WEBVTT - Jigar Shah on the Pathway to Clean, Cheap, and Abundant Energy 0:00:10.200 --> 0:00:13.440 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:13.520 --> 0:00:15.880 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:16.040 --> 0:00:16.439 Tracy. 0:00:17.000 --> 0:00:20.560 Today we have a special episode of the podcast That's Right. 0:00:20.680 --> 0:00:23.439 So we traveled to Austin, Texas. We were there for 0:00:23.560 --> 0:00:27.320 the Texas Tribune Festival, and we recorded a live episode 0:00:27.360 --> 0:00:30.480 with one of our favorite All Thoughts guests, Jiggershaw. 0:00:30.600 --> 0:00:31.040 That's right. 0:00:31.200 --> 0:00:34.360 Jigger is, as listeners may know, the head of the 0:00:34.400 --> 0:00:38.159 Loan Program at the Department of Energy. This is his 0:00:38.360 --> 0:00:40.800 third time appearing. The first time we talked to him 0:00:40.920 --> 0:00:44.360 was early twenty twenty two, when the loan Program's office 0:00:44.600 --> 0:00:47.680 was this sort of small backwater office within the DOE. 0:00:48.080 --> 0:00:50.400 Then we talked to him again about a year ago, 0:00:50.560 --> 0:00:53.680 right after the Inflation Reduction Act was passed, when his 0:00:53.720 --> 0:00:57.160 office got tons of money to lend out. And then 0:00:57.200 --> 0:01:00.480 this was sort of like a one year on at episode. 0:01:00.920 --> 0:01:03.600 What are they doing with all this money at his 0:01:03.720 --> 0:01:06.480 office and what are the real prospects for sort of 0:01:06.600 --> 0:01:08.360 decarbonizing our electricity. 0:01:08.680 --> 0:01:10.120 He's sort of in the groove now. 0:01:10.160 --> 0:01:13.479 He's spending some of the billions of dollars that he's 0:01:13.560 --> 0:01:16.880 been authorized to spend by Washington and it's really interesting 0:01:16.920 --> 0:01:19.520 to see how he's actually putting that money to work 0:01:19.720 --> 0:01:22.520 and what's getting him excited in the energy space right now. 0:01:22.760 --> 0:01:24.560 All right, so take a listen, Jigger. 0:01:24.640 --> 0:01:27.160 We've talked to a couple of times in the past 0:01:27.280 --> 0:01:30.560 on the podcast about the Loan Program Office. What do 0:01:30.680 --> 0:01:33.640 we start just to like sort of a quick summary, 0:01:33.800 --> 0:01:36.479 and we've talked like about what you do, like real quickly, 0:01:36.560 --> 0:01:39.320 just what is the Loan Program Office for people who 0:01:39.400 --> 0:01:42.920 may have not familiar with it or past episode, and 0:01:43.000 --> 0:01:43.440 what do you do? 0:01:44.440 --> 0:01:45.720 Well, thanks for having me back. 0:01:47.080 --> 0:01:49.440 The Loan Program's Office was started in two thousand and five, 0:01:49.680 --> 0:01:52.280 and the whole point of it was that for a 0:01:52.320 --> 0:01:56.040 lot of this technology that Doe is awesome at inventing, 0:01:57.120 --> 0:02:00.760 it tends to not be able to get commercial debt 0:02:00.880 --> 0:02:01.800 for commercialization. 0:02:02.080 --> 0:02:04.040 So a lot of these projects might be. 0:02:04.000 --> 0:02:07.600 A billion dollar project and going to get debt from 0:02:07.640 --> 0:02:09.919 the commercial markets for a first of a kind project, 0:02:10.280 --> 0:02:13.480 you know, namely like you know, the Tesla's first loan 0:02:13.840 --> 0:02:16.639 or some of the large solar and geothermal projects we did, 0:02:17.280 --> 0:02:21.480 it was just not feasible. But what's more interesting is 0:02:21.560 --> 0:02:26.560 today our remit's been expanded substantially, so it used to 0:02:26.600 --> 0:02:29.280 be we had this innovation bucket, and then we had 0:02:29.320 --> 0:02:33.520 this vehicles bucket. Basically, today we have a tribal energy program. 0:02:33.680 --> 0:02:38.320 We have this energy infrastructure refurbishment program, right, so figuring 0:02:38.360 --> 0:02:40.639 out how to take old coal plants and term of 0:02:40.720 --> 0:02:43.760 nuclear plants, or old transmission lines and double them up, 0:02:43.880 --> 0:02:45.880 or you know, figuring out what to do with old 0:02:45.880 --> 0:02:48.640 refineries or tank farms. And so we have a much 0:02:48.800 --> 0:02:52.040 larger scope today. So we've got, you know, a lot 0:02:52.080 --> 0:02:53.239 more resources today. 0:02:53.960 --> 0:02:56.440 So how much money do you actually control now? 0:02:56.520 --> 0:02:59.919 Because of course I've seen variable estimates and I get 0:03:00.120 --> 0:03:02.600 that a lot of it depends on how things develop. 0:03:02.680 --> 0:03:05.360 But you've been doing this for a while. Now, you 0:03:05.400 --> 0:03:07.760 have extended some loans. Do you have a good sense 0:03:07.800 --> 0:03:11.000 of whether it's four hundred billion or five hundred billion 0:03:11.120 --> 0:03:12.280 or six hundred billion. 0:03:12.919 --> 0:03:15.519 I mean, what's a billion between friends? 0:03:15.639 --> 0:03:17.160 What's a hundred million between friends? 0:03:17.280 --> 0:03:18.400 Yeah? I think so. 0:03:18.440 --> 0:03:20.440 When I first came into office, it was roughly forty 0:03:20.480 --> 0:03:23.840 billion dollars of loan authority. Today, if all of our 0:03:23.840 --> 0:03:27.239 loan authority was used, it'd be closer to four hundred billion. 0:03:28.240 --> 0:03:30.399 We have no idea whether it'll all be used, right, 0:03:30.440 --> 0:03:34.000 So the largest program there is this refurbishment program, which 0:03:34.080 --> 0:03:37.440 is two hundred and fifty billion dollars. Interestingly enough, it 0:03:37.480 --> 0:03:39.160 really is taking off. So I think when we first 0:03:39.160 --> 0:03:42.320 started talking to electric utilities and oil and gas companies 0:03:42.360 --> 0:03:45.080 and others about using it, I think they didn't want 0:03:45.080 --> 0:03:45.760 any part of it. 0:03:45.880 --> 0:03:47.480 They didn't really see how it was valuable. 0:03:47.800 --> 0:03:51.840 Today, I think we've already got about fifty six billion 0:03:51.880 --> 0:03:55.640 dollars worth of loans either received or being actively prepared 0:03:55.640 --> 0:03:58.440 that we've seen early drafts of. So we are seeing 0:03:58.440 --> 0:04:00.920 a lot of interest in that program. So you know, 0:04:01.720 --> 0:04:03.680 whether we get to that number or not will be 0:04:03.760 --> 0:04:05.600 determined whether that program is successful. 0:04:05.680 --> 0:04:05.880 Yeah. 0:04:05.960 --> 0:04:08.160 The first time we ever talked to I think it 0:04:08.200 --> 0:04:11.400 was early twenty twenty two and someone said, oh, Jigger, 0:04:11.640 --> 0:04:13.760 he's someone you should talk to. He knows about energy, 0:04:13.920 --> 0:04:15.440 sort of an interesting. 0:04:15.040 --> 0:04:16.520 Guy and knows about this stuff. 0:04:16.640 --> 0:04:18.240 And then I think it was like about three or 0:04:18.240 --> 0:04:22.720 four months later and the Inflation Reduction Act passed and 0:04:22.800 --> 0:04:25.039 someone's like, oh, you know that guy, Jigger, you talk to. 0:04:25.080 --> 0:04:28.000 His office just got whatever six hundred Billion're like, oh, 0:04:28.040 --> 0:04:30.000 so what went from like the sort of I don't know, 0:04:30.120 --> 0:04:33.000 backwater is the right word, but fairly like modest division 0:04:33.000 --> 0:04:35.880 of the Department of Energy, you are now a key 0:04:36.360 --> 0:04:40.880 player and essentially this massive effort by the Biden administration 0:04:41.400 --> 0:04:45.600 to decarbonize our energy system. 0:04:46.160 --> 0:04:46.440 Yeah. 0:04:46.480 --> 0:04:50.200 Look, I think that when you think about my own background, 0:04:50.240 --> 0:04:53.280 having started Son Edison and then Generate Capital, I think 0:04:53.320 --> 0:04:57.599 I have a unique understanding on how this stuff works, 0:04:58.080 --> 0:05:01.039 which is that we have these extraordinary people who frankly 0:05:01.640 --> 0:05:05.680 bust their hump for ten years in obscurity before they 0:05:05.760 --> 0:05:06.280 get to. 0:05:06.320 --> 0:05:07.919 Where the loan Program's office can help them. 0:05:08.000 --> 0:05:10.200 Right when you think about a lot of these companies 0:05:10.200 --> 0:05:13.760 who have figured out green cement or green steel or 0:05:14.120 --> 0:05:18.159 you know, next generation transmission lines or next generation hydrogen facilities, 0:05:18.200 --> 0:05:20.640 I mean they were in a lab getting some like 0:05:20.839 --> 0:05:23.920 fifty thousand dollars grant like ten years ago, and then 0:05:24.080 --> 0:05:26.240 their thesis worked out, and then they decided to get 0:05:26.279 --> 0:05:28.200 an a round and then a B round. Some of 0:05:28.200 --> 0:05:32.680 them may have spacked prematurely, you remember the time, and 0:05:32.760 --> 0:05:35.000 so you know, I think that the goal for me 0:05:35.279 --> 0:05:38.120 is not to you know, puff myself up, but to 0:05:38.200 --> 0:05:41.520 recognize that we have all these people and honestly the 0:05:41.560 --> 0:05:44.920 ecosystem that we have in this country. To take them 0:05:44.960 --> 0:05:49.599 from the technology works to connecting it to the American 0:05:49.640 --> 0:05:51.440 worker building the facility here. 0:05:51.680 --> 0:05:52.640 Doing all this stuff here. 0:05:53.120 --> 0:05:55.360 Frankly, we haven't done in forty years here, right, I 0:05:55.400 --> 0:05:58.360 mean most of our technologies went to Asia or went 0:05:58.400 --> 0:06:01.159 to Europe to get commercialized. And now I think with 0:06:01.200 --> 0:06:03.200 the Inflation Reduction Act, it's sort of my job to 0:06:03.240 --> 0:06:06.760 convince them to use these resources to stay here and 0:06:06.839 --> 0:06:09.160 to do it here, right, And I think a lot 0:06:09.160 --> 0:06:10.960 of that really means that we got to do a 0:06:11.000 --> 0:06:13.160 lot more outreache. We've got to convince them that this 0:06:13.240 --> 0:06:16.400 is a place that wants them, because you know how 0:06:16.480 --> 0:06:18.320 hard it is, right, I Mean, you have to get 0:06:18.600 --> 0:06:21.159 permission from people, you have to get a permit, you 0:06:21.200 --> 0:06:23.440 have to get a governor who actually wants to put 0:06:23.440 --> 0:06:26.160 together an economic development package for you, right, And if 0:06:26.200 --> 0:06:28.560 you haven't done it in forty years, then it could 0:06:28.640 --> 0:06:30.359 be that, you know, it's a little bit harder to 0:06:30.400 --> 0:06:30.800 do it here. 0:06:31.440 --> 0:06:34.159 Do you feel pressure to spend the money, like is 0:06:34.200 --> 0:06:36.400 there a sense of urgency here? And then how do 0:06:36.440 --> 0:06:39.680 you actually balance that with the need to make efficient 0:06:39.920 --> 0:06:43.479 and useful and ideally profitable investments. 0:06:43.800 --> 0:06:46.480 So I definitely don't feel pressure to put the money 0:06:46.520 --> 0:06:48.560 out the door. I think that the money should go 0:06:48.560 --> 0:06:50.400 out the door if it, you know, deserves to gout 0:06:50.400 --> 0:06:53.360 the door. And we have three hundred people who work 0:06:53.400 --> 0:06:55.240 for us at the Loan Program's office, and so they 0:06:55.240 --> 0:06:59.200 are the ones actually evaluating and you know, doing the 0:06:59.440 --> 0:07:01.440 work to get the loan to the finish line. I 0:07:01.480 --> 0:07:04.039 certainly have a lot of subject matter expertise, so I 0:07:04.040 --> 0:07:07.400 can be somewhat helpful, But honestly, the biggest part of 0:07:07.400 --> 0:07:09.840 my job is to get people to trust us, right. 0:07:09.920 --> 0:07:12.440 So getting the growth companies to trust us was something 0:07:12.480 --> 0:07:14.360 that was fairly easy for me because a lot of 0:07:14.360 --> 0:07:17.800 those people are my peers from my professional life. But 0:07:17.880 --> 0:07:20.440 getting the electric utility companies to use us, I mean, 0:07:20.480 --> 0:07:22.920 that was not an easy task. And now I've got 0:07:22.960 --> 0:07:24.600 to get the oil and gas companies to get to 0:07:24.720 --> 0:07:27.360 use us, right, and that's not easy at all. Many 0:07:27.400 --> 0:07:28.880 of them feel like they're going to get stripped of 0:07:28.920 --> 0:07:31.760 their country club membership if they use the Loan Program's 0:07:31.760 --> 0:07:34.480 office right and so, but they're not going to do 0:07:34.520 --> 0:07:37.080 the right thing unless they do it right, because the 0:07:37.160 --> 0:07:40.240 numbers don't work without our debt, Like the returns aren't 0:07:40.320 --> 0:07:43.160 high enough without our debt, and so I need them 0:07:43.240 --> 0:07:44.720 to come into the office. And so a lot of 0:07:44.720 --> 0:07:46.480 what I'm doing is trying to build trust. 0:07:46.800 --> 0:07:49.520 So your company that you started, sun Edison, I mean 0:07:49.520 --> 0:07:53.000 it was a finance breakthrough, right, I mean the solar 0:07:53.280 --> 0:07:56.360 technology has existed, but you understood that there was an 0:07:56.360 --> 0:07:59.200 opportunity to finance the deployment of solar in a new way. 0:07:59.520 --> 0:08:02.160 Can you just speak theoretically or big picture? 0:08:02.520 --> 0:08:06.040 Why are there projects that can pay back the debt, 0:08:06.360 --> 0:08:10.120 but which private sector money is not there? Why is 0:08:10.120 --> 0:08:13.080 it important for the public sector balance sheet to be 0:08:13.200 --> 0:08:16.040 deployed for certain types of energy projects? 0:08:16.080 --> 0:08:18.480 And then maybe we can get into some of these specifics. 0:08:19.240 --> 0:08:21.240 There's a couple of reasons that I'll go through. Right. 0:08:21.360 --> 0:08:25.160 One is the Department of Energy has ten thousand expert 0:08:25.240 --> 0:08:28.880 scientists and engineers on the platform. Right, most of the 0:08:28.960 --> 0:08:32.200 fundamental patents and these technologies were invented by one of 0:08:32.200 --> 0:08:35.120 those ten thousand people. So when you have a methane 0:08:35.200 --> 0:08:38.240 pyrolysis project like monolith materials that we give a conditional 0:08:38.240 --> 0:08:40.800 commitment to in twenty twenty one, like, there's somebody in 0:08:40.840 --> 0:08:43.000 a national lab who actually invented it. And so when 0:08:43.000 --> 0:08:45.200 I go to him and I say, hey, you know, like, 0:08:45.240 --> 0:08:46.240 what do you think about this thing? 0:08:46.360 --> 0:08:46.560 Right? 0:08:46.600 --> 0:08:49.880 They're like, yeah, we've done like eighteen demonstrations of this 0:08:49.920 --> 0:08:52.160 project and we think this will work. And the way 0:08:52.160 --> 0:08:54.559 that they're approaching it's going to work, et cetera. There's 0:08:54.600 --> 0:08:57.080 nobody for JP Morgan to go to for that. They're 0:08:57.120 --> 0:08:59.000 going to be like this scares the crap out of me. 0:08:59.280 --> 0:09:01.120 I'm not going to do that. And so you can 0:09:01.200 --> 0:09:04.360 imagine that there's a lot of technology risk that is 0:09:04.440 --> 0:09:08.000 perceived by the banks that we can actually manage because. 0:09:07.760 --> 0:09:09.400 We have all these experts on a platform. 0:09:09.679 --> 0:09:11.640 The other piece of it, though, is that you know, 0:09:11.760 --> 0:09:14.920 with the Basel three rules, you know, passing up to 0:09:14.960 --> 0:09:17.760 the global financial crisis, for a lot of these banks, 0:09:17.800 --> 0:09:22.280 if they don't actually have investment grade off take agreements 0:09:22.280 --> 0:09:24.040 for some of these things, Like I'll give you an example, 0:09:24.160 --> 0:09:27.560 like for a lot of these critical minerals projects, there's 0:09:27.600 --> 0:09:30.040 no history whatsoever for someone and say you know what, 0:09:31.120 --> 0:09:33.720 I'll pay a fixed price for that lithium for ten years. 0:09:34.000 --> 0:09:36.880 Generally speaking, it's like, well, whatever the lithium price is, 0:09:36.920 --> 0:09:38.560 we're going to benchmark to that price. 0:09:38.840 --> 0:09:41.400 My lithium has gone down by forty five percent already 0:09:41.400 --> 0:09:42.120 this year, right. 0:09:42.000 --> 0:09:45.320 And so so the government is actually willing to take 0:09:45.320 --> 0:09:48.640 that risk because we know that, you know, we're going 0:09:48.679 --> 0:09:51.200 to have all these electric vehicles purchased over the next 0:09:51.200 --> 0:09:51.720 ten years. 0:09:51.880 --> 0:09:53.440 The world's going to be short lithium. 0:09:53.480 --> 0:09:56.280 So even if in the short term lithium prices went down, 0:09:56.320 --> 0:09:58.520 in the long term, you're going to need these resources 0:09:58.960 --> 0:10:03.320 like that. That formula under a bank's rules would require 0:10:03.679 --> 0:10:06.120 a huge amount of Tier one capital to be set 0:10:06.160 --> 0:10:08.319 aside for that loan. So you can imagine them saying, 0:10:08.840 --> 0:10:11.480 I'm not making investment banking profits on this. I'm not 0:10:11.520 --> 0:10:13.600 going to use my Tier one capital for this, right. 0:10:14.200 --> 0:10:17.880 Because there's a bit of a friction, right because on 0:10:17.920 --> 0:10:19.640 the other side you got the Federal Reserve and the 0:10:19.640 --> 0:10:22.559 OCC Commissioners who are saying that looks like a risky 0:10:22.600 --> 0:10:24.480 load if we're going to make you put more Tier 0:10:24.559 --> 0:10:27.160 one capital against it, right, And so there's lots of 0:10:27.240 --> 0:10:31.080 reasons why you have friction in the marketplace. But before 0:10:31.520 --> 0:10:34.800 we were active, most of these these companies had one 0:10:34.840 --> 0:10:37.600 hundred percent equity finance everything. Right, they would just have 0:10:37.640 --> 0:10:40.000 to raise a billion dollars in the marketplace and then 0:10:40.040 --> 0:10:42.080 do that, and you can imagine there's very few companies 0:10:42.120 --> 0:10:45.120 that could do that. So then we were restricting innovation 0:10:45.440 --> 0:10:47.320 and restricting it's getting commercialized. 0:11:02.920 --> 0:11:05.320 I realized I made an assumption in my previous question 0:11:05.360 --> 0:11:07.959 because I said, ideally you would make loans that make 0:11:08.000 --> 0:11:09.720 a profit, and that's probably true. 0:11:09.960 --> 0:11:13.280 But how do you think about profit versus risk? 0:11:13.520 --> 0:11:15.760 Do you have to make a profit or do you 0:11:15.760 --> 0:11:19.720 think there's a role for government to finance riskier projects 0:11:19.720 --> 0:11:21.640 that maybe have a public good or utility. 0:11:22.559 --> 0:11:25.440 Yeah, a profit is a very strong word, right, because 0:11:25.760 --> 0:11:27.880 we don't really make a profit in the government, So 0:11:28.240 --> 0:11:30.680 I don't think about it that way. I think the 0:11:30.679 --> 0:11:33.720 way I think about it is Congress gives us a 0:11:33.760 --> 0:11:36.240 couple of things. So let me just maybe help you 0:11:36.360 --> 0:11:40.040 understand how the money flows. So you know, when we 0:11:40.120 --> 0:11:44.000 give somebody a loan, the US Treasury Department theoretically issues 0:11:44.160 --> 0:11:47.800 bonds and then we issue that loan. So the US 0:11:47.880 --> 0:11:50.520 government has to pay back those bonds, and so there's 0:11:50.520 --> 0:11:53.000 a certain cost to the US government of that thing. 0:11:53.160 --> 0:11:56.960 So if I'm charging someone US treasuries plus thirty seven 0:11:56.960 --> 0:11:58.800 a half basis points, which is a lot of our 0:11:58.840 --> 0:12:02.760 loans are at that rate, then the money I'm getting 0:12:02.760 --> 0:12:05.520 in for the US Treasury bond coupon, I'm not viewing 0:12:05.520 --> 0:12:08.120 as profit, right say, because that's just going back out 0:12:08.160 --> 0:12:10.600 the tour to investor. So it's the thirty seven half 0:12:10.600 --> 0:12:13.040 basis points that you know was coming in abovehand. 0:12:13.120 --> 0:12:13.280 Right. 0:12:13.840 --> 0:12:17.400 Separately, the US Congress gives us something called credit subsidy, 0:12:17.840 --> 0:12:19.920 and what we use that for is to put a. 0:12:19.880 --> 0:12:21.160 Loan loss reserve in place. 0:12:21.200 --> 0:12:24.640 So I might say, like our average loan is rated 0:12:25.280 --> 0:12:27.880 B minus, right, what you guys would call junk bonds. 0:12:28.200 --> 0:12:31.600 So so like you know, by definition, when we issue 0:12:31.640 --> 0:12:35.080 the loan, we are saying that it will likely have 0:12:35.200 --> 0:12:37.800 a default right of let's say, maybe a twelve percent 0:12:38.160 --> 0:12:40.760 risk of default or a twenty two percent risk of default, 0:12:40.800 --> 0:12:43.040 but it's not a one percent risk of default. And 0:12:43.080 --> 0:12:45.240 so then we put that much money to the side 0:12:45.240 --> 0:12:48.679 and a loan loss reserve. So the Congress is saying, 0:12:49.120 --> 0:12:53.360 you have this amount of money to quote unquote lose, right, 0:12:53.400 --> 0:12:55.240 and that's the money that they. 0:12:55.120 --> 0:12:56.880 Allocate through a budget process. 0:12:57.400 --> 0:13:01.440 And what we've averaged today is that we put aside 0:13:01.559 --> 0:13:05.319 five dollars in loan loss reserve for every dollar. 0:13:05.040 --> 0:13:07.520 Of actually realized losses we've had. 0:13:07.520 --> 0:13:10.200 So we put together roughly five billion dollars of loan 0:13:10.240 --> 0:13:12.559 loss reserves and we've lost about one point zero three 0:13:12.679 --> 0:13:16.480 billion total. And so from that perspective, that's you know, 0:13:16.559 --> 0:13:20.280 four billion that the Congress gave us to quote unquote lose, 0:13:20.400 --> 0:13:22.720 that we didn't lose, and that we returned back to 0:13:22.760 --> 0:13:26.200 the taxpayer. So but I mean the other way I 0:13:26.200 --> 0:13:28.560 think about it, right, So that's strictly answering your question. 0:13:28.880 --> 0:13:30.520 But the other way I think about it is it 0:13:30.600 --> 0:13:34.000 is clearly the case that Tesla is the best electric 0:13:34.080 --> 0:13:38.240 vehicle company in the world, clearly, and they will fully 0:13:38.240 --> 0:13:40.000 admit that there is no chance that they would have 0:13:40.040 --> 0:13:43.320 gotten the metals off the ground without our loan. And 0:13:43.400 --> 0:13:47.559 so what's it worth to dominate these industries into the future, 0:13:47.640 --> 0:13:50.600 not just electric vehicles, which happened in the first generation there, 0:13:50.880 --> 0:13:54.400 but in the future. Right when you look at methane pyrolysis, 0:13:55.320 --> 0:13:57.440 what they do is they take natural gas, they split 0:13:57.480 --> 0:14:01.080 it into hydrogen and carbon. Carbon black is something you 0:14:01.120 --> 0:14:04.800 need to make tires, even electric vehicles used tires, and 0:14:04.880 --> 0:14:07.840 so we need to use that, right and so right 0:14:07.840 --> 0:14:10.080 now the largest exporter of carbon black in the world 0:14:10.120 --> 0:14:10.600 is Russia. 0:14:11.040 --> 0:14:11.199 Right. 0:14:11.280 --> 0:14:13.560 If this works, which I'm pretty sure it will, we 0:14:13.640 --> 0:14:16.920 will be the largest exporter of carbon black in the world. Right, 0:14:17.040 --> 0:14:19.840 and that's a really important market for us to dominate. 0:14:19.960 --> 0:14:20.120 Right. 0:14:20.200 --> 0:14:23.120 So the question really is like, you know, yes, there's 0:14:24.160 --> 0:14:26.920 you know, being good with taxpayer money, but the other 0:14:26.920 --> 0:14:28.880 piece is actually reaching real outcomes. 0:14:29.400 --> 0:14:31.760 All right, So we sort of we've covered in the 0:14:31.880 --> 0:14:35.400 very broad strokes the bank that you basically run within 0:14:35.480 --> 0:14:38.120 the Department of Energy. Zooming out is part of this 0:14:38.240 --> 0:14:41.440 whole project. And we're here in Texas in Austin at 0:14:41.480 --> 0:14:44.840 the Texas Tribune Festival. This is a state of course 0:14:44.960 --> 0:14:48.640 where energy and the grid has been in the news 0:14:48.720 --> 0:14:49.880 a lot in the last few years. 0:14:49.920 --> 0:14:51.400 And it seems to me like when we think. 0:14:51.240 --> 0:14:53.160 About the grid, well, a few years ago, most of 0:14:53.280 --> 0:14:54.440 us weren't even thinking about the grid. 0:14:54.480 --> 0:14:56.240 We just sort of took it for granted. It just worked. 0:14:56.560 --> 0:14:59.040 Over the last few years in various states, we've had 0:14:59.080 --> 0:15:04.960 these problems. People want right, cheap electricity, they want reliable 0:15:04.960 --> 0:15:07.880 electricity and increasingly clean electricity. 0:15:08.080 --> 0:15:09.400 Can we have all three? 0:15:10.400 --> 0:15:11.520 We're delivering all three. 0:15:11.600 --> 0:15:15.600 I mean, look at Texas, right, Texas is the like 0:15:15.720 --> 0:15:18.040 ground zero here, right, You're talking about the state that 0:15:18.080 --> 0:15:21.160 has installed more wind power and more solar power over 0:15:21.160 --> 0:15:23.520 the last five years than any other place in the 0:15:23.680 --> 0:15:26.480 entire country. I think it's number one in the country 0:15:26.480 --> 0:15:28.680 and wind and number two in the country in solar, 0:15:28.720 --> 0:15:30.920 and will be number one in the country in solar in. 0:15:30.880 --> 0:15:31.760 Like eighteen months. 0:15:32.280 --> 0:15:34.680 It's also number one in the country and on an 0:15:34.720 --> 0:15:38.920 ongoing basis in installing battery storage, right. I mean, it's 0:15:38.960 --> 0:15:42.120 also the one that's actually like, you know, piloting these 0:15:42.200 --> 0:15:46.160 virtual power plants where there were Tesla Electric Company customers 0:15:46.160 --> 0:15:49.200 this last summer who had like negative six hundred dollars 0:15:49.240 --> 0:15:53.000 bills because they were selling power from their power walls 0:15:53.040 --> 0:15:55.360 into the marketplace at five dollars a kilo an hour 0:15:55.400 --> 0:15:58.720 when market prices dictated it, and so they were helping 0:15:58.760 --> 0:16:02.480 their neighbors, right, And so that that is not allowed 0:16:02.480 --> 0:16:05.560 in California, like that is allowed here. So when you 0:16:05.600 --> 0:16:09.440 think about the level of innovation happening in Texas right now, 0:16:09.800 --> 0:16:12.400 it is at an all time high. And you know, I 0:16:12.440 --> 0:16:15.640 think that part of it is because Texas needs that 0:16:15.760 --> 0:16:19.320 level of innovation, right, I mean, their natural gas fleet 0:16:19.400 --> 0:16:21.760 didn't perform as well as they wanted it to during 0:16:21.960 --> 0:16:24.360 you know, URI and then some of the other issues. 0:16:24.600 --> 0:16:28.080 So they've recognized that they need to diversify where the 0:16:28.080 --> 0:16:30.080 electricity comes from, which is why they're building so much 0:16:30.120 --> 0:16:33.600 solar and wind. But also they've decided to put two 0:16:33.680 --> 0:16:37.680 new semiconductor plants here in Texas. They have all this growth, 0:16:37.760 --> 0:16:40.480 All these companies are deciding that Texas is where they 0:16:40.480 --> 0:16:43.320 want to build stuff. If you fly into DFW Airport, 0:16:43.640 --> 0:16:46.040 there's all these roads and you're like, where the house is. 0:16:46.280 --> 0:16:49.280 They're coming in like the next eighteen months. There's so 0:16:49.400 --> 0:16:53.120 much load growth here. So now the question really becomes like, 0:16:53.280 --> 0:16:56.280 how do we build the grid of the future. And 0:16:56.320 --> 0:16:59.680 they're figuring that out here in Texas. It's pretty exciting. 0:17:00.240 --> 0:17:02.920 Well, setting the great state of Texas aside, and we 0:17:03.000 --> 0:17:05.199 are recording this live in Austin, so I feel like 0:17:05.280 --> 0:17:06.720 I should describe it that way. 0:17:07.560 --> 0:17:08.679 Setting Texas aside. 0:17:08.720 --> 0:17:11.760 I mean, it is true that you have seen demands 0:17:11.880 --> 0:17:15.239 on the grid rise, and in particular, I think I 0:17:15.280 --> 0:17:18.359 saw a statistic saying that something there was a forty 0:17:18.400 --> 0:17:22.760 percent increase in the amount of grid connection applications in 0:17:22.840 --> 0:17:25.399 twenty twenty two alone, And a lot of this is 0:17:25.400 --> 0:17:29.840 coming from you know renewable solar wind that need electricity 0:17:29.880 --> 0:17:31.719 and want to feed it back into the grid. 0:17:32.119 --> 0:17:34.080 How do you solve that problem? 0:17:34.359 --> 0:17:35.879 Let me back it up for a second and then 0:17:36.000 --> 0:17:38.800 like explain to you what's you know, where the friction 0:17:38.880 --> 0:17:40.359 points are, and then maybe we can talk about how 0:17:40.359 --> 0:17:44.040 we solve it. So, in general, you've got three major 0:17:44.119 --> 0:17:48.480 pieces here, right, You've got generation of electricity. You've got 0:17:48.560 --> 0:17:51.679 the transportation of the electricity to your home or business 0:17:51.800 --> 0:17:54.880 or whatever is the transmission distribution grid. And then you've 0:17:54.920 --> 0:17:57.760 got the load itself, right, and so you've got a 0:17:57.760 --> 0:18:01.240 lot of load growth from new manufacturing facilities being announced 0:18:01.240 --> 0:18:04.200 because of the Inflation Reduction Act. You've got electric vehicles 0:18:04.240 --> 0:18:06.680 being added to the grid at record numbers. You've got 0:18:06.880 --> 0:18:10.440 heat pumps, all these other things. Right, So the main 0:18:10.520 --> 0:18:12.880 thing that I think you're asking about is the transmission grid. 0:18:13.119 --> 0:18:14.439 So you've got a whole bunch of people. 0:18:14.560 --> 0:18:16.159 Wait, can we back up for a second. What's the 0:18:16.200 --> 0:18:18.200 difference between transmission and distribution. 0:18:19.160 --> 0:18:22.399 So the transmission grid is generally at much higher voltages 0:18:22.480 --> 0:18:26.960 and you're transporting power long distances from where you know, 0:18:27.080 --> 0:18:28.840 like the Panhandle of Texas where they have a lot 0:18:28.840 --> 0:18:30.000 of wind down. 0:18:29.760 --> 0:18:30.960 Here to populated centers. 0:18:31.040 --> 0:18:34.439 Right, the distribution grid is what's in your neighborhood and 0:18:34.640 --> 0:18:38.919 is you know, basically having to manage, you know, making. 0:18:38.640 --> 0:18:41.440 Sure that you have power for your four heir amp service. 0:18:41.200 --> 0:18:44.359 Because if you plug in fifteen electric cars at the 0:18:44.400 --> 0:18:46.919 same time, then the distribution grid has to either be 0:18:46.920 --> 0:18:50.320 able to handle it or be able to throttle the 0:18:50.520 --> 0:18:54.000 amps to each home so that the distribution grid doesn't 0:18:54.040 --> 0:18:55.000 you know, get overloaded. 0:18:55.400 --> 0:18:58.640 So what are the issues sort of facing the transmission 0:18:58.840 --> 0:18:59.959 aspect of the grid at the moment. 0:19:00.680 --> 0:19:03.879 So basically what happens is is that you know, someone says, 0:19:03.920 --> 0:19:06.439 I've got a fantastic piece of land. I think I 0:19:06.440 --> 0:19:08.800 can put wind power on it or solar power. Mostly 0:19:08.800 --> 0:19:11.240