Henry Blodgett (4:01)

And I don't, given that the show is about big problems and solutions, I don't want to suddenly undermine the whole episode, but I do want to say that you have an amazing stat, which is that because of ongoing electrification and efficiency and other longer term trends, actually the energy wallet spending is projected to decline a lot by 2050.

Umair Irfan (4:22)

Yeah, that's right. There's going to be a number of trends that work in your favor. One was energy efficiency. So we're not just talking about efficiency in more fuel efficient vehicles or switching to electric cars, but things your furnace using electricity over time, your refrigerator, your appliances in general, we've been seeing that they're actually doing more with less. And so we can still maintain and even increase our quality of life and still have a lot of these luxuries while using less energy. And also things like using insulation for our homes and so on. And all those trends are actually pushing the amount of money that we spend on energy downward. Now, this is on a household basis, so we're talking about people living in families. This does kind of leave out what we're going to be spending on industry, which is the other big side of the equation. So what we're going to be using to build our economy, the data centers, but also things like factories, production and all the other stuff that we do Outside of our homes.

Henry Blodgett (5:13)

Well, then let's get into that. Let's talk about electricity, because I do think most of us have seen the charts going around where it was a nice steady line for a decade, it seems like, and now it is up and to the right and hearing reports from all over the country of people shocked by what electricity costs now. So tell us why, what's happening?

Umair Irfan (5:32)

Well, in a way, it's sort of a, perhaps not a regression to the mean, but we've had unusually low or flat electricity prices, as you noted, for a long time, for actually 20 years, basically going back to around the turn of the century. Essentially, as we've seen energy demand go up, we've also seen efficiency sort of counteract that. And that sort of improvement in how we use energy has helped keep prices in check. There have been a number of other things. Of course, we had the financial crisis in the meantime. That also push pushed a damper on the economy as a whole, as well as energy consumption. And then we also saw the fracking boom, which also helped increase the amount of energy efficiencies that we do on the energy production side as well. And that helped keep prices, electricity production, in check. Natural gas is now the dominant way that we produce electricity here in the United States. Fracking is a big reason why. And then we saw the proliferation of renewable energy. Renewable energy prices have gone down dramatically, and they're now the largest source of new electricity on the power grid. So as our needs have gone up, we kept coming up with cheaper and cheaper ways of meeting them, and that's helped keep prices in check. The big spike that we've seen recently is partially due to what we saw as a sort of rebound from the COVID 19 pandemic. So basically, when we saw that big spike in inflation, one of the exact exemptions to that was energy prices, was electricity prices. And that's because electricity is heavily regulated. In order to raise prices, a utility doesn't just set a market rate. They have to go through a public utility commission. Every state has one. And essentially these are elected or appointed appointed officials whose job it is to put limits on electricity prices. And so when there was this big spike in inflation, there was a lot of political pressure to prevent utilities from raising prices. They were facing a lot of the inflationary pressures as well, like they were seeing rising fuel prices, rising tariffs, rising cost of production, rising labor, but they weren't able to pass that on to the consumers between 2020 and around 2024 for that period. Now they're starting to Lift those restrictions in a lot of markets because utilities are going to their utility commissions and saying, look, something has to give here. We're spending a lot more and we're not taking and money. We need to start charging our customers more. And that's starting to happen across the country. And then on top of that, you know, we're seeing the. One of the big things is just that our power grid is reaching its end of life in much of the country. We saw a huge expansion in the 50s and 60s and 70s, and now these 30, 40, 50 year old power lines, transformers and cables and conductors are all reaching the ends of their lives and they all need to start being replaced pretty much all at once. And it's to maintain the level of service that we have right now. And so we're seeing a lot of competition for a limited supply of this hardware on top of having more freedom to charge more. And then we're also seeing a rise in demand, as I'm sure we'll get into with respect to some of these new industries, particularly data centers.

Henry Blodgett (8:24)

Well, talk about that because I think when you, when you hear people shaking their fist at the screen in anger at what's happening, data centers and the, the AI boom and usually are a big factor and sounds like it's much more complex than that, but talk about that demand.

Umair Irfan (8:40)

Sure. So I'll bracket that with a couple of caveats. One is that while we've seen energy prices go up, electricity prices go up across much of the country, they're not going up evenly across some of the country. There are places that have had much smaller spikes in electricity prices, some places have had much larger ones. And some of the places which the largest spikes in electricity prices don't have much data centers in their operation space. So you can't really blame the data centers for some of the largest spikes in electricity prices, but that we've been seeing, those are largely due to infrastructure problems, basically. Again, what I mentioned earlier, the fact that those places that have some of the biggest spikes are also the places with some of the oldest hardware that are now having to buy them at current market rates. In fact, we've seen in some of the markets where we have some of the highest concentration of data centers, like Eldon county in Virginia for instance, they've actually done a fairly good job of keeping their electricity prices in check because they've also imposed generation requirements on these data centers and have forced them to sort of pay their way as well. So data centers on their own are not necessarily the biggest drivers that said, data centers are a huge source of demand on the power grid. And the amount of projection that we're seeing, basically the trend line that utilities are using and trying to plan with, seems to show that there's going to be vastly more demand. And because of that vastly more demand, there's a lot of competition for price for energy generation right now. So the future demand is already starting to manifest in terms of more competition for generation today. And that's starting to get passed down into consumer electricity rates and give us.

Henry Blodgett (10:17)

A snapshot of how the energy industry works. So the electricity industry works. I think one thing that a lot of people don't understand is that the grid run by a totally different set of companies and rules than the actual utilities that we buy power from and that make the power. And you keep saying, and a lot of others saying that the real problem is the grid. And yes, natural energy prices are going up and that's increasing the cost of producing electricity, but it's upgrading the grid that is really hitting prices.

Umair Irfan (10:46)

Yeah, I'm going to just put a caveat that like everything I'm saying is in general in the United States, because we have such a big country with so many different business models, like there's always going to be an exception to how we do things. But in general we have the utilities that you see on your power bill. Those are the customer facing utilities. They're basically private investor owned companies. And what they do in some markets is that they will procure electricity on a competitive market. Essentially you'll have multiple generators feeding into the power grid and they will try to basically buy the cheapest electrons that they can and then give those to you on your power bill. Now there's sort of a layer of, there's a gap basically between your frontline utility and the grid operator. So I'll point to pjm. This is the largest power grid in the United States. It's in the eastern part of the country. It serves Pennsylvania, New Jersey, Virginia. And this area is also home to one of the largest concentrations of data centers in the country. So when I reached out to them about this, one of the things they pointed out to me was that they don't interface directly with customers. So they don't know exactly who's using the electricity, how much they actually need and how much they will need into the future. They're relying on the utilities, the frontline utilities, the customer facing companies to deal with that. And because of that sort of gap in communication, there's a lot of uncertainty that's built into how much more energy they're going to need. And that's starting to raise prices. So earlier this year, PJM basically put out a capacity capacity auction. Basically they are going to power generators and saying we want to procure a certain amount of energy by a certain amount of time and then we're going to sell that energy to customers through these utilities. And this year they reached some of the highest capacity market prices in history, essentially. And those higher prices are then what they're going to be charging to the frontline utilities, which are then are going to be passed down to customers. And one of the reasons for that is because they're anticipating a lot more demand. Now when I started asking around some of the state regulators about what's going on here, they've said that essentially some of these data companies, these big tech companies are actually one wildly overestimating how much more energy they're going to need. They're also shopping around to different utilities and asking them to come up with estimates for how much more power they're going to need. And so there's a little bit of double counting where multiple utilities are telling the same power grid that they're going to need a certain amount of electricity for the same data center. So there's some double counting there. And then also we're in this industry that's in this radical growth phase and we don't actually know exactly how it's going to shake out. One, that there's a lot more players in the industry that are likely going to consolidate. Some of them are going to go out of business. But also the technology might also improve over time. And so while they're placing these big 20, 30 year bets for generation, it's very likely that we're not going to reach anywhere close to that amount of demand. But we still need to pay for it in the present. And that's how that energy speculation about things that we're going to need 10, 20 years down the line starts getting baked into your power bill today.

Henry Blodgett (13:53)

And so the utility is the entity that I or a business buys power from. The grid is what delivers it. What about the generation of it and how important is that piece?

Umair Irfan (14:05)

That's a huge part of it. And so there are also, you know, utilities that are more vertically integrated in which they own the generators, the power lines and the frontline customer saving serving entities. And then there's ones that are more disentangled where you have one group of generators, then you have a grid and then you have the customer serving entity as well. And so, so we have both. We have multiple variations of all those markets. Every permutation you can imagine is how we do things here in the United States. But the generators, basically, their incentive is to produce as much energy as possible and sell it as high as a price as they possibly can. That's not necessarily feasible in a lot of markets. And so increasingly what they're trying to do is offer more flexibility that it's not necessarily we're going to give you a certain gob of power the time, but rather that we can give you electricity when it's cheapest or when you're paying most during, like the hottest time of day in the middle of the summer or during some of the coldest times of day in the winter, essentially during those demand peaks. And so there's a lot of other services that are starting to get baked into the generation side as well. We're seeing a lot more energy storage. That's a big part of that, because arbitrage turns out to be a very big way to improve your business model that basically you can generate electricity when it's cheap. Like you can use renewables to generate a lot of wind and sunlight power when you have it, and then you can sell it back onto the grid, back when power is more needed, but the quantities are lower. So the generation side is all over the place. But in general, renewables tend to be the fastest and cheapest way to add more generation to the power grid. And so that's where you're seeing it take off. And that's why I'll point to Texas as a case study in this. You know, Texas has its own power grid that only serves the state called ercot. And basically they have a wild west free market market where basically any generator can connect to the grid and sell their power as cheaply as they want. And market prices. And what you're finding is that in that sort of completely open free market, you're finding that power companies are building a lot of new renewables and solar and storage altogether. In fact, Texas now outpaces California as the largest installer of wind and solar power. So it's not because that they have any big climate initiatives or regulations on greenhouse gases. It's because on the free market, on the open market, renewables tend to do really well in that scenario.

Henry Blodgett (16:31)

And let's come back to that in just a second because it's so critical in terms of the actual cost of production and distribution. One thing is, are the tariffs making it more expensive? One of the things that I've read and heard analysts say is that as we go and we upgrade the grid, suddenly you're going back to raw materials prices for things like wires and other things that actually go into the grid. Is that a factor?

Umair Irfan (16:55)

Oh, it's a huge factor, yes. Just about everything in the power grid is made out of metal, and we import a good chunk of met. We've seen a lot of tariffs on metal, so that's one direct way that we see that. But also increasingly, a lot of the hardware that you need to manufacture for the grid, we're not making enough of it. And that's also creating a supply crunch. So, for instance, transformers, these are basically devices that convert high voltage electricity into low voltage electricity that's more usable for households and vice versa. They turn low voltage to high voltages. And they're really key part of how we send power over long distances. It's just that in the United States, we haven't built very many for a very, very long time. And so a lot of the companies that were manufacturing them have gone out of business or have moved into other basic business operations. But now, like I said earlier, we're at the point where so much of our grid is due for replacement. At the same time, there's a huge demand for transformers, and we don't have enough supply to keep up with them. These are really big devices. Like you have to tow them with like a big flatbed truck to get them to your site. So that's not something you can easily import either. These are things that have to be, for the most part, built inside the United States. It's just that we haven't built up or maintain a supply chain to continue delivering them. And so you're seeing the industry sort of scrambling to keep up with some of this hardware. Then there's also just again, the existing power lines, the conductors that literally move the electrons across hundreds of thousands of miles across the country, those also need to be replaced. Over time, they wear out. And then on top of that, because we're seeing new demand and we're seeing changes in how demand is working across the United States. We're seeing new load centers in some places, diminishing load centers in others. We need to also restructure how we do that and perhaps upgrade the grid as well. The renewable energy that's been adding a lot of new power to the grid. The downside of renewables, of wind and solar, obviously, is that they're intermittent. And in a lot of cases, we need to upgrade our grid to be able to better handle Electricity moving in both directions. Like if you have a rooftop solar panel, for instance, you can feed power back into the grid and some utilities in some areas will give you basically a feed in tariff or they will give you an incentive where they will lower your electricity bill if you feed power back into the grid. It's just that in most places the power grid isn't designed to be a two way street street, it's designed to be a one way street. And so making the necessary requisite upgrades to accommodate that also costs money. So we're seeing the crunch of tariffs, we're seeing a big supply demand mismatch and we're seeing a huge demand for new technology and upgrades all converging at the same time.

Henry Blodgett (19:25)

All right, so let's talk about solutions because when I hear all this, I think, wow, so this is exactly actually what we want. There are things to build, we want to bring manufacturing back, new materials, new technologies, renewables. It's the future future. And yet there seems to be in the Trump administration in particular a huge resistance to renewables, where we hear about wind in particular getting canceled all the time. You talked about Texas. Talk about that a little bit more because I think it's very ironic and startling to people. Texas tends to be a, a red state and yet as you say, for economic reasons, not because of some subsidy or policy or whatever they are, they have built a huge amount of renewable power and, and talk about how renewable important they are in solving this overall issue.

Umair Irfan (20:13)

Right. Texas is the largest energy producing state in the country. They're the largest producer of oil and gas. They're the largest producer of wind energy. They're the largest installer of solar. Currently, California is in the lead in terms of total solar capacity, but Texas is on track to overtake that as well. There's a lot of reasons for that. Obviously Texas has a lot of industry that needs a lot of energy. But you may recall a few years ago, back when there was those big blackouts in Texas during winter Storm Earth, that was a huge wake up call for the state. Basically they were in the middle of winter over reliant on their fossil fuel infrastructure and it let them down. Piles of coal at coal power plants literally froze solid. A lot of gas pipelines got clogged by ice. And so they realized that this oil and gas infrastructure wasn't quite as reliable as they thought. And they realized that they actually just needed to overbuild the amount of generation in order to help meet that demand. Now, in the year since we've seen the tech Texas power grid get close to more blackouts. Like a few years ago, there were other warnings that went out through Texans across the state saying to conserve power during a heat wave, for instance. But even as average demand and peak demand has continued to rise in Texas, they've actually stepped back from the brink because they've managed to build so much generation so quickly. So, and a big reason why is because they've been installing a lot more renewable power. One is that they don't have a whole lot of restrictions on where you can build. There's a lot of infrastructure that can support it. So like there's a big project to build cross state power lines to build wind turbines where it's windiest in Texas, but far away from where the biggest cities are necessarily that will use that energy. And by building that sort of transmission highway across Texas, they're able to get electricity even cheaper than other places that have to build generation closer to those cities. And so by having a little bit more of a permissive structure for building, they've been able to take advantage of some of the biggest gains from renewable energy. On top of that, you know, renewables tend to be the fastest way to install new generation. And that can't be understated. Right now. If you wanted to build a new gas turbine power plant, you're going to have to wait a few years because it takes time to build just the turbines. Like there's a shortage of turbines. On top of that, then you need to get approval to build the pipelines and you need to get the concrete and you need to get the labor. With wind and solar, you can, from the time you procure it and approve a project, you can start generating electrons before the end of the year. If you get that started like it's the a lot of the parts are off the shelf. They're well established in terms of how easy they are to manufacture. And so being able to scale up that production has been really helpful. That's helped them meet a lot of this rising demand. And then the other aspect of this is storage. Storing energy again is a huge way of mitigating some of the biggest problems with renewables. But it also lets you do a lot of other things on the power grid that you couldn't do before. Again, things like arbitrage, where you just generate electricity when it's most abundant and then use it when it's most expensive. But I adding batteries to the grid adds emergency backup power. When power lines go down, it allows them to do more frequent and more regular maintenance. It also allows you to move generation or the supply of electricity closer to where it's being used. You know, you don't necessarily want a gas turbine in your neighborhood, but maybe you won't mind a giant battery being somewhere along your block. It's not as big of an eyesore, it's not a huge source of pollution, and having that in more distributed generation supply can actually be a huge boon to reliability and help lower costs. And so Texas has basically set itself up to take advantage of all the good sides of the build out of clean energy and they're starting to reap the rewards right now.

Henry Blodgett (24:02)

Support for solutions comes from Zoom. The way we work is changing and Zoom is leading the way, bringing together meetings, chat docs, your AI companion, and more, all on one powerful platform. With everything connected, teams can stay focused, share ideas faster, and actually enjoy getting things done. From smart AI features to tools built for real collaboration, Zoom helps make your workday work for you. Ready to join? Visit zoom.compodcast to learn more and Zoom ahead. Millions of players, one world, no lag. How's it done? AWS is how epic games turn to.

Umair Irfan (24:55)

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Henry Blodgett (25:04)

AWS is how leading businesses are power next level innovation. Support for this show comes from SC Johnson. We've all been there. Choosing not to wear your new white shoes because there's a 10% chance of rain. Bending awkwardly over the tiny coffee table to enjoy a sip of your latte, not ordering the red sauce. Those feelings of dread are what we call stainxiety. But now you can break free from your stainxiety with Shout's triple acting spray that has stain fighting ingredients to remove a huge variety of stains so you can live in the moment and clean up later. Just breathe and shout with Shout triple acting Spray. Learn more@shoutitout.com. So this sounds tremendously encouraging. It sounds like for the first time in my life lifetime, there are actually very good economic reasons to build renewable power and distribution that go beyond oh I want to save the earth. The liberal view of it. We must be responsible. Texas is doing it. And yet, given how attractive renewables are for all the reasons you said, cost ease, speed, so forth, why is the Trump administration so against them?

Umair Irfan (26:25)

I think it's an ideological project. You know the Trump administration has been pushing back against renewables since the first time they were in office back in 2017. President Trump has personal animus towards wind turbines. I recall it goes back to his golf course in Scotland that he didn't want having a wind turbine farm nearby and since have been really down on wind ever since then. And, and he's made a campaign promise to promote more fossil fuel development in the United States. You know, he's opened up more offshore areas to oil and gas drilling. He's opened up public lands to oil and gas drilling. He's also pulled back on support for big transmission projects, these big power lines that would help support renewable energy, but also support all forms of energy in general. So the US Department of Energy has these loan guarantees for these cross state power lines. And recently they pulled support for one of those power systems in New Jersey. They did another one in Missouri recently, recently as well. And a big reason why was because those things were seen to be benefiting renewables over fossil fuels. And that's why they've done that. It's kind of ties into the same reason why he believes in tariffs. You know, despite the fact that most economists will tell you that this is something that, that will be passed on to consumers, this is a tax pace by U.S. customers. I think at a very deep and fundamental level, I think he believes that tariffs are the way to structure the US Economy and that renewables will not meet America's needs and that fossil fuels, we just need more of them. And beyond that, it's really hard to see an argument for this, that even in places that have developed a lot of fossil fuels, they're also seeing big increases in renewables as well when left to their own devices.

Henry Blodgett (28:09)

And so I know there's a sort of a cottage industry in trying to figure out why President Trump thinks what President Trump thinks, but I, and I one could certainly look at the situation now and say, look, yeah, okay, you might not like drilling in Alaska or what have you, but we need more power and so let's do everything we can to generate more power. So go ahead and drill. But it sounds like from what you're saying, any sort of objective look at renewables these days, wind and solar comes to the conclusion, yeah, like, yeah, that's fast and cheap power and so we should have more of it. And I think President Trump's been very clear. He doesn't like wind because, yes, wrecks the view or hurts the golf course or kills birds or whatever it is. Does he have the same animus towards solar?

Umair Irfan (28:49)

I think he doesn't think that solar can actually stand on its own, that he's made a lot of points in his speech that, you know, of course, obviously the sun sets, it gets dark at night. And that solar doesn't generate at 100% throughout the day. And that's true. But a lot of those things can be mitigated. You know, in a lot of markets where we've seen solar take off, one energy storage has been coupled with it. It's not just solar panels that are being installed now, it's solar plus storage. They now come as a package deal. And even with that additional of hardware, solar ends up being more competitive in a lot of places. It's actually cheaper to install new solar than it is to run an existing coal power plant. So think about that like just the cost of keeping a power plant you've already built running that's burning coal is more expensive than shutting that down and installing an equivalent amount of solar. That's a huge shift in the, in the price curve for both technologies. And right now we're seeing that play out. But the Trump administration seems to think that like a lot of the oil old downsides of solar are still there and they can't be compensated for at all. And that basically because solar is out competing coal and natural gas and nuclear in some markets it's leading to an overall less reliable grid because it's cheaper and it's displacing some of the 24 hour a day baseload power generators. And so that, that seems to be the argument there.

Henry Blodgett (30:15)

And I again, a lot of the talk in the administration about we're going to be manufacturing back the good old jobs of building things, you've talked about transformers and rebuilding grid, that you can't do that in China. You can get some parts there, but we got to rebuild it so forth. It seems like so much of this should be stuff that the Trump administration would wholeheartedly support building out new solar and batteries and so forth. We can make the batteries, we can figure out how to start to compete perhaps with China on the solar panels and so forth. So the other thing we know about President Trump is he is totally devoted to rewarding people who help him and punishing everybody who doesn't. It are the, the folks who are installing solar, are they not playing the let's go to Washington and suck up to President Trump game? Well enough. Is that part of the problem?

Umair Irfan (31:05)

There's a mix of those basically. In the first Trump administration, you may recall, the White House put tariffs on imported solar panels from China and that was actually to benefit US Manufacturers of solar. There are lot of like utilities for instance, that were buying cheap solar from China and installing it in huge quantities, and they were very unhappy about that. But a lot of the US Manufacturers were more pleased to see those tariffs on Chinese solar panels to help build, bolster the US Industry. But since then, the Trump administration has been undermining demand for solar in general. So even the US Manufacturers are starting to suffer. And it's really hard for a lot of these industries to make the argument to the Trump administration. One, because they're emerging industries, they don't have as much political clout. They just don't have as much money behind them as a lot of the conventional sources of generation. And even companies that have a mix of generation sources in their portfolio, some of these big utility companies that operate across multiple states, they're leaning into the fossil fuel argument because they know that's the one that's going to win the argument with the Trump administration. So they're, they're trying to downplay their work on renewables and on clean energy and are trying to play up all of their work in terms of extracting more fossil fuels. And so there's this sort of like cycle, cycle essentially that just sort of self reinforces this push towards advocating for more oil and gas development rather than trying to build more clean energy. And yeah, the industry is also seen as something that's built more abroad, like the global supply chain is, makes it a more international industry, and it's one where China has a huge international footprint. And so part of Trump's calculus here likely is that by pulling back from clean energy, they're taking away a huge market for China, which is where they've actually seen a lot of gains internationally. So China has, is now the largest producer of solar around the world. They've been also dominating in electric vehicles and in battery production. And so in all the big components of clean energy, China is gaining a foothold around the world. And so part of this pullback from clean energy is, is to try to keep China out of the US Market.

Henry Blodgett (33:15)

And China, it just from everything that I see, you look at the amount of power generation China is bringing on relative to the United States, the investment, renewables, the dominance of that industry, China is grabbing the future. And we are trying to cling to the past and somehow may that work. Okay, so one key solution here might be for there to be more openness and support of solar and renewable and batteries, these industries of the future that could be accomplished by these companies learning to do what the old oil and gas companies know how to do, which is go work on the Trump administration. Perhaps the Trump administration can See it a little differently. Talk about one other thing that we haven't mentioned, which is a lot of people in Silicon Valley, when you talk about the power demand for the data centers, they say, oh, miniature nuclear reactors, this is a new thing, we can build them. Tell us about that.

Umair Irfan (34:10)

Right. Nuclear has a lot of virtues because it is enabled to provide baseload power in huge quantities without producing greenhouse gas emissions. And some of the new technologies that are being considered, developed by these companies can help solve some of the persistent problems that we've seen with nuclear in the past. One of the big things is waste. So there are new generations of reactor designs that will produce less waste. There are some reactor designs that will actually even burn the waste from other reactors. And so they help close the cycle there basically they can help reprocess spent fuel and use that for fuel. They're also designed to be safer. They're called walk away safe. The idea is that basically these are designs that are inherently designed to shut themselves off in the way in the wake of any kind of like power problem. And then when it comes to small nuclear, the idea is that rather than designing these giant custom built power plants for each individual market, you can design a power plant in a factory. And by making them small, you can essentially scale up or down to the exact size that you need. And that way you can capture the economies of scale of mass production and standardized design. And, and you can basically get to a reactor that has the business case for every specific market. The issue that this industry has been facing is the same one the entire energy industry has been facing in general in that one, inflation, higher cost of capital, lending rates have gone up. And of course the tariffs on imported materials is making the construction costs of these projects very expensive. Nuclear is a very capital intensive way of generating electricity. And all the Bain inputs that we've seen for nuclear have gone up in price. And so that's making it harder to do business. But if you have a visionary company or a utility that's willing to be patient and set their sights 10, 20, 30 years down the line, nuclear makes a lot of sense.

Henry Blodgett (36:12)

And when we step back and look at nuclear for. For decades there was huge pressure on the nuclear industry from environmentalists saying we got to be responsible and so forth. Is that starting to change at all? Is there more to the idea that actually we've had nuclear for a long time and yes, it could be cataclysmic and we've come close a couple of times, but we're getting better at it and as you suggest, our ships and submarines have been run by small nuclear reactors for half a century now. That's going okay. Is there any more openness to it or is there still this idea that no, we will not be in the nuclear business?

Umair Irfan (36:49)

I mean from the environmental groups there's definitely is like, there's in fact a new cadre of environmental activists that are specifically and explicitly calling for more nuclear power. Back in like the 70s and 80s there was a very robust, you know, anti nuclear movement and this was basically a tent pole argument for groups like, like Greenpeace and the Sierra Club basically arguing against nuclear power. But one thing that a nuclear energy researcher pointed out to me was that one of the reasons we saw a drop off in nuclear power in the 80s was again inflation. That we saw that big volcker shock where lending rates jumped up to 10 to 2010, 13% and it was hard for nuclear power plants to just get the financing that they needed to build because they need billions of dollars upfront in order to do that. So the financing is actually what killed the industry in practical terms. Now local opposition still remains in some markets, but increasingly there are some environmental activists, particularly those concerned about climate change have made the case that essentially in order to get the vast quantities of electricity that we need to power this transition, to get off of fossil fuels, to power all the electric vehicles that we're going need, we're going to need nuclear and that this next generation of designs is actually going to help us get there. And so you're seeing a little bit more of openness to this. It's just a matter of now getting the financing and the support to to do these big projects.

Henry Blodgett (38:14)

Support for solutions comes from Zoom. Work isn't just meetings. It's calls, chats, docs, emails, calendar invites, events and more. And Zoom brings it all together on one platform. Everything flows together so you can finally focus on what matters. With Zoom, ideas happen faster, projects move forward and your workday finally works for you. Zoom is more than meetings. It's a unified platform powering how people get work done. Learn more@zoom.com podcast and Zoom ahead. Millions of players, one world, no lag. How's it done? AWS is how epic games turn to.

Umair Irfan (39:08)

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Henry Blodgett (39:16)

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Umair Irfan (40:53)

Right. So there's been a lot of chatter about permitting reform. This is a big issue that undergirds all things. Again, you know, in the United States and in much of the world, it's almost impossible to build anything big on time and on budget. And that's because you start running into a lot of regulatory delays and a lot of them for, you know, well, meaning environmental reasons initially. Like, again, one of the big hurdles to a lot of these big cross state projects in the US Is the National Environmental Policy Act. This was a project that was meant to essentially limit how much the government can build big infrastructure projects without concerning or considering the harms to the environment. The issue is now that there's a lot more veto points in the production of this big infrastructure that we need to support clean energy. So things like if you want to send a power line across multiple states, a lot of local groups can basically object to that or they can bog it down in doing a lot of these evaluations about how it's going to impact endangered species and water and all these other things, and that tends to cause a lot of regulatory delays and all that gets baked into the cost. And so right now in the United States, there's a thing called the interconnection queue. Basically, it's the line you have to wait in if you want to connect new power to the power grid. Right now, the wait time, if you have a new power plant right now, and you want to connect, you're looking at waiting four to five, five years. And that wait time is getting longer. The amount of regulations you have to jump through, the amount of hoops you have to clear are getting more substantial. And so if you can do things on the paperwork side to enable faster and broader building, you can actually enable a lot of these technologies. Now, the environmental groups were saying that these roadblocks were thrown up to prevent more of these polluting industries from building a lot of things recklessly. But these days, it's the renewable projects that are being held up. They're the ones that are in the pipeline. We have vastly more wind and solar right now basically waiting to connect to the grid than fossil fuels. And those are getting delayed. And some of those projects are dying on the wire because it's taking years for them to generate power. And a lot of the. Some of their funders are starting to pull back on them, basically saying it's taking too long. We're not making any money doing this. And so simply smoothing some of the paperwork and the processing that we deal with in order to build these big projects would go a long way to facilitating just about everything that we need to do.

Henry Blodgett (43:13)

So how do we do that? Because I think if you talk to pretty much any individual, they would say, oh, no, no, no, no, yes, I don't, of course, get rid of the red tape. I hate red tape. But I don't want anything built in my backyard. I don't want it to hurt the environment. I don't want my property values to change. And it turns out that we have built a marvelous industry, litigation, everything else to stall things. And that's what's happening.

Umair Irfan (43:37)

So.

Henry Blodgett (43:37)

Sounds great, everybody loves that. But how do we add, actually do it?

Umair Irfan (43:41)

I wish I had an easy answer for you. I think it's just going to be a slow fight to try to change people's minds. I think one is making the big case that a lot of the environmental regulations that we use to hold back some of the more polluting industries are now holding back our transition to a cleaner world, to a cleaner economy. The other aspect is that we need to have more coordination between local, state, and federal officials. Basically, every layer of government has a say in this, and we need to basically clarify who has the final say, who actually gets the ultimate authority on a lot of these things. And it's not always clear who has what jurisdiction over what part of the grid, what part of our energy production system. Now, there's also been a Lot of talk now recently about using AI based tools to help us get through some of these bottlenecks. So for instance, in order to produce, say a new power plant, you need to put out a document called an environmental impact assessment. And just putting together this document can take years. These things are often hundreds of pages long. And essentially you have to game out all the scenarios that you potentially deal with when you're building a new power plant. Essentially what will happen if there is a tornado that comes in, if there's like a natural spill, if there's any kind of earthquake or some sort of disaster. And you have to basically think about all these contingency scenarios, but if you can use some of these AI tools to jump through some of these hoops to put together these documents for you, you can actually kind of speed up these processes to make sure that you check all the boxes and not have to use as much human power to actually go through all the paperwork and divert most of your resources instead to building the generation supply. So there's a number of different approaches here. Some of them are regulatory, some of them are technology. But really what we need is a broader attitude change among every level of government and among the people.

Henry Blodgett (45:29)

And when you look at China versus the United States right now and you see what China has done in the past 50 years and you see the incredible network of bullet trains and the renewable energy that's being built, yes, they're still heavily dependent on coal, but they are moving away, away from that fast. They're leading in electrification. They're way ahead in so many of these different industries that we say are the industries of the future. You look at that and you say, yeah, it's great that in the United States we have the ability to block projects we don't want. And we, it's great that we force our companies to go through these really, really deep impact statements and so forth. But you also see very quickly the advantages and disadvantages of that. And so just to dive in a little bit more on that issue, who is it that has the power, if anybody, to say, you know what, we're not doing five year environmental impact statements for a solar field, we're just not doing that anymore. Is that a, a group of people? Is that the president, United States? Is it a local committee? Who, who can we actually lean on to change that?

Umair Irfan (46:34)

So the N. Nepa, the National Environmental Policy act, applies only to federal projects. And so these are things like cross state power lines. Basically, anytime you set a pie infrastructure across multiple states, the federal government has to get involved because it becomes a federal issue at that point. And so at the federal level, you can smooth a lot of paperwork that way. Now, the Trump administration has tried to do that. Basically they've essentially taken a lot of the teeth out of these regulations, essentially saying that there's not going to be much in the way of enforcement and that they're trying to speed things up on that front. But on things within states, there's still a lot of law, local veto points. There's basically state and local governments that can weigh in on these things and throw up roadblocks. Now, we talked about Texas earlier. Part of the reason Texas can do so much wind and solar, but also so much fossil fuels is because its power grid is almost entirely contained within its state. If it were to send power across state lines, then the Federal Energy Regulatory Commission, FERC would get involved and they would also start having to impose regulations on the kinds of power that it generates. And so in a weird way, the Texas is going alone approach is part of the reason why they can have this sort of freewheeling free market that ends up favoring clean energy. So in a lot of ways, there may need to be a little bit of retreat from federal authority that basically we don't necessarily need the federal government to get involved in some of these smaller energy projects that are happening at the state and local level. We also just need to get everybody on the same page about this. I mean, you brought up China. I mean, there's this view that China is this big authoritarian government that's going to like dictate these five year plans to all the local people. But some of the folks I've talked to who've worked in China say that there's actually a fair amount of local input in a lot of these big infrastructure projects. It's just that in these local communities, they're in favor of them. There's this broad attitude that like building more things is good, that even while we face these problems from construction, this, these waste and pollution, eventually it's going to lead to a better world. And you have a lot more community buy in because you have more people that are going to be employed in these, in these industries once they're done. There's a lot of people that are involved locally in the construction phase. And so there's a lot more buy in as well. I mean, obviously yes, China is an authority authoritarian government and they can overrule that. But that's also to say that there is also widespread support for a lot of these big infrastructure Projects as well. And there's no reason we couldn't do that here in the United States that we could actually build more grassroots support for, for big infrastructure for clean energy and basically get more people on the same page. It's just that it's hard to change anyone's mind. It's often the hardest thing anybody can do and I don't know an easy way to do that.

Henry Blodgett (49:11)

Yes. And nobody wants power plants built in their backyard or data centers for that matter. So it is very difficult but very important. You had a fascinating column recently where you said, you know, this issue could actually be a unifying and winning issue. And I assume you meant for the Democrats who were in the recent elections talking it up in New Jersey and elsewhere. And I think the. So what is the Democrat. Take New Jersey, for example, where Mikey Sherrill, I think was talking about. About it. What, what in addition to saying your bills are too high, we're going to stop that. What is she proposing to do about it?

Umair Irfan (49:47)

Well, on her campaign website, Mickey Sheryl specifically said that she was going to freeze prices, basically utility rates on day one, essentially, basically declare a state of emergency and help essentially keep people's power bills from rising any further. So, so that's one direct way that they were going to essentially keep prices from going up. So it's a very direct state market intervention, something you probably wouldn't see free market market Republicans wanting to do after that. She's also talked about building more renewable energy in the state. You know, there was a big offshore wind project in New Jersey that was slated for construction that was getting a lot of federal funding. And the Trump administration pulled their support for that project. Right. This big offshore wind farm. And so that was one direct way that the Trump administration was basically fighting against renewable energy in the state. And so Cheryl said that they want to support more projects like this within the state that essentially where the federal government is pulling out. They want to reinvest New Jersey's resources in building more of these clean energy projects. And on top of that, they also want to build more transmission. That's again, the infrastructure side is a big part of the reason why we're seeing electricity prices go up. And they want more state intervention to upgrade to increase reliability, but also to be able to route power from where it's produced most readily to the places where it's needed. And so using that sort of multi pronged plan there, that's the pathway that she's proposed to help keep electricity rates in check. The challenge now is whether she'll be able to deliver.

Henry Blodgett (51:15)

And so just one more question for you and this has been terrific. Thank you so much. It's incredibly helpful to understand this at this level. You mentioned that fixing prices on the first day. I am starting to see editorials in places like the New York Times saying, hey, look, I know economists hate this stuff, but it's time to talk about price controls. Speaking as somebody coming from the business world, yeah, price controls, it's just, you can understand the desire for it, but boy, can that screw things up because you can't invest. You, you feel like you're, yeah, you're.

Umair Irfan (51:50)

Going to be capped.

Henry Blodgett (51:50)

It gets all legislation and so forth. Is there a role for price controls here?

Umair Irfan (51:55)

I mean, effectively in the United States there are price controls on energy everywhere. The problem with the electricity generation system is that it's a natural monopoly. You don't have multiple companies building power lines to your house. That would be crazy. You have one set of power lines going to your house. You have one set of power lines going through every neighborhood. You have set of generators essentially in every market meeting that load. But what that means is because it's a natural monopoly, you have a public oversight mechanism in order to keep the worst tendencies of monopolies in check, essentially. You don't allow them to raise rates willy nilly. You don't allow them to basically abuse their customers to jack up rates and lower quality. And so you have this sort of mix between both public free markets and highly regulated markets in the electricity sector. Now some places are a little bit more deregulated than others. They have basically markets setting prices for how generation is procured. But in terms of what's actually billed to customers, there are some pretty strict limits on what gets passed on. And so utilities, the way they typically work is that they have this sort of model where they make money by spending money. So in order to actually increase their, their cash flow, they have to say, build more power lines and they're guaranteed a certain rate of return on top of that. So a lot of the power producers and the grid oper, they have an incentive to continue to build. And then you have these public utility commissions whose job it is to sort of keep that in check. And so finding the right balance between how much free market and how much regulation we need is kind of a challenge. It's if we're, we're constantly trying to figure out what the exact balance is that will serve customers and improve reliability. You know, again in Texas we've seen basically an open market which has allowed a lot more renewable energy. But you may remember again, going back to that winter blackout, we saw customers who, who are being billed, who are paying the wholesale electricity rate, seeing their electricity rates jump tenfold. Like there were people who were getting thousand dollar power bills at the end of the month because there was such a huge supply chain and there was no limit on how much of that power increase could be passed on to them. So without those kinds of breaks and regulations, you could be subject to a lot of volatility. And so, yes, I think there's an open argument to be had here about exactly how much room to be given to the market. And the market has worked well in a lot of cases, but we've also seen it fail and cause a lot of detrimental effect to consumers as well. And so what level of safeguards to be maintained is an ongoing discussion. And we're seeing, because we have such a huge variety of business models across the United States, we have a really interesting laboratory to try out a lot of different ideas. And I think that's going to be the big advantage that the US has over other countries, that we can test a lot of different ways things can work. And if we're willing to learn those lessons, we can apply those lessons. Lessons in different markets.

Henry Blodgett (54:51)

All right, so let me end this by saying I am very encouraged by what you're saying, which is there seems to be a reasonable market solution here. We've gotten the technology to the point where renewables are better than price competitive with fossil fuels, much better. For the long term view, we can rebuild the grid, that's good. We can bring manufacturing back, in a lot of cases, the United States, there's so much, much good here. And what we really need to do is just get out of our own way, basically drop some of these preconceived notions that we have and make it easier on ourselves. Am I looking at it the right way? I'm looking at the two things. Should I be more pessimistic about it?

Umair Irfan (55:30)

I mean, we don't underestimate our ability to get in our own way. Oh yeah, and we're, we're already doing that right now. Again, there's a lot of preconceived notions out there that renewables are just unreliable or that they can't do the job effectively. But at the same time, there's a new generation of workers coming into the workforce, a new generation of graduates coming into the energy industry who don't have those preconceived notions. And as we see people's openness to new ideas coming in. We will gradually see, I think the mentality start to change around these technologies. Obviously the incumbent industries are going to fight tooth and nail for market share. If you're a big gas producer, if you're a big oil producer, you're going to do everything you can to stay online. But ultimately you cheaper wins. Anytime you can do something just as well and better for at a lower price, the market is going to push everything, everyone towards you. And I think renewables are continuing to improve. That's the other aspect to point to this, that we're not going to stay in the current moment. The level of technology is continuing to get better. Solar is still getting cheaper, wind is still getting cheaper, batteries are becoming more energy dense and cheaper. Those there's no sign that we're slowing down here on the technology improvement curve. So while I don't think we can necessarily invent our way out of the problem, the innovations that we're developing here are certainly going to make solving the problem continually easier.

Henry Blodgett (56:52)

Umair, thank you. It's a privilege to have you. Thank you very much for your time. Incredibly clear explanations and we'll hope to talk to you again.

Umair Irfan (56:59)

I appreciate it. Thanks for having me. Henry.

Henry Blodgett (57:02)

Solutions is produced by Megan Cunane. Jim Mackle is our video editor. Our theme music is by Trackademics Nisha. Scott Kurwa is Vox Media's executive producer of podcasts. Thanks for listening to Solutions from the Vox Media Podcast Network. I'm your host Henry Blodgett. We'll see you soon. Support for Solutions comes from Zoom. Your work tool shouldn't slow you down. Zoom brings meetings, chat docs and your AI companion together on work one platform to help you work better. Visit zoom.com podcast to learn more. And Zoom ahead.

Umair Irfan (57:50)

300 sensors over a million data points per second. How does F1 update their fans with every stat in real time? AWS is how from fastest laps to strategy calls, AWS puts fans in the pit. It's not just racing, it's data driven innovation at 200 miles per hour. AWS is how leading businesses power next level innovation.