← Shift Key with Robinson Meyer
Shift Key with Robinson Meyer
A Tale of Two Energy Shocks
00:42:37
Rob hosts a Heatmap roundtable about Iran, Ukraine, long-duration batteries, seabed mining, and more.
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- [00:00]
Podcast Host / Yale Sponsor Announcer
This episode of Shift Key is brought to you by the Yale center for Business and the Environment. Want to accelerate your career in energy? Explore online certificate programs from our sponsor, the Yale center for Business and the Environment. Whether you're designing, policy unlocking, financing or developing impactful projects, Yale's online clean energy programs equip you with tangible skills and powerful networks and you can continue working while learning in just five hours a week. Propel your career, expand your network and make a difference. Learn more about their 10 month financing and deploying clean energy program or their 5 month clean and Equitable Energy Development Program by checking out the show Notes or heading to CBEY Yale Edu to learn more listeners of Shift Key get an exclusive offer, use referral code HEATMAP26 and get your application in by the priority deadline for $500 off tuition to one of Yale's online certificate programs in clean energy. Transform your career, your and the energy landscape. Head to CBY Yale EDU to learn more CBey Yale EDU that's CBey Yale EDU.
- [01:26]
Robinson Meyer
Hi, I'm Robinson Meyer and you are listening to Shift Key Heat Maps podcast about decarbonization and the shift away from fossil fuels. And it is Friday, March 6, and it's been an enormous week for energy news. At the time we're recording this, at least 870 people have been killed in the fighting in the Middle east since the United States and Israel attacked Iran on Saturday, setting off Iranian counterattacks across the region. Six American soldiers died in a strike in Kuwait. They were members of the U.S. army Reserve. In energy, Qatar, the world's second largest producer of liquefied natural gas, has totally shut down its production, which could take weeks to restart. Oil exports are significantly bottlenecked at administrative Hormuz, and gasoline prices in the US are on average already up 27 cents per gallon. Our reporters here at Heatmap have been tracking this burgeoning energy crisis, so today we're going to talk to them about it, catch up, find out what's been affected so far and what might still be yet to come. Today's a special panel episode of Shift Key about the Iranian energy crisis, and I should add the rest of the week in climate news too. It's not all bad news this week. We have some good climate tech news for you. Joining me now are heatmap staff writers Matthew Zeitlin and Katie Brigham, as well as hemap's deputy editor Jillian Goodman. Let's just get into the discussion. Matt Jillian, Katie, welcome to Shift Key. Let's start with what is clearly the biggest news of the week, Iran. And I think the. The topic that has pushed every other energy topic to the side and driven at this point, it's pushed some conversations aside, and it's pushed other topics that, like, feel like things we're Talking about in 2022 back to the fore. And so let's just start here. Matt, you've been tracking the energy fallout from the Iran war. What have been the biggest real world energy consequences so far?
- [03:15]
Matthew Zeitlin
Yeah, obviously the Persian Gulf area is best known for being oil production. You have Saudi Arabia, Iraq, Iran, Qatar, the uae. But I think the biggest story has been the natural gas, liquefied natural gas, specifically. Qatar produces something like a fifth of the world's liquefied natural gas. It's the second largest exporter. And when the Strait Hormuz, which is how all these Gulf countries are able to access global maritime shipping, was effectively closed over the weekend, and then on Monday and Tuesday, tankers don't want to go through there anymore, you know, natural gas prices instantly shot up, and a lot of countries were kind of rerunning a playbook that they had seen from 2022 when Russia invaded Ukraine. And there are similar kind of shortfalls in natural gas locally and then also prices going up globally as you look
- [04:10]
Robinson Meyer
around the global economy. Like, what's been the biggest effect of higher natural gas prices so far, given that we're only what at the time we're recording this, three or four days into this?
- [04:20]
Matthew Zeitlin
Yes, I'd say the most immediate effect has actually not been electricity, although people are definitely expecting higher electricity prices, especially in Europe, which is very dependent on natural gas import. I'd say the biggest effect has actually been on fertilizer. Lots of fertilizer is synthesized, if you remember from your high school chemistry class, or the Haber Bosch process, and then another process to make urea in the Persian Gulf, in Qatar specifically, and surrounding countries. And natural gas is a energy source. And most crucially, it's part of the chemical reactions that create synthetic fertilizer. And so a lot of fertilizer synthesis happens in and around the Persian Gulf, and that is all slowing down. South Asia, which is obviously historically and geographically linked to the Persian Gulf, has seen a lot of this kind of fertilizer slow down, happen immediately with plants reducing production. And so when that happens, it's, you know, affecting agricultural yields. It means the input for farmers all over the world will kind of shoot up in price, if they're even able to. To get it. So it's kind of a shock to the global food system probably more immediately than the global energy system.
- [05:30]
Jillian Goodman
I think it might be worth even taking a step back and clarify why we're talking about liquefied natural gas in particular versus like natural gas as the more general commodity. Because this is the way we ship natural gas around the world. And so we're talking about natural gas exports and imports. We're not talking about like the gas that Qataris use, and we're not talking about importantly the gas that Americans use either. We're talking about the gas that like the Japanese and the South Koreans use.
- [06:03]
Matthew Zeitlin
Yeah, that's exactly right. I mean, Qatar's been exporting liquefied natural gas since the 1996 or 1997. The US has been doing it since the mid 2010s. This is a huge technological and economic development. Natural gas is plentiful, it's drilled often the same place oil is, but traditionally it could only be moved around through pipelines. And that kind of limited its ability to be exported. And it also meant that you had a bunch of different natural gas prices based on where it was. When people realized that you could get really, really, really cold, put it into a ship, sail the ship, heat it up again, called regasification, you kind of create a global natural gas market. And so this meant that countries, especially in Asia, which don't always have the same domestic fossil fuel capacity, could start having a more gas fired economy in terms of electricity and industrial processes, Whereas before it had been kind of more limited in the United States, North America, Europe too.
- [07:02]
Robinson Meyer
As I've been thinking about this story, I hadn't realized, Matt, the degree to which like the two most volatile commodity prices are affected by this in that this is now both an energy inflation story and a food inflation because of fertilizer. I think as I've been thinking about this, like domestically, because of how the US plugs into the global economy and because US liquefied natural gas export is basically already running at full bore, we're exporting it basically as much natural gas as we can with the system that we have, which means that there's not a ton of pass through that could happen into our domestic natural gas prices. We're kind of looking at a system and you should correct me if this is wrong. But like as I think through what politically the ramifications of the war are at least as far as energy goes, obviously this is globally going to be like a gas and fertilizer story and energy security story. Domestically this is probably far more likely to be an oil price story. You know, gas prices now are like at 325 nationally. They could very well be higher by the time we release the episode. Conventional wisdom is that gas prices don't really matter until they get above 350. It's nice to have them for a president below $3 and it's bad to have them above $4. And so they were previously right at the US average, like right below $3. Now it's like 3.25. It's gone up 25 cents in just a few days. And so as I think about what are the constraints on the Trump administration's economic policy making, what are the constraints on the President's decision making insofar as he feels any constraints from the economy, like domestically, it's far more of an oil story than it is a gas story.
- [08:49]
Matthew Zeitlin
Yeah, I mean domestically, to the extent that the natural gas matters at all, it's actually, it's good for the United States. I mean, just like the, some of these cargoes will be more expensive that we're able to sell, which will, you know, improve the terms of trade for the US and we'll probably make it so, you know, construction workers will have to spend less time at casinos in Lake Charles and have spend more time finishing up these projects that are supposed to be online this month. Yeah, I mean gas prices are, gasoline prices, sorry, do feed in, are kind of more twitchy and responsive to the global economy. Now the US is the world's largest oil exporter as well.
- [09:26]
Jillian Goodman
What's so interesting to me too, and this is something you wrote about this week, Matthew, is that, you know, I think people in clean energy especially, I think the knee jerk response is to kind of say, oh well, this will be great for renewables, like high gas prices. Great more people buying EVs. And yet we've seen that has not been the way the market has responded, which very much reflects just the complexity of global supply chains. But like Tesla was down, you know, more than the market as of Monday morning, the first market open day after the attacks commenced, for instance.
- [09:58]
Matthew Zeitlin
Yeah, it's really more in the developing world where you see these kind of crash electrification efforts. I was talking to Kingsville Bond, kind of a big think energy thinker at Ember, and he was pointing, I think to Nepal and Ethiopia as countries that have like really aggressively electrified their transportation so they don't get on the wrong side of these kind of oil gasoline price shocks. And you know, the U.S. depending on how you look at it, is either blessed or cursed by abundant fossil fuel resources. And so you're never going to have that like moment where you wake up one day and it's like we need to immediately get off of oil so that we can make sure cars work all the time in the way that a poorer country that's more dependent on the global market might think, or even
- [10:47]
Robinson Meyer
in the way that China thinks. I mean, I think this is the struggle here is that China has made a set of decisions around its energy security that have led it to a very rapid electrification pathway, basically because it has secure supply of coal and the sun and wind and doesn't have secure supply of oil and that's pushed it to adopt EVs. I think the challenge for American, you know, decarbonization advocates, this is something I think about all the time, is like, if you were to adopt a similar mindset in the US to security of supply is really what matters, we should focus on that. It's not clear to me that you wind up making the same technology decisions that China has made. And there could be very good reasons for national competitiveness, for economic development, for manufacturing, for the US to ultimately pursue an electrification pathway that's like similar to China's electrification of its, of its light vehicle fleet. But it's like you don't have the same constraints.
- [11:42]
Matthew Zeitlin
Yeah, it works both ways too. The US Being now an energy superpower in the way it was in say 20 years ago. I don't think it's a coincidence that the US especially with Donald Trump as president, is so much more aggressive around Iran especially than like the Bush administration was in, in 2003, 2004, 2005, like anytime up to 2008. Risking some kind of huge shock to the global energy system. And oil especially would be a huge problem politically because the US Was still a very large oil importer. The price of oil is still set globally, so we're still vulnerable to price shocks. But it's not existential in the same way that it may have been 20 years ago. And so I think ironically, as the US energy situation has kind of gotten more stable and more secure, the global energy situation may have gotten less stable and less secure because it increases the freedom of action of a sometimes volatile state in the Western Hemisphere.
- [12:48]
Robinson Meyer
It also means that you wind up with these bizarre situations where the US has a long term security interest in protecting and being the military hegemon in the Middle east, partially because of the region's importance to global energy supplies. But the largest users of those global energy supplies are like China and East Asian Countries, and specifically there's a chance that we see, even potentially before this podcast comes out, the image of American naval ships ferrying tankers to the Strait of Hormuz, when those tankers will now go entirely to service Chinese oil demand, which has been the country buying almost all of Iran's oil up until the current moment. I think there's something else too about how different things are from the 2000s that in some ways I feel like the politics had never quite caught up to, which is that there were enormous anti OPEC politics in the 2000s and they were quite bipartisan and they were hooked in to US Israel politics because the long term rivalries between the Arab states and Israel played into American resentment of OPEC's control of the oil markets. And the rise of America as an oil producer has in some ways already reshaped some of these relationships around the US But I sometimes feel like American politics hasn't caught up to the ways that like this should change how we view the Middle East.
- [14:17]
Matthew Zeitlin
Can I say one more thing here that was kind of funny about, you know, so those, those 2000 energy politics, one thing it gave us was kind of this massive subsidy scheme for biofuels because this was seen as homegrown energy resource, especially in kind of politically influential rural states like Iowa. And then yesterday, yesterday, amidst you know, many tweets about kind of the DHS situation and stuff that senators talk about, Chuck Grassley, a long tenured senator from Iowa, said a key to President Trump's affordability agenda, biofuels, E15, it's a regulatory scheme that they get fed into refineries year round nationwide. E15 lower consumer costs and shore up our fuel supply amid unrest in Iran. We need it now. This basically idea, you require refiners, refineries over all year to, to have a certain amount of ethanol biofuel in them. And so this is like pure uncut energy crisis economics policy. You could see this in the 70s, you would see this in the 2000s. And you know, biofuels, they're obviously a huge industry, but they're not like the backbone of America energy independence anymore. We kind of just have enough like fuel now. But because the policy was set during a different time, you have this vestigial interest in things like biofuels.
- [15:38]
Robinson Meyer
Oh, and the, the subsidy itself created a kind of parasitic industry. I mean, I remember looking at the, this after the war in Ukraine began, where all of American energy politics after the 1970s is basically about developing alternatives to Middle Eastern hydrocarbons. And Congress makes a Number of bets. And the politics of all of this works because the bets are kind of regionally distributed and don't break in a clear way on a partisan basis. And one of those bets is biofuels, but another set of the bets is wind energy. And another bet is solar. And another bet is hydraulic fracturing and advanced extraction techniques from shale. And part of what has happened, and in some ways it happened very quickly from like 2008 to 2015, is that a number of those bets actually worked out. And what we used to call alternative energy, like solar or wind or renewables, and at the same time with alternative oil and gas extraction became real energy resources that could operate and meet demand at the scale of the full economy. And that divergence of, I would say, wind, solar, fracking and batteries from biofuels, from other forms of experimental energy technology that like scrambled energy politics in a way that I feel like Congress has struggled to come to a new bipartisan playbook because now that wind and solar are real and now that fracking is such a big deal in the US Economy, you can't craft the same that you could in, say, the 2005 Energy Act.
- [17:20]
Jillian Goodman
Well, I was thinking about this this morning because the other big trade story that we've covered since the start of the Trump administration is tariffs. And that it was so easy to point to like pretty specific effects for clean energy. Like, okay, we get our rare earths from China and if tariffs go up and we really need a lot of copp. And so you could kind of draw out these very specific sort of chains of events. The supply chain disruptions from this, especially regarding clean energy, are extremely diffuse about just like the global economy is a little bit scrambled, like all inputs are getting more expensive. And I, and so I think that the way we will see this filter out at the company level, at the microeconomic level, is going to be a lot more subtle and take a lot longer.
- [18:10]
Robinson Meyer
If this war ends in a week or even in two weeks, it's very possible that we look back on this as a minor economic event and not one with lasting changes. Now some of what's already happened is going to be hard to reverse on say, week long timeframes. So it seems like Qatar is going to fully shut down its LNG production. That takes like a week to spin down. It's going to take two weeks to spin back up. That basically could mean that Qatar is like a month behind over the next six to seven months. And that's a problem because the summer is when the northeast Asian countries when Western Europe, when countries in the Northern Hemisphere that rely on LNG broadly like stock up on LNG and buy it at off season rates. And so we could see this event in European LNG stocks in a year, even if this event kind of dissipates in the next few days. But if it doesn't dissipate, then we're in energy crisis territory. And Democrats have already reframed, I think a lot of their climate policy in terms of affordability rather than decarbonization per se. One point that Leah Stokes always makes is that you tend to get big climate policies historically when there's an energy crisis. And I think if this continues, it opens the window a little bit to maybe more ambitious decarbonization policymaking on the back of energy crisis and affordability concerns that maybe we've thought we would see from Democrats in say the 2026 or 2028 cycle. I also am required to note here that the president in 2024, President Trump while campaigning promised to cut Americans electricity bills in half and their energy costs in half. And he said it would take him six to 12 months. We are now deadline. It didn't, it didn't happen and he's completely failed at it. It was a bizarre and he was never going to be able to do it, but he didn't do it.
- [20:14]
Podcast Host / Yale Sponsor Announcer
This week's episode of Shift Key is brought to you by the great Yale center for Business and the Environment. Are you ready to accelerate your career in energy? Yale's Financing and Deploying Clean Energy Certificate Program is a transformative online certificate program that delivers real world skills and connections to drive immediate impact impact. It's offered by our sponsor, the Yale center for Business and the Environment. And this comprehensive 10 month program will build your expertise in clean energy policy, technology, project finance and innovation. The program's different because it's designed for working professionals. It's fully online, it uses just five hours a week and through it you'll gain advanced knowledge, build a powerful network and stay active in your career while you, you learn. I should add, I go to the CBey annual conference every year in New Haven. It's an awesome event. It's a great group of people and they're plugged in all across the sector. I'm always glad that I went. And right now listeners of Shift Key can get an exclusive offer to this program. You can use referral code HEATMAP26. That's HEATMAP26. And get your application in by the priority deadline for $500 off tuition to one of Yale's online certificate programs in clean energy. You can transform your career, your community and the energy landscape and save $500.
- [21:32]
Robinson Meyer
That's awesome.
- [21:33]
Podcast Host / Yale Sponsor Announcer
Head to Cbey Yale. Edu to learn more. Check out the show notes Cbey Yale Edu. That's Cbey Yale Edu
- [21:48]
Robinson Meyer
to totally pivot here from war and destruction and the breakdown of the international order to some good news. You recently reported on a huge deal between the Iron Air battery company form and Google. Can you tell us about this deal?
- [22:03]
Katie Brigham
Yeah, totally. So last week it was announced that Form Energy would deploy what would be the largest battery in the world by energy capacity for a new Google data center in Minnesota. This Iron Air battery would be capable of delivering 300 megawatts of power continuously while storing 30 gigawatt hours of energy. That means it's capable of continuous discharge for 100 hours straight. That's about four days. And just to put this in perspective, by comparison, the entire US grid added just 57 gigawatt hours of storage over all of 2025. Meaning, like this single form battery is over half the size of all the energy storage capacity that was added nationwide last year. So it's huge.
- [22:45]
Robinson Meyer
Which is also crazy because last year was seen as a very good year for battery installation. Like 57 gigawatts was a lot of batteries to add to the U.S. i think we set a new record last year. It was not like we kind of had a middling year with batteries last year, but this one installation is basically going to come close to 50% of our installed capacity, our new installed capacity from last year. I remember when form first announced, it was a Wall Street Journal story. I feel like it was in 2021 or 2022. And there were. They were very excited about their technology. Crucially, they, as we've been alluding to, they use this novel battery chemistry that isn't lithium ion. It's a rust battery, basically, if you can interject to even explain what's happening here. But it like turns, it rusts iron and then de rusts iron as a way of discharging energy at a high level.
- [23:35]
Katie Brigham
When it's discharging, the battery oxidizes iron, which basically means rusts iron. And this process of oxidation releases electrons that then are able to flow through a circuit to provide electricity. And the inverse of this process just converts that iron rust back into metallic iron. So at a high level, that's how it works. Obviously, like, iron is cheap. All of the elements that go into making this are extremely cheap. Way cheaper than Lithium ion batteries, and that's kind of one of the main promises is not only can it, you know, discharge energy presumably economically for way longer than lithium ion batteries can, but it can do it using these elements that are very abundantly available.
- [24:12]
Robinson Meyer
I remember when they first announced this technology and at the time they didn't have manufacturing for it and they said the technology worked, but there was no proof of it. At this point they have a factory set up in Weirton, West Virginia and they are now selling the biggest battery in the country to Google. Like it, it seems like in a way that was not clear two years ago, the form technology seems to work or at least Google thinks it seems to work totally.
- [24:40]
Katie Brigham
Google and the kind of third partner in this deal, Accel Energy, which is, it's really like a Google, a Google data center being developed with Excel Energy. And Xcel Energy is the entity that has like a long standing relationship with Form. And so yeah, at this point both Google and Xcel Energy have toured the form factor in West Virginia. And when I asked the, you know, Form CEO last week what kind of made this level of scale up possible, he just said it's because the company's been basically heads down for the last 18 months working on scaling up its manufacturing operations. He said something that I thought was kind of poignant, which is like you can't really say your chemistry works until you've scaled it. And so now that they, you know, have convinced themselves, convinced Google, convinced Excel that they have the manufacturing capability at scale locked in, that's when they, you know, in some sense can finally say like okay, this does work. And even though they haven't done a deployment like near this size, the facility was able to demonstrate that it has the capability to do this at scale such that like Excel and Google were all in on announcing this magnitudes larger battery.
- [25:43]
Robinson Meyer
Elon Musk. Complicated figure, but something that I think about that he said all the time is that the product is the factory, like the factory is the product itself. And the ability to scale the technology that works in the manufactured setting is actually like what the test of the company is not whether the technology works in some kind of demonstrative capacity, but whether it works when you've scaled manufacturing of it. And then it's actually that manufacturing process that is the product you're selling, even if you're ultimately selling batteries. I mean there was another big thing about this deal that I thought was interesting which was that the data center, because it has this massive storage capacity, is going to run on largely renewable Energy electricity on entirely renewable electricity, which as we talked about with Peter Fried a few weeks ago, is like not the case for a lot of data centers. Even if they're building huge batteries at the moment. How does form compare to other long duration energy storage technologies that are out there at the moment? Are they the best demonstrated technology? Are they the technology that scaled the most at the moment?
- [26:50]
Katie Brigham
So there are other companies that are even targeting this same market segment as form, the 100 plus hour duration. I reported on a company called Noon Energy a while ago which recently completed a demonstration of its own fuel cell system and form has done internal demonstrations that it hasn't really been public about. So there are other companies that are out there talking about their long duration pilots and demonstration plants more than form has. And there are those pilots and some are grid connected already. And so form has kind of been lower key than some of these other long duration storage companies making announcements. But the announcement they made last week is by far like blows every other announcement out of the water just in terms of its, in terms of its scale. So yeah, forum has raised 1.2 billion to date, so it's by far the best funded startup in this space.
- [27:35]
Jillian Goodman
Yeah, I was just going to ask, is this just like a first mover advantage? It sounds like it's also a funding advantage. How is form able to land a deal this size?
- [27:43]
Katie Brigham
It is partially first mover advantage. I mean they were the first to publicly come out and say that they, you know, could do this 100 plus hour battery storage. Most of the other long duration storage companies in this space have been later to enter than them. They were really the first ones when they made this announcement announcement in you know, 2021 I think it was, it wasn't like they initially came out with a ton of scientific evidence and like a lot of third party studies to back it up. So there was still some skepticism, but that did soon follow. And so you know, the technical validation is very much there at this point and I think being the first to raise like a really significant sum of capital and I think they're farther along now, they've demonstrated with their manufacturing scale up than probably anyone else at this stage. I think that's what's allowed them to make this deal with Google and they've, they've definitely been on the radar, I think of a lot of these hyperscalers for a long time. This was just the first publicly announced deal that came together.
- [28:34]
Robinson Meyer
What's the biggest non form news in climate or energy tech this week, Katie?
- [28:41]
Katie Brigham
Yeah, I'VE been following the deep sea mining debate pretty closely. The International Seabed Authority, which is the sort of organization that, that monitors and sets rules for the open ocean, which has no national jurisdiction, is meeting this week to finalize a plan and establish rules that would hopefully set the boundari which private companies would be permitted to collect these, what they're called like nodules, which are rich in minerals from the ocean floor. So they're hopefully finalizing the plans this week. The hope is that a draft of these rules could be completed by this year. But like a lot of that work is happening in this convening right now. I think there's a lot of nervousness around it from all sides. But it pits like the critical minerals like bowls against a lot of people that just have grave concern over what this is going to do to the ocean ecosystem and what, what the risk is of private companies just sort of being unleashed to go do this themselves in an area of the world where there's no national jurisdiction.
- [29:36]
Robinson Meyer
And simultaneously the US is preparing its own competing scheme for this. Right. Or the US is preparing to issue permits about this.
- [29:44]
Katie Brigham
The US Wants to issue permits. The Trump administration is very enthusiastic about the potential of deep sea mining. And the leading company in the space called the metals company is extremely bullish on this too. They are trying to partner, they have already like acquired a partner in an island nation, can be a partner to them in mining these, you know, metallic nodules off the floor and off the seabed. So they're working in tandem with the administration in many ways to get this going as soon as possible, which I think a lot of people are from an outside perspective quite worried about because they haven't necessarily given people great confidence in their ability to do this.
- [30:17]
Robinson Meyer
Because the Trump administration, yes, stepping back so because of Iran. It's been funny. There's been a number of news stories outside of energy this week that would have been massive. Massive stories such as France potentially extending its nuclear umbrella over all of western that really didn't get a lot of attention because the US and Israel are conducting an open ended war against Iran. I just wanted to go around before we close and ask each of you for one story this week that stuck out that you think didn't get the attention it deserves because the campaign in Iran has understandably led global headlines at this point for several days.
- [30:53]
Jillian Goodman
Can I go first? Because I'm afraid Matthew has the same story as I do.
- [30:57]
Robinson Meyer
Jillian will go first.
- [30:58]
Jillian Goodman
First for me, speaking of big deals, it is BlackRock, well a subsidiary of BlackRock buying the utility AES. The deal also includes a Swedish private equity called EQT as well as Calpers, the like California pension fund. And this was a $33 billion deal. It's expected to close next year. And it shows the extent to which America's largest asset manager is banking on the expansion of Data Cent Power and really thinks that this is going to drive value for shareholders over the next years.
- [31:36]
Robinson Meyer
And not only that, but banking on the returns from the utility business, which even if you think electricity demand is going to go up, is not necessarily a sure thing. And I remember Warren Buffett in his penultimate investor letter in 2024 was like, people are going to keep using electricity. I'm not sure that the utility industry is going to be a great business going forward, but evidently Cowpers and blackrock disagree. That's so interesting.
- [32:02]
Matthew Zeitlin
Matt.
- [32:03]
Robinson Meyer
Did Jillian just steal your story? And if not, what is your biggest story of the week that should have gotten attention but didn't.
- [32:10]
Matthew Zeitlin
Gillian made a great choice, but it was not my story. Maybe it should have been. My biggest story this week is one that's close to home. It's tussling over New York's landmark climate law. Kathy Hochul and and the New York State government have been preparing these estimates of the costs of fully implementing the law, which includes this very aggressive decarbonization renewable energy pathway by 2030 and later. Kathy Hogle seems to be preparing the ground to kind of soften, delay, not implement, not go as hard as maybe the law's biggest boosters would want her to, essentially by trying to portray it it as contrary to kind of the affordability narrative that so many especially Democratic politicians are pushing right now. And Hochul, of course, is also running for reelection this year. I mean, I think it's interesting because it just shows like how different the times we are in right now is. This law was passed at a time when, for one, it was signed by Andrew Cuomo, which is in 2019. Just seems so long ago. And it was a time when there was just a lot more optimism about how quickly renewable energy and how quickly and cheaply renewable energy could be deployed, especially in the Northeast with offshore wind being a huge part of it. Obviously that has not happened and the same way that the law's proponents have wanted it to. And who knows, Kathy Hochul's done these kind of fake outs before. You know, she cancels congestion pricing to help Long Island Democrats win and then she just brought it back. But yeah, I mean, I think we're just going to see A lot of this, A lot of Democratic states pass very aggressive climate, have been passing very aggressive climate laws and have very aggressive climate targets. You know, they're usually decade old. So in 2030, a lot of this stuff is kicking in. And like, there's just. You see this in Europe a lot. You've seen in Washington, you've seen in other places, as climate laws that are effective, that would actually work if implemented to reduce emissions, become binding, the chance that they will be delayed or watered down like skyrockets. It's like an asymptotic situation. And I think we're seeing something like that happening in New York. And I don't think that's only going to happen in New York.
- [34:24]
Robinson Meyer
I think this is maybe one of the most interesting aspects of the Mandani campaign in that in New York, Local Law 97, which requires aggressive decarbonization from the existing building fleet, is going to start really kicking in 2028, during the current mayor's time in office. And Mamdani, who had been a fairly aggressive advocate of climate policy in the State House, not only didn't really run on climate policy, but, like, didn't try to polarize it at all either. And I think the question of how he now manages the Local Law 97 implementation while also meeting his affordability goals is like one of the biggest questions facing his administration going forward. And he says, to be clear, that he's going to enforce the law as written, we'll also maybe look for ways to help, you know, companies meet the law's standards. And so there's an entire set of companies, too, that made a set of commitments in the early 2000s that are all going to hit between 2028 and 2030, and how those companies approach those commitments in a world where it turns out, for instance, that there are far more binding constraints on renewable deployment than it seemed in a world where there is significant electricity load growth in a way that wasn't maybe projected in the same way in the early 2000 teens, and in a way where I think also there's just been more recognition of the physical constraints on decarbonization than maybe there was in 2020, and an understanding of how many of those physical constraints are political as well. That is maybe one of the biggest stories of the next few years. Before we go, though, Katie, what's your big story that didn't get attention and should.
- [36:00]
Matthew Zeitlin
Sure. Yeah.
- [36:01]
Katie Brigham
So Julian actually did take mine. I'm no utilities reporter, but I did think that that was really interesting as it comes on the heels of a lot of other big financial institution acquisitions of utility companies as well, which again, like Jillian said, is just interesting in terms of the bet that they're taking on load growth continuing. But anyway, instead I think there's, and again, I don't know if this is like the hugest news, but there's some interesting, like, things happening in the green hydrogen space, which is obviously like doing terribly overall, but there's some small rays of Sunshine. There's a 220 megawatt project in Utah, green hydrogen project. It's by far the largest in the US and it's now ready to come online. As of last week, like was reported in our AM newsletter, all 40 of the electrolyzers at the facility are now installed, are fully operational. So I think it will be really interesting to monitor that and how the financials of that facility end up working out in an environment that has become far less favorable for green hydrogen as incentives go away and consumers are worried about price. And then, as was also reported another day on our AM newsletter, Spain is also moving forward with a green hydrogen project that's way bigger than this one in the US it's 2 gigawatts. It's called the Andalusian Green Hydrogen Valley project and it's worth 1.2 billion. And so even though this is like supposedly a scaled down version of what this project is going to be, again, it's still 2 gigawatts. Total value of the project is 1.2 billion. And so I think just monitoring both of these projects will be interesting. Europe is often seen as like a more viable market for this technology, but I think it's struggling overall here and abroad. So some rays of hope potentially for
- [37:39]
Matthew Zeitlin
a, you know, some green shoots, if
- [37:41]
Robinson Meyer
you will, green shoots for the technology that I think has performed worst overall during the Trump administration. Can I have one?
- [37:49]
Matthew Zeitlin
Yes.
- [37:50]
Robinson Meyer
Great. Okay. Great. The story that I think deserved a lot of attention this weekend may still get it. We're recording pretty soon to when it was announced is that Luckin Coffee, the Chinese coffee chain. Did anyone see this?
- [38:02]
Jillian Goodman
No.
- [38:02]
Matthew Zeitlin
They bought Blue Bottle. No.
- [38:03]
Robinson Meyer
Luckin Coffee has bought blue Bottle.
- [38:06]
Matthew Zeitlin
That's incredible.
- [38:06]
Robinson Meyer
And I think that is so interesting. And let me say why it's interesting, because even though this is a story of two coffee companies, I think it's relevant to things we talk about here on Shipski and a kind of broader question about the integration of the Chinese and American economy economies, which is that Luckin Coffee is very famous for selling very cheap coffee and for Producing lattes and frappuccinos and any number of kind of iced, sweet, milky drinks and selling them for far below what Starbucks would sell them for. These are, we're talking coffees that in US dollar terms are $1 or $2 or $3. Blue Bottle, meanwhile, is on the total other end of the spectrum. Right? It's hard to get anything coffee flavored at Blue Bottle for less than like six or seven dollars. And Blue Bottle, to be clear, is this Frou Frou chain that exists primarily, I think, in California.
- [38:57]
Jillian Goodman
And yeah, it was venture funded, if I recall correctly.
- [39:01]
Robinson Meyer
Yes, exactly. It was a venture funded coffee chain that kind of came out of the Bay Area. Now you can find it in Washington, D.C. and New York City, and it's in the both New York and DC's big train stations. It's very expensive. It's like 7, 8, 9 bucks, $10 per coffee. These are two classic companies of their type, right? You have Luckin Coffee, which sells very cheap goods to mass consumers. And then you have Blue Bottle Coffee, which has these through brand differentiation, commands incredible profit margins with its largely American audience. And the question historically has been like, like if, say, some Chinese electronics brands or Chinese consumer brands were to expand in the United States or in Canada. We were talking about this back when Prime Minister Carney opened up the Canadian auto market to Chinese EVs. If we see Chinese companies expand in North America, are they going to use the North American market to undercut existing producers, or are they going to use it to harvest profit from the incredibly wealthy, the North American consumer? Right. And so here you have Luckin, Coffee, purveyor of the $2 coffee and blue bottle, purveyor of the $9 coffee. And Luckin's gonna absorb Blue Bottle. And I'm so curious to see what they do to Blue Bottle, because in some ways it's a guide to what the US China economic integration story could look like going forward and how as Chinese firms and Chinese brands continue to enter the United States and sell themselves as Chinese brands, how they accommodate themselves to the American consumer base.
- [40:40]
Jillian Goodman
Well, I think that comparison is especially interesting because we have a contributor on EVs named Andrew Moseman who's written about various stories about the ways that Chinese EVs could be integrated into the US market. And one point that he has made is that there is no way an American version of the cheapest Chinese EVs, as cool as they are, as zippy as they are, could be as cheap in the US because of American safety and manufacturing. Requirements. And so the idea that they would not try to undercut American manufacturers and instead try to extract value from American consumers kind of squares that circle.
- [41:21]
Robinson Meyer
Yeah, totally. It gets at this kind of challenge for American companies in meeting the the competitiveness demands of Chinese companies, which is that the Chinese consumer, part of why the Chinese companies are so good at making low cost products is the Chinese consumer is not as wealthy as the American consumer and they will buy a $9,000 car, they will buy a $15,000 car, and there isn't the same competition from the existing used vehicle fleet that exists here in the US when consumers are making the decisions they're making or they might have different, different consumption preferences. Anyway, this is all to say such an interesting story and we're going to keep covering it here on ShiftKey. I want to thank Matt Zeitlin, Jillian Goodman and Katie Brigham for joining us in this special panel episode of Shift Key. Thank you, Matt.
- [42:07]
Matthew Zeitlin
Thanks for having me. It's a lot of fun.
- [42:09]
Robinson Meyer
Thanks so much for joining us, Katie.
- [42:11]
Katie Brigham
Thanks for having me.
- [42:12]
Robinson Meyer
And Jillian, it's so good to have you. On the other side of the digital recording studio. We'll be back next Wednesday with a new episode of Shift Key. Until then, Shift Key is a production of Heat Map. New news. Our editors are Gillian Goodman, our very own and Nico Lauricella. Multimedia editing, audio engineering is by Jacob Lambert and by Nick Woodbury. Our music is by Adam Komlau. Thank you so much for listening and see you next.