Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Hello and welcome to another episode of the Odd Lots podcast.
Speaker 2: I'm Joe Wisenthal and.
Speaker 3: I'm Tracy Alloway.
Speaker 2: So, Tracy, a thing that keeps coming up is that
Speaker 2: all these AI data centers are going to use a
Speaker 2: lot of electricity. I keep hearing that.
Speaker 3: Yes. Also, I just realized every time you use chat
Speaker 3: GPT to write like a satirical song, you're diverting energy
Speaker 3: away from someone turning on a light bulb or something
Speaker 3: like that, potentially something like zero sum game.
Speaker 4: Yeah, so be.
Speaker 2: Careful about your your random chat GPT queries. Although I
Speaker 2: think the training is like the more Yeah, like I think,
Speaker 2: but you know, like so maybe your song there, maybe
Speaker 2: it's okay. I don't think it's that bad.
Speaker 3: In the grand scheme of things, probably not. But there
Speaker 3: is this overarching conversation about AI's energy use. So what
Speaker 3: exactly it is? This is a big question I have.
Speaker 3: How do you disaggregate AI servers from your run of
Speaker 3: the mill software servers, How much it's going to consume,
Speaker 3: how that capacity is going to get allocated and built out?
Speaker 3: And I think there is this sense that we could
Speaker 3: end up going into very different, very extreme directions here.
Speaker 3: So you could have this great situation that because AI
Speaker 3: is a desirable activity, because it's profitable in many respects,
Speaker 3: that big tech ends up accelerating the energy capacity build out,
Speaker 3: maybe they even start building more green technology capabilities in
Speaker 3: an ideal world. But then you have the polar opposite
Speaker 3: scenario where you need all this power to develop this
Speaker 3: technology there isn't enough and it's sort of a race
Speaker 3: to the bottom where you have tech companies just trying
Speaker 3: to get energy wherever they can, maybe they even start
Speaker 3: using coal and things like that. So it feels like
Speaker 3: there's two very different paths that we could be going
Speaker 3: down here.
Speaker 2: Yeah, there's a lot here for us.
Speaker 4: You know.
Speaker 2: I remember Jigger shaw at Or when we interviewed him
Speaker 2: at the Texas Tribune conference like over a year ago,
Speaker 2: he brought this up. It's getting more and more attention.
Speaker 2: It keeps coming up. On the side of episode. Steve
Speaker 2: Eisman obviously recently talked about it. But I feel like
Speaker 2: it's time to like sort of make it a central
Speaker 2: part of the conversation and actually learn about numbers and
Speaker 2: where this power is generated from and like, yeah, like
Speaker 2: how much are we really talking about here. We know
Speaker 2: the you know, the tech company is highly aware of it.
Speaker 2: There was a headline recently about Microsoft maybe wanting to
Speaker 2: do something with on site nuclear development. They also, you know,
Speaker 2: they did do something.
Speaker 3: So I think they headline, well, didn't they buy a
Speaker 3: data center maybe next to a nuclear power plant? Susqahanna thing?
Speaker 3: I thought they did.
Speaker 2: Yeah, I think you're right about that. But then the
Speaker 2: other element too, is you mentioned that one solution here
Speaker 2: is just fossil fuels and dirty energy, except that all
Speaker 2: these tech companies are very like progressive minded and they
Speaker 2: all have these net zero commitments by you know, we're
Speaker 2: going to get it all from you know, windmills or sorry,
Speaker 2: wind turbines and solar and batteries and stores.
Speaker 3: Windmills next to AI servers would be an interesting one.
Speaker 2: But like you know, at some point, the rubber's got
Speaker 2: to hit the road with like how realistic are there
Speaker 2: net zero commitments or how can they achieve them if
Speaker 2: they're engaging in this investment activity that is highly energy intensive.
Speaker 4: No.
Speaker 3: Absolutely, And you are seeing a lot of this discussion
Speaker 3: reflected in the conversation around AI investment at this point.
Speaker 3: So I think a lot of people feel like they
Speaker 3: missed that first wave of chips around in video, so
Speaker 3: everyone's looking for the sort of second order investment play
Speaker 3: and a lot of people now are talking about energy
Speaker 3: or cooling and HVAC, so we need to talk about it.
Speaker 4: Well.
Speaker 2: I am really excited because I do believe we have
Speaker 2: the perfect guest for this topic, someone who spent twelve
Speaker 2: years at Microsoft, way before it was hot to talk
Speaker 2: about how tech companies needed all this electricity and energy.
Speaker 2: He was the first energy hire at Microsoft, and he
Speaker 2: recently left last year. He left to start his own
Speaker 2: firm to work on this problem specifically. So we were
Speaker 2: going to be speaking with Brian Janis. He is the
Speaker 2: co founder and chief strategy officer at Cloverleaf Infrastructure, a
Speaker 2: power development company that works closely with utilities on solving
Speaker 2: this problem. So, Brian, thank you so much for coming
Speaker 2: on out lots.
Speaker 4: Thank you for having me. Really excited to be here.
Speaker 2: So you got hired for Microsoft twelve years ago to
Speaker 2: do energy, and at the time, I don't think anyone
Speaker 2: was talking about energy as being like a particularly important
Speaker 2: aspect of these software companies or these big tech companies strategies.
Speaker 2: What was going on back then, or like, what did
Speaker 2: they see when they felt like, hey, we need to
Speaker 2: hire a VP of energy here.
Speaker 4: Yeah. It was actually funny because I had spent my
Speaker 4: career prior to that working with mainly large energy consumers
Speaker 4: who were the big who you'd expect it to be,
Speaker 4: the big industrial companies, And so when Microsoft came calling
Speaker 4: and said, hey, we need to get a full time
Speaker 4: energy person, I told them it sounded like a dead
Speaker 4: end job to be the energy person at a tech company,
Speaker 4: because why would they ever actually care about this issue.
Speaker 4: And the person that was recruiting me said, Hey, I
Speaker 4: think there is something to this, this whole cloud thing,
Speaker 4: and I think energy is going to start to be
Speaker 4: pretty central to what we're doing as a company. And
Speaker 4: you'll fast forward a decade and I remember having a
Speaker 4: conversation before I left the company. I was talking to
Speaker 4: the head of corporate strategy and he said to me,
Speaker 4: He's like, I don't think people quite realize the degree
Speaker 4: to which Microsoft is really just an energy company. We
Speaker 4: need power and we need silicon. We need chips. That's it,
Speaker 4: that's the business. If we don't have one of those
Speaker 4: two things, we're in a lot of trouble and so
Speaker 4: it was it was remarkable to see the shift over
Speaker 4: that decade plus of maybe one or two people at
Speaker 4: the company starting to think that energy might be important
Speaker 4: to us, when day to energy is actually absolutely central
Speaker 4: to everything the business does.
Speaker 3: So talk to us a little bit more about that
Speaker 3: cultural shift, because Joe and I heard from someone else recently,
Speaker 3: but they were saying that a bunch of the big
Speaker 3: tech companies that you would be very familiar with had
Speaker 3: representatives down in Houston for zero Week, so the annual
Speaker 3: energy conference, which they were describing as kind of a
Speaker 3: new development. But how familiar are tech companies nowadays with
Speaker 3: energy usage or needs and how much expertise have they
Speaker 3: actually built out in that capacity.
Speaker 4: Yeah, it's been a tremendous shift. And I mean if
Speaker 4: you would have gone to Seria Week even five years ago,
Speaker 4: you would not have seen a whole lot of engagement
Speaker 4: from the tech industry. But as their businesses have shifted
Speaker 4: to the cloud, and as the business opportunities that sit
Speaker 4: in front of them, particularly when it comes down to AI,
Speaker 4: as those have arisen, there's been a recognition that power
Speaker 4: really is central to what they're doing. And it was
Speaker 4: a slow shift. If you go back to the advent
Speaker 4: of the first cloud data centers. It really was about
Speaker 4: being close to the network, and so that was the
Speaker 4: driver of strategically, where do you put data centers, Well,
Speaker 4: you put them where the biggest network cubs are. So
Speaker 4: that's why we have lots of data centers in Northern Virginia.
Speaker 4: That's why we have lots of data centers in Amsterdam.
Speaker 4: Everyone was chasing network. Probably middle of last decade, there
Speaker 4: was a shift and it started to go, actually, we
Speaker 4: want to be close to eyeballs. So this started a
Speaker 4: sort of a land grab of all the cloud data
Speaker 4: centers starting to build lots of new data SISIs new
Speaker 4: countries because they wanted to be close to where the
Speaker 4: customers were. And so from about fall of twenty nineteen
Speaker 4: through probably spring of twenty twenty two, I think Microsoft
Speaker 4: added was adding close to a region a month in
Speaker 4: terms of new data center regions they were establishing around
Speaker 4: the world. And then in mid twenty twenty two that's
Speaker 4: when the realization started to sink in that wait a minute,
Speaker 4: this whole game is about power, because that's when we
Speaker 4: were first starting to hear rumblings of what open aye
Speaker 4: was working on and the scale of what chat gp
Speaker 4: T three was going to be, which was sort of
Speaker 4: the first big release where everyone was like, wait a minute,
Speaker 4: this is this is kind of a big deal what
Speaker 4: AI is doing and how fast it's moving. And then
Speaker 4: when we had that release of chat gpt T three
Speaker 4: in the fall of twenty two, and then shortly thereafter,
Speaker 4: three point five was released, and there was a massive
Speaker 4: increase in capability in that release if you recall, you know,
Speaker 4: in terms of what it could do on you know,
Speaker 4: getting scores on various tests and things. And it was
Speaker 4: that moment that I realized, this technology is moving way
Speaker 4: faster than the utility industry is moving. If we can
Speaker 4: make this much improvement in this technology in a six
Speaker 4: month time horizon, we're in a lot of trouble because
Speaker 4: the power industry does not move that fast.
Speaker 2: So I'm really fascinated by this idea that the release,
Speaker 2: like you know, like you were at Microsoft and so
Speaker 2: you had a front row seat to what open ai
Speaker 2: was doing with GPT one and GPD two, and there
Speaker 2: were a lot of people aware of this, and I'm
Speaker 2: sort of fascinated by this idea that it was that
Speaker 2: commercialization or sort of making easy in public CHATJEP. When
Speaker 2: it became chat GPT, they're like, oh, this is serious,
Speaker 2: and then we sell everyone rushing to buy in video
Speaker 2: chips and all these vcs pivoting to AI, et cetera.
Speaker 2: So talk to us about like the math there. It
Speaker 2: feels like there has been this sort of level shift
Speaker 2: up in sort of expectations of data center demand growth
Speaker 2: basically as a function of all of the excitement for AI.
Speaker 4: Yeah. I think then you're right. I mean, it's not
Speaker 4: like we didn't know that Microsoft had a partnership with
Speaker 4: open Ai and that that you know, AI was going
Speaker 4: to consume energy. I think everyone though, was a bit
Speaker 4: surprised at just how quickly what chat GPT could do
Speaker 4: just captured the collective consciousness. Yeah, and I think, I
Speaker 4: mean you probably remember when when that was released. I
Speaker 4: mean it it really sort of surprised everyone, and it
Speaker 4: became this thing where suddenly, even though we sort of
Speaker 4: knew what we were working on, it wasn't until you
Speaker 4: sort of put it out into the world that you
Speaker 4: realize maybe what you've created. And I mean that's where
Speaker 4: we realized we are we are running up this curve
Speaker 4: of capability a lot faster than we thought, uh, and
Speaker 4: the a number of applications that are getting built on this,
Speaker 4: in the number of different ways that it's being used,
Speaker 4: and how it's just become sort of common parlance. I mean,
Speaker 4: everyone knows what chat GPG three is, and no one
Speaker 4: what it was the month before that, right, So there
Speaker 4: there as a bit of a I think of a
Speaker 4: surprise in terms of just how quickly it was going
Speaker 4: to capture, you know, the collective consciousness and then you know,
Speaker 4: obviously lead to everything that's sort of being created as
Speaker 4: a result. And so we just we just moved up
Speaker 4: that curve so quickly, and I think that's that's where
Speaker 4: the industry maybe got you know, certainly the utilities were
Speaker 4: behind because as you may have seen there, a lot
Speaker 4: of them are starting to restate their load growth expectations
Speaker 4: and that was something that was not happening right before that.
Speaker 4: And so we've had massive changes just in the last
Speaker 4: two years of how utilities are one of the number
Speaker 4: cap So you know, if you take a look at
Speaker 4: a utility like Dominion in Virginia, so that's the largest
Speaker 4: concentration of data centers in the United States, so they're
Speaker 4: pretty good representative of what's happening. If you go back
Speaker 4: to twenty twenty one, they were forecasting load growth over
Speaker 4: a period of fifteen years of just a few percent.
Speaker 4: I mean it was about it was single digit growth
Speaker 4: over that entire period, so not yearly growth, but over
Speaker 4: fifteen years, single digit growth. By twenty twenty three, they
Speaker 4: were forecasting to grow two x over fifteen years. Wow.
Speaker 4: Now keep in mind this is electric utility. They do
Speaker 4: ten year planning cycles. So because they have very long
Speaker 4: lead times for equipment, for getting rights of way for
Speaker 4: transmission lines, they aren't companies that easily respond to a
Speaker 4: two x order of magnitude, you know, growth change over
Speaker 4: a period of fifteen years. I mean that is a
Speaker 4: that is a massive change for electric utility, particularly given
Speaker 4: the fact that the growth rate over the last fifteen
Speaker 4: to twenty years has been close to zero, so there's
Speaker 4: been relatively no load growth in fifteen to twenty years.
Speaker 4: Now suddenly you have utilities having to pivot to doubling
Speaker 4: the size of their system in that same horizon.
Speaker 3: I want to ask a very basic question, but I
Speaker 3: think it will probably inform the rest of this conversation.
Speaker 3: But when we say that AI consumes a lot of energy.
Speaker 3: Where is that consumption actually coming from? And Joe touched
Speaker 3: on this in the intro, but is it you know,
Speaker 3: the sheer scale of users on these platforms, is it
Speaker 3: I imagine the training that you need in order to
Speaker 3: develop these models, and then does that energy usage differ
Speaker 3: in any way from more traditional technologies.
Speaker 4: Yeah. So whenever I think about the consumption of electricity
Speaker 4: for AI or really any other application, I think you
Speaker 4: have to start at sort of the core of what
Speaker 4: we're talking about, which is really the human capacity for data.
Speaker 4: Like whether it's AI or cloud. Humans have a massive
Speaker 4: capacity to consume data. And if you think about where
Speaker 4: we are in this curve, I mean we're on some
Speaker 4: form of S curve right of human data consumption, which
Speaker 4: then directly ties to data centers, devices, energy consumption ultimately,
Speaker 4: because what we're doing is we're turning energy into data.
Speaker 4: We take electrons, we convert them to light, we move
Speaker 4: them around to your TV screens and your phones and
Speaker 4: your laptops, etc. So that's the uber trend that we're
Speaker 4: riding up right now. And so we're climbing this S curve.
Speaker 4: I don't know that anyone has a good sense of
Speaker 4: how steep or how long this curve will go. If
Speaker 4: you go back to look at something like electricity, it
Speaker 4: was roughly about one hundred year. S curve started in
Speaker 4: the beginning of last century, and it really started to flatline,
Speaker 4: as I mentioned before, towards the beginning of this century.
Speaker 4: Now we have this new trajectory that we're ringing, this
Speaker 4: new S curve that we're entering, that's going to sort
Speaker 4: of change that narrative. But you know that S curve
Speaker 4: for electricity took about one hundred years. No one knows
Speaker 4: where we are on that data curve today. So when
Speaker 4: you inject something like AI, you create a whole new
Speaker 4: opportunity for humans to consume data, to do new things
Speaker 4: with data that we couldn't do before, and so you
Speaker 4: accelerate us up this curve. Right, So, we were sitting
Speaker 4: somewhere along this curve. AI comes along, and now we're
Speaker 4: just moving up even further, And of course that means
Speaker 4: more energy consumption because the energy intensity of running an
Speaker 4: AI query versus a traditional search is much higher. Now
Speaker 4: what you can do with AI obviously is also much
Speaker 4: greater than what you can do with a traditional search,
Speaker 4: So there is a positive return on that invested energy.
Speaker 4: So that's you know when when oftentimes when this conversation
Speaker 4: comes up, there's a lot of consternation and panic over well,
Speaker 4: what are we going to do? You know, we're going
Speaker 4: to we're going to run out of energy. The nice
Speaker 4: thing about electricity is we can always make more. We're
Speaker 4: we're never going to run out of electricity. Not to
Speaker 4: say that there's not times where the grid is under
Speaker 4: constraint and there you know, you have risks of brownouts
Speaker 4: and blackouts. That's that's the reality. But we can invest
Speaker 4: we can invest more in transmission lines, we can invest
Speaker 4: more in power plants, and we can create enough electricity
Speaker 4: to to match that demand.
Speaker 2: Just to sort of clarify a point in adding on
Speaker 2: to Tracy's question, you mentioned that doing an AI query
Speaker 2: is more energy intensive than say, if I had just
Speaker 2: done a Google search, or if I had done a
Speaker 2: Being search or something like that. Like, what is it
Speaker 2: about the process of delivering these capabilities that makes it
Speaker 2: more computationally intensive or energy intensive then the previous generation
Speaker 2: of data usage or data querying online.
Speaker 4: There's two aspects to it, and we sort of alluded
Speaker 4: to it earlier. But the first is the training. So
Speaker 4: The first is the building of the large language model
Speaker 4: that itself is very energy intensive. These are extraordinarily large
Speaker 4: machines collections of machines that use very dense chips to
Speaker 4: create these language models that ultimately then get queried when
Speaker 4: you do an inference. So then you go to CHATGBT
Speaker 4: and you ask it to give you a menu or
Speaker 4: dinner party you want to have this weekend. It's then
Speaker 4: referencing that large language model and creating this response. And
Speaker 4: of course that process is more computationally intensive because it's
Speaker 4: it's doing a lot more things than a traditional searchces
Speaker 4: personal search just matched the words you put into a
Speaker 4: database of knowledge that it put together. But these large
Speaker 4: language models are much more complex, and then the therefore
Speaker 4: the things you're asking to do is more complex. So
Speaker 4: it will will almost by definition, be a more energy
Speaker 4: intensive process. Now, it's not to say that it can't
Speaker 4: get more efficient, and it will. And Nvidio just last
Speaker 4: week was releasing, you know, some data on some of
Speaker 4: its next generation chips that are going to be significantly
Speaker 4: more efficient than the prior generation. But one of the
Speaker 4: things that we need to be careful of is to
Speaker 4: think that because something becomes more efficient, then therefore we're
Speaker 4: going to use less of the input resource, in this
Speaker 4: case electricity. That's that's not how it works, because going
Speaker 4: back to the concept of human capacity for consuming data,
Speaker 4: all we do is we find more things to compute.
Speaker 4: And this is you've probably heard of Jabon's paradox, and
Speaker 4: this is the idea that, well, if we make more
Speaker 4: efficient steam engines. He was an economists in the eighteen
Speaker 4: hundreds and he said, well, if you make more efficient
Speaker 4: steam engines, then we'll use us coal. And he's like, no,
Speaker 4: that's not what's going to happen. We're going to use
Speaker 4: more coal because we're going to mechanize more things. And
Speaker 4: that's exactly what we do with data just because we
Speaker 4: because we've had more law for years and so chips
Speaker 4: have become incredibly more efficient than they were decades ago,
Speaker 4: but we didn't use less energy. We used much more
Speaker 4: energy because we could put chips in everything. So that's
Speaker 4: the trend line that we're on. It's still climbing that
Speaker 4: curve of consumption, and so no amount of efficiency is
Speaker 4: going to take us at this point at least, because
Speaker 4: I don't believe we're anywhere close to the bend in
Speaker 4: that s curve. No amount of efficiency is going to
Speaker 4: take us off of continuing to consume more electricity, and
Speaker 4: at least in the near term.
Speaker 3: So I have another basic building block kind of question.
Speaker 3: But when we say that technology companies are aware of
Speaker 3: the importance of energy usage or availability, and that this
Speaker 3: is something they happened working on, what exactly is the
Speaker 3: process by which a tech company gets its energy. So
Speaker 3: you know you have a big data center, I imagine
Speaker 3: you have some sort of agreement with whatever utility is
Speaker 3: in that area. But I also imagine that that agreement
Speaker 3: looks very very different to like my household energy bill
Speaker 3: or something like that.
Speaker 4: I'm certain it does hopefully significant orders of magnitude. Yes,
Speaker 4: So there's two components. I mean, one is, if you're
Speaker 4: building a data center, you have to plug it in somewhere.
Speaker 4: You've got to plug it into the grid, right, So
Speaker 4: there you're working with your local electric utility or transmission
Speaker 4: company and doing planning for how big is the facility
Speaker 4: to be, how much power is it going to pull
Speaker 4: off the grid at any given time, and then over
Speaker 4: a period of time, because these facilities just tend to
Speaker 4: grow forever, and so that's the physical nuts and bolts
Speaker 4: of connecting to the grid. Now, the second piece, of course,
Speaker 4: is there needs to be some generation source as well,
Speaker 4: like where's the power going to come from? And so
Speaker 4: those two things are related, but they could be somewhat disconnected.
Speaker 4: And so this is where you see you know, these
Speaker 4: especially the tech companies who've really been leaders in this space,
Speaker 4: entering into all these power purchase agreements for wind energy
Speaker 4: and for solar energy and in some cases nuclear. You
Speaker 4: mentioned the project earlier that's actually an AWS project where
Speaker 4: they cite it next to the Susquehanna Nuclear plant. Right,
Speaker 4: So all of that is around where are the electrons
Speaker 4: going to come from? And how can with that purchasing
Speaker 4: power of being some of the largest energy consumers in
Speaker 4: the planet, how can they begin to influence the mix
Speaker 4: of generation on the grid? Right? And that's the critical issue,
Speaker 4: is that you're trying to influence where that power is
Speaker 4: being generated from. It's not. And one thing just to
Speaker 4: keep in mind is that you know the electrons you get,
Speaker 4: you know, whether it's at your house or the data
Speaker 4: center down the street, they're all the same electrons. You're
Speaker 4: all pulling from the same grid. But what you're trying
Speaker 4: to do is influence how that that generation is being created,
Speaker 4: and that's where these purchase agreements come in for all
Speaker 4: these different sources of energy.
Speaker 2: All right, now, let's bring the question back to say
Speaker 2: the utility side or save.
Speaker 4: The dominion side.
Speaker 2: So the dominion executives for decades have basically seen no growth,
Speaker 2: and then suddenly in the span of the year, they're like, oh,
Speaker 2: actually we're going to double. What do they do? What
Speaker 2: are they doing right now today on we're recording this
Speaker 2: April tenth, twenty twenty four. What are they doing right
Speaker 2: now to expand generation or expand the grid or whatever
Speaker 2: it is to meet that doubling of demand.
Speaker 4: Well, this is where this is where it gets a
Speaker 4: little concerning, is that you have these tech companies that
Speaker 4: have these really ambitious commitments to being carbon neutral, carbon negative,
Speaker 4: having one hundred percent zero carbon energy one hundred percent
Speaker 4: of the time, and you have to give them credit
Speaker 4: for the work they've done. I mean, that industry has
Speaker 4: done amazing work over the last decade to build absolutely
Speaker 4: just gigawatts upon gigawatts of new renewable energy projects in
Speaker 4: the United States, all over the world. They've been some
Speaker 4: of the biggest drivers in the corporate focus on decarbonization,
Speaker 4: and so you really have to give that industry credit
Speaker 4: for all it's done, and all the big tech companies
Speaker 4: have done some amazing work there. The challenge though, that
Speaker 4: we have is the environment that they did that in.
Speaker 4: Was that no growth environment we were talking about. They were
Speaker 4: all growing, but they were starting from a relatively small
Speaker 4: denominator ten or fifteen years ago. So there and there
Speaker 4: was a lot of overhang in the utility system at
Speaker 4: that time because the utilities had overbuilt ahead of that
Speaker 4: sort of flatlining, so there was excess capacity on the system.
Speaker 4: They were growing inside of a system that wasn't itself
Speaker 4: growing on a net basis. Yeah, So everything they did,
Speaker 4: every new wind project you brought on, every new solar
Speaker 4: project you brought on, those we're all incrementally reducing the
Speaker 4: amount of carbon in the system. It was all net positive.
Speaker 4: Now we get into this new world where their growth
Speaker 4: rates are exceeding what the utilities have ever imagine in
Speaker 4: terms of the absolute impact on the system. The utilities
Speaker 4: response is the only thing we can do in the
Speaker 4: time horizon that we have is basically build more gas
Speaker 4: plants or keep online gas plants or coal plants that
Speaker 4: we were planning on shuttering. And so now the commitments
Speaker 4: that they have to zero carbon energy, to be carbon negative,
Speaker 4: et cetera, are coming into contrast with the response that
Speaker 4: the utilities are laying out in their what's called integrated
Speaker 4: resource plans or IRPs. And we've seen this recently, just
Speaker 4: last week in Georgia. We've seen it in Duke in
Speaker 4: North Carolina, Dominion and Virginia. Every single one of those
Speaker 4: utilities is saying, with all the demand that we're seeing
Speaker 4: come into our system, we have to put more fossil
Speaker 4: fuel resources on the grid. It's the only way that
Speaker 4: we can manage it in the time rise that we have.
Speaker 4: Now there's a lot of debate about whether that is true,
Speaker 4: but it is what's happening.
Speaker 3: So when push comes to shove, it seems like some
Speaker 3: of the green priorities are getting superseded by existential pressures
Speaker 3: on the business model. Perhaps, and we could debate how
Speaker 3: transferable AI actually is at this point and how big
Speaker 3: a moat you have over something like chat, GPT or
Speaker 3: Claude or something like that, but there does seem to
Speaker 3: be the sense of urgency among tech companies where if
Speaker 3: you're not building something out right now and trying to
Speaker 3: dominate the market and really produce the best thing possible,
Speaker 3: well you're either losing, you know, billions of dollars or
Speaker 3: you're going to be superseded by someone who does manage
Speaker 3: to do that successfully.
Speaker 4: That's exactly right, and it's probably not billions of dollars.
Speaker 4: There's probably trillions of time. Yes, yes, And that's where
Speaker 4: the competitive pressure is coming in. And this is why
Speaker 4: there's there's such a focus right now in this industry
Speaker 4: on where is the power going to come from? Because
Speaker 4: the ability to at least envision and on paper design
Speaker 4: training models that are absolutely enormous, just orders of magnitude
Speaker 4: bigger than anything that we've ever built in terms of
Speaker 4: a data center are coming in to start contrast with
Speaker 4: the reality of the power system of one, is that
Speaker 4: power even available? And two, if it could be available,
Speaker 4: is there a way to do it with a zero
Speaker 4: carbon approach, which is again what these companies are committed to.
Speaker 4: And that's that's the tension that we're in right now
Speaker 4: of how do we quickly accelerate the delivery and growth
Speaker 4: of the electric grid? Which is which and I think
Speaker 4: I just want to the quick aside on this consuming
Speaker 4: electricity is in the context where it's talking about is
Speaker 4: a really great thing. I mean, this is something that
Speaker 4: leads to economic growth, it leads to job creation. All
Speaker 4: of this, I mean, this whole problem that we have
Speaker 4: right now of electric utilities having to think about this
Speaker 4: whole new era of growth. It's all because we're on
Speaker 4: shoring manufacturing in the United States. We're building these data
Speaker 4: centers and creating all sorts of amazing tools and creating
Speaker 4: efficiency across all sorts of sectors. And we're also in
Speaker 4: the same vein we're also electrifying transportation and heating. Like,
Speaker 4: all of this is good. It's all goodness. And we
Speaker 4: didn't even get to things like hydrogen production and other
Speaker 4: ways that we're going to use electricity. The real rub
Speaker 4: of this, though, is that we're in this situation right
Speaker 4: now where again the electric electricity industry was somewhat surprised
Speaker 4: by this. They weren't prepared for over a period of
Speaker 4: a couple of years. Again going back to the case
Speaker 4: of Dominion having to double their load forecast flexively, They're
Speaker 4: going to go to the one thing they know how
Speaker 4: to do, which is build gas plants because they know
Speaker 4: that works. That's the easy way out. There are other
Speaker 4: things we can do, though. There are ways we can
Speaker 4: leverage the existing system more effectively. We can use things
Speaker 4: called grid enhancing technologies, where we through sensoring, through better
Speaker 4: dynamic rating of power lines, we can actually get more
Speaker 4: out of the existing system we have. There's ways we
Speaker 4: can use storage more effectively, because really what we're trying
Speaker 4: to manage is just these system peaks. Most of the
Speaker 4: time there's plenty of power. It's really just during the
Speaker 4: modest summer hours or the coldest winter hours that the
Speaker 4: system gets constrained, and that's what's driving a lot of
Speaker 4: the need for utilities to want to build this new capacity.
Speaker 4: But we can manage it in other ways. And it's
Speaker 4: really incumbent upon the data center industry to lean in
Speaker 4: on this, to think through how can we be more
Speaker 4: of a party to solving this problem. Because data centers
Speaker 4: have lots of opportunities to be more flexible. They have
Speaker 4: behind the meter generation, they have behind the meter storage.
Speaker 4: They can actually be part of the solution, not just
Speaker 4: part of the problem.
Speaker 3: I just want to press you on this point because
Speaker 3: I know people will have questions about this, and I
Speaker 3: take the point about in many respects we're talking about
Speaker 3: increased energy usage as a result of new things that
Speaker 3: are leading to you know, new jobs and new productive industry,
Speaker 3: and also the idea that, well, we can produce more
Speaker 3: electricity in different ways, or we can make the delivery
Speaker 3: of electricity more efficient, and all those types of things.
Speaker 3: But I think one of the reservations people might have
Speaker 3: about this is the idea of you know, competition with
Speaker 3: large tech companies that have a lot of money and
Speaker 3: that potentially have a lot of influence over the utility companies,
Speaker 3: and the idea that maybe you could get a situation
Speaker 3: where I don't know, Amazon gets like one hundred percent
Speaker 3: off take from some power plant in whatever state, and
Speaker 3: maybe other people are left with either you know, not
Speaker 3: enough electricity or more likely much more expensive electricity. Can
Speaker 3: you talk about that zero? I was being somewhat facetious
Speaker 3: in the intro talking about zero sum game. But there
Speaker 3: is this idea of like competition and there might not
Speaker 3: be enough to go around, at least at the precise
Speaker 3: times that everyone might want it.
Speaker 4: That's right, And that's the big challenge that good planners
Speaker 4: have today is what loads do you say yes to
Speaker 4: and what are the long term implications of that and this?
Speaker 4: And we've seen this play out over the rest of
Speaker 4: the globe where you've had these concentrations of data centers.
Speaker 4: This is a story that we saw in Dublin, We've
Speaker 4: seen it in Singapore, we've seen it in Amsterdam, and
Speaker 4: these governments start to get really worried of wait a minute,
Speaker 4: we have too many data centers as a sort of
Speaker 4: percentage of overall energy consumption. And what inevitably happens is
Speaker 4: a move towards putting either moratoriums on data center build
Speaker 4: out or putting very tight restrictions on what they can
Speaker 4: do and the scale at which they can do it.
Speaker 4: And so, you know, we haven't yet seen that to
Speaker 4: any material degree in the United States, but I do
Speaker 4: think that's a real risk, and it's a risk that
Speaker 4: the data center industry faces, I think somewhat uniquely in that,
Speaker 4: you know, if you're the governor of state and you
Speaker 4: have a choice to give power to a say new
Speaker 4: you know, ev car factory that's going to produce fifteen
Speaker 4: hundred and two thousand jobs versus a data center that's
Speaker 4: going to produce significantly less than that you're going to
Speaker 4: give it to the factory. Right, the data centers are
Speaker 4: actually the ones that are going to face likely the
Speaker 4: most constraints as governments, utilities, regulators start wrestling with this
Speaker 4: trade off of Oh, we're going to have to say
Speaker 4: no to somebody. And that's the real risk that I
Speaker 4: think the AI and data center industry faces today is
Speaker 4: that they are the easiest target because everyone loves what
Speaker 4: data centers do, but no one particularly loves just having
Speaker 4: a data center next door to their house. And so
Speaker 4: that's a real challenge for the industry is that they
Speaker 4: will start to get in the crosshairs of these regulators, leaders,
Speaker 4: whomever who's pulling the strings as these decisions start to get.
Speaker 2: So I just want to make two random thoughts that
Speaker 2: were in my head. I walked by a film set
Speaker 2: in the East Villaers the other day. They were filming
Speaker 2: this movie, and they are all these like big, like
Speaker 2: thick electrical cables like you know, like that are powering
Speaker 2: the lights and and all that stuff. And I thought
Speaker 2: to myself, Oh, it would be so great when they
Speaker 2: can just make all the movies on AI with Sora
Speaker 2: or something like that, and then you know, we'll also
Speaker 2: get electricity savings because we won't have to have human
Speaker 2: actors with actual lights and stuff like that, so that'll
Speaker 2: be exciting and then being a little facetious about the
Speaker 2: end of human actors, but you know, in theory that
Speaker 2: could be exciting, and then you could you know, you
Speaker 2: mentioned it was like, well, the utilities got surprised by
Speaker 2: the low you know, this the spike in demand. But
Speaker 2: it sounds to me like we can't really blame the
Speaker 2: utilities too much because if even the people inside Microsoft
Speaker 2: got a bit caught unsurprised by the explosion of AI
Speaker 2: interest in the fall of twenty twenty two, then I
Speaker 2: guess like we can't really blame Dominion if they hit
Speaker 2: they were private. Further away from the issue, you mentioned
Speaker 2: peak demand, and this gets to like power, the type
Speaker 2: of power, because people talk about like this sort of need.
Speaker 2: The problem with renewables as well, at least when we're
Speaker 2: talking about solar and wind, there's this intermittency problem. It's
Speaker 2: not always sunny, even if it's hot. When it's hot,
Speaker 2: it's not always windy, there's nighttime, et cetera. How much
Speaker 2: does that constrain the ability of more renewables to be
Speaker 2: sort of the solution to the utilities problem.
Speaker 4: It's a real challenge because again, as you noted, we're
Speaker 4: trying to manage peak demand. That's what all this growth
Speaker 4: is about. So peak demand is about the certainty that
Speaker 4: you're going to have power during those highest system piece,
Speaker 4: the hottest days, the coldest winter nights, and you can't
Speaker 4: always guarantee that renewable generation will be online during those times.
Speaker 4: And this is the role of the system planner is
Speaker 4: to look at all these different resources and figure out
Speaker 4: how can we assure that we have the sufficient reserve
Speaker 4: margin to ensure that we're not going to have things
Speaker 4: like rolling brownouts or black eyes. Now there's a lot
Speaker 4: of tools though, that we have to help manage that uncertainty,
Speaker 4: and we have increasingly, you know, month after a month,
Speaker 4: it seems like lower cost battery options which give us
Speaker 4: more duration that we can deploy to solve some of
Speaker 4: these issues. We have the ability of even the loads
Speaker 4: through like virtual power plants to be more responsive during
Speaker 4: these times of system peaks, right, So we have tools
Speaker 4: that we can use to manage that uncertainty. The problem
Speaker 4: is that it is a very complex problem. I mean,
Speaker 4: you're talking about, you know, millions of different data points
Speaker 4: that you're trying to manage, and the way that utilities
Speaker 4: have historically managed these things has been fairly rudimentary in
Speaker 4: terms of their sophistication, and so they're having to go
Speaker 4: through this learning curve of how do we ensure that
Speaker 4: we can achieve the load growth that all these industries
Speaker 4: you know, are expecting and meet the reliability, cost availability
Speaker 4: expectations of our customers. And that's where that's where the
Speaker 4: challenge comes in. And this is where the whole problem,
Speaker 4: it's frankly really interesting, is that there are lots of
Speaker 4: levers that we have and we don't just have to
Speaker 4: throw more fossil fuel plants at this problem. Does that
Speaker 4: mean we're not going to build any new gas plants
Speaker 4: in this country? I certainly will. I don't think there's
Speaker 4: a way around this problem, at least in the short run,
Speaker 4: without having some incremental addition of fossil based resources. But
Speaker 4: there's also a lot of other things we could be
Speaker 4: doing that would significantly reduce dependence on fossil based resources
Speaker 4: to achieve the growth objectives that we have as a country.
Speaker 3: What are the levers specifically on the tech company or
Speaker 3: the data center side, because I again, so much of
Speaker 3: the focus of this conversation is on what can the
Speaker 3: utilities do, what can we do in terms of enhancing
Speaker 3: the grid managing supply more efficiently? But are there novel
Speaker 3: or interesting things that the data centers themselves can do
Speaker 3: here in terms of managing their own energy usage.
Speaker 4: Yes, I there's there's a few things. I mean, one is,
Speaker 4: data centers have substantial ability to be more flexible in
Speaker 4: terms of the power that they're taking from the grid
Speaker 4: at any given time. As I mentioned before, every data
Speaker 4: center or nearly every data data center has some form
Speaker 4: of backup generation. They have some form of energy storage
Speaker 4: built into this. So there the way a data center
Speaker 4: is designed. Its designed like a power plant with an
Speaker 4: energy storage plant that just happens to be sitting next
Speaker 4: to a room full of servers, right, And so when
Speaker 4: you when you break it down to those components, you say, okay, well,
Speaker 4: how can we better optimize this power plant to be
Speaker 4: more of a grid resource? How can we have to
Speaker 4: optimize the storage plant to be more of a grid resource?
Speaker 4: And then in terms of even the servers themselves, how
Speaker 4: can we optimize the way the software actually operates and
Speaker 4: is architected to be more of a grid resource. And
Speaker 4: that is that sort of thinking is what is being
Speaker 4: forced on the industry. Frankly, we've always had this capability.
Speaker 4: I mean, we were doing I mean we did a
Speaker 4: project like twenty sixteen with a utility where we put
Speaker 4: in flexible gas generators behind our meter because the utility
Speaker 4: was going to have to build a new power plant
Speaker 4: if we didn't have a way to be more flexible.
Speaker 4: So we've always known that we can do this, but
Speaker 4: the industry has never been pressurized to really think innovatively
Speaker 4: about how can we utilize all these assets that we
Speaker 4: have inside of the data center plant itself to be
Speaker 4: more part of the grid. Right, So that's I think
Speaker 4: the most important thing is really thinking about how data
Speaker 4: centers become more flexible. There's a whole nother line of thinking,
Speaker 4: which is this idea of well, utility is not going
Speaker 4: to be fast enough, so data centers just need to
Speaker 4: build all their own power plants. And this is where
Speaker 4: you start hearing about nuclear and SMRs in confusion, which
Speaker 4: is interesting except it doesn't solve the problem this decade.
Speaker 4: It doesn't solve the problem that we're facing right now
Speaker 4: because none of that stuff is actually ready for prime time.
Speaker 4: We don't have an SMR that we can build today predictably,
Speaker 4: on time, on budget, So we are dependent on the
Speaker 4: tools that we have today, which are things like batteries,
Speaker 4: great enhancing technologies, flexible load reconductoring, transmission lines to get
Speaker 4: more power over existing rights of ways. So there's a
Speaker 4: number of things we can do with technologies we have
Speaker 4: today that are going to be very meaningful this decade,
Speaker 4: and we should keep investing in things that are going
Speaker 4: to be really meaningful next decade. I'm very bullish on
Speaker 4: what we can do with new forms of nuclear technology.
Speaker 4: They're just not relevant in the time horise and the
Speaker 4: problem we're talking about.
Speaker 2: At some point, at some point, we're going to do
Speaker 2: an Odd Lots episode specifically on the promise of small
Speaker 2: modular reactors and why we still don't have them despite
Speaker 2: the seeming benefits. But do you have like a sort
Speaker 2: of succinct answer for why this sort of seeming solution
Speaker 2: of manufacturing them faster, et cetera like has not translated
Speaker 2: into anything in production.
Speaker 4: Well, quite simply, we just forgot how to do it.
Speaker 4: We used to be able to build nuclear in this country.
Speaker 4: We did in the seventies, we did in the eighties,
Speaker 4: but every person that was involved in any one of
Speaker 4: those projects is either not alive or certainly not still
Speaker 4: a project manager at a company that would be building
Speaker 4: nuclear plants. Right. We I think we underestimate human capacity
Speaker 4: to forget things right. Just because we've done something in
Speaker 4: the past doesn't mean that we necessarily can do it again.
Speaker 4: We have to relearn these things. And as a country
Speaker 4: like we do not have a supply chain, we don't
Speaker 4: have a labor force, we don't have people that manage
Speaker 4: construction projects that know how to do any of these things.
Speaker 4: And so when you look at what South Korea is doing,
Speaker 4: you look at what China's doing, you know, they are
Speaker 4: building nuclear plants with regularity, they're doing it at at
Speaker 4: a very attractive costs, they're doing it on a predictable
Speaker 4: time horizon. But they have actually built all of those
Speaker 4: resources that we just simply don't have in this country
Speaker 4: that we need and we need to rebuild that capability.
Speaker 4: It just doesn't exist today. You know.
Speaker 2: One of the things that in the when we're talking
Speaker 2: about utilities, they're like weird companies because they're not like
Speaker 2: normal businesses. They're sort of natural monopolies. They price set,
Speaker 2: in my understanding, is based on how much they invest,
Speaker 2: and so they have to then petition some local regulators say, look,
Speaker 2: we had to invest this much, and that's why I
Speaker 2: want to raise the prices this much, et cetera. Are
Speaker 2: there regulatory hurdles or things about the regulatory system right
Speaker 2: now that are going to make that doubling of demand
Speaker 2: more challenging than they need to be?
Speaker 4: Absolutely, And so you go back to the era that
Speaker 4: we've been in of relative no load growth.
Speaker 2: Yeah.
Speaker 4: You know, if you're a utility regulator and utility comes
Speaker 4: and asks you for a billion dollars for new investment,
Speaker 4: and you're used to saying no, used to saying, well,
Speaker 4: wait a minute, why why do you need this, what's what?
Speaker 4: What is this for? How is this going to help
Speaker 4: you know, manage again, reliability, cost, predictability, et cetera. Now
Speaker 4: you're in this whole new world and going back to
Speaker 4: this concept of like we easily forget things. No one
Speaker 4: who's a regulator today or the head of a utility
Speaker 4: today has ever lived through an environment where we've had
Speaker 4: this massive expansion of the demand for electricity. So everyone
Speaker 4: now including the regulators, are having to relearn, Okay, how
Speaker 4: do we enable utility investment in a growth environment. It's
Speaker 4: not something they've ever done before, and so they're having
Speaker 4: to figure out, Okay, how do we create the sort
Speaker 4: of the bandwidth for utilities to make these investments, because
Speaker 4: one of the fundamental challenges that utilities have is that
Speaker 4: they struggle to invest. If there's no customer sitting there
Speaker 4: you asking for the request, right, so they can't sort
Speaker 4: of invest. I mean, if I'm in Vidia and I'm
Speaker 4: thinking about the world five years from now and think, wow,
Speaker 4: how many chips do I want to sell in twenty thirty,
Speaker 4: I can go out and build a new factory. I
Speaker 4: can go out and invest capital, and I can go
Speaker 4: do all this. I mean, I don't need to have
Speaker 4: an order from a Microsoft or an Amazon or a
Speaker 4: Meta to go do that. I can build speculatively. Utilities
Speaker 4: can't really do that. They're basically waiting for the customer
Speaker 4: to come ask for it. But when you have all
Speaker 4: this demand show up at the same time, well what happens.
Speaker 4: The lead times start to extend and so instead of
Speaker 4: saying yeah, I'll give you that power in a year
Speaker 4: or two years. It's now like we I'll give it
Speaker 4: to you in five to seven years. And so that's
Speaker 4: an unsustainable way to run the electric utility grid. So
Speaker 4: we do need regulators to adapt and evolve to this
Speaker 4: new era of growth.
Speaker 3: This is actually exactly something that I wanted to ask you,
Speaker 3: which is we're sort of used to at this point
Speaker 3: when we talk about industrial policy, the importance of an
Speaker 3: end buyer for whatever capacity that we're building out, and utilities,
Speaker 3: you know, to some degree, have struggled with that in
Speaker 3: recent decades, at least this idea that they have huge
Speaker 3: investment requirements. And while there is clearly demand for electricity
Speaker 3: and maybe new types of electricity, it's not always certain
Speaker 3: and you're sort of managing these day to day cycles
Speaker 3: and things like that. But if we know that AI
Speaker 3: is booming, and we know this is a future area
Speaker 3: of growth, and we see these headlines like AI servers
Speaker 3: are going to require like one hundred tarawatt hours per
Speaker 3: year and things like that, does that potentially give utilities
Speaker 3: more certainty or more confidence in the future investment outlook.
Speaker 4: I mean, I would say in some respects it does.
Speaker 4: I mean, they're certainly. And I've been spending a lot
Speaker 4: of time with utilities well for most of my career,
Speaker 4: but even in the last several months having this conversation
Speaker 4: about how are they thinking about this future growth? And
Speaker 4: you know, they're they're struggling a little bit because like,
Speaker 4: all they know is what the customers, you know, show
Speaker 4: up at their door and say that they want. Right,
Speaker 4: they say, well, okay, I talk to X y Z
Speaker 4: data center and this is what they say they want.
Speaker 4: But they don't necessarily have view to the long term,
Speaker 4: like what really is the demand behind that? Like I'm
Speaker 4: getting a request because one data center bought one parsonal
Speaker 4: Land and they need five hundred mega loots of power,
Speaker 4: and then they're trying to extrapolate from that, well, what
Speaker 4: is that underlying demand for data? Right? How much more
Speaker 4: growth should I expect after that? And that's where the
Speaker 4: utilities I think are really struggling is that they don't
Speaker 4: they can't see much beyond the requests that they have,
Speaker 4: and so they're trying to then extra appolid Okay, what
Speaker 4: is it? What are these trends? You know? And really
Speaker 4: the only the only way to get a good sense
Speaker 4: of the the real demand for data and the trends
Speaker 4: is you have to actually go back to the probably
Speaker 4: to the NVIDIAs and the intels of the world and
Speaker 4: go what's the forecast for chip sales? Like, what's the
Speaker 4: forecast for how many chips you're going to make? Not
Speaker 4: I mean not even sales, but really how much they
Speaker 4: produce because frankly, I think every chip they can produce,
Speaker 4: it will get plugged in something. Someone will buy it
Speaker 4: and it will get plugged in. So that's that's probably
Speaker 4: the best estimates that you can come up with for
Speaker 4: what utility load growth should look like, at least as
Speaker 4: it relates to data center. Right. But you know, you
Speaker 4: have thousands of utilities in the United States, so you
Speaker 4: don't have you know, there's not even like a single
Speaker 4: source you can go to to say, Okay, what's the
Speaker 4: forecast next year for electricity loads? Like nobody has that.
Speaker 4: I mean people, there's numbers out there, but they're not
Speaker 4: really based on anything other than speculation. So this is
Speaker 4: the challenge that utilities is that they don't have a
Speaker 4: good view into what load growth really is going to
Speaker 4: look like over the next five, seven, ten years.
Speaker 2: Brian Jenna's fascinating conversation. There's probably like ten more follow
Speaker 2: ups that we could do specifically with you, and maybe
Speaker 2: one day we'll do them. But in the meantime, thank
Speaker 2: you so much for coming on, Odd Ladds. This is
Speaker 2: a great conversation that we definitely needed to get done,
Speaker 2: so really appreciate you joining it.
Speaker 4: Thank you, Joe and Tracy. You really appreciate it.
Speaker 2: Tracy, I thought that was great. I think actually the
Speaker 2: first thing that sort of stands out from my mind
Speaker 2: sort of like working backwards through the conversation, is just
Speaker 2: sort of exactly what you talked about, which is that
Speaker 2: there is this weird situation where you have this very
Speaker 2: unpredictable demand. No one knows like what the steady state
Speaker 2: demand is going to be for this stuff, and yet
Speaker 2: the utilities are sort of legally constricted in the degree
Speaker 2: to which they can say overbuild now or sort of
Speaker 2: operate or plan for that demand.
Speaker 4: No.
Speaker 3: Absolutely, And also, well, going back to the beginning of
Speaker 3: the conversation with Brian, the idea of a mismatch between
Speaker 3: just how fast technology is going at the moment in
Speaker 3: terms of developing AI versus utilities and their you know,
Speaker 3: ten year investment programs that they need to get regulatory
Speaker 3: approval for and all of that stuff. Now, there was
Speaker 3: so much to pick out from that conversation. I also
Speaker 3: thought it was interesting. So I think there is a
Speaker 3: sense among a lot of commentators that there is going
Speaker 3: to be competition for power at least at certain times.
Speaker 3: But I thought Brian's point about how, in some respects
Speaker 3: data centers might be the easy target for politicians to
Speaker 3: kind of ignore, I thought that was really interesting. And
Speaker 3: again his example of what, well, if you know, if
Speaker 3: you're a governor or something, and there's a Tesla factory
Speaker 3: that wants energy versus a data center that probably has
Speaker 3: I don't know, like a handful of employees. Maybe that's
Speaker 3: an exaggeration, then you're gonna go with the Tesla factory.
Speaker 2: Right, totally, so right, You're not going to shut down
Speaker 2: the factory that employs people. You're not gonna politically tell
Speaker 2: people to go without air conditioning on a hot day.
Speaker 2: The data center is going to be the first target.
Speaker 2: I thought that was interesting. You know, again, I do
Speaker 2: think it's like striking, and I think this is not
Speaker 2: even just in the energy context, But I still a
Speaker 2: sort of fascinated by this idea that like open Ai
Speaker 2: was this company, I think it was founded in twenty sixteen,
Speaker 2: and people saw GPT one and GPT two and then
Speaker 2: GPT three, which came out before Chad GPT.
Speaker 3: But it was.
Speaker 2: Really like that day. I mean, it was like that
Speaker 2: day that Chick GPT was announced. Even though like the
Speaker 2: technology was in development, there are also theories and stuff.
Speaker 2: It was like that day of the commercialization of the
Speaker 2: productization of this technology where everyone woke up and all
Speaker 2: these different companies like, we're in like a totally different
Speaker 2: new world and we have to revisit all of these
Speaker 2: investment decisions, whether it's on chips or energy that we
Speaker 2: had made maybe just a year ago.
Speaker 1: Yeah.
Speaker 3: It's also it's almost like bullwhip effect isn't the right term,
Speaker 3: but I'm just thinking the utilities in some respects are
Speaker 3: at the very end of that sort of demand cycle, right,
Speaker 3: So even the tech companies woke up to it very
Speaker 3: very suddenly, the boom and AI and how fast this
Speaker 3: was all going to come about and all of that,
Speaker 3: and the utilities are sort of the last ones to
Speaker 3: know in that respect, and we're expecting them to react
Speaker 3: very quickly to it. It's kind of funny.
Speaker 2: The other thing too, is like it'll be fastating to
Speaker 2: see if some of these net zero commitments just have
Speaker 2: to give, yeah, or something is going to happen there.
Speaker 2: It sounds like it sounds like the rubber is going
Speaker 2: to meet the road. But it does not sound like,
Speaker 2: in the short term anyway, that there is a way
Speaker 2: to accommodate this much increased demand with renewable energy. It
Speaker 2: doesn't seem like it. And so like something is gonna
Speaker 2: it seems like something's gonna have to give.
Speaker 3: I think we're back to the very start of this conversation,
Speaker 3: which is the idea of we have these two very
Speaker 3: different paths where in an ideal world, if everything goes perfectly,
Speaker 3: you have all this new commercial interest in technology that
Speaker 3: requires a lot of energy usage, and so some of
Speaker 3: those dollars get diverted into building out additional capacity in
Speaker 3: terms of energy and maybe even additional green capacity. But
Speaker 3: the other path is kind of depressing, where you have
Speaker 3: a bunch of big tech companies that feel existential pressure
Speaker 3: to do whatever it takes to win the AI race,
Speaker 3: and maybe whatever it takes includes getting energy through coal
Speaker 3: or something like that.
Speaker 2: You know what I think is interesting and it's sort
Speaker 2: of it hadn't really clicked to me, but Brian talked
Speaker 2: about how, you know, after the early eighties, the US
Speaker 2: basically stopped building nuclear and we're like, oh, you know,
Speaker 2: it's like a big mistake. Why do we stop building nuclear?
Speaker 2: But you could sort of understand it in the context
Speaker 2: of very little growth, right, So why make these like
Speaker 2: really big investments in anything when obviously at the time
Speaker 2: there wasn't as much concern or awareness about climate change
Speaker 2: and the effects of fossil fuels, and there just wasn't
Speaker 2: much demand growth, So why make these big things? And
Speaker 2: so you think about like South Korea and China having
Speaker 2: never really slowed down on the nuclear construction, but they're
Speaker 2: also because they're developing countries or poor countries becoming richer,
Speaker 2: they never presumably had that sort of demand plateau just
Speaker 2: by dint of having started from somewhere lower.
Speaker 3: You know what we need what we need chat GPT
Speaker 3: to design a small modular reactor, and then we need
Speaker 3: a robot, then we need a robot yees to build it. Yeah,
Speaker 3: all right, well it sounds like we're probably far away
Speaker 3: from that. Maybe one day, Okay, shall we leave it there?
Speaker 4: Let's leave it there.
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