Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 2: I'm Joe Wisenthal and I'm Tracy Alloway.
Speaker 3: Tracy.
Speaker 1: Today we have a special episode of the podcast That's Right.
Speaker 4: So we traveled to Austin, Texas. We were there for
Speaker 4: the Texas Tribune Festival, and we recorded a live episode
Speaker 4: with one of our favorite All Thoughts guests, Jiggershaw.
Speaker 5: That's right.
Speaker 1: Jigger is, as listeners may know, the head of the
Speaker 1: Loan Program at the Department of Energy. This is his
Speaker 1: third time appearing. The first time we talked to him
Speaker 1: was early twenty twenty two, when the loan Program's office
Speaker 1: was this sort of small backwater office within the DOE.
Speaker 1: Then we talked to him again about a year ago,
Speaker 1: right after the Inflation Reduction Act was passed, when his
Speaker 1: office got tons of money to lend out. And then
Speaker 1: this was sort of like a one year on at episode.
Speaker 1: What are they doing with all this money at his
Speaker 1: office and what are the real prospects for sort of
Speaker 1: decarbonizing our electricity.
Speaker 2: He's sort of in the groove now.
Speaker 4: He's spending some of the billions of dollars that he's
Speaker 4: been authorized to spend by Washington and it's really interesting
Speaker 4: to see how he's actually putting that money to work
Speaker 4: and what's getting him excited in the energy space right now.
Speaker 3: All right, so take a listen, Jigger.
Speaker 1: We've talked to a couple of times in the past
Speaker 1: on the podcast about the Loan Program Office. What do
Speaker 1: we start just to like sort of a quick summary,
Speaker 1: and we've talked like about what you do, like real quickly,
Speaker 1: just what is the Loan Program Office for people who
Speaker 1: may have not familiar with it or past episode, and
Speaker 1: what do you do?
Speaker 5: Well, thanks for having me back.
Speaker 6: The Loan Program's Office was started in two thousand and five,
Speaker 6: and the whole point of it was that for a
Speaker 6: lot of this technology that Doe is awesome at inventing,
Speaker 6: it tends to not be able to get commercial debt
Speaker 6: for commercialization.
Speaker 5: So a lot of these projects might be.
Speaker 6: A billion dollar project and going to get debt from
Speaker 6: the commercial markets for a first of a kind project,
Speaker 6: you know, namely like you know, the Tesla's first loan
Speaker 6: or some of the large solar and geothermal projects we did,
Speaker 6: it was just not feasible. But what's more interesting is
Speaker 6: today our remit's been expanded substantially, so it used to
Speaker 6: be we had this innovation bucket, and then we had
Speaker 6: this vehicles bucket. Basically, today we have a tribal energy program.
Speaker 6: We have this energy infrastructure refurbishment program, right, so figuring
Speaker 6: out how to take old coal plants and term of
Speaker 6: nuclear plants, or old transmission lines and double them up,
Speaker 6: or you know, figuring out what to do with old
Speaker 6: refineries or tank farms. And so we have a much
Speaker 6: larger scope today. So we've got, you know, a lot
Speaker 6: more resources today.
Speaker 2: So how much money do you actually control now?
Speaker 4: Because of course I've seen variable estimates and I get
Speaker 4: that a lot of it depends on how things develop.
Speaker 4: But you've been doing this for a while. Now, you
Speaker 4: have extended some loans. Do you have a good sense
Speaker 4: of whether it's four hundred billion or five hundred billion
Speaker 4: or six hundred billion.
Speaker 5: I mean, what's a billion between friends?
Speaker 3: What's a hundred million between friends?
Speaker 5: Yeah? I think so.
Speaker 6: When I first came into office, it was roughly forty
Speaker 6: billion dollars of loan authority. Today, if all of our
Speaker 6: loan authority was used, it'd be closer to four hundred billion.
Speaker 6: We have no idea whether it'll all be used, right,
Speaker 6: So the largest program there is this refurbishment program, which
Speaker 6: is two hundred and fifty billion dollars. Interestingly enough, it
Speaker 6: really is taking off. So I think when we first
Speaker 6: started talking to electric utilities and oil and gas companies
Speaker 6: and others about using it, I think they didn't want
Speaker 6: any part of it.
Speaker 5: They didn't really see how it was valuable.
Speaker 6: Today, I think we've already got about fifty six billion
Speaker 6: dollars worth of loans either received or being actively prepared
Speaker 6: that we've seen early drafts of. So we are seeing
Speaker 6: a lot of interest in that program. So you know,
Speaker 6: whether we get to that number or not will be
Speaker 6: determined whether that program is successful.
Speaker 3: Yeah.
Speaker 1: The first time we ever talked to I think it
Speaker 1: was early twenty twenty two and someone said, oh, Jigger,
Speaker 1: he's someone you should talk to. He knows about energy,
Speaker 1: sort of an interesting.
Speaker 3: Guy and knows about this stuff.
Speaker 1: And then I think it was like about three or
Speaker 1: four months later and the Inflation Reduction Act passed and
Speaker 1: someone's like, oh, you know that guy, Jigger, you talk to.
Speaker 1: His office just got whatever six hundred Billion're like, oh,
Speaker 1: so what went from like the sort of I don't know,
Speaker 1: backwater is the right word, but fairly like modest division
Speaker 1: of the Department of Energy, you are now a key
Speaker 1: player and essentially this massive effort by the Biden administration
Speaker 1: to decarbonize our energy system.
Speaker 5: Yeah.
Speaker 6: Look, I think that when you think about my own background,
Speaker 6: having started Son Edison and then Generate Capital, I think
Speaker 6: I have a unique understanding on how this stuff works,
Speaker 6: which is that we have these extraordinary people who frankly
Speaker 6: bust their hump for ten years in obscurity before they
Speaker 6: get to.
Speaker 5: Where the loan Program's office can help them.
Speaker 6: Right when you think about a lot of these companies
Speaker 6: who have figured out green cement or green steel or
Speaker 6: you know, next generation transmission lines or next generation hydrogen facilities,
Speaker 6: I mean they were in a lab getting some like
Speaker 6: fifty thousand dollars grant like ten years ago, and then
Speaker 6: their thesis worked out, and then they decided to get
Speaker 6: an a round and then a B round. Some of
Speaker 6: them may have spacked prematurely, you remember the time, and
Speaker 6: so you know, I think that the goal for me
Speaker 6: is not to you know, puff myself up, but to
Speaker 6: recognize that we have all these people and honestly the
Speaker 6: ecosystem that we have in this country. To take them
Speaker 6: from the technology works to connecting it to the American
Speaker 6: worker building the facility here.
Speaker 5: Doing all this stuff here.
Speaker 6: Frankly, we haven't done in forty years here, right, I
Speaker 6: mean most of our technologies went to Asia or went
Speaker 6: to Europe to get commercialized. And now I think with
Speaker 6: the Inflation Reduction Act, it's sort of my job to
Speaker 6: convince them to use these resources to stay here and
Speaker 6: to do it here, right, And I think a lot
Speaker 6: of that really means that we got to do a
Speaker 6: lot more outreache. We've got to convince them that this
Speaker 6: is a place that wants them, because you know how
Speaker 6: hard it is, right, I Mean, you have to get
Speaker 6: permission from people, you have to get a permit, you
Speaker 6: have to get a governor who actually wants to put
Speaker 6: together an economic development package for you, right, And if
Speaker 6: you haven't done it in forty years, then it could
Speaker 6: be that, you know, it's a little bit harder to
Speaker 6: do it here.
Speaker 4: Do you feel pressure to spend the money, like is
Speaker 4: there a sense of urgency here? And then how do
Speaker 4: you actually balance that with the need to make efficient
Speaker 4: and useful and ideally profitable investments.
Speaker 6: So I definitely don't feel pressure to put the money
Speaker 6: out the door. I think that the money should go
Speaker 6: out the door if it, you know, deserves to gout
Speaker 6: the door. And we have three hundred people who work
Speaker 6: for us at the Loan Program's office, and so they
Speaker 6: are the ones actually evaluating and you know, doing the
Speaker 6: work to get the loan to the finish line. I
Speaker 6: certainly have a lot of subject matter expertise, so I
Speaker 6: can be somewhat helpful, But honestly, the biggest part of
Speaker 6: my job is to get people to trust us, right.
Speaker 6: So getting the growth companies to trust us was something
Speaker 6: that was fairly easy for me because a lot of
Speaker 6: those people are my peers from my professional life. But
Speaker 6: getting the electric utility companies to use us, I mean,
Speaker 6: that was not an easy task. And now I've got
Speaker 6: to get the oil and gas companies to get to
Speaker 6: use us, right, and that's not easy at all. Many
Speaker 6: of them feel like they're going to get stripped of
Speaker 6: their country club membership if they use the Loan Program's
Speaker 6: office right and so, but they're not going to do
Speaker 6: the right thing unless they do it right, because the
Speaker 6: numbers don't work without our debt, Like the returns aren't
Speaker 6: high enough without our debt, and so I need them
Speaker 6: to come into the office. And so a lot of
Speaker 6: what I'm doing is trying to build trust.
Speaker 1: So your company that you started, sun Edison, I mean
Speaker 1: it was a finance breakthrough, right, I mean the solar
Speaker 1: technology has existed, but you understood that there was an
Speaker 1: opportunity to finance the deployment of solar in a new way.
Speaker 3: Can you just speak theoretically or big picture?
Speaker 1: Why are there projects that can pay back the debt,
Speaker 1: but which private sector money is not there? Why is
Speaker 1: it important for the public sector balance sheet to be
Speaker 1: deployed for certain types of energy projects?
Speaker 3: And then maybe we can get into some of these specifics.
Speaker 5: There's a couple of reasons that I'll go through. Right.
Speaker 6: One is the Department of Energy has ten thousand expert
Speaker 6: scientists and engineers on the platform. Right, most of the
Speaker 6: fundamental patents and these technologies were invented by one of
Speaker 6: those ten thousand people. So when you have a methane
Speaker 6: pyrolysis project like monolith materials that we give a conditional
Speaker 6: commitment to in twenty twenty one, like, there's somebody in
Speaker 6: a national lab who actually invented it. And so when
Speaker 6: I go to him and I say, hey, you know, like,
Speaker 6: what do you think about this thing?
Speaker 5: Right?
Speaker 6: They're like, yeah, we've done like eighteen demonstrations of this
Speaker 6: project and we think this will work. And the way
Speaker 6: that they're approaching it's going to work, et cetera. There's
Speaker 6: nobody for JP Morgan to go to for that. They're
Speaker 6: going to be like this scares the crap out of me.
Speaker 6: I'm not going to do that. And so you can
Speaker 6: imagine that there's a lot of technology risk that is
Speaker 6: perceived by the banks that we can actually manage because.
Speaker 5: We have all these experts on a platform.
Speaker 6: The other piece of it, though, is that you know,
Speaker 6: with the Basel three rules, you know, passing up to
Speaker 6: the global financial crisis, for a lot of these banks,
Speaker 6: if they don't actually have investment grade off take agreements
Speaker 6: for some of these things, Like I'll give you an example,
Speaker 6: like for a lot of these critical minerals projects, there's
Speaker 6: no history whatsoever for someone and say you know what,
Speaker 6: I'll pay a fixed price for that lithium for ten years.
Speaker 6: Generally speaking, it's like, well, whatever the lithium price is,
Speaker 6: we're going to benchmark to that price.
Speaker 5: My lithium has gone down by forty five percent already
Speaker 5: this year, right.
Speaker 6: And so so the government is actually willing to take
Speaker 6: that risk because we know that, you know, we're going
Speaker 6: to have all these electric vehicles purchased over the next
Speaker 6: ten years.
Speaker 5: The world's going to be short lithium.
Speaker 6: So even if in the short term lithium prices went down,
Speaker 6: in the long term, you're going to need these resources
Speaker 6: like that. That formula under a bank's rules would require
Speaker 6: a huge amount of Tier one capital to be set
Speaker 6: aside for that loan. So you can imagine them saying,
Speaker 6: I'm not making investment banking profits on this. I'm not
Speaker 6: going to use my Tier one capital for this, right.
Speaker 6: Because there's a bit of a friction, right because on
Speaker 6: the other side you got the Federal Reserve and the
Speaker 6: OCC Commissioners who are saying that looks like a risky
Speaker 6: load if we're going to make you put more Tier
Speaker 6: one capital against it, right, And so there's lots of
Speaker 6: reasons why you have friction in the marketplace. But before
Speaker 6: we were active, most of these these companies had one
Speaker 6: hundred percent equity finance everything. Right, they would just have
Speaker 6: to raise a billion dollars in the marketplace and then
Speaker 6: do that, and you can imagine there's very few companies
Speaker 6: that could do that. So then we were restricting innovation
Speaker 6: and restricting it's getting commercialized.
Speaker 4: I realized I made an assumption in my previous question
Speaker 4: because I said, ideally you would make loans that make
Speaker 4: a profit, and that's probably true.
Speaker 2: But how do you think about profit versus risk?
Speaker 4: Do you have to make a profit or do you
Speaker 4: think there's a role for government to finance riskier projects
Speaker 4: that maybe have a public good or utility.
Speaker 6: Yeah, a profit is a very strong word, right, because
Speaker 6: we don't really make a profit in the government, So
Speaker 6: I don't think about it that way. I think the
Speaker 6: way I think about it is Congress gives us a
Speaker 6: couple of things. So let me just maybe help you
Speaker 6: understand how the money flows. So you know, when we
Speaker 6: give somebody a loan, the US Treasury Department theoretically issues
Speaker 6: bonds and then we issue that loan. So the US
Speaker 6: government has to pay back those bonds, and so there's
Speaker 6: a certain cost to the US government of that thing.
Speaker 6: So if I'm charging someone US treasuries plus thirty seven
Speaker 6: a half basis points, which is a lot of our
Speaker 6: loans are at that rate, then the money I'm getting
Speaker 6: in for the US Treasury bond coupon, I'm not viewing
Speaker 6: as profit, right say, because that's just going back out
Speaker 6: the tour to investor. So it's the thirty seven half
Speaker 6: basis points that you know was coming in abovehand.
Speaker 5: Right.
Speaker 6: Separately, the US Congress gives us something called credit subsidy,
Speaker 6: and what we use that for is to put a.
Speaker 5: Loan loss reserve in place.
Speaker 6: So I might say, like our average loan is rated
Speaker 6: B minus, right, what you guys would call junk bonds.
Speaker 6: So so like you know, by definition, when we issue
Speaker 6: the loan, we are saying that it will likely have
Speaker 6: a default right of let's say, maybe a twelve percent
Speaker 6: risk of default or a twenty two percent risk of default,
Speaker 6: but it's not a one percent risk of default. And
Speaker 6: so then we put that much money to the side
Speaker 6: and a loan loss reserve. So the Congress is saying,
Speaker 6: you have this amount of money to quote unquote lose, right,
Speaker 6: and that's the money that they.
Speaker 5: Allocate through a budget process.
Speaker 6: And what we've averaged today is that we put aside
Speaker 6: five dollars in loan loss reserve for every dollar.
Speaker 5: Of actually realized losses we've had.
Speaker 6: So we put together roughly five billion dollars of loan
Speaker 6: loss reserves and we've lost about one point zero three
Speaker 6: billion total. And so from that perspective, that's you know,
Speaker 6: four billion that the Congress gave us to quote unquote lose,
Speaker 6: that we didn't lose, and that we returned back to
Speaker 6: the taxpayer. So but I mean the other way I
Speaker 6: think about it, right, So that's strictly answering your question.
Speaker 6: But the other way I think about it is it
Speaker 6: is clearly the case that Tesla is the best electric
Speaker 6: vehicle company in the world, clearly, and they will fully
Speaker 6: admit that there is no chance that they would have
Speaker 6: gotten the metals off the ground without our loan. And
Speaker 6: so what's it worth to dominate these industries into the future,
Speaker 6: not just electric vehicles, which happened in the first generation there,
Speaker 6: but in the future. Right when you look at methane pyrolysis,
Speaker 6: what they do is they take natural gas, they split
Speaker 6: it into hydrogen and carbon. Carbon black is something you
Speaker 6: need to make tires, even electric vehicles used tires, and
Speaker 6: so we need to use that, right and so right
Speaker 6: now the largest exporter of carbon black in the world
Speaker 6: is Russia.
Speaker 5: Right.
Speaker 6: If this works, which I'm pretty sure it will, we
Speaker 6: will be the largest exporter of carbon black in the world. Right,
Speaker 6: and that's a really important market for us to dominate.
Speaker 5: Right.
Speaker 6: So the question really is like, you know, yes, there's
Speaker 6: you know, being good with taxpayer money, but the other
Speaker 6: piece is actually reaching real outcomes.
Speaker 1: All right, So we sort of we've covered in the
Speaker 1: very broad strokes the bank that you basically run within
Speaker 1: the Department of Energy. Zooming out is part of this
Speaker 1: whole project. And we're here in Texas in Austin at
Speaker 1: the Texas Tribune Festival. This is a state of course
Speaker 1: where energy and the grid has been in the news
Speaker 1: a lot in the last few years.
Speaker 3: And it seems to me like when we think.
Speaker 1: About the grid, well, a few years ago, most of
Speaker 1: us weren't even thinking about the grid.
Speaker 3: We just sort of took it for granted. It just worked.
Speaker 1: Over the last few years in various states, we've had
Speaker 1: these problems. People want right, cheap electricity, they want reliable
Speaker 1: electricity and increasingly clean electricity.
Speaker 3: Can we have all three?
Speaker 5: We're delivering all three.
Speaker 6: I mean, look at Texas, right, Texas is the like
Speaker 6: ground zero here, right, You're talking about the state that
Speaker 6: has installed more wind power and more solar power over
Speaker 6: the last five years than any other place in the
Speaker 6: entire country. I think it's number one in the country
Speaker 6: and wind and number two in the country in solar,
Speaker 6: and will be number one in the country in solar in.
Speaker 5: Like eighteen months.
Speaker 6: It's also number one in the country and on an
Speaker 6: ongoing basis in installing battery storage, right. I mean, it's
Speaker 6: also the one that's actually like, you know, piloting these
Speaker 6: virtual power plants where there were Tesla Electric Company customers
Speaker 6: this last summer who had like negative six hundred dollars
Speaker 6: bills because they were selling power from their power walls
Speaker 6: into the marketplace at five dollars a kilo an hour
Speaker 6: when market prices dictated it, and so they were helping
Speaker 6: their neighbors, right, And so that that is not allowed
Speaker 6: in California, like that is allowed here. So when you
Speaker 6: think about the level of innovation happening in Texas right now,
Speaker 6: it is at an all time high. And you know, I
Speaker 6: think that part of it is because Texas needs that
Speaker 6: level of innovation, right, I mean, their natural gas fleet
Speaker 6: didn't perform as well as they wanted it to during
Speaker 6: you know, URI and then some of the other issues.
Speaker 6: So they've recognized that they need to diversify where the
Speaker 6: electricity comes from, which is why they're building so much
Speaker 6: solar and wind. But also they've decided to put two
Speaker 6: new semiconductor plants here in Texas. They have all this growth,
Speaker 6: All these companies are deciding that Texas is where they
Speaker 6: want to build stuff. If you fly into DFW Airport,
Speaker 6: there's all these roads and you're like, where the house is.
Speaker 6: They're coming in like the next eighteen months. There's so
Speaker 6: much load growth here. So now the question really becomes like,
Speaker 6: how do we build the grid of the future. And
Speaker 6: they're figuring that out here in Texas. It's pretty exciting.
Speaker 4: Well, setting the great state of Texas aside, and we
Speaker 4: are recording this live in Austin, so I feel like
Speaker 4: I should describe it that way.
Speaker 2: Setting Texas aside.
Speaker 4: I mean, it is true that you have seen demands
Speaker 4: on the grid rise, and in particular, I think I
Speaker 4: saw a statistic saying that something there was a forty
Speaker 4: percent increase in the amount of grid connection applications in
Speaker 4: twenty twenty two alone, And a lot of this is
Speaker 4: coming from you know renewable solar wind that need electricity
Speaker 4: and want to feed it back into the grid.
Speaker 2: How do you solve that problem?
Speaker 6: Let me back it up for a second and then
Speaker 6: like explain to you what's you know, where the friction
Speaker 6: points are, and then maybe we can talk about how
Speaker 6: we solve it. So, in general, you've got three major
Speaker 6: pieces here, right, You've got generation of electricity. You've got
Speaker 6: the transportation of the electricity to your home or business
Speaker 6: or whatever is the transmission distribution grid. And then you've
Speaker 6: got the load itself, right, and so you've got a
Speaker 6: lot of load growth from new manufacturing facilities being announced
Speaker 6: because of the Inflation Reduction Act. You've got electric vehicles
Speaker 6: being added to the grid at record numbers. You've got
Speaker 6: heat pumps, all these other things. Right, So the main
Speaker 6: thing that I think you're asking about is the transmission grid.
Speaker 6: So you've got a whole bunch of people.
Speaker 2: Wait, can we back up for a second. What's the
Speaker 2: difference between transmission and distribution.
Speaker 6: So the transmission grid is generally at much higher voltages
Speaker 6: and you're transporting power long distances from where you know,
Speaker 6: like the Panhandle of Texas where they have a lot
Speaker 6: of wind down.
Speaker 5: Here to populated centers.
Speaker 6: Right, the distribution grid is what's in your neighborhood and
Speaker 6: is you know, basically having to manage, you know, making.
Speaker 5: Sure that you have power for your four heir amp service.
Speaker 6: Because if you plug in fifteen electric cars at the
Speaker 6: same time, then the distribution grid has to either be
Speaker 6: able to handle it or be able to throttle the
Speaker 6: amps to each home so that the distribution grid doesn't
Speaker 6: you know, get overloaded.
Speaker 4: So what are the issues sort of facing the transmission
Speaker 4: aspect of the grid at the moment.
Speaker 6: So basically what happens is is that you know, someone says,
Speaker 6: I've got a fantastic piece of land. I think I
Speaker 6: can put wind power on it or solar power. Mostly
Speaker 6: it's solar these days, there's a lot less wind in
Speaker 6: that transmission queue and they say, great, you know, like
Speaker 6: I'd like to apply to be able to use.
Speaker 5: That transmission line. Now, there's.
Speaker 6: Many different regions of the country, and each one of
Speaker 6: them does it differently. Texas is arguably the best region
Speaker 6: for this, and so what they do is they check
Speaker 6: to make sure it'll be safe so when you connect
Speaker 6: it to the grid, it won't actually make the grid
Speaker 6: like unstable and you know, and then take something down
Speaker 6: so they'll check that, But then they don't actually check
Speaker 6: necessarily that there's capacity for you.
Speaker 5: They sort of say you.
Speaker 6: Should just interconnect, and if there's too much on the
Speaker 6: grid any one time, we're gonna tell you to curtail.
Speaker 6: So we're gonna tell you to shut off. And you know,
Speaker 6: you can imagine you're not making any money when you
Speaker 6: shut off, right, and so but Texas is like, that's
Speaker 6: your problem, like you know, and then separ they actually
Speaker 6: calculate really well what the loss to rate payers are
Speaker 6: for that congestion. Right, So if there's not enough transmission capacity,
Speaker 6: then the coal plant that's next to somebody's house has
Speaker 6: to turn on and be used more. That's more expensive.
Speaker 6: They say, Oh, if there was enough transmission capacity, then
Speaker 6: that would have been cheaper and better, right, And then
Speaker 6: that's what they justify paying Encore, which does a lot
Speaker 6: of the transmission distribution, to be able to build new transmission.
Speaker 6: They're like, well, the congestion charges were so large that
Speaker 6: we should build new transmission to make sure that people.
Speaker 5: Have lower bills.
Speaker 6: So that is the ideal situation, and that's what Texas does,
Speaker 6: and you get a lot more movement. I mean, even
Speaker 6: Texas is clogged up just because there's so many applications,
Speaker 6: but they're the fastest. But places like the Northeast, or
Speaker 6: the mid Atlantic States or the Midwest States, I mean
Speaker 6: people are actually waiting like four to five years to
Speaker 6: get permission to interconnect because in those states they largely say, well,
Speaker 6: we we want to know that there's actually a piece
Speaker 6: of transmission that's available for you. So we're waiting for
Speaker 6: this coal plant to cease operations with this natural gas
Speaker 6: plan before we allocate that transmission for you, because we
Speaker 6: don't want to do this curtailment thing. And so as
Speaker 6: a result, we we have twelve hundred megawatts twelve hundred
Speaker 6: gigawatts of like roughly like of generation.
Speaker 5: In this country.
Speaker 6: We have the same amount twelve hundred gigawatts waiting in
Speaker 6: queues for permission to be added to the grid right now.
Speaker 5: Wow.
Speaker 1: As soon as the Inflation Reduction Act passed and everyone
Speaker 1: got really excited about all of this new energy that
Speaker 1: was going to be in a wind and solar, et cetera,
Speaker 1: then immediately people started saying, oh, but we don't have
Speaker 1: the transmission capacity, and then there was this big fight
Speaker 1: we need permitting reform, and we need that because that's
Speaker 1: the only way otherwise we're gonna have all this stranded energy. Like,
Speaker 1: are we at risk of having a bunch of government
Speaker 1: subsidized or government influenced energy that ultimately does not make
Speaker 1: it onto the grid because of some other fight that
Speaker 1: hasn't gotten taken care of.
Speaker 6: You, So let me answer that question from the other side, Okay,
Speaker 6: but I will answer it. I think that in general,
Speaker 6: the question is why does any of this stuff matter?
Speaker 5: Right? Like, I mean, why do you.
Speaker 6: Care rather we actually interconnect all this sore and wind
Speaker 6: or new nuclear plants or a geothermal facility? You know,
Speaker 6: we want to relcense thirty seven gigawatts of hydro dams
Speaker 6: that are like from nineteen ten, Right, why do we
Speaker 6: even care?
Speaker 5: It's because everybody wants to use chat GBT. Right.
Speaker 6: Chat GBT is ten thousand megawatts of compute power by itself.
Speaker 6: Now you add like Google and all this other stuff,
Speaker 6: and then people want to let.
Speaker 5: Your cars they like it.
Speaker 6: You know, like my son yells at the car in
Speaker 6: front of me because it's like they have a tailpipe.
Speaker 3: My daughter, you know, help my daughter does That's how.
Speaker 5: It is right. So that's why we care about this stuff.
Speaker 6: Like, we're not doing it because we're trying to like
Speaker 6: just make everything more complicated. We're doing this because Americans
Speaker 6: believe that using more electricity makes their life better. Right,
Speaker 6: whether it's like storing photos that they probably should delete,
Speaker 6: but they're going to keep them around anyway, right, and
Speaker 6: then paying like Apple another dollar niney nine a month.
Speaker 5: Right, That's that's why we care about this stuff. Right.
Speaker 6: So now the question becomes like, if we all care
Speaker 6: about this enough, right, if we all want this enough,
Speaker 6: what are we willing to do to accelerate it?
Speaker 5: Right?
Speaker 6: So you've got permitting, You've got the National Environmental Protection Act,
Speaker 6: and so people talk about NEPA and all this other stuff,
Speaker 6: and so do we want to make this stuff easier?
Speaker 5: Right?
Speaker 6: And you've got Bill McKibben, who wrote a big article
Speaker 6: about saying it's time to build. I mean, this is
Speaker 6: the guy who led the movement to like kill the
Speaker 6: Excel pipeline, right, and so even he's saying like we
Speaker 6: sort of need to build, right, And so now the
Speaker 6: question really becomes how do we build, and how do
Speaker 6: we do it in a way that's equitable, that like
Speaker 6: make sure that we're you know, paying people a fair
Speaker 6: wage and all these other things. And what we're looking
Speaker 6: at doing is, like you know, is figuring out how
Speaker 6: we actually like check to make sure that things.
Speaker 5: That we really care about are checked. Right.
Speaker 6: We don't want to like, you know, just gloss over
Speaker 6: things and just say, ah, whatever, we should just lower
Speaker 6: our standards. We're just saying that we might be applying
Speaker 6: the standards in an incorrect way for certain projects, right,
Speaker 6: because certain projects really don't have the level of toxicity
Speaker 6: within air pollution issues or local impacts or the things,
Speaker 6: and certain projects maintain those things right, like bring chemical
Speaker 6: plants or some of these other things, And so we
Speaker 6: just need to be more appropriate in the way in
Speaker 6: which we implement those rules.
Speaker 5: Right.
Speaker 6: So that's one piece of it. The other piece of
Speaker 6: it is, you know, we need to do things differently.
Speaker 6: Right for a long time, for twenty years, we have
Speaker 6: not had load growth in this country. Right, So we
Speaker 6: basically sell the same number of tarra wade hours today
Speaker 6: that we did in two thousand and three. And largely
Speaker 6: that's because.
Speaker 1: There's a good reason that no one WI really paid
Speaker 1: much attention to this stuff.
Speaker 3: There just wasn't the need for it.
Speaker 6: There was no need for it, right, I see. But
Speaker 6: now everyone is like, oh my god, we got to
Speaker 6: grow again. That's a lot, right. But the beauty is
Speaker 6: we actually have solutions to all of it. Like the
Speaker 6: crazy thing is, like I'll like on the grid, right,
Speaker 6: there are all these things called grid enhancing technologies.
Speaker 5: I'll give you an example.
Speaker 6: Like the grid basically is operated by slide roll and
Speaker 6: so people say this, this thing basically has three thousand
Speaker 6: megawats capacity.
Speaker 5: Right, That's actually not true, right.
Speaker 6: What's true is that it the capacity changes based on
Speaker 6: the temperature outside.
Speaker 5: Right, So there's less.
Speaker 6: Capacity when it's like one hundred and two degrees outside, way,
Speaker 6: more capacity when the it's forty five degrees. Right, So
Speaker 6: you can put in dynamic load ratings. Right, guess who
Speaker 6: does that? Everybody but the United States? Right, and so,
Speaker 6: and we invented it. So the UK is fully deployed it,
Speaker 6: Belgium is fully deployed, all these other Brazil, India, Everyone's
Speaker 6: doing this stuff except for us. So, like this is
Speaker 6: what I was saying. We have all the entrepreneurs who
Speaker 6: invented all this stuff, and we didn't deploy it here.
Speaker 6: We let them go overseas to deploy it right there?
Speaker 2: Why it seems like a slam dunk.
Speaker 6: Why why not impediment So like PPL was on a
Speaker 6: podcast the other day, which is Pennsylvania Powered Light, and
Speaker 6: they were saying, you know, basically they had this thing
Speaker 6: where they had to solve it. So they put in
Speaker 6: dynamic lotter rings. It was only like nine hundred thousand
Speaker 6: dollars to do it, but it saved fifty million dollars
Speaker 6: of upgrades. And they were like, we make money to
Speaker 6: deploy dollars, Like this was a terrible decision for our shareholders.
Speaker 6: We did it because there was no other way for
Speaker 6: us to upgrade that line, and we had a customer
Speaker 6: that really needed it. And so to upgrade the entire
Speaker 6: United States of America with grate enhancing technologies to unlock
Speaker 6: thirty percent more transmission capacity would cost a total of
Speaker 6: three billion dollars. Let's do it, right, But like, but
Speaker 6: you have, but you, but but you have like all
Speaker 6: these competing interests of people who are like, but Jigger,
Speaker 6: I was gonna spend twenty three billion dollars to upgrade
Speaker 6: the transmission grade that was going to be rate based
Speaker 6: for my shareholders. Why would I want the three billion,
Speaker 6: But you know what, all of that is evaporating away
Speaker 6: today because they're all just saying, we can't.
Speaker 5: Keep up with load growth.
Speaker 6: So we'll do the three billion, and we'll invest even
Speaker 6: more money because a lot of our stuff's fifty years old,
Speaker 6: so we kind of have to like replace it anyway.
Speaker 6: And so all of these traditional like loggerheads that we've
Speaker 6: been at for twenty years is really going away because
Speaker 6: people know that we need both.
Speaker 4: I'm going to take a queue from a member of
Speaker 4: the audience and ask, like, how much interest do you
Speaker 4: see from the utilities themselves when it comes to your
Speaker 4: loan program?
Speaker 2: Are they knocking at your door? Is there still a
Speaker 2: lot of reticence?
Speaker 6: So when this when the Inflation Reduction Act first passed,
Speaker 6: we got this you know, energy refurbishment sort of program,
Speaker 6: and you know, I reached out to them all and
Speaker 6: they said, Jigger, we can raise money ourselves. We don't
Speaker 6: need to use your program. We're never, never going to
Speaker 6: use your program. Then I was able to like recruit
Speaker 6: Leslie Rich, who's the most stock analysts on Wall Street
Speaker 6: for the electric utility industry from JP Morgan to come
Speaker 6: run the program and like, suddenly I've got like fifty
Speaker 6: eight billion dollars with a loan applications in the loan
Speaker 6: program's office. So you know, people really do matter, and
Speaker 6: so she's been able to convince them. She's like, well,
Speaker 6: you know, you kind of are a soft rate cap.
Speaker 6: You can't keep raising rates ten percent a year and
Speaker 6: continue to like have a social license in your state,
Speaker 6: like you should actually figure out how to reduce rates
Speaker 6: for rate payers. And so the arguments are like, you know,
Speaker 6: filtering through. People are having these conversations. I do think
Speaker 6: that for sure, in twenty nineteen, people were not serious
Speaker 6: about the fact that we might have load growth again.
Speaker 6: Even when the Inflation Reduction Act passed. It's not clear
Speaker 6: to me that people really had internalized it. Today, no
Speaker 6: matter where I go, people are actually actively interested in
Speaker 6: learning about how they should do things differently within the
Speaker 6: utility sector in all three areas, right, So generationsmission distribution,
Speaker 6: and what we call virtual power plants, which is actually
Speaker 6: you know, flexing demand with the same level of dexterity
Speaker 6: that we currently only flex supply.
Speaker 4: I definitely want to talk about virtual power plants, but
Speaker 4: since you mentioned electricity rates just then, I mean both
Speaker 4: Joe and I live in New York. We are the
Speaker 4: slaves of con Edison in some respect. And every year,
Speaker 4: it seems con Edison will announce a rate hike, and
Speaker 4: a lot of that goes into not necessarily the price
Speaker 4: of electricity, but the distribution costs. And I think that's
Speaker 4: been a trend for a few years where you know,
Speaker 4: actual load demand or consumption of electricity has been pretty stable,
Speaker 4: but distribution costs have gone up and up. Can you
Speaker 4: explain what's happening with that dynamic and how you know
Speaker 4: the DOE can help with that aspect of it.
Speaker 6: Yeah, so let me start from first principles and then
Speaker 6: I'll answer your question directly. So in two thousand, right,
Speaker 6: the National Academy of Sciences said, you know, the most
Speaker 6: important machine in the whole world was the electric utility grid,
Speaker 6: right of the twentieth century. Right, And so they got
Speaker 6: this award for you know, the best engineering marvel of
Speaker 6: the twentieth century.
Speaker 5: Right.
Speaker 6: This engineering marvel has cost us over at trillion dollars
Speaker 6: to build right over time, and we use it forty
Speaker 6: percent of the time.
Speaker 5: So, if you're a private center.
Speaker 6: Company, which some of these utilities are, and you have
Speaker 6: a machine that you built, a cost a trillion dollars
Speaker 6: and you only use it forty percent of time. You'd
Speaker 6: be like, usually we're trying to maximize the like operational like,
Speaker 6: you know, capacity utilization of this machine.
Speaker 5: We spend a trillion dollars on it, we should use
Speaker 5: it more, right, So.
Speaker 6: The reason they don't use it more is when air
Speaker 6: conditioning came in in the nineteen seventies, right, then you
Speaker 6: had this peak, right, so whenever you have a hot day,
Speaker 6: you have its peak. And so they built the transmission
Speaker 6: distribution grid to handle air conditioning. They built a bunch
Speaker 6: of natural gas peaker plants to be able to power
Speaker 6: that air conditioning. And so the peak to trough youation,
Speaker 6: like has gone bigger. Right, So now you're using one
Speaker 6: hundred units of energy at the top and you're using
Speaker 6: like twenty five units of energy at the bottom.
Speaker 5: Right.
Speaker 6: And so what they have said to homeowners or you
Speaker 6: know condo owners or you know renters, is you can
Speaker 6: do whatever you want with your demand, and we will
Speaker 6: make sure that the lights work.
Speaker 5: Right.
Speaker 6: That's really expensive, right, So every time you buy something,
Speaker 6: whether it's a hair dryer or an espresso machine or whatever,
Speaker 6: it is they have to upgrade the service to make
Speaker 6: sure that if all of you turn it on at
Speaker 6: the same time, or some reasonable amount of you turn
Speaker 6: at the same time, then you can be accommodated.
Speaker 5: Right.
Speaker 6: The other way for them to do that is to say,
Speaker 6: there are some loads that you just don't care about, right,
Speaker 6: Like your water heater. You don't really care whether your
Speaker 6: water heater turns on right after you finished taking a
Speaker 6: shower or whether it turns on like six hours later
Speaker 6: when there's excess capacity in the grid. And a lot
Speaker 6: of real electric co ops have controlled those water heaters
Speaker 6: for thirty years, so it's not new technology. But like
Speaker 6: if you flatten the load, right and you shift like
Speaker 6: you know. And the reason this is coming back in
Speaker 6: a big way right now is because of electric vehicles. Right, Like,
Speaker 6: most people who have electric vehicles, they plug in their
Speaker 6: car when they come home from work or school or whatever,
Speaker 6: and they leave it plugged in for thirteen hours, but
Speaker 6: it's only charging for three of those thirteen hours, right,
Speaker 6: So people don't really care which three hours they're charging
Speaker 6: as long as it's charged by the time they wake
Speaker 6: up in the morning.
Speaker 5: Right.
Speaker 6: And so people are like, oh, like, we can actually
Speaker 6: accommodate a lot more electric vehicles if we do manage charging.
Speaker 6: And so now once you open that door, well, now
Speaker 6: you've got to allow water heaters and thermostats and all
Speaker 6: sorts of other stuff that you have an app for
Speaker 6: on your phone right to be able to manage charging.
Speaker 6: And so so the old paradigm was that kan ED
Speaker 6: just upgraded the distribution circuit every time you found some
Speaker 6: new thing that you want to buy. And now we're saying, ah,
Speaker 6: that's kind of getting expensive. You should actually do managed
Speaker 6: you know, charge.
Speaker 1: So we're about halfway done with our time with you here,
Speaker 1: and I want to like get into like some of
Speaker 1: the specific source of generation. We should talk a little
Speaker 1: wind and nuclear and all that. But before we do,
Speaker 1: there's this critique of the way entered infrastructure in the
Speaker 1: US has developed these days, particularly under that Biden administration.
Speaker 1: And the critique is basically, Okay, we have this mission
Speaker 1: to decarbonize the grid, add capacity, all that, but that
Speaker 1: the administration adds all these other requirements social requirements. Oh,
Speaker 1: the companies have to provide childcare, and they have to
Speaker 1: do this or that, all these other things that maybe
Speaker 1: didn't make it into the bill. And maybe other progress
Speaker 1: several liberal interests like want to squeeze it in somehow
Speaker 1: to how we build out, and they're like, we're never
Speaker 1: going to accomplish these goals of decarbonization if the company's
Speaker 1: building this or that also have to satisfy X, Y
Speaker 1: and z, you know, sort of liberal wish list progressive
Speaker 1: dreams of whatever it is. Do you see that in
Speaker 1: your day to day that this is an impediment that
Speaker 1: things that are not directly related to building an electrification
Speaker 1: get in the way of new construction.
Speaker 6: No, So, so in general, I'd say that we have
Speaker 6: statutory requirements. Right, so for our office, you have to
Speaker 6: pay Davis bake and wages. For construction, you have to
Speaker 6: use this thing called the Cargo Preference Act. But other
Speaker 6: than that, there are no other requirements of my office,
Speaker 6: and so we don't impose any other requirements onto, you know,
Speaker 6: our applicants. Now that being said, remember we haven't done
Speaker 6: this in forty years, right. It's not like the United
Speaker 6: States of America has been like building manufacturing facilities, brand new.
Speaker 5: Manufacturing facilities for four years.
Speaker 3: We haven't.
Speaker 6: And so you know, yesterday I was in Georgetown, Texas,
Speaker 6: one of our companies, Uh, Selling right is building their
Speaker 6: facility up there there to make these extraordinary wire harnesses
Speaker 6: for electric vehicles that are like ninety five percent less weight,
Speaker 6: which is amazing. But you know the thing is, and
Speaker 6: you would think wire harnesses are things that you know,
Speaker 6: you can only make in low wage countries around the world.
Speaker 6: But they have this innovative process and so they can
Speaker 6: make it here in Georgetown, Texas. We asked them to
Speaker 6: put together a meeting right for you know, workforce. They
Speaker 6: have to hire about a thousand people, and so you know,
Speaker 6: how are you going to do that? Where are you
Speaker 6: going to go? Et cetera, et cetera. There were a
Speaker 6: lot of people came and you know, facilitated conversation.
Speaker 5: There's no mandate there.
Speaker 6: I wasn't suggesting that they had to hire you know,
Speaker 6: a good mix of this group or that group or
Speaker 6: whatever it is. It's more like, let's have a conversation, right.
Speaker 6: It was very clear to me that most of the
Speaker 6: people in that room were so appreciative of Selling creating
Speaker 6: a thousand jobs in that community, but had never had
Speaker 6: the chance to provide Selling any feedback about how they
Speaker 6: might recruit better.
Speaker 5: Right.
Speaker 6: Now, that's not because Selling's a bad company, right. Selling's
Speaker 6: a startup company that probably almost went bankrupt like three times.
Speaker 5: And you know, think.
Speaker 6: They're lucky stars that they got the capitol when they
Speaker 6: needed to to actually get to this point and now
Speaker 6: they're building a factory. They're like the American dream. So
Speaker 6: I'm not surprised that the number one thing that he's
Speaker 6: working on is not figuring out that his workforce issues, right,
Speaker 6: and number one thing he's working on is making sure
Speaker 6: that the Chinese don't steal his technology, and like that,
Speaker 6: he's continuing to like, you know, succeed on this stuff, right.
Speaker 6: And so so he came up after me. His name
Speaker 6: is Kevin Cokeley, and he's great, and he said, you know, Jigger,
Speaker 6: this was super helpful.
Speaker 5: I want to do right by these folks in the community.
Speaker 6: I want to actually meet all these people, et cetera,
Speaker 6: et cetera like and so it was a good conversation.
Speaker 6: I didn't force him to hit some sort of metric
Speaker 6: or do this thing or whatever else. But you know,
Speaker 6: in general, what I find is all of the people
Speaker 6: participate in the program's office are you know, Americans who
Speaker 6: are quite proud of their country. They want to do
Speaker 6: right by their workers. They want to do right by
Speaker 6: the communities. So they're in et cetera. But it's not
Speaker 6: surprising me that they're not experts in that part of,
Speaker 6: you know, building a company. They're experts in their technology,
Speaker 6: and so we do facilitate good conversations. I'll give you
Speaker 6: one more story. So there's one company that we provide
Speaker 6: a conditional commitment to. I'll try to keep the details sparse.
Speaker 6: So they're uh, you know, outing them. They are going
Speaker 6: into a state that has an extraordinary shortage of construction workers, right.
Speaker 6: So and they said, look, Jigger, I'm just not gonna
Speaker 6: be pro union, like, that's not going to happen, right. Fine,
Speaker 6: So I said, well, but you should sign a project
Speaker 6: labor agreement. They're like, Jigger, that sounds like a union term,
Speaker 6: and so I was like, well, it kind of is
Speaker 6: a union.
Speaker 5: Term, right, So you should sign a project labor agreement.
Speaker 6: And what that does is it mandates and requires the
Speaker 6: union to do a couple of things. One is start
Speaker 6: training workers for you right now, right six months eight
Speaker 6: months before you actually need them. But two, if there's
Speaker 6: actually too much work and not enough workers, you get
Speaker 6: first in line right now. If you end up doing
Speaker 6: an RFP and you pick a non union contractor, right,
Speaker 6: that's fine. They would still pull from this union hall
Speaker 6: or not or whatever. Like union workers do a lot
Speaker 6: of non union contractor work, right. He's like, Jigger, I
Speaker 6: never understood that. They never taught me that at Harvard
Speaker 6: Business School, Like, I don't know how any of this
Speaker 6: stuff works, right, And so he was appreciative, Like, you know,
Speaker 6: it wasn't like.
Speaker 5: He was union anti union, like pro union.
Speaker 6: He was like, I'm probably not inclined to go union,
Speaker 6: but like, I do need workers that are trained to
Speaker 6: like actually start working on my job site as soon
Speaker 6: as I'm ready, and this is going to make it
Speaker 6: easier for me to meet my schedule and my cost.
Speaker 5: Yeah, I'll do that.
Speaker 4: So you sort of suggested that some of these executives
Speaker 4: maybe they just hadn't thought about it before or weren't
Speaker 4: experts in it because they were focused on other things
Speaker 4: like competing with China. But just to press on the point,
Speaker 4: because I think it's kind of timely at the moment,
Speaker 4: especially given the UAW strikes.
Speaker 2: But one of the arguments that you hear is if you.
Speaker 4: Attach a lot of expensive conditions to the labor force
Speaker 4: within the US that makes it uncompetitive compared to places
Speaker 4: like China or Mexico, where the cost of labor is
Speaker 4: not only cheaper, but also not unionized and is probably
Speaker 4: not providing things like childcare.
Speaker 2: How do you think about the competitive aspect of that.
Speaker 6: As I said before, the Loan Program's office requires Davis
Speaker 6: Bacon wages for construction in general. That hasn't been a problem.
Speaker 6: You know, the in general, when you construct something, you
Speaker 6: want the folks who have the most training doing your
Speaker 6: construction is you know firstand and you know and so
Speaker 6: and so. You know, like that really isn't something that
Speaker 6: we fight over. They're like, yeah, that makes sense. So
Speaker 6: we want the highest quality workforce so that you know,
Speaker 6: when we build this building, it last for thirty years
Speaker 6: and it'll be done properly.
Speaker 5: Right, So, so that isn't really a problem.
Speaker 6: There's no requirement for folks to go union for the
Speaker 6: operating jobs, like we're not requiring that. That being said,
Speaker 6: we're saying to people that these are particularly in the
Speaker 6: manufacturing space again, which we haven't done really in forty years.
Speaker 6: You know, these are craftsmen, right, Like they're actually like
Speaker 6: the more they work at that place, the better they
Speaker 6: get at that job, and they become more productive, and
Speaker 6: they provide a lot of insight. I think when you
Speaker 6: hear Elon Musk talk a lot about this at Tesla,
Speaker 6: you know, they've sort of onshore almost everything that it
Speaker 6: takes to make a car, right, so they don't really
Speaker 6: import from you know.
Speaker 5: One thousand different suppliers.
Speaker 6: They do stuff here, and what they say is actually
Speaker 6: the folks who work on the line actually bring a
Speaker 6: lot of the best innovations to the table, right They're like, oh,
Speaker 6: this could be done smarter, this could be done better,
Speaker 6: this could do stuff like So in general, like you know,
Speaker 6: I feel like we're having these false arguments because this
Speaker 6: is like something that I don't know. It finds like
Speaker 6: certain tribes want one things or tribes want something else.
Speaker 6: So it's a great fault line to create. But I
Speaker 6: think we all agree that you want workers who actually
Speaker 6: want to be there. You don't want turnover, you don't
Speaker 6: want like ten percent of your workforce leaving every month,
Speaker 6: and you know, you want you know, folks to believe
Speaker 6: that they can you know, feed their families and you know,
Speaker 6: support a community and all that stuff on that So
Speaker 6: I don't think we're arguing over those things. And we're
Speaker 6: also not saying that one hundred percent of everything that
Speaker 6: America consumes, we consume a lot is going to be
Speaker 6: made in the United States of America, right, And so
Speaker 6: I think the administration has gone to China gone other
Speaker 6: things saying we're not decoupling. So it's really but there's
Speaker 6: a lot of these high value innovations that we've invented
Speaker 6: out of the Department of Energy, and instead of licensing
Speaker 6: them to other countries, which is basically what we did
Speaker 6: for forty years, we're saying, why don't we tied to
Speaker 6: the American workforce and make them here?
Speaker 3: Nuclear power?
Speaker 1: Two questions, What is the role in your view long
Speaker 1: in terms of meeting all this demand of nuclear growth
Speaker 1: in the US. And is the reason we haven't had
Speaker 1: much nuclear expansion in the US because a bunch of
Speaker 1: people there's like some combination of anti nuclear hippies and
Speaker 1: people who watch The Simpsons too much.
Speaker 5: I challenged the premise of your question.
Speaker 3: No, no, no, I'm just asking is that the reason
Speaker 3: or not? Am I wrong?
Speaker 5: I was?
Speaker 1: I'm not necessarily assuming that, but I believe a lot
Speaker 1: of people there's a lot.
Speaker 5: Of stuff going on. Let me try to unpack it
Speaker 5: for you. I think.
Speaker 6: So basically, nuclear power really had its heyday sort of
Speaker 6: in the sixties and the seventies, right, that's when we
Speaker 6: built a lot of our nuclear parwer plants. In the seventies,
Speaker 6: it was already the case that nuclear power plants were
Speaker 6: becoming more and more expensive. You had the Nuclear Regultory Commission,
Speaker 6: you had a lot more regulation, and so, you know,
Speaker 6: so you were already getting people less interested in doing
Speaker 6: nuclear power by the time you got to the late seventies.
Speaker 6: Then you had through My Island, Right you can imagine
Speaker 6: like that sort of scared people. And so no one died.
Speaker 6: Everyone's fine, Like, you know, nuclear is one of the
Speaker 6: safe technologies in the world, but you know, it's scared people.
Speaker 6: We basically didn't approve any new nuclear plants after that.
Speaker 6: We finished the Biron nuclear power plant, which I grew
Speaker 6: up next to in Illinois in nineteen eighty four, and
Speaker 6: then we finished watts Bar recently, and so we've had
Speaker 6: a couple of nuclear plants come online. Vogel Unit three
Speaker 6: just came online. Vocal Unit furs should come online at
Speaker 6: the end of the year. Early next year, so in Georgia.
Speaker 6: So I think that in general, the nuclear power fleet
Speaker 6: that we have now was largely built in the nineteen seventies.
Speaker 5: Right.
Speaker 6: Nuclear power is one of those things where the frustration
Speaker 6: that I have, and I was on the board of
Speaker 6: Greenpeace for six years, is that they don't actually try
Speaker 6: to do it better, right. It's always someone else's fault.
Speaker 6: It's like nuclear power is just so damn complicated. It's
Speaker 6: so hard to build. This soul and win stuff is
Speaker 6: so easy. Like, we build complicated stuff all the time.
Speaker 6: We built like oil refineries, we built like there's like
Speaker 6: a lot of semiconductor fabs or no picnic right. So
Speaker 6: it's not like we don't know how to build complicated stuff, right.
Speaker 6: But what I find is is that in nuclear power
Speaker 6: it's always something like, well, if the federal government would
Speaker 6: just do it, we should just get the Department of Defense.
Speaker 5: To just do it right, you know, like Okay, but like.
Speaker 6: That hasn't really worked for you since the nineteen seventies,
Speaker 6: so let's not try that because that's not working. So
Speaker 6: I think a lot of what we've done is right
Speaker 6: size the nuclear energy industry by saying, look, you know
Speaker 6: these ten to fifteen billion dollar nuclear plants. It's not
Speaker 6: something that.
Speaker 5: Utilities want to build, right.
Speaker 6: Like, In fact, if you look at like the last
Speaker 6: forty or fifty years of utility bankruptcies, like half of
Speaker 6: them were because of nuclear plets. So you know, I
Speaker 6: can imagine like a CEO of the utility company is like,
Speaker 6: I don't know, I don't want to do a nucleus.
Speaker 5: I like my job maybe not exactly right.
Speaker 6: And so now we have this thing called small modular reactors,
Speaker 6: which are neither small nor modular, but like, that's fine,
Speaker 6: but they basically cost two to four billion dollars, right,
Speaker 6: And in two to four billion dollars, the utilities know
Speaker 6: how to do two to four billion dollar projects, and
Speaker 6: they can find bonding for that and assurance for that.
Speaker 6: There's EPC contractors that have a balance sheet that's large
Speaker 6: enough to wrap a two to four billion dollar project,
Speaker 6: et cetera. So we now have a size that we
Speaker 6: actually can handle. When you look at like Vogel three
Speaker 6: and four, Fogel four was thirty percent cheaper than Vogel three,
Speaker 6: right because the same workforce is working on the same reactor,
Speaker 6: and they did it better the second time around, which
Speaker 6: you can imagine.
Speaker 5: So the way that these.
Speaker 6: Small module reactors work is that you built four in
Speaker 6: one place. You build three hundred megawat reactors. You build
Speaker 6: four of them in one place, and so you have
Speaker 6: twelve hundred megawatts. The first one's probably going to come
Speaker 6: in the closer four billion, the second one thirty percent cheaper,
Speaker 6: the third ones twenty percent cheaper, the fourth than six
Speaker 6: percent cheaper. And so now you get to a place
Speaker 6: where it can be cost effective. Folks can handle it.
Speaker 6: It's bite sized. You can end at any time if
Speaker 6: you don't want to build the third one or the
Speaker 6: fourth one. And so you're starting to see a formula
Speaker 6: that people are getting excited about. Not only are people
Speaker 6: gettingxcited about, they're getting excited about US designs, right because
Speaker 6: there's Korean designs and Russian designs and Chinese designs, and
Speaker 6: so you know, our good friends in Canada chose a
Speaker 6: US design, the Giataci BWX three hundred. So they're building
Speaker 6: four of them at Darlington. The folks at Cinthos and
Speaker 6: Poland also chose the design. There's a lot of lessons learned.
Speaker 6: We're following those lessons learned. So I could go on
Speaker 6: and on and on an entire podcast about this. But
Speaker 6: I would say that in general, I don't think it's
Speaker 6: the fault of the environmental groups or the fault of
Speaker 6: the Nuclear Reglatory Commission, which everyone likes to blame, or
Speaker 6: the Simpsons. I think it's the fault of the nuclear
Speaker 6: energy industry to not say, look, you know, modern finance
Speaker 6: works this way, right, Modern utility CEOs work this way,
Speaker 6: Modern public service commissions work this way. Let's create a
Speaker 6: product that actually works within the framework that we have
Speaker 6: in the United States of America.
Speaker 5: And they've now done that.
Speaker 6: So I think we now have a product that people
Speaker 6: can get excited about. And you saw the governor of
Speaker 6: Texas and now that he was directing the Public Service
Speaker 6: Commission to figure that out here. And you've seen announcements
Speaker 6: from Duke Energy, and announcements from Dominion, and announcements from.
Speaker 5: The Tennessee Value Authority.
Speaker 6: So you're starting to see utilities, you know, say, this
Speaker 6: is actually a really interesting approach, and so we'll see
Speaker 6: if it works. But I think that there's approach now
Speaker 6: that's fit for purpose.
Speaker 4: Setting three eyed fish aside and other Simpsons references, I mean.
Speaker 2: Can you talk a little bit more about how.
Speaker 4: You see it developing, Like what are the hurdles to
Speaker 4: actually getting some of these smaller plants set up? Can
Speaker 4: you walk us through what the process would be and
Speaker 4: how you would imagine it unfolding.
Speaker 6: So one of the challenges with the nuclear power industry
Speaker 6: is that there's no nuclear power industry. So so you
Speaker 6: have like the Nuclear Energy Institute, right, and they're made
Speaker 6: up of a bunch of utility companies that basically own
Speaker 6: nuclear power plants. But like if you ask the CEO
Speaker 6: of like Energy or you know, Doke or Dominion and say,
Speaker 6: are you a nuclear power person? And they're like, no,
Speaker 6: we own nuclear power plants, we own reneal bunergy power plants,
Speaker 6: we own cold plants, we own natri gas plants, right,
Speaker 6: And so you can imagine like they're not necessarily like
Speaker 6: the driving force behind new nuclear.
Speaker 5: Right.
Speaker 6: So then you've got a bunch of other companies you've
Speaker 6: heard of, like New Scale, Oaklow, you know, Giataci, Hole Tech,
Speaker 6: Terror Power x Energy, Right, But they're also not the
Speaker 6: nuclear power industry. They are nuclear power designers. So that's
Speaker 6: like saying I have an architect, and then architect designed
Speaker 6: the beautiful house. Yes, they've designed a beautiful nuclear power
Speaker 6: plant and it works. And you know when I say
Speaker 6: it works, like they've spent a lot of money at
Speaker 6: a supercomputer and told me that it works, right, So
Speaker 6: like it's not like they've actually built one of these
Speaker 6: things before.
Speaker 5: So now you've got that.
Speaker 6: So then the question becomes like who is the industry
Speaker 6: right And so in the case of the Giatachi b
Speaker 6: to b r X three hundred, right, Giataci is only
Speaker 6: a design firm. Ge does not make any of it.
Speaker 5: They don't like.
Speaker 6: All they do is design it right, and then they'll
Speaker 6: probably take it through the Nuclear Regatory Commission.
Speaker 5: B to BXT is.
Speaker 6: The company that actually has been hired to make it,
Speaker 6: and they are in the nuclear submarine and nuclear navy business,
Speaker 6: and so they make a lot of parts for the military,
Speaker 6: and so they have some knowledge of how to do
Speaker 6: this right, and so that's great, and so they're going
Speaker 6: to do parts of it. And then we have to
Speaker 6: now find an EPC contractor that wants to do this.
Speaker 6: Remember the ones who worked on Vogel went bankrupt, right,
Speaker 6: so it's not for the faint of heart for them
Speaker 6: to decide to get into the nuclear energy industry. But
Speaker 6: we're you know, like aspirational, ambitious folks, right, and think
Speaker 6: about it from a national security lens, right. I mean,
Speaker 6: once a country chooses a nuclear power plant, let's say
Speaker 6: from Russia, they're tied to Russia for eighty years. You
Speaker 6: can imagine the national security complex with the United States
Speaker 6: would rather that country pick a US design and tie
Speaker 6: them to the United States for eighty years. So there's
Speaker 6: a lot riding on figuring this out. So a couple things.
Speaker 6: One is that if you're a supply chain provider for
Speaker 6: a nuclear so you're making a forge or whatever it is,
Speaker 6: you can imagine ramping this whole thing up for one
Speaker 6: nuclear reactor is not.
Speaker 5: Your idea of awesome.
Speaker 6: So you're like, well, where are the ten reactors going
Speaker 6: to come from?
Speaker 5: Right? So I've told you this one, where's the next
Speaker 5: one going to come from?
Speaker 6: So in some ways, when I say that, like Duke
Speaker 6: has put nuclear into their Integrated Resource Plan and dominion,
Speaker 6: you know, the governor has been talking about it. And
Speaker 6: then you've got you know, the Tennessee Value Authority where
Speaker 6: Jeff Flash has talked about, you know, putting four reactors
Speaker 6: at Clinch River. And then you've got the Governor of
Speaker 6: Texas directing the Public Service Commission to do this stuff. Well,
Speaker 6: now you've got like a critical mass of people that
Speaker 6: are saying we should do this, And then the question becomes,
Speaker 6: what do you need to go from this would be
Speaker 6: really awesome to do in our state to here's an
Speaker 6: order right for the nuclear reactor. And so we wrote
Speaker 6: a lift off report at the Loan Program's office and
Speaker 6: the Department Entergy was led by Vanessa Chan at the
Speaker 6: Office of Technology Transitions and the Office of Planergy Demonstrations,
Speaker 6: which runs the Advanced Reactor Deployment Program.
Speaker 5: And these are.
Speaker 4: Very cool, by the way, I don't normally say this
Speaker 4: about government publications, but these ones are what I was.
Speaker 3: Going to see the exact same thing.
Speaker 1: They're all really worth reading, very readable, and really good
Speaker 1: entry points and just to understanding some of these technologies.
Speaker 3: So well done on that.
Speaker 5: Thank you, Thank you.
Speaker 6: We like kept it down to like thirty pages or so,
Speaker 6: and then like it's uh, it was. It was a
Speaker 6: really an extraordinary effort. And then the woman who was
Speaker 6: a lead off there there, Julie Kosaraki, is like on
Speaker 6: a speaking circuit. She's going to all these places and
Speaker 6: figuring out how to get this person to move one
Speaker 6: inch this direction and this person to move one inch disrection.
Speaker 6: And so there's a lot of facilitation and technical assistance
Speaker 6: that we're providing in this process. But the roadmap is
Speaker 6: there told to us by the industry in that Nuclear
Speaker 6: liftop report. So you know, I don't know whether we're
Speaker 6: going to get there, but like, those are some of
Speaker 6: the tenants, right, is you need a design that multiple
Speaker 6: people pick. You need to at least build ten, hopefully
Speaker 6: twenty of them, right. You need to make sure that
Speaker 6: the supply chain gets built out. You need to have
Speaker 6: a trained workforce, right, which we have thirteen thousand people
Speaker 6: now that have been trained out of the Vocal Nuclear plant.
Speaker 6: You know, you need all these pieces in order to
Speaker 6: attempt this.
Speaker 1: I just thought of a question, and I've been meaning,
Speaker 1: I've been wanting for like two years to do a
Speaker 1: whole episode on this that I just never happened.
Speaker 3: So now I'm going to ask you this to answer
Speaker 3: this in one literally one minute.
Speaker 1: I read the ISM Manufacturing Report every month and there's
Speaker 1: this section on things that are in short supply, and
Speaker 1: as the supply chain has healed over time, that list
Speaker 1: gets shorter and shorter. But the most persistent thing that
Speaker 1: is in short supply for manufacturers is just electrical components,
Speaker 1: and they complain about that, and it's been this issue.
Speaker 3: What is going on there?
Speaker 1: Do you know, like what the source of this bottleneck
Speaker 1: is and what is driving it?
Speaker 6: Well, I don't know that I know for certain what
Speaker 6: the source of the bottle neck is, but I would
Speaker 6: say that in general, when you look at manufacturing companies,
Speaker 6: they're The dynamic with manufacturing is if you build it,
Speaker 6: they will come right. So like I build a factory
Speaker 6: and you buy one piece, and then the next week
Speaker 6: you buy one piece, and then you're gonna buy a piece,
Speaker 6: and then you're like, ah, I think I'm gonna wait
Speaker 6: two weeks and I'm gonna buy something, right, Like, I
Speaker 6: don't know. That's not like a reassuring like model by
Speaker 6: which I want to stay ahead of the market. I
Speaker 6: like to stay slightly behind the market so that like
Speaker 6: I could charge a higher price and you know, et cetera. Right,
Speaker 6: And so for those folks who want us to accelerate
Speaker 6: investments in the supply chain, they need to make a
Speaker 6: long term order, right. And so for a lot of
Speaker 6: the electrical contractors or a lot of the utility companies
Speaker 6: who are wanting transformers or a lot of these other stuffs.
Speaker 5: But think about it.
Speaker 6: If you're running electric utility company, do you not have
Speaker 6: a predictable track record of how many transformers you install
Speaker 6: every year? Do you not have like an integrated resource
Speaker 6: plan that's as over the next ten years, I think
Speaker 6: we're gonna buy this many transformers. Well, then why wouldn't
Speaker 6: you just make an order for like ten years worth
Speaker 6: of transformers this week? You and like ten of your
Speaker 6: closest friends, and then you build a transformer manufacturing facility
Speaker 6: in your community, and then they feel confident because they've
Speaker 6: got orders for the next ten years, and you feel
Speaker 6: confident because you've got a local supply of transformers. Instead,
Speaker 6: I got a bunch of people going, uh, jigger, we
Speaker 6: need to fix transformers. And I was like, you should
Speaker 6: give me an off take agreement.
Speaker 5: I don't know. That seems like a lot of work.
Speaker 6: And I was like, but that there's a formula to
Speaker 6: how this stuff happens. Like It's not like one of
Speaker 6: those things where it's like I wish I had an
Speaker 6: oversupply of the components that I want and I'm not
Speaker 6: willing to do anything to actually make that happen.
Speaker 4: Speaking of bottlenecks, this is kind of a cliched question,
Speaker 4: but I'd still be curious to get your answer to this.
Speaker 4: If you could waive a magic wand and make you know,
Speaker 4: one aspect of the industry, or the political landscape, or
Speaker 4: the regulatory landscape go away to make the process of
Speaker 4: transitioning to cleaner, cheaper energy better, what would it be.
Speaker 6: Oh gosh, this is definitely gonna get me in trouble,
Speaker 6: so maybe let me say it this way. I think,
Speaker 6: in general, as I've said before, we have all the
Speaker 6: technologies we need to not only tackle this problem, but
Speaker 6: dominate not only you know, the sector here, but then
Speaker 6: to export and dominate around the world, like whether it's
Speaker 6: hydrogen or transmission or you know, whatever it is, solar wind,
Speaker 6: all these other things. We have all those technologies, and
Speaker 6: frankly we invented them. Everyone's like, oh, China makes solar panels.
Speaker 6: We invented all that technology right along with Martin Green
Speaker 6: at the Internasy of New South Wales and so like,
Speaker 6: you know, those are the two places where all came from, right,
Speaker 6: we were forced a license to them because you know, like
Speaker 6: we weren't manufacturing here. And so one of my big
Speaker 6: challenges is that as we learn to build again, what
Speaker 6: we do in the nineteen seventies is basically divorce all
Speaker 6: politicians from knowledge in this area.
Speaker 5: Right.
Speaker 6: So all politicians basically have like an airport authority and.
Speaker 2: They are diplomatically put by the way.
Speaker 6: Right, and they have like a sewer authority, an electric
Speaker 6: utility and you know whatever it is.
Speaker 5: Right.
Speaker 6: So when you ask them, like, hey, how do we
Speaker 6: lead in this area, they don't know, right, And so
Speaker 6: they go to the guy who runs the sewer authority
Speaker 6: or the water authority or the you know, airport authority,
Speaker 6: and that person says, I want to do things exactly
Speaker 6: the same way as my grandfather did in the nineteen seventies,
Speaker 6: and we should replace everything exactly the same way. I
Speaker 6: don't want to install new technology. I've already got people
Speaker 6: who are like trained in the old technology, right, And
Speaker 6: so why do we do this stuff?
Speaker 5: Right?
Speaker 6: And so we need to like come back together and
Speaker 6: commit ourselves to actually taking us technology and deploying it here.
Speaker 5: Right. And the risk aversion is.
Speaker 6: Like leading to a lot of increased cost because doing
Speaker 6: things the same way as nineteen seventies is crazy expensive.
Speaker 6: We have stuff that's ninety percent cheaper. But what happens
Speaker 6: is you go to the consultant who you pay, and
Speaker 6: they say, I don't know if that's gonna work.
Speaker 5: I don't know, Like I.
Speaker 6: Know it's been deployed like forty times in China and
Speaker 6: fifty times in the Middle East and like in Europe,
Speaker 6: but I don't know if it's gonna work here. We
Speaker 6: should do exactly the same thing we did in the
Speaker 6: nineteen seventies, and so it'd be nice to like figure
Speaker 6: out how to break that like sort of knowledge gap
Speaker 6: so that we're doing stuff here again.
Speaker 3: One last question.
Speaker 1: You know, it's kind of it's an exciting time and
Speaker 1: it's fun every it feels like every day or at
Speaker 1: least every week, there's some new announcement. Some of it
Speaker 1: comes from loan program office funding, like some new battery
Speaker 1: factory or some new technology or breaking ground on some
Speaker 1: new geothermal et cetera.
Speaker 5: So much winning.
Speaker 1: So we're getting tired of all the winning with all this,
Speaker 1: But like twenty twenty four, like what is what are
Speaker 1: we looking for? Are is twenty twenty four gonna be
Speaker 1: another year where there's just like ton more in the pipe,
Speaker 1: and we can expect a lot more out of EU.
Speaker 1: Of all these announcements, is there a lot more coming?
Speaker 6: There is a lot more coming, some of which is predictable, right.
Speaker 6: You got the Hydrogen hubits announcement coming out later this year.
Speaker 6: You know, you've got the GRIP funding for like grid
Speaker 6: resilience coming out here pretty soon.
Speaker 5: And so some of it's predictable.
Speaker 6: Some of it's not predictable because like all the folks
Speaker 6: who've applied to my office are confidential. But you know,
Speaker 6: I think that the part that is the most exciting
Speaker 6: to me is that you're starting just starting to get
Speaker 6: mayors and county commissioners and others going, wait a second,
Speaker 6: how do we make our town or our county attractive
Speaker 6: to the next announcement?
Speaker 5: Right?
Speaker 6: And so like, you know, we have like I think
Speaker 6: less than one percent vacancy right right now in industrial properties,
Speaker 6: and so if you talk to brokers, they're like, we
Speaker 6: have no more properties left. I have like four applicants
Speaker 6: who are waiting to pick a site, and that's what's
Speaker 6: holding them up to like actually make an announcement.
Speaker 5: Right.
Speaker 6: But then, like I talked to this guy in Ohio,
Speaker 6: and he's like, oh, yeah, I have like five sites.
Speaker 6: We just forgot to like rezone them and we forgot
Speaker 6: to reregister them this way. And so now he's doing
Speaker 6: that and that property doesn't actually earn any property taxes
Speaker 6: right now because it's classified as a brownfield. They like
Speaker 6: are cleaning it up, putting it back into circulation and
Speaker 6: like you know, folks can pick it and then they
Speaker 6: can like put jobs there. And also there's stuff we
Speaker 6: just like it's one of those weird things in the
Speaker 6: United States where like we have all this extraordinary wealth, right,
Speaker 6: wealth of innovation, wealth of like engineering talent, applied engineering,
Speaker 6: town all this stuff, and like we forgot about some
Speaker 6: of it. It's like just there, it's sitting there, and
Speaker 6: like so like there's all these pieces that we have
Speaker 6: to get out. So part of what's going to make
Speaker 6: next year so successful is not just the announcements around
Speaker 6: you know, the funding opportunities and that kind of stuff,
Speaker 6: but also all these micro decisions that are being made
Speaker 6: by local towns and communities going wait a second, you're
Speaker 6: saying that that piece of property that's just been sitting
Speaker 6: there is actually like an asset. Yeah, it's an asset,
Speaker 6: like clean it up, let's put it back into use.
Speaker 6: Like they have a rail spur that goes to them,
Speaker 6: there's actually there's actually on the river.
Speaker 5: People want to like use that so they could transport
Speaker 5: their goods.
Speaker 6: They're like, oh, man, I thought that was just an
Speaker 6: eyesore in our town. And so like that to me
Speaker 6: is super exciting, right, And then we're starting to get
Speaker 6: a ton of people who are saying, maybe I don't
Speaker 6: have to go to a four year college and maybe
Speaker 6: I can go to Texas State Technical College and do
Speaker 6: a two year degree and like and make six figure income,
Speaker 6: like actually becoming really good at my trade, right, and
Speaker 6: also this stuff and that's bringing pride to people because
Speaker 6: for a long time people were like I like to
Speaker 6: work with my hands, right, that was like a euphemism
Speaker 6: for I wasn't like a book person.
Speaker 5: And but like we actually need a lot of people
Speaker 5: to work.
Speaker 6: With their hands, right, and so like, like I find
Speaker 6: that what's most exciting is not the announcements we're making here,
Speaker 6: but like it's leading to a level of confidence in
Speaker 6: all these other parts of the economy where.
Speaker 5: People are like, maybe we can't actually pull this off.
Speaker 3: Jigger Shaw, thank you so much. This is a real thrill.
Speaker 1: I always love catching up great not dand it on.
Speaker 3: Thank you to everyone uh.
Speaker 1: Texas Tribune Fest and appreciate everyone coming up. That was
Speaker 1: our conversation with Jigger Shaw. I'm Joe Wisenthal. You could
Speaker 1: follow me at The Stalwart.
Speaker 4: And I'm Tracy Alloway. You can follow me at Tracy Alloway.
Speaker 1: Follow Jigger at Jiggershaw DC. Follow our producers Carmen Rodriguez
Speaker 1: at Carmen Armand and dash Ol Bennett at dashbod and
Speaker 1: a special thanks to Moses on them. Follow all of
Speaker 1: the Bloomberg podcasts under the handle at podcasts and for
Speaker 1: more oddlocks content, go to Bloomberg dot com slash odlots,
Speaker 1: where we have a blog, we post transcripts, we have
Speaker 1: a newsletter, and if you enjoyed this episode and you
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Speaker 1: of Jigger in there, so people will be discussing this.
Speaker 3: One for sure.
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