← Open Circuit
Open Circuit
Five years later: the pandemic's energy legacy
00:53:48
We revisit the biggest energy stories from the pandemic, and how they're shaping markets today.
Loading summary
Transcript69 lines
- [00:01]
Stephen Lacy
A quick reminder before we jump into the show. Katherine, Jigger and I are recording a live virtual show on April 16th at 1pm Eastern. What is a live virtual show, you ask? Well, we are going to do an episode over Zoom and you can watch us and join for free and then also submit your questions so you can go to latitudemedia.com events. Sign up and watch from the comfort of your own chair. We will see you April 16th.
- [00:30]
Jigar Shah
Latitude Media podcast at the frontier of Climate.
- [00:33]
Stephen Lacy
Technology Jigger, it's the middle of the night for you there.
- [00:37]
Jigar Shah
Well, I mean 10pm I feel like middle.
- [00:42]
Kathryn Hamilton
It's the middle of the night for me.
- [00:44]
Stephen Lacy
Jigger's off in some weird location recording in the middle of the night. Catherine's isolated in her room, sitting on the floor. I'm here trying to get away from my kid in the other room. It feels like the pandemic all over again.
- [00:58]
Kathryn Hamilton
My job is just to keep our dogs from butting through my door with their heads.
- [01:02]
Stephen Lacy
Oh gosh, we're going for total immersion here from Latitude Media. This is Open Circuit. Five years ago, as lockdown swept the globe, we witnessed an energy shock unlike anything since the 1970s oil crisis. Oil futures briefly turned negative, electricity demand patterns were upended and global emissions dropped by staggering levels overnight. And in the months and years after, Covid created a series of fascinating paradox. This week we're going to explore three that emerged from the how staying home rewired our physical and digital lives in ways that created surprising energy impacts. Then how market volatility ultimately sparked the biggest clean energy investment boom in history. And finally, how the crisis produced dramatically different policy responses around the world. That is all coming right. Open Circuit is brought to you by ONEnergy. Some industries simply can't afford power failures. Data centers, airports, manufacturers. When the power goes out, operations grind to a halt. That's where onenergy comes in. They design, build, own and operate megawatt scale battery storage to keep businesses running and grids stable. With proprietary energy management software and in house expertise, they make energy more reliable, efficient and resilient. Need backup? Peak shaving, faster interconnections? OneEnergy has the solutions because when reliability matters, their track record speaks for itself. Learn more at on energy OpenCircuit is supported by Kraken, the only proven AI powered operating system for utilities. Kraken's tech helps utilities provide excellent customer experiences, increase product innovation to support a distributed grid, unlock new revenue streams and make huge operational savings. Yep, that is all possible with Kraken. Click the link in the show notes or go to Kraken Tech to learn more about how Kraken is helping utilities improve the experience for over 60 million customers worldwide. Upgrade your utility with Kraken. I'm Stephen Lacy, executive editor at Latitude Media. I'm joined by Jigar Shah and Kathryn Hamilton. Jigar's a clean energy investor and former director of the DOE's Loan Programs Office. So five years ago to the day, we were remotely recording. My toddler was napping. I was trying to keep her quiet. And I remember, Jigger, you said that you had house guests from New York seeking refuge in Maryland. Did they ever leave?
- [03:35]
Jigar Shah
They did. They did. It was my wife's brother and his family. I think as soon as Covid became real, I was like, get out of Dodge. Bill de Blasio does not know what he's doing in New York City. And he's like, oh, I think it'll be fine. I think the next morning, he was like, I'm in a car. We're heading down. And it was fantastic. As you know, I only have the one child, and so having his two cousins around, I think made everything a lot easier.
- [04:04]
Stephen Lacy
Kathryn Hamilton is the co founder and chair of 38 North Solutions. Katherine, that episode that I mentioned. You mentioned your husband was working from home before the pandemic, and suddenly you were crowding into his space. Did you and Dave end up being good office mates?
- [04:20]
Kathryn Hamilton
Yeah, we ended up making sure that our office spaces were very separate was the key. In fact, they're two floors apart from each other, so, no. It all ended up working out.
- [04:30]
Stephen Lacy
Katherine, what was your most spectacularly wrong prediction about COVID That it wouldn't last.
- [04:35]
Kathryn Hamilton
Very long, But I think that was everybody's spectacularly wrong prediction. I also thought that. So I live, like, five minutes from National Airport, and it was so quiet. It was actually just. And you could hear the birds. And I was like, this is so nice. Everybody's gonna love this and want to keep it like this all the time.
- [04:56]
Stephen Lacy
Jigger, did you have any spectacularly wrong predictions?
- [04:59]
Jigar Shah
Well, spectacular is in the eye of the beholder. But, I mean, I really did think that we could use the singing birds in the blue skies to encourage everyone to move forward faster. And I do think that in some ways, we did right. I mean, you know, electric vehicle sales are way up, and, you know, clean energy is dominant around the world, but, you know, not as fast as I wanted it to go.
- [05:26]
Stephen Lacy
I really thought those nature is healing memes would do the trick.
- [05:30]
Jigar Shah
Yeah.
- [05:32]
Stephen Lacy
There was one prediction you made I couldn't find it. But in one of the episodes, I think you made an offhand remark, jigger, that you thought this would encourage everyone to, like, learn how to fix their own clothes from home.
- [05:43]
Jigar Shah
Yes, like make our own clothes and fix stuff. And that was spectacularly off. Everyone has been outsourcing like nobody's business.
- [05:52]
Kathryn Hamilton
Oh no, except my family. My family figured out that I could fix everything for them and they were like, oh, well, we'll just get her to do it and we'll get her to cut all our hair. Which I also learned how to do.
- [06:03]
Stephen Lacy
I was one of those normies who just took up running and puzzles. I did, however, buy 20 pounds of elk meat, which my dog developed an allergy to. And so I learned how to make a lot of recipes with dog grade elk meat. That said on the package, not fit for human consumption.
- [06:18]
Jigar Shah
I think we've talked about this in the podcast before. You need to avoid mass purchases of meat. Like, honestly, like, don't worry about the brain worms, man. Yeah, exactly. Exactly.
- [06:31]
Stephen Lacy
So five years ago, we huddled around our microphones trying to make sense of a world that was grinding to a halt. Oil prices were crashing, renewables projects were pausing, people weren't moving around, and we were all wondering how the moment was going to reshape energy. And half a decade later, we can finally answer that question. And like nearly everything about the energy transition, it's very complicated and full of contradictions. So I want to split this conversation into three different categories. I want to explore paradoxes in the physical world, in our digital lives, paradoxes in markets and investment, and paradoxes in policy. So let's first start with the physical world and how we moved around and what happened to us as the world shut down. So when the skies cleared over Beijing, Delhi, Los Angeles, there was this momentary fantasy, as Jigar described, that this collective pause might be a reset button for climate change. Transportation emissions dropped by 50% during those early lockdowns. And without knowing how long the pandemic would last, many wondered if driving would ever rebound. But as some people fled urban centers, others boomed. And while hybrid work certainly persists, the average commute distance has actually increased in many regions. Meanwhile, public transit ridership is well below pre pandemic levels in major cities. And meanwhile, our digital lives generated their own energy paradox. Data center energy consumption soared as video conferencing, streaming, and eventually AI development created new power demands. So we didn't just pause our energy intensive lifestyles during COVID We rewired them in ways that continue to reshape consumption. Patterns today. So I want to ask you both, and this is going to be a question that I ask across all these different categories, what was a prediction that you either made or you commonly heard back then and then how did it actually play out? Katherine?
- [08:27]
Kathryn Hamilton
We didn't have much information, so we didn't exactly know how long it would last. But we certainly, I remember in that, in that episode, during COVID that first episode, you said something like, I think we're 45 days out from peak Covid now. We were like so far out from peak Covid in March of 2020. And I think part of it was like we just didn't really know. But one thing that was strange, stunning was that my kids school had immediately had online resources set up for them. We could. All of my client work immediately shifted online. So while we were, it was still unclear as to how long it would last. Everything adjusted quite quickly.
- [09:08]
Stephen Lacy
I thought, how did this have consequences for the way we were using energy?
- [09:12]
Kathryn Hamilton
Yeah. So by April, so about a month into when it was really known that this was a pandemic of 2020, global electricity consumption decreased by 7.6%, which was more than the 7% drop during the 2008 financial crisis. So there was this initial decline and then in the summer the consumption rose back up 2.1 to 3.5% compared to the predictions were less. So, you know, there was reduced time at spent at home because restrictions were eased a little bit. People were spending more time outside. So I think that's probably why it rebounded a bit. And then 2023 is when Covid, the pandemic was officially over. 2020, 20, 2023 had very mild weather and now demand is surging, of course, economic growth is occurring, cooling needs are increasing. The data center sector of course is expanding. So there are all these reasons that post 2023 we've seen an enormous continued rise in demand and expect more jigger.
- [10:19]
Stephen Lacy
What did you think was going to happen or what predictions did you see emerging that you thought were compelling and how did they actually play out?
- [10:27]
Jigar Shah
Well, beside the fact that I thought everything, everybody would learn how to fix stuff and make their own clothes. Yeah, I mean I, you know, the thing is, is that with demand reduction we saw a lot of oil price reductions and I thought people would want to keep that going. Right. And so they would actually come up with ways to pass policies for us to use less oil faster. You know, some of that's worked out, some of them, some of that most certainly hasn't worked out. But you know I do think that that folks understanding that energy security is now national security seems like a massive change that happened during COVID Well, it.
- [11:11]
Kathryn Hamilton
Was interesting that Fatih Birol of the International Energy Agency, when he released the World energy outlook in 2020, which was in November of 2020, I mean, he really used Covid as kind of the jumping off point for what the next thing was gonna be. And he said because of the uncertainty about the future of energy and this is a critical decade for emissions reduction and energy transition. And he said we should not use low economic growth as our low emission. That instead we should really think carefully and deeply about how do we use go to net zero emissions by 2050. And they built this whole case for it. And then in the next month, he did a whole piece on renewable energy growth for 2020. So certainly people in the world were thinking about this as something that we could use as really a foundation, as an understanding of this is where we could be. And we just need to really now double down on it.
- [12:11]
Stephen Lacy
I think that's a really interesting point, because while ultimately, I think Covid brought a lot more anger and skepticism toward institutions, it certainly catalyzed a lot of collective government action over reorienting supply chains and investing in clean energy. And we're going to talk a little bit more about what that looked like and what the legacy is. But I think part of that prediction or that hope did come true. Jigar.
- [12:39]
Jigar Shah
Yeah, I mean, you know, I, you know, I continue to believe in, you know, collective action. I just think that, you know, there's this inexorable trend against community right now. Right. I mean, there's an epidemic of loneliness. There's an epidemic of, you know, people burying themselves and their phones and their devices and whatnot. Right. And I think, you know, Covid opened that window where people started taking care of their neighbors and, like, checking in on loved ones and, you know, figuring. Figuring out how to. To do things like wear masks or other things to try to protect other folks. Right. And I think for that moment in time, there was this intense feeling that people should think of others and how their actions impact others. And, you know, like, I do think that that memory hopefully, you know, continues to. To spread. Right. Because I think that part is going to be very important. But there's also been, you know, a little bit of a individualistic backlash that's occurred as well.
- [13:44]
Stephen Lacy
Just a little bit. One of the predictions that I focused on was the great urban Exodus, you know, mid-2020. We saw the headlines screaming that we would see the death of cities that they wouldn't ever recover. Zillow searches for suburban homes went through the roof. U Haul couldn't keep trucks in stock in major cities. Rents in premium urban markets plummeted. And the conventional wisdom was that remote work had permanently broken the gravitational pull of cities. And five years later, that reality looks way more nuanced. So it wasn't so much of an urban exodus as it was a reshuffling, because a lot of people left. Cities like San Francisco, New York, but Sunbelt cities like Austin, Phoenix, Nashville boomed through the pandemic. And what emerged wasn't like this simple urban to suburban shift, but a really complex redistribution. The rise of secondary cities, the evolution of hybrid work models that still had some connection to urban cores. And there was an interesting energy paradox to this, because people spread out into larger homes with larger energy footprints. So we saw residential energy use rise, but we didn't see the permanent suburbanization that was expected. Commercial buildings, even though commercial real estate got wiped out, they still consumed a surprising amount of energy because even though they had lower occupancy, there needed to be heated and cooled and maintained. Commutes became less frequent, but they became much longer as people moved. And then underlying all of this, you had to support this distributed activity with a massive amount of data center capacity. So I mention all this because what we saw right away was this rapid drop in per capita energy consumption with the shutdowns, and then this quick increase as things opened up. But things don't look radically different on the energy front. And I thought that was a very interesting prediction. That felt quite dire. That didn't evolve in the way people thought it would.
- [15:53]
Jigar Shah
Yeah, I think that's right. I mean, but I also think that people think a lot more about their energy today than they did five years ago. And I think you're seeing a big growth in backup power systems. And I think folks are recognizing that if they're working from home, that access to electricity actually is how they make money. And so that's been an interesting thing that we've seen since COVID Right. Is that folks are actually more energy aware, I think.
- [16:27]
Stephen Lacy
All right, who are the winners and losers in this area, Catherine?
- [16:31]
Kathryn Hamilton
Yeah, I think that the winners were all these digital resources that we were able to tap into. I think folks who worked outside, and I remember during that episode that we taped, I mentioned that my across the street neighbor was having solar installed, and those workers were just kept on keeping on because they could work outside. There was not an issue. So I think folks that had outside jobs did pretty well. And the losers were of course, people like women, children who weren't able to stay home from school, people who were already suffering from poverty, had a really hard time. So I think from a human level there were quite a few losers. But certainly from a technology level we were able to continue to grow and to, you know, to be very connected technologies technologically.
- [17:25]
Stephen Lacy
I picked data centers as the undisputed champions of COVID Covid didn't just benefit data center infrastructure, it like fundamentally transformed the trajectory and set the stage for the AI revolution. So when we saw the pandemic hit, we saw this massive surge in digital demand. You know, Microsoft reported that it experienced two years of digital transformation in just two months. You know, we had Zoom exploding from 10 million daily users to 300 million practically overnight. Netflix and YouTube were going bananas. E commerce surged. And so all that digital activity lives somewhere in data centers. And while a lot of construction activity ground to a halt, data centers were designated as essential infrastructure. And so they kept building at a really steady clip. Capital that fled, other sectors poured into data centers. They were kind of seen as pandemic proof assets. And what's particularly, particularly interesting is how this surge changed tech companies relationship with energy. So companies like Amazon and Microsoft and Google had already been scaling up their energy teams, but it was at this moment that they started hiring a lot more people. They started to do more creative things, more sophisticated, they became more sophisticated energy players and they started developing expertise in grid integration and advanced forecasting and larger scale project development. And so that created creativity, moved into the AI era. And so when the AI boom started in earnest a couple of years ago, these companies had already built up this really deep roster of expertise to manage a lot of the power demands of large language models. And so that groundwork laid during COVID from like site selection to utility relationships to some of those to their climate targets, became the foundation for AI deployment today. So we're witnessing now with AI data centers, the direct evolution of the digital acceleration from the lockdown years.
- [19:32]
Jigar Shah
I think if you're trying to compare this, I think the undisputed winner was clean energy, not data centers. I mean, I think when you think about just how much money went into clean energy in 2021 and 2022, I mean, it was just massive. I mean, the world has forever changed because thousands of companies got funded during that period of time. And now many of them will go out of business and some of them will have squandered that opportunity. But when you think about how Many Teslas are going to come out of that funding boom. It'll dwarf whatever you think happened during data centers.
- [20:10]
Stephen Lacy
OpenCircuit is brought to you by OnEnergy On Energy is one of the fastest growing battery storage ipps, delivering storage solutions for utilities, enterprises and critical infrastructure. With 300 megawatt hours deployed deployed across 65 projects, their proprietary battery solutions are helping bridge the gap to a future where energy is abundant, clean and resilient. With a vertically integrated approach covering design, financing, software and operations, On Energy seeks to make storage simple. Building on this expertise, On Energy is now expanding its focus on the data center market as energy demands grow in an AI driven world, On Energy is redefining energy infrastructure because downtime just isn't an option. Click the link in the show notes to learn more or Visit on Energy OpenCircuit is supported by Kraken, the only proven AI powered operating system designed for energy utilities. Now wouldn't it be great if your utility could easily embrace the adoption of electric vehicles and other distributed resources, develop customer centric products in weeks, not years, and offer excellent customer service to boot? With Kraken, all of this is possible. They are removing the barriers of outdated tech, bringing together everything a modern utility needs in one purpose built platform. Join leading utilities around the world in switching to Kraken. Learn more at Kraken Tech or click the link in the show notes. Well, that jigger brings us perfectly into the next paradox, if you will. Investment in infrastructure and the pandemic looked like a disaster for energy infrastructure of all kinds. Projects were delayed, supply chain seized up, financing froze. Yet five years later, renewables make up roughly 90% of all new generation being installed globally. Solar's pulling in a billion dollars of investment a day, surpassing investment in oil. But we also saw during COVID a resurgence of coal. And as demand for petroleum rebounded, oil majors promised to promising to reinvent themselves in the wake of COVID largely abandoned their efforts. There are a few other ways the paradox played out. First, while the initial shock sent fossil fuel prices plummeting, the recovery created a lot of volatility. And that volatility demonstrated the price stability of renewables with zero fuel costs, supply chain disruptions, spiking commodity prices force real fundamental rethinking of manufacturing. And then finally we had interest rates which drove a lot of the growth. So that zero interest rate environment created unprecedented capital for clean energy projects fueled this venture capital frenzy in climate tech. But then when rates rose dramatically post pandemic, it hurt startup valuations. It shrunk the climate tech capital stack, increased borrowing costs for debt dependent developers. So there are a bunch of conflicting trends here. So Jigar, what was the prediction in energy markets or infrastructure development that you made someone else made or that you commonly heard and that how did it actually play out?
- [23:18]
Jigar Shah
Well, I think there were many people, including the oil majors and others that predicted that we would really reach peak oil demand. I think at the time BP had said that oil had peaked in 2019 in terms of oil demand. And so I think, you know, and I think that largely has come true in the sense that like while oil demand has rebounded and gone up a little, you know, people are very afraid in the oil markets today that oil demand has peaked and that China is likely to start going down in terms of its oil consumption. India will continue to go up a little bit. But in general you're starting to see that the alternatives to oil have become a national imperative by most countries. I mean, India top of that list, they do not want to import more oil. Right. And they believe that the, the model that China has put forward is something that they can copy. Right. And so I think when you think about the predictions, you know, they were probably premature. We didn't peak oil in 2019, but they weren't far off. I mean, the level of optimism right now and being able to reduce oil demand at the country level has given people a lot of confidence in trying. And you're seeing that across the world.
- [24:44]
Kathryn Hamilton
And remember, there was this big oil price war because the incredible drop in demand during COVID put enormous downward pressure on prices. So Saudi Arabia said to opec, let's cut our production. And then Russia, who's not part of OPEC, but in OPEC plus, which includes Russia, China and the U.S. said no, no, no, no, let's increase it. Let's increase our production and supply. And then Saudi Arabia said, all right, we'll increase it. And then what happened was like in West Texas Intermediate, we got went from $18 a barrel to negative $37 a barrel. Now by the end of the year it had adjusted back up to like $51 a barrel. But I do believe that that kind of volatility and just the kind of chaotic pricing price dropping out doesn't help when you look forward to. All right, well how do we prevent volatility drops like this, especially when you get into a situation where you have uncertainty in any kind of policy or politics.
- [25:48]
Stephen Lacy
When demand came roaring back, oil company profits looked quite healthy and renewables started to take a hit in public markets. Jigger why do investors seem to be enthusiastic about oil and not renewables? If you actually look at how the stock market has performed, well, remember that.
- [26:13]
Jigar Shah
The reverse was true, right? I mean, oil prices were. Oil stocks were way down during COVID and renewables stocks were way up. And so there certainly was a correction that occurred a couple years later. But I don't think that that means that oil stocks are up. I mean, oil stocks are up because of the Ukraine conflict and oil prices were temporarily high. And because Wall street had taken over all the oil companies, they were far more disciplined finally, and they were printing money in over 18 months. They finally made up for all the losses that they incurred since 2009. But if you look at where we are now, I mean, oil prices are much more likely to hit 50 bucks again than they are to go to 90. And so we had a short blip of time when oil prices looked robust. And now with demand flattening, and Goldman Sachs just said that they thought oil prices were more likely to go down than up, the oil industry doesn't look so healthy again.
- [27:16]
Stephen Lacy
So one prediction that I saw very early in the pandemic was that renewable energy development was going to freeze and contract significantly. If you actually look at the analysis from Bloomberg, Wood, MacKenzie, IEA, they all predicted a really strong decline in renewable energy capacity additions. The logic was pretty sound. Supply chain disruptions, economic uncertainty, workforce limitations. We would likely see a lot of capital retreat from the space and people not be able to get projects done. Of course, we saw factory closures in China, construction crews weren't able to travel to project sites. But what actually unfolded was the exact opposite. Instead of contracting, renewable deployment accelerated really dramatically, and capacity grew 45% in 2020 in spite of the pandemic. And so the industry actually demonstrated pretty remarkable resilience. There were creative workarounds with supply chain issues. Obviously, low interest rates were a really important catalytic force. And investors saw renewables as a safe haven amid a lot of volatility in fossil fuel prices. So the prediction failure, I'll say, because it was a widespread prediction that renewables would contract, revealed that the renewables industry really had achieved a level of momentum and economic fundamentals that made it far more resilient than a lot of people expected.
- [28:55]
Jigar Shah
Well, I mean, I would say it a slightly different way, right? Which is that the people who turned out to be the most competent in a changing, ever changing environment with crazy supply chains happen to be the renewable energy industry. Go figure, right? Like the smartest people in the entire world were working in renewable energy. And when all of these things went haywire, the people that were able to figure it out and actually get things deployed, even though folks were betting against them, was renewable energy industry. So, I mean, look, I think it. I think it makes sense that these really sophisticated players who, frankly, I think were still being treated like they were small companies, turned out to be very large, sophisticated companies that knew what they were doing and figured out how to make lemonade out of lemons.
- [29:50]
Kathryn Hamilton
Yeah, I think that's a really good point jigger, because the supply chain stuff should have just stopped everything in its tracks. I mean, I remember one tiny supply chain issue was I had like a sleep sofa stuck in the Suez Canal when that boat ran aground. And like, I was like, oh, my gosh, nothing, nothing's getting through the Suez Canal. But these renewable energy companies were able to come back quickly and were able to pivot. And maybe that's because that's always what they've had to do, is to kind of like, scrape by with whatever they can hack into, whatever they could use, whatever policy and other mechanisms that they could get their hands on. And so maybe they just had a predilection for being able to be resilient in the face of something like Covid Jagar.
- [30:31]
Stephen Lacy
Who are your winners and losers?
- [30:32]
Jigar Shah
You know, I think that the fossil fuel industry, for as much as they looked like winners out of the Ukraine conflict and some of the things that came out of there now are really looking challenged. Right? I mean, even after this election, everybody wants to get off of molecules. Everybody. I mean, just, you know, recording this from London and figuring out what's going on in the eu. Like, they are all in on this. Like, I think we take for granted the fact that the volatility that Katherine talked about has caused everyone to put their smartest people on linking national security and energy security together. And when that happens, everyone is trying to figure out what to do to reduce molecule usage. Everyone, because from their perspective, like, this stuff, like, is out of their control. And I think part of what came out of COVID was folks were like, we need to, like, actually have a little more control. We need to figure out how to map our supply chains, where our vulnerabilities are, and how we actually protect our economy from these kinds of outside, you know, sort of shocks to the system. And I think that, like, that is turning out to be super important. And then the other thing that's turning out to be really interesting is that this whole concept of we just need the cheapest renewable energy and the cheapest stuff has also been one of the biggest losers, right? Folks want resilient stuff, local stuff, right? And you're starting to see a lot of folks decide that they're going to pay a premium if they have to, but they're going to manufacture some of it locally. Like, they're not going to allow their supply chains to be that fragile, right? And you start to see like the huge change, right? When you think about, you know, around like critical mineral supply chains or, you know, just solar panels or battery storage or some of these other things. I mean, there were people that were talking about this before, but not people who were actually passing legislation or people who were actually negotiating trade deals, right? Like, you know, today every single country is looking at this stuff going, wait, what? We're that dependent on one country for stuff like 90% of all grid connections in the world are renewable energy and clean energy. Right. 90% of all grid connections in the world, not just the United States. I just think that this supply chain thing has allowed people to go down a rabbit hole. Some of them are still down that rabbit hole and they're still like studying every single angle. And I think it's just made people recognize that oil is really out of their control and what they control is electricity.
- [33:33]
Stephen Lacy
Yeah, I totally agree. I agree that renewables were seen as a really important resiliency solution and a hedge against volatility, the kind of volatility we saw during the pandemic. And as a result, we saw like $2.1 trillion invested in clean energy in 2024, an all time record. And so the pandemic accelerated all of these trends that you're talking about, the resilient supply chains, local resiliency. The war in Ukraine amplified the rush toward clean energy in many regions. But yet, paradoxically, public renewable energy companies have been hammered, right? So you have policymakers, you have the industry talking about the value of clean energy during this very tumultuous period. But yet, if you look at the Global Clean Energy index S&P's global clean energy Index, it has gotten absolutely hammered over the last few years. It's very interesting how undervalued you see clean energy in the public markets. And I wonder what you make of that disconnect jigger.
- [34:42]
Jigar Shah
I think it was entirely predictable, right? I mean, when the stock prices of all these companies went through the roof in 2021, they thought that they were defying gravity and that they actually deserved those market capitalizations. And they spent money like drunken sailors. But you know, who didn't spend money like drunken sailors. Project finance players, they still like, used real spreadsheets and bought the projects for exactly what they were worth based on discounted cash flow. So then those companies were like, oh, we're still making the same amount of money that we were making before. We're not making more money, but we spent money like drunken sailors. And when the stock market realized that they spent way more money than they had and they made the same amount of money as they were making before, they're like, oh, you're not as profitable as you used to be. And so a lot of those companies are. Right. Sizing themselves right now. I don't think it matters because we're still putting in as much solar as possible. And the pension funds and other big guys are keep are still putting most of that $2.1 trillion to work every year. Right. And so some of them may be so disciplined that they'll go out of business like son Edison did, and others will actually pick up the pieces because they were disciplined. Either way, a lot of folks learned a valuable lesson. Don't spend money like drunken sailors and don't believe your stock price in 2021.
- [36:07]
Kathryn Hamilton
Yeah, you still need the fundamentals to work.
- [36:10]
Stephen Lacy
Let's wrap up with policy. So there's some interesting things I want to talk about in policy. Right. The pandemic forced this unprecedented government response worldwide, but we didn't see a unified vision for recovery. Obviously, we saw the European Union embed climate into its recovery package. The US eventually passed the Inflation Reduction act and the Bipartisan Infrastructure Act. There's deep clean energy routes in in the recovery planning. But there were other nations that took opposite approaches, doubling down on fossil fuels. China saw an astonishing growth rate in renewables, but it also approved more coal plants in 2020 than 2022 than in the previous five years. And then there were other several oil producing nations that used the crisis to retain and strengthen state control over energy resources. And so what we saw is this really fractured global landscape. But beyond the spending patterns, I think the pandemic also sparked deeper political resistance to government intervention itself. And this resistance and anger is playing out in elections and policy debates worldwide. And so there's this real question that I have on what the long term impact will ultimately be. Will the investments in decarbonization outweigh the policy whiplash that we are now seeing as a result of COVID So Katherine, tell me about what the common prediction was during this time and how did it play out?
- [37:43]
Kathryn Hamilton
Yeah, it was interesting because I had mentioned fatih Birol and him wanting to really double down on climate emission reduction and using Covid as a means to do it. And so certainly folks like the EU, they used like 37% of their Covid relief efforts, which was about 700 billion euros in this recovery fund, to climate related initiatives. Unclear exactly what the benefit of all of that was, but it was a real statement. And then there were other countries like Albania, Benin, Ecuador, Jordan and Vietnam and they really worked to align all their Covid recovery efforts with their climate goals. But then as you say, like a lot of the lower income, climate vulnerable nations just didn't have the resources to do that as they were trying to recover. And then South Korea, China and India, of course they did a bunch of renewables and clean energy, but they also did a bunch of coal. So, you know, they kind of did everything. So there was a, there was just like a broad spectrum of folks. And the US did something really interesting, which we haven't covered as much, although we covered it at the time, of course, because it's been superseded by the Inflation Reduction act and infrastructure bill and chips act. But there was in our $2.3 trillion Covid relief bill a whole bunch of stuff about clean energy. So the solar investment tax credit got an extension because it was, it was the wind production tax credit got an extra year. Offshore wind got its own credit. We didn't get the storage credit. It was heartbreaking at the time. I remember I thought I would never recover from that until the Inflation Reduction act was passed. But there was also the energy act of 2020 that was included in the COVID relief bill and that was the Better Energy Storage Technologies act, the best act that created the new long duration storage program under the Trump administration. At doe, there was tons of resour bills that were put in there and they were authorization bills. So some of it was funding for those programs, but also some of it was just like making sure that those programs actually existed and they're about coming due now for reauthorization. So it's an interesting time to be looking at that bill. But one of the things that really struck me as a prediction at that time was that Senator Murkowski in the Senate who had really pushed for this energy act of 2020, said Climate Change and clean energy, it's really bipartisan issue. There's just no difference. Climate is not a bad word anymore. And we know that's not true now. It is now really become so partisan. But at the time we thought it would be, oh, this is great. Everybody can get around this. And the first Trump administration was all on board and signed the bill. And so, you know, we were really thinking that this was going to be something we were going to get done in a bipartisan way and that that would persist. And unfortunately that has not persisted.
- [40:34]
Stephen Lacy
But you know, what are okay words? Resiliency, dominance. And those were words that everyone was using in the post pandemic recovery. There was this interesting moment, actually, when the pandemic first shut everything down. There were questions about whether like crisis austerity would put climate action on the back burner, actually as governments focused on immediate economic survival. And then more people started to feel hopeful that Covid would actually be an opportunity for a green recovery. And then the packages started to evolve. What did you think was going to happen, Catherine, at that moment when it was sort of unclear? Did you believe. You're like an encyclopedia, by the way, when you like rattle off all these changes. But like, did you believe early in the process that that was possible, particularly here in the U.S. yeah, I mean.
- [41:28]
Kathryn Hamilton
I thought that what we had done in the COVID Relief act was not monumental, it was incremental, but it gave us a pathway to doing more. So it was a lot of the kind of underlying and structural legislation that allowed us to build the Inflation Reduction act, bipers and infrastructure law, et cetera. And so of course, I couldn't foresee that because we didn't have an administration that would have been supportive of the ira. But I could have seen something like the bipartisan infrastructure bill passing had President Trump at that time been serious about infrastructure spending. He talked about it a lot, but he didn't really make that happen. But I definitely thought this is a time for incremental improvement. It wasn't sort of the rocket booster that we ended up getting in the Biden administration.
- [42:18]
Stephen Lacy
I had a lot of optimism that green industrial strategies would play a role in long term recovery packages, but I didn't realize how much political backlash we would see as a result. And I did feel like there was a potentially the opportunity to create this, like large global cooperation on shared challenges that might feed into climate change like this we're all in it together spirit. But it gave way to vaccine nationalism, to more supply chain competition, which ultimately ended up being a good thing and sort of increasingly fractured international politics. And so the government in the US and elsewhere rewrote the rules of how government inserts itself into energy markets. And so we have this period of green industrial nationalism. But I didn't foresee the kind of backlash we would See, as a result.
- [43:22]
Jigar Shah
Of those policies, I think you're misreading this whole thing, Steven. Like, I don't think there's any backlash to what we did. And in fact I think everyone's preserving it all. Like they want to use slightly different tools. But I think when you look at what the EU has announced this week and last week, I mean the EU was the last holdout, right? India and Brazil had had local buying requirements. Now the EU's like, yeah, we need some local buying requirements. Like I think when you think about how much every government is all in on industrial strategy now, like that's never going back. Like there's no like going back to like global free trade and we're just going to like buy everything from one country and like. And I think that, I think you misread the coal consumption. The coal consumption is a move towards local, right? So this is not a move towards fossil fuels. This is saying, every country is saying to the extent that we are living off of US lng, we'd rather use our local fuels than US lng, if to the extent that we're importing oil, we'd like to use our local fuels instead of that. And increasingly what they're finding is that local fuels are actually renewable energy and nuclear power. And I think when you see like China's 30 nuclear plants actually get built over the next four years, I think you're going to see them dramatically reduce coal consumption. And I just think that in India has just decided that they're going to go all in on nuclear as well as obviously solar and some of the other things that they're doing. I think that there is this optimism that I have right now that what happened in 2020 and 2021 has unleashed, you know, a set of solutions that are more local and yes, temporarily there was more fossil fuels, but I think long term it's going to be way more clean energy. And I just think that this is an unstoppable force on almost every continent.
- [45:19]
Stephen Lacy
I think you're right about clean energy and maybe I phrased it wrong. What I think is we did not build social cohesion and trust in government. And the pandemic fractured how people view public health measures, emergency measures, and I think that that is going to have very serious consequences for the next stage of policy development for these technologies. So it might not have been a direct result of the green industrial strategy per se, but I think the large scale government intervention around crisis management caused a very serious anti establishment backlash that will have huge consequences going forward.
- [46:06]
Jigar Shah
Maybe. I mean, that's why you got RFK Jr at Health and Human Services. But, I mean, you know, you look at Chris Wright, he's bragging today about how they released money to the Palisades nuclear plant. And so, like, when you think about, like, the tools that we were given at the Department of Energy, this Department of Energy wants to use all those tools. They might want to shift some of the sectors they want to work in, but they have not told me that they want to be less interventionalist. They're saying, I want to intervene on nuclear power instead of intervening on this other stuff. I think these are disconnected things. I think when you think about health and some of these other pieces, I agree with you. Institutions were under siege, and they feel weak. And I think people don't like the way public schools were managed during COVID People didn't, like, like, you know, the way the governors required certain restrictions and other governors didn't. And so, like, I think there's a lot of truth to what you say, but I think on the industrial strategy side of things, I think, like, Trump started and started in 2016 through his rhetoric. I don't think they passed a lot of policy to support his rhetoric. You know, even though it was infrastructure week every week, I think the Biden administration passed a. A bunch of policies. And the Trump administration is kind of like, I don't know, we're going to say nasty things about this policy, but we kind of want to use it to do stuff that we want to do. And so, like. And every single region of the world that I'm studying is going, that looks pretty cool. We should copy a form of that over in our country. And so I hear you on the. The feeling that people have towards institutions, but I see you and raise you that a lot of these folks are, like, leaning in even more.
- [48:00]
Kathryn Hamilton
Yeah. And I honestly think it's a difference between carrots and sticks, too. Like, the Inflation Reduction act did a ton of carrots. Like, the tax credits were huge, and it really helped, you know, really incentivize new manufacturing in the United States, as did the CHIPS Act. And that made everybody jealous around the world. So they all wanted to get in on the like, well, we'll bill local manufacturing, too, but there are other. And grants and loan programs. So those are all really good carrots. The sticks were things like the methane fee, and that's getting rolled back. So there are regulatory pieces which were more of the stick side, and those are really important, too, and they're being rolled back right now, unfortunately. So there are things that are positive and negative, but on the carrot side and the creating the market and the conditions for building more manufacturing and more renewables in the US that's completely unstoppable.
- [48:58]
Stephen Lacy
The Inflation Reduction act put a target on the clean energy industry's back in the Trump era. And then when you look at Covid generally radicalizing people like Elon Musk, who his experience with California's factory restrictions transformed him into this, this government cynic who's leading the efforts to dismantle federal agencies, the result is we're witnessing attempts to obviously freeze IRA spending and try to freeze the industry, but a systematic dismantling of government capabilities essential for the energy transition. So FERC authority, EPA enforcement powers, permitting offices, scientific research programs. And so. So I don't think that the public backlash per se is a result of IRA spending, but I think it created a politically troubling question about did it accelerate Trump's aggression toward the clean energy industry? And are we actually emerging from this IRA spending with kind of a Pyrrhic victory in that now we have an administration who's going to not just, just freeze incentives, but tear down the very infrastructure needed to actually execute it. And so this is a very US Centric take, but I think there's a very real question about what the long term net benefit will be at the end of the Trump era.
- [50:24]
Kathryn Hamilton
The benefit of the Inflation Reduction Act. Yeah, I don't think they're going to tear it all down.
- [50:28]
Jigar Shah
I think that when you think about what Trump cares about, it's basically tariffs and immigration. Every other issue that he comments on, I don't think he cares that much about. And I think that the Republican governors care a lot about the fact the Inflation Reduction act is basically an extension of their economic development office. And so every one of them are like, we'd like to leave all that in place, please. And so I think we're gonna be just fine. Like, look, and I think the other thing is that our industry is so rock solid and so dominant right now. The amount of money available for our industry has never been higher. Right. The amount of enthusiasm for investing in our industry has never been higher. Now valuations have come down, weak companies are going to go out of business. But I just think that the notion that this is a fragile industry, that Trump can do something with that one. We're 90% of all grid connections.
- [51:28]
Stephen Lacy
I feel like I should end on a positive note too. Before listeners ask if I need help.
- [51:33]
Jigar Shah
We all need help. Stephen, open circuit, meetups.
- [51:39]
Stephen Lacy
I do think that the supply chain reorientation story, the pandemic exposing vulnerabilities and that triggering a reshaping of trade relationships and onshoring of manufacturing is going to have a huge generational impact in a positive way, particularly here in the US So I think that is a really important story coming out of the pandemic. All right, well, it's very late there for you, Jigger. I guess we will let you go. Thank you.
- [52:12]
Jigar Shah
It's never too late. The sun never sets.
- [52:14]
Stephen Lacy
Catherine, I didn't see anyone in your family come and deliver you dinner during recording.
- [52:20]
Kathryn Hamilton
No. Supposedly it's ready downstairs, so we'll see.
- [52:24]
Stephen Lacy
That's going to do it. Kathryn Hamilton and Jigar Shah are my co hosts. Open Circuit is produced by Latitude Media. The show is edited by me. Sean Marquand is our technical director and he wrote our theme song. Anne Bailey is our senior podcast editor. Latitude Media is supported by Prelude Ventures. Prelude backs visionaries accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more@preludeventures.com for more on all the topics we cover on this show, go to Latitude Media. Sign up for our newsletter Daily, Weekly or AI Energy Nexus and you can just find subscribe right at the top of the homepage and you can find this show anywhere you get your podcast. Please spread the word and get transcripts at Latitude Media. Thanks for being here.