Electricity Is the New Oil | Rob Thummel on the Energy Opportunity from the AI Boom

Summary

Excess Returns Podcast

Episode: "Electricity Is the New Oil | Rob Thummel on the Energy Opportunity from the AI Boom"

Date: October 6, 2025
Guest: Rob Thummel (Tortoise Capital)

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Episode Overview

This episode explores how the accelerating development and deployment of AI is fundamentally reshaping energy demand—particularly for electricity. Rob Thummel, Managing Director at Tortoise Capital, joins hosts Jack Forehand, Justin Carbonneau, and Matt Zeigler to discuss how "electricity is the new oil," why natural gas and nuclear are likely to lead the next era of energy supply, and where investors should look in this rapidly changing landscape. With investments in energy infrastructure, digital hardware, and data centers surging, Rob outlines both the challenges and opportunities of powering the AI economy, providing a data-driven look at macro energy trends and actionable investing insights.

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Key Discussion Points & Insights

1. The New AI-Driven Energy Paradigm

• AI’s demand for electricity is now the bottleneck:
  “The regulator on the development and the pace of development of AI is going to be electricity…that’s why we say going forward, what’s going to drive the economy? It’s AI. But what does AI need? It needs electricity. So electricity is the new oil as the main driver of the future economy, both domestically and globally.” — Rob (00:00)

• Staggering scale of growth:
  “We’re going to have to add three Japans of electricity here to the US between now and 2050.” — Rob (00:27, 14:50)
  This equates to roughly a 75% increase in U.S. electricity demand between now and 2050, driven in large part by hyperscalers and data center expansion.

2. Evolving U.S. Energy Mix & Infrastructure Needs

• Current mix:

  • Oil and natural gas each provide about one-third of U.S. energy.
  • Nuclear: ~10% (of electricity production, it's about double that).
  • Wind and solar: Single-digit percentages of total U.S. demand.
  • Biofuels and other sources comprise the rest.
    (06:41–07:25)

• Fossil fuels remain critical:
  “For two decades, actually longer than that, three or four decades, fossil fuels, hydrocarbons have represented over 80% of the energy supply to us…You can’t just replace this stuff overnight.” — Rob (03:08–03:45)

3. Energy Poverty & Global Perspective

• There are still over a billion people living in energy poverty worldwide, especially in populous countries like India and China, where per capita energy use is a fraction of that in the U.S. As these economies grow, so will global energy demand. (05:01–05:46)

4. AI, Data Centers, and Incremental Electricity Demand

• Hyperscale data centers:

  • Mega-projects like OpenAI/Nvidia’s Stargate (Abilene, TX) and Meta’s Hyperion campus (Louisiana) exemplify the explosive demand for power.
  • Vacancy rates for existing data centers are under 3%, with demand for capacity and cooling surging. (12:17–13:31, 37:08)

• Magnitude of demand:
  U.S. electricity demand has been flat (~4,000 terawatt-hours/year) for two decades but is now poised to grow sharply due to AI/data center needs. Each new 1,000 terawatt-hours added is equivalent to the total power generation of Japan. (13:49–14:45)

5. Challenges Scaling Renewables

• Grid and storage limitations:
  “The big challenges for wind and solar…first of all, you need a bigger transmission network...but the biggest step change would be the development of large-scale battery storage...and we don’t have a solution yet.” — Rob (17:05–17:51)
• Baseload reliability:
  Data centers require uninterrupted (baseload) power, which wind and solar alone cannot reliably provide. This has led large tech companies to pivot back toward natural gas and nuclear as foundational sources. (16:09–17:03)

6. The Case for Natural Gas and Nuclear

• Natural gas as the bridge:

  • It’s abundant, efficient, and has enabled the U.S. to become the world’s largest energy producer and exporter.
  • When gas replaced coal, U.S. carbon emissions from power generation fell by 20% since 2005. (24:11)

• Nuclear’s resurgence:

  • Carbon-free and gaining public sentiment, with facilities like Three Mile Island being restarted to power Microsoft’s data centers.
  • Key challenge: limited uranium enrichment capacity in the U.S.; must be addressed for nuclear to scale. (20:35–23:52)

7. Inflation, Shale Revolution, and Energy Security

• Shale as an inflation shield:
  “The US Shale industry is probably one of the most underappreciated technologies and impactful—without this, we would have a huge problem with inflation... Instead, prices for oil and gas are lower than they would have been, and so is inflation.” — Rob (25:29–27:47)

8. Energy Investing: Infrastructure Over Commodity Picks

• Steady, fee-based returns:
  Energy infrastructure companies (e.g., pipelines, storage) are less sensitive to commodity prices and benefit from stable, recurring cash flows—more like “toll bridge” businesses than commodity bets. (32:31–34:56)
• Dividend and total return appeal:
  “You can get 5% dividend yields or more from energy infrastructure companies that are going to grow 3 to 5%...” — Rob (34:40)

9. Investing in the AI-Enabled Energy Transition

• Second-order beneficiaries:
  Beyond mega-cap tech, “the enablers of the AI revolution” include data storage device makers (Seagate, Western Digital), network switch suppliers (Arista), advanced cooling companies, and even Bitcoin miners transitioning to data center power suppliers.
• Tortoise’s Three-Pillar Framework:
  Tortoise’s new active ETF (TCAI) covers:
  • Energy systems (core infrastructure)
  • Data infrastructure (data centers & network)
  • Digital hardware (technology/components)
    (36:15–41:22)

10. U.S. Grid Resilience and Expansion

• Power grid is more resilient; now expansion is urgent:
  “A lot of the electricity companies were still spending money and they were investing money in making the grids more resilient... Now we’re going to enter a new phase where we’ve got to expand the grid as well.” — Rob (49:25–51:14)
• Significant capital will be needed for transmission, substations, and hardening against outages and cybersecurity risks.

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Notable Quotes & Memorable Moments

• “Electricity is the new oil as the main driver of the future economy, both domestically and globally.”
  — Rob (00:00, 09:01, 09:41)

• “We’re going to have to add three Japans of electricity here to the US between now and 2050.”
  — Rob (00:27, 14:50)

• “The best investments I’ve ever made are ones when everything… seems like it’s time not to be investing.”
  — Rob (00:30, 53:42)

• On the 20-year U.S. energy demand plateau and coming surge:
  “That number of 4,000 [terawatt-hours] has been consistent for 20 years. But what’s changing is that’s about to change and it already is changing in a major way.” — Rob (13:49–14:08)

• On natural gas and U.S. energy security:
  “Because of U.S. shale technology, the U.S. has become the largest oil and gas producer in the world and the largest energy exporter in the world. Without this, we’d have a huge problem with inflation.” — Rob (00:37, 26:01)

• On energy infrastructure investing:
  “A lot of the energy infrastructure companies don’t benefit from higher or lower oil prices. They basically charge a fee…they’re more volume driven, less commodity price sensitive.” — Rob (33:41)

• On the opportunity for “second order” AI beneficiaries:
  “Those companies really, the benefit of AI to them has yet to be entirely felt, especially in their valuations…they’re underrepresented in portfolios, but they’re underappreciated as well.” — Rob (40:30)

• On why infrastructure investment matters now:
  “If we’re going to generate—if electricity demand in the US and we’re in the age of electricity—it’s going to grow 75% by 2050, we’re going to need a lot more electricity generation and…more power lines, more generation, more transmission, more substations, everything.” — Rob (49:44)

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Timestamps for Key Segments

• 00:00 – 01:00: Electricity as the new oil; AI’s energy dependency
• 02:13 – 05:46: Evolution of energy sector; importance of hydrocarbons; global energy poverty
• 06:41 – 07:25: U.S. energy mix breakdown
• 13:04 – 14:45: Explosive growth in electricity demand & comparison to Japan
• 15:35 – 17:51: Limits of renewables for AI/data center energy needs
• 20:23 – 23:52: Nuclear energy challenges and resurgence
• 25:29 – 27:47: U.S. shale revolution’s impact on inflation and energy security
• 32:31 – 34:56: Energy infrastructure as a stable investing opportunity
• 36:15 – 41:22: Tortoise’s “Three Pillar” AI Infrastructure investing strategy
• 41:22 – 44:49: Second order AI/energy beneficiaries, bitcoin miners as power suppliers
• 49:25 – 51:14: Power grid resilience and need for expansion
• 53:42 – 54:55: Rob’s best investing lessons

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Takeaways for Investors

• Electricity demand is set to surge, largely from AI and data centers.
• Natural gas and nuclear are realistically best positioned to meet new baseload demand.
• Renewables face significant grid and storage challenges, particularly for 24/7 reliability.
• Infrastructure “toll bridge” businesses offer compelling, defensive, and dividend-rich ways to play energy.
• The biggest investment opportunities may not be the biggest tech names, but rather the less obvious “enablers”—infrastructure, data storage, cooling, and grid buildout companies.
• U.S. energy abundance, driven by shale, is a major tailwind for both the economy and energy prices.

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For Listeners Who Haven’t Tuned In

This episode is a data-packed, practical exploration of the seismic shifts reshaping energy investing in the age of AI. Rob Thummel breaks down complex topics—energy demand, infrastructure, investing frameworks—into actionable insights, highlighting both the inevitability of growth in electricity need and how investors can capture the adjacent opportunities. If you want to understand “the picks and shovels” of the AI boom and why “electricity is the new oil,” this episode is essential listening.

Transcript

[Rob]

I think the regulator on the development of and the pace of development of AI is going to be electricity. And how much and how quickly can these large hyperscalers met Microsoft, Amazon, Google and others gain access to electricity? And so that's why we say going forward, what's going to drive the economy? It's AI. But what does AI need is it needs electricity. So electricity is the new oil as the main driver of the future economy, both domestically. And we're going to have to add three Japans of electricity here to the.

[Justin]

US between now and 2050.

[Rob]

The best investments I've ever made are ones when everything.

[Justin]

It seems like it's time not to be investing.

[Rob]

Because of US shale technology, the US has become the largest oil and gas producer in the world and the largest.

[Justin]

Energy exporter in the world.

[Rob]

Without this we would have a huge problem with inflation.

[Podcast Host 1]

Rob, thank you very much for joining us and welcome to Excess Returns.

[Rob]

Thanks for having me.

[Podcast Host 1]

Justin, your firm Tortoise Capital is an asset manager where you focus and have a long history on investing in energy and energy infrastructure. You guys have a number of ETFs and investment strategies focused on investing in the energy ecosystem. And so we thought you'd be a great person to have on talk about a number of things including the state of the energy market here in the US how the mix of oil, gas and coal and nuclear is kind of all evolving in front of us and developments across all those areas and sort of this new demand for energy from this AI and data center infrastructure buildup that we'll sort of get into. So you know, it was kind of interesting. I was thinking about this conversation and like, like two or three years ago it seems like energy was like left for dead. Maybe it was like at its lowest, lowest percentage of the S&P 500. Maybe that's like ever been. I know it's kind of gone up, up and down over the years but you know, it's just kind of interesting how things can change quite rapidly in, in any sector really. But I think this energy sector is a good example of sort of when changes both innovation demand, you got I guess different support priorities of the Trump administration, how it can change sort of the outlook and investors perception of energy.

[Rob]

Yeah, no you're, you're, you're exactly right. So, so here, here's. I've been investing in the energy sector.

[Justin]

30 years guys and this is, this is why I've done it from day one. It's because look, you need energy, you.

[Rob]

Need the energy sector to continue to.

[Justin]

Grow Economies in some ways it's just very simple. It's really essential now. You're right. A few years ago there was concern about concern. There was, the thought was well, what's the form of energy supply going to be? And I think that's what caused at least in the S&P 500 the energy sector to fall. Because in the S&P 500 the energy.

[Rob]

Sector is really represented by Exxon, Chevron.

[Justin]

Schlumberger and a bunch of other more oil focused energy type of companies that everybody thought well, oil's going away and other forms including renewables and other forms of energy are going, are going to basically just become the norm.

[Rob]

And I think what, what the world figured out pretty quickly is a couple things.

[Justin]

As the economy or recovered at post.

[Rob]

Covid, they figured out that the fossil.

[Justin]

Fuel energy, hydrocarbon energy is, is really.

[Rob]

Hard to replace for a couple reasons. First of all, it's really low cost.

[Justin]

In an environment where we had a massive inflation coming out of COVID The one way you can really counteract that.

[Rob]

Is lower energy costs.

[Justin]

And so that's been important. The other thing I think what people figured out is look, you can't just.

[Rob]

Replace this stuff overnight.

[Justin]

I mean for two decades, actually longer.

[Rob]

Than that, three or four decades. Fossil fuels, hydrocarbons have represented over 80%.

[Justin]

Of the energy supply to us. We study this all the time. We study all energy technologies also by the way, and not just oil and gas focused. We end up investing in a lot of oil and gas pipelines because oil and gas is because has and still is the most efficient and most cost effective way to, to distribute energy. And we think that you know, if economies are going to prosper then you're going to need low cost energy. And so we, we look, we project.

[Rob]

Forward and we say okay, well 80%.

[Justin]

Of the, of the global energy supply for the next several decades is probably going to be hydrocarbons. Natural gas will lead to charge, oil will still be important, coal will still be around.

[Rob]

But we're going to need all above approach.

[Justin]

We're going to need more nuclear, we're going to need more wind and solar as well. But that's how we look at things.

[Rob]

Basically from a macro perspective.

[Justin]

Energy is really important for economies to develop. And the last point I would make.

[Rob]

Is the other thing I think that's.

[Podcast Host 2]

Really important when you look at the.

[Justin]

Energy sector is look, the sector is evolving.

[Rob]

There are going to be new fuel supply sources.

[Justin]

We get into a little bit more about why it's evolving in a second.

[Rob]

But you also have to remember there's a billion people, may over a billion.

[Justin]

People out there, the 7 billion people.

[Rob]

On this, on this planet that live.

[Justin]

And I think they call it energy poverty.

[Rob]

So they really just don't have access to reliable electricity or energy per capita levels to support a reasonable quality of life. And just to give you an example.

[Justin]

Of that, if you.

[Rob]

Let's look at China and India, obviously.

[Justin]

The two highest populated countries in the world or amongst the highest populated, their.

[Rob]

Energy consumption per person is fractions of.

[Justin]

What it is in the US and.

[Rob]

So as those countries continue to grow.

[Justin]

And develop and prosper, you're going to.

[Rob]

See energy demand in the two largest.

[Justin]

Populated countries in the world, or some of the most populated grow their energy per capita.

[Rob]

And that just boosts energy demand as well. So for all these reasons, there's just a lot of exciting things going on.

[Justin]

In the energy sector and obviously we'll probably get to several of them as we continue to talk about.

[Podcast Host 1]

Yeah, that's great. And maybe the lesson for investors is, you know, when you have these pundits out there saying, you know, the energy sector or whatever sector it might be is not relevant anymore, you know, you can look at energy as a good example to see why, you know, when people are making predictions like that, it's, it's probably not true. Right. And sectors evolve and go on to live. So anyway, so no, that's great, thanks for that, that overview. So let's talk about US Energy, the mix of energy. So what percentage comes from oil, what percentage comes from natural gas, coal, nuclear and then renewables? You know, just generally speaking. And then how is this, you kind of mentioned the evolving mix of it. How is that sort of likely to change as we look out maybe over the next three to five years?

[Rob]

Yeah. So we're still probably in the mid-30s for, for oil and natural gas each, so that they still have the predominant sources.

[Justin]

It kind of goes back and forth depending on which source you look at. Whether natural gas or oil is the largest energy fuel supply source in the.

[Rob]

US but, but they're, they're both very, very, very important.

[Justin]

Natural gas has been gaining market share lately, but the remainder you've got a little bit of obviously nuclear, at least from electricity side, has, has generated a fair amount of electricity demand. When you wrap that into the global US demand, it's probably around 10%, but of electricity demand it's probably double that.

[Rob]

And then, you know, wind and solar of total US electricity or sorry, of.

[Justin]

Total energy demands, probably single digits. And then the Rest is these biofuels and other forms of electricity.

[Rob]

But there's no doubt that the drivers.

[Justin]

Have been of energy supply both now and in the future will be natural gas.

[Rob]

And from our perspective, because of what's.

[Justin]

Going on with AI, right.

[Rob]

And if the future economy is AI.

[Justin]

Driven, if the entire economy is AI.

[Rob]

Then we are going to, we are seeing the energy sector evolve and natural.

[Justin]

Gas and nuclear, we believe will gain market share and add to their market share even more. So obviously we think coal, coal, coal could decline. Well, coil will either maintain or just grow at a lower, lower rate.

[Rob]

So we see natural gas and nuclear as the future. And there's some huge opportunities there, we.

[Justin]

Think across the entire energy sector if those two lead the charge going forward.

[Podcast Host 1]

One of the things I know you've quoted here is saying that electricity is the new oil. What do you mean by that?

[Rob]

Yeah, that's. That I think that's one of the.

[Justin]

Key things that a lot of people haven't thought about yet.

[Rob]

But electricity is the new oil for this reason. So it goes back to what's going to drive the economy.

[Justin]

And, and you need energy to drive an economy. You need energy to grow an economy.

[Rob]

And historically go way back, that's been oil.

[Justin]

I mean, you go way, way back. That was wood. Let's, we won't, we won't get into.

[Rob]

Too, too deep into the history of, of the fuel supply sources for energy. But, but oil has been a big.

[Justin]

Driver of both the domestic and global economies, you know, over the last 50 years.

[Rob]

Natural gas has gained prominence probably over.

[Justin]

The last 20 years.

[Rob]

But then when we look forward and say, okay, what's going to drive the economy going forward? Well, we'll see. But it really does appear that, you know, the, the future as economy is about autonomous everything. And that's AI, right. And AI is going to do a lot of great things, not just necessarily in our, for our first, you know, chat, GPT and other personal reasons, but business, business potential opportunities to change the course of health care and education and medicine. And so if AI is the future, well, AI needs two things. It needs technology. I think we're doing pretty well there in the US there, but it needs electricity and that's what people forget about. And I think the regulator on the development and the pace of development of AI is going to be electricity. And how much and how quickly can these large hyperscalers met of Microsoft, Amazon, Google and others gained access to electricity? And so that's why we say going forward, what's going to drive the economy it's AI but what does AI need is it needs electricity. So electricity is the new oil as the main driver of the future economy, both domestically and globally.

[Podcast Host 1]

It's interesting that we're having this conversation today because I was just listening to a webinar earlier and they were saying that like they're making the point on these, these big data centers and the hyperscalers and that, you know, utilities used to be the main, what was, you know, getting the, they were the buyer of electricity. They were, they. Well, I guess they're the producer, but they're, but they're, they're making the point that these, these data centers and these AI now you have these massive mega cap tech companies that are also going to require and demand this energy and, and how much that was going to sort of how much demand that was, was going to be. So can you just talk to, you know, over the next five to 10 years as these data centers get built out, like what, how much incremental electricity demand are they likely to require? And like what are the, what are the assumptions? I mean we know when they build one of these data centers they kind of come out and say this is how much electricity we're going to need. So we kind of know and sometimes you see it and it's like, you know, enough to power millions of millions.

[Justin]

Of households or something.

[Podcast Host 1]

So how, how much demand are they likely to, to pull?

[Rob]

Yeah, let me. So, so Justin, this is exactly what we just articulated is exactly why at Taurus. We think it's one of the best.

[Justin]

Times to be investing in the energy sector is because it's evolving, it's changing, it's changing rapidly.

[Rob]

But it's, it's not just going to change overnight.

[Justin]

This is a long duration change. That, that's that steady consists then and we think is just a tremendous opportunity for the energy sector. And it's what you just articulated. Yeah, you think about the development of the data centers. They started out as mainframes on college campuses and today we're building these massive, massive structures basically. Now architecturally they're very simple, right? They're boxes basically or H's but, and they, and they look very boring. But on the inside I said earlier, I think it's somewhere, it's like Cape Canaveral. There's just tremendous things going on and.

[Rob]

They'Re building these things bigger and bigger and bigger.

[Justin]

A couple examples, I mean you've heard about Stargate and Stargate down in Abilene, Texas. That's going to be a massive $500 billion project data center campus being built by OpenAI and Nvidia and others.

[Rob]

Meta.

[Justin]

It's building Hyperion data center campus in northern Louisiana. That's going to sit on a, for context, a land footprint that is the size of Central Park. I mean, just imagine that. It's hard to imagine, but hopefully that gives you a little bit of perspective.

[Rob]

That's just a couple examples.

[Justin]

There are data centers popping up all over the place. New Albany, Ohio, Pennsylvania, even here in, in our backyard. I'm, I'm in Kansas City.

[Rob]

We've got new data centers coming here.

[Justin]

So all that said, there's going to be a lot of activity as you highlight. Now the question is, is how do I frame how much is that? Okay, so let me just, let me, let me try to frame that for you.

[Rob]

So if you go back and look.

[Justin]

At it and we've got a chart on our website. If you go back and look at historical demand for electricity, it's measured in a, in a unit called, well, in watts, effectively or watt hours.

[Rob]

Now the, the numbers get so big.

[Justin]

That you have to, we have to convert it to gigawatts and then.

[Rob]

Or kilowatts have to be converted to gigawatts.

[Justin]

Gigawatts have to be converted into terawatts. So I'm gonna have to give you a broad number.

[Rob]

But, but so for context, you and I, in our house, every year, we.

[Justin]

Use about 10,500 kilowatts of electricity.

[Rob]

Well, the US collectively, the US collectively utilizes about 4,000 terawatt hours every electricity.

[Justin]

Okay, so you say, what does that mean?

[Rob]

Well, what you need to understand here is that that number of 4,000 has.

[Justin]

Been consistent for, for, for 20 years.

[Rob]

But what's changing is that's about to.

[Justin]

Change and it already is changing in a major way.

[Rob]

So for the next 20 years and beyond, we have a lot of growth.

[Justin]

In US Electricity demand.

[Rob]

And that's going to equate probably to somewhere around 3,000 more terawatt hours of growth. Of growth. We're going have to come up with generation. So for perspective, we think that U.S. electricity demand is probably going to grow by 75% over the next between now and 2050.

[Justin]

For what, what does that mean?

[Rob]

Well, 1,000 terawatts is equivalent to the same amount of electricity generated by the.

[Justin]

Country of Japan to power and keep the lights on and keep the industry going in Japan. Japan's, I think, the fifth largest economic.

[Rob]

Powerhouse in the world. And so gonna have to add three Japans of electricity here to the US.

[Justin]

Between now and 2050.

[Rob]

That's just, that's, that's, it's hard to imagine. Imagine we're just getting started. It's starting to show up in all of the data. But it's just a tremendous opportunity, we think, for, for not just days and weeks and years, but for decades for.

[Justin]

Investors that are looking at the energy sector.

[Podcast Host 2]

If we think about how we're gonna meet that demand. Obviously Justin went through all the sources before and you know, there, there's a lot of people, I mean, obviously in, in theory it would be great to meet it with renewables, but, but it seems like there's maybe some barriers to that. So it's funny, when you talk to the people that are, you know, very in favor of solar, they'll, they'll explain like the footprint of solar you would need to cover the whole country is not that big, but it seems like the logistics of getting there is very, very difficult. So, so how do you think about renewables first, like in terms of our ability to scale them to meet this demand?

[Rob]

Yeah, that's a good question. Jack and I, like I said, we at Tortoise, we. I've been investing energy 30 years, I've got some co core fellow managers here.

[Justin]

I mean doing investing just as long.

[Rob]

And we, we, we look at all energy sources, all energy supply sources and.

[Justin]

Follow the demand and look at what.

[Rob]

Are the most effective ways of creating.

[Justin]

Energy and where's that energy going. And we've been doing that a long time. We've looked at wind and solar, we've.

[Rob]

Invested in wind and solar and we have approach here that we're going to need on all of the above approach long term. Now you highlighted, Jack, exactly the challenges.

[Justin]

With wind and solar, the intermittent nature of, of the electricity. And when you look at what data centers need and where the electricity demand is going, you need baseload. Consistent, what I mean, say baseload, that's a term that basically means you need electricity 24 hours a day, seven days a week, 365 days a year.

[Rob]

It can't be intermittent. And so that's why initially a lot.

[Justin]

Of these hyperscalers, Amazon, Google, Netflix have come in, or not Netflix, but Amazon, Google and Microsoft have come in and said, hey, we're going to power this new age of electricity with wind and solar. They quickly pivoted and realized that's not possible if we want to achieve our goals of getting these data centers built and getting these AI applications running and win this AI race for the US.

[Rob]

So they pivot A little bit and.

[Justin]

They pivoted back to natural gas.

[Rob]

Now look, we follow everything that's going on and, and so the big challenges, the big challenge for wind and solar, and you highlighted especially for solar in particular, is two things. First of all, you need a bigger transmission network. You need for wind and solar, you need to be able to transmit electricity further, larger distances.

[Justin]

There's a lot, I'm in Kansas City.

[Rob]

Like I said, western Kansas.

[Justin]

There's a lot of wind that generates.

[Rob]

A lot of electricity. But that trend, that electricity can only.

[Justin]

Travel so far and it only can make it so far before it runs out. And so you need longer transmission lines, you need investment in that.

[Rob]

But the biggest step change would be the development of large scale battery storage. And that has been, that's the answer, that's the problem.

[Justin]

And we don't have a solution yet.

[Rob]

And there's been a lot of research, a lot developed.

[Justin]

Continues to be a lot of interesting things going on with things like solid state batteries. But we watch it every day and, and, and we'll see. But, but right now, battery storage doesn't seem to be very economic. But, but you've also heard that that's.

[Rob]

You know, some of that's part of the reason why.

[Justin]

What do we need? Well, we need more materials, right?

[Rob]

We need, we need more rare earths, things like that. And, and so this is gonna be, this is fascinating. This is why I sit here every day and, and come in. It's probably not fascinating to some, but it is to me. And, and so I really enjoy looking.

[Justin]

At all this stuff. And, but those are some of the limitations with wind and solar versus traditional energy sources.

[Podcast Host 2]

Well, it's fascinating to us. And as you said, I mean, energy with, what's going on with AI energy is front and center now. I mean, everybody is, like you said, it's going to be the constraint. So everybody in the world is now thinking about energy in many different ways. On the solar thing, is it competitive if we put the battery part, the storage part aside, is it competitive on the generation side yet, cost wise, or is it still much more expensive than the other sources?

[Rob]

Well, Jack, it just depends on.

[Justin]

So the answer to the question is in the grand scheme of things, no. And from my perspective, that's, this is.

[Rob]

If you want your lights on, you have to, when you, when you have to do this analysis, you want to, you want to assume that you're going.

[Justin]

To have to keep your lights on 24 hours a day, seven days a week, let's say, or, or just have.

[Rob]

Or have ability to do that.

[Justin]

Right. And you just, I mean, obviously the.

[Rob]

Sun doesn't shine all day.

[Justin]

So, so, so now to generate, you.

[Rob]

Know, the next incremental minute of electricity. Sure. I mean, when's her sun's free. Right. So, so, so it just depends on how you look. And I look at it in totality and say, well, we've got a massive.

[Justin]

Grid here, electricity grid, electrical grid in the US it's complex.

[Rob]

It's taken, you know, it's, you know, electricity is kind of invisible. The way people look at it is, you know, you really don't realize how important it is until you don't have it. And so, so you don't really appreciate it. It's underappreciated from my perspective. But it would become more appreciated if.

[Justin]

We had more intermittent sources of, of. Of electricity supply because we would simply just have more, well, less con.

[Rob]

Less. More downtime and not having.

[Justin]

Not have as much.

[Rob]

You know, I think the uptime from most, most cities in the US is over 99% all. You almost never have an outage, but that, but, but you'd have to have.

[Justin]

A lot more investment if you just had all solar, all windows. And frankly it's not feasible at the present time. How about nuclear?

[Podcast Host 2]

Because I think about that in two ways. Like on one hand it's like when you just look at nuclear, it's like this could be a great solution to everything. And then you think about the regulatory problems, the time frame to get these things spun up. It seems like on one hand it's a great solution, on the other hand it's not much of a solution.

[Rob]

I don't know if that's right. Yeah, well, you're thinking about it right away and a lot of ways. So obviously nuclear is carbon free. So it's become, it's come back. Right.

[Justin]

I mean, I, you know, I've, I.

[Rob]

Interesting to me.

[Justin]

I was talking to. I think there was a Wall Street Journal reporter wrote, wrote about nuclear energy and, and, and it was interesting discussion that we had because I think more people now are interested in having a nuclear facility in their backyard than they are a solar wind farm. Which, which is, which is actually shows you the change in sentiment.

[Rob]

Nuclear went through a period as we all, some of us lived through, some.

[Justin]

Of us are aware of it.

[Rob]

You can go back and look at history where. Yeah. I mean with Fukushima and Three Mile Island, I mean go through these various.

[Justin]

Examples of nuclear reactor, you know, issues.

[Rob]

That, that cause fear basically and concern about people, rightfully so.

[Justin]

And so there's been enough time I.

[Rob]

Think that is maybe reduced, minimize those concerns.

[Justin]

Clearly it's not just concerns, it's the regulatory environment is part of the goal is clearly to make it safe and, and so made a lot of strides so in nuclear.

[Rob]

And now we're, you know, sitting here.

[Justin]

With companies like Microsoft who have agreed to effectively almost agree. I think it's, I think it's been, been penned but the paper, if not.

[Rob]

It will be shortly have agreed to revitalize Three Mile Island. Constellation Energy is going to basically restart Three Mile Island Nuclear, big nuclear facility. And all that power is going is going to Microsoft data centers and that.

[Justin]

Which is really interesting.

[Rob]

Got other examples of large scale nuclear.

[Justin]

Facilities that are going to be closed down. Palisades Park, Michigan, Dwayne Arnold facility in Iowa.

[Rob]

Both of those were to be closed down, decommissioned just a few years ago. Now it's more than likely all those.

[Justin]

Are going to be restarted.

[Rob]

And it's because of this need for.

[Justin]

Electricity and the need for electricity really yesterday, but it's now and into the future.

[Rob]

And so that, that's what's revived it now. So what are the challenges? Well, the big challenge, the big challenge.

[Justin]

Is, and you've heard about SMRs, we could get into smarts or small modular nuclear reactors. There's none of them in the US but they've gotten a lot of publicity. We could talk about that more if you want. But, but what I would say about.

[Rob]

That is so the big challenge with.

[Justin]

Nuclear is enriched uranium.

[Rob]

You need, you can't just simply take uranium. We've got uranium, a little bit of.

[Justin]

Uranium here in the US there's some in Canada, there's a lot in Canada, there's in France. We can import some of that.

[Rob]

But the challenge is not necessarily getting.

[Justin]

Uranium, but that uranium has to be enriched for it to be able to.

[Rob]

Generate, to have the energy to generate.

[Justin]

The steam to turn the turbines and generate the electricity. Now we don't have enough capacity, uranium enriching enrichment capacity in the U.S. and.

[Rob]

So we end so today just to satisfy our existing, you know, 19, 20%.

[Justin]

Of our electricity generation that uses nuclear, we have to go out and basically import a lot of that. And some of those of course come from China, Russia and other countries.

[Rob]

So we're going to do all this ourselves. We were going to have to increase.

[Justin]

Our nuclear enrichment capabilities. And that's why you've seen some things like executive orders to try to improve that. There's some progress being made.

[Rob]

That's why we go back to it. We tortoise. We really like natural gas because, look, we got a lot of natural gas. We can talk more about that, but lots of natural gas in the U.S. it's, it's very low carbon. It's not no carbon, but it's lower the US Carbon emissions. When natural gas replaced coal's electric generations lowered the carbon emissions by 20%.

[Justin]

Since 2005, it's, and it's been a.

[Rob]

Huge contributor obviously to the economy because now we can export natural gas as well.

[Justin]

And, and there's a lot of it.

[Rob]

And it's a lot available and we've got a great infrastructure. So it's just more economic really than anything. And it's also efficient, but it's, you know, it's also lower carbon as well. So we just really like the natural.

[Justin]

Gas opportunity for a lot of these reasons.

[Podcast Host 2]

And when it comes down to it, you think oil and natural gas are what we're going to need to use to meet this demand?

[Justin]

For the most part.

[Rob]

Well, on the electricity side, it's definitely.

[Justin]

Going to be natural gas.

[Rob]

We're going to be nuclear for the first. On the electricity side, globally or globally, the best thing.

[Justin]

Oil will always have a role, you know, I mean, I guess unless we went to 100% EVs, which, you know, that's how some people could debate that. But, but, but oil, Oil goes into so many other things outside of just cars as well, just regular consumer products, almost everything. You're, as I look where you guys are sitting, look around, you're going to have, there's going to be an oil, there's going to be an oil component to almost all of those, all those various products or a oil derivative product.

[Podcast Host 2]

How do you think about this? When we think about it, a high level with inflation. Because it seems like if I go back to economics 101, I've got a lot of demand coming and I don't know if we can put on the supply fast enough. I mean, is this something where you expect energy prices to be going up over time because of these dynamics?

[Rob]

Well, Jack, this is what this, you just, you just hit on what I.

[Justin]

Think is probably one of the most underappreciated aspects ever about the energy sector and the U.S. shale industry. You're all we're all here for was a bad word for a lot of people, fracking was a bad word. But the US Shale industry is probably one of the most underappreciated technologies and I think one of the most impactful.

[Rob]

Technologies definitely in the US And Maybe in the world for this, for the reason you just articulated 2005.

[Justin]

The oil and gas that were going.

[Rob]

To continue to be the fuel supply.

[Justin]

Sources of the future were in decline. The US Was looking at becoming an end, was going to have to import a lot of oil and gas a lot more and that was going to get expensive.

[Rob]

But what happened? Well, these US Shale producers, or well, these US Energy engineers and geologists found this new energy supply source in the.

[Justin]

US and simply found a lot of it. And it was in the form of US Shale was a brand new technology.

[Rob]

Brand new drilling technique.

[Justin]

Nobody knew a lot about it. You know, Exxon, Chevron, they were, they.

[Rob]

Weren'T investing at the time significant amounts of money. It was these independent entrepreneurs, they call.

[Justin]

Them wildcatters in the, in the oil and gas space that took a chance.

[Rob]

And now because of US Shield technology, the US has become the largest oil and gas producer in the world and.

[Justin]

The largest energy exporter in the world.

[Rob]

Without this, we would have a huge problem with inflation. As you, as you, as you highlight, because energy, oil, natural gas are the foundation. They build everything. I mean from the foundation you need a lot of oil and gas. And so those prices go up. The price of the good or service you're buying that, that use oil and gas going up as well. Instead, instead what happened is the price of oil and gas come down, come down. And natural gas, particular oil, I understand.

[Justin]

It'S a little more volatile. It's not $10 a barrel anymore, but.

[Rob]

On an inflation adjusted basis it's much lower. Said a different way. If we would have never had US Shale technology, we never found this. I can't imagine how expensive oil and.

[Justin]

Natural gas would be right now. Can imagine how much inflation would be right now.

[Rob]

And I can't imagine how much slower.

[Justin]

Both domestic and the global economy would have been. And all of it, we've been able to have a faster growing economy and lower inflation in my opinion, for a long time because of shale technology.

[Podcast Host 2]

How easy is it to turn on and off? Because one of the things you hear is when the price goes down, people shut down the capacity and then it takes a while to bring it back on. Is this something that's easier to scale as we have more demand?

[Rob]

Yeah, it is. It's not as simple as flipping a switch, but it's gotten even better. I mean, all closer to that. When I started the industry 30 years.

[Justin]

Ago, you didn't want to do that because you potentially would ruin your, your well, you know, the well, the well that you were drilling. But that, that's changed a lot now. There's been a lot more data obviously, which has led to much improved drilling techniques, much lower cost drilling techniques.

[Rob]

And so yeah, they're able to, so you'll see that, right? You'll see when the global oil market or the global natural gas market is oversupplied, what we're seeing that night right now in oil, well, oil producers tend to slow down or just shut off and not, and not drill for a while and not produce for a while until the market gets back in balance. You're seeing that in oil right now a little bit. Even in the US where I think.

[Justin]

We'Ll see US Oil production probably be flatten out or even decline next year because the oil price is too low to support that. We've seen that in natural gas, as.

[Rob]

You just highlighted last year, oversupplied natural gas.

[Justin]

Too much, too much got out of balance. So the US producers stopped producing as much. Natural gas production declined. Oil market got, or the natural gas.

[Rob]

Market got back in balance.

[Justin]

Demand went back, started going back up and started to reproduce. So it's, it produce more.

[Rob]

So yeah, it's, it's, it's a little, it's not as easy flipping a switch.

[Justin]

I, you know, I, I, I, I.

[Rob]

Think people take it for granted. It's a, it's a really tough business.

[Justin]

But it is possible and it's something that I think we'll continue to see going forward.

[Podcast Host 2]

So if we think of like a macroeconomic level you wouldn't expect then we were also always talking on the podcast about the Fed and inflation and you know, what's driving inflation. So it sounds like, you know, you're positive on the infrastructure for energy, but it doesn't seem like you expect like runaway energy prices because of all this demand coming.

[Rob]

Absolutely not. In fact, we think oil prices are going down.

[Justin]

That'll be good for the consumer, that'll be good for inflation.

[Rob]

Natural gas is probably going to go a little higher, but not, but not a tremendous amount because we just have so much. That's the other thing about the US shale revolution. There's a whole bunch of supply out there. There's a whole bunch of natural gas.

[Justin]

Here in the US and oil to.

[Rob]

A certain extent at the right price. Natural gas, there's a whole bunch at three and a half, $4 and above $5. There's a whole bunch of natural gas you can find in the US oil and above 80 you can find a bunch.

[Justin]

Well, not a bunch, but there's more.

[Rob]

Oil to be found. You know, you think about it, I mean, in Canada you extend that in North America there's a tremendous amount of.

[Justin]

Oil and gas resource in, in Canada as well.

[Rob]

And now we're starting to find, you know, get back to looking for oil or globally and you know, you've seen.

[Justin]

Places like Guyana and other places where there been discoveries of major oil supply sources.

[Rob]

So there's a lot of oil and gas still left left to be drilled.

[Justin]

And found and discovered. And so I'm pretty optimistic about keeping.

[Rob]

A steady consistent price and not having.

[Justin]

Energy cause, you know, some financial crisis or some economic crisis. I should say maybe not a financial, but an economic crisis because of runaway energy prices going back to demand.

[Podcast Host 2]

I mean, this might be an impossible question to answer, but I'm just thinking in my own head like we have obviously the total demand for energy across the world and then we have this incremental thing coming from AI. Like I would assume as a percentage, that's still a pretty small percentage.

[Rob]

Right.

[Podcast Host 2]

Of the total. When you think about like the incremental demand coming.

[Rob]

Yeah, yeah. In the grand scheme of things. Yeah.

[Justin]

Especially when you, when you start, put it in, in the context of the world. Although the world will probably spend some money on AI too. But no, you're talking about single digit percentage growth.

[Rob]

I mean, so, so maybe let me.

[Justin]

Put it this perspective because that's just a good question, Jack.

[Rob]

So, so one of the great things, the other reason why I like the.

[Justin]

Energy sectors, if you look at demand always increases and it generally increases with GDP growth and, and population growth. And what I'm talking about is energy demand.

[Rob]

So if you look back over the.

[Justin]

I've just looked at the last 42 years energy demand growth, global energy demand growth has increased 40 out of the last 42 years.

[Rob]

Now it's not 5%, it's 1 to 2%, you know, so good question. What's, what's, what's this AI thing?

[Justin]

What's, what's it going to do?

[Rob]

I mean we're probably talking about, I.

[Justin]

Don'T know, a half to 1% increases in growth. Added to this maybe a half percent.

[Rob]

But you start compounding that. I mean the numbers get pretty big right? Over, over a longer period of time.

[Podcast Host 2]

And one of the things you've said which I think is interesting is this idea that a lot of energy investing people view it as volatile because it's dependent on the price of the commodity. But you've talked a lot about investing in infrastructure and how that's not dependent on the Price of the commodity. So can you talk about that a little bit?

[Rob]

Yeah, no, that's a great observation. If you just look at the, you.

[Justin]

Know, the xle, the common ETF that a lot of people use, that mimics the weights of the S&P 500.

[Rob]

Yeah, that's what you get, you get.

[Justin]

A lot of more commodity sensitive oil and gas producers and some people, that's what they want when they buy the xlb. They want, they have a view on the commodity and they, and they want, and that's what they want to invest in.

[Rob]

If you want to invest more in energy because it's the economic foundation that's going to contribute to future economic growth both domestically and globally, you want to, you might want to look at the energy infrastructure sector because the energy infrastructure sector is just simply investing and generating cash flows from the transportation sector of the commodity. And so a lot of the energy infrastructure companies don't charge or don't benefit from higher or lower oil prices. They're, they basically charge a fee basically.

[Justin]

To transport the volumes.

[Rob]

They're more volume driven, less commodity price sensitive. Now when the reason why I say it's the infrastructure sector might be a little more attractive is if you look at it, the US operates the largest energy network, the energy infrastructure network in the world. So the US owns the largest energy infrastructure network in the world.

[Justin]

It's a bunch of these underground pipelines.

[Rob]

Oil, natural gas, ethane, propane, lots of natural, lots of pipelines, lots of storage. Once again, they're invisible to you. And I, you don't think about them that much. You don't even, you see that sometimes you don't even see them. The pipelines are especially invisible because they're under the ground. But you really need them.

[Justin]

And so, and the great thing about.

[Rob]

Energy infrastructure and why we've always liked the tortoise is because it's fee based, because it's driven by economic, because the volumes of the cash flows are driven by the economy and population growth and.

[Justin]

Economic growth, which we think will just continue to increase. You get steady increases in the cash.

[Rob]

Flows of these companies and then they pay, they return that cash flow to you in the form of a really.

[Justin]

Good dividend and an increase in the dividend. So you can get 5% dividend yields or more from energy infrastructure companies that are going to grow 3 to 5%, which is, you know, obviously if you're investing in the SOP, you're going to get what, a 1.2, 1.3% dividend yield, maybe, maybe, maybe similar type of growth.

[Rob]

So anyway, so investment looking for yield. This is typically better income.

[Justin]

This has typically been a good place for, for, for investors to, to hang out and, and then also benefit from, from rising markets as well.

[Podcast Host 1]

They're almost like God, but the Buffett toll bridge companies or they transport, they got to pay the toll to, to, to get the energy to where it's going to be. And that's, that's how they make their money.

[Rob]

They do, they have a little bit more risk than that. But, but, but, but you're right, I, they're very close to that.

[Podcast Host 2]

I was, I was just thinking when you were talking about like how far we've come as a country when you're talking about all the energy infrastructure in the US like relative, when I was a kid and we were worried about the wars in the Middle east because that was our main supply of energy. I mean the US is a net exporter of energy, correct?

[Rob]

At this point? That's correct. Yeah. That's right. The largest, the largest exporter of energy in the world.

[Justin]

Yeah.

[Podcast Host 2]

Just amazing thinking about that in the context. I mean it's a long period of time, but it's in the scheme of history.

[Rob]

It's not.

[Podcast Host 2]

And we've come a long way.

[Rob]

That's all shale, Jack. That's my point. You made my point. It's all shale. It's all because of shale technology.

[Podcast Host 2]

So you guys have launched a new energy infrastructure, etf, which is very interesting because that's obviously an area a lot of people are looking to invest in right now. And you use a three pillar framework from energy systems to data infrastructure and digital hardware. But I wonder if you could just talk about those three pillars and how you're kind of thinking about them as you build a portfolio.

[Rob]

Yeah. So what we launched is the tortoise AI infrastructure.

[Justin]

Well, it's not index, it's the tortoise AI infrastructure, Active ETF and it's TCAI is the ticker.

[Rob]

And we did that because we look.

[Justin]

At this opportunity AI and obviously saw a lot of people have invested in.

[Rob]

You know, the large cap, mega cap techs.

[Justin]

But what we saw an opportunity is in, you know, the enablers, what I'm going to call the enablers of the AI revolution and future AI development. It's in those pillars you're talking about. Think about it as like digital infrastructure. So two of those pillars I'll call digital infrastructure, you know, one, one being data centers and one being technology. What's they call technology? Hardware data centers.

[Rob]

I mean, look, these things are getting.

[Justin]

We just talked about them earlier, they're massive, right? They're growing, they're, they're, they're popping up all over the place.

[Rob]

And the reason for that is because basically they can't find enough of them. The vacancy rates and existing data centers are 3% or below.

[Justin]

In some markets they're zero rents, rent space is doubling or rent revenues are double or double digit growth, I should say not doubling the double digit growth in terms of, of rent. You're seeing longer duration contracts for existing data centers.

[Rob]

So you're just seeing huge demand for, for, for these type of, these companies and so that operate these data centers. And we're just building even more and more because what happens, Nvidia is building more powerful chips.

[Justin]

So that's, and they're trying to get into these data centers.

[Rob]

So we like the data center element, we like the technology infrastructure of it. Because once again, what we think is that AI doesn't run on chips alone, it runs on the infrastructure, the technology infrastructure. So as much as you need the Nvidia chips, and there's no doubt we need that technology, but those Nvidia chips basically don't only work if you have the data storage devices inside these big data centers to feed the chips so that they can parallel process that data. This AI only works if you have network switches that quickly and rapidly communicate across fiber optic cables across all these various data centers, in some cases across the world, to get our answers to our chatgpt questions or whatever. Chef bought you one as fast as we can. And so that's the type of thing we're investing. Cooling infrastructure is another thing. You gotta keep all that, that's great. You got a lot of big investment in these big data centers and all of this great technology. Well, you know what you gotta do, you gotta keep it cool. You don't want it to burn up. And so you need, you need simple commercial air conditioners, but then the data centers are getting so big you need the technology cooling infrastructure solutions that are beyond just standard air conditioners. You need things like what's called liquid cooling. And we can get into that. But it's an innovative way for companies to cool these data centers in a much more economic and more efficient way anyway. So there's a lot of really just exciting innovations that are happening in the AI infrastructure area. We're capturing all of those and all of those enablers of this AI revolution.

[Justin]

In this TCI fund.

[Podcast Host 2]

Yeah, it's interesting when you start thinking about the second order effects, you think about the investable universe just keeps going up and up and up in terms of, you know, all the things that are impacted by this.

[Rob]

Yeah, that's, that's exactly it. We answered enough. That's the perfect way to say, Jack, that's the second order is exactly, is exactly what, what we're finding. Because what we found, what we're finding is. And I, I mean, and a lot of your, and I'm, I'm sure you and me, me and, and Justin, every, a lot of people done a fantastic job of finding investing in Nvidia, Matt and Microsoft. That's, that's fine. Those are great investments as well. However, a lot of these second order effects you're talking about, those companies really, the benefit of AI to them has yet to be entirely felt, especially in their valuations. Yet a lot of them are growing at the same rate, in some cases faster rates from an earnings perspective or cash flow perspective than the mega cap tax. So what our view is, is that, you know, the investments we're making in this AI infrastructure, these companies are really. Well, first of all, they're underrepresented in portfolios, but they're underappreciated as well because of the significance that they're going to.

[Justin]

Make and the contribution that they're going.

[Rob]

To make as an enabler going forward.

[Justin]

And we think that's where there is opportunity in addition to the mega cap tech.

[Podcast Host 2]

So I think a decent group of them would be maybe companies that are not traditionally considered energy companies, as you think.

[Rob]

Better.

[Podcast Host 2]

Yeah.

[Rob]

Yes. Yeah, yeah, no. So, yeah, let me expand on that a little bit. Yeah, that's a good question. So when we think about digital infrastructure, we think about data storage devices, right? So companies like Seagate, right. Or Western Digital, those aren't energy companies, but they're infrastructure companies that, you know.

[Justin]

And you look at these data centers.

[Rob]

In these data center complexes and these data campuses that these data centers have, you know, there's millions and millions and millions of data storage devices, network switches. Right. That, that's, that's a really, you know, important area. Right? You got to have hundreds of thousands of network switches. Arista Networks is, you know, is one.

[Justin]

Of the, is one of the big providers there.

[Rob]

Cooling. Cooling. There's some really cool stuff going on, cooling as well. Companies like Modin Inverted, you might not have heard of them. Some people have. You talk to those companies. They've been around in some cases for almost 100 years. I think in Modin's cases now, look they're doing. But you know what they Are, they're innovating. They're innovators because they've innovated and they're not doing the same thing they were doing a hundred years ago. They're actually front center at this liquid cooling, which is a really kind of cool new technology. And they've created it and they're, they're installing it. They're the go to liquid cooling experts. That's not what they started out to be, but that's what they are now because they're innovators. And so there's just a lot of innovation going on now. I'm not even talking. We should spend a few minutes on the electricity side because there's some really cool stuff going on there if you're interested. And we have time about things that are going on with these bitcoin miners. We, we had this, we at. We found these bitcoin miners. We didn't buy them because they're bitcoin miners. We bought them because they had electric capacity, electricity capacity. And so what's happening is you're seeing companies like Riot Platforms and Terra Wolf and Iron. You might probably a lot of people aren't even familiar with those names. I encourage take a look at them, formulate your own opinions. But what we liked about them is a lot of them are converting from bitcoin miners and utilizing their electricity capacity to become data center operators.

[Justin]

And companies like Google are willing to.

[Rob]

Pay them to get access to their electricity.

[Justin]

And so that's just, that's a whole.

[Rob]

New business that's, that's been really created. And like I said, these bitcoin miners who originally were designed to take advantage of that now are transforming into entirely new businesses. So just a lot of innovation, a lot of excitement about as this AI.

[Justin]

Opportunity, this AI race really has just begun. But no, the US needs to win the race.

[Rob]

And there's a lot of companies and.

[Justin]

A lot of innovation that's going to be needed to make sure that happens.

[Podcast Host 1]

Where are those bitcoin miners getting their electricity? Are they sourcing it from rivers or where are they getting their electricity?

[Rob]

Yeah, that's a very good question, Justin. So a lot of them either have agreed upon power contracts from the various, whatever electricity region that they're, that they're.

[Justin]

From, or maybe they have an opportunity in renewable energy to, to, to supply a portion. A portion of it will come from, from the electric grid and portion of it may become from their own. From their own operations. But, but they.

[Rob]

So, so the great thing about, I guess the bigger picture, innovative thing, a.

[Justin]

Lot and you talk to some of these bitcoin miners is they didn't even.

[Rob]

Necessarily decide to be a bitcoin miner. They just had a, you know, I don't know, five, ten years ago. They, they looked at the, the grid.

[Justin]

And then, and they had a.

[Rob]

A little bit of innovation in their mind, I guess, and that they said, look, we think we're going to be short electricity, so we're just going to go out and get capacity, electricity capacity. We're not sure what we're going to do with it, but. And so with, with that capacity at.

[Justin]

Hand and a, you know, and an.

[Rob]

Unknown business model, they figured out well.

[Justin]

That the bitcoin came and they're like, oh wow, we can go put in a bunch of these, you know, high performing computing equipment devices and we can mine for bitcoin.

[Rob]

And look, they make great money mining for bitcoin but they figure out, oh, maybe we can make even more money if we now become data center operators to support this insatiable demand for AI.

[Justin]

And demand for electricity.

[Rob]

And they're still figuring that out, but they're making significant strides towards this transformation.

[Justin]

And it's just like I said, just another great example of what, what's going on here in the US which is really exciting.

[Podcast Host 1]

I feel like we've talked a lot about like the, obviously the bullish case for energy here and you guys are trying to take advantage of that with the strategies you run and the ETF that you're offering. But just kind of talk a little bit about the investment process both on the buy and the sell side. Like how does it work? When you guys, you find an idea, you obviously do your due diligence on it. Maybe you look at, look at it as a team. I don't know, just walk us through, give us some inside baseball on the investment process, both on the buy and then why you might decide to sell a company. Because I think sometimes the sell can be even more important than the buy and sort of how you guys sort of approach it at, at the firm level.

[Rob]

Sure, sure.

[Justin]

No, yeah.

[Rob]

And Justin, we've had this. So we got a great team here for, like I said, four senior portfolio managers at Tortoise.

[Justin]

We got three great analysts are getting ready to add another one as well. And we've had the same investment process in place since I've been here for now 20 years. We look at a couple of ways, so we look at it from a top down perspective.

[Rob]

So we break all of these companies.

[Justin]

Assign all these companies that we're looking at we got a big universe of companies we're looking at because there are so many companies that potentially could benefit from AI or just energy infrastructure in general.

[Rob]

We break them down into what I'll.

[Justin]

Call proprietary subsectors and we look at.

[Rob]

Every, look at the top, the overall, we get an overall view of the.

[Justin]

Entire subsector, you know, you know, even things like just, just as an example of, of house technology, what, what's, what's.

[Rob]

The latest technology related to that particular.

[Justin]

Subject or what's the most. So for instance, on cooling, you know.

[Rob]

What'S the best, most efficient, what's something.

[Justin]

Coming, I don't know with regards to cooling, these data centers. And so, you know, in some, you know, obviously we're looking at liquid cooling, we're looking at immersion cooling, which is actually even in different technology, but it's more expensive. You know, obviously we're just looking at standard commercial cooling as well.

[Rob]

But we start there, but then we go from the, with the, but then we also go from the bottoms up as well. And to look at the companies, look who are the market leaders in these particular subsectors. Then we start dissecting their financial statements, you know, looking at their revenue, looking at the revenue growth, looking at margins.

[Justin]

You know, you know, we can get a pretty good idea from, from, you know, from their margins of, you know.

[Rob]

How, how critical company is or at least what type of market share.

[Justin]

And you know, are they, they gaining.

[Rob]

Market share, losing market share? Are they, are they eroding margins to, to do that or not or, or.

[Justin]

Or are they, or you know, obviously the RDL company, they're growing market share.

[Rob]

In a growing market and expanding margins. And we got a few, we got several of those that invite as well. So, so we go about it that way. Look from the top down, the bottoms up to, to formulate the portfolio. And that's on the buy side. Now you said ask the sell side too, which is a good question. We're always looking every day obviously at the valuations. The valuation is probably the biggest driver.

[Justin]

Of our buy and sell decisions and.

[Rob]

Looking at every single one of these stocks in the universe, you know, relative to an alternative.

[Justin]

And so, you know, sometimes, you know.

[Rob]

In this market, the market values certain things higher valuations than others. You know, I mean, right now, as you know, I mean, semiconductors are valued at a pretty high valuation. Data storage operators a little less.

[Justin]

Much less actually.

[Rob]

Much less. Much, much less. So that, that's an example of, well, maybe we would sell a semiconductor company.

[Justin]

And buy a, and buy A, by.

[Rob]

A data storage operator. So, so there, there are always opportunities like that.

[Justin]

Obviously you got to evaluate not only just the current valuation, but the, but the growth and then the perceived market growth as well.

[Rob]

When we hear.

[Podcast Host 1]

Like the risk of like our US of our power grid, like you kind of, sometimes, you know, you might hear like there's kind of like a, you know, cybersecurity threat to the grid, but then there's maybe just an infrastructure like risk because there's too much demand or maybe it's dated. I don't know a lot about this, but I know I live in Connecticut and I always see, I look out my window here and there's like, you know, power lines and wires all over. You know, we, we live in an old part of the, I guess country where our lines aren't necessarily buried. And so it seems like it's, it's very antiquated to me, but I don't know enough about it. Like, is there, is there a real risk to like our overall like grid? I mean, do we need a big major power grid upgrade in this country, do you think?

[Rob]

Well, I think, I think that's a good question. Just I think what, I think what.

[Justin]

You can say, what I would say.

[Rob]

Is, you know what, look what's happened. There's been a tremendous amount of effort.

[Justin]

Made on, on all of these areas.

[Rob]

So first of all, yeah, the power grid is going to have to get bigger. So are we going to need capital investment?

[Justin]

Absolutely.

[Rob]

If we're going to generate if electricity.

[Justin]

Demand in the US and we're in the age of electricity, it's going to grow 75% by 2050, going to need a lot more electricity generation and it's going to be, we're going to need more power lines, we're going to need more generation, more transmission, more substation, everything.

[Rob]

But that said, existing grid today, a lot of investment made in ensuring cybersecurity.

[Justin]

And in ensuring that the power grid runs, runs very well.

[Rob]

I mean, in a lot of cases, you know, that's, they, they, they operate the power grid, let's say off the.

[Justin]

Internet per se, in a different system so that it becomes less susceptible to, to, to, to do some type of hacking. And so there's a lot of it, a lot of great work done and a lot of money made there.

[Rob]

They call it hardening the grid is the other thing.

[Justin]

So to try to prevent outages and these outages lasting as long, I think.

[Rob]

There'S been a lot of success there. I don't have the statistic But I just think, I know this has been a real big emphasis and in that, and one of the great things is electricity was flat, demand was flat for two decades. Well the, the great thing about that is, well a lot of the electricity companies were still spending money and they were investing money in making the grids more resilient. And so they've done a really good job probably over the last left, definitely the last decade, if no longer making the US electric grid more resilient. Now we're going to enter a new.

[Justin]

Phase where we got to expand the grid as well.

[Rob]

And so that, that, that, that opposed a challenge as well. But you know, I think these companies.

[Justin]

Are up to it and, and that.

[Rob]

And that's opportunities for, we've got a.

[Justin]

Lot of great companies out there like Quanta Services and Mastec and, and others who build these grids, build and expand and build these electric grids.

[Rob]

Keyword, black Beach. I mean there's a lot of great.

[Justin]

Contractors here in the US that, that are more than capable of, of continuing to expand the growth in, in the grid going forward.

[Podcast Host 1]

Ron, I think we've just kind of scratched the surface here with you but because there's so much obviously to talk about and we're kind of doing this condensed master class I guess, you know, in 60 minutes or less. But so hopefully we can have you back on in the future and talk more energy in the developments in the sector. But before you go, we tend to ask, we like to ask her as two standard closing questions and hopefully these will be pretty quick here for you. But the first one is what's the one thing you believe about investing that most of your peers would disagree with you with?

[Rob]

Oh gosh, what do I believe that most of my peers would disagree with? Oh, you know what? Well, you know, I, I, I, I think, well, I'm a big believer in energy. And I'll tell you what, as you highlight there not a lot of people like investing in energy for whatever reason. I mean I got a lot of friends that are portfolio managers of large, larger funds and I, I try to convince them that, you know, you really need to have an allocation to energy because energy and energy infrastructure offer some of the best risk adjusted returns. And that's probably what they don't agree.

[Justin]

With me about is that, and I.

[Rob]

Firmly believe, and my colleagues here do as well, that what we're doing at Torrent is we're trying to find the best risk adjusted returns in the market. And we believe energy and energy infrastructure.

[Justin]

And now AI infrastructure and digital Infrastructure is a place for that as well.

[Rob]

Because in a lot of cases, the.

[Justin]

Absolute need for energy and infrastructure going forward, that the cash flows are going to be steady, consistent.

[Rob]

Maybe it's boring, but that's okay because you're going to get this steady dividend yield that grows.

[Justin]

If you're investing in energy infrastructure and then if we're investing on the other side more in that digital infrastructure, you're.

[Rob]

Getting a little more growth, maybe not.

[Justin]

As much yield, but still you're investing in these absolutely essential businesses that everybody needs. You know, and that's, that's good.

[Podcast Host 1]

It's one thing we didn't talk about, which is dividend yield. So most of the holdings are kicking off some income. Most of them are kicking off a.

[Rob]

Kids on a product. So we have, we have in our energy infrastructure product. Yes. In our TCI fund.

[Justin]

No, I mean they're, they're, they're just growing their earnings per share.

[Podcast Host 1]

Gotcha. And last question is, based on your experience in the markets, what's the one lesson you teach your average investor? I'm guessing it might be like investing energy, but go ahead, I'll let you.

[Rob]

Well, outside of that, you know what? Yeah. I tell this to everybody. You know, the best investments I've ever made are ones when, when everything, it.

[Justin]

Seems like it's time not to be investing.

[Rob]

And, and I mean, I'm not the.

[Justin]

Only one that tells you this. I mean, I mean, Warren Buffett, I.

[Rob]

Mean, when it just feels terrible, it almost feels terrible. Like I shouldn't be doing, I shouldn't be investing this now. Gotta do your homework. But if you have, if you have strong conviction, but, but, but when everybody's going one way, then it's time to be buying it.

[Justin]

Because, because you can easily see, well, you easily see. It's not easy to see at the time, but I've seen it so many.

[Rob]

Times when it seems like the worst.

[Justin]

Time to be investing, it's actually the best time to be investing. Because if you got a good business and a good company, that's absolutely essential. I've seen it in energy. I saw in 2000 energy to a certain extent. We saw it in this bitcoin. These bitcoin miners in our most recent example where didn't feel like, or everybody.

[Rob]

Felt like you're going, going away from these businesses, but then it's time to.

[Justin]

Be buying these stocks and if they've got a good fundamental premise and a good management team and an improving balance sheet, well, then you're probably going to make some money, and that's when I've probably been the most successful here at Tortoise with those type of investments.

[Podcast Host 1]

Good stuff, Rob. Thank you very much.

[Justin]

Really appreciate it.

[Rob]

Thank you for having me.

[Podcast Host 1]

Thank you for tuning into this episode. If you found this discussion interesting and valuable, please subscribe on your favorite audio platform or on YouTube. You can also follow all the podcasts in the Excess Returns network at Excess Returns. If you have any feedback or questions, you can contact us@excess returnspodmail.com no information.

[Podcast Host 2]

On this podcast should be construed as investment advice.

[Rob]

Securities discussed in the podcast may be holdings of the firms of the hosts or their clients.