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Geothermal developer Fervo Energy has successfully brought online the first ever full-scale commercial power plant sourcing from enhanced geothermal systems (EGS) — a groundbreaking development both literally and figuratively. In this episode, Fervo CEO Tim Latimer discusses the company’s accomplishment and where flexible geothermal is headed.(PDF transcript)(Active transcript)Text transcript:David RobertsTraditional geothermal power, which has been around for over a century, exploits naturally occurring fissures underground, pushing water through them to gather heat and run a turbine. Unfortunately, those fissures only occur naturally in particular geographies, limiting geothermal’s reach. For decades, engineers and entrepreneurs have dreamed of creating their own fissures in the underground rock, which would allow them to drill geothermal wells almost anywhere.These kind of enhanced geothermal systems (EGS) have been attempted again and again since the 1970s, with no luck getting costs down low enough to be competitive. Despite dozens of attempts, there has never been a working commercial enhanced geothermal power plant.Until now.Last week, the geothermal developer Fervo Energy announced that its first full-scale power plant passed its production test phase with flying colors. With that, Fervo has, at long last, made it through all the various tests and certifications needed to prove out its technology. It now has a working, fully licensed power plant, selling electricity on the wholesale market, and enough power purchase agreements (PPAs) with eager customers to build many more. EGS is now a real thing — the first new entrant into the power production game in many decades.Here at Volts we are unabashed geothermal nerds, so naturally I was excited to discuss this news with Fervo co-founder and CEO Tim Latimer, an ex-oil-and-gas engineer who moved into geothermal a decade ago with a vision of how to make it work: he would borrow the latest technologies from the oil and gas sector. Ten years later, he’s pulled it off. I talked with Latimer about how EGS works, the current geographical and size limitations, how he plans to get his technology on a rapid learning curve to bring down costs, the value of clean firm power, the future of flexible geothermal, and much more. This is a juicy one.All right then, with no further ado, Tim Latimer. Welcome to Volts. Thank you so much for coming.Tim LatimerThank you for having me.David RobertsTim, this has been a long time coming. I've been tracking your adventures from afar for a few years now, and now you've reached a real milestone here, a real milestone for you, a real milestone for your company, a real milestone for geothermal power, which Volts listeners are like me, big fans of. So to help us appreciate the significance of the milestone in question, I want to back up a little bit and do some background first for listeners who have not, for whatever bizarre reason, heard my previous geothermal pods. So a couple of times we've talked and you've told me kind of this short, potted history of geothermal, the last couple of decades of geothermal, the sort of struggle to align the money and the attention and the technology and everything.So maybe by way of starting just share that with our listeners, sort of like geothermal's struggles to take off in, say, like a post-2000 context.Tim LatimerAbsolutely. Well, to do that, I probably have to explain a little bit about how geothermal works, which is straightforward in the idea, difficult in the implementation, but geothermal has been around for forever. The first geothermal power plant was built in Italy over 100 years ago. Major places like New Zealand, Iceland, and northern California built massive utility-scale power plants going back to the 70s and 80s. But essentially what happened is — as the choicest areas for drilling geothermal, the places that steam was literally coming out of the ground got tapped — we ran out of really good resources and technology couldn't keep up with the challenges needed to go deeper, go into less permeable areas, and still produce economic electricity.So geothermal has been kind of a boom and bust industry. The big technology push for a long time was the idea of something called enhanced geothermal systems, which was a DOE-led effort going all the way back to the 1970s to try to incorporate things like hydraulic fracturing, advanced drilling techniques, better subsurface characterization, to try to solve that problem and let geothermal be a more widespread resource. But many of the early technical attempts came far short of expectations, and so the industry had fits and spurts a lot of unrealized promise that never came about. And kind of the two big waves recently, in the late 2000s, there was a big push to do more geothermal energy development. And you always think about what does it take for a new tech to actually get to market? Well, you got to have the technology there, you've got to have supportive policy, and you have to have market conditions that are ready to go. And so in the late 2000s, the market conditions were there. People started caring about carbon-free electricity for the first time in a really meaningful way. We saw state RPS targets come out. We also were in a world where people thought natural gas prices were going to be exceptionally high for a long time.So people were concerned about how we were going to source electricity. And so there was huge demand for geothermal. And then between different initiatives like the loan program office and the R initiatives, putting funding into alternative energy resources in the late 2000s, geothermal really had a great moment. But what happened there is it was missing that third pillar, it was missing the technology area. So there were a lot of contracts signed, a lot of investment came into the space. There was supportive policy, but a lot of the visions of geothermal in the late 2000s sort of petered out as drilling results were underwhelming.And as a result, it put us in this decade plus of time where there was not supportive policy in the US for geothermal, where there was not investment dollars coming in. And the irony of this whole thing is all of these drilling and subsurface methods that people had tried to make work for geothermal for 50 years, all of a sudden became viable and cheap and cost-effective because of the shale oil and gas revolution. So all of a sudden it wasn't expensive to drill horizontal wells and we could image the subsurface with high degrees of clarity, but for most of 2010s the new tech showed up and in an inverse of the tech was there, but there was no policy and there was no financing.And so it's taken quite some time for this mix of better technology, supportive policy and market demand to coalesce. And it's really just been in the last couple of years where geothermal has finally had all the forces pulling together here.David RobertsYeah, that's what we sort of tried to convey with my last pod with Jamie Beard on geothermal, just how everything's finally coming together. Right now, all the pieces of the puzzle are coming to place. It's a super exciting time. So I think most people get traditional geothermal power, right? You find an area where there's some sort of volcanic activity, which just means sort of tectonic plates rubbing on each other. So you have fractures underneath the ground and then you have water. When you push water through those fractures, it heats up. So you have one well where you push the water down, the water heats up in the fractured field and then comes back up the other well and you use it to generate electricity.That is standard geothermal power. And as you say, that kind of geothermal power, which has been around for a long time, is confined to geographical areas where you find these fractures, where you find this sort of geological activity. So let's talk briefly about how to distinguish that traditional geothermal from the various other kinds we're hearing about now. There's a lot of terms flying around. So there's enhanced geothermal, there's super deep geothermal, there's closed loop geothermal. Maybe walk us a little bit through what is the technological landscape of beyond normal geothermal.Tim LatimerYeah, so the nomenclature here, what the industry has kind of settled on, and the DOE uses this nomenclature, is that first type that you described, which is very descriptive, you know, Iceland, Kenya, northern California geothermal prospects. We call that hydrothermal. And hydrothermal is those areas that have natural high temperatures, natural high flow capacity, because there's these natural fractures and permeability in the reservoir and there's water to circulate. And those areas can be tapped with relatively traditional old school technology. That's why they were drilled out in the 1970s, even though we didn't have all these technology advancements, because the geology is just better suited for it.Now, broadly, the umbrella of next generation geothermal is sort of any advanced technology method to go beyond those really shallow, high temperature, naturally high flowing resources and make them economic.David RobertsIs it the case that those natural areas, globally speaking, are tapped out, or is there runway there? How sort of like how at capacity are we for that kind of geothermal?Tim LatimerWell, the traditional geothermal industry, it's not small, but it is small relative to the total extent of the global power system. So less than 1% of global electricity, but really meaningful in certain markets. It's around 20 gigawatts installed. It grows by 5% to 10% a year. So it's not over by any means. And there's a lot of great investment in projects going on. But whenever you plot it against a resource like solar or wind and the growth that have occurred in those industries over the last decade plus, you can't even see that the line is moving because the axes are so different.So always an important resource. It's certainly not tapped out globally. But when you look at the places that are on accessible land close to power demand that have the right natural resources, it's an industry that can produce a 5% to 10% per year growth rate, not an exponential rapid, world changing growth rate like we've seen in other renewables.David RobertsSo then all the advanced is beyond that. And so what are the relevant categories there?Tim LatimerRight, so you mentioned super deep, for example. So geothermal economics are all dictated by at the end of the day it's how much flow rate can you get out of a well and how high temperature is that flow rate?David RobertsAnd flow rate is just how much water you can push through it for a given time period.Tim LatimerExactly. And so if you want to make geothermal projects more economic, you have to figure out how to lower the cost of drilling or you have to figure out how to make the temperature you're working with hotter, or you have to get the flow rate higher. So those are sort of the three levers you can pull. One of the things you mentioned there was super deep geothermal, which is interesting, which is trying to change one of those levers, which is temperature. Can you go so deep that rather than, let's say, 200 C, which is a reasonable temperature for modern geothermal, can you do 500 C or 800 C and improve the economics through drilling ultra deep and having very high temperature output?So that's sort of one way. And there's super deep there and then there's enhanced geothermal systems, which is what the DOE through the Utah Forge project and their research projects and then us at Fervo have been working on for a long time, which is, can you use methods that incorporate directional drilling, advanced drilling tools and well stimulation, principally through application of hydraulic fracturing, to improve the flow rates? So the way you improve the economics of projects is you drill wells still targeting that same temperature resource, but you do it in a way where you get so much more flow per well that it improves the economics and unlocks a much broader resource.So all of these things are next generation geothermal and the extent that it's tech that unlocks a new class of geothermal resource that goes beyond that traditional older style technology that's been around for decades.David RobertsHow do you slot closed loop geothermal? So the traditional geothermal and enhanced geothermal, both sort of they inject the water, in the ground, and then out of a pipe, and then collect the water at the other side into a new pipe. But then there's also this new closed loop, which is just the water stays in the pipe the whole time. Is that meaningful enough to be its own category?Tim LatimerYeah, it is, because it's quite distinct from traditional geothermal or enhanced geothermal. It is definitely its own category where you're just flowing and recirculating through pipes in the ground and not through these large and extensive geothermal reservoirs. That's definitely a different category.David RobertsRight. And so is it fair to say that enhanced geothermal, which is fracturing more of the ground and improving flow rate, that's the one you're doing and that's the one that's right on the verge of commercial production. The other two are where in the cycle of things?Tim LatimerBoth the other two — the nice thing about enhanced geothermal systems and the applications there is these are technologies that are very advanced and far along in their technological know-how. These are the technologies, like I say, that the Utah Forge site, which is supported by the Department of Energy, are proving out in real time. If you follow that project, every month there's a new advancement of that tech and they are commercially viable today, which is, I think, some of what we're going to talk about later, the results of our pilot project. The other technologies are both ones that still rely on radical technology breakthroughs in drilling technology.So if you're talking about an enhanced geothermal system where you're drilling to 3000 meters depth and targeting 200 degrees C, which is really the area that the Department of Energy and Fervo is going after, we can do that today with existing technology. Getting the right cost structure or drilling down to 10,000 meters depth or 800 degrees C like some of these other projects: Very promising, lot of potential, there a lot of upside. But those are things that would require radical technology step changes in performance that put it more akin to the way that we look at fusion technology breakthroughs, where it's a big prize, it's worth pursuing, but we're certainly talking about deployment timelines that are ten plus or potentially several decades in the future to get those kinds of results.David RobertsGot it. So the advantage enhanced geothermal has is it is going to depths that are familiar to the oil and gas industry. And thus the drilling technology has been worked on and perfected absolutely by the oil and gas industry. Whereas you drill deeper, you start getting hotter, you start basically having to design new kinds of drilling equipment.Tim LatimerExactly. And I can tell you Fervo in a lot of ways came from ideas that myself and my co-founder and other folks in the Stanford Geothermal Research Group started batting around over a decade ago. And one of the constraints we gave ourselves when we launched the company in 2017 is what is the most optimized, effective design that would produce attractive economics today with off-the-shelf oil and gas technology. Because anytime that you want to build a new tool to go down hole, you extend your development timeline by years or decades. And so what we were looking at is the performance curve of oil and gas drilling, because it did get ten times better in the last decade because of how many technological advancements there were in the oil and gas unconventional world.We were looking at what you can do off-the-shelf, and has that off-the-shelf performance from existing oil and gas tech gotten so good that you can drill wells in an effective and economic manner for geothermal? And that was what we set out with our thesis to prove.David RobertsWhich probably explains why you're the kind of first to the finish line. The starting line? I'm not sure.Tim LatimerThe finish of the start line, I guess you could say.David RobertsYeah, exactly. The end of the beginning.Tim LatimerThe end of the beginning.David RobertsLet's talk then about what Fervo does. So, as we said, traditional geothermal finds these areas where there are fractures in the rock where you can squirt water through it and the water heats up. The whole idea behind enhanced geothermal is you make your own cracks in the rock. Basically, you fracture the rock, which is the same thing fracking does. Natural gas fracking cracks the rocks apart and natural gas seeps out. In your case, you just want to fracture the rock so you can squirt water through. So maybe walk us through kind of what the Fervo power plant looks like.Tim LatimerYeah. So the idea behind enhanced geothermal, it works roughly the same as traditional geothermal, where you have those wells, where you pump cold water down injection wells and to calibrate here we are talking about wells that are 2000, 3000 meters depth. They're seven to 10,000ft deep, or in some cases, deeper. So these are really deep wells.David RobertsYeah, you say shallow relative to the deep — but that's not all that shallow.Tim LatimerYeah, shallow relative to deep. And this is one thing I've had to learn is these depths are quite different. And if you're not in the drilling world, we can often make the mistake of just assuming everybody knows what we're talking about. So I can be quite explicit. We're talking about wells that are 10,000ft deep here, which is mind-boggling in certain senses when you think about it, but very achievable when you think about the fact that the oil and gas industry has been doing this for 150 years, and that's what they've gotten exceptionally good at.David RobertsYeah. So you have one well, the injection well that basically squirts water 10,000ft deep, cold water 10,000ft deep, then what happens to the water?Tim LatimerSo, in a traditional geothermal system, it then finds that natural flow paths between the wells heats up to near the reservoir, temperature gets produced up the production wells, and then gets captured at the surface. And that heat is then used to power a turbine and generate electricity. And because you're using the natural heat of the earth to capture that energy, and you're not combusting something like coal or natural gas, there's no emissions associated with geothermal power.David RobertsLet's pause there for a second because I want to press on that a little bit. When we say no emissions, do we mean literally no emissions? Like, just how clean is all this? Is it literally just water and steam and there's no environmental externalities at all?Tim LatimerGenerally, yes, there's obviously risk to projects that developers like us have to be very attentive to. But when we're talking about carbon emissions from modern geothermal power projects, and I'll explain that distinction in a second, we're talking about a system that is truly a zero-emission resource. And the reason I distinguish this modern geothermal is the other surface technological breakthrough that has become mature now and unlocking the resource that we're going after is the advancement of binary cycle power generation technology. So the vast majority of new geothermal that's built in the United States now is this binary cycle.So if you go back to that first power plant in Italy 100 years ago, they had steam coming out of the ground and they slapped a turbine onto that steam and they generated electricity from that. And many of the power plants built through 2000 looked kind of similar to that.David RobertsRight. The steam itself was turning the turbine.Tim LatimerYes. And in those more old, I'd call them old school, geothermal power plants that were very high temperature, the consequence of that steam powering the turbine is then as the steam would be flashed on the other side. If there were things in that geothermal brine that was deep in the earth that were produced, those would cause emissions. So in nearly all cases, we're talking about stuff that's dramatically lower carbon emissions or other emissions from coal or natural gas power plants. But in this older style design for geothermal, there would be some operational emissions just dependent on whatever's in your geologic fluid there.Now, more modern binary cycle power plants are a very different design. And so rather than using the steam from the geothermal wells to power a turbine, what you use is heat exchangers at the surface that are closed loops. So the geothermal fluid is never exposed to the atmosphere at all, and it heats up a different working fluid. That working fluid then goes through a continuous cycle to power the turbine and the power cycle for geothermal. And then the geothermal brine is reinjected back down those injection wells with no losses and no emissions so if you look at the history of geothermal, one of the enablers of recent growth and one of the enablers of the technology approach Fervo is taking is these binary cycle power plants which have multiple benefits.They allow you to do lower temperature geothermal than those traditional resources and still be cost-effective. And they also eliminate the issues related to emissions of any kind, including carbon emissions from geothermal plants. So when we're talking about modern binary cycle geothermal plants, we're talking about a very clean resource that has no operational emissions of any kind.David RobertsTruly zero. And the water, how sort of like closed loop are you on the water? Do you have water requirements? Like, do you require a constant supply of water or is it just you're just recirculating forever?Tim LatimerIt's a very minimal amount because you are really recirculating forever. You know, people that are maybe familiar with the geysers in Northern California know that it declined and has water issues and has to source water from the local counties to make up for that depletion. But that's because it's using that system that has evaporative losses at the surface. Whenever you talk about a binary cycle system, it's much different because you're injecting all the fluid that you take up, so you're not losing fluid through that system. And so in general, you're talking about reservoirs that are fairly well connected in the subsurface, no water losses at the surface.Once you go to sufficient depth anywhere in the world, the reservoirs are always what we call saturated. They're always filled with fluid. And so these geothermal systems, by and large, all we're doing is taking the fluid that's already in the geothermal reservoir and we're recirculating it over and over again. The only change that's happening is it goes down cold, picks up heat in the reservoir, releases that heat at the surface to create electricity, and then goes back again. But we're really just recirculating that same fluid flow for decades.David RobertsDo you deplete the heat at any rate? Or is the heat sort of eternally renewing? Is there such a thing as a decline in production in a geothermal well over time?Tim LatimerIt's a good question, and the short answer is yes. But it's something that is sort of manageable and can be designed for. So you think about the actual — I'm an engineer so maybe I'll go engineer for a moment — you think about your actual energy balance of what's going on. There's a fixed quantity of heat in that block of rock that you're accessing with these wells. There's also a constant flow of new heat replenishing that. So your energy balance here is basically what are you extracting? What was there to begin with and how quick is it replenishing?David RobertsRight.Tim LatimerIt turns out most geothermal systems, you could design them to only be produced at the replenishment rate with no decline period over time. But then you'd be sacrificing a lot on the power output to be doing sort of flow that's that level, and in general, the quantity of heat and we'll talk about this, I'm sure, later. But the geothermal reservoir that we're talking about, we're talking about cubic kilometers worth of reservoir, very hot rock. So that heat resource can last for many, many decades. So, in general, you do design these systems to have some temperature decline because that's a more economically optimum way to operate it, because you can get higher production results, but it's not a very significant decline.Right. In a well-managed reservoir, this will be on the order of 1% to 2% a year. And you can always recover that either by drilling more and drilling deeper, and drilling and doing makeup drilling, or just slowing down fluid flow at some point in the future and allowing that replenishment to catch up. So geothermal is considered a renewable resource because the combination of how much heat content there is plus the replenishment means that these are extraordinarily long-life assets.David RobertsGot it. And so explain how you create fractures in the rock.Tim LatimerYeah. So again, we're not the first to do this, and it's probably worth maybe reflecting a little bit on the original 1970s Fenton Hill experiments done by the Department of Energy, where there was always this concept that if you injected at sufficient rates into injection wells, even in areas that did not have all that natural permeability, that you could create fractures that could then carry the fluid from one well to the next. And so this is something that's been trialed for a very long time. But the distinction is that in those first tests that the DOE did in the 1970s and then in the subsequent let's call it 50 or so tests that have been done around the world, many here in the US some in Japan, New Zealand, you name it. Any country that's a big geothermal producer has usually run some sort of test on enhanced geothermal systems. The vast majority, actually, all of those were done in relatively simple vertical well configurations because that's all that the technology would allow for. And so, by and large, the metrics that we look at to be commercially viable are things like how much surface area are you accessing there for the equivalent of what your radiator is down there in the subsurface, and how much volume for flow can you get? And what volume of that heat through the rock are you actually able to access?And doing it through a simple vertical well and a single zone approach just turned out to not come anywhere close to the metrics we needed to see to say, yeah, this is worth drilling. The output per well you got could not cover the expensive costs of drilling.David RobertsI suspect this is a dumb question, but my brain rebels a little bit at the thought of water pressure fracturing solid rock. It just seems like rock is real solid and water is just water. So what types of pressure are we talking about here?Tim LatimerWell, I'll say a couple of things on this. First off, are you a hiker? Do you ever go hiking?David RobertsI've been hiking before.Tim LatimerYeah. So if you ever go hiking and you can sometimes look, and if you haven't looked closely at it, I encourage you to. Whenever there's, like, an exposed rock outcrop there, a lot of times you're going to see major fractures and faults just exposed in that rock outcrop. And the thing that's fascinating about geology, that's not just something that happens when that rock outcrop is exposed at the surface. You go 10,000ft down, and rock kind of looks the same way. There are these fractures and faults, and it's complex, and there are major forces down there in a way that can really just create these different shapes and fractures and faults in the subsurface either naturally or through some sort of design.So it's something that happens all the time. And I don't know, since you asked the question, I guess I'll keep going down the engineering bent, which is when you look at actually how that rock breaks, what we're actually talking about is what we call tensile failure. So you're not actually crushing the rock right. You're actually creating enough pressure that it pulls the rock apart. And it's somewhat fascinating. Rock turns out to be extraordinarily strong in compression. You can stand on it. You can build pyramids out of it —David RobertsRight.Tim LatimerIt's really strong that way. But then for a lot of rocks, you can just pull them apart with your hands because they actually have much less tensile strength, we call it.And so what ends up happening in these systems is we can pump water down, and water is an incompressible fluid, so it carries pressure really well. So what we're doing in our designs and this is what has been done in a lot of designs for a long time now in the subsurface is we are picking very specific ports where we're opening up our well to that outside geology and that geologic reservoir and that rock and applying a lot of pressure right at that specific point. And it's enough pressure that actually can initiate these fractures, because, again, rocks are relatively weak in tension, and that's what kind of allows this to work.David RobertsSo you're taking natural fractures that are already there and just widening them, or is it the case that you can literally cause a fracture in a solid piece of rock?Tim LatimerYou can cause a fracture in a solid piece of rock. And again, this is a controlled system happening thousands of feet below. And we know to great precision what the dimensions of this look like. But, yeah, it's actually creating these new fractures that go out of the injection wells and into the production wells that create a new flow pathway that didn't exist before that allows for the controlled movement of fluid between that injection well and production well.David RobertsThat is just wild to me that you can do that at all, much less at like 10,000ft down. What is the technology that allows you to see the structure of the rock 10,000ft down?Tim LatimerWell, we're doing all sorts of characterization work here. I think, again, I sort of opened the conversation here by telling you it's simple ideas that are difficult to execute. And actually, the first tool in our toolkit to actually characterize this rock is we can drill down with what's called core bits and actually hollow out a sample of rock that's 10,000ft down and pull it up and then go run a bunch of lab tests on it. So we're doing that work regularly. And that's sort of how you kind of create a baseline for this. Beyond that, we have all kinds of different tools in our toolkit.And a lot of this is stuff that, again, didn't exist ten plus years ago or wasn't cost effective. That allows us to map out what's actually happening in the subsurface. So to your point, one of the challenges why it was so hard to drive innovation in geothermal, even though, like I said, the first tests for this were 50 years ago, was because you do the project, it wouldn't work. And then you'd be sitting around with a bunch of messy data and say, well, we know it didn't work, but we don't know why because it's 10,000ft below you and it's difficult to see.So we have tools that our predecessors didn't have access to. And one of the things that we've invested heavily in and have a lot of innovations around now is fiber optic sensing. So actually, one of the things that we use in all of our projects that, again, when we did this, in a lot of cases, it was the first time this had been applied to geothermal. When we drill our wells, we actually lay fiber optic cables along the entire length of the wells. And we have a special data acquisition system where we send laser pulses down that fiber optics.And because there's impurities in all fiber optics, those laser pulses get reflected back to the surface, and we can look at the reflections there and basically map out what those reflections look like in the fiber optics.David RobertsWild.Tim LatimerUsing that data, as we change things, we can get a very clear picture of what's happening in the subsurface. So, like, if you think back to your fifth grade science class, when stuff gets hot, it expands, right? When stuff gets cool, it contracts. So if we're trying to figure out, for example, how much fluid flow is going down each of these ports that we've opened up into the reservoir, we can actually look at the real time temperature change, because along that fiber optics, if it cools off a little bit, all those impurities get a little bit closer together.And we can read that with our fiber optics and measure in real time the temperature along the entire well. And from that temperature we can figure out everything from how much flow is going where, how much of that is getting over to the other wells that we've drilled as our production and collection wells. We can also map the fluid pathways that are going in between these wells, even if it's hundreds of feet out into the rock. And this is stuff that has given us a data set that allows us to actually understand what's happening in geothermal reservoirs that goes far beyond any sort of data we've ever had access to before.David RobertsAnd so that's what we're using to measure and verify.It's super gratifying to learn that lasers are involved.Tim LatimerOf course.David RobertsThat's always good news.Tim LatimerYou can't do any great technology without lasers. So we've got our lasers.David RobertsSo the big breakthrough here is old enhanced geothermal. All these previous attempts, basically you got one vertical well. You're jamming water down it to create fractures. But you just create fractures basically in a sort of circumference around the bottom of the well, right? And the big breakthrough here is your well goes down and then across laterally and so you have water coming out of those lateral pipes at intervals, right? Like a yard sprinkler is the diagram on your website. So you're creating these fractures over a large swath of rock, basically. So you just get more fractures out of your well is the long and short of it?Tim LatimerExactly. And so you think about what I said before. It's all about drilling is expensive. How much flow, how much surface area, how much volume can you get for each well that you drill. And so in our industry nomenclature, the term we use is zones. So every time there's fluid that's leaving that well and going from one well to the next, we call that a flow zone. And just to give a bit of history, I went to my first geothermal conference in 2015 and I'd started my career as a drilling engineer in the oil and gas industry.I became passionate about climate change. I saw that there was a way to apply my skills as a drilling engineer to a carbon free energy resource that really seemed like it needed some help. And I talked to one of the leading researchers in the space and I was captivated with this idea of multiple zones. And what drilling horizontally allows you to do is put multiple zones in a well. So in our pilot project, what we've done is drilled 8000ft straight down and then we've turned perfectly horizontal, 90 degrees, and we drilled another 4000ft over. And so rather than just having one zone at the bottom of the well where we can choose to inject fluid, that gives us just so much more length to spread that fluid out.And so when I was at this conference, I was talking to this researcher, a very respected person, a career person, and he told me that enhanced geothermal systems would never work. And I said, well, of course not. You can't get the right design metrics you need if you only have one flow zone, but I think there's an opportunity to do multiple zones. And he said, oh, we've looked at that too, and it doesn't work. And I was like, well, what did you model? And he said, well, we've done some extreme cases, we've even modeled up to three zones in one well.And I looked at him confused, because if any of your listeners are familiar with how modern oil and gas drilling works, that's quite a bit different number. And I said, well, I was thinking a lot more than three. And so whenever you think about those specific targeted design flow ports that we open up and flow fluid through in these reservoirs, these zones, in our very first project that we just completed, we have 102 different flow zones.David RobertsSo does that mean the water goes down and travels through all of those on the way to the other well?Tim LatimerExactly right. Exactly right. And what's nice about this is because we have that fiber optic technology that I was talking about, we can actually verify where that fluid flow is going and show that we're getting good distribution across the entire reservoir. So the reason we've had different results and a step change in performance, and why we've made this commercially viable when past efforts have not been successful, is rather than thinking about can we go from one zone to three, we jumped straight to the answer, which is 100 plus zones. And that gives you a radically different result.David RobertsYeah, well, this brings up one of my questions, which is, is there a physical or practical limit to the length of your lateral drilling? Like, you've got 4000ft now, and that gives you 102 zones. Could you do 8000ft and 200 zones? 16,000ft and whatever? Is there a limit to the size of one of these things?Tim LatimerThere is, at some point, a limit. It doesn't become cost-effective to drill further, but we haven't come close to hitting what that looks like yet. So just to give you an example, we've just finished our first pilot project, and the intent of that was really to prove that this all worked. So we wanted to design something, even if it wasn't full scale. But every single bit, every single unknown question, every unknown technology assumption was proven out by this. But it doesn't mean we can't make it bigger, right? So to make that concrete, this system, we drilled right around 4000ft in the horizontal distance.And we also spaced these wells about 400ft apart. And so you think about the amount of power you can get out of the system then is kind of bounded by that geometry. 4000ft long, 400ft across. That's what you're flowing the fluid through. Just to give an example of this and the flow test results that we've gotten from this and this is what we're excited to announce that this worked is we've gotten nearly the equivalent of 4 megawatts of electricity out of this two well system, which is a really great number. It starts talking about the success that this can be at the utility scale because you can do many of these wells in a single field.David RobertsYou have one well going down, one well going up, and all these fracture zones in between that the water passes through. I'm assuming when you are building commercial power plants, is it just going to be a one well down, one well up type of situation or is there a limit to how many of those could you have? Multiple down wells, multiple zones, multiple up wells, all in the same area?Tim LatimerAbsolutely. And that's what makes this so scalable and that's what brings out the potential here. This was an N equals one attempt. This was a first ever. We spent an enormous amount on data acquisition. We made a lot of design choices to make sure we were maximizing the learning from this and maximizing our chances of success. The really exciting thing we've learned about this, to get back to your original question about what are the limits, our very next project that we're going to, we're going to do larger diameter wells, we're going to space them farther apart because we collected the data that shows that we can do that.And then rather than 4000ft, we're going to drill 6000ft in the horizontal direction. And so our next project, rather than getting roughly 4 megawatts of electricity from each well system, it's going to be about double that. And so that's sort of the next move.David RobertsSo just larger wells just get you more flow, right?Tim LatimerExactly. And then the other thing that's great about this, and I know your listeners also have been informed greatly about the importance of modularity and repeatability.David RobertsThat's our next thing.Tim LatimerSo here's the key for this that's very important. If I want to design now an 80 megawatt power system using this design, it doesn't mean I have to throw the book out, start over from scratch and design a completely different system. What I need to do then is take this two well system that I already know works and just do it ten times in a row. And so that's what's very exciting about this breakthrough that we're announcing today. This isn't something that like, oh, now we're going to go 100 times bigger. So we got to go back to the drawing board and redesign everything.For us, going 100 times bigger means doing exactly what we've already done, but just 100 more units of it. And so this is the whole key of the repeatability of making this work. And the next site that we're moving to is going to be a 400 megawatt project, which means drilling wells just like we just did, but just a lot more of them. And in a very tight space, we can stack these vertically on top of each other, we can put the wells close together. And so another thing that people often care about when they look at energy resources is the surface footprint.David RobertsWhat do I see if I go to Nevada? How big or small is your surface footprint?Tim LatimerWell, what's left at the surface when you're done drilling these wells is a well head that's a few feet tall and a couple of feet wide. And that's it and it's actually quite an underwhelming thing. I've taken many visitors out to our site and they expect to see something dramatic. And —David RobertsJust the hole.what you end up seeing is a piece of metal that could fit in your living room. And so that's what's left. Now, of course, we have to connect it to power plants, and the power plants look more like they're warehouse-sized buildings.Tim LatimerBut what's beautiful about the directional drilling that we're using in these projects, another thing that you couldn't do with traditional geothermals, you have to imagine the wells have to be spaced a certain distance apart. And if you're drilling vertical wells, that means if you want your wells to be 500ft apart at the bottom of the hole, they have to be 500ft apart at the surface. If you go visit a traditional geothermal site, oftentimes every new well is a different well pad and it can be spread out over a wide area. Now we're using directional drilling, we have tight control over where we drill these wells.So we can put many, many wells on the same well pad and just drill them out in different directions using directional drilling. And so geothermal already among all the energy resources, typically scores top or near the top in terms of energy output per unit of land used. And this is actually going to be significantly better than traditional geothermal because we can put many of these wells that once we're done, have a very small surface footprint altogether on the same pad.David RobertsBut do you need like, you're starting from that central well pad, that's your injection wells, and you're going out 4000, 6000ft in different directions. Do you have to own all that land that you're going under? Because you'd have to at least own a lot of land, even if you're not sort of like marking it?Tim LatimerYeah, you do not have to own the land. The Geothermal Steam Act of 1970 was passed and signed into law that created a new mineral class for geothermal lease rights. And so what our company owns is not the land itself, but we own the exclusive right to access and develop the geothermal resources for this land. So what we have is a really small surface footprint. And then the wells, as they go, know, we negotiate with landowners. Which because a lot of these resources are in the Western US, a lot of times the landowner ends up being the US federal government.David RobertsYeah, right.Tim LatimerWe negotiate and sign contracts to specifically develop the geothermal resources that are found thousands of feet below the surface.David RobertsBut if I'm on the land that that lateral well is going beneath, I'm presumably unaffected. Like you can have buildings and farms and whatever, 4000ft down presumably is not going to bother anybody.Tim LatimerAbsolutely. Some of the more interesting geothermal power plants you can visit are in urban areas. You could do like a little geothermal tour of Munich, for example, where they have all of these geothermal power plants that also power district heating systems that are plopped down right in the middle of the city of Munich. And there's examples of that all around the world. The stuff that's happening thousands of feet below our feet has no discernible impact on the surface at all.David RobertsThe big promise has been geothermal anywhere or geothermal everywhere. You're going down 10,000ft to what, 300, 400 degrees, you said?Tim LatimerYeah, it's about 10,000ft. And the temperature we target is roughly 400 degrees Fahrenheit.David RobertsSo, is it the case that if I throw a rock at a map of the United States anywhere I hit, if I go down 10,000ft, am I going to find 400 degree rock? In other words, could I build one of these theoretically anywhere?Tim LatimerNo, not anywhere. But for me, the key question is always not can we do it anywhere, but can we do it in enough places that it makes a difference? Right. And to use an oil and gas analogy, you can't drill anywhere in the world and find oil. But that doesn't mean that oil is not an important global commodity to the energy system and geothermal is not any different. The key is can you drill in places where it's economic to drill and you can access the electric grid so you can sell your power to customers. And there is an enormous amount of that in the United States.David RobertsSo that's the limit. The limit is connection to the electrical system. Like physically you could do it anywhere, you just can't port the power out.Tim LatimerYeah, well, there's wide variations in what we call geothermal gradient. So, like where we're drilling our projects, you get to 400 degrees F at 8000ft or so. There's places that are a lot cooler where you'd have to drill to 20,000ft to get to that temperature. And so the question of how much you can develop is really a cost question more than anything else. How deep can you drill and for the right bang for your buck and get the temperature you need? And so I'd say the exciting thing about the Department of Energy launching their enhanced Geothermal Earthshots Initiative recently and one of the first things that they did was review the gradient maps of temperature at depth throughout the United States and come up with a finer resolution output of how much shallow potential there is.And they used in this report and I think a really important number was 4000 meters. And the reason 4000 meters is important is that's a depth that the oil and gas industry drills today, geothermal industry drills today, and we know we can do with existing equipment. And the important thing out of this is, as they looked over this resource, traditionally there'd been a few tens of gigawatts of resource found that way, but with higher resolution mapping. The new report out from NREL on the energy Earthshots that just came out this year, which incorporated a lot of these more advanced technologies into the assumptions, identified an additional 230 gigawatts of potential just in the United States that can be accessed with technology today.And so we're talking about several hundred gigawatts of potential that's in the right temperature range, that's at that 4000 meters or shallower depth, that's ready to go, cost effective today. That can be done. So can you do it anywhere? Not yet. Let us come down the cost curve a little bit more.David RobertsIf it follows the path of oil and gas. As you scale up, things get cheaper —Tim LatimerYes.David Robertsthe technology gets better, the available resource grows.Tim LatimerYeah. So the bet we're taking, you look at this NREL estimate, if we only ever produce a few hundred gigawatts of power in the United States, only get to the point where we're 20% to 30% of US electricity, and that's it, it's probably still worth doing. But I still think that as we get to economies of scale and come down the cost learning curve, we're going to be able to go to even deeper resources and make that work. So there's really no limit to the technical potential of what can be done here.David RobertsRight. So another thing Volts listeners are familiar with is this notion of a learning curve and this sort of famous graph. I interviewed the authors of the paper on the pod. They have this sort of famous graph about which technologies do and don't get on learning curves, and sort of like, what are the features of a technology that make it, that lend it to a learning curve. And the sort of long and short of it was modularity, repeatability, that kind of thing. You're doing the same thing over and over again. And then sort of out on the edge you have these technologies where every new project is bespoke, where you have to sort of do custom engineering for each project.In that paper, geothermal, by which I think they're referring to traditional geothermal, they have out there on the no learning curve side of this for that reason, because every new geothermal project required specialized engineering and its own specialized well drilling and etc., geothermal has not demonstrated much of a learning curve. And so your whole thesis here, starting Fervo, was to fix that, to figure out how to get geothermal on a learning curve. So talk about that a little bit what that looks like and what you need to do to make that happen.Tim LatimerYeah, that's exactly right. And this is one of my favorite papers, too. We share this paper internally for onboarding when people join Fervo because we want people to know, what is it you're doing? And the premise of this paper, and I thought it was so well articulated, is that if you want to create an energy technology revolution that actually scales to global scale, it has to be simple and it has to be repeatable. And they used multiple great examples in the paper. You look at their type one, standardized simple resources are solar PV modules and LEDs.And those are sort of self explanatory.David RobertsEveryone's the same. Every sort of mount is the same. Every field almost is the same. You're just doing the same thing over and over again.Tim LatimerExactly. And if you want to have global impact, you have to figure out how to make that happen. And so what's interesting about this is that I think a lot of things are somewhat short sighted, like how could we make this next unit cheaper? Which of course is important. But if you're doing a bunch of complexity and customization to do that, you're never going to scale the resources. So let me use the oil and gas analogy again. A conventional oil and gas basin, you drill into it, it has huge flow rates, lots of hydrocarbons there, and just pumps out gushers.And it's a simple well. It's vertical. And that's what they were drilling 100 years ago. But the challenge with that is that every geologic trap looks different. Sometimes you find a good resource and sometimes you don't. Oil and gas used to have dry holes. And so you drill one area, you get a gusher, you drill the next. It doesn't work. So you got to stop. You got to retool. You got to remap, try again. You shut down, your crews go away, you lose all the learnings. The next well looks radically different than the one you did before, and it doesn't reduce cost.And you think about a lot of the people who dismissed the shale revolution when it first started out. They had this thought, like, "Well, if this project isn't economic, drilling vertical wells, how is drilling to the same depth and then drilling horizontally for a really long way going to be economic?" Right. You're just adding to it. But what people missed was that it changed oil and gas exploration and drilling from a customized complex problem to one that was standardized. And so in oil and gas, because they can create their own permeability, they can target basically what's called the source rock.And so every well looks the same, one to the next. And the whole reason the shale technology revolution took off wasn't because those wells are cheaper. It doesn't take a drilling engineer to understand that if you drill down and sideways, that's more expensive than just drilling down, but it's because every well could look the same and you could find these huge resources. And so you start looking back ten years ago, all of a sudden these companies would report out like, "We've got 4000 wells in our inventory and every single one of them looks just like the last one that they drilled."And so it shifted oil and gas down to the bottom left. And you look at what we're doing in geothermal and it's actually the exact same pattern. Of course, if you find the next geysers or the classic Iceland resource or something that's going to be cheaper on a one-off unit basis than drilling these deeper wells with more bells and whistles. But you're always chasing something. You have dry hole risk. You drill something, you don't find it, you got to shut down, you got to retool, you can't make it modular and repeatable. So if you're able to create a well design that's robust enough that it works in any geologic setting, which is what we've done through the combination of technologies that allow us to have highly productive wells everywhere we go, we can shift geothermal down to one of those resources that is standardized.And that's the whole key. Because once one well looks just like the last one, you can start bringing it down that learning curve, which has been the most powerful force in driving global energy technology revolutions across all of the ones we've experienced in the last few years. And the key of what we're doing here is we now have a geothermal well design that does for geothermal what unconventional oil and gas did for oil and gas, which is make it standardized and repeatable. And that puts this industry on a learning curve that is not possible if you're just looking at the conventional hydrothermal resources.David RobertsAnd you think you've got that now, so you've got something that you're ready to just start cranking out copies of.Tim LatimerBasically exactly. When we started this company in 2017, we faced an enormous amount of skepticism from the traditional geothermal community and everybody else. We were told that you can't actually drill horizontal wells in geothermal reservoirs because the rock is different. You can't use fiber optics in these wells because the temperatures are too high. There was a whole list of things that we needed to prove out because in order to get on a learning curve, you have to be able to do the first unit right. And that first unit becomes the basis at which you drive cost down and you drive performance and you improve from.And so what we set out with our commercial pilot project that we've now finished, is to prove all those things that you can drill horizontally, that you can get enough surface area, that you can evenly distribute the flow across thousands of feet, even if it's 8000ft down. And what's fantastic about this is we now have all of the data to prove that works and have done it in a commercial project. And so we've now started a new learning curve for enhanced geothermal with the first project.David RobertsRight. Like the starting gun.Tim LatimerThe starting gun. And we're going to do that over and over and over again to bring more clean power onto the grid, more reliable power onto the grid. And with each iteration we're going to bring the unit cost down.David RobertsThe beginning of a new learning curve stirs the heart.Tim LatimerI think this is the right audience for it. It definitely gets me excited, but I don't find other people maybe than other volts listeners that will share the same thrill that we do at Fervo about the beginning of a new learning curve.David RobertsThis is awesome. And this is know. Here we are, an hour in. This is the significance now of what you've done. So you've put all these pieces together into a well, into a commercial sized well and they work now.Tim LatimerYes.David RobertsSo now you are ready to start basically cranking out power plants, commercial power plants, the very first enhanced geothermal working, money making power plants.Tim LatimerYes.David RobertsSo let's talk then briefly about costs. This is everybody's first question, sort of like how much does the power cost coming out of this? And this is not a straightforward question, so first let's just talk about just briefly — I think this is also something most Volts listeners will be familiar with, but it couldn't hurt to do a very brief primer on — just what is clean, firm power? Why is it valuable? How are you doing it? Why do you think it's going to be so — you're not just like power is not a commodity where it's always worth the same in all places at all times.Right. So there are timing issues, there are geographical issues, and there's this thought of the future power system which is based around it's going to be primarily based around wind and solar, which are both variable. You need something to complement that. So just say a little bit about what that means and why you think you're going to sort of fit in and profit in that niche.Tim LatimerYeah. The path to a decarbonized grid has been a multistep journey. And if you reflect back 15 years ago when the first ever RPS targets were announced and corporate 100% renewable energy procurement targets were announced, there was a lot of skepticism that any renewable energy could get built. Wind was still relatively expensive, solar was very expensive. If you go back to 2000s and so the sort of this first step on the decarbonization journey was just the massive successes of getting wind and solar cheap enough that they were economically viable to deploy. And we saw in the 2010s what the impact of those coming down the learning curve were.As now, solar is this unbelievably fast growing resource all around the world. Now, depending on what model you believe of. Course, at some point the fact that those are variable energy resources and obviously solar only works when the sun is shining limits how much more can be produced. And so sort of the next pillar of decarbonizing the grid and the next energy technology revolution that we're all now quite familiar with was the massive reduction in cost of lithium-ion battery storage. And I think there was a lot of exuberance in the mid-2010s to late-2010s, that "Great. Energy solved, solar is cheap, batteries are coming, we did it."And I think in hindsight that was clearly a little bit premature. There were a couple vocal but not necessarily listened to voices out there in the 2010s waving their hands and saying, "Y'all, this is great, we're going to get a good way there. But we need at least one more thing to make this work." Because as it turns out, and you can look at some of our favorites, are the NREL LA100 study, which is wonderful. Your listeners are probably very familiar with Jesse Jenkins and the Princeton Net-Zero America work.And what we see again and again is that even with ultra-cheap solar, even with ultra-cheap lithium-ion battery storage, even with ultra-cheap wind, if that's just what you're dealing with, you do see this inflection point where costs to decarbonize go up exponentially as you get beyond the, pick your model, 60% or 80% electricity coming from carbon-free resources. So what we know is we need at least one more thing. And this is where the whole concept of clean, firm power has come about, which is solar and wind are probably going to be the majority of the electricity supply on future decarbonized grids. Batteries are going to help extend how much of the market share solar and wind can take.But we're going to need something if we really want to get that last 20% done. And I think the big change in the last few years is a few years ago, people viewed this as the purview of academics to debate about because it seemed like a problem that was 20 years in the future.David RobertsWhen you get to 80%, right?Tim LatimerYeah. And I think what we've seen here is it's not that clean the world doesn't work the way that models do. It's not like there's some magic day where you wake up and renewable energy is now 80.1% and you're like "Oh no, we need something else." It turns out some of the growing pains of getting to that system emerge far before the 80% level. So I opened up this discussion talking about how the market and the tech and the policy have to be all there together. Well, there were some major changes around 2020 in the policy- and market-world of this.The first is that because of the success in wind and solar, all of a sudden people said, "Wow, we can maybe actually do this decarbonization thing." And the most ambitious RPS target in the country renewable portfolio standard was California's 33% target in the 2010s, and Hawaii was the first to beat them to it. And Hawaii, going back five years ago, passed the first ever 100% clean energy standard. And then California, not to be outdone, passed SB100. And now we've seen dozens of states follow suit where we've upped our ambition. And so now this isn't a question of like, "Oh, we'll cross that bridge when we come to it."It's like, "Okay, we're ready for the next step. How do we get there?"David RobertsFirm just means it's there when you need it.Tim LatimerIt's there when you need it.David RobertsYou can turn it on and off at will, which you cannot do to wind and sun, obviously. And you can do that, obviously, with natural gas. Natural gas is basically what's playing that role now. It's just missing out on the clean part.Tim LatimerAnd there's an important distinction here between the term firm and the term baseload. Sometimes they're used interchangeably, but they're really not interchangeable. Firm is an attribute of the energy resource. It's there when you need it, but it doesn't necessarily have to always be there. Baseload is a way of operating the resources. Baseload is it's on all the time. Those are two different concepts. Most baseload resources are firm resources, but it's all about how you operate them. So when you look at the solution set of what keeps the lights on in those troubling hours where we don't necessarily have enough variable renewable energy solution, you're looking at a few things.Coal and natural gas are the traditional resources that have played that role, but both of them come with carbon emissions. So if your idea is to decarbonize ,your solution set then becomes nuclear in all of its various forms, whether it's conventional or small module reactor, fusion. Or you're talking about hydro, which has its own geographic limitations and challenges. Or you're talking about a breakthrough in cost for long duration energy storage that goes far beyond the four-hour lithium-ion battery storage that we're talking about today. Or we're talking about coupling CCS onto natural gas or coal plants.David RobertsYes. If you look at decarbonization models these days and dig in a little bit, there's tons of that. There's tons of natural gas with CCS attached playing that clean, firm role, which is like, I've always even before there were technological options, I've always thought, that's not going to be it. There's no way that's going to be it. And now I'm so gratified that other alternatives are coming along.Tim LatimerYeah. And I think the role we see ourselves playing on the grid is when you look at that last 20%, which I do think that most people who think deeply about grid decarbonization say that it's there. Now the arguments aren't, "Do we solve that problem or not? Or is it a now problem?" It's "Okay is it actually 20% or is it 10 if we get cheaper on storage? Or is it actually 40?" Because all of these models made really rosy assumptions about transmission build out and we need even more firm power.David RobertsOr too many nimbies.Tim LatimerOr too many nimbies, you name it.But there's a recognition that there needs to be a role on the grid for clean, firm power. And historically, geothermal has not been included in that conversation. And broadly because people didn't believe that it was a resource that could be widely deployable and they also didn't believe that it was a resource that could get on a learning curve and get cheaper. And I think that's what we have now begun to push back on, and we've now got the data to prove it out, that this is a resource that is more widely deployable than people thought, and the costs are coming down. And it's a resource that has the characteristics to get on a learning curve.So if we invest in it today, it's going to be much cheaper in the medium to long term future. And so we're excited about our results. Some of our results have already worked their way into the most recent NREL annual technology baseline, which is what a lot of people use to sort of discern what might the grid look like in the near future under different scenarios.David RobertsSo maybe the next round of models might look a little different.Tim LatimerI can tell you the current aggressive cost cases for the NREL annual technology baseline for enhanced geothermal systems are much better and much more cost-effective than anything that's come before. And that's been really a combination of us publishing our results and making sure that those get out into the public domain, but also want to recognize the Department of Energy's leadership efforts on that. Utah Forge, which is a test bed in central Utah where they're testing a lot of these techniques, broke all kinds of drilling records on the various updates for their projects. So we're coming out of this great stagnation period of geothermal where there was really no new data for like ten years.So the NREL ATB used to model geothermal costs as if drilling technology had been stagnant for 20 years, which, when you look at the oil and gas industry that's a silly assumption, but if there's no geothermal data to update it, that has to be what you assume. The beautiful thing now is between Utah forge projects, our projects, and other efforts around the industry, we've got the data now to say it's time to get way more ambitious on these cost reduction curves for geothermal.David RobertsAnd this is so, I mean, just from a personal point of view, this was like the last piece of the decarbonized electricity system, and all the sort of extant possible solutions were sort of like slightly hold your nose. I don't want to get into how people feel about small nukes or whatever, but all of them were vaguely problematic in some way or another. This is like the first clean firm solution that is free of footnotes or caveats or skeletons in the closet. This is like a bona fide renewable clean firm. So the last thing I want to touch on which gets into this so traditionally geothermal has been thought of as a baseload resource.I.e., thought of as a clean firm resource that would be run all the time and run at a steady state all the time, which is useful. Baseload power is extremely useful, especially when it's clean and there's plenty of runway there. But even more useful would be flexible clean firm power. I.e., clean firm power that can ramp up and ramp down or store energy for a while and then release it. So flexibility is huge and Volts listeners will recall my podcast with Wilson Ricks last year about evidence that these new enhanced geothermal wells could be used flexibly.So maybe just talk a little bit about what it would mean to run a well like yours flexibly, what you could do, and how close is that to being a reality?Tim LatimerAbsolutely. So a couple of comments on this: One is geothermal historically has been run in a baseload fashion because baseload power historically has had value. There's been very few hours on a traditional grid of negative priced electricity. So if you've got a resource with no marginal cost, you're going to run it. And that's still the case as we're talking right now in July 2023 that that has value and you can see evidence of that. For example, one of the big things that really boosted the market demand for geothermal was in response to the rolling blackouts that occurred in California in August of 2020, the California public utility commission issued what they'd called their "midterm reliability ruling" that required a lot of capacity that is leading to a massive build out in battery storage on the grid.But there was already this recognition in the state of California that we have to be thinking about that next step. So they carved out what they'd call "long lead time resources" and created a 1000 megawatt procurement mandate for clean firm power to help keep the lights on in California while still achieving their decarbonization goals.David RobertsIs that the first specifically clean firm requirement that you're aware of in the country?Tim LatimerIt's the first one that we're aware of and it made a huge difference in catalyzing the modern iteration of the geothermal market. And so a lot of the power purchase agreements we've signed have been in response to this forward looking mandate that California issued on this topic. And so there's a recognition that in 2023 and throughout the rest of this decade getting any kind of power, baseload or not, as long as it's firm, is going to add value to the grid and help achieve the decarbonization reliability goals of our customers. But we also wanted to sort of skate where the puck was going.The grid is always changing. There's a few negative hours a year if you're in like Oklahoma or west Texas with wind, or in California on a spring day with sun. But every single model shows that there's going to be a lot more of those in the future. And the attribute that everybody's going to value going forward is going to be flexibility and dispatchability. So while we're signing these power purchase agreements and selling round the clock 24/7 carbon free power to our customers, we've hatched an idea of working on a more flexible resource for the future as well.And so if you think about geothermal, it actually can operate flexibly with no issues. And in fact, it makes sense if you think about countries like Kenya or Iceland or the Big Island in Hawaii that get such a high percentage of their geothermal power that by definition, it has to ramp up and down because it's a huge part of the grid. And so geothermal is ramped up and down for forever. There's no technological limitation in making it happen. But the thing that we became really interested in is because we're operating in different reservoirs than traditional geothermal, and because we're able to kind of create these closed, isolated systems, we thought, "Well, what about rather than just ramping down production. What happens if we shut in production while we continue to run our injection wells and build pressure in the reservoir?David RobertsSo like, when you talk about, like, Iceland traditional geothermal well running flexibly, you just mean it can ramp down by injecting water at a lower rate?Tim LatimerRight. Or by continuing to produce the well field, but then just bypassing the power plant so that you're not producing extra electricity with that fluid flow.David RobertsRight. So there's a ceiling, a max flow rate that you can do on a sort of baseload way, or you can go down from there.Tim LatimerRight.David RobertsAnd so your innovation is don't pump less water down, just literally put a cap on the other well where things come out. So water's still going down, but it's not coming out, which means pressure is building.Tim LatimerYes. And so this is something where we found in the Princeton Research Group and Jesse Jenkins and Wilson Rick, who you had on the podcast, some like minded folks who shared our views on what was going to be very valuable for decarbonizing the grid of the future. And we applied and got first an NSF grant and then later an RPE grant to actually test this in the field. And if you remember, because we've collaborated with Princeton and Wilson for a while on this, we thought about joining Wilson on the podcast when you discussed this last year.But what I knew at the time was that rather than talking about our modeling results, if we just waited a few more months, I could come out and tell you about real results and so we wanted to hold off on it. And the great thing about this, and I would encourage folks who are interested in this topic, Wilson did a wonderful job articulating the value to the grid and how this would work on the Volts podcast last year. But what's nice now is we've actually collected the data to prove that this works. So thanks in part to the RPE funding we got during our test phase of this project, we tested for traditional industry standard time to prove that under conventional operating conditions, this was an effective and viable way of producing geothermal power.We were very excited about the positive results there, but then we took and extended an extra time to do cycles of what we call Fervo flex, which is this idea of doing in reservoir energy storage.David RobertsRight, because if you're capping the well coming out and you're still pumping water in and pressure is building, you are effectively storing energy underground.Tim LatimerExactly. And so the idea here is we have a geothermal power plant that by itself is very valuable because it could produce 24/7 carbon free electricity. But then as we get to grids that have ever increasing levels of, in our case in the western US, mostly solar built out, we could operate it in a mode where we actually continue to inject into the reservoir throughout the daytime without producing any new electricity, taking power and using that to run our pumps to build pressure in the reservoir. And then when the sun starts to set and we're dealing with these challenging evening ramp conditions where you've got to add tens of gigawatts of power —David RobertsThe neck of the duck.Tim LatimerThe neck of the duck. We can open the wells up. And that pressure that we've stored throughout the day means that we're still getting geothermal fluid flow out, but it's coming out at a faster flow rate and temperature than just our steady state conditions. And so we can be responsive to the neck of the duck in a really powerful way. And so, to be clear, this was a shorter test than sort of the industry standard test that we ran on the geothermal round-the-clock production methods that we're very confident in now. But it's great to run a model and then get out there in the field and deal with the tens of thousands of feet and all the real-world conditions and have the field production results match the model perfectly, which they did.And we have an enormous amount of optimism about how not just 24/7 carbon-free power from geothermal, but also incorporating a flexible energy storage mechanism into the output profile here is just going to further unlock potential for geothermal.David RobertsYeah, and then you have clean, firm and energy storage in the same package. A true Swiss Army knife for the modern grid.Tim LatimerExactly.David RobertsAnd so we know that's possible. That's not something you're ready to do in a commercial setting yet. Do you have any timeline on that or any idea like when that might be a reality?Tim LatimerYeah, the power purchase agreements that we're signing up with folks right now, again, the grid still needs baseload power right now, and it's an urgent crisis. In fact, I was just reviewing the Electricity Reliability Council's report for their five-year outlook on grid reliability. And I don't want to scare everybody, but it's hard to look at it and not get scared. They break it up by grid ISO and they have an okay color and then a yellow color and a red color. The yellow color is under extreme weather conditions. This grid is going to struggle to meet demand in 2027.The red color is under normal average daily operating conditions. This grid is going to struggle to meet demand in 2027. And it's a little bit scary how much yellow and red there is on that chart. So the world still needs reliable power and it needs it fast, especially if we're going to continue this decarbonization journey, which we must. And so the products we're building for the next two to three years, at least, the utility scale products we're building are going to operate that way because that's what the grid needs. But we have continued R&D scope that as we're building out these geothermal power plants, we're going to do longer and longer test cycles of the Fervo flux methodology.So that the power plants that we build by the end of the decade are all going to have that proven out and built in as a feature of the way we operate geothermal plants of the future.David RobertsSo the plants you're building, even if they don't run that way, will be ready to run that way when it's proven out.Tim LatimerYes.David RobertsThat's an interesting proposition for a buyer, I would think, sort of like, here's the price and the value you now want and need. And here's a little hidden bonus. It might someday become even more valuable.Tim LatimerThat's right. And I don't mean to draw too big of a distinction between what we've proven already versus what we're trying to prove now. The catch on this is, as you know, and probably have had many guests on the show, people who buy utility scale power don't like risk and they don't like the words "new stuff". And so we're very clear to market this is the proven thing and we can bring it to you in the next two to three years, and it has enormous value for your decarbonization goals and your reliability goals. Also. We've got a nice topper to that that's less proven, but it could be out there.And so it is interesting, as much as power buyers want that, though, it's incredible whenever you're actually building a business, how important it is to bifurcate. Here's the proven thing versus the stuff we're really excited about, but it's going to be a new feature that we're able to add as we scale and get to market.David RobertsEspecially in a very conservative market, conservative industry. I have kept you too long, but this is all super cool. So enhanced geothermal, no longer a gleam in our collective eye, is now a real thing, ready to commercially produce power. So what's next for Fervo? Is it just, I mean, do you feel let's check in on your feelings here, Tim. Do you feel like you've kind of crested a summit here and you're ready to just like "Hell, yes. Let's just start building power plants and making some money." Do you feel like you sort of completed a phase here and the next phase is going to be a little easier? Or is it just all challenges forever in this industry?Tim LatimerThere's a reason why people talk about R&D as distinct from deployment. We've crossed the chasm now where what we're doing is, it's not you know, low technology readiness level. It's not unproven. And the work and I can tell you, I've worked on this for over a decade now. We founded Fervo six years ago. I worked on it in a research capacity for years before that. So to see steam coming out of the ground because of the thing we drew up on a napkin nearly a decade ago has been just a phenomenal experience for me personally and the whole team at Fervo.We took a moment to celebrate. But then you realize that deployment isn't easier than R&D. Deployment is just a different set of challenges. So we've had a moment now where it is "How do we do this all again and again?" And that comes down to how can we standardize, how can we bring it down, the cost structure, how can we get the right interconnection position and transmission policy that supports this?David RobertsYeah, now you're getting to really old school industrial problems, right? Like, how do we make our process efficient and all that kind of stuff.Tim LatimerSo what we've done is we've built a new system that is creating electricity in a way that has been hypothesized for 50 years but never done before. But we've just done it once and doing it a second time and a third time and then 500 more times because that's what it takes to move the needle on global carbon emissions. It's not any easier, it's just different.David RobertsBut you've got contracts now. You are officially a GENCO. A power producing company no longer a mascot for geothermal research. You're a producing company now and you've got enough contracts to keep you busy.Tim LatimerThat's right. We've got power purchase agreements lined up from now through 2028. That's going to keep us drilling and drilling for some time to come. And we've got the production test results behind us now where we can say with confidence this works. So we are a developer. We're developing a new kind of energy that has been hypothesized, but not part of the grid mix to date. And we're now trying to do it as fast as we responsibly can, because that's the only way to make a difference on the grid.David RobertsSo exciting. These are exciting times. Well, thank you so much for coming on. Congratulations for working on something for ten years and then having it work out. That's not everybody's story. So it's really amazing what you've done. And congratulations.Tim LatimerThank you.David RobertsThank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at Volts.wtf. Yes, that's Volts.wtf so that I can continue doing this work. Thank you so much. And I'll see you next time. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.volts.wtf/subscribe

In this episode, I have a conversation (IRL!) with longtime energy analyst Ramez Naam about a wide range of nerdy but fascinating topics.(PDF transcript)(Active transcript)Text transcript:David RobertsAs I previewed a few weeks back, on Wednesday, June 28, Canary Media held a live event in the downtown Seattle home space of beloved local independent radio station KEXP. It’s a gorgeous space, with a coffee shop and a small vinyl store, well worth a visit if you make it up this way.In addition to a lively panel about the IRA and plenty of mixing and mingling with a fascinating, diverse crowd of energy nerds, the event featured a conversation between me and energy analyst/guru Ramez Naam.We had a wide-ranging discussion covering everything from hydrogen to space-based solar power to geoengineering. Then we opened it up to Q&A and got a bunch of geeky questions about grid-enhancing technologies and performance-based ratemaking. It was so fun!As promised, it was recorded for all you wonderful Volts subscribers. Enjoy. David RobertsI just wanted to say before we started, I should have thought in advance how to say this delicately. A lot of us have been to a lot of energy events, a lot of us old hands, and especially in the early years, we got very accustomed to seeing seas of gray hair at said events. And so it's just such a thrill that things have come as far as they have and this room is full of exciting young people doing cool stuff. Makes me feel old, but it's a small price to pay.Ramez NaamAre you saying that we're old now?David RobertsYes, I'm afraid, yeah, if you do the math. Also, this is being recorded for my podcast. This will be an episode of Volts. So maybe everybody in the room say hi to Volts listeners at home. You could have been here, but you were too lazy. I'm joined today by Ramez Naam, who is a longtime energy guru I guess would be the word, forecaster, VC guy, now author of books on climate change and Sci-Fi books and other books, speaker, et cetera, et cetera. Somebody I have been looking to for wisdom since I started this back in the dark ages.So I'm excited to talk just about sort of where things are now that we've been in this game for 20 years and how things have changed and sort of what's next? So the way Mez came to my attention, and I think a lot of people's attention in this world, was a 2011 blog post in which Mez said, here's the rate at which solar is getting cheaper. I'm going to make the bold prediction that it is going to continue doing that, which you'd think wouldn't be that revolutionary of a thing to do. But anybody who knows energy forecasts knows that as long as there has been solar, there have been people forecasting that it's going to stop getting cheaper, that it's going to level out, it's going to plateau.If you look at the forecast, it's just plateau, plateau, plateau. And the reality is just down, down. And Mez just said, yeah, it's going to go down. And if you just project ahead on existing learning curves, you get what looked like ludicrously optimistic projections, which you then updated in 2015 and then updated again in 2020, and both times found that despite having been decried for ludicrous optimism, prices had in fact fallen farther than your forecast. And you did a similar post on batteries, more or less, with the same structure. So I guess the way since, I think we agree that solar, wind and batteries are going to be the core of the electrify everything century, I guess my first question is just do you think solar is going to keep doing that?Ramez NaamYeah. Well, so first, David, it's awesome to be here. We've been together for twelve years now and we met basically on Twitter, arguing with this stuff back then. So, yeah, in 2011 I wrote a piece for Scientific American, a blog post, and at the time, the IEA International Energy Agency had a forecast for solar costs, said the cost of solar would drop by about half from 2010 to 2050. And my forecast was very naive. I'm not that smart. I was very lucky. I came from tech, where we have Moore's Law, and so I just applied the very same sort of very dumb learning model to solar.And because I didn't know enough about energy to know how I was going to be wrong, it worked, more or less. So my forecast was the cost of solar would drop about a factor of ten to 2050, and it actually dropped twice as fast as I thought it would. And again, there were various things wrong in that model and I've updated them since and found where the errors are, I think. Will it keep getting cheap? The future is uncertain, but the odds are yes. So my personal forecast is the cost of solar will drop by another factor of four by the time solar is about a third of all electricity generation on Earth, something like that.Now, could it be twice as fast? Maybe that's pushing it. Could it be half that rate? Yeah, but it's already the point, so I think it is clean electricity, especially solar, and now batteries have gone through, they're entering their third phase. The first phase was all of history from the 1970s to 2010, 2015, they were in their first phase. That was totally uncompetitive, totally policy dependent. Then with a second phase where new electricity from solar to wind became cheaper in some parts of the world than building new power from gas and coal, at least during the hours of the sun shone, or that the wind did, and that's their second phase cost competitive, and now they're into their third phase.We've seen this like next era, started saying this in 2018, 2019, they hit this phase where the cost just on a pure kilowatt hour basis of, let's assume new solar, new wind would be cheaper than the operational cost of an already built coal or gas power plant. And that's happening. That happened in Indiana, it happened in Texas. Again, it doesn't deal with intermittency and what you do when the sun goes down and so on. But it's on a bulk electricity basis and there's every reason to believe this will continue. Now, solar is the fastest of these technologies.Batteries are nearly the same pace. Wind is like half the pace. And wind has various problems, doesn't scale as fast. Hydrogen electrolyzers are going to look like batteries. I think. Batteries and EVs, EVs are still in their first phase. They're still more expensive than gasoline cars, but they are plunging in price and growing in scale at twice the pace of solar. So I do think there's lots of reasons, not in every single clean tech, but in those and the ones we make in factories, mass produce in high volumes, simple single part items, if you can, that those will have a very, very rapid learning rate for decades to come.David RobertsGood stuff. So, one of the big questions about the electrify everything model is wind and solar variable. Even with batteries, the batteries we have today, you can get two, four, maybe six, eight hours out of lithium-ion batteries, but you still have variability to deal with. And so, there's this idea that sort of you're going to get to, depending on who you ask, 60, 70, 80, 90%, and you're going to have to fill in the remainder with something else. And it seems to me whether that's 60% or 90% depends a lot on just how cheap solar and wind get.So, how far do you think electrify everything is going to go? Do you think these learning curves are going to be so far and so fast that we're going to end up needing less of that supplemental stuff than is currently forecast?Ramez NaamYeah, it varies on a variety of things. It varies on geography. So, for instance, Europe is harder to power with renewables than the US. The US has more sunshine and solar gets cheap the fastest. Europe or Japan or Taiwan or South Korea are these places that have winter peaking systems and don't have a lot of sun. So, they're more dependent on wind. It doesn't get cheap as fast. It also matters how big the grid is. Like if we built a Chinese scale grid in the US, you could have solar going from New Mexico to New York. You could have wind from the great plains going out to the coast.But if we don't get transmission built, and right now we're sucking at building transmission in the US, then powering New York in winter is actually really hard. So, those are like big variables. And in general, I have my opinions on what I think is going to get cheap the fastest. But I'm in general a believer in let's have more tools in the toolkit than we think we need because some of them are not going to pan out in certain areas. So, let's invest in all of it. Let's invest in small modular reactor, nuclear, nuclear fusion, transmission grids, ultra long duration energy storage, power to hydrogen.Let's do all of it and be in a certain way of more tools than we need rather than fewer.David RobertsAll right, you're doing all the above cop-outs. I'm going to push you on this. You have solar wind and battery, you have your variable core, and then you have your supplements to even out the power, smooth out the power. Right now, what's going to occupy that role, that supplemental role is up in the air, could be a lot more storage. It could be, as you say, a lot more transmission. It could be some sort of clean, firm power like geothermal or small nukes. It could be small natural gas plants with CCS, which is what you see in the models.In the big models, they have truckloads of natural gas with CCS all playing the same basic role, which is evening out the variability of renewable energy. So, I want to know, yes, we want to invest in everything. Yes, we want to pursue everything, yes, we want to keep our options open. But in your opinion, what is the mix that's going to play that role?Ramez NaamThe most underrated of those technologies is ultra long distance, like coast to coast, continent scale transmission. It's probably the one that has the best upside and the most certainty that we can do it. But it's blocked not by economics, not by technology, but by permitting, fundamentally. And we're not doing a lot on there, I think clean firm, whether you call it nuclear vision, SMR vision, fusion, geothermal everywhere, ultra deep geothermal can get power. Any place on the Earth has a big role to play. Ultra long duration storage is a wild card. Like twelve-hour storage, I'm convinced, is like that's going to be solved.But in Europe or on the US east coast, you need weeks or months of storage. And we don't think there's a few technologies that might do that, but they're wild cards right now. I think offshore wind has a huge role to play. And floating offshore wind is one of the most underrated technologies because in deep water you basically can't do bottom out offshore wind. So around Japan or the US west coast, I think floating offshore wind is probably also a massively underrated technology. And then my very favorite total wild card in these that nobody believes in really, but me, is space-based solar.David RobertsI knew it.Ramez NaamAnd that one, my friend Greg Rainey has been talking to me about space-based solar for a decade and I'd be like "No no no, Greg, 20% of the Earth's land area is desert, space launch costs so much why would we ever do this?" But in space, there's no clouds. You can just have it. You can get 24/7 power. You can beam it to Earth as microwaves that penetrate clouds and rain. And some models show it getting in at like two or three cents a kilowatt hour. Based on things like how cheap Starship is going to make launch cost, we think.Right. And isn't space — it's getting cheaper, right? Getting up to space rapidly getting cheaper?Space launch is getting cheaper faster than solar. Only two things in history have gotten cheaper faster than solar to date, which are computing and gene sequencing, or gene printing. But right now, we're in a phase where the cost of space launch is actually dropping faster than the cost of solar. And so, that, and then you have this other advantage: if you beam power back to Earth with microwaves — there's a variety of challenges with it, let me tell you. There are a lot of challenges — but if you beam it down to the same intensity as sunlight, rectennas are like three or four times as efficient, so you get four times the power for the same land area, and it works in winter.So that's my personal wild card. There's like six startups in the whole world doing it.David RobertsHas there been solar power transmitted to Earth from space, like, as it actually happens?Ramez NaamNo. And there's various problems with it. So we've had the first experiments of transmitting — we have lots of solar in space for satellites — and we have the first experiments happening for transmitting solar from one satellite to another. But the big problem so some startups are using lasers. Lasers are BS, because lasers don't penetrate clouds and rain. So why would you do it? Doesn't matter, but one of them just raised a bunch of money. Whatever. The way to actually do it is microwaves. But the problem with microwaves is, if you want to hit a target on Earth, you need these kilometer square arrays in space, and no one's ever built anything of that size in space.So if you want Sci-Fi that's totally Sci-Fi.David RobertsAnd do you fry the birds? Do you fry the birds?Ramez NaamYou can transmit it, I mean, you could if you're really good.David RobertsIf you wanted to.Ramez NaamNo one can get that good. No one can get that good at beaming microwaves yet, but you could transmit it at like, one sunlight intensity, but get three or four times the energy on the ground in the same area. So getting to where you can fry birds is actually a really really hard problem. It's not the problem that we have right now.David RobertsInteresting. And this brings up my lonely wild card. Since you're talking about lonely wild cards, the one that only I seem to care about, which is wireless charging of electrical devices, which I always thought conceptually solves all kinds of problems. I can just imagine power transmitters seeded throughout your city and every electrical device having a receiver able to receive power through the air. I mean, those technologies exist. Like, you can power something at a distance now, even at a reasonably large distance. There are, like, sonar versions, laser versions, there's X-ray, weird X-ray versions. I just thought, like, cut the cord, all these charging difficulties go away.Basically, everything electrical is charging all the time. When I do my little "the future" meme, the future world we're going to have meme, like, it's all wireless charging. Do you have an eye on that? Is anything happening there? Do you think that's going to go anywhere?Ramez NaamI have a little bit of an eye on that, but it still doesn't solve all the problems because it's really hard to do super long distance again unless you build these — if you want to penetrate clouds anyway — unless you build these kilometer square transmitters. So I think for a short range, like within our room, there are potential or maybe for, like, mountaintop to mountaintop. But getting it across a continent without bouncing it in space is really hard, I think.David RobertsAnd you are in tech, really, and not really in politics. But I'm curious what your take is. I wouldn't say that IRA has taken care of the funding problem. I mean, I think we still need a lot more funding for everything, all the time, everywhere. But there's a huge accelerant now, at least in terms of money. So what do you see then, when you think about the US decarbonizing? What are the big remaining barriers that worry you?Ramez NaamIt's a really good question. I'd say, like, the IRA is just part of the puzzle. It's interesting. The IRA is understated. It's not $450,000,000,000 of federal spending a year. It's like trillions. Because the IRA is not a pool of money, it's a per unit subsidy. And forecasters always do what on unit forecast. They always underestimate it.Audience MemberRight.Ramez NaamSo the actual size of the IRA is actually much larger.David RobertsI think Goldman Sachs said 1.3 trillion, I think was its number, as opposed to the official number, which was 3.9 billion or 300 and something billion, but a lot more than the official forecast.Ramez NaamYeah. And I think the IRA also we talk about the US, but let's think about this globally, like, three big things happening in global climate policy over the last few years. China has further put its foot on the accelerator. India has done some I won't even count that. Vladimir Putin invading Ukraine. Putin is, like, now a climate hero. He's an a*****e, but he's done all this work because we thought natural gas was going to be the last fossil fuel we got off of. And Putin thought the natural gas exports to Europe, he had Europe over a barrel. But instead he's accelerated the pace, which Europe is getting off of gas, deploying more renewables, ultra long duration storage, hydrogen funding, fusion, all this stuff.So those are equally big. And the IRA is really big. What does the IRA and by the way, in the US. We talk about the IRA. We don't talk enough about state level policies. 29 states in the US have a binding RPS or CES. Right. And that started before the IRA, and it's actually potentially even more impactful. What does the IRA not solve? It doesn't solve permitting. And that's actually like the Achilles heel that we have. And we talk about permitting. There's a strain of environmentalism that is like "don't build it environmentalism", and that's going to kill us.That's the biggest political barrier we have in the US. Is that it's so dang hard to build things. And people talk about NEPA reform, whatever. NEPA is just the feds. Like, if you want to build something, it's this internested issue of multiple federal agencies and then multiple states and then county level and city level and every property owner. We just had the first interstate transmission line in the US. The biggest one, approved, like, two months ago, I think Arizona to California. I think it's an $8 billion project. Okay, we spent trillions, right? That $8 billion project took 18 years to get approval from multiple states, multiple counties, landowners, and so on.If that's the pace, we're just in a world of hurt. So what do I think the most important thing we can do in policy in the US is get out of the way and allow stuff to be built. NIMBY is like the death of the world if we don't stop it.David RobertsYeah. This is going to be an interesting tension. I think there was a great article in Heatmap about it just this week. Everybody should be reading Heatmap.Ramez NaamEric has an opinion on that.David RobertsAfter you're done with Canary. You should read Heatmap. And I not just toot my own horn, but I wrote about this back in 2012 or whatever, but this distinction between climate hawks and environmentalists is, how I put it, people who are primarily focused on decarbonization, people who are primarily coming out of the environmental movement with all its sort of associated commitments and whatnot. And I think this is going to be a huge tension, but it's also — do you worry at all, maybe you don't worry, I worry about a lot of the people who are yelling about permitting, want to cut down environmental review because they don't care about the environment and want more oil and gas and don't this is all bad faith from one large portion of this debate.Do you worry about being on the same side with a bunch of bad faith jerk offs?Ramez NaamI think the bad faith the bad faith actors, the actors that want, like, permanent reforms they can build more fossil fuels are on the losing side of history. They're betting on a technology that fundamentally is going to lose on cost. So I say let it come, like, in an open playing field. If it's easier to build pipelines and transmission lines. Clean electricity is going to win. So I'm totally happy taking that deal. Bernie Sanders disagrees. Right? Like he voted against the Schumer-Manchin permitting reform bill that you had one Republican vote for because he's so obsessed, obsessed with don't build fossil fuels.Well, guess what? Building more renewables is actually more important than not building fossil fuel. On a competitive basis, at least my bet, the clean energy just wins on cost. So like open the floodgates, let it in and clean energy is going to win is my personal viewpoint on that.David RobertsWhat do you make of this? Just came out another version of information that's come out over and over again over the years, which just shows that fossil fuels are not declining globally. They're not declining. We are adding on to the total energy load of the world that's what renewables are doing is increasing the total. But the actual amount of fossil fuels is not declining, which leads a lot of people to say building new renewables is not enough. We have to cut off supply at some point. What do you make of that argument?Ramez NaamSo, I think you have to look at leading indicators and trailing indicators, and the leading indicator is cost. What's going to win economically? The next derivative is like the pace of deployment increase, and then actual deployment and actual deployed stocks is a super trailing indicator. So, you look at this and ask, are we growing renewables fast enough now? Are they undoing fossil fuels? Well, actually, we might have passed peak fossil fuels in the power sector in 2022. All the growth we have not yet shrunk the internal combustion engine car fleet. But what was the — anybody want to guess? — like, what's the year in which sales of gasoline-powered cars peaks? Can we have a guess. 2017, 2018. It happened already. Now we want it to go down faster. We want retirements of ICE cars to be faster than deployments. But all the growth in vehicles and passenger vehicles is electric. So, have we peaked yet? No. And I think we'll have peak total fossil fuels and peak emissions sometime later in this decade towards 2030. It's not fast enough but the writing is on the wall. Like fossil fuels are primarily dead men walking. It's just a matter of how fast can we pull it off.David RobertsSo, let's talk —Ramez NaamI'm very opinionated here, but that's just what the math says.David RobertsSo, let's talk then about the hard to abate sectors then because they're the ones I wouldn't say we have electricity in hand, but we have a sightline to where we're going on electricity. We have a sightline where we're going on transportation. We have a sightline in buildings, although this crowd is full of people who will tell us all about the many complications of doing what we know how to do in buildings, but we know how to do what we need to do in buildings. But there are these legendary, difficult to decarbonize sectors. So, two questions.One is, do you think they still warrant that term? Do you think they're still difficult to decarbonize? And which of those worry you?Ramez NaamYeah, they are. And so I should say that what I've been saying is mostly related to power and ground transport. That's where we have really, really fast linear rates. But if you add up ground transport and power, you've got maybe 45% of global carbon emissions. Right. The really big ones are industrial emissions. Rahul talked about cement, my math is more like six, seven percent of emissions. Steel is another seven or eight. But like, industrial emissions are really hard and it's not clear that learning rates will be as fast as our renewables. So that is a big problem.That said, I wrote a piece for Tech Crunch in 2018 or something where I was really worried about this. And we've made more progress, faster on industrial emissions than I expected those four or five years ago. So, are we going to go fast enough? I don't know. But we're moving that needle and then the other one that's hard and big, we talk about aviation. Steel is four times as big as aviation, right? Like aviation we will solve eventually. But steel and cement are really big ones. But the other one that's really hard is agriculture, forestry and land use, cows and deforestation.And that one's not growing, really, but about a quarter of all emissions, it's bigger than industrial emissions. It rivals, electricity. And that's going to take a mix of just pure policy work to protect land and finding a way to feed the world's appetite for meat, which is just going to go up. Like, forget about reducing meat consumption, it ain't going to happen. Meat consumption is going to keep going like this and this. So we got to find ways to produce that meat or people think is meat at a way that's cost — And I'm actually not that bullish on alternate proteins either.I think it's got to be like mostly it's going to be fields like where we grow corn and soy and so on today and wheat and animal agriculture is my guess. We've got to find a way with a cost perspective to reduce that cost, reduce the emissions, reduce emissions of things like fertilizer 96% of emissions and protect land from being converted from forest or wetlands into crops or grazing land. And that one, cows and steel and cement keep me up more than electricity and cars.David RobertsSo, what is happening in steel? You say we're making more progress than you thought. What is the solution that you —Yeah, I think with steel, the most likely solution is power to hydrogen. Like a lot of the steel emissions — so for recycled steel ... use electric arc furnaces, you can power them with renewables. But for primary steel, we use coal as a reducing agent. Iron ore has oxygen on it. You got to strip the oxygen off. So we're using the coal. You can bust the coal. You get carbon monoxide. It binds with oxygen and strips it off. It's a reducing agent. So you can use hydrogen for that. And hydrogen does look like it's going to have a sharp production.Ramez NaamIt's not the only bet. There's other bets, I think, breakthrough invested in a company that does a form of electrolysis to extract pure iron that you can use to make steel from iron ore. So there are multiple technology pathways in each of these. But right now, hydrogen looks like the best bet, I'd say, for steel.David RobertsWell, let's talk about hydrogen for a second then, because this is like, as Amy said earlier, everybody, hydrogen is on everybody's tip of everybody's tongue. It's the next belle of the ball. Everyone loves it. Everyone thinks it's going to do everything, and you can technically do everything with it if you wanted to. This gets back a little to one of my original questions, which is how far electrification is going to go and how much you're going to need other stuff.Ramez NaamYeah.David RobertsHow big of a role do you see hydrogen playing in the final analysis?Ramez NaamHydrogen could be enormous. It could be that we build as much power gen, as much renewables to produce green hydrogen as we do for direct power into buildings and electric vehicles and so on. We'll see. I think there's things that hydrogen is not the solution, as we mentioned earlier, like hydrogen-powered cars and trucks. Forget about it. That's been clear for a decade. That's not going to be cost-competitive electrification.David RobertsYou saw the Toyota guy now —So out to lunch. They were so good on hybrids and they just totally missed the boat on electrification.He's out now doing sort of the falling on his sword thing, apologizing to everyone. And yeah, I mean, it's clear for anybody who doesn't know what we're talking about. Toyota's, it was one executive, I think it was like the legendary longtime head of Toyota was like, electricity ishmactricity, it's going to be hydrogen fuel cells. And just clung to that.Ramez NaamAnd that was a unique Japanese thing. Like Japan as a country has made some interesting on paper bets on hydrogen that just don't make any sense. Importing hydrogen across oceans. Hydrogen is so hard to move.David RobertsMixing hydrogen into your natural gas in your natural gas pipelines.Ramez NaamYeah, that might work for just distribution of the hydrogen pipeline. It is the only cheap way we know to move hydrogen today. Or using the hydrogen to make steel, for instance that you then ship round the world. But hydrogen for building heat doesn't make any sense. Hydrogen for cars doesn't make any sense. But hydrogen makes a ton of sense for steel making, maybe for high-temperature industrial heat. Hydrogen makes a ton of sense as an ingredient to make electrofuels. You can put it in existing ships and planes, whether that's ammonia or a drop-in kerosene, we'll probably never make hydrogen-powered planes.They don't make any sense. But making a drop-in fuel from hydrogen that you can burn in existing Boeings and Airbuses does potentially make sense. And hydrogen for green fertilizer, fertilizer is already like, I don't know, a $70, $80 billion market for hydrogen goes into methane-based hydrogen for fertilizer on the world today. So that's already like an enormous market that once hydrogen gets cheap enough, it has various access to.Yeah, everybody should listen to the pod I just released this morning I think. I'm not sure when this will come out, so this won't mean anything to listeners, but my last pod, a guy whose business model is off-grid renewables, feeding directly into electrolyzers, making green hydrogen, which then go directly into methanol. They're starting with methanol for ships. None of it's connected to the grid, no pipelines coming in or out. The only thing that comes out of the whole thing is trucks full of methanol. It's really interesting —It makes a ton of sense. It's way easier to move hydrogen as a product that's not hydrogen than it's hydrogen itself.David RobertsRight. That was his calculation. His calculation was it's really difficult to move hydrogen and it's really difficult these days to move electricity. So let's move the methanol. Let's make methanol and move it.Ramez NaamI will say that the policy details about hydrogen were mentioned in the earlier panel and there's a big policy fight right now of what gets counted as clean electricity for hydrogen. And there's every chance we're going to screw it up. And that the IRA is going to be interpreted by the treasury that actually controls who gets the tax credit to just let you buy grid electricity and unbundle directs, which are kind of BS, as a way to call your hydrogen green. And if that's the case, it's going to set us back for a while and we'll see how the treasury rules. But it's not looking that pretty.David RobertsAlthough, it's worth saying that it says not to get into this whole thing, but it says in the statute that the hydrogen subsidies must reduce emissions. So if they do it that way, it won't reduce emissions. So I don't see how they get around that very plain statutory language, although I'm sure if they tried hard enough —Ramez NaamI'd love to be wrong. I hope that you're right.David RobertsAnd another big battle going on around hydrogen that's maybe just worth calling out is natural gas. Companies that are dying, looking at obsolescence, flailing about for some reason to stay alive, are now talking about mixing hydrogen in with natural gas to lower the greenhouse gas intensity of the natural gas, which is just somebody compared it to pouring champagne in your municipal water supply or something like that. Just the most ludicrous use of hydrogen possible. But there's a lot of money, a lot of money behind that one. Now so a lot of opportunities for shenanigans around hydrogen.I want to ask a bigger theoretical question, because this is one of my favorite things to talk about and I'm never sure how seriously I take it, I'm never sure how serious I am about it. But when you look forward at the solar cost curve, it was ludicrously optimistic back in 2011. If you just do the same thing today, once again, like ten years out, it's just ludicrously cheap. It's just cheap beyond anything anybody knows how to process today. Wind, too, and batteries too, but mainly solar. You had a great chart about batteries, which just made the point that as they get cheaper, you find more uses for them and as you find more uses for them, they build more and they scale up and they get cheaper, et cetera, et cetera, et cetera.Same for solar. Like as it gets cheaper and cheaper and cheaper and cheaper, it's just going to be possible to put it everywhere, on everything, all the time. And so you can see in the distant future, but our lifetimes, I think a society in which power is ubiquitous and to coin a phrase, too cheap to meter, is that going to happen?Ramez NaamI think we'll always have a reason to pay for it. And as the cost goes down, appetite might go up. You look at other things, like the cost of lighting has dropped by a factor of 500 over the last century, and that's a combination of power getting cheaper, the way they produce lighting any cheaper, and efficiency, LEDs. So will the cost of power drop eventually? It will. I think that what you're going to see is right now the grid investment is sapping up most of the reduction in cost of renewables, and the cost differential of power across time and space is going to change.What I mean by that is today power costs do fluctuate by season and by location, but fossil fuel costs vary less. Whereas in the future you're going to find is like, how do you power stuff in winter, especially a place far away from the equator. So the power cost average of the year might be cheaper, but in January, like in the UK, in London, you get one 7th as much power from solar panels in January as you do in June or July. So that means that the cost of power from solar at least is going to be loosely high in winter.And guess what? UK energy use, or Germany's peaks in winter. So I think you might find much cheaper power in certain times and places, but not as much in northern latitudes in winter. And that's going to cause funky things in sort of our power pricing. That having been said, I think there's every reason to believe that in the long run, energy is going to be cheaper for people than it is today, certainly as a portion of income.David RobertsYeah, I guess I just wonder if you ever can imagine it becoming cheap enough and ubiquitous enough that we get to something like elevated global standards of living and fully autonomous luxury communism or whatever you call it.Ramez NaamMaybe. I mean, we're getting more elevated standards of living around the world today. People don't know this, but global inequality peaked in the 1970s and has been dropping since then. If you compare countries around the world, and not just within one country, poverty has dropped massively. So the number of people on Earth that don't have electricity access has dropped materially in the last 10 or 20 years. The number of people without access to clean water and food has dropped a lot in China and India, less so sub-Saharan Africa. So we are gradually increasing global abundance. Are we going fast enough?No, but it's happening, and I think there's every reason to believe that it will continue to happen.David RobertsSo let's talk about fast enough then, because obviously the counterweight to fully automated luxury communism is climate dystopia. Who knows how those might balance out? What fun? What fun? We'll all find out.Ramez NaamIt's good for science fiction.David RobertsYeah. So, I think it's clear though, that even with all the good news these days and all the momentum behind clean energy, and I think growing momentum, you could say it looks pretty clear that we're not going to hit our 1.5-degree target that we all agreed on in the UN. Not at least through the replacement of fossil fuels with clean energy alone. So, I think that people say that a lot and then there's a sad trombone and everybody's sad for a while and then we move on. But it seems like that's important and we should be thinking about what that means, what to do with that information, what we should do.Are there emergency pull handles, if emergency type things we should be doing when we think about avoiding 1.5 or trying to keep to 1.5 or compensating for not hitting for 1.5? So, how do you think about sort of if you think of the energy world as kind of going the right direction but not fast enough, what do you do about the rise in temperature in the meantime?Ramez NaamIt's a great question. Just like to put some numbers around that. When you and I both sort of got into this field, 2011, let's say we thought the world was headed for four, five or six degrees Celsius of warming. And that's the difference between now and the middle of the last Ice Age. That is truly the stuff of nightmares. That is like agriculture would fail in various large parts of the world. Probably not an extinction level event, but maybe the end of human society in certain ways.David RobertsYes. I never forget Kevin Anderson's quote, "Four degrees is incompatible with organized global society."Ramez NaamIt ain't good. Right. So the good news is we have very likely canceled that apocalypse. Like if you look at what's happened now, just in the last 24 months, we had a raft of papers saying the most recent one says the most likely outcome, there's climate dice, there's probability distributions. There's lots of unknowns in this. Most likely outcomes now are, I think the most recent papers had 2.1 and 2.4 degrees Celsius of warming. And so the good news is we should all celebrate that for a while, because that is a level of temperature that is actually compatible with the world overall growing richer.We've canceled — like, it's no longer going to be what's the movie where you have a new ice age come in, whatever — any of these day —David RobertsDay after tomorrow.Ramez NaamDay after tomorrow. We're probably not headed for that right now. So let's take a moment to actually be happy.David RobertsAnd that movie had an ice age literally coming, like, block by block. There are people running away from it.Ramez NaamThat'd be really bad. But the bad news is we have missed 1.5 degrees C. And I don't know how to say this anymore, clearly, because there are people that will tell you that we might hit it. The odds of that are minuscule.David RobertsYou can still torture a model to get the model to show us hitting it.Ramez NaamThe carbon budget, the remaining budget. The most recent papers, like, from last month, say that the carbon budget to have a 50-50 shot of staying below 1.5 C is about 250 gigatons. We're emitting about 50 gigatons of carbon per year. So that's five years of emissions. Or if we smoothly went from 2020's numbers to zero in ten years, by 2032, we'd have about a 50-50 chance of staying below 1.5. That ain't going to happen. Okay? Like, it is just not a thing. Now, the good news is to stay below two degrees C is about a trillion tons.That's about 40 years of emissions. So it's about a little over 20 years of emissions. If we had 40 years to reach zero, you have a 50-50 chance of two degrees C. That's a stretch. 2062. But it's not impossible.David RobertsIt's a stretch.Ramez NaamAnd 2.5 degrees C is more than 2 trillion tons. So that if you, like, smoothed out from today to net zero in 2100, you do a 50-50 chance, the models tell us of staying below 2.5 degrees C, and that is totally achievable. That's the good news. Okay, what's the bad news? So first, like, at 1.5 degrees C, the world does not end. It doesn't end at 1.6 degrees C, but every tenth of a degree matters. And right now, for instance, most recent papers say that every coral reef on Earth above 1.5 degrees C will experience bleaching events more rapidly than they can recover from.They won't all die on day one, but they'll just enter a period of permanent decline. Now, the planet's going to be fine after the last mass extinction event. It took about 4 million years to recover biodiversity in the oceans. That's nothing to the planet, but it's forever for human civilization. So our children and their children will not live in a place of such abundance. Okay, so what can you do? I've started to say that there's three things we can do on climate. Number one is build. That's what we just talked about, getting out of the way of permitting, having more policies to build stuff, so on.Number two is help nature adapt. And I'm going to say the things that are like my most provocative things. Maybe you're not going to like me after this, but I'll just call it how I see it. There is no such thing as wilderness on planet Earth anymore. We have modified the climate such that if you're if it's a forest, if it's a coral reef, if it's a wetlands, it doesn't exist in the same climactic band that that natural ecosystem evolved in. And so if you want to preserve those, we have to actively manage every so-called wild ecosystem on Earth, whether that's a rainforest or a forest in the Northwest or in Canada or in the tundra or things like coral reefs.And there's ways we can do that. But we have to get off of this naturalistic fallacy of like, we should just leave nature alone. You leave nature alone, it's going to die. Right? The only way to do this is we know there are some coral species that do better in high temperatures than acidity. Nobody wants to genetically engineer them, but you could be selectively breeding coral species for maximum survival rates in high temperature and helping these coral reefs adapt so that they can survive. So that's one, and then the next one is the even more controversial one is we've already geoengineered the planet.We just have. We've done it accidentally through carbon emissions, and we've also done it by things like when people talk about solar radiation management, this is scary kind of geoengineering. We're talking about reflecting more sunlight into space, cloud brightening, or injecting aerosols into the stratosphere to reflect a tiny bit of sunshine back into space. Nobody wants to do that. Okay, but let's be clear. We're already doing that, and we're undoing it unintentionally. Today, if you look at IPCC's numbers, all greenhouse gases account for about three watts per square meter of warming. That's human activity. The sulfur aerosols we're already emitting from ship fuels, from diesel engines, from coal plants, low altitude, they cause acid rain and other nasty stuff.That's about one watt per square meter of cooling. That's already a solar shield with huge air bars, bigger air bars than greenhouse gases. And guess what? We're undoing that. In 2000, the International Maritime Organization's new IMO regulations went in that reduced the sulfur content of ships. And that means that we're in for this bonus warming where we're undoing our solar shade and we're going to have more warming happening. You see it. You're going to see some satellites, shipping lanes having less reflection and more sunlight being captured.David RobertsYes. This is an irony that is not well understood in the public, I think, is that by cleaning up air pollution, we are pretty radically accelerating warming.Ramez NaamSo James Hansen and James is a little bit of a radical scientist, but he's got a paper out. He's really, really worried about unforeseen bonus warming as we cut these sulfur aerosols. So should we just start injecting some into the stratosphere? No. What? We ought to do some science. So, last year, before the IRA, the world spent about $1.1 trillion on climate tech. $1.4 if you ask the IEA, that's one times ten to the ninth. The total budget for all science into solar radiation management has been about $10 million. Right. Like one times ten to the seventh.Right. I think I've had a factor of three off there. Sorry, ten to the twelfth versus the seventh. That's 1/100,000th. As much we spend on just doing, like, computer modeling and small experiments. And so I'm a modest man. I don't think we should spend a lot of money on this, but let's spend a billion dollars a year. That's nothing. Americans spend $4 billion a year on shampoo, so a billion dollars is not much. It's like chump change. A billion dollars in climate gets you nothing. But let's spend like a small amount, a billion dollars a year on actually doing the science.Better computer models, more compute time, more funding for scientists, platforms that have sensors. When the next volcanic eruption happens, it sends stratospheric aerosols up. We can send LiDAR and spectrography and so on through them and see what happens. And some small controlled experiments, tiny ones, to actually see how this works. Just to know, do we have this tool in our toolbox so that we could deploy it? If the Arctic starts to warm exceptionally fast, we have uncontrolled methane release. And if we're not doing that, I think that's criminal. And that is the single biggest problem that we have in climate tech, the single biggest omission that we have in our climate plans today.David RobertsSo when I think about those things —Ramez NaamLike, no one's throwing a tomato at me yet.David RobertsEverybody's still chewing on it, when I think about these things, one of the things I've learned over the course of my career is that lots of ideas sound good if you can sort of stipulate a rational humanity to do them. But it turns out that's a large stipulation and in fact, we don't have one of those, and in fact, we screw everything up. So I'm just trying to imagine humanity as we currently know it with our current leaders and our current institutions trying to manage every global ecosystem, and my mind turns to various horrors.Ramez NaamAnd it could be horrific. But let's bear in mind, we're just doing it now on accident. So we have this status quo bias of like, oh, as long as it's accidental, it's fine for us to play God. But you know, like, God forbid that we start like, doing it with a plan. And some of these things like solar radiation management are so cheap that Bill Gates could afford to just do it on his own. He's not going to. But if we don't do the science, then somebody's going to do it without having data on what the effects are. So I think that's more irresponsible than actually understanding it.David RobertsYeah, I think it's in the book The Deluge, which maybe some of you guys have read. I did a podcast on it a while back. I don't know if you've read it. You really should. You would love it. It's an effort to sort of play out climate politics for the next 40 years. And one of the chapters of that book is about India rogue solar managing and leading to causing a war, basically like an invasion.Ramez NaamAnd Kim Stanley Robinson had a plot like that in Ministries of the Future as well. It's something that any small country basically could afford to do.David RobertsYeah. Crazy. Okay, I quasi deliberately left about ten minutes for a spontaneous Q and A. So if anyone has questions for me, please say so.Audience MemberI have a question. So you talked about the deep stuff with we're not likely to meet the limit to 1.5 and all that. I've been thinking a lot about options to phase out fossil fuel infrastructure potentially early to get rid of locked-in emissions, which is causing a significant chunk of that problem. So this could be a range of different options from phasing out coal plants early to creative options to get people off this sort of dependence I don't really want to bring up here. But what are your thoughts on that area in particular in terms of how much it can at least make a difference towards limiting damage overall?Ramez NaamYeah, I would say overall I'm less of a cut-off supply person because so often if you cut off supply in one place, somebody else produces it and routes around it. Right. If you like, Shell sold all of their oil fields in the Permian. Guess what? They sold them to Exxon or somebody who just produces the oil anyway. So like divestment is also it's a hard sell to me that having been said that we should try many things. And so some of those successful policies have been policies that worked with local communities. The Sierra Club's Beyond Coal campaign funded by Mike Bloomberg worked with local communities to shut down coal plants early and to find jobs for the people that worked in coal mines working these coal plants, replace them off with natural gas, with renewables and so on. Sometimes —Wildly successful before it was cool, by the way. Shout out to Sierra Club.Yeah. And so I think you can have creative stuff. But as Jessyn was saying in the previous panel, you got to have buy-in from the community, from other stakeholders, to get that sort of model built, I think.David RobertsWhat would you say if I can inject here, what would you say to someone who said, if you are willing to contemplate something as extreme as humans managing all global ecosystems and managing the atmosphere with SRM, it seems like the chances of those screwing up are high, and it would be worth a lot to avoid them. What do you think about MOM's argument for ecoterrorism?Ramez NaamI don't advocate violence. As a science fiction writer ecoterrorism is very exciting because you can, like, you can write a plot, a thriller plot around — it's hard to write a thriller plot around climate in general. But in reality, would it work or would it have negative effects or blowback? I really don't know. But one of the reasons to do the research on things like SRM is to reduce the need for someone to engage in ecoterrorism. And so I think that's worth thinking about.Audience MemberHi. Big fan of the podcast. I absolutely adore it. My name is Ben Riley. We've gone beyond just simply the energy transition. My question is related to that, which is the role of negative emissions and how do you feel about various forms and what role it has to play?Ramez NaamYeah, so again, I'm somebody who's a believer in let's build more tools than we think we might need. And I'm a big tent person. Like, I'm dubious on nuclear fission, but I'm like more power to it. Let's invest in it. Let's change the NRC, make it easier to build stuff and so on. That's more or less how I feel about CDR, too.So, personally, my bet is permanent carbon removal is just too expensive. To cut temperatures by about a tenth of a degree C, you've got to cut carbon emissions by 100 billion to 200 billion tons. And so if you're talking about $100 a ton carbon removal, you're talking about 10 or $20 trillion. And that's real money, and that's how you get to $100 a ton. So personally, I'm really excited that Stripe, Microsoft, and Google are committing billions of dollars to carbon removal advanced purchases. They've learned a lot from learning rates and so on. It's modeling up that off what we learned in solar, and I think more power to them.But I'm not making any bets in that sector because I just don't see, like, if you tell me that carbon removal could get down to, like, $10 a ton or $5 a ton, I think it might be a big part of the solution. But at $100 a ton or $50 a ton, I just don't think the world I think there will be multibillion-dollar markets. You'll have some people make a lot of money. Some venture capitalists will do well, some ... will do well, and it won't move the needle is my personal bet, but again, I'd love to be wrong.Audience MemberSo David and Mez, you've both expressed sentiment that we have sightlines to decarbonizing most essentially of the economy and that clean energy is cheap and it's getting cheaper and that it's going to outcompete fossil fuels in a lot of applications. But I'm curious about the possibility and what you see as the potential that we get most of the way there and then we get to the really hard parts and things kind of stall out in terms of the political will to accept the high cost of getting to a completely decarbonized future, which we need to get to to actually halt global warming. Because although clean energy is cheaper, probably for a lot of applications, it's questionable that an economy that uses exclusively clean energy is going to be cheaper than one that uses clean energy and also has the option to use fossil fuels where they're most cost-effective. So curious for your thoughts on that.Ramez NaamYou want to take that one?David RobertsYeah. I mean, it's an interesting conceptual question about how you think about the transition. Whether it is like a boulder rolling down a hill, gaining momentum and momentum, momentum such that it will just crush and go right through the last bits, or whether you're eating the fruit off the tree that's lowest and you have to climb higher and higher and it gets harder and harder and harder and harder. And I think there's a little bit of both. But I'm so curious what you have to think.Ramez NaamI think of it as we're on an S curve, right? And it's like renewables, let's say, just in power solar and wind are 13% of global power generation, they are entering the decade where they might have the fastest growth and we're going to see the growth accelerate. But at some point, they do hit these headwinds of as Jessyn has done, and you've done these like they cannibalize themselves. They suppress prices at the hours that they're operating with the problem of winter. And so you —Get to more difficult land.You get to more difficult land for sure. And so you do hit this challenge, whether it's at 60%, 70%, 80%, where it gets harder and harder. And so I do think most like models of decarbonization assume a curve that looks like this. We have the fastest reductions early and then it kind of goes like this. And I think that we're going to see something that's much more of like an S curve where it's going to take a while to hit the peak and then renewable like, emissions are going to drop from some sectors really fast. And then the last bit is going to be really hard and really slow.But while everyone's obsessed with hitting net zero, if we get to 10 billion tons a year by 2100, that's actually still compatible with canceling the apocalypse. So I worry more — this is to steal a memorable movie quote, I worry more about the next 20, 30, 40 50% than I do at the last 20% right now — although I do think we should invest in more technologies to try to have a head start on those sectors now than we need.David RobertsAnd just one other consideration to throw in there is that as the carbon lobby shrinks, policies to reduce carbon become easier to pass. So when you're targeting a smaller part of the economy, it's a little politically easier, I think, than it was when you're saying, everybody reduce everything.Audience MemberHi. So, under the umbrella of hot trends and climate tech, I'm curious about grid enhancing technologies, specifically both on the transmission and the distribution system. I'm curious if there are any things that either of you are particularly excited about and what do you think some of the limitations or challenges are to adopting those technologies and how do we overcome them. So, small question.David RobertsYeah, you want to go first?Ramez NaamGo ahead, sure. Yeah, I think it's fascinating. I think like the grid, I talked about permitting and long-range transmission, but interconnection queues and distribution are a more pressing problem. They're a problem for like, hooking up your renewables to the grid at all. They're a problem for things like Jessyn was talking about. How do you build an EV truck charging depot? If you want a system of high-speed chargers for electric semis, that's like a tens of megawatts power drop, that's like a small town. So building that is really hard. And the grid is not used to working fast.I'm a big fan of software control of power generation and consumption. There's lots of startups that are doing interesting things to make more efficient use of the grid. Storage at the grid edge, I think, can do a lot to make better use of the current system. And then you have some other crazy ideas. For instance, a friend of mine did her dissertation on taking high voltage AC transmission corridors — assume that you can't build more transmissions of permitting, but upgrading the power electronics on current corridors from AC to DC and you could get — this is Liza Growing — you could get triple or quadruple the power on this existing rights of way. So I think there's solutions like that that are probably still under invested in or there's Veir, it's like a superconducting tape you apply to — I don't know if that'll ever work, but that one would be cool. You can apply it to current transmission lines and again, massively increase the power on them. So I think there's room for a lot of creative solutions.David RobertsYeah, I don't think people get that on a lot of these big long-distance transmission lines. A lot of our big transmission lines, they run at like 30% capacity, like 30, 40% capacity. Just because we need a big buffer, because we don't know in real-time what's happening on that line. This gets to a larger theme, which I just was mentioning on a podcast earlier, which is I don't think people appreciate, especially people who grew up around the Internet and people who view information as sort of like modular and transmissible everywhere and everything. People think of the grid that same way, but I think people would be shocked to hear how much of the grid operates by people turning knobs and making phone calls to other people like, "Hey, you should probably use less power over there."It's weirdly primitive how we run our grid now. And that's not a technology problem. There's all kinds of grid-enhancing technology. There's all kinds of ways to get a lot more out of the existing grid and just generally moving towards digitizing the grid. To me, the barriers there are almost 100% sociopolitical, it's almost 100% utilities, which is you pull any string in this mess long enough and you end up back in utilities. It's utilities not being on top of things. So I think that's on the one hand, that's very frustrating, but on the other hand, I think that could change quickly if we ever get utilities in hand.Ramez NaamFix their incentive model.David RobertsYes, I know it changed. We don't have to get into the whole utility mess. But yeah, that's 100% about just procedures and regulations and things like that more than technology.Ramez NaamI think that was the execution of the death sentence.David RobertsI think we're done.Ramez NaamThank you all.David RobertsOh yes, okay, so we're done everybody. Thank you for coming.David RobertsThanks.Ramez NaamGive money to Canary.David RobertsThank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversation like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf so that I can continue doing this work. Thank you so much and I'll see you next time. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.volts.wtf/subscribe

In this episode, Kelly Mitchell of journalistic watchdog group Documented discusses Republicans’ furious pushback against ESG funds due to their ostensible greenness, and the ridiculousness of said vehemence since ESG ratings are actually a poor reflection of companies’ true environmental impact.(PDF transcript)(Active transcript)Text transcript:David RobertsFor the last few years, the fastest growing segment of the global financial services industry has been ESG (environmental, social, and governance) funds.Here’s how it works: one of several ratings firms uses its own proprietary formula to rate how well a company is responding to environmental, social, and governance risks. An environmental risk might be: will the county where you’re locating your data centers have sufficient water supply in coming years? A governance risk might be: have you filed all the proper disclosures?Fund managers like BlackRock then gather highly rated companies into ESG funds, which are sold to investors as socially responsible. Hundreds of billions of dollars flow into ESG funds every year.Note that there’s a bit of a shell game at the heart of the enterprise. What customers and investors generally think is that a company gets high ESG ratings because it goes above and beyond in those areas, that it is trying to “do well by doing good.” But in reality, high ESG ratings simply mean that a company is responding to material risks — maximizing its profits, as public companies are bound by law to do. So Tesla gets no ESG credit for accelerating the electric vehicle market, but it can pull a low ESG rating (and fall out of ESG funds) over vulnerability to lawsuits over working conditions. (This is why Elon calls ESG “the devil incarnate.”) McDonald’s loses no ESG points for the enormous carbon impact of its supply chain, but it gains points for reducing plastic in its packaging, because regulations against plastic packaging are imminent in Europe. So investors get to feel like do-gooders and big companies are rewarded for carrying out their legal obligation to assess risks to their business. There’s not much social benefit to the whole thing, but everyone feels good and green and happy.Except now there’s a problem: Republicans bought it. The whole sales pitch — they believe it. They believe that companies in ESG funds are going out of their way to do social and environmental good … and they’re furious about it. Over the past year or two, an enormous, billionaire-funded backlash against ESG has consumed the GOP, leading to multiple congressional hearings, hundreds of proposed state bills, and red-state treasurers vowing never to do business with woke lefty activist funds like [checks notes] BlackRock. It is stupid almost beyond reckoning. And I’m just brushing the surface. To dig into the deep layers of dumb and where it all might go, I called Kelly Mitchell. She’s a senior analyst at the journalistic watchdog group Documented, which uncovered emails and other communications between the architects of the anti-ESG campaign that led to a New York Times exposé.All right then, let's do this. With us, we have Kelly Mitchell from Documented. Kelly, welcome. Thank you so much for coming to Volts.Kelly MitchellThank you, David.David RobertsKelly, when I first decided to do this episode, I started looking into it, thinking, you know what, this all seems kind of stupid. But what happened is as I dug in and explored it into the nooks and crannies, some of the background, some of the work you've done, some of the work Documented has done, what I discovered is that it is actually so much stupider than I ever could have imagined. The depth of stupidity here is remarkable. So I just want to thank you. I feel like you should get hazard pay for what you do. And I just want to thank you for immersing yourself in this. It must be wearying.Kelly MitchellIt is. It's like the Thunderdome of stupidity. But I'm glad we can talk about it.David RobertsYes, let's talk about the levels. Okay, so let's bracket for the moment what ESG actually is in reality. We'll get to that later. Bracket for the moment the merits of the criticisms that conservatives have of ESG and let's just talk about what's happening. So I think probably normal news consumers are aware that sort of ESG, or the sort of boogeyman of ESG, has come up sort of out of nowhere and is everywhere now. So maybe just tell us a little bit about what has happened here, who's doing what and what are the bills? And tell us the phenomenon we're discussing.Kelly MitchellWell, the current iteration of this phenomenon really kicked into high gear probably in about 2021. And there's been a long history of folks who have opposed corporate social responsibility, who have opposed any restriction on investment in things like coal or natural gas. But a lot of gasoline was thrown on the fire in 2021, probably for two major reasons. So first is that Larry Fink, the CEO of BlackRock, published two back-to-back letters to his clients, to corporate CEOs, basically saying that BlackRock, the largest investment firm in the world, was now going to consider climate risk as a fundamental investment risk and wanted CEOs to do the same.And the second is that in May of 2021, an activist investor company called Engine 21 or Engine No. 1 rather, bought a small slice of ExxonMobil and used that slice to wage a battle to get new board seats on Exxon's board that would take into account climate risk and against a 100 million dollar campaign by Exxon. They succeeded. And they succeeded with the help of large institutional investors like BlackRock. And I think those two moments sort of broke a lot of people's brains. Wall Street is not supposed to be against the fossil fuel industry, it's not supposed to be against the right-wing apparatus.And it provided this galvanizing moment for a lot of dark money groups to look for ways to mobilize state agencies and state legislatures against ESG.David RobertsBrains then broken, what do they start doing?Kelly MitchellThere's two fronts that open up. So first you see a big infusion of resources by groups like the Heritage Foundation by Leonard Leo's, Consumers' Research into weaponizing state treasurers to attack, quote, unquote, woke investing or ESG. And it's a smart play because state treasurers are people that nobody pays any attention to.David RobertsWhat are they? Maybe just take a minute and tell us. Like, I know that such a thing exists, but I couldn't tell you in a million years what they do.Kelly MitchellYeah. So basically they're in charge of managing large pools of money that the state uses to pay its bills for the long time, to receive tax money, to give tax money to folks who need it. And in that role they get to decide who manages that money, how that money is invested —David RobertsPension funds and the like.Kelly MitchellExactly. And so there was this big opportunity to kind of utilize these folks to start pulling money away from asset managers that they believed were in some way boycotting fossil fuels or in other ways, looking down on disfavored industries.David RobertsBeing woke.Kelly MitchellBeing too woke, not wanting to put their money into investments that were going to lose them lots of money. The worst woke sin of all.David RobertsYeah, we'll get to that later. So then the right-wing activists get to the red state treasurers and what then? What happens?Kelly MitchellSo they start to do a number of things. They begin to organize these treasurers onto big sign-on letters to do things like block appointments to the Fed, to chastise members of the Biden administration for speaking out against oil and gas. But then they start to take more direct action. You see states like West Virginia and Louisiana start to send letters to financial institutions basically saying they're no longer going to do business with them. West Virginia stops doing business with JPMorgan Chase, they stop doing business with BlackRock because they believe that these companies have been unfairly targeting and blacklisting fossil fuel investments.They also transform a lot of these treasurers into big mouthpieces for the movement. You see treasurers going on Fox News, writing letters in the Wall Street Journal, and they have this kind of air of authority because they manage money. They're going out and really criticizing woke investing from that role as a state elected official.David RobertsYeah, and as I read about this, I think traditionally, based on our rapidly crumbling norms in this nation, state treasurers were quite nonpartisan. They were quite distanced from the whole politics fight. They were supposed to be sort of technocrats. But the young generation of conservatives, they're all creatures of Fox, they're all activists. And so now they're getting in those positions as well.Kelly MitchellAbsolutely. And that's basically the deal that these treasurers were offered. If you look at the State Financial Officers Foundation, it's sort of a trade association of Republican elected state treasurers and auditors. They basically said, "Look, we're contracting with communications firms. We have access to this whole web of right-wing organizations, you're a nobody state treasurer who anyone's ever heard of. But if you join this anti-ESG effort, we're going to get you on the news. We're going to boost your op-ed, we're going to provide you communications training," and suddenly people who no one would have ever heard of are becoming household names because they've dove into this culture war issue around ESG.David RobertsYes, this is, I think, for young conservatives why you get into politics in the first place, right? It's to get on Fox News. That is the, you know, the sort of middle stage where you actually do policy and affect people's lives has just kind of fallen out of it. Now they're all just like, "What can I say? This outrageous that will get me on Fox News." What about legislation?Kelly MitchellYeah, so we saw the first round of anti-ESG legislation launch in 2021. A think tank called the Texas Public Policy Foundation basically drafted a bill. It was basically governed contracts in the state. So it said that state governments, municipal governments, can't contract with organizations that boycott the fossil fuel industry. That went into effect in September 2021, and it kind of became this great natural experiment for what the impact of these bills are. And I know we might talk about it later, but —David RobertsYeah, we're going to get to that in a second.Kelly MitchellWe see this first bill come out in 2021. In 2022, we see another 16 states kind of dabble with these anti-ESG bills. But where it really took off was this year where there were about 157 bills introduced in 36 states. So a huge amount of legislation.David RobertsIs that every red state?Kelly MitchellJust about, yeah.David RobertsI think that's almost all of them.Kelly MitchellAnd plus yeah. So they absolutely flooded the legislative market with bills this year, sometimes introducing multiple bills within a single state to discover what approach might have the best chance of success.David RobertsPeople familiar with the operation of the right wing these days will not be surprised to hear that. ALEC, The American Legislative — what is it?Kelly MitchellExchange Council.David RobertsThank you. The American Legislative Exchange Council is known, I think, at this point, for having these sort of template bills where you just fill in the name of your state. They have those bills for this, right? I mean, that's how they proliferate so quickly.Kelly MitchellThat's right. And this year, there are about five different buckets of template bills, model bills that were introduced throughout the country. Some, yeah, came through ALEC, the American Legislative Exchange Council. Others came from the Heritage Foundation. Others came from the Foundation for Government Accountability. It's been a really instrumental bill on rolling back abortion access and voting rights in this country. So bills were everything from the style that the Texas bill introduced, which was restricting contracting within the state. We saw a number of bills that specifically went after pension funds, either putting restrictions on what asset managers pension funds could work with or even more insidious, introducing language — this is what we saw in Florida, for example, this year — that said that pension managers can only consider what they call pecuniary issues, sort of fiduciary, financial-return-focused issues when making decisions. And the best case scenario, the bill is effectively worthless because pension managers are already required by law to only look out for the best financial interest of the state's pensioners.David RobertsIndeed.Kelly MitchellBut what it actually did was sort of redefine what it means to hold that pecuniary interest in heart and said that if you're looking at systemic risks that violates pecuniary interests, if you look at risks with some margin, of uncertainty that violates pecuniary interests. And if you look at just a broad suite of kind of environmental or social criteria that potentially could violate your pecuniary interest. So it's basically rewriting the rules of what risks an asset manager can evaluate or not. And that's the stuff that really, I think, scared a lot of folks in the state because hamstringing investors like that could have some really big consequences down the line.David RobertsThis, I think, gets to a key feature of all this, which is that the sort of rhetoric is like you need to just be focusing on money but in reality it's saying you cannot consider certain risks.Kelly MitchellAbsolutely.David RobertsLike there are certain threats to the money that you're not allowed to listen to, which is very different, the sort of contradiction there. So this is very much something that was sort of born and germinated in big money, right-wing circles. Right. It sort of starts with these big money groups which then sort of they just push out into the states.They have this machine basically if all the big money people get worried about X, they just push it out and suddenly it's like in every state government it's on Fox all the time. But this is clearly a sort of big money originated thing, right? There's no popular outcry here.Kelly MitchellAbsolutely. This is not a grassroots movement. I mean, I think if you polled any person on the street they would have no idea what ESG even was, let alone have an opinion about it. Yeah, this has absolutely come from you have Texas Public Policy Foundation which has been a longtime recipient of Koch money, of oil and gas industry money. Leading this you have the Heritage Foundation super deep pockets and then within all of this you have groups like Consumers' Research which have been propped up by Leonard Leo, most famous for buying a Supreme Court justice or two.David RobertsBuying a couple? Yeah, he's completing a set.And what do you give a man who already owns half the Supreme Court? You get him onto some new culture war issue and you know, we know his organizations have been pouring millions of dollars specifically into this anti-ESG woke capitalism fight. So very, very deep pockets. A lot of dark money on the right launching this effort.Yeah. Even more top-down than usual, I think.Kelly MitchellAbsolutely.David RobertsAnd it's interesting, they are pretty explicitly trying to replicate what they did with CRT. The whole critical race theory thing. They realize, like, CRT means nothing to anyone, but that means it's just an empty vessel that we can fill with all sorts of bizarre, paranoid crap. They're trying to do the same thing to ESG, make it sort of another one of these kind of right-wing buzzwords that means just anything bad you can think of.Kelly MitchellYeah, absolutely. And they've been in the situation where in recent years it's sort of fallen out of favor to be an outright climate denier. But now with ESG, they found this vehicle to sort of drag climate denial kicking and screaming into the culture war.David RobertsSame thing. You can't be anti-racist in public anymore, but you can be against CRT. You can't be sort of just outright anti-climate anymore, but you can be anti-ESG.Kelly MitchellBut you can certainly believe that ESG is part of a globalist cabal that's forcing climate action on all of us.David RobertsYeah, but one thing I wanted to get clarity on before we move on is just this is something I don't think I really got a sense of reading around is are the amounts of money that red states manage material to a giant firm like BlackRock? Like I get there are sort of PR issues here and sort of like public — how things look. But just in terms of the quantity of money, is this something that's going to materially affect the financial industry?Kelly MitchellThe short answer is probably no. So in general, blue states, even though there are fewer of them, typically have much larger pools of money in their pension system than red states. And when you talk about a company like BlackRock, I mean, BlackRock has $9 trillion. That's an amount of money I don't understand. So one of the biggest pieces of action we've seen this year is that the state of Florida pulled $2 billion out of BlackRock and that was sort of the single largest withdrawal of funds that we saw from states in the last couple of years.And $2 billion is a rounding error to BlackRock. But I think to your point where the real issue has been is that it has kind of created this chilling effect where now you see Larry Fink and BlackRock not wanting to use the words ESG. And now you have this completely bizarre phenomenon that the New York Times has dubbed "green hushing," where you see insurance companies, financial actors continuing the practices they had before of evaluating climate risk, of looking into environmental considerations, but just not talking about it anymore because they're afraid of the political attention that's going to get directed their way. So, yes, on a dollar for dollar basis, BlackRock has more money under management today than it did when this campaign began, and it'll probably have even more next year.But I think folks just don't want the ire and they don't want the spotlight.David RobertsYeah, this is just a classic example of a very small group of people with extremely unrepresentative views and interests just having the raw money to make a lot of noise and just look bigger than they are. Right, you see this over and over again. They make so much noise that somebody in BlackRock is like, well, I just don't want to deal with it. You just would, like, at some point, they just run this same scam over and over again. At some point, you'd like some leader of a big institution like Larry Fink to just say, you know what?There aren't that many of these people. They don't represent anyone. Screw them. I don't care. But no one ever does. They're so easy to intimidate.Kelly MitchellAbsolutely.David RobertsThese big leaders are —Kelly MitchellIf I was in charge of $9 trillion, I think I would feel a little more confident.David RobertsLike, I own you people. I could crush you. Yeah, I don't get it. So I want to go through a couple of amusing aspects of this whole thing. There are several. One is it seems like it's mostly been a flop so far, both with the public and even with red state business communities. So maybe tell us a little bit about what we know about polling and what we know about how the actual financial institutions in these red states are taking this.Kelly MitchellIt's been a deeply unpopular effort, I think, for its attempts to copy CRT. It hasn't hit in the same way. So first off, if you poll folks about should the government be intervening to limit investment decisions based on ESG? It's a pretty unpopular thing. I mean, even among Republicans, I think about 70% of polled Republicans oppose it when they're asked about it, and polling can be what it is. But I think in this case, the proof is in the pudding in terms of how this stuff played out in the state. So 165 bills, 83 of them dead as a doornail.Some that are sort of lingering on to maybe continue into the next legislative session, a few that are pending and haven't quite had committee hearings. But overall, this hasn't been a slam dunk. And as much as I wish it was because maybe environmental advocates were showing up in these state houses, a lot of the opposition has come from the banking community, from chambers of commerce, and from pension managers in these deep red states. And they have been coming out hearing after hearing after hearing with strong language to oppose what's happening in these bills. The bankers are worried about compliance risks and costs.The Chamber of Commerce see this as a huge assault on the free market. Pension managers are worried about how this is going to reduce returns for teachers and firefighters over the next ten years. Even in the state of Wyoming, we saw the Wyoming Petroleum Association come out to oppose the bill because they even thought it went too far because some of their members have some methane emissions plans and work, and it's helped them to attract some financing and they don't want to put that at risk.David RobertsRight.Kelly MitchellWe're talking about states where Trump won by huge margins and they're coming out in force to oppose these bills.David RobertsYou're threatening the money. It's like one thing when you're like, waving bloody flags and causing parents to go yell at school boards, but you're starting to step on the money here. And that's —Kelly MitchellI mean, a lot of money. So in some of the states that had bills specifically around pension funds, like I was talking about earlier, those often came with the highest price tags. So in the state of Indiana, their pension board system said it would reduce pension incomes by over $6 billion. In the state of Kansas, they said $3.6 billion in reduced pension returns.David RobertsYou mean if these laws are passed.Kelly MitchellIf these laws are passed, yeah, because it's going to restrict who they can do business with, and it can restrict the amount of risk that they can continue to evaluate when making investment decisions.David RobertsThere was a study maybe that's what you're referring to, was it in Texas, where they sort of because Texas passed this bill and then they measured the increase in borrowing costs. It's not theoretical. It's been detected.Kelly MitchellThe effects yeah, that was the benefit of Texas going first is we got to see what the real life impact of these bills are that restrict contracting. And University of Pennsylvania Wharton School did a study on the municipal bond market in Texas before and after this bill, and they found that within the first eight months of implementation, it cost those municipal governments almost half a billion dollars.David RobertsGood grief.Kelly MitchellAnd if you're talking about small towns in Texas, like an extra million or $2 million you're paying to service a bond, I don't understand how these legislators go to these folks and say, "Oh, you're not going to build your library this year, but guess what? We really stuck it to the globalist cabal." So it's all good guys.David RobertsYes. It's amazing. It's such a punching yourself in the face phenomenon, right? That's just one of the levels of stupidity here, is like, even if the bills passed, none of the hated targets will be inconvenienced in the slightest. Like no one is going to be hurt by this that they're trying to hurt. They're literally just hurting themselves.Kelly MitchellRight. They're literally just like reducing the amount of money a firefighter can retire on, having a little less money for roads in a small town somewhere. And all just to make a political point in the culture war.David RobertsSo the business community hates it, the banking community hates it, the public hates it. The attempt to replicate CRT is not working. Another amusing aspect of this, I thought, is that if you could go back five years, ten years, and make your index fund hyper woke by taking all the oil companies and gas companies out of it, you would have performed like gangbusters these past five to ten years. Like energy stocks have been for s**t these last five to ten years.Kelly MitchellAbsolutely. I mean, oil and gas was the worst performing sector of the entire market in the 2010s. Like, you would have been better off, yeah. Just taking your money and putting in a pile and lighting half of it on a fire than investing in a lot of energy companies during that period. We saw hundreds of bankruptcies during that time. So, yes, it would have been a much sounder investment philosophy in 2010 to pull oil out of the equation.David RobertsYeah. If you had gone woke, you wouldn't be so broke.Kelly MitchellAbsolutely.David RobertsWhich is hilarious to me. Another amusing aspect: Our favorite presidential candidate, Vivek Ramaswamy.Kelly MitchellOh, yes.David RobertsPeople might sort of know him peripherally. He's one of these Republicans running for president, and he's sort of made his name by being kind of the lead anti-ESG guy, the lead critic of "woke capital," upon which he allegedly has some credibility because he's a finance guy, he's a money guy. So it turns out, I couldn't believe this, it turns out he runs a fund that he wants states to do business with. Like, he's literally a competitor in this space trying to work up this hysteria to hurt his competitors. It could not be more like it's not even hidden.Kelly MitchellYeah. To his credit, he's the most transparent grifter in this entire fight. His whole story is amazing. Right. So he founds this pharma company, and then after BLM takes off, he has to quit because it's so hard to, I don't know, say true things. After BLM —David RobertsHe's one of these guys who cancels themselves because he just knew he was going to get canceled.Kelly MitchellRight. He pre-canceled himself to go become an anti-woke crusader, and then he really immerses himself in the dark money. Right. So he's a frequent guest at Heritage Foundation. He's part of Teneo, which is another Leo Leonard sort of vehicle for young, up and coming culture warriors on the right. He embeds himself with the State Financial Officers Foundation and starts making all these connections with state treasurers, and then he decides to, I'm sure by coincidence, launch his own investment firm, Strive Asset Management. And then we see in case after case, how he uses the relationships he formed through the State Financial Officers Foundation with treasurers through Heritage to gain kind of special access to pension fund managers.So you can look at all these emails with pension fund managers where he's getting a special introduction from the treasurer and they're talking about how fun it was that they all had that steak dinner together. And then he goes before these pension fund managers to pitch either his proxy advising services. So he'll help you kind of vote your shareholder resolutions or he'll hold on to your money and directly invest it. So he's playing both ends, sort of churning up the anti-woke sentiment and then trying to find a way to profit off of it.David RobertsYes. And the state of Indiana went for it.Kelly MitchellYeah.David RobertsTheir pension fund is now signed up with what is it? Strive.Kelly MitchellStrive Asset Management. Yeah, they signed up for the proxy advising firm and a reporter out there was able to get a leaked copy of the contract and it included a $4,000 per hour fee for Vivek Ramaswamy's personal consulting services. Good work if you can get it.David RobertsI know. So he's out on Fox stirring up anti-ESG sentiment, then going with his own fund to hoover up that business and subsequently making $4,000 an hour advising Indiana. Even by our degraded standards these days, such a transparent grift. And nobody says "boo". Like, he's on the team. So boggling.Kelly MitchellAbsolutely.David RobertsOkay, so you've got this massive anti-ESG movement that's sort of stirred up by the right-wing money people through the right-wing money groups, through these treasurers in red states, opposed by the public, opposed by the red state business and banking community, a failure. Where it succeeds, where it is passed, it just causes states to lose money without hurting the woke targets at all. And it's just sort of the site of an amazing amount of grift. So just like all that together just makes it such a perfect crystalline example of conservative politics circa 2023. So let's talk about then, just briefly, because this is, I think, the real mind blower and something that a lot of listeners probably don't know. A lot of —I think a lot of people even involved in this argument don't know, which is what is ESG really doing? What is it really? Because I think people have the impression that you take your company to these ESG ratings firms, right? There are these firms out there that will assess your company and give you an ESG rating. And if they give you a high rating, then you can be part of an ESG fund. And there's tons and tons and tons of money flooding into these funds. So there's reason to want to be highly rated on ESG. These ratings firms, the sort of intuitive understanding that people on the street have is the rating firm goes and looks and tries to find out, are you a do-gooder? Do you have sort of like charitable initiatives? Like, are you doing good things on race? Are you doing good things on climate because of the goodness of your heart? And if you are, then we'll give you some points, right, so that the people who rate high on ESG do so because they are do-gooders, that are doing good in the world. That, I think, is people's intuitive understanding of what ESG is, but that is, in fact, not at all what ESG is.In fact, ESG is how you react to risks to your business posed by environmental, social, and governance issues. So, for instance, I'm sorry I'm ranting here, but this blew my mind as it sank in. Like, McDonald's, for instance, is highly rated in ESG funds. Why? Because they're doing something on plastic packaging. Why does that get them a good rating? Not because they're doing it out of the goodness of their heart, but because a bunch of European countries are contemplating regulations on plastic packaging. So McDonald's is reacting to a business risk by paying attention to its packaging, whereas McDonald's is an enormous source of climate pollution throughout its supply chain.But according to the ESG ratings firms, there's no imminent threat of regulations on that stuff that might affect McDonald's. So the fact that McDonald's isn't doing anything on climate is neither here nor there. It just doesn't affect their rating at all. The climate is immaterial to their rating because it's not currently posing the business a risk. So it's literally the opposite of what people think. These are not out of the goodness of your heart, do something good for the world. It's literally assessing businesses based on whether they are responding to risks. But do people who are following this fight get this, even like the pro ESG people?How well understood do you think this is?Kelly MitchellI mean, I think this is the layer where the entire ESG story jumps into absolute brain melting territory.David RobertsThat's just why I'm ranting. I can't even —Kelly MitchellI will give a shout out to Kate Aronoff at the New Republic, who I think has probably done the best piece so far on this. Just this whole idea of the right coming after this "woke investor class" when obviously no such thing exists. To the extent BlackRock or any of these guys are talking about climate risk, it is recognizing with eyes open that the world is decarbonizing. So depending on what industry you are in, how is that going to affect your bottom line? It's recognizing that the climate is changing in different ways. And if you have operations perhaps near a coastline or in a floodplain or in an area where wildfires are sparking up every five minutes, that's going to have a real impact on your business.It recognizes that there's an incredible amount of public political pressure for new regulations. The plastic stuff you mentioned that is eventually going to change and that the companies that are aware of these risks and can adapt to these risks and are taking the proactive steps now are the companies that are going to be successful in the long run. This is all in service of people continuing to make more money. And ESG overall, I think has been a pretty great thing for the oil industry because there are these rating agencies and each of them kind of have their own sort of standards and metrics that they use.David RobertsYeah, we should just pause to say people take these ESG ratings for granted. But these are mysterious black boxes. They're just, private firms, who do not even tell you, who do not even necessarily have to tell you what criteria they're using.Kelly MitchellAnd they all use different criteria. So I think in this muddiness, right, in the muddiness of having different rating agencies, in the muddiness of no one understanding what ESG even means, oil companies are kind of in the sweet spot right now where they get to put out their methane reduction plan. They get to put out their 2050 net zero plan. They get to kind of speak the language of risk and responsiveness, but they don't really have to do anything because at the end of the day, as of today, this moment, there is no government agency that's going to come and round you up and put you in cuffs if you're lying about your ESG plan.And so oil companies have kind of had the best of both worlds in some ways, where they can speak the language of sustainability via ESG without really having to do anything. And banks get to do the smart bank thing, which is evaluate risk, but they still get to pour billions and billions of dollars into oil and gas companies because they can make the claim that there's no existing regulation that makes that too risky of an investment for them.David RobertsRight. And then when there are regulations, which are a bunch happening on methane, right, methane is subject to furious regulation all over the place. Of course, oil companies have to do something about it. They have to. They literally have to. And yet they all get brownie points on these ESG funds for doing the thing that they have to do. So it's not like the ESG funds are saying you are going above and beyond on methane. You oil companies, so you get extra points. It's just like you're responding to this obvious looming risk, here are some brownie points.And they're all doing it. So they're all getting the points for it, right. So it's not you're even distinguishing among and between oil and gas companies on this?Kelly MitchellNo. And it's like when I ask my kids to clean their room or take the trash and they're like, well, what are we going to get out of it? I'm like, that's just the rule of living here. You don't get points for it. The stuff we reward these guys, we're just basic compliance with the law. We're like, wow, you're really stepping up.David RobertsYou get points for not breaking the laws.Kelly MitchellRight? But I think it speaks to sort of another fear that has animated the ESG stuff. So I spoke to the Larry Fink letter and the Engine No. 1 letter. But the other kind of looming threat that is driving a lot of this anti-ESG work is the threat that the Securities and Exchange Commission is actually going to throw a wrench in this plan and put in place some requirements that will force companies to disclose their emissions in a much more rigorous way and to actually have some teeth and enforcement behind ESG claims as we started to see in Europe. I mean in Europe, if you lie about your ESG goals, they do come and lock you in bank jail or whatever you do.But I think the fear of our government through the SEC actually starting to take some action and move ESG out of this black box amorphous "We're just just making sure companies evaluate risk" and actually force companies to put plans on the table that they're going to comply with and to really disclose the emissions impact of their products when used as directed. That stuff is scary and it's probably the place where for all the hilarity of the anti-ESG movement, what a disaster this has been in the states, what a disaster it's been in congress when they've tried to hold hearings. The one place where potentially it has had some impact is that it has given the illusion that there is enough resistance to climate action in the financial sector that maybe the SEC should be a little more cautious in implementing rules or maybe congress, because this is a hip new culture war thing, maybe congress should pitch back.David RobertsThere are sides and if the SEC does something it's taking a side exactly.Kelly MitchellIt moves it out of that risk management, let's keep our financial system in working order space. And now suddenly the SEC having a disclosure requirement becomes a culture war issue. And that's where potentially things get a little less hilarious than the bulk of the anti-ESG movement.David RobertsWell, one background question that I think occurs to a lot of people right around at this point in the discussion, which is if in reality ESG is just businesses responding to material risks to their bottom line, why is it a special thing? Why isn't it just part of the natural operation of business?Kelly MitchellYeah, it should be part of the natural operation of business. I think the biggest issue is that it's really easy for businesses to do that when there are these immediate, time-bound, practical, tangible risks. Like if you know that a road is going to be built near your factory, you can have a plan for that. I don't know why that's the best example I can think of a tangible material risk. But when it comes to some issues like climate change, or if you have some issues like addressing some really big disparities around race or gender in the workplace, they're so big.And the time horizon is so long, that I just don't think companies are very well built to figure out how to integrate that into their business decision. So in the best case of ESG, if you're steelmanning ESG, it actually provides a framework for companies to try to evaluate some of those really kind of long-term risks in a way they're not typically suited to do.David RobertsAnd I think you could fairly say that just the way public opinion is moving and the way sort of advanced democracies are moving. There's just more attention to these issues.Kelly MitchellAbsolutely.David RobertsMore regulations, more laws, more action. And so it's just, I think, areas that corporations traditionally were just not that cognizant of, didn't have to be that cognizant of. So I think that's why it sort of has this sort of air of novelty to it, because it is a little bit new for them to be caring about this.Kelly MitchellDefinitely. And they have to, for better or for worse. Yeah.David RobertsAnd they have to, which is the most cosmically, stupid — oh, and this is also a good time to — I opened this up on Twitter and the one question a ton of people have because this is sort of one of the times when ESG broke the surface of the news cycle and kind of poked itself into everyone's attention. Which is why Tesla lost its ESG rating. And then Elon Musk subsequently comes out — what I forget his exact words.Kelly MitchellLike ESG is the devil, I think is literally a tweet.David RobertsYeah, the devil incarnate. That was it. There you go. So people were confused by that, because people have it in their heads that ESG ratings are just a rating of how good a company is for the environment and society. Right. Which is not, again, not what these ratings are. So, like, if there are no imminent regulations forcing people to switch to EVs, then there's no brownie points for making EVs. Right. Whereas what they got dinged for was the race stuff. Right. Which is a material threat that they are not responding to.Kelly MitchellYeah, I think that too. And then there's the G, which I think is the piece of ESG that no one really likes to remember is there, which is governance. And that covers really basic issues like, do you have an independent board of directors or is it all your dad's golf buddies? And Tesla has suffered from some very serious governance issues.David RobertsYes. Are you making massive decisions on the fly on Twitter, half-joking might be like a governance issue. For instance, as you say, these dumb critiques of ESG tend to occlude the reasonable critiques of ESG, of which there are many. One of which is just, why is this a basket? Why are these three things in a basket together? It just muddies everything for them to be mushed together like this.Kelly MitchellYeah, it's really wild, actually. So the whole reason we got started looking at this anti-ESG work back in 2020, 2021 —David RobertsSay briefly what Documented is doing and how you ... I forgot to ask that early on, but sort of how did you dig up stuff on this?Kelly MitchellSo, Documented is an investigative watchdog group. We cover oil and gas issues, but also sort of democracy issues, things like voting rights and just the large influence of the dark money right. Increasingly creeping over our politics. And with this issue in particular, the way we came about the anti-ESG movement is for a while, we were attending industry conferences for the oil and gas industry, and we were noticing this trend that at every conference there would be some presentation from an ESG consultant that was actually there to talk to the oil industry basically about how to boost its ESG scores.And they would say things like, ESG doesn't have to mean green. It's just about saying this in your document and saying this in your document. And say —David RobertsIt hardly has to mean anything, really.Kelly MitchellExactly. It was all about how the oil industry effectively could kind of game the murkiness of ESG to attract more investments. And so we were following that for a while and about to potentially do a little write up exposé on some of those consultants that were making big money from this. And then, yeah, it was kind of around that time, that 2021, 2022 space, where suddenly the script flipped. And it wasn't really necessarily about how to game ESG anymore. It was about how ESG is sort of a threat to democracy and low energy prices and the stability of America.And it got politicized just really quickly. And so that's kind of where we started, just filing thousands of public records requests and tracking how this was playing out in different states.David RobertsI don't know if this is like a function of me paying more attention these days than I used to, but it seems like the scheming of the evil empire has just gotten less and less hidden. These emails you have uncovered are just like, I don't know, they're all in a bubble together, so I guess they just don't no longer feel any need at all to kind of, like, use euphemisms or to disguise what they're doing. It's all very straightforward. So let's talk about these hearings, because nothing really came of them. But I feel like we just need to at least spend a minute on how dumb these hearings are, even, again, relative to our degraded baseline standards for how dumb a congressional hearing can be, these were some spectacularly dumb hearings.Some of the accusations in these hearings. Are just —Kelly MitchellYeah, so the house oversight committee held two hearings in the last month or so on ESG, and, oh, man, they were a mess. So to start off, the star witness in the first hearing was the attorney general of Alabama, Steve Marshall. If for some reason the attorney general of Alabama is familiar to you, it's because he's been sort of a longtime leader in the Republican Attorneys General Association, including heading up the org that sent robocalls directing people to the January 6 insurrection. So he has a couple of questions about the election, but he's here to tell us the facts on ESG.David RobertsHe's just asking questions. Yeah, he's an attorney general. Not, we should just point out, say, pension manager or no, someone in the financial industry. Someone who knows anything about the financial industry.Kelly MitchellNo, but he has some feelings about cabals. Basically, the testimony from the attorneys general, who were their star witnesses and the members of the Republican caucus was like a bingo card of culture war catchphrases. Like, we had to talk about Bud Light and Dylan Muvaney. We had to talk about a cabal of global elites.David RobertsOh, the SVB. The bank.Kelly MitchellWe had to talk about that bank.David RobertsThat only went under, as we all know, only went under because of wokeness.Kelly MitchellWe had Representative Grothman worried that ESG meant that certain men of, quote, European descent would no longer be able to get jobs in this country.David RobertsThis is what we all know ESG is moving toward, not allowing corporations to hire white people anymore.Kelly MitchellExactly. My favorite, though, was Lauren Boebert. She described with a complete straight face, BlackRock, not as the world's largest asset manager, not as the world's second largest investor in fossil fuels. She described them as a left-wing activist fund.David Roberts$9 trillion. Imagine if lefty activists had a $9 trillion fund on their side. Just imagine the possibilities.Kelly MitchellOh, man. So, yeah, they basically brought out all the hits. I think they probably had to pinch themselves under the table to not say, like, the Jews and just talk about global elites and their secretive cabals instead. I mean, the anti-Semitism was certainly dialed up to ten on this one.David RobertsSo there's the cabal, and they're saying insofar as they're making any tangible accusations, they're trying to say to their base that these companies like BlackRock are boycotting fossil fuel companies, gun companies, agriculture companies, all the companies that are crucial to the heartland, et cetera, et cetera, et cetera. And just, you know, they're not.Kelly MitchellThey're definitely not at all. Yeah. I mean, look at any major oil company in this country, and look at who the top investors are, and it's all the companies that are supposedly boycotting them.David RobertsThis is a hearing that Katie Porter, who has been to her share of hearings, called the stupidest hearing I've ever been a part of, which is, if you can get that out of Katie Porter, who's sat through a lot of dumb hearings, that's very impressive. So I just hardly know what to say about it. So is anyone in charge over there? And if so, what do they want out of this? As we've seen, insofar as they succeed in any of the things they're trying to do, it does literally nothing but hurt their own states. It just makes borrowing more expensive.It just makes running the pension fund more expensive. It increases the bills for municipal budgets. Is there a discernible goal here?Kelly MitchellAny goal would be a little bit of speculation on my part, but that's why you come on a podcast. So you can just wildly speculate —David RobertsWildly speculate here that's what we do.Kelly MitchellI think for a lot of the individuals involved, to them it's like a ticket to higher office, quite frankly. We talked about how the treasurers have gotten communication support through doing anti-ESG work. So Riley Moore of West Virginia is riding his recent anti-ESG fame to make a congressional bid. There's a number of places where you're seeing state reps and treasurers who have been on the forefront of this anti-ESG movement seek higher office, governor's offices, AG's offices. So I think for them it's really a personal branding issue. It gives them a stake in the culture war for their base.And then I think for the folks with really deep money, like the Leonard Leos of the world, the folks who are running some of the bigger dark money groups like Heritage, it potentially accomplishes a couple of things. Like Leonard Leo has talked about how he basically wants to build a Federalist Society for everything. It's not enough that he built an organization —David RobertsWhat a nightmare phrase that is.Kelly MitchellIt's terrifying, right? And he sees himself saying "Okay, I was able to do this for the courts. I was able to cultivate young lawyers, young judges through the Federalist Society and then eventually" —David RobertsWidly successfully.Kelly MitchellWildly successful. And now he's saying, okay, well how do we do that in entertainment, how do we do that in finance? How do we do that in other areas of government? And so I think this is potentially a bit of a little salvo for him to see how he can sort of cultivate and deploy his own network.David RobertsGet some drones into the financial industry.Kelly MitchellOr boost the profile of actors like Vivek Ramaswamy or these are sort of state treasurers that he wants to have a long term stake in. And then I think from the perspective of the oil and gas industry, they've had a really interesting role in this. They're not the folks who are on the ground lobbying for these bills. They are not the folks testifying in Congress. They've actually been quite quiet on the anti-ESG stuff, I think, because they want to have their cake and eat it too. Like they like the ESG apparatus for what it's able to get them in the near term and muddy —David RobertsThey're pulling in all kinds of investment through it.Kelly MitchellExactly. So they're not going to cut off that gravy train just yet.David RobertsJust literally the opposite of what Boebert et al. are saying. They're saying ESG channels investment away from oil and gas and ESG literally does the opposite by doing these notional mild steps, many of which are required by regulation anyway. Oil and gas companies get more investment, extra investment.Kelly MitchellBut what I think they do like is people in state houses, people in Congress falling on a sword to talk about how the worst thing we could ever do as a society is cut off financing to the fossil fuel sector, whether or not that's what ESG is doing at all. You have these champions of investing in industry now in all of these states and you have a lot of resistance within Congress to SEC regulations around climate disclosure. And so what I think that the fossil fuel industry has gained in this process is just creating potentially some new champions and potentially creating a little bit of doubt among the Biden administration and other regulators about how —David RobertsSpooking people.Kelly Mitchellhow aggressively, exactly, they can move on this front. And so I think that will be something that's paid dividend. We haven't talked about it quite as much, but it's like we know that American Petroleum Institute has been in the mix with the treasurers a bit. We know they're coming out now publicly in favor of a bill that's going to be marked up this July in Congress around these issues. So they are starting to creep into the mix a little bit here through the trades. But I think the world is better for them when there are more people who want to block action on climate change.David RobertsYeah, I wonder that's the calculation for them, the sort of tangible benefits of ESG as currently operating for them versus the sort of more difficult to quantify, but possibly quite larger benefits of just kind of shifting society away, spooking society away from taking climate seriously.Kelly MitchellExactly.David RobertsA real devil's bargain there. So I just want to pause to say, like, yes, there are some of those potential benefits attenuated benefits, but really even more than the usual right-wing kind of moral panic, two-minute hate or whatever they call it, even more than usual, this is like almost entirely self-contained and without consequence. You know what I mean? It's just a show for the show's sake. There's not even things in the world that are hinging on it anymore. It's just they are just performing for one another now.Kelly MitchellAbsolutely. I mean, it's your best audience but no, I'll give you just one example. So, I was at a petrochemical conference earlier this year and not the greatest champions of the environment historically, but the whole conference was a love note to ESG. And you had guys come to the stage and they say, "Look, you might hear a little bit about the political pushback, but in reality no serious investor is going to stop looking at ESG criteria." And that's how folks are opening their speeches. And I was able to talk with a pretty high up exec in a global petrochem conference and I asked her that, I said, "Look, with all this political pushback, are you going to be changing your practices?Are you going to be abandoning your DEI initiative? Are you going to abandon your ESG initiative if you're given political cover to not have to do it?" And what she told me was "No, because we'll never be able to hire anyone again." And so I think this stuff is so baked into the system where investors can't look away from these risks anymore, companies can't look away from these risks anymore. There's a real question of how much anyone here is really going above and beyond. But yeah, the fighting from the movement on the edges is super performative.David RobertsYeah, just like dealing with risk. That's the thing, the big companies will do a lot of things in service of right-wing culture wars, but they won't risk money. They won't risk their bottom line. That's where they draw the line. It's like, "Wait a minute, we're actually making money off this hold up. We'll take down pride displays, but we're not going to risk money." I guess, insofar as it's almost entirely performative. How do you anticipate it playing out? Is anything going to come out of this? Is there a next step? Is it going to go anywhere or is this just going to sort of fade and they'll be hysterical about something else next month?Kelly MitchellI think there are two places where we see it heading and they're both around legal issues. So they've kind of played the legislative card for the time being. I think what we'll see next is we've had a number of attorneys general, similarly organized through the Republican Attorneys General Association, who have threatened to bring antitrust cases against companies that are part of any partnerships.David RobertsWhat is the European group? Zero —Kelly MitchellYeah, there's a G fans and an N fans and a Glasgow.David RobertsYeah, I forget what all the acronyms are for, but there's lots of these associations of companies who are about taking these risks seriously and trying to alter their portfolios in response. Is that I mean, with legal issues these days, it's almost immaterial to ask if there's any merit to it since if it gets to the Supreme Court, who gives a crap with it?Kelly MitchellLeonard Leo stacked the deck for us.David RobertsExactly, because Leonard Leo finished his job there. But is there any merit to the antitrust angle here?Kelly MitchellMy understanding is if there is, it's slim and it's probably if there's any place where there may be some merit to it, it's with insurance companies. Now, I won't explain why because I'll say a bunch of things that aren't probably true, but that's sort of the legal read I've been given. And I think that's why we've seen a number of insurance companies who have dropped their membership in some of these alliances. And interestingly enough, none of them have rolled back any of their climate-related policies. Like, they're all still taking into account climate risk. They're just not going to do it through these global alliances because their lawyers have informed them that potentially there is some amount of risk involved.David RobertsRight. Why take on the hassle? That's the thing to intimidate these people. It's like a little bit of hassle, why bother?Kelly MitchellSo I think we'll see the antitrust stuff continue to rev up and again, it's like, yeah, when you have people like Ken Paxton, when you have some of these AGs that are just really aggressive and really political, like you said, they'll bring a suit whether the merits are there or not. And so I think that could create a bit of a chilling effect.David RobertsIf there's anything goofier than Republicans suddenly pretending to care about high school girls sports, it's Republicans suddenly worrying about trust.Kelly MitchellReal champions of antitrust —David RobertsAntitrust champions. There's one thing they worry about. It's corporate concentration of power.Kelly MitchellSo we may see that, and I think it will follow the same path of being mostly very stupid and nonsensical, but then having these little moments of real-world impact along the way because people get spooked. And then the other area where we could see some evolution is we've now seen two class action-esque lawsuits filed. So one in New York State against the New York State pension system, and one in Texas, but actually against the American Airlines pension board, whoever manages the board, and basically their lawsuits against those two pension bodies for either divesting from fossil fuels or for offering ESG options in their pension fund.David RobertsJesus.Kelly MitchellMy sense again is neither of them have an incredible amount of standing. I mean, the American Airlines one is wild to me because it's not even that they took this guy's pension money, the guy who's suing and invested it in some vehicle he didn't like. It's just that they offered ESG funds in the menu of funds that pensioners can self-select. So it was a complete opt-in environment, but just the existence of that opt-in checkbox is sort of prompting his lawsuit.David RobertsGood lord.Kelly MitchellSo what I could see happening potentially is that similar to the legislative strategy where they just threw nearly 200 bills across a number of states to these hearings where they're testing out every conspiracy theory. Maybe we enter this phase with antitrust action from AGs and or these private citizen suits where they're again, just sort of trying to test the water and see if there's any ground here to stand on.David RobertsWell, pushing it into the legal realm is that's where Leonard Leo has already done his work. So the merits are going to matter a lot less in that territory than when you're talking to actual money people who actually care about actual money. Super dumb. But I think it's fair to say, just by way of kind of summarizing and tell me if you agree, the broad global trend of big money taking climate risk into account is unstoppable. You're not going to turn the clock back on that?Kelly MitchellNo, it's left the station and you can't not take it into account. There's too much actual change happening in the world for any sound money manager to ignore it at this pace. So in the long run, I think this is where the investment community is headed. I think a lot of executives will take this stuff and integrate it into their company's decision making.David RobertsAnd young people, one of the reasons all this started is that whether you like it or not, old guy on the board, young people care about this stuff and you need to be able to hire young people.Kelly MitchellAbsolutely, yeah. I think for the oil industry in particular, it is a huge problem for them. They offer very good salaries, like, they pay their workers very well. Now, sometimes they're not always doing the most desirable work, but they pay well. They've been a great ticket to opportunity in a lot of communities and they are struggling to hire given their current reputation. And so, yeah, this type of action is what makes it palpable for a young engineer to come work for ExxonMobile.David RobertsYeah, and I forgot to actually mention, even though it's in the headline of this pod, but the reason we're doing this now is that July is, according to Republicans, ESG month. This means at least for the next month, it's going to be an absolute festival of dumbassery and further ridiculous hearings.Kelly MitchellI think they're doing two a day on some days this month. They're doing double-header ESG hearings in the middle of July, which is a real way to know an issue.David RobertsHow many conspiracies are there? Like, how do they fill up the time? I'm not going to hurt myself by watching, but I honestly wonder sometimes, once you've run through the top-ten, Fox News — What do you talk about after that?Kelly MitchellI think you just rinse and repeat.David RobertsAll right, thank you so much, Kelly. Thank you for digging into this and documenting what's going on and thank you for walking us through it. And again, I commend you for maintaining your psychological health throughout this process.Kelly MitchellThanks, David. No, it's been fun and, yeah, thanks for having me on. I really appreciate it.David RobertsThank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf so that I can continue doing this work. Thank you so much and I'll see you next time. This is a public episode. 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In this episode, Priya Donti, executive director of nonprofit Climate Change AI, speaks to how artificial intelligence and machine learning are affecting the fight against climate change. (PDF transcript)(Active transcript)Text transcript:David RobertsAs you might have noticed, the world is in the midst of a massive wave of hype about artificial intelligence (AI) and machine learning (ML) — hype tinged with no small amount of terror. Here at Volts, though, we’re less worried about theoretical machines that gain sentience and decide to wipe out humanity than we are with the actually existing apocalypse of climate change. Are AI and ML helping in the climate fight, or hurting? Are they generating substantial greenhouse gas emissions on their own? Are they helping to discover and exploit more fossil fuels? Are they unlocking fantastic capabilities that might one day revolutionize climate models or the electricity grid?Yes! They are doing all those things. To try to wrap my head around the extent of their current carbon emissions, the ways they are hurting and helping the climate fight, and how policy might channel them in a positive direction, I contact Priya Donti, an assistant professor at MIT and executive director of Climate Change AI, a nonprofit that investigates these very questions.All right, then, with no further ado, Priya Donti, welcome to Volts. Thank you so much for coming.Priya DontiThanks for having me on.David RobertsWe are going to discuss the effects of artificial intelligence and machine learning on the climate fight. And I think we're going to, for reasons that will become clear as we talk, kind of like taking on an impossible task here. As we'll see, it's going to be very difficult to sort of wrap our heads around the whole thing. But I think we can make a lot of progress and maybe get clear about sort of some of the directions and some of the applications and get a better sense of how things are going, because this is something I've been sort of meaning to think about and talk about for a while.I'm excited. But to start, can we just get some definitions out of the way? Because I think people hear a lot of these terms flying around. There's artificial intelligence, AI. There's machine learning, ML, in the business, and then there's just sort of the digitization of everything, and then there's just sort of more powerful computers. Like, if I'm running a climate model and I want to put more variables in there, but I'm constrained by the amount of computing power it would take, computers that have more power and more processing cores or whatever, then I can do that.So help us understand the distinction between these things, between just sort of more and better and faster computing and something called machine learning and something called artificial intelligence. What do all these things mean?Priya DontiYeah, so I'm going to start with AI: Artificial intelligence. So AI refers to any computational algorithm that can perform a task that we think of as complex so this is things like speech or reasoning or forecasting or something like that. And AI has two kind of main branches. One of them is based on rule-based approaches where you basically write down a set of rules and ask an algorithm to reason over them. So when, for example, Deep Blue beat Gary Kasparov in the game of chess, this was a kind of rule-based scenario where you were able to write down the rules of chess and get an algorithm to understand and reason over what to do given that set of rules. Of course, there are lots of scenarios in the world where it's really difficult to write down a set of rules to capture a task, even though we kind of know how the task goes.David RobertsMost you could say are difficult.Priya DontiExactly. And so, one of these things is, like, if I have an image, what does it mean for that image to contain a picture of a cat? I can probably tell you, okay, there's got to be a thing with ears, a head, a tail, but it doesn't capture that always because you can't always see the tail. Like, how does this work? And so, machine learning is a type of AI that basically tries to automatically learn an underlying set of rules based on examples. So, for example, it takes large amounts of data, like, that it can analyze and use to help kind of figure out what the patterns are in that underlying data, and then apply those patterns to other similar scenarios, like classifying other images that the algorithm hasn't yet seen but are similar to what it saw when actually being created.And yeah, I would say that in terms of what's the distinction between these things and computing, I would say computing is a workhorse behind many of these algorithms. So in order for these algorithms to work, you need fast computers that are able to kind of execute the computations behind the creation of these algorithms. Behind the learning. You also need good data. And with those things together, you can basically create a lot of these more powerful AI and machine learning algorithms that you've seen today.David RobertsI see. So in AI, you're kind of telling the computer the rules and then hoping that the computer can use the rules to respond effectively to new data. With machine learning, you're just feeding it an enormous amount of data and it is deriving the rules or patterns from the data.Priya DontiRight. And those rules might be derived in a way that either is or is not interpretable. So I may or may not be able to go into the model and actually pull out what the set of rules are. But implicitly, at least in there, there's some set of rules that's being learned based on the data.David RobertsSo there are so many side paths that I'm going to try not to go down all of them as we go. But I'm sort of curious because one of the fears people are always bringing up is you feed it this enormous amount of data, it derives some rules from it and applies that to new data, but you don't really know what it's doing. And this is something we hear about AI a lot, is sort of relatively quickly the sort of complexity of what's going on and the kind of foreignness of what's going on to our way of thinking, to sort of human reasoning just puts these things out of touch. And pretty quickly we're in a kind of like, well, it seems to be working, so let's keep using it even though we don't know what it's doing.So I guess my question is, is that a limitation of our knowledge? In other words, is it theoretically possible if we had sort of the time and willpower to dig in and figure out what it's doing? Or is there some reason that in principle it's sort of impossible to know what it's doing? Does that make sense?Priya DontiIt does, yeah. And I'd say that one thing to kind of step back and note also is that there's a diversity of machine learning methods, some of which are inherently a bit more interpretable than others. So, linear regression, even though people don't think of it as a form of machine learning, it actually is, right? Because you're taking in some data and you're learning parameters that allow you to make some kind of prediction. And linear regression is, abundantly, interpretable. And similarly, you have things like decision trees. There are more complicated methods, like physics-informed machine learning or other methods, that try to just constrain the model in a way such that the goal is you can pull out certain kinds of rules.So, there is that axis of methods, but then there are these other methods, like some of the more complicated deep learning methods you see today, where, agreed, we basically view it. It is a bit of a black box. You don't know exactly why a prediction is being made, and there is some work going on to try to get at this issue and see if there are ways we can understand what the model is doing post hoc. But it's an area of research, I think, one that undergoes a lot of debate. Also, in terms of can you post hoc explain what a deep learning model did?For example, if I, as a person, make a decision and take some kind of action and you, David, ask me, "Hey, why did you do that?" I could probably come up with any number of explanations for you, all of which seem plausible, but those may or may not actually describe how I actually made the decision. So there's a bit of a debate about kind of even if you can try to somehow understand what the deep learning model did, what are the limits of that analysis and interpreting what it actually did and why?David RobertsYeah, there's a lot of things about this whole subject matter that sort of unnerve people. But this is kind of what I think is at the root of it is just that as these things get more complex, you pretty quickly get into an area of kind of trust or faith, almost like our machine masters. They seem to be doing well by us, even though we don't know exactly why. There's just something a little weird about that.Priya DontiYeah. And maybe just one thing I'll add. There are levers here, though, right? In any kind of machine learning pipeline, you have the data, the model, and then the outputs are how you evaluate the outputs. And you do have the ability to kind of quality control or constrain any of those things. So you should know exactly what's going into the data that's going into a model. In order to understand if your model is actually seeing quality things that it's trying to learn from. You can, as I mentioned, constrain your model to be an interpretable model.And then, what some of my work looks at is, you can actually often constrain the output in certain settings. So, if I create a controller for a power grid based on machine learning and it outputs some kind of action, but I know something about the control theoretic constraints that that action should satisfy, there are ways I can actually constrain the output so that it still satisfies various performance criteria that we recognize. So, it isn't sort of a foregone conclusion that AI and machine learning must be this sort of black box, scary thing. But I would say that there is work to be done and kind of intention that goes into making sure that we really understand and are constraining and quality controlling how the whole pipeline goes forward.David RobertsRight. And one other general question. So when people talk about AI these days, I think mostly in the popular imagination, I think mostly what they're talking about is what's called general intelligence. This idea that you could create a program that could find its own data and apply rules and figure things out, basically that has some autonomy, that would be the AI, right, the rules based. Like you give it the rules and then it goes and applies this to the world. Or is there a dispute about how you get to general intelligence? Which of these routes leads you to general intelligence?Priya DontiYeah, so I would say that the distinction between sort of general intelligent AI versus task-specific AI, it's not quite the same as this AI machine learning distinction of rules versus data. It's something different. And it kind of comes down to, when you create an algorithm, there is some objective that you're creating it with in mind. And so, for example, if I am creating a forecasting model of solar power, that's a very specific task. I'm kind of giving very specific data. I'm making a very specific ask when I look at the output of the model. But others are saying, can we somehow imbue a lot of data or a lot of rules and learn some kind of foundational representation that really is capturing a ton of general knowledge that can be kind of tuned or specified in various ways.These are kind of the kinds of works that really are trying to lead towards something more general. And so, yeah, I would say that there's kind of these different threads of work within the machine learning community at the moment.David RobertsRight. And just to be clear, we have not reached general intelligence and no one knows how to do that. And there's a lot of theoretical work going on, a lot of work going on in that. But practically speaking, almost all of the AI or machine learning that is happening today is task based. Right? I mean that's to a first approximation, when we talk about AI and machine learning, that's what we're talking about today.Priya DontiYes, that's right. So, I think that there is some kind of research going on in specific labs that is trying to work on artificial general intelligence. But when we think about the implementation of AI and machine learning across society and what it's really used for in practice, I think it is safe to say that a lot of it is task-based. And even some of the stuff that looks very clever and artificial general intelligence-like, there is genuine debate as to whether that is actually the case. For example, large language models and models like GPT have been called stochastic parrots, which is to say, they're not actually thinking; they are mirroring, parroting in a kind of stochastic way, what they're seeing in their data.And we potentially as people who then read text outputs that seem realistic, we maybe ascribe intelligence to that. But that doesn't necessarily mean there's any thinking actually going on under the hood.David RobertsYes. And then, of course, there's this whole, like, back in the "dark ages", I was in grad school in philosophy and I used to study cognitive science and consciousness and all these sort of theoretical debates around this stuff. There is a sort of debate. There is this sort of idea that all we're doing is what the language models are doing, just on a vast scale. So, there is no sharp line. They're just like, eventually you do that well enough that you are, de facto, deploying intelligence, and the models will eventually, eventually there will be no point in drawing a distinction between what they're doing and true intelligence.But that is well far afield of our subject here today anyway. So we're going to try to wrap our heads around how this all applies to the climate change fight, the clean energy fight. But just as a caveat up front, in one of your papers you write "those impacts that are easiest to measure are likely not those with the largest effects." So just by way of framing the discussion. What do you mean by that?Priya DontiYeah. So when we think about the impacts of AI and machine learning on climate, we need to think about a combination of AI and machine learning's direct carbon footprint through its hardware and computational impacts. The ways in which AI is being used for applications that have quote, unquote immediate impacts on climate change, be those sort of good or bad. But then we also have to think about the broader systemic shifts that AI and machine learning create across society that then may have implications for our ability to move forward on climate goals. And I'm sure we'll get into the specifics of all of those things.But I guess, briefly speaking, these sort of broader systemic shifts that AI and machine learning is going to potentially bring about are extremely hard to quantify, but they'll be large. And so it's important to make sure that as we think holistically about the impact of AI on climate, we do the quantifications in order to guide ourselves. But we also make sure to look at this holistic picture, even for things that we're not able to put so concretely into numbers.David RobertsYeah, I think about going back to, whatever, the beginning of the 19th century and just saying, like, well, what are the systemic impacts of automation going to be? Who knows? But they were in fact enormous, right? And they did, in fact, sort of swamp the kind of tangible, measurable immediate impacts. So this just to keep in mind that we are to a large extent, I think, stumbling around in the dark here, kind of guessing, like, we know something big is going to happen. Big things are coming, but good big things? Bad big things. What kind of big things?To some extent, we're guessing from behind a veil of very little information. So let's start then with the immediate impacts. And this is something, when I threw this out on Twitter, this is something I got a lot of questions about. I think it's in some ways the easiest question to ask, which is, just as you say, all these algorithms require a bunch of computing, a bunch of calculations, which requires a bunch of chips and a bunch of data centers and a bunch of hardware, basically. And so the first thing to ask is just, do we know this shift into AI and machine learning, do we have a good sense of just how much it is increasing the world's computing load and just sort of exactly how big the greenhouse gas impacts of that computing load are? This is a conversation I think people are very familiar with, vis-a-vis, Bitcoin, right? Like lots of people are asking about Bitcoin. Is whatever we're getting out of Bitcoin worth the immense resources we're putting into it, computing wise? Sort of same question with machine learning and AI. So do we know how to wrap our head around that do we know how to measure the total amount of computing devoted to this?Priya DontiYeah, and there are some macro level estimates here but they are kind of evolving quite a bit over time. So in the kind of latest numbers at least that I am on top of at a macro level is that in 2020 the total information and communication technology sector was something like 2% of global greenhouse gas emissions and machine learning is an unknown fraction of that. And one thing that was happening is that we were starting to see kind of an increase and I think exponential increase in the amount of computational cycles that were being demanded from just various types of compute that we're doing across society. But hardware was also getting efficient at a similar rate which kind of kept these greenhouse gas emissions and energy impacts relatively constant over a decade or so.But we're seeing a couple of these trends change. For example, we're starting to see larger and more energy intensive AI and machine learning models being developed and we're also potentially reaching the end of, quote, unquote Moore's Law improvements that were leading to these hardware efficiencies. And so it's really important that we get honestly better and more transparent data on machine learning workloads and sort of the dynamics and trends of that in order to really understand what we're dealing with. And this is one of those things where it's, from a technical perspective, not the hardest in the world to measure the computational impacts of AI and machine learning. You sort of know where they're happening or you know what entities are doing them. And it's a matter of instrumenting some computational hardware. But for political and organizational reasons we don't tend to have transparency on that data. It's also worth noting that hardware is an important part of this conversation because, of course, data storage and machine learning algorithms, they all kind of rely on having computational and storage hardware. And the kind of creation and disposal and transportation of that hardware has not only kind of energy impacts but materials impacts and water impacts and all other sorts of impacts that we really need to be thinking about.David RobertsSo is it true that Moore's Law is slowing down? I don't know that I had tuned into this issue, but is it measurably slowing down or is it a fear it's going to can we see it? I imagine it's not super clear.Priya DontiYeah. So I'm not a computer systems researcher myself, but I will say that there has at least been discussion within the community about are we reaching the end of Moore's Law as we've potentially run against just physical limits on how small you can make something.David RobertsRight, interesting. Yeah, we're getting down to nano, whatevers. Now, is it fair to say that the majority of these direct impacts are about the electricity that is running these things or are the embedded emissions in the hardware itself that you were just referring to are they comparably sized? Do we know how those two compare to one another?Priya DontiYeah. And I will say again, it's a bit of a shifting landscape. But as of now, I would say that the computational emissions are higher than the embodied emissions. But this is also shaped by organizational choices in certain ways. For example, what we see is that when you have data centers, they are often replacing their computational infrastructure very quickly in order to make it so that your computations are more efficient. So you kind of reduce your computational emissions footprint.David RobertsRight.Priya DontiBut by doing that, by replacing your hardware so quickly, especially when your hardware is not actually spent, you're increasing your embodied emissions. And so I think we're seeing kind of adds a picture of what the computational emissions are versus how quickly are we replacing hardware. The kind of proportion of embodied emissions sort of is increasing if we kind of believe this fact that the hardware is getting more efficient.David RobertsAnd just in terms of how much to worry about this, about these impacts in particular, I mean, I guess I'm inclined to just say most of that comes down to the power sources. A) the power sources that are running the data centers, or b), the power sources that are running the factories that are producing the things. Those power sources are getting cleaner over time. Right. They're being replaced by renewables over time. And so you can imagine a not too distant future where this particular family of impacts, the direct impacts, are fairly low to negligible. So I guess I'm just inclined to just not worry about that piece of it much. Is that off? Do you worry more than that about this piece of it?Priya DontiI do worry about it. And this is because if we think about decarbonization strategies across any energy related sector, the first order of business is to reduce waste and improve efficiency. And if every sector feels entitled to its unbounded growth in energy use, we start to run into various constraints on the actual "can the grid handle this?" on the decarbonization-of-the-grid side. So I would say that here this translates to kind of reduce waste is; if it's not worth running a particular machine learning algorithm, if the benefit on the other side isn't worth it, then we shouldn't be doing it.And then improve efficiency is; for use cases where we've decided it is worth it, let's make sure to do that in a way that is reducing energy use as much as possible. And I think this sector, like every other energy based sector, needs to be thinking about those primarily in addition to, of course, decarbonizing the grid.David RobertsRight. And there's a lot of runway left to make these things more efficient, like the computations themselves. Is that mostly a software thing, a programming thing to make them more efficient? Or do you mean physical improvements in chips and data centers and whatnot?Priya DontiSo there's both stuff that can be done in software and in hardware. There are kind of physical improvements that are doable and are being worked on to make hardware more efficient. But also in terms of the software, there's work that's looking at if you have a big model, can you somehow actually do something called pruning or architecture search? Things that allow you to figure out are there smaller versions of the model that would make sense. You can also, when actually training your model so getting it to a state where it's making good predictions. There are various procedures like hyperparameter tuning that go on, where you're trying to figure out kind of meta design choices around how the model is designed.And there's more and less wasteful ways to do hyperparameter tuning. We can again pick to not always use the most complex model if it's not worth the value. So if a kind of much less energy intensive model gives you 99.9% accuracy and it takes you 1000 times more energy to get to 99.99, that may not be worth it in every use case. And so really, I think there's a lot that can be done in there as well.David RobertsAnd it seems like we could also although I don't think we will, it seems like we could also say as a society that some things are not worth putting all this effort into. Like maybe if you're creating a bunch of greenhouse gases and burning a bunch of data center cycles to sort of improve the performance of a button position on a particular Amazon page or whatever, maybe we should just say deal with the current button position. There are frivolous things that we're throwing enormous resources at already.Priya DontiIt's totally true. And I think all of these are driven by the fact of money speaks. And I think it's unquestionable sort of where money flows in society.David RobertsOkay, well, so those are the computing related sort of direct physical impacts. The next tier up is what you call immediate application impacts, which is just what are the things that are running on machine learning doing now for climate? And I guess you might say against climate, it's like, oil companies have access to this stuff too and I imagine are throwing tons of resources at it. One of the papers you sent me was sort of this catalog of things that are using machine learning and it's just already it's so vast that you can't really wrap your head around it.It's spread so fast that it's hard to say anything general about how they're being used. But is there some way of sort of wrapping our heads around or categorizing what machine learning is being used for now in this world? In this sort of clean energy climate world?Priya DontiYeah. So I can give a couple of themes that I think cut across a lot of the applications that I've seen and these aren't exhaustive, but hopefully are at least illustrative. So one of them is machine learning is maybe unsurprisingly being used to improve predictions and by analyzing past data in order to provide some kind of foresight. So an example there is the nonprofit Open Climate Fix in the UK is working with National Grid ESO to basically create demand and solar power forecasts by ingesting a combination of historical data, the outputs of numerical weather prediction models and in the case of solar, things like videos or images of cloud cover overhead.And by basically cleverly combining different data sources and then using machine learning models to learn correlations between these, they were able to cut the error of the electricity demand forecasts in, I believe half —Oh wow!by doing that. And there are also applications in the climate change, adaptation space. So for example, there's a Kenya based company called Selina Wamucii which is using AI to predict locust outbreaks which are exacerbated by climate, by basically combining agricultural data, weather data, satellite data. So the idea is basically if you have a bunch of different data sources that are telling you something a bit different about the problem, machine learning is really good at combining and learning correlations among these heterogeneous data sources and then kind of using that to make some kind of forecast in the future. So that's one theme.David RobertsAnd does that theme also apply to the climate models themselves? Like, I'm assuming climate modeling in general is going to benefit from all this stuff.Priya DontiYes. And so there is a lot of work that's looking at not machine learning as a direct predictor of climate because ultimately climate involves a shift in what's going to happen. And what machine learning is good at is you have a data set, you identify existing patterns and then to the algorithm, those patterns are the world. So it's going to continue trying to apply the same patterns. But where machine learning has been used in climate forecasting is to do things like take these existing physical models that are really complicated to run and try to approximate portions of them so that the overall model runs more quickly.Or take the outputs which are often coarse grained and try to downscale them or fine grain them based on on the ground data. Kind of post hoc.David RobertsInteresting.Priya DontiYeah.David RobertsSo just prediction.Priya DontiYes so prediction is one.David RobertsSeems like an obvious enough one.Priya DontiYes. The second one I'll talk about is taking large and unstructured data sources and distilling them into actionable insights. So this often comes up when thinking about the large amount of satellite and aerial imagery that's becoming available as well as the large amount of text documents we have available on public policies or patents or things like that. So for example, there's a project called the MAAP Project which is using satellite imagery to try to give like a real time picture of deforestation in the Amazon in order to then enable interventions to actually stop it. And in the public sector, the UN Satellite Center UNOSAT they use AI and machine learning to analyze satellite imagery to get high frequency flood reports because basically you can have a human looking at satellite imagery and analyzing the extent of flooding, but it's a task that's hard to do at scale for a human.And so they use machine learning to actually try to analyze how is flooding changing and get real time reports that have helped them improve disaster response actions.David RobertsYeah, in a sense it's just pattern recognition even for data collections that are so vast and heterogeneous that maybe the human mind sort of is stymied. The human minds are just pattern recognition machines too, but we have our wetware limitations so it just can find patterns in much larger and more heterogeneous data sets.Priya DontiYeah, I mean, in some cases it's that the patterns are just really hard for people to grasp. Now, I have to emphasize the pattern needs to exist. You're not going to find patterns where they don't exist. But that's one case. But another case is one where we as humans can grasp them and readily apply them. It's just that scale is really hard. Kind of labeling a couple of satellite images to understand flood extent is fine. Labeling thousands and thousands that you're just going to run out of human time.David RobertsAll right, that's two.Priya DontiNumber three. So the third is machine learning can be used to optimize complex real world systems in order to improve their efficiency. So while the kind of last two themes I talked about with forecasting and distilling data into actionable insights, it's fundamentally about providing information that ultimately will go on to inform a decision. But there are places where machine learning is itself in some sense, making a decision is automatically optimizing some kind of system. This comes up, for example, in building automation. So there are companies that are using AI and machine learning to automatically control heating and cooling systems. For example, in commercial buildings, based on sensor data about weather, temperature, and occupancy, we are trying to leverage that to basically find efficiencies in how the heating and cooling infrastructure is managed —David RobertsYou can throw power prices in there.Priya DontiYou can throw power prices in there. Yes. And I think this is actually a really kind of underrated and underexplored area of work where there's work using machine learning for demand response and market trading and there's work using machine learning for building energy efficiency. But I think actually there's a lot to be done in kind of bridging those two views. And so I'm really glad you brought that up, actually.David RobertsWell, I can also think of another large complex system that desperately needs some optimization, which I think you also know something about one of our shared, shared obsessions, namely the electricity grid. I'm very curious what is currently being done with machine learning on the grid?Priya DontiYeah, it's a great question and I will say , so, machine learning is pretty widely deployed across power grids for forecasting and situational awareness kinds of tasks. When it comes to optimization and control, I would say largely a lot of those applications sit more on the research realm than in the deployment realm right now. And part of the reason for that is that I think there's just a big lack of appropriately realistic data and simulation environments and metrics that actually allow us to test out and validate research methods in an environment that is realistic and actually advance their readiness that way.Because by testing out a research method in an environment that looks realistic, you then understand how do I need to adjust my method to make it responsive to the realities of the grid. And you sort of have that feedback loop and kind of progression of readiness which I think we're lacking a lot of infrastructure for. But concretely, where machine learning can play a role there is when we think about centralized optimization problems. So things like optimal power flow problems and the stochastic and robust variance of that, these problems are computationally intensive to solve. And so sort of similarly to the theme of improving the runtime of climate models, we can similarly think about are there parts of the problem we can approximate, or can we learn quote unquote warm start points?Or can we even make direct and full approximations to these centralized optimization models, but in ways that preserve the physics and hard constraints that we care about? And that's actually what some of my work looks at. And then also on the kind of distributed and decentralized control side, we want to construct controllers that can make decisions based on local data, maybe plus a limited amount of communication to get some more centralized data. And this is a place where control theory is playing a role and AI and machine learning can potentially also play a role by basically learning complex patterns in the underlying data and using that to make nuanced control decisions.David RobertsWhen I first thought about AI, machine learning and climate, this was the very first place my brain went, I guess. No surprise to any listeners. But the rise of DERs, the rise of distributed energy resources is just, among other things, an enormous increase in complexity. You're going from, whatever, a dozen power plants in your region to potentially thousands, tens of thousands, hundreds of thousands. And I think I mentioned this when we talked earlier, but I'm not sure ordinary non-grid nerds really understand how much of grid operation today is still like people turning knobs and making phone calls to one another.It's bizarrely low tech, a lot of it. And so that just seems to me like an absolutely ripe area for this kind of thing.Priya DontiYeah, I definitely agree. I mean, there's the scale problem you talked about, there's the speed problem as we deal with increased variability, and there's actually the physical fidelity problem. So right now, because on power grids, we find that true physical representations are really hard to kind of solve computationally. So you often will use something like DC optimal power flow as an approximation to the grid physics, rather than something more realistic like AC optimal power flow. Then what we rely on is we make a kind of decision a bit ahead of time based on these approximate physics.We let that play out, and then we allow real time adjustments on the grid. Things like automatic generation control take place to compensate for mispredictions or mischaracterizations of the physics. And as we have fewer spinning devices on the grid, and we're starting to see things like faster frequency swings because we don't have that buffer provided by spinning devices attached to the grid in the same way, we also lose some of our kind of buffer in terms of being allowed to be slightly physically off in terms of our characterization.David RobertsSo we need to be more precise.Priya DontiWe need to be more precise.David RobertsYeah, this is the thing about solar power in particular, is just so digital. It just seems like it lends itself to digital control and not to this sort of old fashioned kind of inertia and spinning and all these sort of very physical, very physical things.Priya DontiAnd I think one way to think of it is I know there's a lot of folks who are very scared. I mean, we're fundamentally talking about a safety critical system where if it goes down, it's a real big issue. And so I think there's a combination of for those physical constraints that we can kind of write down and really be certain of, there are ways to start to construct AI and machine learning methods to fundamentally respect those. And then also, I mean, it's not unreasonable to think that at certain timescales that we would possibly have some amount of human in the loop control.Sort of in the same way, when you're driving a car, you as a human are steering it, but you're not dictating every lower level process that takes place to make the car go.David RobertsYeah, the car analogy getting slightly off course again. But the car analogy raises something that I've been thinking about, which is some of the dangers of automation coming from machine learning and AI. And I think the car example works really well. So it's generally pretty safe for a human being to be 100% in charge of the car. And I can imagine a level of AI and sensing and et cetera, and infrastructure sympathetic infrastructure makes it such that 100% automated control is safe. But what doesn't seem safe to me is the sort of quasi semi-automation where the car can drive itself most of the time, but then you need a human out of nowhere, possibly quite suddenly. And it's just we humans are not really made for that, to sit there not doing anything for hours on end and then be ready at any second to jump in. And I wonder if there's an analogy to other systems in that is there that gap between no automation and full automation where there's weird automation-human interactions that are kind of sketchy. Is that analogy broadly applicable or is it just a car thing?Priya DontiNo, I mean, I think it is broadly applicable and it's a combination of what is the correct level of sort of human automation-interaction both at the level of an individual component but also you're often thinking of multiple components interacting with each other that may have different trade offs. So in cars, that is, if you have a mixture of autonomous, semi-autonomous and fully human controlled cars on the road in grids, you can imagine, of course right, multiple grids. I mean, it's a physical system, but there are different sort of governance and jurisdiction related things such that we're doing different things on different parts of the system. And so how do those interact with each other becomes a super important question.David RobertsYeah, and it's one thing in a car, it's another thing if you're driving a grid. As you say, the cost of mistakes is much higher. But I interrupted your list, I think. Was there a fourth?Priya DontiYeah, I had a last theme that I wanted to talk about. Yeah, so the last one is machine learning for accelerating the discovery of next-generation clean technologies. We've talked so far about machine learning for operational systems, but of course, as we're trying to transition systems, how do we come up with that better battery for frequency regulation on the grid or for your electric vehicles or how do you come up with a better carbon dioxide sSorbent for sequestration related applications, things like that, or electrofuels. So what machine learning has been used to do is analyze the outcomes of past experiments in order to suggest which experiments to try next, with the goal of cutting down the number of design and experimental cycles that are needed to get to that next better material or clean technology.David RobertsRight. Yeah, I hear a lot about this, and this always seems enormously positive to me. And I thought, isn't it also in addition to just suggesting experiments, isn't it also a thing that they can sort of run the experiments virtually? Sort of do the materials science experiments virtually, so you don't have to do the physical experiment at all?Priya DontiYeah. So you can do some amount of physical virtual simulation rather in order to understand what the performance characteristics of a particular material are. But virtual simulations are not perfect. And so ultimately you do sort of need to synthesize at some point. Right? You need to synthesize or create the thing and test it out in the physical world.David RobertsAt least you could narrow down the number of physical experiments you need.Priya DontiThat's exactly right. That's exactly right. And so the goal is really to in this case, it's again, not that you're sort of letting a machine learning algorithm itself sort of dictate exactly what experiments you do at all times, right. There is sort of human scientific knowledge that's really coming into play. On the other side, to look at the output and say, that seems reasonable, that seems like something I'm going to try versus this might not be worth the millions of dollars it takes me to synthesize this thing. So it's sort of an interaction between the computational insight and sort of the human judgment on the other side.David RobertsThis is a big thing in pharmaceuticals too, right? Like drug development. Is there a clear sort of a success story in that particular application? Like, is there a materials advance where the company that did it was like, look what we did with AI. Can we point to something yet?Priya DontiYeah. So a group of us wrote this report for the Global Partnership on AI, which provides recommendations to policymakers on how they can align the use of AI with climate action. And as a part of that, we actually highlighted a couple of real-world use cases where we are seeing kind of on the ground successes. And so actually, some of the examples I've talked through today are from there. But in this category, one of the successful ones that we highlighted in that report, it's a startup called Aionics, which is a Stanford spin out. And what they do is they work with battery manufacturers across different sectors, so across energy and transport in order to help them kind of speed up their process of battery design, where of course, the properties of your ideal battery vary based on your use case.David RobertsRight.Priya DontiAnd they use a combination of machine learning and some physical knowledge to do this analysis. And per their reporting, they've been able to cut down design times by a factor of ten for some of their customers.David RobertsSuper interesting.Priya DontiI think there's a lot of potentially very impressive gains in that area.David RobertsYeah. I mean, to return to my theme, how do you even begin to predict where that's going to go? I mean, the mind boggles on some, on some level. So in terms of these immediate application impacts, you listed four sort of broad themes, all positive examples. I'm assuming carbon intensive industries are also —Priya DontiVery much seeing the power of AI.David RobertsYeah. Are there prominent sort of examples where AI is being used to find or burn more fossil fuels?Priya DontiDefinitely. So AI is being used in large amounts by the oil and gas industry to facilitate their operations. So things like advanced subsurface modeling to kind of facilitate exploration, the optimization of drilling and pipelines in ways that try to improve extraction and transportation and also, I mean, marketing, right. To increase sales. And so there's a lot of applications here. And there was a report called Oil in the Cloud by Greenpeace that came out a few years ago.David RobertsYes, I recall.Priya DontiYeah. And that one estimated that AI was going to generate hundreds of billions of dollars in value for the oil and gas sector by kind of the middle of this decade. And that is substantial.David RobertsYeah. And I believe their point was like Google is out there claiming to be a champion of clean energy and decarbonization and et cetera, et cetera, and it is providing these technologies that are turbocharging the fossil fuel industry. Seems odd.Priya DontiYeah. And there's genuine debate, which I do happen to fall on a particular side of, but there's genuine debate about sort of whose responsibility the resultant emissions are. But I guess what I will say is every entity is very — the tech sector, the oil and gas sector, they're very eager to claim that every set of emissions is scope three emissions that are not within their direct control. And given the urgency of hitting climate change related goals, if anything, we shouldn't be so worried about, well, we need to make sure that — this sector is responsible and this isn't — by all means, double count it. Make multiple entities responsible for any packet of emissions and just make sure something happens.David RobertsYeah. What's the danger of double counting? We might reduce emissions, accidentally reduce emissions too much.Priya DontiYeah.David RobertsSo here's an unanswerable question for you then. When you look out over the landscape of these immediate application impacts, sort of the way AI and machine learning is being used today, is there any way to sort of net things out and say, oh, it's good for climate or bad for climate, or is this just sort of like this is just making everybody who does everything slightly more powerful? You know what I mean?Priya DontiYeah. AI is an accelerator of the systems in which it's used. And this is not an original quote, it's a quote from many other people much smarter than I am. But what that means is that we need to look at what are the societal incentives around kind of who gets to leverage technologies like this and what kinds of processes does it mean it's likely accelerating as a result. For example, is there more money in oil and gas than in renewables? Right. That picture is shifting. But I mean, as long as that's the macro level case, you're going to see AI deployed where there is more money to spend for the use of AI.And so, yeah, I would say that in some sense, the kind of obvious answer would be net, like, the impact is not good for climate. I mean, and this is aligned with the fact that we as a society are needing to work pretty hard to hit our climate change related goals —David RobertsJust because society isn't good for climate right now.Priya DontiExactly. But I think importantly, as we think about both the broader climate fight and the role of AI within it, these are shapable. Right. So I think that in some sense, the macro level question of is AI good or bad for climate? Often leads to maybe the wrong implied downstream action of should we do or not do AI? Which I think unfortunately, or fortunately at this point is a bit of a foregone conclusion. And instead we need to really be thinking about how do we shape these developments on a macro level to be aligned with climate action.And that's not to say that certain applications shouldn't go forward. Like, I think that's a very valid thing to say. A particular application is one where we should not be applying AI, but on a macro level, it's really about kind of steering both thinking about where we should and shouldn't use it and then how we should use it where we should.David RobertsWhich is the same set of questions that face us on everything else too. Right. On any technology or doing anything, really. In a sense, the effects of these immediate effects are downstream of just sort of larger forces and will change as those larger forces change.Priya DontiYeah, and the reason to think about them in an AI specific context is the same reason we think about sector specific policies when we look at climate action. There are in principle macro level policies that should just address everything, right? Like if you deal with the emissions and the pricing, sure, technically all of the underlying incentives should follow. But in practice, we find that sector specific policies that are really cognizant of the bottlenecks and trends in a given sector are helpful. And so this is the same thing with AI understanding who the players are, what the levers are, and how we can come up with more targeted policy and organizational strategies. To actually address those is ideally additive to thinking about it on just a macro level.David RobertsRight, well, I want to talk about policy, but just real quick before we get there, this third level of impacts is system level impacts, which are just going to — I barely even know how to talk about them. There's going to be sort of emergent large systemic shifts that arise out of the changes that these things bring. Are there examples of systemic impacts that could help us wrap our mind around what we mean by them and is there anything general to say about them other than they're probably going to happen?Priya DontiYeah, I mean, I would say that there are some that are a little more in that, "Uh, they're probably going to happen" and others that are more shapeable. So things like machine learning is a key driver behind advertising and increased consumption, not just because of advertising, but because of on demand delivery and all of these things that AI and machine learning creates which often increase emissions, but not always in ways that make us happier. Right. Which again, like emissions increases. I think there's this thing about well, but if there's a benefit on the other side. But there isn't always, and largely, it's obviously a big question across society, is increased consumption making us happier?And AI is certainly driving that. In addition, AI is changing not just how we consume goods, but also information. So different people, when googling something will get a different answer. And on social media, also the targeting of posts, the generation of misinformation, but also the detection of misinformation. So I think there are some complex ways in which AI actually interacts with this, both in terms of having the capability to serve better information, but likewise be able to serve worse information as a result. And then there are things like the use of AI for autonomous vehicles where it's unclear what the impacts will look like, but they are potentially very shapeable.Where if AI and autonomous vehicles are developed in a way that facilitates private and fossil fueled transportation, that has very different implications for the transport sector than if you're facilitating kind of multimodal and public transportation, right. Making it easier for people to connect between different modes of transit. And that's not a foregone conclusion, the direction we go in. And so I think there's actually a lot we can do to kind of shape the directions these technologies take in these settings.David RobertsBefore we move on. There's just one other thought that occurred to me, is the use of these algorithms in trading in people day trading stocks, they're down to like one millisecond whatever trades. Now, I've read a lot of people a lot smarter than me write about this, and their conclusion is just like, no one needs this. No one is benefiting. The market is not benefiting from this. This does nothing but allow people skimming off the middle to skim more off the middle. So there's an application of algorithms and machine learning where we could just say, no, just don't. Just stop doing that.Priya DontiYeah, I think my tagline for people working on financial markets is; energy markets are way more interesting because you have both your financial system and your underlying physical system. I know there's a lot to be done there to facilitate renewables integration. Come join us.David RobertsYeah, there's a reality on the other side of all our numbers instead of just this weird sandbox that you're all just playing pretend in. Okay, by way of wrapping up, then let's talk about policies. So in your paper where you are making policy recommendations, some of the policies are just sort of obvious. You price carbon emissions, right? And then that produces a more or less universal force, pushing down carbon emissions and things like that. You offer tax incentives for greenhouse gas reductions. Just general good climate policy, you recommend a lot of that and all that stuff would be great, of course.But are there more sort of AI specific policy directions we should be thinking about?Priya DontiDefinitely. So when it comes to facilitating the use of AI for climate action, what we want to think about is creating the right enabling data digital infrastructure, kind of targeting research funding in particular ways, enabling deployment pipelines. So I talked about this kind of research to deployment infrastructure that's needed in power grids and also capacity building. I mean, I think that both in terms of people who have the skills to actually implement all or parts of AI and machine learning workflows, but also people who have the ability to run organizations or govern systems where AI and machine learning will play a role.I think having just that base level of literacy in terms of what you're dealing with becomes super important in sort of allowing there to be a lot of ground up innovation where people now are equipped with knowledge of their particular context and these tools and can make things happen as a result. So I think there's a lot that can be done and those all sound like very general levers, but of course there are specifics in there like how should research funding look? I mean, it should not be that climate funding is diverted to becoming AI plus climate funding only. It shouldn't be a narrowing of scope.It should be things like making sure you have AI expert evaluators in climate calls so that they can understand when something's being submitted that makes sense. And it's about shaping AI calls to have climate focuses. So there's some subtleties there, but basically a lot of things that are needed to enable the use of AI for climate action.David RobertsAnd it also occurs to me that there's tons of things you could think of where AI and machine learning would improve outcomes that won't necessarily make anybody money or might even by increasing public provision or reducing demand for some services, cost people money, like might reduce the net amount of money to be made. And that seems like a place where government policy could help nudge research funding and activity into those areas.Priya DontiAbsolutely trying to identify those quote unquote public interest technologies and channeling funding towards them. Exactly. And of course we talked about the kind of negative impacts of AI on climate and these should absolutely be accounted for as well. So when it comes to the computational and hardware footprint, we talked earlier about how it's just really hard to understand what's going on because you don't have transparency on what the computational energy impacts look like, even though you know in principle how to measure them because there aren't reporting incentives or requirements or things like that. And when it comes to hardware impacts, we can get a sense of embodied emissions.But I mean, measurements on water and materials are really hard, just kind of putting in place at minimum reporting frameworks and standards so that those who want to report voluntarily know what that means. But I think more importantly, putting in kind of more mandatory reporting frameworks for some of these things so we can figure out what the dynamics and trends are and what it makes sense to do next.David RobertsRight, final issue. But this is something that several people flagged to me that they wanted to hear about is we've recently, I think, seen some articles about the enormous amount of human labor that is behind these AI things. And of course, the world being the way it is, it's often poor people, it's often exploited people, a lot of people that aren't treated well, aren't paid well. So once again we find ourselves with this sort of shiny new thing in the west and you scratch down a few levels and you find blood and tears from poor people behind it.Is there any sort of like climate or energy specific way of thinking about that or is that just a general concern and do you have any thoughts about sort of like what to do about that?Priya DontiYeah, I mean it is a general concern and I would say that some of this also comes from machine learning being right now predominantly developed in contexts that have certain assumptions associated with them, like large scale internet data that is able to be scraped and maintained by entities in the west. Whereas in many settings in the climate realm, for example, you don't have data that's that large nor do you have the capability to maintain it. But then when you make the assumption that large data and larger models are sort of the way to progress AI and machine learning, which is an implicit it is an assumption that is created by virtue of who it is who's doing it. Now then you also create all these human costs, all these hidden costs that are really important to take into account.And so I think really what has to happen is that and this is sort of along this point of also what can we do at a policy level to sort of align the use of AI with broader climate goals: I think we really need to think about what it means to develop AI in a way that is actually serving the needs of people around the world, which doesn't always mean biggest data AI. There are other ways to do AI and where the applications are ones where we're also picking in ways that drive the development of AI in these directions. So if you think about the development of AI for power grids, you're going to think about robustness and safety critical aspects differently than if you're looking at other areas.And that's going to shape how AI itself moves forward and what other domains it immediately has benefits for. And so this just integration of climate and equity considerations more deeply into AI strategies in a way that should then inform funding programs and incentive schemes and the creation of infrastructure and all of that is going to be really important.David RobertsThank you so much for this. This is really helpful for me to wrap my head around all this. And it just highlights again the fact that I emphasize over and over on this pod, which is it really seems like we are on the cusp of a wild wild time to be alive, to put it as bluntly as possible. Like, we're going to see some crazy stuff in our lifetime. Thank you for helping get our heads around, at least, how that's shaping up so far, so Priya Donti, thank you so much for coming and sharing.Priya DontiThanks so much.David RobertsThank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's Volts.wtf so that I can continue doing this work. Thank you so much and I'll see you next time. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.volts.wtf/subscribe

In this episode, Anthony Wang, co-founder of ETFuels, describes his company’s business model of using renewable energy to make green hydrogen, then using the hydrogen to make carbon-neutral methanol.(PDF transcript)(Active transcript)Text transcript:David RobertsAnthony Wang, a mechanical engineer by training, spent years as a researcher on hydrogen technologies. He worked with governments to develop policy and infrastructure plans — he was project manager on the EU's big hydrogen backbone project — and with private companies like Total and Shell to develop hydrogen technology roadmaps. He has authored or co-authored several industry-defining reports on hydrogen and been cited in countless publications.A few years ago, he decided to throw his hat in the ring and try to actually build hydrogen projects in the real world. All his research and contacts in the energy world led him to a very specific — and, to me, extremely intriguing — business model.ETFuels, the company he co-founded, develops projects that couple giant off-grid renewable energy installations with hydrogen electrolyzers; it then uses the resulting green hydrogen to synthesize carbon-neutral liquid fuels. (First up is methanol for shipping, but the company plans to branch out into other e-fuels.)This model somehow manages to implicate half the stuff I’m interested in these days — green hydrogen, markets for hydrogen fuels, off-grid renewables, coupling renewables directly with industrial loads — so I was eager to talk with Wang about it. We dug into the limits of “electrify everything,” the difficulty of transporting hydrogen, and the economics of e-fuels, among other things.This one gets fairly deep in the weeds, but if you find the real-world challenges of developing clean-energy projects interesting, you don’t want to miss it. All right, then, with no further ado, Anthony Wang. Welcome to Volts. Thanks so much for coming.Anthony WangThank you so much for having me, David.David RobertsSo you were sort of recommended to me as somebody who knows a lot about hydrogen, about sort of green hydrogen, the markets. I know you've worked with public on policy roadmaps. I know you've worked with private companies on technology roadmaps. So I know you've given a lot of thought and sort of analysis to the green hydrogen phenomenon, the green hydrogen market. And you settled when you decided to start a company of your own, you co-founded this company, ETFuels. You settled on a very particular business model, which I just find sort of fascinating as it sort of implicates half the things I'm interested in these days in the energy world.So I wanted to just run through it with you and talk about why you made the choices you did and get into some of the bigger issues that way. So just for listeners' benefit, the idea here is you find a big piece of land somewhere out in the middle of nowhere. You build a bunch of renewable energy, mostly solar, maybe some wind. Instead of hooking the renewable energy up to a grid, you pipe it directly into electrolyzers and make green hydrogen out of it. And then instead of exporting the green hydrogen or selling the green hydrogen, you use the green hydrogen, combine it with CO2 to make methanol, basically, carbon-neutral methanol, which you are then going to sell to shipping companies. So that's a big puzzle. That's a big puzzle with lots of pieces put together. So I want to kind of start at the front end of it. My intuitive reaction to this is you're taking valuable renewable energy and then you're converting it to hydrogen, you lose a lot in that conversion, and then you convert it again to methanol and you lose a lot in that conversion as well. It sounds sort of inefficient.So the question comes up like, why not just sell the renewable energy? So why off-grid in the first place?Anthony WangFor us, obviously, it depends where you're talking in the world, right? So renewable energy, if you can get it connected to the grid, you're completely right, it's extremely valuable. I mean, you've seen what prices of power have done in the last couple of years in Europe and in the US. And if you can use it to electrify your vehicles or heat up a heat pump, that's a very good use of that renewable energy. That said, there are many places in the world where solar and wind, on a levelized cost of production basis, are the lowest cost sources of energy we have.And on top of that, most of these locations are not connected to grids. And so one question that always puzzled me a bit was everyone's talking about renewable energy getting cheaper and cheaper and being the lowest cost source there is. So why, why aren't we seeing that being reflected at all in, in the prices that we see a) on the wholesale market, and b) ultimately on our bills at the end of the month? And thought a lot about this, and I'm not an economist, but it does seem to me that while we've got very good at producing renewable energy in a very cheap way, I'd argue it's the cheapest that we've got.We seem to have made a lot less progress in transporting, storing and balancing that renewable energy in a way that meets the consumer when they need it, where they need it. We know also that the energy transition is going to put this massive strain on power grids. Today we transport about 20% of our final energy through the grid. And in a fully decarbonized system, I mean, depending who you talk to, that number should be going up to 60, 70, 80%. We should electrify as much as we can. But that also means that we need about three, four, five times the number of cables, transformers and substations.And right now the grid does not seem to be set up to deliver that. And so we wanted to marry that problem in a way with an opportunity that we saw in producing hydrogen. And obviously, when you lose 30% through energy, conversion losses. That's a huge deal if your power is super valuable. It's a lot less of a big deal when your power is virtually free, depending on where you are.David RobertsSo sort of to summarize that renewable energy itself at the point of production is super cheap, but all these balance of system costs, mainly transmission and distribution, end up boosting the cost anyway. So your idea is just to use the cheap renewable energy and avoid all those other costs. Basically just use the cheap energy directly and not have to pay those additional costs?Anthony WangYeah, exactly. And cost is quite a simple way of capturing it. But there's lots of other things right in projects it's also time. The biggest risk in developing renewable projects is often getting the grid connection permit. I think, not to bash too much on the grids, I've got lots of good friends there, but the numbers speak for this. So if you look at the US, I think the Berkeley National Lab found there's a two gigawatt backlog or 2000 gigawatts, sorry, of PV, wind and storage.David RobertsYeah. Terawatts.Anthony WangTerawatts, exactly. Which is like almost double of the installed capacity base today. And you see similar numbers in Europe. And the cost of interconnection, the deposits that developers are asked to put down are twice what they used to be. They can be almost as big as your CapEx of your solar project. So it's lots of things that have come together that are just making it very difficult to connect the phenomenal amounts of renewables that are available to the demand where it is.David RobertsSo, I'm curious how you see this playing out. Because the enthusiasm is for electrifying everything and as you say, that's going to mean like four or five times our grid capacity and nowhere that I know of is a shining example of how to build grid capacity that much, that fast. I don't know that anyone's doing it. So, do you think that is going to be a serious constraint at the macro level on electrifying everything? Do you think that's going to push a lot of activities to this sort of off-grid model?Anthony WangWe hope so. At ETFuels we're definitely pushing it. Look, I've got nothing against the electrify narrative. I think it makes total sense and where we can, we should. But the reality is that it's incredibly difficult. I mean, we're finding this ourselves. We're trying to develop projects which are in the middle of nowhere. And even there, permitting and consent can be a challenge. So, imagine building a transport cable that crosses the entire country. These transmission highways in Europe, we're talking about the European super grid. Governments are trying to kind of coordinate about who gets what space in the North Sea.We're talking about kind of hydrogen backbones that should cover the entire continent. And you can just see the political and practical implementation challenge of doing projects like that I think. I was working closely on a hydrogen pipeline project between Spain and France, these countries putting a pipe through the Pyrenees. I think now they've landed on kind of putting it through the Mediterranean Sea and said, you see presidents shaking hands about which pipelines should happen and then it still takes eight, ten, twelve years before they're actually implemented. So, I think it's a question of let's do everything as much as we can and whichever one gets to market first, you should have some merit to that.David RobertsRegular listeners will know that. I'm sort of fascinated by this question. We had John O'Donnell from Rondo, the heat battery company on and that's sort of his thesis of his company is kind of the same logic. The grid constraints are going to push a lot of renewables off-grid. Basically, they're going to be coupled directly with industrial applications and just skip all the grid stuff, which I find a fascinating trend. That's one of the reasons your kind of business model caught my eye. So then you're generating all this variable renewable energy which notoriously comes and goes, waxes and wanes, sort of out of your control and you're using it to make green hydrogen.So part of the conventional wisdom that I always hear is that's a bad match because electrolyzers need to be run a lot of the time to pay off. Basically to be worth the investment, they need what's called a high capacity factor. And if they're sort of tied to variable renewables, how do you think about that problem? Have you thought about putting anything in between them? This is the heat battery question again. Have you thought about putting anything in between them to smooth the supply of the energy to the electrolyzers? Or is a lower capacity factor just a cost you think is worth bearing?Anthony WangYeah, a really good question. Obviously when we started the business that was probably the first question that we looked into because obviously we're only doing this because we think that we have a commercially viable proposition and we can provide hydrogen at lower cost than what is currently available on the market. And fundamentally when you look at this equation, you're kind of balancing three variables, right? You've got on the one hand, your cost of power. Secondly, you've got the number of hours that you're able to run your kit on that power, which obviously is lower with renewables.And then the third is just the cost of the kit itself. So let's say the CapEx of the electrolyzer and the cost of balancing the power. And when we look at modeling this out across the year, there are places in Europe, in the world where your renewable energy wouldn't be producing often enough for this to be worth it, right? So if you only have a solar production model in the north of Europe, then it's probably not going to work. You can't run your electrolyzer for 1000 hours a year and hope it to make money but there are also places where it definitely can work.And you're seeing lots of projects these days which actually combine solar and wind together in these types of hybrid configurations. And that's useful, one because they're not entirely I mean, so wind is a bit more expensive, but it runs a bit more often. But then on top of that, depending on where you are and there are special deserts where this is particularly the case where the wind and solar production hours actually very anticorrelate very well, where you essentially have solar during the day and then wind which mainly blows at night, not exclusively, but mainly at night. And when you combine those two, you can get very, very steady profiles up to 5500 hours a year of essentially base load production.And when you spread that across an electrolyzer, and especially obviously today electrolyzers are still quite expensive, but going forward their cost will come down. You'll see that the numbers actually pan out very well. And when we've done the math, we come to conclusions where depending on the power that you're using but if you're comparing a hybrid solar wind project in, let's say, the deserts of Chile or in the Middle East or in Western Australia, you can easily get to production costs of hydrogen that are 40% lower than if you were using grid connected power, paying essentially wholesale prices in Northern Europe. So that's on the economic side.Then there's of course the question around can the electrolyzer even run flexibly?David RobertsRight.Anthony WangAnd this is a bit more of a technical question. Obviously, you've got different technologies. You've got PEM, so the Proton Exchange Membrane electrolysis, and you've got alkaline ones. PEM is more flexible. But even the latest kind of pressurized alkaline models are able to run flexibly depending on their ramp rate. The specific model, you may need to add a small battery in between. But in principle you don't need to run, especially if you got 6000 full load hours from your renewables. You're mainly looking at balancing on the kind of second to minute level and the technologies that are on the market today can handle that.So you don't need any additional storage. It's more of just a pure economic thing. If your power price is low enough and your hours are good enough, then you can make it work.David RobertsRight. So two things: You go to places where a hybrid renewable system can actually reach relatively steady production and then you go to places where the power is super, super cheap. So what about electrolyzers then? Let's talk about electrolyzers because you're saying you're going to produce green hydrogen that's cheaper than what's on the market. Is that purely because the power you're making it with is going to be cheaper? Or is there something about your electrolyzers that is special?Anthony WangYeah, and just to clarify, so when we say our green hydrogen is cheaper, I'm comparing to other green hydrogen projects, not the fossil hydrogen projects that are of course hydrogen that's on the market.David RobertsBrown or —Anthony WangYeah, exactly.David Robertsgray or whatever the hell.Anthony WangSo, that stuff's definitely cheaper at the moment. So for us, the innovation is not in the electrolyzer technology itself. We're not an equipment supplier or manufacturer with our own technology. Our development IP, I suppose, is in the integration of the different technologies. So we haven't really spoken about the methanol component, we'll get there. But what we essentially do is we find the optimal end-to-end project configuration that makes the economics work for the final offtaker. Because we start with what is the price that we need to hit for our final product, which is methanol, we'll talk about, it can be a bankable commercially viable product.And then we work backwards. So then we reverse engineer. Okay, what does that mean in terms of the electrolyzer size? What does that mean in terms of the hydrogen storage size? What does that mean in terms of the solar to wind ratio? What does that mean in terms of the battery if you need to add one? And so what we've done is we've optimized that end to end. And what you'll see is that you might have to do some slightly unintuitive sizing decisions from an engineering perspective. So that's kind of where our added value sits. And also just in terms of the development of those individual pieces of the project and pushing them forward at the same time.David RobertsYeah, I'm wondering how much now because even if you have a hybrid renewable system, I'm wondering how much sort of overbuilding you do to try to boost that capacity factor. Like are you overbuilding and throwing away a lot of power just because it's so cheap?Anthony WangYeah, we do a little bit of that. So maybe a couple of things. So a typical project for us, what that looks like we're actually developing in Europe and in the US. So in the US, a site will be very big, 8000 acres, which is 8000 football pitches. European ones, I think the American ones are half the size it's like 8000 ... Anyway, you get the point. It's huge. And most of that's earmarked for onshore wind. So about 6000 acres is onshore. Turbines are spaced far apart, so you need a lot of land. And the remaining 2000 acres is a mix of solar PV and the process plant itself.And that will give you about, I mean, these are rough numbers, but about 200 to 300 megawatt of onshore wind, one to 200 megawatt of solar PV. So you're looking at a combination of, let's say 400 renewables. And then we would probably put an electrolyzer that's around half the capacity next to that. So a 200 megawatt input electrolyzer. And that sounds like a very big delta. But actually, if you look at lots of the studies that have been done, they come to similar conclusions because you don't end up curtailing anywhere near half of the power you end up curtailing only a fraction of what you produce because there's only very few hours where both the solar and the wind are producing at peak.David RobertsRight.Anthony WangMaybe just to complete the picture of the project. So that produces about 20,000 tons of hydrogen a year, depending on your load factor, which is a lot of hydrogen. That's I think the equivalent of about 30'000 to 40,000 Tesla Model 3 batteries in a day that's getting produced.David RobertsSo the electrolyzer part to you is mostly just a commodity at this point. When you're looking at big cost centers like the big CapEx and OpEx costs, where are the big costs here? Like, are the electrolyzers themselves a big cost center or is it all down to kind of the cost of the power? Is that the biggest variable?Anthony WangIt's about 50/50. I mean, for us, we have kind of a renewables plant or part and then a process part, and it's about 50/50 between the two, the electrolyzer representing the main component of the process part. We've been doing a lot of, say, electrolyzer shopping in the last couple of months and you're probably wondering how that's going.David RobertsI am quite curious about what you're seeing out there in electrolyzer land.Anthony WangYeah, the reality is no one has actually built and constructed a 200 megawatt electrolyzer to date. It's not because electrolyzers are a risky technology, we've had them for hundreds of years. But at the scale that we're talking, we haven't really got that much experience. Even the biggest technology OEMs don't. And so as much as there is a big boom in the hydrogen space, I think for me personally, it's been quite a sobering experience being in the market, actually trying to procure these pieces of equipment because —David RobertsIs the hype getting a little out ahead of where the market is?Anthony WangObviously there's the hype and then there's the reality of getting things done on the ground. It's not that I'm disillusioned by what I've seen. It's more that you just realize that there are so many practical implementation considerations that you haven't thought of, right. Well, one is on pricing, obviously, because there's very little, very few of these projects have happened. There's not that much price liquidity and so no one really knows how much this stuff costs. Not even the EPCs who are meant to build this really know. So everyone's trying to figure it out. People are also aware that there are subsidies, so everyone's trying to make sure that they don't leave a penny on the table in terms of how they price their kit.And obviously you can imagine if everyone does that, then your economics go out the window. So that's on pricing and all the electrolyzer OEMs know the game and they're kind of looking to find a way to play into that. And then in terms of the actual technical and implementation challenges, ultimately this is going to be a process plant, right. This project is going to look a bit like a refinery. That means that every single valve needs to be lined up, every single power cable needs to be at the right voltage. And especially in our case, because we're off grid, for example, when you try to run your entire renewables to electrolyzer without — in the engineering terms, I think they call it like clock — you don't have a base frequency that you can follow, you end up having to create your own kind of grid stability. And that brings it with a bunch of challenges around frequency, voltages, harmonics.David RobertsRight? You're not getting any of those grid services. You kind of have to do all that yourselves.Anthony WangYeah, so turbines, usually they're connected to the grid, so they just follow the frequency of the grid. Whereas when you don't have that, you need to create it yourself and then your electrolyzer is there, kind of disturbing it a bit because it's not entirely efficient. And so there's lots of day-to-day engineering challenges that we need to overcome that, I at least, had not expected when we started this.David RobertsYeah, it does kind of seem like the mother of all optimization challenges you've taken on here. There's like so many variables moving at once. So you feed this cheap power into electrolyzers and just one last question about electrolyzers. Just from looking around in the market and your general sense of things, are you anticipating or do you feel like the sort of market is anticipating, substantial reduction in those costs or is that just kind of a fixed piece in the middle of this puzzle?Anthony WangYeah, good question. Obviously, when I speak with our suppliers, I always ask them because I hope that the prices that they give me today are not reflective of where they hope things will end up in the future. So today, they're obviously not pricing in that cost reduction. That said, all of them are very optimistic about the price reduction and usually, especially on the PEM side. I mean, when you talk to the PEM electrolyzer suppliers, they tell you that the reason they chose that technology is because it just has a lot more cost reduction potential.And you've got lots of levers there, right? You've got the raw materials themselves switching from the very precious ones to the slightly more common ones and that'll obviously reduce the cost. Then the second one is purely in terms of the design. So lots of the OEMs are trying to figure out ways to modularize not just the stacks and the core kind of arrays of the electrolyzer so the area where the hydrogen gets produced, but also the balance of system and the balance around that stack. So the purifiers, the transformers, rectifiers.David RobertsRight. All that stuff is still pretty bespoke at this point, right, for big electrolyzers?Anthony WangYeah, it is. And this is where the traditional OEM kind of equipment manufacturing model slightly overlaps with what traditionally an engineering company would have done. So the big EPCs would design stuff and engineer stuff to order rather than having prefabricated productized modules. But what you're seeing is that the intent is for electrolyzers to really follow what wind and solar have done, where in the future, if you need an electrolyzer project, you're not having to engineer for a year to find the right size of purifying tank. But you can just call up an OEM and they'll deliver you something that essentially comes out of a box.I mean, I'm simplifying, but that's the idea.David RobertsYeah, something containerized.Anthony WangYeah, exactly.David RobertsAnd if those cost drops manifest, will that be a substantial piece of making this kind of model viable in more places? In other words, is that a big lever or how big is that electrolyzer cost relative to say, the renewables on one side and the methanol on the other?Anthony WangYeah, we have our projections for this obviously. So we have our power part and our electrolyzer part. Obviously, we're more optimistic about the electrolyzer part coming down further. We don't expect renewable. I mean, there may be perovskite solar panels, you may have some thought on that, David, but on the renewable side, things will happen as they do. On the electrolyzer side, obviously, this is a huge part because when you think about that equation of cost of power, cost of the electrolyzer and then the number of hours as you reduce the fixed cost of your electrolyzer, the incremental impact of your cheap power just becomes even greater.So all the benefits that you get from going to the cheapest places in the world so your windy deserts just get magnified and you will get to a point where whereas today you use your power, let's say it's 50 kilowatt hours per kilogram of power that you need to make hydrogen. That efficiency conversion factor, when you reduce the cost of the electrolyzer, it'll make a huge difference to the economics for sure. We're very bullish on that and we're hoping that those costs come down but we're not relying on it. And our first project probably won't be benefiting from a lot of those cost reductions.David RobertsRight. And of course, there's also just scale and learning.Anthony WangYeah, of course.David RobertsJust the natural cost declines that come with more people buying more electrolyzers which I assume is going to be happening soon. So then you synthesize this green hydrogen and then the question is why not just sell the hydrogen? Why not sell the green hydrogen? It's pretty precious these days, a lot of people want it. Why not pipe or truck or however one carries hydrogen to customers? Why the third step?Anthony WangWhen we started this business we probably thought of two main challenges. One was excessive production costs and then the second was kind of the midstream transport challenges. And on the production costs, we've kind of covered that but to the midstream challenges. So maybe just as a bit of context. I spent my entire career in hydrogen and green molecules, working with power utilities, oil and gas companies. And at one point I actually led a project called the European Hydrogen Backbone, which was an initiative by the gas TSOs, the pipeline network operators in Europe to try to repurpose their pipelines from natural gas to hydrogen.I'm a mechanical engineer by training. I spent a lot of time doing hydraulic modeling of pipelines and compressors at the time, and I learned quite quickly that hydrogen is a relatively leaky gas. It's not the easiest to move around, and it's also the reason that we don't really transport or store it at large scale today. It's not that you can't do it. You can. But the economics and the practical details of implementing it become quite challenging.David RobertsYeah, just to pause there since you were just talking about having studied it, because I'm really interested in this question. When gas infrastructure companies talk about this, I've seen two things. One, I've seen mixing some hydrogen in, right, just sort of lower the carbon intensity. And then there's discussion of just turning the infrastructure over to hydrogen entirely. And my question is, just from an engineering standpoint, are those pipes ready for hydrogen? It seems like hydrogen is a lot harder to hold onto than natural gas. And there's thousands of miles of these pipes. Are they just going to work or is this going to be a thing where you have to go through the whole system and sort of fortify it?Anthony WangYeah, it's a good question. And I mean, just on blending and repurposing. So in Europe, the discussion is mainly on repurposing. So fully converting, not blending hydrogen into gas pipelines. I think it's a bit depending on the political environment where you are in Europe, blending is not really seen as a viable solution. The energy impact is tiny because hydrogen is less dense than natural gas. So when you blend like 10%, I mean, there's only a fraction of that on an energy basis.David RobertsYes, I mean, I think it's just a political fig leaf here. I'm sure it'll go away once the practical challenges become more clear here too, I think. But at least right now, natural gas companies are kind of waving it around as one of their "Please don't kill us" ideas.Anthony WangYeah, that's on blending. Just to clarify on the technical viability of repurposing, I mean, in Europe, they've actually done a lot of work on this and a lot of good work. I mean, the German TSOs have just had DNV GL, a very reputable engineering company, look at this and they essentially conclude that just on this, you do need to actually go through each single pipe and look at whether it's ready or not. So it does take a lot of work to do. But in Europe, the pipelines are in a very good state and you can repurpose them, but it will come at a cost. Mainly, at least currently, with the way that the codes are set up, is that you need to derate them. Which means that whatever pressure you are operating the natural gas pipeline at, if you want to operate it for purely hydrogen under the current safety standards, you have to lower the pressure. And when you look at the hydraulics of hydrogen, you really don't want to be piping it at low pressure because it just becomes very expensive. And so on the per kilometer or mile transported per megawatt hour, it becomes quite expensive.David RobertsIt's just more manageable at high pressure.Anthony WangWell, you want to store it at high p... So because hydrogen is a lot less energy dense than natural gas, to get the same energy content throughput, you need to compress it more and transport it at much higher velocities. So when you don't do that, you end up, kind of like, transporting hydrogen, but very slowly. It's a bit like a congested motorway. And so in terms of value for money, obviously you get a lot less throughput and capacity of transport. That's the main reason.David RobertsDo you think, I mean, in Europe, I suppose, is probably the most promising place of anywhere, that this is actually going to happen on a timeline that is meaningful? Or alternatively, are a lot of green hydrogen projects going to end up doing what you're doing, which is basically being off the hydrogen grid, converting hydrogen before you ship it out? I'm sure there'll be some of both. But how bullish are you on hydrogen infrastructure generally? Pipeline infrastructure?Anthony WangWell, we've not bet our company on it. That said, look, I mean, I wish them the best, right? Obviously it's a hugely ambitious project and I think that they're making progress. But ultimately I wouldn't want to for our projects and the ones that we're trying to raise financing for. The argument that you've got a business case because 5-10 years down the line there may be a hydrogen pipeline that comes in and it's the same for CO2 infrastructure, really. I mean, it's just not going to fly when it comes to raising debt financing for a project of this size.David RobertsAnd there's no practical way for you to build a pipeline even if you wanted to. So are there even alternative ways of transporting green hydrogen that are practical at all? Or is it pipelines or nothing?Anthony WangAt the scale that we're talking now — hydrogen is already transported in trucks and you can put it in tanks and stuff and that's usually compressed, you could liquefy it as well, but that's even more energy lossy. You end up having to compress it. So you pay for the compressors, which are expensive, or the liquefaction, and then it's again not very dense, so you end up having to pay a lot for the transport itself — and at the scale that we're talking, 20,000 tons a year, that's not something that you would want to be trucking around. Also from a safety perspective, I'm sure that's not ideal and lots of local authorities would not be very happy with that.David RobertsYeah, that's a lot of trucks.Anthony WangYeah.David RobertsSo it's just not practical, basically, at this point to build green hydrogen out in the middle of nowhere where the renewables are good.Anthony WangRight, yeah, exactly. And that's also why I think today most of the hydrogen projects that are actually getting somewhere and having traction are the ones that are near industrial clusters and by ports and next to an existing refinery, which makes total sense. Right. Decarbonize the existing hydrogen that you have. But that's not going to cut it when you're trying to integrate renewables from the best regions into where the demand sinks are.David RobertsRight. Yeah. Are there even exclusively hydrogen pipelines now? Is there much of that infrastructure now?Anthony WangSo it does exist. So there is what's already available and there are industrial clusters and there are pure hydrogen pipelines. They're mainly operated by the industrial gas company. So the Air Liquides, the Air Products of the world, but these tend to be quite small. So these are 10-20 inch pipelines that aren't meant to transport across long distances. These are mainly pipes to bring it from one side of the industrial site to the other or as a backup. I mean, they work, they're totally safe and people have experience building them. But at the scale that the natural gas pipeline companies are thinking, which is like 48-inch huge cross country type pipelines, we don't have anything at scale or that's commercially kind of running.But the TSOs, especially in Europe, are running pilots and trials. And I think there's one connecting Germany and France. There's a bunch of projects in the Netherlands. I know that the Dutch TSO is very active on this, so there's definitely stuff coming. But as to when and where exactly it'll be up and running, I don't know.David RobertsRight. And I'm thinking of the US. We have this huge hydrogen hub program. I'm sure you're familiar with it. It's a similar idea, building these huge industrial clusters. And I guess we're just going to have to build pipelines for all those in the US. Because there's not sort of curious about site selection for those too.Anthony WangYeah. As a principle, it's very difficult as an individual project developer to make a pipeline like this work. I mean, it really requires everyone to come together and the stars to align. And then you often need — this is why these companies are typically regulated, usually is, because that's the only way to finance it. And so I know we've looked at, for example, using pipeline transport, and as an individual company, there's no business case for building a pipe just for your own uses. It would have to be because you pool into it with other producers and off takers.David RobertsA little coordinated industrial policy to build that infrastructure. So you make the green hydrogen and then you combine the green hydrogen with CO2, basically to make methanol. So my first question about that is, where do you get the CO2? Because you've dodged the importing and exporting electricity problem, you've dodged the importing and exporting green hydrogen problem, but now you've got an importing CO2 problem. I guess my question is, how big of a problem is that? How available is CO2? How easy is it to get it where you need it?Anthony WangYeah, when we looked at this, it was like we kind of put the main energy carriers and commodities, we stack rank them electricity, hydrogen, CO2, methanol. Which one would you rather transport and which one would you rather store?David RobertsRight.Anthony WangAnd kind of where you end up is you really don't want to transport electricity if you've not got an existing cable network, you don't really want to transport hydrogen. CO2 is a bit easier. I mean, it's still not ideal. It's an industrial gas. You need to liquefy it. But it's better than hydrogen. Much better. But the best thing to transport in store is methanol because it's liquid at room temperature. So what we try to do is you try to bring everything into our sites and then make methanol there, and then ultimately transport the methanol out to a port and on the CO2.So we have two options, really. One is to work with industrial point sources and we try to work with companies who have either unavoidable process emissions so cement companies, or biogenic sources of industrial CO2. So pulp and paper.David RobertsSo this is carbon capture you're talking about CCS.Anthony WangYeah. So this is carbon captured.David RobertsIs there enough of that to supply you?Anthony WangSo, obviously, we've got quite a big carbon CO2 supply problem. So from an availability in the flu gases, for sure, obviously, I think you're asking about the carbon capture itself.David RobertsRight. Is enough being captured to supply a substantial market?Anthony WangInterestingly for us, when we started this, we looked at the market and said, okay, very few are actually capturing the carbon. But when we spoke to a lot of these potential CO2 capture companies and suppliers, to our surprise, lots of them already had been doing lots of engineering study and were very keen to implement this technology. The problem for them is they had nothing to do with the CO2. Interestingly, for a cement company, especially the ones that we spoke to in Europe, they're under such immense pressure with the EUTS, the European Carbon Cap and Trade system, where they're essentially, once that's in full swing, their product price doubles because it's one ton of CO2 per ton of cement.Cement sells for 50 euro per ton. So you can do the math. Right. So for them, they had to do something. So they've been studying this and looking to pull the trigger on some investment decisions.David RobertsI thought there were industrial uses of CO2. I thought there was a market there.Anthony WangYeah, CO2 is already used today for greenhouses, but at a very small scale. And usually, the CO2 is not coming from big industrial point sources, although there are some. So there's some ammonia plants that already capture CO2. So that's one is on the industrial point source. The other source that we think is a very good option and where we have lots of discussions, is with biomass, often anaerobic digestion. So if you look at RNG, what you have actually is a very pure source of CO2, because in the process of making RNG, what you do is you essentially purify RNG from biogas.And biogas is about 50% RNG and 50% CO2. So in the process of purifying RNG, you actually inadvertently purify CO2. But because there is no offtake for it, the CO2 is currently vented. People don't make a big deal out of it because it's biogenic CO2, right, because it comes from dairy manure or agricultural residue. But it's still right. It's CO2 that's vented into the atmosphere, which we could at that point, you're not really talking about carbon capture, right? It's just connecting it to a pipe because it's already pure. You don't need to scrub it or clean it.And that CO2 is a very good source for us because, a), it's very, very pure, so it's cheap, and b), it's obviously biogenic.David RobertsWell, if they were going to throw it away, if you hadn't come along, I would imagine they're willing to sell it to you quite cheaply.Anthony WangYeah, exactly.David RobertsSo in terms of just sort of absolute numbers, you're not worried about supply of CO2, you think you have enough CO2 to go on for a while or what's your outlook on that?Anthony WangYeah, so, I mean, just to give you an example, right, we have an agreement with Cemex, a major cement company, and their cement plant produces 450,000 tons of CO2. And one of our projects takes 150,000. So three of our projects are needed to decarbonize one cement plant, just to give you a sense of the scale. And then these guys have tens of these around the world, and that's just one company. So in terms of scale, we're not too worried about the CO2.David RobertsRight. So in terms of its availability in general, clearly there's a lot of it. But in terms of the mechanics of getting it to you, that's not a bottleneck at all. How does it come to you, by the way? Does it come to you in a truck?Anthony WangSo we use a combination of rail and trucks. So both CO2 and methanol, we rail and truck. Typically, what we find is that actually the CO2 producers or industrial facilities are again close to ports where traditional industries are. And so what we end up doing is we use the same infrastructure, so the same rails and same train rail, cars and trucks to import the CO2 and then export the methanol. And it's a similar principle where we use tankers. So you liquefy the CO2, put it on a train and then the methanol is already liquid and you export it out.And so that infrastructure all exists and it's just a matter of connecting to the right infrastructure.David RobertsAnd to be clear, you intend to only use captured CO2, not like natural CO2 from underground, because your sort of process is only carbon neutral if you're using the carbon that's been captured somewhere else.Anthony WangYeah, exactly. And I mean, there's lots of debate and discussion about what exactly is good CO2. Maybe that's a rabbit hole that we don't have time to dive into.David RobertsHave they made up a bunch of colors for that yet?Anthony WangWouldn't be surprised if they're getting to that stage. So in Europe they call it biogenic CO2, which ultimately means that it has to be CO2 with a short cycle. So it can't be CO2 that's from the ground basically. Right, but obviously, even with things like processed CO2, you can argue how green is that compared to if it was from agricultural residue? But then you can argue that some of the biomass that's being used today for power and heat production from wood in the Amazon forest isn't great either, so it's a pretty big topic.David RobertsOr direct air capture. Is direct air capture even enough of a thing for you to have thought about it? Or is that still just a gleam in somebody's eye, more or less market wise?Anthony WangYeah, it's not competitive at the moment, so obviously for us it'll be an option in the future. Today there is not nearly enough scale and it's not competitive enough for us to consider it. But I mean, I'm definitely keeping a close eye on it, but for now, we stick to the industrial point sources. Obviously, it would take out a lot of the transport considerations because we could power the direct air capture with our own renewables. So we could just put everything in the same location.David RobertsYeah, you could make your own CO2.Anthony WangExactly.David RobertsThat would add another piece to the optimization puzzle. You're going to have to bring AI in to deal with all this. So I think my knowledge of e-fuels is pretty sketchy, as I think most people's are. My understanding is that if you have hydrogen and CO2, there's a number of different fuels you can make. So of all the sort of possible fuel choices, why methanol? Is it easier, process-wise, to make it, or is it something about the market for it is better, or what are the sort of considerations?Anthony WangYeah, for sure. Obviously we had to pick one. We looked at the hydrogen market and if you look at where most experts think hydrogen will be used today and likely in the future, it's mainly as a feedstock. So it's for ammonia, methanol, steel and sustainable aviation fuel (SAF). And so those are the main kind of derivatives that we considered. Obviously we looked at the technical side, so we've talked a bit about the transport options and methanol kind of comes out on top. There ammonia, better than hydrogen, but still quite a toxic gas as well. We had to pick one to start with for our first project.But I would like to add we're called ETFuels, not ET Green Methanol for a reason, not only because the latter is not very catchy, but also because we see our off-grid production model as a way to scale into a multi-fuel future. But for our first one, we chose methanol. Again, partially for technical reasons, but also part of it was just timing, because this was around the time that the big Danish shipping company called Mersk made a huge announcement that they essentially committed to methanol as their decarbonization fuel of choice. And they had put in an order for eight methanol-fueled vessels at the time.This was a couple of years ago. Obviously, that number of methanol ship orders has grown exponentially since then. Last I checked, in the first half of 2023, methanol vessel orders represented 62% of the order book, outstripping all other fuel types. And so for us, the message from the shipping sector was clear. If we're going to decarbonize and do anything in the next ten years, it has to be methanol, because the ammonia engines just aren't ready yet. So that was quite an obvious one for us. And then on top of that, methanol is already an existing market of 100 million tons a year, used as a chemical feedstock for various plastics and chemical products.So that's kind of the main reason that we went with that fuel.David RobertsSo you chose methanol because it's easy to transport at room temperature and there's a relatively guaranteed market for it, but you think the model, there's nothing about the model that's going to prevent you from moving into other kinds of e-fuels.Anthony WangYeah, exactly. I think one of the reasons the model is attractive, the off-grid model, is because so much of the cost and learnings are applicable to other fuels as well. So obviously the renewables is the same, the hydrogen production is the same, and this is the notion of hydrogen as this platform chemical. And then the final part is, depending on which fuel you go with, is 15-20% of the total CapEx. But you could have a train for ammonia, you could have one for methanol, you could even have one for e-methane, which some people are doing, which is kind of e-RNG.And so for us, it's — obviously we bet on methanol as our first. We think the market is ready there, but ultimately, ammonia might have a big future in shipping as well. And ammonia doesn't have the CO2 problem. So for us, it's a really good way to kind of keep our options open.David RobertsIs making methanol out of hydrogen substantially more or less expensive than making ammonia out of it, or methane? Or are there substantial cost differences in that last piece of the puzzle?Anthony WangSo the main difference is — they're all a bit different. So obviously, ammonia, the big benefit is you don't need CO2. So whatever you were paying for the CO2, you're now no longer paying for.David RobertsBetraying some rank ignorance here, but how on earth do you make hydrogen into ammonia?Anthony WangYou combine it with nitrogen, so you take nitrogen out of the air, so you purify nitrogen and then you run it through a reactor. It's a similar type of synthesis reactor where you basically run your gases at a certain temperature over a catalyst. So for ammonia, it's called the Haber Bosch reaction. For e-methane, it's called the Sabatier reaction. I think the methanol reaction doesn't have a name, but they all have similar principles, which is you put it into a chemical reactor, hydrogen plus some other compound.David RobertsRight, so it's not no, it's very similar.Anthony WangI mean, there are obviously some technical, detailed process differences. So ammonia in terms of reaction, temperature in terms of how well it operates under fluctuating load. So all of these processes, whereas the electrolyzer is very flexible, most of these chemical reaction kind of chemical plants are a lot less flexible because you need to maintain the temperature and the pressure. And it's much more like a refinery than an electrical kind of process. And then for methane, when you're obviously methanol, the last step is distillation, where you have to separate the methanol from the water, whereas with methane, you're separating a gas from water.So there are some kind of nuanced differences. But in terms of the big picture, I mean, your renewables is the same, your hydrogen is the same, and the last 20% you can kind of flex that if you need to.David RobertsSo in terms of carbon-neutral methanol, for which there is this sort of nascent market just emerging, these shipping companies just sort of getting into this. Are there lots of competitors? Do we know? I mean, is there a good sense yet, like, what it ought to cost? I guess it's far from commoditized at this point. But how mature is that final market? Or is this sort of like everybody's figuring this out as they go?Anthony WangProbably more the latter. I mean, there are definitely competitors. I'd say most e-fuel announcements you see are probably around ammonia because it's just slightly easier because you don't have to source CO2, which is a challenge. So for us, it's a competitive advantage, I think, that we know how to source CO2 and we know our way around that market. On your question around pricing, so of course people are figuring it out. There are a couple of pilot plants. There's a few that have just started, kind of just taken an FID. Orsted has just bought one in Sweden where they've started construction, but they aren't producing yet, so no one really knows how much it's going to cost until it's operational.Obviously, we know, today we would be producing at a price premium to fossil methanol. But that'll be the benchmark is — how many times more expensive are you compared to either fossil methanol or the fuel that you're replacing. So in our case it'll be fuel oil for shipping.David RobertsYeah. I'm guessing you're a lot more expensive than fuel oil at this point.Anthony WangYeah. So at this point we're significantly more expensive. Obviously what gives us comfort is that we're well one is the cost reduction trajectory of the technologies and the learning that we think we will gain and two is our relative cost differential against our direct competitors which we see as green methanol. Right. So we don't think we will be directly competing with fuel oil because one obviously from a regulatory perspective those get treated very differently and all the incentives that a shipping company, especially in Europe, in the US you've got the IRA in Europe there's lots of incentives for fuel switching demand side kind of quotas and ways to benefit.So you only get those if you're to decarbonize fuel. And for us, what gives us comfort is not so much the comparison to fuel oil but the comparison to other green methanol projects. And for us the off-grid nature gives us this competitive pricing advantage because of our cheaper power and that's what allows me to sleep at night.David RobertsWell, one question I have is, what counts exactly as carbon-neutral methanol? Because, as Volts listeners know, because they listen to the hydrogen tax credit episode, the question of what is the carbon intensity of your hydrogen is far from straightforward. And there's a lot of debate now about whether to require it to be off-grid or exactly how to measure the cleanliness of the electricity going into it, et cetera, et cetera. It's a very complicated debate here in the US. I'm sure you're very familiar with it over in Europe too, you are very clearly making carbon-free hydrogen because nothing's more additional than renewables that you are building yourself to attach to your electrolyzers, right.So you clearly pass the bar. But is that same debate live in Europe? Because if people can use cheaper grid renewables I don't know, maybe that actually wouldn't give them a cost advantage. I don't know. But is there debate right now over what counts as e-methanol?Anthony WangYeah, for sure and really good point on the additionality I hadn't mentioned. Thanks, David. It's a big part of why we've chosen this model as well. It's the cost, it's a scale and it's the additionality on the debate around what is green methanol. So for sure, I think in the US it's a bit of a different discussion. There's not really so much a definition of what is green methanol because you make it compete with fossil methanol through the IRA, through the tax credit. In Europe, we've just had a big legislation passed called the Delegated Act for Renewable Fuels of Non-Biological Origin.Anyway, lots of rules kind of were described in that one is for green hydrogen, which is the one that you talked about, which I think is the similar discussion in the States around additionality temporal correlation, geographical correlation, which we comply with. And the second one is around CO2 essentially how you carbon account for the CO2 in a fuel like green methanol. And the European policymakers agreed on that. So the commissioned parliament and so what we have is up until 2040 any CO2 is okay. So that's kind of what they agreed on. And then beyond that, you would need to be either unavoidable process or you need to be biogenic.But for now, their argument is because there is so much CO2 that's kind of going into the atmosphere that we're not decarbonizing — all of those sectors, for those sectors, you can capture the CO2 and use it and it'll qualify as a "renewable fuel of non-biological origin." That's what they call it.David RobertsInteresting. So as I'm thinking about a project like yours in the US in a post-Inflation Reduction Act world, I'm sort of slightly boggled at the number of tax credits or subsidies that you could rack up with this. You could get tax credits for building the renewables, tax credits for green hydrogen which are substantial. I think there's tax credits for using the CO2. I think there's tax credits for the e-fuels. Like every piece of this is going to get money showered on it from the IRA. I'm wondering whether that makes these projects more attractive.I mean it must. And whether you've been thinking about that. And two, just on a more general basis, how you think about subsidies and whether you need them and to what extent this business model relies on them.Anthony WangYeah, we founded the company before the IRA, before all these policy and incentive mechanisms came out. And we founded it because we believe there to be a commercially viable proposition without it. So we didn't create a business that relies on or is reliant on subsidies. I don't think that would make for a very good business.David RobertsWell, there are plenty of them.Anthony WangYeah, I guess so. But I mean, obviously now for us what this means is kind of accelerated our trajectory so we can do things much faster and basically just get going. And obviously we can't not go for them because it'll make us less competitive because our competitors are. In terms of which ones exactly, I mean, we take quite an opportunistic approach. Obviously in the US we'll try to play into the tax credits the extent to which you can, I don't know, what I would call "double dip" in the sense that get benefits from the US credits and then export your fuel to Europe and then get more benefits there from avoiding the EU ETS.I don't think that's entirely clear. I mean, I'd be quite personally, as a taxpayer—if I were a US taxpayer—I'd be a bit skeptical of that. And even as a European one, I'm not sure how comfortable I feel with importing US-made fuel subsidized with US tax credits and then getting another whammy on top of that in Europe. Yeah, but I think that's all to be identified in Europe. Obviously, you've got the innovation funding there's all the onsite measures, which I think are much better. Like for example, the renewable fuel quota. That's a very clean quota for ships where they just have to switch a certain share of their fuel to be green.And then you've got various other kind of incentive schemes, carbon contract for differences, which are meant to be a support mechanism for hydrogen production. And so we'll see for us, basically what it means is that our projects are even more viable than they were a year and a half ago.David RobertsHave you done the math yet on a project with all the IRA subsidies? Because the green hydrogen tax credit is ginormous.Anthony WangYeah, obviously we've done the math just to give you maybe cut some numbers. So the $3 per kilogram hydrogen tax credit translates to about $600 per ton of methanol. And just to give you a sense of fossil methanol, so methanol made from natural gas today, I mean, I haven't checked the latest numbers, but historically it's kind of traded at around $500 per ton. So that's only for your hydrogen. And then on top of that, there is potentially a CO2 credit, which again, the extent to which we can play into that, I don't know. But the CCU tax credit is $60 per ton of CO2.And in terms of when you translate that to methanol, you would get to around $100. You multiply by 1.5. So again, it's a lot of you add it up, you get to like a $700 per ton of methanol tax credit compared to the fossil price of $500.David RobertsIs that enough to erase the delta with the fossil kind?Anthony WangYeah, we'd be in the money for sure.David RobertsI mean, it would be wild to be on the market selling carbon-free methanol that is cheaper than the carbon kind.Anthony WangSo that raises the question is what you're paying fo, right? That's where it's different in the US than in Europe. In the US, essentially that's the mentality, right? You're not trying to sell some different product, you're just trying to sell the same product cheaper. And that's why you need these support schemes to make that work. Whereas in Europe you're essentially saying, well, it's green, so it's okay that it's more expensive, but you have to do it because it's green. So it's kind of a different mentality.David RobertsYeah, there are more sticks in Europe and we're all carrots over here in the US.Anthony WangYeah, but I mean, from a developer and financiers perspective, it's not clear which one is better because obviously with the renewables, the drawback in the States was that one year you had them one year you didn't. Whereas in Europe the demand side signal meant that you had a very kind of fixed base load of demand.David RobertsRight. Yeah, that's interesting. So, the final question is just, it does seem like to some extent this business model is a reaction not to technological factors, but to socioeconomic factors. So, for instance, the limits of the grid and the slowness of getting on the grid, the slowness of interconnection, the lack of hydrogen pipelines, these are kind of bottlenecks or pressures that one can imagine easing over time. Right? One can imagine the grid getting built out more. One can imagine green hydrogen, I don't know, I actually have trouble imagining green hydrogen infrastructure being built. But who knows, it could happen.So, I wonder if those became easier and they were less of pressure points, would some of the rationale for this business model go away?Anthony WangYeah, I'm not sure if I fully agree with that statement. Just from the perspective of — yeah, okay, there are challenges with the incumbents and the pace that they're getting things done. But for us, it's also fundamentally what is a more efficient way to run the energy system. It's not just because it's not being done, we need to find some loophole that can make it work. Fundamentally, you can ask the question if you had a renewable energy system or an energy system that was driven mainly by renewables, is it more efficient to overbuild your grid, to run all that stuff intermittently —I mean, I've been part of grid planning sessions in Europe and when you've got capacity factors of solar of 15% to 20% and wind of 25% to 35%, you have to build an enormous grid to balance that. By the time that you've actually built out the grid to kind of run your power system base load, your balancing cost, sometimes they call it balance of system, basically the cost of all the extra stuff to keep it running becomes quite excessive. So, I think a study by Imperial estimated that that cost would be 50 to 60 pounds per megawatt hour of just pure balancing costs. That's in addition to the renewable costs, which by the way are a lot less cheap in Europe than they are in Chile.And so, you very quickly get to power prices which are much higher than what we are paying today. And then you can wonder, wouldn't it be more efficient if you could import some of that cheap power, put panels where it's sunny or put turbines where it's windy and import the power. And then also the other thing is, does it even make sense to try to aim for this type of base load, supply driven system or should we be running more flexible assets? And in many ways, what we've got is just a flexible asset, right? It's an electrolyzer that follows the renewables.And so, the system benefit of an asset like that is quite big. So, I don't think I fully agree with your framing of the business model. I think there's more to it than just it's a way to bypass all of the slow incumbent infrastructure. But it's definitely a good question and I don't think anyone really knows the answer until we've tried both paths.David RobertsSo, you think that the limits of electrify everything are more than just incidental or contingent? You think we're going to run into these balancing cost issues and it's going to make more sense to run more stuff on liquid e-fuels?Anthony WangNot for everything, obviously. I wouldn't ever buy a diesel car and then hope to ever be able to afford e-diesel rather than an electric car. So, obviously there are time and place for everything. For certain sectors, though, I definitely think, I mean, I'd rather fuel my ship or my airplane with an e-fuel made where renewables are cheap than to try to do that next to Heathrow Airport in London or something like that. So, I think, as always, it depends and we're very targeted in where we go. We're not looking to sell e-fuel to heat homes or do anything like that.It's very targeted to the sectors which are hard to abate and don't have other options.David RobertsThis has been super fascinating. I hope listeners agree. I hope we haven't gone too far down the technical rabbit hole and lost people. But I find this, this is where all the sort of interesting issues in the energy world are hitting the ground, right? Like you're trying to actually do these things. And as, as you said, when you start trying to actually do things, whole different challenges arise and whole different sort of questions arise about optimization and stuff like that. So, super fascinating to walk through this with you. Thanks so much for coming on, Anthony.Anthony WangThanks for having me, David. It was a pleasure.David RobertsThank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf so that I can continue doing this work. Thank you so much and I'll see you next time. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.volts.wtf/subscribe

Unlike other parts of the country, the 11 western US states have not joined together in a regional transmission organization (RTO) to more efficiently and cost-effectively administer their respective electrical transmission systems. In this episode, Michael Wara, director of the Climate and Energy Policy Program at the Stanford Woods Institute for the Environment, discusses the current status of a potential western RTO and the political factors affecting the conversation.(PDF transcript)(Active transcript)Text transcript:David RobertsIn about half the country, power utilities have turned over administration of their electrical transmission systems to regional transmission organizations (RTOs), or what amounts to the same thing, independent system operators (ISOs). RTOs and ISOs oversee wholesale electricity markets and do regional transmission planning, which increases system efficiency and reduces costs for ratepayers.The power utilities in the 11 western US states are not joined together in an RTO. California has its own ISO, but it only covers that one state. In the rest of the region, utilities are islands — they each maintain their own reserves and do their own transmission planning within their own territories. It leads to enormous duplicated efforts and inefficiencies.For years, there has been discussion of creating a western RTO, to bring the western states together to share resources and coordinate transmission planning. Analysts have found that an RTO could save the region’s ratepayers billions of dollars a year.Recently the discussion has begun to heat up again. A regionalization bill in California was tabled this year but promises to return next session. Governor Gavin Newsom expressed his support for the idea. Nonetheless, numerous sticky technical and political issues remain to be hashed out.To explore the promise and risks of a western RTO, I contacted Michael Wara, director of the Climate and Energy Policy Program at the Stanford Woods Institute for the Environment. We discussed the political forces pushing for and against an RTO, the way the west's electrical system has changed since the last time this discussion came up, and incremental steps that can be taken in the direction of greater regional cooperation.All right then, with no further ado, Michael Wara, welcome to Volts. Thank you so much for coming.Michael WaraThanks for having me.David RobertsSo we're here to discuss something that is somewhat complex and rests on a set of concepts that might not be — that everybody might not come in understanding. But because I want to talk about the specifics and I don't just want this to be a 101 kind of thing, I'm going to assume Volts listeners have some basic background. So I think the main thing to know is the US electricity system is sort of divided in two. On the one hand, you have the traditional old school, vertically integrated utilities which own the generation and the transmission and the customer interaction, the whole deal.And then the other half is what's called "deregulated" or "liberalized" or whatever the term is. Basically have created markets, wholesale energy markets, where generators compete and sell into the markets. And then distribution utilities which interact with customers buy power from those markets and sell it to customers. And those areas with energy markets are overseen by organizations called Regional Transmission Operators or sometimes Independent System Operators. RTOs and ISOs, as everyone in our world is so familiar with saying over and over again I'll just use RTO, I think from now on as a shortcut for those. So in these liberalized areas RTOs sort of manage regional transmission planning.And the idea is if a bunch of different utilities can sort of share backup and share reserves and share generally they're going to lower costs for ratepayers. And so there are RTOs in the Midwest, there's one in the Northeast, et cetera. Listeners might be familiar with PJM and MISO. These are all regional transmission operators in various parts of the country. So as it happens, the western states, the eleven western states of the United States are almost all old school vertically integrated utilities which means they operate as islands. There's not a lot of sharing. So California has its own RTO or ISO, in this case California ISO or CAISO, but it only does planning for California.So what we are here to discuss is the long standing discussion about whether the western states should form an RTO of their own, join together into a regional organization so that they can do more of this sharing. That is the question before us. And there are all sorts of ins and outs and details about this but that is the basic background. So maybe the place to start is just at a very general level, sort of abstract level. You could explain what are the advantages of joining an RTO versus just operating as an island? What is the pot of gold at the end of this rainbow?Michael WaraI'd want to start by saying that there are advantages and disadvantages, right? And it's important to be straight about that. I think the key thing for listeners to remember and understand is that the primary mission of an RTO or an ISO is to operate. It's to operate the electricity system in a particular geographic footprint. And in general it is the case that it is more cost effective to operate across a larger footprint. And so a discussion around increasing the size of the California ISO or CAISO is about increasing the operational efficiency of the overall system. What I'd say also is that it's important to think both about the average conditions or kind of the expected conditions and then periods of extreme stress on the system.I guess my view is that the discussions around regionalization or growing the California ISO further outside of its California footprint have really become more important because of the challenges of the reliability that we've had in California and elsewhere. But especially in California over the last several years due to drought, the unavailability of hydro as a result, and the growth of intermittent renewables.David RobertsThe duck curve.Michael WaraThe duck curve.David RobertsThe dreaded duck curve. Yeah. So the idea here is just if you have more states or a wider area involved, you just have a larger pool to draw. And so if you're having a sort of like choke point or grid congestion here or a shortage of power here, there's maybe power over there that you can import just the larger geographic area you're covering, the larger sort of base of power and the larger variety of power sources you're drawing from. And that generally leads to resilience.Michael WaraYeah, I think an intuitive way for people to think about this is kind of national borders and trade, right? If you ship goods across an international border, they have to go through customs, and there are barriers to that. And we have rules about how those barriers are supposed to be under the WTO and other agreements we have with other countries. But it's just harder to ship things internationally than it is to ship something from California to Nevada, because we're all within a free trade zone. And what these ISOs or RTOs really create when they're done well is a free trade zone where electricity can be traded at very low cost.And what that means is that the optimal power plants turn on within a system footprint to meet the electricity demand that exists within that footprint. So that lowers costs because it means that you're not buying something expensive within your little market because it would cost money to get something cheaper that's just across the border.David RobertsRight. So it's just easier to share. And it's also worth saying, all these islanded utilities, the vertically integrated utilities, they're required by law to have a certain amount of backup available, basically resource backup in case of problems. And if you operate in an island, you have to have enough backup for your own island, which is and then the next island over also has to have enough backup for its island, et cetera, et cetera, et cetera. So you end up duplicating efforts over and over and over again. You have sort of like duplicated backups. And what this wider area allows you to do is sort of have a pool of backup, right?So not everybody has to have —Michael WaraThat's right.David Robertsenough to cover, and that also reduces costs. So these are the, I think, the sort of abstract benefits. Like a larger footprint means more sharing, better planning, lower costs. So back in 2016, 2017, there was a bill that came up in California, because at least one pathway to this, the first step would be right now, California's ISO is more or less controlled by California. The governor appoints the members and the California Senate approves them. So it's a very California-centric operation. So if you were going to expand that to incorporate other states, obviously you would have to restructure CAISO, so that it's not California-centric, because, like, other states are not going to join if California completely controls who's on it and how it works.So there was a bill back in 2016, 2017 to restructure CAISO this way, and that sort of prompted a whole round of this discussion back then. So what I thought I would do is sort of throw out at you some of the sort of worries and objections that were voiced back then and then maybe you could tell us, are those worries? Were they valid then and are they valid now? Have things changed, sort of catch us up on sort of stakeholder worries and issues. So I think probably the strongest opposition to the whole notion of regionalization, especially back then, came from unions because California's climate laws have a lot of domestic content requirements, so they require that the power be generated in California, which means a lot of jobs in California, a lot of union jobs in California.And I think the unions worried if we expand the footprint to include multiple states, California will be able to find cheaper power elsewhere and we'll just import it and that will mean fewer jobs here in California. So maybe you could say, was that a valid worry in 2017 and has anything changed now to address that worry?Michael WaraSo that, I think, is a primary worry about this proposal, and it does reflect the desire of the unions in California that have really benefited from the renewable portfolio standard here to make sure that those benefits don't evaporate. And I think it also in less maybe self-interested sense, the cooperation and support of labor unions in California has been critical to the political economy of getting hard bills through the legislature and signed by the governor that have been really important in terms of driving the climate policy situation forward in California. So we don't want to damage that. And the situation in 2017 was that you could build solar in California.If you do that, you have to pay prevailing wage and have an apprenticeship program, which basically means you're hiring unions to do the work. And that is not the case in many neighboring states. And so that was the situation circa 2017, I think there was a legitimate concern about that issue. There was some attempt to kind of massage the legal questions using clever language, which at the time made many of us, I think many of us were skeptical that that language would survive review if challenged. It's notable that the language in the California RPS, which you correctly point out, David, is I don't know if I'd call it protectionist, but it's certainly designed with particular outcomes in mind about where generation gets built, has never been challenged.So fast forward to today and the situation is different in a few respects that I think are worth talking about. The first respect, and this was actually true in 2017, but people didn't focus on it so much, is that we need to be real about who's going to want to join a sort of common electricity market with California. And probably it's not going to be states like Wyoming which are committed to subsidizing their coal-fired power plants as long as possible and in whatever way is legally tolerated by various courts and they also happen to have a really nice wind resource which if it were interconnected to California's grid would be extremely valuable. Rather than try to link up with Wyoming in a market sense what the CAISO is doing is actually building its own transmission line that it will control out to Wyoming to connect with Wyoming Wind.Right? So it's sort of decided that there's not a future where that happens. And I think many of the benefits that were envisioned for kind of out-of-state generation resources circa 16, 17 really depended on this vision where the entire west is in a single RTO. I personally think that's highly unrealistic. It's unrealistic today for two reasons. The first one is what I just mentioned that very conservative states do not want to share power with a very blue state like California. So I think it's unlikely those states are going to want to join whatever the economic benefits.It's a tribal issue. The second issue though is that there's a competing RTO under development in the west now that will be kind of the eastern side of the western interconnect and will involve a lot of these other states. SPP, which is an existing RTO based in Little Rock, is in the pretty advanced stages of getting ready to file with FERC to create an RTO across western states. So that's one set of issues. The big talk back in 16, 17 was "We'll get Wyoming Wind in the CAISO and that's going to really be great for various reasons" which it's still true it would be great to have more of that resource in the electricity mix in California.The other thing though that's changed is federal law: The Inflation Reduction Act passed. The Inflation Reduction Act says that if you want to get the full PTC, the production Tax credit then you need to pay prevailing wage and have an apprenticeship program. Period. Full stop. Starting on January 1 of next year. So any projects that would be a part of the California ISO and hope to receive federal tax credits which are material to the economics of these projects is going to have to pay wages and have unionized labor apprenticeship programs that are very similar to California's. Now the prevailing wage in Nevada or Arizona may be somewhat lower than in Kern County where a lot of the solar gets built in California or in the western part of the Central Valley and in the Westlands Water District.But at least a significant chunk of the kind of economic advantage to building out of state is eliminated by the changes to the Inflation Reduction Act the pro-union measures that the Biden administration has put in place. So I'd say we're actually doing some economic analysis right now to try to understand this with current data but none of the assessments that have been done of the ISO RTO concept and sort of regionalization really take account of this change and it's incredibly important. The unions are still opposed. And that may be the reason why we don't do this.They are very nervous. From the perspective of a California union, it might not matter whether nonunionized labor or a Nevada union construct.David RobertsI was going to say it's not necessarily quiet their worries to say "Oh, these jobs that will be taken from you will be given to a union somewhere else."Michael WaraThis is just anecdotal. But what I've heard is that there aren't actually unionized construction workers in a lot of these neighboring states to California because they're right-to-work states. And so some of what's happening is that in order to qualify for the Inflation Reduction Act tax credit structure, workers from California are being moved to Nevada or other states to construct these facilities. Kind of like man camp style. Because they need to make sure, right, they want to make sure that they check all the boxes to get the full tax credit.David RobertsRight.Michael WaraAnd that's a part of it. And so it's a somewhat fluid situation. I personally can't believe that that sort of approach will be sustained in the long run. But the general picture is that — I guess the other thing I'd say is that and maybe this is a third point I should have said there are three because it was better three. Is that California is running up against the challenges of really achieving the SB 100 objectives. We are sketching out construction rates, starting to procure, attempt to procure renewables at a rate that is really unprecedented in California. And we're going to need to build everything.And this is kind of a key message that I bring to this conversation. We need to make sure that we're building all the rooftop we possibly can. We need to make sure that we're building all of the in-state generation that we possibly can. And we are going to need to procure a lot of out-of-state generation.David RobertsYes. And even then, those goals are going to be very difficult to hit. This was, I thought, the strongest point you made. I was reading what you've written about this. It's just that California, its goals are so ambitious that this is not a scarcity situation. This is not an either-or situation. It has to go flat out to get all the power it can from everywhere it can. And even then, it might not be able to get enough.Michael WaraI really think that's the right way to view the situation in California right now. And we are working in our group on policies that will reduce barriers to in-state construction, reduce the barriers around interconnection, which are really the big delay right now.David RobertsOh, yeah, I want to pause and emphasize this point too, before you move past it, because I thought it was another great point you made in your writing, which is that the real — if you're worried that there's not enough in-state construction happening. The prospect of imports from other states is the least of your worries. Like that's not what's holding up construction of new power in California. It's all these things that Volts listeners are very familiar with permitting, NIMBYism, et cetera.Michael WaraThat's right. And I think the challenges there in California are quite acute. They also interact with just how much else the other jobs that our utilities have that are kind of even more pressing than achieving the SB 100 goals like not having wildfires ignited by their equipment. And many of the engineers and line workers that are needed to do the kind of renewables build-out in California are busy with that work as well. And so we have resource constraints in California that are real. We need to work on those, we need to train more line workers, we need to train.All of this needs to scale. But there are things we should be doing in California and we've been working on them. Many others are working on these issues as well. The PUC at the ISO, at the Energy Commission as well, of course, is to remove the barriers that exist to building things in California at the same time as we facilitate greater use of imported power that's actually clean and not just the old way. California has long imported large amounts of electric power. We built our coal-fired power plants in other western states and on the res and we have shut those down, mostly.A lot of it has been replaced by natural gas-fired power that we import and some renewables that we're importing as well.David RobertsLet me pause and emphasize that point too because another of the objections back in 2017 or whatever were from environmentalists who say "Here in California we've got laws mandating clean power. But once you open it up, you're going to get a bunch of these coal plants in other states, generate cheap power and sell it into the RTO. And we're going to end up in California getting coal power in our mix when we don't want it."Michael WaraIs that is just much less of a concern than it was in 2016 for a whole bunch of reasons. But the fundamental and most important one is that coal is a five cent product in a three cent market and it is just the economic loser pretty much no matter how you slice it. And the states that are trying to prop it up frankly can't afford to do that.David RobertsYeah. And the last thing they want is market competition. Right. I mean the more you expose it to market competition, the less well coal will do.Michael WaraThat's absolutely right. And so exposing coal, especially to markets that have a lot of renewables in them, so there's a big daily cycle in prices is really challenging for that type of resource. So I guess I look forward and I'll say I think about this also this proposal in terms of what the situation will be like, not right now, but in about five years, because it's going to take several years to get — eve if this law or a law like it were to pass this session, or frankly, it's not going to pass this session, it passed next session, then there would have to be preparation of a proposal that the ISO would share with the state government and then would submit to FERC, and FERC would review that proposal and approve it.And only after that approval would the ISO be able to implement it. And I think we're looking at the late two thousand and twentys at best. So really you need to ask how much coal is left in the western United States circa 2028? And I think the answer is not very much. And even if it's there, it's not running. So then the question is, what about the other resources? And certainly there's a lot of natural gas in the west, and we might import some of it if — we would import some of that power if we were more strongly tied to other western states.But California has its own issues with burning lots of natural gas to generate electric power. We generate enormous amounts of electric power using natural gas. And many of the gas plants we utilize are older, they have significant environmental impacts, they're located in EJ communities. And we are on the record of saying "We want to shut them down." So all of us in the west that have renewables goals and clean energy goals are going to be working on this question. But it's not like we're better, we're cleaner than other western states. And I guess the other point that you alluded to, David, that I want to come back to is the situation has changed fundamentally with respect to other states renewables goals as well.In 2016, 17, we were out way ahead with SB 100, proud of that fact, and looking at most states in the west that had either very timid RPSs from California's perspective or no policy at all. Today, six of the states in the west have 100% clean energy goals, just like California. And there are several additional utilities that have taken on those goals and haven't just taken them on, but are proposing integrated resources plans that are consistent with them. So near term action to achieve those goals. And they're doing it because of the favorable economics of doing it right, that a mix of wind and solar combined with some batteries and natural gas is the cost-effective portfolio to have these days.Now, it may get harder, we'll see, right? It could be that all of us get to 80% clean and things get really hard, and then some of these folks that are saying they want to do that now change their minds, but that's in 10 to 15 years. We've have a lot to do in the meantime, and a lot of potential partners in achieving those goals that we didn't have five, six years ago.David RobertsYeah. And not only are a bunch of states now targeting 100% clean energy, but it's worth noting that Colorado and Nevada specifically passed laws saying we support the RTO idea, we like the idea of a wider area here. So there's some momentum out in those other states.Michael WaraAbsolutely. I think there are a set of partners, some of which have become public and some of which are less public, that are sort of looking to see what happens. Right. There's this proposal from SPP. There's a lot of discussion in California. My sense is that the partners want to see, like, if there were to be a California option, the economics of it are highly favorable to others because California is just such a big chunk of the population in the west, 40 million out of 100 million people. So there's a lot of potential buyers of electricity in California, and having access to that market for other players in the west could create a lot of benefits for them and also benefits for California because California would be able to purchase lower-cost power.I think where the other parties start to get worried is when we, and I say we, I'm a Californian, start to want to impose our values on others.David RobertsGreat segue because the third and sort of final objection I was going to raise to that law when it came up then was just the general worry that with a California-only ISO, California is very tightly in control of it and can ensure that the values of the ISO reflect Californians' values, the sustainability goals, et cetera, et cetera. The worry is if you dilute that, California will to some degree lose control over the running of the common ISO, or at least it will just be one voice among many. And I think some people in California, some lawmakers, some environmentalists, are worried that you're going to end up with an RTO that doesn't reflect what California wants. And at that point, California will be just up the creek.There's nothing you can really do once you, once you have committed to the RTO.Michael WaraYeah, so I guess I think this is a valid concern. If the governance structure of the ISO is not designed with some care.David RobertsBracket that because we're going to return to precisely that question.Michael WaraOkay, so let me just speak at a high level then. Certainly there are a bunch of states, one of whom I mentioned, Wyoming, that have really different priorities for their energy systems than California. California also is so kind of tribal in its blueness and its pro-climate policies, that can be a real turn off to more intermountain conservative states. Even with utilities that are a little bit out of step with their state. And I would note that Idaho Power has a 100% clean energy goal, but the state of Idaho does not, right?David RobertsTo say the least.Michael WaraAnd so Idaho Power needs to be careful and I think they're interested in participating in the regional sort of markets that the California ISO — We haven't talked about this —David RobertsBut that's our next topic. So you're setting it up perfectly.Michael WaraSo California has spent, since the last effort at full-blown regionalization creating a regional RTO, California has spent a lot of time developing kind of what I term like halfway houses to an RTO.David RobertsRight.Michael WaraThis thing called the energy imbalance market and then the enhanced day-ahead market proposal.David RobertsLet's talk about those. Right now, CAISO is operating what's called the Western Energy Imbalance Market, which involves multiple western states. And then it is developing what's called a day-ahead market, which will have a bunch of those same participants. Maybe you could just tell us, what does the energy imbalance market do? What would the day-ahead market do that the energy imbalance market doesn't do? And what would a full-fledged RTO do that the day-ahead market doesn't do? What are these halfway houses like? How big of a step is the energy imbalance market and what's the next step?Michael WaraSure. So the energy imbalance market has been something that's generated a fair amount of benefit for all the states that participate. And basically what it says is you optimize in your footprint. And that optimization typically happens mostly a day ahead. Right. So power plants are on, they're not on, whatever based on a forecast a day ahead. But those forecasts are never perfect. And so there's always some kind of leftovers that — maybe there's too much in one place or not enough in another. And what the EIM does is allow trading in that real-time or almost real-time space where the day-ahead forecast was wrong and somebody has a little extra, somebody has not enough, and they can exchange and create benefit from that exchange.And the real benefit is not having to turn on a power plant or call on a resource that would be expensive but can turn on quickly.David RobertsSo it's an incremental bit of sharing there.Michael WaraYeah, it's like the tip of the iceberg of benefits from lowering barriers to trade. And then there's this giant iceberg underneath, which is the day ahead.David RobertsAnd the day ahead is not yet running.Michael WaraNo.David RobertsIt is in development.Michael WaraYes. And the day-ahead is where you, say if you're a grid operator, look at the weather forecast and make an estimate of what electric demand is going to be, and then you decide which power plants you're going to utilize to cost-effectively meet that demand. So coordination across and I should say, even if there isn't a market right, like in these vertically integrated states, the utility is making that decision every day. So what the day-ahead market, The EDAM, as people call it around here, the Enhanced Day-Ahead Market Proposal will allow, is states if they want to, and if their utility commissions will allow them to, which is an important caveat, allow some utilities to kind of opt into participating in a single optimization across the footprint. Now, the challenge here, though, is it gets complicated to know what will really happen. And the reason is that many parties that say they're interested in the EDAM in this day-ahead market proposal say they are interested in it as a halfway step to an RTO and they are much less interested in participating in it if there is not an RTO proposal.David RobertsIf it's a terminal EDAM.Michael WaraIf it's the end, yeah. And the reason for that is, understandably, utilities don't want to — what an ISO RTO kind of construct is turning over your system to somebody else to operate. And if that somebody is in Folsom, California and you have no say over how the rules are written, no seat at the table in terms of designing future transmission expansion proposals, that strikes many people as unfair, let me just put it that way in simple terms. And certainly the players that do have a seat at that table are going to seek to maximize their benefits from whatever gets decided.And that's going to mean that the utilities in California, PG&E, Edison, and San Diego Gas and Electric principally get the most benefit.David RobertsRight. So EDAM is run out of CAISO, basically. And so the worry from other utilities is California utilities are going to get they're going to be at the head of the line here. They're going to get sort of favorable treatment.Michael WaraAnd California has bent over backward to create a governance mechanism for the EIM, the tip of the iceberg market that is really multistate and fair and is functioning well. And I think in many ways, many of the concerns that were raised in 16, 17 about what the governance would look like once California shared some power can be actually pretty well answered by just looking at how EIM governance functions today and has been functioning for several years. And it's a very successful model. It's widely perceived as fair.David RobertsAnd the participants are happy, the utilities —Michael WaraEverybody's happy.David RobertsYeah.Michael WaraEverybody loves it. That's why the EDAM project has moved forward, because the people that participate in the EIM, both California and non-California entities, have said, "Let's go further." But as this project has neared completion and it is getting close to that, two things are happening. One is this competition from SPP, which I think will thin out participation in the EIM, which is spread out quite far across the western grid and it will also limit participation in this new program, the enhanced day-ahead market. So the real story here is that to some degree, if California wants to have sort of day-ahead integration, it needs to maintain momentum toward power sharing.David RobertsAnd so what would the RTO do beyond the day-ahead market?Michael WaraWell, the other thing that it would do is actually plan transmission.David RobertsYes.Michael WaraRight.David RobertsYes. Praise be.Michael WaraYeah, right? Yes. And so today, in the footprint that a western RTO centered on California might contain, there's internal transmission planning each utility or within the California ISO, the ISO plans transmission build-out and then there are seams. And the seams are where different markets meet each other. They're kind of the border. And there are real limitations on planning across the border, planning transmission lines that cross these state lines and cross market barriers and just planning what people are today starting to call transfer capacity, which is the ability to move power for California, especially out of the Pacific Northwest and into California.And I just add to that another challenge that we've all confronted in the west in the last few years also is the effects that large wildfires can have on these transmission lines. Because there may be like four lines that connect California to the Pacific Northwest, but they're all in one right of way. And so if there's a big wildfire that's putting a lot of smoke into that right of way, it can shut down the whole thing.David RobertsRight.Michael WaraAnd so there's kind of an additional need for greater redundancy which will create resilience to wildfire.David RobertsSpeaking of that, I'm going to throw one more twist here at listeners who are now juggling whatever a half dozen acronyms we've thrown at them so far. But there's also something called the Western Resource Adequacy program.Michael WaraYeah, WRAP.David RobertsWRAP. Tell us what that is and how it fits in with that silent w.Michael WaraWell, so one thing to say, another big objection, way back when, was the fear of imposing a capacity market. As you mentioned earlier, David, resource adequacy is an important goal that all utilities or system operators plan for. They need to have enough power available on those hot, in California, it's the hot summer afternoon into evening to make sure that we don't have to do rolling blackouts like what happened in Texas.David RobertsRight. You need enough resources to meet the maximum conceivable demand.Michael WaraYes.David RobertsWhich, as we say, if you're doing it over and over again in each one of these utility islands, just leads to huge amounts of capacity that is idle almost all the time.Michael WaraThat's right. It's incredibly wasteful. So there's a developing program for utilities in the west to try to plan some of that resource adequacy together and sort of share resources more than they have in the past. How and whether this interacts with the burgeoning proposals both from CAISO and from the SPP group to have RTOs I think really depends on the rules in the markets. California has made it very clear that there's never going to be a capacity market in California and that the states that join any RTO created under — by governance change at the California ISO will maintain control over their RA.It doesn't mean that the amount of resources might change. Right. So it might be that you need a little bit less because you're in this larger footprint utility, and the ISO say "Well, we can get by with this much instead of this much plus a gigawatt or something" because we're operating the whole system as one. But what those resources actually are will be determined by the participants and ultimately then by the state commissions that regulate the participants in an ISO or an RTO. That's like kind of a non-negotiable item for California.David RobertsIs there a particular reason that it's so uptight about this particular point?Michael WaraWell, I think it relates back to our earlier point about kind of California wanting to have some real say over the power plants that it's using to meet load. Also, I think it has to do with the observations from the outside of experiences with capacity markets within PJM, especially where there's been litigation over the desire of states to build new capacity in their own state as opposed to having it be controlled by an auction mechanism. I think anybody who's participated in some of these auction mechanisms as a market participant will tell you that they're problematic, very hard to design well. Often in retrospect, designed poorly, and then the market operator is left trying to fix things after the auction, after money's changed hands, kind of change the rules retroactively, and so no one's super happy with them.It may be the least worst thing, but from California's perspective, they don't want anything to do with it. It's a non-starter, and that'll be written into the legislation. Any viable legislation that would allow for power sharing would say, power sharing fine, but there will be no capacity market. And if there ever were, California would withdraw.David RobertsGot it. We've got the energy imbalance market as a little step forward. Then they've got the day-ahead market, which is going to be a really substantial step forward. Beyond that, I mean, I think it's worth pausing just to say that sort of analyses of these things show benefits of the day-ahead market that just dwarf the benefits of the energy imbalance market.Michael WaraYeah, but let me just back up to these studies. Yes, they do. However, the studies that have been done to date typically assume full participation. So they ignore — they're like engineers sitting down to say "What would be the coolest electricity market we can imagine in the west?" Rather than people who are connected to the political process, which is very important in all of this, saying "Who are the most likely partners?" Or I would frame it somewhat differently who are the most valuable partners that California could have in an RTO, and what do we need to do to get those people?And who cares if all the western states join? It really doesn't matter. What matters is and I'll just call out one particular partner, like, what are the things that we can do to induce the participation of Bonneville Power Authority? If you want to think about really successful heavily reliant on renewables systems. Think about like northern Europe and Norway. That is a system that we should aspire to be like where Norwegian hydro balances German and other European wind. Right? And today a lot of that happens. Right. We trade power every day in large quantities with Bonneville. But if we could induce participation of Bonneville and a number of the northwestern utilities in a California ISO that would do an enormous amount to simplify having more renewables on the system.David RobertsRight. So there's the day-ahead market that's being hashed out there's, the resource adequacy program going alongside here and these are all sort of envisioned, I think by a lot of people at least, as steps towards an RTO. So let's pause for a minute and just think about if you're sitting down with a blank sheet of paper today and designing a western RTO what are the sort of main design issues that you want to make sure — because there's not like a set blueprint, right? There's not like a blueprint. You take off the shelf and say here's our RTO.These are all sort of designed in somewhat bespoke ways and would need to be designed in somewhat bespoke ways to fit the values of the participants. So what in your mind are sort of the top issues that anyone designing an RTO for the western states ought to keep in mind? I know that stakeholder input is a huge one, so maybe we could start there.Michael WaraYeah, well, as I look at it, I think we need to design a system that takes account of the real circumstances in the west and that isn't just a cookie-cutter approach. The EIM did an important first step toward that, but the reality is it doesn't go quite far enough. So I would say we should look at what's happened there, look at the successes and failures in the EIM, mostly successes. Honestly, I can't really think of real negatives and start there. But we'd also need to say there's not going to be a capacity market. We're going to give states sovereignty over their resource adequacy as long as they show that it meets the requirements for the system.And then we need to work out some kind of a body of state regulators that has voting rights that reflect the complexity of the west, where we have a few states with very large urban populations that are going to be, particularly in the early years of a California ISO, the vast majority of load and so be paying most of the transmission access charge. But we also need to make sure that states that have relatively small populations have a real voice, not some sort of nominal participation where they don't really have any power, so that they feel less concerned that California might just go on some spending spree and run up their transmission charges because Californians can afford it, and other states are much more price sensitive to the cost of electricity. So to me, this sounds a lot like the problem that the Founders solved with the Senate and the House. It's also a problem that's regularly tackled in international agreements.And the basic model is you say you need two majorities to move forward, you need a majority of states and you need a majority of load to make a recommendation and that's going to ensure that all the recommendations that come forward are really consensus-based and it gives everybody power to shape what happens. Another key kind of governance characteristic, that I think will be ultimately important is to make sure that the states that do participate in this market and in the body of state regulators that will be created have what's called Section 205 filing authority, at least for the really important issues that come up within an ISO and an RTO. And that basically just means that if the board of the RTO were to take some action that the body of state regulators really objected to, just basically the board kind of goes AWOL and starts taking their own independent actions without really consulting and considering what the states want. That the states can go to FERC with a relatively low burden of proof to get before FERC and have their issues considered on the merits.David RobertsOh, interesting. Just pause here and say back in 2016, 2017. Another one of the worries about an RTO is that at the time the Trump administration was in power, it was sort of bullying RTOs to allow more coal and just to be dirtier in general. And some of the RTOs were sort of seen as kind of bullying the states involved, disrespecting states, sort of clean energy goals, basically not giving states their independent due. So that was another of the worries about this is just when you give power to an RTO, you are giving up some power and I guess you just want some guarantees that you're not going to get that the RTO is not going to go bad and start steamrolling you over stuff.Michael WaraYeah. So this is an important reason why not having a capacity market is a good idea, right? That's an insurance policy. So what the Trump FERC was doing was really interfering in a material way in the issues around what kind of power plants exist in particular states within these RTOs. And if you just take that off the table by saying that that's not going to be a question that the RTO is really concerned with, then you can go a long way toward avoiding that problem. But we don't have any guarantees that a future administration will not wreak havoc with western electricity policy.That is possible. And that's why it's important that everybody vote who cares about the clean energy transition. Try to make sure that never happens. But there are lots of ways beyond FERC. I mean, you want to interfere, you could simply eliminate the tax credit provisions in the IRA if you had a cooperative Congress.David RobertsYeah.Michael WaraSo it's a problem that is just present in a country that is evenly divided politically on this issue, as the United States is. And given that FERC has jurisdiction over all the high voltage transmission, right, so it's not just these federally regulated electricity markets where there's a greater FERC role, for sure. But also FERC oversees all of the high voltage transmission in the United States because it's in interstate commerce. Even those vertically integrated utilities that kind of do things on their own. They still have to go to FERC and get approval for things. And if FERC wanted to, they could do things to make life difficult.David RobertsNotoriously in transmission planning, one of the difficulties is cost allocation. Who pays for what? Who gets the benefits of a transmission line and who pays for it? Do RTOs help with that? Would an RTO help smooth that issue?Michael WaraIt can remove some challenges, but it doesn't remove them all. And this is also getting to why having a good participation model for the body of state regulators, which would be kind of a subsidiary body to the board of directors but would provide a lot of input to the board, is important. Some RTOs have been very successful at building transmission to enable build out of renewables. Probably MISO is one that stands out.David RobertsI did a pod on that.Michael WaraYes, you did. And it was a good pod.David RobertsListeners want to go Google that.Michael WaraOther RTOs have been less successful. See PJM's long-standing cost allocation disputes. So I think it just really depends on the context and on creating a mechanism where there's mutual interest in seeing these new transmission lines get built. As I said at the beginning, I think we need to build them. And the ISO in California is building new transmission lines out to even distant other western states. We also need to build a lot of intrastate transmission. Right. And I think if that's the way to get things done, I'm sort of a person who's like "What can we get done?"What's going to push us further down the track toward where we need to be and also create a political and economic situation where there's strong support for continued transition? And I do think that those problems are solvable as long as you don't try to pit people against each other.David RobertsRight. Well, you sort of raised another issue which I wanted to ask about, which is there's a couple of really big utilities in the region whose disposition on this question will be very important. So I think like PacifiCorp and Xcel, for instance, and there's this idea, I think, like, if you listen to Southern Company, say a utility in the southeast, they are busy fighting off these efforts, fighting off efforts in the south to create a more unified market, to take steps towards an RTO, et cetera, et cetera. Even though all the same considerations apply. An RTO would be great for the southeast, for all the obvious reasons, but I think utilities like Southern Company view an RTO as kind of a direct threat to the vertically integrated utility model.What do you think? PacifiCorp and Xcel, where are they on this? And do you think that the vertically integrated utility model is under threat? Once you start this process, once you start going down this road toward more sharing and pooling of resources.Michael WaraWhat I'd say is, it is potentially under threat in some ways, but the question again is, what are the costs and benefits? And does your vertically integrated utility also have an independent subsidiary that builds merchant renewable generation? Right. And PacifiCorp is one vertically integrated utility within a basket of utilities and other companies that are owned by Berkshire Hathaway Energy. And I think BHE is able to take a higher level perspective on what's valuable for all of its assets and what the potential market opportunities might be. But I also think the situation is somewhat different because the west is so different than the southeast, where in the west market access to California is super valuable for some of these utilities.And so I think PacifiCorp looks at the situation and says "Yeah, well, there might be some more merchant generation that gets built in our footprint, but you know what? We could build it, A). And B) then we can sell all the energy to California and meet this, be a part of this really big market that we have trouble getting access to."David RobertsSo you think most of the big utilities in the west, generally speaking, are on board with the general movement in this direction?Michael WaraI think so. I think that the other thing is that it's challenging for a state as big as California with all the generation portfolio that we have to manage the transition to a solar heavy grid. But if you're smaller, that problem gets even more challenging. And so a lot of these utilities are also Portland General Electric or Seattle. Power and Light, I think is —David RobertsCity LightMichael Waraor City Light. Thank you. Yeah. Are looking at what they understand to be their future, right? And saying, "Wow, there's even additional benefit today to being integrated into a larger system."David RobertsYeah. If you're just building fossil fuel plants to satisfy your own load in your own footprint, it's all very simple. But once you start moving to variable renewables, the value, the need for these larger footprints and more sharing just rises and rises and rises.Michael WaraI think that's right. And also the ability to do things that are — to have pretty sophisticated demand response programs, to have the ability to integrate distributed resources and then bid them into the market becomes more valuable. Those are still kind of nascent technologies. But utilities are looking at this problem five years — like I said, they're not thinking about now, they're thinking about five years from now.David RobertsYeah, those things are going to get overwhelming for a single utility to manage, I feel like pretty quick. I've always felt that about distributed resources particularly. It's like —Michael WaraAbsolutely.David Robertsone thing when you have a dozen participants in your wholesale energy market, but what about when you have 1000 or 10,000 or 100,000 with DERs? Things get complicated quick.Michael WaraAnd particularly managing electric vehicle charging in a way that is grid supportive rather than grid destructive. I think it's going to be really important. There's a whole bunch of things that are coming at utilities relatively quickly and there's value in having scale. And a lot of the really innovative policies, like the innovative policies for integrating storage into wholesale electricity markets, those have come out of California.David RobertsRight.Michael WaraAnd ultimately become national FERC orders. But the early experiments happened here and I think there's a greater consensus, at least within the electric power industry, that that is the direction we are heading.And so then that makes participation in an RTO more valuable and particularly in one like California's.David RobertsSo let's return to something I've previewed a couple of times here, which is a little chaos agent in this mix, which is this other RTO, the Southwest Power Pool. SPP is at the, how did you put it, the eastern end of the western states. It has started to do a couple of things. One is it launched something called the Western Energy Imbalance Service, which sounds similar to and is similar to CAISO's Western Energy Imbalance Market. It's sort of a competitor to the EIM and it's sort of out there trying to lure states and utilities into that service rather than the EIM.And then it's also got designs on expanding its own footprint. So basically what you have now that I think is new in the equation is this other RTO out there talking to western states saying "Hey, never mind California, come join our thing, come join our Energy Imbalance Market and then eventually come join our RTO." So a couple of questions about this. Like why? Why does SPP all of a sudden have these sort of imperial ambitions? Why does it want to expand? Why is it doing it now? And then do you think that has a chance of succeeding?You can really see, you could imagine the western states, the western region kind of being split between two RTOs. So what's your take on all that?Michael WaraSo the first thing to say about the two RTO thing is like "okay, fine," there's lots of RTOs in the US.David RobertsRight.Michael WaraAnd the west is a big place. And while certain system planners have long kind of imagined that sort of the apple in their eye, like this one market —David RobertsYes!Michael Waraspanning across the entire interconnect, I don't think the sky falls if there are two. And it may actually be better for some of the parties to be I think there are real tensions that would come up in the body of state regulators, potentially, with having states that really just — it's not even that they don't care about climate. They view climate as a tribal issue, and they're on the other side, and California is on one side, and it's going to be hard to divorce some of those questions.So I'm sort of like, actually, this could be a positive. It might mean that some resources aren't available to California that otherwise would be very economic to have, and that's too bad.David RobertsBut at least everybody involved in the California ISO would be on the same page, right. Moving in the same direction.Michael WaraOr at least sort of roughly. I don't think we can go too far there, but I think that there's flavors of that. So why is SPP doing this? I do think part of it is kind of a desire to expand, just sort of like empire building. But there's also the fact that they're meeting a need. Right? There is a need for greater interstate coordination. The EIM was a market test of that need. It proved that this is really something people want. And the EDAM is another step in that direction to meet that need. And SPP is recognizing that there is a void created by the sort of idiosyncratic governance structure of the California ISO, which is a legacy of the California electricity crisis, remember?David RobertsRight.Michael WaraNone of the other ISOs work have governance that's like this. The reason California has it and the reason FERC tolerates it is what happened in California. And that also when you go to the legislature in California, not so much the legislators because of term limits, but the staff remember.David RobertsPTSD.Michael WaraAbsolutely. I don't know if it's active anymore, but surprisingly recently, last few years, there's been active litigation still over who pays the costs of that debacle. And so the California governance structure is unique because of that. It creates challenges to regionalization that would otherwise not be there if there were an independent board, which is what all the other RTOs have.And as a result, SPP sees an opportunity and they're stepping into it. And so the question really is, does California see wisdom in also stepping into that space?David RobertsKind of puts a clock on things, right? It was either nothing or a western RTO before, but now it's like, you need to move, or your competitor is going to suck up all your —Michael WaraYeah, we'll lose some opportunities. Although I think you see that some utilities do switch RTOs. That does happen. Little Rock, Arkansas, where SPP is headquartered, is not a part of SPP.David RobertsHilarious.Michael WaraBecause the utilities switched out because it didn't like the deal it was getting.David RobertsSo it's not permanent. Like these things are fluid even after the —Michael WaraThey can be there are significant costs, and I think especially, and this is important to emphasize, there would be very high cost for California to withdraw. Might be easier for another state that's a smaller part of it to switch out of California as RTO. But once you get rid of your control room, you're kind of committed, or you have to move to another person's, another entity that has a control room.David RobertsAnd I also hear worries about basically like, if SPP hoovers up all the states that California will be isolated in, this growing reliability problem that you alluded to earlier, this sort of serial crises, this growing duck curve, et cetera, et cetera. It's going to be that much harder to solve those problems if California remains isolated. Just if CAISO as an island amidst a larger SPP, do you give any credence to those worries?Michael WaraYeah, I mean, I think California as an island is not a situation that we want to be in. I'm a little bit skeptical that that's going to happen in the near term. And if it were to start to happen, I think that California, that would increase pressure on California to respond by creating a pathway toward shared governance. I guess that the other thing I would just sort of say about all of this is that people in California tend to be really afraid of this shared governance idea of sharing power. But I think we need to be confident about what we've accomplished, how that has changed where other utilities think the future lies, and in our ability to persuade other states and other utilities to come with us on this journey.And I think we can.David RobertsOn the politics of it, I forgot to ask this earlier, but I just throw it in now. There was a bill this session to restructure CAISO along these lines to take the first big step toward an RTO, and it ended up not advancing. And then, like the week after it died, Governor Newsom came out and endorsed it, which I think was puzzling to me as an outsider. What's going on there? Like, is Newsom on the side of the angels here? Are there internal political dynamics that are worth kind of calling out?Michael WaraWell, I think what happened with that bill was that it was essentially a reintroduction of the thing that did not pass in 2017 rather than an attempt to update it to the new circumstances. And so that was not perceived favorably. However, the issue is one that Newsom's team views as important. Remember, these are the people that have had to deal with the serial emergencies that have occurred on the California grid. The buck stops with Newsom. He understands that if there are rolling blackouts, à la Texas, he's politically accountable for that. And there's a sad history of what happens to governors in California that no one wants to go anywhere near.And so I think Newsom's team has long been supportive of this, but maybe not ready to step out and publicly say that. And the point at which this bill was going to fail was the point at which Newsom decided that this is something that he had to get involved in. And so without supporting the bill, what he is supportive of, and this is I think, where many of us are, is the process is developing a workable proposal that can pass, that addresses some of the legitimate concerns and that keeps us moving. And so it's my understanding that at the staff level within the administration and also at the agencies, at the CEC and the PUC, there's high level attention being paid to this issue that's going to hopefully produce something that can pass.David RobertsRight. So you think the politics are good, there's momentum going —Michael WaraWell.David Robertsthe big stakeholders are on board, more or less.Michael WaraLet me be clear. I think the politics are still challenging. Anything that unions are opposed to in California —David RobertsRight.Michael Warahas challenging politics.David RobertsAnd is there any prospect of bringing them on board, of persuading them? Like I'm sure the arguments have been made to them a million times. Are they immovable on this?Michael WaraIBEW is the shop union, is the union for the California ISO. All the California ISO employees are in IBEW 1245. But I think the bigger issue is the building trades and how the people that do all of the work that is not electrical when you build a big utility scale solar farm. And there the question is going to, I think, ultimately going to turn — and this is also actually where having the governor involved is really useful and important. The question is going to ultimately turn on what else do the building trades need?David RobertsRight.Michael WaraAnd is there a trade where the governor's team feels like giving something along some other dimension is worth it —David RobertsI see.Michael Warato get this value?David RobertsInteresting.Michael WaraBecause it's never just one dimensional, it's never just one thing that any organization as complex and powerful as the building trades needs.David RobertsI say. I've always found this comes up again and again, the sort of opposition of the building trades to clean energy bills in a bunch of different states. Somewhat mysterious to me because it just seems to me like of all the worries you might have about a clean energy transition, a shortage of building work should be at the bottom of your list. You're just going to build a crapload of stuff everywhere, everybody, all the time. It seems like an odd worry. Like, if anything, the building trades are going to be overwhelmed with the amount of work.Michael WaraWell, trades are generally supportive, like trades supported SB 100 trades are generally supportive of a lot of the clean energy legislation in California. They're worried about moving stuff out of state. And I guess the thing that I point to, and I think the issue that I feel California legislators and other stakeholders should be most focused on is the reliability question for the following reason: I'm old enough to remember the aftermath of the electricity crisis in California, where the basic political response was to roll back all the things that had led to that series of rolling blackouts. And what I worry about is a sustained heat wave in the context of a drought in California where we have significant rolling blackouts.And the political response to that is rollback of SB 100 goals. And I think that is not something we should rule out of hand.David RobertsWow, that's dystopian.Michael WaraI don't think it's dystopian. I mean, electric reliability is incredibly important, particularly in a heat wave. People will die. Like, there are real near term concerns with that kind of a reliability crisis like what happened in Texas in February of last year or two years ago. It's totally unacceptable.David RobertsWell, yeah, and you look at the response of the Texas legislature and it does not augur well for —Michael WaraWithout weighing in on their inadequate response, I would hope that California would have a more substantive and adequate response to a crisis like that were it to occur. I actually have confidence that we would, but I do think that it would raise real questions about particularly that last 20% of the SB 100 goal. And I don't want to see those. I want to see us succeed. And I want to see us do the things where we execute on that goal, ideally ahead of schedule. And so reducing risks is an important part of that. That's the reason why I think building trades should support this, because it's going to allow us to build more stuff.Like it avoids a situation where we have an emergency stop or at least an emergency pause.David RobertsRight, that's a good point. Final question here is and it gets to the schedule as you just brought up, whatever happens in this process of taking steps towards an RTO, it's going to take a while, as you said, late 2020, as earliest, probably more like 2030. There's a dire, immediate need for more transmission and better transmission planning in the western region. And I think everyone can agree that it would be really bad if all of that waited until 2030 to get started and if California didn't start regional transmission planning until 2030 when an RTO was in place.So are there ways to get more regional transmission planning going parallel to this RTO effort?Michael WaraThere are, and you see some of it in the current transmission planning process at the California ISO. So one alternative option is to begin to build transmission lines that are owned and operated by the California ISO, but which exist in other footprints. And that's something that has started to happen. It's happening with respect to connecting Wyoming Wind or a big slug of Wyoming Wind to California. I think we may want to think about that for sources of clean, firm power as they develop in the western interconnect. There are a lot of interesting geothermal proposals in Nevada and in Utah.And without weighing into the nuclear conversation, there's some news. A lot of the small modular reactors are going to get built in Utah first. And so how we leverage our existing transmission to these states, as the coal units that were the original rationale for it shut down, and whether we construct new transmission on the California dime where California recognizes paying for these lines, no one else's to interconnect new sources of especially valuable supply to California demand. I think it's something we need to look at in the near term. The good news is that the California ISO over the last couple of years has really pivoted from being pretty reluctant to build new lines to being maybe making some parties uncomfortable with the ambition of what they are proposing.And I think that's healthy. I think we need to be very ambitious in the near term because these lines take so many years to build and we need to be looking at where the puck is going to be, not where it is and thinking about systematic build out of the system to incorporate much larger renewable shares. And the ISO is moving aggressively in that direction. I think there's still room for them to move, but they are off the base and running, so that's good.David RobertsThank you so much for coming on and walking through this all. It's super fascinating. There's just so much going on in the electricity system. Everywhere you look. This is a really interesting little subdrama chapter here, so thanks for walking through it. Michael Wara of Stanford. Thanks for coming on, Volts.Michael WaraPleasure. Thanks for having me, David. Great to talk to you.David RobertsThank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf so that I can continue doing this work. Thank you so much. And I'll see you next time. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.volts.wtf/subscribe

Will the US clean-energy transition be hampered by a shortage of electricians, plumbers, and skilled construction workers? In this episode, Betony Jones, director of the DOE’s Office of Energy Jobs, talks about the challenge of bringing a clean energy workforce to full capacity and the need for job opportunities in communities impacted by diminished reliance on fossil fuels.(PDF transcript)(Active transcript)Text transcript:David RobertsNow that the Inflation Reduction Act has lit a fire under the clean-energy transition, a new worry has begun to emerge: can the US create the workforce it needs to build all of this stuff? And can it care for the fossil fuel workers who are displaced in the process?Across the trades that will be necessary to build out clean energy — electricians, plumbers, construction — industries are reporting worker shortages. Meanwhile, entire communities are being disrupted and displaced by the closure of refineries and other fossil fuel facilities.What can the government do to help growing industries create the job pipelines they need? And what can it do to help cushion the blow to fossil fuel communities?To get to the bottom of these questions, I contacted Betony Jones, the director of the Office of Energy Jobs at the Department of Energy. She has spent years thinking about clean-energy workforce issues and working with industries to create shared job training and apprenticeship programs. We talked about the jobs that are coming, the jobs that are going away, and the need for an active hand in smoothing the transition.With no further ado, Betony Jones. Welcome to Volts. Thank you so much for coming.Betony JonesIt's great to be here. Thank you.David RobertsYou know, ever since the Inflation Reduction Act passed and the rest of the legislation sort of like kicking off a new era of clean energy acceleration, I've been thinking about what are the remaining kind of now the policy log jam has broken, what are the remaining impediments? What are the remaining dangers? And I've sort of narrowed it down to the four Horsemen. The four or four horsemen of the clean energy apocalypse political blowback, which is basically Republicans taking back over and undoing everything NIMBYism, which is the difficulty of building all the things we need to build interconnection queue and transmission i.e. making the grid big and robust enough. And then, fourth, workforce issues. I'm going to try to do a pod on all these eventually, but we're here to talk about workforce issues. So just by way of background, maybe start by telling us what your office is and what it's for and what it's intended to do.Betony JonesFirst, I just want to say when the Inflation Reduction Act passed, that was really game changing for someone like me who's been working at the nexus of climate change and labor issues for so long. And so to answer the question of what my office does, the Office of Energy Jobs at the U.S. Department of Energy is responsible for a few things, but one of them is making sure that the jobs that are being created from these historic investments are good, quality, family sustaining jobs that people want. And so writing the rules around the funding and how it goes out the door and how it's made accessible.David RobertsWas the office created by Biden, or has this been around a while?Betony JonesThis iteration was created by Biden, but it has also been around for a while. I think Obama had an Office of Energy Jobs, and so did President Trump. But our office is really focused on, first and foremost, making sure that the investments are getting out into communities, that the investments are creating broadly shared prosperity and good jobs for American workers, and that we're investing in new industries in the domestic supply chain to provide the materials and equipment for this clean energy transition. So that's really exciting. It's actually just an absolutely incredible opportunity to show that we can address the climate crisis while creating real material benefits for American workers.David RobertsYeah, you're really at the nexus there. That's a white hot area. So when I think about workforce issues and the clean energy transition, there's sort of two sides of it. There are the people in communities who are going to lose fossil fuel based jobs, and then there are the people in communities that are going to gain clean energy jobs. I want to start with the latter, although we will return to the former later. So there's all this work to be done electrifying and everything else. But I wonder, do we have a clear quantitative understanding or projection or good models or a sense of exactly what the job shift is going to be? I.e. Like how many jobs are going to be created in what industries, how many will be lost in what industries, or is there so much uncertainty that we're sort of adapting as we go?Betony JonesThere's always uncertainty because nobody can tell the future. I mean, my office puts out the U.S. Energy Employment Report every year, which is a backward look at energy jobs. And we can see some trends in that backward look. But in terms of forecasting, that's really challenging to do. For the bipartisan infrastructure law, it's difficult to determine where exactly some of these investments are going to take place because for the Department of Energy and most of the energy investments, they're competitive. And so different private sector companies compete for funding, and then they decide where it is that they want to build their hydrogen hub or their battery factory or what have you.And so it's hard to determine exactly where those jobs are going to be. But we do know that a lot of them, and I would say probably 75% of them are in the construction sector. And so this is traditional jobs. This is laborers and operating engineers, the folks who move heavy machinery, earth moving equipment to prepare the ground for these things or drill the geothermal wells. They're electricians, plumbers, pipe fitters, iron workers. These traditional construction occupations. And it's not that different building a battery factory from building a data center or building a hospital, for that matter.Construction is construction. The jobs that are created are mostly in traditional occupations sort of regardless of the technology that's being deployed. For the Inflation Reduction Act, this is the really game changing legislation because of the way that it's structured with tax incentives, so we expect to see those investments pretty much everywhere. Now, obviously for things like wind and solar geothermal, you're constrained by the location, by the availability of that resource geographically. But if you're building a factory to make solar panels or battery cells or EV charging stations, you're much less constrained geographically. So that's one thing.I mean, communities all across the U.S. are competing for those types of investments and then at the same time and this maybe gets to the first part of your question there's fossil assets that can be repurposed for some of the things that we're trying to develop now. And so there's a lot of attention on how do we repurpose those fossil assets, these facilities that have grid connections, that have water and other resources, that have a workforce and a community that supports that. So that's another area of focus.David RobertsYeah. The reason I ask is just because a theme I'm going to return to again and again is just the difficulty of guiding this stuff with policy on any sort of macro scale. That's kind of something I want to interrogate a little bit. But as you say, this legislation that Dems passed we expect ought to create a surge of new jobs in the trades, in pretty conventional trades. And yet all I hear or read in the news is the trades telling us that they face a huge shortage of workers, that they can't find new workers, that the pipeline is drying up, that there's like a million jobs for every applicant, et cetera, et cetera.So I guess I want to know why is that? Clean energy aside, why doesn't — you would think a market like this is what markets are supposed to do, right? Like when demand for something increases, the market produces new supply. So what is going wrong here that we have these shortages?Betony JonesWell, a little bit of it is who you're hearing from. So there are employers out there who can't find workers for sure, and then there are others where there's a line out the door for the opening. You have these established firms with some, you know, where a worker feels like there's some reliability. Siemens, for example, or GE, they can generally fill their positions. The other thing is registered apprenticeship and in particular the union apprenticeship programs. I am being told that even now with this historic low unemployment, they have ten times the applicants as they have openings for.So what that really shows is that people want jobs but they want good jobs. And so if employers are counting on paying yesterday's wages or counting on the labor market from pre-pandemic, then yeah, they're going to struggle to find workers. But the employers that have a good track record, unionized firms, union pathways into construction as opposed to just general construction, but the pathways that provide reliable access to the middle class, the ability to buy a home, to go camping on the weekends, have a garage full of toys, whatever, people want those jobs. And so the more that we can make sure that we're creating those kinds of jobs, jobs that people are excited about, that they want, it shouldn't be a problem to attract workers.Is there a bit of transitional pain? Sure. But I think that that's okay because we're in a ramp-up. We're at the bottom of a ramp-up phase. And so what's really exciting, I think, is that we have this big boom. This inflation reduction act is really significant, not just in terms of the greenhouse gas emission reductions, which is huge, 40% by 2030. I've been working in climate change for over 25 years, and I never thought that I would see that actually. So it's really significant in terms of the greenhouse gas emission reductions, but it also is significant in terms of its ability to transform our economy and rebuild a lot of these jobs that historically have provided pathways to the middle class for workers without a college degree.And so the fact that this is all happening so quickly, yeah, it's an abundance of riches and we have to do some work to realign the labor market. But it's also a great opportunity because there's a lot of buzz and it's a really exciting time to get into energy.David RobertsThat's what kind of breaks my brain, is that on the one hand, we have all this hype, all this talk, all this new legislation, et cetera, et cetera. And then on the other hand, over here you have electricians saying "Hey, we have a graying aging workforce. We don't have enough young electricians. We're falling short here." Trying to fit those two things together in my head is what kind of doesn't compute.Betony JonesWell, I think that's exactly where this is an opportunity because, yeah, there is sort of this silver tsunami in the trades, and it hasn't been an area of work that parents have pushed their kids into for a while. And that's also true with manufacturing. But now with these investments tied to actual labor standards that will make sure that these are good career track, family-sustaining jobs, that's going to shift. The promise of a college degree has changed. It's no longer the reliable path to the middle class that it has been. And so we're seeing even people with college degrees going into apprenticeship programs where not only do you not have to take time off work to go get trained because you're earning as you're learning, but there's also no tuition associated.So you're not going into any debt. You can tomorrow go sign up, get into a registered apprenticeship program. You start earning money immediately. You get to work with your hands. You get to see the fruits of your labor. There's a lot of people actually who want to do that. And so this wealth of investments that we're making really, I think, shows workers, young people or people looking to transition in their careers, that this is a pretty stable area of work to get into, that there's going to be investments for a while. This is a reliable career path, and I think that's really attractive to people.David RobertsYeah. One of the articles I read, it says the Bureau of Labor Statistics estimates that there will be 80,000 job openings for electricians every year until 2031 as we electrify everything. My own 17-year-old son is seriously considering going into the trades instead of college.Betony JonesAnd how do you feel about that?David RobertsBecause of all the stuff you mentioned, working with your hands, making decent money, not going into debt. And of course, he's like, I don't want Zoom meetings. I don't want cubicles. It's not just that blue-collar life maybe is looking a little better these days, but also that white-collar life is like "ugh". Young people aren't all that excited about it. Yeah, so we're thrilled. Of course, he's a teenager, so we're trying not to act thrilled. But the Bureau of Labor Statistics also says that the manufacturing sector is short 764,000 workers. So just catching up from that deficit plus all the new growth prompted by IRA to me just says that these labor markets, these particular labor markets in the trades, are going to be tight for a long time.Betony JonesThey're going to be competitive for a long time. They're going to be competitive. And I think they'll compete with other sectors for workers like warehousing or the service sector. These sectors that have traditionally relied on low-wage labor are probably going to feel a bit more of a pinch than they have for decades, because now there's manufacturing and construction work that have the ability to pay more, be more stable, be more rewarding.David RobertsBut I see you would think if you're a company in one of these areas and you're short on workers and you're competing for workers, one of the things you could do to compete for workers would be to make the jobs higher paying union jobs. And you would think that would attract people. And yet it just doesn't seem like that's spontaneously occurring to many companies. Instead, they're complaining to the press about entitled workers and asking the Fed to raise interest rates to weaken the labor market. What would it take? And now you're here basically saying it's got to be policy forcing, basically, or using incentives and tax credits to force these companies to make these decent jobs.Why is it just habit of having crappy jobs in these sectors in the US? Like, what is it with US employers and the resistance to the sort of obvious solution of just making the jobs better?Betony JonesYeah, I think there is some habit there. And to be honest, we don't have a lot of really strong policy levers. We have carrots and carrots and carrots and we're trying to use those. And I think this administration is really committed to helping companies to provide better jobs. I mean, certainly at the Department of Energy, we bake job quality into our funding guidelines because we know that these companies are really only going to be successful if they are able to attract and retain the skilled workers that they need. And so we want them thinking about that up front.And we're not the only agency doing that. But I think there is habit. There's decades of anti-union sentiment. Some startups say to me, I don't know why, but I've been made to believe that I should never talk to unions or that I should fear that at all costs.David RobertsYeah, it's just ambient now among that class, I think.Betony JonesI think for a long time in the clean energy realm, we've thought about the lowest cost as the solution to the climate crisis. And that lowest cost sometimes usually comes on the backs of workers and lower wages. And there's been even a concern among climate advocates that better jobs are going to slow down adoption or slow down deployment. And so I think that it's pretty entrenched and not just among employers. And I think this administration and certainly the passage of the Inflation Reduction Act puts that theory to the test because the Inflation Reduction Act passed in part because of the labor standards, the prevailing wage requirements, and apprentice utilization standards that are tied to so many of the infrastructure investments.David RobertsAnd I would be remiss if I didn't also insert here that states pioneered those kinds of policies, including my own home state of Washington were really early in doing that, in tying the sort of level of tax credits to the level of worker agreements and things like that.Betony JonesRight. I mean, it makes sense, right, because when people see a future for themselves in a low carbon economy, it's much harder to remain resistant to that transition. But for decades we didn't design our policies that way except at the state level where some states were innovative.David RobertsRight. Even that it's pretty recent at the state level. Yeah. So the traditional ding you hear when you talk about workforce issues, one of the things you often hear is we're asking the country, the workforce, to move away from jobs that are really well paying and unionized to jobs that pay less, basically to worse jobs. The idea is that solar and wind and retrofit jobs and solar installation jobs are just worse than the jobs that are being moved away from. And this is one of the things that creates immense resistance among unions because, you know, not unreasonably, they want to keep the good jobs and are not induced by the promise of less good jobs waiting over the horizon. So do you feel like that's changing or will change?Betony JonesIt does have to change. Again, employers that are paying well with some career stability for workers do not have the same challenges with recruitment. And we have data that shows there's a lot that shows that that's the case. And it's also true that solar jobs don't pay as well as fossil jobs, but they also don't pay as well as just general construction jobs. So this effort to drive down costs of renewable energy has been really important for increasing adoption, but it has not been helpful for fulfilling the workforce needs of that industry or building a nimble workforce that can transition from one technology to the next, which is really what we're going to need.We don't need a massive workforce of solar installers or wind technicians or EV charging infrastructure maintenance workers, we need people who are able to perform tasks associated with those technologies, but not only that, who can also pivot when the incentives for solar decline and something else picks up that they can pivot to another job. So I think the narrow focus on clean energy workers as if they can only do one thing has been detrimental to building the broader workforce that can do more of these things and also making clean energy jobs compelling. Because right now, if they're lower paying and less stable and you have to travel all over for work, that's just not very attractive for very long for workers. And so it has to change and it will change.But the other thing that is changing is that clean energy, while we might think of solar panels and wind turbines as these iconic symbols of clean energy, now clean energy means so much more than that. It means battery factories for electric vehicles and EV charging infrastructure all across the US. And geothermal.David RobertsGeothermal!Betony JonesYeah. I love Geothermal. I love Geothermal because it's such a direct —David RobertsEverybody loves geothermal.Betony JonesDo they? That's news.David RobertsWell, everybody in my tiny world.Betony JonesWell, we should be friends. The workers who maintain the fossil infrastructure, those skills are directly transferable to geothermal and so it's a really great opportunity for transitioning workers, whereas the workers from a natural gas power plant, that is a pretty different workforce from building a solar farm.David RobertsHydrogen hub.Betony JonesSo there's some technologies a lot we're investing in now. Yeah, hydrogen hubs are another example where you have much closer alignment between skills from the fossil industry and the clean energy. And not just the skills, but some of the employers are the same. Some of the fossil fuel companies are the ones who have the resources to invest in some of this new clean energy. So that could also help.David RobertsSo over time, as these labor markets are tight and employers are competing for workers, there's going to inevitably be a movement to make the jobs better, if only just to attract the workers. In some sense, that's just like the normal operation of market capitalism at work. So my question to you is to what extent can public policy speed that up? To what extent do you have levers that can induce employers to improve their jobs, that can create maybe like, programs to onboard people into these areas? How big of a lever is public policy relative to what are huge macroeconomic trends?Betony JonesYeah, so we have our funding, but I wouldn't say that's the strongest lever that we have.David RobertsThe carrot?Betony JonesYeah, we have the carrot. We have the 62 for DEO, the $62 billion for energy infrastructure through the bipartisan infrastructure law, then another $30 some billion through the Inflation Reduction Act. And there's the tax credits that are tied to, again, prevailing wage and apprenticeship standards. So we have our funding levers. And those are significant, I think especially the Inflation Reduction Act lever is significant. It will kind of move the needle for construction job quality, I think. But we have these other levers, too.Or maybe lever isn't the right word, but the federal government has real great convening power. And so one of the things we're doing to address manufacturing, and battery manufacturing in particular, is to bring together employers and unions and other experts in the field to identify what are the skills required to manufacture battery cells? And then we'll look up and down that supply chain and can we get to some industry consensus? And the argument that we make to employers is this there's no coherent system of workforce development for advanced manufacturing in this country. And so what that means is that every employer is responsible for training their own workers and there's nothing really to keep their trained workers working for them as opposed to going to work for a competitor.David RobertsRight. You invest in the worker and then the worker goes somewhere else. And that's inducement not to do it in the first place.Betony JonesRight? So there's this free rider problem. We can move away from that because workforce doesn't need you're competing on so many different areas. Workforce development, workforce doesn't need to be a point of competition. We're trying to rapidly grow this industry and facilitate the ability of American companies to compete with Asian companies in this space. So let's take workforce development out of the competitive arena for manufacturing and figure out what are the skills that everybody needs. So there's always going to be 15% or something that's proprietary, but what's the 85% that's not? And then how do we standardize that, communicate it to community colleges or support the development of new apprenticeship programs that will really support the rapid growth of that industry. And so that kind of thing where you're building industry consensus and trying to do that in a really rapid way to get these training guidelines to support the development of a whole new industry that's I think a really powerful tool that we have and that we're using.David RobertsIt seems like other countries, specifically European democracies, I guess specifically, I'm thinking of Germany. But I'm presumably not only Germany are sort of better at this than us. There's more sort of like bringing industries together and doing this sort of common work and setting up institutions for training people that go into these. Are there models from other countries that you think are really promising in terms of trying to not just shift a workforce so that it's ready for a booming industry, but to do so purposefully and quickly? Are there other models in other countries?Betony JonesThere are models, but I would say I more look at the success of other countries. So Germany has a really robust apprenticeship system. They have seven times the number of apprentices per capita as the US has. And it's a really valid training pathway in the eyes of parents and students and workers. And I think we need to build up our apprenticeship system to get there. But the challenge of looking at other countries is that the context is so different. Other countries, I was talking to a roundtable of embassy people recently and I was talking about our approach with the Inflation Reduction Act and the Bipartisan Infrastructure Law and they were just floored that all we have is incentives.They were like, can't you just require this? Like what?David RobertsYou just got to explain budget reconciliation to them. It all makes total sense.Betony JonesRight. I mean, the context is just so incredibly different that our solutions really do have to be American made. But there are examples in the US that work really well. So I will refer again to the construction industry and the system of registered apprenticeship. Let me just tell you for a second why this is such an incredible system of workforce development. One, it's privately funded.David RobertsThis is here in the US you're talking about?Betony JonesHere in the US union apprenticeship training for construction occupations. It is privately funded by both the employer and workers. Workers take money out of their paycheck to fund the next generation of training. And so the people enrolled in apprenticeship, they work out in the field, learning on the job while also taking classroom training. And they're paid from the get go, they're paid from day one and their pay increases as they acquire skills and training. And so they have this articulated trajectory of pay until they graduate three to five years later with their journey card.That is a transferable industry recognized credential that they can take anywhere in the country and get work. And so again, it's privately funded. Employers are putting in money and workers are putting in money. And that ensures that the system is accountable to the employers in terms of the skills that it's providing people and accountable to the workers in terms of realizing that they're going to get more money as they advance in their career development. And so that system works really well and it's collaborative. A bunch of employers contribute to that same system of training and then they can draw workers out of that system of training when they need them on the job.How do we translate that to new industries? How do we expand that model for manufacturing?David RobertsWas that born of some kind of public policy nudge, or is that just something the industry developed itself over time?Betony JonesOh, my gosh, that's a stumper. I don't actually know. But it has been around for a very, very long time and it serves everybody well. It's sort of one of these things. If it was developed today, it would be like the greatest social innovation. It would be all over the headlines. It's this incredible system. The unions put $2 billion a year into apprenticeship training.David RobertsOh, wow.Betony JonesThat's the contribution of workers and then there's an equal contribution from employers. It's not dependent on public policy. It's not dependent on the whims of philanthropy. It's not dependent on anybody. It's built into the system to make sure that the construction industry will be able to retain and grow a skilled workforce continuously.David RobertsBut on the other hand, the Bureau of Labor Statistics also says that the construction industry is short 413,000 workers.Betony JonesI like your stats, and BLS is a reliable source. But the thing is, the construction industry is not very heavily unionized. So on the one hand, we see ten people seeking apprenticeship openings as there are positions for. Ten people for one position. Why can't apprenticeship programs just accept more people? If they have ten people who want in, why don't they just bring ten people in?David RobertsRight.Betony JonesIt's constrained by their ability to put people to work. So if they don't have a project labor agreement to build the thing, then they can't guarantee a job for that person they're bringing into apprenticeship. As they get more agreements and as more construction activity gets built union, then that system of training can expand rapidly. And we've seen that in the past. It's very, very nimble. It can scale, but it is driven by demand. And not just demand for construction workers, but demand for union construction workers.David RobertsIt sounds like the slow pace or the anemic state of unionization in the US is a big part of what is creating this backlog or this appearance of backlog or this sort of choke point. Would you like to see and maybe you aren't allowed to say, but would you like to see other kinds of policy? I mean, are there other things that Congress could do to accelerate unionization or to support unions that you think would have the sort of side effect of accelerating the clean energy workforce?Betony JonesSure, Congress can do whatever they agree to.David RobertsOr can't, as the case may be.Betony JonesBut there was an early proposal, I think, to tie the electric vehicle tax credits to union made, or at least have some higher level tax credits and bonus credit if the vehicle was made in the US and made union that got stripped out, that would have helped. Right now we have Davis Bacon is the law that applies to federally funded construction work. So for construction, if you're using federal dollars, there are certain labor standards and wage standards and reporting standards that you have to meet.And then in the Inflation Reduction Act there's wage standards and apprentice utilization standards. But beyond construction there's nothing statutory to nudge more work or to make it easier to unionize. Ultimately, unionization is the choice of the workers. But there are a number of barriers, ever increasing barriers, to support unionization. So it has actually been the National Labor Relations Act was passed in 1935 and that act says quite clearly: It is the policy of the federal government to support worker organizing and collective bargaining because the quality of bargaining power is important to the free and fair conduct of commerce.Or some 1935 language that I'm not paraphrasing very well, but it says explicitly it is the policy of the US government to support worker organizing and collective bargaining and yet lawsuit after lawsuit and decision after decision have kind of cut away at that right of workers.David RobertsYeah, I wonder to sort of loop this back in. So there's this story in The Washington Post about how during the pandemic and post-pandemic, basically inflation kind of brought down the purchasing power of upper income people and labor market tightness raised the wages of lower income people. And as a consequence, the inequality gap in the US shrank by a crazy amount in a crazy short period of time, which you might think, woo! But in Rides, Powell and the Fed who say explicitly the rise in worker wages is a problem, we have to solve this problem by raising interest rates.So it seems like we have a macroeconomic institutional setup that is intrinsically hostile to raising the wages of blue collar workers. Even as with the other hand of the federal government, we're desperately trying to improve those jobs. What do you make of that? Is that resolvable?Betony JonesI mean, I can see how one would draw that conclusion. I don't know. I think there's a lot of barriers to trying to improve job quality, particularly for workers without a four-year degree. And all I'll say is that I don't think we can achieve our ambitious clean energy goals without doing that and that employers will, whether they do it because we're now asking them to or they do it because they eventually realize that they have to. The labor market is competitive. The balance of power has shifted more to workers after the pandemic or during the pandemic, and I think workers are asking for more from their employers.If you're an employer and you want to find and be able to retain a skilled workforce, you're going to have to make some investments in that workforce. And think about workers really as something that you're investing in and not this disposable commodity, because that's not a recipe for success, to be just churning through workers that employers aren't willing to invest in the skill, development, and advancement. I mean, you think about things like batteries or advanced manufacturing. This requires a really high level of skill. And right now, the way that that work is structured is to bring in low-wage workers to do very rote work and bring in foreign workers to do the skilled work.And there's no transfer, there's no knowledge transfer happening. That's not going to work. Once we have 100 battery cell factories across the country, we're going to need to invest in our own workforce if we're going to be successful here.David RobertsAnd also, I think, worth noting here is we can remember back to sort of globalization draining away these high-paying jobs and the federal government responding. I remember Bill Clinton sort of responding with this sort of hand-waving about worker retraining. This was kind of a mantra like, oh, retraining, retraining. We're going to help our workers adapt. And to my understanding, those federal worker training and retraining programs just have an abysmal record. And so, consequently, jobs were degraded, people got kicked out of jobs, and there was an immense and still ongoing political backlash. So you would hate to see like a decade of transition to clean energy followed by a backlash against the sort of low-wage labor it's involved.Betony JonesAnd sometimes, I mean, not just accounting for the track record of those programs in terms of job placement, but sometimes massive training programs can actually have the opposite effect, where even during the ARRA period, we invested tons of money in solar training and other clean energy workforce training. And what happened then is that we sort of flooded the labor market with basically qualified people who couldn't find work. And so that drove wages down, right? That people were competing with each other and trying to get a job. That drove wages down. That served the industry, or it served the employer part of the industry, but it maybe hurt the industry long term because now people think of clean energy jobs as unreliable or as volatile, and that might not have helped us long term.And so this time around, Congress passed these policies with very little money in the way of workforce education and training. There's very little. There's a few programs for a few things, but most of it is money that we're investing in the infrastructure itself, in the implementation, the deployment, the demonstrations. And so employers need to think about how they're building workforce development into their implementation plans because there's not just this massive pool of public funding to go train a bunch of people and hope that they find their way to jobs. This time it's much more demand-driven in order to ensure that there's good calibration.And even if Congress were to pass or put some money into workforce development, the timing of that is more likely to align with when real jobs are going to be created. Because right now, there's a lot of construction planning happening, engineering happening, but a lot of the construction is yet to materialize. And then the manufacturing jobs are even a little bit further away. First, you have to build the factory before you can staff the factory. So we do have a little bit of time to kind of reorient the labor market to meet the demand for these positions.David RobertsBut the overall message here is this is not going to be a thing where the federal government steps in and sort of spends a bunch of money taking charge of the workforce itself. You're basically convening private industry and trying to help them and train them and show them how to develop these programs themselves so that they become kind of self-sustaining?Betony JonesYeah, I think it's an all-hands-on-deck. I mean who knows what Congress will appropriate in the future? But right now we're not dealing with a lot of public money for workforce development and so we are looking at how do we engage strategically? There's a massive community college system out there, 8.5 million students. There's a massive apprenticeship program out there, there are states and there are workforce boards that are funded through the Department of Labor. How do we align all of this existing workforce infrastructure to meet some of the needs of the clean energy sector? That's where I'm thinking more.I don't think we have as much power when we have a million dollars to spend and we go train 26 people but if we have a million dollars to convene and corral the massive community college system out there then we're getting somewhere. So it's just what resources do we have available? And that's just an example by the way, we're not spending a million dollars —David RobertsIt seems like —Betony Jones— to community colleges.David Robertscommunity colleges for their own purposes have all the incentive in the world to try to get smart on this and to try to orient themselves toward the big burgeoning jobs of the future. I'm sure they're hungry for guidance or are they? It seems like they should want this.Betony JonesAbsolutely and it's hard. Guidance is hard to develop. Getting industry consensus for an emerging industry, that's challengin. And so yes, people want that because they want their curriculum to meet employer needs. They want the students that they train to be able to find work in their community. So yeah, people are hungry for the guidance and I think that's a really valuable thing that we can do.David RobertsOkay, my attempts to goad you into badmouthing the Fed having failed, let's move on into one other thing, which I didn't leave all that much time for. And it's really, really huge subject, but maybe we can just sort of say some broad things about it, which is the other side of the coin, which is fossil fuel jobs going away. If you count not only sort of direct fossil fuel jobs but all the kind of second-order peripheral jobs around fossil fuel jobs serving fossil fuel workers, et cetera, et cetera. There are a lot of those and there are communities that depend on those fossil fuel jobs almost completely.And there's been a lot of hand-wringing about this, about what to do with all these workers that are going to basically be pushed out of jobs if we do the clean energy transition successfully. I hear a lot of talk about this and I hear a lot of happy talk about how we're going to retrain them to work in geothermal or whatever. But the scale involved, I have not yet seen anything that seems of the scale of the problem. So are these sort of like fossil fuel worker retraining programs, are they just like nice brochures? Is there any prospect of having a humane response to that problem at scale?Betony JonesWell, there has to be the prospect of it, and I think that's the thinking around and talk around a just transition. We can't leave people behind. It's not the right thing to do, and it will slow us down in terms of building political will to do more of the kinds of things we need to address the climate crisis. So it's not just a moral imperative, it's just a pragmatic issue. It's not just jobs. It's the fossil fuel industry's hold on the economy, actually the tax revenue for communities that are dependent on those industries. There's a lot of issues beyond just the jobs that threaten or pose risks too.David RobertsYeah, I mean it's their schools, it's public services. It's all sustained by fossil fuel money in some of these places.Betony JonesSo our approach is really, like, looking at economic redevelopment and diversification. There is no one-for-one replacement for a fossil fuel facility in a community. Like, I live in a county that has five refineries.David RobertsOh my God.Betony JonesThey are at risk at some point due to transportation electrification. There's no single industry that can come in and replace that economic base or those jobs. So then the challenge is economic diversification. And how do you retain an industrial base for blue-collar workers? It's not all just transitioning to the creative class or something else. How do you retain an industrial base in these communities?And I think that advanced nuclear carbon capture and storage, direct air capture, hydrogen, some of these technologies that we're investing in provide those opportunities because they aren't necessarily dependent on a resource. They can be anywhere. So why not locate in a place that can use existing assets, including the infrastructure but also the workforce? There's a whole interagency working group that is really looking at how to serve energy communities, how to connect them with resources, how to make sure we get this transition right and create new opportunities for workers.David RobertsLet me ask about that because you wouldn't expect jobs in those new industries that you're talking about to sort of spontaneously align with lost jobs, right? You wouldn't expect them to sort of spontaneously line up with the places that need to replace fossil fuel jobs. So aligning them has got to be active, right? It's got to be done by someone and a) sort of like whose job is that and how does it work? And b) sort of like do we have a track record of success? Everybody's talking about this return to industrial policy, which is fantastic.But industrial policy involves a lot of really difficult questions that we have not necessarily done great on in the past. And one of them is like trying to match new jobs to the places that most need them. What are the kind of instruments you can use to push that alignment?Betony JonesWell, one, I will say the track record of success is really with military base closures.David RobertsRight.Betony JonesAnd there's a whole process that they follow so that they're not just leaving a community high and dry. And so again, there's domestic examples that we can think of. Aside from fossil fuels there's this massive transition underway in the automotive industry where the places where we're seeing new investments in battery factories are not necessarily the places that were supplying the parts and innards for internal combustion engine vehicles. And so in some of our grants and Congress gave us language to do this, we can create extra incentives for projects that are locating in communities that have or had an automotive facility. Or repurposing, I think there's funding for repurposing automotive factory supply chain factories, for battery factories.So there's some levers in order to kind of put the thumb on the scale of locational decisions and then some of it is getting the word out around what are the assets of these energy communities and getting that in front of investors and people who are looking at where they can set up shop. And that's what the Interagency Working Group is really doing, like trying to draw investments to these communities.David RobertsYeah. What I come back to again and again is the scale of these macroeconomic trends relative to these policy interventions you're talking about is the thumb on the scale. I have no doubt that in a few years there will be a few success stories you can talk about like oh look, this factory closed and this one opened. But does that seem adequate to the scale of the problem? Does anything seem adequate to the scale of the problem? Is there more you would like to see or more you think the government could do?Betony JonesYeah, I think that's a good question. I mean, I guess I approach this with a bit of curiosity. I mean, for years again working on climate change, I sort of knew that we weren't doing enough to combat the crisis and yet I kept working on it. And then we got like a pretty significant bill adopted to reduce greenhouse gas emissions by a lot if we're able to get through some of these hurdles that you're going to cover in your podcast series. And so I think right now, me and I think others are trying new and creative things, partnerships, bully pulpit, levers with the funding that we have and with the authorities that Congress has given us.And we're studying what works, and we're trying again and we're looking at what it's iterative. I feel incredibly optimistic. It might be because I don't have time to read the news or the headlines, which are always all so negative, but I see the kinds of things that we're putting into place for the long haul, and I sort of like I kind of can't imagine how it won't work.David RobertsWell, let me raise one possible way that it won't work, as my special talent is imagining problems. And this is probably not something you're going to want to answer since it's political, but one of the —Betony JonesThere is a big reason why it won't work.David RobertsYes. It's called the Republican Party. But let me flesh that out. One of the big trends we're seeing and there's been a bunch of headlines about this since the passage of IRA. IRA has spawned already billions and billions and billions of dollars of investments in factories, et cetera, et cetera. And most of them, the bulk of those investments are in red states. Most of the new investment is going to red states. And red states sort of notoriously have this kind of low unionization, low wage, you're on your own.Betony JonesYeah, they're all right to work states.David RobertsRight to work states, et cetera, et cetera. So in a sense, the Biden administration's quest to make these high paying unionized jobs is, it seems to me, going to run into red state's long-time habit and ideological commitment to worker precarity, lack of unions, low wages, high churn. There's this article in the Washington Post the other day about, "Oh, why are red states hiring more?" And then they looked more closely at it, and then "Oh, they're just hiring and firing more" because there's more churn, because these are crappy jobs —Betony JonesPeople are quitting.David Robertsmove through them more quickly.So do you worry about that? Do you have any way to circumvent that? Do you see any prospect that Republican policymakers might change their tune on those issues to attract those kind of jobs? What are your thoughts on that?Betony JonesYeah, I mean, you're right that it probably is too political to weigh on some of the specifics, but I do think that the Inflation Reduction Act is designed in such a way that I think Americans who haven't seen why they should care about climate change, their livelihoods, are now going to be tied to somebody caring about climate change. And how does that not sort of shift the way that people think? Not that people always vote in their self-interest, but —David RobertsI mean, Florida is sinking under the water and they're still — self-interest.Betony JonesBut again, your livelihood is tied to a battery factory and the electric vehicle transition, it has to change a bit how people think and how lawmakers think, I don't know. I mean, the other thing is red states. Companies are locating in, quote, red states for a lot of reasons. But I don't think it's primarily because they're right-to-work states or because they're cheap labor states. It's usually because the permitting is quick, they can break ground quick, and they can get going quickly. And maybe there's some tax credits thrown in as a cherry on top.And so there's a lot of factors that go into locational decisions. But I think, like, if you take Tennessee, for example, tons and tons of investment, well, that's going to make the labor market tighter, more competitive, and that will ultimately give workers more power. And so how do we change this dynamic? Some of it is going to be — the drive to organize your workplace going to grow right now that's seen a resurgence. Is that going to continue? Are workers going to feel empowered to ask for more? And how is that going to be a differentiator between companies in a state or between states?David RobertsWhat a fascinating dynamic. That will be fascinating and terrifying to watch. Well, I've kept you for too long. Let me finish with a sort of general question about your broad feelings about this area. So my analogy is sort of there's a lot of worry these days about the material specifically like minerals and metals requirements of clean energy. And there are a lot of sort of specific issues and specific problems and the solutions are not necessarily obvious or ready to hand. But generally my feeling is like, that's going to work itself out. Like of all the things that capitalism is good at, substituting materials and finding materials, is really good at that.So I can't necessarily give you chapter and verse why, but sort of my strong feeling is like in 10-20 years we'll look back and be like "Oh, that just sorted itself out." Is that how you feel about the workforce issues or does your worry run deeper? Do you worry that this could be an actual bottleneck, an actual slow work to slow the transition? What's your sort of general level of optimism about this stuff?Betony JonesFor the clean energy transition, I'm not at all concerned because I think there's the capacity of these jobs and industries to compete really effectively for workers in the broader economy and labor market. Where I'm concerned is like, am I going to still be able to get cheap takeout? Or like workers will come from somewhere and are they going to come from the service sector where we've gotten really comfortable with very low-cost services.David RobertsRight.Betony JonesSo that's more likely, I would guess, to be where things are going to change. But I would also say this, this is an incredible opportunity to get more workers who face systemic barriers to employment off the sidelines and into the labor market. There's workers with a history of incarceration that have a very hard time finding work. Can these jobs be more accessible to them? Or to veterans? Or to youth who've been funneled into these four-year degrees, taking on enormous debt, not being able to find jobs? Is this more opportunities for workers like that? Or for women who have sat out since the pandemic because they can't find good childcare?This is actually an opportunity to tap more of the full talent of the American workforce that hasn't been able to access it because of one barrier or another. And if we think more broadly around the workers that are available, if we do a little bit of work to help reduce some of those systemic barriers that are keeping people out, I think then I really don't worry. But I don't worry anyway.David RobertsSo we have the people.Betony JonesI think so.David RobertsThis is super interesting. I'm going to maybe slightly downgrade my worry about this particular horseman and compensate by worrying more about one of the other ones.Betony JonesWorry about permitting.David RobertsI worry about that plenty. Okay, Betony Jones. Thank you so much for coming on and talking with us. It was great.Betony JonesThanks for having me.David RobertsThank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf so that I can continue doing this work. Thank you so much. And I'll see you next time. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.volts.wtf/subscribe

In this episode, Jenifer Fernandez Ancona of Way to Win discusses the ins and outs of Democrats’ notoriously ineffective political messaging, and what needs to be done about it. (PDF transcript)(Active transcript)Text transcript:David RobertsIf there is one thing upon which almost everyone in US politics agrees, it is that Democrats suck at messaging. They constantly find themselves on the back foot, struggling to respond on culture war issues that make them uncomfortable. Biden's approval rating remains abysmally low and the enormous accomplishments he and congressional Democrats have secured despite the barest of majorities remain almost entirely unknown to most of the public.But why? What exactly is the problem with Democratic messaging? That is where the agreement breaks down.Is it too liberal or not liberal enough? Has a young vanguard distorted the party's perspective and alienated it from swing voters or is an old guard holding back a diverse new coalition? Is Democratic messaging using the wrong words and phrases, or is the problem that it simply doesn't control enough media to ensure its messages are heard?To dig into some of these questions, I wanted to talk to Jenifer Fernandez Ancona, the co-founder, vice president, and chief strategy officer for Way to Win, a Democratic research, analysis, organizing, and fundraising group that came together in the wake of the 2016 election to make sure its mistakes were not repeated.Way to Win just released its final report on the 2022 midterm elections, digging into who exactly bought advertisements, where they ran, and what they said, as well as how they performed with various demographics. I’m excited to talk to Ancona about what Democrats are saying, what they’re not saying, who’s hearing it, and how they can do better.So with no further ado, Jenifer Fernandez Ancona, welcome to Volts. Thank you so much for coming.Jenifer Fernandez AnconaThank you so much for having me.David RobertsI'm excited to do this because like anyone who's followed U.S. politics for many years, I have beefs about Democratic messaging and theories about it and all sorts of stuff to say about it. And I found over the years that everybody has a lot to say about Democratic messaging and everyone feels that they're an expert on it. But what I've come to see over time is most people, probably including me, are full of it and are just going off instincts and hunches and projecting their priors overinterpreting their own particular epistemological bubbles on and on and on.So I'm extremely glad to have, I think, probably the closest thing the world has to an expert on this subject, on the pod to discuss it by way of bolstering that claim. Before we get into the details, let's just talk about Way to Win. Like, why did it come together and what has it been doing since the 2016 election?Jenifer Fernandez AnconaWell, we came together essentially in the wake of that election when we felt like the same strategies that led to that complete failure. And honestly, a lot of the losses that we had seen over the course of the last four years across the country at the state level and local level, that we needed new strategies to change, that we weren't going to get out of this crisis using the same strategies that got us into the crisis. And that is what we were hearing as we were in Democratic big, major donor funding circles at that time, a real inability to recognize that major shifts were needed and an unwillingness to even confront what had led to Trump's rise and ultimate power.David RobertsAnd one wonders what could shake people out of that kind of complacency if not that.Jenifer Fernandez AnconaExactly. Yeah. So a bunch of us came together, and it was those of us who had been working in the field of trying to bring more resources to movement building, progressive movement building, multiracial coalition building. Especially. We had Tory Gavito, who was one of our co-founders, who's now the CEO of Way to Win. She came from Texas. She's in Texas and was part of trying to, over time, flip Texas blue and had learned some really important lessons in the past few years. And we just felt like we needed to nationalize this idea of taking the fight to different places.So we got so stuck in a battleground state world, which was really focused in the Midwest, and yet so much of the population growth is actually happening in the South and Southwest. And we saw the importance of states like Georgia and Arizona coming into power, but not enough resources actually going there. So that was one of the things, is, like, we need to re-imagine the map and actually expand the places where we could go to build power and to take power from Republicans. So we were some of the first coming on the scene to say we need to put major resources into Georgia, just as Stacey Abrams initial campaign was going, but it wasn't on the map of most national political organizations.They still weren't talking about Georgia or even Arizona. So we were part of that. And we were saying we have to push into places like Texas as well as North Carolina, Florida, places across the South and Southwest that are growing and changing. So that was one thing. The second thing was funding politics in a way that actually leaves something behind. So when you only fund candidate campaigns, as you know, there's nothing left at the end of the day, the candidate wins or loses. There's no infrastructure to keep going, so you have to start over. So we wanted to create a way for donors to fund electoral victories in the short term, but that would also build toward the long term.David RobertsI think they call that losing well.Yeah, exactly. And knowing that if we're going to build in a place like Texas, we're going to lose statewide a few times, but we're winning in local areas, we're flipping counties, we're flipping congressional districts, we're showing how you can build over time. But then funding organizers, leaders, and groups that are going to be there the day after the election to continue to keep fighting. So that was two. And then the third thing was having essentially a three-part strategy, but a comprehensive strategy that would ensure not only we have, like I was saying, base expansion, community builder, power builders working in cities in states and actually growing and building a base over time also that the purpose of winning power is to pass policy.Jenifer Fernandez AnconaIt's not just about electing a democrat. We want to make sure that we're arming the communities in that place with the tools and the ability to actually push for policy, whether it's democracy, climate education, et cetera. And then the third part, which I know you're interested in, given your intro, is that we have narratives that shape the multiracial diverse coalition that we have. We need to be going toward inclusion. So we want to make sure that we're winning, but not in a way that is more divisive or causing different groups to fall out of our coalition.We need to continue to grow and forge this multiracial coalition that we have, our winning coalition. And we do that with a narrative strategy that is all about building across those differences.David RobertsRight. So it is this latter part I want to focus on this sort of research you've done, on what messages Dems are using and how they're hitting. But before I get into that, I want to address my main hobby horse in this area, which I come back to again and again, which is I come up in the climate area. So I'm most familiar with the sort of agonizing, over climate messaging that has been going on and on and on and on as long as I've been following this area, and mostly has manifested in endless research and resources put into these kind of focus groups where you get a group of college students in a room and you read them various paragraphs and then you see which ones they react well to, and then you wildly over interpret that as some sort of messaging strategy. In other words, this sort of obsessive focus on what words are we using, what are the words and phrases, is it national security, is it home and hearth? Like what's the right themes? And I have come to think over the years that this a little bit misses the forest for the trees in that the reason the right wing seems to dominate this kind of messaging sphere and that they're always on the attack and the left is always on the defense is not their cleverness, they're not particularly smart.A lot of their messages are quite stupid. They just are repeated over and over and over and over and over and over and over again in your face, everywhere you look. So in other words, it's not the cleverness of the message, it's ownership of the means of distributing messages. And that's Fox News, that's OAN, that's all the local newspapers they're buying up. All the local news stations they're buying up. Basically, right wingers are running Facebook now. Basically right wingers running Twitter now. I mean, they're just on a march through media, dominating media. And if you spend the money and exercise the power to dominate media, you can get your messages in the heads of the public, even if the messages are super dumb.So I guess what I want to ask you is, is this a fair dichotomy, this dichotomy between the sort of messaging focus versus capacity to get the messages out? Do you think that's a fair dichotomy? And how do you sort of view the balance between those, or, like, how should resources be divided up between those?Jenifer Fernandez AnconaYeah, it's a great question. The way I see it is not that it's not a dichotomy, because it really, I think, has to be both. And how I would think about dividing it is a good question, but I would say how we think about it is we absolutely need to be building different modes of ownership of media. Like, it should be a huge part of our strategy. We haven't focused on it enough. The right is certainly beating us, so I'd say we're behind there. I think we have to put significant resources there, but it really can't be the only thing, partially because that takes time to grow and build and we have low hanging fruit on the table.Now, that I think that's what I've really been focused on is how do we actually build a process that can understand where voters are through research, then make content that tries to reach them in an emotional way, and we can test that content. There's lots of tools that can help us see what does this actually move people the way we want to move them. So there's a lot we can do. Now, I think that's not about necessarily being clever or finding the right words. It's like, can you deeply listen to the community you're trying to move?Can you hear from them? Where are they actually? And not just trying to test in a poll with some words and see if they like what they hear. It's more like understanding how they think. It's like deeply listening is what we call it. And we use a lot of research tools that actually are much deeper than you would get from a focus group or for sure a poll. We use a lot of online panels where people actually you can kind of get underneath how they think. So that's what we're sort of about, like, how do we actually figure out what's underneath what people really, truly want, and then how we can speak to it in a message and then test that to see does it work or not?So for me, it's not about necessarily finding the right words, but it is about finding the right kind of frames and the right overarching argument that we're trying to make. And then it absolutely is about repetition, repetition, repetition. So I think we can do it at the same time we can get better and smarter about how we actually do our message work. A lot of Way to Win and a lot of our partners that we work with do. But it's not the norm of the Democratic establishment or major campaigns right now that's what we're trying to do is influence and push in that arena, because I think there's just low hanging fruit that we could actually reach do better.And I think that the midterms is a good example of where we actually did that. And so that just gives me hope. And we can talk about that if you like, but that experience just gives me hope that there is a way for us to get more aligned overall across the ecosystem, whether it's candidates, the president, groups on the ground, activists, et cetera. If we're all kind of rowing in the same direction on our message, it doesn't have to be all exactly the same words, but we're kind of saying the same thing in a big picture argument way that can actually break through.David RobertsHerding cats. Famously difficult to do on the left.Jenifer Fernandez AnconaIt is. But like I said, we did it in the midterms. I mean, we should talk about it as an example of what we did, because it was really interesting.David RobertsLet's get into that. I want to come back to the capacity question later, but let's get into that because I think the thrust of your report was that the midterms were a success story in terms of Democratic messaging, which you don't hear. Success story and Democratic messaging don't go together a lot.Jenifer Fernandez AnconaSuccess and warning signs.David RobertsI want to ask a semi specific question. So going into the Midterms, I think there was a piece of conventional wisdom among Democratic elites which went something like this the sort of positions of power in the Democratic coalition, the staffers, the people who are actually out there doing the work. That class has been kind of taken over by a young, very diverse, highly educated, highly liberal set of young Democrats who just talk to one another and convince one another that everybody's as liberal as they are. And they've sort of taken over the messaging, they've taken over the party's posture.And what they don't realize is that whatever Joe average voter, Joe average mid-state voter, those concerns and things that they value don't resonate with him. So there's one story that goes the Democratic establishment has been taken over by lefties and they're alienating everyone else. And I sort of want to know a couple of things. Like a was there a lot of lefty messaging in the Democratic advertising going into the midterms? Like, were people actually out there saying defund the police and make immigration legal and all these kind of things. A was that the face the Democrats were showing the public?And B is that the way the public actually does view the Democrats as sort of captured by their left flank, too far left? In other words, sort of like is the kind of rising left flank a vulnerability for Dems in terms of kind of messaging and posture?Jenifer Fernandez AnconaI really don't think so. I mean, my position is a couple of things. I think that those of us on the left and myself included, I consider myself progressive. Way to Win certainly has been funding a lot of progressive groups over time. So we're situated in that. We're progressives. We consider ourselves part of the left and the folks that we talk to in our coalitions really don't see things that way. I think we're very clear who our coalition is. Right? And it's ideologically diverse and it's racially diverse and it's diverse in terms of age too. And a lot of those things overlap, of course, but it's fundamentally a different task than the Republicans have.When you're looking at we have 42%, 43% of our overall people who voted for Biden are not white. And then on the Republican side, it's 92% white. Right. So they're essentially trying to consolidate one group while fracturing off as much as they can from the other. We actually have to hold a really big coalition together, white voters and all kinds of different voters of color. So it's just a fundamentally different thing. And there's a lot of ideological diversity in that. So I think we understand that that right now it's an anti-MAGA coalition, really. It's like against this kind of MAGA Republican.And that was partially the success of the midterms was making that clear. So I will say, number one, I think we're very clear what our job is. And we don't see the idea of a median voter. We see it in this diverse coalition way and needing to hold it together. Meaning you don't want to have messaging targeted to one part of the coalition that completely turns off and demobilizes the other. Right. You have to actually figure out how to get both to be persuaded and mobilized to vote for Democrats.David RobertsYeah, well, you have both factions basically accusing the other faction of using messages like that. Like your messaging excludes me. No, your messaging excludes me. Is there some magic message that doesn't exclude either of them?Jenifer Fernandez AnconaYes. I think we found it in the midterms when we talked about we need to protect our freedoms. We have these MAGA, extreme Republicans who are trying to take our freedoms away and it's our job to actually come together. We did it before, we rejected Trump, we can do it again. That actual overall message really worked for both sides. But back to your original question absolutely ridiculous. Because when we looked at the midterm, like you said, it's called TV Congress's report that we did, which looked at the paid broadcast advertising, which unfortunately is still a huge amount of money, it was like about around $600 million that we studied on both the Senate and just the Senate and the House on both sides.And so when you look at that spending, even on the Democratic side, just looking at Senate, it's $296 million. And looking at those ads, who's controlling that? It is not young, quote unquote, woke lefty liberals, okay? It is old school. A lot of consultants who've been around for a really long time, media firms, they are the ones who are driving this message. It is also not liberal. I mean, what's so fascinating to me about this debate within our party is it's like it misses the actual bad guy, which shocker, is the Republicans, okay? It's the Republicans who are lifting up defund the police, who are lifting up bad immigration narratives, who are talking a lot about crime and all of these racially coded things and attacks.It's the Republicans who are painting us that way. So if there's a perception among our voters, which frankly there is, unfortunately, we still see it even today, there's a perception that Democrats are too liberal or Democrats don't care about you. It's not because of what Democrats are actually doing. It's because of how lockstep Republicans are in their messaging. I mean, it's absolutely mind boggling when you just see the amount of money that they spent trashing Biden, Biden, and Pelosi in their midterm advertising. It was over $200 million just attacking Biden.David RobertsYes. Even though Biden was notably not up for election.Jenifer Fernandez AnconaYeah, because they care about brand. They are trying to trash our brand, and they did it pretty effectively. And I think that plays into Biden's approval ratings being so low.David RobertsBut what would you say, though, they do use defund the police. I think it's fair to say that people on the right probably said the phrase "Defund the police" ten times more often than any liberal ever said it anywhere. Yes, but a few liberals did say it. You know what I mean? So they did get that ammunition from liberals. And so the argument ends up coming down to sort of like, on the one side, people saying liberals should stop saying stuff that's so obviously out of step with the mainstream, and then other side saying, well, you can't prevent all liberals everywhere.You just don't have that. Kind of like if a single liberal somewhere saying something goofy results in like a ten week Fox News campaign about it, there's only so much you could do. You can't control every liberal everywhere. So how do you think about that?Jenifer Fernandez AnconaWell, it's a different job. It's the job of movements to push the boundaries on what's possible. It's the job of movements to fight for their own lives, to fight for the things that they need and want. That's a fundamentally different job than winning elections. So those of us who are focused on winning elections. We actually have to just work with it. And that is what I think is our philosophy is like I was saying, we have a diverse coalition. We have to move them. So how can we actually figure out what they need and want? How can we talk to them in a way that they can hear?Because we can actually make the case on things like community safety, for example, which is where that defund piece comes from. Ultimately, when you actually talk to voters, they don't like that kids are being shot by cops unarmed. They don't like it. It's not popular. Like voters actually don't like that. In our own coalition that we're trying to move, they care about it. They care about violence. They want something to be done. And what the problem is I think that we've really been saying in which we said in our report, is like, we actually need to embrace it a little bit more.We need to figure out how to make comprehensive arguments on all of these things, whether it's crime or immigration or gender and LGBT issues, because what we've too often done is just ignore it. Like, think it's going to go away, dismiss it, try to focus on something else. Oh, it's just got to be about kitchen table issues. We can't actually address those things. We're not actually going to talk about crime, even though that's what the other guys are talking about. That's probably one of the biggest mistakes that I haven't seen us solve yet, and that is the focus of 24.David RobertsOne of the other big themes in messaging debates these days is you have, I think, I guess they're called popularists. I don't know if any of them still want that label or if that label means anything, but there's a group of people that say basically like Dems have a core set of issues on which they are extremely popular and they tend to be "kitchen table" issues. We're going to protect Social Security, we're going to give you better health care. We're going to put you to work. Economics and health, basically kitchen table issues. And by this way of looking at things, anytime Dems sort of focus campaigns on other stuff, typically culture warish issues, they suffer.And so what Dems should do is stick to their strengths, stick to talking about issues where they know they are popular. And insofar as they get drawn into these other debates, they're going to lose. I have so many questions about this narrative, including like, what the hell counts as a kitchen table issue? If I'm a young woman, abortion is an extremely economic issue for me. It's something about which I worry at the kitchen table, as a matter of fact.Jenifer Fernandez AnconaExactly, yeah. What kids are reading in school and how their teachers are treating them and what books they're banning are also kitchen table issues these days.David RobertsRight, but the conventional wisdom is sort of like these core economic and health issues or where Democrats should stick.Jenifer Fernandez AnconaRight, it's wrong.David RobertsA) you think that's wrong but first I'd like to hear sort of like did Dems do that in the midterms? Did they stick to those issues or what did they do instead and why is it wrong?Jenifer Fernandez AnconaRight? This is what I would say. It's another false dichotomy, honestly, to say it's got to be kitchen table versus culture, because it's all swimming together right now and we're not going to be able to have a conversation about one thing when the other side, which you noted has a very large set of megaphones and channels, is going to talk about the other thing. You can't ignore it. Politics isn't solitaire like our friend Anat Shenker-Osorio likes to say. So you have to know what the other side is saying and you can't expect to have a totally different conversation.What we looked at in the lead up to the midterms, because we knew this was going to happen, was figuring out how to actually tell a story that does merge these two ideas together in terms of an economic, focused narrative and that also addresses the contrast of what the other side is trying to do. So it was a structure that involved sort of three parts. One is really just saying what you're for leaning into what we believe in this case, the things Biden has done created all these millions of jobs. Democrats came together and passed this amazing Inflation Reduction Act.Like there were a lot of things we could point to of like this is what we tried to do, we actually did. We created millions of jobs with better pay and better benefits. These were think concrete things we did. Number two, you pointing out that the Republicans have completely gone off the deep end and this is what they're focused on. They're trying to ban your books, they attacked the Capitol with violence, all these things. You can actually point to the contrast and then at the end of the day just again remind people the third part that we are a diverse coalition and we came together before to say no to this kind of extremism and we can do it again.And that three part strategy for the message actually really worked in our research to show that it moved folks over toward Democrats whether they were liberal or moderate or even somewhat conservative. And it also worked across black, white, Latino, Asian American voters as well because it's a unifying message that doesn't try to separate these two big topics, whether it's economic, kitchen table and kind of culture war and our freedoms that the Republicans are trying to take away. There really is a way to talk about them together.David RobertsYeah, I mean one thing that should be noted is that Republicans talk about them together, like, Republicans, when you hear them address economic and kitchen table issues, it's always through a culture like everything's culture war. Now it's all woke, right? Like, they don't neatly distinguish between those two areas.Jenifer Fernandez AnconaNo, because they wrap their anti woke culture fear. We call it status threat. That's a term from academia. But status threat, it's like anything around race, gender, to try to make people feel threatened, to try to make people who are economically insecure in particular feel like there's someone else that they can blame for that. It's a way of deflecting blame for people rather than putting it where it should go, which is the actual Republican policy that has led to this kind of economy, which is for the elites, which is for rich people getting all the tax cuts, et cetera, et cetera.But they literally wrap their anti woke status threat messages around a core message about money and taxes and how you're going to get more if you vote Republican. So you're right that they completely merge the two. So that's why I never understand why Democrats think we can't or we can somehow separate them and only talk about one and not the other.David RobertsWell, I just think there's a fundamental and I think this runs deeper than argument. I just think there's a real and this is like, maybe it even dates back to, like, the 90s, when a lot of the Democratic establishment was sort of coming to political age. It's just the very deep sense that the general public doesn't share, like, that Democrats are that their positions on these culture war issues are sort of intrinsically unpopular and they're sort of quasi embarrassed by them. And so there's all this, like, let's just don't talk about that stuff. And that seems to me, as you say, a strategy that is not sustainable over the long term.Jenifer Fernandez AnconaIt's super outdated. It's an outdated way of thinking. I don't think in the age of Trump, when we can see what our coalition is I mean, Trump ignited a huge group of people that were not that engaged in politics before. And we've seen in the data they're still engaged, actually. I mean, the young people who came out in 2022 were the very same young people who came out in 2018 and even grew from there. So there actually is a different playbook that needs to be applied because our task is different, our coalition is different. We're not in the 90s anymore.It's a completely different world. And so you're absolutely right that that way of thinking is super outdated because abortion rights are popular, book bans are unpopular when you talk about it.David RobertsI can't believe they're banning books, and we can't make hay out of this.Jenifer Fernandez AnconaExactly.David RobertsMakes me bang my head against the wall.Jenifer Fernandez AnconaWe should we shouldn't be able to. And like, gun violence prevention reform is popular. All of these things are actually popular with the people we're trying to move. So some of it just comes down to are we actually clear about who the audience is that we need to move. And it includes the swing voters who you may have always thought about, who are a little bit older, but it also includes what we call the surge voters, who are much younger, much more diverse, and there's a lot of them, there's a lot more of them, actually, than the more traditional swing voters.So we got to figure out how to talk to them, but again, not at an expense of the other. So we did find that in the midterms, when we made an argument, look, the midterms were supposed to be a disaster. Everybody said we were going to get clobbered. There was a lot of hand-wringing about whether we should talk —David RobertsReally classic Democratic stuff, just classic Democratic hand-wringing, self-loathing doom saying, it was in full bloom.Jenifer Fernandez AnconaIt really was. But we could see in the data that there was some salient, like abortion was super salient. We saw that even before Dobbs happened that people were really mobilized when you talked about even what the Supreme Court did around the Texas law. So we knew that. And then the democracy issues, partially because of the January 6 hearings, and getting more salience in the minds of voters, the President really making it a priority in what he talked about. We could see in the data that we were looking at a real power in linking those two in a story and using the frame of freedom and freedoms.Because freedom is an American value. I mean, most Americans will say it's their top value, but the left has never actually tried to own it in the same way that the right has that's contested territory. I mean, we can't let them have freedom. And in fact, when you look back at our own history of progress, whether it's a civil rights movement or the LGBT marriage equality movement, freedom has been a powerful frame. So kind of reclaiming the idea of freedom because it's a frame that can actually tie a lot of different issues together. And we paired that with this idea in persuasion that's called loss aversion, which is like when people have something and they think it's going to get taken away, it's very motivating for them to take action.And so we combined those two tactics in the message that said, this election is about these MAGA Republicans who are trying to take away our freedoms, block everything we need, and we as voters can protect our futures and our freedoms by joining together and saying no to them. And that made a huge difference.David RobertsFor all Barack Obama gets sort of beat up in retrospect these days, I thought one thing he was absolutely great at is this loss aversion question. I did a whole pod on what's called "system justification," which is a slightly fancier term, I think, for roughly the same thing. Like, people tend to approve of the larger systems in which they are embedded even if they're sort of on the ass end of it and prospering from it. People are just sort of inclined to be averse to big — like we're going to change the system, we're going to burn it down, et cetera.So what Obama did is frame like the ongoing struggle for greater and greater freedoms and greater and greater equality and greater and greater prosperity spread more widely is the system. That is America. That's what America means. And so when we're doing that we are affirming the system. We're not trying to burn it down. I thought he played that twist really well and I always thought should run with that.Jenifer Fernandez AnconaYeah.David RobertsIn terms of this dichotomy, I'm a little curious where does climate change fit into all that? I mean I think the conventional wisdom on climate change and messaging is just that it's a very very low priority for voters.They don't really care. They don't really want to hear about it. Did you find anything to the contrary? How do you sort of view that issue amidst these others?Jenifer Fernandez AnconaYeah well I mean it's becoming more and more important just because of the rise of especially the Gen Z voting generation because they do really care about it very as you know, passionately and it's not something that they're willing to let go of and not care about. So what we found really is like a) it is important b) in the messaging study that we released there was very little TV advertising talking about the climate provision that Biden had passed, again, despite how popular they were with voters. So that was like a challenge and a miss that I think that we saw in our own research. It was like we didn't sort of quote unquote, try to figure out how to talk about climate but actually more when we listened to voters about what they cared about.Climate did always rise to the top. And again we talked to "gettable" voters across the board in several swing states, we call them gettable because they believed that Biden won the election. So we took out anybody who didn't believe that.David RobertsLow bar there.Jenifer Fernandez AnconaBut they weren't all Democrats. They were a mix. They were a lot of independents and people were there, white working class, Latino, working class, black, AAPI, across different class demographics. So it was a very diverse group of voters. It was about 300 people in qual studies that we ultimately talked to. And it's true that they saw the climate as a part of the future that they wanted.They would see a healthy climate as a part of it. There's also a definite pain that voters are feeling around the climate disasters that are happening and all the changes that are happening. So people are feeling it. I think it's how do you wrap it into the overall narrative, which is the chance that we have right now with all of the legislation that's been passed is actually framing it in terms of the kind of way that Democrats are working for you. Democrats are part of this world we're in right now is, like, we're trying to help people with lower costs.We're creating these clean energy jobs, lowering energy costs. Kind of like how do you grow the middle class? How do you have people feel like things are getting better for them? There's an economic narrative in that that I think climate really fits well into that narrative in terms of it's part of this different future we're creating. I think that's what we saw the most.David RobertsI would also say maybe this is like, getting a little ahead of things and maybe this message will work a few more years out. But in terms of the broader freedom narrative, I've always thought that we put up with a lot of horrible crap from fossil fuels because there's no alternative. They're the only way to get the prosperity we needed and have been for years. But now we have an alternative so we can be free of fossil fuels finally. And that, to me, is a great freedom message. Like, imagine being free of the fumes and all the geopolitical nonsense you have to put up with and just the worst people in the world being empowered, just like all the freedom from all of that.I think that's so fertile, a fertile message.Jenifer Fernandez AnconaI totally agree. And that was always part of our thinking with the freedoms message, that it does apply not just to abortion and democracy. It can apply to all these things, the freedom to earn a fair wage and to have a good life, to retire with dignity, to breathe clean air, to thrive. What does it look like for us to actually get to a freedom to thrive? Having freedom from fossil fuel companies, as you say, is a key part of that. So that's how I see it. The most success we've seen is fitting it into a larger story because your point is correct, that it's hard to focus on one issue like that with our voters.David RobertsYou say in the report, sort of the old, again, going back to sort of old conventional wisdom, and I think this is probably still the conventional wisdom among the aforementioned consultant class. But the idea is, like, you pick your issues, your message, your spin, and you just stick to it and repeat it over and over again and ignore everything else that's going on. And you say that no longer works. You say, we need offense across multiple issues and channels. So what does that mean? What is that mental shift and sort of operational shift that you're referring to there?Jenifer Fernandez AnconaYeah, I mean, one of the things that we talked about in our report was the compare and contrast of two different Senate races. One was Tim Ryan in Ohio and the other was John Fetterman in Pennsylvania. And it's kind of a perfect case of what you're talking about because when you look at what Tim Ryan wanted to talk about, it was China.David RobertsA lot of China.Jenifer Fernandez AnconaA lot of China, like, outsourcing. He hadn't made up his mind about what it was that he wanted to say, and it didn't really mesh with what Vance was saying. So you have Vance talking about, I mean, really, some of the most extreme, horrific, racist —David RobertsGood Lord.Jenifer Fernandez Ancona— sexist messaging. And you have Ryan being like "But I am bipartisan, and I want to work with the other side."David RobertsYeah, lots of, like, "I'm not like the other Dems" talk, which people in purple states just believe in their bones for some reason is going to work and never seems to.Jenifer Fernandez AnconaHe even spent a million dollars trashing Obama. Okay? So that is one thing. And when you look at some of the charts in our report, you can see it's like, here's what Ryan talked about, issue, issue, and here's what Vance talked about, issue, issue. They don't match. Like, there's nothing related to each other. Whereas when you look at Fetterman versus Oz, a different state for sure, but not completely different in terms of Pennsylvania versus Ohio. But you saw actually, the issues that are salient for voters, whether it was economy and jobs, crime, well, really, those two were the kind of the top inflation, crime, economy.Those are the issues that people in the state cared about. Oz talked about them, and Fetterman talked about them. So it was a way that he went on offense. So that was kind of what we were talking about before, where you could imagine, okay, Oz is going to attack Fetterman on crime, which was one of the biggest attacks that happened, and Fetterman could have just tried to deflect it or ignore it or try to focus it on something else. Well, I just want to talk about working-class blue-collar jobs. You could imagine that scenario, and that's essentially what happened in somewhat in Ohio.But instead, the Fetterman campaign, they took it on. They took it on head-on. They had a real argument about their vision for community safety and their take on what it would actually take to make people more safe and to reduce crime. And it involved gun violence reform. It involved things that were really popular for voters. So that's what I mean, is that we actually can go on offense. We have to be aware of what the other side is doing and what they're saying, and we shouldn't be afraid to address those things. Whether it's Vance's xenophobia racist sexist attacks, or any Republican who's coming at us around inflation or crime narratives.David RobertsOr even just Oz making a fool of out of himself.Jenifer Fernandez AnconaI mean, that helped.David RobertsIn addition to the sort of big picture you're talking about between Fetterman and Oz, just on a day-to-day level, the Fetterman campaign just seemed sort of like alive and awake and engaged, like they never let anything go by, even if it was just an opportunity to sort of mock Oz for being from out of state, like they were engaged. And I've always thought and I don't know how you would make, like, a quantitative case for this, but I've always thought one of the big things that Republicans have over Democrats is just that they seem to really believe what they're saying. And they say it no matter what, and they repeat it no matter what, and they just have the strength of their convictions. And that's what you got from Fetterman, is this sense that, oh, you want to talk about crime?Let's talk about crime. Let's do this. I believe in my own crime position, so I'm not going to go running away from you when you bring it up. And just that confidence. I think in addition to Fetterman's sort of general aura of big burly manliness, he just was confident in himself and his own beliefs and that's like, you can't really put a number on that. But so many Democrats just come off as like "What do you want me to say? What do you want me to say? I don't want to offend you." And it's just, like, you can't help but have a little sliver of contempt for people like that.Jenifer Fernandez AnconaYeah, that's absolutely right. And that's the brand shift that I think we're trying to say we need, right? We need to shift to actually making the case for what we already believe and what we already think in our own ideas.David RobertsWhat a thought.Jenifer Fernandez AnconaCoke doesn't run ads talking about how great Pepsi is, right? So we can stop running ads that make us sound like Republicans or that don't actually lean into the conviction of our own ideas. I really think that's a fundamental flaw. It does come from the triangulation, as you noted, and it's dead. Triangulation is dead. It doesn't work anymore. Our political messaging apparatus just hasn't caught up to that reality. There's many of us doing that kind of work, and we're doing great things and we're trying to push an influence, but I think that's fundamentally what it is.At the end of the day, we haven't caught up to the new reality that we're not in the 90s anymore.David RobertsYou cannot repeat often enough how unfortunate it is that an aging cadre elite is running all the levers of power in the Democratic Party is just like more and more glaring kind of how far behind they are from reality. But you are segueing perfectly into my next and one of my main questions and the one I've most interested in and sort of continually frustrated about, which is go back 50, 60 years, really, but certainly to the beginning of your Limbaughs and your sort of dedicated right-wing media. The main, absolute core of their message from the beginning was Democrats are bad. That is their number one thing.Everything else hangs off that that is the theme they return to over and over again. Every news story is used to illustrate that. Like, everything every Democrat says is used to illustrate that. Everything is around that point. Way more than you ever hear "Republicans are good on those things." Like, they often are grumpy about Republicans because they want them to be more farther right. But the one thing that entire side is unified on is Democrats are evil grooming, pedophile, Satan, whatever. You can't go overboard in saying horrible things about Democrats. In other words, they've defined their opponents as bad, which you might think, yeah, seems basic, but if you look at Democratic messaging and you look at Democratic advertising, they hardly ever say that.They kind of put their toe in the water this last cycle, and of course, all these high horses came out like "Oh, we don't want to be like them, and we don't want to be divisive. And voters don't want partisanship. They don't want this us or them stuff. They like us working with the opponents. They like bipartisanship and all this." Basically the way I've reduced this to a single word is branding. Like, Republicans brand Democrats. And Democrats, by and large, do not attempt to brand Republicans despite Republicans giving them so much material. I mean, as we said, they're literally banning friggin books. Now to make a 32 second ad, they literally are banning books for you. You couldn't ask for a better way to sort of say, like, this is who these people are. But we don't. So. Why, Jenifer? Why?Jenifer Fernandez AnconaWell, it's interesting. I really believe and I'll give credit to Dan Ancona, who you also know, my husband, who says that the party brand is an open source process. The party brand is open source. We should all have a say, right? So if you think about it in that way, you can see where some of the challenges are. It's like you've got these different factions of our side, right, and people tend to divide up around issues. As you know. People tend to divide up. We saw the spending in 2021. It was just completely divided by issue.So when all you talk about is one issue, you're not hitting into a larger brand about what this is about, right. You're not actually connecting it into a larger story. So the division by issue is a problem. There's a problem in the way that the Democratic Party establishment is focused or organized in that you've got people mostly working for candidates. So they're trying to provide a candidate brand. They're trying to elect one candidate. They haven't historically, I think that it's a big missed opportunity who is actually trying to brand the Democratic Party writ large because you've got the movement on the outside.They don't necessarily see that as their job. They don't see it as their job to brand the Democratic Party.David RobertsKind of the opposite. I mean, kind of their job is to hassle the Democrats and call the Democrats, sellouts and push the Democrats left, right.Jenifer Fernandez AnconaBut the party itself, it hasn't historically been organized outside of a presidential campaign. You'll see the DNC now starting to come in behind Biden, and there is kind of more larger branding messaging because they're getting ready for the presidential. But in between those cycles, it's the DCCC focused on House, it's the DSCC focused on Senate. It's like, never the twain shall meet. They don't actually talk about, well, what is the larger Democratic brand that we should be advancing here? And so that has been actually the role that we have tried to play a little bit in this outside movement where I sit. But with Way to Win it's much more about, like, we see it as part of our job to help push a larger, across the party inclusive and effective message and brand, especially when there's no presidential cycle because there's really nothing to knit it together right now in the current structure.David RobertsYeah, I mean, if you just go ask normal voters, like, why are Democrats good? Why would you vote for a Democrat? It's amazing how little standard narrative and mythology and just sort of phraseology and just that messaging is not out there. I don't think people could tell you what you end up with is like, Republicans want to be crazy, and voters will go along with them up to a certain level of crazy, and then they'll overdo it, and they'll be like, all right, well, what's the other one? Let's let the other one in for a while.But there's no positive reason for the other one because the other one isn't telling you and also not doing a very good job branding the other side. And this, to me, is crazy. Like —Jenifer Fernandez AnconaCrazy.David RobertsI went through, sorry, a rant here. I told you I had a few rants about this, but I went through the George W. Bush years. I remember thinking, like, after this, the Republican Party brand is going to be destroyed for a generation. Like, they will not soon recover from this. This whole series of fiascos, disasters, lies, scandals. Like, it's just comically over determined at this point that the Republicans are doomed. Ha ha. On me, it took all of two years until the 2010 midterms for them to just be back unashamed. Like, hey, we're back criticizing spending.I'm like, wait, but it was just a few years ago that you ran the deficit through the roof to pay for a war. What about — but what I realized over time is events do not tell their own story, right? The news does not tell its own story. If you want people in general to come to believe that about the Republican Party, that they're bad because of all the things they've done, you have to go out and say it, and no one's going out and saying it.Jenifer Fernandez AnconaWell, it's true. I mean, we saw it in the early lead up to the midterms in 2021 when we were seeing in our data and research like, wow, the Republican brand is really pretty toxic right now in the minds of our gettable voters. When we ask them, what images come to your mind when you think about the Republican Party brand? They literally put up so many images of the actual devil and like, things on fire. So it's true that that brand has tarnished and become more toxic in the minds of people just because of Trump. I think the rise of Trump and January 6 played a huge role in that.But at the same time, we found even in 2021, a resistance to actually calling them out for the January 6 attack. For example, for calling them as extreme as they were. We were saying, look, we're seeing this in the data, people are open to this argument, like we should really be branding them this way.David RobertsYou mean resistance from the message makers, the advertisers?Jenifer Fernandez AnconaYeah, from kind of people in some of the establishment, which is just like, well, we can't really do that. It doesn't really work. We've tried it before. That kind of, sort of we don't want it's going to backlash. There is definitely a timidness and kind of an overall fear, like you had said before, of just leaning into not only what we care about, but having a lot of conviction to call them out for who they are as well. But I will say so we saw in the 2020 Report that we did, the TV Congress Report, it was really wild to us because we saw very clearly the right was calling us crazy.They were calling us extreme, they were calling us radical. That was the most money —David RobertsAfter four years of Trump, is amazing.Jenifer Fernandez AnconaGuess what? We didn't say anything about that. There was one campaign, Lucy Macbeth in Georgia, who talked about their extreme position on abortion. And by the way, she was one of the few that won in the toss up in that district, but in other places they didn't do it. But we did see in our data in 2022 a complete turnaround. So we saw not only they use those words a little bit less, but we use those words much more. I mean, we definitely won that one in 2022.David RobertsDo you have an explanation for that? What was the shift in opinion that caused that? I mean, I know Biden coming out and saying it was somewhat significant, but I don't want to over ascribe too much to him.Jenifer Fernandez AnconaNo, it's like what I'm saying, this is how we can win is when you have people on the inside and people on the outside and people in lots of different campaigns saying the same thing, ultimately we got to it, right? So I was saying there was some initial resistance, but there are a lot of people who pushed we were pushing Anat Shenker-Osorio and her teams were pushing the research collaborative. You had people at the Center for American Progress really pushing the idea of a MAGA Republican and the extreme Republican. There were enough people in different parts from inside the beltway to outside in the movement saying it at the same time.And I think that that made a difference. Ultimately, it's that what I like to call Dems in array.David RobertsBut did here's another thing about Dems. They accidentally did a good thing and accidentally won. Will they learn that lesson and carry it forward? Are they aware that's why they won?Jenifer Fernandez AnconaI think so. I've definitely heard in a lot of the post mortems that I've been to since 22 a recognition that actually being in alignment around what we were saying about the Republicans was important. I mean, we're not totally there yet because like I said with Tim Ryan, we still saw people talking about bipartisanship too much, not actually branding them, but overall, especially in the House, which is honestly what we were supposed to lose, 30, 40 seats. We lost only five. I think people could see we made these surprise gains, and you could look at that kind of message where it was really clear.The branding against them was really clear. I think people are seeing that and saying, okay, so that did work, and that's something that we can do more of. But the warning sign piece is that we have to keep doing that around branding them. And it's not enough just to only attack them. We also have to have a brand for what it is that we're doing, how we want to run the economy, how we're going to make people's lives better. That's the meta narrative about the past few years that we just don't have yet. And that's why we see in the data, 80% of voters can't name one thing Biden has done to make their lives better.Or our Latino focus groups that we just came out of in Arizona, Nevada, saying, like "Nada", nothing they saw, nothing that Biden has done to help them. So that's our challenge going forward. Keep leaning into this branding of them that is really effective around how extreme they are, around MAGA, taking away freedoms, being out of touch, all of that. It's really good. It works. It's a narrative that we have to keep pushing together for 24.David RobertsBranding them and branding ourselves. I think we should all celebrate and lift up the woman from Nebraska. This would be a better story if I could remember her name, but she's in the Nebraska legislature filibustering their trans bill. You listen to an interview with her, and she's just like, "I don't want anything to do with these people. These are horrible, hateful people. They're trying to hurt my kids." None of this like, "Oh, we just disagree about the right vision, and we're all there's no red or blue America." None of that b******t.She's like, they're trying to hurt my kids. And she's just reacting to them the way you would react to someone trying to hurt your kids. Right? Which is like, screw these people, they're horrible. And it's just so refreshingly human. It just sounds human and not —Jenifer Fernandez AnconaIt does.David Roberts— focus grouped to a fare-thee-well.Jenifer Fernandez AnconaWe saw that with Mallory McMorrow, too, right, in Michigan when she went on that rant. So yes, I completely agree.David RobertsYes, speak like humans. Okay, well, we're almost out of time. I just have a final question, which I wanted to return to after bringing it up at the very beginning, which is back to capacity. So you've talked a lot about the kind of meta narrative we need about Democrats and about Republicans and the way to sort of weave together Democratic issues and the way to talk about them. But let's return briefly to capacity. The right has spent many decades very systematically trying to take over as much media as possible and now basically have their propaganda in everyone's face all the time, everywhere.It's going to clearly take a while to reverse or even make a dent in that situation. But what can people on the left do? Because I raise this all the time, and then people ask me, well, like, what do you mean? Should we buy a TV station? Should we start a blog? And I'm like "Oh, I don't really know. My job is just to complain about this. You have to figure out the solutions." But what can the left do to build media capacity that works in the 2020s? Not just sort of like an obsession with cable news.I know this cable news is still big, but like a more broader 360 degree view of the media landscape. Where does the left need to be trying to build capacity and how?Jenifer Fernandez AnconaYeah, well, it's got to be comprehensive, and I think it's a combination of things. I think it probably is a ten year strategy that we need to start now, right? Like, it is going to take time, but we have to do a lot now. We can't wait. We need to buy media properties that includes TV stations, includes radio. There's a really interesting project that's being done in Wisconsin right now where they've bought up kind of all the rural radio stations.David RobertsOh, yeah, I heard about that.Jenifer Fernandez AnconaYeah, that's really interesting. That's a model we could look out for other places. It's not about creating a lefty channel. It's about creating a more neutral channel, actually. It's progressive, but it's not about left versus right. It's actually about building a more of a coalition, like I was saying, across ideology. So that's interesting. There's the Latino Media Network, right? Like, building up in different particular audiences our own channels, which includes a lot of online YouTube, recruiting talent. Like, who are the Shapiros on our side? God invest in now, right? Because there are a lot of talented people out there, and there are people building audiences right now. So how do we support them in doing that? There's the world of micro influencers and people who are building on TikTok and Instagram. I think we need to do a lot more "always on" sort of — it's a funding stream. We have to create, actually, like people are artists and we need to pay them for their work. So we want them to talk about our message. Let's actually bring them in, make them fellows.David RobertsYeah. Are our billionaires — their billionaires clearly get that. They provided a lot of money, steady operational money for years. Do our billionaires get that?Jenifer Fernandez AnconaMore and more, I think you'll see more and more. It's just becoming really clear, and there's a lot of people out there talking about it on our side. I'm seeing a shift in terms of people actually paying real attention and putting real money and resources in. So I think we'll get there. There's a lot of great people doing work in this area. There's Accelerate Change, a group that has been buying up different online properties that either focus on audience or focus on things like news. There's a whole group that's looking at more sort of state-based news, which is a little bit different.Yeah, like state newsrooms, like creating a place where you could actually get real information around state news. That's happening. I think it's called State Newsrooms. That's really interesting. There's a lot of stuff happening, but it is these three things which are: We got to buy up things that exist, we have to build our own things, and we have to try to influence the properties that do exist now, too.David RobertsYeah. Working the refs.Jenifer Fernandez AnconaYeah. So it's a long-term plan, but I mean, that's supporting things like Crooked Media, which is one of our great owned media properties. They have a whole new thing people can do and become a friend of the Pod and support them. That's good. There are things that individuals can do as well as accountability on things like Fox, which we're in a moment now around. MoveOn has a really great campaign on that right now. So there are things individuals can do. Even if you're not a billionaire who can buy up a radio station.David RobertsYou could subscribe to a Substack. Throwing ideas out there.Jenifer Fernandez AnconaExactly. I love that idea. You should give them some links they can subscribe to.David RobertsWell, Jenifer, thank you so much. Thank you for listening to my rants about this, which I've been carrying around with me for years and for actually knowing something and doing real research and pushing on this. So I really appreciate your work. Thanks for coming on.Jenifer Fernandez AnconaThank you so much. It's been great.David RobertsThank you for listening to the Volts podcast. It is ad-free, powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Volts subscriber at volts.wtf. Yes, that's volts.wtf. So that I can continue doing this work. Thank you so much, and I'll see you next time. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.volts.wtf/subscribe

The podcast host announces the introduction of transcripts for all episodes in three forms. The host also discusses making the active transcripts available for free. Furthermore, a live event in Seattle is announced, featuring a discussion with a clean energy analyst to raise money for Canary.

Maryland passes the Promoting Offshore Wind Energy Resources (POWER) Act, targeting 8.5 gigawatts. Clever policy innovations promise politically resilient and economically just funding. Tax credits in the Inflation Reduction Act turbocharge the process. Discussion on Maryland's offshore wind bill challenges, subsidies conflict, funding and revenue aspects, and progress in passing energy bills. Impact of offshore wind policy and next steps towards transparency and procurement. Procuring energy for state buildings and future plans in Maryland.