Speaker 1: Hello, and welcome to another episode of the odd Locks Podcast.
Speaker 1: I'm Joe wisen't Thal and I'm Tracy Hallaway. Tracy attention
Speaker 1: that we keep coming back to, I think is that
Speaker 1: in this moment of high inflation, high energy costs, there
Speaker 1: seems to be I guess maybe maybe the way to
Speaker 1: describe it is a tension between long term planning and
Speaker 1: short term pain. And so in theory, this is a
Speaker 1: good case to be investing in sort of new energy,
Speaker 1: perhaps decarbonization technologies that reduce our reliance on fossil fuels
Speaker 1: in the countries that have particular access to them. But
Speaker 1: at the same time, there's also a lot of impulse
Speaker 1: to just get the price down right now. Yeah. To me,
Speaker 1: it comes back to just the cyclicality of the energy industry.
Speaker 1: And if you think back to when we had um
Speaker 1: the oil prices going down quite suddenly and everyone was
Speaker 1: talking about a glut in shale oil and all this
Speaker 1: energy industry capacity had expanded too quickly and now you know,
Speaker 1: there wasn't enough demand to actually justify it. And then
Speaker 1: fast forward to today and it seems like we're in
Speaker 1: completely the opposite problem, and so it just seems kind
Speaker 1: of crazy to me to be swinging from you know,
Speaker 1: access to shortages on like a five to seven year timeline,
Speaker 1: and it seems like it's really bad for as you mentioned,
Speaker 1: planning for the future, right, how are you supposed to
Speaker 1: attract investment into the space if you're going from feast
Speaker 1: to famine all the time. So I guess one question
Speaker 1: that arises is can the state? Can the government player
Speaker 1: role in ameliorating the swings on both sides, essentially reducing
Speaker 1: the volatility, And the government has this infinite balance, it
Speaker 1: doesn't have to optimize for profits itself. Obviously, you know,
Speaker 1: in theory it doesn't want to waste money, but itself
Speaker 1: does not. The government itself doesn't have a profit motive.
Speaker 1: And can there be sort of a role for planning,
Speaker 1: for thinking strategically for public investments such that we don't
Speaker 1: have these so that we actually have like a strategy
Speaker 1: of vision that's not just sort of at the whims
Speaker 1: of these incredible swings that we have in what seems
Speaker 1: like a fairly short period of time. Absolutely, and I
Speaker 1: think you put it well like that's the question whether
Speaker 1: there's a role for the government to come in as
Speaker 1: a source of stability and an extremely cyclical market. And
Speaker 1: also I don't think anyone's really talks through exactly what
Speaker 1: the different roles are for the government versus private investors.
Speaker 1: And I still think, you know, when you look at E.
Speaker 1: S G. For instance, UM, there seems to be a
Speaker 1: lot of onus placed on private capital and this idea
Speaker 1: that well capital is going to come in and fix everything.
Speaker 1: But actually I still think you need the government to
Speaker 1: come in and do a lot of this. But anyway,
Speaker 1: this sort of question about what the different roles are
Speaker 1: for private versus public capital, I think is a fascinating one, right.
Speaker 1: And there's one other phenomenon. You know, we talk a
Speaker 1: lot about gas and gasoline prices, and the other thing
Speaker 1: that's going on in energy to especially going to the summer,
Speaker 1: is concerns about the grid, like various regional grid operators
Speaker 1: warning that blackouts are going to increase, uh this summer,
Speaker 1: potentially lots of concerns once again about the Texas grid,
Speaker 1: but not just Texas, it's really everywhere is worried that
Speaker 1: this sort of like baseload power has seen under investment,
Speaker 1: and so lots of big questions about the sort of
Speaker 1: what role can the public sector play and all of
Speaker 1: these challenges, both short term and long term. So I'm
Speaker 1: very excited. We have a very special guest today. We're
Speaker 1: gonna be speaking with Jigger Shaw. He is the director
Speaker 1: of the Loan Program Office at the Department of Energy
Speaker 1: and in a prime spot to be thinking about and
Speaker 1: addressing some of this stuff. So, Jigger, thank you so
Speaker 1: much for coming on odd lot. Oh it's great, thanks
Speaker 1: for having me. It's ah, you're you're a staple in
Speaker 1: my podcast listen. Uh you absolutely absolutely flattered, dear. So
Speaker 1: what do you tell us, like, just give us the
Speaker 1: sort of quick summary of like what you do, what
Speaker 1: you do at the d o E, and your background,
Speaker 1: like how you got into this role. Yeah, no, it's
Speaker 1: it's it's a good question. I'm a mechanical engineer by training,
Speaker 1: and my my career has really largely been about figuring
Speaker 1: out why technologies that are already fully proven don't scale, right.
Speaker 1: So I started UM in the solar industry and uh,
Speaker 1: you know, started sun Edison, which largely invented the power
Speaker 1: Purchase Agreement, which is now attracted you know, over two
Speaker 1: trillion dollars of capital uh into uh solar objects right
Speaker 1: around the world using that financial structure, and then you know,
Speaker 1: after that, did some nonprofit work with Richard Branson and
Speaker 1: understood a lot more about lots of other sectors UM,
Speaker 1: and then started Generate Capital with two co founders in
Speaker 1: twenty fourteen, where we really changed the entire way that
Speaker 1: infrastructure investors thought about, UH, first of a kind deployment
Speaker 1: and scaling up new sectors because you can imagine the
Speaker 1: vast majority of people before that we're in fund structures,
Speaker 1: and fund structures, you know, you get paid more if
Speaker 1: you make a higher I R R, and that doesn't
Speaker 1: quite work for commercialization. So we flipped the script on
Speaker 1: that and created the first sea corp to do that
Speaker 1: back in before tax rates went down. UH, and then
Speaker 1: got tapped for the the you know d O WE
Speaker 1: Loan Program's Office as a perch by which we you know,
Speaker 1: helped to commercialized technologies UM from the U. S. Government seat.
Speaker 1: So I'm gonna go ahead and clean and say that
Speaker 1: I wrote some very unflattering things about Sun Edison, but
Speaker 1: I did it. I think it was around uh so
Speaker 1: after you had left the company, and it was mostly
Speaker 1: it was mostly about the leverage that they taken on
Speaker 1: and very undisciplined after I left, so they deserved all
Speaker 1: of the criticism hard blog posts. Okay, but actually I
Speaker 1: want to go back to something you just said, which
Speaker 1: is this idea of proven technologies that are nevertheless difficult
Speaker 1: to scale. So what is the issue there? Because you know,
Speaker 1: you would assume that if someone comes along and says,
Speaker 1: I have this amazing new technology to produce energy, you know,
Speaker 1: hopefully uh, you know, cleaner way than than we do traditionally,
Speaker 1: you would naturally expect people to get very excited about
Speaker 1: it and for some private investors to start pouring money
Speaker 1: into it. But historically that hasn't been the case. Yeah,
Speaker 1: it's a weird thing, right, I mean, the what happened
Speaker 1: after the Arab oil crisis in the nineteen seventies as
Speaker 1: we invented the Department of Energy, right, we put it
Speaker 1: in place, And what happened on the technology front is
Speaker 1: America has figured out how to make things smaller and
Speaker 1: more uh you know, sort of bite sized. Right, So
Speaker 1: the phone in your pocket is more powerful than all
Speaker 1: the computers that you know, it took to put a
Speaker 1: man on the moon. The same thing is true with
Speaker 1: solar panels. It's the same solar panel that you put
Speaker 1: thousands of in one field and make utility scale solar,
Speaker 1: or twelve of them on your roof for residential solars.
Speaker 1: So when I first started sun Edison back in two
Speaker 1: thousand three, we had signed contracts with Whole Food, Staples,
Speaker 1: I Kea, and others right of way and people said,
Speaker 1: that's great, Jugger, but you only need sixty million dollars
Speaker 1: of capital, And I was like, only like sixty millions
Speaker 1: a lot. And I started this company by taking out
Speaker 1: a home equity loan on my house, and so you know, like,
Speaker 1: so I feel like that's a big number. And most
Speaker 1: of these folks are like jigger. Infrastructure investors don't get
Speaker 1: out of bed for less than two und fifty million dollars, right,
Speaker 1: And so if you can't aggregate up two hundred fifty
Speaker 1: million dollars with projects, then you know you're not gonna
Speaker 1: get any attention from us. And I'm like, well, but
Speaker 1: we miniaturized the technology. It's no longer billion our scale
Speaker 1: just to get in. You could do it at scale
Speaker 1: and up rooftop. And so we ended up getting money
Speaker 1: from Goldman Saxes, you know, Special Situations Group, and you
Speaker 1: know they made a nice seventeen percent rate of return
Speaker 1: to to do the first set of deals, and then
Speaker 1: once we got to that multi hundred million dollar scale,
Speaker 1: we got Walls far Ago and Union Bank of California
Speaker 1: and lots of other folks to come in. But you
Speaker 1: know that's happening in battery storage. I mean when Generate
Speaker 1: Capital first started funding battery storage, I think the check
Speaker 1: size that STEM needed at the time was twenty million bucks, right,
Speaker 1: and you know they had all these battery storage deals,
Speaker 1: like you know, behind the meter. I think one of
Speaker 1: their first customers was like a print press company who
Speaker 1: really needed it because they were paying like fifty cents
Speaker 1: of kilo one hour because of demand charges. And so
Speaker 1: you have all these weird niche projects where you have
Speaker 1: very high rates of return for new technology, but it
Speaker 1: amounts to like fifty million million, seventy five million initially
Speaker 1: of capital needed before it goes to trillion dollar scale.
Speaker 1: Can you talk about that model, you know, for for listeners,
Speaker 1: and when I say listeners, I also kind of mean myself, uh,
Speaker 1: but for listeners who maybe don't understand it. What was
Speaker 1: that model that you pioneered at Sun Edison, that original
Speaker 1: model when you say, you've got these deals with Whole
Speaker 1: Foods and others. What was the sort of uh, the
Speaker 1: sort of breakthrough business model that you pursued there. Yeah, so,
Speaker 1: I mean when I worked with Whole Foods, I remember
Speaker 1: it was great. The guy who ran the store in Edgewater,
Speaker 1: New Jersey really wanted to put solar panels on his roof,
Speaker 1: and he said, Jerry, yours is the first model. Lets
Speaker 1: me do this because every other model I had to
Speaker 1: pay four and fifty thousand dollars for these solar panels
Speaker 1: and wait for ten years to get my payback. Right,
Speaker 1: what we did was we said, no, we'll own the
Speaker 1: panels and we'll just charge you for the electricity every month.
Speaker 1: And so it's pay as you save. And when I
Speaker 1: talked to the CFO above him of the Eastern Region,
Speaker 1: she was like, you know, this is two thousand and three.
Speaker 1: Whole Foods is growing so fast, jigger that I either
Speaker 1: can buy a solar system or open a new store.
Speaker 1: And so I'm not going to buy a solar system.
Speaker 1: And so as soon as we were able to give
Speaker 1: them this pay as you save contracts, she was like done. Like,
Speaker 1: I mean, really the contract was a way to get
Speaker 1: past the CFO right the because they were saying, look,
Speaker 1: you know, like we shouldn't be putting our capital into
Speaker 1: this kind of asset, right, Like, that's not our core competence.
Speaker 1: So if we fast forward to today, you're at the
Speaker 1: Department of Energy, Now, what exactly are you doing over there? Well,
Speaker 1: it's all the next generation of entrepreneurs, right. So when
Speaker 1: you think about where I was in two thousand three,
Speaker 1: and you know, after we did the Goldman Fund and
Speaker 1: we had you know, five million dollar pipeline, you still
Speaker 1: had a hard time breaking through with banks. And so
Speaker 1: a lot of banks would say, look, I don't get
Speaker 1: paid that much, and you know, like you're basically asking
Speaker 1: me to do something weird. I have to basically write
Speaker 1: twelve white papers to educate my investment committee on this
Speaker 1: new asset class. And it's so much easier for me
Speaker 1: just to do a really weird real estate deal. And
Speaker 1: so why am I like spending all this time on it? Right?
Speaker 1: And so largely there isn't real technology risk. Sometimes there's
Speaker 1: perceived technology risk, like in fuel cells for instance, or
Speaker 1: in hydrogen where people are just afraid of it um,
Speaker 1: But most of the time it's just getting their attention, right.
Speaker 1: They they just really need someone to be first, and
Speaker 1: so they come into loan program's office. We give them
Speaker 1: money first and do a proper underwriting due diligence. You know,
Speaker 1: we're really respected for you know, how much of a
Speaker 1: pain in the ass we are to get through. And
Speaker 1: and then after we do the first deal, a whole
Speaker 1: bunch of banks say, all right, we're happy to be
Speaker 1: the second money in because we can read Department of
Speaker 1: Energies white papers and we can do all of that.
Speaker 1: We don't have to do that work, and we can
Speaker 1: do the next phase of it, and we're proud to
Speaker 1: play that role across I think twenty sectors or so. Now,
Speaker 1: so I started off, you know, in the beginning, we
Speaker 1: were talking about this tension because uh, you know, in
Speaker 1: the long term, it looks like there's still plenty of
Speaker 1: returns and possibilities for some of the new energy technologies
Speaker 1: to change the way we get get our energy. And
Speaker 1: I know, wind and well, I'm sure we'll talk about
Speaker 1: that and solar and hydrogen, all these new technologies. On
Speaker 1: the other hand, like right now in June of two,
Speaker 1: there's concerns about whether just the grid is going to
Speaker 1: stay up for Americans this summer, and in the Midwest
Speaker 1: there's warnings about that, and obviously in Texas going back
Speaker 1: to sitting aside everything else, like, how would you diagnose
Speaker 1: the issue, like what is going on, whether it's under investment,
Speaker 1: or what is going on such that this has suddenly
Speaker 1: become a concern again about whether the lights will stay
Speaker 1: on through the year. Well, I mean, you know, I
Speaker 1: think there's entire books that have been written about so
Speaker 1: I don't know that I could answer this question in
Speaker 1: a minute, But what I'd say is, we have a
Speaker 1: lot of old infrastructure, right. So the average coal plant
Speaker 1: in this country is almost fifty years old, right, And
Speaker 1: so when people say, oh, those environmentals are shutting down
Speaker 1: coal plants, I think old age is shutting down coal plants, right,
Speaker 1: And the same thing to have natural gas plants. We
Speaker 1: built a tremendous amount of natural gas plants in this
Speaker 1: country to deal with air conditioning. Remember, conditioning wasn't a
Speaker 1: thing in this country until the early eighties. That's when
Speaker 1: most people got air conditioning. And because it created this
Speaker 1: huge spike in demand during the day, um, we built
Speaker 1: a whole bunch of natural gas peaker plants and those
Speaker 1: natural gas peaker plants were built in largely the late
Speaker 1: eighties and then into the nineties, right, and so they're
Speaker 1: all old today because they were never made to last
Speaker 1: more than let's say years, Right. And so now we're
Speaker 1: sitting here and saying, should we reinvest in more coal
Speaker 1: plants and more natural gas plants, or should we use
Speaker 1: the next generation of technologies to you know, provide generation
Speaker 1: for our grid. And then at the same time, because
Speaker 1: we weren't really thinking about the dexterity of demand, we
Speaker 1: were only thinking about the dexterity supply. So today you
Speaker 1: can do whatever you want at home, and the generators
Speaker 1: have to ramp up and down to meet what you
Speaker 1: do at home. Right, But tomorrow you could really easy
Speaker 1: ramp up in down people's EV chargers at home, people's thermostats. Right,
Speaker 1: You could do lots of things if you gave them
Speaker 1: an incentive to do that. And it's cheaper to ramp
Speaker 1: people's uh, you know, EV chargers and air conditioners than
Speaker 1: it is to build a new power plant. What do
Speaker 1: you mean? What are you sorry? Can you explain that?
Speaker 1: What do you mean? It's cheaper to ramp people's EV
Speaker 1: chargers or so So I live in a nice neighborhood
Speaker 1: in Bethesda, Maryland, right, and every time I go for
Speaker 1: a walk, someone's got a new electric vehicle right. Right.
Speaker 1: You can imagine that these homes in this circuit, when
Speaker 1: it was built in or whatever it was, wasn't built
Speaker 1: for a bunch of electric vehicles to plug in. Right.
Speaker 1: So the utility companies coming in and saying, well, we're
Speaker 1: going to spend seventy million dollars to redo the distribution grid, Well,
Speaker 1: it's a lot cheaper for the utility just to put
Speaker 1: in a one thousand dollar bi directional charger in my
Speaker 1: garage and say, when everyone's plugged in at the same time,
Speaker 1: we're going to ramp everybody down from ten kill a
Speaker 1: while of draw to only one kill a lot of
Speaker 1: draw so that we don't have to upgrade this entire
Speaker 1: distribution circuit, but instead we actually just make sure that
Speaker 1: we're not over burdening the distribution circuit all at the
Speaker 1: same time. Right, Because most of the time my distribution
Speaker 1: circuit here on my block, I think the average capacity
Speaker 1: factor is maybet which means it's only being used roughly
Speaker 1: at the time, right, But they're going to increase that
Speaker 1: and pay seventy million bucks to do that and drop
Speaker 1: it down to right just because a bunch of people
Speaker 1: bought Tesla's right. At some point, that math doesn't work, right,
Speaker 1: So we've doubled the cost of transmission and distribution infrastructure
Speaker 1: in our country. We used to pay roughly two cents
Speaker 1: a kilo one hour for transmission distribution. Now we pay
Speaker 1: roughly four cents. And that's largely because we keep over
Speaker 1: building it and then using it less and less on
Speaker 1: an average basis, right, And so if you want to
Speaker 1: use it more, well you fluctuate the way the loads work.
Speaker 1: Because your house is thermal storage, right, like when you
Speaker 1: when you turn on your air conditioner, unless it's a
Speaker 1: super leaky house, then it maintains that temperature for like
Speaker 1: six to twelve hours. Right, So you could put the
Speaker 1: temperature down to sixty eight when we have excess power
Speaker 1: and capacity in the grid and let it float up
Speaker 1: to seventy two, you know, when you have a lack
Speaker 1: of capacity or generation in the grid. But that whole
Speaker 1: approach is not something that we do. Instead, Warren Buffett,
Speaker 1: I think, proposed that that he wanted to get paid
Speaker 1: like six billion dollars to build natural gas plants in
Speaker 1: Texas with on site natural gas storage just in case
Speaker 1: a polar vortex hit once a year. Why would you
Speaker 1: do that reversus paying poor people or paying middle class
Speaker 1: people or wealthy people to like fluctuate their loads. So,
Speaker 1: I mean it's the issue. Then it's not that we
Speaker 1: don't have enough energy, it's that we're not particularly good
Speaker 1: at I guess calibrating the flow of it depending on
Speaker 1: changing demand, is that right? Yeah, The asset utilization of
Speaker 1: the entire grid is going down, right, And when you
Speaker 1: pay a fixed amount of money for something and the
Speaker 1: asset utilization goes down, then the cost of it goes
Speaker 1: way up to use it because you're not using it
Speaker 1: very often, right, And so so we've got to figure
Speaker 1: out how to optimize for asset utilization and stop optimizing
Speaker 1: for cost per kilo one hour at this particular place. Right,
Speaker 1: What we care about is system costs, because all the
Speaker 1: system costs are shared amongst the rate payers, is they're
Speaker 1: referred to, and and so they don't care that the
Speaker 1: levelized cost of energy of that solar plants one point
Speaker 1: six cents of kill one hour, or that nuclear plants
Speaker 1: seven cents of kill one hour, or that pumped hydro
Speaker 1: storage facility costs two billion dollars. What they care about
Speaker 1: is to provide me with reliable electricity? Right? What do
Speaker 1: I have to pay at my house? Right? And so
Speaker 1: we evaluate things on an individualistic basis as opposed to
Speaker 1: a system wide basis, and so that has led to
Speaker 1: a bunch of individual decision making that has led to,
Speaker 1: you know, no optimization at the system level. At what level,
Speaker 1: whether it's the federal government or the regional power authorities?
Speaker 1: Like what would have to change in order to get,
Speaker 1: as you say, a sort of a superior evaluation of
Speaker 1: the grid so that we actually so that we stop
Speaker 1: optimizing for this sort of individual level get system wide allocation?
Speaker 1: What what? What incentive structure or regulatory change? Like, how
Speaker 1: do you how do you get to that? Uh? That
Speaker 1: different approach? So, I mean, we do a lot of
Speaker 1: this modeling at the Department of Energy, but we do
Speaker 1: it on a nationwide basis, which is not that helpful
Speaker 1: and a decision making the side of things because the
Speaker 1: decision is made at the low the level. Right. So
Speaker 1: each state has a public service commission, and that public
Speaker 1: service commission is one that makes this decision you could
Speaker 1: imagine the Public Service Commission is is hugely under resourced, right,
Speaker 1: and so they get ten thousand pages of documents from
Speaker 1: the utility and then they have to read it all
Speaker 1: and say here the twelve assumptions in here that we
Speaker 1: don't like, please go back and make these changes or
Speaker 1: whatever it is. But they don't really have the ability
Speaker 1: to do all of that modeling themselves. And so like
Speaker 1: what has happened in the past is, for instance, the
Speaker 1: city of l a Um owns one of the largest
Speaker 1: municipal utilities in the country, l a w P, and
Speaker 1: they hired the National Renewble Energy Laboratory to do a
Speaker 1: comprehensive study called l A one hundred and that it
Speaker 1: has said, here is the you know, four ways for
Speaker 1: you to optimize the system for decarbonization and reducing prices
Speaker 1: for everybody. And so now they're implementing that l A
Speaker 1: one hundred study because they pay the National Energy Laboratory
Speaker 1: to do their own thing. That made sense. But I
Speaker 1: think that unless you empower the public service commissions to
Speaker 1: be able to do their own independent analysis, which we
Speaker 1: could do. We have resources that Department energy, but they
Speaker 1: would have to ask us to do it. Um, Then
Speaker 1: it's hard to equip them with what they need to
Speaker 1: negotiate with the utility because remember, the utilities are not
Speaker 1: bad people, but they've been given a monopoly license and
Speaker 1: they have shareholders. They get paid based on how much
Speaker 1: iron they put in the ground, right, So the more
Speaker 1: money they invest, the more shareholder equity returns they make.
Speaker 1: So I'm fascinated by the idea of you know, you
Speaker 1: mentioned the banks having to write white papers on new
Speaker 1: types of technology. Um. And I can just imagine someone,
Speaker 1: you know, trying to wrap their heads around some new
Speaker 1: emerging energy technology and trying to convince their investment committee
Speaker 1: to put a bunch of money in it. But how
Speaker 1: does how does the d OE actually go about it? Like,
Speaker 1: can you give us some color on on what it's
Speaker 1: like if someone approaches you with a new idea or
Speaker 1: a new project, what is that process of approval actually
Speaker 1: look like? And how do you judge one project over another? Yeah,
Speaker 1: it's a great question, um, And I'd say that the
Speaker 1: first part of it's easy because look, what the Department
Speaker 1: Energy does mostly is invest in R and D and so,
Speaker 1: and we're increasingly doing a lot more on the commercialization
Speaker 1: side under Secretary Grant Home. But you know, when you
Speaker 1: think about what we have is we have ten thousand engineer,
Speaker 1: scientists and experts who work on our platform at extraordinary
Speaker 1: natural laboratories across the country. So there's not a single
Speaker 1: new idea that we ever get pitched, right, that idea
Speaker 1: is new to the marketplace. But the person who invented
Speaker 1: the patent probably works at one of our national apps
Speaker 1: and did it twenty seven years earlier. So so the
Speaker 1: the so the technology part of it doesn't scare us
Speaker 1: because we've got all these experts in the platform. On
Speaker 1: your the second half of your question, i'd say that
Speaker 1: we don't compare produc jecks to each other. Right, if
Speaker 1: if they qualify for the Loan Programs Office and they
Speaker 1: can get through the gauntlet, then we'll give them alone. Right,
Speaker 1: they have to be you know, technology, they have to
Speaker 1: meet our innovation standards, they have to meet our greenhouse
Speaker 1: gas emission reduction standards. But if they qualify, we don't say, well,
Speaker 1: this one saves one percent more than you do, so
Speaker 1: therefore we're going to give it to this one, not
Speaker 1: that one. We'll give it to both of them, because
Speaker 1: from our perspective, it's about starting the flywheel, right, It's
Speaker 1: about putting the first and second and third projects out
Speaker 1: the door, and then they're going to have to win
Speaker 1: on their own merits in the battlefield we call capitalism.
Speaker 1: So what are you doing, Like, what specific areas are
Speaker 1: interesting right now? Do you in terms of technologies that
Speaker 1: you're potentially backing or thinking about backing or see is
Speaker 1: very promising? Like what are the what when you look
Speaker 1: at the opportunities, what what's exciting? Well, we spend a
Speaker 1: lot of time in twenty or so different sectors, right
Speaker 1: there's a lot of teas that have been done around
Speaker 1: how you decarbonize the grid, how you decarbonize the economy, etcetera.
Speaker 1: I'd say that where we're getting the most interest right
Speaker 1: where people are actually submitting applications are in nuclear energy,
Speaker 1: in carbon sigiustration and storage, hydrogen battery storage, transmission, e
Speaker 1: V charging, UH rollouts, but also critical minerals. You can
Speaker 1: imagine with all of the rise and costs of critical minerals,
Speaker 1: we're getting a ton of interest for people to you know,
Speaker 1: to mind more critical minerals here, to process them more efficiently, etcetera.
Speaker 1: You mentioned battery storage, and I'm very like. I feel
Speaker 1: like I read very mixed things, whereas some people talk
Speaker 1: about like, okay, batteries are really key and they're particularly
Speaker 1: going to be crucial for increasing our ability to rely
Speaker 1: on renewable sources like solar and wind because then they
Speaker 1: we can preserve the energy at night or when the
Speaker 1: wind isn't storing. And then others say, you know what,
Speaker 1: it's a pipe dream. People have been pitching grid level
Speaker 1: battery storage for years. It's not going to get cheap enough,
Speaker 1: and we're like not even close to having battery capacity
Speaker 1: to meaningful, meaningful you move it in, and not being
Speaker 1: an engineer myself, I don't really have any way of
Speaker 1: evaluating these competing claims. How do you think what is
Speaker 1: the battery storage opportunity and what is like where can
Speaker 1: battery storage play a meaningful role in accelerating adoption of
Speaker 1: some of these non carbon based UH power sources. Yeah, no,
Speaker 1: it's a fascinating question, you know, like the the the
Speaker 1: whole narrative around storage fascinates me because it's actually not
Speaker 1: that complicated, but everyone makes it super complicated, right, I
Speaker 1: need the simple, the simple sm So you guys have
Speaker 1: been studying supply chains on your podcast for a long
Speaker 1: time now, right, And the largest supply chain in the
Speaker 1: entire world that is real time only is the electricity market.
Speaker 1: Yeah right, every single millisecond of every single day, the
Speaker 1: supply and demand has to equal each other. That is exhausting, right.
Speaker 1: Think about like how transportation feels works, or or agriculture,
Speaker 1: there's like storage everywhere. You have grain elevators, you have
Speaker 1: tank farms, you have all these things. We don't have
Speaker 1: storage on the grid. The only time we built storage
Speaker 1: was in the nine seventies. We had this thing called
Speaker 1: pumped hydro. And the reason we built it is because
Speaker 1: the nuclear plants of the nineteen seventies were designed to
Speaker 1: never be turned down, and so you had all this
Speaker 1: excess power at times, and so we needed to dump
Speaker 1: the extra power. So that's just pushing water up and
Speaker 1: then you let it down. That's exactly right, right, And
Speaker 1: so now what we're saying is we basically have found it.
Speaker 1: By adding storage into this supply chain, it makes everyone's
Speaker 1: job easier. You don't have to do this real time
Speaker 1: thing all the time. You can just store power. And
Speaker 1: so when you have some circuit that you know has
Speaker 1: a squirrel that gets you know, fried on it and
Speaker 1: so like it goes down, you can use a battery
Speaker 1: to to like fix that problem if something happens, to
Speaker 1: use a battery, right, And so so that's why we
Speaker 1: have battery storage. Right. We've been working on it since
Speaker 1: the nineties. I've been working on it like with Sandy
Speaker 1: and National Laboratories, etcetera, since nineties. And and so the
Speaker 1: technology though, got cheap because we started using lithium mind
Speaker 1: batteries for laptops and cell phones. And then Elon Musk said, well,
Speaker 1: that supply chain is there, so we should use it
Speaker 1: for electric vehicles. And so then that got even cheaper.
Speaker 1: The cost came down using rights law. Right, it's not
Speaker 1: new information, right, the learning curve has been around for decades,
Speaker 1: and you know, after five or six cumulative doublings of experience,
Speaker 1: the cost has come down to the point where people
Speaker 1: are like, this is cheaper than building a natural gas
Speaker 1: peaker plant. That's what a Yes figured out back in
Speaker 1: so they started building a bunch of battery storage because
Speaker 1: it was cheaper than running their their peaker plants. And
Speaker 1: then people just kept growing and then but just the
Speaker 1: sheer scale of it, I think it's hard for people
Speaker 1: to fathom. Yeah, so I'll just give you a sense. So, um,
Speaker 1: when you think about electric vehicles, Uh, the President has
Speaker 1: said that we're gonna have fifty electric vehicles by right
Speaker 1: being sold every year. To do that, we'll need eight
Speaker 1: hundred gigawatt hours of um of uh battery storage. Right
Speaker 1: to put a kill one hours of battery and your
Speaker 1: four f one fifty lightning and your sixty six kilo
Speaker 1: one hour battery pack and your hyundaionic right and and
Speaker 1: so that's eight hundred giga what hours right, um, And
Speaker 1: just put that in perspective. You know, we use like
Speaker 1: four thousand tarowatt hours, right, So that's like four million
Speaker 1: giga what hours per year in the United States. Right. So, um,
Speaker 1: So eight hunred gig one hours the total amount of
Speaker 1: utility scale battery storage that we expect to be on
Speaker 1: the grid by a hundred and fifty giga what hours, Right,
Speaker 1: So we will have eight hundred gig at hours of
Speaker 1: batteries sold in people's cars in one year. The total
Speaker 1: cumulative amount of battery storage on the grid in utility
Speaker 1: scale battery storage will be a hundred and fifty gig
Speaker 1: one hours. And then blow your mind even more, we
Speaker 1: just closed alone for hydrogen storage right in a salt
Speaker 1: cavern in Delta, Utah. That one salt cavern will store
Speaker 1: a hundred and fifty gigo at hours where the hydage group.
Speaker 1: So when it comes to designing the supply chain for energy,
Speaker 1: as you mentioned, who should be the ultimate standards setterer there?
Speaker 1: Because on the one hand, you have the government, which
Speaker 1: clearly has priorities of its own, and you would assume
Speaker 1: that increase battery storage or something like that would be
Speaker 1: part of it. But on the other hand, you do
Speaker 1: have pools of private capital that are often funding a
Speaker 1: lot of these projects and efforts, and I'm sure they
Speaker 1: have their own preferences as well about how these things
Speaker 1: should work. So who should be the standard setter here
Speaker 1: or or how should these two um groups kind of
Speaker 1: oh work together. It is a fascinating question, and every
Speaker 1: question you ask, I think like needs its own one
Speaker 1: hour podcast. We could do a series, We could have
Speaker 1: like a five episode series with you. We might do
Speaker 1: maybe we'll do that later in the year. But like
Speaker 1: I think that I think when you think about your question, right,
Speaker 1: like who should be the standard bearers? So Department of
Speaker 1: Energy writes a report, right, and says, here's the status
Speaker 1: of all the technologies that we've done R and D
Speaker 1: in and here's where we think the pathways will work
Speaker 1: and the roadmap and all that stuff. Right, And then people,
Speaker 1: you know whatever, Sometimes they ignore it, sometimes they read
Speaker 1: it it's great, um. And then at some point you've
Speaker 1: got venture capitalists, right, and then they fund companies and
Speaker 1: they have you know, all these different companies. And remember
Speaker 1: like in two thousand nine it was like Heinrich Fisker
Speaker 1: versus Elon Musk, right, and there was like Fisker Automotive
Speaker 1: and this kind of thing, right, And why did Elon
Speaker 1: Musk win versus Heinrich Fisker. It wasn't because his technology
Speaker 1: was better or execution around like you know this particular
Speaker 1: thing or that particular thing. It was because like a
Speaker 1: raw grit and perseverance and all the things that you
Speaker 1: know we herald entrepreneurs for right. And so he succeeds, right,
Speaker 1: and he you know, now has the most valuable car
Speaker 1: company in the world, and it's it's wonderful, right. But
Speaker 1: it didn't like come out of some sort of like
Speaker 1: thing that I wrote up in a roadmap at Department
Speaker 1: of Energy, you know, in two thousand and seven and
Speaker 1: said this is exactly how the electric vehicle market will work, right,
Speaker 1: and so so that happens that way, right. But then
Speaker 1: when you get to trillion dollars scale, right, then the
Speaker 1: structure investors don't care. That's the interesting thing, right, what
Speaker 1: they care about, and they're the large bucket of money
Speaker 1: that is going to spend the ten shillion dollars to
Speaker 1: decarbonize the United States and the larger numbers to de
Speaker 1: carbonize the world. And for them, they want to contract
Speaker 1: that they think is going to pay them back. That's
Speaker 1: all they care about, right. They don't care whether it's
Speaker 1: lithium ion batteries or nickel metal hydride batteries, or zinc batteries,
Speaker 1: or iron air batteries, or hydrogen storage or pumped hydro
Speaker 1: or whatever it is. What they care about is is
Speaker 1: this asset likely to be used for the entire period
Speaker 1: of the loan or the equity I'm investing in it
Speaker 1: because they're gonna make a six eight percent return, right,
Speaker 1: They're not getting paid to like take a whole bunch
Speaker 1: of risk. So what they want to know is what
Speaker 1: is the regulatory infrastructure why does the utility want to
Speaker 1: do this? Like is this likely to get you know,
Speaker 1: like used for the period of time that's required, etcetera. Right,
Speaker 1: and so so you've got this interplay between the choices
Speaker 1: that the infrastructure investors have though in front of them,
Speaker 1: are limited. Right. They don't get to look at the
Speaker 1: entire landscape and say here the twenty seven technologies for
Speaker 1: us to look at, and we pick this one. They
Speaker 1: get to only invest in the things that they get pitched.
Speaker 1: And so if only two of those seven entrepreneurs are
Speaker 1: competent and capable of actually getting to what we talked
Speaker 1: about the beginning of the podcast, which is two or
Speaker 1: fifty million dollar scale, then those are the only two
Speaker 1: applications that they get to choose between. When we talk
Speaker 1: about these infrastructure investors, hey who are we talking about?
Speaker 1: Like where where do they sit in this sort of
Speaker 1: like you know, the constellation of private capital? And then
Speaker 1: how do you see your work with them? And how
Speaker 1: do they think about you? And you think about you know, Okay,
Speaker 1: you provide these sort of initial loans, then maybe a
Speaker 1: handoff to them like who are we talking about and
Speaker 1: how much do you do work with them? Yeah, it's
Speaker 1: a good question. They're generally not American. So the American
Speaker 1: names are generally insurance companies and they've got their own
Speaker 1: conversation that we can go through. But um, it's usually
Speaker 1: Canadian and Australian companies. So this is like ods Super
Speaker 1: q I, c Ontario Teachers, aim COO out of Alberta,
Speaker 1: c p p I B, right, the Canadian Pension Board.
Speaker 1: These are the folks who you know, um, like remember
Speaker 1: when like City of Chicago sold their parking meters or
Speaker 1: someone like invest in toll roads. It's always them, right,
Speaker 1: They're the ones doing the cool stuff on the infrastructure side, right,
Speaker 1: it's and so it's not cowpers or Calisters or newar
Speaker 1: Common or some of those folks. It's usually those big
Speaker 1: infrastructure investors. And what they're looking for is outside returns, right,
Speaker 1: because if you have a municipal bond backed project, you're
Speaker 1: making three percent, right, So they're looking to make six
Speaker 1: to eight which is higher than three, right, And so
Speaker 1: that's that's what they're solving for. And they're saying, well,
Speaker 1: they got to be early, they have to move a
Speaker 1: little faster, they've got to have bigger staff, right, so
Speaker 1: they can like network with folks, etcetera. And sometimes they
Speaker 1: invest in the company. So like c pp I B
Speaker 1: bought out Pattern Energy, which is one of the largest
Speaker 1: wind and transmission line developers in the country, because that's
Speaker 1: how they could get access to proprietary deal flow. Otherwise
Speaker 1: they were getting out competed by other cheaper forms of capital.
Speaker 1: So is it just inevitable that people will have to
Speaker 1: choose between paying higher rates for energy in order to
Speaker 1: incentivize investment or um, we'll just have to deal with,
Speaker 1: you know, creaking infrastructure because no one wants to actually
Speaker 1: pour money into it. Like, is that just a tension
Speaker 1: that that we can't get around? Well, it's certainly the
Speaker 1: It's certainly the default point of view. Right. The default
Speaker 1: point of view is that you know, you wait for
Speaker 1: things to break, supply chain costs go up and then
Speaker 1: incentivizes a bunch of people to invest, and then you know,
Speaker 1: supply chain costs come down. Right, So that's the default
Speaker 1: of view. I mean, you know, when you think about
Speaker 1: the speech that Brian Desk gave on industrial policy, um,
Speaker 1: and then you know, as re client wrote that, you know,
Speaker 1: big piece in the New York Times about it, and
Speaker 1: I think he defined it as industrial policy is the
Speaker 1: idea that a country should chart a path to productive
Speaker 1: capacity beyond what the market would on its own support. Right.
Speaker 1: And so I think we are at a crossroads where
Speaker 1: I think we're asking ourselves should we be proactively dealing
Speaker 1: with all these supply chains? And if we are going
Speaker 1: to do that, what tools do people want us to use? Right?
Speaker 1: Remember when you think about us commodity supercycle, right, which
Speaker 1: we went through during the Bush administration. You know, there's
Speaker 1: three ways to dealing with the commodity supercycle. Right. One
Speaker 1: is you've got to get more of the raw materials. Right.
Speaker 1: You gotta mind more, you gotta produce more, you gotta
Speaker 1: do whatever it is. Right. The second thing is you
Speaker 1: use what you have more efficiently, right, Like you get
Speaker 1: cars that have better mouse per gallon you like, you know,
Speaker 1: have batteries that use less lithium than the previous version
Speaker 1: to get the same amount of output. Right. And then
Speaker 1: the third is you find substitutes, which is largely what
Speaker 1: I do for a living. Is you know, you fund
Speaker 1: all of the different technologies, all the different things that
Speaker 1: would you know, reduce the amount of the base commodity
Speaker 1: that you need. And that process is slow, so so
Speaker 1: that process is not something that's going to happen in
Speaker 1: twelve months. But you need to do all three of
Speaker 1: those of those things, right, and that can be planned,
Speaker 1: but there needs to be a framework that everyone agrees
Speaker 1: to and then each of the technology fits into one
Speaker 1: of those three things. Right. Either you're you know, streamlining
Speaker 1: permitting so that you can get more minds built or
Speaker 1: more things built. You're you know, investing in R and
Speaker 1: D so that you can like make the use of
Speaker 1: those minerals more efficient, right, or you're investing in alternatives
Speaker 1: because and scaling up those investments early when you don't
Speaker 1: need them. Right. That's the biggest problem is when commodity
Speaker 1: prices are low, people are like, well, why are you
Speaker 1: making that investment? We don't need it. Well, because it
Speaker 1: takes ten years for that technology to get to match maturation,
Speaker 1: so we can scale it to trilling our scale. Can
Speaker 1: you talk about speaking of funding alternatives, and you mentioned
Speaker 1: that just today we're recording this on June nine, but
Speaker 1: just today that you funded a hydrogen project, and I'm
Speaker 1: I'm still a little unclear in my head, like where
Speaker 1: hydrogen fits intell this, Like when we think about cleaner
Speaker 1: fuels obvious or cleaner source of energy, Lots of talking
Speaker 1: about solar, lots of talk about natural gas or sorry, um,
Speaker 1: when some talk about uh nuclear, what is how should
Speaker 1: we understand, you know, when we talk about this vision
Speaker 1: for expanding capacity, how should we understand in your view,
Speaker 1: the role that hydrogen has to play on all this?
Speaker 1: Now that's a good question. I look, I think that
Speaker 1: people get confused because they're thinking hydrogen and what they
Speaker 1: should be thinking instead is energy carrier. Right. So if
Speaker 1: I say to you the wind and solar industry, right,
Speaker 1: and also natural gas and coal and other things, right,
Speaker 1: they have a lot of surplus capacity in the spring
Speaker 1: in the fall, right, because there's not a lot of
Speaker 1: air conditioning or heating being used then, and so and
Speaker 1: we have a lot of excess grid capacity. So what
Speaker 1: could we do to store all of that capacity so
Speaker 1: that we can use it in the winter and summer
Speaker 1: when we need it? Right? Like it put it all
Speaker 1: into big batteries. But those batteries have a degradation rate
Speaker 1: of like you know whatever, it is, like point two
Speaker 1: per day. So if I store it and I stick
Speaker 1: it there for ninety days, then by the time I
Speaker 1: need it, it could be like gone, right, So that's
Speaker 1: not a great energy carrier for seasonal storage. I could
Speaker 1: use pump hydro, but then if I just sit sit
Speaker 1: up there, it might evaporate. Right, there's some evaporation that happens, etcetera.
Speaker 1: And then I could put hydrogen in a salt cavern
Speaker 1: and guess what, that doesn't degrade at all. So the
Speaker 1: hydrogen just sits there. And a lot of people argue
Speaker 1: with each other over points that are meaningless, like so
Speaker 1: for in sends, people will say, well, hydrogen doesn't make
Speaker 1: any sense because the round trip efficiency is way lower
Speaker 1: than it is for lithiumine battery storage. Okay, factually true,
Speaker 1: but LITHIUMI and battery storage is not good for seasonal storage.
Speaker 1: On top of that, you can't get paid only like
Speaker 1: four times a year to like use lithiumine battery storage.
Speaker 1: You have to get paid to use that every day
Speaker 1: or else it doesn't petzel for hydrogen storage. If I
Speaker 1: store a bunch of hydrogen in a salt cavern and
Speaker 1: then Texas needs it at nine thousand dollars of mega
Speaker 1: an hour for like two days, that whole thing is
Speaker 1: paid off, right, And so each thing has its own
Speaker 1: like thing that it does within a system. That's why
Speaker 1: I'm saying, like everyone's like, well, this is more expensive,
Speaker 1: this is like worst round trip efficiency. I get it.
Speaker 1: But on a system wide basis, each one of these
Speaker 1: technologies helps to make each other resilient so that when
Speaker 1: we have more extreme weather, when we have all these
Speaker 1: other issues, we actually have tools that we can use
Speaker 1: to keep the grid going. Sorry, but Tracy, just one
Speaker 1: real short question here, can you? I don't. Can you
Speaker 1: just give me the real sketch of hydrogen stored in
Speaker 1: assault cave? Like, what do we actually talk about here?
Speaker 1: How does that work? So? Salt caverns have been used
Speaker 1: for years, right, We use it for the Strategic Petroleum Reserve.
Speaker 1: We use it to store all the natural gas that
Speaker 1: everyone is like on pins and needles around every single day.
Speaker 1: And we've been using it for temporary storage for hydrogen
Speaker 1: near refineries for decades, like forty years. So it's not
Speaker 1: like a new technology. This is the first ever commercial
Speaker 1: you know, salt cavern storage. This particular salt cavern just
Speaker 1: happened to be there. So, um, there's an eighteen hunter
Speaker 1: megawatt coal plant that's on top of this salt cavern
Speaker 1: and um Group Paddington Ventures looked at it or twelve
Speaker 1: years ago and says, this is a really cool salt cavern.
Speaker 1: At the time, they didn't know they were using for hydrogen.
Speaker 1: They just said salt caverns don't happen every day, and
Speaker 1: salt cavern's basically trapped things. So even though hydrogen is
Speaker 1: super light, right, it's number one on the periodic table,
Speaker 1: it doesn't escape from a salt cavern. A salt cavern
Speaker 1: has this crystal sort of lattice and so it keeps
Speaker 1: things in right, and so there's some money that has
Speaker 1: to be spent to make it usable to pump stuff
Speaker 1: into it and then pump stuff out of it. But
Speaker 1: otherwise it's a natural phenomenon and it's you know when
Speaker 1: you see it. And right now there's a run on
Speaker 1: salt cavern so everybody their mother is trying to buy
Speaker 1: up salt caverns and the Western United States right now.
Speaker 1: So it's, uh, it's always interesting. This is this disc
Speaker 1: I already it's like ten or two at least ten
Speaker 1: follow up episodes coming on, Like it's like we gotta
Speaker 1: fight like someone that we gotta like find someone who's
Speaker 1: like making a read like a salt camera that has
Speaker 1: to exist somewhere anyway, Sorry, keep going, but I'm just thinking,
Speaker 1: like there's just so many anyway, keep going, No, no,
Speaker 1: and so like, And so you this one salt cavern
Speaker 1: can store a hundred and fifty gig of what hours
Speaker 1: of of hydrogen, right, which is an enormous amount of hydrogen, right.
Speaker 1: I mean it's the same amount as we expect to
Speaker 1: be on the grid for lithium mind battery utility scale
Speaker 1: battery storage by and so it's it's this extraordinary thing.
Speaker 1: And then they've got two and twenty megawatts of um electroalizers, right,
Speaker 1: which turn electricity excess electricity into hydrogen, right, split water
Speaker 1: into hydrogen and oxygen um. And then you know, but
Speaker 1: because there was a coal plant there now which has
Speaker 1: extended its life through UM, the grid capacity to run
Speaker 1: those electroalizers is already there because it's there for the
Speaker 1: coal plant. So it's the perfect project because the grid
Speaker 1: is already built around this site, and so you don't
Speaker 1: have to like add another billion dollars worth of grid
Speaker 1: infrastructure because it's already been built and it's already there.
Speaker 1: And so they could probably expand the electric electrolysis and
Speaker 1: electroalizer capacity there to two thousand megawatts under the existing
Speaker 1: grid conditions there. So so you could imagine in the future, uh,
Speaker 1: this project, you know, being an anchor for a hydrogen
Speaker 1: hub and people co locating a green ammonia plant, right,
Speaker 1: and then turning that hydrogen instead of turning it back
Speaker 1: into electricity, they turn it into fertilizer, or they turn
Speaker 1: it into green chemicals, right, and people use hydrofluoric acid,
Speaker 1: hydrochloric acid, you know, things for industrial processes, and so
Speaker 1: it's a it's a pretty exciting time to think about
Speaker 1: all these things because supply chains are getting disrupted and
Speaker 1: people are wanting to see how we do things here
Speaker 1: in this country, and well that happens to be the
Speaker 1: president's goal as well as to onshore and and you know,
Speaker 1: build up a lot of the capacity that we have
Speaker 1: here in the country. What's the most exciting project or
Speaker 1: technology to you right now? Like where do you see
Speaker 1: the most potential or what gets you the most excited. Honestly,
Speaker 1: it's hard to answer, because I'm excited about things in
Speaker 1: all sorts of sectors. Like I'll give you an example
Speaker 1: there's a company that has figured out a way to
Speaker 1: tke um these sort of like uh, you know these
Speaker 1: like nutrients right when you have a chicken farm and
Speaker 1: they say that that you know, their manure like pollutes
Speaker 1: the ocean and creates algae blooms. They they have a
Speaker 1: way of just spinning all of the nutrients into their
Speaker 1: component parts and going back to nitrogen and phosphorus, etcetera,
Speaker 1: and then selling it. It's groundbreaking, right because right now,
Speaker 1: like there's a lot of these uh whether they say
Speaker 1: like birth control and that kind of stuff that's in
Speaker 1: waste our treatment plant waste they have right now, waste
Speaker 1: our treatment plants have to spend money to dispose of
Speaker 1: what they call p fas. This company could just spin
Speaker 1: it back out into its um essential elements and sell
Speaker 1: it back into the marketplace, right I mean, and so
Speaker 1: like it literally could be game changing. Right, we don't
Speaker 1: have to mind for as many of those elements because
Speaker 1: we can get it from our waste tream. Right. There's
Speaker 1: other folks who have created next generation business model innovation
Speaker 1: around car rentals, right, I mean, you know, fifty of
Speaker 1: Americans basically just live from car payment to car payment,
Speaker 1: and you know, and for those of us who don't
Speaker 1: live on the coasts, right, I mean, many people's car
Speaker 1: payments are larger than their house payment. Right. They're paying
Speaker 1: like seven hundred bucks a month for that f one fifty,
Speaker 1: and they're paying four hundred bucks a month for their mortgage.
Speaker 1: And so, you know, like figuring out how to get
Speaker 1: people off of car payments but instead into something that
Speaker 1: looks like cars as a service where you never have
Speaker 1: to do maintenance in your car. You have to do anything,
Speaker 1: because electric vehicles don't require maintenance compared to uh in
Speaker 1: jone combustion engine cars. Right, so you can just rent
Speaker 1: it for a hundred fifty bucks a week for as
Speaker 1: long as you need it, and whenever there's a problem,
Speaker 1: you just give it back and get another car that works. Right,
Speaker 1: I mean, just the amount of reduction of stress for
Speaker 1: people is worth every penny, right, I mean, but there's
Speaker 1: just technology after technology manufactured homes. Right, there's a lot
Speaker 1: of innovation and manufactured homes now where the old school
Speaker 1: manufactured home industry basically you know, continues to sell you
Speaker 1: these these houses for like five six thousand ars a
Speaker 1: year because of the except the auxiliary dwelling unit marketing California,
Speaker 1: the places there's all these startup companies who can now
Speaker 1: three D print a home that's basically net zero for
Speaker 1: ninety thou bucks, right, and so you could just radically
Speaker 1: change like home affordability but also make them net zero
Speaker 1: energy users, um and so like, the amount of innovation
Speaker 1: Americans are capable is amazing, and a lot of what
Speaker 1: we're doing at the Loan Program's Office is figuring out
Speaker 1: how to tie them to institutional capital at infrastructure scale
Speaker 1: because their innovators, right, they their brain is like how
Speaker 1: do I make this technology work? And how do I
Speaker 1: manufactured at scale? Right? I mean what Elon must say
Speaker 1: manufacturing Hell that he was in in eighteen. They're there,
Speaker 1: so they need partners like us to help figure out, Okay,
Speaker 1: if you do this, this and this, here's a billion
Speaker 1: dollars they can actually like get the rollout to occur.
Speaker 1: Jigger show. This is a great conversation, actually kind of
Speaker 1: inspiring there at the end. We have so many like
Speaker 1: negative conversations these days about shortages. It's exciting to be
Speaker 1: reminded that there are people working on big solutions to
Speaker 1: these things, and maybe they'll come to fruition and uh,
Speaker 1: no joke, literally like ten episodes to do maybe maybe
Speaker 1: five of them with you alone. But thank you so
Speaker 1: much for coming on odd Locks. That was a real treat.
Speaker 1: Thanks for having me. I wasn't joking, that wasn't kind
Speaker 1: of inspiring, Like it is good to be reminded that
Speaker 1: there is entrepreneurship and potential technological breakthroughs or technological breakthroughs
Speaker 1: that already proven they just need commercialization or investment. That
Speaker 1: not everything is like this, Not everything is so dire
Speaker 1: that people are working on People are working on a
Speaker 1: lot of this stuff well totally. And I know we uh,
Speaker 1: we've talked a little bit about the fertilizer shortage, but
Speaker 1: it's nice to hear that there's a company that has,
Speaker 1: you know, an active solution to actually try to capture
Speaker 1: some fertilizer from from wastewater and things like that. But
Speaker 1: it does seem like jiggers emphasis on the scaling up
Speaker 1: problem and I guess the problem of incentives. And it's
Speaker 1: almost like every time you come up with a new
Speaker 1: technology or um a new way of doing things, it
Speaker 1: feels like it's hard for the system to adapt to
Speaker 1: it because they've already adapted to the way things are
Speaker 1: being done, and they've become very good at extracting money
Speaker 1: from the current system. And so once you start messing
Speaker 1: around with the way the whole system misfunctioning, it just
Speaker 1: feels like it's hard to get everyone on board. Does
Speaker 1: that make sense? No, it does. And it's pretty clear
Speaker 1: that the existing system has all kinds of perverse incentives.
Speaker 1: And this is something we've talked about before and he
Speaker 1: mentioned it. Now. You know, if the if the publicly
Speaker 1: owned utilities are largely UH, their shareholder return is a
Speaker 1: function of, well, we spend X on investment, and so
Speaker 1: we're going to raise the rate to X plus some
Speaker 1: y percent. Does that create the incentive to just spend
Speaker 1: more even if it's not the most efficient thing? Do
Speaker 1: the existing Is there an existing um incentive to come
Speaker 1: up with ways to use the grid more efficiently such
Speaker 1: as that we've talked about in the beginning of the conversation.
Speaker 1: These are they're hard economics problems, like the technology is exciting,
Speaker 1: the financing is exciting potentially, but the economics to get
Speaker 1: to those excuse me, to get to that state is tricky. Yeah,
Speaker 1: I think that's exactly right, And that's really where it
Speaker 1: feels like energy infrastructure investment is different to traditional infrastructure investments.
Speaker 1: So you know, if someone proposes, oh, this bridge is
Speaker 1: really old and we need to redo it that, you know,
Speaker 1: sure it might be complicated in certain ways, but you're
Speaker 1: basically building another bridge. Whereas if someone says, oh, we
Speaker 1: need to talk about hydrogen power, we need to talk
Speaker 1: about how we're storing electricity, we need to think of
Speaker 1: new ways to capture waste products from the energy that
Speaker 1: we are producing, it just feels like you're almost building
Speaker 1: a new system every time, or at least it's hard
Speaker 1: to sort of bolt those onto the existing system. You know.
Speaker 1: It's also interesting, you know you asked that question at
Speaker 1: the end. It's like, well, what what what's most interesting
Speaker 1: to him? And it is sort of one of the
Speaker 1: striking things that I sort of got throughout the whole
Speaker 1: conversation is sort of with different solutions to different problems,
Speaker 1: Like some places, maybe it's pumped hydros some places, maybe
Speaker 1: it's hydrogen some places, maybe it literally is putting more
Speaker 1: lithium ion batteries directly plugged into the grid. But I
Speaker 1: guess it's sort of like this all of the above
Speaker 1: way of thinking because the electricity system is obviously, or
Speaker 1: the energy system overall is obviously like extraordinarily complex. And
Speaker 1: so the idea that there's just going to be sort
Speaker 1: of one fuel that solves it or one new thing,
Speaker 1: it really is just like what do we have here,
Speaker 1: what infrastructure is here? Oh there's a salt cavern here
Speaker 1: or something like that, Like how do we get it
Speaker 1: so that what we have in place or what what
Speaker 1: exists locally can be used in in the best way. Yeah,
Speaker 1: which again comes back to that scale problem. Um and
Speaker 1: almost the beginning of the conversation where Jigger was talking
Speaker 1: about Sun Edison and creating basically micro solutions that are
Speaker 1: extraordinarily efficient for one particular house or building or one
Speaker 1: particular area, but they become hard to do at scale.
Speaker 1: And almost everything in this world, certainly in finance, is
Speaker 1: a scale business. It's a volume business, right, and so
Speaker 1: it becomes very hard to get people, I think, excited
Speaker 1: about these individual solutions. I think we should start a
Speaker 1: salt cavern read by day that would buy buy up
Speaker 1: all the salt caverns that we can and then uh
Speaker 1: floated on the market. I think that could be a
Speaker 1: good business. So I was googling a little bit during that.
Speaker 1: And first of all, salt caverns are beautiful, um. And
Speaker 1: second of all, yeah, it looks like a lot of
Speaker 1: big energy companies UM have been snapping them up. I
Speaker 1: saw Traffic Bureau was buying some of them. I mean, yeah,
Speaker 1: let's do the salt cavern reat first person episode. It
Speaker 1: looks like there might be a read already that has
Speaker 1: salt caverns. Anyway, play that that on ironically, like ten
Speaker 1: episodes out of that one, right, yeah, I think so?
Speaker 1: Wait there is a salt cavern reat. Oh my gosh. Okay,
Speaker 1: well yeah, okay, now we have to do an episode
Speaker 1: on salt caverns. Okay, shall we leave it there before?
Speaker 1: We planning like an entire ten part series. Okay, this
Speaker 1: has been. This has been another episode of the All
Speaker 1: Thoughts Podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway and I'm Joe Why Isn't All?
Speaker 1: You can follow me on Twitter at the Stalwart. Follow
Speaker 1: our guest on Twitter Jigger Shaw. He's at jigger Shaw
Speaker 1: d C. Follow our producer Carmen Rodriguez at Carmen armand
Speaker 1: followed the Bloomberg head of podcast Francesco. Leave at Francesco
Speaker 1: Today and check out all of our podcast at Bloomberg
Speaker 1: unto the handle at podcasts. Thanks for listening one