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Energy Gang
Permitting reform and the politics of building the grid | Live from the ACORE Grid Forum in Washington, D.C.
00:47:28
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- [00:01]
Daniel Polkin
If we're talking about the race for AI in these kind of advanced manufacturing, the commanding heights of the 21st century economy, we are losing sorely in the race to bring on new electrical capacity. And it's something we need to address.
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Elizabeth Horner
Where do we want to end up on permitting and where do we want to end up on transmission? That first principle I think we've seen fits and starts. Now that all generation sources are being impacted, we're starting to realize the problem is the same for everyone.
- [00:26]
Matt Christiansen
I don't think states inherently want to stand in the way of transmission facilities. I mean we have built a lot of line miles of transmission over the last couple decades. Maybe less than I think we need, but still a substantial number.
- [00:38]
Daniel Polkin
And that is the constant story of transmission. You can't plan it. When you can plan it, you can't build it.
- [00:43]
Ed Crookes
Got power? At Hythium, we make sure the answer is always yes. Recognized seven times as a BNF Tier 1 best provider and ranked top two globally for battery shipments for 2025, Heathium delivers safe, reliable and profitable energy solutions that keep the clean energy transition powering forward. Let green energy benefit all trusted worldwide. Built to last. Discover more at www.Hythium.com and let's talk energy that works for good. Hello and welcome to the Energy Gang, a discussion show from Wood Mackenzie about the fast changing world of energy. I'm Ed Crookes and today we're coming to you from the ACOR Grid Forum in in Washington D.C. this is a gathering of some of the biggest names in the U.S. electricity industry and policy and regulation to talk about the challenges facing the grid and some of the possible solutions. Now one of the hottest topics here has been one of the thorniest issues in U.S. energy policy, which is permitting reform. There is widespread agreement that building new infrastructure in the US Takes too long and costs too much. Of course, that's an issue we've covered many times on this show in the past. Question is what exactly needs fixing and how can we fix it without weakening environmental safeguards or cutting communities out of the process? And that's the question we're going to be discussing on this show. In a moment we're going to be hearing from three people who are in the thick of it in the debates over permitting here in Washington D.C. but first we're going to hear from Matt Christiansen. He's a partner at Wilson Sonsini and he's a former general counsel of the Federal Energy Regulatory Commission, ferc, which has been trying for many years to expedite the process of building out new grid infrastructure. Hello, Matt. Welcome to the show.
- [02:24]
Matt Christiansen
Thank you. It's a pleasure to be here.
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Ed Crookes
Yeah, thank you very much for joining us. So, look, wanted to carry on on this theme of permitting reform and to really try and drill down a bit into the details of what we mean when we talk about permitting reform. Often seems to me that it's one of those things that people talk about as this kind of deus ex machina. This is the wonderful thing that's going to save us. It's too hard to build stuff in America. But once we get permitting reform, everything will. And people, I think, often are quite vague about what they actually mean when they say that permitting needs to be reformed. So I'm interested in your perspective, both now in the private sector and previously when you were working at ferc. When you look at the issues around permitting, what are the real choke points? What is it that actually stops infrastructure getting built and grid infrastructure in particular getting built in the United States?
- [03:17]
Matt Christiansen
Yeah. So I think you're entirely correct that permitting reform is one of those things that's a little bit in the eye of the beholder, and it means a slightly different thing to different folks. When I think about the specific challenges to energy infrastructure, though, I do think there is a challenge in getting the actual permits that you need from the relative resource agency or the relevant, I should say resource agencies to getting through NEPA review and the litigation that inevitably follows the relevant documents for any major piece of infrastructure. And I think I have the strong sense that people on both sides of the aisle recognize that that is a barrier and that that needs to get reformed one way or another. There may be some disagreement as to exactly which of those ways is the right one, but I think those are sort of table stakes. When you move beyond that to different types of infrastructure, I think that sort of challenge applies generally different types of energy infrastructure, be them LNG export facilities, interstate natural gas pipelines, electric transmission facilities. There are particular challenges that are sort of idiosyncratic to each of those types of infrastructure. And I think that's where you are going to start to see significant disagreement from different sections about which challenges to fix and how exactly to go about doing that.
- [04:26]
Ed Crookes
Right. That's really interesting. And I want to come on later to the question of the politics of all this and the possibility of finding some kind of bipartisan compromise that everyone will agree on that moves permitting forward in a kind of constructive way that helps all kinds of infrastructure to get built. But before we get into that let's dig into some of those details a little bit more. So you mentioned nepa, the National Environmental Policy act, which is the law that governs environmental approvals for infrastructure projects, among other things. What are the issues there as you see them? Because that seems to be. When people talk about permitting reform, very often people go to thinking about NEPA immediately as one of the biggest issues.
- [05:08]
Matt Christiansen
So I think there are a couple issues. I think one is NEPA review is very complicated and it involves a lot of different discrete, very fact intensive questions. And so to the actual work of a NEPA review, putting together an environmental impact statement or environmental assessment, the document that serves as the basis for an agency's decision, is incredibly time intensive. It often takes years for significant pieces of infrastructure to get through that review, and that alone can be a significant delay. The other big issue, and this is the one that I get the sense people again of both parties really recognize as a problem, is that almost any major piece of infrastructure is going to be subject to at least one, sometimes multiple lawsuits. And those lawsuits are often going to involve NEPA challenges. And because the regulations around NEPA are so prescriptive, and these, the records are so good, big and voluminous, those lawsuits often significantly slow down the final investment decision or whatever steps need to take in order to start actually putting steel on the ground.
- [06:14]
Ed Crookes
So if you're thinking about reform, how do you think you get the balance right on this? Because of course a lot of people will say, oh well, reform is just code for sweeping away environmental protections, making it easier for companies to do whatever they want in terms of adding to pollution, damaging quality of life for people around the projects they're building, and so on. You may say NEPA implementation is complicated. It's complicated for good reason, which is that these projects can have very large environmental impacts. And it's important that the environment, nature, communities are protected from those impacts. And it's important for people to be able to challenge those projects in the courts and have those impacts issues properly resolved. Do you accept that that's a potential danger in reform that you kind of say sweep away protections that are actually needed?
- [07:07]
Matt Christiansen
I think that is a potential danger. I think the, the risk though, is asymmetric in the other direction. Like, I am all for environmental protections. I am all for ensuring that communities that are affected by energy infrastructure projects have a say in the process. I think my concern though is that that process has become bloated, it takes too long, and that by adding process on top of process, we're not actually benefiting the communities that are hosting this infrastructure and that there are other ways that you could potentially do more for those communities and that the time and resources that are lost in the pursuit of process actually slow down needed energy infrastructure, public interest infrastructure, without a commensurate benefit either to the environment or the communities that host that infrastructure. When you're balancing the impacts of energy infrastructure on communities versus the need to develop that energy infrastructure, let's face it, we need energy infrastructure and it's going to have to go somewhere. What I think is really important is a recognition that process alone is not going to make anyone feel better and that what we should be thinking about is we should recognize that the communities in which infrastructure, and I mean infrastructure of all types, lng, export facilities, electric transmission facilities, you name it, that is going to have a disproportionate impact on the communities in which they are physically sit. And I think a priority for federal regulators or state regulators as well, anyone involved in the siting or development of that infrastructure is to make sure that those communities bear some of that or sort of reap some of the benefits of that infrastructure as well. And I think ultimately that will do more to get infrastructure developed than layering on additional process. It's more about making sure that the folks that bear outsized cost get a commensurate share in the benefits as well.
- [08:56]
Ed Crookes
Right. And that is something we've not always been great at in the past.
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Matt Christiansen
No, I think frankly, those communities have been left behind and a lot of by again, this is not limited to any single type of infrastructure. This is true across the board. And I'm wary of the idea that more process is going to make a community feel better about a piece of infrastructure it doesn't want, when really the thing that can help those communities and the folks that live in them is to make sure that some of the benefits from that infrastructure can be kept in the communities themselves.
- [09:24]
Ed Crookes
Right. So what about the role of FERC here, the commission where you used to work under successive FERC chairs? It seemed like a big item on the Commission's agenda was addressing exactly some of these issues, trying to make it easier to build new energy infrastructure in the U.S. we've just had a couple more commissioners confirmed by the Senate, expected to be appointed to FERC soon. And presumably that will kind of energize the work of the commission and lead to them being able to take on new issues and pursue their agenda the way they want to. What are you expecting now from the commission? What do you think they might try and do?
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Matt Christiansen
Well, I think there'll probably be no single thing. There'll probably be a number of priorities. The Commission's jurisdiction is very broad. But I think to pick up what you were saying there, I think one of the priorities will be around facilitating and expediting the review process for needed energy infrastructure that's cited by the Commission, and that includes hydroelectric facilities, interstate natural gas pipelines, LNG export facilities. There's a limited role for electric transmission facilities as well. And I think expediting those reviews is probably going to be a priority. I think, though, if there's a unifying theme, and I do think it ties back to that, this administration is very focused on data center development and the issue of how do you ensure that data centers have access to reliable electricity in a timely fashion? I suspect that will be a through line that runs through a number of the Commission's major initiatives over the next few years.
- [10:53]
Ed Crookes
And in terms of what we know about the views of the two new commissioners that are just going to be appointed, both Republican nominees, do you think that they're going to essentially sort of continue the efforts that we have seen over the past few years from FERC in terms of trying to, as I say, make it easier to build infrastructure broadly, or do we think they're going to have kind of completely different agenda, maybe try and undo some of the things that have been done in recent years by FERC and try and make improvements to the system on their own lines?
- [11:25]
Matt Christiansen
I think there'll definitely be a change of emphasis. I think the idea of making it easier to build infrastructure, I suspect that will be a through line for all of the new commissioners or all of the commissioners, I should say, not just the new ones. There may be slightly different spins on where you can sort of wring the efficiencies from the system in order to expedite that review? I do think, though, the focus on data center development and sort of laying the groundwork for the digital infrastructure we need to power data centers and then the energy infrastructure you need to power that digital infrastructure, I think that will become more important. That's something that Chairman Rosner has focused on, and I suspect that's something that the next commission will take up with gusto.
- [12:05]
Ed Crookes
And realistically, how much change can be made at the federal level, either through federal legislation or through ferc? It often feels like when you dig into the details of why particular projects haven't gone ahead, particularly perhaps electricity transmission projects, one of the crucial reasons is that they've been opposed at the state and local level. So is that always going to be a significant obstacle, do you think, to getting the grid built out if you've got that state and local opposition, no matter what happens at a federal level?
- [12:39]
Matt Christiansen
I think there's a lot that can be done at a federal level to provide either expanded backstop siting for electricity facilities, electric transmission facilities, which is what we have now. You could certainly expand that. I think there are also, there have been proposals to establish that certain types of transmission facilities will be cited by the federal government in the first instance. I think that would be an improvement. I don't think states inherently want to stand in the way of transmission facilities. I mean we have built a lot of line miles of transmission over the last couple decades. Maybe less than I think we need, but still a substantial number in its own right. Where I think the federal government has a potentially very important role to play is, is on those very large multi state, what I would call national interest transmission lines, that the benefits are not gonna accrue to any single state. And so a state will almost definitionally have too small an aperture when reviewing the project. And that's sort of for me, the key place where the federal government can come in, site the facility and then ensure that it can recover its costs appropriately.
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Ed Crookes
So preempt states rights a bit.
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Matt Christiansen
You mean in a limited fashion. I think the way I would describe it is where you have reason to believe that the state might not be in a position to consider the full benefits of the piece of infrastructure, then it makes sense to have the national regulator come in and have that full, that broader perspective. And I will say I think that's essentially what we do on interstate natural gas pipelines. That's where if pipeline is purely an intra, intrastate facility that's benefiting customers, we let the states do the siting. If it's an interstate facility that has more national impacts, that that's when you have the federal regulators take the helm.
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Ed Crookes
Right. And that's a quirk of the system. Right. Which is the same doesn't happen for interstate electricity transmission.
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Matt Christiansen
Exactly. And I think you'll hear people say hey, we should have parity for interstate pipelines and interstate electric transmission facilities. And I think that can be an oversimplification sometimes because there are real differences in how those facilities get financed and paid for and their costs recovered. But I think the basic idea that regional facilities that can't have their benefits captured by any one state, that's exactly where you want the federal regulator both on the transmissions, the electric transmission side and the interstate natural gas side as well.
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Ed Crookes
Right. So we're talking at a meeting in Washington, D.C. let's talk about the politics a little bit.
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Matt Christiansen
How can we avoid that?
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Ed Crookes
Sadly, I think we can't. Clearly, there's nothing happening in Washington at the moment. The government is shut down. The parties are very far apart. There is essentially political deadlock. But before we got into the situation we're in now, there did seem to be some kind of rumblings around Congress that maybe there could be bipartisan progress on permitting reform? Certainly that was some of the talk around Washington over the summer. What is your expectation now? How realistic is it that I guess once this whole shutdown situation gets resolved, we could see the parties coming together to pass legislation that would really make a material difference to energy infrastructure investment and grid investment in particular?
- [15:45]
Matt Christiansen
Yeah, I'm optimistic and I'm optimistic about that for two reasons. One, I think you have members of both parties recognizing that we need a lot of energy infrastructure and that we need a lot of energy infrastructure of different types. And I'm hopeful that whatever passes and gets 60 votes in the Senate is not going to be just an electric transmission bill. It's not going to be just an interstate natural gas pipeline bill. It's not going to be just a oil and gas bill. It's going to have to have a broad basis in terms of the types of infrastructure that it facilitates. And I'm hopeful that that can bring bring about a compromise that can get 60 senators the other. And I mean, I recognize that there's you could, you could see a little bit of naivete in that. But I do think there's a real chance that things are slightly different now. And the second reason which relates to that point is we are seeing a huge increase in energy demand, particularly electricity, driven by data centers. And that increase is going to have impacts on reliability and affordability of our energy system if we don't build a lot more energy infrastructure. And I'm optimistic that that backdrop, which didn't exist even two years ago, is going to provide an impetus, or an impetus, I should say, for more potential compromise to facilitate the development of all types of energy infrastructure.
- [16:58]
Ed Crookes
Excellent. That's good to hear. Let's hope you're right.
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Matt Christiansen
Let's hope.
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Ed Crookes
Matt Christensen, thanks very much indeed. Great talking to you.
- [17:04]
Matt Christiansen
So pleasure to be here. Thank you.
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Ed Crookes
That was Matt Christensen, formerly general counsel at FERC and now a partner at the law firm Wilson Sonsini. As he explained, the barriers to building new infrastructure in the US Are deeply structural. They're baked into the system by decades old laws and overlapping jurisdictions and given that to talk about what can reasonably be expected in terms of reform. I sat down here at the GRID Forum with three experts on the policy and politics of infrastructure permitting. I'm joined by Elizabeth Horner, who's a partner at the law firm Arendt Fox Schiff and his former chief counsel to Senator Shelley Moore Capito.
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Elizabeth Horner
Right, Shelley Moore Capito. I served on EPW for about seven and a half years, first under Senator John Barrasso from Wyoming and then under Senator Shelley Moore Capito from West Virginia.
- [17:49]
Ed Crookes
Right. Well, thanks very much indeed. Gives you a great perspective, I think, on the issues we're about to be talking about. It's also a pleasure to welcome Daniel Polkin, who is the director of Infrastructure for Energy and Permitting at Arnold Ventures and is also formerly someone who worked in Congress. You're a former staff member, aren't you, at the Senate Committee on Energy and Natural Resources?
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Daniel Polkin
That's right. I worked under Chairman Joe Manchin as his lead on electrical grid policy and prior to that worked for Senator John Hickenlooper of Colorado on a range of energy issues, including electricity.
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Ed Crookes
Right. And tell us a bit about what you're doing now. So Arnold Ventures, I think of it as a philanthropic foundation. How do you describe it?
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Daniel Polkin
We are a philanthropic organization founded by John and Laura Arnold many years ago, but recently stood up an infrastructure team. So we make grants to a number of organizations that are working to advance evidence based policy that helps us build faster, better and at lower cost, all types of energy infrastructure. And in fact we have focuses beyond just energy. But that's what I work on.
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Ed Crookes
And it's also a great pleasure to welcome back to the show Jeremy Horan, who is the lead for permitting at acor, the American Council on Renewable Energy, our hosts here at this forum. Hi Jeremy, welcome back.
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Jeremy Horan
Yeah, thanks Ed. It's great to be back with you.
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Ed Crookes
Great to see you again. You were just reminding me we last spoke just as OB3 was passing, didn't we?
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Jeremy Horan
We did, yeah. I think dramatic time, probably your most listened to episode. I think it came out right before the fourth of July holiday. But we did cover, you know, the bill was pretty much done and I remember we touched on some of the glorious FIAC issues and just sort of the state of play. So we now know how that's played out a little bit.
- [19:18]
Ed Crookes
Yeah, indeed. And that is actually a great segue in what I want to talk, which is the next big piece of energy related legislation that could come out of Congress, which is on permitting reform. Elizabeth, maybe you could start us off here. When people talk about permitting reform, what really is the problem that they want to address?
- [19:36]
Elizabeth Horner
Yeah, that's a great question. And I'm glad that Daniel and I are both here because I think we have complementary experiences in the public lexicon. I'd say over the last five years, permitting has become a catch all phrase. And to your point, what does it mean? And in the energy space, I really view it as two different but related questions, which is permitting the actual authorizations to build a new project, making sure you're not. Making sure you're complying with substantive environmental laws. And then there's the question of transmission. And that is as we can kind of talk about really two separate policies under our current legal system. The Senate Environment and Public Works Committee is the one that implements statutes like nepa, the National Environmental Policy act and the permits. By contrast, the Senate Energy Natural Resources Committee implements policies and oversees FERC interconnections. That's a separate. And so we have really two different issues, I would say, that are sort of coming together at the same time. But I think it's useful to think about them both as sort of independent and interrelated. And permitting is often a catch all that sort of makes the issue seem simpler than it is.
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Ed Crookes
And all of those things are problematic for the industry, or are some worse than others?
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Elizabeth Horner
Let me turn it over to Daniel to give the perspective on the transmission part.
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Daniel Polkin
I don't want to say who's got it worse, because I think any industry can make a credible claim that they face serious challenges. But I can speak specifically to the transmission challenges, which both kind of layer into the challenges that Elizabeth was talking about with NEPA and these laws that make it very hard to permit things, but then also have their own special challenges that kind of lie within this old statute called the Federal Power act, which the committee I worked on oversaw. And I was the principal staffer tasked with working and negotiating policy on. The problems with the Federal Power act really can be distilled into saying that before you even get to permitting, you have to have a line that is planned and being developed in order to even apply for a permit. The problem with transmission often happens before the permitting stage. And to illustrate that, you can look at the different regions around this country, we have about 10 regions that are responsible for planning transmission. There was a regulation passed in 2011 in a bipartisan manner by FERC that said you have to do planning within your regions and you have to coordinate transmission build between them. We have planned exactly zero transmission lines between regions in the 14 years since that regulation passed. Many of the regions, I think most of them have also planned and selected zero lines through these planning processes within the regions, in the regions that have worked. When you get out of this, you often end up in a nightmare scenario where to give one example, there was a line called the Plains and Eastern Line which you can read about in the Russell Gold's book Superpower.
- [22:24]
Ed Crookes
Oh, great book. I always recommend that book to people. It's terrific, isn't it?
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Daniel Polkin
Fantastic introduction to kind of the challenges that these lines face. That line, large ambitious project, constantly litigated. At one point the federal judge overviewing the docket in which the challenges through NEPA and other statutes were being litigated. The parties were trying to allege that they just hadn't considered all of the relevant environmental impacts of this line and what have you. And the judge had to make the observation that this line had generated a record of over 100,000 pages now. 100,000 pages, right. Pages eight and a half by 11. That's about a foot for government purposes. 100,000ft. There's 5,000ft in a mile. So that's 20 miles of paper. You could have made that transmission line out of paper mache, but instead they didn't make it at all because that line is still under development now with a different company. And that is the constant story of transmission. You can't plan it. When you can plan it, you can't build it. You zoom out, you look at the total numbers. The entire North American continent has developed 7 gigawatts of large scale inter regional transmission since 2014. South America is beating us at 22 gigawatts. Europe at 44. China in a seven year period from 2014 to 21, 260 gigawatts. If we're talking about the race for AI in these kind of advanced manufacturing, the commanding heights of the 21st century economy, we are losing sorely in the race to bring on new electrical capacity. And it's something we need to address.
- [23:48]
Elizabeth Horner
And I want to just build briefly on one additional item related to permitting and it's judicial review. I mean that's something. So prior to working on the Hill, I worked at another law firm and we had a lot of energy clients. And I tell folks, while these issues perhaps to folks like those in the tech industry are relatively new, these are challenges that have existed for a long time. And even if you get the permits on time, which almost never happens, you're left with litigation. And what some agencies often do is they try to be robust in their record. They try to say as many things as they can. But when you have 10,000 pages, there's something in there that someone could argue conflicts with another statement. And so you almost are in this catch 22 where you have to be thoroughly, but if you're very thorough, it could create ammunition for an interest that doesn't want a project to go forward to try to latch onto. And so judicial review, we heard that earlier from Senator Capito. That's something I think that also we needs to fit into the permitting side of the equation.
- [24:50]
Jeremy Horan
But I just wanted to jump in. I think we've done a nice job of sort of hitting some things, but I think it's worth thinking, as we're thinking about what is permitting reform and why do we need to do it. A lot of these laws were put on the books in the 1970s. And if you think of where our economy was, the issues that they were confronting then, a lot has changed in the last 50 years. So I think fundamentally permitting reform is now how do we update those laws so that we maintain high standards of we all want clean air, clean water, a clean environment. We now have a lot of really good environmental technology that allows us to do some of these reviews, to understand these things better than we ever did. And so really, just how do we update these laws for a 21st century economy that's going to support all the stuff that Daniel and Elizabeth just laid out? That's really the central question.
- [25:37]
Ed Crookes
Right? I do agree that, as you say, is the key question. But I have to say, Daniel and Elizabeth, hearing both of you talk, it seems profoundly depressing. It seems like one of those things. The problems seem so great, they're kind of unfixable. And as you say, Daniel, there have been efforts in the past, certainly through the regulatory process, through ferc, there have been these efforts to try and improve things. My fundamental question, I guess, is is any reform possible? Is any useful reform possible? But I suppose perhaps being slightly less despondent about it, if reform is possible, what form would that take? What are the steps you think that would actually make a material difference to expediting investment in the grid in the US what are your thoughts?
- [26:26]
Daniel Polkin
So I do think reform is possible, but it's not guaranteed. And it's important for the public, for affected industries, and especially the consumer side. When we're focusing on the grid, it's so often a focus around which generation source wants to connect. I personally don't care about that. I care about this from the consumer perspective in delivering power that is affordable and reliable to the consumers, that the entire economy depends on our grid. So as for why I think this is possible, take stock briefly of the energy policy ecosystem. We went through a period after ARRA, the Recovery act in 2009, which was itself coming out of a period of the big energy legislation. In 2005 and 7 it seemed like we were on a roll kind of legislating and advancing energy policy. 10 year period where we did next to nothing. We just had tax extenders fights and we lifted the oil export ban. But then in 2020 we did the massive Energy act of 2020 which fed into the bipartisan infrastructure law. That then was followed by the ira, which was obviously amended by the one big beautiful bill. And you had the CHIPS and Science act and you had the Fiscal Responsibility act which had permitting provisions on nepa. So Congress has been legislating on permitting at a tempo of at least once per year. And it's doing so in partisan congresses of either side and it's doing so in bipartisan congresses. And this is a change. And so as for like what would we do on transmission, there's a different menu of options. But the core thing is something that is big enough to kick the ball over the hill. What I mean by that is the problem with transmission. We have done a lot of legislating on it in the past that has moved the needle on paper and not in the real world. In Epact 05, the 2005 bill, I referenced three transmission policies. One that ran through the PMAs, one that was the so called Backstop Authority. One that was one that was a consolidated environmental review process. They all fell flat. It's been 20 years since that policy. Zero transmission lines permitted as a result. And the lesson I take from that is that you have to do something that is not just moving incrementally on paper, that is kicking the system into gear. And so when I was on staff on the Energy Committee working for Joe Manchin, we negotiated in a bipartisan manner a bill with ranking member Barrasso's office. And that bill did a great job laying out a framework for how we could develop large scale transmission. It required FERC to make a rulemaking directing these 10 regions in the country to pair up with each other and plan inter regional transmission lines that had broad benefits, but just for affordability and reliability, not touching things that either party disagreed upon. And then we backed it up with a backstop siting authority that already exists in statute, but was made more objective and easier to use by FERC instead of something that ran through the more political Department of Energy.
- [29:03]
Ed Crookes
Right. And in a moment, I want to get onto the politics and the way Congress might decide on these things and whether it could be possible to pass something like that Manchin Barrasso bill in the present Congress. Before I do, though, Elizabeth, maybe just to get back to the policy with you in terms of what you think would make a really material difference, what do you think are the changes that really would help the industry?
- [29:28]
Elizabeth Horner
Yeah, I mean, I think speaking on the permitting side, it needs to be like I said, there's the transmission part, the permitting part. The permitting part affects everyone. It affects transmission. It affects different types of generation sources, it affects new steel plants, it affects semiconductor fab facilities. And so we really need for there not to be what's perceived as the whipsawing back and forth. You know, are you the favored technology of the day? You know, having spent time on the Republican side from 2017 to 2024, we saw sort of natural gas and coal have a more favorable administration and then a very disfavorable administration. Now I think folks in the wind and solar are experiencing a similar and that going back and forth makes it very difficult. And so because they are broadly applicable statutes, we have nibbled around the edges. There's been examples of limited permitting reforms. I think the Fiscal Responsibility act was a great example that it applied to everyone. And that's what folks need. I like to do, I'm sorry, refresh.
- [30:29]
Ed Crookes
My memory on that one.
- [30:30]
Elizabeth Horner
Which one with the Fiscal Responsibility Act, Responsibility act included.
- [30:35]
Ed Crookes
This was post in which year went.
- [30:36]
Elizabeth Horner
This was passed in 2023. 2023. It was largely about the debt ceiling and other much larger issues. But as part of that was the first time that the National Environmental Policy act had been amended in 50 years. And so that showed and I think built trust. And this is something I saw on the Hill. And I think it's built despite the rhetoric. I mean, I think it's building that these statutes, there's this fear if you open it up, the sky is going to fall. I worked on a carbon capture provision that opened up the Clean Air act. And at the time people said, oh no, we can't do that. You know, you're going to try to sneak in this and you're going to argue that amendment's germane. If you have trust among the negotiators and I think on both sides of the Capitol at the legislative level, they can Maintain that trust. There's obviously some, you know, a lot of tumultuous currents right now, but they can maintain that trust if you have a common understanding of the goal. And I think that's what we've been missing today. Where do we want to end up, where do we want to end up on permitting and where do we want to end up on transmission? That first principle, I think we've seen fits and starts. I think now that all generation sources are being impacted, we're starting to realize the problem is the same for everyone. And that's really when you have an ideal environment for legislative involvement. Because no matter what your values are as a Democrat or Republican, I want to build more natural gas pipelines or export more coal or I want to increase our use of solar and wind and geothermal. You need the same thing. And that's kind of the prime environment I think we're seeing now.
- [32:09]
Ed Crookes
So, Jeremy, what's your view on this from the renewables industry's perspective? What is the end point that you think we want to get to?
- [32:17]
Jeremy Horan
Yeah, I think it's interesting. You know, right now I think just certainty and stability would be nice. We hear consistently, you know, you mentioned the whipsaw back and forth. And so I think, you know, within the industry, particularly with the changes to OP3 and other things, you know, I think people are really focused on like, let's get our projects moving. Let's, you know, we need to get them going, get them in the ground. You know, these are the lowest cost resources. This is the vast majority of what's in the interconnection queues that can serve the really rapidly increasing load. And I think that's another factor. We haven't, Daniel, touched on it a little bit, but I think this is one thing that's a little different from even last year's permitting discussion is this acute recognition by members of Congress on both sides of the aisle in both chambers of Congress that in order to win at AI, in order to support our advanced technology, national security and economic development, we need a ton more electricity. We've got to get it on the grid. And so I think for us, ACOR represents the whole value chain. Investors, developers, everything in between, really. Just certainty, stability. Certainly some shot clocks or timelines would be helpful on the judicial review and other things.
- [33:29]
Daniel Polkin
But yeah, I want to piggyback off that. I mean the load growth thing is a really game changing dynamic for folks on Capitol Hill. It affects its. We're trying to build new manufacturing, we're trying to build data Centers, it's not a mystery. We're not trying to swim our way through a new space that we've never been in before. If you look around the country, right. This is a little unfair to some of the states, but roughly 49 states right now are really convulsing trying to figure out how to handle what is ultimately 2, 3, 4% annual load growth. One state.
- [34:01]
Ed Crookes
Sorry, I was just about to say.
- [34:04]
Matt Christiansen
Which is the exception?
- [34:05]
Daniel Polkin
Yeah. Who is the exception? I would argue the exception is Texas. While the rest of the country on average has been completely flat for the past decade, Texas has quietly been growing load at 2 to 3% per year. Now what is different about Texas, they have their own grid and they do a few things differently. They have an interconnection process that is, I think, the envy of a lot of other regions. They make it easier to cite things. It's the only state with no state siting authority that also bans the counties from placing restrictions on sightings. And they have good resources, they have good gas, good wind, good solar. They also have planned large portfolios of very long range regional high voltage transmission. Spent about $8 billion on it and have compounded those investments over the years. Those investments, by the way, they didn't just benefit the gas generation or the solar generation or the wind generation that got built as a result of it. They benefited load right where they were building those lines in West Texas in the mid aughts. You know what was happening then, that was the shale boom. The US was embarking on what would turn out to be the largest and one of the most successful industrial projects in the 21st century. And if you're, if you're doing that, it really helps to have a bunch of cheap available power already wired up right in the region. So sometimes, you know, you shouldn't generally build transmission with a, you know, we hope some new industry unforeseen will materialize around it. And we thankfully don't have to do that today because we can see the industry squarely. It's data centers, it's AI, it's these, these innovative technologies. But even in that case, where you didn't expect it, you had a massive growth of new demand that the Texas transmission build out. The competitive renewable energy zone lines served that load.
- [35:39]
Ed Crookes
Yes, that's really interesting. And actually if you look now at the national numbers we compile this data, Wood mackenzie, in terms of where companies are planning to put new data centers, where they're getting interconnection agreements from utilities, Texas is right up there as One of the top states, I can't remember the numbers now exactly, but certainly one of the top states, if not the absolute top state. I want to go back, Elizabeth, to something that Jeremy and Daniel have both been talking about, which is this question of this sort of international competition and the fact of the United States perhaps being seen as lagging behind China in energy investment and this being seen as a really critical issue now for national security because of the link between energy and AI. Do you think that's changing the debate in Congress? Is that making a very profound difference to the way that people think about these issues?
- [36:28]
Elizabeth Horner
I would say somewhat. I would say it has two effects. The first is I think the stakeholders who are engaging energy issues in the energy sector for permitting writ large has generally sort of been the poster child. I remember I was speaking on the Hill with a company that was traditionally one that didn't trigger nepa, the National Environmental Policy act. And they said, well, we just want an exclusion. And I said, well, that's really hard to do legislatively. They're like, but this is really hard. And so that was really. And this was a household company name. They just didn't even really know what NEPA was because they hadn't had to wrestle with it. And so I think by having more of these domestic onshoring, that's something, I know AI is the driver, but it's also domestic onshoring of manufacturing and those sort of jobs. It's new stakeholders, new interests. And even if you're not from an energy state, you're suddenly hearing from folks now who say I need this power or I'm trying to build this type of facility or I've gotten federal funding now and I'm concerned about triggering more requirements. So that's one, one thing. The other is certainly, I think Covid exemplified the effects of our supply chain current structure. You know, it wasn't just toilet paper. There were a lot of things that, that were affected. And we realize that we need to do more here. Critical Minerals is a great example and those have applications in defense, certainly energy context. And so I think that that's something that the defense community had been talking about, but now we're seeing it in consumer products too. And I think that bigger tent means A, more folks are advocating B, when if you're from a place that doesn't have a lot of energy development but you're in the grocery store, and I'll pick a random state, Connecticut, you're now hearing from your constituents. And that's what really, I think Energizes the issue.
- [38:16]
Ed Crookes
Yeah, that's really interesting. What about affordability then, in that context, as you say, in terms of what members of Congress are hearing from their constituents, that seems to be the issue that's absolutely racing up the political agenda because electricity bills are rising significantly faster than the general rate of inflation. It's something a lot of people are becoming more concerned about. Do you think that creates pressure for reform? What do you think?
- [38:41]
Jeremy Horan
Oh, for sure. I mean, it's. It's a fairly major issue in the New Jersey governor's race right now. And just recently, you know, PJM was getting raked over the coals by the governors and the state legislators that serve that region. So it's definitely an issue that people are paying close attention to. Although it was interesting. I was just. There was a study that came out recently from Lawrence Berkeley Lab where they, they looked at some of these things and one of the interesting takeaways of which there are many, so apologies to them for probably over shorthanding and picking out only one thing. But they were looking at states where costs stayed relatively even even as demand has grown, adjusted for inflation. And those were states where more generation got on the grid. So it's really interesting where you're able to build and get those electrons onto the grid and to serve consumers. Fun fact. When there's a lot of supply, the price comes down. And so I think that's something to be looking at. But I should also note that Daniel is wearing a PJM merch tie, which I did not know that that existed, but I needed to make sure that that was flagged. As we talk about pjm.
- [39:50]
Ed Crookes
Is this symbolizing your defense for the beleaguered PJM organization, which, as you say, has come in for quite a bit of criticism recently.
- [39:57]
Daniel Polkin
I consider this having done my part to support the organization. Obviously PJM is under a lot of strain right now and is working hard to address these problems. But to echo what Jeremy said, that LBNL report was, I think a really good reminder. The finding he was mentioning where they looked at all the states in terms of all 50 states and said who grew load by how much and plotted it on the X axis and whose rates went down or up from 2019 to 2024 and plotted it on the Y axis, clear negative trend. The states that grew load more had rates go down. Now that past performance is not in this case a guarantor of future results, it is probably going to be the opposite. The difference with that load growth and the load growth we're seeing now is one, it was modest, other than in places like really Texas and North Dakota and one or two other states. And two, it was happening selectively. There was a selection bias for states that already had the spare capacity on the grid. So things like Texas's Crestlines, things like the 765kV backbone the AEP had built throughout much of the Midwest, you had a lot of capacity. You often had easier permitting laws than in other parts of the country to bring things online. And it is a good reminder that we are not fated to have higher costs because of load growth. Everybody talks about this fatalistically, but if supply can keep up with demand, you can lower costs. Because the whole merit of the grid is it provides economies of scale and it provides redundancy. And the bigger it is and the more interconnected it is, the more of those things you have.
- [41:23]
Ed Crookes
Yeah, that is a fantastic point. And as you've been saying, that Lawrence Berkeley National Labs report is really interesting, would very much encourage anyone listening to this to go and check it out because it is really important piece of work. But as you say, that is really important context and that really helps kind of understand it. As you say, what's that warning about investments? You know, past performance has no guarantee of future returns. It's not necessarily true that the future will look like the past. So I want to wrap it up here then by just thinking about the future and just really thinking about realistically what is possible and what would success look like. So we've been talking about all the reasons why permitting reform is desirable, some of the reasons why it might actually be be possible to make progress in Congress in the near future. If we were to reconvene a year from now, or let's say, maybe by the end of 2026, what could we hope for? Perhaps, maybe put this two ways. What's the best we could hope for and what perhaps is the most realistic outcome? Maybe, Jeremy, start with you on this. What do you think?
- [42:33]
Jeremy Horan
Well, it's a date, Ed. We'll put it on the calendar.
- [42:36]
Ed Crookes
Let's do it. Okay. It's a book.
- [42:38]
Jeremy Horan
No, but I think, you know, best case scenario is we get, you know, a big bipartisan permitting package that gets something like 80 votes in the Senate, the President signs, and everyone is comfortable that, you know, it's going to be executed effectively over the next year, and that that encompasses all of the things we've talked about in terms of, you know, probably the bones of the Speed act and the work that is going on in the Senate on transmission as well as NEPA and other things. So that would be sort of the best case scenario. And frankly, getting it done before the end of this year would probably give folks time to really utilize it. So I think that would be our best case scenario and I'll probably stop there and let somebody else do the less.
- [43:20]
Ed Crookes
What's that old meme format about? You want, you'll settle for, you'll get, but okay, that's the one. Daniel, what do you think?
- [43:27]
Daniel Polkin
Like Jeremy said, you're going to need something that ties together a lot of these different pieces that bring in different segments of industry, that bring in the data centers, that bring in the generators, that bring in utilities, that bring in folks who are outside of the energy sector looking for sector agnostic permitting reform that helps them. So it's going to need to have reforms to NEPA and other environmental statutes that have been on the books for a while. And there's a broad acknowledgment of a need updating. You're going to need reforms, I believe, in the Federal Power act and in the transmission space. I'll speak a little bit to that and kind of what I think is needed there. I think really you have two principles and that's all you need to guide you. One is that you have to kick the ball over the hill. You have to avoid what I describe as the round down to zero problem, where like I was saying earlier, you pass a policy, you celebrate. It looks like you did good on paper. Twenty years later, you check back on the policy or policies that you passed and you find, oh look, zero transmission lines have moved through them. That is a real problem. You know, I'm a physicist by background. I think of it as like a potential energy problem. You just have to clear that that hurdle. Second thing is you have to do it in a way that protects ratepayers. There are ways to build out transmission that would broadly shift or socialize costs. Congress is going to need to steer clear of those. Not only are they bad policies, they're policies that would stoke a lot of political division. And so you need to do something that puts the cost where the benefits are and makes sure that the benefits are in excess of the costs for the folks who are having the lines built for them, whether that's residential consumers or AI or manufacturing or new electrified technologies. What? Have you got it?
- [44:58]
Ed Crookes
Thanks. So, Elizabeth, then what do you want to say? Do you want to talk about what we need or what we're going to get?
- [45:03]
Elizabeth Horner
Yeah. So, I mean, I'm ever an optimist. And you know, I'd like to say we'll get it done by the year. And you know, I think the folks around this table are committed to, to trying to make that happen. The pragmatist on my shoulder would say, you know, over the next year, I think, and I'll just sort of name the broader political factors that I think are going to push that. First of all, I think you do see this administration is pushing policies and initiatives faster than I think anyone could have imagined on in certain areas on the energy dominance agenda, announcements about batteries, critical minerals and those projects, like I said, like others, can begin to run into some of these issues. And so, so to sort of execute on some of those initiatives, legislative reform really is the answer. So you have that the administration sort of energy in that space. Then you have in Congress the surface transportation reauthorization is coming up right in the next year and that the IIJA or the Bipartisan infrastructure Law that was really a catalyst for a lot of additional policies. Although it started as Senator Capito and her staff at the time like to say, it was all about the federal highway bill sort of to start became the, the Christmas tree, if you will, that other ornaments were added onto that ultimately became the IJ that's happening right now. And then the third thing I would say is we talked a lot about the energy tax credits in general earlier today, but there was the broader tax package. Right. And I think what, what we hear from sort of corporate America is a lot of the non energy related tax are very helpful for bringing on new investment right now. You know, making permanent R and D expense, expensing, bonus depreciation. Those sort of issues have created a lot of economic opportunity, I think. And so I see all those factors really elevated right now. And so I think, you know, maybe they can catch a ride sort of on this, on this transportation effort in the next year.
- [47:04]
Ed Crookes
Well, it'd be great to talk to you all a year from now to see exactly how much of that has worked out. But for now, unfortunately we do have to leave it. But it's been great talking to you all. Jeremy, thanks very much indeed.
- [47:14]
Jeremy Horan
Thanks so much for having us. Ed.
- [47:16]
Ed Crookes
Daniel, thank you. Great talking to you.
- [47:18]
Elizabeth Horner
Pleasure to be here. Thank you for the invitation.
- [47:20]
Ed Crookes
Likewise. Great pleasure for us. Thank you very much indeed. So that's all for this first episode of the Energy gang from the ACOR Grid forum in Washington D.C. huge thanks to Matt Christensen, Elizabeth Horner, Jeremy Horan and Daniel Polkin for joining us. And to ACOR for hosting such an insightful event. If you enjoyed the show, please rate and follow us wherever you can you get your podcasts. And stay tuned for our next episode from the Forum, which will be coming out on Monday, November 3rd that will also be available on our YouTube channel where you can watch the conversation on video. Just search for energy gang on YouTube. Until then, goodbye.