WEBVTT - Jigar Shah on the DOE's Role In Accelerating The Energy Transition 0:00:11.000 --> 0:00:14.880 Hello, and welcome to another episode of the odd Locks Podcast. 0:00:14.960 --> 0:00:19.040 I'm Joe wisen't Thal and I'm Tracy Hallaway. Tracy attention 0:00:19.160 --> 0:00:21.880 that we keep coming back to, I think is that 0:00:21.960 --> 0:00:27.360 in this moment of high inflation, high energy costs, there 0:00:27.360 --> 0:00:30.080 seems to be I guess maybe maybe the way to 0:00:30.160 --> 0:00:34.599 describe it is a tension between long term planning and 0:00:34.720 --> 0:00:37.960 short term pain. And so in theory, this is a 0:00:38.080 --> 0:00:40.960 good case to be investing in sort of new energy, 0:00:41.560 --> 0:00:46.800 perhaps decarbonization technologies that reduce our reliance on fossil fuels 0:00:46.800 --> 0:00:49.640 in the countries that have particular access to them. But 0:00:49.720 --> 0:00:51.720 at the same time, there's also a lot of impulse 0:00:51.760 --> 0:00:55.760 to just get the price down right now. Yeah. To me, 0:00:55.880 --> 0:01:00.400 it comes back to just the cyclicality of the energy industry. 0:01:00.480 --> 0:01:04.080 And if you think back to when we had um 0:01:04.200 --> 0:01:07.280 the oil prices going down quite suddenly and everyone was 0:01:07.280 --> 0:01:11.000 talking about a glut in shale oil and all this 0:01:11.400 --> 0:01:16.840 energy industry capacity had expanded too quickly and now you know, 0:01:16.880 --> 0:01:19.920 there wasn't enough demand to actually justify it. And then 0:01:19.959 --> 0:01:23.320 fast forward to today and it seems like we're in 0:01:23.360 --> 0:01:26.520 completely the opposite problem, and so it just seems kind 0:01:26.560 --> 0:01:29.800 of crazy to me to be swinging from you know, 0:01:30.120 --> 0:01:35.280 access to shortages on like a five to seven year timeline, 0:01:35.560 --> 0:01:38.560 and it seems like it's really bad for as you mentioned, 0:01:38.600 --> 0:01:41.240 planning for the future, right, how are you supposed to 0:01:41.280 --> 0:01:44.560 attract investment into the space if you're going from feast 0:01:44.600 --> 0:01:47.560 to famine all the time. So I guess one question 0:01:47.640 --> 0:01:51.960 that arises is can the state? Can the government player 0:01:52.080 --> 0:01:57.040 role in ameliorating the swings on both sides, essentially reducing 0:01:57.080 --> 0:02:00.080 the volatility, And the government has this infinite balance, it 0:02:00.720 --> 0:02:06.160 doesn't have to optimize for profits itself. Obviously, you know, 0:02:06.480 --> 0:02:08.840 in theory it doesn't want to waste money, but itself 0:02:08.919 --> 0:02:11.280 does not. The government itself doesn't have a profit motive. 0:02:11.760 --> 0:02:13.880 And can there be sort of a role for planning, 0:02:14.240 --> 0:02:18.840 for thinking strategically for public investments such that we don't 0:02:18.880 --> 0:02:21.200 have these so that we actually have like a strategy 0:02:21.280 --> 0:02:24.560 of vision that's not just sort of at the whims 0:02:24.560 --> 0:02:28.160 of these incredible swings that we have in what seems 0:02:28.160 --> 0:02:32.160 like a fairly short period of time. Absolutely, and I 0:02:32.200 --> 0:02:34.280 think you put it well like that's the question whether 0:02:34.280 --> 0:02:36.920 there's a role for the government to come in as 0:02:36.960 --> 0:02:42.359 a source of stability and an extremely cyclical market. And 0:02:42.400 --> 0:02:47.720 also I don't think anyone's really talks through exactly what 0:02:47.760 --> 0:02:52.400 the different roles are for the government versus private investors. 0:02:52.440 --> 0:02:55.079 And I still think, you know, when you look at E. 0:02:55.280 --> 0:02:59.360 S G. For instance, UM, there seems to be a 0:02:59.400 --> 0:03:02.320 lot of onus placed on private capital and this idea 0:03:02.360 --> 0:03:04.440 that well capital is going to come in and fix everything. 0:03:04.480 --> 0:03:07.680 But actually I still think you need the government to 0:03:07.680 --> 0:03:09.799 come in and do a lot of this. But anyway, 0:03:09.880 --> 0:03:12.320 this sort of question about what the different roles are 0:03:12.480 --> 0:03:16.280 for private versus public capital, I think is a fascinating one, right. 0:03:16.320 --> 0:03:18.239 And there's one other phenomenon. You know, we talk a 0:03:18.280 --> 0:03:23.360 lot about gas and gasoline prices, and the other thing 0:03:23.400 --> 0:03:26.840 that's going on in energy to especially going to the summer, 0:03:26.960 --> 0:03:30.600 is concerns about the grid, like various regional grid operators 0:03:30.880 --> 0:03:34.280 warning that blackouts are going to increase, uh this summer, 0:03:34.400 --> 0:03:37.880 potentially lots of concerns once again about the Texas grid, 0:03:37.920 --> 0:03:40.800 but not just Texas, it's really everywhere is worried that 0:03:40.840 --> 0:03:45.160 this sort of like baseload power has seen under investment, 0:03:45.640 --> 0:03:47.960 and so lots of big questions about the sort of 0:03:48.000 --> 0:03:50.400 what role can the public sector play and all of 0:03:50.440 --> 0:03:53.840 these challenges, both short term and long term. So I'm 0:03:53.920 --> 0:03:56.160 very excited. We have a very special guest today. We're 0:03:56.160 --> 0:03:58.880 gonna be speaking with Jigger Shaw. He is the director 0:03:59.320 --> 0:04:03.160 of the Loan Program Office at the Department of Energy 0:04:03.480 --> 0:04:06.120 and in a prime spot to be thinking about and 0:04:06.120 --> 0:04:08.880 addressing some of this stuff. So, Jigger, thank you so 0:04:09.000 --> 0:04:12.840 much for coming on odd lot. Oh it's great, thanks 0:04:12.920 --> 0:04:16.440 for having me. It's ah, you're you're a staple in 0:04:16.520 --> 0:04:21.880 my podcast listen. Uh you absolutely absolutely flattered, dear. So 0:04:22.040 --> 0:04:23.560 what do you tell us, like, just give us the 0:04:23.600 --> 0:04:26.560 sort of quick summary of like what you do, what 0:04:26.640 --> 0:04:29.480 you do at the d o E, and your background, 0:04:29.560 --> 0:04:33.080 like how you got into this role. Yeah, no, it's 0:04:33.160 --> 0:04:35.599 it's it's a good question. I'm a mechanical engineer by training, 0:04:35.680 --> 0:04:40.720 and my my career has really largely been about figuring 0:04:40.720 --> 0:04:45.760 out why technologies that are already fully proven don't scale, right. 0:04:45.800 --> 0:04:49.520 So I started UM in the solar industry and uh, 0:04:49.560 --> 0:04:53.200 you know, started sun Edison, which largely invented the power 0:04:53.279 --> 0:04:55.839 Purchase Agreement, which is now attracted you know, over two 0:04:55.839 --> 0:05:00.479 trillion dollars of capital uh into uh solar objects right 0:05:00.520 --> 0:05:03.920 around the world using that financial structure, and then you know, 0:05:03.960 --> 0:05:08.120 after that, did some nonprofit work with Richard Branson and 0:05:08.279 --> 0:05:11.600 understood a lot more about lots of other sectors UM, 0:05:11.680 --> 0:05:14.400 and then started Generate Capital with two co founders in 0:05:14.839 --> 0:05:18.880 twenty fourteen, where we really changed the entire way that 0:05:19.440 --> 0:05:23.640 infrastructure investors thought about, UH, first of a kind deployment 0:05:23.880 --> 0:05:28.120 and scaling up new sectors because you can imagine the 0:05:28.200 --> 0:05:32.520 vast majority of people before that we're in fund structures, 0:05:32.520 --> 0:05:35.360 and fund structures, you know, you get paid more if 0:05:35.400 --> 0:05:37.839 you make a higher I R R, and that doesn't 0:05:37.880 --> 0:05:41.400 quite work for commercialization. So we flipped the script on 0:05:41.480 --> 0:05:43.919 that and created the first sea corp to do that 0:05:43.960 --> 0:05:48.320 back in before tax rates went down. UH, and then 0:05:48.360 --> 0:05:50.600 got tapped for the the you know d O WE 0:05:50.680 --> 0:05:54.279 Loan Program's Office as a perch by which we you know, 0:05:54.320 --> 0:05:57.479 helped to commercialized technologies UM from the U. S. Government seat. 0:05:58.560 --> 0:06:00.880 So I'm gonna go ahead and clean and say that 0:06:00.960 --> 0:06:04.240 I wrote some very unflattering things about Sun Edison, but 0:06:04.480 --> 0:06:08.880 I did it. I think it was around uh so 0:06:09.000 --> 0:06:11.680 after you had left the company, and it was mostly 0:06:12.120 --> 0:06:14.480 it was mostly about the leverage that they taken on 0:06:14.520 --> 0:06:18.560 and very undisciplined after I left, so they deserved all 0:06:18.600 --> 0:06:23.800 of the criticism hard blog posts. Okay, but actually I 0:06:23.800 --> 0:06:26.000 want to go back to something you just said, which 0:06:26.080 --> 0:06:32.040 is this idea of proven technologies that are nevertheless difficult 0:06:32.200 --> 0:06:36.080 to scale. So what is the issue there? Because you know, 0:06:36.160 --> 0:06:38.320 you would assume that if someone comes along and says, 0:06:38.360 --> 0:06:42.200 I have this amazing new technology to produce energy, you know, 0:06:42.320 --> 0:06:46.560 hopefully uh, you know, cleaner way than than we do traditionally, 0:06:47.600 --> 0:06:50.840 you would naturally expect people to get very excited about 0:06:50.880 --> 0:06:53.479 it and for some private investors to start pouring money 0:06:53.520 --> 0:06:58.120 into it. But historically that hasn't been the case. Yeah, 0:06:58.200 --> 0:07:02.440 it's a weird thing, right, I mean, the what happened 0:07:02.440 --> 0:07:05.000 after the Arab oil crisis in the nineteen seventies as 0:07:05.080 --> 0:07:07.400 we invented the Department of Energy, right, we put it 0:07:07.400 --> 0:07:10.960 in place, And what happened on the technology front is 0:07:11.040 --> 0:07:15.280 America has figured out how to make things smaller and 0:07:15.320 --> 0:07:18.160 more uh you know, sort of bite sized. Right, So 0:07:18.320 --> 0:07:20.560 the phone in your pocket is more powerful than all 0:07:20.560 --> 0:07:22.800 the computers that you know, it took to put a 0:07:22.800 --> 0:07:24.440 man on the moon. The same thing is true with 0:07:24.480 --> 0:07:27.480 solar panels. It's the same solar panel that you put 0:07:27.600 --> 0:07:30.800 thousands of in one field and make utility scale solar, 0:07:30.960 --> 0:07:34.400 or twelve of them on your roof for residential solars. 0:07:34.400 --> 0:07:36.880 So when I first started sun Edison back in two 0:07:36.920 --> 0:07:40.720 thousand three, we had signed contracts with Whole Food, Staples, 0:07:40.800 --> 0:07:44.640 I Kea, and others right of way and people said, 0:07:45.160 --> 0:07:48.480 that's great, Jugger, but you only need sixty million dollars 0:07:48.480 --> 0:07:51.840 of capital, And I was like, only like sixty millions 0:07:51.880 --> 0:07:54.400 a lot. And I started this company by taking out 0:07:54.400 --> 0:07:57.480 a home equity loan on my house, and so you know, like, 0:07:57.960 --> 0:08:00.640 so I feel like that's a big number. And most 0:08:00.680 --> 0:08:03.480 of these folks are like jigger. Infrastructure investors don't get 0:08:03.480 --> 0:08:06.760 out of bed for less than two und fifty million dollars, right, 0:08:06.800 --> 0:08:09.920 And so if you can't aggregate up two hundred fifty 0:08:09.960 --> 0:08:13.000 million dollars with projects, then you know you're not gonna 0:08:13.000 --> 0:08:16.240 get any attention from us. And I'm like, well, but 0:08:16.360 --> 0:08:19.480 we miniaturized the technology. It's no longer billion our scale 0:08:19.520 --> 0:08:22.200 just to get in. You could do it at scale 0:08:22.200 --> 0:08:24.760 and up rooftop. And so we ended up getting money 0:08:24.840 --> 0:08:28.240 from Goldman Saxes, you know, Special Situations Group, and you 0:08:28.280 --> 0:08:30.600 know they made a nice seventeen percent rate of return 0:08:30.680 --> 0:08:33.199 to to do the first set of deals, and then 0:08:33.280 --> 0:08:36.360 once we got to that multi hundred million dollar scale, 0:08:36.840 --> 0:08:40.000 we got Walls far Ago and Union Bank of California 0:08:40.080 --> 0:08:43.080 and lots of other folks to come in. But you 0:08:43.080 --> 0:08:46.160 know that's happening in battery storage. I mean when Generate 0:08:46.280 --> 0:08:49.360 Capital first started funding battery storage, I think the check 0:08:49.400 --> 0:08:53.240 size that STEM needed at the time was twenty million bucks, right, 0:08:53.400 --> 0:08:55.920 and you know they had all these battery storage deals, 0:08:55.960 --> 0:08:58.400 like you know, behind the meter. I think one of 0:08:58.400 --> 0:09:01.080 their first customers was like a print press company who 0:09:01.120 --> 0:09:03.480 really needed it because they were paying like fifty cents 0:09:03.480 --> 0:09:06.200 of kilo one hour because of demand charges. And so 0:09:06.320 --> 0:09:09.360 you have all these weird niche projects where you have 0:09:09.480 --> 0:09:12.640 very high rates of return for new technology, but it 0:09:12.679 --> 0:09:16.440 amounts to like fifty million million, seventy five million initially 0:09:16.920 --> 0:09:19.520 of capital needed before it goes to trillion dollar scale. 0:09:20.040 --> 0:09:22.880 Can you talk about that model, you know, for for listeners, 0:09:22.960 --> 0:09:26.480 and when I say listeners, I also kind of mean myself, uh, 0:09:26.480 --> 0:09:29.560 but for listeners who maybe don't understand it. What was 0:09:29.679 --> 0:09:33.400 that model that you pioneered at Sun Edison, that original 0:09:33.440 --> 0:09:35.400 model when you say, you've got these deals with Whole 0:09:35.440 --> 0:09:38.800 Foods and others. What was the sort of uh, the 0:09:38.840 --> 0:09:42.960 sort of breakthrough business model that you pursued there. Yeah, so, 0:09:43.080 --> 0:09:44.880 I mean when I worked with Whole Foods, I remember 0:09:44.960 --> 0:09:48.480 it was great. The guy who ran the store in Edgewater, 0:09:48.559 --> 0:09:51.440 New Jersey really wanted to put solar panels on his roof, 0:09:51.520 --> 0:09:54.600 and he said, Jerry, yours is the first model. Lets 0:09:54.640 --> 0:09:56.920 me do this because every other model I had to 0:09:57.000 --> 0:09:59.800 pay four and fifty thousand dollars for these solar panels 0:10:00.200 --> 0:10:03.240 and wait for ten years to get my payback. Right, 0:10:03.360 --> 0:10:05.520 what we did was we said, no, we'll own the 0:10:05.559 --> 0:10:09.200 panels and we'll just charge you for the electricity every month. 0:10:09.400 --> 0:10:11.880 And so it's pay as you save. And when I 0:10:11.920 --> 0:10:15.240 talked to the CFO above him of the Eastern Region, 0:10:15.360 --> 0:10:17.640 she was like, you know, this is two thousand and three. 0:10:17.880 --> 0:10:20.640 Whole Foods is growing so fast, jigger that I either 0:10:20.720 --> 0:10:23.920 can buy a solar system or open a new store. 0:10:25.120 --> 0:10:27.800 And so I'm not going to buy a solar system. 0:10:27.840 --> 0:10:29.839 And so as soon as we were able to give 0:10:29.920 --> 0:10:33.600 them this pay as you save contracts, she was like done. Like, 0:10:34.120 --> 0:10:36.040 I mean, really the contract was a way to get 0:10:36.080 --> 0:10:40.440 past the CFO right the because they were saying, look, 0:10:40.480 --> 0:10:43.440 you know, like we shouldn't be putting our capital into 0:10:43.640 --> 0:10:46.400 this kind of asset, right, Like, that's not our core competence. 0:11:03.280 --> 0:11:06.280 So if we fast forward to today, you're at the 0:11:06.320 --> 0:11:10.480 Department of Energy, Now, what exactly are you doing over there? Well, 0:11:10.520 --> 0:11:13.760 it's all the next generation of entrepreneurs, right. So when 0:11:13.760 --> 0:11:17.480 you think about where I was in two thousand three, 0:11:17.600 --> 0:11:19.600 and you know, after we did the Goldman Fund and 0:11:20.120 --> 0:11:22.800 we had you know, five million dollar pipeline, you still 0:11:23.040 --> 0:11:25.440 had a hard time breaking through with banks. And so 0:11:25.840 --> 0:11:28.640 a lot of banks would say, look, I don't get 0:11:28.640 --> 0:11:31.920 paid that much, and you know, like you're basically asking 0:11:31.960 --> 0:11:35.120 me to do something weird. I have to basically write 0:11:35.120 --> 0:11:38.160 twelve white papers to educate my investment committee on this 0:11:38.200 --> 0:11:41.680 new asset class. And it's so much easier for me 0:11:41.760 --> 0:11:44.679 just to do a really weird real estate deal. And 0:11:44.760 --> 0:11:48.400 so why am I like spending all this time on it? Right? 0:11:48.440 --> 0:11:52.520 And so largely there isn't real technology risk. Sometimes there's 0:11:52.559 --> 0:11:55.679 perceived technology risk, like in fuel cells for instance, or 0:11:55.960 --> 0:11:59.680 in hydrogen where people are just afraid of it um, 0:11:59.679 --> 0:12:03.160 But most of the time it's just getting their attention, right. 0:12:03.200 --> 0:12:07.120 They they just really need someone to be first, and 0:12:07.200 --> 0:12:10.400 so they come into loan program's office. We give them 0:12:10.440 --> 0:12:15.160 money first and do a proper underwriting due diligence. You know, 0:12:15.200 --> 0:12:17.760 we're really respected for you know, how much of a 0:12:17.800 --> 0:12:20.400 pain in the ass we are to get through. And 0:12:20.400 --> 0:12:22.640 and then after we do the first deal, a whole 0:12:22.640 --> 0:12:24.720 bunch of banks say, all right, we're happy to be 0:12:25.200 --> 0:12:28.640 the second money in because we can read Department of 0:12:28.679 --> 0:12:30.880 Energies white papers and we can do all of that. 0:12:31.040 --> 0:12:32.840 We don't have to do that work, and we can 0:12:32.880 --> 0:12:35.079 do the next phase of it, and we're proud to 0:12:35.640 --> 0:12:38.400 play that role across I think twenty sectors or so. Now, 0:12:39.000 --> 0:12:41.080 so I started off, you know, in the beginning, we 0:12:41.080 --> 0:12:43.680 were talking about this tension because uh, you know, in 0:12:43.760 --> 0:12:46.240 the long term, it looks like there's still plenty of 0:12:46.280 --> 0:12:50.880 returns and possibilities for some of the new energy technologies 0:12:51.240 --> 0:12:53.840 to change the way we get get our energy. And 0:12:53.840 --> 0:12:55.880 I know, wind and well, I'm sure we'll talk about 0:12:55.880 --> 0:12:59.880 that and solar and hydrogen, all these new technologies. On 0:13:00.000 --> 0:13:05.200 the other hand, like right now in June of two, 0:13:05.559 --> 0:13:09.000 there's concerns about whether just the grid is going to 0:13:09.040 --> 0:13:12.440 stay up for Americans this summer, and in the Midwest 0:13:12.480 --> 0:13:15.680 there's warnings about that, and obviously in Texas going back 0:13:15.720 --> 0:13:18.520 to sitting aside everything else, like, how would you diagnose 0:13:18.640 --> 0:13:21.720 the issue, like what is going on, whether it's under investment, 0:13:21.800 --> 0:13:24.440 or what is going on such that this has suddenly 0:13:24.480 --> 0:13:27.640 become a concern again about whether the lights will stay 0:13:27.640 --> 0:13:30.120 on through the year. Well, I mean, you know, I 0:13:30.120 --> 0:13:32.719 think there's entire books that have been written about so 0:13:32.760 --> 0:13:34.480 I don't know that I could answer this question in 0:13:34.480 --> 0:13:37.600 a minute, But what I'd say is, we have a 0:13:37.679 --> 0:13:41.720 lot of old infrastructure, right. So the average coal plant 0:13:41.760 --> 0:13:45.280 in this country is almost fifty years old, right, And 0:13:45.360 --> 0:13:48.240 so when people say, oh, those environmentals are shutting down 0:13:48.320 --> 0:13:52.679 coal plants, I think old age is shutting down coal plants, right, 0:13:52.720 --> 0:13:54.600 And the same thing to have natural gas plants. We 0:13:54.720 --> 0:13:57.240 built a tremendous amount of natural gas plants in this 0:13:57.320 --> 0:14:01.000 country to deal with air conditioning. Remember, conditioning wasn't a 0:14:01.080 --> 0:14:04.120 thing in this country until the early eighties. That's when 0:14:04.160 --> 0:14:07.240 most people got air conditioning. And because it created this 0:14:07.400 --> 0:14:11.840 huge spike in demand during the day, um, we built 0:14:11.880 --> 0:14:14.440 a whole bunch of natural gas peaker plants and those 0:14:14.520 --> 0:14:17.240 natural gas peaker plants were built in largely the late 0:14:17.280 --> 0:14:20.520 eighties and then into the nineties, right, and so they're 0:14:20.520 --> 0:14:24.560 all old today because they were never made to last 0:14:24.640 --> 0:14:28.240 more than let's say years, Right. And so now we're 0:14:28.240 --> 0:14:32.080 sitting here and saying, should we reinvest in more coal 0:14:32.160 --> 0:14:35.680 plants and more natural gas plants, or should we use 0:14:35.840 --> 0:14:39.640 the next generation of technologies to you know, provide generation 0:14:39.720 --> 0:14:43.120 for our grid. And then at the same time, because 0:14:43.560 --> 0:14:46.560 we weren't really thinking about the dexterity of demand, we 0:14:46.560 --> 0:14:49.320 were only thinking about the dexterity supply. So today you 0:14:49.360 --> 0:14:52.560 can do whatever you want at home, and the generators 0:14:52.560 --> 0:14:54.800 have to ramp up and down to meet what you 0:14:54.840 --> 0:14:59.320 do at home. Right, But tomorrow you could really easy 0:14:59.440 --> 0:15:03.600 ramp up in down people's EV chargers at home, people's thermostats. Right, 0:15:03.640 --> 0:15:05.840 You could do lots of things if you gave them 0:15:05.880 --> 0:15:10.160 an incentive to do that. And it's cheaper to ramp 0:15:10.240 --> 0:15:13.920 people's uh, you know, EV chargers and air conditioners than 0:15:14.000 --> 0:15:16.440 it is to build a new power plant. What do 0:15:16.440 --> 0:15:18.080 you mean? What are you sorry? Can you explain that? 0:15:18.120 --> 0:15:20.680 What do you mean? It's cheaper to ramp people's EV 0:15:20.840 --> 0:15:24.360 chargers or so So I live in a nice neighborhood 0:15:24.360 --> 0:15:27.680 in Bethesda, Maryland, right, and every time I go for 0:15:27.720 --> 0:15:31.200 a walk, someone's got a new electric vehicle right. Right. 0:15:31.320 --> 0:15:34.760 You can imagine that these homes in this circuit, when 0:15:34.760 --> 0:15:38.440 it was built in or whatever it was, wasn't built 0:15:38.480 --> 0:15:40.680 for a bunch of electric vehicles to plug in. Right. 0:15:41.280 --> 0:15:43.680 So the utility companies coming in and saying, well, we're 0:15:43.680 --> 0:15:47.480 going to spend seventy million dollars to redo the distribution grid, Well, 0:15:47.520 --> 0:15:49.840 it's a lot cheaper for the utility just to put 0:15:49.840 --> 0:15:52.720 in a one thousand dollar bi directional charger in my 0:15:52.760 --> 0:15:57.280 garage and say, when everyone's plugged in at the same time, 0:15:57.360 --> 0:15:59.760 we're going to ramp everybody down from ten kill a 0:15:59.760 --> 0:16:02.200 while of draw to only one kill a lot of 0:16:02.280 --> 0:16:05.200 draw so that we don't have to upgrade this entire 0:16:05.240 --> 0:16:09.400 distribution circuit, but instead we actually just make sure that 0:16:09.600 --> 0:16:13.520 we're not over burdening the distribution circuit all at the 0:16:13.560 --> 0:16:18.000 same time. Right, Because most of the time my distribution 0:16:18.040 --> 0:16:21.600 circuit here on my block, I think the average capacity 0:16:21.640 --> 0:16:24.760 factor is maybet which means it's only being used roughly 0:16:25.320 --> 0:16:28.960 at the time, right, But they're going to increase that 0:16:29.280 --> 0:16:32.120 and pay seventy million bucks to do that and drop 0:16:32.120 --> 0:16:36.000 it down to right just because a bunch of people 0:16:36.040 --> 0:16:40.760 bought Tesla's right. At some point, that math doesn't work, right, 0:16:40.800 --> 0:16:45.359 So we've doubled the cost of transmission and distribution infrastructure 0:16:45.360 --> 0:16:47.600 in our country. We used to pay roughly two cents 0:16:47.640 --> 0:16:50.440 a kilo one hour for transmission distribution. Now we pay 0:16:50.520 --> 0:16:54.040 roughly four cents. And that's largely because we keep over 0:16:54.120 --> 0:16:57.240 building it and then using it less and less on 0:16:57.360 --> 0:17:00.440 an average basis, right, And so if you want to 0:17:00.560 --> 0:17:04.359 use it more, well you fluctuate the way the loads work. 0:17:04.960 --> 0:17:08.640 Because your house is thermal storage, right, like when you 0:17:09.040 --> 0:17:11.320 when you turn on your air conditioner, unless it's a 0:17:11.440 --> 0:17:15.119 super leaky house, then it maintains that temperature for like 0:17:15.200 --> 0:17:19.199 six to twelve hours. Right, So you could put the 0:17:19.240 --> 0:17:21.720 temperature down to sixty eight when we have excess power 0:17:21.720 --> 0:17:23.960 and capacity in the grid and let it float up 0:17:24.000 --> 0:17:27.000 to seventy two, you know, when you have a lack 0:17:27.040 --> 0:17:31.520 of capacity or generation in the grid. But that whole 0:17:31.600 --> 0:17:34.920 approach is not something that we do. Instead, Warren Buffett, 0:17:34.960 --> 0:17:38.280 I think, proposed that that he wanted to get paid 0:17:38.320 --> 0:17:41.119 like six billion dollars to build natural gas plants in 0:17:41.160 --> 0:17:45.440 Texas with on site natural gas storage just in case 0:17:45.440 --> 0:17:48.600 a polar vortex hit once a year. Why would you 0:17:48.640 --> 0:17:53.480 do that reversus paying poor people or paying middle class 0:17:53.480 --> 0:17:57.080 people or wealthy people to like fluctuate their loads. So, 0:17:57.800 --> 0:17:59.760 I mean it's the issue. Then it's not that we 0:18:00.160 --> 0:18:04.360 don't have enough energy, it's that we're not particularly good 0:18:04.560 --> 0:18:08.480 at I guess calibrating the flow of it depending on 0:18:08.680 --> 0:18:13.280 changing demand, is that right? Yeah, The asset utilization of 0:18:13.320 --> 0:18:17.040 the entire grid is going down, right, And when you 0:18:17.080 --> 0:18:19.879 pay a fixed amount of money for something and the 0:18:19.920 --> 0:18:22.960 asset utilization goes down, then the cost of it goes 0:18:23.080 --> 0:18:26.359 way up to use it because you're not using it 0:18:26.480 --> 0:18:29.480 very often, right, And so so we've got to figure 0:18:29.520 --> 0:18:33.240 out how to optimize for asset utilization and stop optimizing 0:18:33.320 --> 0:18:38.600 for cost per kilo one hour at this particular place. Right, 0:18:38.680 --> 0:18:40.840 What we care about is system costs, because all the 0:18:40.880 --> 0:18:44.720 system costs are shared amongst the rate payers, is they're 0:18:44.760 --> 0:18:48.560 referred to, and and so they don't care that the 0:18:48.720 --> 0:18:51.160 levelized cost of energy of that solar plants one point 0:18:51.240 --> 0:18:53.560 six cents of kill one hour, or that nuclear plants 0:18:53.600 --> 0:18:56.360 seven cents of kill one hour, or that pumped hydro 0:18:56.520 --> 0:18:59.800 storage facility costs two billion dollars. What they care about 0:18:59.880 --> 0:19:03.720 is to provide me with reliable electricity? Right? What do 0:19:03.800 --> 0:19:08.280 I have to pay at my house? Right? And so 0:19:08.400 --> 0:19:12.119 we evaluate things on an individualistic basis as opposed to 0:19:12.160 --> 0:19:15.080 a system wide basis, and so that has led to 0:19:15.320 --> 0:19:18.320 a bunch of individual decision making that has led to, 0:19:18.840 --> 0:19:22.320 you know, no optimization at the system level. At what level, 0:19:22.480 --> 0:19:26.399 whether it's the federal government or the regional power authorities? 0:19:26.440 --> 0:19:30.080 Like what would have to change in order to get, 0:19:30.119 --> 0:19:34.199 as you say, a sort of a superior evaluation of 0:19:34.240 --> 0:19:36.280 the grid so that we actually so that we stop 0:19:36.359 --> 0:19:41.280 optimizing for this sort of individual level get system wide allocation? 0:19:41.359 --> 0:19:44.639 What what? What incentive structure or regulatory change? Like, how 0:19:44.680 --> 0:19:46.800 do you how do you get to that? Uh? That 0:19:46.920 --> 0:19:50.399 different approach? So, I mean, we do a lot of 0:19:50.400 --> 0:19:52.359 this modeling at the Department of Energy, but we do 0:19:52.440 --> 0:19:56.160 it on a nationwide basis, which is not that helpful 0:19:56.400 --> 0:19:58.720 and a decision making the side of things because the 0:19:58.720 --> 0:20:00.800 decision is made at the low the level. Right. So 0:20:01.160 --> 0:20:04.119 each state has a public service commission, and that public 0:20:04.200 --> 0:20:06.800 service commission is one that makes this decision you could 0:20:06.840 --> 0:20:11.520 imagine the Public Service Commission is is hugely under resourced, right, 0:20:11.560 --> 0:20:14.520 and so they get ten thousand pages of documents from 0:20:14.520 --> 0:20:16.720 the utility and then they have to read it all 0:20:16.800 --> 0:20:19.280 and say here the twelve assumptions in here that we 0:20:19.320 --> 0:20:21.440 don't like, please go back and make these changes or 0:20:21.480 --> 0:20:24.200 whatever it is. But they don't really have the ability 0:20:24.280 --> 0:20:28.120 to do all of that modeling themselves. And so like 0:20:28.240 --> 0:20:30.240 what has happened in the past is, for instance, the 0:20:30.240 --> 0:20:33.399 city of l a Um owns one of the largest 0:20:33.440 --> 0:20:36.600 municipal utilities in the country, l a w P, and 0:20:36.680 --> 0:20:39.320 they hired the National Renewble Energy Laboratory to do a 0:20:39.359 --> 0:20:42.280 comprehensive study called l A one hundred and that it 0:20:42.320 --> 0:20:45.679 has said, here is the you know, four ways for 0:20:45.720 --> 0:20:49.960 you to optimize the system for decarbonization and reducing prices 0:20:50.000 --> 0:20:53.960 for everybody. And so now they're implementing that l A 0:20:54.000 --> 0:20:57.000 one hundred study because they pay the National Energy Laboratory 0:20:57.040 --> 0:21:00.199 to do their own thing. That made sense. But I 0:21:00.240 --> 0:21:03.720 think that unless you empower the public service commissions to 0:21:03.840 --> 0:21:07.399 be able to do their own independent analysis, which we 0:21:07.440 --> 0:21:09.760 could do. We have resources that Department energy, but they 0:21:09.800 --> 0:21:12.320 would have to ask us to do it. Um, Then 0:21:12.359 --> 0:21:15.399 it's hard to equip them with what they need to 0:21:15.560 --> 0:21:18.600 negotiate with the utility because remember, the utilities are not 0:21:18.640 --> 0:21:22.199 bad people, but they've been given a monopoly license and 0:21:22.240 --> 0:21:25.160 they have shareholders. They get paid based on how much 0:21:25.480 --> 0:21:29.040 iron they put in the ground, right, So the more 0:21:29.040 --> 0:21:32.200 money they invest, the more shareholder equity returns they make. 0:21:32.960 --> 0:21:35.639 So I'm fascinated by the idea of you know, you 0:21:35.680 --> 0:21:40.320 mentioned the banks having to write white papers on new 0:21:40.359 --> 0:21:44.800 types of technology. Um. And I can just imagine someone, 0:21:44.920 --> 0:21:48.040 you know, trying to wrap their heads around some new 0:21:48.040 --> 0:21:51.760 emerging energy technology and trying to convince their investment committee 0:21:51.800 --> 0:21:54.080 to put a bunch of money in it. But how 0:21:54.119 --> 0:21:57.280 does how does the d OE actually go about it? Like, 0:21:57.359 --> 0:21:59.280 can you give us some color on on what it's 0:21:59.320 --> 0:22:01.919 like if someone approaches you with a new idea or 0:22:01.960 --> 0:22:06.520 a new project, what is that process of approval actually 0:22:06.520 --> 0:22:11.920 look like? And how do you judge one project over another? Yeah, 0:22:11.920 --> 0:22:15.600 it's a great question, um, And I'd say that the 0:22:15.680 --> 0:22:18.439 first part of it's easy because look, what the Department 0:22:18.560 --> 0:22:22.280 Energy does mostly is invest in R and D and so, 0:22:22.359 --> 0:22:24.920 and we're increasingly doing a lot more on the commercialization 0:22:25.000 --> 0:22:28.119 side under Secretary Grant Home. But you know, when you 0:22:28.119 --> 0:22:31.199 think about what we have is we have ten thousand engineer, 0:22:31.320 --> 0:22:34.679 scientists and experts who work on our platform at extraordinary 0:22:34.760 --> 0:22:38.200 natural laboratories across the country. So there's not a single 0:22:38.280 --> 0:22:41.240 new idea that we ever get pitched, right, that idea 0:22:41.400 --> 0:22:44.560 is new to the marketplace. But the person who invented 0:22:44.600 --> 0:22:46.919 the patent probably works at one of our national apps 0:22:47.160 --> 0:22:51.080 and did it twenty seven years earlier. So so the 0:22:51.080 --> 0:22:53.879