The top stories of 2024 so far: AI, grid constraints, geothermal, and more

Some news: this will be our final installment of The Carbon Copy. But don’t go anywhere! 

Later this fall, the feed will be transformed into a new show that will profile the people architecting the clean energy economy. We promise it will be a valuable part of your media diet.

For our last episode, we brought back some old friends: Jigar Shah, director of the DOE’s loan programs office, and Katherine Hamilton, chair of 38 North. 

Jigar, Katherine, and Stephen dissect some of the biggest storylines of the year in clean energy business and policy. They’ll tackle AI energy demand, grid constraints, geothermal, nuclear, the demise of California's rooftop solar industry, and America’s green bank.

Which trends are overrated, which ones are underrated, and what does it all mean for mass deployment? 

The Greenhouse Gas Reduction Fund will provide $27 billion for clean energy projects nationwide, potentially mobilizing up to $150 billion in public and private capital. Join Latitude Media and Banyan Infrastructure on July 18th for an in-depth discussion on how we can deploy these billions with the highest impact. Register for free here.

Make sure to listen to our new podcast, Political Climate — an insider’s view on the most pressing policy questions in energy and climate. Tune in every other Friday for the latest takes from hosts Julia Pyper, Emily Domenech, and Brandon Hurlbut. Available on Apple, Spotify, or wherever you get your podcasts.

Transcript

Stephen Lacey: Well, no sense in burying the lead. I've got some big personal news. This is going to be the final episode of The Carbon Copy. I'm stepping away from the mic for a while. I have been making podcasts on the energy transition for 18 years, kind of hard to believe. A lot of you out there have followed me since the beginning, back in 2006. I have been so lucky to interview thousands and thousands of people who have built the clean energy industry from the ground up and I have been so incredibly lucky to have an audience of professionals who care so deeply about the topics we cover because they're actually out there doing the work and it's so great to have a show that connects to what people are doing on the ground. But as we build up Latitude Media, it's time for me to step aside for a bit and focus on growing other areas of the company.

But don't unsubscribe, this feed is not going dark. We're working on a brand new concept with a new name and a new host that we're launching in the fall right here. For those of you working in the clean energy industry, and again, I know that's most of you, I promise this new show we're developing will be a really valuable piece of your media diet.

So over the coming weeks on the feed, over the summer, you're going to hear a five part series of The Big Switch on the Global Battery Economy. That's a show that we developed with Dr. Melissa Lott of Columbia University, and we're going to play all of those episodes for you. And then in the fall you'll hear a brand new program right here, so stick with us. And remember, we've got lots of other good podcasts you can still follow in our network, Catalyst with Shayle Kann, Political Climate, With Great Power, The Big switch, Columbia Energy Exchange, and Where The Internet Lives. So to mark our final episode of The Carbon Copy, we brought back two people that many of you know well. My co-hosts of The Energy Gang from 2013 to 2020.

Jigar, the last time we spoke to you, you were merely the director of The Loan Programs Office and a member of the TIME100 Climate list. But today, you're coming to us as one of Time100's most influential people of 2024.

Jigar Shah: I know who Dua Lipa is now.

Stephen Lacey: A lot of people buy those Time magazine photo shops and stick their picture in it to get that pretend prestige, but you're one of the rare people who don't need to do that now.

Jigar Shah: The fact that this even makes the TIME100 that anyone cares enough for it to be this mainstream, I think is a huge amount of effort from a lot of people.

Stephen Lacey: Not to be outdone, Katherine Hamilton comes to us as one of Washingtonian Magazine's 500 Most Influential People of DC for a third year in a row. Did they give you a jacket for that, Katherine?

Katherine Hamilton: I do get a fake cover of the Washingtonian though.

Stephen Lacey: Do you now have members of Congress who are carrying around copies of Washingtonian magazine around the halls being like, "I thought that was you."

Katherine Hamilton: They knew us more from the podcast than anything else.

Stephen Lacey: I moved out to the Berkshires and suddenly I stopped making it onto any lists.

Jigar Shah: You're on my list, Stephen.

Katherine Hamilton: Totally.

Stephen Lacey: This is The Carbon Copy, I'm Stephen Lacey. In our final episode, America's clean energy finance czar Jigar Shah and DC policy maven Katherine Hamilton join me. We'll dissect some of the biggest storylines of the year so far in clean energy business and policy. We'll tackle AI energy demand, grid constraints, geothermal, nuclear, America's green bank and the demise of California's solar rooftop industry. Which trends are overrated? Which ones are underrated? And what does it all mean for mass deployment? That's coming right up.

Well, it's been I think over a year since we were all together and there are so many new storylines to comment on. So I wanted to run through a bunch of them together and judge whether overrated or underrated. Before we do that, I want to talk about a story that is of course on everyone's minds and that is the election. We're a few months away from the presidential election. It's a super tight race that will determine vastly different outcomes for climate energy policy. And Katherine, I'm wondering how is the election starting to influence the way people are talking about these issues in DC right now?

Katherine Hamilton: Well, I mean I deal with companies and organizations that are outside of DC and basically they call breathing into a paper bag and saying, "What on earth is going to happen?"

Stephen Lacey: And I mean, is the breathing getting more labored now in the paper bag?

Katherine Hamilton: Yes. Yeah, I'm always positive. I'm always like, "Oh, everything's going to be okay." And sometimes you really have to talk people down, for sure.

Stephen Lacey: As you know, this is overwhelmingly an industry audience. What would you say to the industry during this uncertain political time, Jigar?

Jigar Shah: I think it's important to realize where we are. The venture capital community, it was hovering around 10 billion, 15 billion a year worth of investment into our sector. In 2020, 2021, 2022, they got up to roughly 60 billion of investment into our sector. We SPACed a bunch of companies. The IRA bill had now passed. So America was always the place that you wanted to start your company, but many of your markets were overseas because we had a patchwork quilt of implementation. Today that is not true. I mean, we're investing in every single county and every single state in this country. But what matters the most right now is fully realizing the promises that your company has made. Whether you announced a factory, you got to start building it and hiring people into it. If you announced a project that you're deploying, you got to complete the project and get it operational.

I don't think that energy abundance is a political issue. I think everybody wants America to be an energy superpower. We obviously generate a lot of oil and gas. We obviously generate a lot of nuclear power. We are obviously growing in a big way, in long-duration energy storage, in geothermal and lots of other things. But I think part of this is, is that the government has now provided all these tools, these tools are going to be here for some time. It's important for this sector to stop acting like it's alternative. When you're 80% of everything being deployed every year, sometimes 90%, politics is part of this, so are regulations, so are lots of other things. People have to make sure that they understand what it means to be a dominant industry in this country and they have to act like it. And for years they were not, they outsourced all of their work to the environmental organizations. They phoned it in when things have to happen.

All of these programs are going to come under attack all the time, we've got to step up and defend them. That means you have to fund people to defend them. You have to actually allow your name to be used. People are so afraid of having anyone hate them that they're like, "Oh, I don't want to mention that we're an applicant to loan programs office. I don't want to mention that we're applying for this grant," or whatever else. That's not going to work going forward. In this new time, Republicans and Democrats want the economic development that come from all of these projects, but folks have to actually recognize how important they are to the fabric of our economy and they have to start bragging about it.

Katherine Hamilton: Yeah, I totally agree with that. I would just say that my entire career built up to what we've finally ended up with the Inflation Reduction Act and then the last two years has been a flurry of implementing that and actually getting the rules right. And thank goodness for Department of Energy and Department of Treasury and all the folks out there who are working hard to translate statute into something that companies could find comfort and certainty to invest in. And it takes a little time. So it's taken a little time to make sure that the rules are out to get the investors to the table, but directionally we are there and we have to be able to talk about that and have to be able to talk about where we want to be. And I think we can do it, we're all going in the right direction, we just have to keep on.

Stephen Lacey: All right, so I want to walk through many of the consequential storylines that are playing out that have been played out this year so far, and I'm going to set up the story then you're going to tell me whether you think the trend is overrated or underrated and then explain why.

So the first story that we're going to talk about is load growth, more specifically AI load growth. And over the last year, the narrative around scaling AI has shifted from chip availability to energy availability. Top hyperscalers are planning to double data center capacity, Bloomberg just released this analysis showing that energy demand from new data centers is outstripping the renewable power supply in many countries. Goldman Sachs projects data centers could account for 8% of power demand in the US by the end of the decade. Reactions to this trend are mixed though some like data center expert John Cooney think the highest projections are overblown. Former Tesla VP, Drew Baglino just said on The Catalyst podcast recently that, "It wouldn't be as dramatic as people think because of improvements in chip efficiency, co-located renewable strategies," etc. So what do you all think? Is this trend overhyped, underhyped, Jigar?

Jigar Shah: No, the trend is definitely underhyped. I mean, I think you can at the same time say that the highest projections are wrong, which I agree. I don't think we're going to add 7% load growth every year. I think it's probably more like 2.5%. But, it's still something that we don't have the tools to deal with right now. When you think about the normal course of business for most utilities is to build more natural gas plants, build more transmission and build more distribution, today that formula results in 10% rate increases every year. That is not workable. The electric utilities have to keep shareholders happy, ratepayers happy and Governor's happy and that last piece means not giving people four-year interconnection timelines for manufacturing facilities that create family-sustaining jobs.

If you were to ask all the utility companies, what is your formula by which you're going to do this, which clean firm power generation sources are you going to install? Which tariffs are you going to use, like the Clean Transition Tariff that Google just signed with Fervo Energy and NV Energy, is that something you're going to replicate? Are you reconduct for your lines? Are you going to put in grid enhancing technologies? Are you going to do virtual power plants? They have the list, that's not the point. But they don't have an agreement between themselves, their regulator, their shareholders, their governors on exactly what they're going to do now to meet the requirements. And as a result, there are very long timelines being offered to folks for interconnection, and so that's a problem.

Katherine Hamilton: I'm going to take the opposite view. I think it's overhyped. I think it's overrated because I do think we have solutions. Now, I also would point to some of what Jigar said as I don't think he's wrong about we don't necessarily have a plan, but I would point people to a really good webinar that Latitude Media did back in May that you can listen back to, and it's a really good discussion about this. So it was somebody who worked from Microsoft, it was somebody from Energy Innovation and it was somebody from a company that provides solutions for AI companies to how to manage their demand. And energy innovation offers a few things.

They say you want to build renewables and storage where you can. Those are quick, we can get that done quickly. Generate closer to demand. So there are places where plants are being sited, AI plants are being sited closer to generating facilities like nuclear facilities, and we'll talk about that in a little bit. Work with customers to flex demand, so there's batching that you can do. There are all kinds of things that AI centers can do to manage their demand. Improve your existing infrastructure, so make sure that you use and get as many electrons out of what you already have that you can. And part of that could be through grid enhancing technologies, which I think we're also going to talk about. And then finally, really, this is what Jigar is getting to, is make sure that there's really strong regional and interregional coordination and resource adequacy. And that's where we lack is all this coordination to make sure that we know where all the resources are and that we can get them when we need them.

But I don't think it's impossible to do, I think we have solutions right now. We have solutions that are quick, we just have to have the willpower to do it. And we also need some other regulatory tools, potentially things like the Clean Transition Tariff that Google has started thinking about, which is you get the utility to buy clean generation at a certain price and then sell it to the customer for a price that becomes this tariff for carbon free and firm power. So I think there are a lot of tools out there, we have to figure out what all of them are, but I think it's a little overhyped.

Stephen Lacey: Think I might know the guy who hosted that webinar too.

Katherine Hamilton: You were.

Stephen Lacey: Brian Janous said something, again, the former VP of Microsoft said something on that event that really struck me and he said, "Sure, the chips might be getting wildly more efficient, but if these companies can get their hands on these chips, they are going to deploy them." And you look at the planned build out of all these hyperscalers and they're going to double their capacity over the next year. And I generally agree with you, Katherine, that the solutions are at hand, but I was pretty skeptical of some of the projections around the doubling of data center demand because if you actually look at historical data center demand, while internet traffic between 2010 and 2018 increased 550%, data center energy demand barely budged and that's because of the way these data centers are designed, the procurement of renewables has been helpful in decarbonizing some of these facilities. So I was pretty skeptical about some of the more aggressive scenarios.

But if you actually look at planned build outs now, I'm starting to realize that it's becoming a worst case scenario. And while these companies are going to try hard to procure renewables, there is a disconnect between how quickly they need to make land decisions to site these facilities and serve new demand and how quickly they can bring renewables online due to long interconnection weights where those renewables can be placed relative to the facility. There's this massive disconnect in timing. And so I think it's going to be a greater problem than I thought maybe a year ago.

Jigar Shah: But I also think that the principles are not clear. For a lot of these hyperscale data center companies, they're sort of like, "Do I stick to my clean energy commitments? Don't I just hook up to natural gas?" Or if they do hook up to renewable energy, they're like, "How about I just get away with four hours worth of battery storage, so not really 24/7 and I am taxing the rest of the grid, but whatever." Right?

No, you got to put in long duration energy storage and yeah, it's going to cost you more, but you're the one who signed up for 24/7 clean firm power targets on your website and they still haven't taken it down. So they're getting all of the free PR for putting it on their website, but now they have to actually pay for 24/7 clean firm power on the other side. And they can't shift the cost to poor people and have everyone's rates go up by 6% because of their load growth. So I do think that the principles behind this are not agreed upon yet, which is why I think the cultural shift, which Katherine is suggesting we need to make to be able to get all of these solutions that we know we have implemented is not a foregone conclusion.

Katherine Hamilton: Yes. And I am even working with companies that are trying to cite manufacturing plants, not AI plants, but other kinds of manufacturing and have a hundred percent clean energy mandates and just trying to figure out where they can cite where those resources are. I mean, it's pretty challenging, but a lot of these companies are pretty determined to do that and will be creative in the way they do it. And they have a lot of leverage over the utilities too. They can do bilateral agreements with utilities, whereas regular old Joe Schmoe customers can't. So they do have some power in that, and if they stick to their guns and make sure that they really follow through on all of their clean firm energy and carbon-free energy mandates, then hopefully we'll be able to avoid building more natural gas plants because that can't happen quickly and instead use much more resources that are at our fingertips cheaper and quicker.

Stephen Lacey: Let's go into one of the technology sets designed to potentially deal with this problem opening up more grid capacity for things like data centers and manufacturing facilities, and that is grid-enhancing technologies. There's been this surge of interest in grid-enhancing tech to expand grid capacity, like dynamic line rating, power flow controllers, also with the retrofitting of existing lines with advanced conductors and taken together that could potentially double the size of the grid. And of course a DOE liftoff report concluded that we could support a hundred gigawatts of incremental peak demand through these technologies. According to Energy Innovation, this could also quadruple the current pace of nationwide transmission build out through reconducting, it could cut the cost of a 90% clean grid by $85 billion by 2035. And Brian Deese calls it, "A triple win for doubling the size of the grid." So there is a lot of excitement about these technologies, certainly a lot of barriers to how they're getting deployed within specific utilities. So is this set of technologies underrated or overrated? Katherine, you go first on this one.

Katherine Hamilton: Yeah, I work with a grid enhancing technology company, LineVision, and I think they're underrated. You did list all of these benefits, but I do think that there are these kind of elegant, less expensive options where you can get a lot more bang for your buck with existing transmission and even with new transmission. And the studies show just incredible results. So first of all, you get, just through dynamic line ratings, like 15 to 20% more transmission capacity if you put dynamic line ratings in, so that's huge right there. Then the Brattle group did a report a couple of years ago just for Kansas and Oklahoma and found that you could enable twice as much renewable energy resource on the grid, avoid 90 million metric tons of CO2, save $5 billion a year with a six-month payback, I mean nothing is that cheap, and create thousands, tens of thousands of jobs permanently operating these systems.

And that's just with two states. So in 2024, RMI did a report about PJM, because PJM, as Jigar mentioned, has a terrible interconnection queue and they found that you could relieve 6.6 gigawatts by getting solar, wind and storage on the grid by 2027 and relieve the queues. It's cheaper. It would be a billion dollars annual savings on production costs. I mean, right off the bat. This is super low hanging fruit and the only issue that we have, because everybody agrees this is a cheaper, quicker, really elegant solution, but the issue is utilities don't build it and TSOs build it into their best practices. It should just be the way you deal with transmission, the way you install transmission, the way you maintain transmission, it should just always be there. And FERC is starting to get the hint on that. We can talk about that a little bit, but I feel like it's still slightly underrated.

Stephen Lacey: Jigar?

Jigar Shah: I mean, I can't disagree with Katherine on a grid related topic. No, of course, I mean absolutely it's underrated. And I am very proud of the Liftoff Report that we put out. And look, I think that my argument I would say is similar to the last topic, which is that this is a technology that has been fully deployed in the UK, it has been largely deployed in other countries as well.

And in the Grid Liftoff report, we talk about how some of these technologies can be deployed in the next one to three years and they've gotten a lot of pushback from industry on that because they're saying, "It'll take us 7 to 10 years just to figure out what we want to do." And it is, as you're suggesting, Stephen, in the last topic, is that we have solutions, but we have to actually figure out how culturally to deploy them at scale. And that's not just the utilities, it's also the regulators and others who aren't necessarily sure that they believe that you're going to be able to maintain the resiliency and reliability on a hot day when dynamic line ratings probably provides you maybe a little bit of less benefit than you do on a normal day. And so there's some of these things that we have to work out. We work closely with EPRI to try to, the Electric Power Resource Institute, to try to get a lot of these questions answered. But I do think it's critical to figuring out how we get the culture piece right.

I will say that we have a lot of 1706 loan applications, about 90 billion or so, that have come in and mostly from the electric utility industry. And every month that goes by, they're adding more grid enhancing technologies and more reconducting with advanced conductors to their applications. And so I do think that the message is sinking in and folks are doing this.

The last thing I'd say though is I want to make sure people keep these things in proportion with each other. When we say that there's a hundred gigawatts of additional peak capacity that could come from all the different measures being deployed, if you pair that with virtual power plants, well then you never have to go above that peak demand. I mean, part of this is actually recognizing that what leads to rate increases is an increase in peak demand, and every other country focuses on figuring out a reduced peak demand, but for whatever reason, we haven't really done that yet. And so now going after peak demand means that we can actually live within the system we've already paid for.

Stephen Lacey: And just to be contrarian here, I guess I'll say overrated only because I think that culture shift and the misaligned incentives around what utilities want to build are a big problem for these technologies. But the economic and grid expansion benefits are clear. They're proven technologies in other countries, but that culture shift is something that is definitely a barrier for the near term adoption.

Katherine Hamilton: Yeah, I would just note that FERC has done a couple of pretty proactive things. One is in Order 1920, which is their transmission planning order. They did require that GETs be considered when doing transmission planning, and then they also just released an advanced notice of proposed rulemaking just for GETs themselves. So that's all really good signals, and that will signal to utilities and other transmission operators that this is something that they have to put into the mix as part of the consideration.

Jigar Shah: I also think that most of the utilities are hitting a soft rate cap where their regulators are saying, "You just can't keep raising rates like this." And so that is causing them to look at these more cost-effective solutions in ways that they may not have been enthusiastic to do so in the past.

Stephen Lacey: Well, let's move over to the other set of solutions on the clean firm power side. Let's talk about geothermal first. So after a couple of decades of struggles, geothermal is suddenly getting a ton of serious attention. Fervo Energy just signed the biggest PPA ever for geothermal with Southern California Edison at 320 megawatts. A few weeks before that, Fervo and NV Energy signed a 115 megawatt deal with Google. Quaise Energy, which is developing a deep geothermal drilling technique, raised 21 million in March, and Zanskar an AI geothermal exploration company raised $30 million in May. And speaking on this show actually a couple of weeks ago, Andrew Beebe of Obvious Ventures called Geothermal, "Our best shot at Bridging Rising Demand with clean supply." So is this recent activity a sign that geothermal is ready to step up, overrated or underrated as a solution, Jigar?

Jigar Shah: I mean, not only is it underrated, it is not on anybody's rating system. I mean, I think that when you think about the work that we did back in 2004, 2005 on renewable portfolio standards and all this stuff, I mean George W. Bush back in 1998 mandated 500 megawatts of wind power. I think the potential that the DOE described in this liftoff report on geothermal was that we have to build two to five gigawatts of new geothermal by 2030 in the six states where it's most cost-effective or else we have no shot at really getting those costs down. That is what it takes to get the learning curve started, and in the same way that PG&E and others signed their 17 cent per kilowatt-hour power purchase agreements back in 2007 for solar power.

And so we need the hyperscale data center companies, the AI folks, et cetera, to sign up to these clean transition tariffs. We need them to step up and actually recognize that if they want to get interconnected faster, then they have to actually agree to meet a public policy goal. So I do think that we're in this very important phase where people like geothermal, but I do not yet see a clear path to two to five gigawatts of new geothermal at a cost of roughly $25 billion that has to be deployed by 2030 if we're going to get the cost down.

Stephen Lacey: You've mentioned this Clean Transition Tariff a couple of times. Can you explain to listeners what that is?

Jigar Shah: Yeah, and Katherine can correct any mistakes I make here, but it's pretty straightforward, basically NV energy is a regulated utility, is one of the states that has a great geothermal resource and so Fervo is going to unlock that power. The easiest way for Google to get access to that power is through NV Energy. Now, NV Energy might not normally pay over a hundred dollars a megawatt hour for power from a clean firm power generation source, and so if they're going to agree to that, it's easier for them to do that if they know they can just turn around and sell it to Google for roughly the same price they paid for it.

And then the other piece of this, remember, is that it's not just the geothermal, Google wants 24/7 matched power. So NV Energy has to do some additional gymnastics on their side to do that because most geothermal units in the country right now only have 60% uptime. These new geothermal plants might be able to have higher uptimes, but NV Energy has to help Google with other power sources as well under that tariff to get to 24/7.

Stephen Lacey: Katherine, what do you think? Geothermal, underrated or overrated?

Katherine Hamilton: So underrated. I totally agree with Jigar. And that liftoff report that DOE did was great, it was really, really top-notch. And I agree we have a lot of work to do, but there are so many solutions. You mentioned a few companies, Eavor is a company that I work with, they're a closed loop technology. So the cool thing about these kind of next generation technologies is you don't have to find reservoir, you don't have to find a hydrothermal resource, all you need is heat. So you dig down, you find heat, and guess what? If you dig far enough anywhere in the entire world, there is heat. So Eavor's first commercial project is in Geretstried, Germany. They're going to produce thermal and electrical energy. They have a lot of district heating in Europe, so this is a really good solution for them, and that is not what you would consider a super thermodynamic resource in Germany as opposed to the American West where it's really, really good. And yet that's where they're starting.

And I think that's going to happen throughout the US as well, in addition to the American West where the resources are really, really good. But you need some things. You need a categorical exclusion on public lands the same way that oil and gas and other renewables have. You have to have people really processing those permits. So if somebody from BLM has a stack of permits, they have a fishing license and the snowmobile permit and a geothermal plant all in the same pile, we need to get people up to speed on being able to process those. We need to be able to build Department of Defense withdrawn lands we to make sure that we continue to fund demo projects, not just R&D, but actually get these projects to be commercial and scale. And I think you've seen that with some of these projects announcements with Fervo.

But I think it's very underrated and I think it's all, it's all going to be an opportunity for geothermal. The other thing geothermal can do is it almost acts, especially the closed loop systems, as storage, so you can do load following with these resources. So they're really good to use for grid management in addition to providing clean firm power. So I'm a big stan of geothermal and think it's been the stepchild for too long.

Jigar Shah: We are on track though, to be clear on the categoric exemption side for BLM, so that was announced in April, and all unused oil and gas permits on public lands can automatically be converted into geothermal.

Katherine Hamilton: Yeah. To me, that's a personnel issue. We just have to get enough staff to process them because I think the rules are going to be in place.

Stephen Lacey: Man, Jigar, your team has put together a comprehensive liftoff report for every topic here. When am I going to get a leather-bound version of all those liftoff reports together signed by you?

Jigar Shah: It'll be like Time Life books, every month we'll send you a leather-bound book for 24.95.

Katherine Hamilton: Does it come with a plate or a spoon you could put in a little cabinet.

Jigar Shah: We'll get you a coin, one of those silver and gold coins you could get for a low low price of $595.

Stephen Lacey: Let's go over to the other clean firm resource that everyone's talking about, which is nuclear. The big news on nuclear power came out of Washington recently when lawmakers passed a major piece of bipartisan legislation promoting advanced reactors as part of The Advanced Act. It's designed to streamline permitting and cut regulatory costs for new reactor designs, which have often languished in regulatory purgatory, even with nuclear's long struggles with costs and engineering talent and regulation, many believe this policy win plus load growth is creating real tailwinds for the industry. Constellation CEO says, "Nukes and data centers are like peanut butter and jelly." Nuclear, I suspect there are some very strong opinions out there among our listenership about this one, overrated or underrated? Katherine, over to you first.

Katherine Hamilton: I had a feeling you were going to call on me because I know what Jigar is going to say. I've always thought nuclear is overrated. That's just my going in position. I've never worked on it, never been... I certainly am interested in developments in nuclear, but it's not something I work on or advocate for at all. It is 19% of the US's electrical resource out there, so it's producing power, doing a good job. There are a lot of plants out there operating a long time. I know there are a lot of technologies coming along. The The ADVANCE Act does simplify some of the NRC rules now, some of the environmental groups are saying this is not great for the environment and for the waste issue and could skirt some of the safety concerns. But given that and the $900 million that DOE is going to devote to SMRs, maybe it'll go somewhere. I still just think it takes too long and it's too expensive. But I'm sure Jigar has a very different view on it.

Jigar Shah: It's a very funny thing for me as the solar entrepreneur to be viewed as the head of nuclear power at the US government. I think maybe just starting with first principles. Look, I think it is underrated, and I do think that when you think about what we all want to accomplish, which is the decarbonization of the electricity grid, but more than that, the electrification of the energy usage that we already do, whether it's in electric vehicles or whether it's in industrial heat or other places, we are going to need a lot more electricity. So I think when you think about how much solar and wind we're going to be deploying, it is as much as we possibly can do. And you see that for sure in China. You see that in Europe, you see that in the United States, although I think we could be doing more in the United States, and you're still short a lot.

And so I just think that there is this feeling that people have falsely because they've got some weird spreadsheet that solar can meet a hundred percent of our needs in the United States and it just can't. And I love solar, but it just can't. And so then the question becomes, where do we get it? And I love geothermal, but it's only cost-effective in six states right now, and not dissimilar to solar by the way. I mean all the very low costs that we get are really from the Texas panhandle. You're not getting that level of cost per megawatt hour in New York.

And so one of the challenges that I have is when you think about what this grid looks like in the future, it's got to be a lot more diverse, and so that's why I think nuclear has to at the very least maintain its 19 to 20% market share for the foreseeable future as we double electricity generation in this country and probably needs to go up a little bit because we're going to be taking offline over 200 gigawatts of coal over the next 15 years, just mainly because it's at the end of life. So there's that piece of it.

The other piece of it though is we've already done the hard work. So the American nuclear industry basically didn't exist when we started the Vogtle nuclear plant. We had to complete the design. This is the first reactor ever to get a construction permit and be completed under the NRC. Every other reactor started under the Atomic Energy Commission. And so the first time the NRC has ever started and finished a reactor is the Vogtle nuclear plan. We had to complete the design. We had to figure out how to actually build the entire workforce. We had to put in place the entire supply chain, had a high-profile bankruptcy in the middle of that supply chain. And now with all of the additional incentives, you can build a new nuclear reactor as long as get some of the bonus credits like Energy, Communities, etc., at a hundred dollars a megawatt hour.

Guess what else is a hundred dollars a megawatt hour? Geothermal. Guess what else is a hundred dollars a megawatt hour? Solar, plus wind, plus long-duration energy storage. And so it's all the same cost. And so for those folks who are like, "But solar is at $35 a megawatt hour," fine when you have no battery storage and you stick it in the ideal location. But if we're looking at hyperscale data center companies and they need 25,000 megawatts of new load here, all of the solutions that are 24/7 clean firm are starting off at roughly the same cost and now we have to see how we get all of them down the cost curve.

Stephen Lacey: What do you think of the The ADVANCE Act? This is a question for either one of you. How big of a deal is it? Certainly a big deal that we had this piece of bipartisan energy legislation pass, but is it transformative?

Jigar Shah: It is. Remember that when the NRC was established, Three Mile Island occurred right after. And so the NRC's main mandate has been only safety and not the promotion of nuclear power. And with the The ADVANCE Act, they now have a dual mandate of both safety and promoting nuclear power. That is a huge shift in culture, which I'm sure will take time to fully implement. But separately, I would say that having done this nuclear stuff for the better part of three years, I don't know of a single project that was hurt in any material way by the NRC. So I do see the NRC being a bottleneck where we're building 10 reactors a year, but we're not building 10 reactors a year right now and so the NRC is not currently the long pole in the tent, even though everybody wants to blame them. The current challenge is just that America has to learn how to do big things.

Stephen Lacey: Let's go to distributed solar now, over to California where the solar industry has imploded. After net metering reforms, solar installations fell quarter by quarter by 80%. We'll probably see a 40% decline in residential installations in 2024 according to Wood Mackenzie. But battery attachments have risen by 50% according to Lawrence Berkeley National Lab. Jigar has for a decade and a half been talking about reforming solar incentives. I mean, this is something you've extensively about as we've discussed this over the years, and you told Shayle Kann over at the Catalyst podcast in a recent episode that the game of putting dumb solar on people's roofs is over. So if we think about the decline of California's solar industry, the worries about the decline, are those worries overrated or underrated? Kind of a funny way to put it.

Jigar Shah: I'm not exactly sure of the question. This is like a ballot initiative. You're like, "Am I voting a against it or for it? I don't understand this ballot initiative."

Stephen Lacey: Are the concerns overrated or underrated?

Jigar Shah: Look, I think that people's lived experience is real. I mean, we have thousands of people laid off that are not working right now in the state of California, and it's devastating. And the thing that bothers me the most is that this keeps happening. This happened in 2015 in Hawaii when we basically converted all of the net metering... We ended net metering on a certain timeline. I think it certainly happened in California. It's happened in other states around the country as well. It almost happened in Puerto Rico, but then they extended the net metering and so we'll see where that goes.

I think that one of the big challenges is that the solar industry is so successful and it does such a good job of advocating for itself. And so when this transition occurs, then it slow plays the transition. It waits forever. We all know that 1% penetration of solar is meaningless and is fine and pays for itself, and there's no cost shift. We know when it gets to 5%, then the cost shift starts to appear and we have to convert. But that's when we have a lot of power in the solar industry. And so they're like, "No, please leave it exactly the same for longer." And then you get this full pulling the rug out from underneath hardworking people who are just trying to make a living meeting consumer demand for things.

And so I do think that the grand poobahs around the table from the utilities to the Public Service Commission, to the California Solar and Storage Association, all these folks have let down these folks. We should have had a more careful transition to a place where the rooftop solar is actually in line with the decarbonization strategy of the state of California, which generating power in the middle of the day when we're already curtailing utility scale power is not the best use of net metering subsidies. So figuring out how to get everyone to shift their load and all of those things had to be a part of this. And we had been talking about this on the Energy Gang podcast and now this podcast for the better part of since 2013. So this was not new to anybody, but Lord Almighty, did they take their sweet time to get to where now we need them to go.

Katherine Hamilton: Yeah, so we have a huge problem in California, and this is the part that's underrated, and I think the rooftop issue is somewhat different than this, although it all falls under Title 24 where the California Public Utility Commission said, "New homes have to have solar plus storage or they can access community solar and storage." And what has effectively happened over the last month is that the community storage sector has been decimated in California. And it was as a result of a decision that was made by the PUC that basically said that the construct that they were going to use for community solar would not be third party based. So third parties would normally come in, have people subscribe and compete to enable the least cost community solar.

For all of those customers that don't have rooftops, that don't own their homes, that don't have roofs that are work for solar, having community solar is a huge option. Having community solar for CNI is a big option too. So having those plants out there developed by third parties is really, really important. There's a big program in New York, a big program in Illinois. There are about 20 states in DC that have these really successful programs. California basically said, "Nope, that's not what we're going to do. We're only going to have it work for utilities to run these projects."

And what that means is they're not going to be cost-effective. They're not going to deliver costs to the customers, especially low income customers. So it is really problematic. We fought back some of the worst part of the decision, which would've made them all PURPA projects, which would basically have killed all of the programs in all of those states because it would've hearkened back to a federal law as federal statute. Instead, they made a decision that's really going to be difficult, and they're already developers of community solar pulling out of California and looking at other states where they're going to be more friendly. And it's too bad because California has incredible resource. They have incredible opportunity and willingness, customers want to have solar and want to have community solar options. And because of this decision, it's really going to be almost impossible for them to access that. And hopefully there will be another law in the next legislature in California. But it's really too bad, and I think it's something that's been underrated and something we need to focus on in the next year.

Stephen Lacey: So Jigar, a simple question with a complicated answer. If we are trying to avoid these cost shifts, support more battery attachment, and ultimately get these dumb solar systems to be part of virtual power plants, is there a particular policy that you think would be better for that? And I know you might not be able to advocate for a particular policy within DOE, but are there policy frameworks that you think are better to be considering?

Jigar Shah: We have a liftoff report for that Stephen. You get a liftoff report. You get a liftoff report. No, I think... Look, I think that, let's start from the 50,000-foot level, which I think is where we started this conversation. The US for the first time in a very long time has load growth. So a lot of these conversations that people have long memories around are really around the zero-sum game conversation. Because we had no load growth, every time someone put a new solar system on, that was another power plant that was getting backed off that they had already paid for that they thought they were getting a lower rate of return on. So today, we now are returning to load growth, and it's a load growth that frankly is a little scary to a lot of the regulators, a lot of the utilities, et cetera. So as a result, we have an opportunity to make electricity more affordable through good policy.

We are really at this moment where we can make good decisions. One of those decisions is to figure out how to use what we've already paid for more effectively and more efficiently and more cost effectively. This is something that Richard Kauffman talked about with the REV effort in New York, which failed miserably. And so this is a very difficult thing to solve, and I think that those of us who actually just sort of say, "Oh, don't worry it's going to happen," are fooling ourselves because even if the electric utilities wanted it to happen. They don't have the systems in place, most electric utilities don't have any data that they're collecting beyond the substation where the distribution grid starts, as you know, since you sponsored this whole grid edge effort for 10 years. And so we are sitting in a situation where the solar industry knows more about what's happening on a grid than the utility does because the inverters collect data all the time to make sure it's meeting IEEE 1547.

So we are in a weird situation where these two parties have to figure out how to work together. And when you think about the fact that most solar projects are financed, those financing companies have a 20-year relationship with that homeowner. So as every single appliance that you purchase comes with an app, I just bought two humidifiers, for the love of God both of them had an app, a humidifier. But certainly your water heater does, your refrigerator does, your EV charger has an app that's associated with it, et cetera. So by definition, there's connectivity. Now when you look at different company solutions, whether it's Lunar Energy or Enphase or IQA or others, they're actually integrating all that stuff in. It's not just solar plus storage, they're actually integrating your natural gas backup generator if you want into the control system.

So now let's talk about California. California has instituted all this pain in some ways in the most offensive way possible and provided no carrots, no support. But remember, the most lucrative year ever for batteries in California was last year, the most lucrative. Guess who got no benefit out of it? Residential solar. And so at some point, this all has to come together and utilities have to believe that rooftops can be a part of how they solve this load growth. We can no longer be assuming that people can just turn everything on and that the utility grid has to be able to handle it, because that leaves you with what amounts to, I think 15% rate increases every year for the last four years for PG&E because of uncontrolled distribution grid investments. And it's not wildfire related. Let's just be crystal clear. People call it wildfire, three 3 to 4%, 5% of it's wildfire related, the rest of it is poor, poor planning, and we just have to figure out how to fix it.

So there's lots of policy recommendations, but the biggest policy recommendation are two things. One, everything needs to be opt out. This notion that we need to spend $700 to talk to people and beg them to opt into something is Looney Tunes. When you hook up something, it's automatically opted into a VPP, and then we should give you an unsubscribe link just like your emails and everyone can unsubscribe easily from a consumer protection standpoint, but you have to be opted in. But the second thing is that it has to be automated. The notion that you're going to be sending people text messages and signals every day, four times a day to do this is nuts. You can't expect people to live their life by texting responses. And so it has to all be automated. And so that means there has to be a price signal, has to send a price signal, and whether it's a third party or whether it's the electric utility that buys the software, all that stuff has to get done.

Katherine Hamilton: My message to utilities is always, there are all these companies with solutions. All these third parties have solutions, exactly the ones that Jigar mentioned and utilities need to do what they're really good at doing, and they need to partner with folks who know how to solve for what's at the edge of the grid and not try to do it all themselves. They just don't know how to do that. So I feel like this is something we need to really continue to hammer home with regulators and with utilities because yes, you want to partner with them, but let them do what they're really good at and let all of these entrepreneurs and innovators at the edge of the grid bring those resources to the utilities and trust that they're going to work together. Because I think that's the only way we're going to get it done quickly.

Stephen Lacey: Well, let's wrap up with the conversation about how we finance this stuff. If we're talking about EVs and solar and heat pumps, we'll turn to the Greenhouse Gas Reduction Fund known as America's Green Bank. It includes tens of billions of dollars that are being administered by local financing partners to offer financial support for a wide range of clean energy technologies to people who might not otherwise be able to afford them. But this money that is now being sent to these financing partners needs to get out the door fast and efficiently. And a lot of local lenders around the country have never financed, say, a distributed solar project, and a lot of the programs that are managing these dollars at the local level are also new. So is the Greenhouse Gas Reduction Fund really ready to unleash tens of thousands of clean energy projects, as Michael Regan EPA administrator said recently. Katherine, this is the thing that you've been working on for so long, for such a big part of your career. I obviously know that you think that the GGRF as underrated, am I right in that?

Katherine Hamilton: Yes, I think they're underrated and that the problem is overrated.

Stephen Lacey: Okay, so explain your rating here.

Katherine Hamilton: Yeah, so when the bill was originally written for the Build Back Better piece of legislation, before the Inflation Reduction Act, it was a long piece of legislation. It detailed how this all should work. And of course, when it got into the Inflation Reduction Act, because it had to be done through reconciliation, everything had to be the length of a tweet, so you couldn't put in a lot of that background, this is how this thing should work. To EPA's credit, they went back and read the original underlying legislation and I feel like they've done a really good job of trying to figure out how do they parse all this funding? How do they make sure it's going to go to groups that are going to be able to leverage partnerships that then get the funding to the right folks? And crucially, the funding, if it is not obligated by September 30th of this year, it goes away.

That was intentional. That was to get the funding out the door before anything were to change in our administration. So there are three different parts of it. One is what you would think of as the big National Green Bank, which is the National Clean Investment Fund, and that's $14 billion. There are three applicants that have put together these institutions that will... They take slightly different approaches, but they're all going to figure out how do you do private sector investment, leveraging the funding, partnering with community organizations to deploy, deploy, deploy basically. Then there's another piece called the Clean Communities Investment Accelerator, which is $6 billion, and there are five applicants that are establishing hubs for community lenders. So those are being set up. And then there's sort of a separate program, which is $7 billion, and that's the Solar for All program that was actually a Bernie Sanders bill to try to get rooftops, it was originally rooftop solar, but it also includes community solar, and that's going to states, tribes, territories, and munis to try to leverage solar and get more solar programs out the door. So they're kind of in different categories.

And they're doing it. I mean EPA is, they're getting right now, they're very, very focused on getting those contracts in place. And then they will come up with the actual detailed... Give applicants time to put together their more detailed work plans over the following year, but they're going to get the funding out the door, absolutely. They're not going to risk that being stopped in any way. And I think the trick is just making sure that the work plans are in place in a way that really leads to impact so that they can report out good success along the way once those are put into action. But EPA is doing a really good job with the tools that they have.

Stephen Lacey: And so Jigar, I guess I'll have you answer it the same way Katherine did, which was GGRF as a tool, overrated or underrated, and then barriers to deploying this money overrated or underrated?d

Jigar Shah: So obviously I agree with Katherine on her answers to the question, but I would say that there's a couple of pieces that I wanted to highlight. One is that, so if you look just at household appliances, LMI customers buy roughly $4 billion worth of household appliances a month, and usually because it's an emergency, they have to put it on their credit card or have a payday loan for it at 30% interest. And so if you just helped people get into energy efficient appliances, which you of course opt into a VPP, then that's five months worth of money. It's the same thing to do with subprime auto. So if you look at subprime auto, if you try to get all these folks into electric vehicles that were using the Used Car Tax Credit of $4,000, subprime auto is roughly 1.7 billion a month. So that means one year basically of subprime auto is covered by $20 billion.

So I think it's important to recognize that there are a lot of communities around our country that are not focused on, and so my hope is that these folks use different paths, because there are different people who are awarded money to make sure that everyone gets coverage, and that anyone who wants to participate in this green transition into this revolution has the ability to do so because their local bank may not provide it something, but the CDFI would, or the United Way might or Enterprise might be able to help them or rewiring or other folks, their local green bank. In order for this to be successful longterm though, they have to figure it out securitization. And that, I think is the biggest challenge because a lot of these folks like doing weird stuff. And if you do too much weird stuff, then that loan will sit on your balance sheet forever because no one will buy it from you.

And so if they don't get into standardized documentation, then once they've gotten someone to take a loan to do these things, they won't be able to sell it to someone to be able to securitize it, then put the money back in so they can put it back out the door. And this is really the challenge that's been exemplified by the Connecticut Green Bank versus the New York Green Bank experience. And so I just want to make sure that folks recognize that that last piece is a huge cultural challenge for this community. And so we'll see where this goes. I'm obviously hugely hopeful and I think this money is so important, but I want to make sure it's catalyzing something that meets the moment, and $20 billion is not enough money if it's one-time money.

Katherine Hamilton: Yeah, you're totally right to bring that up, Jigar. And I would just point to the Coalition for Green Capital that's been working on this for years and years. Their vision was of course to have two separate ways of looking at it. One was to invest in high-yield projects that aren't risky, and then have the returns from that to feed back into the projects that could be potentially more risky. So they partner with Elemental Accelerator and some others to try to make sure that they can do that, that they can divvy it up so that yes, you get a lot of funding going to communities that need it the most, the low-income communities and just those that have been left behind, but that you also have projects that are going to be continually bringing in revenue so that you can feed those and secure those loans. So I think there's a lot of thought behind it, but you're right, it was supposed to be a hundred billion dollars. So now we're down. That group has 5 billion, let's see what they can do with it.

Stephen Lacey: Katherine Hamilton, chair of 38 North Solutions. Thank you.

Katherine Hamilton: Thank you. This has been great.

Stephen Lacey: Jigar Shah, director of the DOE's Loan Programs Office. So good to see you, what a treat.

Jigar Shah: So great to see you.

Stephen Lacey: Thank you all so, so much for listening over the years. Again, stay subscribed to this feed. We are launching a new show in the fall on the ins and outs of what it takes to build and scale different kinds of climate tech. I promise it's going to be different from other shows out there on this subject, and I think it's going to be a critical part of your understanding of the market. The Carbon Copy is produced by me, Stephen Lacey. Sean Marquand is our technical director, Anne Bailey is our senior editor. Stay up to date with the industry conversation by subscribing to the Latitude Media Newsletter. Go to Latitudemedia.com and hit the subscribe button. Thank you again to everyone who's listened over the years, I'll catch you later.