Speaker 1: Welcome to the Bloomberg p m L Podcast. I'm Pim Fox.
Speaker 1: Along with my co host Lisa Abramowitz. Each day we
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Speaker 1: broadcasting from the Sea the Future of Energy Summit. It
Speaker 1: is powered by Bloomberg New Energy Finance. I'm Pim Fox
Speaker 1: here with Lisa Abramwitz and you know, Lisa, our next guest.
Speaker 1: I would have not expected to see this gentleman here
Speaker 1: at a conference on energy. He bikes all the way
Speaker 1: here from California, that's right. And and you know what
Speaker 1: he doesn't he's on the bicycle most of the time.
Speaker 1: Uh and um, well, he does happen to manage over
Speaker 1: two hundred billion dollars and he's right, and he is
Speaker 1: responsible to the retirees of the California State Teachers Retirement System.
Speaker 1: Chris Silman is the chief investment Officer and he joints us. Now, Chris,
Speaker 1: thanks for being with this, Thanks for stopping by. What
Speaker 1: are you I mean not that we don't love seeing
Speaker 1: you and having you around, but what are you doing here? Yeah? No,
Speaker 1: it's very unusual. I think I'm the only chief investment
Speaker 1: officer that's actually here. I'm only the second number two
Speaker 1: pension plan and the whole world that's actually here. Has
Speaker 1: anyone talked to you? I mean, or you get to
Speaker 1: be up, you get to be anonymous? Now you guys?
Speaker 1: All right, Well, I actually came to I saw the
Speaker 1: radio station here's like, came here to say hi to you. Um. No,
Speaker 1: people don't know us very well here. We're actually kind
Speaker 1: of incognito, which is kind of nice. It's a great
Speaker 1: learning experience the second time I've been here. Um, the
Speaker 1: future of energy is huge. The demand will continue to
Speaker 1: rise globally, and the sources of energy are going to
Speaker 1: really diversify. And so that's an investment opportunity. It's a
Speaker 1: risk and an opportunity to us. Although Chris, you were
Speaker 1: saying that we do not see other chief investment officers here,
Speaker 1: certainly not of retirement systems. You have to wonder, you know,
Speaker 1: will there be a growing amount of demand from public
Speaker 1: pension managers such as yourself, and how big do you
Speaker 1: think that demand could be Oh, I think it's gonna
Speaker 1: be huge. Energy is already a giant part of everybody's portfolio.
Speaker 1: But if you think about power generation, it's very long term.
Speaker 1: It's going to show up on our infrastructure portfolios. It's
Speaker 1: already impacting our real estate portfolios. It's going to show
Speaker 1: up in private equity in terms of new opportunities and
Speaker 1: new investment, and in the general equity portfolio. Energy power
Speaker 1: generations a big part of the US equity market. Well,
Speaker 1: but how much do renewable sources of energy already factor
Speaker 1: into your portfolio at all, or how much do you
Speaker 1: see the potential for that going forward. I've always been
Speaker 1: really clear with people. We were an early mover into
Speaker 1: solar and in wind back in two thousand three, and
Speaker 1: an early being an early mover is not necessarily an advantage.
Speaker 1: I quote the late Joe Deer who said, you know,
Speaker 1: clean energy was a noble way to lose money, but
Speaker 1: it lost us money there. You know, it's like there's
Speaker 1: a really good noble but you know it definitely is
Speaker 1: going to be part of the future. You're seeing clean
Speaker 1: energy show up as much as ten percent of the
Speaker 1: power generation Michael Leeverrick just showed a slide that said
Speaker 1: that in some countries it's of the power generation, so
Speaker 1: it's becoming price competitive. It's still subsidized in many parts
Speaker 1: of the country, but it's showing up in our infrastructure
Speaker 1: portfolio a little bit in our venture capital portfolio. And
Speaker 1: what's interesting I'm learning here is that companies people like Alphabet,
Speaker 1: Amazon Um buy so much power more than some countries.
Speaker 1: They're actually going out and developing their own power generation
Speaker 1: because it's a critical need to them. When you think
Speaker 1: about clean energy, you have this whole supply chain that
Speaker 1: is different than burning fossil fuel of any kind. Having
Speaker 1: said that, when do we get to the point where
Speaker 1: it's just energy? The cause the decision making process changes.
Speaker 1: As the head of a public pension retirement program, does
Speaker 1: it matter to your beneficiaries how you make the money
Speaker 1: for that? It does? You know? I think I represent
Speaker 1: California teachers and extent. If you lose a ton of money,
Speaker 1: nobody cares whether it was like nobly or not right
Speaker 1: exactly well, And our mandate first and foremost just is
Speaker 1: to fully fund that retirement system over thirty years. So
Speaker 1: we have to be focused and on return, but representing
Speaker 1: California teachers. We hear from a lot of them. They
Speaker 1: are very concerned about how we make our money. But
Speaker 1: you know, I think him when you look at the
Speaker 1: future of energy, it's you know, it's going to be
Speaker 1: a long term trend. I need a big wave. So
Speaker 1: I'm a bike ridor, but we like to serve in California,
Speaker 1: so I need a big wave of an investment wave.
Speaker 1: It's going to stick around for a long time that
Speaker 1: we can catch up with. And that's why we're here
Speaker 1: is to see it early so that we can ride
Speaker 1: this for a long time. And I think that we'll
Speaker 1: start talking about energy when there's actually a price on carbon.
Speaker 1: Right now, coal plants and natural gas plants can burn,
Speaker 1: and they've got a subsidized nuclear and wind and solar
Speaker 1: to be price competitive because the carbon plants don't pay
Speaker 1: for their waste. Al right. So Chris, you're biking, you're surfing.
Speaker 1: I love it. I love the California vibe coming to
Speaker 1: us right now from Chris Amon. Uh. You know you
Speaker 1: said that it was a noble way to lose money
Speaker 1: to get in early with renewables. But now as you
Speaker 1: listen to the presentations, is there anything that's caught your
Speaker 1: ear as far as a promising potential investment that you're
Speaker 1: gonna look more at. Let me get back to California. UM,
Speaker 1: the whole world distributed energy, the fact that with solar
Speaker 1: on rooftops you've got people generating electricity all over the place,
Speaker 1: and the big difference, and they talk about here kind
Speaker 1: of the holy grail is battery technology. UM is the
Speaker 1: ability to store all of that renewable because it comes
Speaker 1: during the day or only when it's windy, and you've
Speaker 1: got to hit it for peak time. So for us,
Speaker 1: I see this. You know, energy trans mission distribution is
Speaker 1: an infrastructure play. Storage will probably become very much a
Speaker 1: strong infrastructure opportunity. Which companies are at the forefront of
Speaker 1: the battery technology well, obviously Tesla gets all the headlines
Speaker 1: to the giant right, but you know it's we don't
Speaker 1: spend a lot of time talking about what you gotta
Speaker 1: when you're gonna dispose of those lithium batteries. You know,
Speaker 1: I think we have to look long term. It's not
Speaker 1: always all all great, glorious, But we just saw a
Speaker 1: couple of slides. The automakers are very interesting and if
Speaker 1: GM and four don't get their act together. People like
Speaker 1: Toyota and what in Voteswagon are actually gonna eat their
Speaker 1: lunch Internationally when it comes to UH electronic vehicles. Uh.
Speaker 1: You see a lot of electric cars in California, not
Speaker 1: so much obviously here in New Yorker in the Midwest,
Speaker 1: but you're going to see US companies, even the odds
Speaker 1: of Lockheed Martin. Right, Chris Alemen, thank you so much
Speaker 1: for stopping by. Always wonderful to speak with you and
Speaker 1: hear about your fifteen mile bike right to work every morning.
Speaker 1: Chris Alman is Chief Investment Officer for California State Teachers
Speaker 1: Retirement System in Sacramento, California, with more than two billion
Speaker 1: dollars of assets under management. And he's not lonely anymore,
Speaker 1: even though he is probably the only uh C I
Speaker 1: O certainly of a retirement plan. Here at the Future
Speaker 1: of Energy Summit. We are here at the Future of
Speaker 1: Energy Summit, which was powered by Bloomberg New Energy Finance,
Speaker 1: and we're lucky to be speaking with Ralph is O, Chairman,
Speaker 1: President and chief executive officer of Public Service Enterprise Group
Speaker 1: Incorporated that's otherwise known as p S E and G
Speaker 1: and Ralph I wanted to start with your capital investment program,
Speaker 1: which you have just recently laid out, and it includes
Speaker 1: a four point seven billion dollars of plan investments this
Speaker 1: year that is the most ever in your history. What
Speaker 1: are you spending that money on? That's right, So it's
Speaker 1: primarily an electric transmission. We have an aging infrastructure that
Speaker 1: is in desperate need of replacement, both from a reliability
Speaker 1: and a storm resiliency point of view. A close second
Speaker 1: is in gas pipe replacement. We have the largest cast
Speaker 1: iron main system, you know, it's many of our pipes
Speaker 1: approaching a hundred years old. And then probably in third
Speaker 1: place would be the fact that we're building three natural
Speaker 1: gas combined cycle power plants. So it's electric transmission, gas
Speaker 1: pipe replacement, and power plants um in addition to the portfolio.
Speaker 1: I wonder if you could speak a little bit about
Speaker 1: nuclear power generation. Yeah, so we've we've actively engaged in
Speaker 1: a policy discussion around nuclear power. We're concerned that short
Speaker 1: term market forces will push the system to a one
Speaker 1: fuel only electric supply option, that being natural gas. We
Speaker 1: believe natural gas is abundant, we do believe it's low cost,
Speaker 1: and we do believe it's a comic fuel. But we
Speaker 1: just think that like tricity is so core to the
Speaker 1: economy and all quality of life that a lack of
Speaker 1: fuel diversity could be a serious problem from a system
Speaker 1: interruption or resiliency point of view. And then, of course
Speaker 1: that doesn't speak at all to the environmental benefits from
Speaker 1: an air emissions point of view of nuclear, and nor
Speaker 1: does it speak to the fact that many nuclear plants
Speaker 1: are major employers and in different states. So what proportion
Speaker 1: of P S E n g's UH energy comes from
Speaker 1: renewable sources right now? And where do you see that
Speaker 1: going in the next decade? YEA, So, so right now
Speaker 1: we are fifty seven percent of our output comes from nuclear,
Speaker 1: thirty five percent of our output comes from natural gas,
Speaker 1: about five percent from coal, and the remaining three or
Speaker 1: four percent comes from renewables. More important from a policy
Speaker 1: point of view is what percent of New Jersey's output
Speaker 1: comes from those various fuel sources. And New Jersey gets
Speaker 1: about forty four percent from nuclear, about one percent from renewables,
Speaker 1: and fifty five percent from actual guest of the absence
Speaker 1: of nuclear would make New Jersey a single fuel jurisdiction,
Speaker 1: which is just not a good idea. So what are
Speaker 1: some of the steps or what are some of the
Speaker 1: programs that you're involved with in order to make sure that,
Speaker 1: for example, plants stay open because I understand that you
Speaker 1: know some of them they're not making any money, and
Speaker 1: you've already said that unless there's some way to figure
Speaker 1: out how to make these cost effective, they could be
Speaker 1: shut down. So we're taking two approaches. PIM One is
Speaker 1: to say, if you look at organizing markets, there's a
Speaker 1: missing money problem. Uh, it's it models the mind to
Speaker 1: think that a nuclear plant that takes in that courts
Speaker 1: anywhere from thirty to thirty five dollars a megawatt hour
Speaker 1: would retire and be replaced by a new combined psycho
Speaker 1: plant that estimates range would require fifty to sixty dollars
Speaker 1: a megawatt hour from a proven investment point of view,
Speaker 1: How can the market create that reality that a low
Speaker 1: cost plant would retire and be replaced by something that,
Speaker 1: over the long term, should be more expensive. So that's
Speaker 1: getting FIRK to recognize that there's a price formation issue
Speaker 1: at the state level. What we're saying is, if we
Speaker 1: look at how you're subsidizing renewables, arguably you're paying anywhere
Speaker 1: from two to four hundred dollars a ton of carbon
Speaker 1: to get less than two percent of your electricity from
Speaker 1: rooftop solar grid connected solar. No one has ever estimated
Speaker 1: to be carbon worth that much. Why would you want
Speaker 1: to let your nuclear power plants retire what you're getting
Speaker 1: paid zero for carbon today? So we're really approaching us
Speaker 1: at the policy level in two different ways. We're saying
Speaker 1: markets are not pricing the attributes of nuclear that are important,
Speaker 1: nor are states fairly pricing the attributes of carbon that
Speaker 1: they seem to be saying are reporting. I like that
Speaker 1: the missing money problem. I can say that I can
Speaker 1: come home and say to my husband, we have a
Speaker 1: missing money problem after I went shopping today. You know,
Speaker 1: I do want to just go back to this fifteen
Speaker 1: billion dollar spending plan, capital spending program over the next
Speaker 1: five years. You know, we talk a lot about jobs,
Speaker 1: and you know President Trump has emphasized jobs with the
Speaker 1: fossil fuel industry. Will you be hiring more people in
Speaker 1: order to complete some of these projects? Yes, we we
Speaker 1: we are actively hiring people to complete these projects. We
Speaker 1: think that there are some improvements that could be made
Speaker 1: in state regulation to make the hiring of these people
Speaker 1: are less lumpy, for lack of a better word. Right now,
Speaker 1: utilities are compensated by state regulators in a way that's
Speaker 1: a that's been going on for a hundred years, and
Speaker 1: we just think that it needs to be a more
Speaker 1: predictable system of state regulation that allows us to hire people,
Speaker 1: train them, and keep them in the pipeline. Because an
Speaker 1: aging infrastructure isn't getting younger, right we so we will
Speaker 1: need to continue this investment profile out and for the
Speaker 1: foreseeable future. And right now, the way which we've we
Speaker 1: fund these programs is going back for incremental additions. So
Speaker 1: we hire a lot of contractors, and we hire people
Speaker 1: for short duration and what we'd rather do is hire
Speaker 1: them for a long career. But that requires a more
Speaker 1: predictable regulatory system than the one that's in place now.
Speaker 1: Thank you very much for joining us, pretty much appreciate it.
Speaker 1: Propito is the chairman, the president, and the chief executive
Speaker 1: of Public Service Enterprise Group that are known as PEG.
Speaker 1: At least that's symbol well PG PG PEG where thank you? Yeah?
Speaker 1: Where that it's PEG and you're Lisa, okay, and yeah,
Speaker 1: well so far and we're broadcasting of course from the
Speaker 1: seen The Future of Energy Summit. It's all powered by
Speaker 1: Bloomberg New Energy Finance. We want to take a moment
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Speaker 1: Energy Summit. It's all powered by Bloomberg and New Energy Finance.
Speaker 1: And here to tell us about energy policy and the
Speaker 1: world's climate situation is Barbara Buchner, the executive director of
Speaker 1: Climate Finance of Climate Policy Initiative. They're based in San
Speaker 1: Francisco and Barbara Buchner can be followed on Twitter at
Speaker 1: b Buchner thirteen. Barbara, thanks very much for being with us.
Speaker 1: Maybe just give people a little bit of an idea
Speaker 1: of what the Climate Policy Initiative is. Sure, and thanks
Speaker 1: so much for having me here. So Chemic Policy Initiative.
Speaker 1: It's a non for profit organization be really focused on
Speaker 1: helping policy makers and decision makers how they can improve
Speaker 1: basically their policies around land use climate energy, but doing
Speaker 1: that with a specific focus on finance. So what dcs,
Speaker 1: We really want to advise them on how to use
Speaker 1: public policies and public resources most effectively in order to
Speaker 1: unlock more investment and really get us on the local
Speaker 1: climate recident passway. So you spend a lot of time
Speaker 1: in Washington now with guests amongst other countries. We are
Speaker 1: a global organization. So do you find that, given the
Speaker 1: new presidential administration in the U S that you've gotten
Speaker 1: more pushback in Washington when you go and you talk
Speaker 1: with different policy makers. Well, I do think you know that,
Speaker 1: and we've heard it also today at the summit here
Speaker 1: that there is a generally positive sentiment that is caused
Speaker 1: by the folly technology costs of renewable energies and so
Speaker 1: notwithstanding you know, obviously some delays or like some slow
Speaker 1: down in some of due to some two political developments.
Speaker 1: But BC is a very good, you know, general trend
Speaker 1: saying that the energy transition is irreversible. And I think
Speaker 1: this is something that we hear also from policymakers. But
Speaker 1: obviously it is something where you know, we work a
Speaker 1: lot is the private sect in order to understand how
Speaker 1: we can make the case with policymakers on what the
Speaker 1: instrument should be in order to get the climate sector
Speaker 1: in So have you found that you've had to make
Speaker 1: more of an argument on a financial level, much more
Speaker 1: so than in the past, where you could talk about
Speaker 1: the actual science behind UH global warming, etcetera. I mean,
Speaker 1: now it is it's sort of a finance focus. It's like, look, guys,
Speaker 1: you can save money, so do it well. To be
Speaker 1: very you know, this is something which you've done over
Speaker 1: the last year's already. As exactly, we work not only
Speaker 1: in the US, we have offices in Brazil, in India,
Speaker 1: in Indonesia, and you know wherever we go. What we
Speaker 1: want to do is really enable economic growth while reducing
Speaker 1: climate risk. And so that the narrative that we have is,
Speaker 1: you know, try to understand what's the incentives for the
Speaker 1: private sector will come in. You know, given that the
Speaker 1: economics of renewable we see actually very positive trend there.
Speaker 1: At the same time as insaide like we've had not
Speaker 1: been We've had not that many discussions now here in
Speaker 1: Washington in order to see what's the changes. We have
Speaker 1: not really seen any changes yet. Maybe just give an
Speaker 1: example of the kind of work and the kind of
Speaker 1: partnership that you have with states, because I know that
Speaker 1: you work with New York State on a renewable energy
Speaker 1: plan and also you put together what's called a carbon
Speaker 1: dashboard for California. What are those things? Yes, So the
Speaker 1: carbon dashboard, for example, this is really kind of to
Speaker 1: provide the information to all market players. We are tracking
Speaker 1: the prices of the carbon market in in California and
Speaker 1: really try to kind of inform decision making by different
Speaker 1: stakeholders public sector, private sector. It's a statement, but you
Speaker 1: know what I would love to talk about a little
Speaker 1: bit more is our interactions not only with states, but
Speaker 1: with different types of stakeholders from like governments, from private sector,
Speaker 1: from commercial banks, um, institutional investors, and different types of
Speaker 1: really investors, both for the public and private side. And
Speaker 1: we do that in the context of the Global Innovation
Speaker 1: lab for Climate finance that we manages the secretariat. The
Speaker 1: idea there is really to work with different constituencies and
Speaker 1: different stakeholders to come up with innovate definancial solutions that
Speaker 1: really can help use public money most effectively drive private investment.
Speaker 1: So as you talk with people in these finance arms,
Speaker 1: do you encounter many climate change deniers? Um? Pause? Actually
Speaker 1: not really, I do see, you know, but that again,
Speaker 1: I think the narrative you're using is not only focused
Speaker 1: on climate change. We really try to show that, you know,
Speaker 1: I understand that, but I think that there is sort
Speaker 1: of this understanding that you know, the clock is ticking
Speaker 1: amongst sort of certain scientifics circles. So there's a certain
Speaker 1: urgency to making changes. Whereas you know, if somebody doesn't
Speaker 1: necessarily buy into the argument that you know, human man
Speaker 1: made influences are causing global climate to uh change substantially,
Speaker 1: then you know, okay, maybe it saves me a few bucks.
Speaker 1: For what's the incentive to really make a make a
Speaker 1: big change right now? Well, I think the incentive is
Speaker 1: that you can make money. There is a business case
Speaker 1: to invest in renewable energy, and I see you now
Speaker 1: we're seeing renewable energy costs go down and their competitive.
Speaker 1: It's almost all regions for almost all renewable. So I
Speaker 1: do think, you know, there is a shift in awareness
Speaker 1: that there is not only risks and you know it's
Speaker 1: like the unknown fountain, we have to stick to business
Speaker 1: as usual, but that there is a real opportunity to
Speaker 1: go into new grounds. And you know, I think what
Speaker 1: we need to do is just to help scale that
Speaker 1: movement and make sure that we really feel you know,
Speaker 1: the gaping investment that we see at the moment. You
Speaker 1: get us on a on a two degrees buthway. Now
Speaker 1: you have some your financial support from the German Ministry
Speaker 1: of the Environment, also Open Society right to George Soros,
Speaker 1: plus from the Norwegian Does having that government and that
Speaker 1: foundation level support, does that make a big difference in
Speaker 1: getting a project succeed, you know, to succeed give you
Speaker 1: that twenty seconds. Well, the support we received this from
Speaker 1: multiple sources, not only the ones that you've seen. I
Speaker 1: think in the context of specific projects that we try
Speaker 1: try to you know, pilot there, we really need the
Speaker 1: initial seat funding from public sources. So yes, they're you know,
Speaker 1: funding from governments, from a foundations is really helpful to
Speaker 1: take off some of the races at the private sector,
Speaker 1: otherwise wouldn't be able to take Yeah, thanks very much. Um.
Speaker 1: Barbara Buchner is the executive director Climate Finance and Climate
Speaker 1: Policy Initiative. Thank you very much for being with Thank
Speaker 1: you so much for having me. Thanks for listening to
Speaker 1: the Bloomberg P and L podcast. You can subscribe and
Speaker 1: listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast
Speaker 1: platform you prefer. I'm pim Fox. I'm on Twitter at
Speaker 1: pim Fox. I'm on Twitter at Lisa Abramo. It's one
Speaker 1: before the podcast. You can always catch us worldwide on
Speaker 1: Bloomberg Radio.