← Plain English with Derek Thompson
Plain English with Derek Thompson
The Energy Story of the Moment: The Unstoppable Rise of Solar Vs. the Unmovable Demand for Global Fossil Fuels
01:12:27
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- [00:01]
Dave Jacoby
What's up everybody?
- [00:02]
Chris Vernon
Chris Vernon here and welcome to a.
- [00:04]
Dave Jacoby
New season of the NBA and the Mismatch.
- [00:07]
Chris Vernon
And huge welcome as well to my new co host, Dave Jacoby.
- [00:10]
Dave Jacoby
I can't wait to link with you twice a week, every Tuesday and Friday right here on the Mismatch to break down everything that's happening in the league.
- [00:19]
Chris Vernon
Who's playing well, who we loved, who.
- [00:21]
Dave Jacoby
We loathed, trade rumors, team dysfunction. We've got you covered right here. So follow us, subscribe and hit us with those five star ratings on Spotify or wherever you get your podcasts. And also don't forget to follow us on social media. That's Ringer NBA. And check out the full Mismatch episodes with the two handsomest podcasters in the history of podcasting right on The Ringer NBA YouTube channel.
- [00:47]
Chris Vernon
This episode was brought to you by Workday There are two kinds of people in the world. Backward thinkers and forward thinkers. Forward thinkers have plans 15 minutes from now and 15 years from now. They're not just one step ahead, they're 1,000 steps ahead. And when you're a forward thinker, you need a platform that thinks like you do. Workday's AI illuminates decision making and reimagines how you manage your people and money for long term success. Workday Moving Business Forever Forward Find out more@workday.com this episode is brought to you by Indeed. Hiring someone new for your business can be a big move, and I understand you probably want to take your time to make sure you've found the right person. But playing the waiting game could do more harm than good because that's extra work and extra stress you're putting on you and your team. It's not a healthy work environment when it comes to hiring the right people fast. Indeed is all you need. Their Sponsored Jobs Move your job post to the top of the page, letting you stand out first to relevant candidates. It makes a massive difference. According to Indeed data, sponsored jobs have 45% more applications than non sponsored jobs. Another great thing about Sponsored Jobs is that you're only paying for results. You don't have to worry about monthly subscriptions or long term contracts. There's no need to wait any longer. Speed up your hiring right now with Indeed. Listeners of this show will get a $75 sponsored job credit to get your jobs more visibility@ Indeed.com that's Indeed.com plane right now and support our show by saying you heard about Indeed on this podcast. Indeed.com plane terms and conditions apply. Hiring Indeed is All you need today the state of energy in the US and around the world. Energy is good. In fact, it is genuinely difficult to overstate just how good it is. Human progress is in many respects a story of our ability to transform our natural environment into energy that releases us from the scourge of natural suffering. Our food is energy, our clothes and our homes energy. Our air conditioning and our hot water, our light and our electricity. You are hearing my voice right now because joules of energy pulled from natural gas or oil or the sun itself were transformed into an electric current that flowed into a device that you're currently holding or driving or resting on the counter. Energy is good and its absence is bad. According to the historian Vaclav Smil, nearly a billion people today still have no access to electricity. And the average annual per capita energy use among more than 3 billion people today is at levels comparable to those of rich European countries in North America in the 1850s. In the next few decades, these billions of people will increase their energy usage as they economically progress, because progress itself is an energy intensive state. But most of the world's energy relies on burning stuff we find in the wood, coal, oil, natural gas. The burning of these hydrocarbons automatically releases carbon dioxide into the atmosphere, where it traps heat, warms the planet. And thus our greatest triumph, which is energy progress comes with a receipt, is inextricably connected to a great change challenge, which is an energy transition toward green or clean or zero carbon technology. And make no mistake, the challenge is very real. 2024 was statistically the warmest year on record since at least 1850. The average length of American heat wave seasons has now tripled since the 1960s. In India last year, companies had 320 mentions of heat waves in their earnings call transcripts, more than in the previous four decades combined. In one day this past October, Valencia received more rain than it had in the prior three years. Here are some inconvenient truths about climate change and decarbonization. Number one, coal Sounds like a dirty tech that the rich world is moving on from. But nearly 9 billion tons of coal were burned last year, an all time high. Number two, peak oil is a prediction that many analysts have thrown around the last few years. But oil production is also near its all time high. Number three, we might not even be at peak wood. Yes, if you're listening in the US or Europe, you might think, wait, wasn't burning trees for heat something that we did in like the mid-1700s? Yes, yes, it was. But global wood fuel production was actually higher in 2024 than it was in 1980. At the same time, I think there's optimism here, room for tremendous optimism. I think renewable energy is proving to be its own unstoppable phenomenon. Solar and battery installations are still exploding upward. And whereas some skeptics are worried, or have been worried, the world wouldn't be able to provide the essential elements and metals to build out a green energy system, those doubts seem, for the moment, a bit overwrought. Lithium, for example, which is one of the most important metals for battery production, has seen its global resources double since 2018. So what we have here is not a pretty picture, but a messy one. A green energy boom matched with an enormous, nearly insatiable demand for fossil fuels around the world as billions of people drive and eat and demand the middle class lifestyle that is their right. Today's guest is Nat Bullard, an independent energy analyst. Something I really want to do with this show, and just generally as a journalist who's interested in a chaotic diversity of things, is to find individuals that I can trust to give me a masterclass on a big topic. This is my second sort of masterclass episode of the year. Just as Michael Sembalist from JP Morgan did a big, wonderful State of the 2025 economy episode for us a few weeks ago, Nat is cut from the same cloth. Just an extremely wide ranging, articulate, and absolutely no bullshit expert who really bestrides the energy field in a way that few others do. I'm Derek Thompson. This is plain English. Nat Ballard. Welcome to the show, Derek.
- [08:12]
Dave Jacoby
Thanks for having me back. It's great to be here.
- [08:15]
Chris Vernon
Your decarbonization deck is cause for celebration in many corners of the world, and I'm very honored that you agreed to bring the party here. You're in Singapore, I'm in Singapore and I'm in North Carolina. So if folks feel like I sound a little sleepy or Nat sounds a little groggy, just choose instead to be impressed by the technological fact of podcasting in real time across 10,000 miles. Nat, to kick us off, who are you and what should we know about this deck?
- [08:45]
Dave Jacoby
So I'm an analyst by training. I spent the last 18 years now really only looking at the world of energy and how it changes state by technology, by market, and by what we choose to prioritize in terms of what we build to energize our whole world. I did this for a startup. I did this at Bloomberg for more than a decade. I now do this on my own. I do this also through a startup that I'VE co founded in the US and my main priority is to try to bring the clearest possible view of the present day. I think we have so much noise and so much sort of energy, no pun intended, floating around the world in terms of thinking about the future that the best possible thing we can do to help us is to just get a very clear view of the present day. So starting a couple years ago, freed from the surly bonds of a giant corporation, I was able to go ahead and do what I'd always wanted to do, which is this. Make a presentation that told a narrative, if you will, driven entirely by facts, but a narrative that talked about where we are and used that to think about where we might be going. And it's I think a useful exercise that I do every year for myself, largely in terms of helping me understand. But I decided to make it public and publish it. And I wouldn't say that there was necessarily a void for this kind of thing in the market, but there is a world that tends to be bucketed into these multi trillion dollar sectors on their own. Transportation, the transportation of fuel, the consumption of fuel, the power sector, oil and gas, petrochemicals. And I was like, you know what? No one really gets a chance to wrap this all into one ball now. It's by no means comprehensive, by its nature it can't be. But I try to touch upon everything that I think of as the prime movers or the main drivers of change in the moment and just get a clear picture of where we are and hopefully that helps inform people on where we going.
- [10:42]
Chris Vernon
We just had Michael Sembelis from JP Morgan on the show to give a state of the economy as his Eye on the market newsletter. Just is this dozens of pages that give you a sense of everything that matters that's happening in the US and global economies. I think of this report very similarly. This is a state of global energy report. 200 pages, 200 charts. We'll link to it in the show notes of course. But here in the show I want to focus on four major themes of this year's report, which I'm just going to name now to set the table for you and for listeners. First, I want us to be very clear about the challenge. It's not just that the world's getting hotter. It's also that fossil fuel production is near or at record highs. So the fossil mountain has never been higher by some measures. That's the challenge. Number two, I want to talk about progress and in particular I want to focus on the progress Made in solar energy and battery technology. Number three, I want to talk about bottlenecks to progress. Progress isn't easy. There are a lot of regulatory and political and market side challenges to barriers to solar and battery and other clean tech moving forward. And then finally, I want to talk about China, Tesla AI and the future. So let's start with point one. Let's start with the challenge. And to be honest, I think you lay it out beautifully. And let me just give two facts that I gleaned from your report. Fact. In 2000, Europe consumed twice as much coal power as India. Today, India consumes more coal than Europe and North America combined. So why is coal production near or at an all time high? It's because of facts like that. Number two, in 2000, Europe and the US both imported 10 times as many barrels of oil as China. Both imported 10 times as many barrels of oil as China. Today, China imports more oil than both of us. I think that offers a taste of why fossil fuel production remains so high. But help us understand from a global standpoint just how robust and sturdy fossil fuel demand still is.
- [12:56]
Dave Jacoby
We're in a tricky spot right now, which is that it's possible to sort of see where these things might peak every time you look forward five years. And in fact it's been that way for at least the last decade in my mind. And we have yet to meet it because energy demand is really sticky, it's really persistent. There are parts of the world that are still energizing, so to speak, like they need to just get access to energy to begin with. There's other places that are sort of under energized compared to the way we live in Europe, Europe and the US and all of the kind of what we would call the rich countries of the world in the oecd. And then there's also just a lot of industrial activity in particular in a place like China and in a place like India. There's industry as well as a demand cycle that we went through a long time ago in North America, which is air conditioning, making sure that we're better prepared for the heat of a warming world. And it's been very hard to displace these trends with anything new. Yet there are some signs that at least in China, this might be coming towards a couple of potential peaks. I'm very loath to call a full on peak in anything right now until we see more years of Data. But these two countries on their own are what, 2.6 billion people, 2.7 billion people, with together much less access to energy on a per capita basis than anything we've got in the West. And also in particular in China's case, the bulk of manufacturing of almost any good you can think of, whether it's a primary good, whether it's a finished good. And so that just means that all of that demand has flowed to these places. And then there are other places that have to catch up. So it's important to note, and this is not original for me, but there's no such thing as a wealthy, low energy country. There's no such thing around the world as a country that has high degree of per capita income and a very low degree of energy consumption. It just does not exist. And so in the absence of anything better, we're going to be doing this with fossil fuels. And the sort of urge, the societal and human urge to be in a high energy and wealthy position is I think, very, very hard to not only unwind, but hard to even not wish on people. In a sense.
- [15:17]
Chris Vernon
It's not just China and India that are producing a ton of fossil based energy. It's interesting because I'll sometimes watch economic commentators who see the incoming Trump administration and say, finally, we have someone who's going to unleash energy abundance in America. And I sometimes wonder whether these commentators or economic reporters realize just how much oil and gas the US Is producing and exporting. What's a good way to wrap our heads around the state of oil and natural gas production in the US alone?
- [15:53]
Dave Jacoby
I mean, to be very direct about it, most of those comments are living in a kind of fact free environment. I mean, the US Is the largest oil producer today and ever. We are the largest producer of natural gas. We are the largest exporter of natural gas in liquefied fashion, a trade which did not exist a decade ago effectively in the United States. Put it as an aside, when I started doing this, I did a project for a great big power utility and a utility and energy holding company, and they owned two US liquefied natural gas import terminals at the time. This was 2010, okay? Their expectation was that the US was going to be importing natural gas in liquefied form from places like Qatar or Australia. And instead in that time, we've blown past that and have buried both of those countries in terms of our total exports. This is very basic data. It's not political, it's not fancy, it's not fussy. We produce more of those two sources of primary energy than anybody in the world and we now export it. When I was a boy, the US was importing as much energy as we now export. The US materially exports on a primary energy basis, rolling together all the energy value in coal, oil and gas. We export more now than we imported when I was a little boy. I don't understand how this is not seen as some kind of abundance. To add another wrinkle to it is it's not like we are an export based energy economy either. Which is another unusual thing about that. Most countries that are exporters, that's what they do. They are businesses, societies, countries that are built around that as a prime mover of their economy. It is not a prime mover of our economy. It's an important element of it. But yeah, we live in an energy world that I think we should acknowledge is really abundant, to put it in terms that I know you like, and unequivocally so. There's no parsing you need to do with this. There's no caveat or qualification. We have an awful lot of this. Does it need more unleashing? This is really a fascinating question. The way that I always think about it is that if you're a business executive, you of course want the call option to be able to do more. That is reflected to some degree at a policy level. But we're also not only this giant energy economy, but we are market based. You cannot, unlike in some other countries, call up the chief executive of a big producer and say you are going to do more. Maybe you can do that under the guise of national defense, but you cannot force publicly listed companies to do something like this. It's the flip side of these companies burning 40 to 50 billion dollars a year when they were building. The capacity we now have is that you also can't make them produce when the time comes. I think that's important to note. We have a great deal of everything we now export. We have this nimble private sector that drives almost all of this and it will respond to a market, it will respond to price signals, it will respond to supply and demand. And it's unusual in that sense, if not unique globally.
- [19:05]
Chris Vernon
I think everything you said gives us a really good sense of what the energy transition is up against. All the energy technologies that we've named so far. We didn't mention wood, but by some measures, according to your report, global wood fuel production was higher in 2024 than in 1980. Just to give people a sense of how much carbon intensive energy is being produced, how much we're burning wood and oil, natural gas, coal, certainly these are carbon intensive technologies. And when we use these technologies to cool people's homes, heat people's homes, make people food. Obviously that's a mitzvah, but we all know what the cost is. We know what the receipt is. It's carbon into the atmosphere that's creating a hotter planet. And that's part of the motivation for the energy transition. But I want to give people a sense of just how tall that fossil mountain is, because it is daunting. So let's get to the energy transition. Let's start with solar by percent growth. How fast is solar growing right now compared to other energy generation sources in modern history? And to what do you credit its growth at the moment?
- [20:24]
Dave Jacoby
So solar is a unique beast in the energy system. Everything that we've developed over the last couple of centuries has generally thrived by becoming bigger. Efficiency comes by greater individual scale of a small number of very large things. There are worldwide counts only in the thousands to then tens of thousands for typical big energy assets. And they become more efficient by getting bigger. Solar and wind, in an allied fashion, are different. You build them by the tens of thousands every year in the case of wind turbines, and comfortably these days by the billion in terms of solar panels. And solar right now is growing faster after the kind of liftoff moment, which takes a long time for all technologies, but after the kind of liftoff moment that is arbitrary in this case, but it's about 100 terawatt hours a year, which is like what a medium sized US state would consume. We are in a position where solar grows faster than anything else has ever grown in absolute terms, in relative terms, okay, nuclear power was growing about the same rate in the 70s when the energy economy was much smaller. But it's just the fastest thing that we've ever added in absolute terms to the power grid once it hits a takeoff point. And that's a bit of a brain breaker for a lot of people because it doesn't match this expectation of, well, it's thousands of giant coal plants with exhaust stacks and cooling towers, or it's dozens or hundreds of nuclear power plants being built. It's assets, when you count them up financially in the tens or hundreds of thousands every year. And it's individual deployments of these technologies by the billion. But it's that deployment and that, that total amount of stuff that happens every year that's being built that gives us the kind of improvement in cost and efficiency and performance that you tend to expect with some kind of mass manufactured good, as opposed to something that's made out of tons of steel. I'll give you a quick aside here as a comparison. So a great big natural gas plant that you would buy these days, the turbine sets in, those weigh more than an Airbus A380 empty. Okay, so that's one technology that, if you think about the ski, that that's the achievement of greater efficiency through greater scale. Solar, on the other hand, creates greater efficiency and lower cost through greater volume, which in turn gives you a reason to. Gives you costs driving down and efficiencies up, which gives you reason to do more of it. It has a way of sort of inducing its own good fortunes, to put it that way.
- [23:03]
Chris Vernon
I think it's really fascinating as a piece of energy history that if you go back to the mid-1950s, the solar cell, the efficient photovoltaic cell, is invented at Bell Labs just around the same time that the first nuclear power plant is built in America. And I sometimes think about being Nat Bullard in that moment, trying to be like an energy analyst, thinking, which of these technologies is going to take over the future? Is it the photovoltaic cell, the solar cell, or is it the nuclear power plant? And if you had bet on nuclear power plant, you would have been right for decades. Nuclear power is built like crazy in the US the 1960s, early 1970s. It's built around the world. It still today accounts for what, 20% of U.S. electricity generation? Nat's nodding his head. It's about 20%. But famously for the nuclear heads out there, we essentially stopped building new nuclear power plants in the 1980s, 1990s, 2000s, I think only one plant, the Volktul plant, has been finished in the, in the 21st century that was started in the 20th century. I mean, it's just extraordinary the degree to which we've essentially stopped building nuclear in this country. Meanwhile, like the tortoise winning the race against the hare, ironically, nuclear is the hare here. The tortoise winning the race is solar, which is getting off the ground and fits and starts in the 1960s. 1970s kind of has a shutdown moment under the Reagan administration in the 1980s, is basically dormant for decades, and then Boom in the 2010s takes off and is now, according to your words and your reporting and other reporting that I've seen, by many accounts the fastest growing energy generation source in human history. It's an extraordinary thing to compare. Those technologies which again, had sort of their birth dates in a way, were right around the same time in the mid-1950s. You're bouncing around in your chair like you have something to say so before I go to the next bit, which I think is going to be batteries, why don't you jump in there on my solar history.
- [25:08]
Dave Jacoby
I love the way you've captured this because it's something I hadn't even thought about that much. But the way that they both emerge at the same time and at the same kind of moment in American history too. And what we have to think of is there's kind of like a cognitive dissonance for most people who made their bones in the energy business anytime between the 70s and today, which is that you had big things that got better by getting bigger, and then you have a tiny thing that gets better by doing more of it. And these are very. They're very kind of different modalities that you have to sort of embrace and they don't care about.
- [25:40]
Chris Vernon
We keep circling this idea, we might as well just say it. Bell Labs invented the solar cell. They also invented the transistor, which ended up becoming famous because of Moore's Law. What you're saying is to a certain extent, nuclear power has the opposite of Moore's Law. Oil does not have a Moore's Law. Coal does not have a Moore's Law. Chopping down trees to burn them does not have a Moore's Law, which is the idea in transistors where every 18 months the transistor density on these chips seems to double in history. Photovoltaic cells have something like a Moore's Law. There's something like an incredible ability to have a learning curve over time that the technology to become better, smaller, more efficient. We've never had this for technology really before solar, is that right?
- [26:23]
Dave Jacoby
We haven't had something that is in a position where you can make them buy the billion. The closest thing I can think of would probably be the internal combustion engine in a car. Like the kind of thing that we now we make by. I don't know, we probably make 80 million of those a year new for cars. I don't know how many we make in related things like generator sets or things like that, but you have to think about it as something like that. The difference with those though is that they still require fuel. The cost of energy that you get from a gen set is not buying the gen set. It's what it costs to fuel. The thing, the difference in the solar is that you pay up front and that's it. I have friends who have early solar panels from the 70s as home decorations that are still energized. They're like, yeah, like if I plug anything into it, it will still make power completely passively less efficient than it did in 1976, but it still works. Whereas the genset, if you're not fueling it, if you don't put anything in that generator, it will do nothing. So there's a big difference that I think again, we sort of inherently know this, but sometimes it's worth making it more explicit in terms of how we think.
- [27:37]
Chris Vernon
This episode is brought to you by Indeed. Hiring someone new for your business can be a big move, and I understand you probably want to take your time to make sure you've found the right person, but playing the waiting game could do more harm than good because that's extra work and extra stress you're putting on you and your team. It's not a healthy work environment. When it comes to hiring the right people fast Indeed is all you need their Sponsored Jobs Move your job post to the top of the page, letting you stand out first to relevant candidates. It makes a massive difference. According to Indeed data, sponsored jobs have 45% more applications than non sponsored jobs. Another great thing about Sponsored Jobs is that you're only paying for results. You don't have to worry about monthly subscriptions or long term contracts. There's no need to wait any longer. Speed up your hiring right now with Indeed. Listeners of this show will get a $75 sponsored job credit to get your jobs more visibility@indeed.com plane that's indee.com plane right now and support our show by saying you heard about Indeed on this podcast. Indeed.com/terms and conditions apply. Hiring Indeed is all you need. What does it mean to be rich? Maybe it's about measuring life and laugh lines and time. Not by how much you have, but by how often it stands still. At Edward Jones, we believe the key to being rich is knowing what counts. Our dedicated financial advisors provide one on one support meeting you where you are through all of life's changes. Because what matters most is living a life you love. Let's find your rich together. Edward Jones Member SIPC exclusively on ESPN.
- [29:28]
Dave Jacoby
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- [29:54]
Chris Vernon
I asked you to pick the slide out of the 200 slides in your deck that makes you most bullish about the energy transition. What is it and why don't you tell me a story about it.
- [30:08]
Dave Jacoby
So it's interesting. I spent all this time covering solar for years. As you can tell, once a solar analyst, always a solar analyst and covered wind as well. I've looked at all of the technologies that generate power and they're all nifty and they've all improved a great deal. It's the battery that I find most fascinating right now. So installations of battery energy storage, so not in cars but attached to the grid, went up almost 70% last year. And the battery is actually the thing that allows these other technologies to kind of escape the range bound nature of how much they can integrate into an energy economy without some kind of energy storage to serve all kinds of purposes in the grid. Sometimes it's down to the intra second time others it's out to 4, 812 hours. Eventually it will be over multiple weeks. Is the thing that allows something that is never always there to become reliable enough that you can count on it. And the battery is like connective tissue or enabler or something for all of these other things to happen. And the great part is that the batteries themselves follow a similar kind of dynamic to manufacturing solar or manufacturing consumer electronics. They all derived originally from the consumer electronics business. They now have their own logic behind them in terms of who makes what and what purposes they're optimized for. But the battery is what allows us to blast through what used to be viewed as like pretty consistent range limits in terms of how much you can integrate wind or solar into a system. And in a wonderful way they've got their own industrial logic behind them. They've got a lot of highly competitive companies, they've got a ton of innovation and not just kind of pie in the sky innovation but like the really kind of important grind it fine process innovation to make these things by the billions. And it's the battery that allows us to go and build 40% solar in a market and 25% wind and have things work along with more macro stuff. But batteries are also going to like, they're going to revolutionize the way that systems get built full stop where there is no grid. If you're going de novo to a place that has really underenergized, let's say you'll find people building sort of expanding grids of solar, wind and batteries together that maybe make it less likely that you're building a lot of big centralized stuff. And they're fast and they're interoperable and the markets are really highly competitive. These are all good things. Again, back to a book that I hear someone's writing from an abundance perspective. Sorry, has written. Not is writing, has written.
- [32:54]
Chris Vernon
I'm going to take the bait there in this next question. Let me just sum up where I think we are. So far we've talked about the Goliath of sticky fossil fuel demand. We've talked about the David of solar electrons and batteries that move them across time and space and make that solar powered electricity useful, as you said. I have a book coming out with Ezra Klein on, among other things, the future of liberalism and technology in America. And there is in fact a section about the challenges of building the energy infrastructure of the future here in America and why the US doesn't entirely seem up to task to that challenge at the moment. You know, we have questions about interconnection cues. We build solar power, but how do we connect it to the grid? There's issues with long distance transmission where we've fallen miles behind the pace on building the power lines that carry electrons from where they're generated to where they're used in the biggest picture. Nat, what do you see as the most significant impediments to decarbonization in America? And don't mention incoming policy just yet because that is the next question.
- [34:06]
Dave Jacoby
I appreciate doing this as a two parter because I think it's actually important to disaggregate different things because they can be impacted at different levels and with different approaches. The first is this. You mentioned the interconnection cue for those listening. That is the volume of energy capacity in the US that people want to build and are waiting to connect to a wire, put it very, very basically. And it's just a silly number. It's like twice the number just for folks.
- [34:37]
Chris Vernon
I'm sorry, I'm not going to interrupt you again here. I do find there's some people for whom energy doesn't quite click without a metaphor. They know more visually. Is it a little bit like a huge reservoir of water in your local town, but no one building the pipes to get that water to your house to use for cooking, to use for bathing? Is that the.
- [35:03]
Dave Jacoby
I'll give you a demand related one, which is this. Somebody's built a bunch of subdivisions and they're not yet connected to that water. And they're waiting for the water sewer, power hookup. Right?
- [35:12]
Chris Vernon
Bingo. Got it.
- [35:13]
Dave Jacoby
So it's the inverse of that. Right? It's the supply that's waiting to be connected, not the other way around. And look, everybody wants to do this. Everybody wants to go and build. People are ready to do this they have built their businesses, their lives. They hope to build their fortunes in building new energy infrastructure for the U.S. the things that keep that from happening are a mindset that is very slow in terms of what is required to approve one of these things. There's a lot of, I would say, willful delay on the part of people on both the American left and the American right in terms of saying, I don't want this thing to happen. And so I'm going to sort of gum it up and keep it from going. There's a lot of proceduralism. I mean, you can't imagine. Actually, you probably can imagine the amount of paperwork you have to do to get one of these things built. And that's millions of dollars, many, many years. It could be completely a sunk cost. So it's largely a mentality. It's a decision. And I don't think of it as policy or politics. It's societal. It's a decision, are we going to build things or not? And I try to strip it down as very simply as possible to just that that's a decision. Do we decide that we're going to build or not? And the unfortunate thing is, for a lot of the country, the decision is we're not going to. And look, there are parallels too. We're not also going to build housing in expensive coastal cities. We're not going to invest in expanding all kinds of other elements of local state capacity because we don't want to spend the money on it. But the reality is, if you do that, you forestall the future. And sometimes you could forestall it completely. You could prevent the future. And I don't particularly care for that as an American. Let's put it that way, bro.
- [36:58]
Chris Vernon
Wow. That was a more effective summary of my book than I was prepared to offer on this show. So I really appreciate you doing that. Let's move to politics. You've got an incoming administration that has made noises and even plausible threats about shutting off a lot of the subsidies that came with the Inflation Reduction act, ironically named because a lot of it had to do with clean energy subsidizing. What do you currently consider the biggest political risk to the energy transition? Now we're moving from the mentality change that we need in order to actually build energy to what's the biggest political risk to the energy transition at either the regulatory or legislative level.
- [37:40]
Dave Jacoby
I think of these things as one thing being downstream of another. There's politics, there's policy, and then there's regime, there's inaction, there's Stuff that's actually happening. So the challenge is that policy, and it should be to some extent downstream of policy, people are elected to enact the will of the voter and that has to move from politics into policy. And then what comes after policy is ideally stability too. A mix therein of like yes, we want to do what the voters want, but we also want to ensure a multi political and ideally even multi business cycle stability to give people reason to invest. And you make it very, very difficult for people with long planning cycles who need to devote capital upfront on the not the expectation but the necessity of having it paid back over years to just constantly change the underlying regime, provide not enough stability across political and business cycles for people to be able to build. That's something that we didn't used to have. I'll give you a great analogy. When I used to Live in Washington D.C. i took some interns to see an old coal plant that's just down the river from the airport on the Potomac. And the engineers there said they're like, oh yeah, we built this in 1950 and the two state utility commissions here and in Maryland, one across the river from each other. We're like, you know what, our demand growth is fast. Why build one of these when we can build three for thrice the price? And the state commissions got together with GE and we built three identical power plants. That's what a regime of stability looks like, where the expectation is yes, I can build something and keep it going. And when you rug pull people, regardless of their politics, in terms of what they want to build, it makes it very difficult for long term commitments to come in. The other challenge in the US is not quite the guarantor, but the underwriter to an extent of so much of this real transformational stuff, as always in the United States is the government through grants, through long term loans, through long term contracts, through long term stable policy to plan for things that have to go on for years and decades. And look, I can tell you that the world of other parts of domains like building things such as highways or providing for national defense are generally able to operate on longer timelines like that. That gives people reasons to invest. It gives people a reason to commit capital on a long term basis.
- [40:20]
Chris Vernon
We're talking about the impediments and the bottlenecks to the energy transition. You've name checked an anti build mentality. You've name checked political instability and lack of contiguous political will in order to make this transition. There's another thing that we have to throw into the mix Here, which is your deck, points to evidence of what I have to just call a climate tech bubble or a climate investment bubble. There are big institutions, Goldman Sachs, Morgan Stanley, BlackRock, JP Morgan, Citi bank of America, all of those financial institutions have said they're going to leave the Global Net Zero Alliance. Now, what exactly that means, I'm going to let you tell me. But in addition to that, climate and sustainability references in CEO letters are plummeting. The S and P Global Clean Energy Index peaked now three and a half years ago. Messages of ESG in corporate announcements and earnings calls are down 60%. Something seems to have popped here. What I'm less clear on is what exactly has popped and what it means. So what has popped and what does it mean?
- [41:31]
Dave Jacoby
It's a really good question and it's an important one. ESG I've always thought of as a complex and kind of unwieldy framework in the sense that these are ideals, but they're not necessarily an investment driver.
- [41:45]
Chris Vernon
And just tell people what it is.
- [41:46]
Dave Jacoby
Esg, esg, sorry, Environmental, Social and governance have been lumped together into this acronym. And it's funny, it's really important that you asked me to do that, because when you split them out and say them together, I would hope that your listeners are saying, what do these have to do with each other? And the answer is nothing necessarily. And I say that because you can have companies with fantastic governance at a corporate level and a terrible environmental record. You can have companies that have terrible governance and a great environmental record, and they've been sort of lumped together as a set of things that you should view as lenses on investment. And they can be a lens on thinking about a company, but that doesn't mean that they're necessarily a driver of investment. Unless you are an environmental services company, then environment is probably not a prime mover of your business. It's an element of how you measure what your business does. You could apply the same thing to everything else. Governance is governance. Every company that's public in theory should care about governance. And in fact, we all do. You can go onto any kind of financial information service and find out all you need to know about who does what, who's linked to whom. So they've always been a kind of an unwieldy construct. And I think it got very overbought in 2020 and especially 2021, when it was a kind of commitment that people could make in the absence of having to enact that commitment. Yet the same thing with this alliance, the Net Zero banking alliance that got announced, which was, to be honest, a huge ask to make of institutions to make a commitment. You're going to do this particular thing to zero out a large section of your business on this timeline. Imagine trying to do that for any other business. You're going to zero out your loans to consumer packaged goods companies. You are going to zero out your investment in private sector housing in the next couple of years. That would sound like a big ask. And I think the theory of these things was a lot easier than the practice. And there's a reason I say that it's like a 2021 thing. These all got announced all around the same time in 2021. And I've actually had people ask me, and I think not in a snarky way, and I tend to agree with the question, is this all something that happened as a sort of pandemic effect? And there is an element of that. I think that this is especially at a time when you're like, look, the world is materially different now than it was a couple of years ago. We're in two years now where energy use has sort of declined and where we've still seen a lot of energy and attention going to the clean side of the ledger on things. Let's make this commitment. But then it becomes very challenging to enact. And it would be challenging regardless of politics, policy, strategy, or anything. It's just a challenge. And it's another question beyond our scope here. But what is the role of these institutions? What is it their job to do?
- [44:38]
Chris Vernon
Is it just a rhetorical bubble that's popped or something more material popped as well? Because among the things that I listed, a lot of it was literally words like global net zero alliance. That's just words. Climate sustainability references and CEO letters. Also words. Mentions of ESG down 60%. Also just words. But words mean something. And sometimes words are connected to material outcomes. So is the popping of the ESG bubble rhetorically connected to something that's more materially significant?
- [45:12]
Dave Jacoby
So what's really fascinating about this is that. Well, I should step back a little bit before I say it's fascinating. There are other parts of the world besides the United States. Your listeners may be aware that there are institutional and retail investors in, say, Europe, and they have priorities that are really not aligned with, nor do they particularly care about, US politics. So while BlackRock's mentions of ESG in its chairman's letter that he publishes every year have really plummeted, its sustainable assets under management are a trillion dollars. They have not gone anywhere they have more than $400 billion worth of just retail ESG mutual funds that have not gone anywhere. Now. They rose significantly from 2020 to 2022 and then have bounced around, but they've not gone down. There's still interest in going in there. And so this is where you get from kind of theory and rhetoric to practice and what actually investors want. And this is where I say that it's a really complex ask to make of something. It's like if these are institutions that are just meant to be making smart, stable allocations on behalf of their investors, then they still, on that allocation side of things, devote money to all of these kind of ideas. ESG exchange traded funds and mutual funds are almost 5% of the total mutual fund assets under management in the world. So that number just keeps going up, not growing the way it used to, but it hasn't vanished, it hasn't gone away. So a lot of what you see pulling back are these grand but also quite unformed plans about the deep future versus the portfolio allocation present day that is still continuing to go on.
- [46:58]
Chris Vernon
So let's hold this up against the solar build out in the United States specifically. So you have this momentum clearly for building solar. You have problems with interconnection, you have problems with long distance transmission, you maybe have problems in terms of the vibes being a bit off in corporate America about being seen as a climate person. Whereas 4 years ago it was cool, now it's no longer cool. I know there's more to economics than coolness, but investors are people too and they feel the vibes. Is it your view that all these things together, and you can add Ira, uncertainty, all of these things present an enormous challenge to the continuing momentum of solar in America. Or is it your view that solar has reached a kind of escape velocity that makes it a little more impervious to all of these challenges that we've just listed?
- [47:56]
Dave Jacoby
I really like this question. It's my hope and my medium strongly held conviction view that there's been a bit of an escape velocity here. In particular, it's an energy source that moves extremely fast when given the chance where you can find that area to connect. It goes very quickly, it builds very fast, it's increasingly reliable. I will tell you, I know loads of people in the development business and they generally want nothing to do do with an ESG label because it doesn't help them. They're in the business of moving metal into the ground and providing a service for people. Over the course of 20 to 25 years that's really what they do. In that sense, they're no different than building industrial facilities or building real estate. And so for them, it's not particularly helpful to have any of that kind of ESG association right now. But the main thing they need is stability or a sense that if promises are made by the federal government of a fiduciary nature, that those promises will be honored. That, I would say is very important. They're not so much probably worried about their counterparty, Microsoft, being able to pay for the energy for a data center. They're more worried that something has been yanked post facto from an agreement that was already made.
- [49:21]
Chris Vernon
Last question in the US before we go abroad, I'm fascinated by what's happening in artificial intelligence right now. And my hypothesis is that at the federal level at the moment, AI policy is in large part energy policy. Data center construction investment last year, according to your report, exceeded construction spending in hospital buildings. So the data centers powering AI or other Internet technologies just a few years ago were half a third of what we were spending on hospital buildings. Now they're about to be in excess of what we're spending on hospital buildings. Just to give people a sense of the extraordinary growth of the sector, IT power demand is expected to double by 2028. The end of this administration. You have a really interesting comment about AI and energy in this report. You write, quote, when it comes to AI, energy is everything and energy is nothing. What does that mean?
- [50:27]
Dave Jacoby
I love this one. And to give full credit, I have the data from a group called Epoch AI&I in turn borrowed the idea from an investing partner and a researcher at Energy Impact Partners named Andy Lubershain. And it's this awesome chart of some foundation models that have been trained. And it breaks down the cost of training those models by their inputs. And those inputs are what they call R and D staff. So basically software engineers and the cost of equity for those software engineers, which is non zero, shall we say, the AI accelerator chip, the other server components that go in the interconnection cost, and then at the very end of that, all of the energy. So this is an older model, but it's a great example. Gemini 1. Almost 50% of the cost of that is software engineers and the equity to pay them. 4.5% of the cost of that model is the energy. It just doesn't matter. It's a tiny, tiny rounding error on an operational basis for what it costs to run things. But you got to have it. It's not like you can make do with 80% of it. It's entirely binary. You either have it 0% of it or you have 100% of it. And you also have it at either 0% reliability effectively or 100% reliability. And this is really unusual in the world of really massive energy consumers. If you run a steel electric arc furnace, you are so highly sensitive to the price of electricity, I can't even tell you how important it is for your business. And you live or die on that. Your margin depends upon that. Entirely Data center. If you double the cost of electricity to train a model, they're like, yeah, fine, I need it. I need the electricity in order to be able to do this. And it's way more important that I have it than at what price? Okay, that's the trained models. This is kind of a special case. It will change over time when this becomes highly operationalized. What they call inference, basically doing stuff for you and me as opposed to training a model. But it just gives you a sense for why people are like, sure, I'm going to build this data center and in the meantime I will also build a power plant that could run a medium sized city because that's much less of a part of the cost stack to me in terms of cash outlay, but it is 1000% essential to my operations to have it.
- [52:59]
Chris Vernon
Just one more question here. As we're moving from the first generation models to the deep reasoning models, and as we're moving, as you said, from expensive training to inference, which is just a fancy AI term for consumer use, right? Powering the ultimate consumer use case, should we expect the energy share of AI cost input to go up dramatically? Like at that point has a certain amount of, say, engineering work been baked into the pie? Or you still have to keep those engineers on staff in order to run the best models and keep pushing forward the frontier. So overall just costs keep going up and energy remains about 3% to 5% share of the total price.
- [53:44]
Dave Jacoby
So I think that when it gets to inference, we will see much more sensitivity to the cost of energy because then it becomes something that has a marginal cost that you start charging people for. The challenge right now with training the models is that we don't really direct that is effectively subsidized by a giant company or by venture investors or a combination of both. Whereas inference is going to be a service that you pay for. It has a marginal cost. Once you start doing it, it always has a marginal cost. The question is, who is bearing that marginal cost there? I think you will find lots of incentive to Be as efficient as possible in a couple of different ways. One, you could either charge people less. I find that unlikely. I find much more likely that you just do gobs more of it and offer that service much, much more widely. This is something that apparently everybody has now had to dust off an 1859 book called the Coal Question and learn about the Jevons Paradox. But I will put it in a more plain way, which is you essentially induce demand at a price point. The more of this is available at a lower price, the more people are going to want it and use it, which is absolutely the case. Come on. You and I are not going to look at the incredible advances in deep reasoning and say, well, if we got 10% more electricity efficient, so I'm going to use 10% less of it and spend the same money. No way. That's not really what's going to happen. We're going to want to do more with it. But the, the way in which the system builds to accommodate that could be very different. We might not be building $5 billion data centers to do just that. This could propagate outward. This could be. Listen, at some point these could reach the point where they're hosted on a device. That's certainly the dream for all of these sorts of things. And then the equation gets much more complex, much more interesting. But for right now it's really build and build and build. It's like do as much as you can.
- [55:45]
Chris Vernon
Very, very last question before we go to China. Can you put all this together? Because there's a puzzle here for someone to figure out. You have an energy transition happening in the US alongside an administration that wants to put its foot in the accelerator of oil and nat gas production at the same time that you have this absolute hydra monster of energy demand with AI coming up, is there something that we should be looking forward to? Something around the bend, some prediction that you are looking at, or even just a place that we should all have our eyes on? Because it seems to me like these are three cars headed towards intersection and something's going to happen. What do you think that something is?
- [56:34]
Dave Jacoby
So I think the main thing is that everything works in cycles. We see when everything is going all up and up at the same time. I think it can give us a false sense of correlation and I think we should consider that industries have their own boom and bust cycles, which is really important to note. So I did a lot of digging around to come up with some slides for an analogy here. But you and I are old enough to remember when Everybody had to be laying 10 million kilometers of fiber a year in the US because the new thing was going to be that Internet traffic was doubling every whatever, I can't even remember whatever silly number it was. That was the new priority we had to accommodate. The reality is that that bubble burst and then we built almost no new fiber for quite some time. We did the same thing with combined cycle natural gas power plants at almost the same time. We have massive store of demand. This is the new thing that we need to accommodate. Let's all go build and we overbuild. And this is in every resource economy. You should think of oil and gas as part of that. They tend to go in cycles. Although in the US I would say that might be something that's easier to mute because you control the capital taps so much more nimbly in a world of shale oil and shale gas, where the unit is much smaller than building deep water offshore oil. If you're building $5 billion data centers and you've built dozens of those, and those end up being overbuilt, then that is another boom that will sort of subside. But as with everything, that doesn't mean it goes away. It becomes a new source of capacity for other uses. It becomes a new thing that people use for another purpose. It does not go dark. There is no way on earth that if you managed to build a multi billion dollar data center, it's going to not be used for something. At the moment the resource that it is is this collection of attributes where it's located. Does it have electricity, is it permitted, is there cooling available? That becomes the asset. It's kind of fungible in a healthy way in terms of what people exactly are going to do with it.
- [58:56]
Chris Vernon
Let's move on from energy in America to cars in China. Tesla posted its first annual sales drop in more than a dozen years last year. Tesla sales are basically flat year over year. Meanwhile, China's BYD automaker didn't just outsell Tesla last quarter, according to your deck. I had no idea this was the case. It matched Ford's estimated sales in 2024. Did I read that right?
- [59:27]
Dave Jacoby
You did read that right. So BYD, which is an auto company that's not quite 30 years old, is now almost as big as Ford Motor Company and it does that with not entirely, but with largely an EV fleet. It makes loads of electric vehicles and it is a really extraordinary company. I'm here in Singapore. I live in a great big apartment complex. The garage downstairs me is full of BYDs and incidentally other Chinese electric cars. But I'll give you a more dialed in sense. To be fair, this is not the biggest auto market. It's about 40 something thousand new cars a year. So take that with a grain of salt. But In December of 2021, BYD had had 0.2% market share in Singapore. And in December 2024 it had 14.4% market share, which means that it had passed Tesla, Honda, Nissan, Toyota, Mercedes Benz, BMW. Sorry, Toyota's the only one that didn't pass. It has passed every company except Toyota.
- [60:33]
Chris Vernon
In four years?
- [60:33]
Dave Jacoby
Yeah, in four years. And that's pretty remarkable. And it's because it ships a great product that is constantly improving, refreshed all the time. A lot of new models, very competitive pricing. I travel all over the world. I was in Brazil in August of last year. There were two giant billboards for two giant Chinese carmakers there and they have factories there as well. There are ads for Chinese pickup trucks and pretty cool ones in Thailand, all over the place. Same in Malaysia. So there's a, the thing that I think a lot of Americans are wrestling with, we still have this vision of what happened when Japan arrived on the world's auto scene. Nothing compared to the scale of what's happened to China. China in 2023 made almost 40% of the world's automobiles.
- [61:22]
Chris Vernon
It's unbelievable.
- [61:23]
Dave Jacoby
It's the biggest maker of autos, the biggest market, it's the biggest exporter, it's the biggest exporter of EVs. All of those things are true for.
- [61:30]
Chris Vernon
People who are familiar with the EV fleet in the us. They know their Teslas, they know their big automakers that have their own EV cars or their plug in hybrids. What makes BYD so competitive? You mentioned quality, you mentioned updates from a price standpoint. What are we talking about here?
- [61:51]
Dave Jacoby
It's a good question. It varies market by market, so unfortunately I can't give a great reading on it. But it's, it's very much competitively priced. If we were to have them in the us, they'd be competitively priced with anything in China. Which is the best, probably example, the EV model underprices the equivalent internal combustion engine model about 60% of the time. About 60% of the like from like models are cheaper upfront as an electric than the competing internal combustion engine model. So that I think is probably the best view I can give on it. And also they're just new. There are tons of new designs. There are companies that I see in my garage here that I was dimly aware of. A year ago, in my garage there is a zeekr and an XPENG suv. And I would be delighted if any of your listeners have ever heard of these companies. But they're great. They are. And I hate to be too analogical here, but it is very similar to things thinking about mobile telephony and what happened with this proliferation of models downstream from Apple and Samsung that are highly competitive, pretty ruthless, pretty innovative, and willing to fight it out. And designed too, in a way. Tesla and BYD both, to their immense credit, are incredibly integrated in their supply chains in a way that is also, I think, breaking expectations and is important to Note. I think BYD does something like 80% of stuff in house, which is not the way that the North American auto complex or the Japanese auto complex does its work. That's everything from batteries to seats. I remember Tesla did this years ago. They're like, we need to make our own seats. It's more efficient. And a lot of people in legacy automakers are like, that seems ridiculous, but there's a logic to it if you can do it right. And BYD in particular has this full integration of stuff that is really, really impress, allows you to control costs throughout the value chain. It also allows you to integrate innovations much more quickly. Yeah, it's a company to watch, shall we say. If we didn't have a lot of structural reasons in North America for the auto sectors we do have, that is not importing a lot from certain other places, we would have loads of these around, I think.
- [64:23]
Chris Vernon
Nat, last question. We didn't have a chance to talk about your charts on carbon removal. There are folks who are investing in and interested in fusion, including Sam Altman, the head of OpenAI China I just read is building. Feel free to edit this description. A laser to channel the power of the sun to create energy. Question mark. You're struggling too. Okay, so you read the same vague description of that technology that I did. With the full fleet of energy technologies on the horizon at your offer, what are you most excited about? I want you to talk about something that is not a biggie today. It's not anywhere close to electric vehicles, but it's something that 15 years from now might be or 20 years from now might exist at the level that we now talk about. These technologies that are increasing, like electric vehicles and solar, what are you looking at?
- [65:23]
Dave Jacoby
So one of them is energy storage, but of longer duration. So going out weeks or even months, that enable you to really build an ultra high percentage renewable power grid because you can actually account for what the Germans have this lovely word, dunkelflaute, which basically means no wind. I'm not going to bother to translate the actual German. But effectively it means that there's no wind and you have to back that up with power some other way. But the ability to build a grid sort of on the first principles of being renewable power that you can then store for a much longer duration of time. Right now we really only do this kind of operationally in terms of let's make sure that things are operating well and you arbitraging certain periods intraday. The ability to do this over the course of weeks or even months would be amazing in terms of expanding the realm of the possible for what people can build. It will be. Especially in a world if we can't, sadly, if we can't build a whole bunch of new transmission, this will be a part of what we do related to transmission. I'm super excited about things that allow us to having literally more dynamic understanding. This is nothing dramatically new, but there's something called dynamic line rating which just means we have a better sense of how things perform. They're rated one way, but they're rated that way essentially in a laboratory. This is how it works under these ideal conditions. If we don't want to get our faces ripped off by some activity with high volatility, we don't want to go outside that. If you can dynamically rate the amount of power that goes through your existing infrastructure, it's like magic, right? It's like you had a. Imagine it being a plumbing analogy. You had a one and a quarter inch pipe. Now you've got a. Now you've got 1.75 inch pipe without changing the pipe. You're able to put that much more through a system that already exists. I'm very excited about what I think will be coming in geothermal technology, which is receiving the attention that it has long deserved and hopefully achieving a liftoff that it deserves and that we deserve. Which is an ability to provide very nearly always on highly reliable power with a much more broad capability. In terms of where it can be cited. I think if geothermal. If the new geothermal technologies and approaches really work, we'll find something really neat which is people go to where that resource is. Like if I'm building a data center for training, I'm less sensitive to location. Latency doesn't matter as much. So you build the energy park and then you build the assets to attach to them as opposed to the other way around. And look, I'm always excited to see what happens with nuclear, my challenge with anything is that. But they're a little outside my aperture for the next three to even five years. And I think one thing that it's important to remember, and this is a very neutral statement, is that every company, and I mean this, every big buyer wants to make a commitment like this because it's in their interest to make a call option to contract with a nuclear company. And I think they're also genuinely very interested in making these things work. But there's a timeline that takes time and I'm just not adept enough to sort of be able to handicap or call one of these technologies. They're back a little bit to my earlier thing. Even if we have an absolute explosion or proliferation expansion of the small modular reactor fleet, it'd still only be in the range of hundreds in the next, in the next, I don't know, five, six years before the end of the decade, as opposed to tens of thousands of like long duration batteries that we hopefully will be building in that same time.
- [69:17]
Chris Vernon
Yeah, I feel about nuclear the way the X Files poster I Want to Believe expresses. I want to believe. I'm not a nuclear bro. I'm certainly not anti nuclear. I want to believe. But what I see is that nuclear power plants are literally the most expensive thing you can possibly build in the world. And they take between, at least in the west, seven and 50 years to complete. And that's just a long time to spend 10 to 20 billion dollars on something when the energy that we need, the clean energy that we need, is much closer to the here and now. So we'd love to have another podcast with maybe a historian about the rise and fall of nuclear because it's a fascinating story, but it's worth doing. But yeah, I'm not sure that it's going to save us this decade. Nat Bullard, thank you so much. That was wonderful.
- [70:05]
Dave Jacoby
Thanks, Derek.
- [70:06]
Chris Vernon
My one thing to remember from today is that solar is happening. And I am investing in Nat's hope and even his conviction of moderately held faith that this technology has achieved escape velocity in America. This is the first energy technology that operates according to the rules of software in manufacturing. You look at oil drilling, you look at fracking, certainly you look at burning trees. This is not something that gets tremendously more efficient over the span of a few years. Oil drilling is more efficient than it used to be, but it's not moving in anything like Moore's Law. But the cost of photovoltaic cells truly is declining at a rate that is similar to the declining cost of software. Now, I think a smart person who knows that energy is going to say the cost of those solar cells is not the full cost of the energy itself. You need labor, you need installation, you need integration, interconnection. Absolutely. You need all of that. But solar is powered by a different kind of technology. That's really important. And as I said in the open, I am really, really interested in the fact that a lot of people were worried about resource restrictions for the clean energy transition. But lithium, one of the most important metals for the entire energy transition, has seen its resources double since 2018. So I am faithful that hopeful that on the market side and the technology side, solar is a revolution that's here to stay. Talk to you next week.