← Open Circuit
Open Circuit
Musk takes a chainsaw to 'energy dominance'
01:03:35
Trump and Musk are gutting the very agencies they need, while Texas shows clean energy is winning on economics alone.
Loading summary
Transcript91 lines
- [00:02]
Stephen Lacy
Latitude Media podcast at the frontier of climate technology.
- [00:08]
Jigar Shah
All right, I'm back from vacation. Did I miss anything?
- [00:12]
Kathryn Hamilton
What five things did you do when you were gone?
- [00:14]
Jigar Shah
Unfortunately, one of them was sitting by the pool in Costa Rica watching Elon at CPAC brandish a chainsaw.
- [00:22]
Kathryn Hamilton
That sounds like five right there.
- [00:24]
Jigar Shah
Katherine, what did you do last week?
- [00:26]
Kathryn Hamilton
Well, the first thing I did was hire someone to do the other four things. So that was very productive. And this incredible new director at my firm, Tyler Clevenger, that we found at Department of Transportation, is also helping me prep for the show, which is going to be super wonderful because as you know, I get a little stressed when I prep.
- [00:48]
Stephen Lacy
Well, that's all that preparation. You should just wing it like I did.
- [00:56]
Jigar Shah
From Latitude Media, this is Open Circuit. This week, the Trump team continues gutting the very agencies it needs for energy dominance. At the doe, mass layoffs hit nuclear security teams and grid operators, only for officials to realize they jeopardize critical infrastructure. At ferc, a sweeping order puts an independent technical commission under White House political control. And the EPA is systematically erasing climate programs while trying to claw back billions in legally committed funds. We'll summarize the latest, plus a market reality check from Texas. Despite a $5 billion state program designed to boost gas fired power plants, developers are walking away from projects citing equipment shortages and soaring costs. What does it tell us about the role of gas in the new era of load growth? OpenCircuit is brought to you by On Energy. 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. I'm Stephen Lacy. I am the executive editor at Latitude Media, joined by my co hosts Kathryn Hamilton and Chigarh Shah. Kathryn Hamilton is the co founder and chair of 38 North Solutions. How are you?
- [02:42]
Kathryn Hamilton
I'm doing great. Thank you so much.
- [02:44]
Jigar Shah
I got a call from you this morning while you were out on a run to talk about the run of show. You're not out of breath?
- [02:52]
Kathryn Hamilton
Yeah, I was able to chill out a little bit after you talked me down.
- [02:56]
Jigar Shah
Is that how you do your show prep? By going for a run?
- [02:59]
Kathryn Hamilton
Yeah. And Listening to podcasts, that's how I, I just want to have somebody talking in my ear and try to make me smarter.
- [03:05]
Jigar Shah
Jigger, have you been on a run today?
- [03:06]
Stephen Lacy
No, I mean, I was running this morning. I had to like, get my son to school. The whole process is stressful, but. Right, so, but, but yeah, it was good.
- [03:16]
Jigar Shah
Jager Shah is a clean energy investor and former director of the DOE's loan program's office. Everything good? Keeping up with the flood?
- [03:24]
Stephen Lacy
Well, as we talked about last week, I don't read it until 10 days after it occurs. Like, I find that like so much has changed 10 days later that like it's, it preserves my sanity to not know what happened in the change in policy during the intervening nine days.
- [03:42]
Jigar Shah
So in our very first episode, we pointed to a glaring contradiction. The Trump team says it wants energy dominance, but it is systematically pushing policy that will hinder that goal. And that contradiction is personified by Elon Musk, a man who once took a half billion dollar loan guarantee that saved Tesla, which then became profitable by selling $10 billion of carbon credits through a government created incentive program.
- [04:07]
Kathryn Hamilton
I really just wanted to do useful things like, you know, basically build products, you know, provide products and services that are, that are good and that, that I wasn't really like that interested in being political. It just like there was at a certain point, no choice.
- [04:23]
Jigar Shah
That was Elon at the Conservative Political Action Conference last week, looking like he stepped out of 4chan, wearing a large gold chain, reflective sunglasses and his signature dark MAGA hat. And he was seated in front of a chainsaw that he had just been waving through the air, pretending to cut down the government.
- [04:41]
Kathryn Hamilton
And like in dc, I'm like, look, it's like being in a room and this target, the wall, the roofs and the floor are all targets. So it's like you gotta close your eyes and go shoot in any direction. Cause you can't miss, you know. So it's pretty wild. You just push on things a little bit and you save billions of dollars. Like just a little bit, you know, it's wild.
- [05:04]
Stephen Lacy
It's scary, isn't it?
- [05:05]
Jigar Shah
So Elon's Department of Government Efficiency has laid off thousands of workers with plans to cut hundreds of Thousands more. Approximately 2,000 employees, 11% of the DOE's workforce were terminated. And the indiscriminate cuts hit nuclear security specialists at the National Nuclear Security Administration, grid operators at the Bonneville Power Administration, and climate scientists across multiple divisions. In some cases, like at NNSA, where over 300 staffers were fired. The administration had to hastily reverse course when they realized they'd compromised critical functions. And Catherine's going to tell us a little bit more about that. Meanwhile, the EPA is systematically erasing climate initiatives, removing terms like environmental justice from its website, repealing climate focused executive orders, and most dramatically, attempting to claw back $20 billion in green bank funding that was legally committed months before the election. That is an ongoing story. It's kind of a weird story. We're going to touch on it a little bit here. And then I think later we'll dev an episode to talking about the state of the greenhouse gas reduction fund. But perhaps most consequential is the February 18th executive order asserting direct White House control over independent agencies like ferc. This fundamentally restructures energy governance in America by subjecting what has traditionally been a technical market based regulatory body to political oversight. Former FERC chairs from both parties have sounded alarms. So we're gonna walk through these three areas and my view is like, this creates three really distinct challenges. First is the immediate disruption to agency operations. Second is the regulatory uncertainty for energy markets and infrastructure investments. And the third is the long term implications for politicizing technical decisions about grid reliability and market structure. So let's start with the layoffs. Catherine, tell us about what exactly happened at the Bonneville Power Administration.
- [06:58]
Kathryn Hamilton
Well, I want to first just set the stage a little bit for how these happened. Remember, these were all considered probationary employees. And that doesn't mean employees that are considered to have not been doing a good job and therefore they're on probation. It just means they were in their jobs for one or two years or had just been promoted to a new job or had just changed agencies. Some of them had been in the government for decades, so some of them were real experts in their jobs. And they were sent emails that said things like, your knowledge, skills and ability don't meet our current needs. Your performance has not been adequate to justify further employment at the agency. Or based on your performance, your employment is no longer in the public interest. These are people who dedicated their lives to public service, and for many of them, it was their dream job. They had worked their way up into a job that they really, really loved and wanted to do. So that's just to give you a sense of the public servants that are out there. These are not just faceless bureaucrats. These are people who had really important jobs and wanted to do those jobs. So that's just to kind of give you some context on what this felt like as an employee.
- [08:10]
Jigar Shah
Yeah. And to Jump in. Actually, that's a really good point. A lot of people see the federal workforce as a lot of Washington bureaucrats, but the vast majority of the federal workforce are people outside of Washington who are performing really critical functions. And these are the people that have been hit. So continue.
- [08:30]
Kathryn Hamilton
Absolutely right. So I was able to talk with Steve wright, who spent 32 years at the Bonneville Power Administration, over 13 of those at his administrator of that administration. And just to give you a sense of who Steve is, he wrote a book called Inspired Public Service. And this book that you can get on Amazon really talks about how to find meaning in public service, how to become highly, highly productive, and how to build a culture that is inspired and really gets to reinforcing democracy. Small D. Right. So he believes in public. He's been a public servant all of his life, just to give you some context. So he also wrote a piece that was in News Data, and it was with Randy Hardy, who was also an administrator of Bonneville, and to let you know a little bit about Bonneville. So the public marketing administrations were built in the. In. Bonneville was the first one that was built. It was built in 1937. It was really to manage the dams. So Bonneville was built to manage Bonneville and Grand Coulee dams. But basically all of the power marketing administrations are there to. First of all, they don't cost anything to run because they get their fees from the people who purchase their electricity. They're there to run large projects, mostly in rural areas, and they don't cost the federal government anything. So when you lay people off from these administrations, you're not actually saving the government any money. And Steve and his colleague Randy wrote a piece that was not meant to be critical at all. It was really meant to be informative and to also let the Bonneville folks know that their jobs are really important to the grid and to the way our system functions. So he kind of pointed out to three big pieces, public health and safety impacts. So staff reductions really do really do cause issues and could potentially cause disruptions to the grid. And I hearken back to my days at a utility where if you have a crew, and I was on crews quite a bit, you have several people that are really important to being on an electricity crew. You have a. A lineman, a groundman, an operator, because you need like a. Often if you're going up onto a pole, you need a cherry picker to get up there. You have a foreman, and if one of those people is pulled out, you've basically lost your crew. You really have to combine with another crew. And so what you're going to do is have less people out there monitoring lines in very, very rural settings. So it means that you're gonna lower reliability and resilience. And also these folks are very highly trained. These are technical jobs. They are very dangerous jobs and they require years of apprenticeship. So if you remove someone who is, you know, alignment first class or a foreman, you've lost a huge amount of real expertise and understanding. And getting people trained up takes years to do. So certainly the public safety is huge because of workforce issues, because you're not delivering reliability as well as you could. Another is really serving economic development. So, you know, they had just hired a bunch of new transmission planners and project designers to decrease processing time for building new generation and transmission infrastructure for processing interconnection. So all those things that we need to promote AI and to meet all the demands of our new manufacturing needs, that would not happen. And then also just the economic lost opportunity. So the hydro and nuclear power resource base, which a lot of these, especially Bonneville has, you know, they keep customer rates low and those are also in jeopardy by having people lost. So I just. This is something that shouldn't be overlooked and something we should see as these are people who are critical to allowing our grid to function and to actually meeting the goals of this administration.
- [12:21]
Jigar Shah
Yeah, so like a day later, the administration realized this after getting a lot of criticism and then brought those, many of those people back to the job. You know, this is what we feared the most. Elon was very transparent about how he was going to make these indiscriminate cuts. And he of course did this at Twitter now X. But obviously the consequences are very different when you're operating critical infrastructure versus just a website that, that people are using to send messages to each other. So they realize, oh, BPA controls 75% of the high voltage transmission lines in the Pacific Northwest. They manage the flow of electricity from like over 30 dams and a nuclear plant. Jigger. What are the, like, what are the consequences that the national security and reliability implications of losing this kind of institutional knowledge at agencies like this?
- [13:18]
Stephen Lacy
Well, I think as Catherine mentioned, you know, a lot of this stuff is not academic in nature. It's actually experiential. And so there's a lot of people who've been through it before. And so then when it happens again, they know how to respond in a timely fashion or they know how to predict that these kinds of things could go wrong and therefore they should be prepared for them. And so you think about, you know, a lot of the electricity outages or emergencies that we have that deal with. The electricity sector has experts from the Department Energy who fly out there the next day, whether it's the LA wildfires or whether it's the hurricanes in North Carolina. And they help to make sure that federal resources get to the right places. Right. FEMA does broad things, but like, when it comes to the energy nexus and the electricity nexus, I mean, that's really doe. But I think one of the things that we have to be mindful of though, is that it also took years to convince people to join the administration. Right. Like for a lot of the best people that we needed that had, you know, a different set of experiences than are typical for government employees, right? Convincing them to leave the private sector and come into the government in this moment took a long time to convince them to come in. So many of those people finally got convinced to come in and then they had been there less than a year and then they were terminated. Right. And so they're like, well, I'm never going to do that again. Right. And so, like, part of this is just if you want to bring in people with a different type of, type of background in the government, right, Having this kind of indiscriminate policy, like, just causes people to be like, yeah, like I'm never going to give that experience, like, you know, a five star rating. And so the next time a friend calls me about an opportunity like this, I'm going to tell them not to do it.
- [15:13]
Kathryn Hamilton
So this is all in what is supposed to be a move for more efficiency. But I would argue that efficiency has to do with a fully functional government. So in a move to try to be efficient, they're simply cutting jobs. It's the big chainsaw thing, right. Rather than trying to figure out, all right, what is it that we can legitimately try to make more efficient. And I would say there's some things like approving interconnection transmission planning, approving siting and permitting that really require additional capacity. You need more people to do that to become more efficient. It's like you have to spend in order to save and that's what's being lost here.
- [15:54]
Jigar Shah
That's actually a really good point, Catherine. And I was going to ask, like, how would you go about this if you wanted to reduce the federal workforce in a logical way? You know, I just. We have a bipartisan audience. Like we, I know historically, having done this show, we have a lot of people across the political spectrum and I'm sure many of them have supported Trump. So I don't want to sit here and reflexively say that all layoffs are bad. I think there are very strong arguments to be made for bringing efficiencies to the federal workforce. Of course, I think that's an idea that everyone can get behind. And, you know, there's a thoughtful way to consider how you downscale in certain areas. It's just the callousness and the thoughtlessness behind this that feels so jarring. You know, jigger. Based on, like, what you know about how the government works now, having been at DOE for years, what do you think is the reasonable way to go about this?
- [16:46]
Stephen Lacy
There is no reasonable way of going about this. I mean, that is the problem, right? Is it like we've had three blue ribbon commissions, right? They've all suggested exactly how to cut. Right. We've had deals between President Obama and the Congress around how we, you know, keep budgets flat or maybe going down by 1% a year, and then the Congress figures it out. But like, if you look at, under the first Trump administration, the first Trump administration zeroed out a lot of programs, including the loan programs office and the President's budget to Congress. All of those programs were reinstated by the Congress when they passed a budget and probably increased. Right? And so, like, look, part of the problem with this is could there be a more reasonable way of doing that? Yes. And it should certainly be less cruel and arbitrary as this has been. But I think there's a lot of people out there who are like, this never happens, like it never works. Like we just keep spending more money, right? We keep hiring more people. We never implement, like next generation technologies. Like, look at the faa, right? When you think about how advanced aviation is in Asia and Europe, we are not allowed to use any of that advanced technology here in the United States, right? Like, you could land planes, like in an automated way. We do it through physical humans with air traffic control, right? And it's one of those things where every plane is outfitted with this next generation technology, but we're not allowed to use any of it. Right. And so I mean, I look, I. This is absolutely the wrong way to do it, 100% the wrong way to do it. But I think there's a lot of people who are like, there are no right ways of doing it. Like, everyone has tried the Bush administration, the Obama administration, like Republican Congresses, Democrat Congresses, and every single program has a sponsor. And this is how you pass a budget, is like you make deals and you're like, you Vote for my deal and I vote for your deal.
- [18:42]
Jigar Shah
Katherine, what else stood out to you about the layoffs, either at DOE or elsewhere?
- [18:46]
Kathryn Hamilton
Yeah, I think one of the things that it's doing, and some of it is by design, is really making the folks who are left fearful and not have faith in their organization, not, not have loyalty, essentially, even though there is a loyalty test. And I think there's a way in which you could actually have the federal workforce become much more efficient and loyal by simply having them come up with some of like, all right, if you were going to try to remove this, this and this friction point and make things better, what would you do? Because a lot of those folks are stuck with the processes that are in place at their agencies when they come into their jobs. And having them start to solve that, I think would be really helpful. And that's not really the way they're about it. I mean, I'm hopeful some people will stay. I'm seeing a lot of people retiring who have a lot of brain trust, and I hate to see that because they've been there. They've been the stalwart public servants that bring the technology expertise to especially the Department of Energy, for example. And I hate to see them leaving. But I also see that Secretary Wright and others have pushed back on some of that. For example, that email that was sent out by Doge saying, what are the five, if you don't give us the five things that you did last week, be fired. And the agency heads were like, no, no, no, no, no. Like, you guys need to ease up a little bit. Let us be in charge. We were hired to do this job. We were confirmed by the Senate. Let us do our jobs. So I'm hoping that there's going to be some settling down of that.
- [20:20]
Jigar Shah
And what you just described, Catherine, is what I meant by, like, a reasonable way of doing this. And I understand, Jigger, there are these institutional barriers that make it really difficult. But of course, we know that that's never how Elon has run his companies. So I don't know if we expect it any differently, but it surely is an extremely callous way of going about it. And I wonder, Jigger, since we're seeing thousands of DOE layoffs and there was a lot of hiring that went on to help implement the IRA parts of the Bipartisan Infrastructure Law. How does this impact that kind of work?
- [20:55]
Stephen Lacy
Yeah, it's not clear. Right. I mean, on the one hand, the US Congress and the incoming administration has made it pretty clear that they expect all unspent money to get swept and used to offset other expenses in the tax bill. So I don't think they expect to do a lot more new grants or new loans even. Even though I think Chris Wright has said that he wants to do new loans, there's a tremendous number of grants that are already in place. And it does look like money has started to be released from those grants as well as loans. And those have to be managed. Right. For the next, you know, three years, five years, 20 years in the case of loans. And so. So that has to continue to happen. But as Katherine suggested, like, I don't think that Chris Wright in particular or Doug Burgum at Interior would have done these cuts in this way. Right. And so, you know, now they have to figure out who's left, right. And what expertise they have left in the. And how they reorient those people who want to stay to be able to implement all of the, you know, the requirements that the Department of Energy has to undertake. Right. And some of that might actually be reducing some of the requirements the Department of Energy has to take. But remember, they continue to actually be bold in the goals that they have. Right. Whether it's energy dominance or energy abundance, but also, you know, figuring out how to commercialize geothermal and new nuclear and fusion and all these other technologies. Right. And so, I mean, one of the big challenges I see in front here is that, I don't know when, you know, Chris Wright and Doug Burgum will actually be able to run their respective agencies. And if they don't get to run their respective agencies soon, then I don't know how much longer they'll stay. Like, why would you stay there and take full responsibility for all the outcomes? Many, many negative, Right. If you have no control over what the agency is doing, like, it's a huge reputation risk for them.
- [23:06]
Jigar Shah
Okay, speaking of lack of control, let's go to the situation at ferc, and that is where a new order now requires the agency to submit its decisions to the White House for review and theoretically align its legal interpretations with the administration's views. Catherine, what's going on there?
- [23:25]
Kathryn Hamilton
Yeah, so just as. As you got into the Wayback machine with me before with Bonnev, we're gonna do that with independent agencies as well. They were created. The first one was created in 1887 as the Interstate Commerce Commission, and it was built to control and regulate railroad rates. And the reason they started with these and Congress decided to do independent agencies was that even though technically they're under the executive branch, they're Very technocratic, they're adjudicated, they're very regulatory and, and fair, competition minded. They're not subject to the politics of any given administration. So just to give you a sense of where they are, they usually have an odd number of commissioners. In FERC's case, it's five commissioners, three of one party, two of another. Whoever the President is gets to decide who the chair is. So right now FERC has five commissioners. Two are Republicans and three are Democrats simply because of the way the terms have been staggered. But the chair is a Republican, Mark Christie. And so that allows for a kind of fair process and it allows this not to become under such political pressure. That doesn't mean that Mark Christie doesn't come with a point of view. And of course all of the staff at FERC then report to him. So they'll come with a certain point of view. But it also means that it isn't subject to vast swings of political whims. And so if, when you think, and it's also, FERC is not funded by Congress, again, ferc, just as the power administrations are funded, is funded not by the taxpayer, but by the fees that the folks that are regulated by FERC pay into it. So again, it's not a matter of fiscal responsibility. But you know, some of the things that they do that we're watching is like all these AI colocation decisions, right? Hydropower Licensing Order 2222 implementation, interconnection rules, transmission incentives, gas pipelines. There's so many things that come under FERC and they have so many decisions to take. And let me tell you, they do not take them quickly. It takes forever. It is a long regulatory process. It's very stakeholder heavy. It's very much about input all, every single step of the way. And in that way I think it's, you know, you build a record, you have to make a case, it's adjudicated on the other end. It makes for a process that is thoughtful. It may not be fast. So that's one thing. Of course, Hydro licensing, wow, I wish that could be faster. There are some things that are hopefully happening in the background that can make that faster. But putting it directly into the President and having all of those decisions go through the Office of Management and Budget is not gonna speed things up. It's gonna slow things down drastically. And a lot of things just simply won't get done.
- [26:10]
Jigar Shah
So Jigar, what are your biggest concerns about what could happen here? Either by rejecting decisions or putting political pressure on certain decisions, or just creating a bigger Backlog?
- [26:21]
Stephen Lacy
Well, I mean, you know, part of my challenge has been that I do think that both sides comes to the party with their own set of facts. Right. Like, it is very obvious, for instance, that we need, you know, clean, firm power generation. Right. And that you're not going to be able to, like, do all of this stuff with an inefficient using of the grid. Right. And we have a lot of rules that, frankly, were put in place in the late 90s, you know, probably popularized by Pat Wood, who was the FERC chair under George W. Bush. And they're just outdated now. Right. They just don't work, given where we are today. And the value of the independent agencies is they actually bring a lot of that expertise to both adjudicate the craziness coming out of the solar and wind industry and the craziness that comes out of the coal industry or the natural gas industry around having fuel on site or all the other stuff that we talked about during the first Trump administration. And so. So I think that this independence matters because, you know, like, I just. I don't know that they would have made great decisions if the Biden administration was telling them what to do on all these things as well. Right. And so I don't think that people should get collared by Trump here. Like, I think both presidents and senior officials in OMB and the White House are just completely unprepared for the technical detail that these agencies have to deal with.
- [27:59]
Jigar Shah
So, Catherine, how could this play out? Like, can you walk me through a potential scenario? In 2018, then energy secretary Rick Perry pressed FERC on a plan to bail out coal plants, and you could see how. And then it was rejected. Maybe just walk us through that example and then how that could play out differently under this new scenario.
- [28:23]
Kathryn Hamilton
Yeah, that's a really interesting story because, of course, there was somebody who's a friend of mine, actually at doe, who's a Trump person in the first administration, and he was tasked with doing this report, the outcome of which would need to be that coal is the most reliable and resilient asset. And they hired a really good person to do that analysis. And it did not come out that way. And they couldn't hide the fact that Cole did not end up being the winner in that analysis. And so everything kind of ground to a halt with that. It wasn't. The report was out there, but it was certainly not touted by the administration because of the way it turned out. I do think a couple of things could play out. One is it's really Congress's job to manage the independent agencies and to provide the rules and regulations. So jigger, certainly Congress could put forward amendments to the Federal Power act that created FERC and try to streamline some of those processes. Congress has yet to step up on any of this. Right now. I don't know what's going to be the Rubicon over which we need to cross for them to do that, but that would be one way to do it, which would be really helpful. And in fact, they could do some, have some really interesting conversations in the Senate Energy Committee or the House Energy and Commerce Committee to talk through, like what's gonna make these agencies work more efficiently and better and make rules work for everybody. You know, that's like.
- [29:56]
Stephen Lacy
That is what they did for the Nuclear Regulatory Commission with the advance act last year.
- [30:00]
Kathryn Hamilton
Exactly. Yep. Yes. No, you're exactly right. That's a great example of something that happened. The other thing is I'm assuming that won't happen so that it will be brought in to be much more under the White House control. And I think, looking, you know, I'm just listening to some chatter at naruk, listen to some chatter at naruk and the thought that they would bring in a state commissioner, one of the state commissioners from a red state to, to come in and replace Willie Phillips. His, his term doesn't technically expire. He was the chairman and now he's back to commissioner until 2026. But that they would fire him and bring in another Republican instead. So you'd have three and two. You would still have two Democrats at ferc. I mean, I will say that Chairman Christie, because he comes from a state, and this happens with a lot of folks that come in from being state regulators into being FERC commissioners. They bring a state perspective. So they really believe in being deferential to states. And I think that would simply grow. And that may not be the worst outcome in the world because even though state regulators are a little bit like deer in the headlights right now, I think, and they don't have enough capacity in their states to do everything that they need to do, I still believe that that means that their states are going to still move forward. If they give more deference to states, it just means that it will erode FERC's authority even more.
- [31:28]
Jigar Shah
So what we're seeing here is literally almost word for word, the Project 2025 blueprint for FERC, it's coming to life now. It calls for FERC barring commissioners from favoring carbon free power or justifying costs for what they call the vague social benefits of climate change. And so at a moment when, you know, 90% of everything hitting the grid is clean, you could imagine this having wide reaching consequences. Jigar, what do you think the potential? I mean, we're talking in theoreticals still right now, but what do you think the possible business or market impacts could be?
- [32:07]
Stephen Lacy
Yeah, it's the weirdest thing I've ever seen, right? Like on the one hand, the Trump administration is talking about reducing people's electricity bills, and on the other hand they are pushing the most expensive solutions they can possibly make, which are the ones that the electric utilities want to do. Right? What the electric utilities want to do is put in the most expensive stuff possible because that is what they're used to doing. And you're seeing that with Sempra's electricity, you know, with, with Sempra's stock price coming down, with other folks, you know, stock getting hit, like, you know, like, because a lot of the utilities are telling the Trump administration we can handle load growth. What they're not telling the Trump administration is we're gonna do it by raising people's rates by 10% a year, every single year. And when you talk to Chairman Christie, he's like the most concerned person in the entire country with rate increases, right? Like, his whole mantra is affordability, right? Above climate change, above energy transition, above everything else. He just cares about affordability, right? And so this is a train wreck. Like, I don't exactly know where this is going to go, but forcing everyone to do natural gas when it's coming in at such expensive prices, right? And nobody wants to build merchant natural gas. You see that in Texas, you see that in lots of places. And then, you know, everything that's being added to the grid right now, which is the cheapest are battery storage and solar and, and obviously folks are working on new geothermal and new nuclear and some other stuff. And then hopefully, you know, God willing, hydro finally catches up at some point. If FERC figures out how to relicense these things. We are in a really weird place where the politics are pushing the most expensive solutions possible. And FERC is trying really hard and the person running FERC actually really wants to prioritize affordability.
- [34:03]
Jigar Shah
OpenCircuit is brought to you by On Energy. 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 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. Let's finish this segment up with a quick look at what's happening at epa. We're seeing removal of environmental justice and climate change from its website. That is not really much of a surprise. But we're seeing also the review of the Endangerment finding attempts to claw back the $20 billion in funding for the Greenhouse Gas Reduction Fund. As I said, we'll talk about the Greenhouse Gas Reduction Fund in more detail as the story evolves. But Catherine, what is jumping out to you about the biggest changes at EPA right now?
- [35:25]
Kathryn Hamilton
Yeah, so EPA's mission is to protect the environment and human health. And every study out there that I am aware of shows that the biggest and most dangerous health impacts are in communities where the most water and air pollution is. And those are communities that are generally disadvantaged because wealthy communities do not allow those projects to be built in them. And so removing sort of the environmental justice piece to me is it then doesn't give you a way to focus like how do you focus your remediation, how do you focus protecting the environment and human health if you don't know who is being impacted? And I would just say one of the things that they had launched was a screening tool for climate and economic justice. And it was really just data on where are these communities where the ones that are the most impacted. Luckily the Public Environmental Data Project has pulled that and has that information on their website. But that was brought down. And what's ironic about that is that the whole Doge mantra is we want AI to run everything, but you've just taken out all the data. So AI is only as good as the data that go into it. Right. And I just think, you know, removing that just doesn't give them anything to focus on. And I, I think that is a feature, not a bug. The other piece of course is the Greenhouse Gas Reduction Fund, which was not really designed initially to go into epa. It was more of in the rubric of Department of Energy. But EPA did as good a job as they possibly could setting all of that up. The funding from that in the Solar for All, which was a $7 billion fund, all of those projects are under contract and Those accounts have been unfrozen. But the greenhouse gas reduction fund, the $20 billion, the bigger piece, is housed at what you'd call a financial agent, Citibank, and it's housed in that fund on purpose. This happens, has happened dozens of times when there are complex interactions, financial interactions, the government often uses a financial agent who knows how to do this. So there's nothing wrong with it being in Citibank, but. But of course, the Department of Justice, and it's committed. So it's not any longer the EPA's funding. It's sitting somewhere else and it's committed. A D.C. federal prosecutor resigned because they were told to launch criminal investigation into Citibank. And they said, there's nothing to see here and I'm going to leave rather than being forced to do this. So I think this is a story that is really ongoing and remains to be seen what will happen. Of course, the hope is that Citibank doesn't, doesn't cave and that keeps going with all the contracts that it, that it executed on.
- [38:16]
Jigar Shah
This is actually like a really bananas story and a great example of how differently things are playing out than I expected to or a lot of people expected them to. So EPA Administrator Lee Zeldin claimed to have discovered these gold bars of climate funding parked at Citibank. And that reference to gold bars comes from this Project Veritas video where a EPA official was surreptitiously recorded saying that by kind of getting the $20 billion out the door to these other institutions that would distribute the funding to local green banks. They said it was like throwing gold bars off the Titanic. And so then there was like this wild conservative response on social media and Lee Zeldin is out there talking about finding these gold bars. And then there was this internal pressure, as you said, Catherine, to get this federal prosecutor to open up a criminal investigation into Citi. She abruptly resigned because she didn't want to do it. So, Jigger, this is like a really wild story. What are you following as part of it right now, if anything? Because I know you're 10 days behind the news cycle.
- [39:27]
Stephen Lacy
I am following none of it. I talked to all of the green banks and whatever, the folks who got money this week, and they have said that, that it's all business as usual. Like folks are getting the grants that.
- [39:41]
Jigar Shah
They'Re supposed to get as part of Solar for all.
- [39:43]
Stephen Lacy
No, as part of, like the actual, you know, $14 billion of allocations for the, you know, Climate United and CGC and some of those folks. And they're all, you know, like, meeting the obligations that they've met. So if they have a valid loan and they've, you know, they're ready to wire money, they're wiring money. So, like, you know, in general, like, everything's working. Like, nothing has been paused. Like, nothing has been stopped. And so to me, all of this is in some sort of TMZ news page. Like, this is not actually. Like, this is a legal contract. Right. Congress gave money to epa. EPA ran a valid process. They awarded.
- [40:27]
Kathryn Hamilton
And very public, by the way.
- [40:28]
Stephen Lacy
Very public.
- [40:29]
Kathryn Hamilton
Very public press.
- [40:29]
Stephen Lacy
Right. A valid process. Very public. Public. The people who won these awards are extraordinarily qualified for the work that they're doing. They are, you know, being very careful about how they put the money out the door and making sure that the projects meet the original intent of Congress. And so everything's being done exactly as it was intended to be done. Like, I. I don't understand exactly what world we're going into, but at the moment at which you decide that you being against something means that it has to stop happening, like, energy abundance goes out the window. Like, I don't know what it is that they think is happening, but this is having a chilling effect on the entire business of energy. Right. So I don't. I don't know what's happening, but, like, it's not good for, you know, investor confidence.
- [41:24]
Jigar Shah
Yeah. I mean, I think that's what the. That's the scariest piece of all of this, is that they don't care. There's zero logic to any of this.
- [41:31]
Stephen Lacy
Is what I'm saying. I think that they do care. I don't think that they understand, and I don't even know who they is, to be clear. Like, I think that, like, the people wrote Project 2025 who are running OMB and the people who are doing DOGE are different. And I just found out that Elon's not running doge. There's some woman named Amy Gleason who's running. I don't know what's happening. And then I think there's some.
- [41:52]
Jigar Shah
Did you get that news alert while we were recording, too?
- [41:54]
Stephen Lacy
Yeah.
- [41:56]
Kathryn Hamilton
Then what is he cutting with this chainsaw?
- [41:57]
Stephen Lacy
I have no idea. And I don't. I don't even know if it's a real chainsaw. And then, like, you know, it might be a prop from some movie. Movie studio. And then you've got some National Energy Dominance Council who seems like another they. Right. Like, I don't think that three days actually have one unified. You Know, approach. Right. And I feel like this is some sort of, you know, like, I don't know, like, weird, like, reality television show. And so I don't quite understand it at all. But it matters a lot to people, right? I mean, if we are going to have the amount of, of economic development that we think is necessary for America to continue to compete in the world, we need these projects to actually get built. And I don't think that these actions are providing a lot of confidence in the market.
- [42:46]
Jigar Shah
We will do our best to make sure this is not a reality show recap podcast. Oh, God, no. Go ahead, Catherine.
- [42:54]
Kathryn Hamilton
I would also watch out for the Department of Agriculture's REAP program that has also been having its funds frozen. And that funding goes to rural communities to build clean energy projects. And these are all projects that are going to help people. And I just, I hope that at some point someone starts paying attention and understands that these are the people that elected this president and we want to make sure that they get the most affordable clean energy they can.
- [43:23]
Jigar Shah
So to wrap this section up, I just want to ask about manufacturing investments and how some of this uncertainty is impacting many of those investments. The New York Times had a really good story looking at the $130 billion that's flowed into factory construction for clean technologies. And I believe you were quoted in that story. Is that right? Jigar, did you talk to the.
- [43:45]
Stephen Lacy
Yeah, that was the end. Positive quote, optimistic quote, go for it, jigger.
- [43:51]
Jigar Shah
So look, the story, well, catalogs a lot of factories that have been delayed or scrapped, some of which were a result of the political situation and the uncertainty. But you kind of have a positive spin. So you've seen a lot of these many manufacturing facilities get planned and started construction. What's at stake? And do you think we're going to see a lot more investments scaled back?
- [44:20]
Stephen Lacy
Well, I mean, there's 950 or so manufacturing facilities in energy, right, that were announced and some of them were expansions of existing manufacturing. And, you know, when you look at each and every one of them, many of which I did underwriting on and have looked at, I mean, they're moving forward, right? They actually have real customers, they have real offtake agreements, they have all these things. Now, obviously their economics might be changed based on how the Inflation Reduction act might get modified in the future. And so many of them are reminding their local, you know, congressmen or senators that their long term viability depends on some of those rules staying in place. But this is the other they. Right. Like, I don't actually know who represents they in this White House. But like Steve Bannon's whole national populism thing. Right. And America first and you know, the first term of President Trump when he went to that, that, you know, you know, washer and dryer factory in, in Indiana and said we need to keep manufacturing jobs here in the United States. And all of the bluster with, you know, like tariffs on Canada and Mexico are around manufacturing here in the United States. And so I don't quite understand like exactly how this squares with the talking points coming out of the White House. And so like, like, you know, there's been a couple of folks who've paused and I think, you know, half of the 955 might pause. Right. Because, you know, that's normal. And that may have happened, frankly, even without Trump. Right. I mean, things happen and things markets change. But like Aspen Aerogels just put out a press release saying that they have paused their facility in Augusta, Georgia and they're going to wait until they figure out what's going to happen with the loan programs office and whether, you know, this secretary and you know, the new head of loan programs office is honoring loans. Right. And so, I mean, these decisions all have consequences around people's confidence levels.
- [46:26]
Jigar Shah
Catherine, final thoughts on the consequences?
- [46:28]
Kathryn Hamilton
Yeah, it should get the attention of, as Jigger said, the politicals who have to answer for this. And I don't know if you saw, but a lot of folks are going back to town halls and not hearing happy thoughts from their constituents. And their leadership is telling them, well, they just don't do any more town halls. But in the end, those people vote. And so I do think that people are going to be hearing, whether it's in town halls or not or just snail mail, that they need to not cut back on these incentives or it will really damage the economies of a lot of these places.
- [47:03]
Jigar Shah
Let's turn our attention to a story playing out in Texas. It's kind of an extension of last week's conversation about the role of gas to serve the data center boom, according to Doug Lewin, who writes the Texas Energy and Power newsletter. And then some reporting from Latitude Media. French energy giant Angie has withdrawn two natural gas projects, Perseus and Spencer from the Texas Energy fund. That's this $5 billion program designed to finance new dispatchable generation, that is gas with low interest loans. And Angie notified the Texas PUC director that equipment procurement constraints and rising costs would make it impossible to a deadline. And while gas plants struggle with equipment shortages and these spiraling costs, solar and battery storage are continuing to break records across the state and performing really, really well. And zero carbon power now makes up 47% of the ERCOT grid, up from 40% just a year ago. So what I want to talk about here is what's going on with these gas projects in Texas? Does it tell us anything about the economics of gas nationwide? And Jigar, let's start with you with the nuts and bolts here. What are the constraints being identified that are delaying these gas plants? What does it tell you?
- [48:24]
Stephen Lacy
Well, can we start with the first constraint? Because I feel like we're skipping it.
- [48:28]
Jigar Shah
What's that?
- [48:29]
Stephen Lacy
The state of Texas basically said because the private sector has no interest whatsoever in building new natural gas in the state of Texas, that they are going to guarantee a $5 billion fund from the state of Texas to subsidize natural gas production and that they couldn't get enough people to actually even sign the contracts to do this work. They had to twist arms of people to beg them to build natural gas in the state. So I just want to start with that first, right before we go on to what's actually happening in natural gas right now, that the state of Texas is being saved every single day by new battery storage and solar that's getting added to the grid because their load growth has been phenomenal in the last two to three years. Right. That Angie has gone out and said, great, we will sign up to do this gas plant. We will build this gas plant. And there's a requirement in the loan that you have to start drawing on the loan by the end of this year.
- [49:33]
Kathryn Hamilton
Year.
- [49:34]
Stephen Lacy
Right. And ge, Mitsubishi and Siemens are sold out. They are completely sold out. And they basically said, if you didn't put an order in 18 months ago, then we cannot ship you a turban until at least 2029, if not 2031. Right. And so Anji is like, why would I start drawing on this, this facility by the end of 2025? To do what exactly on the land when none of the equipment's coming until 2029 or 2031. Right. Let alone, yes, Bechtel and Kiewit and all of the different players have, like, you know, fired up, to use maybe a reference here, their natural gas deployment arms that have been basically doing no work at all since 2018. But some of those people have gone to other jobs. Some of them are not interested in going back to the natural gas division. And so they're having to hire up and finding people to do this. And then on top of that what you find is that the entire natural gas grid is kind of full. And so you have to upgrade the natural gas pipeline capacity to be able to handle this. Because what I didn't know is that, that electric utilities rarely pay a capacity payment for gas, right? So the way the gas market works, and I know this because we funded a bunch of Bloom Energy stuff when I was at Generate Capital, is you have to secure the rights to the pipeline and then you pay for the gas through the pipeline, right? The utilities don't secure the rights to the pipeline. They only just buy the gas on an as available basis on the pipeline. Right? And so if the pipeline is, is full of other people's gas, you could potentially not get gas for your plant right at that moment when you need to burn gas. And so now they're going like, wait, we need to upgrade the pipelines to actually be able to handle more gas. Right? And that goes back to ferc and that goes back to all of the other conversations there. And on top of that, GE's like, because I'm so sold out, and we're a recently spun off company from the Mothership, Georgia, we're charging top dollar for these turbines, right? And so is everyone else in the pipeline, right? So now for gas plants that were built last year, there were 1700-2000 a kilowatt. Today they're now quoting $2400 a kilowatt installed for new gas plants, right? So by the time you add that plus natural gas costs, plus pipeline upgrade costs us, you're definitely like at that $100amegawatt hour we talked about in the last episode. Then people are like, is this the cheapest way for us to do this or the fastest? I don't know. And so, yes, everyone is rethinking their position right now.
- [52:33]
Kathryn Hamilton
Yeah, it was so funny. I was, I was like, googling around looking for stories and I was like, oh, listen to this. Turbine production bottleneck threatens plans for new German gas power plants. And it's talking about Siemens, Mitsubishi, Georgia. And I realized as I was reading this story, which is basically what Jigger's talking about, that it was February 27th of 2024. So this is not new. This is something that has been happening for a while. And I would just say, you know, about the gas situation also. They are doing it in the name of dispatchability and flexibility. But that is exactly what wind and solar and batteries provide. Even the CEO of Nxtera says, look, you can build a wind project in 12 months, a storage facility in 15 and a solar project in 18 months. Gas plants take years to build. And so, you know, why not use what we already have? And it's also working, it's working really well. So we need more of that. And maybe you can do a few things on a longer term, but they're really dicey and as Jigger says, like they haven't really thought through everything as they clamor to build more assets. And I would, I would just hearken to Entergy's application for AI data center growth with natural gas facilities. And they haven't even built in the cost and the volatility of the fuel pricing. As they look at putting all of the cost of this onto the shoulders of the ratepayers in Louisiana.
- [54:01]
Stephen Lacy
Oh, it's nuts. The other thing is that during the first Trump administration we doubled LNG exports from like, you know, 4bcf to maybe it was like 8bcf or 10bcf. And then the Biden administration got it up to about 14 billion cubic feet. Right. And you know, with all of the LNG facilities already under construction, you know, we're going to be up at 28 bcf by the end of this four years. Right. And so like, I don't know what that's going to do to natural gas prices, but I don't think it'll have zero impact on natural gas prices.
- [54:36]
Jigar Shah
Jigger, you made a comment earlier about how solar and battery storage are saving the Texas this grid like every single day. And the fact that's actually like not hyperbole, the state is seeing that solar and batteries together are really working and doing what they're supposed to do. We actually have a great interview. We do this show called With Great Power in partnership with GridX. And Keith Collins, who is the Vice president of Commercial operations at ercot, joined the show and sort of talked about how renewables and batteries are working together. And he detailed a variety of examples. When solar is dropping wholesale market rates, retail rates are going down, and also batteries are meeting the late daytime peak. And during record breaking heat waves last summer, for example, Texas avoided any conservation notices as solar and batteries were more solar and batteries were deployed. So Jigger, how would you actually characterize the way renewables and batteries are working together on Texas Grid Grid.
- [55:39]
Stephen Lacy
It's like amazing, right? When you think about who the smartest developers in all of Texas are, it's the solar and battery storage developers, right? They're the ones that are going through all the hoops figuring out how to get the land rights, figuring out how to meet the transmission requirements, figuring out all of those pieces like they're doing all that work. But the part that you didn't mention is that Texas is the world leader now, like second probably only to the UK on virtual power plants. And so when you think about how they're using behind the meter batteries, I mean today if you are on Tesla electric, you can set your app to say, whenever wholesale prices go above this price, dispatch my powerwall. And there are people getting negative $600 bills in the summertime from that. So when you think about the fact that the new NEMA standard finally came out for the vehicle to grab, grid architecture for connecting your electric vehicle to the grid, the first place people are going to do that to monetize their new electric car is Texas. Because whenever you have a crisis, they don't have a capacity market. So prices can go to $5,000amegawatt hour. And if that happens, that power in your electric vehicle is probably worth putting back into the grid. Right. And so there is this extraordinary amount of innovation happening in Texas, which is why I find the fact that the legislature had to create this like ridiculous boondoggle for the natural gas industry to beg them to build natural gas plants is ludicrous.
- [57:23]
Kathryn Hamilton
Yeah, I totally agree with Jigger. And remember, Texas has a great competitive, super competitive market structure. Their ancillary services are really valuable. It's easier to interconnect. Land is cheaper. There's also just this ability to do things a lot faster there given you have so much solar and batteries. And I would point to a report that RMI did called about power couples and what it shows is, all right, let's take an existing gas plant because they've got a good interconnection, use that interconnection because that's always a hang up. Less so in Texas than in other places. But let's use that and then let's use the gas plant only after all the other grid obligations are met and let solar, wind and the batteries do all of the maintenance main stuff, you won't be using that gas plant for very long.
- [58:10]
Jigar Shah
So Bloomberg New Energy Finance released numbers on Texas. They added nearly 10 gigawatts of utility scale solar last year, plus another 10 gigawatts of rooftop installations. Battery storage discharge hit an unprecedented 3,900 megawatts during peak demand. And that really helped during a lot of grid emergencies in the summer particularly. The question is, can it keep pace with demand in Texas? So Texas itself is witnessing a big jump 17% since 2021 with an 86 gigawatt peak. And that's data centers, it's electrification, it's oil and gas operations in the Permian Basin. Jigger. Can renewables and batteries realistically keep pace with that growth?
- [58:55]
Stephen Lacy
Well, basically where we are is Texas needs more capacity. Right? And whether you're subsidizing gas or whether you want more solar and battery storage, you need to pay for capacity. Right. And so Texas has to figure out what that looks like. So if it wants the solar developers to not just do two hours of battery storage, but instead do eight hours of battery storage, they need to say, here's how you're going to get paid for that eight hours of battery storage. Because right now the marketplace is paying for two to four hours of battery storage storage and saying, I don't know that we're going to fully compensate you for eight hours of battery storage. Right. And so if Texas wants that extra capacity, it needs to figure out how to compensate folks. And that same thing is true for new nuclear or new natural gas or for all of these things, as Katherine's suggesting. Right. Because why would they pay for all that capex if they're not going to be able to run enough and be profitable enough to get paid back? Right. And so, so it's the. I don't think there's a problem with the amount of assets that are in the queue in Texas. I think they have enough assets in the queue for interconnection to be able to meet the growth. But the economics are challenged in their energy only market.
- [60:09]
Jigar Shah
So Catherine, if I'm in the Trump administration and I say let's look to a state with no official mandate, it's a free market, and understand what the market is telling us. What does the Texas market tell them is happening?
- [60:25]
Kathryn Hamilton
Yeah, it tells them go for it, like clean energy is the way to go. And I think that's, it's really important. I think it's also important to differentiate that ERCOT is not in FERC jurisdiction. And in FERC jurisdiction there are a lot of things you can't do that Texas does. And so Texas has a market that's very amenable and open to these technologies and open to really kind of this free market world. Other states have a much harder time of it. And that's what we have to continue to work on.
- [60:53]
Stephen Lacy
And this is the conflict, frankly between the FERC story and the Texas story. Right. Because, you know, folks are blaming FERC and their regulatory powers for why the rest of the markets are not as nimble as Texas are. But the other state that you would point to that loves clean energy is North Dakota. And Doug Burgum knows a lot about that. Right. And so I just, you know, I think everywhere you turn you're like, gosh, so much wind, so much solar, so much battery storage getting added right now. And make no mistake, where the solar and wind industry are headed is towards capacity. Right? So they're moving away from just building solar and wind and they're moving towards building batteries. And it just happens to be that solar and wind are the most affordable ways to fill the battery with electrons. Right. But you're actually just building batteries. Right. That's where the capacity comes from. And I just feel like people are missing that big change. Right. The amount of solar and wind that's being added right now that doesn't have batteries associated with it is almost zero.
- [62:01]
Jigar Shah
Good episode. This was a lot of fun. Kathryn Hamilton, always a pleasure.
- [62:05]
Kathryn Hamilton
It was a pleasure to be here with you too.
- [62:07]
Jigar Shah
Jigger Shock. Same.
- [62:09]
Stephen Lacy
I look forward to it every week. It's amazing.
- [62:15]
Jigar Shah
All right, that wraps up this week's episode of Open Circuit. Open Circuit is produced by Latitude Media. Jigar Shah and Kathryn Hamilton are my co hosts. The show is edited by me. Sean Marquand is our technical director and he wrote the theme song. Latitude Media is supported by Prelude Ventures. Prelude backs visionaries accelerating climate innovation that will reach shape the global economy for the betterment of people and planet. Learn more@preludeventures.com and for more in depth reporting on the topics we cover on this show, sign up for Latitude Media's Daily, weekly or AI Energy Nexus newsletter. You can just go over to Latitude Media and hit subscribe at the top of the page. And of course, you can find this show anywhere you get your podcasts. It's been really remarkable to see how fast the audience has grown for this show because so many of you had listened to us previously and we really appreciate you spreading the word. So give us a rating and review. Tell your friends and colleagues to listen to the show. Thank you so much for doing that. Thanks for being a listener. And of course you can find transcripts of the episode at Latitude Media as well. So if you want to revisit anything that we've said and share this out on social platforms, you can go ahead and do that. We will catch you next week. Thanks for being here.