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A
The energy industry is changing faster than ever. So to make sure we're helping you stay on top of every development, we'll be adding some extra shows to the schedule over the coming weeks. First up, we'll be at New York Climate Week speaking with leaders in clean energy, finance and policy and partnering with our good friends at NYU for a very special panel discussion with some big names from companies including Nvidia and Amazon. That episode will be out on Friday, September 27th. So mark your diaries now and we'll also have lots of extra shows throughout the week of September 22, so make sure you're following the show wherever you get your podcasts. Hello and welcome to the Energy Gang, a discussion show from Wood Mackenzie about the fast changing world of energy. I'm ID Crooks and we have a lot to talk about on this show. I was talking to someone in the energy business a couple of days ago who said that when the histories are written, this may come to be seen as a pivotal week for our energy system. I guess you could say that when they finally make the energy transition, the movie these last few days will be a pivotal scene. And to explain these momentous times in the world of energy. Can't think of anyone better to talk to than our good friends Amy Myers Jaffe and Melissa Lott. Amy is the director of the Energy, Climate, justice and Sustainability Lab at New York University. Hi, Amy, how are you? Are you feeling the hand of history on your shoulder?
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B
I do feel the hand of history on my shoulder big time.
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A
Yeah, absolutely. It's certainly going to be a lot to talk about on this show. And Melissa is the partner general manager for Energy technologies at Microsoft. Hi, Melissa, how are you doing? Great.
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C
We've got apparently about 9ft of snow coming to us here in the Sierras, so it's quite an interesting week here too. But I'm excited for the conversation and.
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A
As usual, of course, Melissa, with you. We have to note the standard corporate disposal disclaimer. Anything you might say in this show is very definitely your own opinion. Doesn't represent the views of Microsoft. It's not official company policy or anything like that.
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C
Exactly.
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A
So a very big week in energy to talk about, and I think so. When people talk about this being a historic moment in energy, they're really talking about the convergence of two things happening just about simultaneously. The first, of course, is the inauguration of President Donald Trump, the barrage of executive orders that he launched on his first few days in office. And. And we'll talk about those in more detail in a moment. But Then the other thing that happened was the release of this new Chinese AI model, DeepSeek. Lots of fascinating aspects of that story, but for our purposes, of course, what we care about is what it means for energy and in particular the question of what it means for energy consumption and the demand that there's going to be to support AI in the future. Because it seems like the energy needed for training Deepseek is a lot less than for the earlier generations of AI models. I've seen a lot of numbers flying around, but it seems like Deepseek's power consumption for training the model could be just 10% or 5%, maybe even 3% on some calculations of what's needed for the previous generation of models like OpenAI's ChatGPT, that could potentially upend everything. We've been thinking about how AI is going to cause this huge surge in demand for electricity over the years to come. So, Amy, maybe come to you first on this one. What do you think?
- [03:25]
B
So I'm always, I'm a big believer in markets, as you know. So the first thing I did was look up what happened to Constellation stock and what happened at like a big firm like eqt, which was had its whole fortunes changed by the idea that we were going to need more natural gas.
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A
Yeah, footnote for the listeners then. So Constellation, one of the big independent power generation companies and indeed very important.
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B
Because Constellation serves the region that has the most data center demand and also the data center demand that serves the U.S. government and the security apparatus. And so therefore they were talking about national security today when we talk about electricity. And so they were like the important utility, not that all the other utilities aren't important, but they were like dead center. And they had made the striking merger with Calpine, another independent energy company, but that also had a lot of natural gas assets. And so people were really focused on them because they did this historically large merger deal. So let's just talk about their stock for a minute. Their stock was $347 on January 24th. It went to a low of 274.79. And now it's back a little bit. It's 299.90. So the market has adjusted. I think in their mind that maybe all this power demand hype was too much hype, but maybe there's still going to be even with an efficient model. The question is, could I come up with even more things to do? And so it's still going to be high on demand. And then, you know, think about It. I mean, then the question is, what does the Trump administration do with the Inflation Reduction Act? Because a lot of the hype was on data centers, but we also had electricity demand was gonna trend upwards based on new manufacturing and. Or electric vehicles, but I think new manufacturing was the more significant. And so, you know, it's kind of like, where are people now? Cause a lot of uncertainty. But for the natural gas producers, EQT is an interesting company because they're a big gas player, and they're in Appalachia. You know, they're not kind of down in the Gulf coast with surging lng. So their stock had been in the doldrums before the election. You know, at around $35, they were up as high as 53. But then after January 27, they fell to a low of 47, 46. And now they're sort of back to 51, 30. So there is this sort of milling around of investor sentiment over how do we parse the uncertainty and do we overreact? Are we underreacting? I still think the jury is out on that.
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A
Yeah, it's absolutely fascinating. And I do think that's a really interesting aspect of the times we live in now that, as you say, company like eqt, a natural gas producer, its stock is in some ways behaving like a tech stock, because people make that connection between data centers and power, and power to natural gas to generate the power. And therefore, if you're a natural gas producer, you're in some sense part of the AI value chain. And so it's a telling example of the world we're in now where we're seeing these kind of market movements. So, Melissa, what was your reaction to all this, and what did you make of these market movements? Are people underreacting? Overreacting?
- [06:58]
C
I had the first reaction of something we've talked about before on the show, which is, okay, well, where would these impacts happen? Right. Because we've talked about expanding electricity demand and how it's not smooth. It's corridors where ev, you know, charging stations have been built out. It's corridors to Amy, which Amy just said, where manufacturing investments have been or are being made. It's places where you would have data centers or just other sources of big electricity demand. And so I started sketching that out, and I. I think overall, and I'm curious if y' all have seen different numbers. You know, does it change the overall story for me in terms of where I expect global electricity demand to go? No. Could it have local impacts? Yes. And when I say no because I saw your reaction, Ed. What I mean is, do I still see a growth story overall given everything going on? Sure, but could it have some significant impacts in some regions? Maybe, but the jury's still out. But I just ran the numbers first.
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B
Well, and data centers are like 1% exactly at the margin. It's not even big at the margin. Right. So I think the point is what's hype and what's real? In the US we tend to think about PJM and the different regional transmission system areas. So in a particular region, it can be really different. And so the question really becomes, is there really somebody still out there shopping around to locate a 1 GW data center in the United States? And if so, where do they want to plunk it down? And there were a lot of unrealistic dialogues about that. You know, people are talking about building a natural gas thermal plant behind the meter. And, you know, I was talking about that with some of the hyperscalers and, and people were saying, well, let's talk about that. Number one, is there fiber optic cables and capacity that's big enough to make that worth doing? Number two, natural gas can't go off either. So this plant can never go on maintenance. It can never shut down on maintenance. What's your backup for that off the meter thing if you're not connecting to the grid? And so there aren't really these really promising locations with stranded gas when you really met it out to do these kinds of things. And then if you're a very environmentally oriented hyperscaler, do you trust a company, if they come to you and say, hey, we're gonna do natural gas right now, and then eventually we're gonna put in ccs. Do you think you're gonna get to the CCS part? And if you do get to the CCS part, it can't be for enhanced oil recovery. So it would have to be storage. So then you have to be scientifically sure of the storage technology. So I think that a lot of what was said was complex and then, you know, power to Microsoft again. Melissa, I'll say it for locking down one of the three locations in the United States where you could restart a nuclear plant and Therefore obviate the 10 to 15 year timeline to do a greenfield project. There's just a lot of swirling around of talk, talk, talk, talk, talk. But then when you get into the weeds of where would I actually build one of these things if I was building from scratch and what kind of energy source is actually available? It becomes a Much more sanguine conversation where all these options that are being overly talked and you know, stock, people's company stock is going up and so forth. You know, we're not really into the details of where, like Melissa's saying, where is the actual demand and how would you meet that demand in that actual location?
- [10:37]
C
Okay, let's go back to North Star's fundamental truths. Like what are we saying? What did we know before all of this demand projection conversations started, right? And, and when we looked at, okay, we're about to hit an inflection point or not, how big is it going to be? I talked about this last year in Congress, right, Which is that we knew this was coming and also we knew that. Let's focus on the United States for a second. I'm going to move away from Global because it'll simplify the following comments. We knew that our electricity system and our energy system was aging. We knew that the infrastructure was not where we wanted it to be. None of that changed. Like none of those fundamental underlying things have changed. We still have wires that still need to be improved. We still have power plants that we've got to make decisions on. We still have to make decisions. What are we going to build? Where as a country, and we are so far from the only country that has that set of aging infrastructure that we still have to make choices on. And so I don't mean to minimize the conversations this week at all, and I'm not going to, but those things are true. In absence of this entire conversation, in absence of the inflation reduction act, in absence of of all of these actions that are filling the news right now, we still have an aging grid in the US we still have issues with reliability. We still have those problems that require investment to fix. That's what I see.
- [11:47]
B
Melissa as you and Ed know, I have a major research project going on looking at virtual power plant and demand management and some of these battery storage and some of these things that utilities can utilize. And so I was talking to a major US Utility a couple days ago and I had told them, I'm doing this thing on vpp. And they were like, you know, let's talk about that again, because there have been these sudden shakedowns where there's congestion in a very localized place and the grid goes down in a place that it never went down before. And VPP is a faster and more efficient solution to something like that than planning a new power station to be built.
- [12:35]
C
Amy I just want to double click on something that is in the heart of a Lot of stuff I think, that you're talking about, which is that this whole conversation is huge. It's in the news. Can we all just back up for a minute and think about a dozen years ago, 15 years ago, when was electricity hitting the headlines like this? No. And this is actually signaling to me that regardless of any one change, we make it in any one part of a system or don't make it any part of one system. We're at an inflection point. We're at an inflection point where we have so much going on in that system that is aging that we are wanting to use more, that we have to make some decisions. And so, you know, it's great to have this conversation about what a certain announcement might change. But putting it in perspective about, okay, how much does that change actually, what needs to be done next? I'm going to argue that it doesn't if you're a government regulator. It doesn't if you're, you know, looking at the overall electricity system, the exact. On the margins and regional changes. Maybe, maybe when I look at the numbers, but globally, we still just need to invest more in the system. That's the numbers. That's the fundamentals I'm seeing. I think I see you nodding, but y', all, like, argue with me if you think that I'm totally off base.
- [13:42]
A
No, I wouldn't argue with you at all. I think that's absolutely right. And I think just taking it back to the market movements that Amy was talking about earlier, my interpretation for a lot of their stock price moves is just that there was an enormous amount of hype. These stocks had run up a very, very long way, and people were looking for an excuse to take some profits and maybe let a bit of air out of the market in some of those companies. And as you're saying, Amy, actually some of them have been coming right back up again or recovering at least some of the losses that they've made.
- [14:12]
C
This is us, Ed. Okay, so you say that, and I'm going to counteract with this very positive view on things. It's very optimistic, which is. I'm encouraged, because people are okay. So what this shows me is that people are trying to make decisions as well, and they're unsure because the world is not full of people who study energy like we do every day and every moment of every hour. So, Amy, it's like folks like you, folks like I used to work with at Columbia, who are out there kind of dispelling myth hype from reality. Such an important role right now because you've got a bunch of folks making a lot of decisions who don't live, breathe, eat, sleep, the energy industry and helping them understand does this change things or not? Like, that's a really, really important role. And I'm so glad that folks are filling it, including you, Amy. Like, I'm so glad.
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B
I gotta tell you, for the first time and maybe ever, I have people from the nuclear industry having my phone number on speed dial. Like, I haven't thought about nuclear. And I mean, I did a study on nuclear back when I was at Rice, so I'm not gonna say how many years ago that was. Cause it'll date me like two. Yeah, right. But, you know, and you and I, when we had a conversation earlier this week, you know, off the mic, you asked me this question, which I'd love to ask Melissa, which is, what is baseload today?
- [15:27]
C
Oh, man. Or can we really, Ed, can we open this up? I really.
- [15:31]
B
Is there baseload? I mean, is there baseload anymore?
- [15:35]
A
Okay, can we do this? We can do this. And I would love to have this conversation, but before we do, because I think it's a great segue into kind of the second half of the show, which is gonna be talking about President Trump and what his administration wants to achieve. And baseload is an absolute priority for them. And if you hear Chris Wright going to be the new energy secretary, if you hear Doug Burgum, who's the new Interior secretary, talk about this, they use the word baseload a lot. And so I think it is really important to kind of interrogate what we mean by it and so on. Before we get off the subject of AI, though, I had a few other points that were kind of, I'm burning to make about AI.
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C
So fine, fine.
- [16:12]
A
One is again, a kind of taking that step back. My other conclusion, Melissa, which very much relates to what you've been saying, a lot of people don't follow energy all the time. I don't follow AI all the time. Right. And so when news about AI breaks, it comes often as a surprise to me. Seems like it comes as a surprise to a lot of the world. The conclusion I draw is that this is a very fast moving industry, very volatile industry. A lot's happening. Literally nobody'd even heard of Deepseek. No one knew that even there was a company working on this model until they made their announcement last week. So it is just fundamentally difficult, I think, to predict what's going to happen. Second thing I think is that improvements in energy efficiency won't necessarily lead to reductions in energy consumption. In fact, it's quite possible exactly the reverse will happen. It was great to see Satya Nadella, CEO of Microsoft, tweeting recently about the Jevons Paradox, which is exactly that. I'm feeling a bit like the fan of a cult band that's now gone mainstream. I read about the Jevons Paradox and AI almost a year ago. I liked it when it was still playing the small clubs, but still, it's kind of good to see it going mainstream and people talking about it. And this is the idea basically, that as energy efficiency increases, energy consumption will rise because you can do more with the energy. You want to use more energy to do more work. I've got the quote, actually, because I wrote it down from Jevons. He said it is wholly a confusion of ideas to suppose that the economical use of fuel is equivalent to a diminished consumption. He was talking about coal there in Britain in the 19th century. But principle still holds pretty good today, right? Do you think? I mean, what's your take on that?
- [17:58]
C
So you're looking at someone who. A big part of my master's research thesis at UCT Austin when Michael Weber was my advisor like two years ago. Amy.
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A
Right.
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C
This is like 30 seconds ago. No, when he was a brand new professor. But I digress, was on the Rosenfeld effect, which is this idea of like a negawatt, of like how you actually implement things that increase energy efficiency and then what that does over time to like temperature, you know, per capita demand or demand for a service. And I think it's what you say.
- [18:24]
A
And sorry, just to dig into that, what is the Rosenfeld effect? What does that mean?
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C
Yeah, so Art Rosenfeld created this concept of like a negawatt, so the idea of like, you can actually increase energy efficiency. He was studying at the time what happened in California decades after they'd implemented like housing standards, energy efficiency standards, and a whole bunch of other policies that affected how energy was consumed and what, what things were put into particular buildings, but other systems to decrease the amount of energy you need to achieve a certain outcome known as a warm house in the winter and a cold house in the summer and those types of things, or a cool earth and have the outside temperature house in the summer. And so within that, it's this idea of like, okay, can you completely get rid of demand increases with efficiency? And at least when I study history, the answer is no. Globally. Let's go back to how many people don't have electricity access, how Many people don't have reliable electricity, access all these things. Yes, efficiency is really great, but it doesn't change the fundamentals of increasing energy demand.
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B
Let me push back a little bit.
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C
Go for it.
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B
We do know globally that the link between economic growth and energy has shrunk over time because of efficiency.
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C
Right.
- [19:41]
B
So energy intensity, which is a different word, energy intensity of economies has been shrinking, and it's actually helped with greenhouse gas emissions. To the extent that you're using the AI or other kinds of digitization to eliminate a high use of energy and to lower the energy intensity of your economy, you can actually make progress and actually have demand go down, even if you're doing more stuff.
- [20:12]
C
Oh, no, but being very clear, I'm talking about places where there is essentially no demand right now because there's no infrastructure and access. And I do think it's pushing it a bit far if we don't acknowledge in those places, no matter how efficient you go, when you're going from access to one light bulb and you might be able to charge your cell phone to, like, a full economic development situation, we should be efficient. First fuel all the things I've talked about for years on this show and through my career. But that's the thing. We can have a US conversation, an OECD conversation, but then the global conversation, those places come into it. So I think we'll do more over time as we have more access to energy and as we need less energy for every unit of more stuff we do. Sure. That's what history teaches us. Absolutely. But to argue that there's waste in those systems that I'm referring to, it's like we all know they're not. So that's just to clarify, Amy. That's what I was pushing on. It's like globally, this is. What do I know globally, when I look at all these diverse sets of countries, some of which are still very much in the developing and emerging space.
- [21:10]
A
Are you saying, Melissa, that the Rosenfeld effect is basically sort of the opposite of that is where increased efficiency does lead to reduced consumption? Because, as you say, you get a certain level of energy services, you get the outcome you want, and you don't need to go beyond that. So there's a kind of a limit to demand, and then as you increase efficiency, you can just reduce consumption, and you can imagine those two effects kind of being at play. And sometimes one will be more relevant, and sometimes the other will be more relevant. And it's actually very complex and difficult to know in advance which will be predominant and you kind of just have to see by experience and empirical research which wins out.
- [21:51]
C
So the Rosenfeld effect did. Was it focused in on per capita energy demand and it showed how actually we can stabilize it with existing technologies, like in households, existing technology and all of that. And so what ends up happening is, okay, you have increasing populations, of course, per capita you multiply and then you might see demand increases, all that. You may also see locally these relocation of an industrial facility. And if it comes into your system or leaves your system, you're going to feel that effect, those types of things and you can make it efficient, et cetera, et cetera. But I think the point of all this, if we just distill it down, is that efficiency is an incredibly underutilized tool in the system. We all know that, like there are so many opportunities to reduce waste that, I mean, low hanging fruit, first fuel. How many International Energy Agency reports do we need on this? How many? And I could go down American site for energy efficient economy. I mean, go take your pick, there's so many. And it's also very clear that it's very hard to get efficiency into systems when you're talking about distributed houses that were built 50 or 100 years ago and would need major retrofits. But it is a different conversation when I'm talking about, you know, different types of things in my house or otherwise that maybe have a higher turnover rate, whether it's a toaster, an iPhone or something else, where you could see those effects of big changes and big advances in material science and energy efficiency hit you in a very different way. And so what is the overall takeaway of this conversation? We're seeing lots of changes in the system. I think it can all make us humble about crystal balling it too much to the exact number we're going to see. And I think that's good. At the same time, when I'm asked, does this fundamentally change things when I'm having a beverage with friends who are also energy nerds. I mean, quote me later, y' all replay this in like a decade. I still think we're in a period of growth across the entire electricity system globally. At that level, we're still trying to figure out how we can meet increasing demand. That's where we are today.
- [23:48]
A
And again, just tying that discussion back to AI specifically, it just feels to me that because the industry is so new, because it's changing so fast, we just don't know what the feeling is. We don't know what the technology is going to be able to Achieve ultimately, we don't know where we're going to go with it, what the demand is going to be. And that definitely would incline me to think that there's going to be more upside there, even if we don't know what it is.
- [24:15]
B
To answer this question, if I'm doing more with robots, what are the people who used to be doing that doing? Right, so just patterns of consumption could potentially change dramatically. If they're all going on holiday with their basic income, that could put jet fuel demand up or. I mean, it's just so hard to think through when you're talking about such huge changes in how we live.
- [24:47]
A
Yeah, no, that's a fantastic point. And that brings me to something, I think, which is another thing I fundamentally believe about AI and energy, which is that the constraint here is going to be on the energy and electricity supply side, not on the demand side from AI. The potential demand for AI is highly uncertain and potentially enormous. We don't know. What we know an enormous amount about is the constraints on electricity supply. All the things you were just talking about, Amy, those things that Nextera have been talking about in terms of how difficult it is to get permits for things, how difficult it is to find a site to put a power plant, how difficult it is to get a grid connection, how difficult it is crucially to get all the equipment you need, the transformers, a topic we've talked about a lot on this show, to get the gas turbines for gas fired power plants and so on. All of those things are real, present, immediate material constraints that are going to determine how fast the power industry can grow in the US and around the world. And my sense then is that the tech industry, the AI companies, will take as much power as they can get, but they won't be able to get all the power they want because it's the supply side that's going to be constrained. Melissa, what do you think?
- [26:11]
C
I actually got to broaden it out, Ed, which is that when I think about constraints on economic growth, availability of energy is absolutely a part of that. I can remember three years ago sitting down with an energy storage company that shall remain nameless for the purpose of this conversation in California, and they were saying they were thinking about can we relocate, can we do these other things? Because the speed at which they were able to develop their technology was limited by if they could actually get their local grid upgraded quickly or not to get them a bigger fire hose of electrons, and then could the local grid supply that at the times they needed and the patterns they needed, they would shift overnight. They would do whatever demand shifting was needed. But they needed a fire hose, and they had, like, a little garden hose. And so it's one of those things where we seem to, in history find ways to use energy when it's available. So the question, is it available? And going back to the overall system, what I do see is we still haven't made the really big choices about how we're going to upgrade the whole system just as a society. Like, how are we going to invest in that? Are we going to speed things up? And we've talked about it at length in terms of what that does, in terms of concerns about the power system, and is it going to be able to meet our needs? Now, to your specific question within that. So the electricity system, specifically within the broader energy system. Yes. I see electricity having an increasing role moving forward. The numbers I talked about at the very top of the show, they still show that happening globally. Even if I, you know, make some wild, crazy assumptions that I don't think would be reality, it still has an increasing role.
- [27:47]
B
So, listen, the one thing that people do not seem to want to talk about, which I keep writing about, is electricity trade. Okay? So one of the ways around this question about whether or not I have all the generation capacity I need in a certain location, the solution to that in many cases is you're gonna trade electricity across borders, Whether in the United States, that means between states, or in the United States, that can mean getting electricity from Canada. And so in Europe, lot of electricity trade and a lot of, you know, now needing to police the security of that electricity trade. And debates about whether all countries in the AU should be paying for, you know, new nuclear capacity in one place versus another. Who's responsible for paying for new generation electricity? Trade is gonna be a big thing. We focus a lot here in the United States under the Trump administration on other kinds of trade. But I think there needs to be a moment where we sit and analyze electricity trade as part of the solution to these markets, because that's gonna be a big feature of it. The African Union is talking about how can they connect their four power poles to make African efficiency and capacity better.
- [29:10]
C
Yeah. And those types of decisions are going to be huge for how the electricity system develops. I will flag some research that's out of capsark. What is it? King Abdullah Petroleum Energy Research center in Saudi Arabia and Riyadh. Some work by David Wogan and his colleagues. Full disclosure. David Wogan was a grad school buddy of mine, but he went on to do fantastic analysis about electricity trade in the region, and not only, as I think about your comment about trade with Canada and the connections there. My Canadian electricity colleagues have frequently told me it's easier for them to connect with the US Than it is to connect across provinces, which I find very interesting in terms of the discussion point. But then I moved to other regions of the world where for geopolitical stability, for a whole host of different reasons, trade is done and trade is not even done in dollars. It's like here, I'll give you a cup of sugar today, you can give it back to me another day type of thing, because I want cheap you to have this stable electricity. So just some great work there. And it's a really important point.
- [30:04]
A
So that is a great point. I know, but go on, because we're.
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C
So excited to talk about baseload. So we're going to do that.
- [30:10]
A
I'm going to come to that right now. This is exactly the moment, because I think you've opened up a great segue to talk about this, which is, as you say, the importance of energy development and electricity development in particular for economic development more broadly. And that is clearly an issue that's right at the heart of what the Trump administration is thinking about. Obviously, they are jettisoning anything to do with climate policy, and they're focused on increasing energy supply for a number of reasons, both because they think it'll drive the economy forward, create good paying jobs, increase investment. They hope to drive down the costs of energy for consumers. And they also see a very important national security aspect to it. And one of the crucial national security aspects is that they see artificial intelligence as dual use technology with lots of military applications as well as civilian applications. They think there is an AI race now between the US and other countries, particularly China, along the lines of the space race between the US and the Soviet Union in the 50s and 60s. They do not want to get behind in that race. And they think that because AI needs power, therefore developing the power industry is an important part of strengthening national security. But there is a wrinkle in there, which is that they don't believe that all electricity is equally important and equally valuable. And if you read President Trump's executive orders, if you hear the statements from the members of the administration who are working on energy, they talk very specifically about reliable power and they talk about baseload power. And they're essentially excluding wind and solar and probably storage as well from their considerations of the electricity that they think is important to develop in the US and they're Very much putting the emphasis on developing natural gas fired power plants and probably keeping open coal fired power plants as well, and developing nuclear where it's possible because of this focus on baseload power. So promised we could have this discussion. The question first, I suppose is take a step back, think about first principles. Does the concept of baseload power have any meaning to you?
- [32:33]
C
Yes, yes it does. Oh, this is like such a pain point in my daily life for like, I don't know, at least a decade. What is baseload, what is dispatchable, what is firm, what is reliable? So this is. I'm going to pick apart a couple things. Y' all stop me, give me the wave when you want to hook me off stage. Because I'll say around baseload, I mean, this is something that was a term, right, that we used when we talked about the minimum amount of demand that would be on an electricity system at any given time. And baseload was kind of used to describe an operating condition where it's how that plant is operating, it's supplying that baseload power. So it's just operating even keel, not ramping up and down, supplying a set amount of energy over a long period of time. So it's putting that electricity in the system that is very different than the term dispatchable or firm. Which means I know I can call this thing if I need it, it is dispatchable. It can come into the system when I need it. It might ramp up and down, it might only come on for a couple hours or whatever is needed. But we're talking about a mode of operating versus the thing that the system can supply. I'm also going to pick apart reliability real quick, Ed, which is the idea of if you don't expect a power plant to run 24, 7, 365, you expect it to be able to do certain things. So I'll use the analogy of you expect someone to come in and do what I did in my first job, the 4am to 4pm shift. You're reliable when you show up for that shift and do what you promised you were going to do. You're unreliable when you don't show up for that shift and you don't do what you promised you were going to do. All right, so the idea of variability, meaning you're unreliable doesn't meet the sniff test. It's like one of those, okay, are you able to commit to something and do you show up? I don't care if you're committing to 24, 7, 365 or a two hour block. Did you show up for your shift? You know, that kind of a thing. But baseload. Oh, pain point.
- [34:24]
B
And did access to water affect whether you can show up or not? Did access to cooling affect whether you can show up or not? Right. Did a hurricane affect or a fire effect whether you can show up or not? So I think this whole baseload thing needs to be retired. What we're really talking about is how do I eliminate system congestion and huge.
- [34:52]
C
Risks that lay on top of each other doubling down on a single point of failure. Single points of failure are scary for anyone. One thing goes wrong and it takes on your system, that's a problem.
- [35:01]
B
And that could be, that could be a nuclear plant that doesn't have water. That could be, you know, that could be a coal plant that has a maintenance problem. So I really feel like in today's flexible system with ancillary services and capacity markets and storage, you know, we're in a really different technical systems landscape. And I really feel like in my conversations with utilities, when you get really under the nub of the nub of the nub, we're talking about how much congestion do I need to relieve when I thinking about expanding my system to meet rising demand? And where is that congestion? Because, you know, in some cases, a conversation I alluded to earlier, maybe that level of congestion is only at peak and only in particular locations. And maybe it could be relieved. Not with quote, unquote, baseload.
- [35:54]
A
Well, hang on. I can't work out then if you're agreeing or disagreeing with each other. So, Melissa, I heard you saying you think baseload's an important concept and it's something you think about a lot. Then, Amy, you're saying this concept should be retired and we shouldn't be using it anymore.
- [36:06]
C
No, no, we're agreeing. Because what I'm saying is baseload is not used properly. Baseload is a description of how a plant operates in a system. I don't, no offense to an individual power plant, if I was working at it, I would really care about how I was operating in that moment. Okay. I, I care about the entire system being able to reliably and affordably deliver me at my home that I'm sitting in today. Electricity. We got nine feet of snow coming. I want my lights and my heater to stay on. That's what I want. And so baseload describes how you operate in a system, but the concept I think that Amy and I are both getting at, but she's going to tell me if I'm totally off here?
- [36:41]
B
No, I think you're on.
- [36:42]
C
How do we get a mix of things that is going to provide us with that affordable, reliable 24. 7, 365 energy? And the reality is, given the tools in our toolbox today, we've talked about this on the show, the the answer is a mix of things. That mix mitigates some risk. The mix of things does include not just investing in supply, but investing in all the connective tissue infrastructure. So thinking about congestion points, how do we shift that with storage, how do we upgrade the wires, how do we put new wires down? But the idea of just focusing on something that in the system is incentivized to run 24. 7, 365, it's kind of missing the boat for me. My thing is how do we make sure that, yes, we have firm, dispatchable power plants, we have cheap variable renewables, we have energy storage, and how do we make sure that the markets are set up to incentivize all of these things to come together and give me the cheapest kilowatt hour at my house so I stay warm this weekend? How does that happen?
- [37:36]
B
And then when we think about capacity markets and the way system operators are operating, if the way you're doing that is that you're going to have a $10,000 electricity price for an hour and then you're going to spread that over all your different consumers, that's a problem too. I really think that unfortunately, electricity, as I've learned, as I keep learning more and more about it, is a really complex thing. I used to think oil was complex. Like oil is like you could teach a two year old how to trade in oil markets today. But teaching someone about how electricity markets operate in the United States, I mean, you know, you need to be a rocket scientist. So absolutely, you know, it's much more complicated than just putting down a baseload plant, something that we used to call a baseload plant.
- [38:27]
A
Okay, so here's then an argument I think which would resonate with people in the current administration is that that exactly is the reason why we need to revive the concept of baseload. That essentially what you're doing, as you put a growing proportion of variable renewables on the grid, is you're making grid management wildly complex. You're putting all these different factors in play that have to be managed. Then you're saying, okay, so we have workarounds with VPPs and storage and demand response and other kinds of flexible generation. Whatever it may Be. Which just creates an issue that is fundamentally impossible to solve.
- [39:11]
B
No, maybe we need all those other technologies because the weather is so extreme. He's just. Having three plants that do something is not good enough.
- [39:21]
A
Indeed. Well, absolutely. But then, conversely, why not make the power system simple again? Go back to plants that run 24. 7 and demand. That's there, 24 7. Put the two together.
- [39:36]
B
When one of those plants goes out because of the weather, Ed is just.
- [39:40]
C
Putting fuel on this fire right now, and I'm loving watching it. He's doing this on purpose, Amy. Like, he's just. No, no, no, no. But let's break it down. Let's break it down. Amy, you go first. Then I've got. I've got you.
- [39:52]
B
No, no, you break it down. You're the engineer, Melissa. You're going to be more credible than me. People think of me like I'm too in love with vpp. So you. You break it down first on a system.
- [40:03]
C
Okay, what do we want? Can we a Marie Lovins it? Oh, you know, it's a good show. And I bring up Amory. What do I want? I want cold beverages and hot showers. That's what I want. So how do I get those at an affordable price? And let's acknowledge that a lot of people, even here in the United States, str their energy bills. So how do I do that? I invest in energy efficiency. I try to make my building or whatever it is use less. Of course, I do that whenever it makes economic sense. But then whatever electricity demand is left. When we run the numbers, Ed, I mean, this is the soccer team that I've talked about for how many years at this point that we talked about on the big switch back in the day, the numbers tell us that we want a mix of technologies, because the reality is we're never probably. Unless we get to a place where. That we're not going to get to a flat demand place. Really, when it comes to actual demand in your home now, you can simulate it as being flat on the grid by having local storage. Oh, wait, we've already incorporated other tolls.
- [40:55]
B
Well, what about. Yeah, heat wave. Yeah, it's flat. Except in a heat wave. Yeah, it's flat.
- [40:59]
C
And a heat wave. It's flat. You know, in terms of how the grid sees you because you've buffered enough with some power walls or put your favorite battery here. But the reality is, like, we do different things at different times of the day, and it has different energy demand. Like, that is what it is. And. And actually believing that we can completely flatten that out. No, we would flatten it out. I think it's reasonable to say by using technologies to simulate flat, which is not actually flat. So that's it.
- [41:23]
B
The way we used to flatten it out was building 50% more capacity than we needed and wasting it all because we only needed it for an hour a day.
- [41:32]
C
So we have technologies today that I mean. And I'll just go ahead and poke the hole in the argument in absence of the commonly cited subsidies like production tax credits and investment tax credits and everything else in that space, not going to go too deep on this rabbit hole. That are exceptionally cheap. And so if we can use them, we want to use them, it makes sense to use them. And so this goes back to you have strength and diversity. So when you have a diversity of technologies, you are reducing the opportunity for single points of failure to take you down. But also because we do have these valuable things, when we have cheap variable renewables, we want to use them. They're cheap, we want to use them. And so how do we design the system that allows us to have that cheap, reliable power? Now, I'm going to say one more thing, which is that within this, I don't disagree the numbers don't disagree with the argument that we do need to pay more attention to our firm dispatchable. See, I'm not saying baseload firm dispatchable power plants. And this is go to Jesse Jenkins, Sepulveda, Jenkins et al, like all of this analysis, but there's a long list of literature on this that says that we need probably the same amount of in the United States firm dispatchable capacity that we have today, in the future, and we have to make decisions now to actually make sure that we're replacing that. Because no matter how many variable renewables and how much energy storage you put in the system to keep costs down, according to all of that analysis that they've put out over the years. Just look for Jesse Jenkins and his group's work, among many others. If we don't have that, we will see increasing costs. So that part of the argument that we need firm dispatchable, that's I don't think, disputed in the energy system. It's this idea of picking one technology as opposed to supporting a suite of technologies in your bucket. That's where we start to get into issues when we look at costs.
- [43:19]
B
I think there's an under evaluation of the role that batteries are currently playing in the system and could play in the system going forward.
- [43:30]
C
Yeah, I don't disagree with you and.
- [43:32]
B
Jesse's model under utilizes batteries and doesn't have a good cost curve for batteries. So it doesn't come out with the exact answer that we might actually need.
- [43:44]
A
Because the costs of batteries still seem to be plummeting. Right. It's just going down and down.
- [43:48]
B
Right. And we're having breakthroughs in battery technology. So I will note, Ed, that I went and read the actual White House release on their website about, you know, the new National Energy Emergency Statement. And Melissa, you'll be happy to know that besides reliable and affordable, the word diversified is one of the key three words. And I think diversified is important. I think they understand that diversified is important. And I think one of the interesting things going forward is how will different countries define what is reliable and diversified and will they continue to favor certain kinds of green energy because they can produce that at home and they don't have to import it. Right. So I made my argument that there might be a country or two out there that stay the course with hydrogen because that is what's going to be domestic, because they can make that with domestic resource when they can't. Same thing with certain kind of biofuels even here in the United States. Right. You notice that when people make statements in the United States about natural gas and about nuclear, at the very tail end of the sentence, they actually mention biomaterials because waste to energy is becoming not a big play in the United States. But at the margin, it's pretty important. I do think that we should highlight that the Trump administration used the word diversified. But, but the reality is, like I'm saying, building what you used to call baseload to address a two hour problem at peak is not the most efficient and cost effective solution in today's world. And that requires one to think through where is the deficit? Is the deficit all day or is the deficit at peak hours? And the technical solution is going to be different whether the deficit is all day or whether the deficit is at peak hours.
- [45:55]
C
I love your comment on the energy storage thing, Amy, because I've got two things that have really been sticking in my brain lately in conversations, but they're nothing new. One is when we say energy storage, some people mean short duration batteries, some people mean hundred hour batteries, some people mean long duration, short duration, everything together. And I agree that we're underestimating things across the board and different models do it better or worse than others. But I think someday. Let's come back to that one, please. I really want to, I want to take it apart.
- [46:23]
A
Yeah, definitely. We are actually planning a special just on energy storage. We have a potential guest coming on, someone who's literally written the book on energy storage, who we're hoping to get on the show soon. So watch this space.
- [46:37]
C
Fantastic. Well, I will send you questions because I have things on that one. But around it, you know, the need for and the potential role of long duration energy storage to complement batteries. Where we are seeing these cost declines is a really important gap to kind of address. Putting that aside for the minute, even though I really don't want to when it comes to all these discussions, it highlights to me just again, how we designed our energy systems for the past, we need to design them for the future. We need to design them for the future we're already living. Which is one that also has, I think, Amy, it was when you threw this out, apologies if it was you, Ed, earlier about extreme weather events and like the realities that we're already facing that are baked into the system as we look at our changing climate. And so we got to lean into this. So one thing I will double click on is regardless of how much we argue semantics and letters and short words, it is really important and exciting to see that there is attention being paid for this. And so, okay, how high up on the agenda will it stay? And will it stay up high enough to actually make sure that we have tools that we need as a society to create the energy system we need in the future? That's the big question. Are we gonna actually unlock some things or not? And jury's out. I mean, these are early days. Who knows?
- [47:52]
B
Everybody's trying to think of a new way to address Ed's thing, which is the most important, critical thing, which is how do I permit or expedite construction of infrastructure. And Ed, again, reading the document from the White House, they have this concept of emergency permitting and using the Army Corp as a paradigm. And so it'll be really interesting, you know, under an administration that is able to think outside the box because the permitting problem and federal authorities is really hard. And as we know from the Congress, you know, talking about it and not getting far enough along, it'll be interesting to see the creative things that the Trump administration tries to use to solve that problem.
- [48:41]
C
Can I pull in one last point, which is something that we've discussed off mic, this idea of, okay, the administration has signaled that like, boosting supply is a matter of national security. And so overlaying all this is like, how does that affect what is developed where and how quickly? And Ed, I don't Want to steal the point that you brought up, which I thought was a really important one, about what's in the queues right now. So I don't know if you want to touch on that, but I feel like we should bring that piece in here a little bit. A little bit. Because it's important to the discussion.
- [49:09]
A
Yeah. So I actually had a couple of points on this, if you like, on your side of the argument, in other words, supportive of the case for continuing to invest in wind, solar and storage. One is, as you say, in terms of what is waiting to be connected to the grid in the us the vast majority of that is wind, solar and storage. I was looking at the numbers from Lawrence Berkeley National Laboratory as of the end of 2023. This is a little bit out of date, but it wouldn't have changed massively. There is something like 1.6 terawatts worth of projects for power generation waiting to get a grid connection. Of those, 93% are wind and solar. So the vast majority of what's out there and is in the progress of being developed as wind and solar. So if you say no to that, then you cut off a whole load of potential capacity that could be brought onto the grid. And it also goes back to this point. Amy, that great slide you were talking about from Nextera Energy, which I would thoroughly recommend everyone goes and looks at, it's on the Nextera Energy website. It's from their most recent investor presentation, their fourth quarter earnings statement. It's there. And as you say, they just make that point that if you want to build a new gas fired power plant, if you don't already have an order in of what they call an unplanned plant, you're kind of deciding today, hey, I'd like a new gas fired power plant. You're going to get that into service by 2030 at the earliest, quite possibly. Beyond that, if you're talking about a new small modular nuclear reactor or something like that, that's 2035 and beyond. But if you want wind and solar, you can actually do that pretty quickly. The equipment is available now. And in a world where AI industry is developing very fast, as you're saying, Melissa, national security is an important priority. Time to power is crucial. No one wants to get left behind in this race. If you need speed, renewables are the way to do things quickly. And so quite apart from the points you've been making about costs and so on, which I think are very valid as well, just in terms of simple availability, equipment, ability to bring new Capacity online fast. The case for renewable energy there is very, very compelling.
- [51:29]
B
But let me be fair. I had my class this week, my finance class, we worked with a spreadsheet, and I have everybody in the class, they break into teams and they have to pretend they're bidding on a PPA to build a solar utility scale plant in Northern California. And we did the exercise and certain group one, and then I think they were like around 29, $30 per kilowatt hour. And then we redid it where we took off the tax credits, federal tax credits, and then I made them look at their IRR internal rate of return of their development project without the tax credit. And many teams didn't meet their hurdle rate. So then we had to go back and rebid. We had to resize the plants or rethink through how to do it without the tax credit. But there were still teams that could present a pretty good price without the tax credit. And so I was telling that story to another friend of mine who is a solo developer, and they said, well, you didn't have the students add a cost for Chinese solar panels in a tariff to see whether or not they could still get like a 7% IRR without that. So it was kind of a fun exercise just to look at it and think about what are the levers one can pull to keep those projects commercial in terms of efficiency or location or size and scale.
- [53:06]
A
Well, yeah, that's a great point. A lot of moving parts here. A lot of different factors still at play. We're going to see how those get resolved, see what happens with tariffs. Still a lot of uncertainty over that. A lot of uncertainty over the IRA tax credits, PTC and itc, probably going to come up for a vote in this big budget reconciliation bill that everyone's talking about. Probably going to get voted on in Congress in April, but totally uncertain there as well. A lot of hard negotiating to come there. So that's something I think we should park for another day and come back to later as that debate in Washington develops. Before we get off the subject of the Trump administration's executive orders, anything else that struck you about them? Was there anything else you thought was particularly interesting and noteworthy in there that we ought to be talking about today?
- [53:54]
C
So I won't go into specifics about any individual one, because that's not actually my thing. I don't know, Amy, if you have some you want to flag that are individual ones, but I was just struck by how wide reaching the potential impacts on the energy system are. So there were different executive orders that might have impacts on supply, that might have impacts on demand. I mean, it was just it's a lot to digest and I'm not going to spoil my free electrons, so I will stop there with that comment.
- [54:18]
B
Okay, so I know a lot of our listeners are coastal, and so if they haven't read the White House emergency order, they haven't seen the language about the growing threat of, quote, dangerous local policies, which is specifically called out. Let's be clear. We're talking about the Northeast and California. So I think a different show I mentioned that, you know, California might be considering in the past they've put a lot of lawsuits together. Federal government might be considering lawsuits together. So if you're talking about natural gas bans, if you're talking about regulation that would close refineries or regulations that would close coal plants, I think these are things that might be sort of battlegrounds going forward. And that was sort of flagged in the executive order under national security. So could be a sort of states versus federal issue on what is a necessary emergency energy facility.
- [55:24]
A
Yeah, I agree. That's a really interesting issue and definitely something we should keep an eye on because it's quite possible that's going to be a real flashpoint or series of flashpoints over the months to come. So unfortunately, I think we should leave it there. I know you have other things to go and do, which I'm sure are more important but probably less fun than talking to us on the show.
- [55:45]
C
Fair comment. Fair comment.
- [55:46]
A
Before we go, though, we should do our free electrons. I don't know who wants to go first. Melissa, you trailed yours just now.
- [55:52]
C
I did.
- [55:53]
A
You said you didn't want to spoil it. What is it?
- [55:55]
C
Did and I'll say fair comment. I enjoy this tremendously. All I hope I say that enough because it's a lot of fun. I'm going to be thinking about this one after. So two things I don't know about all of our listeners. There's a lot going on after inauguration in D.C. i've been trying to parse through it and finding different ways to see what executive orders have come out. Ed, I know you just sent out some stuff for your Energy Pulse and newsletters that you sent out. So I can't preview that right now. But I really enjoyed two articles that have helped me kind of keep track of what's going on. One happens to be yours from a few days ago, just tracking like, okay, what executive orders on energy have come out. And then I'm going to flag an article. I'VE been reading that was actually by the Guardian, which is like, it just gives a list and literally the Explainer is called all the executive orders Trump has signed so far. And they just sort it out by different categories. And they're not perfect the categories for my own energy nerd purposes, but I just wanted to flag those as interesting tools for folks because trying to cut through the noise and figure out what's actually happening and what it means is just what I said earlier. Like, Amy, I'm so glad you and other folks in academia are stepping into that space and, you know, a number of people that you work with trying to cut through the noise and helping us understand what's going on. So I just wanted to flag those two and I imagine if it was a little bit later, I would be flagging the one you just.
- [57:16]
A
And yet another one. Exactly, exactly. That's what I'm guessing.
- [57:18]
C
So I just want to flag that for people.
- [57:20]
A
So watch this base. By the time this podcast is broadcast, I'm sure the update will have appeared as well. But thanks very much indeed for the plug. That's very kind of you. People can find those on the wood Mackenzie website, woodmac.com so do go there and take a look. And the other one, you're saying the Guardian article looks good. So is that, is that guardian.com, what is their website?
- [57:40]
C
Yeah, so it's guardian.com and it's just called Explainer. All the executive orders Trump has signed so far and it gives a breakdown about everything energy related, not energy related. It's just like it takes all the executive orders and it puts them into categories and gives you links to the text, but gives you like a one sentence kind of what's it about? And I thought that was really useful today. And just to our listeners, Ed did not know I was going to flag his stuff. That's just, it just happens to be something I found extreme, extremely useful. And so I'm not going to disqualify it because the author is sitting next to me virtually. So there you go. Anyway, that's my freebies this week.
- [58:15]
A
So, Amy, what's yours?
- [58:17]
B
Okay, so mine, Ed, is, you know, you and I have always like debating these technological opportunities, like the solar road, for example. So I have a new one, I think that falls into the same category as Solar Rose that can charge cars. So this is called a company called Lone Star Data holdings and they have made a press release saying that they're gonna use the SpaceX Falcon 9 rocket to launch a fully assembled small I say very small pilot data center using the intuitive machines Moon Lander Athena.
- [58:54]
A
Wait, what? This is a data center on the moon?
- [58:57]
B
We're putting a data center on the moon. Okay. I mean, you know, I went a couple of years ago, I was at a seminar on cyber, and there was a person there who said that the tech companies were all planning these businesses on the moon. And at the time I just thought, oh, my God, that's just so ridiculous. But apparently that moment is now. It'll be powered by solar energy. It has some naturally cooled solid state drives. They actually have customers. So let me just tell the listeners who the customers are. State of Florida. Okay. Valkyrie, the AI firm, and the rock band Imagine Dragons. So we have a really diverse customer.
- [59:43]
A
Base that's, as you say, really diversified customer base there. That's very impressive.
- [59:47]
C
Okay, completely personal comment, Amy. You've managed to bring together energy, space travel, and Imagine Dragons into the same thing. This may be the. This is the peak. There's no going up from here.
- [59:57]
B
Like, there's a science fiction novel just waiting to be written here. Okay. And better than truth. Right. The reason Florida is the backup system is going to be in Florida. And so, like, I had to look up, like, how does the space station transmit data back to the. You know, back to land, back to Earth? And apparently they do that either through satellites or radio waves. So this press release did not actually explain how they can do this without fiber optics. Right. But anyway, I figure that'll be in a later story when the thing gets deployed. And as one commentator said in an article about this project, it was written about in many different space tech blogs and all kinds of different blogs. One person made a quote, something about radiation could be a problem. And I'm like, you think?
- [60:54]
A
But as you say, very useful for anyone who's wanting to watch Netflix on the moon. They'll be able to use that data center there. That's it. Or I guess, you know, go on Spotify and listen to Imagine Dragons music. That's.
- [61:07]
C
Dude, if you guys are into Imagine Dragons, they have some great music. I'm just saying.
- [61:10]
A
I'm sorry. Yeah, yeah, sorry. Not dissing Imagine Dragons in any way.
- [61:15]
C
Put some Mumford and Sons up. Let's go. I'm dating myself.
- [61:18]
A
Let's go. That is fantastic. I'm definitely gonna go and look that up there. That does sound absolutely amazing. So look, my free electron is actually. It's less funny than that and not energy related in any way, but it is something I'm really excited about. Cause it's a book I'm really enjoying at the moment, absolutely gripped by it, which is called King. It's biography of Martin Luther King published a couple of years ago, written by a guy called Jonathan Icke. Have either of you read it? I think it won the Pulitzer Prize.
- [61:43]
C
No. Anyway, I'm looking at it.
- [61:45]
A
Absolutely fantastic. Just really great sort of narrative history. I think they say that there hasn't been a biography of Martin Luther King published for quite a while. And he's got access to various new sources and things. So it's able to paint really quite a broad picture of the man from people who knew him across the civil rights movement, everyone involved in that, a lot of stuff that I didn't know. And just really fascinating about kind of social change, change, how social change happens, what drives it, the role of mass movements, the role of leaders, the role of individuals and particular kind of talents. And this incredible talent for oratory in particular that Martin Luther King had. I feel like maybe it doesn't quite get to kind of the heart of the man himself, but, you know, as a narrative of him and his times and that movement, just really fascinating. Very, very highly recommended, I would say. If you're at all interested in that subject, do go and check it out. I think it's fantastic and it's just a really great read, y'.
- [62:53]
C
All. This is like Christmas for me because it's like space energy, good music and books. Like, you've just hit the Melissa Lott high point. So sorry, all joking aside, great electrons. I've already put it in my cart, Ed, so I'm excited to read it.
- [63:05]
A
Fantastic.
- [63:06]
C
It's Eig is, I think the last one.
- [63:07]
A
Eig, pronounced Ig, I think, is how you say it.
- [63:10]
C
That's great. Yeah, that's great.
- [63:12]
A
Excellent. Well, look very glad, Melissa, to be able to end on a high note for you there, but unfortunately we do have to leave it there. Many thanks, Melissa, for joining us.
- [63:20]
C
Great to be here. Really enjoyed the conversation. Thanks for opening up Baseloaded. That was a dream come true there. So thanks for that indeed.
- [63:28]
A
And for me, too. Many thanks, Amy.
- [63:30]
B
Thank you, Ed and Melissa, always wonderful to be with you.
- [63:33]
A
Absolutely. Looking forward to seeing you both again soon. Thanks to our producer, Toby Biggins, Gilchrist, and above all, many thanks to all of you for listening. We really value your feedback, so please do keep it coming. Email us, leave us a review, however you want to get in touch, use social media. It's always great to hear from you. And we'll be back in two weeks with all the latest news and views on the energy transition. Until then, goodbye.