B (3:51)

So I guess first we didn't talk about any of the positives. There's some areas that look like they're going to grow healthily, but maybe first sticking with renewables was where you started. How much impact do you you see for the industry over the next three years? So let's say you take whatever the baseline would have been if there hadn't been any changes at all. And how much do you see that it's impacting and retarding growth as a result of the changes that have been put in place overall?

A (4:23)

Well, our modeling we did in spring of last year, looking at the one big beautiful bell ax showed I think about a 3/4 drop in deployments of onshore wind as a result of the changes in the bill. You know, for whatever reason in our modeling, onshore wind is really, you know, heavily contingent on the availability of those tax credits. The production tax credit, especially solar pv, is a little bit more durable just based on its cost trajectories and where it can be deployed and the types of values that it's added. So we saw some drop off in wind, but not as, not nearly as much as, I'm sorry, some drop off for solar, but not nearly as much for, as we did for wind. And I think the one thing that's difficult to capture is this kind of pull forward effect. Right. So the tax credit timelines mean that any developers who basically think that they can qualify for the tax credits based on the current Criteria are going to try and pull those projects earlier in the development pipeline before the tax credits expire. So you know, near term I think you might actually see a growth in solar this year. It wouldn't totally surprise me, but I think that tapers off after a few years. There is this mitigating factor though that we have this pretty rapid increase in demand or forecasted demand now which we haven't really seen in 20 years. And for folks who haven't been following basically the gas turbine suppliers have said they can't deliver incremental new supply beyond what's booked out. So if utilities or developers are going to be able to, are going to build to be able to meet this demand, it's going to have to come from these types of sources like solar, wind and storage. And so that you know, that may help support continued growth, especially for solar pv, but to some extent for wind where it can be permitted, you know, and there aren't local ordinances preventing that.

B (6:19)

Given well, let's assume that the projections for demand growth are somewhat accurate and they're very healthy. Do you see one, what areas do you see being bullish on? Because so far it sounds like you're, you're fairly bearish on renewables in particular. Wayne and I guess. Well, let me let you take that first and then I'll ask you a follow up question.

A (6:48)

Sure. So I think battery storage I think is, you know, is really in a prime spot for growth. I think there's to help meet the, you know, the growing capacity need and to support kind of shifting of that supply around to when it's needed. I think battery storage is really prime for, for a lot of growth this year and beyond especially since it got some favorable treatment with the tax credits. I'm really intrigued by enhanced geothermal. I think we're still somewhat early on the learning curve but there's some really prom seeing you know, deployments and operating results from a couple of companies, Fervo and Eber being being two that come to mind. How quickly those can scale and get to market I think is a little bit of an open question, but they're quite promising. I hope that small modular reactors, SMRs become a thing and that we have another tool in the toolkit. I'm just, I haven't seen it yet. Doesn't mean it can't happen this year. So I think those kind of come to mind and ones I'm bullish on. I think also this year we have maybe the first commercial scale long duration storage project, Iron Air that will be built and maybe start operating. So that's an interesting technology to keep an eye on. And I think just in terms of being bullish, I think that in the immediate term the need for solar is there and it's what can be built. So I do think that this year could still be a year in which we see a lot of solar, perhaps more than last year, be deployed. And, and so I think it's a little counterintuitive for, for us we're trying to, you know, read the tea leaves and dissect the policy change. And in the long run it looks fairly negative. But a lot of the modeling shows this kind of near term growth actually as everyone kind of races to take advantage of the tax credits before they expire.

B (8:36)

What do you take the argument that there's demand growth? Power prices are soaring. In some regions where I live, they're soaring. In the New York region there will be political pressure both at the state and federal level to do something about it. And so some type of loosening of something, you know, either or a combination probably, it's not probably just one solution, but transmission of maybe tariffs, maybe some of the tax credit rules will change, permitting something that there'll be a lot of political pressure to do something to bring energy prices down and that that could change people's forecast that what we have today may not be the situation that developers are encountering two years from now.

A (9:31)

Yeah, I think it's obviously it's, you know, power prices are going up all over the country. I think it's going to be very hard, bordering on impossible to make a material impact to that in the near term. You may have some instances like in New York actually we have these negotiated settlements with the utilities so they defer some of the investment to bring some downward pressure on near term rates. Some of that is sort of artificial. It's just moving around when the costs are incurred or it's deferring some capital expenditure that the utility wants to make. So I think the, you know, important to remember that people's bills are made up not just of power plants, but also the transmission and the distribution infrastructure and all of the other on bill stuff, depending on what state you're in. So I think policymakers can make a dent in some of those things, whether it's bringing the utilities to the table to see how they can lower their, their rate of return or defer some investment or, or shift things around to bring some downward pressure. And I think that's important. I just don't know how you Know, like durable. That is, in the long run there are certainly some things that would help. You know, you named one of them which is like figuring out how we can build stuff faster and cheaper. It's a major, major problem in this country. No matter what you want to build, the, you know, the inability to interconnect, the time it takes for grid operators to go through the, you know, important process of determining safety, it's just, it needs to change. I don't know if you know, FERC will be able to make ground on that or if it's going to be something the individual grid operators and utilities are going to have to really make headway on. But those, those bottlenecks are real and they are helping to drive up prices. And then I think the, you know, some of it though is tied to fuel prices, right? A lot of this countries power comes from gas. Gas is often the unit on the margin setting the price and as gas prices go, so to do electricity prices. So if we, you know, see gas price growth the way that the futures are projecting or the Energy Information Administration is projecting, you know, they, they're looking at significant growth in gas prices, not a return to the low prices from a few years ago. And that means that power prices, particularly the wholesale energy component, will continue to go up. So we need a holistic strategy to tackle each of these. We need something to tackle the wholesale energy price issue. We need something to tackle the capacity piece, you know, being able to build more stuff faster. We need to address the fact that a lot of utilities might be, you know, one thing we like to say is gold plating or overinvesting in the transmission and distribution system which, which adds to people's bills. There needs to be a holistic approach to it. I don't think we've seen much to date of the administration that is, is trying to apply some kind of holistic strategic lens to this in a way that will materially make a difference in the next 12 months.

B (12:28)

So I guess hard for us to know what the political situation is going to bring because that's hard for anybody to know. But if you're right and prices are not going to either come back down or, and there'll be upward pressure. Actually given that once we get past this short term boom in renewables to qualify for the tax credits that then looking forward for people trying to plan out in the future that there's actually going to be fewer renewables installed than there otherwise would have been, what do you think is going to happen to data centers and EVs and things like that. I mean, does that mean that either we're going to see a lot of data centers building their own power, or are we going to see a lot of data centers just not getting built that are projected to be built five years from now? They're just not going to get built because power is going to be too expensive in the U.S. yeah, it's a.

A (13:23)

Great question, and I am wondering some of the same things I did see. For example, PJM just announced they're revising down their data center load forecast, which I think is interesting. It's like one of the first things we've seen now where we're actually coming down instead of the forecast going up. So we know that a lot of data centers are putting in multiple interconnection requests in different areas to try and just figure out which one they can get access to. So I think there is a good chance that the current load projections for data centers are high. Although I think a lot of the folks who are prognosticating about how much load there will be are getting better about trying to figure out, you know, what share of these are real versus speculative requests. There's also, to your point, a lot of seemingly interest in data centers trying to find ways to bring their own supply. Some of that is leveraging mothballed or retired plants. There's been some announcements about, you know, restarting retired nuclear. I am a little bit skeptical that that's going to pan out the way that folks think it might. But whether it's, you know, identifying mothballed supply and restarting it or bringing their own clean energy, I think data centers are increasingly going to be trying to find ways to solve that supply gap. And you're seeing this politically happen. Senator Tom Cotton introduced a bill this week that basically aims to let data centers form their own utilities, to be completely disconnected from the main grit, trying to set the groundwork for them to do that kind of thing.

B (15:04)

That seems tough to me though, given the liability factor that the data centers need. That doesn't seem like really, I think, for most data centers.

A (15:11)

I agree. I agree with that, and I think that it would, you know, data centers are willing to pay an awful lot for power. I don't know if they're willing to build their entire own grid with the level of reliability that they need. I do think another interesting facet of this is that until maybe like Q3, Q4 last year, basically all the data centers were saying, we're not going to operate flexibly. This is a race this is an arms race. We got to win, we got to win all out and we can't afford to ramp down at all. And then you see, well, if the utility is going to tell me that I can't connect for seven years, maybe I can find some flexibility there. So I think we're maybe on the edge. I think there's quite a range of opinions on how reasonable it is or possible for data centers to do this. But if data centers can find a way to be flexible, even if it means they just invest in a ton of storage, I think you're going to start to see them exploring any way they can to, you know, expedite that connection process, including potentially building their own micro grids. Although for reasons you just mentioned, I find it hard to believe we're going to see a ton of, you know, hyperscaler data centers running, being their own utilities.

B (16:25)

So kind of in summation is what where do you, you know, from my just listening to our conversation here, what I would say is your forecast is in the very near term, when I'm talking near term in our business, you know, is, is a year or two because everything takes a long time capital deployment. But over the short term, seems like there could even be an increase in solar, definitely in energy storage, probably not in wind, but overall could be okay in terms of deployment. But once you start looking out two, three years from now, there's, there's going to be major headwinds which will put additional pricing pressure on rates and all the retail consumers are going to be upset in the data center. People are going to be looking for some other place to go. Is that a fair assessment or what, what, what, where do you see things going?

A (17:21)

Yeah, I mean, I think that's, that's pretty spot on with how I'm seeing things right now. I think, you know, one of the mitigating Factors could be 2, 3, 4 years from now if the gas, you know, if we still have load projections from data centers where they are or higher and the gas, you know, suppliers are booked out, you might, solar might be fine. It might could still be continuing to grow, be deployed at a growing rate. The difference is like that, that will result in, not that, but you're going to, because it's going to cost so much more, it's going to be harder to build. You're going to see the fact that the data centers are there. You're going to continue to see upward pressure on rates. You know, solar and wind help with the wholesale energy price component by, because they're you know, they don't have any fuel costs, but those capital costs which are now 30, 40, 50% higher because of the loss of the tax credits due to the one big beautiful bill act, are going to be loaded onto ratepayers. I mean, there might be some merchant operators, but you know, you see in the capacity prices in PJM hitting the cap. So I think in terms of deployment, I think storage and solar are in decent shape. Certainly this year, storage for a while, solar might, might be fine for the next three, four, five years. But I don't really, you know, I still think rates are going up, things be really hard except for these negotiated solutions which again are important but are like maybe a little bit more of a paperwork shuffling than a, you know, material difference in capital investment. Those kinds of things will be helpful and you know, considering changing where we, where we assign costs. Right now we use utility bills for a lot of things that go, that extend well beyond your power. I mean different efficiency programs, different social programs which are important and it was fine to load those onto bills in the past. But I think you're going to see, and maybe this is one prognostication you're going to see a lot of state politicians and regulators start to take a really close look at what's on people's bills and what they can shift off of there into other areas.

B (19:36)

All right, well, I, I hope to some extent you're wrong. I'm not saying you're gonna be wrong. But things don't get done until there's a crisis. And I think if prices keep going up, we'll head into what would be, you know, not a literal crisis, but a relative crisis given what we've seen in the past and hopefully some of these inefficiencies that are in the market in terms of delays that are kind of self imposed and kind of the, There'll hopefully be some inefficiencies too. Some, some efficiencies that we can work into the system that given that things will be a little simpler without the credits. Yeah, that could maybe speed things to market, lower transaction costs. Maybe there's people who will sharpen their pencils to get stuff done, put some downward pressure. So who knows? I, I just gotta believe that with all the people working to try to find a better way to get there and the pricing signals in the market that there'll be some, some way that some of this demand will get met that we're not seeing today.

A (20:37)

I hope I'm wrong too. I hope that's, I hope that's the way it happens. I hope to be proven wrong and we get a surge of new supply, clean supply, and some some help for folks who are seeing their bills be as high as they've probably been in 20 years.

B (20:51)

All right. Well, I'll take the help. And thanks for joining us today.

A (20:54)

All right. Thanks, Todd.

B (20:58)

You can find us online at www.project finance law or send us an email at currentsordonrosefulbright.com Please rate, review and subscribe on Apple Podcasts, Spotify or your preferred podcast app. Our show today was produced by Emily Rogers. Stay ahead of the Currents.