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- [00:03]
Latitude Media Announcer
Latitude Media, covering the new frontiers of the energy transition.
- [00:08]
Stephen Lacy
Caroline, it's your birthday.
- [00:10]
Caroline Golan
It's my birthday.
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Stephen Lacy
Amazing.
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Jigar Shah
Yeah.
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Stephen Lacy
Do you believe in astrological signs?
- [00:14]
Caroline Golan
I do believe in astrological signs, and only because it's so prescriptive and I think usually dead on. So it's the age of the Aquarius right now.
- [00:24]
Stephen Lacy
What does that even mean?
- [00:25]
Caroline Golan
It actually means planetary alignment, essentially. And so the way the planets are lining up in the cosmos is, in theory, opening up an energetic portal for people who were born in the Aquarian age.
- [00:40]
Jigar Shah
Yeah, I mean, there's a song about it, Steven, from the 1970s. You just have to sing it and then the verses explain the answer.
- [00:48]
Stephen Lacy
If there's a portal somewhere, can I jump through it? I need to get the hell out of the real world.
- [00:53]
Caroline Golan
That's sort of how I feel most days.
- [00:58]
Stephen Lacy
From Latitude Media. This is open circuit. In 2025, we saw a major shift in the energy conversation. Suddenly everything was filtered through the affordability Lens. Now in 2026, the plans are coming in and two very different paths are emerging. The first is a blunt force approach led by the Trump administration. Keep coal plants open, force markets to change, make big energy users pay for new power plants. The second path is quieter but getting more attention. It's what we're seeing play out in states like Virginia and Illinois. An asset light leans on distributed energy, virtual power plants and grid tech to help lower bills and avoid overbuilding the grid. Both pathways claim to be about affordability, but they imply very different futures for utilities, regulators and ratepayers. So this week we're asking, are these plans forcing real change or just buying time?
- [01:55]
Latitude Media Announcer
AI became the center of gravity for the energy industry in 2025. The solutions to address AI load growth are getting more sophisticated. But there is still no uniform blueprint for building at gigawatt scale. On April 13th and 14th in San Francisco at Transition AI 2026, Latitude Media is bringing together the stakeholders who are successfully getting projects cited, financed and built. Head to latitudemedia.com events or click the link in the show notes to see the full agenda and Register for Transition AI 2026. And as a bonus for our listeners, use the code PODS10 for a 10% discount.
- [02:34]
Stephen Lacy
I'm Stephen Lacy. I'm executive editor at Latitude Media. Welcome all. I am here with Jigar Shah and Caroline Golan. Jigger is the co managing partner of Multiplier and you look like you're in like a spaceship or something. Where are you today?
- [02:48]
Jigar Shah
It's the age of Aquarius. This is for it's. For Caroline always.
- [02:53]
Stephen Lacy
You found the portal.
- [02:54]
Jigar Shah
You found the portal.
- [02:56]
Caroline Golan
I guarantee you the portal is not in San Francisco. I guarantee you it's not.
- [03:00]
Jigar Shah
Oh, I mean, I feel like that's where they were singing the song, definitely.
- [03:04]
Caroline Golan
Oh, actually, that may be true.
- [03:07]
Stephen Lacy
They opened up the office early for you.
- [03:09]
Jigar Shah
Yeah, yeah, they're very sweet. It's a great incubator.
- [03:14]
Stephen Lacy
What's got you on the West Coast?
- [03:16]
Jigar Shah
Well, I mean, this conversation, like, I feel like we're in the middle of finally having people take affordability seriously. And so there's a couple of big events where we're going to try to get this stuff done into the legislature.
- [03:30]
Stephen Lacy
Caroline is the CEO of Envision Energy Advisors. How are you on this birthday?
- [03:35]
Caroline Golan
I'm great. I've already gotten so much done and it's, you know, only 9:30 our time.
- [03:42]
Stephen Lacy
I always front load my day. I like to say by 9:30 I've had a productive day.
- [03:47]
Caroline Golan
Good, good. That, I mean, you will probably live longer because of that. That's what all the studies say. It's the people who sleep in and stay, they're in trouble.
- [03:56]
Stephen Lacy
You both made it out of Texas without a problem. Thank goodness I was one flight away from being stuck there. Thank you to everyone who came to the Power Resilience Forum. We had a great live show there, especially the folks who stayed to the end while Winter Storm Fern approached. It was quite the backdrop to the event. And we came home, of course, to a different backdrop. Scenes in Minneapolis of masked officers beating up protesters, spraying them point blank in the face with chemicals, and killing yet another unarmed American who in his last moments was directing traffic and making sure an onlooker who had been pushed was okay. It is the American government turning against the American people and then falsely shamelessly labeling them terrorists. And it has ignited an intense backlash to the administration, you know, that we really haven't seen in the last year. It feels like it's a much different kind of response. And for the first time since the president started his blitz over the last year, corporate leaders are actually starting to use their voices. And just this week, for example, Xcel Energy signed on to a letter calling for an end to the escalation in Minnesota. So before we get started, I just wanted to acknowledge all of this and talk about it a little bit. Carolyn, how are you processing it all?
- [05:14]
Caroline Golan
Yeah, thanks for saying that, Stephen. I think it's hard. And as we discussed, I'm new to sort of being in a world where I can theoretically say what I want or how I feel or what I think. And I believe that every person in this country, irrespective of your political posture, is nervous about where our country is going at a micro level. And I think also at a micro level, I don't think we're going to download from Davos here, but there were some pretty powerful speeches at Davos that hit on sentiments that we haven't heard before about the geopolitical order, the US's role in the world, who we are to our neighbors. And I think that that's playing out with who we are to our neighbors on a community level. And so I'm processing it with hope still in who we are as a country and a lot of belief that the people here are good and we all want to see the same. There's a lot of heartache, you know, for me and for my friends, and I have a lot of friends in Minnesota. And I think everyone is just, you know, was hoping that 2026 would start off with a little more positivity than maybe, maybe it has. Yeah.
- [06:41]
Stephen Lacy
But, yeah, go watch Mark Carney's speech from Davos. The Prime Minister of Canada. He had a really powerful speech about the reshuffling of the world order. Highly recommended. Watching or listening. Chigarh. How about you? What are you? What are you. How are thinking about this moment?
- [06:58]
Jigar Shah
Yeah, I mean, I'm so, you know, proud of my friends in Minnesota. I mean, I think that the administration was deliberately trying to goad them into doing things that would fracture the community. And in fact, that they've invested so heavily into the community. The community came together in this moment to, you know, reject the tactics here. Look, I think that it's very obvious that the Trump administration won the presidential election based on immigration first and foremost, right? So there are a lot of people in this country who want this type of aggressive activity to occur to make sure that, like, you know, criminals or whatever it is are taken out of the country. But now I think that there are people who are just trying to work, right, who are getting picked up in Home Depot parking lots, and there are people who are just trying to assert basic human dignity that, you know, we all enjoy that, like, are now getting shot in the face with tear gas and there are people who are being accused of being domestic terrorists and put down. Right? And as somebody who is a person of color, right? Where, you know, even, like, Vivek Ramaswamy, like, wasn't, you know, like, spared from all the vitriol and hatred from the MAGA folks, right? And so you're in this weird spot right now where for people like me who are naturalized citizens, like you worry that like, not only are they going too far here, here, but they're going to come after naturalized citizens and take them and take them out of the country. Right. Like, where does it end? I mean, how much do I want to invest in the United States when, you know, the United States doesn't want to invest in me potentially? Right. And so I think that we're in dangerous. We're in a very dangerous place. And the people of Minnesota showed us how to act with, you know, just like intentionality and grace in a moment that could have been far worse.
- [08:52]
Stephen Lacy
Absolutely. Yeah. We try not to drop politics outside of energy into these conversations. It's extremely important for us to make this show a place where we can have reasonable, reality based conversations about the future of energy for people of all political persuasions. You know, so much of the clean energy industry is perceived as progressive, but it is very diverse, often more conservative than people realize. So I don't take it very lightly when I say what is happening now is not okay. This is not about left versus right or about immigration policy per se. It's about standing up for a humane, reality based, true freedom driven principles. And so Latitude itself is going to be closed on Friday in solidarity with the nationwide strike to de escalate the conflict. And so that's what it means to us.
- [09:49]
Caroline Golan
Thank you, Stephen, for just holding that space for us to talk about before we get into the riveting conversation of.
- [09:59]
Stephen Lacy
Yes. So with that, we got so much to tackle this week. Let's roll into it. We are talking about starkly divergent approaches to lowering electricity prices. And gosh, there's a bunch of elements to this. So I want to just look quickly at the Trump administration's approach to reliability during Winter Storm Fern and then we're going to talk about the PJM capacity auctions. So Energy Sector Secretary Chris Wright issued this statement saying that grid operators should coordinate with DOE on utilizing 35 gigawatts of unused backup generators and batteries scattered across the country to help keep the grid up. This seems pretty reasonable on its face, but jigger, your take was that this was kind of meaningless. It was like a meaningless exercise in virtuous signaling. Explain your reaction.
- [10:42]
Jigar Shah
So not meaningless. It's just another example of where this administration has good ideas and no intention of executing on them. Right. Like when you think about it like this whole backup generator issue has been going on since the Obama administration. The EPA has not provided clarity around what to do with backup generators and how they can be used to help with the grid. I mean, obviously there are some folks who at the state level have said, you know, if you're in a true emergency, you can run them, etc. But like, it's, it's unclear. So then the EPA issued some guidance, I think, in March of last year to a response that Duke Energy had asked for to be able to use these backup generators during, you know, an emergency situation. And they provided a limited approval there. Right now, the 35 gigawatts of backup generators are real, right? We have friends like Enchanted Brock and others who do this for a living, right? You've got folks like Voltas or CPOW or others who, I mean, you know, who've been doing this for years, right? I mean, Tim Healy at Enernoc was like running backup generators way back in the day, right? So this is not a new issue. But when you announce that you want this to happen, what normally happens is you have a group called Caesar within the S3 vertical at the Department of Energy. They help manage all these things. They put together frequently asked questions for everybody. They get all the grid operators on the phone and they say, well, this is what we intend to do. For instance, when Gavin Newsom allowed for this to happen, right? He said, we're waiving the air quality, you know, requirements, and then we're paying you $2 a kilowatt hour, for instance, to operate your diesel, right? What were the guidelines here? Like, when I talk to people in Virginia, they're like, well, my permit doesn't allow me to run this thing. Did EPA actually say that, well, we're superseding your permit and you now can run it? No, of course they didn't, right? And then when folks said, well, how do I get compensation for this? They're like, well, we haven't thought that through. How do I actually get onto the queue? Right? So they did this 202C designation for their friends at Calpine and LS Power. Fantastic. But if you had a 10 megawatt, the meter diesel at a hospital or a campus or whatever, like, do you have to tell PJM to specifically do a 202C for this? Well, it turns out they did. And so yesterday PJM said, you know, we are going to, like, do this for everybody. So if you have a generator that you want to run, like, email us at whatever it is behindthemeterjm.com and then do it by 5pm close of business. And this is on Monday, right? And so you could imagine that they could have done this a week earlier had they actually had half a brain cell and thought this through. But it was clearly some 24 year old that was just issuing vibes based press releases to like own the libs. And I'm like, what are we doing? Like people's lives are at stake here. Like take your job seriously.
- [13:36]
Stephen Lacy
Caroline, do you agree that this was performative?
- [13:39]
Caroline Golan
I mean, I think it's a mismatch in a well intentioned approach and a misunderstanding over who has a direct line into a lot of these industrial customers. So we actually saw some of this in Europe too. Right. So when we had the European energy crisis, at first there were policymakers calling left and right, but the TSOs at the same time were saying, we're good, we actually don't need you to turn down. If you want to do so out of political goodwill, please go ahead and maybe we'll create something out of it. And I think that you have that a bit more of a D perspective coming on. Oh, my doorbell just rang. Can everybody hear that? Perhaps it's a large thing of flowers waiting for me for my birthday. No, but what I think is happening is on the data center side and the industrial side, they're waiting from a call from their retail utility provider. So if they're in Virginia, they're waiting for a call from APCO or you know, from Dominion or Alike, and they're waiting for whoever their customer rep is to call them and say we need you to turn down by, you know, X percentage or X number of megawatts. And then there's a process in place to do that. Most industrial customers have a process in place to do that and the first thing they ask to Jigger's point is what's the timeline, what's the environmental permit situation here? Are we going to be fine? How long can we run? I will add that a lot of diesel gen is not built to run for more than a day or in a blackout situation. So relying on it, you know, for multiple days is a real problem. And if the roads are closed and snowed in, getting diesel to those operations is even a harder problem. You know, so there's a logistical issue here. And if you're not getting that direct call from that customer that knows you, knows your system, knows your total voltage, knows what's going to happen, there's a lot of misunderstanding from an operations perspective. And like at Google, we tried to get the energy team completely out of this because they would be calling me, they'd be calling other members of the team and we made sure that it was at an operational level. And from what I understand, most of the data center fleet throughout PJM at the operational level was very unclear. Well outside of Google, like throughout the entire industry was very unclear how this was going to take place, who they should listen to. I don't think so much payment was an issue, Jigger. I don't think anyone was thinking how am I going to be compensated for this. I think what everyone was concerned about is if I do this in two months and all of a sudden am I going to get $100 million fine for going over air permit? Right. And there was no clarity on that. So I get the intention, which is like let's use large load as a flexible asset and let's use all this backup gen as a critical floating resource. But there's just no line of communication. And going back to my point we made last week at the conference, this can be done seamlessly with the right technology, with the right software, with the right communication, but we're not there yet as a grid or as a, as a community in the way we operate whatsoever.
- [17:19]
Latitude Media Announcer
On April 13th and 14th, Latitude Media is offering the chance to hear from the experts on the front lines of the AI energy infrastructure buildout transition. AI 2026 is a two day in person conference in San Francisco addressing the challenges of building at gigawatt scale in the face of AI load growth. The lineup of speakers includes Meta's former Director of Energy strategy Peter Fried, regulatory expert Arushi Sharma Frank, Tim Hughes of Stack Infrastructure and Google's former head of energy development Carolyn Golan. And our podcast listeners get a 10% discount. Use the code PODS10 when you check out. See the full agenda and Register today for TransitionAI 2026@latitudemedia.com events or click the link in the show notes.
- [18:01]
Stephen Lacy
Yeah, that's really helpful. So let's actually that brings us nicely into the conversation around pjm. Speaking of well intentioned policy that is not fully thought, you know, this administration is developing policy in emergency mode. And so if we look to this other emergency mode approach, the administration brought together this bipartisan group of governors to try to force big energy users to pay directly for new power plants in pjm. And they propose doing this through an emergency auction to make up for a capacity shortfall. And on paper I guess it sounds pretty simple, you know, build more supply, make the biggest customers pay and protect everyone from higher bills. But the big question is how it will actually work. And it was interesting to note that this was sort of established without PJM's input initially. Caroline, what is this coalition trying to do?
- [18:57]
Caroline Golan
I mean, I think what this coalition is trying to do is speed up the process of paying for and building infrastructure. And I think that for over two years now there has been a sentimentality that started actually before the Trump administration amongst many of the governors in pjm, that regulation, bureaucracy, red tape, inefficient markets were slowing down what was waiting and patient capital to invest in power plants. I think that is an over simplistic view of what's actually happening, but it's a very politically salient view. Right. So what I see actually happening is a divergence in the way the supplier market really thinks about the future of building power. And on one hand you have suppliers who believe the future is bilateral negotiations, co location and sort of carving up existing power plants to either serve the market or serve large load. And then you have another portion of the industry that truly believes that in order to actually build new power plants you have to secure long term price signal or else the cost of capital is going to be way too high. And to do that you need capacity prices to go really, really high in order to hit that signal. Because the truth is we just haven't built a ton of power in this country. We haven't built a ton of baseload power. And so that waiting in patient capital I think is a little more skeptical than everyone politically wants to be attuned to. And I get it, I completely get it and I understand the frustration and the motivation. I think on the other side here, what's happening, and this is a bit of a nuance, but I think it's important to understand is that throughout PJM most of the retail utilities are collecting very, very, very high minimum system cost payments through a demand charge and requiring an extreme amount of upfront collateral to even get in the queue, the generation queue, or sorry, the load queue, which is a fictitious phrase that I'm coming up with, which is basically just to try to interconnect, right. And that is what is tying up developer capital. So if you are simultaneously saying for you to get in line for an ESA, you need to post two, $3 billion of collateral and you need to be able to shell out 90% minimum charge on your demand day one, irrespective of your ramp, that doesn't leave a ton of development capital to participate in a bilateral auction and it doesn't leave a lot of credit worthy offtake for that bilateral auction as well. So you have these two forces working against Each other. At the one hand you have the administration saying, let's just connect suppliers and buyers. Suppliers have a different view of where the world should go and where the market should go. And on the other hand you have utilities who frankly have sort of taken care of this, you know, use it. We used to be in a use it or lose it situation where utilities like, if you just don't, you know, use the amount of energy that you've contracted for, we're going to give it to someone else. Now it's a take or pay situation. And they've done that through upfront charges, collateral requirements, minimum system charges, and then you're layering this other part onto it. And I just, I don't see how the different parts are going to work with each other. I think one's going to have to give versus the other. And it's just a determinant of where you think the market should go. Do you think it should be colocation and this load should be siphoned out of the existing market? Do you think it should be part of the market and it should drive power development across multiple states? Do you think it should go through electric regulated utility model who are all vying for re reg, by the way, and they should be in charge of collecting the upfront capital or should it be open to a bilateral contract negotiation? So there's wildly different views across the entire system and multiple forces at work that are in real conflict with each other. And I think it's tying up capital and I think it's confusing and it's going to be hard to figure out where and how to invest. And I haven't even gotten to the point where everything that everyone wants to do still takes four to five years to come online.
- [24:14]
Stephen Lacy
Yeah. Yeah, right. Well, let's have Jigger unpack that.
- [24:17]
Caroline Golan
Yeah, that was my Aquarian moment and now I'm done.
- [24:21]
Stephen Lacy
That will, I mean, that was so helpful to unpack the nuances of this. Jigger. Do you fall on any one of those approaches and like, what's posturing and what's actual policy here?
- [24:31]
Jigar Shah
So I think we start with the same conversation we just had with the PGM emergency generator order, right? Like they clearly don't have a plan and there's nobody in charge of actually creating a plan. Right. Like when I was serving in government, Caroline knows, like I demanded that the hyperscalers come in like every month and we would have this conversation with the Secretary of Energy in the room. Like it wasn't like. And you know, and the utilities were There, et cetera. And they all gave their talking points and they sucked and whatever it was. And then we like have write ups and then we would have like bilateral conversations with everybody to say, hey, can you move a little? Can you move a little? Like, and then we would have another meeting, right? Like, so there's a process by which you do this if someone is actually serious about trying to unpack all the complexity that Caroline went through and then trying to find a way forward, right? And then you provide guidance because, you know, like according to the president's notes, you know, he is expecting an auction to occur by September. Right? And so, okay, at least we have a date. And this auction is going to be exempt from the PJM cap, right? So like, my sense is it's going to clear it much higher than the cap, right? And so now you're in a place where you're probably going to have a bunch of bilateral contracts that clear above $333 per kilowatt day, right? And then the question becomes, to Caroline's point, like, what can get built in a timely fashion, right? Probably bring your own capacity solutions. Right? And all of the hyperscalers have either negotiated a bring your own capacity solution or signed a bring your own capacity solution. And so then the question becomes, how much work should the bring your own capacity people do? Like, for instance, I could probably build 3 gigawatts worth of batteries in 12 to 18 months in PJM just by putting a battery behind the meter. Sorry. At a community solar project, right? They've already got a 5 megawatt interconnection. They're already operating. They already have an extra acre of land that's just sitting there that they already own. They could just put batteries there, right? And they've got an interconnection. So then they just have to update their interconnection. Should I do that? How much money in development costs should I incur before the September auction? Should I wait for those folks to win the auction? And then like, say, okay, now I'm going to speed up to try to deliver within a year. These are conversations that could be happening. Like, not at a restaurant, like I was having one yesterday, but instead, like actually having them in some sort of official capacity. But you need somebody on the other side who actually wants to take the process seriously.
- [27:05]
Stephen Lacy
Do you get the sense that the hyperscalers are talking to the administration and trying to figure this out or project developers?
- [27:14]
Caroline Golan
Yeah, I mean, yes, the hyperscalers are always talking to every administration. That's sort of our Job and jigger failed to ever provide us with good lunch whenever we came in. I will say that.
- [27:28]
Jigar Shah
But I am on a government budget, Carolina.
- [27:31]
Caroline Golan
I know, just like maybe some potato chips or something.
- [27:34]
Jigar Shah
I mean come on, you know, hangry. That's how I like to see all of you guys.
- [27:40]
Caroline Golan
But I really think it's important for the administration and for PJM to think through the legal and regulatory consequences of when we say that driving load is exempt from historical market mechanisms. And because we're treating this as if it's a blip in the system. But I don't believe it's a blip in the system. It may be the highest spike over the next couple years, but every single global report says the trend is upwards in terms of electrification EVs. And so I think what you're going to see is this real fracturing where it used to be. Are you for hybrid markets, full retail deregulation or vertical integration? And even among those three sort of camps, you're going to have this huge fracturing of what is the role of the customer. And then if the customer is co locating and then paying full system cost for its interconnection line, poles, wires, everything, transformer, and it's doing a bilateral negotiated off market contract for its generation capacity, you're just going to build a bunch of loops and they are going to be completely separate from the reliability of the grid moving forward.
- [29:21]
Jigar Shah
And that's bad for everybody.
- [29:23]
Caroline Golan
And that is potential. Back to our initial conversation about what do you do with extreme weather last week? That's not a good place for us to grow into. Right? So I mean I think what happens is the well intentioned narrative here is these are the richest companies in the world. There's more capital going into fixing this problem than any other problem in our country right now. It automatically makes sense they should just pay for it. And I think they should. I mean I don't think anyone's arguing that, but I think how we set up the structures to see that happen and more importantly, which technologies and which solutions get to play in solving that problem has demonstrative impact on what our grid and the reliability of our grid, the interoperability of our grid is going to look like over the next five to 10 years. And I don't think that that is truly being thought through by the administration, to be honest. And jigger, as wonderful and lovely as you are, very few administrations have been responsible for thinking through that because none have been forced with this type of monstrosis threat to their political platform. Right?
- [30:41]
Stephen Lacy
And what do you, I mean, so, so what are we saying exactly? Like that the general approach to these bilateral deals is not workable? Or if we think about the loops in the system that you just described, like, are you taking, what is your stance on whether we should encourage this kind of deal making?
- [31:00]
Caroline Golan
I mean, I think that this type of deal making is happening is what I'm trying to say. Like I actually think there are entities going out to market outside of the PJM auction and trying to secure their own pipeline of turbines storage, what, you know, whatnot. The problem is there's no mechanism for them to legitimize it it within their footprint. Right. Unless they go behind the meter. And it's funny, but this is on a big level. This is like the solar net metering wars of a decade ago.
- [31:41]
Jigar Shah
Like, except bite your tongue Aquarius, bite your tongue. It is.
- [31:45]
Caroline Golan
I mean, if you think about it, this is like, should they be able to be responsible for that? What's the compensation? And it's the flip side here. But, but we're in a weird space where a lot of capital right now in the powered land industry and I think there's been a couple articles about this, comparing Nvidia or Google vertical integration versus sort of kicking the market from all sides, is that a lot of capital right now is tied up in regulatory cost requirements to interconnect to the grid. I think that unless you ease some of that, it's going to be very hard for that same capital to then say, yep, we were secure offtake for a billion dollars on a power plant.
- [32:36]
Jigar Shah
The thing I think people have a hard time wrapping their brain around is that like when you use lizard brain thinking, you think if I just have my own backup generator, I'm good, right? Like I can, like me against the world, I can just do it. Right? But those backup generators that they're buying, they run 50% of the time, 60% of the time. They're not designed to run 8,760 hours a year. Right. So that's why you have a grid. Right. And on top of that, remember, we're talking about the learning, you know, like data centers. We're not really talking about inference data centers in the future. Right. And so for the learning, for the learning, like data centers, the training data centers, Nvidia chips can actually spike for 50 milliseconds from 1.4 kilowatts to 2.1 kilowatts. And batteries cannot handle those spikes. And so the best way to handle those spikes is inertia. So you actually want like spinning mass or whatever it is. Right. And so, but the best way to get inertia is the grid. The grid itself is inertia. Right. With all the inertia on the grid. And so just solving it by having a 31 different types of natural gas generators behind the meter at a META facility in Ohio is not ideal. Then like, so then you put that to the side. That's physics and we can go through that. But then on the other side, like who, who holds the spare parts to those 31 different types of natural gas generators? They break all the time. Like all the time. Right. And so who actually holds all those spare parts? Do you actually have META do that? Meta's going to outsource it to this group. This group does that. Are they doing it for the entire region or just for meta? Right. I, like, I just think that when you think about, like what the electric utility has accomplished in 35 years, right. My friend Chris, for Hoplis, who, you know, worked with me, he was at Scott Madden, he invented the approach to shutting down a natural gas plant, doing a full diagnostic and turning it back on in seven days to like, you know, no matter what went wrong with it, he fix it. Right. That took 35 years to perfect. Right. The, the natural, the, the utility companies built a ton of natural gas generators in the 90s, did not know how to operate them, and it took to figure out where we are today, where everyone knows how to operate natural gas generators at the level of sophistication that we're at right now. These data centers have no idea how to like, manage a fleet of natural gas generators, particularly 31 random ones that they put behind the, behind the fence. Right. And so I just think that the level of complexity for these loops has multiple layers. Like, there's the physics part of it, then there's the affordability part of it, but then there's just the practical cost of running these units, which it took us a long time to figure out.
- [35:26]
Caroline Golan
And we haven't said this yet, but if you actually look at the numbers, let's say we fix for the generation issue, which I think that is a whole separate conversation. If we can actually fix that. The vast majority of what's driving up costs for the residential and commercial customer today is distribution level investments and transmission costs. And, and that is still going to be handled through a CPCN at the state level, which has a hodgepodge of different approaches throughout pjm. And so my, I want to, I need to actually think and reflect about it. More maybe by next week I'll have a much clearer vision of exactly what to tell the administration to do with a. I gotta find the portal because I want to believe that a special market can work. But my fear is based on where the supplier industry is based on where capital is. Participation may not be as high as the administration thinks it will be. And the solution set could end up being long term, very bad for the grid and it doesn't fix what is ultimately going to continue to drive up costs, which is poles and wires.
- [36:55]
Stephen Lacy
Yeah.
- [36:55]
Jigar Shah
And this is an important point, right? Because if you have a BYOC contract to bring your own capacity contract, right. I mean, then you could put the batteries in the middle of a field, right. And like actually just connect it to transmission voltage. But you can also put those batteries in the back of Walmart stores across New Jersey. Right. And then those Walmart stores can actually use those batteries to help with the distribution system challenges as well as dispatch for capacity for the hyperscalers. Right. And so you're in this weird spot where with a little bit of work and planning, you could get 1 plus 1 equals 3 or 4 or 5, but instead you're going to get 1 plus 1 equals 1.1. And you're like, what the hell did we do there?
- [37:40]
Caroline Golan
Yeah, I mean I think, but I also think, and I've said this before, like I don't agree with the methods necessarily, but the administration is forcing everyone to figure this out, right? They are saying if you don't figure this out, we're gonna figure it out. And in some ways, which is an.
- [38:01]
Jigar Shah
Empty threat because there's only madness over there, they're not gonna figure out crap.
- [38:05]
Caroline Golan
Well, but at the same time, I do think they have shown that they have a coalition of the willing when it comes to a handful of governors to pass policy when it comes to the hyperscalers to do investments, I just want to ensure that that strategy doesn't leave us with stranded assets in eight years and a less reliable grid and an over investment in capital in the wrong type of solutions.
- [38:38]
Stephen Lacy
Well, you both peeled back a few layers that I hadn't really thought through. And I guess it sounds like I'm in good company with the administration. But I guess to just like wrap this up, is there a world in which we get the right participation, the right incentives align and we do lower prices in PJM under this approach?
- [38:56]
Caroline Golan
I think that's gonna come down to what resources are able to play and I think it's gonna come down to what are the restrictions around interconnection and the topography of where there's no resources are placed, and if there are thoughtful guidelines around where generation should be placed for overall system reliability and stability, and if there are thoughtful guidelines around minimizing the additional amount of transmission infrastructure that would need to be applied, and if there are real carrots and sticks around to the utilization of the grid accompanying at the regulatory level, then it could happen. I do still think though, and I don't know this across all players, but I know for a fact that those regulatory requirements are inhibiting a lot of investment. There's a lot of, of data center capital out there right now that would much rather use the billion, $2 billion they have to hold in collateral on their balance sheet in order to just interconnect that would rather use that and go spec on new gen, interesting new gen, but they can't. So I think there's going to have to be a reckoning there as well.
- [40:18]
Jigar Shah
That was a long way of saying.
- [40:19]
Stephen Lacy
No, no, no, it's a thin line to walk.
- [40:23]
Jigar Shah
A single part of the planetary alignment has to happen.
- [40:28]
Stephen Lacy
She's an Aquarius. She believes in the alignment.
- [40:30]
Caroline Golan
I'm in my planetary alignment.
- [40:31]
Stephen Lacy
Jigger. No, it's a thin line to walk. I mean, what do you, what do you, you don't think it's possible? Jigger.
- [40:36]
Jigar Shah
No, no. I mean it is possible, but I, I just. The reason I've been on this for so long, right, is that it takes this long for us to succeed at, at this big quest, right? Like when you think about how many years you've been working on Grid Edge, right? And then everyone's going to distributech, I think this week or next week, right? And how many people have never gotten contracts out of that conference, right? Or like how many of these things are occurring as Caroline suggests? This is, this traverses PJM and the local utilities and the way in which they make decisions, right? So like, I mean, do I think that the Rewiring America reports are completely and utterly like, seriously? Not really. Like, I don't know that you're going to accommodate a bunch of hyperscaler data centers by just paying for people to have heat pumps in their house. But there's a grain of truth to some of that, which is that if you actually take the circuits that are near the hyperscalers and say to them we're going to put assets on those load entities, whether it's a Walmart store or a church or a school or whatever, they now get valuable tech, right? They get a battery Backup, which they could use. Right. Because a lot of schools are emergency centers, et cetera. They actually even get other monetary benefits. Right. Cause they can potentially use that battery to shave demand charges on their bill for peak demand charges that they're being charged anyway on their tariff. Right. They can then use those batteries for deferral of distribution system investment. Right. So they can do that and they can help the data centers who now have helped to finance it with a 15 year contract out of this auction in September. Right. Do I think that that is going to happen? Like, I'm not a pool shark and so I can't do one of those trick things where it like pops over the thing and then that's the thing into the corner pocket. But there are people who are capable of doing those kinds of trick shots and I'm rooting for them to use this opportunity to get that done.
- [42:41]
Caroline Golan
Maybe the quickest way to avoid my laundry list here is to say it's a market outside of the PJM auction, that the variable is not base load gas, nuclear, coal as we've defined it, but the variable is speed to capacity with the minimum amount of new poles and wire needed to produce that. That type of market. Would one be fascinating. I'd love to see what shows up. You can put the money where their mouth is in terms of all the aggregators and all the innovators in the space. And I think if you can show that that would work. That's what we want right now.
- [43:29]
Jigar Shah
And that's the legislation that the governor of Virginia, and that's the pivot is passing. Right. Right now. Right. In the legislature.
- [43:38]
Caroline Golan
Yeah. But again, what's interesting, and then we need to get into the state legislature is that the state legislature is still dependent on the existing regulatory structure of their utilities. What this is saying is just bilaterally negotiate it and produce it, and maybe that is the ticker. So if the administration is listening to us jigger, let's see if we can get them to do that type of auction.
- [44:09]
Stephen Lacy
That is a great segue into our state level conversation. So we talked in the fall of last year about how the affordability question was influencing elections. And it did play a role in the outcome of elections from New Jersey to Virginia. We've seen a bunch of action in Illinois. So let's just kind of break down what's happening at the state level right now. You know, many of these folks are responding with a very different instinct than what we just talked about. Leaning more on distributed resources, virtual power plants, try to shave peaks, use existing infrastructure more efficiently. Tigger, can you just break down on what you think the most interesting components of state level plans are right now? Are there any commonalities you're seeing?
- [44:53]
Jigar Shah
Well, I think that, that, I think we start with the extraordinary work that Katie and the Vote Solar folks did in Illinois. So that was sort of a two year effort to pass legislation that just passed last year that basically was done, I think implicitly. I don't know if it was explicitly done with ComEd, but like it, but ComEd definitely supported it. I just don't know whether they came out and loudly supported it. But it was like 3 gigawatts of batteries, right?
- [45:25]
Stephen Lacy
Oh, I thought that was. So that passed last year, not this year.
- [45:27]
Jigar Shah
It passed. Well, I mean we're only in January, so.
- [45:30]
Stephen Lacy
Oh yes, yeah, but, right, right, right, yes.
- [45:33]
Jigar Shah
But they, but like, so Gil quinones, who's the CEO of ComEd, is like now pushing really hard to use that for deferral of distribution system investments. Right. And, and so you're starting to see that. And I think part of the thing that I learned within my time at the loan programs office is that is a lot of this comes down to the electrical unions for the utilities, right? Because they don't want a lot of this infrastructure to be outside of their work scope. Right. Because on this side if you're upgrading the distribution substation, that's union work. On this side, if you're building a bunch of Tesla powerwalls in people's houses and using it to dispatch, then that's not union work. Part of this was actually getting the unions on board and getting them to understand that this was actually going to create net, net more work for them, which they now I think think largely believe. Most of the unions are saying we're going to be fully employed. Like there's so much maintenance work to be done that like we're not threatened by this. But that was a solid year of conversations that I created a new organization with Arnab Paul, my political advisor at lpo, you know, called Deploy Action. And that's a lot of what we did was just talk to the IBW and the utility unions to get them on board. Right. And so like, I think that the actual substance of the bill we can go through and, and it features batteries and demand flexibility and some of that stuff. But I think the politics of this moment is figuring out how we get the three traditional democratic sort of like constituents, right? So the union folks, the environmental folks and then the poverty related folks to all come to the same table and say, can we come up with a set of solutions that we think would actually, like, solve this problem but not piss off any of our constituencies, Right? And so I think that's the big breakthrough through in Illinois. Then you go to like New Jersey and Virginia where you had explicit governor's races, where they were spending actual money on campaign ads, talking about how they were going to lead on this area. So when Spanberger got inaugurated, she was like, this is my number one issue. We're going to have a bill, like, I've been working a lot with her team through Deploy Action and like, and this bill, like, we'll see. Like, it got through one chamber, I think it should get through the next chamber. And then like, and hopefully it'll get to our desk in like a couple weeks, right? And so we'll see. But what that bill does is simply say the Public Service Commission and the utilities now have an obligation to measure grid utilization. Right? Which our friend Astrid Atkinson can do from CAMU and others. And like, and then improve it, right? Because if you improve grid utilization by 10 percentage points, then you can onboard all these large loads, which then increases utility sales and decreases bills for everybody by 5%. Right? And so, like, I mean, that's a win, win, win if I've ever seen one. But it starts with the data and unlocking the data out of the utilities, which they have been reticent to provide. Remember, we tried to do this under the rev with Richard Kaufman in 2012 and got our asses handed to us. And so that's that next piece. And then I think you're seeing, you know, Governor Sherrill in New Jersey looking to do similar things, although her timeline is, I think, a little delayed from what Spanberger's doing in Virginia and then California. We passed, you know, SB541 last year to do very similar things here, and Governor Newsom vetoed it because he's like, it wasn't my idea and I don't like to do things that aren't my idea. And so. So we're going to go through the process again this year, hopefully with him actually claiming it to be his idea. And then maybe it'll pass, we'll see. Or it might take two years. You don't know. Some of these things just need to get socialized. But I think that the goal of all these programs is to help with all the stakeholder management, because what the utilities are saying to me is they're saying at the CEO and CFO level, the staff level are Mixed. But they recognize that they can't raise enough money actually at Wall Street, Wall street has told them that you're cut off, right? Like, you can't keep just spending like drunken sailors because like some of your budgets are the next five years you're going to raise more money than you've raised in the entire history of your utility. Like, we don't believe that that's something that we can support, right? And so the CEOs and CFOs are like, we need to start doing some of these cost effective measures and not just running up the scoreboard with expensive stuff, right? But they're like, we can't just do that by ourselves. We need regulatory support on this. And then the regulators are saying, saying, I can't tell you how to run the utility. Like, so I'm not going to force this on you. We need state legislation that actually forces us to regulate you in this way. And so that's why a lot of these bills are coming forward, because people recognize that to achieve affordability, the utilities actually have to operate in a way that's different, that doesn't reward them just for spending more money, but rewards them for grid utilization.
- [50:45]
Stephen Lacy
So Carolyn, what are you seeing in the states that you like right now?
- [50:49]
Caroline Golan
I, I love that the conversation around how consumer value and consumer empowerment on the residential, commercial and you know, even on the industrial side is now seen not as a pilot program, but like as a real solution and demonstrative part of where our markets need to go. And I think that's the thread throughout much of the state legislation. I think the other part that I'm loving is that we are no longer treating generation as one siloed investment structure and grid as another siloed investment structure too. To Jigger's point about grid utilization, which is a very seamless and I think eloquent solution around solving a lot of these problems. Where I think it falls down is that, and Jigger sort of alluded to this is that it's unclear that the carrots and the sticks are going to be seamless throughout these states. And Jigger's right, you need state level legislation to not only provide the COVID but provide the policy signals that give investors confidence that the utilities are going to start earning money differently and they should, they should be able to earn money differently and they should be given that challenge and then they should be rewarded when they meet that challenge. But there needs to be more clarity around what that looks like. The reality is, is for most utilities it's a 50, 50 debt, equity split, it's somewhere between 9 and 12% return on investment based on whatever our existing capital costs in large chunks of steel. You can change that. But it needs to be sort of uniform across different states in order for capital to really open up and in order for, I think, the solutions to be done at scale in a way that fixes the problem within pjm. So that's where I think some of this falls down. The other, the other concern I have is on the EM&V of all this. Like, how are you going to measure this and how are you. How are they going to be? Pardon?
- [53:24]
Stephen Lacy
That's always been a problem.
- [53:25]
Caroline Golan
Yeah, it's always a problem and it's.
- [53:27]
Jigar Shah
Always bringing the big brains. That's why you bring in asterisks.
- [53:30]
Caroline Golan
You bring all the big brains. But what I similarly to encouraging the governors who are trying to get together to figure out nuclear, the governors who are trying to get together to figure out this PJM auction. Consistency and clarity around basis points, around return schedules, around transitioning things from the O and M bucket to the capital bucket and that return model for the utilities and around the sticks and the EM&V, if you know, to hold utilities accountable. But it's more so than holding utilities accountable. It's giving very clear guidelines and posts for capital to invest, test. Right. And to assess. And I think if we can do that, we're sitting here and all the tools are there, this could be really, really, really powerful. And I still believe in all of this mess. I still believe if we do this right, this huge load growth that we're seeing from AI, this huge capital infusion can lead to the residential and commercial customer in a better position over the long run if it's done well in terms of resilience, in terms of cost control, in terms of value streams. And I think you're seeing the pieces of that.
- [55:00]
Jigar Shah
But who has to lead that? Right? Because I think that the Trump administration is like, we want to choose the most expensive solutions possible at every single turn, right? They're like, bring back the coal at nine and a half cents a kilowatt hour that has four years of life left on it that will probably cost a billion dollars to retool four years, right? Let's like, take those natural gas turbines that are, were built in 2003 that are being held together with duct tape and like, let's run them longer, right? And so look, I mean, I'm all for like, you know, baseload power generation, but I think it's just critical to understand what different people are solving for and what, what is actually in their model and in their spreadsheet. And I generally feel like the Trump administration is running on vibes and like just trying to get people to burn more coal and natural gas. And like, I think a lot of these state governors, I think, are trying to figure out what this threading of the needle looks like in ways that I think were way more thoughtful.
- [55:58]
Caroline Golan
I also think there is some real artificial scarcity conversation going on between the administration and some of the traditional fossil fuel providers. And I think there is, is no one wants to say to the administration, we can't figure this out, we don't have the ability to do this. So they all want to say we can do it, we just need you to do X, Y and Z. And I think that that is potentially making this seem, as Digger's pointing out, like the simplest and most eloquent answer is just do what we did for the past 50 years. And I think that when you break it down, it's just, it's just not the case. I will also say here on the, on the VPP solution because I think it's important to push the community on this. You know, when, when I was at Google we got really serious about this. Jigger and I were on the phone many hours, many nights about this and we sort of ran our own RFP and talked to a dozen different companies and providers. And I will tell you, there was only one within PJM that was willing to take accreditation risk, that was willing to do all the customer acquisition and was willing to make what we signed look like every other PPA we've ever signed.
- [57:24]
Jigar Shah
And she's amazing was that.
- [57:25]
Caroline Golan
And she's amazing and that was Voltes. And everybody else needed Google to do help with customer acquisition, needed Google to fund demonstratively the way that this would look from an aggregation and from a policy movement space. And what that says to me is that we sit here and we talk and we complain about how none of the traditional generators want to go merchant and yada yada yada, but this is an ailment that's sort of across the ecosystem. And my hope is that this signal can help this part of the community invest. And what clearly needs to be a very simple contract structure and something that a hyperscaler can pick up or data center developer can pick up and sign tomorrow. It's not there yet. The VPP industry is just not there yet. And I want it to be there. I really want it to be there. But it's not there yet.
- [58:32]
Stephen Lacy
Yeah, yeah, riff on that, Jigger. I mean, you spent a lot of time thinking about setting the agenda for VPPs with the Commercial Liftoff Report at DOE. I know you've been focused on them with deploy action. Like, yeah, just what is the health of the market right now? And is the situation that Caroline just described with only one VPP provider being really ready?
- [58:51]
Caroline Golan
That's within pjm.
- [58:52]
Stephen Lacy
I'm just within pjm. Okay, yeah, yeah. Just. What do you think about what Caroline said?
- [58:57]
Jigar Shah
So I had had over 50 of these companies come into the loan programs office, right? Part of the reason I was on the phone with Caroline so much was I was saying to them, these contracts are not bankable. Let's figure out how to make them bankable. Right? So we were helping them get to where they want to get to, right? The way this stuff always works, and I think you've been in the solar industry long enough that you've sort of seen it, is that one person figures it out and then their law firm somehow leaks their contract and everyone else uses it, right?
- [59:28]
Caroline Golan
This is true.
- [59:29]
Jigar Shah
I don't think it, like this is going to be a difficult process once the first group figures it out. And Dana's in the market right now raising money, and she's already oversubscribed by 3X. And so there's clearly a lot of investors who want in on this action, Right? And so if investors are sending a signal that they're in on it, well, then other, you know, VPP companies are going to be like, hey, we're Voltus 2 or we're Voltas 3 or whatever it is, right? And so they're going to come in. Now the other problem that we had though was remember that part of this in the EM and V side of things is that you needed a data stream from the utilities, right? One of our big problems in New Jersey, for instance, is that they have systematically shut down any access to AMI data to any of these folks. So they can't settle in the PJM under FERC Order 2222 unless they have meter data, right? And so like, you know, one of the companies who's coming out, swimming out of this is Utility API. And what do they do? They scrape the data from the utilities with their permission because the utilities admit freely that they can't fix their IT systems to get the data to the VPPs. So they're like, devin, why don't you just scrape my data and then give it to them like through the back door, right? And I was like, Devin, how have your sales doubled? He's like, well, the utilities want this to happen. They don't know how to solve it within their IT system. And so they're like hiring me to like scrape their data. So like, so the utilities have to also do their job and figure out how to take all of these billions of dollars of smart meter investments that they made and provide a lot of that data to these folks so that they could clear their transactions. Right? So like, so, like, I mean, do I think that like. So the way that Voltus does this, just to be crystal clear, is they put an additional $2,000 worth of equipment at every single commercial site and they have their own metering that they settle with. Right? Because they can't trust that they're going to get of the utility. But you can't put $2,000 worth of equipment in every single residential home. The numbers don't work.
- [61:36]
Caroline Golan
Well, you can if, if you are, if you think this is where you're willing to be exposed because you think that you'll make it on the back end. And that's sort of what I'm getting at, which is like these type of policies.
- [61:50]
Jigar Shah
A smart meter, like it's already there.
- [61:52]
Caroline Golan
Well, right, if it's duplicative, absolutely. But this is what I'm saying, which is like these types of legislate, this type of legislation is what is going to give companies, you know, the big ones and the small ones, I think the signals where they can go and raise the debt to do the customer acquisition and to do the investments that's needed to really grow this as a real capacity. And so that's why these are so great. And what my only point is, the industry hadn't been there, so there wasn't a menu. It wasn't like Google or Microsoft or anyone was saying, we don't want to invest in VPPs as a capacity solution that doesn't make any sense to us is that the menu wasn't there to do it at scale, to do it at an amount that was even going to make a difference in our ramp rate. And a lot of that, if you circle the drain is again, it's just like investor confidence right in the uptake. And I think that that's what this could do and I hope that's what this does.
- [62:56]
Jigar Shah
Oh, I think these companies are all gearing up to bid 1,000 megawatts in the September auction. Right. Like, I think that they are gonna go for broke on this stuff. And I think it's time, right, because there is Nothing else that can actually deliver in a 12 to 18 month period. And so I think that there's going to be a lot of alignment and.
- [63:18]
Caroline Golan
Leave the customer better off. That's the other thing is like it's. And hit the affordability.
- [63:23]
Stephen Lacy
Yeah. So yeah, just to really simplify this jigger, what is the case for VPPs lowering bills across the system? And are any of the states creating a pathway for VPPs to actually substitute new generation or wire?
- [63:42]
Jigar Shah
So I think there's two or three different angles to this and so we'll cover the first one and then the second one. But like, so the first one is basically we have a ton of load growth. Load growth is usually a good thing. Right. You want to sell more kilowatt hours. Right. But you don't want it to actually, you know, put an excess burden on the existing system. So you want to be able to handle those like 100 to 300 hours for the peaks. We've had this conversation with Tyler Norris and all that stuff. Right. And so VPPs basically form a strategic reserve that can be dispatched to meet those peaks. Right. That's in its plain simplest form, you have the ability to do that. That increases grid utilization, that reduces the costs of what we've already paid for because it's peanut butters. Those costs across more kilowatt hours. Right. Like the formula is investment on the numerator, kilowatt hours sold in the denominator. Right. You want to reduce the investment. So the second layer to this though is reducing the investment. Right. So part of this is just increasing the kilowatt hours. Right. Rates can go down. You do have the strategic reserve. The reducing of the numerator though requires the utility to actually agree with reducing and deferring investment, which the CEOs and CFOs have all agreed to. But the people who work like below them have said old habits die hard. And we don't think that these solutions are as robust as just building new infrastructure Now. Now they have a three year wait list for some of their supply chain parts and so they don't have a choice and so they have to do these things. But it's hard. I mean, and it's not just the stuff that we've talked about, right. So you have thermal storage, right. So that's like thermostats and water heaters. Right. Then you've got battery storage, right. Which is operating more like a power plant and already meets the Huels test. Right. According to sort of energy.
- [65:32]
Stephen Lacy
Yeah, just the Huels test, but is.
- [65:37]
Jigar Shah
Basically Runs like a power plant. You have telemetry, you have all these things. You can put it into the grab operations. Then the third piece is EV charging, which we've grid and some of those guys are doing. But the fourth piece, which I think people are not recognizing, is the smart panels, right? So SPAN, IO, Schneider Electric, et cetera. So many of the utilities are upgrading pole transformers that they don't need to upgrade because they think that they need to put everybody on 400amp service to be able to accommodate heat pumps on the electric vehicles. When you can just have smart panels that actually manages your amps and the way that you're using them across your circuits in that smart panel. And it's one third the cost, right? And so figuring out all of these different technologies which are at distribute tech, visit their booth and please give them a contract for the first time in 15 years. And that reduces the numerator. And so you have to reduce the numerator. You can't keep investing $1.1 trillion, which is what EEI is bragging about between 2025 and 2029. They want to invest and believe rates are going to go down. That's just too much money. It's an enormous amount of money for them to invest. Right. And so the numerator's got to go down with better technology and the denominator's got to go up, which means you have to accommodate more load growth.
- [66:53]
Caroline Golan
And I think the one thing I would add here is if we just zoom out for a second and say, where do we want invest in what could be a risky signal around load growth? I said it before and I will continue to say it. I think the trajectory is going to continue to go up. How steep that line is on the graph, I think is questionable in the long run. But wouldn't you rather want to invest in something that ultimately ends up in the customer being better off and the grid being more resilient than over investing in large capital speculative projects that may or may not come online within the next six years, where there's going to be within that timeframe, a lot of consolidation in the market that's driving upload. There's going to be a lot of consolidation in the financial players and there's going to be a lot of change in the way training operates, the efficiency of training. And so I think that the important aspect here to think about from an investment perspective is that the way you get the most returns out of your money. So if you're third capital investing in this space, the way you're going to get the most returns out of your money is going to be a lower capex investment with a higher upsell. Right. And right now you can charge. Wait, what's the highest we've seen, Jigger? 25, 26 cents per kilowatt hour. If you can get online tomorrow. If you can't get online tomorrow, that number drops year by year by year.
- [68:45]
Jigar Shah
Year.
- [68:45]
Caroline Golan
Right. And so to me, why wouldn't you invest the capital in the low capex solution and still extract the same returns?
- [68:57]
Stephen Lacy
That, to me, is one of the most compelling cases for VPPs. I mean, I totally agree. And there is a lot of risk in the upside numbers. Jigger.
- [69:05]
Jigar Shah
And then the one other thing that I'd add to what you're saying, Caroline, which I think is embedded in what you said, is that, I mean, one in five households in the United States now are behind on at least one energy bill.
- [69:15]
Caroline Golan
Yeah, that's like heartbreaking, actually.
- [69:18]
Jigar Shah
So on this side, you're like, I'll pay 25 cents a kilowatt hour to get interconnected tomorrow. On this side, you have hundreds of thousands of homeowners who are in weatherization queues with no grant money to do weatherization of their homes. You could just weatherize their homes, reduce their bills, and actually free up a bunch of capacity in the market. And you're just like.
- [69:40]
Caroline Golan
And we tried to do that. We tried to do that at Google and we actually couldn't get accreditation for it.
- [69:47]
Jigar Shah
That was the problem. But this is what I'm saying, right, is like, whether it's like, you know, grid enhancing technologies with line vision and advanced conductors, or whether it's like helping weatherization occur for people who've already signed up to be on this list, but, like, there's just not enough money coming to do the work. Like, I just think that, like, this whole concept of VPPs is a broader definition than I think what we've been using for.
- [70:11]
Caroline Golan
Yeah, agreed.
- [70:12]
Stephen Lacy
So to wrap this up, we've been talking about really wildly divergent approaches to affordability and electricity abundance. And it's just, this is like the most wild time I've ever seen in the power sector. I guess to ask, like sort of an unknowable question. I mean, how do you both see these paths colliding? Like, where are we going to with these two very different approaches to solving the problem?
- [70:38]
Caroline Golan
I mean, my hope is, and I'll go back to what we talked about earlier with the divergent views from the supplier industry. I mean, my hope is that the Supplier industry sort of takes back their role in terms of producing innovative capacity solutions in the market and structures that in a way that allows not only for data center capital investment, but third party investment in the way I know we all want to see. I think that can happen and I think it will happen. My concern is in the middle there's going to be a lot of fighting over who's going to get their pound of flesh at the political level and that that could slow things down. And I truly believe this. There is, there isn't a capital, I mean there isn't a fund out there and there isn't a hyperscaler out there, data center developer out there that is going to say or even necessarily has the intelligence to be discerning around electrons right now. And so that forcing function is going to make innovation happen whether or not it happens seamlessly at the political level so that it can be a widespread scalable solution. I don't know. I don't really know because I think, well, what we've seen historically, I mean we live through New York rev. What we've seen historically is that entities want their pound of flesh and that pound of flesh can slow down good solutions. But I am hopeful that this is going to happen because there isn't a lot of other options. We have to build new power, we will build new power, but in the next five years we also have to create it.
- [72:30]
Stephen Lacy
Jigar, where's this collision course headed?
- [72:32]
Jigar Shah
Yeah, I mean I am super bullish and optimistic because I mean luck is preparation meets opportunity. I mean, Lord almighty, I've been prepared for this moment and so I'm going to hit it hard. Right? I mean, whether it's legislation in all the states that we're passing legislation in or working with the hyperscalers and others who've already negotiated these contracts just for smaller mechanics, megawatt amounts. Right. So they can now make them larger megawatt amounts or with all of the capital funds. Right. I mean I've been working with them for years, specifically for the last three years to get them to be comfortable with merchant risk. Right. Because a lot of them were really just wanting PPAs and not really doing merchant. But batteries are always merchant. Right? Because even if you get a long term contract from the hyperscalers, that's only going to be one revenue stream. There's five other revenue streams that you need to get on top of that which are going to be merchant. And I think you're starting to see a huge number of funds in the 20, $30 billion scale that are coming in that want to take some of that merchant risk. And so we're prepared for this moment. We can mobilize the capital, we can mobilize the people. We have already figured out the supply chain so we can actually deliver enough product over the next 12 months. Obviously there's some fiac requirements, so we're going to have to navigate that. But like we're ready, we're ready for this moment. And I just think that like a lot of things have to come together. I'm not suggesting it's a foregone conclusion, but like, I don't think we're like, you know, we're taking this moment lightly. I think everybody is like laser focused.
- [74:02]
Stephen Lacy
Jigger Shah is the co managing partner of Multiplier. Thanks Jigger, for spending your early morning with us on the West Coast. It was kind of fun watching the sun.
- [74:11]
Caroline Golan
Remember the sun come up. Yeah, yeah, yeah.
- [74:14]
Stephen Lacy
Although I know that you would probably be dreaming about this subject anyway if you were in bed. So. Caroline Golan is the CEO of Envision Energy Advisors. Thanks for sharing your birthday with us.
- [74:27]
Caroline Golan
Aw, no better way to start the morning, truly.
- [74:35]
Stephen Lacy
Thanks everyone for being here. Open Circuit is produced by Latitude Media. Chigarsha and Caroline Golan are my co hosts.
- [74:42]
Jigar Shah
Hosts.
- [74:42]
Stephen Lacy
I am Stephen Lacy, your co host and executive editor. The show is edited by me by Sean Marquand and Anne Bailey. You can find all of our episodes of open circuit on YouTube. Subscribe to the Latitude Media YouTube channel. You can also of course, find the audio version of Open Circuit anywhere you get your podcasts and we've got transcripts at Latitude Media, so find us everywhere. And of course at Latitude Media we've got link stories stories for all the topics that we cover here and you can subscribe to our newsletters to get them in your inbox. Thank you so much for being here. We'll see you next week.