Memphis is that there’s a significant way for this project to be done wrong. You had an, already environmentally overburdened Black neighborhood, in Boxtown in Memphis that then had to have this additional environmental burden laid on top of them. And so, you know, cumulative impacts is a longstanding debate, in environmental justice community, and so this is just another forum by which it speaks to the need of those types of policies.

David Roberts: Yeah. And you, and you get here really to the need for state capacity. You know, we come back again to the need for state capacity. Like, you need the ability to do these sort of analyses, ratepayer risk, and different site alternatives, and their relative risks, and all this kind of like you need state capacity to do that. And also, because you keep raising the Memphis thing, this is like the Memphis example, the, the AI facility that Elon is putting in Memphis, is just like outright breaking several laws. Like, there are laws in place, you know, like there are air quality laws that they’re just flat out breaking. So in some sense you don’t even... You need state capacity, but you also just need state willpower. You know what I mean? Like, you could hold that facility accountable for the laws it’s breaking, and it just doesn’t seem like Tennessee is doing that.

Saleem Chapman: Well, yes, I think we can all agree that we need our state actors and policymakers to be taking advantages of the tools that are available to them, but it’s sometimes isn’t that straightforward. So even in the case of the Memphis example, that facility was subverting, local regulations by, only operating for 364 days because there was this stipulation within the regulations that said that if a facility was portable, it was exempt from certain requirements. Which goes back to where we started this conversation, that for us as Climate Cabinet, I know most people know us for our Moneyball approach to electing state and local climate champions, but we also have a robust policy program focused on strengthening the capacity of state lawmakers, and this is just another example of why we really need to make sure that we are improving the ability of our institutions to govern.

David Roberts: All right, and so the last one on the list here is, has to do with these incentives, you know. So people know that whether it’s like a big industrial facility or a sports stadium or whatever it is, you often have states competing for these things by offering big tax breaks and tax incentives. But as you say, this particular kind of customer poses risks that don’t necessarily, that aren’t necessarily the same as, you know, a sports stadium or something like that. So you’re talking about tying those incentives to performance. Say a little bit about what that would look like.

Saleem Chapman: Yeah. So I think if we follow sort of the traditional trajectory of how this works, right? You have a government entity provide an incentive to some sort of project, then the project sort of, materializes, and then subsequently they evaluate the economic impacts of that. And more often than not, it shows that the projected economic impacts actually didn’t meet, um- ... What was, what was actually materialized, right? Like those two things didn’t match up.

David Roberts: Yes, a familiar story.

Saleem Chapman: Yeah, a very familiar story. And so ultimately what we wanna do is to say that, okay, there could be very important use cases for incentives to be used, even though I think we know that that isn’t necessarily the biggest influencer in the decisions that these, data center providers are using to make their decisions, right? It’s not the biggest factor. Ultimately speed to power is the biggest factor. Yeah. But-

David Roberts: It’s in the mix, though.

Saleem Chapman: It’s in the mix, exactly. So if you are gonna give incentives, then you should make sure that they are conditioned on actual performance. So if you do that economic impact study and it’s not passing muster, right? That the benefits actually aren’t materializing as projected, that you’re actually requiring back some of that investment that you made.

David Roberts: Right. Right. And that’s, and that seems to me like good to do for incentives for data centers, but also, like, really state lawmakers ought to be doing that for all kinds of these big incentives. You know, like if the sports stadium doesn’t draw the audience or whatever, then you get some of that tax abatement back. You get some, you know, you get some of that incentive back for the citizens who paid for it in the first place. Like, performance-tied incentives seem like a good idea across the board.

Saleem Chapman: I couldn’t agree more.

David Roberts: Okay, that’s a, that’s a big... It’s kind of a menu there for lawmakers who are contemplating when these things are thinking about coming to your state. So one question this sort of raises is, a lot of that is about conditioning new interconnection agreements, but of course, in a lot of cases, these things are kind of already built. There’s a lot of places where these things are already up and running, and it would be kind of perverse if new data centers faced all these requirements, et cetera, and the old ones are just kind of grandfathered in and allowed to run the way they’ve been running. So is there any way to get at already built and running facilities?

Saleem Chapman: Yeah. So we addressed this a bit in the policy paper we just, released last week, that there is sort of a different approach needed for existing facilities. And we recognize that, you know, the avenues for making that change is much different than sort of a new data center project, because ultimately you have to wait, for those projects to come up for some sort of renewal period where you actually have the opportunity window to be able to institute new requirements. But to, as you alluded to, this is about avoiding creating a two-tier system, where there are, you know, new developers that have to face requirements that existing actors, don’t.

David Roberts: And then I think one of the things, that hyperscalers and land developers are going to be thinking, and I’m sure you’ve heard this, and I’m sure they’re out there saying this to state policymakers, which is, “Look, all this sounds nice, but if you, if you, State X,” you know, Virginia, whatever, “impose this sort of network of tight requirements on us, we’re just gonna go elsewhere.” This is why states throw these unconditional incentives at customers. It’s why states, you know, states are generally wanting these things and kind of begging them to come, and I think developers are gonna be saying this to state policymakers, and I think state policymakers are going to be having this fear that, like, if we become the state with all these requirements, they’re gonna go to a different state. So what is like... How do you respond to that and, like, what is the-- is there a track record here to point to? How do you respond to that-- what I’m sure is a very common complaint?

Saleem Chapman: Yeah, so when we look at the Virginia example, which is a really good case study, we are seeing that that is a evolving policy environment. Obviously, the issue has gotten increased attention in recent years, but it has been evolving for a significant period of time. There’s a reason why Virginia is perhaps the world’s most mature data center market.

David Roberts: Yeah, and they’ve taken... The state government there has just done more stuff, data center-related stuff, than almost any other state.

Saleem Chapman: Exactly, yeah. I think we see session after session, that there is a huge volume of legislation that’s being proposed to sort of address this issue. In 2025, there were more than 30 data center bills put on the board, and then this year you saw them pass the first of its kind tax on data center electricity consumption. I think neither of those dynamics, the fact that it’s getting more attention and ultimately translating into durable policy outcomes, is gonna stop Virginia from being a highly successful market in attracting data center development. There is broader dynamics at play, which is why you’re seeing these data centers cluster, in specific places, right? If it was just down to the economics of it, we would see a much more dispersed network of development, but that just isn’t bearing out.

David Roberts: So you say if a state is attractive to data centers, that’s gonna be true even if they put, even if they put some of these requirements in place. The factors that are drawing data centers there will be in place regardless, even if these restrictions go into place.

Saleem Chapman: I think so because, you know, I think what we’re seeing here is now is that the politics around this issue is converging, right? Like, whether you’re looking at blue states or red states, you’re seeing that there’s an aggressive approach to sort of try to mitigate the impacts on ratepayers. Like, let’s just look at the last 60 days alone. You had a Democratic governor in New York, pass the first statewide moratorium on data center development, and then in Texas, you had a Republican governor basically say that data centers have to self-fund their infrastructure.

David Roberts: Mm.

Saleem Chapman: I think as the landscape is changing across the board, data center, developers are realizing that they’re gonna have to adapt to this new environment, which ultimately might require more of them. And like I said before, I think that setting the standard high is important because these are some of the most innovative companies, in the world, and certainly within our economy, and I have all the confidence in the world that they can meet the challenge.

David Roberts: Is there a particular state that you think is doing better or worse? Like, I... Just quickly, do you wanna, like, to grade a couple of states? Like, who’s-- who would you look to as being sort of ahead of the, curve? As you say, there are, like, almost every state, there’s like, I forget the stat. It’s like 300 bills in state legislatures have been introduced about this in just the past session or two. So everybody’s grappling with it. Is there a, is there a state you think is sort of ahead of the others?

Saleem Chapman: Well, I look at the issue like this, is that we have to tease out, volume from actually outcomes.

David Roberts: Mm.

Saleem Chapman: And so what our framework is allowing states to do is to say that, you know, “Here’s how we take meaningful steps forward, given the political and policy window we have available to us, and then here’s how we do the work of what remains.” And so if we return back to the Virginia example, you know, I highlighted how they just passed a first-of-its-kind tax on data center electricity consumption. But if we evaluate that, we know that that is primarily a revenue mechanism and doesn’t necessarily provide a comprehensive approach to cost allocation. It doesn’t encourage operational flexibility-

David Roberts: Mm. ...

Saleem Chapman: that makes data centers a great asset, and it certainly doesn’t address cumulative impacts. What I’d sort of like to sort of look at is that even in a region, that has confronted this issue perhaps in a more tangible way than any other place, it’s still requiring an incremental approach. Certainly we have, you know, benchmark policies out there. There’s a really good policy, being considered right now in Illinois, the POWER Act, which is incredibly comprehensive. But even that, uh, based upon our analysis, has some significant gaps. And so what we ultimately wanna provide is a consistent and comprehensive framework, that state legislators could use to evaluate the policy environment over multiple legislative sessions.

David Roberts: Have you thought about doing what, shoot, what is the right wing group that does this? I can’t think of their name. It’s a state, it’s a state-based group, but they basically create model legislation, like, you know, just off the shelf. Like is there... Have you thought about creating like a bill that covers all of these things? Something like a comprehensive bill as a kind of model for states to draw on?

Saleem Chapman: We thought about it. As I was saying earlier, I think where we thought the most important place to start, is really ensuring that policymakers have the information, analytical capacity, and tools to make sound and durable choices. Because they’re being asked to do this, to make these very long-standing generational decisions on incredible time pressures.

David Roberts: Yeah.

Saleem Chapman: And so that was our starting point, is to really help them do some sense making around this issue. And then once we have a better understanding of how these dynamics are playing out in different states, what trade-offs they’re making, then ultimately, I think we might be in a better position to make a model bill that might be applicable across multiple different states. But right now we see, what’s most clear is that this is a local challenge, not a national one. And so, there’s gonna be some things that are translatable, but a lot of this is gonna have to be done on a state-by-state context.

David Roberts: Right. Right. Okay. So that sort of covers the waterfront. I guess as a final question, if I’m a state lawmaker who’s reading and listening to all this, you know, it’s a little overwhelming. There’s a lot involved, there’s a lot going on. Is there a sort of like- I wake up Monday morning what do I do first? What, what’s kind of step one here for state lawmakers who see this train coming down the tracks at them?

Saleem Chapman: Yeah. So I think the first step is to understanding, where in the project life cycle are you trying to address.

David Roberts: Right.

Saleem Chapman: The next step is to really understanding, okay, what has been currently done in your state. That’s certainly something that Climate Cabinet could help with. We actually were able to put together, a legislative portfolio review for lawmakers in Pennsylvania, where at the latter part of June, they were considering as many as 30 different data center related bills.

David Roberts: Jeez.

Saleem Chapman: And so we were able to help them understand, okay, what was the cumulative impact of the bills that were under consideration, and where the gaps remain so that it could set them up well for potential follow-up legislation. So call the Climate Cabinet, we could help you with that. But once you sort of understand the policy environment, it’s then to really understand, okay, how can we begin to sequence these mechanisms in a way that gets us to a comprehensive environment? You alluded to the fact that a lot of these policies are ambitious. They will take a time perhaps that extends over multiple legislative sessions.

David Roberts: Mm.

Saleem Chapman: But certainly there is a starting point, and so once you find that starting point, we can help you with the sequencing that comes after that, which is a little bit of a teaser for our upcoming paper for us.

David Roberts: About sequencing specifically?

Saleem Chapman: About sequencing specifically.

David Roberts: All right. All right. Well, we’ll stay tuned. All right. Well, Saleem, thank you so much. This is really interesting. This is the, this is the state legislative issue right now. The sort of it’s right on everybody’s plate, and I just thought it would be good to just to lay out a framework to help them not feel overwhelmed. So I hope this is helpful to them, and I hope they get in touch with you. Thanks for coming on.

Saleem Chapman: Me as well, and thank you for having me, Dave.

David Roberts: All right. Awesome.

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Lithium-ion batteries, as all you savvy Volts listeners know, are generally composed of an anode and a cathode, with an electrolyte in between them. As the battery charges and discharges, the anode and cathode exchange lithium ions — thus the name.

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In the last 30 years, the cathode material in these batteries has undergone all kinds of innovation. You can find cathodes made of varying combinations of lithium, cobalt, nickel, manganese, iron, and aluminum, depending on the application. NMC, LFP, LMO — all these acronyms refer to different cathode materials.

But anodes have not seen as much innovation. Historically, they have almost always been made of graphite, 95 percent of which comes from China. In the last decade, however, a number of companies have attempted to use silicon in the anode, as silicon unlocks much greater energy density and faster charging times.

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At a Pacific Northwest Climate Week event held by Canary Media on Tuesday, July 14, I spoke with Rick Costantino, the CTO of Group14 — one of the leading companies involved in this effort and one of the first to reach real scale. We discussed the challenges of working with silicon, the solution his company has patented, where silicon anode batteries are showing up today, where they might be tomorrow, and the enormous performance boost they promise.

Timestamps

• 00:00 – Introduction and the graphite anode problem

• 01:54 – Why silicon, and why it kept failing

• 06:26 – From pharma to batteries: Rick's path

• 09:24 – How SCC55 works: silicon in a carbon scaffold

• 14:38 – The payoff: energy density and charge speed

• 18:59 – A drop-in material, and scaling in South Korea

• 21:11 – Where the batteries go: phones, EVs, drones

• 24:29 – Cost versus graphite

• 26:20 – Cycle life, calendar life, and safety

• 31:26 – Supply chain and the silane bottleneck

• 36:26 – Pairing with LFP, DOE support, and phones

• 40:30 – Bringing the cost down, and competitors

• 43:27 – The five-year outlook

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Rick Costantino

  • Group14 (Website - LinkedIn)

• U.S. Department of Energy

Company & Industry News

• Group14 opens factory to produce battery materials for flash charging EVs

• Group14, the Washington company at the center of the EV lithium battery revolution

White Paper: Sionic Energy and Group14 Whitepaper on Life Cycle

Text Transcript

David Roberts: All right. Hello, first of all, Rick Costantino from Group14, welcome to Volts. Thank you so much for coming.

Rick Costantino: Thank you very much.

David Roberts: And, thanks to all of you for coming. I’m excited for this. So if you listen to Volts at all, or if you follow clean energy at all, you probably know that batteries are everything. Everything is batteries. If you have a problem, throw a battery at it. That is practically the slogan of my podcast. And so we’re gonna talk about batteries today, a battery innovation, a very exciting battery innovation. So I think the place to start is, I think most people know batteries these days, or batteries typically are an anode and a cathode, and an electrolyte in between them. They’re sending ions back and forth. When you charge and discharge, you’re sending ions back and forth from the anode to the cathode. And I’ve been following battery chemistry innovations for a while now. I’ve written about a bunch of ‘em. I’ve done podcasts on a bunch of ‘em. Maybe you’ve heard, you know, they started, like Tesla is using nickel magnesium cobalt. There’s lithium ion, there’s lithium iron phosphate. Lot of different chemistries you may have heard about flying around. But what you may not know is that all of that innovation, all of those varieties, are cathodes. Those are all cathode materials. The anode, basically since lithium ion batteries were invented back in the early 1990s, have been made of graphite, and that is, that was true then, it’s true today. So to start with, Rick, why don’t you just tell us what is the role of the anode, and why has it been so resistant to change and innovation?

Rick Costantino: Okay, great. That’s a great setup. And yes, batteries are, a lot of our joy and a lot of our frustrations, and we’re trying to improve them. And so like you said, last 50 years, lithium ion batteries have really been using that same, you know, anode, that graphite anode. And, the bottom line is that it, that it works. It’s what was started originally. It’s a very ubiquitous material, and it works, it works very, very reliably. And at the time it seemed like a very logical choice, you know, to pair. And over the last, you know, about 50 years or so, there’s been lots and lots of advancements in the battery except for that anode. We’ve been using that same graphite chemistry, you know, for this whole time. For this whole while though there’s been an interest in developing, you know, new anode materials, and particularly silicon, which is, which is basically the new, the new material that Group14 and other companies are developing as this, as the anode. it’s quite difficult. Those challenges have been met recently with technology. But until now, it really hasn’t been possible to commercialize those types of batteries.

David Roberts: Yeah, so silicon has been... People have been talking about silicon anodes for a decade now. I’ve followed on and off. There have been lots of attempts that have not really gone anywhere. Maybe start by talking about the challenges of making silicon work, why it’s been so hard to make it work.

Rick Costantino: Sure. One thing I should mention is that the cathode is what brings in your amount of energy, brings in lithium ions, right? And as you mentioned, you’re sort of bringing the cathodes, bringing that lithium from the cathode to the anode back and forth again, and of course, electrons are going the other way. So your energy density of your battery depends on how much cathode you can bring and how much lithium you can get in the cathode. And so the reason people are interested in silicon as a new anode material is because you can store a lot more of the cathode. So basically, you know, in your battery, your anode takes up a lot of the volume. So if you can have a more powerful anode that has a much higher capacity for absorbing, you know, the lithium atoms, you can shrink, you know, your anode. So imagine shrinking your anode, so now you can make your cathode bigger, so you can bring in more lithium into the battery. So people are interested in silicon and other, you know, anodes that have a higher energy density that can actually store more lithium than the, you know, than graphite can.

David Roberts: 10 times, as I, as I understand it. Graphite’s made of carbon. I think it’s like 1 atom of silicon can hold 4 lithium ions, where it takes, like, 6 carbon atoms to hold a single lithium ion, something like that. You can hold a lot more lithium ions with a single atom of silicon.

Rick Costantino: That’s right. It’s about 10 times the capacity on a mass basis. And, you know, the way that graphite works, if you kinda remember your old carbon, structures, you know, you know, graphite is carbon, and it’s a particular form of carbon where it’s in layers. And the way that graphite takes up lithium is that it can intercalate between those layers. And so but there’s only so much lithium that you can store. It’s very, it’s a very reliable way to store it, but it’s a very limited way that you can store it. But with silicon, it actually forms an alloy with the lithium, so it’s, so not only does it store more, about 10 times on a gravimetric basis or also volumetric basis, but it also can, it can absorb and give up that lithium much more rapidly. Now it’s basically thermodynamic. It wants to exist in that alloy state, so it’s not really a matter of kinetics and sort of pushing carbon layers out of the way. It’s about forming an alloy that nature naturally wants to form.

David Roberts: But when silicon absorbs lithium, it swells. This is, as I understand it, the big problem, and if you have an anode that’s swelling, you’re eventually cracking your battery, you’re ruining your electrolyte, et cetera. This has been the challenge, right?

Rick Costantino: That’s right. That’s been the key challenge, for silicon for a long time. It does, expand quite a bit, about 400, about 4 times its, you know, volume when it absorbs lithium ‘cause it forms this new phase. Lithium, it has to go somewhere, it has to form this form, this lithium silicon alloy. And so every time that it absorbs that lithium, it decreases the volume. The consequence of that is that it has a bigger interface. And so, you know, there’s something around that material called the solid electrolyte interphase, or SEI, and you want that to be very stable. And if that’s constantly growing and shrinking, it can actually, you know, crack over time, and it can, it can form separate kind of particles, and that could absorb more and more lithium irreversibly that you can’t exchange back and forth each time. And this can also, you know, cause shorts in your battery. So silicon has been a great material to, you know, charge and discharge once, but to have it in a recycled battery has been, has been quite a challenge.

David Roberts: So let’s talk about then how you solved this problem, and this, I think, gets, interestingly to your origin story. You’re not an electrochemistry guy. You’re not a battery guy originally. You have been thinking about how to deliver silicon in a completely different context. So talk about where you came from and sort of what transferred over.

Rick Costantino: Yeah. So, you know, despite, being CTO and co-founder of a battery materials company, I am not a battery guy. So I hire really good electric chemists that teach me, you know, about batteries every day. And often I find that not knowing what’s supposed to work or not work has been really helpful to invent new ways of looking at things, but as long as you’re careful. So, you know, so my background as a chemical engineer, I actually worked in the pharma industry for more than a decade and, you know, worked in the heyday. I worked for a company called Genentech, which was one of the first, you know, biotechs on the planet, and it was all exciting and, uh... But in 2009, I ended up, doing some, consulting work. My company at that time was doing drug delivery and at that point, because we didn’t own the actual active pharmaceutical ingredients but a delivery technology, when all those companies downsized their departments looking at sort of new ways to market their pharmaceuticals, they decided they didn’t want our delivery technology anymore, so I ended up consulting.

David Roberts: But when, and when you say deliver, you mean like getting the drug to where it needs to be in the body?

Rick Costantino: Yeah. Actually, I-- So the technology I invented was, biodegradable microspheres where so instead of sort of injecting a solution of your, let’s say, your peptide or protein once a day, you can inject it inside a microparticle, which, you know, in a way is not too dissimilar to thinking about a, an energy storage particle, and that particle in your body would degrade over say days or weeks or even months. So we, for example, had a growth hormone product that instead of injecting it once or multiple times per day, you could inject it once a week. Or for indications like schizophrenia, Risperdal, instead of injecting, you know, every day, you can inject once even a month. This is very, very important for some of these kind of disease states. So that was a very interesting technology. We also were developing vaccine technologies, and one of my expertise was freeze-drying with the way to, you know, freeze and then, you know, remove that solvent, by under vacuum, and it’s a great way to, you know, take a pharmaceutical preparation and make it stable, like, for example, for third world storage and things like this. So that was my expertise. So I was consulting, and one day I got a call from Rick Luebbe who was the CEO of a company called EnerG2 at the time. And he said, “I heard that, you know, you’re expert in freeze-drying. I saw that you’re consulting. I saw you wrote this book on freeze-drying. I’d like to hire you know, for your help.” And I said, “Oh, great. What pharmaceutical are you working in?” He’s like, “Oh, no.” He’s like, “I’m working on a battery material.” And I said, “That’s a really dumb idea.” I’m like, “Freeze-drying is really expensive and really energy intensive. It’s gotta be a better way to do what you’re doing.” So kind of long story short, you know, I helped them solve their freeze-drying problem, but I sort of quickly realized that there was a much better way to engineer that battery material using some of those same kind of principles, and we kind of reinvented the way to make the carbon as a completely solvent-free, kind of processing that we call Dryrolysis, and it’s actually the basis for making the carbon scaffold, the carbon backbone that we now make our silicon carbon, composite material. So that’s how I got into batteries.

David Roberts: And so you have this scaffold, as you say, a scaffold made of carbon. And so the idea, as I understand it, this is I’m sure very simplified, is that you absorb, you put silicon inside the scaffold and so that when it swells, when it absorbs the lithium ions, it does that inside the scaffold rather than bumping up against other stuff. Is that roughly correct?

Rick Costantino: Yeah, that is correct. And so we, you know, at the time, had this carbon technology, and we were developing this for a different kind of battery called a ultracapacitor. And so this is a sp- very special batteries that are, that are very important. They’re niche batteries. At the time, we thought they were all gonna make us rich and famous, but we were, we were wrong. But they’re a very interesting technology where you have a lot of surface area, a lot of volume inside of that carbon material so it can, it can absorb different ions in this mechanism. So these ultracapacitors have a very, very, fast charge and discharge, but they don’t, can’t hold very much energy. So they’re used for things like regenerative braking to kind of store energy in very, very short timeframes. So that was our technology and, but we realized that that wasn’t gonna make us rich and famous, so we had to pivot to something else, and we got very interested in lithium ion. And we, you know, we were using hard carbon as a kind of an alternative for replacing graphite. And of course, everybody wanted to, you know, work on silicon, like you said. And everybody had this challenge of this silicon expansion issue. And so at the time, there were many companies that were making different types of silicons, and they came to us and said, “Hey, can you take your carbon and coat it, like, around our silicon material?” That was kind of gen one idea, was, “Okay, let’s just protect the, you know, silicon with a coating of carbon,” like a little magic shell, like the ice cream with the chocolate kinda coating. And that worked pretty well. It improved the silicon quite a bit. You know, it didn’t really keep it from expanding completely, but it sorta helped, you know, keep it a little bit more stable. it improved it a little bit, but it really didn’t look like a game changer, and it really wasn’t a great sort of business kind of opportunity for us, just, you know, improving other people’s materials. So we pivoted to, “Okay, how could we make it-- how could we make that material better?” Kinda still use this equation of silicon plus carbon. So kind of our gen two approach, I’ll get to the gen... the final gen three in a second. The gen two approach was we took a, an existing alloy of silicon aluminum alloy and etched away that aluminum to create a porous silicon, and then we put that inside a carbon, and that worked really well because now we had this sort of nano-sized, kind of silicon features en-encased in carbon, and that worked pretty well. The problem was we created this enormous amount of byproduct, this aluminum alloy, aluminum salt, and we said we had to help create a whole nother business to sell that, and we said, “That doesn’t make any sense either.” So then we came up-- we literally, you know, went through a period where we went kind of the drawing board and said, “Let’s kinda rethink this whole thing.” And it’s, you know, it’s kinda hard to convince your CEO to go in a new direction after you’ve invested all this time and money. But we went a new direction, and we thought of the problem of a different angle and said, “Look, we know how to make carbon. We know how to engineer it. Instead of thinking about, like, adding carbon to the silicon, let’s figure out a way to make a silicon scaffold, a place to grow the silicon inside.” And that was kind of our a-ha moment where we said, “Okay, let’s create a porous carbon.” So think of kind of a sponge of... We created a carbon, and we’re growing the silicon inside of that, of that carbon material. So we have kind of a, think of a micron-sized, you know, porous carbon particle sponge, and inside of that we’re growing nano-sized amorphous domains of silicon. So now the silicon, has the freedom of kind of being inside of that carbon scaffold. So you can think of the Group14 material, it’s, by weight it’s about half and half, carbon and silicon, but by volume it’s about one-third silicon carbon and one-third void. So every time that particle kind of absorbs the lithium, you know, can sort of help, you know, maintain that expansion within the particle so we can get the best of both worlds. We can get the high capacity, of the silicon but get the good stability and surface, features of the carbon itself.

David Roberts: And so this material you’ve made, it’s called SCC55. If you haven’t thought to think of a cleverer name for your material than the-

Rick Costantino: That’s also kind of a funny story. You know, when you’re only five employees, you know, you only have so many, big marketing team. So- So you know, marketing team came up to me and is like, “Okay, we gotta figure out what to call the material.” And I said, “Well,” I said, “We call it SCC55. That’s Silicon Carbon Composite 55.” And they’re like, “That’s a great name. I’m gonna use that one.” I’m like, “Okay.” You know, but you know, it does speak to kind of the simplicity and the novelty of it. It literally took us like fif- 55 iterations. And you know, some of our competitors, you know, advertise they’ve done thousands of combinatorial things, and you know, while I think that’s great, I’m also quite proud that, you know, we just, you know..

David Roberts: you don’t, it only took you 55

Rick Costantino: We gotta figure out the next one. I wanna call it, you know, fif- do we go 55BCD or do we do 56, 57? But you know, so I gotta figure out what the next generation’s gonna be.

David Roberts: As I, again, as I understand it, you, it’s not a s- it’s not a set ratio of silicon to carbon. You can vary that ratio. You can use more silicon relative to carbon, and as I understand it, the more silicon you use relative to carbon, the better your energy density, et cetera, the more performance you get out of it. But presumably there are trade-offs. Sort of what’s the trade-off when you increase the percentage of silicon relative to carbon?

Rick Costantino: Great question. So the core technology is, as you said, it’s flexible, so we can sort of modulate, for example, the ratio of silicon to carbon. We can modulate how much, the volume. We can modulate the particle size, to some extent the shape, et cetera. Now we’ve sort of have one particular flagship product that seemed to work pretty well across, you know, for different customers, so we kinda fixed that one design. But our manufacturing platform is quite flexible, and we actually, we’re already working on designing kinda multiple next i- you know, iteration products out of our pilot plant in Woodinville, Washington, which we’ve finally transitioned from, you know, commercial production back to what I wanted to use it for as our sandbox. So you can, you know, create different, you know, materials using the same core technology and there will be trade-offs. You know, the higher, if you want higher capacity, you have to have more silicon. So there might, you know, might be, it might be a bit, you know, more expensive to produce silicon versus the carbon, for example. And silicon, you know, has less conductivity generally than carbon ‘cause it’s a semiconductor, whereas carbon is more conductive. But you can, you can compensate for that with other, you know, kind of tricks on the particle design as well. So there are some trade-offs, but there’s also ways to mitigate, those trade-offs. But different customers want different things, so we’ll, you know, we’ll kind of tailor different products as kind of the market, demands them.

David Roberts: So let’s get to- The meat of the issue, which is if you replace a graphite anode with an anode made of SCC55, what do you gain, and how much?

Rick Costantino: Okay, you know, great question. And, you know, the key benefit that you get is the increase in energy density, you know, which is whatever was in the holy grail for the, for the silicon material. Now, we’re not getting the 10 times the density, because our material’s half silicon, half carbon, so we’re about 5 times, of the capacity. So one way that my CEO likes to describe it is every 5 tons of Chinese graphite you import, you produce 1 ton of domestically of Group14 material. So we’re kind of that equation. Uh-

David Roberts: Five, 5 times the capacity is not a, that’s not a small thing.

Rick Costantino: Still pretty good. That was kind of the big benefit that you get is the energy density. But the other benefit that you get, and we didn’t really fully honestly appreciate this as we were kind of forming the the company and exploring the technology, was the increased rate capability that you get with silicon. And, you know, this was something where, again, because, the way silicon interacts, with the lithium ions fundamentally differently than how graphite interacts with the, with the lithium ion, you can get much faster charge and discharge. So whereas your, you know, normal battery based on graphite might take tens of minutes or hours even to charge, you can charge in less than 20 minutes, less than 10 minutes. We’ve got customers that are creating batteries you can even charge in just a few minutes, even less than one minute, which is mind-boggling. So, you know, once you can start charging that rapidly, then maybe this sort of range anxiety, certainly charge time anxiety goes away, and maybe even range anxiety with you can truly go that fast. Now, to reap the benefit of that, you have to kinda rethink other parts of the battery, ‘cause the batteries haven’t been designed for 50 years to do that. So you’re gonna have to think about how to maintain, you know, how do you generate a lot of heat when you charge and discharge that quickly, for example. But once you understand and that’s what you wanna do, we have customers who are making some pretty phenomenal batteries, across different, at different industries.

David Roberts: So if I take a set battery with a set amount of cathode, the same sized anode, but made of SCC55, I get, I can store 5 times as much energy, and I can charge in minutes rather than hours.

Rick Costantino: Yes, exactly. Some of our customers are quite aggressive and wanna completely dispense with the graphite and use our material, you know, silicon-based anode instead. And for those customers, they’re able to get maybe up to 40 or even 50% higher energy density for that same, that same physical battery, that same, that same dimension of battery. Or you can make your battery smaller for the same energy, or you can make it lighter, depending on what, you know, whether it’s even taller, whatever. So those are kind of the gains you can get. Now, other customers ha- are choosing, instead of going all the way into the silicon material to start with, they decided they wanna sort of have incremental improvements. So for example, we’re see, you see this more in the cell phone arena, where there’s been a series of cell phones, and we are now in over 20 million cell phones in Asia. And materially we actually made in our plant in Woodinville, Washington, so it’s kinda fun. And-

David Roberts: And just to, and just to be clear, ‘cause I’m not sure we’ve actually said this out loud yet, but you’re making the material, selling it to battery makers, and then the battery makers are designing batteries and building batteries around the material. You’re just in the material business.

Rick Costantino: That’s right. So I like to use the analogy we’re the Intel inside, so we don’t make the computer. We, you know, we make the chip, so we don’t make the battery. We make the material to make all the batteries better. And we’ve early on, you know, decided that making batteries is really hard and lots of folks do it really well. So I aspire, you know, let’s make the world’s best materials and let’s let everyone else, you know, figure out how to make the best batteries out of it and let those end users make the best devices, the better, the better cell phones, the better cars, the better computers, the better drones, the better whatever.

David Roberts: And this gets to the scaling issue, too, ‘cause one of the things that has brought down, I think, a lot of previous efforts to make silicon anodes is they often are entirely novel technologies that would require entirely novel factories. And, no, it takes a lot to talk a battery maker into scrapping factories and building entirely new factories. Your material works in extant lithium ion manufacturing facilities. Is that, is that categorically true?

Rick Costantino: That is categorically true. So we design the material as a drop-in, so we... It’s a black powder. It looks, you know, kinda like graphite. It processes very similar to graphite. Now, if you’re completely displacing your graphite with our black powder, you may have to do things a little bit differently, but you’re using the same equipment. But you may have to change your recipe a little bit, your stir rate and so forth.

David Roberts: Yes. This was the analogy I thought of. It’s like a bakery. Like you don’t need new machinery in your bakery, but you do have to tweak the recipe of your bread if you’re using a new kind of flour, for instance.

Rick Costantino: That’s a good way to think about it. Yeah. Exactly.

David Roberts: And so when you’re talking about scaling- Currently, you’ve got a factory, you’ve got this-- your Woodinville factory’s now returned to being your sandbox and your little innovation box. You’ve got a factory built now in South Korea producing the material, selling it to battery makers. It’s going into batteries. The batteries are going into phones. Where else are the batteries going?

Rick Costantino: Yeah, so I can’t talk too much about specific customers, unfortunately. You know, but we’ve been engaged with most of the world’s battery production. I think now we’ve got something like 150 customers, I think is the latest number.

David Roberts: Battery makers-

Rick Costantino: Battery makers

David Roberts: who want your material

Rick Costantino: Who want the material. We’re engaged with something like 95% of the world’s battery-making capacity has- is looking at our material at some stage or another, either commercialized already or about to commercialize. And that was, you know, by our early design. So we took a very different strategy to commercializing our material. Like from our very start, we were very interested in commercial partnerships and supply chain partners. Our very first investors were BASF, when we spun out of the EnerG2 company I mentioned, and of course the US Department of Energy was one of our early investors, our first project. Our first, Series, B was with ATL and our s- first Series C is with SK Materials in Korea, which is the company we’re now partnered in the plant we mentioned. And so we’ve been always interested in partnering with either cathode makers or other carbon makers or electrolyte or other companies or folks that produce the silane gas that is also used to make our silicon material. So we’ve always wanted to be part of that supply chain to make sure that we knew what the market, how the material would use it, and make sure that we were kind of in lockstep with where the industry was going because so many things have changed about our assumptions from when we started producing this material. But we’ve been able to kind of stay ahead of the technology and stay with the market.

David Roberts: And you have some kind of deal with Porsche, but as I understand it, there’s not a car with a battery with this stuff in it that a customer can buy yet.

Rick Costantino: not yet. Yeah, Porsche was, Porsche was one of our investors, and we were going to say Porsche. It was reminding me to say that. All right. So, otherwise I get in trouble for-

David Roberts: We’re in America here

Rick Costantino: Yeah, exactly. But, yeah, so they’re one of our investors and they’ve been, they’ve been with us, and yeah, we c- I can’t comment on any specific timelines, but certainly, you know, they have a lot of long tradition and interest, you know, in high performance vehicles and, you know, they made the realization that, you know, electric, is k- you can get some pretty darn high performing electric vehicle, so.

David Roberts: So but in theory, we are talking on some time horizon about EV batteries that hold lots more energy, get lots more range, and charge lots faster. That’s kind of the, that’s the scale, that’s the scale market, presumably. That’s the, that’s the big fish. I don’t know what the analogy is. That’s the big market you’re gonna go after eventually, presumably.

Rick Costantino: Yeah, that is the big market and that was sort of our founding market, you know, for the company, although I’ve heard some predictions that, you know, kind of either, you know, AI or other data storage could be a bigger market for silicon batteries. And again, and the performance by the way is so different from a lithium-ion standard battery that they’re, people are now calling these batteries silicon batteries, and that terminology has really caught on, so the market could even be bigger. Non-EV applications could be bigger, for silicon batteries.

David Roberts: And are you in drones now?

Rick Costantino: Oh, yes. Yeah, we’re definitely in drones. Um- And again, we’re in batteries that we are- And you know, if you think about your ability to carry payload and, you know, a lot of payload and to go long distances is very, very important for drone applications. So yeah, so drones is a b- is a big application for silicon batteries.

David Roberts: Well, let’s talk about cost ‘cause I think that’s what everybody’s interested in, and I think, you know, one way to ask about cost is how much is a pound of your material versus a pound of graphite? And then another way of thinking about it is the per energy output cost. So talk about both those. Presumably the material itself on a volumetric basis is more expensive than graphite just because it’s d- a custom manufactured as opposed to, and graphite has a very long history of scaling.

Rick Costantino: Yeah, folks have been optimizing graphite for quite a long time. You know, it’s definitely spending more, but you know, you’re paying for a high performance material, and you know, part of that is, as you said, is the sort of, you think about the cost and you know, you know, what do you charge per kilogram or per mass, right? But you know, we keep trying to convincing the procurement folks of our customers, you know, “You should be think about is how much you’re paying per energy storage unit, right? So how much you’re paying per milliamp hour, right?” So when you’re buying gas, you know, you’re not, you’re not thinking about how much per you’re paying per gallon. Well, nowadays it’s so high maybe we’re all numb, but you know, you think about like what, you’re gonna pay more for higher octane gas, right? ‘Cause, and you’re gonna get more miles for the dollar. So if you think about batteries on a sort of kilowatt hour per dollar basis, you can actually have less. You can actually have a savings even though you’re paying more money per mass for the anode material, you can make batteries that have lower cost. And I can, I can go through the spreadsh- I can’t do it in the room right now, but I c- I can go in the spreadsheet and we’ve spent many hours with the procurement people and they understand it and finally they say, “Well, we still want you to charge us less money.” So any new technology’s gonna have a premium, and then there’ll be a market for that. And so any, you know, companies that wanna be at the forefront will pay that premium. And over time, you know, as we get to larger scales and our, as our supply chain gets more mature, those costs will come down. But, you know, right now, you know, I think it’s a pretty good, kind of value proposition and I think the really savvy players in the market are seeing that, and we’re already seeing pretty good traction.

David Roberts: What about cycle life? This is always a question that faces any new, any new battery. There are lots of fancy new types of battery chemistries that I’ve read about over the years that sort of crash on the shore of you can only charge and discharge them a limited number of times before they burn out and everybody wants resilience in their batteries. So how does this replacing graphite with this material affect cycle life?

Rick Costantino: It’s a very good question and, you know, we’ve designed, you know, the material to keep that silicon in its best possible form that we can think of, again, which is that nano-sized amorphous form. It’s been academically studied that that’s the best form of silicon. It’s just really hard to create that in a commercializable form, and again, we do it by putting it inside the carbon scaffold. And so, you know, we have customers that can achieve the same cycle life as the graphite battery, and it may not be easy the first time. You can’t expect to use exactly the same recipe, just if you’re changing your flour, you can’t expect, you know, if you’re gonna use, you know, potato flour or whatever instead of, you know, wheat-based flour, you’re gonna make a very different cake. So you gotta change your recipe accordingly. Um- And but you can get a really good result. We’ve, we published a white paper, fairly recently, if anyone’s interested I can, you can come approach me, I can give you the link to it, where we had over 15 customers using our material across different chemistries, cathodes, and different chemistries that were able to achieve 1,500, even 2,000, even 3,000 cycles. So that’s, we’re back to the m- So we say that 1,500 cycles or 2,000 cycles is now the new normal versus 1,000 cycles. So you can get, you can get a good result, but you may have to work at it, and like I said, if you are, using kind of small amounts of our material, you know, changing for graphite, it’s easier to get a good result right away, but if you’re more aggressive, it may take more work. And one of the things that we learned is that, you know, you have to, you have to also get, you know, pretty good at making batteries yourself to show your customers sometimes. And so we’ve developed in Woodinville, we have a pouch line to make pouch batteries, the same kind of batteries in your phone, and we can make those there, and we’ve gotten pretty good at it. It’s taken us a while, but, you know, once you can make a battery that’s pretty good and show your customer, “I got a good result, you guys must be much better than we are at it, you’ve been doing it for this long time.” So if you can show the material works firsthand and show that first data and then present them a data package, say, “Look, here’s the recipe how we did it, you guys can certainly get a better result than we did,” it really helps to kind of speed the conversation.

David Roberts: I read that paper about cycle life, and it says you can, some customers have matched lithium ion cycle life, but it doesn’t say much about temperature or depth of discharge or the conditions in which that works. Is it more sensitive to heat or cold? Does it, does the depth of discharge matter? Do any of those conditions under which it’s cycling and oncyc- and recycling affect this material differently than graphite?

Rick Costantino: Yeah, all those things can matter, and all those things were kind of different in the different studies. And in that example, it was whatever data we had to beg the customer to let us present anything. So we’re, I think, on our own developing a more robust data set that when we kind of publish, get ready to publish our own white paper, we can go in more in-depth these things. But generally, you know, as you go to higher or lower temperatures, it gets more challenging for the battery. So higher temperatures, you have to worry a lot more about the kind of thermal runaway, and as you get to colder temperatures, you have to worry about the viscosity of the electrolyte and so forth.

David Roberts: But that’s, but that’s any battery. Is it, is it different for your material than graphite in these conditions?

Rick Costantino: Um, in principle, no, but you do have to keep in mind that, you know, if you have more energy to deal with... I’ll give you anecdote. So the first time one of our customers came back to me, he went, “Oh my God, we did our first nail test,” where they kind of literally shoot a nail through the battery.

David Roberts: Right, right, right.

Rick Costantino: And he said, “Man, we shot this nail through and it had this huge, you know, flame, and it’s like, man, it released, you know, 50% more energy than we’ve ever seen before.” And I’m like, “Well, how much more energy was in the battery, you know, before you shot the nail through?” And he’s like, “Oh, 50%.” Well, what do you expect, you know? And the customer solved that issue, right? So now they’ve realized that they had to redesign the electrolyte to store the energy.

David Roberts: So safety and preventing thermal runaway will be a bigger deal if you’ve got more energy packed in it.

Rick Costantino: Right. But it... Yes, yes, exactly.

David Roberts: What about, calendar life, briefly? Calendar life is the other, there’s cycle life and then there’s calendar life, which is just if you sit it on a shelf, how long does it take for it to sort of begin to degrade? This has also been a problem for silicon traditionally.

Rick Costantino: That’s a good question. So far, we haven’t heard, any sort of commercial, barriers to commercialization regarding calendar life. so our customers don’t necessarily tell us how they’ve solved the problem or whether they see it or not. And believe me, our customers, if they have a problem, they come to me as first person. And so that has not, that has not stopped them. Now I suspect there may be more challenges there, again, because you’re storing more energy, it’s a little different, maybe recipe or chemistry, you may have to, you have to redesign things a little bit. But you know, when you talk about, you know, this calendar life question, you know, if you think about buying a lead-acid battery off the shelf for your car or whatever in the old da- you know, that thing might be on the shelf for 5 or 10 years. So is a lithium-ion battery gonna really sit on the shelf for 10 years before somebody goes to grab and use it? It’s gonna be outdated by, no one’s gonna even know how to plug it into their device anymore. So I don’t know if the jury’s out on how long do we really need a calendar life and how important it is, but I think in principle, you know, there’s no reason why sol- co- should be that different. So I think, again, so far it has not been a barrier to commercialization.

David Roberts: Let’s talk about supply chain, which is a big advantage that you are promoting here. I don’t know if we mentioned this earlier, but China produces, what is it, 90, 95% of the world’s graphite and has started putting export duties on it is not just theoretically, is using it as a kind of industrial tool, weapon, pressure, whatever, counter to tariffs, whatever, you wanna call. So you, silicon is everywhere, pretty easy to get, but you are using a particular form of gas, silane gas, to create this material. So tell us a little bit about what that looks like and where you get the silane gas and who makes the silane gas. What-- Tell us about the supply chain for that.

Rick Costantino: Sure, and this sort of, this general question of supply chain, even from our very first, inventing this material, we were very keen on understanding the complexity of the supply chain. And we realized, you know, very early that US energy dependence is not just about just this energy, you know, generation, but energy storage, and vast majority of these anode materials, vast majority of battery production, et cetera, in China and Asia. And so building that infrastructures is really important, and this sort of, this silicon kind of carbon revolution, you know, the kind of the invention in the US and protecting that has been very important. And so the, you know, so the material that we produce, we produce both the carbon and the silicon. And we produce the carbon itself we produce from essentially commodity chemicals that you could really get anywhere in the world that are not very super exotic. And the precursor that we use for the, for the silicon is silane gas, SiH4. It’s kind of the most sort of elemental, you know, kind of most simple form of that, of that, of silane, of silicon in the form of a gas. And so there’s not much production in the US, except for a company called REC Silicon that is now, kind of owned by Hanwha. It’s the long story. I don’t, I don’t even know what the latest in this, in this soap opera is. But basically, we kind of realized early on that we were gonna have to control our own destiny. So we acquired a technology, from a German company to create, silane gas, which we think is the most efficient way to do it on the planet. And so we have that technology, we have a plant to do that in Germany, and so we’re ready to deploy that technology anywhere in the world for future plants. So right now we’re kinda sourcing silane that’s already commercially made in the US, for example, out of REC Silicon in Butte, Montana, or in Korea through SK, which is, which is our partner and the Korea company. But we have the ability to actually produce our own plant from scratch and build in the silane plant in it. And really the vision is not just building the silane, but putting the whole supply chain. So for example, our battery customer, it’d be great to be next door to them, and maybe the automaker next door to them. So you have the whole kind of this, the whole supply chain kind of in the same geographical region. So we have a technology that we can meet the needs locally, whether we wanna build just a, just our standalone plant, or whether we wanna be part of a larger chain, you know, built just for that, for that region. We’re looking at both kind of options depending on where in the world.

David Roberts: So just to clarify, the manufacturing of the silane gas is somewhat of a choke point currently that you’re working on overcoming, but the materials, there are no materials choke points. You just gotta build enough production capacity.

Rick Costantino: So the material to make silane gas is metallurgical-grade silicon, which is a commodity you can buy anywhere in the world, and that’s made basically from quartz, from SiO2, so.

David Roberts: So in theory, you just said this, but I wanna run through it again. In theory, someone making EV batteries could in the same compound, on the same site, create, manufacture the gas, make the anode, make the cathode, make the battery, vertically integrate the whole supply chain in a single location.

Rick Costantino: Right. And that, and certainly that vision makes a lot of sense for some areas. Yes, exactly.

David Roberts: And, another thing I forgot to mention earlier, which is one of the things that I thought was really exciting about this, and maybe people had intuited this, but this anode works with any cathode, any lithium-based cathode chemistry, LFP, NMC, if everybody knows all the acronyms, and also solid state batteries. What’s your relation to s- the solid state world right now?

Rick Costantino: Good question. So I guess solid state as kind of the more formal definition of like, you know, not like being a solid, you know, we, there are solid, state, anode architectures that actually prefer to use silicon, and some companies that have advertised silicon works really well with that, and we have some customers that are, that have solid state architectures that look at our material as their anode active material. Now, some folks may call solid state as a kind of a pure metallic, you know, lithium anode. That’s different. That’s not really solid state. That’s really a very, very different battery. But I guess solid state is defined as being a solid phase. You know, silicon is, or even, or a silicon carbon composite is a very, suitable material for that kind of anode.

David Roberts: And just I’ll editorialize briefly here, like if people are familiar with LFP batteries, lithium iron phosphate, they are cheaper to make, and they use much more common materials. Tesla uses them in some of their cars and overseas, but mostly they’re used for grid scale storage ‘cause they’re cheaper to make and the materials are cheaper, but they lack the energy density of your NMC batteries for your high-end performance. So if you could pair this anode, which increases energy density by 5 times, with the cheapness and materials advantages of LFP, that kind of seems like the magic, the magic battery right there.

Rick Costantino: I wanna take you when I talk to procurement guys with our customers. ‘Cause the way you described this makes sense to me. Yeah. And so, you know, LFP, you know, it’s cheaper type of batteries basically, and pairing it with a premium anode material makes a lot of sense. In terms of getting improvement per dollar, it can make a lot of sense.

David Roberts: Is someone making LFP batteries with these anodes yet?

Rick Costantino: Yeah, yes. The, again, I can’t talk to any specific customer, but if you look at our, for example, some of the papers, our white paper and some other things, we’ve presented some examples of LFP chemistry that works really well with SCC55.

David Roberts: You were getting a bunch of money from the DOE back when the DOE was different. Now it’s different. Are you still getting that money from the DOE? What’s your current relationship with Department of Energy, sorry.

Rick Costantino: Good question. It’s certainly been a pretty wild ride for us, but we’ve kind of-

David Roberts: You’re not alone, my friend

Rick Costantino: But we’ve really weathered it all, right? So we’ve, we sort of ascended on a, on kind of Trump 1. We’ve raised a bunch of funds under Obama, and Trump 2, we’re, you know, here we are. We’re still have multiple awards. We have two big awards at Moses Lake, one for our commercial manufacturing plant, our 2,000 ton per year plant. We’re building two of those modules in Moses Lake, and we’ll have, we’ll have those, by middle of next year, we’ll have both of those running.

David Roberts: Those, the Moses Lake plant got moved back by a year or two. It’s still on track?

Rick Costantino: Still going. It’s been delayed a little bit. We had to open up our Korea one first.

David Roberts: And that’s just for the material or for silane gas too?

Rick Costantino: That’s for making the material. We also have a, an award for silane gas production, and that one will be, will be deployed after that.

David Roberts: And you’re still getting those awards. They have not-

Rick Costantino: We’re, again, they’re, we haven’t talked specific timelines at this point, but those programs are still moving. They’re just not, they’re a little delayed.

David Roberts: Also, I forgot to ask ‘cause everybody loves their phones, um, are the batteries that they’re putting in phones with this stuff, are the batteries lasting longer? Are you, are you getting substantial increases in battery performance in phones? ‘Cause everybody loves that.

Rick Costantino: Yes. The main batteries that we’re in that we’ve-- that have been advertised has been the Honor, the Magic phone is- which is basically, which is more the AI enablement, so it’s not so much about higher energy density, but about higher c- sort of computational, capability.

David Roberts: Mm-hmm.

Rick Costantino: And about higher sort of, charging and discharging rate capability, frequency switching for those batteries. And, you know, again, I don’t really understand why frequency... And this is one of those things where, like, we had no idea how important. So, you know, you talk about rate capability, like being able to charge and discharge rapidly, but being able to change the rate at which you’re charging and discharging very rapidly-

David Roberts: Hmm

Rick Costantino: it has been huge. And I don’t understand why that’s so important, but apparently it is. And I’ll tell you another anecdote. One of our customers, he had a test where they were, they were basically charging a battery, you know, discharging it, and every second, they were kinda stopping and waiting and then, and then trying to charge again. And they could, they could only, they couldn’t do this with graphite at all, and they could do it with silicon.

David Roberts: Hmm.

Rick Costantino: And then, and then he said, “Wow, and I did it, I could do it at a millisecond.” So I said, “Well, actually, why don’t you try a microsecond?” And he said, “Well, I can’t do that. My equipment can’t do that.” I said, “Well, then change your equipment.” And he eventually figured out how to do it, and then it worked at milliseconds. So now I’ve challenged him to do nanosecond, but he hasn’t figured out how to get the equipment to do that yet. But apparently this is very, very important for AI, this frequency switching capability. And again, it’s because it’s an alloy, because it’s a different mechanism.

David Roberts: Okay, I got-- I’m running out of time. I got two questions left. One is just about cost curves. I always, I always ask of any technology, what pieces of this puzzle are-- can you work on that will bring down costs over time? Presumably scaling up the manufacturing of silane gas will be a big piece. What else is gonna bring down the cost of this material over time?

Rick Costantino: Yeah, I think, bringing down the, you know, getting the silane gas is gonna be a key piece to it, and just getting at scale, right? So of course our first, plant is the most, is the hardest one to get up and running. And I think as we get more of the plants, we’ll get more of that economy of scale. So understanding how to get more efficient, understanding how to increase the throughput through the same equipment. And, you know, we’re already working on designs to increase the throughput of our plant maybe another two or even tenfold more, with the same kind of a technology. So we’re constantly kind of challenging ourselves to get more efficient at how we can produce the material.

David Roberts: So that’s scale. That’s mostly scale. The material itself, are you gonna get... Is the, is the goal over time to increase the amount of silicon relative to carbon, ‘cause that’s kind of what you’re getting your performance out of it, is the goal over time, is there such a thing as, in the future, a 100% silicon anode? Are you always gonna need the carbon for the lattice? What’s the, what’s the theoretical maximum amount of silicon you could get in there?

Rick Costantino: Yeah, it’s a good question. So at some point there’ll be, diminishing returns where your material inside the sponge is more than the sponge itself. Sort of a 50/50 mixture seems to be kind of a nice sweet spot. We certainly, I think, can improve that to maybe a 60/40, maybe 70/30 equation or something. Getting beyond that, I think you’re going to lose this sort of nano size domain of the silicon, so it’ll be a different challenge. There may be other ways to build or grow your silicon inside the anode material, and we’re looking at some other technologies as well. But this seems to right now be a nice, a nice sweet spot for the technology.

David Roberts: And are you worried at all about competitors on your heels? Is anybody else doing this thing, and do you anticipate other people doing this thing? Do you anticipate the inevitability of China stealing this and doing this thing? Like who... How worried are you about competitors?

Rick Costantino: We are very aggressive in defending our IP. You know, you kinda mentioned China, that clearly is an issue. It’s been quite in the news right now. Uh, one of our competitors, has filed against a Chinese company actually, and we’ve published our own, opinion on that. And so I will let you guys read our opinion rather than me kind of espouse it here, but we feel quite strongly about our specific position, I- the strength of our position. We feel quite strongly about the US, needing to keep the dominance.

David Roberts: Are there other US companies trying to put silicon in a carbon lattice specifically?

Rick Costantino: there are other there are other distinct technologies where folks are looking at silicon anode materials.

David Roberts: Okay. Really final question, asking you to speculate. In 5 years, what percentage of lithium ion batteries will have this material in their anode?

Rick Costantino: I would say 80%, maybe 100.

David Roberts: All right. All right. Ambitious. Awesome. Well, Rick Costantino, thank you so much. This is absolutely fascinating. Thanks everybody for coming.

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

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

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

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

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

Timestamps

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

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

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

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

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

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

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

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

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

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

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

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

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

• 46:41 – Tax credits versus permitting reform

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

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

• 66:48 – Grid utilization versus building new grid

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

Resources

People & Organizations

• David Roberts (Substack - Bluesky LinkedIn)

  • Volts (Apple Podcasts - Spotify - YouTube)

• Lily Bermel (LinkedIn - Columbia CGEP)

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

  • Columbia Center on Global Energy Policy (Website)

• Michael Thomas (Distilled - Cleanview Newsletter)

Company & Industry News

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

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

Books & Articles Discussed

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

• How green energy will survive Trump to fight climate change

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

Related Volts Episodes

• Doing data centers the not-dumb way

• A fireside chat with Jigar Shah

• Making sense of the data center backlash

Text Transcript

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

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

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

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

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

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

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

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

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

Lily Bermel: Exactly. Yep.

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

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

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

Lily Bermel: Yep.

David Roberts: And then what happened about, emissions?

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

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

Lily Bermel: Yeah, perfect ...

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

Lily Bermel: Yeah.

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

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

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

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

David Roberts: Right. 19% more emissions.

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

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

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

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

Lily Bermel: Yep.

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

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

David Roberts: Mm-hmm ...

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

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

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

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

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

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

Lily Bermel: Mm-hmm

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

Lily Bermel: Yeah.

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

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

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

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

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

Lily Bermel: Yep ...

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

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

David Roberts: Right.

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

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

Lily Bermel: Exactly ...

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

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

David Roberts: Yeah, yeah.

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

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

Lily Bermel: Mm-hmm.

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

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

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

Lily Bermel: Yeah ...

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

Lily Bermel: Low bar ...

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

Lily Bermel: Mm-hmm ...

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

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

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

Lily Bermel: Just not wind and solar.

David Roberts: They really just hate wind and solar.

Lily Bermel: Totally.

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

Lily Bermel: The sacrificial lamb

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

Lily Bermel: Yep.

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

Lily Bermel: Yeah ...

David Roberts: All that stuff, did not-

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

David Roberts: Yeah, yeah. Yeah ...

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

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

Lily Bermel: Yeah ...

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

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

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

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

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

Lily Bermel: It’s creative.

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

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

David Roberts: Yeah.

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

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

Lily Bermel: Totally. And the investment environment

David Roberts: Yeah ...

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

David Roberts: Yes ...

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

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

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

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

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

David Roberts: Right.

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

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

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

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

Lily Bermel: Yeah.

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

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

David Roberts: Mm-hmm.

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

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

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

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

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

David Roberts: I know.

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

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

Lily Bermel: Exactly

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

Lily Bermel: Exactly

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

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

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

Lily Bermel: Yeah, well said.

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

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

David Roberts: Yes

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

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

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

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

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

David Roberts: Right ...

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

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

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

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

Lily Bermel: Exactly ...

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

Lily Bermel: Yep ...

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

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

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

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

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

Lily Bermel: Yep ...

David Roberts: Which they seem to do.

Lily Bermel: Yeah, every time.

David Roberts: Every time.

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

David Roberts: Yes ...

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

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

Lily Bermel: Yeah.

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

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

David Roberts: Mm-hmm ...

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

David Roberts: Yeah, yeah.

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

David Roberts: Mm-hmm.

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

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

Lily Bermel: Yeah ...

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

Lily Bermel: Mm ...

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

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

David Roberts: Mm-hmm ...

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

David Roberts: Yes this is such an important point

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

David Roberts: Yeah.

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

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

Lily Bermel: Mm-hmm.

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

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

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

Lily Bermel: Yeah ...

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

Lily Bermel: Love it

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

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

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

Lily Bermel: Yep

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

Lily Bermel: Totally

David Roberts: Like all, all these things.

Lily Bermel: Let’s do it all. Yeah.

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

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

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

Lily Bermel: Yep.

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

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

David Roberts: God.

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

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

Lily Bermel: Yes.

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

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

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

Lily Bermel: Okay.

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

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

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

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

David Roberts: Hmm.

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

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

Lily Bermel: Sure.

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

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

David Roberts: Mm-hmm.

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

David Roberts: Hmm.

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

David Roberts: Mmhmm.

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

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

Lily Bermel: Mm-hmm ...

David Roberts: Transmission.

Lily Bermel: Mm-hmm.

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

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

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

Lily Bermel: Sure ...

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

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

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

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

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

Lily Bermel: Yeah.

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

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

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

Lily Bermel: Mm-hmm

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

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

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

Lily Bermel: Yeah.

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

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

David Roberts: Sure. Sure.

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

David Roberts: Transmission obviously a huge—

Lily Bermel: Yeah ...

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

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

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

Lily Bermel: Yeah.

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

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

David Roberts: Mm.

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

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

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

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

Lily Bermel: We are bumbling, yeah ...

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

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

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

Lily Bermel: Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Mm ...

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

David Roberts: Okay. Permitting reform. What else?

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

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

Lily Bermel: Yep.

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

Lily Bermel: Yep.

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

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

David Roberts: Mm ...

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

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

Lily Bermel: Oh, yeah. ...

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

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

David Roberts: Yeah

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

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

Lily Bermel: Yep ...

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

Lily Bermel: Yeah ...

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

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

David Roberts: Yes, that’s one tiny…

Lily Bermel: Which would take too long to enumerate,

David Roberts: Yeah one tiny piece of the puzzle.

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

David Roberts: Mm-hmm.

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

David Roberts: Drive down costs

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

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

Lily Bermel: It was great.

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

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

David Roberts: That’s my jam.

Lily Bermel: Me too.

David Roberts: All right. Thanks, Lily.

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

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

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

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

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

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

Timestamps

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

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

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

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

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

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

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

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

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

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

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

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

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Will Poff-Webster (LinkedIn - IFP profile)

  • Institute for Progress (Website)

• Stephanie Pollack (LinkedIn - IFP profile)

  • MIT Mobility Initiative (Website)

• NYU Marron Institute - Transit Costs Project

• Eno Center for Transportation - Project Delivery Initiative

Books & Articles Discussed

• The Transit Abundance Playbook

• Reform Funding to Encourage Early Transit Planning

• Focus Capital Investment Grants on Improved Project Delivery

• Reduce Needless Bus Customization

• Get the Best Value in Transit Procurement

• We Should Know How Much Transit Components Cost

• Transit Projects Need a Single Decision-Maker

• Let Agencies Do Their Own Environmental Review

• Fast-Track Democratically Approved Transit Projects

Related Volts Episodes

• US transit costs and how to tame them

• How is public transit doing in the US?

Text Transcript

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

Stephanie Pollack: Thanks for having me.

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

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

Will Poff-Webster: Yes.

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

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

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

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

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

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

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

David Roberts: Right.

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

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

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

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

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

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

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

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

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

David Roberts: Awesome.

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

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

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

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

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

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

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

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

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

David Roberts: Hmm.

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

David Roberts: Mm-hmm.

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

David Roberts: By law.

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

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

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

David Roberts: Right.

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

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

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

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

David Roberts: Ah.

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

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

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

David Roberts: Right, right, right

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

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

David Roberts: Right.

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

David Roberts: Yeah.

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

David Roberts: Mm.

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

David Roberts: Yep.

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

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

David Roberts: Mmhmmm.

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

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

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

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

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

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

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

David Roberts: Yes

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

David Roberts: Yes.

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

David Roberts: Right.

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

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

Will Poff-Webster: That’s right.

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

David Roberts: Hmm.

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

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

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

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

David Roberts: Right. Right, right.

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

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

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

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

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

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

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

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

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

David Roberts: Mm-hmm.

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

David Roberts: Mm-hmm.

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

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

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

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

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

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

Stephanie Pollack: Right.

David Roberts: Yes.

Stephanie Pollack: But that’s a politically-

David Roberts: Yes.

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

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

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

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

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

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

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

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

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

Stephanie Pollack: Thanks, David.

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

David Roberts: Awesome.

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

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

Timestamps

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Jigar Shah (LinkedIn)

  • Energy Empire (Website - Apple Podcasts)

• Arnab Pal (LinkedIn)

  • Deploy Action (Website)

• Searchlight Institute (Website)

• Breakthrough Institute (Website)

Books & Articles Discussed

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

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

• Ezra Klein and Derek Thompson - Abundance

Related Volts Episodes

• Doing data centers the not-dumb way

• Giving clean electricity a political voice of its own

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

Text Transcript

Jigar Shah: Dave, how are you?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Yes.

Jigar Shah: And so…

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

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

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

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

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

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

David Roberts: Yes.

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

David Roberts: Mm-hmm ...

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

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

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

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

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

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

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

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

Arnab Pal: No, but but it-

David Roberts: They’re still fighting

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

David Roberts: Yeah

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

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

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

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

Jigar Shah: Right.

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

Jigar Shah: Right.

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

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

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

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

David Roberts: *Laughing*

Jigar Shah: Right? Have you heard about this?

David Roberts: Oh, oh yes.

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

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

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

David Roberts: Everything is gender

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

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

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

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

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

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

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

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

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

David Roberts: Yes

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

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

Jigar Shah: We’re gonna have two of those

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

Jigar Shah: Yeah, Ralph Norman

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

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

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

Jigar Shah: What’s your take, Arnab?

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

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

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

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

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

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

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

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

Jigar Shah: Yeah. Well, the thing-

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

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

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

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

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

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

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

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

Jigar Shah: Laughing

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

Jigar Shah: Right

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

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

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

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

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

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

Jigar Shah: Bite your tongue, Dave Roberts

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

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

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

Jigar Shah: You heard it here first.

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

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

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

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

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

David Roberts: Yeah that was a real coup.

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

David Roberts: No one knows what that means-

Arnab Pal: Yeah.

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

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

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

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

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

Jigar Shah: Yeah, exactly.

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

David Roberts: Niche podcasts are the future.

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

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

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

David Roberts: Here’s hoping

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

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

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

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

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

Timestamps

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

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

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

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

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

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

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

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

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

• 42:03 - Affordability after the federal subsidies

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

• 51:53 - State power against federal hostility

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

Resources

People & Organizations

• David Roberts (Substack - Bluesky)

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

• Chris Lee (LinkedIn)

  • Electric Innovation Initiative (Website - LinkedIn)

• National Caucus of Environmental Legislators (Website)

• Rewiring America (Website)

Company & Industry News

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

• Why data center operators should pay for residential electrification upgrades

Books & Articles Discussed

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

Related Volts Episodes

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

• What’s the deal with balcony solar?

• Tying utility profits to actually doing a good job

Text Transcript

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

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

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

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

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

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

David Roberts: Eight?!

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: It wasn’t that long ago.

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Alright. Thanks. See you now.

Chris Lee: Take care.

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

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

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

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

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

Timestamps:

• 00:00 - Introduction

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

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

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

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

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

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

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

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

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

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

• 48:34 - The assessor objection

• 52:45 - What the Spokane modeling shows

• 59:31 - The plan for next session

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

Resources:

People & Organizations

• David Roberts (Bluesky - Twitter)

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

• Greg Miller (LinkedIn - New America)

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

• Kitty Klitzke (Spokane City Council - LinkedIn)

  • Futurewise

Company & Industry News

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

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

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

• Two States Pass Land Value Tax Enabling Legislation

Books & Articles Discussed or Related

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

• Policy Brief: The Vibrant Cities Act

• Land Value Tax Legislation Tracker

• Tax Land, Not Buildings, to Spur Development

• Non-Glamorous Gains: The Pennsylvania Land Tax Experiment

Related Volts Episodes

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

• Why housing is a pass/fail question for climate

• What YIMBYs are learning from their victories across the country

Text Transcript:

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

Greg Miller: Thank you for having me.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Yeah.

Kitty Klitzke: And we disincentivize maintenance.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Kitty Klitzke: Mm.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Hey, hey oh.

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

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

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

David Roberts: Who passed?

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

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

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

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

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

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

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

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

Kitty Klitzke: Except themselves.

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

Kitty Klitzke & Greg Miller: Thank you

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Text Transcript

David Roberts

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

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

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

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

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

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

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

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

Pete Wyckoff: Thank you so much, Dave.

Sydnie Lieb: Thanks, Dave.

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

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

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

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

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

David Roberts: Right.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Yes. Yeah.

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

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

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

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

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

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

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

David Roberts: Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Is their IRP is their resource plan.

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

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

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

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

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

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

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

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

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

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

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

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

Pete Wyckoff: Or not.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Yeah.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Roberts: Your reflected brilliance.

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

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

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

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

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

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

Sydnie Lieb: I think we caught it all.

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

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

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David Roberts

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

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

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If you’re wondering why anyone fights over a utility board, part of the answer is that SRP — which was planning new gas plants, a new gas pipeline, and new fees on rooftop solar — isn’t regulated by anybody but itself. It is unusual in that its elected board is the only check on what it charges and what it builds, and even more unusual in that only landowners can vote in board elections. Votes are weighted by the acre — the more land you have, the more votes you get, and renters don’t vote at all. It is exactly as feudal and anti-democratic as it sounds.

The people who pulled off that win are my guests today. Charlie Fisher ran the Arizona ground operation through his group Arizonans for a Clean Economy; Ning Mosberger-Tang is behind 1.5°Climate, a funder network targeting state-level, climate-significant elections.

Fresh off SRP, they are now going after a bigger prize: the Arizona Corporation Commission, the statewide body that regulates all the other state utilities. It’s a rematch against TPUSA.

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And it’s a much tougher fight. Every one of the five seats is currently Republican, and a Democratic slate that tried to upend that situation (Volts listeners may recall that I interviewed one of those candidates) lost in 2024. Can the SRP playbook scale up to win a bigger fight with a real statewide electorate? Can the affordability and anti-corruption messages overcome partisan headwinds? And can they win races beyond Arizona? That’s what I’m going to get into with Fisher and Mosberger-Tang. Let’s do this.

With no further ado, Charlie Fisher, Ning Mosberger-Tang, welcome to Volts. Thank you so much for coming.

Charlie Fisher

Thank you so much for having us.

David Roberts

Charlie, let’s start with you. I’m curious how you got involved in the Salt River Project election at all. It seems small, obscure, and one of the things I’ve been wondering is, did you get into it and then Turning Point came in to fight you, or did Turning Point get into it and you came in to fight Turning Point? How did you end up getting involved and so involved in this election?

Charlie Fisher

Just to give a little bit of background. I started my career organizing with Arizona PIRG, the Public Interest Research Group in Environment Arizona, and a passion for climate and clean energy issues eventually led me to electoral politics. Prior to co-founding ACCE in early 2023, I was the executive director of the Arizona Democratic Party. I had fairly deep experience in campaigns and elections in Arizona. I had never even heard of SRP elections prior to starting ACCE in 2023, which was wild.

The obscurity is hard to overstate here, but the reality is that the 2024 election was the first time that Arizonans for a Clean Economy, or ACCE, got involved. Turning Point was not involved at all in 2024. We were very surprised to see their significant investment starting in early 2025.

David Roberts

Do you have any idea why they identified this? At least you’re in Arizona and in clean energy in Arizona, so it makes some sense for you. But they’re a national organization. How on earth did this come on their radar, do you know?

Charlie Fisher

It’s a good question and I don’t know for sure. I think one of the reasons given, or one of my theories at least, is that this was an early test of their ground game. Looking ahead to November of 2026, one of their top priorities, certainly in Arizona and nationally, is the governor’s race. They have come in heavily in support of Congressman Andy Biggs, who is in the Republican primary. They went so far as to send canvassers out to talk about SRP wearing shirts that said, “Thank you, Andy Biggs, for saving our utilities,” which is a bizarre strategy, to put it kindly.

I think it could have been some early flexing of the field-organizing muscles as we move towards November 26. The other information that has come to light is that a couple of SRP board members made sizable donations to Turning Point USA prior to their involvement. One $200,000 donation, and I think there was a $20,000 donation from SRP board members. Of course, they say it is unrelated, but I am not sure that passes the smell test for me.

David Roberts

What’s $200,000 among friends? Explain a little bit because I had trouble believing this when I was reading about it. It is flummoxing. I mentioned it in the intro, but explain a little bit about how the SRP election works. It sounds like it is transported from a different, earlier era of history. It’s wild to me that it still exists. Explain how these board members are elected and who gets to vote.

Charlie Fisher

Yes, you are right. It is from a different era. This system was initially established pre-statehood. SRP is unique because it was essentially created by a group of landowners, farmers, ranchers in the early 20th century. They came together, formed an association, and put their land up as collateral to convince the federal government to build Roosevelt Dam, which was our first big dam here in central Arizona. That was the beginning of the system. The fact that we still elect these folks on a system based on the early 1900s is clearly a problem.

The way that it works is there are 14 governing board members. Not to get too in the weeds, but there are two separate governing boards because SRP is technically two separate entities — water and power. For this discussion, we’ll just talk about the power side. The SRP district governing board is 14 members. On top of those 14 members, there’s an elected president and vice president. The president, vice president, and 10 of the 14 board members are elected on an acreage-based voting system, which, you mentioned at the top, means only eligible landowners have the opportunity to vote.

You have to own land in SRP service territory, and there are whole swaths of ineligible voting lands in SRP service territory. Just figuring out whether you are eligible is a challenge in and of itself. They are elected on four-year terms where half of the body is up every other year. The elections are held in April of even-numbered years when no one is thinking about elections.

David Roberts

The whole thing seems designed to absolutely minimize turnout. You don’t even know if you’re eligible to vote. You don’t know when the election is. These must have traditionally been tiny, tiny-turnout elections.

Charlie Fisher

Absolutely. Just to give you a sense, there are around 750,000 people who are eligible to vote in SRP elections. Looking back to 2022, when some grassroots climate and clean energy activists had started running and picking up seats, 6,972 people voted in 2022 out of 750,000 eligible for an entity that delivers water and power for over 2 million people in central Arizona. We knew that was the first problem we needed to solve — we needed to raise awareness and increase turnout.

David Roberts

Let’s talk then about how you do that. This is not a normal election. It’s not a normal voter base. A lot of the voter base doesn’t even know whether it’s the voter base or not. What was your strategy for targeting voters? You can’t just put ads on TV and stuff like that. This seems like a case where you really do have to go find people one by one. What was the strategy for increasing turnout?

Charlie Fisher

This was one of the most difficult questions for us, our team, our coalition to answer because it is so obscure. We did a huge amount of research into all of the eligible voters and did both qualitative and quantitative research to get as much data as we could on these folks: what is their voting history in other elections? We could really get a sense of who these folks are, what makes them tick, and what motivates them.

The other challenge was at what acreage, at what amount of land does your property not just become your home and the place that you live and your single largest asset, but become more of a business and a financial relationship. That very much changes the incentives of how you want to vote for SRP board members.

David Roberts

This is a big question I have. My gut says the more acreage you have, the more likely you are to vote for conservative candidates. But is that true? Does that hold?

Charlie Fisher

I can’t say for sure, but that was our theory as well: if you have 10 or more acres, and we set our threshold at one acre or less for a number of reasons. If you have more than 10 acres, you view your property as an investment, a financial, wealth-building tool rather than a place that you live. That was our first, and there was no hard science behind it, but we ended up deciding that if you have an acre or less than an acre, there’s a high probability that your home is where you live and that you will be persuaded and deeply affected by rising utility prices.

We looked at the districts that were going to be voting, the district board seats that were going to be voting in April, honed in on those ones, set our acreage cap at one, and then we talked to folks that we knew were good voters in other elections and were completely unaware that they even had the opportunity to vote in SRP.

David Roberts

That’s door knocking. That’s going out to their houses and knocking on their doors.

Charlie Fisher

Oh, yeah. We ran a comprehensive campaign. We had five direct mail pieces to this universe. It ended up being about 60,000 people. We did five mail pieces. We ran a whole series of digital ads. We did both paid and volunteer canvassing — door knocking, phone banking, texting. We threw the kitchen sink at this thing to make sure every single one of these folks knew that they get to vote for these people that set their rates. You can request your ballot in the mail, which has been made more difficult in Arizona in all other elections.

But for SRP, to their credit, they do a good job of maintaining a permanent early voter list. That was the goal: make sure people are frustrated with their bills, know that this board is elected and the election is coming up, and all you have to do is request this ballot in the mail and then you have a say in these people who are setting your monthly bills.

David Roberts

Ning, I have the same question for you. First, maybe just tell us briefly a little about what your group is, and then how did this weird, obscure little election come up on your radar? How did you get involved?

Ning Mosberger-Tang

David, first, I want to mention that I’m very excited to be on this call because I am a big fan of your podcast.

David Roberts

Thank you.

Ning Mosberger-Tang

It covers a lot of topics that we are very interested in. My background: I used to work in the tech industry. Back in 2006, because I was so concerned about the climate crisis, I left tech to focus on climate change mitigation work. I have been doing that ever since. The first 10 years, between 2006 and 2016, I focused on conservation work, including some global work and energy efficiency campaigns, education for climate change, environmental issues, and a whole bunch of things on the ground. But the 2016 election changed my strategy.

Maybe I’m late, but I realized that in order to make a real dent, really change something in the climate space, I have to get engaged with policies and politics. I started in Colorado state politics and state policies in 2018, and then in 2020 moved onto the national level, doing more policy and political work at the federal level and in other states. In 2022, I started a 1.5°Climate donor collaborative because I realized that there is only so much one group can do. We have to get more donors on board and through our collective effort we can make a difference.

1.5°Climate was started in March 2022 and since then we have grown our membership from one, which is me, to more than 700. In the past four years we have moved more than $36 million through our collective effort to more than 100 organizations including Charlie’s.

We are very excited about ACCE’s strategy, the way they engage with the voters and get turnout in these low-hanging fruit type of campaigns. Because you just turn out a small number of voters and they will be able to change the majority of that SRP board and make a big difference there in Arizona. These are ideal applications for us at 1.5°Climate Network. We are trying to identify low-hanging fruit, high-impact but under-the-radar strategies and get our donors to pay attention to that and move funds to them.

David Roberts

You were involved in the Georgia PUC elections last year, were you not? Volts listeners will be very familiar with that. I had one of those candidates on. It was a very exciting election that the good clean energy candidate won. You were engaged in that?

Ning Mosberger-Tang

Yes, we were very involved. We brought in Briante McCorkle. She is amazing. She leads the Georgia Conservation Voters. We helped them raise funds to fill their C4 gap. We also had some conversations with Peter Hubbard and Alicia Johnson. They were great candidates.

To win elections you have to have the finance. You also have to have great candidates and I think we had that in that election. I’m very excited that both of them were able to win. We are going to continue to be engaged this November because they are going to have two more races there. Peter needs to get reelected and then Sheila Edwards is running for the open seat. We are hoping that we can help them again through Georgia Conservation Voters. If they win, they will be able to get three-to-two.

David Roberts

Yeah, they’ll have a majority.

Ning Mosberger-Tang

Majority. That’s right. That’ll be so exciting for a red state like Georgia.

David Roberts

I’m curious about the messaging that you used in SRP in this election. If you’re identifying donors who are already inclined toward clean energy, inclined toward Democratic candidates, maybe all you needed to do was just let them know that this was happening and that they could vote in it. Was that the majority of it or was there a specific set of messages that you focused on in this particular race?

Charlie Fisher

It was a combination, to be honest. I will make a quick distinction. AZCE, Arizonans for a Clean Economy, did purely educational work and that was about 80 percent of the total campaign, in coalition with other organizations as well. We did not do this alone. The vast majority of the work, to your point, Dave, was just letting people know that this is an election that happens, that impacts your monthly bills, and you have the opportunity to vote. That did a huge amount of the lifting for us.

We were also incredibly disciplined in our messaging in that we were just letting folks know SRP just voted to raise your rates again. In February of 2025, they voted to raise prices on residential customers for the fifth time in five years. We wanted to make sure that every single eligible voter, particularly the ones in the districts that were going to have seats up for election, knew that fact.

The reality is that SRP has higher favorability than all of the other investor-owned utilities in Arizona, and historically they have had lower rates. We needed to make sure that people knew that the SRP board just voted to raise rates again for the fifth time in five years.

David Roberts

Rates were the central message. That’s the central message.

Charlie Fisher

100%.

David Roberts

Not so much on all the gas incoming, the gas pipeline, all this stuff. Not a dirty versus clean energy thing, more just affordability.

Charlie Fisher

100%. The candidates on the other side, because we were on the independent side and couldn’t coordinate with candidates, were talking about clean energy, they were talking about data centers. That became a big topic towards the closing stage of the campaign. We were really focused on “these folks are raising your rates. Request your ballot today.”

The huge value that Ning and the 1.5 team brought in is we did, because so many of the questions that we got were, “Who should we vote for?” We aren’t able to answer those questions as AZCE, but with Ning’s support —

David Roberts

You’re a C3, so you can’t say, you can’t weigh in on that.

Charlie Fisher

Exactly. We said, “Here are the two websites of the different competing slates of candidates. Check them out.” We wanted to make sure that you vote. With Ning and her team’s support, we were able to raise PAC dollars into Arizona Power PAC, which is our sister PAC organization. In coalition with CHISPA Arizona PAC, we were able in the closing month or so to follow up with all of those same folks and say, “These are the good guys.”

David Roberts

That’s a C4. They’re allowed to do electoral work, the PACs. This is an election analysis question. I’m curious what both of you think about it. Some of the conventional wisdom after the dust settled was that Turning Point’s heavy, high-profile engagement in this kind of ended up backfiring. Even some GOP consultants felt it ended up backfiring. It just drew attention to the race, raised the salience of the race, raised the number of people who voted, and it backfired on them. Do you agree with that assessment?

Charlie Fisher

I agree partially. There is absolutely no doubt that Turning Point’s investment and involvement and the media coverage of their involvement raised the salience and awareness far beyond what we were doing. I do think it backfired. The strategy — like we talked about earlier — whether it was the “Thank you, Andy Biggs, for saving our utilities” T-shirts, the fact that they were supporting the entire status quo slate of candidates that had just voted to raise rates for the fifth time in five years, or the fact that they blanketed the entire county in street signs. Those really large political signs for an election that not even a third of Maricopa County residents are eligible to vote in and no one knows about.

Putting up street signs for an election that no one knows about and very few people are eligible for, and randomly out of nowhere saying, “Keep the Green New Deal out of Arizona” in really liberal neighborhoods. I live in midtown Phoenix, one of the liberal cores here, and on the end of my street was an anti-Green New Deal sign. I think people were just, “What are they talking about? What is going on?” On the other side, we continued to be incredibly disciplined, talking to just those 60,000 people, educating them on this opportunity. It was a combo.

Ning Mosberger-Tang

That’s a really unusual time. In Wisconsin, Elon Musk tried to engage in the Supreme Court race there, and it really backfired. The bottom line is still the affordability message, because the same thing happened in Georgia. When the GCV ran a campaign in Georgia, they focused a lot on the utility rates and affordability and how the current commission was raising the rate many times in a row. That’s the message that resonates with voters.

David Roberts

Arizona has Prop 211 that now forces C4s to disclose their donors. This has been a long time liberal campaign worry about dark money coming in, etc. Do you think that kind of disclosure helps or constrains your group, your C4?

Ning Mosberger-Tang

It does make people more cautious when they want to invest in Arizona because a lot of donors do not necessarily want to be disclosed. On the other hand, we are doing what we believe is the right thing. The candidates we support or the initiatives we support, we are proud to be one of the supporters. It has an impact, but it is not a huge impact. For example, this election with SRP, our donors invested directly in the PAC, so we donate to the PAC, and it is all disclosed.

David Roberts

Let’s pivot. The main thing I wanted to focus on today, the main thing of interest now, is this upcoming election for the Arizona Corporation Commission. This is the Public Utility Commission that regulates all the other utilities in the state in the more normal way. The machine you built up, or this campaign you built up, this group and network you built up, is trying to roll into this next election and win it, too.

The striking thing, the most immediately striking thing, is that this is just a very different kind of election. It’s not this weird feudal landowner thing. It’s a statewide election with a statewide electorate. Charlie, I’m curious what parts of the playbook you think transfer here in terms of turnout, messaging, etc.

Charlie Fisher

You are 1000% right. That is a completely different dynamic. It is a different thing in November.

David Roberts

Not as obscure, but PUC elections are not high on people’s priority list either. It’s still semi-obscure, but not nearly as obscure.

Charlie Fisher

Absolutely. Of course, we have all of our statewides, we have competitive congressional races. There will be tens of millions of dollars spent communicating to voters in the lead-up to November. That was just not the case.

David Roberts

You don’t have a quiet room in which to target these messages. You’re going to be competing with a lot of other messages. They’re going to be getting a lot of direct mail and messages from all over the place. How does the strategy translate?

Charlie Fisher

The first piece is being incredibly disciplined and targeting, really trying to identify who are both our base voters who are likely going to vote or maybe skip midterm elections, but really are unclear about what the Arizona Corporation Commission is, because we have a situation in Arizona where almost every cycle there are over 100,000 people who cast ballots who will vote for the Senate race or the presidential or the governor, and will just skip over the Corporation Commission.

The first job that we need to do is educate those folks specifically that you cannot skip this election and you have two votes. Use both of them and understand this is the only line on your ballot that directly impacts your monthly budget. The targeting and being really disciplined about who we talk to is one thing that absolutely carries over. The education piece is similar. It will be more expensive and certainly a much larger universe of folks we need to talk to, but we need to simply educate them that the Arizona Corporation Commission regulates monopoly utilities in Arizona.

Oftentimes people think that it’s just for business owners. They do paperwork and administrative stuff, which they do as well. But the primary function is utility regulation. The affordability message, to Ning’s point, has to carry through. I would guess that both sides are going to be making that claim that they are the affordability team.

David Roberts

Voters of all kinds across the country are going to be hearing that word out of everyone’s mouth these coming elections. That does muddy the waters a little bit.

Charlie Fisher

I just think it is a much more difficult case to make as an incumbent commissioner who has raised rates consistently over the four years of your service that you are the affordability team.

Really educating folks early on those points, on those facts, is critical. We’re excited. We just launched an education campaign called Follow the Power to help people connect those dots and understand how they can get involved at the ACC, how they can scrutinize their decisions, provide testimony, and then register to vote and commit to vote for ACC in November.

David Roberts

To the extent you’re willing to tell us, I’m curious what the scale of investment required here is for a true statewide race versus the much smaller, much more targeted SRP race. Is it a lot more money?

Ning Mosberger-Tang

Oh yes, I think it is going to cost millions of dollars potentially, but it is going to be a team effort. There are many other races up and down the ticket in Arizona, including the governor’s race and also the state legislature and congressional races as well. I hope the GOTV efforts done by other groups, other funder-pilot donors will be helpful for this ACC election as well.

What Charlie is doing is really important to reduce the down-ballot drop-off for this commissioner vote. All these together, potentially we can make it a really good year in Arizona and finally get the state trifecta in Arizona. That is going to have a pretty big impact down the road for policymaking, not just for clean energy, but for other things as well.

David Roberts

One difference here is that the SRP elections were facially nonpartisan. They are not Democrat versus Republican. There is no D or R next to the candidates’ names on the ballot. In some sense that is helpful because then the only distinguishing feature is affordability. The message is the main thing. The message is up front, the affordability thing. But Charlie, in this election the ACC candidates are partisan. They are Republican or Democrat. They are going to have an R or D next to their name. The basic fact of Arizona is that there are more registered Republicans than there are registered Democrats.

Do you think that hurts or helps here? In a race that they don’t necessarily understand, they don’t necessarily understand the dynamics or who the candidates are, are people just going to revert to partisanship? Is that something that’s on your mind?

Charlie Fisher

Absolutely. It definitely makes it more challenging to make the message be the leading point that sticks with folks. The race is partisan and there are going to be two Democrats versus two Republicans and potentially some third-party candidates as well.

The messaging shouldn’t be, though, because these issues aren’t. It’s why ACCE, I have a background in Democratic politics. ACCE’s mission is to build durable bipartisan support for clean energy leadership in Arizona because clean energy is popular across party issues and rising utility bills are incredibly unpopular regardless of whether you’re a super conservative Republican or a super liberal Democrat.

No pro-high-bills constituency.

Exactly. Very limited constituency for “Yeah, let’s keep raising bills.” I think continuing to focus on that message and just name plainly who the folks are that have been raising bills and who are the folks who are committing to changing that status quo. The registration advantage is real. The reality is that we need to focus on those folks in the middle. The nonpartisan voters in Arizona make up the second largest, and it’s very close with the Republican Party. Those are the critical voters that determine outcomes in generals in Arizona.

David Roberts

It does seem like anti-incumbent — everybody’s pissed off these days about something or other. There’s a lot of anti-incumbent energy.

Charlie Fisher

Backlash election after backlash election these days, it seems.

David Roberts

Which is useful to you if you’re out of power. But the minute you get in, it works against you. It’s troublesome. Turning Point is back. They’re engaged in this election too and they’re backing an insurgent MAGA challenger against the Republican incumbents in the primary of this ACC election. Do you think that is going to split the right or create fissures and conflicts on the right that are going to hurt them in the general election? Or do you think they’re all just going to unite around whoever ends up on the ballot? How much of a threat is that MAGA challenger to the right — unity in this election?

Charlie Fisher

Initially, and Ralph Heap is the gentleman that you’re speaking of. He’s a legislator down in Tucson. Initially when he filed to run for corporation, he was running as a team with another legislator from Northern Arizona named David Marshall. They were very much the Turning Point slate and were working hard to out-MAGA the two Republican incumbents who are in my view pretty staunch conservatives themselves. Every single bill that both Heap and Marshall ran during the legislative session was essentially a clean energy ban.

They did a lot of messaging during the legislative session. About a month ago, David Marshall dropped out of the ACC race because he was appointed, potentially illegally, to be the Navajo County Recorder, the top elections official in Navajo County in northeastern Arizona.

Now that there is not a slate, I am curious to see whether Turning Point really does invest deeply in Ralph Heap’s primary campaign or if the opportunity to wholesale swap out the nominees with two more Turning Point-aligned folks was more motivating to them. We have not seen too much spending from them.

That was definitely the thinking initially with that slate, that it was going to be a nasty, negative primary and that the candidates on the Democratic side who don’t have a competitive primary would be able to start talking to the general election, staying positive, sharing their vision while the others were fighting each other. We will see whether there is a significant investment from Turning Point, given that new dynamic.

David Roberts

Data centers came into the SRP election. They are obviously out of nowhere a huge issue for everybody. Are you messaging around those at all? Do the Democratic candidates versus the Republican candidates have different messages on them? What role are data centers playing in all this?

Charlie Fisher

Certainly a big issue with a huge amount of grassroots opposition, as you have seen across Arizona and across the country. It has not been a top issue that I have seen from any of the candidates yet. The legislature just finally wrapped up last week or the week before. One of the big takeaways was that they removed the tax break, tax credit that has been available to data centers in Arizona for many years. You very quickly saw both sides take victory laps on that win.

I anticipate that trying to talk tough and be seen as tough on data centers is going to be, similarly to affordability, an issue that both sides try to claim high ground on. It is going to be really difficult for the Republicans given the fact that one of the incumbents, Kevin Thompson, is a lobbyist for data centers. He works for EdgeCore and he just announced that publicly at a conference or a panel that he was speaking on a couple of weeks ago. It is going to be real difficult to be the anti-data center guy, given that is how you pay your bills outside of your commission work.

David Roberts

It’s funny that the same messages, the same push, the same messages, everybody wants to grab them. There are no high-profile issues on which the R and D are disagreeing. Everybody’s trying to claim the same ground. It’s an odd dynamic.

Ning Mosberger-Tang

Data centers will be an important issue this year in the election, I believe, because it is so connected with affordability. If you look at the polling, affordability of energy is one of the top priority issues for voters in many states. For example, states like Michigan, this is one of the top issues that voters are concerned about this year. Because of that, our group, 1.5°Climate, has been very interested in state-level policies for data centers. Our donor network hosted an educational call for our members about data center policies just a couple of months ago and then we followed that up with data center policies that will go into the state legislature in three states: Illinois, Colorado, and Virginia.

Our members were very interested in getting engaged, trying to make sure that data center policies ensure that data centers will be clean, bring their own energy, and make sure that the data center customers, meaning the hyperscalers, will be covering the cost for transmission, for adding the load for consumers.

David Roberts

It must be tricky because I think all the populist energy here is just “no data centers.” Data centers are bad. I’m sure you would prefer more nuanced policy than that.

Ning Mosberger-Tang

We have a different view. I don’t think I can represent our entire network of donors because we have 700 members and everybody has a different experience and opinion on that. Mostly our group takes the view that data center buildout may not be preventable. There are a lot of questions about AI, whether it’s going to be good or bad for humanity and what can we do about it, but it’s probably going to happen. If that’s going to happen anyway, let’s make sure that we are directing the development, making sure that it’s going to go in the right direction for consumers, for all of us, and not just for the hyperscalers or for the utilities. That’s our take on that.

We support efforts in state legislatures where they would like to regulate the data center buildout to make sure that it will be beneficial for climate and also for consumers. We look at it as a potential opportunity to increase the availability of clean energy. If the data center buildout gets overbuilt, which is possible, because there are a lot more requests for data centers than what they actually can use right now, potentially it could create energy sources for the future, which will be helpful for electrification of everything.

We look at it as an opportunity, but that needs to be guided and supported in a way that will be beneficial for us.

David Roberts

Charlie, I’ll just ask point blank: affordability has been a worry for a while. Democrats went after the ACC in 2022 when they had a really good year, when they won Governor and Secretary of State and Attorney General. They won a bunch of other really competitive races and they lost all the ACC races in 2022. Then they went after them again in 2024 and lost them all again. There does seem something slightly cursed about this. Why do you think this time will be different? More money, more organization, more concern about affordability? Why do you think this is going to be different than the past two races, which people had high hopes about as well?

Charlie Fisher

The answer is all of the above. We are more organized and have a larger coalition of nonprofits, C3s, C4s, an IE coalition that is very large and robust. We’re working in complete lockstep. Historically, what happens is groups will try to coordinate when they’re working on the same race and at least try to share messaging and talk about who they’re targeting. We are building our entire plan as one coalition. We got in the room in May and wrote one plan. We are using one shared universe —

David Roberts

For all these state races?

Charlie Fisher

No, just for Corporation Commission. This is a coalition that only is focused on Corporation Commission. These different organizations that are a part of it will obviously work on Governor, AG, SOS, Legislature, all the different races. But all these groups have come together and said we are committing all of our resources for ACC. We are working in this shared coalition, using this shared universe, sharing all of the data, shared research and polling to make sure that it is really a comprehensive campaign and not just folks talking to different groups, potentially stepping on each other’s toes. It will be really coordinated from beginning to end.

That’s a coalition that we hope is going to stay together for the long haul — so that we can continue to learn lessons and grow and do that early education work, which was so critical to SRP, that has to be done for ACC too. Our plan is to start ASAP with that education effort and be able to really follow it up with the candidate-specific work later.

Ning Mosberger-Tang

I also believe that this year’s election environment will be different from 2022 or 2024. In 2022, we did not get a red wave that was predicted. In 2024, we did not have a very good election environment. I’m hoping that this year will be different. The ACC election is partisan. That is really important — that we have the right kind of election environment overall for Arizona this year. On top of that, with coalitions that Charlie and others have built and with a collective effort and investments from networks like ours, I hope we can finally get that breakthrough and at least win two seats there.

David Roberts

One notable difference is in 2024 all the ACC candidates did this pledge where they refused to take PAC money. They only took public money, which was noble, but resulted in them getting outspent a gazillion to one. Now it is more of a gloves-off — there are PACs, there is money getting involved, and I think at least it is going to be a lot better funded this year. Possibly a fairer fight, money-wise.

Charlie Fisher

That’s the absolute importance of the work that we and CHISPA and EDF and others are doing in this coalition. The same situation in 2026: it is extremely difficult for Corporation Commission candidates to raise private dollars. Both the Democratic candidates and I believe all three of the Republican candidates are running with our public funding system, clean election system this year too. The bulk of the messaging, organizing, and education really does need to come from outside groups.

David Roberts

They’re privately still committing to that. They’re not personally taking the money. It’s outside groups where the money is being spent.

Charlie Fisher

That’s right. They can raise about $29,000 in $200 increments as seed funding to get their campaign started. After that, it is about $100,000 for the primary and $240,000 for the general, and that is all they can spend.

David Roberts

A lot more money than that will be involved ultimately, outside. One question here is it’s a five-seat commission on the ACC. They’re currently all Republicans. In this election cycle, two of the seats are up. Even if clean energy candidates win both those seats, they’ll still be in the minority. What is the prize here? What does this all get you?

Charlie Fisher

Even one pro-clean, pro-climate commissioner has an enormous impact. We saw that in 2020. Every commissioner has individual subpoena power. The ability to open up the books, to really get access to data from the utilities that they are not always eager to share, is a huge benefit. I don’t believe that all of the Republican commissioners are dyed-in-the-wool anti-clean energy folks. Some of them are. There are coalitions to be made, especially if there are two Democratic commissioners and three Republicans. They are going to have to work together. There are policy priorities that they could come together on and make some positive movement even when pro-clean folks are not in the majority.

The importance of electing two this November is to have a real opportunity going into 2028 with all of this infrastructure built, with all of this knowledge and this list building and these supporters, carry all that education work into 2027. Don’t stop in November. Continue to educate, continue to engage and organize. Rolling into 2028, we have an opportunity to elect a pro-clean majority for the first time in decades.

David Roberts

Conventionally, presidential years are more difficult for you because there is going to be enormous turnout on both sides. But if you have two commissioners in place and there are three races up, you only have to win one more to get a majority.

Charlie Fisher

That’s right.

Ning Mosberger-Tang

It’s similar to the Georgia Public Service Commission race.

Last November we got two, and then this November hold one and then win one more and it’s a two and then we get three-to-two majority. It’s a two-election process.

Charlie Fisher

I don’t want to be Pollyannish here, but I think there’s a real chance that 2028 generates, with two genuinely new presidential nominees from both parties, fingers crossed that’s what happens, that there could really be a significant political realignment and we could potentially move beyond this constant backlash after backlash election roller coaster that we seem to be in. I’m cautiously hopeful that we can get there.

David Roberts

Who knows?

Charlie Fisher

Got to stay positive sometimes.

Ning Mosberger-Tang

We’ve got to take advantage of the environment this year and get us to win as many state-level trifectas as we can. That’s one of our focuses for 1.5°Climate this year: to help win the trifectas in states like Wisconsin, Michigan, Nevada, Arizona. We have this opportunity, could be a historic opportunity to win a trifecta. If we have a state trifecta, it will really be helpful in terms of redistricting, in terms of governing, in terms of protecting free and fair elections because a lot of these states are battleground states for 2028.

David Roberts

Looking beyond Arizona, this is a big fight and I think it is representative of a lot of other fights in that affordability is huge. The race was previously obscure but all of a sudden is very important, and there are big climate and energy stakes involved, and affordability is at the center of all this. I think that is going to be true in a lot of other places too.

Ning, by way of wrapping up, what other races do you have your eye on? Are there any other under-the-radar, high-impact climate-related elections? Are there others that are on your radar that you’d like to share with us either this cycle or in 2028?

Ning Mosberger-Tang

You’re probably familiar with rural co-op board elections. Those are also very much under the radar and the turnout rate is below 10% for sure.

David Roberts

Rural co-ops are notoriously dirty, typically pretty conservative, correct?

Ning Mosberger-Tang

Correct. We just hosted a call with CVIQ to support their rural co-op operations. They are doing some test pilots in Midwestern states to use digital ads, communicate with those voters that they want to educate about the importance of these rural co-op elections. That is one of the many under-the-radar opportunities that we have supported and continue to support.

The other thing will be, as I said, state trifectas are really important this year. They are not necessarily under the radar, but usually state legislature elections get a lot less attention than congressional races. That is one of the things we pay a lot of attention to. I know you also work with groups like Climate Cabinet because they pay a lot of attention to state and local races. Also Jane Fonda, the Jane Climate PAC, and those are the groups that we work closely with as well and supported in the past.

David Roberts

A lot of these under-the-radar races have always had climate implications, but they have been underfunded and slightly scattered and not super organized. From your perspective inside this donor network and doing this work, do you think there is something like a coordinated and powerful clean energy money and electoral machine getting built here? How optimistic should we be about that?

Ning Mosberger-Tang

That’s one of the things that we try to do. The whole purpose that we started this network is we recognize that there are so many opportunities out there, but the donors only have so much time to figure out where to invest to make a difference. We are trying to make it easy for them and we do the vetting and we talk to organizations like Charlie’s and talk about the strategy and make sure that it’s something that we should share with our network and get them supported.

I’m more optimistic this year than in 2024 because I think that eventually we have a lot of issues with the federal government and overreach, but because of that it created a backlash. People are motivated, mobilized. For people who care about climate, we all know that clean energy is also cheap energy.

We also know that voters are very concerned about the affordability of electricity, of energy. It’s almost like things are coming together in a way that will hopefully be beneficial for us to win back the pro-clean energy power this November. I’m feeling pretty hopeful. But hope alone is not enough. We have to fund this work. In 1.5°Climate we are trying to expand our network because even with 700 donors we cannot fund all the projects we have identified which are catalytic, impactful, and under-resourced like Charlie’s. If people are interested, check us out or join us. They can go to our website, 1.5climate.org/join. We will be happy to get some collaboration going and help us win back power and protect climate.

David Roberts

This will be such an interesting test case of so many things. I’ve never been in a more uncertain, chaotic, unprecedented set of circumstances electorally and in terms of not just all the chaos at the national level, but ferment around clean energy and data centers and a lot of unknown and crazy things going on. It will be really interesting to see how this plays out. I think the ACC race will be a bellwether of a lot of other things.

Thank you both for coming on and walking us through the thinking here. I appreciate it.

Ning Mosberger-Tang

Thank you so much, David.

Charlie Fisher

Thank you so much for the opportunity, Dave.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out especially to my super producer Kyle McDonald, who makes me and my guests sound smart every week. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much and I’ll see you next time.

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Text transcript:

David Roberts

All right, everyone. Hello. This is Volts for June 24, 2026, “How to keep people cool without making the planet even hotter.” I’m your host, David Roberts.

Today, keeping ourselves and our products cool — air conditioning and refrigeration — produces around 7% of global greenhouse gas emissions, as much as global cement production. If the technology doesn’t substantially improve and growth continues, especially in emerging economies where AC ownership is climbing 10-15% a year, that share could nearly double by 2050. The IEA now projects AC electricity demand will grow faster than data center demand between now and 2030.

Cooling heats the climate in two ways. First, the refrigerants leaking out of ACs are powerful greenhouse gases, often thousands of times more potent than CO2. Second, the electricity to run them is already 17% of global power consumption, projected to triple by 2050, and a lamentable amount of that power still comes from fossil fuels.

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In short, more cooling produces more warming, which raises demand for cooling, which produces more warming … it’s a bit of a doom loop.

Unlike many subjects we cover here on Volts, this is not primarily a tech innovation problem. Between more-efficient ACs and electricity decarbonization, we already have the technology to cut cooling emissions by something like 97% — no tech breakthroughs required. The trick is that getting there means a broad array of reforms, everything from rewriting how we test ACs to retooling manufacturing to upgrading buildings to redesigning cities for heat. It’s a lot.

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To walk through it with me, I’m talking today with Ankit Kalanki, who leads RMI’s Global Cooling Efficiency Accelerator. We’re going to get into all of it — why current ACs are underperforming, what reforms could boost efficiency, new tech on the horizon, and the building and urban-design pieces that must be part of the answer. I’ve been meaning to get to this subject for a long time, so I’m excited to jump into it.

All right then, Ankit Kalanki, welcome to Volts. Thank you so much for coming.

Ankit Kalanki

Thank you, Dave. It’s a pleasure.

David Roberts

All right, we’ve got so much ground to cover here. I’m somewhat daunted, but I think the right place to start is just a very quick walkthrough of basic air conditioning technology. I was blown away as I was reading the history of this.

This guy, Willis Carrier — people will recognize that name, continues to be an air conditioning company to this day — patented this basic vapor compression process in 1902. The pieces of it have changed somewhat since then, but the basic architecture of how it works is still the same. We’re still using vapor compression technology. Maybe just start by walking briefly through what vapor compression technology is. How does it work? How do we cool spaces with this today?

Ankit Kalanki

Vapor compression technology works by moving heat from indoor spaces to outdoor spaces. That’s the fundamental of what cooling or air conditioning really is and what an air conditioner does. It’s not about making cold, but about moving the heat.

Air conditioner — think about it as a heat pump where you are moving heat from inside the rooms and dumping it outside. The working fluid that enables this is what we call a refrigerant. That refrigerant takes the heat from indoor spaces, evaporates, absorbs that heat. Then you have a technology called a compressor where that refrigerant gas gets compressed. Then you have the outdoor unit where that heat goes and gets rejected to the outdoor ambient and the cycle gets repeated — it’s a closed loop cycle. That’s how the vapor compression technology works. That’s how the air conditioner moves heat outside and keeps your indoor spaces cool.

David Roberts

That’s air conditioning of spaces for people. That’s refrigeration of coolers. That’s basically all cooling — you take the refrigerant, it evaporates and absorbs heat. Then you compress it, makes it super hot, goes outside and it condenses, which releases the heat. Then you reduce the pressure again, it goes back inside, does it all over again. This, as I said, is basically the same. These pieces — refrigerants have changed, compressors have changed somewhat and gotten more efficient and so on. But that basic cycle is still how air conditioners work today.

As you mentioned, we’re not going to get into this, but just as a side thing for my listeners, I’ve done many podcasts on heat pumps, and this is exactly the same way a heat pump works, just in reverse. A heat pump is just a reverse air conditioner, or an air conditioner is just a reverse heat pump, you could say.

Let’s then talk about the basic levers we can use to improve this process. These pieces — the refrigerant, the compressor, etc. How do you improve these pieces? Maybe we’ll just start with refrigerants because the history of refrigerants is quite interesting. There have been a lot of rounds of angst and replacement and then more angst and more replacements. Tell us a little bit about how refrigerants have evolved.

Ankit Kalanki

You said it. It’s a closed loop with refrigerants, where the full circle is getting completed again. When we first used any form of cooling or mechanical cooling, it was based on natural refrigerants. Carbon dioxide, ammonia were used as refrigerants very early when we wanted cooling and refrigeration. Then we evolved to synthetic refrigerants, which were called chlorofluorocarbons because they were more efficient in doing the same thing or providing cooling and refrigeration. But while doing so, they were causing a very big problem — a hole in the ozone layer.

Because of that, you had the Montreal Protocol treaty that decided to phase down and ultimately phase out all these chlorofluorocarbon refrigerant gases. That made way for hydrofluorochlorocarbons, which we call HFCs, that are widely used today — introduced because they had zero ozone-depleting potential, or ODP. That was a way at that time for solving the problem of the hole in the ozone layer. But as these HFCs became more and more common and widely adopted, we all realized that these are now very high-potent greenhouse gases that have on average 2,000 times more global warming potential than carbon dioxide. If they get released into the environment, it could be a climate catastrophe.

David Roberts

They’re not released into the environment from an air conditioner that’s working properly. They leak in manufacturing, transport, units that aren’t working correctly. These are all leaks we’re talking about. But there are hundreds of millions of these units around. All these small leaks of highly potent greenhouse gases really add up.

Ankit Kalanki

Precisely. I say that refrigerant inside a closed system is totally fine as long as it doesn’t leak, because it’s giving you the cooling that you need and the refrigeration that you need, and it’s allowing you to do it in a very efficient way. But it’s through that operating lifetime when the system gets serviced by a contractor that comes to your place and then they play with the system. Over a period of time, due to the corrosive nature of the environment or other ambient factors, the system might develop some issues — like the coil gets corroded and then you have some leaks in the system.

David Roberts

And disposal too, right?

Ankit Kalanki

Yes, exactly. I was going to come to that. End of life is another problem where, despite — in the United States, for example — refrigerant venting is legally banned, there is very limited refrigerant recovery that happens at the end of life. You end up in a system or in a loop where a lot of that refrigerant ends up getting leaked into the environment at the end of life as well, which is the problem.

David Roberts

Now we’re trying to move past HFCs too.

Ankit Kalanki

Yes, exactly. Now that the world has discovered and understood that the HFCs are also very highly potent greenhouse gases and are contributing to global warming significantly because they are also short-lived and significantly more potent, now we are going back to natural refrigerants. In many parts of the world we are looking at hydrocarbons — one of the refrigerants is propane, which is being used for air conditioning applications, which has a global warming potential of about 3. In industrial applications, ammonia continues to be a refrigerant of choice for many in grocery stores. In many industrial applications, carbon dioxide with a GWP of 1 is increasingly also getting adopted. We are heading towards where it all started — the world of natural refrigerants.

David Roberts

But the reason we moved off those natural refrigerants in the first place is ammonia is quite toxic, propane is quite flammable. There were trade-offs with these that led us away from them in the first place. Those are still problems. We have not yet found a refrigerant that is the magic, does all the things we want with none of the things we don’t want. We are now returning to some that are toxic and/or flammable.

Ankit Kalanki

We have not found any ideal refrigerant to date that checks all our boxes. Depending on the application, you can make what refrigerant works best. If it’s an environment where you have outdoor setups and large access to ambience, you can consider some of these natural refrigerants which have been used in many industrial applications for many decades now. It’s more about getting used to it with the right set of safety practices and adapting it and adopting it at scale.

David Roberts

Let’s also talk briefly about the other pieces then. Compressors — these are driven by electric motors. I guess all Volts listeners know electric motors have gotten more efficient over time. How have compressors improved?

Ankit Kalanki

The compressor, as everyone calls it, is the heart of the air conditioner or a heat pump technology. That is what makes the air conditioner deliver the cooling or the heating.

David Roberts

And that’s what’s consuming the electricity — everything else is plumbing.

Ankit Kalanki

That’s the majority of the power. The compressor dictates how much power, and more particularly peak demand, air conditioning and heat pump contribute. The industry on the compressor technology has evolved significantly over the last few decades. We used to have a lot of fixed-speed compressor technology, which means it’s only either on or off. Once you set a certain temperature on your thermostat or using a remote control on your air conditioner, your system will operate until it reaches that set point and then your technology will cut off. It was the technology that was commonly used for multiple decades.

Over the last decade or so, markets have evolved to what we call inverter technology, or in other terms, variable speed technology, where now you are not in the on and off situation only, but the compressor reduces its speed as you reach closer to your set point or the point that you have set on the threshold. There has been this innovation where you have this variable frequency drive or VFD that gets attached to your compressor and compressor motor technology, and it enables that adjustment of the speed based on how quickly and how much cooling or heating you want from the system.

When you look at that transition — if I give you an example, in India, the fixed speed market was almost 80% in 2015, and in 2025, it’s the opposite. 80% market is now inverter technology in the residential air conditioning sector. Japan is primarily inverter technology. China is again very high on inverter technology, close to 80, 90% as well. Most of the market has evolved and moved on to inverter technology. Now that’s an area where more innovation is needed as to how you can further improve the aspects of the variable speed technology.

David Roberts

The other piece is, I guess, heat exchangers have probably improved over time also. And the controls — talk a little bit about the software controls because as I understand it, that’s also a big piece of this.

Ankit Kalanki

That is, in my view, today’s biggest piece that needs to get solved for — that will significantly improve the efficiency of air conditioners — and it is tied to two pieces. One is what we need air conditioners for in real terms. Controls have a big role to play in that. Controls have a big role to play in how these air conditioners are tested and rated. Controls are the piece that connects both of them. I’ll come to the first part first.

You mentioned Willis Carrier and the history of air conditioning. Let me share this with the audience. Air conditioner technology in the first place was not invented to provide cold temperatures. It was meant to reduce humidity or remove the moisture from the air. Willis Carrier was working back in the day in a Brooklyn-based paper factory and he was constantly noticing the warping of the paper and it was disrupting the quality of the paper. That’s where the idea came from — what can we do to remove moisture from the air so that the paper quality doesn’t get affected?

Over many years, that definition changed. It became about how quickly you can cool the air and how quickly you can reduce the temperature. With climate change and global warming and the pace at which it’s happening, you are seeing the very humid conditions that people are experiencing all around the world. Now it’s going back to how air conditioners can deliver not just lower temperatures, but also reduce humidity and reduce moisture from the air and deliver comfort in the true sense and do that in a very energy-efficient manner and in a way that’s affordable for people to operate it.

Controls are a critical element — they can make the air conditioner smarter in how they assess temperature and humidity and how they optimize the compressor and the refrigerant flow and the fan speed and how all of that comes together to deliver the comfort that people need. Controls have a big role to play there.

David Roberts

One other thing that’s probably worth mentioning just in terms of the AC units themselves is I presume we could get better at reducing these leaks. That’s just more regulations, better training of technicians, better disposal techniques. Is there work underway to reduce the amount of leakage over the course of the lifespan?

Ankit Kalanki

Absolutely. Installing leak detection systems is one intervention where a lot of work is happening. Especially in the commercial sectors where you have several thousands of pounds of refrigerant inside a facility, installing these leak detection systems is a way to assess those leaks as soon as they happen. Then bringing your contractor on site to fix that. At the end of life, there is a lot of attention being given to how we ensure and incentivize contractors and technicians to recover the refrigerant at the end of life and not let it vent, and what are the right practices around it.

A lot of effort is going on and a lot of awareness is being built within the industry, within the communities to stop those leaks in the first place and at the end of life as well.

David Roberts

If you put together — this is the interesting thing to me — if you put together all the things that we already know how to do, RMI has this global cooling prize and prototypes that have won those prizes have been 60 to 75% lower electricity use than typical ACs, just using technologies that we already have.

The question is, why can’t a US consumer walk into a Home Depot and buy one of these super efficient ACs? Oddly, the answer to that question traces back to how they are tested and rated. This is the focus of a lot of your work. Talk us through briefly, what’s wrong with how we test and rate these things today.

Ankit Kalanki

That’s the crux of the problem — if they are technically feasible, then why are they not commercialized? That’s where the commercialization journey is very different from an innovation journey where you develop prototypes. Great, you have proven something. But then the commercialization journey is a long journey. There are iterations on the prototypes. You are looking at different standards for safety and for compliance, and depending on the market they can vary. Then you have to understand the market and what their needs are. That journey is where we are actively spending a lot of time, as you mentioned, through the Global Cooling Efficiency Accelerator.

Standards is one piece, Dave, which is extremely crucial in this commercialization journey. Industry designs products to standards and those standards get referenced everywhere. Whether you are looking at a building code and when they specify equipment and the performance, it all ties back to what standard is used to rate and assess the performance of those air conditioner technologies.

There is nothing wrong. I don’t blame industry there because industry is designing to standards. They have done a good job at making sure that products are compliant. They have been cost optimized to make air conditioners affordable for many millions of people around the world. Where the change needs to happen is how in the first place those ACs are rated and tested, because then industry will do it once the standards change.

David Roberts

This comes down to the difference between latent cooling and sensible cooling.

Ankit Kalanki

Yes.

David Roberts

Tell us briefly what those mean.

Ankit Kalanki

Sensible cooling means, in simple terms, temperature-based cooling. If you have to go down from 80 to 70 degrees Fahrenheit, how quickly and how efficiently your air conditioner can deliver that cooling — that’s sensible cooling. If you have a space where you are feeling very humid because relative humidity is 85% and you want to bring it down to 60%, all that effort that will go into reducing the moisture — that’s the latent cooling part, and you expect air conditioner to do both of them at the same time.

How it happens today is you use temperature as a proxy for managing humidity because air conditioners only have a temperature sensor inside them. You start with a certain temperature set point on your thermostat and when you still feel sticky or you walk into a conference room and it’s feeling cold, but it’s clammy and muggy, you will keep reducing your thermostat until you feel the relatively drier air. The air conditioner is doing that.

David Roberts

This is crucial — even cooler air, if it’s still humid, is not comfortable, and people tend to crank the temperature down further if that happens.

Ankit Kalanki

That wastes energy today. That’s the piece that standards can solve for. Standards today, based on which the air conditioners are designed and tested and rated for performance, use temperature as a way to assess the efficiency, and that’s what goes on the labels that you see on air conditioners today. It’s a purely sensible cooling-based approach to testing today. Humidity management is a byproduct because when you cool the air, there is some level of moisture that gets removed as air reaches its dew point temperature.

However, if we have to deliver better cooling, if we have to deliver cooling that provides comfort to people and does not waste energy and does that in an energy-efficient manner, we have to start thinking about how we can bring latent cooling not as a byproduct, but as a central piece of that testing protocol and the testing method against which air conditioners are designed.

That’s the kind of effort that RMI along with partners are actively working towards — how do we build on one side the awareness that this is missing today and then generate the data and the evidence through field testing that we have done and through engaging with manufacturers to then go to the standard setting bodies and say, “We need to change these standards because that’s the only way we can avoid locking in inefficiencies for multiple decades to come.” Especially when you look at the boom in air conditioning in global south countries.

David Roberts

You’ve done these field tests that show that when it’s humid, air conditioners are using up to 30% more energy than you would think from their ratings, because people are pushing them down farther than what the temperature would suggest. Currently they are wasting a ton of that energy just because that humidity piece is not getting measured.

Reading around about this, it sounds like you are making progress on this. The incoming president of ASHRAE — I’m not even going to attempt to unpack that acronym, but it’s basically the association of Heating and Cooling Engineers — sounds like he’s heard about these field tests and he’s cognizant of the problem. The ISO — everybody knows that’s the International Standards Organization — is working on a new standard and India’s Bureau of Energy Efficiency has updated some of its benchmarks. It does sound like things are moving. I wonder where that process is and what is the distance between what’s currently happening and that bright future when I can walk into a Home Depot and see a standard rating that accurately reflects these things.

Ankit Kalanki

You’re right. There has been a lot of good progress and in the right direction in regards to the standards conversation. The ASHRAE president highlighted the overcooling issue and the energy waste associated with overcooling in his presidential speech globally — he travels and addresses the technical community and the engineers. That has elevated the awareness around it. Those same people then go into the technical meetings and talk about it. That has helped us raise the awareness around it. ISO is already working on a new standard, which is a move in the right direction — it’s going to shift away from a traditional standard capacity-based approach to an approach which recognizes better controls.

With that, you can optimize the performance of your air conditioners. ISO is heading in that direction. We are hopeful that in the next couple of years ISO will come out with a fully published standard along that updated standard process and then it will come down to the countries. Once ISO publishes a certain standard, then the national standard bodies — in India, it’s the Bureau of Indian Standards; in the US it could be the DOE or the AHRI — will look at that or will already start working on it in parallel and think about how we can better acknowledge the aspects of that standard into the national standards.

Every manufacturer will design the products that are sold in the market according to the national standards and the regulations. That process takes its own time because there is a lot of consensus building that needs to happen through the technical committee efforts. This is where organizations like RMI step in, where industry players — we find the players that are really trying to take the first step and are seeing this change and acknowledge that this will happen.

It’s not about if, it’s about when and how soon it will happen. They are noticing it and they are willing to take that first step. We work with them and we work with aspirational buyers and actors on the demand side who are willing to take that step in demonstrating and deploying those technologies that can generate the market confidence that policymakers need to see ultimately to expedite their efforts on the standards front as well.

They are all interconnected. It’s not a sequential process. We have to work on all of those aspects — when one industry player jumps in, it creates FOMO and other industry players also jump in. When they see one buyer doing it, others also want to do it. Then you start creating multiple voices around it, and that’s how you start shaping the market. Ultimately that leads to the day when we walk into a store and see a product that is optimized for humidity, optimized for delivering comfort while delivering energy efficiency in the real world and not just on a label.

David Roberts

There’s also a set of problems — if a new standard drops, manufacturers, OEMs, still need the tools by which to meet those standards, and those aren’t necessarily in place. Is there work starting to build those up in advance? They need their own testing infrastructure, they need their own modeling tools that are optimized to this kind of thing. How long before some mid-tier OEM in, say, Vietnam is capable of producing these even if there is a new standard in place?

Ankit Kalanki

That’s an important question because that’s what dictates the timeline for adoption at the national level, Dave. The readiness of the local labs and the local manufacturers’ testing capabilities determines how soon and to what extent those standards will get adopted. There are efforts happening where RMI, for instance, is engaged in inter-laboratory testing, where we are looking at the different test protocols that exist that are different from what is followed today as an industry practice.

We are trying to work with those research institutions and those labs in different regions to help everyone come on the same page by showing that these new test methods are replicable, they produce consistent results. Whether you do it in Japan, India, or the US, you are expecting to see consistent results. Those are the efforts that allow test labs and industry players to build the confidence that, yes, that evidence helps build their confidence further, which then moves us to the next phase of building the consensus and moving to the adoption of the standards as well.

David Roberts

If you were pushed to guess at some sort of timeline, how long is this going to take to get these — as we say, we’re capable with this current technology of getting 60, 70% better — how long before those 60 to 70% better air conditioners are in stores in, say, emerging economies? Do you have any guess as to that timeline?

Ankit Kalanki

I will answer this question in a slightly different way. We know what and how we can reach that 60 to 70% target of super efficient ACs. How we go about that journey is we start with what is the most practical and the most feasible way to introduce products in the market that have controls capabilities that are making these air conditioners smarter in delivering comfort in the real world. You can do that with existing set of compressors, with existing set of heat exchangers, what exists today. Supply chain readiness is also important when you think about emerging economies and where they are and the policy ecosystem there.

Knowing what exists today and what manufacturers are able to do today, taking that first step of advancing controls by making your air conditioner better respond to both temperature and humidity can instantly deliver 15 to 20% savings right off the bat. I feel confident that could happen in a matter of a couple of years, because you are not looking at establishing a new supply chain or finding a new vendor. You can work with their existing vendors and you can do that.

From there on, the journey goes on to advancing towards that 60 to 70% number where controls is part of that. But now you have to think about compressor technology and you have to think about heat exchanger technology and what exists today and where is the innovation happening —

David Roberts

And the regulatory updates, the standards updates.

Ankit Kalanki

Regulatory updates, yes. Manufacturers are in a tricky business. The air conditioning industry is not a very profit-making industry. The margins are very tight and they rely on commodities — copper, aluminum, plastic. That’s the core of what makes an air conditioner today. When you are thinking about, on one hand, industry is being asked to constantly raise the efficiency benchmarks and the efficiency of their products while keeping the products affordable, while keeping the supply chain domestic, all of that.

It’s a complicated and complex problem and a multivariable problem to solve for. This is why a phased approach is something that we can really make good progress with. These updated products that have existing hardware and use better controls can immediately bring savings to people, to the power grids, to the environment. From there on, we can continue to go towards that ceiling and ultimately achieve that 60, 70% target.

David Roberts

Let’s pull the lens back a little bit from the AC units themselves. Let’s talk about the buildings that these AC units are in. There’s lots you can do with buildings to reduce how much cooling you need in it. Maybe can you just mention a few of those things?

Ankit Kalanki

I like to think about it as you don’t need air conditioning in the first place. Start with thinking about your building and how you can reduce the cooling need inside the building by measures like shades, ventilation, and insulation. Windows, better insulating windows. Paint your roofs with materials that can reflect and radiate the heat into outer space. All of that can have a significant impact on the amount of heat that gets trapped inside the buildings that ultimately gets radiated through the walls and through people.

Once you do that, your heat load that has to be removed to outdoor that we talked about in the very beginning is significantly reduced. You can now reduce your size of the air conditioner or in some cases maybe you don’t even need an air conditioner depending on where in the world you are. It’s very important.

David Roberts

Then of course you’re getting into building codes, construction codes, all that stuff. That’s a whole rabbit hole we could go down. But one thing I did want to take a brief look at just because I’m fascinated by it — I should probably do a separate pod on this — talk briefly about these passive daytime radiative cooling materials. Everybody is familiar with painting roofs white. That reflects a lot of heat away. That alone can do a lot. But then they have these special new paints, these special new materials. Say a word briefly about these things because they seem like magic to me.

Ankit Kalanki

It is fascinating. PDRC, or Passive Daytime Radiative Cooling Products, can take many forms. Paint is one form they can take. The interesting thing about them is that they reflect the heat like a typical white paint would, much more efficiently, but they also radiate the heat. The infrared portion of the sunlight, which is the heat component, and also from the indoors, these PDRC materials can transfer all of that heat to outer space in a very narrow window.

David Roberts

It goes right through the atmosphere.

Ankit Kalanki

Yes. There’s a very narrow window when you think about the science behind it — a very narrow window in the atmosphere of 8 nm to 15 nm between which you have to produce that radiation or that reflection for it to pass to outer space. These PDRC materials have been tuned in a way and have been innovated in a way where they enable that heat to go into outer space through that narrow window. That’s the beauty of it, where you can achieve significant reduction not just on the surface of the roof, but also indoors, because it’s able to radiate the heat also from the roof.

David Roberts

You can actually — it can help your building be below ambient temperature.

Ankit Kalanki

Yes.

David Roberts

Actively cool the building. It’s wild to me. When you think about it, it’s not just reflecting the sunlight away, it’s sending heat out into the atmosphere. In some tiny way, it’s helping with global warming too, in a very marginal way, but absolutely fascinating. Just on white roofs, I constantly have people ask me whenever this comes up, and I’ve had the question myself, which is — that just seems so obvious and easy.

They’ve done studies where if you paint a bunch of roofs white in an urban area, you can reduce this urban heat island effect. Where heat concentrates in urban areas, you can keep buildings cooler. White paint is not expensive. Why isn’t there more of that? Why isn’t that the default? Why haven’t we seen that spread faster and become more ubiquitous? Do you have any theories on that?

Ankit Kalanki

There are some practical aspects of why the scaling has not happened at the pace at which we would like it to be. Similar to air conditioner technology — technology is not the problem, it’s the other elements of it, when you think about commercialization and deployment, that have to be considered as well.

A couple of things that are important to note which impact the adoption at scale: one is the reflection itself and the glare that comes from just painting everything white. That has been raised as a potential concern. There are efforts to solve that. That’s one of the concerns — if you paint everything white, the glare becomes a concern and an issue for people in the surrounding areas or in surrounding buildings.

The second is depending on where you are in dense urban environments, where you have tall buildings, skyscrapers, all that reflected heat might just bounce between the different buildings and it might just remain trapped. It is reflecting from one roof, but then it might get reflected back through other surfaces. It’s not a solution that can be just applied anywhere, but context specific, yes, it can definitely be applied and needs to be applied.

The third more practical thing is the wear and tear — when it rains, if you live in an area where there is a lot of debris or dust, the effectiveness of that traditional white paint also gets impacted. There are more efforts needed to solve some of those practical aspects of the work. While they are great in reflecting the sunlight and in studies we have seen the numbers in terms of how much delta on the temperature standpoint they can get, from a durability standpoint, there is more work needed for them to get really adopted at scale.

David Roberts

The PDRCs, these magic materials that reflect the infrared out into space — are they commercial at any scale yet?

Ankit Kalanki

There is a lot of active testing happening of PDRC materials in different forms, as a film on solar panels, as a paint. There are a lot of startups, including organizations like RMI, that are supporting these startups to test the veracity of the claims of some of these PDRC products to generate more evidence and generate more awareness. That is where we are at this point. We need to do a lot of evidence generation around not just these technical and performance aspects, but also on some of these durability aspects so that they can really build that confidence among the policymakers and among the adopters in different parts of the world.

David Roberts

Interesting. Now briefly, let’s pull the lens back even farther from the building to the city, to urban design. There are also things that city planners can do to provide comfort, because that is ultimately what we’re about — comfort. Talk about a few of the things you can do at the neighborhood and city level to help cool people.

Ankit Kalanki

This work that happens at the city level and urban level is a key part of building resilience. Whatever we talked about until now, everything is inside the buildings or impacts people inside the buildings. But then you have people that are working outdoors. Urban level measures and urban heat mitigation measures are crucial if we are to truly address the need for cooling and tackle this heat issue for people around the world. Some of the ways in which urban heat mitigation happens — greening the spaces, planting more trees. There are efforts happening around that. A lot of policies at the local level, at the municipal level, are encouraging green spaces for people.

Establishing cooling centers is another way where outdoor workers can go to these spaces that have some form of a cooling mechanism, whether it is fans or evaporative or mist-based cooling or air conditioning, where they can get some respite.

The most fundamental part of this is when you think about urban heat — how can we inform people in a timely manner so that they can take the appropriate action? Multiple cities do this in many different ways. You have warning systems and announcements that happen. More and more of that is now becoming a priority for local administrations where they are increasingly using technology and using weather data to inform people about these heat issues in advance so that they can either plan their work properly or they can take breaks accordingly so that they don’t cross a threshold which might impact productivity and, in some cases, maybe even become fatal, given the extent of the heat.

David Roberts

A couple other specific questions about this. One of the things that occurred to me is every city everywhere has tons of pavement, roads, and parking lots. Pavement is of course black or very dark, so it absorbs heat. Anybody who’s been to Phoenix, Arizona or anywhere knows that the pavement itself can become hot enough to genuinely be painful. Is there any way to make lighter colored pavement? Is that a thing?

Ankit Kalanki

It is a thing. RMI has tested that in India, in Palawa City, near Mumbai. We have seen between 3 and 5 degrees Celsius of temperature change with light-colored tiles and reflective blocks. It is a thing and it exists. We have tested them in India as well.

David Roberts

One other piece which is fascinating to me is district cooling. Of course, Volts listeners are familiar or should be with district heating where you make heat centrally and then pipe it to buildings. But there’s also district cooling where you’re doing this same cycle, but on a larger, more industrial scale and then piping the air. Is that common? Is it spreading? Is that a big piece of the puzzle here?

Ankit Kalanki

It is an important piece of the overall solution set. There is no one-size-fits-all solution when it comes to how you provide better cooling to people. It is so context dependent. District cooling is one piece of that broad, big puzzle on how you provide access to cooling to people. Especially if you think about mixed-mode developments where you have a good mix of residential, commercial, industrial, office spaces where the cooling load is fairly consistent on average — those kinds of setups, those kinds of parks which are coming up in many developing countries. District cooling is a good solution for those kinds of setups. In traditional dense urban environments, it is hard to have all that centralized system and piping and delivering cooling.

David Roberts

Especially if you’re trying to retrofit already built environments.

Ankit Kalanki

Correct. But in these new projects that are coming up, if you can plan them properly, and if you can have a cooling load that is averaged in a way where you can meet everyone’s demand, district cooling can offer a good opportunity to reduce the cost for consumers because then you can think about it as the project developer will be incentivized to invest in the most efficient solution instead of a low-efficiency product. They will be getting paid by how much cooling they deliver. The more efficient they are with their systems, the maintenance of their systems, the more incentive they have and the more profitable it is.

It could be a win-win for people where consumers don’t have to own the asset, they don’t have to worry about the upfront cost, they just have to pay for the cooling they use. The developer and the operator are incentivized to invest in the most efficient system and better maintenance because that way they can improve their financing position as well. In that way, district cooling has potential, but it’s context dependent.

David Roberts

We don’t have a ton of time left, but there’s a whole — here we come to a thing we could do a whole pod on — most of what we have talked about, and I think most current effort and most of your hopes for the near and midterm future are around improving the basic vapor compression systems as they exist today, making them work better.

But there are under development here and there among startups and labs some fundamental alternatives emerging. We could just run through a few of those quickly. We could start with desiccants because those are the closest and are even being integrated into vapor compression. Talk a little bit about that first.

Ankit Kalanki

It comes back to humidity where we started. Desiccants are a solution to manage that humidity in an effective way. We are seeing a lot of innovation from startups. Multiple of them are also supported by RMI through our Third Derivative program. They have developed desiccant materials and innovation in that desiccant material space where they integrate or attach onto an existing vapor compression system and they can independently and separately manage the sensible cooling or the temperature and latent cooling or the humidity. That way your air conditioner doesn’t have to overcool the air to remove the moisture.

Now the desiccant takes care of that humidity and the moisture removal, it sucks the moisture out of the air, makes the air dry. Your vapor compression system is only doing enough to reach the temperature that you feel comfortable at. That’s one area of innovation which has a lot of potential and a lot of startup activity.

David Roberts

Desiccants are materials that absorb moisture, more or less?

Ankit Kalanki

Correct. But they can be in liquid form and solid form. There are varieties of it. Fundamentally they are the ones that suck the moisture out of the air.

David Roberts

You suck the moisture out and then the dry air goes into the traditional vapor-compression system. But it has to do less work.

Ankit Kalanki

Correct. The innovation piece in the desiccant solution set is how do you regenerate that desiccant. That’s the piece which often gets missed. While you are solving one problem, you don’t want to create another problem where you are now spending energy to regenerate that desiccant because that desiccant material, like any other moisture absorbing or water absorbing material, will get saturated as it absorbs more and more moisture. How effectively and efficiently can you regenerate that desiccant so that it’s ready to work efficiently?

David Roberts

When you say regenerate, are you squeezing the moisture back out of it or are you replacing it with new desiccant?

Ankit Kalanki

Squeezing the moisture back out of it. You need typically a heat source to do that process. How efficiently and innovatively you do that is what will determine the overall efficiency of the system when those desiccants are integrated into the solution set.

David Roberts

Those are actually — Amazon, I read, is deploying systems that involve those desiccants commercially now. Those are pretty close.

Ankit Kalanki

That was exciting news from two weeks ago. Amazon partnering with a startup, Transera, to deploy their product was exciting to see.

David Roberts

Then there’s solid-state thermoelectric cooling. What the heck is that?

Ankit Kalanki

You mentioned one way of solid state cooling. There are more terms like that. There is barocaloric and there is magnetocaloric, thermoelectric. What solid state cooling is — you use solid materials to produce the heating or the cooling effect by applying some force. That force can be a pressure, a magnetic field, or an electric field. When you do that with that solid material, it undergoes a phase change. The crystals in the solid, their alignment changes. As a result of that, there is a phase change that happens and you can generate heating and cooling.

This is an exciting area of innovation where a lot of startups are working on all these kinds of caloric solutions — barocaloric, magnetocaloric, thermoelectric solutions. A lot of good activity and a lot of potential. Also because of two reasons. You don’t need a compressor, because you don’t have a refrigerant gas. That’s what makes it exciting and compelling in the context of the current refrigerant transition that we are in.

David Roberts

Because we still don’t have that perfect refrigerant. You eliminate refrigerants, you eliminate the compressor — which is the vast bulk of the electricity demand.

Ankit Kalanki

Yeah.

David Roberts

Are those installed anywhere or is this all lab and prototype stuff?

Ankit Kalanki

I don’t know about the commercial installation, but I know that one company which is supported by RMI’s Third Derivative called Magnotherm, from Germany, has developed a beverage cooler or a wine cooler using magnetocaloric technology.

David Roberts

Where you’re applying a magnetic field to this solid material?

Ankit Kalanki

Yes.

David Roberts

It’s wild. I’m assuming that similarly to solid-state batteries, it’s a lot less maintenance because you have a chunk of solid material. You don’t have as many moving parts.

Ankit Kalanki

It’s early to comment on that because of the nascent nature of these technologies, because you still need pumps and mechanisms to move the fluid. The material can produce the heat and the cool, but then you have to move that heat and cool to wherever you need it. You still need some of those pieces and the parts of heat exchange — heat exchanger and valves and the pumps and the fan — to ultimately deliver that cooling. There is much more to be learned and discovered about these from an overall maintenance standpoint as these units start to get into the field in the coming future.

David Roberts

I’m curious about your long-term view about the relative effort and hope we should be putting into improving vapor compression units like we have been talking about for most of our time, versus improving and scaling up some of these very promising alternatives. Which do you place more hope in in the mid term and long term?

Ankit Kalanki

I will answer that question slightly differently because I think we should be really looking at better cooling and whatever it takes to deliver that better cooling. If urban heat mitigation measures are required to address the needs of certain aspects of society and community, those solutions need to happen at the right scale. All efforts need to happen to build that resilience and mitigate that urban heat.

Wherever there is new construction happening, let’s make sure that our buildings are designed in a way that reduce that heat trap inside the building so that we can reduce the need for that mechanical cooling in the first place and deliver better cooling to people inside the spaces.

We have to do everything we can to avoid locking inefficiencies in our systems and making our grids stress during the hottest days by significantly improving the efficiency of the products. It’s not about stopping people from buying air conditioners. When people cross a certain threshold, they will buy an air conditioner. We have to think about how to make it more efficient.

In that context, in the short to medium term, there is a huge opportunity and a lot of effort should be put towards improving the existing vapor compression technology because the entire ecosystem is designed around it — from an industry awareness standpoint, from a consumer awareness standpoint, from a policy and standards standpoint. We should put all our heads and minds to solve that problem of how do we get vapor compression technology to its ceiling and not just focus on raising the floor, but how can we really start pushing the overall efficiency of the air conditioners towards that ceiling that we have demonstrated through projects like Global Cooling Prize.

In parallel, we have to start thinking about what application requires what kind of cooling. Do we need vapor compression-based technology everywhere or for a product like a wine cooler or a vending machine which is just sitting in a shopping mall in a corner, can we use a more novel and sophisticated technology? We need venture capital partners, we need innovators, we need adopters to come together to support these upcoming technologies so that we can start creating a market for these solutions as well. We do need a buckshot of solutions — not just one silver bullet of solutions.

David Roberts

You don’t worry at all that the traditional vapor compression dominating the standards development and all that stuff — you’re not worried about that process boxing out new disruptive entrants? You think these can peacefully live together and proceed alongside one another?

Ankit Kalanki

It’s an interesting question. There is an opportunity to build partnerships here because while the industry is doing its part of pushing the ceiling through, we are helping them to continue to do that. They’re doing that. They’re also looking out for other opportunities.

Let’s be honest, industry has the scale, industry has the capability to test products. Industry has the capability and the network and the voice to get the products certified. Startups should think about how they can collaborate and partner with these manufacturers and create value for the community and for the ecosystem. They will need each other to ultimately solve the cooling problem and scale these exciting, innovative products that are needed to solve the access to cooling issue.

David Roberts

Final question — I’ll ask you to speculate a little bit, look down the road a little bit. If you listen to these IEA projections, you just look at the current trajectory, it’s pretty dire. It’s pretty dire. Maybe I should have emphasized this more at the beginning, but this is not about luxury. This is about survival for a lot of people. The earth is getting hotter. No one involved in any of this wants to deny the best cooling technology to people who are going to be living in these hot and humid environments that are coming.

This is not something we cannot do. But if you look at the projections of the impacts of doing it, it’s pretty dire. It’s going to be an enormous chunk of global greenhouse gases. What is your — are you bullish on progress here? Do you think those projections are going to be overstated? Do you think we’re going to manage to pull this off and to hit that ceiling and to reduce the need and what do you worry about in terms of blockers or problems — what’s the knottiest part of this problem to you and how optimistic are you about getting through it?

Ankit Kalanki

I do think that we have all the solutions that we need to bend the curve. We have a good understanding of what it takes to mitigate urban heat. We have solutions for that. We have solutions that can reduce the heat trapped inside the buildings or prevent heat gains inside the buildings through passive measures. We have solutions for that and we know what it will take for others to adopt it also. We know from a technology standpoint what solutions can bend the curve from an energy and emissions and peak demand standpoint.

I agree with you that it should not be treated as a luxury anymore. Cooling access is critical for health and safety. The goal is not about less cooling. We have to deliver better cooling. Where people need more access to cooling, we have to make and find ways to deliver better access to cooling where we can avoid the waste, where we have to avoid that waste in all forms, whether it is refrigerants, whether it is electricity consumption. We have to ensure that air conditioners and any aspect of the cooling technology and cooling solutions can really support the power systems that often get stressed during the hottest parts.

To the second part of your question — the knottiest part?

David Roberts

What keeps you awake at night?

Ankit Kalanki

What keeps me awake at night is when I see the projections of cooling electricity consumption tripling from 5,000 terawatt hours, which is the same as what the US consumes today, entirely, to 18,000 terawatt hours by 2050, which is the entire electricity consumption of the US, China, India, Japan, and Germany — five major economies of the world. That keeps me awake. At the same time, the potential that we have demonstrated — that RMI, through its Global Cooling Prize Initiative and the Global Cooling Efficiency Accelerator Initiative, has demonstrated what’s possible — that keeps me hopeful, motivated, and also awake that we can solve this problem.

David Roberts

Awesome. That sounds like a great place to wrap up. Ankit, thank you so much. This has been extraordinarily illuminating. I appreciate it.

Ankit Kalanki

Thanks, Dave. It was great to chat with you.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out especially to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much and I’ll see you next time.

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David Roberts

Hello everybody. This is Volts for June 19, 2026: “America’s flagship automaker enters the home energy market.” I’m your host, David Roberts.

Last week, General Motors — America’s top automaker, and its No. 2 seller of electric vehicles, behind Tesla — made a series of announcements that are of great interest to Volts listeners.

The first is the debut of Energy Pass, a collaboration between GM and EV-charging providers that will offer a single account for owners of any GM brand EV (including Cadillac, Chevrolet, etc.) that can access an array of fast chargers from Tesla, Electrify America, IONNA, and more. (Energy Pass currently covers about 70% of existing fast chargers, with more being added soon.) The goal is to simplify the EV-charging experience so that EV owners no longer have to juggle multiple apps and accounts to find a charger when they’re on the road. It’s a big step toward that much-hoped-for future when EV owners can simply stop at any fast charger they want and begin charging without fuss.

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The second is about a new collaboration between GM and Peak Energy, which provides sodium-ion batteries for grid-scale energy storage. Regular Volts listeners are, of course, familiar with Peak Energy and with sodium-ion batteries, as I interviewed Peak CEO Landon Mossberg on the pod last year. This is a huge boost for the sodium-ion market, which is very cool because sodium-ion batteries contain cheaper and less-toxic materials than conventional lithium-based batteries, work over a wider array of temperatures, and generally last longer, with less need for cooling and maintenance. It is also a battery market that China does not yet dominate and the US still has a chance to compete in. This is part of a broader shift we’re seeing as several US automakers pivot into the grid battery space, which is going to be a huge boon to the grid.

And finally, the announcement that is the subject of today’s podcast: GM is investing heavily in bidirectional EV chargers that will enable vehicle-to-home (V2H) and vehicle-to-grid (V2G) integration. GM already has several hundred thousand EVs on the road that are capable of bidirectional charging, but of course, getting it to actually work requires homeowners to buy and install home chargers, inverters, and batteries, and for utilities to enable V2G by establishing the right kinds of tariffs and programs.

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That is a complicated thicket of challenges, and that is what I flew to San Francisco to discuss with GM Energy’s Chief Revenue Officer, Aseem Kapur. Kapur comes out of the utility space — he spent over 18 years with Con Edison, working on information technology and distribution system planning — and is now playing a key role in GM Energy’s efforts to integrate its EVs with the grid, to provide EV owners with new streams of value and the grid with new sources of flexible demand and stability. We got into all those issues in our conversation, which I very much enjoyed and hope you do too.

Aseem Kapur, welcome to Volts. Thank you so much for coming.

Let’s start with what the product is. When I think about the home energy ecosystem, a lot of things are potentially involved in that: solar panels, inverters, smart appliances, home energy management systems, batteries, EV chargers, EVs, etc. What chunk of that are you biting off? What is the home energy product that you’re starting out selling?

Aseem Kapur

Our home energy management ecosystem has the EV at the heart. It starts with the EV that connects with a bidirectional charger, that then connects with an off-board inverter. We have a smart panel that allows the customer to configure what circuits they want to back up from their EV. Those are the three basic components that you need with an EV in order to have a vehicle-to-home capable technology or system that allows your EV to serve as a backup generator. You can then optionally add what we call our stationary storage system, what we call the power bank product.

You can add that on. It comes in different configurations starting at 11.5 kilowatt-hours, all the way to 35.2 kilowatt-hours. That gives you the flexibility. In the event that you don’t have an EV, you can use your stationary storage system to back up your home. Depending on whether you are an existing solar customer or considering solar, the system is compatible with both AC solar systems as well as DC solar systems. The system is configured to design.

To your point earlier, the ecosystem extends to smart appliances, smart panels. All of that is outside the purview of what we’re doing. We’re leading with that EV experience because the true capability that we are unlocking for our customers is the flexibility. You can pull electrons from the EV, you can pull electrons from your stationary storage system. You can do either or you can do both. You can stack them. That is what we are offering that’s unmatched by any other OEM that’s out in the industry today. And you heard about it today at the event. We have 12 EVs that are capable of this technology. Today we have a car park of about 250,000 EVs on the road that are capable of this tech.

David Roberts

If you’re going to use it for backup, that means you need to be able to island from the grid.

Aseem Kapur

That’s correct.

David Roberts

Which is not an automatic feature. A lot of people get solar systems and think that they’re going to be able to do that, and then it turns out you have to have the right kind of inverter to do that. This is what your inverter can do. That just trips automatically if grid power stops coming in?

Aseem Kapur

Yes. The inverter is designed; it satisfies the UL standard that is required, 1741, that is necessary to be compliant with islanding requirements with the grid. That serves two purposes. One, it allows you to island from the grid itself. The second aspect is it works hand in hand with the smart panel in terms of controlling the circuits that you’re powering from the vehicle itself. That is the configuration, the way the system is designed. It’s designed to be modular because in many cases customers get into the EV and the bidirectional charger first, and then they decide later that they want to upgrade, and from there they invest in our inverter and the smart panel. That’s the technology that protects the home from the grid, ensuring that we satisfy the islanding requirement.

David Roberts

Do you have to get the utility involved in any way? If you’re islanding from the grid, my understanding is that you have to at least get sign-off from the utility. If you’re going to install one of these things in your garage, what permissions do you need?

Aseem Kapur

The answer varies. It varies on where you live. There are 4,000 utilities in the United States. They all have their own requirements. In most cases, the answer is they just need to be notified; they do not have to approve the installation of the system. That is true for the majority of the cases. However, there are scenarios where the utility does approve the drawings, does sign off on the installation, and confirms that there is no backup power that can get into the system.

One of the upfront requirements that we’re satisfying is that we’re getting our hardware qualified with all utility programs. We’re ensuring that our inverter, the smart panel, and the EV or the battery, the utility is indifferent to it. But we’re ensuring that both the panel and the inverter are certified as approved products by the utility companies because that’s a big step in ensuring that the customer doesn’t have to go through additional approvals.

David Roberts

One of the things I’m curious about with all this is how you’re selling it, how you’re marketing it. I follow this stuff all the time, I’m geeked out about home energy, etc. But I’m assuming that most — especially if you want to scale this stuff up — most of your customers are just going to be people out shopping for a car who know nothing about anything. Is there a home energy package that you’re offering that bundles these things together? How are you pitching this to the customer? Where does the customer encounter this? Is it at a GM dealership or what’s the customer interface and packaging?

Aseem Kapur

Yeah, it’s a very astute observation. Our go-to-market strategy is dependent on our dealer network. We are a B2B2C company. We have 4,000 dealers and 90% of the US population is within 10 miles of a GM dealership. We have the benefit of the scale and the reach. Typically, the customer’s journey starts with an EV. It’s about educating the customer on all the features the EV has, which includes the energy features — like bidirectional capability — and then qualifying the customer at the point of sale with the dealership on whether they’re interested in additional capabilities like home energy management or backup power.

Typically, we rely on the dealer to get the customer into the charger, get the charger installed in the customer’s garage, and then offer them two options. They can buy a unidirectional charger or they can buy a bidirectional charger, depending on whether they’re a homeowner, how informed they are about local utility incentives, how passionate they are about clean energy or sustainability generally.

Typically, the dealer network helps us qualify the customer, and if there is interest, we then follow up, we call the customer, we put a proposal in front of them that is very unique and specific to where they live based on the energy prices in the grid, the reliability metrics. We pull all of that data in to put a proposal in front of the customer. We also aggregate all the incentives and then we tell them, “Customer, if you make an investment and purchase a home energy bundle, this is what the ROI of that investment looks like.” It is a high-touch sales experience, but it fast follows from the conversation after the dealership.

David Roberts

One thing I often hear from EV owners or prospective EV owners is that dealers themselves are not super familiar with EVs, and I’m sure you have heard these complaints. For as many EVs as GM sells, it is still a small percentage of the total sales. I hear from people all the time who go to dealerships and the dealers do not even know the basic features of EVs, much less home energy management systems. How big of a piece is dealership education and training? Is that part of all this?

Aseem Kapur

Yeah, absolutely. That is one of the largest areas where we invest, and as part of our go-to-market strategy, it’s about how do we enable that channel. We support the dealers with marketing, we support the dealers with running campaigns that generate traffic into the dealerships. As part of that campaign, we also educate them on how to talk about the product. That goes back to the core EV. We have some very intensive training requirements.

I’m new to the industry, I’ve only been with GM for about four years because I was in the energy sector. I’ve been floored by the amount of investment GM makes in training the dealers and also investing in helping them load the product. Most of these people are car enthusiasts. They’re very passionate about the technology. They love cars. The key is then how to get them to talk about energy.

David Roberts

It’s not necessarily natural. I think of the two as very overlapping, but I’m not sure it comes naturally to a car enthusiast.

Aseem Kapur

I’m in the same camp as you. I feel they’re interchangeable. In most cases, what we find is that we want to keep things simple. We start at the basics, which is around charging. Let’s help the customer get comfortable with charging. EV lifestyle involves having accessible charging, whether it’s your home or public. That’s where we invest our resources with the dealer network and we get them comfortable with how to make the product, how to offer the chargers or the adapters, how to help them finance or lease them. We educate them on the public charging network, Energy Pass, for instance. We do a lot of that onboard training. Anything related to energy today, we fast follow with the high-touch sales experience. Just the nature of how we’re unlocking the market.

I will add, to your earlier observation, dealers have different degrees of interest. We have dealers in parts of the country where EV adoption consistently remains high that have figured out the entire installation network. They have looked at the customer journey, what it takes to get the customer into a car, what type of charger they need, how to get the charger installed. These are entrepreneurial, very progressive business people and they are driven to ensure that they deliver the best customer experience.

One of the key metrics that they are driving towards that they share with us is NPS, which is the net promoter score. Specifically, how a customer who leaves the dealership rates the dealership on that overall purchase experience. Early on, yes, there were marked different NPS scores between buying a gas vehicle versus an EV vehicle. But we’ve seen in states where there is highest adoption that the NPS for EV customers is higher — order of magnitude higher — than gas customers. There is a tide that is turning. It is slower than we all expected, but it is turning and there is light at the end of the tunnel.

David Roberts

Is GM viewing this as a way to sell more cars, as almost a loss leader to increase EV adoption, attaching this to EVs, or does it view the home energy business as something that might take on a life of its own and become a serious revenue generator and even be sold to people who own different kinds of EVs, non-GM EVs? How attached is the home energy business to the car business?

Aseem Kapur

At a corporate level, it is one of our top strategic KPIs that is measured at the senior-most leadership level, and we report those metrics up to the board. GM Energy is one of those business units that is measured on its performance. To answer your question, it’s all of the above. What it means for the consumers today is how do you get them comfortable with charging that EV lifestyle, and then if they’re interested, how do we get them into a home energy management system?

The reality is, and a lot of the discussion we had today with the panels, what Kurt talked about and what Wade talked about, the future of the grid is mobility and energy converge. EVs are a flexible energy resource. Whether it is flexible supply or flexible demand, they are going to continue to have a solution to support affordable grid expansion. That is the way we look at it. If we do not actively lean in and have a role to play, we are not going to be able to differentiate our core product, which is the EV. We have got the battery technology, we have got the industrialization and scale, but most importantly, where the rubber really meets the road is with consumer experience. What we are really good at and where we can lean in with scale is how to solve for the tough problems.

You asked the question earlier, what permission do you need with the utility? The answer varies. You can’t expect the customer to know this, you can’t expect the dealer to know this. That’s where we come in. We come in to say, “We’re going to thread that ecosystem. We’re going to take this from a consumer standpoint to understand.” Today it’s all about how do you get the customer comfortable with an EV. In the very near future, it’s all about how do you reposition the customer to think of an EV as an energy asset. We are solving for all those pain points step by step to ensure that it’s a consistent, repeatable experience across all our 4,000 dealerships.

That will take threading that problem statement across multiple utilities. That’s the reason why we’re investing, because it’s good for the customer, it’s good for the grid. As Sterling said, and I loved his comment at the end, it’s probably the first time in history when all of the incentives are getting aligned across energy companies, OEMs, battery manufacturers, because there is an unprecedented demand that the grid is facing and you need all solutions to come to market. It’s in our collective interest to solve for the consumer pain point, because you can’t drive adoption without solving for the complexity the customer is going to face. Our core motto as a corporation is keep things simple.

David Roberts

In terms of the customer experience, if I buy my EV, say I know nothing about any of this, I go to the dealership, they sell me an EV, they sell me the home energy package with it, GM comes and installs it, an electrician comes and installs it. Who comes and installs it? What’s that touch point look like?

Aseem Kapur

I’ll be brief in terms of just walking us through the journey. Typically, a dealer qualifies the customer for us. We have a home energy consultant team, which are highly specialized energy consultants who will call the customer, put the offer in front of the consumer, and if the consumer expresses interest, they’ll handle their payment and financing, all of the rest. The product gets directly shipped to the consumer’s home in parallel. We also give the consumer the option to either work with our certified installer network and receive a quote for their installation, which allows us to manage both the quality and the price of the installation, and ensure that the customer is aware of the timing and the cost before they make the final decision to purchase the hardware. That is a really important point of the journey.

We also give the customer the choice to go out and get their own electrician. What we find is that in most cases that experience is inferior because the electricians are not familiar with the technology. It’s new. We have an internal metric that drives both the sales teams and our delivery teams to incentivize the consumer to work through our install network and be transparent on the price, be transparent on the timing. Today we’re building out an installation network. Much like how some of the other industries I’ve worked in, whether it’s the solar industry, it all comes down to the distribution network and the installation network. We are building that installer network.

The good thing is that we have the opportunity to do it in some states first, where we see the highest adoption, and that is allowing us to refine that experience, learn from it, build a network. More importantly, just in the last nine months since we have been selling the system, we have seen a 30% drop in installation prices. The way we have been able to achieve that is we are improving the product to take price out, to make it easier to install.

Second, we’re training the installers. Something that they would read through a manual and probably take them three days to figure out, we’re saying, “Here’s a video, here’s how you can do it and reduce the amount of installation.” We measure ourselves on total time to commissioning. We measure ourselves on what percentage of all the sales are going through our installer network. We know in the end the NPS score that we’re going to get through a transaction that flows end to end through our network is a lot higher than when the customer has to handle that on their own.

David Roberts

Once it’s installed, does it just work? How much fiddling does a customer have to do with it on an ongoing basis? Can you just install it, set it, and forget it, or are there settings, are there interventions that the customer has to make? How much of it is self-running?

Aseem Kapur

I’d love to sit here and tell you that everything runs 100% of the time, wholeheartedly. The first step in the process is you get it commissioned. Once the system is commissioned, up and running, it’s visible in our backend systems. We have what we call the energy cloud platform. We can see the asset. At that point in time, we have monitoring capability. It also allows us to do over-the-air firmware updates. We’re continuously enhancing the product, we’re adding features, and in some cases we’re removing features that add complexity to the installation.

As the product is dynamically evolving, it allows us to do over-the-air updates. That is a very key capability. The third piece is we are learning. This is the first version of the product. In order for us to truly improve the next generation of the product, early customers who adopted the technology today are giving us a lot of feedback. We go out and do customer testimonials, we are doing our research, focus group studies.

It’s not only about how to sell and install it. We’re saying, “How do you use it?” What is it that you find the most valuable? Is it the fact that it keeps your lights on? Is it the fact that you’re saving money based on energy rates? As we learn those preferences for consumers, we want to take that feedback loop into our product life cycles and continue to improve that.

David Roberts

Do the customers have to do anything to it?

Aseem Kapur

They don’t have to do anything to it once it’s configured and set up. I can’t tell you how many customers, when we’ve gone out and done interviews, have told us they slept through outages without even knowing that their car powered their home.

David Roberts

Every string you pull in decarbonization these days, or affordability or resilience, name it, you end up with batteries. This is the way to think about EVs now: just mobile batteries. That is the unlock, but that is not necessarily how consumers currently think about them.

It sounds like the immediate pitch — the systems that are being sold today — is based on backup power. That’s the value proposition. Are you targeting presumably states or areas where blackouts are more common and frequent? There are a few reliable grids in the US where people don’t necessarily have to worry about this. Where is that a sufficient value proposition?

Aseem Kapur

Everything is batteries. The focus area for us is really in states where we see the highest adoption of EVs. I’ll explain how and why we focus there. In most cases, when customers are entering into an EV lifestyle, they are worried about what they are going to charge. Is it the home, is it the public? Public charging infrastructure is gradually becoming more common, mainstream, and more reliable. That is going to take time.

Our first value proposition is, “Let’s get the charger installed in the home.” The lion’s share of charging happens at home, and in order to improve the TCO or the total cost of ownership is when we offer the home energy bundle to say, “You can save money, especially if you live in a state where you have tariffs that support that structure, whether it’s free nighttime charging or you have lower price for charging.” That’s typically the entry point.

We’ve also seen that after major weather events, like we had a tough winter out in the East Coast, out in the Southeast as well, when we’ve run targeted campaigns in those states, we’ve gotten a lot of interest. People have reached out to us. Going back to the point around decarbonization, now some states have mandates around new natural gas connections. They can’t go out and get a backup gas generator because it takes a lot more time and money to get that. They’re either left with using a diesel backup generator, and those are available in the market. But then they realize that they’re noisy, they’re costly. In most cases, our biggest opportunity is awareness. Most people don’t know about our hidden secret that all our EVs are capable of bidirectional generation.

David Roberts

They are backup generators.

Aseem Kapur

Yes.

David Roberts

This is the beauty of batteries. They are everything. On the tariff question, that’s also different utility to utility. Only some utilities have these time-of-use tariffs. If I’m a customer and I am in one of those areas, and arbitrage, moving the timing of my charging back and forth to take advantage of that — is that all done behind the scenes too? Do you pitch that to the customer, saying, “We’ll do this arbitraging for you and we’ll save you some money”? But again, you don’t have to fiddle with anything. You don’t have to be aware of the tariffs or know anything about the tariffs, etc.

Aseem Kapur

Today what we do is we expose the tariffs to the consumer. It’s an education. Most of us don’t even look at our electric bills to really understand what we pay for energy. We don’t care about it unless the bill is higher than what we paid last month or our lights are out. That’s the beauty of the monopolistic utility business model. For us, it comes down to giving customers the choice to be able to configure the vehicle and making them aware.

We say, “You can set up your charging schedule in your infotainment system in the car, or you can do it on your app.” Where we have partnerships with energy companies, where we’re running managed charging programs, we give the customer the option to opt in. We actively enroll the customer into a program that’s offered by the local utility. It’s not available in every state, it’s not available in every utility. Those programs are growing. As those programs are growing, we have an entire team that’s focused on ensuring that our customers have access to those programs because it drives confidence in our product and the experience. They can lower their energy costs. That’s the second step in the journey.

In the future, and I would say in the very near future, what we’re trying to do with companies like PG&E out in San Francisco, our vision is that we want to enroll the consumer at the point of sale. When they leave the dealership, they’ve opted in to a program. Their settings in their vehicle and in their app are preconfigured in order to support and manage that experience that’s conducive to the grid where they live. If they are going to save money on it or make money on it, like through arbitrage, then it can directly impact their EV ownership experience. If we move these incentives forward and lower the monthly lease payment for EV car buyers—

David Roberts

Folding the utility savings into the price of the EV lease.

Aseem Kapur

That’s correct. Now it’s a very sticky transaction. It’s a very sticky ecosystem that allows the customer to appropriate that value with the investment that they’ve made in the EV. That’s the net benefit. We are trying that and testing this actively in San Francisco. We’ve got four or five dealerships that are lined up to support that.

The reason why we’re so bullish about it is that it just takes away all the complexity. None of us want to sit here and read our bills, understand tariffs, figure out how to configure our car. Some of us who are tech enthusiasts will jump in, but my mother is not going to do it. She just wants set and forget. To get there, when you buy the car, it should already come preconfigured with that capability and I should see the value either immediately or in something that I associate with my car purchase. That’s the vision.

David Roberts

This is slightly esoteric, but I’ve wondered about it before: if you are selling these cars as batteries — that’s what all this is about — your car is a big battery. Big batteries can do a lot of things other than drive you around. What’s the value proposition for then also having a home battery? The study that you all sent me says that in terms of just the value to the grid, the economics are generally better for home batteries just because they don’t detach and drive to the store periodically. Why would an average customer want both their EV and a home battery? Since they’re both batteries.

Aseem Kapur

Today the choice is frankly driven by price point. Can I afford to have both? Because I have the flexibility in the event that the car’s not home and I want to keep the lights on, I can use the backup battery. We sell about the same number of systems — full home energy management systems — as we do vehicle-to-home systems. The distribution of the product mix is about 50/50. In the future, and you have seen the E3 study, we need to have product parity with stationary storage.

For a customer to consider an EV and a grid operator — and I worked in the energy industry for two decades, worked as a utility operator and I worked in those control rooms — as a former operator, to be able to dispatch that resource, that needs to be firm capacity. You need to be able to call on it and it needs to respond within eight cycles, or else you’re going to trip all the circuits upstream. That has significant impact on reliability.

For us, it comes down to: we’ve launched the first generation of technology. As technology improves over time, whether it’s onboard inverters on the vehicle, the battery, the energy density both on the EV and the stationary battery, the unit cost for that available capacity or the flexible demand, as Patti talked about earlier, continues to drop on a per kilowatt-hour basis. At that point, there’ll be a trade-off where the difference between a mobile battery per unit cost versus a stationary battery — in some markets the customer will be indifferent. We’re not there today yet. Where we are today is where the market is unlocking. All the incentives are tied to stationary storage and specifically stationary storage paired with solar. That’s what’s most impactful to the grid. If you don’t do it in an organized way, it can be fairly harmful to the grid. That’s the key.

David Roberts

One more question about the vehicle-to-home, the basic system, which I think the home energy package is something like around $7,000, which is a decent chunk of money. Have you thought about financing tools? You mentioned that you might be able to fold the utility incentives in and bring that down a little bit. I’m wondering how daunting that price point is for customers.

Aseem Kapur

It is not for everyone at that price point. In order for us to lower the barrier for entry, we are in the process of offering a leasing program. I don’t have a date for that yet. Leasing the home energy system, specifically leasing the home energy systems. One of the biggest drivers for that is the change in the legislation that happened last year. The investment tax credit for batteries, for residential batteries specifically, has been extended through leasing offers. It’s advantageous.

It’s not available in all states. However, the states that allow for third-party operated leases or TPO leases specifically allow customers to take advantage of the tax credit as well, in addition to lowering their monthly payment. You can buy it on payments versus paying it all upfront. Both of which we are actively working our way through. It’s a new asset class for us. As we work through the regulatory requirements, as we work through the details around getting approvals to offer leases to consumers directly, we are going to launch that offering soon.

David Roberts

The vehicle-to-home stuff is in some sense pretty straightforward. I think an average consumer can get it. It’s a battery, it can be my generator. They have a mental category for that. Once you get into the vehicle-to-grid stuff, then you’re in more complicated territory. From what I can tell, I’m trying to get a sense of how far along that is. The systems are capable of it, but how many of these systems are actually being used that way, that the grid operators are aware of them and coordinating them in some sense and using them as demand response? As far as I can tell, that’s not happening on a commercial basis anywhere yet.

Everything seems like it’s testing and pilot programs. What is the state of the vehicle-to-grid side of this?

Aseem Kapur

The way I think about the state of the vehicle-to-grid technology is that it’s emerging and it’s accelerating at a pretty fast pace.

David Roberts

People have been talking about this for a long time, and it hasn’t amounted to much to date. Do you think it’s reaching a threshold?

Aseem Kapur

Yeah, it is. What has changed — absolutely, people have been talking about it for about a decade now. What’s different now, in this moment in history, is the fact that for the first time utilities are facing unprecedented demand. They can’t build their way out to serve all this capacity, and they need flexible grid resources.

As we heard Patti talk about this today, and she’s one of the most emphatic proponents, adding flexible demand to the grid improves grid utilization and is good for the customer, the grid, and lowers cost for everybody. It’s the most affordable way to add grid expansion by adding flexible electrons in the grid. That is, by far, probably has always existed, but the need for it is now as all AI-driven demand is coming on and autonomous vehicles, as electrification generally is happening. That trend has accelerated just over the course of the last year.

Plus, as AI technology is evolving very quickly and the frontier large language models are moving towards now small language models, a lot of the inference is moving to the grid edge, or what we call the edge compute. That is going to become increasingly more important. Each of us is going to have more compute that’s available on our laptops, on our phones. As that per capita for energy consumption increases, what it does for the grid is now you have all that grid congestion that moves to the last mile.

We talked about queues this morning, around the fact that PG&E territory has 8 to 10 year queues to connect this gigawatt-scale supply. You have to solve for that, definitely, you have to work towards solving for that. More importantly, you can’t ignore the fact that the last mile is far more expensive to upgrade and replace because you have to do it one by one. Especially in cities like San Francisco or New York, where the cost of infrastructure upgrade is significant or it can be very prohibitive. The flexible capacity becomes more important.

What gives me confidence on why we are here now and why we haven’t been here for the last decade is the fact that the emerging need and, more importantly, the consumer behavior. We’re adopting this technology in our day-to-day lives. My own recollection is from the time when iPhone first came out and we were all excited about the apps and we threw away the physical maps and started using the map app on the phone. That’s the closest analogy I can think of in my life on how agents are changing the way we use AI.

As more dependence increases and consumer behavior is changing, this is going to become mainstream for us. Grid planners and technology drivers for the first time are now saying, “We have to think through programs that drive or incentivize customers to bring these flexible resources to the grid.” Time-of-use tariffs — there was a study just in the E3 study that was the basis and one of the things they talked about — it is the first time in the US regulatory framework when you have more time-of-use rates than you have ever had in any other utility.

David Roberts

It does seem that it’s becoming the default. Every utility is eventually heading in that direction for various reasons. One of the ways I’ve always seen this framed by companies that are out doing this stuff on the edge is every house is a pre-approved Internet connection. There’s no interconnection queue. The residences are already there, approved. Why not exploit every one of those already existing interconnections as much as you can? Why not get as much out of it as you can?

Aseem Kapur

The way I think about this is, and without totally geeking out on this topic —

David Roberts

Feel free to geek out.

Aseem Kapur

Flexible interconnections have to be the common standard. You can’t expect a customer to have to upgrade your panel every time you have to go out and buy a new car or buy a new laptop. That’s just ridiculous. You cannot live in a world where the physical grid constraint holds you up from having access to innovation. To that end, flexible grid interconnections are really important. How do you get to that flexibility? You need to be able to call on those flexible resources, you need to be able to dispatch them and optimize them.

That is where our technology investments unlock that platform. GM is investing in that technology with GM Energy that has the software layer with this virtual power plant. You have millions of these batteries on wheels that become a virtual power plant. Now they can interconnect with the grid. I don’t have to upgrade my service, I don’t have to upgrade my panel.

David Roberts

What if I have a 120-volt panel? Do I have to upgrade to 240? Even a Level 2 charger — a lot of people, this is a barrier to them. If they have an old panel, I assume you at least have to have a 240-volt connection to have all this equipment, all this home energy equipment.

Aseem Kapur

You need to have an 80-amp. 80-amp is the maximum that you do. In fact, if you want to keep it under 40 amps, we allow for the charger to be derated and to keep it under 11.5 kilowatt-hours. We give the option because the charger is designed, because it’s an AC/DC charger coupled. You charge on AC and you can have two different speeds. You can charge at 11.5 kilowatt-hours or 19.2. The constraint there is whether or not you need a panel upgrade. We allow the customer to derate it.

On the discharge capacity, it’s the same 9.6 kilowatt-hours. The amount of energy that you draw out of the battery in the vehicle is the same in either configuration. We’ve thought through that and how to make it cheaper to install. In the long run, meter collars are going to become more prevalent because they’re going to allow for bypassing. One of the biggest challenges that electricians face with connecting this equipment is the smart panels. The smart panels are going to also become mainstream. All new homes come equipped with smart panels that allow for that flexible interconnection capability. You don’t have to upgrade your service every time.

David Roberts

Span, the smart panel people, now have a little edge compute box that you can put on there. They’re doing — speaking of edge computing — all this stuff is, everything’s converging. What do utilities need? They need time-of-use tariffs. It seems like GM is doing the management of the system and the awareness of the system. Is it as simple as the utility just coming to GM and saying, “Provide us flexible capacity”? Is that the extent that the utility needs to be involved? The utility doesn’t need to manage these systems itself or technological capability; any utility could do this?

Aseem Kapur

Yeah. The utility doesn’t have to worry about what happens with the resources at the end of the last mile. We take care of that. That’s our promise to the consumer. We’re responsible for deploying the asset, maintaining the asset. That is the brand promise that we’re delivering to the consumer.

What we are partnering with the utility companies on is what they need to have is two things in place. One, they need to have market mechanisms that allow them to run these programs at scale. Most of the programs today are proof of value pilots. They’re not being offered at scale because the regulators have to approve and authorize that they can add these investments into their —

David Roberts

And you just mean variable rates, time-of-use rates.

Aseem Kapur

Tariffs is a piece of it. Another key aspect is if you have to truly incentivize flexible demand, then there’s no better way of doing it than to pay the consumer. Pay the customer for getting into that technology. Now, instead of upgrading the grid, I can call on that asset that I have incentivized the consumers. We are a big proponent that regulation should allow the vehicle-to-home and the home energy management systems to be treated as a regulated asset. Let the utilities add it to their books like they do. In many cases, they have storage systems being added to their books so the utilities can earn. It’s a win- win. The consumer benefits, the grid benefits, and it’s the most affordable way to add grid capacity. That’s one.

David Roberts

But you need them to have confidence in it too. This is what I hear from utilities.

Aseem Kapur

That’s right.

David Roberts

They want it to be as reliable as a power plant. I don’t know that a lot of them are convinced yet.

Aseem Kapur

We’re there. We’re working very closely with them. It’s only a matter of time when all of this testing comes out, and then once one company gets behind it, all the other companies get behind it. Just the nature of how the utility industry works.

The second thing, I just also want to go back to your original question: what must be true for energy companies or utility companies? Interoperability is also key. OEMs like GM are really taking the charge. We’re leaning in, we’re all in with our EVs, but we have to have standardized standards that drive bidirectional charging because that drives interoperability. Right now, the customer can buy a GM Energy home management system. Today it only works with a GM EV, but in the future it should be able to work with any EV or vice versa. That is what drives adoption and scale as well.

Utilities don’t want to be in a position where they say, “We’re only going to issue a flexible capacity contract to General Motors.” They want to be agnostic to technology, they want to be market makers. What we are doing is, and we recognize the opportunity because it’s the right thing to do for our consumers as we did with the NACS port. We agreed that this is in the best interest of the consumer. We’re leaning all in. Similarly, we’re working with the SAE, the IEEE to lean in on these, including partnership with our other automakers to unlock these new bidirectional charging standards.

David Roberts

If I’m a consumer, one worry I might have about this is am I getting locked into a walled garden? If I have one piece of GM equipment, am I then stuck only being able to buy other pieces of GM equipment? Could my battery come from a different manufacturer? Could I use a different EV with your inverter, etc.? To what extent are those standards in place now and this technology agnostic versus that being a future destination?

Aseem Kapur

Let me answer the question on the top. First, I’ll answer it in the context of where the maturity of the standards is. Then I want to answer your question around consumers and how they think about it. There are three standards that must be true. It’s the IEEE standard that’s related around the 1547-2018, which is the inverter technology — how do we make sure every vehicle is capable of inversion either onboard or off-board to the same standard? Today we design our inverter that’s off-board on the wall that satisfies that requirement.

The second is around ISO 15118-20, which is the emerging standard for bidirectional charging. Today our EVs communicate with our home energy management system on a proprietary protocol. In the future, everything that we are going to design — Sterling talked about this in his talk earlier. With model year 28, all of those vehicles will be ISO 15118-20.

The third piece is around the IEEE, the 2030.5 or the OCPP 2.0.1. These are emerging global standards around how charging and discharging happens, how settlement of payments happens, the transaction cost transparency.

All of these standards are — IEEE standard has been finalized, the ISO standard is near finalization, and the ISO standard is probably six months away from becoming the formal source. The product life cycles for the OEMs are going to fast follow. We expect we are going to be the first one out the gate that is going to have all these standards adopted in our vehicle-to-grid technology and vehicle-to-home technology. That is the first part.

Going back to your original question about consumers being locked into the walled garden. The way we think about this is slightly different. Yes, you can have a choice to be able to lock into a walled garden. But there is a reason why people buy Apple devices. It is the same reason why people buy GM vehicles. We have by far the highest brand loyalty of any automaker. Once the customer gets into our brand of products, they trust us with that ownership. It is across the portfolio. We have a vehicle at every price point and we have customers who through generations just buy GM vehicles. We have seen that brand loyalty increases with EV propulsion systems. It is a higher brand loyalty.

We’re not concerned about the fact that today customers are making an investment in a vehicle-to-home or home energy management system. We’re so confident in our EVs that we know that they’re going to come back into another EV from us and trust us with that experience as well.

David Roberts

One thing I hear when I talk to experts about this is that most of the benefits of the grid communicating with EVs, most of the benefits you want in terms of flexibility, you can get through just managed charging, that is, timing when you’re putting electricity into the battery. I saw even on the PG&E pilot there is not yet energy going from the EV to the grid, leaving the home — basically export of energy. Do you think that’s going to be a big piece? Do you think we’re going to get most of the way there on flexibility just with timing, or do you think export into the grid is going to be a big piece of this at some point?

Aseem Kapur

Let me turn that question over to you, Dave. How many outages have you experienced, say, just in the last year?

David Roberts

Probably two, and usually pretty short, usually on the scale of hours.

Aseem Kapur

Would you say they’re increasing or about consistently the same?

David Roberts

I don’t know. I don’t know over time.

Aseem Kapur

The way I would answer the question is in most cases the average US consumer is experiencing more outages than they have over the last decade.

David Roberts

That’s vehicle-to-home. That’s your vehicle in your home.

Aseem Kapur

That’s correct. That’s the first entry point on how the customer gets into the technology. What is also happening is that in many cases, there are short duration outages in many parts of the country, but when there are major weather events, those outages are typically prolonged. They are three to five to seven days.

In most cases, utilities are not equipped to energize communities or neighborhoods at scale and what they’re looking for typically — and in my prior life I worked at Con Ed, I was responsible for at one point in my career powering all of the grid north of Times Square. Every heat wave in the summer we would deploy backup diesel generators because the grid would go out of power. Now imagine there’s a parking garage in every corner in Manhattan. If we have all those EVs that are parked in that garage, that become our vehicle-to-grid enabled technology, that can now become a grid resource that can be dispatched.

David Roberts

But then you need something like a microgrid. You can’t just pour that energy into the whole grid area. You need some sort of isolated —

Aseem Kapur

That’s correct. Where the technology is, again, going back to what we talked about earlier, as the last-mile congestion increases, the frequency of the outages increases and the impact increases. What the utility planners are going to look into is how do we design these circuits to have flexible interconnection with distributed energy resources. It’s already happening with batteries, it’s happening with community solar, it’s happening with community storage. Now utilities in many cases, they’re regulated to do that. The reason why they’re doing that is that they’re purposely reconfiguring portions of the grid to adopt these technologies on a permanent basis.

Why they do that is because they see value, it’s cheaper, and this is a big portion of what the distribution study that we shared with you about how you manage for the distributed energy grid expansion or deferral in capacity. It’s going to come down to: in the past, the technology has not been there. You can have a flexible interconnection point, but then how do you monitor the asset? You are absolutely right. We have to earn the utility operator’s confidence. We are laser focused on doing that. We are making such a large investment in our labs, in our technology, we are running these pilots.

The reason why we’re doing that is because we want to get that confidence, we want to get that approval from the utility operator that your technology is good to go. Beyond that, the tech stack exists right now. It’s a function of what we bring to the table — the consumer we bring to the table. We can do the customer acquisition, we can deliver the most unified experience to them. When an event happens, yes, there is a good probability that between the three of us, not all of us are going to make our vehicle available.

Given the amount of data and information that we have around consumers’ behavior on their driving, behavior on their energy consumption at home, we can forecast with a very high degree of confidence what is the likelihood that one out of three EVs is going to respond at a given circuit, at a given proof point. Once utility operators and utility planners have access to that information, that just changes the game.

Our perspective today is all about how we have designed the grid for 100-plus years. It is unidirectional flow of energy. You have to have an islanded system. I can think of 100 reasons why this will not work. I have been on the other side. The need for change has never been higher and tech is moving at a much faster pace than all of us imagined, even five years ago. That really gives me confidence.

As a utility former planner, I didn’t have the tools to even do the analysis to say when can I project overload in a certain specific circuit? I had to run studies after studies, load flow models, and run a probabilistic scenario for all different load curves, 8760 analysis that we had to do, which is every load curve for every hour in the day. Now you plug that in and Claude could run it for you in a matter of seconds.

David Roberts

Final question. Theoretically, five years from now, ten years from now, you, GM, are going to be running VPPs all across the country. Theoretically, you’re going to be a big power company, you’re going to be a large-scale energy company. I’m curious how deep you all want to go into the VPP or could you see handing that off to someone else? There are all these VPPs popping up, there is a lot of ferment in that market. Do you anticipate eventually managing hundreds of megawatts, gigawatts of power across the country? That would make you a large-scale energy company. Is that the destination here?

Aseem Kapur

Absolutely. There’s no reason for us not to do it if it’s the right thing for the customer. Is that our core competence and expertise today? Absolutely not. What we’re doing is investing in gradually building and learning it step by step. What’s more important is we’re threading an ecosystem. We don’t want to go it all alone. We want to bring the utility companies, we’ll bring the aggregators. The way we see it is if there are certain markets where an aggregator can do that, we’ll partner with them.

If there are other markets where we have to step in and do it, we may do it. The intention is what brings the time to value. How do you energize that capacity and bring that to value? We are laser focused on the core outcome for the customer. We’re not moving forward with the direction that we want to be the largest power company in the world. We are looking at this problem statement in the context of how do we create value for the consumer that gives them confidence in the propulsion system, in the energy technology, in our battery technology, and we continue to scale that.

David Roberts

Thank you. It’s very illuminating. Super interesting stuff. It’s been fascinating to watch as everything becomes batteries — transportation, grid management, home, customer — everything is becoming one. Everything comes on the grid, everything becomes one big thing. It’s muddling all these previous business categories, all these previous silos of different business models are all getting mushed together. It’s fascinating to watch how things are going to fall out of that. What do the businesses look like when they’re managing all these batteries and all these different kinds of categories and all these different — it’s fun to watch. It’s a fun time to be involved.

Aseem Kapur

Exciting time.

David Roberts

Thank you for listening to Volts. It takes a village to make this podcast work. Shout out especially to my super producer, Kyle McDonald, who makes me and my guests sound smart every week. It is all supported entirely by listeners like you. If you value conversations like this, please consider joining our community of paid subscribers at volts.wtf, leaving a nice review, telling a friend about Volts, or all three.

Thanks so much, and I’ll see you next time.

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David Roberts

Hello everyone. This is Volts for June 17, 2026: “Can the UK stay the course with its climate plans?” I’m your host, David Roberts.

By many measures, the UK is a genuine global leader on decarbonization. It passed an extremely ambitious climate change law in 2008 and has largely stuck with it since. It shut its last coal plant in 2024, making it the first G7 nation to leave coal behind entirely. It has cut its greenhouse gas emissions by almost 50 percent from 1990 levels, well ahead of, ahem, some other countries one could mention.

But its decarbonization push has recently hit some turbulence. The cross-party consensus that held for 15 years seems to have come apart: with the Labour party running the government, the Conservatives now want to repeal the very climate law they once championed, and Reform UK, which is leading in many national polls, is promising to scrap “net stupid zero.”

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To make matters worse, America’s ill-conceived Iran war has gas prices spiking and household bills heading back up — an awkward backdrop for a government elected partly on a pledge to cut household bills by £300 by 2030.

All of this agita will be on display later this month when Parliament votes on the UK’s seventh carbon budget, which will give the government guidance on how and how fast to continue cutting emissions. As proposed by the Labor government, it maintains course, but increasing concerns about industrial competitiveness and the costs of heat pumps and transport mandates will make this a spicier affair than past budgets.

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Can the government produce a credible policy package that meets the targets laid out in that budget? Now that the easiest reductions in the electricity sector are behind it, can it make similarly ambitious cuts in heating, transportation, and aviation? Can it restitch its climate consensus and restore its global leadership?

Much of this effort will fall to Katie White. For two decades, she has been a leading climate campaigner, working at prominent NGOs to establish the UK’s climate law and its basic policy architecture. Then, in July 2024, she became a member of Parliament, and in September of last year, she was appointed the UK’s climate minister. It’s a rather dizzying ascent into the higher reaches of government. I can’t wait to talk to her about how the climate effort looks from the inside and how she intends to keep the country on track.

Katie White, welcome to Volts. Thank you so much for coming.

Katie White

Thank you for having me, David.

David Roberts

Let’s start here. The most striking thing about UK climate politics at the moment, from the outside perspective, is that you were instrumental — after working for years with NGOs — in passing the Climate Change Act way back in 2008, which passed on a cross-partisan basis and has had majority cross-partisan support ever since, up until it looks like right around 2023, when it looks like the consensus fractured. Reform obviously is now out promising to repeal the whole thing. Conservatives are now following up, saying they want to repeal the whole thing. It really looks like that consensus flew apart pretty abruptly starting in 2023. I’m just curious, why do you think that happened? What is your diagnosis for what happened?

Katie White

Thanks, David, that’s a great question. In terms of where we are and why do I think it’s happened, I don’t think it’s quite as broken as you might think or hear. Undoubtedly, there has been some fracturing and you’re right that in 2008 it was the Conservatives under David Cameron. David Cameron’s leadership campaign was to call for a climate change bill and then the Labour government introduced it and they continued to deliver. In the last few years, there’s been some questioning about that and I have been taking a step back and asking what is the questioning, what do we agree on, what do we disagree on, and what’s the problem with that?

I think we are at a place in terms of a few bits. One is our energy bills. That’s probably the main thing and it’s certainly the number one issue for voters in the UK and the number one priority for our department. Secondly is energy security. Thirdly is climate change, and it’s probably in that order that people care at the moment. It’s not to say they don’t care about these things because I think the British public, the numbers who support action on climate change, is incredibly high.

At the same time, most humans want to have low bills and energy security and tackle climate change. We’re trying to deal with that. I think the case was made around climate change years ago. I’m not sure we’ve made the case particularly well. But also, energy bills have continued to rise and people have made an equation there of “hold on a second, are these costs directly comparable?”

Now, David, you’re an expert on this. It’s a very complicated picture. In the UK, we’re moving from a system where we’ve almost been renting energy, but it’s been a commodity-based system. We’re buying off, we have a certain amount ourselves, but broadly we’re buying off other people, be it the US or Norway or other countries, we’re buying oil and gas. We’re now moving to an infrastructure model. We’re almost buying our own house and there is a down payment cost on that. We have invested in terms of having wind turbines and actually the last government, due credit to them, set a lot of this in train.

The challenge is they also didn’t do the grid infrastructure, which meant that we haven’t been able to take advantage of some of those costs. We are at that tricky point in the transition. We need to be honest about that. There’s also politics all involved in it and obviously this is even more so in the States. It’s very much a binary, has been left and right. I’ve never really agreed with that and I’m happy to call things out on the left, on the right. People want to have an argument about whether things have got a label or whatever. I don’t really care about the labels, frankly. I just want to make sure that we’ve got clean energy that is cheap, good for the UK, and good for the planet.

The other point, and you might have some reflections in terms of why you think it is from where you’re sitting, but I was with a group of leaders yesterday and some business leaders and some of them have been working on this for a while as well, and they were saying a lot of this is cyclical and there are generally cycles of support and lack of support and we are for sure at a lower ebb. They were reassuring me that it was going to go up. We’ll see. They did say that the troughs of those peaks, the trough is getting higher as the trend is going up.

Finally, I would just say there’s quite a lot we do agree on. There’s been a lot of debate in the UK recently politically and energy has been a part of that debate. But electrification, you’d be hard pressed to find anybody across the whole political spectrum who doesn’t agree that electrification is the way forward for the UK. I’m like, if we agree on that basis, let’s build on that, let’s keep going, because that is great for our prices, for energy security, and for the planet.

David Roberts

The one thing I wanted to say, as I was looking at these charts, is political support has split rather abruptly, but that’s not reflected in public support. If you poll the public, they’re not as intense in their support as they used to be, but still majorities are in support. It’s really an elite political phenomenon that’s happening. But you raised the main issue. Let’s talk about the main issue. You believe, I believe, I’m sure most people listening to this podcast believe that if you make these big investments in renewable energy, infrastructure and resilience, Britons will be better off in the long term, maybe even in the medium term.

But politics lives in the short term and people are facing high prices in the short term. Originally, I think Labour was promising “we’re going to lower your household bills,” I think specifically by 300 pounds by 2030. That, for a variety of reasons, is looking quite implausible, not all of which are in your control, of course. Some of that is the Iran war, pushing gas prices up, etc. But the question I would just put to you is what are you going to do in the short term? How do you propose to restrain costs between now and 2030?

Katie White

You’re absolutely right. We’ve committed to bring bills down and the bills were lower in 2025 than they were in 2024, so we were heading in the right direction. But you’re absolutely right, I think everybody can see the international crisis we face and the challenges. We’ve done a couple of things. One is we have done targeted Warm Homes Discount for people who need energy support most. We did that over the winter and we increased the distribution of that so there were more people getting access to Warm Homes Discount.

We also took some of the costs of the renewables obligation we had on bills and we’ve taken those in house to the Treasury. Yes, the taxpayer is paying, but for families and businesses that is having a reduction in cost and that’s why the price cap was lower in April. It has gone up because of the Iran war, but it hasn’t gone up as much. We were working from a lower base. We’ve already made a couple of interventions.

I’ll also give you a story. I was out knocking on doors because that’s what we as politicians do out in the northwest the other day and came across a guy in a very modest house in a not hugely affluent area who was explaining how he’d been in energy debt and he was in a thousand pounds worth of energy debt. He’d got a couple of solar panels and within a year to 18 months he got that debt down to 170 pounds.

The more we can do, as you say, to meet that short term need, because I totally agree with you. In the long term we’re going to be in a better place and that’s what we should be doing as politicians and leaders, setting up the country for the long term. But we also need to meet that short term need and we’re acutely aware of that. We’re looking at all options now, particularly because of the Middle East crisis, of how we can accelerate any of that. Getting solar panels on roofs. We’re trying to get the, we said we’re going to introduce these plug-in solar that you get in Germany, that you can get in the middle aisle of our discount supermarkets.

We’ve just got to get the regulation through. We’re trying to do that as quickly as possible because it is a way that people can insulate themselves from bills. That’s the number one thing I’m concerned about, how do we support consumers and use this time that we have wisely. It’s pretty hot here at the moment. Energy demand is lower, demand in terms of heating etc. is lower. But we will head into a winter where prices look like they’re going to rise. How do we do everything now to be protecting consumers for that next winter?

David Roberts

A slightly nerdy question related to that, and this is something Ed Miliband has referenced frequently. One of the reasons that household bills are going up is that gas prices are going up. In the UK, the way the energy market is structured, gas is still the price maker. The price of energy is still pegged to gas. In a sense, you’re very stuck on this roller coaster with everybody else.

I’m curious, in terms of energy markets, how are you going to break that link? How are you going to stop allowing gas to establish the price of electricity in the UK? I know there are market reforms in the works. How do you want to break that link and when might it be broken?

Katie White

There’s two things to say here. You’re absolutely right. We’ve announced we’re looking at how to break that link and how structurally we can do that. There’s a review going on at the moment in terms of breaking that link. We’ll be able to tell you more in hopefully not too long a time because we’re operating within the framework where energy costs are causing a lot of challenges.

The other thing is the more we move everybody onto that electrification piece, every single solar farm, offshore wind turbine that we are pulling onto the grid as quickly as we can, and we might come on to Clean Power 2030, the mission that the Secretary of State brought in, allows us to be less exposed to those fossil fuel prices. We looked already, and again I give credit to the last government because their investment, the fact that we have got so much wind on our system, means that the prices are less than they were. We were protecting and insulating. We want to do more of that, which again is a bit baffling as to why people don’t support what A) they did and B) when it’s coming to fruition. But humans can be a little baffling at times, can’t they, David?

David Roberts

We don’t get any of that in the US. I’m not sure what you’re talking about, we’re approaching things rationally over here. The seventh carbon budget was just released yesterday. We’re talking on June 3rd. It was released on June 2nd. It’s about the period from 2038 to 2042. It would represent an 87% cut from 1990 levels. This is what the Climate Change Committee recommended. It is a statement of ambition, it is a statement that you are staying on course.

But the same Climate Change Committee also says that around 39% of the cuts needed to hit the 2030 target, which is much closer, are at risk because the grid connection queues are clogged, supply chains are backed up, and most of all you don’t have the transmission you need. There’s lots of on-the-ground local public opposition to building new transmission. It seems like if you want investors and others to put credibility in that long-term target, what are you going to do to make sure you hit the short-term target, the 2030 target, especially since you’re so far behind on transmission and transmission just takes a long time to build? How are you getting back on track for 2030?

Katie White

The Climate Change Act, which we brought in in 2008, is for those five-yearly budgets. We are currently in carbon budget four and we set yesterday for carbon budget seven. We can have that long-term trajectory for a couple of reasons. One, because it meets the climate change challenge, which is what we’re suffering today is what happened from our grandparents and their grandparents. What we’re laying down today is affecting our grandchildren. It meets that, we used to call it the “not in my term of office” challenge, which is “why would I care as a politician if it’s not going to affect my term of office?” You need to create an incentive structure to do that.

That was the point of the Climate Change Act. It was also stating legal ambition, but without a straitjacket. The 2030 target is actually beyond. We met carbon budget 1, 2, 3. We’re in carbon budget 4. The Clean Power 2030 mission is not a legally binding target. That is part of a way to accelerate our mission, which will help meet those budgets. It was something that came in with the Labour government and the Secretary of State wanted to have ambition and be really clear because he cares about the things we talk about: energy security, bills, and climate change at the same time.

It was a case of how do you manage each of those? We’ve done a few things. Day two of us being in office, he scrapped the onshore wind ban. That was gone. There was a backlog of things on his desk in terms of planning decisions, which he’s just gone through. Yay or nay, let’s move them on. He set up a control mission with a brilliant guy called Chris Stark, who has mission control of this and he looks up everything that is going on. As you say, we had this problem with the grid queue and with the connections where property speculators were putting projects online which were just speculation, which were actually zombie projects, never going to work.

You could see how that had happened. It was just a fault in the system. Government had to intervene because the citizens need to make sure we’re getting that queue sorted. We’ve reordered the whole queue, took everybody out, which you can imagine not everybody was thrilled about. But we need to get the system working. That is our job. We’ve reordered the queue. Things are moving a lot faster. We can take advantage of that. We’ve got a planning bill that has gone through the House of Commons and we’re looking at whether we should do anything on top of that in terms of national infrastructure projects.

I don’t think anybody, whether they’re a supporter or not a supporter, would say that the Energy Secretary didn’t hit the ground running with, excuse the pun, a huge amount of energy for this agenda. We have been going at it to make sure that we are moving forward and getting things done on this. The Committee on Climate Change brilliantly, rightly comes back and marks our homework and says on different areas which bits we’re doing. In terms of the grid, you’re right. It’s a big challenge. We’re looking at big investments and also how we can manage that more effectively, whether it’s through AI or whether if there’s more battery-based systems, will that take some of the peak load and some of the demand off.

We’re open to all that, looking at all our options and Chris Stark, who’s been doing the 2030, is now looking at that, how we make sure that is delivered most effectively. Supply chains have been a challenge across the world. We know that since pre-Covid and at each level we’re moving this whole transition and people are always going, “there’s not enough this and there’s not enough that.” I do more visits than any other minister because I love going out and hearing from real people what they’re doing and what’s happening and also what’s their story, where’s the gaps?

I go to heat pump manufacturers and they’re saying, “I’ve got more capacity if demand goes up here, these are my extra lines.” I go to apprenticeships and they’re absolutely stacked out because they’ve got people who are wanting those jobs, the future. There are challenges. It’s great for them to point that out. That’s inevitable when we’ve got such a big systems change. I feel we’re totally on it and I’m really grateful for anybody pointing out any gaps in our plan because we want to fill them.

David Roberts

Let me briefly hit an issue that’s very hot in the US right now. Tony Blair recently came out with a big op-ed and a couple of interviews saying that Labour should scrap the net zero goal, etc. I think he was roundly mocked for that.

One of the reasons he was saying that is he’s now very big into AI and he’s part of a group of companies and corporations and a lot of big investors who want to build a lot of data centers in the UK. Of course, those data centers are massively power intensive. To the extent they’re sucking up power, that’s less power for everyone else. The more of those you put online, the more difficult it is going to be to hit that 2030 target. A lot of people just read that as “we should prefer data centers and AI over our 2030 target.” I wonder if you see any conflict between data centers and your short-term goals.

Katie White

There’s been a lot of commentary going on in the UK and in broad terms, I welcome the opportunity to have a great conversation about energy, the target, and there’s two targets. There’s a 2030 clean power and then we’ve got a 2050 net zero. I’ve been in this for a long time. Up until 10 years ago, I’d never even heard of net zero. It wasn’t even a term we were talking about. Where the real excitement is, is where’s the electrification, where’s the grid, what’s the demand, how do we manage this? Therefore, what’s the job and the investment opportunities?

The clean power transition, call it what you want. I think we’re getting caught up on something that is almost in Act 7 of our story when we’ve got all of these other bits to go at. I’m happy to have the conversation, it’s not really where the action is and it doesn’t mean to say that we don’t need investment in our energy system, be it you are climate skeptical or not, you want energy. I think they’re missing the point of having that argument.

I listened and Tony Blair is a great thinker, he’s a great strategic thinker and I enjoyed reading the article. I listened to one of his podcasts and he said, “we do need to meet net zero. I’m just not sure about the level of transition.” Is it 2048 or 2052? I’m going to crack on with what I’m doing today and it’s not going to make that much difference to me in terms of the transition.

On your wider point around the data centers. We want to be in the game on AI, 100%. The UK wants to be in the game on AI. We see it as a big opportunity in terms of productivity and you’re right, it’s a big energy demand. We’re lucky enough to have great scientists here and in the department we have Patrick Valance, who you might not know, but certainly in Covid here was one of our national rock star heroes because he led the science. I sat down with him and asked him about it and said, “AI, are you excited? Are you worried in the context of climate and energy?”

He said, “there’s as many opportunities in terms of AI using and helping us with the grid in terms of reduction as there is in terms of demand.” I’m definitely an optimist, but I do think we want to go in and see how can we support this industry. We now have much more capacity and capacity challenges because we’ve got a lot of overcapacity in some areas of the country. Is there a way of working those two things together to have a holistic energy system which allows us to stay on track for that clean energy?

Climate change is real, is happening and there are implications happening in the UK and overseas. We want to play our full role in that. At the same time, we want our economy to grow. I do think there is a way of managing that effectively. That’s the thing about the carbon budget, why it’s so great, is choices. It’s the same with a fiscal budget.

A politician or any person could find any which way of things they want to spend money on. Of course they can. It’s about choices, isn’t it? You make those choices and if you’re going to go big on one thing, then you’ve got to squeeze back on the other. It just allows you to have a sensible, practical way to do that.

David Roberts

Let’s turn to another subject that a lot of people were pushing me to ask about. Labour’s plan has this sort of a national fund now which is going to invest a lot and put a lot of money and energy into nuclear power and hydrogen and carbon capture and sequestration. There are a lot of people in my world who view all of those as very expensive, very slow distractions.

There’s some recent experience in the UK that would give them some evidence. The Sizewell C nuclear reactor ended up costing double what you thought it would. The SMRs that you’re ordering are, best case scenario, coming in mid-2030s. The hydrogen for heating thing has kind of fallen apart. Those pilots kind of fell apart. I don’t think anybody’s still pursuing that. CCS, there’s not really any up and running. If you’re behind and if you need short-term fast reductions in cost and in emissions, why not reorient toward the things that move quickly, which is mostly electrification and batteries? Why are you still chasing these white whales, I guess is the non-flattering way to put it?

Katie White

Let’s take each one because they’re very different, aren’t they? They’re very different entities. I am genuinely excited about our nuclear program. We have a problem in this country in terms of building things on time and on budget. We have a problem with that.

David Roberts

I can’t relate. I don’t know what you’re talking about.

Katie White

That is something that our countries need to get a lot better at because there are places that can build things much more effectively and for various different reasons. We could do a whole other podcast on this. We’re not great at building things on time and on budget and making choices that are fiscally driven for the best return on our investment. That is a separate thing and we definitely need to be concerned about that and I am concerned about that.

However, I think our nuclear industry is something I am excited that we are investing in because we need baseload and it does capacity in a way that our renewables doesn’t do capacity and we want to have that diversification of our energy system, but it gives us that baseload. We have some technology and capability that nobody else has, which is why we’re working with the US. I’m very keen to take the competitive advantage angle here. I’m not ashamed to say I want Britain to do well out of this. I want us to look at where we can do best and invest in that capability and double down on it. That’s good for our country, for our economy.

Nuclear is an area where we do have capacity and capability that I think we should be investing in. The SMR project is one of those. You’re right, David, but it’s not that far in terms of we’re just talking about a budget 2042, 2038–2042. If that budget allows us that long-term framework. The only frustration in nuclear is that we haven’t cracked on with this sooner. The excitement around SMRs particularly and that baseload and having that is right.

Your wider point on should we be doing things quicker and on budget, 100%, and that should be trialed through the SMR. We’re excited to work with Rolls Royce as our chosen company for the first one, but we’re working with other countries across Europe on how we can work together on this in terms of supply chains and how we make that as effective as possible for everybody. I think the nuclear story is absolutely the right one and we need to make sure we do that safely, almost for economic reasons as well as for energy reasons and for our capability.

David Roberts

What about hydrogen? There’s a lot of people, and I’m sure you’ve heard from them, who think that the whole hydrogen thing is a dead end. There’s still lots of money in the budget for it. Do you still have hopes for hydrogen?

Katie White

We’re about to publish a hydrogen strategy, so I shouldn’t really talk. There is more to come on hydrogen from the UK and where we see the best role for hydrogen, in terms of making sure we are investing wisely. We’ve got a Treasury that is very keen to make sure, understandably, that every one of our pounds is invested wisely. I think there are some opportunities and particularly we’ve also invested in communities, as it will come on CCS, where could hydrogen fill the gap that other technologies couldn’t do? We will keep each of this and that’s why we also have the long-term plan, which allows us to see how each of these things are performing and how much we invest and where the support is needed, etc.

CCS again is, the Committee on Climate Change would say to us each scenario requires CCS, but also we do have a geological capacity because we’ve used a lot of our North Sea oil and gas. We have that geological capacity that if we can crack it and make it work at commercial scale, it does look like we are going to have to look for options like that in the longer term. We will always keep things under review, but at the moment we think those are the right choices.

David Roberts

Let’s talk about what is arguably one of the most difficult. This is very much in your brief and one of the most difficult nuts to crack in the whole decarbonization thing. I’ve done a million pods on people’s various frustrations and difficulties, which is the retrofitting existing homes. That just turns out to be quite a riddle for everyone, especially in the UK, because I think heat pumps at this point have like 1% penetration. It’s almost all gas boilers.

Right now it’s cheaper, just straight up cheaper to heat your home in the UK with gas than it is a heat pump. It’s like a 4 to 1 ratio. You have the difficulty of just the fact that all these residences and homes, it’s just a high touch, home by home. It’s very difficult. You have to deal with every homeowner, every homeowner has very strong feelings about their home, and then you have this cost imbalance. This is just a difficult thing. I’m curious how you’re thinking about that part of your brief?

Katie White

I was in Sweden a few months ago and the Swedes, a much colder country than Britain, and I think they’ve got 70% of their homes have got heat pumps. I said to the minister, “how on earth did you do it? How did you switch everyone?” This guy, very straightforward, direct, said, “it was in the 1973 oil crisis and my grandmother came home and said, ‘that’s it. We will never use another drop of oil on heating again.’” As if the whole country just switched. I love that level of rationality.

David Roberts

That level of rationality we can all envy.

Katie White

I know. I was like, flipping it, as you say. People are like, “hold on a second, it’s going to be a bit of a mess.” We definitely haven’t had that level of rationality to shift towards it. We are looking at a lot. We’ve done lots of things in terms of heat pumps and there is more to do.

As it stands at the moment, given we are in the Middle East crisis, there are a lot of people looking and you’ll see our EV sales have gone up, solar panel sales have gone up. People are starting to ask about batteries and in terms of heat pumps as well, slightly less sexy than an EV probably, but still people are starting to go, “hold on a second, how do I do this?” Once you’ve started on that, you can move forward. We’ve got a boiler upgrade scheme so we’re trying to incentivize people to do that.

A lot of this is around misinformation and then also hitting some kind of tipping point. In terms of the misinformation, there was lots of things going around. “Does it really work? Will I get a hot bath?” Every time I was like, “I assure you, you get a very hot bath.” It’s things like that that people care about. At the end of the day, it’s their home, as you say, it’s their personal space and they want to make sure that they’re going to feel comfortable. A lot of what we’re moving towards should be an upgraded experience.

That’s what consumers want on a day-to-day basis. We can’t deny as humans that is what we want. We want an upgraded experience. If you think your house is going to feel, yes, cheaper is great but if it’s going to feel better as well, that’s even better. It’s got to be that twin thing and then, a bit like solar panels and EVs, the more people have them and the more your neighbors have got them, the more you have this cascade effect.

We were reflecting as we’ve done carbon budget seven that when we introduced the act in 2008 we had 156 electric vehicles on UK roads, like 1, 5, 6. Now we’ve got over 2 million. We’ve got figures like that on offshore wind and on solar. The shift that happens over that time. We want to do everything we can to try and get it to be easier for people to do it, encouraging people to do it. Some of this is going to be a case of other actors within society and neighbors doing it.

I was talking to someone today from the industry and they’re in touch with their customers all the time. I said, “where are your blockages?” They said, “at the moment, unless every single room can be heated to a perfect temperature, then people are saying, ‘oh, my heat pump’s not for you.’” Whereas actually the status quo is there’s not that expectation for gas.

The other thing, and David, you might have more of this, I was talking to someone the other day, people saying in the States there’s been a lot of shift because people don’t want methane within their homes. There’s that shift as well, that people are moving for other reasons because they don’t want methane in their homes. We’ve done our future home standards, so we’re looking as well. I think that’s a big opportunity for us of how to make sure that new homes are built in the right place. Because we’ve, when we lowered our future homes on.

David Roberts

Labour did have in place a mandate that no new boilers could be installed even in existing homes and they dialed back on that mandate. Clearly there’s some political pressure around all this. There’s some adjustments being made.

Katie White

We’ve got to make sure we’re meeting people where we’re at. We’re trying to encourage everybody because it’s an upgraded experience and it’s good for the UK for all the reasons I’ve said: price, energy security, and climate. At the same time, Brits, probably the same way as Americans, do not want to be forced to do anything. We’re trying to take a carrot approach as opposed to a stick.

David Roberts

Another big part of your brief is what’s called local net zero, which is a lot of these decarbonization dynamics and things that need to happen play out at the local level, at the local council level and housing and transportation waste. But it requires money to do this kind of thing. Local councils are legendarily at the moment quite broke. If they’re going to be prioritizing things, they’re going to prioritize the basic necessities above these more long-term things.

One question is where does the money for these local councils to do local action come from? The second question is a bunch of these local councils have been taken over by Reform and Reform people are just like, “we don’t care about the mandates, we don’t care. We’re dismantling our targets, we’re rescinding these climate emergency declarations.” Trying to deliver big decarbonization through a local level that is one, broke, and two, in many areas occupied by your opponents. How does that work? How are you navigating these local struggles? What are you telling local people who are just telling you, “we don’t have the money to do this”?

Katie White

I don’t think it’s quite as bleak as that. You’re absolutely right that local authorities had a 90% reduction in places under the last government. A lot of them were hollowed out and services. My council, where I’m from, was running a deficit and it’s the first time ever they’ve not had to make cuts this year because we have done the biggest settlement they’ve had in 15 years. We’re starting to build that back up. We are starting to reinvest because we see the local councils are hugely important at the front line and actually the places where we can get a lot of this done are in responsible social housing, some of the poorest people within our communities.

We’ve already started to replenish that money. There’s no magic wand, it will take time and there is a lot of investment needs to happen: roads, houses, schools, hospitals, etc. We are also working a lot more with mayors and we’ll come on to the mayors of different colors. We’re working with mayors who are looking at that much more strategically. It’s really interesting because some of them have managed to go a lot further because they’re working on bigger areas, but still managed to have that accessibility. They’ve managed and they are managing and we’re looking at actually they’ve got bigger low carbon funds.

How can they work together to get economies of scale? Is it that they can be doing local heat networks, those elements that are happening across Northern England? We’ve got Great British Energy, which we’ve introduced and that is doing investments in schools and hospitals. The other thing it’s doing is people can apply for local community energy and you can come together as a cricket club or whatever and say, “we want to have a wind turbine and we’re all going to invest and we get the money back” That is open now. People are applying.

In terms of people owning their own energy, it is a real game changer. You then asked about, “if you’re going to climate skeptics, you might get this vibe.” I am a pretty positive person and I look for where we have things in common. I’m not really bothered about statements, things that people are signing up to, it’s sort of helpful, but it’s sort of virtue signaling in some way. It’s not going to change what actually happens on the ground.

What I’ve seen is, it’s interesting in Hull, in East Yorkshire, we’ve got a Reform mayor and they’re very much like, “I don’t want this climate emergency statement and I don’t want that net zero thing, but I do want all these wind turbines and jobs that are behind me because that’s massive investment.” By the way, I was at a factory this week, a wind turbine factory. I was at Siemens Gamesa and Orsted and they had, I think, 75% of their jobs within 45 minutes of the factory. They’re local people.It’s not just people coming in, it’s local people’s jobs. All of a sudden you’re not going to rip that out.

I actually think, and as I say, we go back to, most people agree on electrification, most people agree on that. We have to be clear about why this is the right choice. We’re not doing this because we want to make some statement. We’re doing this because it’s the right thing for our country. It’s the right thing for the world as well, but it’s the right thing for our country in terms of our consumer bills, in terms of energy security, and in terms of the planet in the longer term.

David Roberts

You talk about people owning their own energy, local energy. You have this public participation program called Energizing Britain. You’ve said we’re only going to succeed in this larger effort if we bring people along. We need people to be involved and engaged and people to play a role. This usually takes the form of what’s called distributed energy, rooftop solar panels, batteries, etc. This is a real bright light in Australia, for instance, they get a huge amount of their energy from that now and it is bringing, people are participating, it’s bringing people along.

As I was looking at your larger plans, it looks like most of the flexibility, the grid flexibility you’re looking into is coming from these big grid-scale batteries. I don’t see any household batteries or targets or anything like that. It seems like the distributed energy piece is a little bit of an add-on and not a center of focus. It kind of looks like you’re mostly leaving that up to Octopus, which is doing amazing things. I’m just, I wonder about that. Why is there not a greater focus on trying to get batteries and solar panels and microgrids, all these things that are bottom up, local first, in part as a solution for the previous problem?

Katie White

It’s great and there’s so much to that and you’re getting me excited, David, because there’s so many different bits to this and this is a bit where you’re like, this is such a great area, isn’t it? There’s so many different elements and so many different ways and also so many different actors involved in this transition. There is a role for everybody if they want it. The public participation plan was actually a recommendation of the Climate Change Committee who said, “if you want people to come with you, you need to work with them.”

When I came into this job I was like, “what are we doing? What are we actually doing? Just talking to people?” I don’t want to sit in a room and just talk. I like to talk but I want to get something done. People don’t really want to listen to politicians all the time. There might be some engaged, but sadly we’re not the most trusted voices. I think we come after estate agents in the UK.

It was a case of we ended up meeting all over the country, these incredible people who were doing amazing things. A lot of it is shining a light on those people. I’m really interested in actually practically what people can be doing and what is the best way of doing that and what is the way of making people feel involved but also their practical outcome of reducing their bills and then hopefully the same thing but might be different.

It’s almost like — what’s the gateway drug for people to get involved into this? I’ve had one side, people say to me that batteries are the gateway drug for people to get involved. I was like, I don’t know whether if you look at the different demographics it’s different sorts of, is this a dad thing, are they into the batteries?

Then I’ve also been told that it’s EVs is the way in to have that gateway drug. We are looking at all of that because in a way the complexity and the beauty of this system with all different areas is exciting to me but it can also be confusing and overwhelming for individuals. Where do I start here? It’s how to make sure it’s really clear that people can get involved either as an individual getting an EV and ultimately we’ve got a vehicle-to-grid infrastructure that will help in taking off some of those pieces or we’re doing this plug-in solar panel. That would be another thing people can do for themselves. They also might want to get involved in a community project as we just said, through this power plan which is backed up by Great British Energy. They will be able to do that.

We’re not opposed, we’re trying to go as a government with all this array of opportunity, where do we need to focus our time and do that? We’re trying to make sure we make those right choices. We’ve not got as much space as Australia, but we’re certainly not opposed to any of that. I’m really lucky to work with a great team and they are intellectually curious about how any of this can work and how in different areas and where there might be microgrids.

At the moment we do have a big challenge with our grid and that is not least because we’ve got a lot of offshore wind up in Scotland and we want to be able to use that in different places. We do need to think, and the context when it changes, like you say about AI, how do we use that most effectively, how do we make sure it’s getting to the place, how do we make sure we’re remunerating that and if there’s opportunities, like with a lot more EVs on the road that makes different opportunities, with AI, that makes different opportunities. Again, how do you bring people with you? Yes, great, if we’ve got some big players in the market who are doing fantastic things, but how are we bringing communities on and giving them space to thrive?

One of my first meetings here was with an MP in the Scottish Isles who was saying, “look, they’ve got a massive big wind farm project, but they’ve got a really tiny community wind farm that can’t get onto the grid. If you don’t let us have this little bit, they’re not going to support this.” Sometimes you’ve got to make sure that you’re listening because that tiny connection might not make a massive impact in terms of prices and the planet, but it might make in terms of how people feel and their pride and that’s important.

David Roberts

Just before we leave this, I’m curious, you said that there’s some public skepticism about heat pumps, in part fueled by some misinformation. The UK is not the sunniest place in Europe. I’m curious what people think about rooftop solar and if that is catching on and whether it works, whether it’s a good investment in the UK and what the public thinks about that. As you say, these things tend to be viral, they tend to be peer to peer. You tend to see your neighbor doing it and then you do it. There have been studies about this, particularly about rooftop solar, about it being viral in that way. I’m curious if that’s happening with rooftop solar in particular. What is the public mood around rooftop solar, I would say?

Katie White

David, the public mood around rooftop solar is really positive, really positive and it is catching on. Absolutely, you get it at all times. Of course when it’s super sunny, but you can pretty much, it’s only a percentage off when it’s cloudy, you’re still getting a lot of the energy. I was at a school the other week, we were on their rooftop and all of the kids were up and it was in Oldham on the west coast, which is a pretty rainy place.

The weather kept changing and they were looking at, monitoring the impact of that inside, which was a great educational thing as well. They’d taken primarily a lot off their bills, which was great. There’s definitely a lot of support. We’ve moved as well with Great British Energy. We’re doing investments in hospital car parks. I’ve got one in my hospital car park in my constituency. It’s great because everyone’s like, it’s just a no-brainer. A roof, everybody’s happy if there’s a roof on their car park and then you just plaster it with solar panels.At factories that we’ve got, plaster them with solar panels.