Texas' Renewable Energy Growth with Suncast's Nico Johnson

Texas has added more new power supply over the last four years than any other state and over 90% of it has been wind, solar, and storage. Today, renewable energy is no longer "alternative" in Texas. It is the backbone of our power grid.

At this year’s Intersolar North America conference, I sat down with Nico Johnson, host of the excellent Suncast podcast, for a conversation about how the Texas energy market got here, where it’s headed, and what it means for the future of clean energy across the country.

We talked about how Texas’s energy-only market, where the lowest-cost resource gets dispatched without preference for technology, has been critical to the rise of wind, solar, and storage. This growth has helped make electricity cheaper in Texas, helping attract manufacturers and data centers to locate here. And as I discussed recently with Tyler Norris on the pod, if we can successfully tap into flexible demand from these large new loads, we can go even further, helping to integrate more clean energy, strengthen reliability, and lower system costs over time.

But Texas’ success is not guaranteed. I shared my concerns about Senate Bill 819, which I discussed in more detail in A Conservative Case for Clean Energy and wrote about in A Time for Choosing. If passed, this bill could impose some of the strictest permitting requirements for renewables in the country, putting future projects and billions in investment at risk. A strong Texas grid depends on continuing to build low-cost, homegrown energy resources, not restricting them.

We also explored the rise of distributed energy and microgrids, including a new $1.8 billion program Texas passed to support critical facilities like hospitals and water treatment plants with backup power packages that combine solar, storage, and gas.

Throughout our conversation, Nico and I talked about the outdated "us vs. them" framing between oil and gas and clean energy. That divide is breaking down. Oil and gas companies are major consumers of solar and wind, and increasingly storage. They are increasingly players in hydrogen and geothermal projects. As I explored in Geothermal’s Moment with Jamie Beard, technologies like next-generation geothermal could bridge traditional and emerging energy sectors, creating opportunities that expand energy production, not replace it.

We also covered:

* How battery storage is reshaping ancillary services and market dynamics in ERCOT

* Why Texas’s merchant market structure creates both risks and big opportunities for developers

* The rapid rise of large-scale rooftop solar and distributed generation

* How the Inflation Reduction Act is driving a resurgence in domestic manufacturing

* Why Texas’s unprecedented load growth from data centers and factories may help sustain the solar and storage boom, even as arbitrage opportunities tighten

There’s a lot to be excited about and a lot we still need to get right.

There is no question that Texas is at an energy crossroads. With smart policies, continued market innovation, and a focus on resilience, we have an opportunity to lead the nation in building an abundant, affordable, and reliable clean energy future.

Timestamps

* 00:00 – Intro: Doug’s background, Nico’s role, and setting the stage at Intersolar

* 05:00 – How oil & gas are embracing renewables and the grid

* 06:45 – The market structure that supported robust solar & storage

* 8:30 - The second mouse gets the cheese (sorry, California)

* 10:30 – Merchant risk & developer incentives in Texas

* 13:00 – Can batteries keep winning in ERCOT?

* 14:00 – Load growth, data centers & electrification

* 16:00 – Policy threats: SB 819 & permitting crackdowns

* 20:05 – Vernacular shift: energy expansion vs. transition

* 25:00 – Domestic manufacturing & the IRA’s lasting impact

* 31:00 – The rise of distributed energy & microgrids

* 36:00 – Final reflections & event promotion

Show Notes

Nico Johnson and Suncast

* Subscribe to the Suncast Podcast! Great interviews and insights from clean energy leaders across the solar, storage, and renewable energy sectors.

* Youtube Channel, Spotify, Apple Podcast

* Nico Johnson on Linkedin, Twitter

* Profile at Solar Head of State

Further Reading and Listening

* Annual Solar and Storage Installations – SEIA Data – National trends in solar and storage deployments, including Texas’s leadership in new capacity.

* How Load Flexibility Could Unlock Energy Abundance (Doug Lewin’s Substack) – Deep dive into why flexible loads and lowest-cost dispatch are key to grid reliability and affordability.

* A Conservative Case for Clean Energy (Doug Lewin’s Substack) – Why conservative principles support clean energy expansion in Texas’s competitive market.

* Geothermal’s Moment with Jamie Beard (Doug Lewin’s Substack) – How geothermal fits into an all-of-the-above approach to Texas’s energy future.

* How Load Flexibility Could Unlock Energy Abundance (Doug Lewin’s Substack) – Deep dive into why flexible loads and lowest-cost dispatch are key to grid reliability and affordability.

* A Conservative Case for Clean Energy (Doug Lewin’s Substack) – Why conservative principles support clean energy expansion in Texas’s competitive market.

Transcript

Doug Lewin (00:07.598)

Welcome to the Energy Capital Podcast. I'm your host, Doug Lewin. This week's episode is a little bit different. I had the pleasure of recording a podcast with Nico Johnson of Suncast, the podcast on solar that is over 800 episodes strong. Nico is the best in the business and has created a just treasure trove of podcasts going back a decade.

That get into every aspect of solar and renewables. And I was honored to be on that podcast. We recorded it a couple of months ago at InterSolar, their flagship event in San Diego. Definitely want to mention to you to mark your calendar because they do one in the fall in Texas. This is obviously reflective of Texas massive solar boom. So the InterSolar and Storage North America Conference and Expo will be in Grapevine, Texas, November 18 and 19.

Be sure to be there. It was a great event and I really appreciate Inner Solar making the space available to Nico and to me to have this conversation called Inside Texas's Renewable Energy Boom and the Policy Risks. So yeah, this one is less specific about particular bills that we did get into a couple of them because it was kind of early in the session, but great discussion, if I may say so, about the growth of renewables in Texas and the directions it may be headed.

Really want to thank Nico and the whole Suncast team. Really enjoyed this conversation. I hope you do too. As always, please leave us a five-star review wherever you listen. Please share the podcast with friends, family, colleagues. And thanks so much for listening. Let's dive in. All right. Welcome to the Energy Capital podcast. I'm your host, Doug Lewin. Today, I'm very excited to be with Nico Johnson, who is the host of Suncast, the podcast covering solar. For how long now, Nico?

Nico Johnson (02:03.212)

A decade.

Doug Lewin (02:04.174)

Decade over 700 almost 800.

Nico Johnson (02:07.022)

790, I think 792 this morning.

Doug Lewin (02:09.55)

I mean, if there's anybody in the world that knows more about solar, I probably haven't met them yet, but we are going to talk about Texas mostly today. We're going to kind of turn the tables. Nico's going to ask me some questions about Texas and Nico, if you're okay with it, I might ask you a couple of questions too, because we're recording live at Inner Solar where you've been the last three days talking to guests from around the industry. And I want to hear a little bit about what your takeaways from this great event are. So if that's all right, we'll do that too.

Nico Johnson (02:34.19)

Happy to do it, my friend. I am looking forward to it. We're to turn the tables on Doug today since I, a podcast host, rarely get a chance to speak as an authority on my own podcast. And so know what it's like when your audience, you know, doesn't get to fully appreciate your genius or your specialty because you are so different as the host to the guest. Ideally, ideally, that's how it should be, right?

Doug Lewin (02:57.87)

You're kind to say genius. There's probably other words a lot of people would choose, but you're kind, Nico.

Nico Johnson (03:03.342)

Well, Doug, because I'd like to cross-post this over on Suncast. Yeah, absolutely. I would love to give folks, even folks who are perhaps new to Energy Capital Podcast, a bit of background on how you've become a specialist on the Texas energy market, particularly, and why folks across the spectrum, especially in nonprofits, come to you for strategy around how to approach policy, how to understand it, and what the development cycle or development market looks like in Texas. So why don't you give us a little bit of background on how you've developed that expertise.

Doug Lewin (03:34.86)

Yeah, appreciate that. So I've been working on this in this area now for 20 years. Started as a staffer at the Capitol, worked for three different members, both House and Senate side. And it was a really interesting era. It was 2005 to 2009. So you had like, Inconvenient Truth came out. You had Governor Perry fast tracking 11 coal plants. Had the, not the beginnings, kind of well maybe end of the beginning stage of the initial build out of wind in Texas. Wind was really taken off during that period. You had the legislature actually expanding the renewable portfolio standard, passing in SB 20, the CREZ, the competitive renewable energy zone transmission build out. They really enabled that next wave, energy efficiency expansion, all these things were going on during that period while I was there. And I really got bit by the bug. Was like, this is a lot of fun. This is interesting. And I was just like,

This is what I'm gonna do. This is one of those things where you like knew it was gonna happen. I went on to lead a nonprofit focused on energy efficiency for five years. It just, you know, basically over these last 20 years as the ERCOT market has become more and more dynamic and as renewables have taken off, demand side starting to get more interesting, I've just continued to just kind of double down and double down again on this line of work.

Nico Johnson (04:52.46)

So Doug, I have to ask in a market where I imagine 99.9% of your friends are in energy, is in Texas for fossil fuels. Are you seen as a bit of an outsider in any way for that portion of your career where you really focused on energy, what has now become energy transition, energy efficiency?

Doug Lewin (05:01.582)

Professional friends. Sure. Yeah. Yeah. Which is using less fossil fuels.

Nico Johnson (05:21.749)

Using less fossil fuels.

Doug Lewin (05:23.814)

You know, it's funny, like we used to, you when I was kind of starting out in this area, we would talk about solar and wind as being alternative energies, right? And like now, you know, 90%, as a matter of fact, the governor in his State of the State address a couple of weeks ago said Texas has added 35% power supply over the last four years. Since Winter Storm, we've added 35%. And-

Nico Johnson (05:48.704)

In a new generation.

Doug Lewin (05:49.806)

Two generations, like 125 gigawatts nameplate all the way up to 170. And so I was like, that's really interesting. I wonder if that's right, first of all, and it was. And where that's coming from, 93% of it is wind solar storage. 75% of it is solar and storage. So those aren't alternatives anymore. And I say that because I think it's way to answer that question is there are very few people I talk to in the oil and gas industry. And I talk to a lot of them. There's very few people that sort of now view all of this as just a silo.

Texas is the energy capital. It's not the oil and gas capital, it's not the solar capital, it's energy. And one of the things we've really seen, Nico, that is so fascinating in Texas is oil and gas companies scrambling to connect to the grid for their fracking operations. Why? Not because of some ideology, because it's cheaper than running a diesel gen set out in the Permian, right? So I think we're seeing this kind of permeability between the different energy companies that is really fascinating and kind of fun.

Nico Johnson (06:49.452)

Yeah, so the Texas market for anybody who is unfamiliar is an island for all purposes from an electrical perspective. It has its own operating grid effectively. And the way that that market operates is unique in many ways. It is an unregulated market. There are many folks that sell, that generate and sell power, unlike the investor owned or regulated utilities across most of our continental United States. Could you talk about the evolution of the energy market in Texas with regards to the adoption of renewables, what the driver was? Because for those who were paying attention to solar and battery energy storage, there was the logical California and New York markets and some of the Midwest markets for community solar. And then around 2020, 2021,

Texas very quietly and quickly became categorically the leader in new solar project development, say, and then new solar project interconnections, and then seemingly overnight battery energy storage. And it feels like to folks watching, not to those of us who were sort of seeing how it was being done, it felt to folks like, well, batteries sort of came out of nowhere, but it's like...

It was a little bit of like tail wagging the dog. Can you talk about the market structure that incentivized such a pivot of the industry towards solar and battery energy storage?

Doug Lewin (08:24.686)

For sure. You know, think California, New York, and like you mentioned, the Midwest markets are kind of, they've been more policy driven. So Texas, be clear, in the early days, it was policy driven. It was a renewable portfolio standard in 99, expanded in 2005. But over the last 15 years, really haven't been as many policy drivers. So I would characterize what's happening in Texas a little bit like...

Nico Johnson (08:32.813)

Yep.

Doug Lewin (08:45.102)

Second Mouse Gets the Cheese, this will anger a lot of my California friends, right? They kind of overpaid for that first wave of solar. That's not fair, like they didn't overpay. They paid a lot. But it was important to stimulate a market when California did. That's a major contribution and people in Texas frankly should be thankful for that. But in a sense, that Second Mouse Gets the Cheese, like once that cost curve had come down and to your question about the Texas market, it is a market that is economic dispatch only. No like loading order.

Nico Johnson (08:54.616)

That's they're-

Nico Johnson (09:18.291)

Best to find that. What's economic dispatch for those who don't understand that?

Doug Lewin (09:20.888)

Economic dispatch just means the lowest cost resource is dispatched. That's all it means. And so, and the lowest cost resource over the last several years has been wind and solar. Obviously there's a high upfront capital cost, but once you get that on the grid, there's not a fuel cost. So they're bidding in quite low. That is having a downward pressure on prices, which is one of the reasons why a lot of manufacturers are coming to Texas, why a lot of data centers are looking at Texas. It's been really good for the economy, but what you started to see, like you said, around 2020,

2020, 2021, right in there, maybe even a little bit before like 2018, 2019 was solar really starting to come up that curve at the time of Uri. So very beginning of 21, we had like 6,000 megawatts of solar. We're up to about 30,000 within our cotton. So just a meteoric rise in storage, you kind of saw the same thing. Uri, we had like 200 megawatts of storage up to 10,000 now. We doubled just in 2024 from five to 10,000. So, and that again really kind of comes to like,

The other side of that economic dispatch is when you don't have enough of the low cost resources, prices can go very, very high in the market. That's a big inducement to the batteries to come.

Nico Johnson (10:30.156)

And this is the secret for those who are doing project development in other markets where you don't get the kinds of incentives that you get in tech. So I want you to unpack a little bit what developers are betting on or banking on. Traditionally, the banks would never give you financing, certainly non-recourse financing, on a project that had anything that looked like a merchant tale, anything that had market pricing risk. They wanted firm offtake. However, my understanding at least is that the majority of folks that are prospecting into the Texas market with battery energy storage and solar are considering that the merchant tale is where the upside is in the market. So could you talk a bit about the dynamic of what people are betting on in the market that makes it so appealing from a developer perspective, especially with regards to storage?

Doug Lewin (11:21.58)

Yeah, so I think with storage, it's probably more true on the merchant side than it is on solar. Solar, you'll see a lot of bilaterals and people really wanting that off take. Certainly there's some of that in storage, but in storage, you are looking at those high price intervals, A market cap of $5,000 a megawatt hour, no other market in the US, I think in North America, maybe Alberta, but it has higher than like a thousand, right? So that's a...

Nico Johnson (11:28.59)

Think that's right.

Doug Lewin (11:49.07)

Very, very rich incentive to bring fast acting generation because it might only last for five minutes. Five minutes at $5,000 megawatt are still a lot of money. So that is a big inducement to batteries to come into the market. Then I think the other part.

Nico Johnson (12:04.73)

And it's so quickly dispatchable. It's instant on. It's not spinning reserves. There's almost no standby cost relative to the standby cost for other types of generators.

Doug Lewin (12:17.442)

Well, and that's the other part of this that is like really kind of amazing what's happened in Texas is the much of the ancillary service markets. That's the backup reserves, which those are pretty rich markets because you have to have those backup reserves around. Energy storage has really kind of taken them over. And in 2024, they were a lot less rich because batteries were so effective at driving prices down. This is so, yeah, I mean.

Nico Johnson (12:43.214)

This is the question I have for you actually, someone who's been watching the market evolve. I said it in a podcast maybe two years ago, I said, here's what I think is gonna happen, because arbitrage is a moment in time, it is not a market. Arbitrage in the Texas market that drove a gigantic leap in battery energy storage deployment is going to eat its own lunch, right? The question, do you see a long-term play for battery energy storage in the Texas market that looks like the kind of upside we see today when if you flood that much batteries into the market, it has to necessarily reduce the economics.

Doug Lewin (13:20.078)

So I do think in the very short term, might see, I wouldn't say a slow down, but maybe a less rapid rate of growth. Some of the projections out there I think might be a little bit overheated right now because of what you're saying, right? That like 2024, ERCOT has said was the lowest priced year in the market in a decade. Out of the last 10 years, and it was, a lot of people in Texas say, it wasn't so hot. And that's the reason.

People in Texas say it wasn't hot in 2024, it's because 2023 was hellacious, but it was the second hottest ever, almost in a tie with 2011, but 2024 was the sixth hottest summer in recorded history. I think you are starting to see some of that happen, but I think the counter to that is this whole phenomenon of large loads, right? Which is like you can't, so how far can you make it into any conversation? Yeah, exactly. You know, and in Texas it's a big deal.

Nico Johnson (14:12.309)

Loads I love it.

Doug Lewin (14:13.08)

Yeah, and it's data centers for sure. But it's also, and you've covered this, the manufacturing boom in solar in Texas, right? So even like manufacturing of solar, but of all kinds of different things, the industrial electrification that's starting to happen, both in oil and gas, like we were just talking about, but even petrochemicals and refineries, we have an electric steel manufacturing facility in Texas now. One of the LNG export facilities is grid connected.

700 megawatts. So we're seeing all this load growth. And I think that's the counter to sort of solar and storage kind of eating their own lunch, cannibalizing.

Nico Johnson (14:50.702)

Is there any, what research organizations do you see providing the best focus or data on this kind of sort of backend project analysis that developers who maybe are thinking about is there still opportunity in Texas should be looking at? Are there free resources, paid resources that you feel like get overlooked?

Doug Lewin (15:12.686)

I mean, there's a ton of great resources out there. One that I would highlight would be Aurora Energy Research. I don't know if you're familiar with them, but they've done some fantastic studies, including one looking at, I don't know if they've analyzed the latest winter storm yet, but the winter storm in 2024 known as Heather, and they said batteries saved the market 750 million. Then they're producing a whole lot of good research that they cover all over the place, but they have a-

There are American headquarters in Austin and they've got 80 people there. So they're really kind of all over.

Nico Johnson (15:45.614)

Yeah, I know them one of our customers Amperon works a lot with Aurora and produces some a lot of data driven Insights that I've had not come across them before that. Yeah Doug Because folks come to you for essentially advice strategy consulting on how the markets working and where it's going I thought it'd be prudent to ask

Everyone sort of looks at Texas as this perpetual motion machine, right? Like we can go there, it's gonna keep growing. Like we just talked about, what do you see happening in a policy level or at a local level that maybe folks outside of the market aren't necessarily seeing yet or paying attention to that could upend this whole thing, right?

Doug Lewin (16:27.566)

Yeah. So there's a couple of things, but I think number one, the far biggest threat is there is a bill in the Senate called Senate Bill 819, which would put into place if it were to pass as it is drafted, probably the most restrictive onerous permitting requirements for both wind and solar in the country. Mean, developers have really struggled in Ohio and Michigan and some other places with their permitting regimes. This, I think, from what I've heard,

Talking to people would actually be worse in a world where we need to be freeing up permitting.

Nico Johnson (16:58.174)

Worse in a world where we need to be freeing up permitting.

Doug Lewin (17:01.486)

And it's kind of wild too, right? Because you have this kind of, this is playing out at the state level and at the federal level, Is this sort of like, on the one hand, if you want energy dominance, but you want to like squash renewables, like you can have one or the other, you can't have both.

Nico Johnson (17:18.574)

I mean, for us, the foregone conclusion is great. We're going to have energy dominance. We're going to focus on energy being a US superpower. Then if you're going to free up, that means you implicitly are trying to remove bureaucracy for, let's face it, natural gas, fracking and oil and gas, which by the way, exploration, like more exploration to get to drill, baby drill. We're years away from being able to actually exploit that promise. So it's naturally going to have to come from the fracking fields.

And that that's naturally gonna have to come from reducing bureaucracy that was put in place to help us avoid continuing to extract fossil fuels. How does that not benefit the renewables industry? Well, if the explicit instruction is also, by the way, don't let renewables win.

Doug Lewin (18:04.078)

Yeah, mean, when you're talking about permitting reform, it needs to be across the board and not just sort of picking certain technologies. Really again, I mean, that's what like most, I would say that, you know, the folks that are supporting 819 or more, Senate bill 819 are more the exception of role. Most people in Texas from, know, the statewide, you know, chamber of commerce to oil and gas companies that want to buy renewable energy. Most people understand that this is more of an all of the above energy system and that these,

These different energy resources compliment each other. I was really fascinated by, was a report. So last session, the 2023 session, there was a bill that required the railroad commission to set up a hydrogen production council and produce a report. And their report was actually pretty good. And it said, hey, we've got all this low cost electricity from wind and solar. That may help us produce hydrogen and actually be good for the fossil fuel industry.

And so, I think you're starting to see things like that. The Railroad Commission has never been a big cheerleader for renewable energy, but they are also starting to understand that, this is a system and these things actually.

Nico Johnson (19:08.334)

You can understand why they transport a lot of fossil fuels.

Doug Lewin (19:12.104)

They do and the fossil fuel industry is really interested in hydrogen as a potential

Nico Johnson (19:16.428)

Yeah, I think what you understand and this is a big transformation for me as a someone who's kind of born and raised in the solar industry I had not spent much time in traditional energy and the sort of the shift in thinking for me was starting to think well, I'm familiar with electrons Fossil industry is all talks about molecules molecules. You knew exactly where I was going right? And if you can understand well

What is not just the language of the business model around molecules, you can quickly see which of the, I'm gonna do air quotes for those who can't see us, like the renewable technologies that will allow for fewer stranded assets for the fossil fuel industry. You can see where lobby interests, et cetera, align, things like carbon capture, things like geothermal, which I'm a huge fan of. I'm curious, as a local in the Texas market in the energy capital of the world,

Doug Lewin (20:04.289)

Absolutely.

Nico Johnson (20:11.67)

I've heard you use two in particular sort of key words. We used to call it alternative power. Yeah. You just said renewable energy. In Texas right now, what is solar wind, the clean energy spectrum, how's it referred to? Are there any sort of key words that...

Doug Lewin (20:34.254)

I mean, people talk about it all kinds of different ways here, all kinds of different language, but I think at this point, clean energy is energy at this point. Look, last year on the grid, were about 45% carbon-free, about 35% renewable, 10% nuclear. In Texas. So I mean, at this point, it is a misnomer to call it alternative. I think people still refer to it as renewable energy. When I say it's no longer alternative, like...

Gas, as far as new capacity, gas is a little bit of an alternative energy right now, right? I mean, just kind of is, right? It takes longer, it's more expensive. Really, like the state is actually, Texas is actually trying to subsidize new gas plants. Like it's just the speed and scale and cost of solar and storage is just so dominant to use that phrase, right? Like that is what's being deployed.

Nico Johnson (21:26.094)

Had a really interesting conversation with the guy who runs the predominant think tank for the propane industry. I had him on the show and it was entirely because he proffers a word that I disagree with fundamentally and that is, well, of a phrase, renewable natural gas. And so I had him on to sort of go back and forth. Have a conversation about the reality of renewable natural gas. Are there phrases like that that you also hear where the industry, see it sort of adopting this language that is effectively, and where I wanna go with this is actually, I think that there is no us versus them. I've said this since 2020. I'm like, guys, we can't have a fight with oil and gas. Unless you, in case you haven't noticed,

Two of the largest solar developers in the United States, actually much more than that, but we'll just focus on LightSource and SiliconRange. Their majority investors are oil and gas companies, right? And if you go look at Energy Toolbase, you look at Fraxon, I can name a dozen companies off the top of my head where the private equity money behind them is oil and gas. Like there is no us versus them. It's only us figuring out our energy future. How do you see the vernacular evolving and we talk about this a lot here because like we're considered a solar podcast, but I say we're a clean energy podcast. We can't actually have solar without batteries. Texas is the perfect example of that.

Doug Lewin (22:56.066)

Yeah, yeah, yeah. So, you you were talking earlier about molecules and electrons, right? So like today, you know, something like of global energy use, % is molecules, 20% is electrons. IEA thinks to get to net zero by 2050, it's gonna be like 50-50. There's still gonna be a whole lot of molecules out there. Yes, that's And they need to be as clean of molecules as possible, right? And so, and the balance sheets.

The engineering expertise, the financial expertise of oil and gas companies is going to be needed in the transition. Just is. I just don't think we can reach the speed or scale without it. You mentioned geothermal. That's a perfect example, right? I mean, they're drilling. They're literally drilling and in some cases fracking to try to get heat out of the ground. And you have seen Schlumberger, which is now SLB, and all these different oil and gas oil and fuel services companies, even Halliburton companies like that getting into geothermal.

So this, I agree with you. Think that this, if it is us versus them, it's possible that we could decarbonize. It's gonna be a hell of a lot harder, slower, more painful. This really needs to be everybody kind of pulling together. And I think that those, I think my experience with folks in the oil and gas industry is they are, to put a word on it, pragmatic. Yes, that's right. And they see the opportunities in clean energy and in this.

Nico Johnson (24:24.762)

There you go.

Doug Lewin (24:18.786)

Transition a lot of them. I'll tell you about vernacular. One of the things I hear a lot in Texas is energy expansion Some people don't like energy transition though, like the greater Houston partnership the chamber for the Houston area They talk about the Houston energy transition They call it use an energy transition initiative, but a lot of other folks get sort of spooked by those words They talk about energy expansion and I'm kind of like whatever whatever words you want to use as long as we're talking about Making energy more abundant and affordable safe, reliable, and clean. All of those things. They're all important goals. We gotta balance them, but they're all important.

Nico Johnson (24:55.534)

Love that

Doug Lewin (24:57.582)

I ask you a quick question. Know I have. So you have been talking to people the last couple of days here. There something you can share with the listeners that you're, and I know this is hard, it's like asking you to pick which of your children is your favorite, but like something you're really excited about right now within the solar industry. Could be utility side, could be distributed side, could be a new technology.

Nico Johnson (25:19.81)

Yeah, there's two things and I'll give you some stories around it. So when I started in this industry, 2006, companies like BP, Mitsubishi, Shell, Shot were global name brand manufacturing organizations with factories here in the US. Were buying.

You know, we're building and buying panels in Maryland, in Mississippi, in Oregon. And I watched in the course of five of the, like maybe five, six of the first years I was in this industry, that industry wither away as we had a tacit handshake with Asia to produce it at a lower cost. And by the way, there was a very intentional, very strategic government decision.

In China specifically to throw as much money at the technology problem as possible to get the technology to the place where it would become economically viable. Through a series of administrations now, we've seen an increasing call for domestic manufacturing, something that I never thought I would see in my career again on US soil. I called

BS on it the first time I saw it, I was like, this is never gonna make financial sense. 2019, 2020. And I was like, this is never gonna make any sense. Back in the first Trump administration, was like, this is never gonna happen.

Doug Lewin (26:43.714)

When was China's just gonna help compete us because it's just too dominant.

Nico Johnson (26:57.492)

And I was wrong. And as I have watched now, when I first came in the industry and was working at Trina and like just had one of the leaders of one of the largest solar manufacturers in the world on our stage. And another gentleman that he and I worked with is running another, one of their competitors. I've watched my friends become owners and managers of these large module manufacturing businesses.

And I've gone to them and said, help me understand the economics. Is this durable? Like I've asked them on our podcast, please explain to me why this is not another flash in the pan. Please explain to the American people why this is going to be here for 10, 20, 30 years. Yeah. And they have solid answers. Mark Sokolov at Qcells has a solid answer for why Qcells is going to be around, why they're not just going to be around, but why they're doubling down on further vertically integrating on US soil.

Doug Lewin (27:54.646)

And is that policy? Is it economics? Is it the technology? Is it all that?

Nico Johnson (28:01.294)

It is, so I think it's a change in the tide of the sentiment of the buyers, one, and it is a realignment of policy, like what we've seen in various iterations in the past, at a state level to compete on a regional basis. Like how are we going to attract tax dollars, tax revenue? How are we going to attract jobs? And it's all built in almost entirely on the back of this need, this desire for jobs at a local level to revive the Rust Belt, to bring jobs back to the South and to restore, I'll use the word for the current, to restore dominance globally of the American brand. So I think it's at least 10, 15 years durable, which actually is fine. That's a great cycle. Powerful. That's a great cycle for our industry. So I sat down yesterday.

A major Asian battery manufacturer and I said, they want to work with us and advertise on our platform. And I said, look, what's your domestic plan?

Crickets. I pressed and I said, how are people going to buy domestic content from this company? You are a world leader, well established, they want to buy from you. You're the market leader in, you know, in adjacent countries. Well, we have a JV in Europe and we're going to sell through that. And I was like, I hate to burst your bubble, but not only are you not going to be able to advertise on our platform, but I don't want to waste that money just to take it.

To for self preservation when I know that in the end, you're going to get zero orders because your answer is we don't have a domestic plan. And every buyer now is going to require you to have a domestic plan because that's the plan. And if you don't have a domestic plan, I'm not going to allow my reputation to be on the line for my listeners to go, why is Nico sort of lobbying for this brand that is not committing to our local economy?

Right? It's that it is, so we are seeing this globally, this resurgence of domestic, that sort of reshoring. Yeah. Right? And this domestic supply.

Doug Lewin (30:18.222)

I think it's really fascinating because it is a convergence of the clean energy industry and a major part of what Trump and the Republican party seem to really want right now, this energy dominance, America first. It's like we should be making things here in the United States. So maybe there's this weird sort of like left and right like meeting up. It's gonna be fascinating to see what happens with so many parts of the IRA, but like 45X manufacturing incentives. How do you take those away when you're building factories?

Nico Johnson (30:46.414)

I've been good authority from more than a handful of sources that 45X seems very secure.

Doug Lewin (30:54.444)

Yeah, it'd be hard to imagine a bunch of voting against their district after he's out of their districts that are built

Nico Johnson (30:57.88)

Cannot fathom right there right now. And then the second is, I've been sort of informally and through this show formally polling what sector is finally poised for growth. What do you think it is? Let's just focus on the solar industry.

Doug Lewin (31:15.15)

Solar industry, which sector is posed?

Nico Johnson (31:18.166)

It's traditionally sort of broken into three and a half, four sectors like Rezzi, commercial, utility, community solar.

Doug Lewin (31:25.294)

I mean, so I always think about Texas, right? So like, so sorry to be annoying and give you the Texas answer, but I actually think there's a huge amount of growth that will likely happen on the more distributed side. Residential, but also some, whether you call it community solar or just like the, you know, there's a certain level of interconnection if you're above 10 megawatts. So you can do 9.9s at congested areas around like, I think we're gonna see a lot of that. And Texas is...

While we've been great on the utility scale side and 30 gigawatts and that's awesome, we're way behind on the distributed side.

Nico Johnson (32:01.006)

Not just Texas, the rest of the country as well. So as long as I've been in the solar industry, I sold what was at the time the first 100% solar powered newspaper in the country, the Monterey County Weekly in 2006, 33 kilowatts. All these people will tell you I the first X, was peanuts compared to what we're doing today. But I've watched the commercial sector be the next big sector for 18, 19 years that I've been in the industry. It is inevitable that code will get cracked. And I think that 2025 will be the tipping point, what I'm seeing, and I'll call it here. I think that 2025 is going to be the first year where we actually see distributed generation, in particular, focused on commercial industrial, large scale rooftops, not Rezzy. I think Rezzy is going to continue to suffer. I'm sorry to hear say that. It'll be the first time that we see the C&I sector at scale, see a tipping point and start a run towards velocity in that market that we've not experienced in the last 20 years.

And I see it in companies like I just had Jorge Vargas from Aspen Power, the guys from Encore Renewables, Chad, those guys up in Vermont. Like the Northeast in particular are a great bellwether for what's happening. There's a flight to quality with capital, but there is an enormous amount of capital funneling into the distributed energy market.

Very interesting. And I'm very bullish on the distributed energy market, in particular, large-scale rooftops.

Doug Lewin (33:32.322)

I'll just say one more thing. I think there's good market reasons to put distributed energy. Look at Houston, something like 60 to 70% of the power coming into Houston is coming in from other parts of the state. Obviously, Herrickot's this closed system, but it's coming in from West Texas. There are constraints along the transmission line. So putting generation locally makes a ton of sense. The other sort of important thing in Texas, I mentioned earlier that the state was subsidizing large gas plants. Part of that bill, was putting $1.8 billion towards micro grids that the law mandates must be a mix of solar storage and gas at critical facilities like hospitals, water treatment plants. You think of winter storm, Uri, like what kind of infrastructure do you absolutely need to have? Like not even five nines, but just like 100% uptime, right? Hospitals, nursing homes, water treatment facilities, stations, fire departments. Those kinds of that, 1.8 billion is a $500,000 a megawatt subsidy specifically for these microgrids at critical facilities, backup power packages, they call it, maybe not technically microgrids. But I think that's gonna be a big inducement to distributed solar. That's a really interesting.

Nico Johnson (34:40.641)

Completely agree with you and I'll note that microgrid for me is a subset of distributed generation, particularly the CNI sector. And you'll hear a lot of buzz around microgrid this year. And one of the big sponsors for InterSolar over here is this company Zendi right here on San Diego. They've basically become the de facto sort of operating software for determining what a microgrid should look like. And this blending of the various forms of energy generation, the various loads, at a local level has like microgrids are not a new thing, right? Submarine's a microgrid. We've been powering microgrids with renewable energy for a long time. And I completely agree with you. I didn't know that about Texas. And that's one of the reasons I'm really glad to have this conversation with you is there are pockets in the United States right now that are investing big time into microgrids. It's as a subset, it is effectively distributed generation. A local load and it is a very local problem to solve. It's not going to be solved by major national companies like Honeywell. They will invest in it, right? They'll be there, but it's going to be solved at a local level. And that's one of the things I'm also really bullish about is that we're going to see a return instead of major national brands to local, maybe even super regional brands that dominate the industry moving forward in the next two, three years.

Doug Lewin (36:03.982)

Very interesting. A lot to watch for, a lot to be excited and interested about. Yeah, I'll just say kind of in closing, Nico, I really appreciate you making the space available. As you said, we're here at Innersolar. There's gonna be an Innersolar later in 2025 in Texas. That's right. I don't know if you're coming. I hope you will. Because there's great, great. Because there's so much happening in Texas and I'm really glad Innersolar did one in Austin last year will be in the DFW area next year. It's a great event and I encourage people to, to mark their calendars for November, 2025 for Anderson. Yeah, great. Fine. There you go.

Nico Johnson (36:40.79)

Well, I have enjoyed co-hosting the Energy Capital podcast with you today. Thanks, Really a lot of fun. I look forward to it. I hope we do more collaboration in the future and have you on our Suncast podcast. Let's do more about Texas specifics because we got to help folks know where to point their resources. And this is one of ways we do it.

Doug Lewin (37:04.534)

Anytime, just ask, I'll be there. You do a great job covering the solar industry. There's nobody better. So thanks so much, Nico. Appreciate it. Thank you for listening to the Energy Capital Podcast. I hope you enjoyed the episode. If you did, please like, rate, and review wherever you listen to your podcasts. Until next time, have a great day.

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