Energy Capital Podcast

This podcast is on YouTube with Graphs Congress’ new budget bill is an energy earthquake. It could wipe out tens of gigawatts of energy production, just as we’re experiencing load growth unlike anything since the 1960’s. It will drive power bills higher for families and factories, and give China the upper hand in the race for 21st century economic supremacy.To understand in more detail the impacts of the federal budget bill, this week on the Energy Capital Podcast, I talked with Dan O’Brien, senior modeling analyst at Energy Innovation. His team modeled what this bill really means for Texas and the numbers should stop us in our tracks.If you’ve been reading this newsletter, you know I’ve warned about this moment for months. Now, the data is here. It’s worse than we thought. We were on a path to energy abundance and we’re about to get energy scarcity including increased risk of blackouts and much higher electric bills.From Ramp to Cliff: What This Bill Actually DoesHere’s what Congress passed:* Ends clean energy tax credits abruptly. No glide path, no transition, just a cliff.* Imposes impossible project timelines that most developers can’t meet.I’ve written before about how this creates scarcity, not abundance (Energy Scarcity). We’re pulling the cheapest, fastest-growing resources off the table while demand is surging. That’s a recipe for higher prices and weaker reliability.And make no mistake: this isn’t happening in a vacuum. It’s happening right when Texas has proven that solar and storage are great for reliability and affordability.The Modeling: 77 GW GoneDan’s modeling tells the story:* 77 gigawatts of lost clean energy in Texas, including over 50 gigawatts of solar and over 20 gigawatts of wind)* Only 2 gigawatts of additional gas* Household power bills up $400–$500 a year* Industrial energy costs up 50%* Tens of billions in lost rural tax revenuePut that in perspective: ERCOT’s entire summer peak is about 85 gigawatts. This bill wipes out nearly that much future clean power before it’s even built.These numbers aren’t isolated. Princeton’s REPEAT Project and Columbia’s Climate Knowledge Initiative show the same trend: abruptly ending credits doesn’t save money. It costs money—because you’re replacing cheap renewables with expensive alternatives, or worse, with nothing at all.Demand Is Exploding, So Why Are We Pulling Back?At the same time, Texas demand is skyrocketing. From 2021 to 2025, Texas has experience 6% year-over-year growth, the fastest since the 1960s. AI data centers, crypto, and industrial electrification are all plugging in at once.And here’s the kicker: the resources meeting that demand surge aren’t gas or coal. They’re wind, solar, and batteries. They’re 92% of what’s been added since 2021. In the first half of 2025, wind and solar made up 40% of ERCOT’s generation mix. Batteries are breaking records almost monthly, keeping the grid balanced during extreme heat and sudden shifts.ERCOT calculated summer energy emergency risk dropped from 16% to under 1% in one year, because of solar and storage. We have the data. We have the results. So why are we sabotaging it?The Human Side: Jobs and Rural TexasThe energy sector is one of the largest drivers of job growth in Texas. These are real people—60,000 Texans working in wind, solar, and storage, including 6,000 veterans. It’s rural school districts balancing their budgets with wind and solar tax base and farmers and ranchers keeping their land in their families for another generation. It’s welders, electricians, and manufacturers in counties that haven’t seen this level of investment in decades.Global Stakes: China’s Electrostate MomentZoom out. While we’re cutting our legs out from under us, China is sprinting ahead. Last year, they added 400 GW of clean energy, several Texases worth of power. Last month, they put in 90 gigawatts of solar. The Financial Times calls them the first “electrostate.”The U.S.? We added 60 GW in 2024. And now we’re debating LNG power plants that don’t exist. As I wrote in Energy Submission: this isn’t energy dominance. It’s energy surrender.If we abandon clean energy leadership now, we’re not just risking higher bills—we’re giving away the 21st century.There’s Still Time: Ramp, Don’t CliffI’m not arguing for permanent subsidies. We should phase them out, but smartly, with predictability. A ramp-down avoids price shocks, keeps manufacturing momentum, and protects rural tax bases while we scale what’s next.We’ve already proven the formula: reliability up, prices down, emissions falling. It’s not theoretical. It’s working. And throwing it away overnight isn’t policy, it’s ideology.The Bottom LineThe Texas grid is stronger than it’s ever been, because of solar and storage. That’s not my opinion; that’s ERCOT’s own data. Reliability is improving, costs are falling, and we’re finally catching up to the energy future the rest of the world is racing toward.This bill reverses that progress. It’s a choice between abundance and scarcity, between leadership and surrender. And the clock is ticking.Timestamps* 00:00 – Introduction* 02:00 – What is the federal budget bill and why is it important?* 04:30 – Impact on Texas power* 07:00 – Why is there only a tiny increase in new gas capacity * 10:00 – Modeling Assumptions and Safe Harbor Provisions* 12:30 – Demand forecasts and modeling variables* 14:00 – Residential energy cost increases: $480/year* 16:00 – Why that could be worse if Treasury’s guidance is restrictive* 19:00 – Why are power prices high if renewables are lowering costs?* 21:00 – 54% increase in power costs for large commercial & industrial customers* 25:00 – Job losses from the federal bill* 29:00 – Rural community impacts and manufacturing losses* 30:00 – Policymakers could revisit this policy as the impacts take hold* 32:00 – Phasing out credits would protect consumers and end them permanentlyResourcesEnergy Innovation - Linkedin* Daniel (Dan) O’Brien - LinkedIn * Updated: Economic Impacts of the U.S. “One Big Beautiful Bill Act” Energy Provisions — Energy Innovation* Impacts of the One Big Beautiful Bill on Texas Energy Costs, Jobs & Emissions (PDF) — Energy Innovation* Texas Reliability Entity 2024 Reliability Performance & Regional Risk Assessment — Texas RERelated: Writing * TRE: Solar and Storage Help Reliability; Texas Grid Roundup #68 - Doug Lewin* Clean Energy Development Slows Without Tax Credits — Texas Tribune* Boom Fades for U.S. Clean Energy as Trump Guts Subsidies — Reuters* What the ‘Big Beautiful Bill’ Would Mean for Renewable Energy — Governing MagazineTranscriptDoug Lewin (00:05.922): Welcome to the Energy Capital Podcast. I'm your host, Doug Lewin. My guest this week is Dan O'Brien, senior modeling analyst at Energy Innovation. Dan has spent a lot of time working on a model to show the impacts of the federal budget bill that passed the Senate on July 3rd, signed by the president on July 4th. This episode is a shorter one. Quick note to the listener, there were some charts and graphs. You can see all of that on the YouTube channel, Doug Lewin Energy.But if you are listening to the podcast version, we made sure to describe all the charts and graphs so you'd be able to follow along. The stuff that we got into in this particular podcast, the change in capacity that will be coming from the federal budget bill, which was a massive loss for Texas, 77 gigawatts of capacity. In the next 10 years, we talked about which sources that comes from and what might fill the gap and what doesn't fill the gap. We don't see a whole lot of gas. So we talked about all of that. We talked about the change in cost, both for households and businesses, a massive rise for both, but much bigger for businesses, about a 20% increase for residential consumers. That's $500 per year per family, but a 50% increase compared to had current policy stayed in place for businesses. We also talked about job losses, the loss of investment impacts on rural communities.Compare Texas to the impacts of other states. This is a short but very dense, very full episode. Hope you learned a lot from it. As always, please give a five-star review wherever you listen to your podcast. Please follow along, become a subscriber at YouTube, the channel's Doug Lewin Energy. And to subscribe to Texas Energy and Power Newsletter and the Energy Capital Podcast, go to douglewin.com. And with nothing further, let's jump in to this podcast on the impacts of the federal budget bill on Texas. Thanks for listening.Dan O'Brien, welcome to the Energy Capital Podcast.Dan O'Brien (02:07.694): Thank you for having me.Doug Lewin (02:09.389): So let's start with you've spent a lot of time obviously modeling the federal budget bill. Let's just start from the highest level. Why? Why spend time modeling this bill? What is the bill and why is it so important that you want to spend time modeling?Dan O'Brien (02:25.166): Well, energy is everything, Republicans got that right in campaigning last year. And one thing that this big, beautiful bill does is really changes how energy will be produced and transformed and consumed in the US in the next decade. And this happens a few different ways. So the biggest one being changing the tax credit structure around energy in the United States. So the big bill repeals a number of different tax credits that are offered to companies to incentivize development of new energy facilities like power plants in the US. It also increases the amount of oil and gas leasing in the US through running more auctions and lowering the royalty rates for these projects. It delays conservation funding that was passed in 2022. So it's kind of all consuming and touches a number of different areas. And my organization is one that tries to focus on producing quantitative analyses of bills like this. So we've definitely put a lot of time into it and happy to chat through it.Doug Lewin (03:34.612): Awesome. And you guys at Energy Innovation have done a great job and a great service in modeling this. I do just want to say from the outset, there are a lot of folks out there modeling this. And one of the articles I wrote, I think it was Energy Inflation, but we'll put a link in the show notes. I cited, I think, four different modelers that had in the same ballpark of similar results. There's, of course, key differences and all of that, but so that people don't have the impression that this is kind of a lone voice out there. There's a lot of folks doing this. They're all kind of directionally showing the same thing, but for energy innovations model, let's talk about what you're actually seeing or the results in the models from the passage of the federal budget bill. Let's start with what is the change in capacity. And we're going to focus mostly here on Texas, the Energy Capital Podcast, but if you want to cite some of the national statistics, I think they're relevant, but mostly with a focus on Texas. Let's start with what do we see in the differences in what gets built with this bill in effect.Dan O'Brien (04:35.138): Sure. So the biggest change is this bill repeals and shortens the lifetime of the clean electricity tax credits for developers and utilities around the country. And these are tax credits that incentivize new power plants coming online. And they're especially targeted towards renewables, though they're technology neutral. So any power plant that's not generating emissions can qualify for this. And because of the timelines for development and how simple these projects can be, wind and solar tend to be the technologies that are losing out. And so what we see is those are the biggest losers in terms of new capacity in Texas. Texas is actually the state that we find has the biggest losses in terms of capacity from this bill, about 77 gigawatts of lost capacity in the next decade. And about two thirds of that is solar and one third is wind, roughly.Doug Lewin (05:35.182): Just to put that in context, that's obviously a huge number. Texas' all-time peak demand in the summertime is about 85,000 megawatts or 85 gigawatts. So that's almost as much as Texas' entire peak demand. The total installed capacity in Texas is somewhere around 170. So losing 77 is a great big deal. But I would like for you to address while you said there's 54 gigawatts of lost solar, 23 gigawatts of lost wind, three gigawatts of lost batteries. And then you had in your models only two and a half gigawatts of increased gas. That's certainly, I think, counterintuitive to what a lot of folks, including probably the folks that authored the bill and championed it, thought would happen. They talk a lot about how we need less renewables, we need a lot more gas. Can you talk about why you think the model produced that? Why is that the result?Dan O'Brien (06:28.462): Sure, and let me share a graphic here that kind of shows off that point that you're talking about.Doug Lewin (06:33.494): And Dan, as you're pulling that up, let me just say for, because I don't think I said this yet. We will describe these. If you're listening to the podcast audio only, we'll describe them so you won't lose anything. If you're in a place where you can follow along on YouTube, the channel is Doug Lewin Energy and we'll have the video there so you can see the graphs. Go ahead, Dan.Dan O'Brien (06:51.758): Sure, thank you for that. So the graph that I'm showing is the annual change in Texas's electricity generation capacity. And what it shows is that solar is the biggest loser, wind is second to that. And it shows a stacked column chart highlighting that the losses in these different technologies increase over the next decade. We see a few gigawatts lost in 2026 to 2029. But in the early 2030s is when we see the biggest losses in new capacity for these technologies. Simultaneously, it shows that there are really small additions of gas plants on the positive end of the chart. As Doug pointed out, about 2 and 1 half gigawatts of new gas capacity is what we project to come from the bill. Now, why is that? Folks who are listening here may be well-tuned to the shortage of new gas turbines that utilities and developers are unable to source new gas turbines for plants that they might want to build in the next four or five years. So we don't really have the ability to meet the loss in renewables with a gain in new gas plants. And as a result, what we're really seeing is existing gas plants, especially, are just running longer hours of the day to meet existing demand and growing demand due to things like data centers and manufacturing facilities.Doug Lewin (08:20.874): We would see... Your modeling is showing an increase in capacity factor of gas plants, which are probably... I think the number is 45, 50% right now. They might go to something like 60, 70%, something like that. They're higher.Dan O'Brien (08:36.994): Yeah, that's exactly right. So presently we see around 40 to 50% capacity factor for gas plants, that is for combined cycle plants. And what we find in our modeling is that these tax credits for renewables in the 2030s especially really drive down that capacity factor. As more and more renewables are hitting the grid, we're seeing those more efficient combined cycle plants are running fewer hours of the year down into like the 30s percents range. But as a result of the bill, the trend reverses and those plants are running more hours into the 50s and 60% range. So it's really a dichotomy of whether or not these tax credits are in place that are really increasing the profitability of new wind and solar plants to meet rising demand.Doug Lewin (09:27.862): Now, there's obviously something interesting that's happening that is probably really hard. I would imagine is really hard to model. You could let me know if that's true or not. You're modeling the final bill, which the Senate modified to allow a runway for wind and solar projects and other projects as far as the foreign entities are concerned. But basically you have through the end of the year to commence construction, as long as you're completed in four years, you can still get the tax credit. Are you modeling that or are you adjusting to what appears to be the executive order from the president to treasury, which is basically trying to obstruct that and make commenced construction a much harder definition? Are you able to account for that in the model? Are you just modeling it sort of on face value as it passed the Senate and was signed into law?Dan O'Brien (10:18.914): You know, all these groups, you noted at least four groups modeling this. All of us are doing our best at interpreting what we think will come out of this. We are assuming that some producers are able to pull forward their construction dates and begin construction this year so that they can engage with the safe harbor rules and claim the tax credits for the next few years. Really intricate ways of doing that. Essentially what we assume is the Energy Information Administration has a list of planned power plants. And we assume that all those plants that have received regulatory approval but have not yet started construction can pull forward that construction date. I think it threads the needle relatively well, especially given the executive order kind of aims to make it harder for plants to receive that regulatory approval and start construction. So maybe we're a little bit conservative in which producers and developers are able to do that. But if anybody tells you they know the future right now, they're not telling the truth, you know.Doug Lewin (11:23.502): No, anybody ever tells you they know their future, they're not telling you the truth, but especially now, there's a lot of uncertainty. And I think unfortunately, the administration's point is to have a lot of uncertainty, which is unfortunate. But it's safe to say, Dan, that what you just showed in that chart, which is a lot of drop off in the 2030s and only a little bit in the late 2020s, could be much worse. We could see more supply constraints, higher prices, all that kind of stuff. If the guidance out of treasury is particularly onerous, this could actually be worse.Dan O'Brien (11:58.018): Yes, it could be worse, the degree to which is really hard to estimate from a quantitative approach.Doug Lewin (12:03.854): Got it. Okay. Thanks for that. Before we get into talking about cost, I do want to just ask you kind of a modeling question. What are you guys putting in there for demand, especially in the ERCOT market? Because there's such a wide range of demand forecasts. I had Olivier Bofisse from Aurora Energy Research on the podcast, and their demand forecasts in the 2030s are in the low hundreds at 110 gigawatts. ERCOT's are 150 by 2031. There are some that are forecasting much, much higher even by the early 2030s in a 200 range. So obviously within that spread, that's going to create very different results. So where do you guys kind of come out on the demand side of the equation?Dan O'Brien (12:48.098): Yeah, I don't have a number to put in front of you right now, but my guess is somewhere in the middle there. For most of our demand forecasts, we'll pull government data, so EIA data, for example, so wherever they're landing. And then we're starting to build into the model a little bit more exogenous demand projections so we can better account for data centers and growing demand from that because the government projections can be a little bit delayed and trying to stay on top of growing demand from that side is something we're focused on.Doug Lewin (13:18.584): Okay, cool. Yeah, it'd be great if you can, we can include in the show notes. I'd love to have what that is. Because I do think part of what is going on here is, and one of the reasons why this is so difficult, is these things play on each other, right? If there's not as much supply, particularly affordable supply, then you may end up getting less demand, right? But if that demand pool ends up being really strong, you could get a lot more supply, but it's going to end up being very high cost supply. So it's obviously really hard, but I think that number will matter a lot and how that's modeled if there's a different range. I think having different demand numbers is a really useful thing for folks in the market and planners, regulators, policymakers, for everybody to be able to see.Dan O'Brien (14:05.974): Yeah, completely agree.Doug Lewin (14:08.022): All right, cool. So let's talk about cost. So this is one of the main takeaways you guys have. Again, you modeled all 50 states. Texas was one of them that came out worst. What did you see as far as increased energy costs? Maybe we start with households, but you can take it in whatever order you want.Dan O'Brien (14:25.934): Sure. So I feel like just starting with overall power prices is helpful. When you pull renewables offline or don't add them to the grid, what you see is gas running a lot more often like we just discussed. And when you see that across the whole country, we find that the incremental gas demand from the bill outweighs the incremental gas production from the bill. And just from like a supply demand perspective, that shows you gas prices going up. So you pair that with increased reliance on natural gas and you see power prices go up. And that's something on the order in Texas of around 20 to 50% depending on the consumer. So residential consumers probably on the lower end of that and then industrial commercial consumers on the higher end. So what does that mean for households? In Texas, what we find is around $480 a year of increased energy spending. And where does that fit? So depending on the state, we see somewhere between $50 and $650 of increased energy spending. And I'll put a graphic up on the screen here that can kind of show where those costs are distributed. So what we find is it's really states in the South and the Midwest that have the highest increases in power. And these are states where, you know, they're really well geographically oriented for renewables. You know, the sun shines a lot in the south and the wind blows a lot in the Midwest. So when you pair that with tax incentives, it makes a really economically favorable environment for renewables. When you pull those back and a lot of these are states that don't have strict renewable portfolio standards, for example, that are maintaining that market certainty and giving business certainty to developers. And so those are the states where power prices tend to go up the most.Doug Lewin (16:25.806): So about 500 bucks a year by 2035, a little over $200, $220 by 2030. I mean, again, I just want to emphasize the degree to which those power prices might shoot up quicker will depend on a lot of how this plays out at treasury and what that guidance is. If it's very restrictive, I think we're going to see power prices that you'll pull forward those price increases. Is that a fair conjecture to make?Dan O'Brien (16:56.322): Yeah, that's absolutely right. So by assuming that producers can pull forward the construction date on some power plants, we're assuming that some of those renewables get online in the near term and keep prices down in the near term. But if the treasury guidance reverses the ability of those developers to do so, then power prices will go up more in the near term.Doug Lewin (17:16.811): If you're listening and not able to see the map, what we're looking at on the map is sort of a line right up the center of the country with some of the biggest price increases, including Missouri and Kentucky, but also Kansas, Arkansas, Oklahoma, Iowa, Minnesota. Like Dan said, a lot of the windiest places. Then as far as sunny places, you're seeing high increases in North Carolina, Florida, Texas. The states that fare worst are Missouri, Kentucky, South Carolina, Oklahoma, Texas, kind of right there in that next tier. You said that's about a 20% increase, the $500 equates to about 20%.Dan O'Brien (17:50.358): In residential power prices. Exactly right.Doug Lewin (17:53.048): For residential power prices. Okay, great. Let's talk about, well, not great, it's terrible, but great information. Let's talk about what this means because there's huge implications here for the broader economy. Obviously, it's always important to center this around people and always important to ground ourselves in the fact that there is a large portion of the public that is unable to afford their energy bills as they are now. So the stat that I like to cite there is that one out of six people nationally are in arrears on their electric or gas bills or both. The U.S. Census Bureau consistently shows 30%, sometimes higher, sometimes a little lower, but usually not much lower, about 30% that self-report choosing between paying for energy, their light bill, or medicine and food. So that's a very devastating increase to residential. I hear a lot and Dan, you're happy for you to talk about this if you like, but I feel the need to address this because I get this a lot. People are like, look, power prices are already high. I don't know what you're talking about. I'm hurting. My bill's really high. You know, I get this a lot. And what I like to remind people, first of all, I hear you. I get it. It's painful and it's not right. We should be doing more to help people. I'll acknowledge that first and foremost. And your power prices would be a lot higher right now if we didn't have renewables in the mix like we do. They do put a downward pressure on generation. Most of the increase in the last few years has come from transmission and distribution and specifically really the distribution side of the grid. So we've seen large increases in T and D. Now we're going to see large increases in generation too. So it's kind of this double whammy. You're welcome to address any of that you want. I do also want to talk about the commercial sector and industrial consumers because this is a lot of the drivers of the economy and if power prices go up there, particularly for those that are very price sensitive, which would include steel mills, oil and gas producers that are trying to connect to the grid, refineries and petrochemical facilities, all kinds of different industries that are very price sensitive. So feel free, Dan, to address anything I just said as far as affordability and all that. And then let's do talk about commercial and industrial.Dan O'Brien (20:13.518): Sure. So I appreciate your point that it is important to both say energy costs are too high and are impoverishing people and renewables are helping. I'd point to a report from Josh Rhodes that found about $32 billion of cumulative savings thanks to renewables in ERCOT. And that was between 2010 and 2022, I believe. So renewables help people. It's really hard to see that impact because all you see is your own power bill. You don't see here's your power bill and here's what it would have been if we didn't have these power plants on the grid. That's right. So I think that's really helpful perspective and important one for folks in energy to focus on. To your point, residential consumers, households, people like you and me, we don't just pay for a gas turbine to run. We pay for all of the services that go into making sure our electricity is reliable and it doesn't shut off at random parts of the day. We pay for the transmission that gets it from the power plant to our towns and we pay for the distribution that gets it into our homes. That's one reason that we find that 20-ish percent increase in residential power price being lower than the 50-ish percent increase in power price for commercial or industrial consumers.Doug Lewin (21:38.964): I just got a pause. Wait, 50% increase for large consumers specifically in Texas.Dan O'Brien (21:46.478): That's right. 54% is what we found.Doug Lewin (21:51.146): Yeah, keep talking, tell me more, because that is an eye-popping figure.Dan O'Brien (21:56.586): It's an eye popping figure. And what does it mean for business is kind of the key question here, right? There are a lot of industries that are heavily reliant on costs of energy. So data centers, for example, we keep hearing about them, hearing about the boom of AI, but a majority of the operational costs for a data center are power. Most of the spending that they do on a day-to-day basis once they've opened is paying for electricity. And so if you see the price of power increase by 50% in your state, you're not going to be a state that's attracting new data centers. Other types of consumers like steel mills, for example, you listed, or other manufacturing sites that are heavily dependent on electricity are going to find themselves going to other states. These companies are going to other states that have lower power prices or going outside of the US and offshoring to places where there is this continued investment in the technologies of the future on the grid that are making electricity cheaper rather than subsidizing the past.Doug Lewin (23:09.857): 54%. So the average megawatt hour in ERCOT the last couple years from memory is something like 35, 40 bucks, not including 2022 where gas prices were so much higher, but say 23, 24 even this year were somewhere around 30, 40. So you're talking about going to like $60 a megawatt hour on a wholesale basis, something like that.Dan O'Brien (23:31.822): I think an important clarification here is we're not comparing to today's numbers. We are comparing a world before the bill and a world after the bill.Doug Lewin (23:41.368): Good distinction. Okay.Dan O'Brien (23:43.822): Yeah. So a world before the bill, renewables make up a large share of the grid, and they're running in more hours of the day, and they're producing electricity without any fuel costs. Then you shift to a world where we're heavily dependent on gas, and gas prices simultaneously are skyrocketing. And so the difference between those two scenarios is a 50% increase in power prices for industrial consumers.Doug Lewin (24:11.16): Got it. How does that compare to other states? You talked about how different data centers or any number of industrial customers might move to other states. Are other states seeing 50% increase or is that really kind of unique to Texas?Dan O'Brien (24:26.574): Texas is towards the top of the list. There are a few states that are higher. Kentucky, for example, like you listed earlier, Kansas, could be heavily reliant on wind, but without the tax credits, kind of shifts back to coal or gas. Oklahoma sees really high increases. Again, similar, really favorable environment for wind, but without the tax credits is more reliant on fossils. That said, aside from those few states, Texas is definitely seeing amongst the highest cost increases and definitely higher than a lot of states, especially in the Northeast where you have renewable portfolio standards and other state level policies giving a little more economic certainty to renewable developers.Doug Lewin (25:09.314): Very interesting. Okay. Let's talk about jobs as well. We've talked about the cost of power and what that might mean for investment and competitiveness. There's a whole lot of jobs in clean energy in Texas right now, and those were increasing significantly to the point where even there was a very interesting tweet earlier this year from Governor Abbott where he said, we had beat out California actually in the addition of wind and solar jobs earlier this year. And he was rightfully bragging on that. So we've really seen this make a big impact for Texas workers. What happens to jobs under the budget bill?Dan O'Brien (25:46.228): Like you said, renewables and clean energy generally powers a lot of the economy in terms of new job additions. I'm now showing on the screen here for those who aren't looking, a graph of the change in jobs in Texas as a result of the bill. And I have it broken out into seven different sectors. So agriculture, fossil fuels, electric utilities, manufacturing, construction, government, and other. And what we see is in 2025, there's very small impact from this bill because it takes time for utilities to update their planning and make different power plants. What we see is that by 2035, 10 years from now, Texas loses around a hundred thousand jobs in sectors other than coal, oil, and gas. And those three sectors, coal, oil, and gas, add around 6,000 jobs on the same time frame. The overall loss is around 94,000 jobs just in Texas alone. And like you just said, it's the biggest state for clean energy in the country right now. And this is kind of a big reflection of that reality is that losing clean energy does a lot more to harm the economy than gaining in coal, oil, and gas can.Doug Lewin (27:10.648): So that's about 30,000 manufacturing jobs, about 20,000 construction jobs. You got this other category. Is that, is a lot of that like wind technicians and solar installers and things like that, or do those fit into construction?Dan O'Brien (27:24.632): Those are probably mostly in construction, but other captures the induced impacts of these losses around the economy. So these are convenience stores on the corner that are shutting down because people aren't buying goods because the economy slows down. These are teachers and nurses and other folks employed around the economy that lose their jobs because clean energy is such a powerhouse in Texas that when that slows down, the rest of the economy shrinks.Doug Lewin (27:55.278): Particularly in Texas rural counties, right? I mean, I refer a lot to, and we posted it on the YouTube channel. There was a hearing around Senate Bill 819, which was the very onerous restrictive permitting bill that passed the Senate but did not pass the House. When they brought it up in the Senate, there was some great testimony. I highlighted in the YouTube video the testimony of folks from Armstrong County, Schleicher County, and Nacogdoches County. The first of those two, Armstrong and Schleicher, like 2,000 people and they literally have tens of millions of dollars of investment going into their schools and roads and all the rest. So we would obviously see much less of that. But it's interesting to me though, Dan, even if you were to discount all that, and I don't think that should be discounted, but even if somebody's listening and says, well, I don't know about all that, you've got 30,000 manufacturing jobs lost for 6,000 oil and gas jobs gained. Even if you just look at that piece of it, it's a terrible trade off for the state of Texas. This may work out other places okay, but it looks pretty obvious from the modeling. And again, yours isn't the only one. We're seeing pretty consistent results that this is a terrible outcome for Texas. And it's hard to imagine any elected official in the state of Texas supporting this kind of thing.Dan O'Brien (29:11.628): Yeah, that's right. It's pretty stark losses when you look at it around the economy. And even if you focus on one sector like manufacturing or construction, each of those on its own are two or three times, at least the losses that you see in the gains in the fossil industry. I think you point to a correct reality that rural communities are really the ones that are harmed the most from this. These are communities, especially where new power coming on is often from smaller companies, family-owned businesses that can't afford and don't have the capital to be resilient to big shifts in policy like this.Doug Lewin (29:50.444)Before I ask you if there's anything I should have asked that didn't or anything you want to say in closing, I will just say I think as the results of this bill start to become more more apparent, as people's electricity bills go up, again, depending on what kind of guidance Treasury gives, that could happen very quickly or it may take a couple of years. But either way, as the jobs start to be lost, as the manufacturing starts to move out of the state of Texas, even outside the borders of the United States, I think it's going to become very important for policymakers of both parties. We've talked about a lot of the states that are going to see the biggest impact from this. I think of folks like Senator Moran and Senator Grassley and Senator Ernst and Senator McConnell from states like Kansas and Iowa and Kentucky, and even Cornyn and Cruz from Texas, trying to figure out how to create some kind of bipartisan policy. And you don't have to agree or disagree with this, Dan, this is my view of the world. If you're going to phase out the tax credits, and I actually think it's okay to phase them out, if it's actually a phase out, if there was actually a ramp, a slope downward, not a cliff. And I think that who's really going to end up at the bottom of that cliff are consumers and American manufacturers. And what we need to do is durably phase them out in a way that Democrats agree to so we don't get this whipsaw back and forth. I think the modeling that you guys have provided is really helpful for people to start thinking that through. As we start to see what happens and how that lines up with the models, I think it's just going to become so important to revisit this and come up with some durable policy. You can react to any of that you want or leave it alone if you like, but also let the listeners know anything else that you wish I would have asked you, anything else that you want to say in closing, Dan.Dan O'Brien (31:38.838): I mean, all I can do is agree. I think good policy is designed with quantitative backing, like the modeling that we're trying to do here. Good policy gives certainty to businesses around the economy. Good policy focuses on helping people. And this is not good policy. If it were done right, it would be just like you described. It's understandable to want tax credits to phase out over time as the industry matures and the US becomes a powerhouse in the clean energy industry in a different world. It's important to phase out government subsidization of that. It's important that these are industries that learn to stand on their own in the same way that it's important that the fossil industry eventually does so. And giving that independence while also making sure it doesn't happen by pushing them off a cliff is important to keep it from hurting consumers and burdening households like yours and mine with high energy costs and making people lose their jobs just to get the kind of policy you want in place rather than the policy that makes the most sense for individuals.Doug Lewin (32:47.714): Yeah, unless anybody thinks it's just impossible or hopelessly optimistic. I, first of all, acknowledge that it's maybe a bit of a long shot that this would actually be fixed. But I will say two things on that. One, there's still a lot that Republicans in Congress want to get done, like permitting reform, right? Senator Barrasso had worked with Senator Manchin in the last Congress. They didn't get that across the finish line. And number two, no matter what anybody says, I just don't believe that any policymaker wants to see electric bills go higher and American competitiveness get harmed. So I think as long as we can talk about those high level goals, and again, just like you said, Dan, a high level goal can also be ending subsidization. If that's your goal, you're better off doing it in a bipartisan way so it doesn't get reversed next time Democrats are in control. So maybe it's naive, maybe it's optimistic, but it's a little thread of hope or something that I'm holding on to. Anything else you want to say in closing, Dan? This was great. I really appreciate all the work you're doing at Energy Innovation. This modeling has been super useful to me. I've put it in the newsletter, so thanks for everything you do. Anything else you want to say in closing?Dan O'Brien (33:53.966): Just appreciate your having me on and happy to chat with you in the future or answer any questions from your listeners. So thank you.Doug Lewin (34:01.016): Thanks so much, Dan, appreciate it.Thanks for tuning in to the Energy Capital Podcast. If you got something out of this conversation, please share the podcast with a friend, family member or colleague and subscribe to the newsletter at douglewin.com. That's where you'll find all the stories where I break down the biggest things happening in Texas energy, national energy policy, markets, technology policy. It's all there. You can also follow along at LinkedIn. You can find me there and at Twitter, Doug Lewin Energy, as well as YouTube, Doug Lewin Energy. Please follow me in all the places. Big thanks to Nathan Peavey, our producer, for making these episodes sound so crystal clear and good, and to Ari Lewin for writing the music. Until next time, please stay curious and stay engaged. Let's keep building a better energy future. Thanks for listening. This is a public episode. 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In May 2016, a wildfire ripped through Fort McMurray, the heart of Canada’s tar sands and bitumen mining region, with a speed and intensity unlike anything firefighters had seen before. It created its own weather. And it triggered the largest evacuation in Canadian history, which had to happen within mere hours.But this fire wasn’t just a freak event. It was a warning of more to come. Since then, Texas experienced its biggest wildfire ever — the Smokehouse Creek Fire — in 2024. On the latest episode of the Energy Capital Podcast, I talked with John Vaillant, author of Fire Weather: On the Front Lines of a Burning World, to unpack what happened in Fort McMurray and why it matters more than ever today.A City Built for Oil, Burning on OilFort McMurray exists to extract bitumen — a heavy, tar-like form of oil that’s mined, not drilled. The scale is staggering. It’s one of the largest fossil fuel reserves on Earth, and the city’s infrastructure, economy, and identity are built around it.John explains how the very thing that built Fort McMurray also made it vulnerable. Warming temperatures. Drier forests. Flammable building materials. More people living in high-risk zones. A city that was a tinderbox.Why This Story Hits Close to HomeTexas is no stranger to extreme heat and fast-moving fire.The Fort McMurray fire was one of the first modern wildfires to force a major oil-producing region to confront the new physics of our climate.But it wasn’t the last.In the episode, we talk about:* The almost unimaginable intensity of modern wildfires* the Lucretius Problem: the worst or biggest hurricane, flood, fire, etc. is not the worst or biggest possible* parallels between Fort McMurray and Texas suburbs near the WUI (wildland-urban interface)* Why we need to rethink infrastructure, building codes, and land use to have a chance at resilience in the face of extreme fire weatherThis is one of the most powerful stories we’ve featured — and one of the most important. Thanks for checking it outThis work would not be possible without your support. This episode of the Energy Capital Podcast is free, but paid subscribers get access to select episodes, including this one on the future of advanced nuclear reactors with Matt Loszak, as well as Grid Roundups, the full archives, special presentations, Reading and Podcast Picks, and more. If you’re not yet a paid subscriber, please become one today. The Texas Energy and Power Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a paid subscriber.Timestamps* 00:00 – Introduction* 02:00 – The Fort McMurray Fire* 04:00 – Fort McMurray’s economy is based solely on a fossil fuel: bitumen* 07:00 – The context of the Fort McMurray fire* 10:00 – The physics of modern fires: radiant heat of 900 degrees * 13:00 – The toll on firefighters* 14:30 – The megawatt equivalent of a wildfire: “this now is what fire is capable of”* 16:30 – Fires now create their own weather: pryocumulonimbus clouds* 19:00 – The Lucretius Problem and discontinuity* 22:30 – The connection between monster firestorms and floods and other extreme weather events * 26:00 – Similarities between Texas and Alberta* 27:30 – The Texas legislative session and flood response, adaptation* 29:00 – Examples of effective adaptation: “defensible space”* 32:00 – Texas wildlife risk and Wildland Urban Interface (WUI)* 37:00 – Greenhouse gas levels are higher by far than at any time in human history* 40:00 – The American Petroleum Institute’s policy reversal* 44:30 – Opportunities for business and industry from reducing emissions* 46:00 – Who’s leading the race for the future of energy? * 49:00 – Could Texas lead the way?* 51:00 – Final Thoughts & A Path ForwardResources* Fire Weather: A True Story from a Hotter World by John Vaillant* The Fires Sweeping Across Texas Offer a Terrifying Warning, New York Times Op-ed by John Vaillant* CBC documentary: Fort Mac Fire: Rogue Earth* The Fire Age by Stephen Pyne * Ladies and Gentlemen, the Northeast Is Burning, New York Times Op-ed by John Vaillant* The Fires Sweeping Across Texas Offer a Terrifying Warning, NYT Op-ed by John Vaillant * Mark Carney should understand better than anyone why Canada is burning. Here’s how he can change course, The Star Op-ed by John Vaillant* Steiner Ranch neighborhood gets second emergency evacuation route | FOX 7 Austin* Texas Wildfire Risk Assessment Portal* California Burning by Katherine BluntTranscriptDoug Lewin (00:04.984): Welcome to the Energy Capital Podcast. I'm your host, Doug Lewin. My guest this week was John Vaillant. John wrote a book that really struck me, and as soon as I read it, I knew I was going to invite him to be a guest on the Energy Capital Podcast. It's called Fire Weather: On the Frontlines of a Burning World, and I cannot recommend this book highly enough. It was an absolutely fantastic read. It was the story of a fire that went through Fort McMurray, which is a town that exists for bitumen mining sort of a type of oil, but it's not really drilled. It's mined. We get into that in the conversation, but this fire was absolutely horrific. One of the worst that humankind has ever seen. We are dealing with fire weather in Texas in 2024. The Smokehouse Creek fire was the worst fire that ever happened there. And John brings a whole lot of insights. He was a Pulitzer Prize finalist, National Book Award finalist for this book.It took seven years to write it, to detail everything about it. Just incredible book. Again, highly recommended. But what really was the takeaway for me from this book was the Lucretius problem, which we talk about in the interview. So I won't talk about it now, but listen to the podcast. And I think you'll also find that that is a really useful construct to think about what's happening in our world in 2025 as we get the worst flood we've ever seen, the worst fire we've ever seen, the worst hurricane we've ever seen, so on and so forth.The Lucretius problem is a really valuable frame for this. I really enjoyed this discussion with John. Hope you do too. As always, please do spread the news of this podcast to friends, family, colleagues. Let people know about the Energy Capital Podcast, Texas Energy and Power newsletter. Word of mouth is very important and we really do appreciate those five-star reviews wherever you listen to your podcasts. And with that, here's the podcast recording with John Vaillant.John Vaillant, welcome to the Energy Capital Podcast.John Vaillant (01:57.4): Doug, so good to be with you. I'm glad we finally got it organized.Doug Lewin (02:01.838): Yes, sir. I've been trying to make it happen for a while. Because as soon as I read this book, I knew I needed to talk to you for the podcast. I'm talking about Fire Weather: On the Frontlines of a Burning World, a book you released last year, and John, just blown away by the book really truly, just a fantastic piece. I think, you know, wildfires are such a defining feature of this epoch, this era we're in. I think yours and Katherine Blunt's California Burning are probably, I need to have Katherine on for sure, just really the standouts. But why don't we just start with, can you just talk about the book, what it's about, how long it took you to write it? Let's talk about Fire Weather first, please.John Vaillant (02:42.926):So I was working on a novel back in 2016. My head was not in fire. I was not even in Canada. And while I was away, Fort McMurray, Alberta, which is the petroleum hub of Canada, almost the Houston of Canada the center of the industry, caught on fire. A wildfire swept into town on May 3rd, 2016. That's still early spring in the subarctic, which is where Fort McMurray is. So there was ice on the lakes. There were car-sized blocks of ice on the river that flows through the city called the Athabasca River. But the temperature record for that day was broken by about eight degrees Fahrenheit. It went up into the low nineties, relative humidity was around 11 percent like Southern California, and an unstoppable fire swept into the city of Fort McMurray, driving the largest, most rapid evacuation due to fire in modern times. People got out. No one was quite sure how many actually escaped, but about 80,000 people left.The fire, meanwhile, stayed burning in the city limits for nearly a week straight, and it shut down the multi-billion-dollar Canadian petroleum, I should say, bitumen, industry for weeks and hobbled it for months.Doug Lewin (03:57.59): And it really is this kind of amazing crystallization, because you mentioned bitumen there, right? And we should probably talk about what that is. This is what is often referred to as tar sands, right? This is really oil that has to be it's not really oil, but has to be heavily, heavily refined. So just to give a sense of the setting and the context of this fire, can you talk a little bit about bitumen and Fort McMurray?John Vaillant (04:23.374): Sure. I mean, if the oil you know, the sweet crude that you're getting out of the Gulf of Mexico or out of Texas is rum, what you're getting out of the tar sands is molasses-soaked sand. And in order to turn that molasses-soaked sand into a bottle of rum, you have to melt the bitumen out of the sand, which requires billions of cubic feet of natural gas every day just to melt this stuff into something that will fit and flow through a pipeline. Then you need to dilute it with condensate, which is super volatile, super toxic, and then pump it basically a thousand miles south, 700 miles south to the US border to specially designed American refineries that can process ultra-heavy crude. So this crude is so heavy, it sinks in water. And we all know oil doesn't sink, it floats around. This stuff sinks to the bottom.And so it makes oil spills, bitumen spills, almost impossible to clean up. And it's just a very, very energy intensive fuel. It almost doesn't make sense. And the business model is a very, very different one than you would use in Texas or that the Saudis would use. And it's a very particular animal that ends up being the most dirty, most expensive, most environmentally destructive petroleum product on earth.Doug Lewin (05:48.864): And the whole town basically exists to mine that, right? I mean, like there might've been a fort there before that, but like there's a hundred thousand people, I think roughly living there at the time of the fire less now, right? Because not everybody came back, but a hundred thousand people at the time. And it basically is a town that exists for this bitumen mining, correct?John Vaillant (06:10.446): Solely, solely to service bitumen mining. And I'm glad you used the verb mining because that is how they extract it. They use gigantic shovels and load them into 400-ton dump trucks that are the size of three-story houses. Then they have another method called SAGD where they pump superheated steam, again, heated by natural gas, into the bitumen deposit and melt the tar out and then suck it out, you know, basically with a giant straw, but it's still not like the way you would pump oil in Texas or the Gulf of Mexico. It's still this incredibly stubborn, dirty, full of heavy metals and other contaminants product. So it requires layers and layers of extensive and expensive and energy-intensive refining to turn it into something remotely sellable, really.Doug Lewin (06:59.598): And it's just, I think, a really important reminder that even those that are, and sometimes especially those that are working within the fossil fuel industry are not immune, obviously. They're like the rest of us to the sort of ravages of this extreme weather that's hitting us. So that's the setting. So it's like May 2016. Let's talk about the fire a little bit. I think this is, you know, obviously this is something that affected Alberta. But as you note in the book, California has had what's something, I think this stat was, something like 10 out of the worst 20 wildfires ever in the state have happened in the last few years. Texas, of course, just last year in 2024 had the largest wildfire in its history, the Smokehouse Creek fire. So while this is the story of one particular fire, obviously, the implications are much broader. But can you talk for a little bit about the fire itself and the magnitude of it?John Vaillant (07:56.504): So we have conditions that would be familiar to Texans years of drought, record high temperatures, excessively flammable, explosively flammable conditions. But again, we're in the boreal forest. So we're on a latitude the same as Alaska, but we're in northern Alberta. It's really wet up there. It's really the wettest biome on Earth, but it is drying out right now. And so we had two years of drought. We had El Niño. We had record spring temperatures, you know, breaking into the nineties when it's normally in the forties and frosting at night. And now we've got southern summer temperatures and you've got this rock bottom humidity. And so there were five different fires burning around Fort McMurray on May 1st. And, you know, water bombers were on it. Alberta has a very robust wildfire fighting program. Some of the best wildfire fighters in the world reside there.But the conditions were so explosive that when the embers generated by the inevitable winds that come out of even a small wildfire started, you know, the embers started to fly, they didn't just land and fizzle and sputter. Each one turned into a new full-blown fire. So now you have this almost like imagine a drone swarm of incendiaries flying around. The wind shifted as predicted. By the way, just for the record, all the predictive data going months out was basically impeccable. It was clearly going to be an unusually volatile fire season, 2016, and the weather for early May was going to be exceptional. And the wind prediction predicted to blow into town at noon on May 3rd came to pass like clockwork. And when those embers started landing on houses and yards that were already bone dry, they didn't again just fizzle and sputter. They burst into flames and so by around 1:30 there was a wall of flame about 300 feet tall and six miles wide that basically kind of broke over the southwestern edge of Fort McMurray and just started consuming neighborhoods.And I learned a lot about radiant heat this book took me seven years to write. I'm not a fire person, not even really a climate person. So I had a very steep learning curve. This was a very complex and dynamic situation. But from the very beginning, when it first made headlines and started being the chyron on the bottom of news shows around the world as Fort McMurray disappeared, it was clear that we were into something different and unusual. And the radiant heat coming out of this fire, the radiant heat is the heat that tells you not to touch the candle, it's invisible. It moves at the speed of light. The radiant heat coming out of this fire into Fort McMurray was about 900 degrees. So that's hotter than the planet Venus. And what that does is it desiccates everything in its path. Every single tree, every blade of grass, every garden is suddenly tinder dry. And not only that, as those excessive heats start hitting vinyl siding, tar shingles, plastic playground furniture, garbage cans, those are all made of hydrocarbons, which are in fact volatile. And when 900-degree radiant heat hits them, they start to off-gas and vaporize. And so by the time the fires landed, what you have is each neighborhood is essentially turned into kind of a gas can of volatile hydrocarbon vapor. So these houses did not catch on fire in the sense that we are used to. They exploded into flame.And when firefighters started telling me, "These houses burnt from the roof to the foundation in six minutes," you know, my response was, "You know, dude, you know, adrenaline, you're talking to a journalist, you know, there's no way you're looking at your watch when this is happening." Well, I was wrong. And I interviewed a lot of different firefighters working in different parts of the city. I heard three minutes, I heard six minutes, I heard nine minutes. This is how fast these houses were actually burning down. So these are two-story, three quarter million dollar rich oil workers' houses. It's the highest income in Canada, by the way, in Fort McMurray. $200,000 a year per household is the average. And these houses that they had built were going into the basement in the time it takes to smoke a cigarette. So this was a kind of supernatural energy and hyper-combustive situation that was sweeping the city from end to end. And so as I learned that, it was clear we're entering a new regime. And then when Stephen Pyne wrote about this same fire in Slate later in May 2016, and that's I'm pretty sure that's when he coined the term the Pyrocene Age, the age of fire. I call it 21st century fire, but it's the same thing. You talk to any wildfire fighter about what their experience was in 2000 and what their experience is now, and it's a different reality. Fire does different things. We saw that in Texas in the Smokehouse Creek fire. That fire became the biggest fire in Texas history in about four days. It killed a fire chief. We lost a fire chief. That is really unusual. He was a volunteer, but he'd been fighting that fire, I think, for five or six days. And I think he had a heart attack. It doesn't matter though, the mode of death, the fire, the stress of that fire, the intensity of that fire, the relentlessness of these fires does enormous physical and psychic damage to firefighters.Doug Lewin (13:44.31): Yeah. And this is the Lucretius problem, which I really just so appreciate you introducing that term into my vocabulary. We'll talk about that in just a second. You said 300 feet high, six miles wide. Did I hear that right? That's how big the fire was. So I want to, if you don't mind, John, I want to read you just a little, well, not read you, it's your writing, but read for the audience a little section of the book. So this is the Energy Capital podcast where I'm usually focused on energy and power grids and things like that. I think that this is highly relevant. Obviously the Smokehouse Creek fire started with some utility poles. There's all kinds of connections between wildfires and power sector. But the way you put this in power terms, I think our audience will particularly appreciate. So I'm going to read just a, well, it's not super short, but it also gives the audience a flavor of the writing, which again, I just think is phenomenal."Under normal circumstances, head fire intensity, fire's raw energy output, is measured in kilowatts per meter along the leading edge of the fire. One kilowatt is equivalent to the energy produced by ten, 100-watt bulbs or a thousand-watt space heater. Barring excessive wind, a fire of a thousand kilowatts, a million watts per meter, can be managed effectively by a ground crew. But once it jumps above two kilowatts per meter, or two megawatts per meter, even heavy machinery and water bombers may have trouble containing it.By the time it intensifies to 10 megawatts per meter, 10,000 kilowatts per meter, 10,000 space heaters worth of energy per meter of fire, you have an out-of-control wildfire on your hands. Keeping in mind that a head fire intensity of 10,000 kilowatts per meter represents an uncontrollable fire, consider this, at its height, the Chisholm fire generated 225,000 kilowatts of energy per meter. That's 225 megawatts. That's a decent-sized power plant across a front that was described as miles wide. If you're having trouble imagining a quarter of a million space heaters compressed into the length of a yardstick and then multiplied by several miles, you're not alone. Six scientists from four countries who studied this fire had the same problem. We are beyond the normal scope of fire here. Familiar formulas no longer apply. This is the kind of energy that is not burned but vaporizes, energy more often associated with lasers, atom bombs, and suns."I'm skipping ahead just a little bit. "For fires of this magnitude, we need a different scale of measurement. And in the end, the six authors of a peer-reviewed paper entitled 'The Chisholm Firestorm' resorted to megatons, the units of energy used to measure the explosive power of hydrogen bombs. The energy released during the fire's peak seven-hour run was calculated to be that of 17 one-megaton hydrogen bombs, or about four Hiroshima bombs per minute. This now is what fire is capable of on Earth."That was kind of a, I had to put the book down after I read that, and like catch my breath. Stunning, absolutely stunning. You can react to that however you want and add in any additional detail. I'm wondering though, has there been one bigger since then? Is that the biggest recorded fire in the history of humanity?John Vaillant (17:01.39): So that was the Chisholm fire of 2001 that coincidentally also burned in Alberta, about 200 miles south of Fort McMurray. And it produced a pyrocumulonimbus fire column, which punctured the stratosphere and was mistaken by US military satellite data analysts for a nuclear test in the boreal forest of Canada. And they actually called Canadian authorities and said, "Did you just perform a nuclear test?" And they said, "What are you talking about?" "Well, we have this 45,000-foot-tall plume coming up out of the forest in Alberta. You know, what's up?" That's what it was. That was the Chisholm fire of 2001. So that to me is kind of the beginning. There were other big fires then, of course, but this one was sort of, with fanfare and a lot of charisma, welcome to 21st century fire. And so we have had bigger fires since then. And Fort McMurray was certainly a player. California has generated quite a few pyrocumulonimbus fire clouds. We can talk about that in more detail, but those are effectively firestorm systems that perpetuate themselves. And they were effectively unknown to fire science prior to 1998. The only place you would see gigantic lightning-generating plumes like that that would puncture the stratosphere is over huge volcanoes. Well, now wildfires can generate that same kind of energy. And so that's what we're seeing in California. I'm not positive the Smokehouse Creek fire generated a pyro CB, but Canada in 2023, that record fire season that turned New York City orange and basically changed the sunsets all the way to Europe through the summer of 2023, that was the worst fire season in Canadian history. Canada generated by itself 142 pyrocumulonimbus fire systems. And these were barely on the radar, so to speak, 20 years ago. So we're in a new world now.Doug Lewin (19:13.72): So to that point, we're in a new world now. I really think the Lucretius problem is a really great way to sort of characterize, I think, how we need to think about this. And this is one of the reasons I was so keen to talk to you about this, because I really do feel like, and we have obviously an experience of this now with the Smokehouse Creek Fire, but it's like each of these events, and frankly, even the flooding that happened just a week or two ago, right? You get these events that kind of push the limits of human understanding and even comprehension. So talk about the Lucretius problem. And then I want to actually dive into this for a little bit, because I really think that this is, at least for me, that was one of the big takeaways and kind of a central theme of the book is that we have got to reorient ourselves. And if we don't, the consequences are dire. So maybe start by describing the Lucretius problem that we get into talking about a little bit. What is it?John Vaillant (20:10.392): So Lucretius was a Roman poet and philosopher, lived about 2,000 years ago. And among his many observations were that people tend to base their assumptions about the future, not only on past experience, which is logical, but also on local experience. The distillation of that is "the fool thinks the biggest mountain in the world is the mountain that he himself has seen." In other words, I live out here in Vancouver. I'm looking at the coast range. There are about 5,000-foot-tall mountains. And it would be like me saying, "Well, these are the biggest mountains in the world," but we know the Rockies are just, you know, a thousand miles to the east of me. And then the Himalayas, you know, are even bigger. And so it's that kind of mindset. And I think firefighters and probably flood managers run into this too. It's like, "Well, we know this river. We know this forest. We had that really bad one back in '85 or that really big one back in '98. And so that's about as bad as it gets. And we've calibrated to be able to handle that." And what all the climate science is telling us and all the very hard-won physical experience is telling us is we are now entering a regime where floods, rain, drought, fire, storms in general can behave in ways that simply exceed or just blow through any past records that we're familiar with and will do so at a speed and with an intensity that we are physically unable to respond to in any meaningful way. And so the Lucretius problem pairs well with a futurist named Alex Steffen's term "discontinuity," which is scenarios wherein past experience and past knowledge cease to be effective.And what we see though, especially with large institutional response, especially firefighting services and whatnot would be, well, they're designed to respond to 1998-size fire and flood, but we're now in the 21st century and fire is doing things that are simply outside that box. And we're still responding, kind of playing catch-up to this new reality. And also then when we see this new reality, there's a tendency to treat that as a freakish aberration rather than, the bar is actually moved and we need to respond accordingly and actually imagine something even bigger and even worse and even faster in order to have any hope of getting ahead of these disasters which are catching us off shore over and over again to devastating effect.Doug Lewin (22:58.242): Yeah, exactly. Imagine and then prepare for. And that's the really hard thing is because, you know, it's very hard to get people, because it's, it frankly costs money. It's expensive, right? To get a warning system, for instance, a river rising 26 feet in 45 minutes costs some money. And, you know, people will say, "Well, river can't rise that fast." Well, this is where we've got to imagine that 26 feet in 45 minutes, the next time it could be 26 feet in 30 minutes, right? I mean, the moisture that is falling out of the air because the temperature is warming, the firestorms that are happening, the droughts that are happening, even the heat waves, right? Heat waves for sure. Like that's another thing we've got to plan for. How much air conditioning demand do you need for your power grid? When you say, "Well, can't ever get hotter than 112." Really? It probably can, right? And then there's one that's a little bit more, the science is a little less certain on this, but it's what scientists will say is like medium confidence around ice storms, right? Texas had Winter Storm Uri in 2021 and 10 million people were without power for days. And I hear this all the time in power circles, like, "Oh, that was," as you just said, like a freakish aberration. Basically people will say those exact words. So we'll plan for a Winter Storm Elliott or 2011-style winter storm. We don't really need to think as much about Uri because that's probably never going to happen again. That's dead wrong. And to the Lucretius problem, there's no reason to think that the next winter storm won't even be worse. We have to not only imagine it, but prepare for it.John Vaillant (24:34.666): Exactly. And the science is all there. If you look at CO2 levels, which hit 430 parts per million for the first time in three million years this year, if you look at methane levels, which are rising even faster, I think, than CO2, we can extrapolate out where temperature is going to go and where storms will then follow. And so we really have to look at who benefits from inaction. And it's pretty clear in Texas who the beneficiaries are and, you know, that rugged individualism, "pull yourself up by your bootstraps," put that to one side. And on the other side, look at excess deaths for the state over the past few years and track that through this current administration and just see where you are. You know, how there's a lot of dead, rugged individuals out there. And, you know, we understand about community and Texans understand about community and we keep each other alive. We take care of each other. And that's how a lot of people were saved from that terrible flood is because the community showed up.Doug Lewin (25:41.26): Yeah. Yeah. And to make sure that in the next flood, and this is where I think, John, this is really important, right? And I think one of the reasons why it's so just intriguing and fascinating, and I mean, what's the word? Almost like it's such an amazing coincidence of sorts that it happened in Fort McMurray is that the very fossil fuel interests that are trying to stop the reduction of emissions are being impacted as well. Maybe this is just the hopeful optimist inside me, but I'd like to think we get to a point where enough people even within that industry go, "Okay, look, we're going to continue to produce oil and gas, but we have to do so in a way that reduces emissions. We're being impacted too." Dare to dream.John Vaillant (26:25.93): Yeah, I think it is a dream. And I think as your Texan listeners may know, Alberta is really your twin, is the Canadian twin to Texas. And toxic libertarianism is alive and well in the province of Alberta and in the state of Texas. And you can really see it in the response to the Fort McMurray fire. The most expensive weather disaster in Canadian history. And their response was to rebuild the city exactly as it had been out of the same materials and expand bitumen production and refused to talk about climate or climate change. And you know, that status quo is lethal. And Fort McMurray was really lucky in that last fire, but that luck is going to run out. There have been numerous evacuations in Fort McMurray since then due to fire, because it's been almost 10 years, as well as devastating floods. So many of the same issues that Texas faces and is resistant to taking meaningful action are Alberta's reality too, and for many of the same reasons.Doug Lewin (27:37.422): Yeah, I think one of the areas where I think there is some, and we'll see, Texas is about to, by the time this podcast comes out, probably will have started a special session. The Texas legislature only meets every two years unless called by the governor. There's going to be 18 things on the call. The biggest headline item is going to be mid-decade redistricting, but one of the 18 items on the call is going to be disaster preparedness. And it's going to be very interesting to watch what the response is. Is it just a very localized solution where all they're going to do is fund a siren warning system on the one particular river, the Guadalupe River, and then kind of dust their hands and say, "We're done"? Or is there a much more comprehensive approach taken?I'm curious, since you've written the book, or even in the process of writing the book, have you seen examples of places around the world where adaptation is really done well? Because I wrote an article a week or so ago and cited your book and Lucretius problem. I called it "failure to adapt." And I think that is one of the stories of just being alive as a human being anywhere in the world in 2025. We can talk about mitigation. We're clearly not doing what we need to do to reduce emissions. There's also this kind of parallel path of even if we brought emissions down to zero tomorrow, we've already baked a lot of the changes that are happening in, and the adaptation is just not keeping up. Do you have examples of places you've come across where you're like, "Here's a place that has really done the early warning system, has mastered evacuations," anything like that you can point to?John Vaillant (29:21.526): Yeah, there are a few different examples, and all this is with the caveat that we just can't underestimate the inertia of the status quo and the incentives, which is mostly petroleum-based, to maintain the status quo at really at all costs, including the cost of human lives. But there are communities in Canada and I think most notably in California where people are really managing, you know, what's called their "defensible space." And these are these concentric rings around a given value, which would be say a house or a school or a community, where people are really trying to manage the fuel load, thin out the forest, ideally create multiple escape routes. Because that's a real issue, especially in new developments. There's only one road out of these places. And if that road is blocked, could be by two T-boned escaping vehicles or could be by fire or fallen trees, you're trapped in there. You are literally in a fire trap. And so that killed a lot of people in Paradise, for one.So it's very sporadic. You see some of it in building materials. So people are deploying metal roofs more often. There are lots of low-cost, easy-to-install external sprinkler systems that are basically modified garden sprinklers that will create a water curtain over your house. And that's really good for flying embers and small fire. Another example would be in what's called "fire smarting" up in Canada where, and I know they have that in some communities in the US, where firefighting service representatives will come out to your community, to your backyard, to your cul-de-sac, to your town meeting and talk to you about how to make your own home less flammable. So that would mean moving wood piles, taking down the wooden fence and putting up a metal one. There are a lot of different conduits for fire. And so what these firefighters can help you do and what I tried to do in Fire Weather is kind of invite the reader to look at the places where they live through the lens of fire. So how does fire take advantage of your spaces and in fire conditions, the mulch in your flower bed will turn into a fuse that can lead right to your house and set your porch on fire. A wooden fence can do the same thing. That beautiful juniper bush that you have growing outside the window that you meant to prune but never quite got around to it, so now it blocks the whole window, that thing will set your house on fire by itself. Those are really explosively flammable torches. So this kind of thinking means for actually relatively little money, it will turn into a fuse that can lead right to your house and set your porch on fire. A wooden fence can do the same thing. That beautiful juniper bush that you have growing outside the window that you meant to prune but never quite got around to it, so now it blocks the whole window, that thing will set your house on fire by itself. Those are really explosively flammable torches. So this kind of thinking means for actually relatively little money, you can modify your space and probably reduce the flammability of your house and yard by probably double digit percentages. And that's not going to stop a firestorm, but there's a lot we can do when it's just embers and ash that are flying. But it means admitting that this is a possibility and that's hard to do to think, well, my house could actually burn down. And that's a psychological and emotional leap that a lot of us are resistant to making.Doug Lewin (32:37.442): Yeah, for sure. I mean, it's not like a fun topic. Nobody wants to think about this, but it's absolutely essential that we do. In Texas, you know, we've talked a little bit about Smokehouse Creek in the Panhandle, but the central part of the state, you know, basically from Dallas down to San Antonio, where a lot of the state's population lives, particularly west of the I-35 corridor, at various times can be a tinderbox. I mean, there's just a ton of cedar out there. I think various studies have put Austin and San Antonio and kind of the hill country, the same area that just flooded. So there's less risk right now because it just flooded. But in future years, when drought inevitably returns, those areas are some of the most fire prone in the country. And then you have, and you talk about this a lot in the book, the wildland urban interface. I want to talk about that a little bit where a lot of these suburbs and the exurbs are sort of growing into areas that used to be wildlands and kind of burn from time to time and are meant to do that, but now we suppress them. And so now you've kind of got these tinderbox areas with a whole bunch of homes in them. So I do think we've got to start thinking about this much more comprehensively, both from a community aspect. You mentioned the only one road out. There was actually a fire in a neighborhood in Northwest Austin called Steiner Ranch several years ago. Might've been 10 years ago now, where that was exactly the thing. There was one road out. There were arguments for years after that about punching another road through there to give people another way out. So we have to think comprehensively at like a community scale, those kinds of issues, and then also individually. Do you, I don't know, again, if you've come across in any point in the research for this book, I mean, this is almost an impossible question to ask, but I'm gonna ask it anyway. Like, how do you get over like these, because really what we're talking about is there's the physical response, but there's like the bigger barrier, I think, is the psychological response, right? A, people don't want to talk about it, and B, even if they do want to talk about it, they're going to say, the biggest fire we ever had was this, so that doesn't look like that much of a problem.John Vaillant (34:43.479): Boy, I think we are very well defended psychologically. And then if you have a kind of a libertarian culture, for example, which is super independent minded and frankly, very reactive, you know, we'll deal with the problem when it comes. And then you, if you add very deep religious faith, you know, that, you know, God's going to cover me here, that can make it a lot harder to look squarely at the science and look squarely at things that are hard to see. Temperature is invisible, but it really impacts our reality. Off gassing, vinyl siding, and tar shingle and mattresses, it's invisible, but it will turn your house into a bomb. And if you want to see a really graphic example of that, Underwriters Laboratories has a video on YouTube comparing an old fashioned sort of grandma living room with cotton and wool and horsehair stuff sofa with the modern living room, which is all polyurethane and laminates, and they set them both on fire the same way. The grandma's living room takes 25 minutes to become uninhabitable. The modern living room explodes like a refinery fire at three minutes and 20 seconds. Three minutes and 20 seconds, and the room blows up. And it blows up because the heat from that fire that's burning in the sofa, starts the cushions off gassing, which starts the synthetic carpet off gassing, which starts the nylon curtains off gassing. So even before they ignite, they're just filling the room with flammable vapor that reaches a certain density and blows up. It is shocking to watch. And that's where most of us live now. You got three minutes.Doug Lewin (36:40.052): It's heavy stuff. I want to talk about a couple other things here. Number one, you mentioned that, you know, we haven't reached 420 parts per million in the last three million years. There's been a lot. I think it originated with a Joe Rogan comment a couple of weeks ago where he had a Washington Post chart up. We can try to find this and drop it into the show notes, but it went back like, you know, a half a billion years and says, well, you know, actually 420 isn't that uncommon for the history of the earth. But I think it's important to remind people humans, even hominids, pre-humans, have only existed for a few million years. We're in that like Goldilocks zone of climate that has now been changed. And 500 million years ago, it doesn't matter that much to us. Like it's two and three million years that we've existed.John Vaillant (37:29.442): Yeah, and I don't agree with Joe Rogan on all that many things, but I think we can certainly agree that through the lifespan of planet Earth, the past couple billion years, there have been some very high CO2 levels. What makes this era unique is the speed with which it has happened. So there's no other era in the history of planet Earth where CO2 and methane rose at the precipitous rate that it is doing in our era, and that is directly attributable to the combustion of fossil fuels. And so that is just a different scenario that we have created. Most geologic change, with the exception of a meteorite impact, happens very gradually over tens or hundreds of thousands of years. We are doing this in decades. All of us, most of us listening to this podcast, can remember normal winters and normal summers. So in our lifetimes, basically in the past 50 years, we've seen extraordinary changes to our environment so that spring, summer, winter and fall are behaving in ways that would not have been recognizable to us or even conceivable to us when we were 10 years old. And that has never happened before. And we did that. And that is, it's hard to take responsibility for that, especially if you're from a petroleum driven province like Alberta or a petroleum driven state like Texas. And somehow we have to be able to quantify and show gratitude for the gifts that petroleum has given us, which are too many to number. But even now, those gains are being taken away from us by another byproduct, another unmeasured externality of this petroleum well. And that is CO2. And that's the hard math we have to do.Doug Lewin (39:29.282): Yeah, for sure. And this is interesting. I obviously live in Texas. I work in Texas. I work within energy in Texas. So I do talk to a lot of folks very regularly that work within and for fossil fuels. I do think there is a pretty high awareness at the individual level of what is going on with extreme weather and rising emissions and the change of our climate at the institutional level, it's much, much slower. You talk in the book, and you called this, I think I captured this correctly, is a direct quote, the most consequential policy reversal in the history of human civilization, the American Petroleum Institute's decision to leave the climate task force many, many years ago. Can you talk about that? You talk about that a lot in the book and why you think that's the most consequential policy reversal?John Vaillant (40:26.796): Yeah, in so doing, we can give a shout out to the petroleum industry. Petroleum is why we get to live the lives we're living right now, why we have the mobility that we have, the wealth that we have. Countless products that we have now are thanks to that industry. And they are very good at what they do. They also have very good scientists. And when CO2 level rise became measurable in the 1950s, thanks to Charles Keeling, who came out of Caltech with some new equipment that enabled him to do that, enabled us to do that. The petroleum industry earnestly, with good intention, got concerned, got interested, because they knew that fossil fuel emissions contain a lot of CO2, coal does, gas does, oil burning. So they studied it. And they studied it with the same zeal and skill with which they studied other aspects of the petrochemical industry. And they discovered in the late 70s, actually earlier, that fossil fuel anthropogenic CO2 had the potential to alter the climate in very destructive, possibly irreversible ways. So they knew this in the 1970s and 80s, and the evidence hadn't shown up yet. The temperature hadn't risen enough to prove the theory, but they gamed it out. And if you look at their graphs of volume of CO2 generated by a naturally growing fossil fuel industry through the 90s through the 2000s into the 21st century and where temperatures would be and where CO2 levels would be, they're spot-on for 2025 and they figured that out almost 50 years ago. So they predicted almost 50 years ago where we would be today. And that's why people say Exxon knew, Shell knew. They didn't know in the sense that the temperature hadn't got there yet, but they had good scientists and they used the scientific method to predict this. So fast forward to 1982, 84, there's an oil glut. There is a lot of depression. I think there's a recession going on at that time. The oil industry is really struggling and the API makes this decision to basically disavow the science. It would be too costly to the industry to respond in a meaningful way to the CO2 generated by the fossil fuel industry. Because if we think about it, at root, the fossil fuel industry is a fire industry. And if you're in the fire industry, you're in the CO2 industry. And as they demonstrated with their excellent science, if you're in the CO2 industry, you're in the climate change industry. They understood that and leaders at the top, you know, who have names, made the decision to say we're not gonna go down that path and we're going to deny that this is an issue and we're going to distract and obfuscate. And that's where this notion of the merchants of doubt came in. They used many of the same methods that the cigarette industry used. And so we still live in that world now and we're paying increasingly heavy consequences in human lives and human jobs and human quality of life for this intensifying heat and fire and weather disaster. So this is all traceable. And right now, if you're interested, the American Petroleum Institute, the API, is trying to pass legislation that would reduce protections for oil workers in hot climates, in dangerously hot conditions. So it's a ruthless entity. And while individuals who work in that industry may be lovely people and contributing to their community in all kinds of ways, the organism that will stop at nothing to survive and that will stop at nothing to appease shareholders and squeeze every last dollar out of the industry before we tip over into renewables has no conscience. And that's what we've seen for the past 50 years. And we're suffering.Doug Lewin (44:39.33): There is, I think, a sort of a thread of hope here in the sense that there could be bigger business opportunities with lower emissions, particularly when you think about global markets and how fast they are moving. Asia and Europe, you know, the United States is, you know, huge and a behemoth, but we are, you know, at the end of the day, part of a bigger world. And I think that that is where some of the change, maybe not at the API level, but within some of their member companies is coming from. I think there's two things. One, while their organizations, as you say, act differently, the individuals are people and have families and kids and grandkids and nephews and nieces and look at that and say, what kind of a world are we leaving them? We have a responsibility. That's not enough, right? But when it matches up with, maybe there's a market opportunity here to market a low emission fuel, to get into using oil and gas experience in the geothermal industry or capturing carbon and storing it or any number of these different sort of potentials. That's where I think there might be something. And I think John and I, I'm curious what you think about this and this might be a good place to end. I mean, there's so much more to be said about this. But there is this long history, which is really tragic, of an industry as a whole really, as you say, obfuscating, really sowing doubt and sort of intentionally misleading. Here we are in 2025. We are seeing the impacts in fires and droughts and floods and heat waves. I am more interested in what people do from this point going forward than I am in the past. The past matters. We can't whitewash it. We're talking about it. It's important for people to understand that history. But what matters to me right now is what people do going forward. That's what I'm watching.John Vaillant (46:40.75): Yeah, I'm with you 100 percent on that, Doug. And unfortunately, who's owning the future is China. And I'm surprised that this doesn't sort of gall that competitive American spirit. I know Americans are fighters, are competitors, are inventors, super creative people. And yet China now is running away with the renewables industry, is running away with the EV market. And Ford is content to, you know, offer an F-150 Lightning, but is leaning hard on gas powered F-150 pickup trucks, which is a 20th century vehicle that has no relevance or real utility in the future that most of us would like to inhabit, which is one that has some kind of stable climate. And the F-150 is not contributing to that. And that's a super popular truck. Ford sells a million of them and American oil companies are happy to gas them up, but that is not where the future is. Right now, China is installing more than a... So a gigawatt of energy will power roughly 750,000 to a million homes. And China is installing maybe one and a half or two gigawatts of renewable energy every day in that country. And the EV market, BYD and four or five other electric vehicle companies that none of us can pronounce has run away globally with the EV industry. They are stealing the 21st century from us in terms of energy. And who controls the energy really controls everything dependent on that energy. It has been oil. Oil has owned it for 150 years. They are not gonna own it for the next 150 years. And no one is saying, ban oil, but we need to respond meaningfully. We need to look at the writing on the wall, not the wall that's just in Texas, but look globally. And that's where the current regime is really hobbling us. It's no time to take a provincial stance. It's no time to be kind of willfully protectionist and not respond to the needs of the rest of the world, which are one, a need for a stable climate and reducing CO2, and also for the incredible abundance and opportunity offered by renewables now. Solar is the cheapest energy ever invented, and battery technology is in its nascent. It's exploding right now. And so the possibility of having a stable renewable grid is well within grasp, and this is where Texas is actually a leader in the country. I think you're installing, Texas is installing more renewable energy than even California. So this is again where that independent mindedness and hardworking horse sense of Texas can really take advantage of the future and be a leader.Doug Lewin (49:48.49): And competitiveness, John, right? Because this is the future. Like, you know, the Financial Times called China "the world's first electro state," right? The idea that they're going to control the supply chain on electricity should be scary to Americans, particularly those that are worried about China dominating the 21st century. The world is going to want these low emission products and services. We should be using American ingenuity and innovation to compete. And particularly Texas, Texan innovation and ingenuity. And like you said, oil has provided so many advances. I think a lot of times in discussions around climate change that is left out. And I think that's very off-putting to folks within the oil and gas industry. They don't think of themselves as bad people. And like you said, they're active within their communities, their identities of good people. And they're like, hey, we're trying to provide something the world needs. Granted, the world has needed and continues to need oil and gas. Where there are alternatives that are lower emission, we should use them. Where there aren't, we should reduce emissions as much as possible, right? And that is the formula for competitiveness, because the world is going to demand these products. China sees this, and it's stunning to me that American leadership doesn't really seem to get this, at least yet. John, I'm going to give you a chance. I'll ask you in just a second, if there's anything I should have asked you that I didn't that you want to add. But I will just say to the audience again, I said at the beginning, I'll say it here at the end, this book is just remarkable. And no matter what your belief system is or what your background is, like read this book. I actually don't think it is primarily a climate change book. I don't know how you think of it, but it is a book about a fire in a place. And no matter what your beliefs are, I think you will read it. It is a page turner. You know, usually people think of page turners as fiction. This is one of those great non-fiction works that just keeps you from putting the book down. So kudos on a great book. And is there anything else you want to add in closing?John Vaillant (51:50.146): Well, thank you, Doug. I really appreciate that. And I, you know, I think one reason the book does resonate is I spent a lot of time talking to firefighters and people on the ground. You know, it's not climate scientists' opinions of what happened. It's the experience of people who actually went through this and lived it. And that gives it a kind of credibility. And the other thing I would say is CO2 and methane will not wait for us to get our act together. They will keep rising and they will keep intensifying weather behavior. And so it really behooves us to take note of the science, take note of CO2 and methane, and recognize that it doesn't care if we flood or burn or flourish. It really doesn't matter to those gases. And we have it in our power to moderate the increase of them. And if we allow them to increase rapidly, as rapidly as they have been, we are going to have a world that is increasingly difficult to live in and that our children will be increasingly unable to flourish in or even envision a future in. And so that's where we can have our opinions and our feelings about our modes of energy, but the science doesn't lie and the science doesn't wait.Doug Lewin (53:10.378): And a different path is possible. Like we can reduce emissions. We can get better at adaptation. We totally. We're going to have to. John, thank you so much. I really appreciate it.John Vaillant (53:21.048): Really a pleasure to speak with you and I'm so glad that it was worth the wait, I hope. I really enjoyed it.Doug Lewin (53:27.054): Absolutely it was. Absolutely. Thanks, John.John Vaillant (53:29.464): Yeah, take care Doug.Doug Lewin (53:31.65): Thanks for tuning in to the Energy Capital Podcast. If you got something out of this conversation, please share the podcast with a friend, family member or colleague and subscribe to the newsletter at douglewin.com. That's where you'll find all the stories where I break down the biggest things happening in Texas energy, national energy policy, markets, technology policy. It's all there. You can also follow along on LinkedIn. You can find me there and on Twitter @douglewinenergy, as well as YouTube @DougLewinEnergy. Please follow me in all the places. Big thanks to Nathan Peavey, our producer, for making these episodes sound so crystal clear and good, and to Ari Lewin for writing the music. Until next time, please stay curious and stay engaged. Let's keep building a better energy future. Thanks for listening. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

Either the Texas grid is highly reliable, or the sky is falling.Spoiler alert: bet against the latter.A June report from the Texas Reliability Entity (which has federal statutory responsibility to report on Texas’ grid risks) shows that the ERCOT grid is increasingly reliable. That’s mostly because of solar and battery storage additions to the state’s energy portfolio.It also directly contradicts a report from President Trump’s Department of Energy, released about a week later, which said Texas faces a severe and shocking likelihood of outages every year — including this year.Meanwhile, in the real world, ERCOT expects to approach record peak demand next week. Again, thanks to the state’s booming solar and storage resources, ERCOT forecasts that we’ll have 35 more gigawatts than we need when demand peaks.What gives?Solar and Storage Is Powering the GridIn its report, the Texas Reliability Entity writes:The Region’s reliability performance remains strong while navigating [many] challenges. … The Region’s resources managed extended high summer peak periods in 2024 (as in recent years), helped by new solar generation and energy storage. Annual energy production increased (alongside renewable generation output and peak renewable penetration levels) to meet projected peak loads. As a result, the Region did not experience any Energy Emergency Alerts related to insufficient responsive reserves in 2024 [emphasis added].Yes, no matter what anti-energy politicians or activists say or believe, Texas’ abundant solar and battery storage resources are helping meet our booming demand. But don’t just take the word of the entity whose one job is to ensure Texas grid reliability …ERCOT CEO Pablo Vegas told the ERCOT Board just last month, “The risk of emergency events during [peak demand] periods is shrinking, dropping from over 10 percent a year ago to under 1 percent.”Vegas — again, the CEO of ERCOT — also said, “The peak in the summer, of course, is in the afternoon at the peak heat, when air conditioning load is at its highest. Solar energy is very well suited to help support that.”And the Chairman of the Public Utility Commission of Texas, Thomas Gleeson, said much the same late last year: “Solar and storage are key for reliability in this state,” Gleeson said. “We need them to be successful.”He added that solar and storage “saved us this summer.” He was speaking of 2024; it’s almost certain to be true this summer as well.Yet President Trump’s Department of Energy reached a very different conclusion – thanks to deeply flawed assumptions and methodology.What the DOE got wrongFirst and foremost, the DOE assumes that only “Tier 1” energy generation projects will be built over the next six years. These are projects that are so far along that they’re almost certain to be completed. Texas has about 29 gigawatts-worth of them (see graphic below).The thing is, Texas has added 50% more than that to the ERCOT grid in just the last four years.There are 112 gigawatts-worth of projects — nearly four times as much as is in Tier 1 — in Tiers 2 and 3, just waiting to graduate. The DOE assumes that none of that will get built.Unfortunately, the DOE report comes on the heels of the catastrophic new federal budget law (the apparently unironic “Big, Beautiful Bill”) that was designed, especially with subsequent executive actions, to hobble renewable energy projects in Texas and around the country.Maybe that’s the reason for the DOE’s pessimism about the Texas grid: it’s like a doctor mocking the health of a patient after cutting off the patient’s medicine.The DOE report seems to describe a state of energy scarcity that the administration and Congress have created. Given the regulatory uncertainty they’ve injected into the process, a shortage of Tier 2 and Tier 3 projects might become a self-fulfilling prophecy.The graphic below is from the North American Electric Reliability Corporation’s (NERC’s) Long-Term Reliability Assessment, published in December last year. It shows more than 100 gigawatts of generation in Tiers 2 and 3. It also shows steadily rising reserve margins — the amount of supply in excess of demand represented in the blue bars — as additional Tier 2 and 3 capacity is brought online.But because the President has directed the Treasury Department to make it as hard as possible to qualify for tax credits, many of these projects won’t get built to service rapidly rising load growth.They’re literally creating energy scarcity in place of energy abundance.What We Talk About When We Talk About CoalWhy would the administration make such a big bet on such dubious numbers?The clear implication is that officials are scrounging for excuses to force inefficient coal and gas plants to keep running, no matter how bad they are for consumers and grids. As Princeton energy modeler Wilson Ricks told Canary Media: “This report seems designed from the ground up to justify keeping coal plants open with emergency orders.”Of course, old coal plants are far from reliable. As TRE noted in their report, and as shown in the chart below, forced outages of conventional generation are up significantly in recent years. Forced — that is, unplanned — outages at gas and coal plants are up 50% compared to ten years ago.Indeed, old gas and coal plants are among the least reliable generation resources in existence.What’s the Plan?DOE’s shoddy analysis also doesn’t bother with a prescription. Clinging to aging, unreliable power plants is a Band-Aid at best.Worse, there’s a worldwide shortage of gas turbines right now. If you order a turbine today, you’ll get it a year or two after President Trump’s term ends. Gas plants aren’t coming to save us.Nuclear power also can’t deliver the amount of electricity we need, at least not until well into the 2030s. To be clear, I’m excited about new nuclear plants. There’s real hope there for clean, constant power … but not in the next few years. The technology simply can’t scale that fast.So, seriously, where does anyone — including the Trump administration — propose getting the new electricity that America is going to need to power rising demand from AI data centers, industrial electrification, and increasing extreme heat?Texas is a place to look for answers. ERCOT expects to integrate a mix of renewables, storage, gas peaker plants, and demand response programs in coming years to meet the state’s aggressive demand growth projections. Texas is also on the front lines of energy waste reduction: the PUC and ERCOT’s Energy Waste Advisory Committee will soon take that crucial issue up, per requirements that the legislature approved this year.Vegas, ERCOT’s CEO, has been a consistent defender of the state’s competitive energy market and its ability to meet the state’s energy needs. In a House Committee on State Affairs meeting this year, state Rep. Rafael Anchia asked Vegas whether “market forces exist today, absent heavy government involvement, for us to meet load forecast?” (That’s a load forecast showing a 75% increase in peak demand in five years, by the way.)Vegas’s reply: “The market, as structured today, is very well suited to support the growth trajectories that we're seeing increase in the state of Texas.”And it’s working. The U.S. Energy Information Administration says the wholesale cost of power in ERCOT is 15% below the national average — all while reliability in Texas has improved:The Trump administration should be looking for ways to support these market forces. Instead, with the budget bill, executive orders, and now a misleading DOE report, it’s undermining them.We Need More SupplyTexas Governor Greg Abbott rightly bragged in his State of the State speech this year that the ERCOT grid’s generating resources grew by 35% over the past four years.Of that growth, 92% came from wind, solar, and storage.Unfortunately, the President and Congress just passed a law that makes it much harder to add new supply. That reduces grid reliability.It’s kind of perfect that the DOE released its doom-and-gloom report just days after the bill was signed. It’s a self-fulfilling prophecy, foretelling a future of energy scarcity, higher prices, and lower reliability that the administration itself is creating by throttling the renewables that our state and nation increasingly need for economic growth..Their report is not a representation of current reality or trends; it’s a window into the world they’re creating.When we get there — when you’re spending more than you can afford on less reliable power — remember who to thank.The Texas Energy and Power Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

In this episode of the Energy Capital Podcast, I sat down with Matt Loszak, co-founder and CEO of Aalo Atomics, a startup based in Austin, Texas, that’s reimagining how we build nuclear energy. 🎧 Listen to the first 15+ minutes for free, and if you’re a paid subscriber and want to listen in Apple Podcasts or Spotify, just connect your private Substack … This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

We’re on the verge of one of the biggest energy shifts in decades: the increasing use of demand side resources.They’re often referred to as Virtual Power Plants, or VPPs. Add together thousands of rooftop solar installations and home batteries and you reach levels of power equal to medium sized power plants. They add power capacity, can provide key grid support in ancillary services, and give consumers uninterrupted power during outages of any kind.Unfortunately, the budget bill passed yesterday by the Senate would make this much harder. (We talked about the bill and its implications but we recorded on June 23 before we knew how bad it would actually be.)VPPs are already working in Texas, and started to gain momentum. This week on the Energy Capital podcast, I spoke with Blake Richetta, CEO of Sonnen USA, and one of the most forward-thinking leaders in the clean energy world. We broke down what’s happening in Texas, why the rest of the country isn’t paying attention, and what’s at stake if we get this wrong.The Big Idea: Solar Alone Isn’t Enough. Batteries Make It Work.Blake lays it out clearly: The economics of rooftop solar by itself don’t work very well. You need a battery to make the math work.At midday, solar power is often so abundant it’s not worth much on wholesale markets. But during the evening — when people are getting home, turning on ACs, cooking, watching TV and the sun is setting — prices rise.A battery allows you to store cheap solar and sell it when it matters most. As Blake put it, that allows you to shape load perfectly and inject energy optimally. It’s not only a savings strategy; it’s also a boon to grid reliability.And if thousands of homes do this together? You’ve got a power plant, one that’s already connected, decentralized and closest to load, and can scale to solve some really difficult locational problems on the grid.What’s a VPP, and Why Are Texas Homeowners Getting One for No Upfront Cost?This isn’t theoretical. This is live in Texas.Sonnen and their Texas partner, SOLRITE, have already deployed over 3,000 residential batteries into a fully operational Virtual Power Plant. Here’s what makes it different:* A zero-upfront-cost offer for homeowners* 40 kWh, 9.6kW battery storage system: bigger than what most homes get* A locked-in energy rate (~12¢/kWh with a small escalator), generally lower than market prices* The ability to participate in grid services without even noticingTexans get resilience and savings. The grid gets flexibility and stability. The model works.Key Takeaways* Batteries unlock the real value of solar: economically and operationally.* Texans want energy independence and resilience to extreme weather events, and this model delivers it.* Competitive markets enable this kind of innovation in Texas in a way other states can’t match.* The grid gets stronger when consumers get stronger.* The President and Congress are poised to significantly slow down what Texans are doing.What Comes NextSonnen and SOLRITE are betting big on a Texas-led VPP revolution. But there’s still work to do:* Unlocking distribution-level grid value (like locational value and deferred infrastructure costs)* Expanding ADER pilot (aggregated distributed resource) programs* Supporting U.S.-based battery manufacturing to reduce foreign dependency* Ensuring that federal policy doesn’t kill the momentum just as it starts to scale.Texans remember what it feels like when the power goes out. VPPs offer a smarter, cleaner, more resilient future, without needing to sacrifice freedom or reliability.We finally have the technology.We finally have the market model.Now we need the political will to help Texans strengthen themselves and strengthen the grid, too.Timestamps00:00 – Introduction03:00 – How Sonnen helped develop Virtual Power Plants and paired solar w/ storage06:00 – Using Texas’ competitive market to make VPPs available for $0 upfront cost12:00 – Consumers’ cost to get a VPP through a retailer and a “VPA”17:00 – How VPP economics work for Sonnen and its partners (hint: it’s the batteries)19:30 – The market is sending signals for “firming” right now22:00 – The resiliency benefits of solar & storage, advantages over generators26:00 – Grid following vs. grid forming batteries for backup power32:00 – ADER pilot in Texas, grid services from VPPs33:30 – Fundamental goal: shape load perfectly and inject energy optimally37:00 – The potential to monetize the distribution value of VPPs and ADERs41:00 – How Distribution System Planning using DERs could lower costs45:00 – Tapping into locational and temporal value of distributed energy51:00 – Why some utilities make the leap to VPPs and tap the value of DERs55:00 – How vertically integrated utilities in Texas could benefit from VPPs57:30 – Implications of federal budget bill on residential DERs (as of June 23)1:02:00 – How market value can, in time, replace tax credits1:03:30 – sonnen’s manufacturing in America to realize the tax credit adder sonnen’s manufacturing in America to realize the tax credit adder1:05:00 – Final thoughts on being a “disruptor” in the marketResources* Sonnen USA (home battery & VPP solutions)* SOLRITE Texas Virtual Power Plant* SOLRITE + sonnen VPA launch (January 2025)* Utility Dive: Texas grid-optimizing VPP details* Abundance + SOLRITE + sonnen VPP collaboration* 25D Residential Clean Energy Tax Credit (IRS)* SEIA: 25D Solar Tax Credit explainer* Senate’s “One Big Beautiful Bill” tax credit updates* Reuters: U.S. Senate adjusting rooftop solar line in budget bill* AP News: Senate GOP solar & wind incentive cuts* Reuters: Rooftop solar firms warn House bill would set back sector* We’re Not Relying on the Texas Grid This Summer. Michael Hardy, Texas Monthly.TranscriptDoug Lewin (00:07.928)Virtual power plants have massive potential to make the grid more reliable and resilient and lower costs for consumers. But all that hangs in the balance. Welcome to the Energy Capital Podcast. I'm your host, Doug Lue, and my guest this week is Sonen CEO, Blake Richetta. Sonnen is a German manufacturer doing a large business in the United States, particularly in Utah, California, Texas. Doug Lewin (00:36.114)among their leading states. We recorded this on the 23rd. So just about a week ago and just at the very point that the Senate language was starting to come out, we were actually recording in the morning, so that language wasn't out yet. We were not able, obviously, to talk about the very latest of what is going in the Senate as this podcast is dropping. That said, it is highly relevant. Doug Lewin (01:04.299)because we did talk about the threat to the tax credits that help people get solar in storage at their homes. So when the next hurricane or ice storm or whatever it is hits or just a general power outage, which happened all the time, 95 % of them are on the distribution grid. And it's just because the wind blows really hard. A storm comes through, lightning hits a transformer, whatever it might be that knocks the grid out. People want to have solar and storage at their home. Doug Lewin (01:32.91)It's good for them to have that resilience. It's also good for the grid when those distributed assets can participate to support the grid. This is something Blake and I got into in great detail. I learned a ton, as you'll hear. A lot of times, asked questions about things I didn't understand. Learned a lot from Blake and really excited about the promise for virtual power plants, distributed energy resources, particularly in the Texas construct. But before we get into this, I think it's really important to say, given the moment that this Doug Lewin (02:02.488)podcast is gonna be dropping. All of that is in serious, serious doubt. And if you are somebody that was hoping to have solar and storage in your home or hoping that distributed solar and storage could make the grid stronger, all of that is very much in peril. I will be covering that at the newsletter and further on the podcast.gluon.com. But for now, enjoy this great conversation with Blake Riketa, CEO of Sonin US. Thank you. Doug Lewin (02:32.814)I'm Clay Kraketta. Welcome to the Energy Capital Podcast. Blake Richetta (02:35.746)Thank you, Doug. It's such a pleasure to be here. Doug Lewin (02:38.786)Great to have you. We've been obviously trying to get this together for a while. Really excited about the things you guys are doing at Sonnen, particularly in the Texas market, but let's just start at a high level. What is Sonnen for folks that don't know? Brief with this answer if you can, because I want to get into all kinds of different policy things, but it's important that people know what Sonnen is. So let's start there. Blake Richetta (02:57.39)Sure. Sonnen is a pretty special company. I joined Sonnen in 2016 when I left Tesla because of the incredible advancements that Sonnen had made in the European market and specifically in the German market, which is still really a world leading position in the virtual power plant based energy system. And we looked towards Sonnen even at Tesla with inspiration of how do they do what they do? How they achieve so much as such a Blake Richetta (03:26.892)at that point, small company that was really fast moving sort of startup. This was back in 2016. Sonnen started in 2008 with the innovation process of the first battery, 2010 launched the first product to the German market. And a very short summarized answer is that Sonnen, which in the German language is the Sonnen, which is the plural of sun, sort of like suns. There's no real English translation. Sunny battery, I don't know, was inspired by this idea that Blake Richetta (03:56.854)solar needed to have a greater purpose and that the intermittency of solar was a dead end for the German energy system, which was already being seen economically and scientifically. And then we needed to harness and harmonize solar, help it produce real value for the grid and serve real authentic grid services and also help balance the grid. that led to the concept of the virtual power plant, which Sonnen was the Blake Richetta (04:25.528)first in the world for residential batteries to ever launch back in 2012, which is like ancient history. mean, at Tesla, were still trying to figure out the Model S and figure out the Roadster back then. And so you fast forward to now and this whole idea of networking batteries and swarm dispatching them and locational clusters to perform grid services that replace power plant energy or infrastructure to really help energy transition truly be affected. Blake Richetta (04:55.522)has been the central purpose of Sonnen. And we have the largest virtual power plant in the European Union, 180,000 houses. And then we have some very substantial virtual power plants here in America with the biggest utility managed directly controlled VPP in the country here in Utah. Now almost 6,000 houses. we have smaller VPPs in California and Puerto Rico and other states. And as you pointed out, we have a big... Blake Richetta (05:24.266)launch happening in Texas with our VPP. Let's Doug Lewin (05:27.19)Let's Doug Lewin (05:27.41)just jump right in and talk about that. There's a lot of different directions we could go, but let's, let's talk about Texas. It's the energy capital podcast. How many homes do you have here? What's your aspiration? And like, obviously it's not a sales pitch, but we do want customers to kind of understand like, what does this mean for them? How would they actually get a hold of these? So yeah, let's, let's jump right into Texas. What's going on. Blake Richetta (05:48.75)Absolutely. Well, the Texas VVV is led by our partners. They are just an incredible organization. highly recommend you maybe looking at having the CEO of this company on because he is such a pioneer company called Solright. S O L R I T E. Regan George is the founder and innovator in chief there. And what Regan basically set out to do is use the deregulated Texan market structure to create a Blake Richetta (06:17.624)framework for the virtual power plant that looks very much like what has been achieved in Europe, because Germany's a totally deregulated energy market. The most close thing to it in America is indeed Texas. But he wanted to do it in an American way. And he wanted to do it in a way that enabled people to get solar and battery in their home and join the virtual power plant without paying anything at all upfront. And having Blake Richetta (06:46.958)substantial backup power, is another thing that the German market's not very concerned about, is backup power. And so having really a American VPP in the deregulated Texan market was the mission. And that's being achieved. So to your question, I believe there are well over 3000 houses now and they just launched. What was it? Not even real. Doug Lewin (07:09.088)January. I think the announcement was in January. Yeah. Blake Richetta (07:13.288)And moving so fast, they're raising substantial capital and they've used fundamental principles to be able to do a true and scalable virtual power plant in Texas that are, I think, principles that might've been, well, I don't know, maybe lost on some other companies and other types of entities, but they're relatively risky. But at the same time, these fundamentals, if pursued, allow you to have a full VPP with a full value stack. Blake Richetta (07:42.882)And that's what's SoulRite has basically launched. That's their innovation is financially and then market wise and all this stuff making work. Doug Lewin (07:51.886)So this is going to be just a heads up for the listeners. We are going to get a lot more into this in future months and dare I say years because the Texas competitive market is such a fascinating thing. So just a level set for folks that may not know. So about 75 % of ERCOT is in competition. Austin Energy and CPS in San Antonio are as well as the co-ops are exceptions to that. Doug Lewin (08:16.694)and the sort of nomenclature of the market, they're often referred to as NOEs or non-opt-in entities because they didn't opt into competition. But the rest of the state, and that would cover most of the DFW area, there's couple, you know, Denton and a few other sort of carve-outs there, but basically most of the DFW area, almost all the Houston area, Corpus Christi, Laredo, Lubbock just opted in in the last year or two, are all competitive. And that means that consumers can choose Doug Lewin (08:43.617)their own energy providers. That is pretty unique in the United States. There is customer choice, obviously, in a dozen or 15 other states, but that's kind of more limited to commercial customers, whereas here residential can actually choose. So a lot of people still have never chosen, like 20 years after they could have chosen, a lot of people are still with their legacy provider, which turns out to be Reliant or TXU. Those are kind of the legacies, but there's all this possibility in the market out there. And for years, I've been working in this space for 20 years. remember Doug Lewin (09:13.396)literally 15, 20 years ago at the Capitol, people talking about this is how we're going to get these new technologies out to market. It's the competition, right? It's the competitive market that's going to deliver that. And I think just in the last couple of years, we're really starting to see that happen. So when you talk about market fundamentals, you're talking about a company in this case, Solright, working with you to provide the technology and then marketing that to customers and saying, Doug Lewin (09:39.626)what's important to you. And for customers, know, it's a choice, right? Nobody's in Texas required to do this. But if they decide that they don't want to have to pay upfront for solar and storage, but they're willing to enter into a longer term deal. And maybe this is where I should have a conversation with Mr. George. I think you said his name is, but as much as you're comfortable speaking about that, I'd love to, I think people are really curious about this and want to know. So maybe if you could talk about that a little bit more, like what does that look like from a customer side? Blake Richetta (10:06.86)Yeah, sure. Absolutely. And just to cap off on what you had said, caps on what you had said earlier, the market fundamentals, you're right. The competition, the free enterprise that is enabled in Texas has really inspired a lot of this. Ironically, you can look at Utah where we have this enormous VPP success as well. It's interesting. It's a vertically integrated old school energy market, Rocky Mountain power, exactly. And now all of Pacific corps, we're in four states now. Doug Lewin (10:29.292)Is it Rocky Mountain Power? Blake Richetta (10:36.844)And it's interesting that was a success that was based on certain fundamentals and also had, let's call it some conservative, ethos, color to it. And of course we also had the support of the quote unquote liberal because we always do when it comes to renewable energy, but we have this other side support that I think is really special. It's a growing story now, but the virtual PowerPoint being a technology and infrastructure that Blake Richetta (11:04.706)both sides of the aisle can get behind, which is kind cool. And now we're seeing that in Texas, but ironically, Utah sees themselves as very conservative and they arrived at this vertically integrated model is good and that's conservative to them. Texas also conservative, but sees that free market classical liberal conservatives, conservative view as the way the Texan system wanted to progress, of course, with free enterprise. Doug Lewin (11:31.906)More of a Milton Friedman kind of a conservatism. Blake Richetta (11:35.498)Yes, exactly. So I think there's a funny somewhat of a connection here. It's interesting is that once again, here's a market that's somewhat conservative, but the VPP ends up being something that seems to really resonate well. And I think will resonate with consumers and regulators and retail electric providers. And we get both sides of the aisle, if you will, excited about it. So that's just a foundational statement for me as it pertains to the consumer. Yeah. So in Texas, the consumer can choose. Blake Richetta (12:03.97)course, whatever retail electric provider they like, like you said, in the deregulated areas of the Texas energy system in ERCOT. And if they choose to go with Solright, Solright will give them options of retail electric providers that support the virtual power plant. So then they still have the power to choose a retail electric provider, but they have to choose a retail electric provider that actually supports the virtual power point concept. If they don't, then there's no way it Doug Lewin (12:31.756)So Solrite itself is not an REP. are not a retail electric provider. They're partnering with Blake Richetta (12:36.502)No, and that's a pretty good separation. think they are financing. They own the solar and the batteries. So look, it's Urquhart stuff that's maybe not great there for retail electric provider. And they are selling it. Well, they're not selling the equipment. They're selling these agreements, these power purchase agreements, which they call a virtual power plant power purchase agreement, which is way too many P's. So they shorten it to VPA, world's first VPA. And so Blake Richetta (13:04.306)They're providing the financing, they're doing the installation, they own the assets and they provide this agreement with the homeowner regarding these assets. And then as far as what the homeowner is paying for with Sol-Rite, they're paying a monthly fee for a fixed amount of solar production from the solar array on the roof, which is either coincidentally when it's produced, also consumed in the home, or it's time shifted and harnessed in my battery and then harmonized with the load later in the day or Blake Richetta (13:33.974)If it is above the solar production that the homeowner purchased, then that solar can actually be activated within the Ricat market after it's been harnessed in the battery. anyway, so to go back to your basic question. So what's happening here is the customer is signing up for an agreement with Solrite. Solrite is paying for the installation and the equipment of solar and battery in their home. Unprecedented amount of batteries, 40 kilowatt hours average of energy reservoir for Blake Richetta (14:02.082)backup power, is way, way, way higher than the Texan average and a decent size solar array. The customer pays monthly for the solar production and they get all the backup power effectively for free. And so this is really cool. It's a really neat option. And I'll finish with this. The rate that the customer is paying for the solar production from the Solar Right Solar Array is basically around Blake Richetta (14:30.67)retail market rate or even a little lower. And why that's substantial is that most of the solar PPAs in Texas today, the rate that you pay for solar production is actually quite a bit higher. So you're seeing 19 cents, 20 cents, 21 cents for PPAs. Doug Lewin (14:46.99)Are you talking about like for residential customer? It's 19 cents. Okay. Okay. Right. Cause as I saying, the commercial market, we're looking at like $40, $50 a megawatt hour would to be four or five cents, but for customers, it's much higher for, for residential customers. No, no, no. front of the meter, utility scale. Huge distinction. Just wanted to make sure we were clear on that. Blake Richetta (15:00.598)You mean in front of the no- Blake Richetta (15:03.753)Right. Blake Richetta (15:08.522)not correct to say four cents. Right. Not four cents for commercial behind the meter, brother. But yeah, for in front of the meter solar farm utility scale, you're obviously you would see a 45 cents for commercial behind the meter. I don't know the exact number quite a bit higher. Residential behind the meter would be the highest. Right. So 19 or 20 cents. mean, anyway, so if commercial residential Texans paying whatever 13, 14, 15 cents or something for their electricity. Doug Lewin (15:24.664)Yes. Blake Richetta (15:37.058)for sole right to charge 12 is really good. mean, it's just below the, and it's way, way, way below the other residential PPA competitors, if you will. So the customer is signing an agreement that they're going to allow all this stuff to be put in their house. They're going to pay this amount and they're going to use a retail electric provider that supports the virtual power plant. If they don't want to use a retail electric provider that supports the VPP sometime in the future, they can completely Blake Richetta (16:06.946)go away from it. But what happens then is there's a new fee that Solrite has to charge them because they're no longer able. Solrite's not able to monetize the battery anymore. Doug Lewin (16:16.194)So if they were to leave, there is like sort of like an exit fee or something like that. But as long as they stay with them, that 12 cents is guaranteed over the 25 years. Wow. Okay. So that's, mean, that's, Blake Richetta (16:26.99)Oh, Blake Richetta (16:27.25)by the way, there's a little tiny escalator, it's like, gosh, you have to ask for reading. It's like 2 % or 1.5%. Doug Lewin (16:33.804)No, no, that's fine. I will interview him at some point and we can find more. And even before we put this out, Blake, we can get to Regan and just say, give us the information. We'll post it on the show notes. So people have all the, know, obviously anything we say here, here's where like I'm the son of a lawyer. Read the terms and conditions that we'll post. But I want people to have as much specific information, but also kind of this general understanding of what's the size and shape of the offer. So that's what we're trying to do here for the particulars. can read the T's and C's. So. Doug Lewin (17:03.062)I would imagine the solar component is going to vary house to house and solar is very valuable, but really like the secret sauce here is the batteries. And I'm talking to you with Sonin, so like this is kind of teeing this up for you, but you talked a minute ago about like the shifting factor there, right? You can actually store up that solar. So that's where when you talk about like 19 cents, right? In the middle of the day in Texas, Doug Lewin (17:29.848)We're recording on a very hot summer day. Peak's going to be somewhere around 80 gigawatts. The price is going to be like two or three cents on the wholesale markets. It's very hard to make that work, but if you can shift, if you can store up that solar power and then deploy it back to the grid in a battery, sometimes even at the net peak when the sun is down and demand's still high, sometimes we're still in a four or five cents. But some days in Texas, know, cap is $5,000 a megawatt hour. There's ancillary service market. So there's lots of different ways. Doug Lewin (17:59.832)kind of monetize that. You said there's a 40 kWh battery. You're actually doing two batteries that are 4.8 kW, roughly 5 kW, 20 kWh each. So you're putting a 10 kW, 40 kWh system on every house, pretty much standard. Blake Richetta (18:16.81)And 9.6 kilowatts, 40 kilowatt hours. Yeah. And that's exactly right. And I think the fundamental here is that solar by itself, especially at the end of the distribution system adjacent to the customer's load behind the meter can be good, as you said, but it's also intermittent and relatively can be volatile, variable energy generation. And it depends on what market you look at to see the extent of that. But certainly in the German market and the California market, we've seen it pretty Blake Richetta (18:47.79)And, it's been very substantial what renewable energy has done, both positive but also negative to managing the energy system. So this idea of, yeah, if I'm just pumping solar into the grid at noon because it's sunny, the Texas energy system will punish me for that unless I have this solar buyback program with a retail electric provider that gives me this high rate. The problem with that is the retail electric provider is somehow Blake Richetta (19:16.034)subsidizing this whole thing because like you just said if the retail electric provider is buying electricity from you just because you're Pumping solar into the grid because it's sunny and they're buying it from you at 14 cents a kilowatt hour but the the market rate at that time is before sense Even if they're balancing their book it makes no sense to them But they do it anyway because they're trying to get a customer and that's all fine and good But eventually that hits a wall no different than that meter in Dinnie, California Doug Lewin (19:43.01)I Doug Lewin (19:43.1)mean, honestly, Blake, we've already hit that wall. Like really nobody's offering net metering because of what you just described. Like it just doesn't make sense financially. So we just don't see. And this is one of my like biggest critiques with like people that are pushing some of these like firming proposals and stuff like that. It's like what you just described, the market is sending the signal for firming. The signal from the market is quite clear. Like if you don't have batteries, the economics of solar just don't work that well. So put a battery with it. Blake Richetta (20:08.312)Perfectly said. So the idea exactly how you said is basically, look, what we want to do is harness that solar. We want to harmonize it with grid operation. And of course, what that means is we're going to stop it from flowing into the grid unfettered. That's step one. And by the way, that goes to a little bit more of a modern European look to the design, but Americanizing it. So in the European Union, we see way bigger batteries and smaller solar arrays now. And now we're seeing that in California as well. Doug Lewin (20:33.227)Interesting. Blake Richetta (20:36.334)And it's X is what you see with solar, it's the same thing. So instead of crazy 120 % offset kind of thing that you see for years and years in America. Instead, it's no, it's a 70 % offset and then a huge battery. And this is very logical because then I can definitely catch all the excess solar and drink it in the battery and hold it and then and bottle it up and then use it. And to your point, I might use it against a load later in the day or I might inject into the grid. And you know what? If there's not enough solar. Blake Richetta (21:06.52)to really perfect that load shape. Unlike old school solar where there was this kind of weird myth that, you just pump all the solar to the grid. Then later in the day, you pull the same solar back out. of course, it's a physics perspective. That's not how that works from an electrons perspective. at any rate, so what we're doing is saying, of course, no, you're either going to harness that solar and offset your load later. If it makes more sense, the Texas energy system based on price signals, you're going to inject it. You might withdraw from the grid later, but hey, Blake Richetta (21:36.128)If solar's not working that well for a day because it's cloudy, you might need to withdraw from the grid during a super off peak period and use those electrons against load. And this is a very, very smart thing for the Texas energy system, but something that people don't do generally in the United States for many reasons, but now we will be doing. yeah, that's the fundamental that just to compliment what you said. Doug Lewin (22:02.284)I want to talk about another component of this. So there's obviously the market value, which we could talk about for a lot longer, but I want to talk a little bit about the resilience value. think I heard you say that like that doesn't have as big a value maybe in Germany or Europe. Maybe it's just cause there's like not hurricanes there and stuff like that. But like, I'm curious what you're seeing in Texas in the market. And we'll put a link in the show notes. Texas monthly had an article from one of the writers, I it was Michael Hardy, who Doug Lewin (22:31.81)had bought a generator in his first home in Houston, and he described the experience of getting a generator. And I was sort of reading that and cringing a little bit because I'm like, really should have gotten solar storage because the generator, you're probably not going to use it day in, day out. Like you're going to use it only in an emergency. With solar and storage, you've got it for the emergency, but you're using it day in, day out to lower the cost of power and to... Doug Lewin (22:57.73)help the grid, if that's something you care about. And this is where I really think like, regardless of ideology, temperament, like there is something in this for everybody. If you care about the grid, it's great for the grid. You don't care about the grid, you only care about your house. It's great for that too. Like it really, you anyway, so let's talk a little bit about the resilience factor. And if you're seeing that in some of the discussions, them, the kitchen table discussions that you and your company are having with customers in Texas. Blake Richetta (23:28.108)Yeah, I two points because you brought up two great points. One resiliency and then real quick before, you're right. What the customer connects to. So the beautiful thing about the Solrite model is that you're not coming out of pocket $75,000 for an installation of solar and batteries. And so it's a very different mental process where you hear, Hey, we're not going to charge anything upfront. And it's just a monthly fee that is for the kilowatt hours produced from the solar and then you get the backup power for free. And you're right. People think, well, that's really nice financially. Blake Richetta (23:57.806)It's also good backup power wise. And then what you do is you, if you're a salesperson, you authentically lay around the other cool parts. say, look, this is actually solar. That's got a much bigger purpose than just regular solar. Can you believe you get a little power plant in your house? And it's actually doing the same kind of thing as a power plant. And if you do care about fighting climate change, this is a better way to do it. And you might say, homeowners are already going to check out at that point. Actually the research that we have shows that's not the case. Blake Richetta (24:24.814)Most people that we've interviewed a bunch of techs at Homework, which was fun. They kind of get into it when they know they're getting these other key benefits as a foundations. They know they're getting low cost solar and backup power. And when you add on what you're doing in a greater level, people think that's neat. Oh, that's cool. That's really neat. They had to brag into their customer. No, sorry, the customers, their friends, something like this. So anyway, we can go back to that stuff later. But as far as the resiliency thing, I Doug Lewin (24:51.736)love Doug Lewin (24:51.936)that, by the way, and we should dive further into that. But yeah, go on with resiliency. We'll come back to customers. It's really cool. Yeah. Blake Richetta (24:57.47)It's Blake Richetta (24:57.68)very different than spending 75,000 something. And you're like, I'm not spending 75,000 to save Texas's energy grid. What does that even mean? Right. But it's different when you don't pay it. So resiliency. Yeah. This is really interesting, Doug, because I came from Tesla over to Sonnen and we were in awe, of course, of this idea of swarm dispatching for locational value, substation value, non-bars alternative, all these cool things that we were doing at Sonnen was doing in Germany. And then I look closer to the products and like, ooh. Blake Richetta (25:28.494)Over 98 % of the batteries in Germany didn't even have backup power at all. There's not even a grid forming inverter. I'm like, No, batteries in Germany. Batteries in Germany. Doug Lewin (25:35.47)98 % of the solar Doug Lewin (25:40.814)98 % of the batteries in Germany didn't have backup. Blake Richetta (25:44.802)Yeah, can't do back up at all. Okay. Doug Lewin (25:47.37)they just can't provide it. they were literally just for the homeowner at their house and couldn't do anything for the grid. Blake Richetta (25:54.274)Nope, not at all. No backup power. If the power went out, the solar and the battery would just turn off, which is how most... No backup power. Doug Lewin (26:04.49)There wasn't like an IEEE 1547 or something like it wasn't configured to island. So it would just shut down when the grid went down. Blake Richetta (26:12.942)That's, well, that's part of it. 1547 would be interesting, but really the fundamentals are, let's start with the fundamental, which is, do you care about having backup power or not? If the answer is no, the way I design an inverter is as grid following only and not grid form. So when you go into nano grid mode, you have to grid form and 1547 aside, I can do nano grid without 1547, but I could just be a grid forming inverter. But if I'm a grid following inverter and I cannot change the grid forming, which by the way is a much cheaper way to build an inverter. So you save a lot of money. Doug Lewin (26:25.73)I see. Blake Richetta (26:42.23)a lot of money by building an inverter that doesn't grid form and doesn't form a nano grid. So first of all, there's this huge cost in all American energy storage systems and most Americans don't even know could be taken out completely if they were in Europe. And you might say, why does anybody want a battery if it doesn't do backup power? Well, because the virtual power plant was the whole reason. The self-consumption first, the harnessing the solar and using it properly because in Germany, basically, if you're injecting solar, say this Blake Richetta (27:10.23)legislation called the Anoyabata and the Ganges, which is like their version of net metering. And effectively by about 2015, if you're injecting solar into the grid, most of Germany, you're not getting anything. You can get far. So the battery market became an essential and very important part of the business, but it wasn't about backup power. was about, my gosh, I need a battery or my solar's useless. And it's going to be great. I'll get, you know, finance by monetization. Blake Richetta (27:40.334)And that only changed a little bit when the Russians invaded Ukraine. And then you saw some Germans wanted to have some backup power because they thought there could be a war. then that kind of went away now too. So it up to like 10 % of the market. Now it's stacked down to two or 3%. So why I tell you all this is that Sonin's this awesome leader in virtual power plant. We're so excited to Americanize that. But we had no experience in backup power, barely at all. Blake Richetta (28:07.466)American energy storage companies are the polar opposite. They're all backup power. That's the only thing they think they're supposed to do. And they have no idea how to do a genuine virtual power plant. And so we're very fortunate. There were years ahead still of even the closest American company on this VPP thing, but we definitely had to play catch up on the backup power thing. So to your point, do people care about backup power in America? And in Texas, the answer is, yeah. And we had to build Blake Richetta (28:37.506)grid forming inverters and backup power capable products. And also German loads are much smaller than American. So you had to make a more robust and beefy. So long story long, we have achieved that backup power need for Americans to feel good about having backup power and the VPP. And that is the Sonin USA unique solution. Doug Lewin (29:03.214)Okay, love this. All right, and thank you for indulging my dumb questions, but I feel like that sometimes the dumb questions are the best ones. So I needed to understand what you were saying there. It's actually incredibly important, right? Because this is a big issue at ERCOT right now. And I'm sure, I hope that what he requisited, Dan Woodford and the whole crew at ERCOT operations, Pablo Vegas, everybody over there listens to this because this is a big issue. There are NPRRs right now around grid following versus grid forming. Doug Lewin (29:31.724)You're you're saying is on the distributed side, at least through your model, and I'd imagine most of the companies that are working on distributed, for the reason you just said, because resilience is so important to customers, are going to be doing grid forming. That means we could be getting a whole lot of assets distributed all around the grid that they can potentially, they can potentially use. I'm putting that in air quotes for people just listening, because at the end of the day, and this is again, the beauty of the competitive market, Doug Lewin (29:59.358)Unlike in a place where you have a vertically integrated utility that's gonna control that, unlike in a place where it's going through the grid operator to do it, it's actually going through the retail electric provider and their partners, close to the customer, making sure it's a good customer experience. Because if it's not a good customer experience, you got nothing, right? Like your business is dead in the water. But still, these grid forming assets all over the grid to help deal with problems. Doug Lewin (30:25.76)like what happened in Spain in April. If you had a lot of grid forming inverter batteries on the grid, that would have made a big difference here. We're about to have them. Okay. Yeah. Yeah. Anything else you want to say about that or we can... Blake Richetta (30:38.936)No, Blake Richetta (30:39.176)I didn't mean to catch up. Look, our fleet in Spain, like almost all batteries in Spain don't do backup power, so that wasn't very helpful. But if you had backup power, then that would have been great. Anyway, I think the American solution of both VPP, smart battery that works with the grid and a battery that can actually provide backup power is a great optimization. Doug Lewin (30:59.896)So you get the best of both worlds. got that resiliency benefit for the home. Also, because it's grid forming, it's actually, its benefit to the grid is much, much greater as we were just describing. Blake Richetta (31:11.054)Yeah, I mean, it's the biggest benefit for the grid forming local device is that you're able to have backup power for a building. You're able to basically close off a little energy system and become your own little grid. And that's the biggest value that's different. But yeah, as far as the virtual PowerPoint grid services, it adds a little bit, but not a ton. It could in the future add more. But yeah, so anyway, the point is that Americans who are always benchmarking Generac and Blake Richetta (31:40.428)backup generators can get a battery that actually does this whole virtual power plant magic and also does the backup power. that's how to know. Doug Lewin (31:50.03)It's pretty incredible. It's pretty amazing. So let's talk. There's a couple different things I want to go into. I want to go to the sort of transmission system operator side in the ADR task force. And then I want to come back to the distribution side and do a little compare and contrast because Europe has DSOs, distribution system operators. We don't have those in America. I want to get into all that. let's... Someday maybe. We were just talking about grid forming and the potentials. So the biggest benefit you said is the... Doug Lewin (32:18.86)backup power on site and that's a huge benefit. But isn't that where the ADR pilot in Texas, the aggregated distributed energy resource pilot is heading that these distributed resources actually can provide benefit to the grid in the form of ancillary services? Blake Richetta (32:35.726)Yeah, and that has nothing to do with the grid forming inverter So it's just a little bit different on the nomenclature so you can do I mean in Germany we do nine grid services is the most advanced residential battery-based VPP on the planet by far and most of those batteries are not grid form, so that's now as it pertains to ADR and what Adder is doing and the opportunity it's providing I think it's a terrific program I think people like Arushi Sharma Frank are really Doug Lewin (32:47.51)Got it. Blake Richetta (33:04.534)were terrific in the way that they drove this and all the many people in Texas that drove this. But I I have a relationship with her and I know she's, I feel like she's just brilliant. And I think Adder is ADER is really a good overall program. And you're right. It's trying to drive towards a deeper value stack for batteries. And I think the way that Solrite has launched this, which is kind of neat, is it takes the fundamental first of shape load perfectly. And Blake Richetta (33:34.188)by doing so, and by the way, I'll add to that, also inject energy optimally. Just by doing that, you increase the profitability of the retail electric provider quite a bit. And if you have a fundamental concept that says, the profitability of the retail electric provider went from X to Y because of the battery, well, you don't need any, because Texas is so well-built in the deregulated structure, you actually don't, Blake Richetta (34:03.982)don't say this too passionately, but you don't need anything else. You don't even need ADR to be able to say, okay, well, what was the extraordinary profit created by this daily cycle? Well, that extraordinary profit basically needs to be split with the owner of the battery, in this case, Solrite. And what that does is it allows Solrite to spend money on all this stuff. They're taking a risk, a big risk. But if they believe in it and they really believe in the value, Blake Richetta (34:31.575)They can raise billions like they've already raised over a billion for the consumers of Texas to have all this equipment. And they're betting on the fact that the extraordinary value brought by the battery when they split the profit with the retail electric provider will make it make sense because what they're getting from the homeowner doesn't do it. So basically the capstone it the magic here is that without even having ADR, you have this powerful model that just lies on the foundation of our cot system. Blake Richetta (35:02.21)And then if you add on, if you're going to add on non-spinning reserves and frequency response, woo, that's just terrific. I'd be very excited at all the different grid services that we could add on. And a much more, let's call it, even if you take a look at locational value and you said, Hey, with 30,000 batteries in this area of west of the DFW area or whatever, making that up as far as a load pocket, that actually has X amount of value, both Blake Richetta (35:30.22)mitigating, peaking power plants and mitigating infrastructure. Wow. That would be a lot more monetization. I think that's the direction ADR would go and where Texas in general is going. So capstone is that the fundamental statement for me or overall statement is by using the basics, we make this work and it's very scalable. You do need a pioneering financier that bets on all this, which is very hard to find. Nobody wants to bet on this. Blake Richetta (35:59.564)And then the final piece is at a retail electric provider that wants to do it. And then the final piece is that on top of that, we can add all these other things to actually get the full value of the battery. Doug Lewin (36:11.65)Yeah, so that ends up being kind of gravy on the potatoes, ricing on the cake. The cake itself is the market fundamentals of sort of shifting that power around and injecting the power into the grid when it's needed. Then you can potentially monetize ancillary services for increased revenue and things like that. So there's still though, the question of the distribution grid. So this has got to still be a problem I'd imagine, right? Because so... Doug Lewin (36:40.226)distribution costs have gone up quite a bit all over the place, but including in Texas, we're up to like five or six cents KWH on the distribution grid, I think you correct me if I'm wrong, but it's like five, six, and at least an encore and center point, I'm not exactly sure what it is in AEP or some of the others, but probably right about there. And when you're charging that battery, well, I guess you're charging it from the solar. So I guess you can avoid that. Doug Lewin (37:02.722)five to six, but when were talking about earlier, maybe you're pulling from the grid at certain times, you're paying five. What I want to get to here, Blake, you can answer any part of this you want, but what I want to get to here is that's great that the main part of the revenue can be made back from the bulk market, from what's essentially the transmission system operator market, from the ERCOT market. But these are distributed resources that have massive value to the distribution grid, and we don't monetize that value yet. Doug Lewin (37:30.976)And my view of the world, that will hold back the scalability of these DERs unless they're able to bring that value. doesn't mean they won't scale though. They will scale. I do believe, especially with the dropping prices of batteries and we should talk about that too, that these technologies will scale and we'll start to see them all over the place, but it'll happen much faster. Customers will get that benefit quicker if we can get to some value given to these resources on the distribution grid too, right? Blake Richetta (38:01.75)You're exactly right. So to complement what you're saying and kind of tell you where we're at now and why it works, but where we should go is what you're saying. So where we're at now. Yeah. When you withdraw from the grid, you pay the distribution fee. Sure. But you would pay the same distribution fee at 6 PM versus two in the morning. So now let's say that I'm withdrawing from the grid at two in the morning and the total all in price of the kilowatt hours. I don't know. Pick the number. I'm not sure. Let's call it. Doug Lewin (38:27.288)Well, at two in the morning or at noon, frankly, it's probably eight cents because you're paying like two cents in wholesale power and six cents in the distribution cost. But that distribution cost, as you said, is the same whether there's scarcity or not. And that's kind of screwed up. Blake Richetta (38:41.474)No, Blake Richetta (38:41.654)you're right. It's not cool, but at least what it does today, which is not ideal, but it creates. right. Fine. Is it. Aventages for the retail electric provider to withdraw energy from the grid at two in the morning and time shifted potentially against six PM. So the retail electric provider is not delivering that same kilowatt hour at six PM, which of course, including the distribution charges, you also have higher ERCOT energy charges at that point, potentially. So when you think about that spread, okay. Blake Richetta (39:11.49)That's still an interesting monetization mechanism, especially when what you're saying is as long as I can increase the profitability of the retail electric provider and they split it with the owner of the battery, then any of these spreads are a win. Now to support your point, is it nearly as much as there should be? And then I say spread, but let's just say compensation for the battery and the value of the battery. No, not at all. And you're right. Blake Richetta (39:39.426)biggest value we've seen, at least scientifically and economically in Europe for the battery swarms and battery networks that are at the end of the distribution system and adjacent to load is really more on distribution system flexibility and on infrastructure and on infrastructure investments being deferred and on just the balancing of that system. There's a lot of value to that and there's a lot of real monetization that should be seen for that. And you're right. Blake Richetta (40:09.28)in Texas that's still a work in progress. But I think the reason why the right is a great first step is instead of saying, we need all this figured out by Euricot now before anybody invests a billion dollars. Instead, sole right said, no, we're going to raise a billion dollars and invest it in Texas's consumers based on these basic principles. Blake Richetta (40:38.326)of the daily cycle and of a load shape and to inject wind versus not to inject. And even if we're not getting paid nearly and all we're doing splitting the extraordinary profit with the retail electric provider. And even if that's not nearly the real energy system value of the battery, we're still going to do it. Why? Because, well, it works for the first several years. The IRR is okay. And then we bet on the future of what you're talking about, all the things you're talking about. Blake Richetta (41:07.566)And that should in theory, to your point, increase the value stack of the battery and further increase the monetization to be more fair. But fundamentally, we can't wait for all that to have investors. that's the problem. In my opinion, my friend, is that most investors and most competitors and most players in the industry are basically like, well, it does a pencil. Doug Lewin (41:29.67)Their attitude is we'll wait till it's perfect and it's obvious, but when it's perfect and it's obvious, then all the money flows into that space and you lose the advantage of being a first mover. So I just want to give an example of this for the listener. So let's think about a home that's built in the DFW area. It's a new home. So it's got, it's pretty energy efficient. We've got a decent building code in Texas, but you know, on a hot summer day, it's probably going to use what? 5kW give or take. Is that a decent number? that? Doug Lewin (41:58.99)Two I, two L. Peak power on a hot day, 105 degrees in Dallas. Blake Richetta (41:59.596)Power perspective for peak power. Blake Richetta (42:04.586)How big's the house? Doug Lewin (42:06.735)I mean, in Dallas, Fort Worth, 3,000 square feet would be small in Dallas, Fort Worth, right? Blake Richetta (42:11.18)No, Blake Richetta (42:12.012)the same big houses. I would go more towards six kilowatts or seven, but that's that's just off the of my head. Doug Lewin (42:18.744)So six or seven. So let's say then they just bought a F-150 Lightning or whatever. They got an EV, right? And they got a level two charger. So now what are you looking at? Another five or six on top of that? Blake Richetta (42:34.25)Yeah, Blake Richetta (42:34.7)of course. You have, if you're doing a level two charger of the electric car, then you're doubling that pretty easily. Maybe a little more like my level two charger at home is it's pushing up towards nine kilowatts. Doug Lewin (42:45.72)Okay. Doug Lewin (42:46.0)So now if you're a distribution utility, you could make the case to your regulator, I have to build enough distribution infrastructure to have 15 KW instantaneous demand for every house in that new subdivision. Blake Richetta (43:00.808)or or Doug Lewin (43:02.446)Or, Doug Lewin (43:02.726)would you like to finish this statement? Looks like you want to finish the... I if it's a market. don't if it's an incentive. It's something I'm trying to figure out. One of the things I love about this space is not all the answers are ready-made off the shelf, but we have a competitive market in Texas. We have a competitive and conservative, in the classic sense, ethos of competitive forces. Is there some way to say... Blake Richetta (43:06.264)thought. Feel free. No, please. Doug Lewin (43:31.832)Hey, load shape really matters and building a system that is 15 kW for every single house would cost maybe not three times as much as a five kW for every house, but like at least 50 % more, twice as much, something like that. So let's have some kind of market signal that these new homes are all built with solar and storage. So you get, as you described it earlier, like a perfect load shape. That doesn't mean you have to put a 15 kW solar. Doug Lewin (43:59.542)array on it. might be a small five or six with the battery, but now you're keeping it at four or five, maybe even two or three KW at its peak because you're just smoothing that out using the batteries. again, that distribution value, which I would argue is extreme. There's some studies on this in Texas, Texas, and the Energy Business Alliance a few years ago before the cost of power was on the distribution side was going up as much as it has the last five years. Doug Lewin (44:26.84)quantified it as like a half a billion or so benefit every year for what they call non-wires alternatives. I think it's in the many, many billions of dollars a year at this point. But at this point, that's all on the company. It's all investor risk. It's all on the customer to fund. is no market signal on the distribution side to say that that smoothing and bringing from 15 KW down to five is valuable. Blake Richetta (44:53.33)That's very true. The locational value specifically added on to what you're saying exponentially increases this argument. So if there is a very congested circuit or node or substation load pocket that we're able to effectively smooth and balance, well, the value could be enormous. And we, of course, we see some of this quite a bit in European Union. So in Germany, we balance solar plus electric vehicle plus load plus grid signals and they're Blake Richetta (45:23.278)They have, it's a law in Germany that everybody that wants to can opt into a price structure that changes every 15 minutes. So it's very much like a very real, real time kind of, it's not really real time, but you know, it's, ish, very intense time of use. call it. Doug Lewin (45:39.371)Is there a cap on that? What is the highest it can go? Do you know? Blake Richetta (45:44.008)no, I don't know what's going on right now as far as the pricing. But yeah, the pricing is generally pretty high. It used to be really, really high when everything was super unbalanced. And now it's come down a bit. Then the war made it go back up again and now it's back down again. as they figured out a good alternate sources for gas, but maybe another topic for sure. But as far as the distribution system value goes, yeah, just being able to say Blake Richetta (46:11.64)Do not charge your electric car at peak period. Here's a really nice incentive for that. Number two, here's a really nice monetization incentive to make sure you time shift excess solar to offset load during peak period, at least a reasonable amount. These are two pretty basic functions. They're not the most difficult to me. We're doing... Doug Lewin (46:16.428)NetPeak Blake Richetta (46:36.92)Fast frequency response, regulation up, two second response time, which is required in Germany, it's bananas, and really aggressive reactive power, grid services, voltage support. This stuff I'm talking about is like the meat and potatoes, a simple VPP. And to your point, none of that's really valuable in America yet. Super valuable. In other words, what you're saying is entirely true in the sense that the real value of that Blake Richetta (47:05.098)load pocket being decongested and being balanced properly in the distribution system. It doesn't really have any mechanism to show the value. I guess the only thing is, like I said, at least the energy prices can be different at different times. And so we can try to use that, but distribution incentives are not there. So hopefully this is what happens in the future. We actually have a code name to the project. We call it Dragonfly, which is kind of like Dragonfly is like this new beginning symbolizes new beginning in some Blake Richetta (47:34.552)cultures and whatnot and this new level. And so we're trying to do whatever we can at Sonin to influence this full grid services value stack happening in America, which would really be beautiful. Yeah. Doug Lewin (47:48.426)So when you say, I just want to clarify something when you say that you're doing all this like reactive power, voltage support, all that kind of stuff in Germany and you say that's not valuable in the U.S. Like you can't do that as a distributed resource in Texas right now. Blake Richetta (48:01.033)It's hard to figure out how to actually get in and get paid for that. It's really rough. don't know. Frequency response, I don't even think is allowed at all still. You could verify this, for a behind the meter battery, residential behind the meter battery, and some of the other ones maybe. But man, it is really, really hard. And ADR, I think, is the vehicle to try. Doug Lewin (48:25.91)Right. I was just going to say, I think that's where this is all happening. But yeah, like fast frequency response in Texas, I know, because I looked into this after Spain, is 15 cycles, 250 milliseconds. So that, I could imagine, could be very hard on the distribution side just because of the communications and all that. But there's other parts of responsive reserve that are not milliseconds. They might be two seconds or four seconds or something like that. those might be possible. Blake Richetta (48:52.148)Two seconds is very possible for VPP. Doug Lewin (48:54.21)The other thing I wanted to ask, I'm not clear on, and if you're not clear on it, it's fine. We could always do this in a future episode. I maybe need to get Mr. George on of Solright and ask him some of these questions, but you were talking about the ability to monetize in different locations or different times, but is there not, for locations we have this, we do have a nodal market in Urquhart, but load is settled zonally. Doug Lewin (49:20.312)So are you actually able to achieve those nodal prices or no, because you're considered low? I'm confused by that. Do you know? Blake Richetta (49:26.75)Yeah, I don't know exactly either because this is pretty new. That being said, put it this way, whether we can or not, it's still not to your point, the value stack of taking a locational value of a really tough part of the grid, which is where we shine, know, it's where to find the mirror and the distribution to your point. It's really where we shine in the European Union, for instance. my gosh. This part of this area is in trouble. Doug Lewin (49:29.176)Okay, that's fine. Blake Richetta (49:56.514)Well, we can flex that thing all day long and really provide a ton of value. And that's the stuff that is really not, well, at least that I know of is really not being compensated for. There's no mechanism for it. But yeah, if the nodal price and zone price, yeah, I'm sure. Hopefully we can do all that stuff. We'll be doing a lot of it soon. I'm Doug Lewin (50:17.76)Yeah, so basically what Doug Lewin (50:19.111)you're saying is like on the front end, like in the early days here, the time value, very clearly that signal is there. But when you talk about a grid and where the real values are, it's time and location. And so like that's the kind of the next frontier is like, how do you deal with the locational value? Blake Richetta (50:35.554)Yeah, because what we would do is say, let's go deploy 5,000 batteries exactly here. In Utah. Yeah. Yeah, we did it here Utah. Here I'm in Utah. We have this enormous battery cluster because of the substation there. And there's great research that shows how much value we brought. Doug Lewin (50:40.8)in this place where it's needed here. Doug Lewin (50:51.874)So two things I want to say on that. Number one, this is a conversation that is very actively going on in the state of Texas is what kind of, it needs to be more active, but it's at least begun. What kind of distribution system planning do we have? Right? The distribution system planning happens, but it generally happens in a black box at the utility. Everybody kind of learns about it a little bit in the rate case, but it's kind of like done at that point. And like there's, there's very little. Doug Lewin (51:19.874)sort of interaction with different market participants that may have solutions that cost less. For a long time, I think utilities really resisted that sort of thing because if it led to less spending on the distribution grid, that of course has less profits to them. In today's world, with all the data centers coming, the industrial electrification, oil and gas electrification, process electrification, transportation electrification, like their opportunities for investment are so many. Doug Lewin (51:48.002)that if you reduce the opportunity for investment on one strained part of the grid, they're going to be just fine. Thank you very much. So I think we're in a new context where maybe that distribution system planning involving DER providers, that might be a conversation that is ripe at this point. Blake Richetta (52:06.222)I agree with you. And I think this is an interesting example to pull in the vertically integrated market, even though it's such a different model. So again, a vertical integrated market could either be really, really bad, really, good or in the middle. Who knows? It's based on the vertically integrated utility. But in the case of Rocky Mountain Power, because they're so, so, so pioneering in this space, they've shown just how much you can do quickly in this area. So as it pertains to Blake Richetta (52:33.578)Okay, let's look at locational value. Let's look at load pockets. Let's look at different grid services. Let's look at what the different grid services actually provide to the grid in this area. Let's make sure we're trying to get projects done in those areas. And as far as planning goes, yeah, there's no reason why there couldn't be a ton of support from behind the meter assets to Blake Richetta (53:03.49)help with a very long-term strategic plan on these different areas of the grid. And my gosh, here's the thing. It's a Rocky Mountain Power and I can get a Rocky Mountain Power executive on here and tell you about it. That's better for them. So the whole idea that they have to, you know, rate base everything, it's all based on their investments and their capital investments, that's how I make my, you're right, that's true, but it's much more complex than that. You know, if you're a utility executive and I'll use vertical linear utilities for a minute, just because it's a good example, it's easier. Blake Richetta (53:30.414)If you're a Rocky Mountain Park executive who came on your show and explained this as well, yeah, can't just make a bunch of silly investments. If we make good investments that really take away a bunch of silly investments and we show that and the commission sees it and the people see it and rates stay really reasonable, but we also have our profits still what it's supposed to be. This is better for the energy system long term. So it takes a much bigger, how do I say this? Blake Richetta (53:59.266)much bigger perspective from a utility to see this way. But I believe, cause I've seen it at Rocky Mountain Power, that that exists for some utilities. And so if they see this as, this is going to save a lot of money for the utility. We're still making investments, but all by lower cost, getting a lot more out of it. This is better. Let's do this. And that's what I think means. It means a lot for utilities to make that leap. Blake Richetta (54:26.67)But once they do, all of a sudden, virtual power plant becomes very attractive. Doug Lewin (54:30.944)And look, they have a lot of motivations, like clearly, depending on who you're talking to at the company, right? The higher level you go, the higher that priority is going to be. And that's not, I don't say that to be damning. It's like, that's their job. They're supposed to make money for their shareholders. get it. They also like live in their communities and want to see like real resiliency outcomes. Cause guess who gets yelled at when the power isn't flowing, right? It's they, they go to their kids soccer games and people don't like them very much. So there are these like social pressures. There's it is more complicated that we give it credit for. Doug Lewin (55:00.682)I do think there's huge opportunity. hope my friends at Centerpoint and Oncord AEP listen to this because distribution system planning, the DR providers can provide a whole lot of resiliency benefit and just distribution system benefit. other thing though, Blake, I think it's really important. Number one, we have vertically integrated utilities that are outside of, caught, right? So there's four of them in Texas, including Southwest Power, Excel, Swepco, AEP. Doug Lewin (55:28.938)Entergy in east of Houston. And then we also vertically integrated within ERCOT as well. And the value proposition there. I'm talking of Austin Energy, Virdnallis Electric Co-op, Bandera Co-op has actually really gone down this road of DERs and VPPs. Waterloo Bay Valley Electric Co-op has made a big move into that. San Antonio, CPS, these are all vertically integrated utilities. So they already have that same kind of- Doug Lewin (55:56.992)incentive that you're describing, blocking amount of power to look at their whole system. But there's actually even a bigger incentive because the way transmission costs are allocated, they basically appear as one big customer. So if they get that perfect load shape, as you described it, for the residential customers, they use a utility benefit and every customer in their service, Terry benefits from every house that has this. So I would love to see those munis and co-ops do a whole lot more in this space. Blake Richetta (56:21.998)Well, yeah, and what you exactly what you saw from a reputational perspective, even then, hopefully that's what they see. Rocky Mountain Power has these really, you look it up, really, really, really positive overall reputation in Utah with consumers. I can't say that's the same even where I live in San Diego with the utilities. So first of all, the reputational value makes a lot of sense to try to have a positive reputation. And then to your point, wait a minute. Am I also getting other financial value from a system level? And by the way. Blake Richetta (56:51.85)is giving, empowering people that individual home backup power also creating system level resiliency and all these different failure points as opposed to one big failure point in the unidirectional grid that actually creates backup power for everyone in society in some ways, you know, because we were stopping the grid from going down in the first place if I have enough batteries and all of these things end up being values that can be considered by any forward thinking utility executive. And so, yeah, I think it's a great. Blake Richetta (57:21.624)thing and I hope these Texas utilities go for Doug Lewin (57:25.09)Last question before I ask you, the general question of if there's anything I should have asked you that I didn't. I do though want to ask you about the federal situation. We're recording on June 23rd, so by the time you hear this, dear listener, things might have changed drastically, but Blake, I would be malpractice. If I didn't ask you, how is the federal situation impacting business? Obviously, I think in both the House and the Senate, it's a cliff, not any kind of a ramp for 25D, which is the home. Doug Lewin (57:54.612)residential solar credit. think batteries fared better, but I don't know if they did on the residential side or if they're treated differently. Tell me a little bit about the things you're thinking through and what you're worried about, what you're maybe hopeful. Blake Richetta (58:06.798)Yeah, good question. And I'm happy to say that we're actually meeting with staff from a certain senator today, which is great. And this is a GOP senator that's very much trying, I think, let's say, balance things out a bit. very forward thinking gentleman. And I guess I'll go back to my earlier statement of, regardless of your politics, the VPP tends to do well on, quote unquote, both sides of the aisle. And again, we have no... Blake Richetta (58:36.354)problems with the quote unquote left. They're always pretty pro VPP, but also on the conservative side, we do really well as soon as we're able to speak to people and explain what solar with a greater purpose, thoughtful solar, directed and managed solar versus unfettered, what it means. my dad, I was using my dad as an example, he's a really old school conservative. And he, until I told him about everything and then on the VPP side, he didn't have any interest in renewable energy. then his Blake Richetta (59:05.39)I could get behind that son. And I was like, he's a very old school conservative. And I'm like, good, if my dad likes this, then I know anybody can get behind it. So I say that because I think old school solar just being on the roof and pumping solar into the grid is not going to do well likely in either the House or the Senate's version of one big beautiful bill. Speculation, of course. What do I know? I'm just a guy in Blake Richetta (59:35.342)CEO of a battery company. think batteries will do better. And whether you think the whole thing is bad and should all go away, regardless of your politics and whether you think that investment tax credit was 25B or 48 doesn't matter. You think it's the greatest thing in the world or not, matter. What I can at least say is I think batteries are going to do better than solar by itself. I think this is going to push change even faster and harder. Blake Richetta (01:00:05.326)In some ways, like a parallel world to what we saw in California, which I'm sure you're very familiar with, but the California change followed the German change by about five to seven years. You know, in the German market today, if you buy a solar array by itself, it's completely ridiculous. Nobody would do that. I guess some people would do that, but very, few. So I'm hopeful that there is a path forward for batteries. think that is likely. And I don't say it just because I'm a Sonen guy. I cause I think it is really the right thing. Blake Richetta (01:00:35.242)And with that foundation, we hopefully as the battery industry can carry renewable energy along with us. Solar by itself, a solar array might not have any tax credits, but batteries might. And can you make an argument with that? And again, it probably sounds, man, he's a battery guy. He's too centered on this. No, this is really the truth. This is exactly what's happening right now. So just look at the Senate's version or batteries. Blake Richetta (01:01:05.398)are immune to a lot of what solar is being thrashed on. I think ultimately my perception is that you'll see, like we saw in the German market, when all of their incentives went away, there will be probably a massive transition in the industry. There'll be a lot of companies that are hurt by it, but then there'll be those who rise above and make it work. And I guess the last piece is the whole domestic content piece. Doug Lewin (01:01:34.028)Yes. Blake Richetta (01:01:34.894)You know, we've been pushing on that pretty hard since the Inflation Reduction Act was passed under the Biden administration. We've been very focused on it. done very, we feel we've done very well. We're going to continue to do better. So if you're talking about American jobs, American energy dominance, American batteries, which is really good for national security, I think, and resiliency and hardening of the grid. You know, I think we have a lot of good arguments and with us, we can bring solar. Doug Lewin (01:01:56.04)Absolutely. Blake Richetta (01:02:04.334)I think so I guess in conclusion, it's not going to be easy. might be really painful. I think batteries will be in a pretty good position, but I capstone with this. whole idea you've spent several minutes of the interview on, which we call Project Dragonfly, which is to actually get in the United States, the full value stack of the battery somehow in a market mechanism or to buy a lateral contract with a utility one or the other. That's really the ultimate because if we could do that, Blake Richetta (01:02:35.416)I don't know we need any tax credits at all. Solar War Batteries. Doug Lewin (01:02:38.818)But Doug Lewin (01:02:39.068)to be clear, to be clear, you don't have that full value stack yet. That tax credit matters a lot to like bridge that gap to a full market. I mean, that is the dream, right? That eventually you're really getting market values for market performance and that is driving everything. But you have to acknowledge you don't jump to the absolute. Like there's a period there while we're figuring out how to value these things. And that tax credit is very valuable to bridge that. Blake Richetta (01:03:06.434)You're exactly right. And it makes it so companies like Soilright can go get, can go raise these billions we need them to raise. It's harder when they can't have any tax investors involved at all. It's just raw investors that have nothing to do with tax appetite. It's much easier when they have tax. Doug Lewin (01:03:26.306)Got it. And just very briefly, you guys are manufacturing mostly in Germany, but you have some American manufacturing. Blake Richetta (01:03:31.96)Yeah, we have our headquarters in stone mountain, Georgia. We're doing some very nice final assembly and finishing there. We're trying to do more and more there. We're actually looking at all kinds of options for building our inverter, our power electronics, our central processor, our battery module, all of it. But right now what we're doing is a lot of system enclosure, thermal management system, BMS, all these things, system level BMS. We're getting a lot of things for the domestic content. Blake Richetta (01:03:59.912)adder in the investment tax credit. And then the next thing that we can do is likely inverter and then actual battery cells. And some of that right now is being built in the European Union and then especially on the inverter side. then we have cells are still built in China, but we would like to change that. Doug Lewin (01:04:26.176)And this is where the bipartisan agreement needs to happen is that domestic content to bring that cell manufacturing to the United States. Like you said, I like to remind people, batteries aren't just about the grid. What are you powering drones with? Modern warfare, as we've seen in Ukraine, it's drones. You don't want to be in a position where you're dependent upon China for batteries. We need to make them in the United States. Blake Richetta (01:04:51.33)very well said, we would agree with you deeply as a national security level and just the let's call it stability in our energy system. Even if we were in a position of being under attack, the energy storage technology, energy storage in general offers a lot of value. And we did see the Chinese system effectively. I guess kudos to them create a world dominating position in both solar and in batteries. We certainly can change that in batteries. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

Anti-energy crusaders have a lot of facts wrong. I’ll break that down in this video. They’re also personally insulting the hard-working men and women in the renewable energy industry, calling solar jobs “fentanyl jobs.” They should apologize to the hard-working Americans helping to make our grid stronger every day.The ERCOT CEO told the Board earlier this week that solar and storage has strengthened our grid. Our risk of an energy emergency went from 16% one year to ago to 0.5% this year “because of the contributions of new resources on the grid.” Those resources are solar & storage. I show all of this in the video, which you can also watch on YouTube. I also covered a couple of the biggest problems haters of renewable energy and storage have: (1) They can’t credibly deny the benefits of renewables and storage, and (2) Where’s the alternative power going to come from if you limit renewables and storage?We have rising demand. If Congress lessens supply, what happens to prices?I wrote recently about how abruptly ending the clean energy tax credits will hurt our efforts to win the AI race and is actually Energy Submission to China. I also wrote about how short-sighted energy policy will raise costs, causing Energy Inflation for consumers of all kinds. The best way to handle the clean energy tax credits is a predictable ramp down of the tax credits — not a cliff.What You’ll Learn in This Episode:* How Texas slashed outage risk by 95% thanks to solar and battery storage* Why gas is not the fastest way to add power even though some people continue to falsely insist it is* How fossil fuel companies are using renewables to cut costs* The simple math of supply, demand, and rising prices without a credible backup plan📺 Watch on YouTube:Why It Matters:* Demand is up 25% since 2021: rapid growth not seen since the ’60s* Without tax credits, supply tightens, prices go up, and grid reliability suffers* Gas turbines aren’t coming fast enough, nuclear is years awaySeriously, over the next 4-5 years, where is the power going to come from if not from wind, solar, and storage? It’s not a rhetorical question and they can’t answer it. They’ve said LNG power plants, but those don’t exist. They’ve said nuclear but that’s 2030’s at best. They’ve said gas plants, but good luck getting a turbine.Final ThoughtIf policymakers want to kill clean energy incentives, they need a plan to replace the power. Because without one, consumers will pay more, grid reliability will suffer, and elected officials will face a backlash. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

This is the read-aloud version of my June 26 article, now on YouTube & the Energy Capital PodcastI don’t usually record readings of my articles, but I made an exception for this one.If Congress passes the budget bill as is, it would spike energy costs for families and businesses and cause serious economic harm.So I sat down and read the piece aloud with a few added thoughts and commentary as I went.Watch on YouTubeRead the original article hereWhat you’ll get in the episode:* Why “leveling the playing field” leaves out 100+ year old coal, oil, and gas subsidies (aren’t they mature industries at this point?)* How a $300 increase per household could be heading for your utility bills* What the real consequences of a 60-day cliff would be (I explain it in plain English)* Why this is really about consumers and voters, more than renewables, which will get built anyway, but they’ll cost more… which is probably why so many people oppose ending the clean energy tax credits.This is more than just a policy argument, it’s a warning. And a reminder that what Congress chooses in the next few days and weeks will show up on bills, ballots, and balance sheets.If you want to understand what’s at stake, and how we got here. Give it a listen.Thanks for being part of this. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

The U.S. was finally catching up.After decades of watching solar manufacturing develop overseas, mostly in China, the Inflation Reduction Act gave domestic producers a fighting chance. Texas responded in a big way. New factories broke ground. OCI and its sister company, Mission Solar, prepared to launch a full supply chain operation in San Antonio, including the rare addition of cell manufacturing, one of the most critical (and missing) links in our solar economy.Now? All of it hangs in the balance.I sat down with Sabah Bayatli, President of OCI Energy, for one of the most urgent and clarifying conversations we’ve had on this podcast. If Congress moves forward with budget as it passed the House, it could wipe out hard-won progress in U.S. energy independence and kill manufacturing momentum.This is not only an energy and economic issue, but also a national security issue. We covered:What the IRA Actually Did for Solar ManufacturingBefore the Inflation Reduction Act (IRA), manufacturers in the U.S. were forced to make short-term bets, never knowing if tax credits would last. That’s a terrible way to plan billion-dollar infrastructure investments. The IRA changed that. By giving developers and manufacturers a 10-year time horizon, it triggered a surge in U.S. supply chain planning.Sabah put it simply: You can’t invest in manufacturing without a longer time horizon.* The 45X tax credit provided per-unit production incentives.* Developers got extra credit for using U.S. made solar panels, creating demand.* Factories started popping up, especially in Texas, where low power prices make large-scale manufacturing viable.Now, that long-term signal is under threat.What’s in the “Big Beautiful Bill” That Could Undo It AllSabah broke it down for us: the current House version of the bill would eliminate developer tax credits by 2028, with an abrupt cliff 60 days after enactment. And while the latest Senate version is slightly better, it’s still a cliff:* Full credit in 2025* Drops to 60% in 2026* 20% in 2027* Zero by 2028The manufacturing credit technically stays, but if developers lose the adders for domestic content, American manufacturers lose their market. DC’s Math Doesn’t Add UpEveryone agrees: the deficit matters. But what’s often missing in DC is that you can’t shrink your way out of the deficit, you have to grow out of it.Growth means:* Domestic manufacturing jobs* Local tax bases* Energy independence* Lower-cost powerI covered that in much greater depth here:Timestamps* 00:00 – Introduction & opening context* 01:45 – What is OCI Energy?* 03:30 – OCI’s origin story in San Antonio* 5:00 – The elephant in the room: the impact of the not-so-beautiful bill* 10:00 – Investment signals leading to solar module and solar cell manufacturing* 13:00 – Manufacturing tax credits (45X)* 15:00 – The need for low cost power to spur economic growth to lower the debt* 20:00 – Lost cost power in ERCOT is attracting manufacturing of all kinds* 23:00 – Supply chain issues across the power sector* 25:30 – The need for moderate, durable policymaking, gradual ramp of incentives* 31:00 – The retention of the manufacturing tax credit won’t necessarily help* 34:00 – Where panels used in America are manufactured (hint: not China)* 38:00 – The need to communicate national security implications* 41:00 – To grow our economy, and reduce our debt, we need a lot more power (see chart discussed in this segment in Resources section below)* 44:45 – How to design Foreign Entities of Concern (FEOC) provisions well* 52:00 – Texas policy and the recently concluded legislative session* 54:45 – Is there a future for solar and battery manufacturing in America?* 58:30 – What could the Senate do to grow American manufacturing* 1:00:30 – Final thoughts, closing remarksResourcesInformation about Sabah and OCI* OCI Energy* Mission Solar* The chart Sabah sent me after he read Energy Submission:Discussed in the Episode:‘City of San Antonio Solar Development Plan. April 2012. H.R. 1, One Big Beautiful Bill Act (Dynamic Estimate). Congressional Budget Office (CBO).TranscriptDoug Lewin (00:05.426)The solar manufacturing renaissance in America, and particularly in Texas, is very much at risk as Congress considers a budget bill that would end solar incentives and clean energy manufacturing incentives. Welcome to the Energy Capital Podcast. I'm your host, Doug Lewin. My guest this week was Sabah Bayatli. He's the president of OCI Energy. OCI Energy is both an IP and a project developer throughout the U.S. installing solar and storage, but also a manufacturer through their sister company, Mission Solar. And Sabah told me that that manufacturing plant, which currently produces modules and was getting ready to expand to cell production with 800 Texas jobs, is at risk and will not proceed if the bill in Washington passes in its current form.We talked about that and a whole lot of other things both related to the bill, but also talked about Texas policy, solar in general, what it means for the economy and growth. This was a great discussion and extremely timely. And I thank you for listening and we'll ask one more thing of you: if you can give us a review wherever you listen or particularly leave a five-star review, that is super helpful for our small but fast-growing podcast so that other people can find it. And I greatly appreciate it. You can find all the episodes of the Energy Capital podcast, become a subscriber to the podcast and to the Texas Energy and Power newsletter at douglewin.com. With that, please enjoy the show. Thanks for listening.Sabah, Bayatli, welcome to the Energy Capital Podcast. Great to have you.Sabah Bayatli (01:41.426)Thank you, Doug. It's wonderful to be here.Doug Lewin (01:43.896)So can we just start with a very brief little background? Folks may not have heard of OCI Energy. Tell us a little bit about OCI and Mission Solar.Sabah Bayatli (01:52.536) Quick background: OCI Energy is a developer and IPP for utility scale solar and battery energy storage systems in the U.S. We have been operating since 2012. We are headquartered in San Antonio, Texas. OCI Energy is a subsidiary of OCI Holding, a South Korean conglomerate based in Seoul. They have multiple businesses worldwide. I would say one of their core businesses is polysilicon manufacturing.For the audience, people who are not familiar with polysilicon, you can think about it as the raw material basically to the solar panel. It sits very, very upstream. In fact, I think they are the second largest polysilicon provider in the world if you take the Chinese manufacturers out of the list. That's a fact about OCI Holdings' operation on the polysilicon business.In the U.S., they have OCI Enterprises. You can think about it as a sub-holding company basically to the U.S. market. Under OCI Enterprises, there are multiple operating companies. One of them is OCI Energy, the developer and IPP for utility-scale solar and battery energy storage. We also have a sister company here in San Antonio as well called Mission Solar Energy. They are a manufacturer for solar panels. They also started business in 2012, 2013. In fact, when they started, they were producing cells in the early days as well. Today, they are producing solar panels. And we can talk more about them in the next few minutes.Doug Lewin (03:20.268) Yeah, it's interesting. A long, long time ago, I was involved in a lot of discussions in San Antonio in that kind of 2009, 10, 11 period when they were looking at how to develop a clean energy economy in San Antonio. I have not super sharp memories of that period, but some, and it's really gratifying and neat to see you guys there as such a big part of San Antonio and of that ecosystem.Sabah Bayatli (03:46.862) It brought us actually to town in 2012. What brought OCI Company to San Antonio and brought all these manufacturing jobs and basically development jobs to San Antonio. Today we are headquartered in San Antonio. We basically service all the U.S. on the development side as well as on the manufacturing side. But if you go to the story, actually the way OCI Energy, the OCI Company actually penetrated the energy market in the U.S., it was through an economic development agreement with the city of San Antonio. Yes, through CPS Energy, the utility.This is our public information. So in 2012, there was an economic development agreement entered into. With that, we had a commitment basically to develop up to 500 megawatts of solar projects. In 2012, it was a huge deal, right? So, and we did develop them, and in exchange, we got offtake agreements basically with CPS. And what we gave was we gave an overhead commitment to the city of San Antonio.So we had to bring manufacturing, we had to assemble the factories here. OCI Energy was assembled at that time. It was called OCI Solar Power. We actually brought inverter manufacturing to San Antonio as well. We brought a big EPC from Minnesota called Northern Central to open a branch in San Antonio too. That was a huge commitment actually by OCI Company to the city. It ended in 2020-22. But to your point, I think you can see the fruit today. The company's still operating in San Antonio. We are creating a lot of jobs basically for San Antonio and Texas, and this is a new technology and this is a new industry.Doug Lewin (05:17.868) Yeah. So I think we need to jump into kind of addressing the elephant in the room here, Sabah, which is right, you guys are a manufacturer in the United States, right there in San Antonio, here in Texas. And that had a first mover from some city initiatives, but over the last couple years at the federal level, congressional bills, particularly the Inflation Reduction Act, but also the Bipartisan Infrastructure Law put in place a lot of incentives for manufacturers.Can you talk a little bit about what is going on right now with the officially named "big, beautiful bill" that would reduce some of those and how those impact you as a solar manufacturer? And I'm hoping Sabah, in that answer, you can kind of get into also some of the components of the different parts of solar that are being produced in America and how this bill affects those. Because it's not all the same. There's the different parts of the supply chain and you guys get into several of those.Sabah Bayatli (06:15.262)It is truly the elephant in the room these days and has been for the last few weeks now. Everybody's trying to understand how this will play out for the energy industry. I mean, I guess for the audience to understand, the "beautiful bill" we are talking about is more than 1,000 pages, right? So what we could cover here in this podcast is more related to certain sections inside the beautiful bill, which is related to tax credits within an act called the Inflation Reduction Act, people call it the IRA, that was passed in 2022.So now, big picture is, look, we acknowledge at the U.S. level today, at the federal level, there is a budget issue, there's a deficit. We acknowledge it. We are business leaders. We understand that this has to end. We have to balance this budget. No question. I think what we want also the Congress to consider is designing for the system: while we're trying to balance the budget, how we can also incentivize to bring more investment to the U.S. and we bring more manufacturing to the U.S. That's really the big picture, right? So we understand it.If you look into the solar industry, I mean, it has been probably more than 10 years. We always have this cliff of tax credit ending at some point. We had it in 2016, later I think we had it in 2022. I don't remember exactly, but you always had this cliff of like ITC is going away.Big picture is what's really the whole purpose of giving credit to a certain technology: you're trying to give that technology to your country, you get the supply chain, you diversify your power market, you have more resources in the power market, and this way you are more diversified, more secure, more affordable. So that's really the big picture. So this cliff, it was no news for the market until 2022 and the Inflation Reduction Act passed. When it passed, basically it gave more certainty to the market.The challenge before 2022 is we did not have a long view basically on what the credit would look like to be enough to bring manufacturing investment to the state. We had enough to develop projects and we did develop a lot of projects basically in Texas and across the U.S. But before 2022, it was not enough to convince investors to come and invest in those manufacturing facilities. Right. Because bringing manufacturing investment to the U.S. is challenging. And here is why: because you have to get approval from your own board as a business leader. Later, you need to get financing, basically approvals. Later, you need to set up the factory. And all this takes time. And after that, you start covering your investment. And we're talking about billions and billions of investments here. Those are not only $100, $200 million investment. So you really need to have a horizon. You need to see how this will look. And you want to have confidence in this market to convince everyone to come here and build the manufacturing, right?So that happened in 2022. It was wonderful for the entire market for really the new industry to bring this industry back to the U.S. So I can probably give you the view from a development perspective, but I have good knowledge on the manufacturing side. I can share that as well. So since 2022, it passed and basically people started really thinking to bring the supply chain back to the U.S. From the development perspective, it also gave a good horizon. So we started developing more solar projects, more battery energy storage projects. From the manufacturing side, we saw more manufacturing coming to the U.S., opening module factories.Now you have to examine the supply chain for the module factories. It's not only the module. To the audience, if you have seen the solar modules, inside the solar modules you have those small squares. We call them in our industry "cells." So basically that's another technology that we want to bring to the U.S. as well. And now people start thinking about it. As an example, our sister company Mission Solar is actually thinking about bringing cell manufacturing as well. They are producing modules and now they are thinking to bring cells as well, and that will bring 800 more jobs, right?Doug Lewin (10:07.732)And real quick, just want to drill down on that a little bit more because I want to make sure it's not lost on anybody in the audience what a big deal that is. We have had, correct me if I'm wrong, but very, very little cell manufacturing in the United States. We've had some module manufacturing, not a ton of that either relative to other places in the world, but cell manufacturing pre-2022, we've had very little. And now you're starting to, to your point of getting that longer term investment signal, we're starting to get a significant, I think as much as in the tens, maybe as high as like 40 or 50 gigawatts of announcements where we had in just single digits, one or two gigawatts of production before the IRA. Is that about right?Sabah Bayatli (10:46.734)That's actually a wonderful question. The answer is yes. Fun fact, actually, when Mission Solar, our sister company, was established in 2012, they actually had cell production as well. So cell production and module production. What happened after a couple of years, because other countries subsidized their solar manufacturing too much, U.S. manufacturers were not able actually to be sustaining in terms of manufacturing cell products.So actually they had to close the cell manufacturing. Again, this is all public information. We are not shy about sharing. They had to close the cell manufacturing. So we were really early movers. We are talking about 2012, 2013 investment in the U.S. in San Antonio, Texas. So that cell manufacturing portion had to close actually because of that. And since that day, you really did not have a lot of module manufacturing in the United States. It was limited. I mean, size-wise, we were not able to compete.People were shrinking, shrinking with time instead of growing, we were shrinking because there was too much subsidies going on outside the U.S. that made our manufacturers here in the U.S. not able to compete. So I'm glad you brought it. It's a really good point to highlight. So beyond module supply, beyond module manufacturing, which by the way, we did not have full manufacturing to even cover our own consumption here in the U.S., we actually did not have anything on the supply chain for the modules.Doug Lewin (12:09.67)Let's talk about these cycles, right? In the past, what you're talking about with the tax credits, they were usually called like "extenders," right? The tax extenders at the end of the year, typically would be December. Congress would extend the investment tax credit, the production tax credit for development, for actually putting projects on the ground. And that happened like, I think it was like 2011, 2013, 2015. Like every two years, it would be a one or two year extender.And in 2022, it changes and you get this 10 year, right? It's either like, I think it was like a 75% reduction in emissions or 10 years. Nobody really expects 75% reduction in emissions. So it's basically a 10 year and it was whichever goes longer. So it basically gives a guarantee of 10 years of runway. And there's the 45X, right? Which I assume was very big to your company. Can you talk a little bit about the manufacturing tax credits particularly?Sabah Bayatli (13:00.494)Again, just to clarify also to the audience, 45X is so under the IRA, there are multiple credits for different stages of the supply chain. You have credits for the project level. So if you are a developer, you are developing solar projects, you have certain credits. If you are a manufacturer for solar panels, as an example, you have certain credits. So 45X is more related to the manufacturing tax credit that was passed by the IRA. So 45X basically gave more as well as the credit that the developer is able to use.So it basically incentivized manufacturing to come back to the state and people to start investing back to the state. And here is why, because exactly what you mentioned, it gave 10 years of horizon. You can see there is 10 years of certainty here. Now you can bring investment. And the way it worked basically, it helped manufacturers to claim credits when they produce solar panels. It gave them certain credits. And it also helped the developer who will buy those solar panels.If they are able to achieve domestic content, this is a definition, right? If you are able to meet the domestic content requirement with this purchase of your domestic solar panel and many other equipment, then basically it helps the developer to claim additional tax credit. So for a developer, base case was like 30%. And if you are able to use domestic content, then you can get an extra 10% of tax credit on your project. So that basically incentivized manufacturing to come back to the U.S. on two different levels, at project level, as well as at manufacturing level. So I think that's what we had inside the 2022 act, the Inflation Reduction Act. Now things are changing, basically, as we see with the beautiful bill in D.C.Doug Lewin (14:44.206)So I want to come back to what's in the bill and some of the discussions you've been having around that. I actually, I want to come back to something you said earlier, because I think it's really important, Sabah, is that you acknowledged, and I think this is important, that deficits do matter, that we do actually need deficit reduction. And I think what is often missing from these discussions, I've tried to inject some of this. I wrote this article called "Energy Submission" the other day that really sort of dives deep into this topic.That in order to reduce the deficit, you have to have economic growth, right? So you need manufacturing in the United States. You need to actually make things, but you also need low cost power in order to have manufacturing, not just of solar cells and modules, though that low cost power is important for that too, but for anything else you're making, right? Whether it be steel or you're refining oil or you're having a data center or like semiconductors and chips, like whatever it is that you're manufacturing, you need that low cost power. And I think this is part of what's missing from the conversations in D.C. And I'm wondering what you're hearing as you're having conversations in D.C., how could you possibly get out of the deficit unless you have really robust economic growth? And how could you have really robust economic growth if you don't have low cost power? So it feels like we're caught in this little trap that I'm not sure how to get out of.Sabah Bayatli (16:07.598)We truly are. I mean, I was in D.C. yesterday. My feeling is people are really under a lot of pressure on both sides of the aisle, House and Senate, to make things work. I think to your point, Doug, is you have to consider what this investment will bring. And I will give you an example from that additional cell factory that our sister company, Mission Solar, was trying to bring. So that will create 800 jobs. So basically, you are immediately creating 800 jobs for your community.And think about the ancillary jobs that you will be creating for that community, right? We're talking about restaurants, hospitality, hotels, residential, property taxes, everything, right? So, and the question is now how are you able to index this. I think what's happening in this, now I take you back to D.C., you have the finance committee on the Senate side, you have the Ways and Means on the House side, people are trying to put numbers on these investments, right? So the question is like how are we indexing this, how are we putting a good forecast for what this could bring, right? Is it purely just the capital investment, what are we missing, or are we exactly including all this consideration, what type of economic value this will bring over the long term, which will create obviously more revenue for the U.S. government. And therefore, it basically goes to a point that probably will help us to reduce deficit down the road. So the question is like how is the math working today, how are the assumptions made. That's really a big part of the formula today in what's happening in D.C. It's an amazing point. It's an amazing point.Doug Lewin (17:37.924)We're recording on June 18th. Yesterday, June 17th, there was a new analysis out from CBO. They did some dynamic scoring, right? Dynamic scoring, right? I think most of our listeners will know this, but in case you don't, it basically is like, okay, you have one amount of money that you're reducing the deficit by, but then there's these other things, like you said, there's sort of knock-on effects of new jobs created and all that kind of thing. So dynamic scoring takes all that into account. The bill, as it passed the House, actually worsens the debt when dynamic scoring is taken into place. And again, I think this is what people are missing. Like if we can really have this longer term signal for manufacturing, you will not only get that manufacturing base, which in and of itself would be good, but you have all these second order effects of a domestic supply chain for low cost sources of power, which then can enable us to do things like AI and robotics and all of these kinds of things. So we've talked about this a lot. If you want to say more about that, I've got other questions I could move to. But if you want to say anything more, I'll let you.Sabah Bayatli (18:40.55)Yeah, no, I mean, maybe just for the audience to understand the beautiful bill, I would say in my own mind has three revisions so far and who knows what's next. But there was the original revision or the original version of the beautiful bill that was introduced by the Ways and Means by the House. And later there was the revision that was passed the House. And finally, we have the revision that was just shared through the finance committee in the Senate on June 16th. So there are too many things changing actually from revision to revision as we speak now and things are getting baked in D.C. as we speak.Doug Lewin (19:15.274)And so talking today with the latest version that has come out, the Senate bill, and it sounds like you were just in D.C., so you're probably pretty familiar with this. You could speak to the Senate version or frankly, you could speak to the House version if you want. And I know you can't get into too much specifics, but this has to majorly hurt the economics of manufacturing. I know you probably can't say specifically like we would or would not continue with our stuff, but can you just talk a little bit about what that would actually mean for the prospects of manufacturing in San Antonio and broader throughout the state of Texas.Sabah Bayatli (19:48.27)I think for the manufacturing, frankly speaking, I mean, I'm speaking on behalf of my sister company, and we are not shy about saying it. We said it yesterday. I was there with the president of Mission Solar, my colleague, Sam Martin. If this basically passes as is, then basically this disincentivizes manufacturing to come to the state. That's super simple. Because the way basically it's written today, we don't see the horizon. We don't see basically a good long term that will help manufacturing investment back to the state.And there is a lot of manufacturing today actually selected Texas to come. If you look into where is the module manufacturing coming back today, almost everything is coming back to Texas. And here is simply why, because the energy pricing is affordable in Texas. And now it's like, if we ask ourselves why the energy pricing is affordable in Texas today, it's actually because of a simple reason. We have a good penetration of solar and wind in the state of Texas.That's actually helping the pricing to be affordable in Texas. And that's actually triggering, it goes back to your earlier point, that's basically attracting more investment to come. I mean, there's a fact today, if you zoom out to the U.S. market, and if you try to find out what is the lowest pricing of the energy power market, it's basically ERCOT, it's the state of Texas. Specifically ERCOT has the lowest energy pricing in the U.S. In fact, I think globally ERCOT is the lowest energy pricing.So if you are a foreign company and you want to open manufacturing back in the state, even if you are really inside the state and you want to bring manufacturing back, what's your choice? Simply is Texas. And again, this is driven by the fact we are not an over-regulated state, which is really helping, right? And also our energy pricing is very, very affordable.Doug Lewin (21:37.814)Yeah, and then if this passes, we're going to see prices go up because, and look, I mean, this is an assertion a lot of people make, but it just sort of follows logic, right? You would be taking away the tax credits that's adding a 30% cost. And then a lot of people say, well, we'll just build more gas. But as has been well documented, it is very, very hard to get a gas turbine. Even if you can get a gas turbine, the cost of gas longer term is going up because of increased LNG exports.So it's very interesting, Sabah, and later in this conversation, I do want to talk about the Texas legislature, but one of the things we saw during this session and even the previous session in 2023 was folks that in the past have been, I wouldn't say necessarily oppositional, but sometimes oppositional, certainly less supportive of renewable energy, like the Manufacturers Association really supporting renewables. And it's for exactly what you say. Like they want more manufacturing in Texas and low cost power is absolutely a key part of that equation. Not the only part. You've got to have other things working for sure. But low cost power is fundamental. Without it, you don't get a lot of manufacturing. It's basic, right?Sabah Bayatli (22:43.854)That's very true. And Doug, I would like to highlight your point on the gas. I should clarify we are an energy company. We are not shy about exploring any technology to develop that could make sense for our country and our state. But people tend to think that gas can come online in the next year or two. I think it's important for the audience to know gas has as complicated, probably more complicated supply chain than the solar or the wind industry today.Second, it has limited supply chain as well. And that's why we are seeing the lead time. I mean, if you are a company and you want to buy a turbine today from the main suppliers, then basically you are talking about five, six years delivery lead time. You're talking about 2031, 2032 at your best case, right? And people also tend to think that they will scale manufacturing. Well, actually it's not easy. It's really not easy to scale manufacturing. We have seen it in the high voltage equipment.So one of the big issues in the interconnection today, where you have everything set, you signed your interconnection agreement, it's actually how long it takes you to get high voltage equipment, transformer, breakers, things of that nature. Those are not a new technology. Those are very old technology. And we are still like really before COVID, just to give the context to the audience, we used to get transformer, main power transformer. Those are for high voltage lines, 138 thousand volt, 345 thousand volt, we used to get those in eight, nine months. Today you are talking about three to four years delivery. You would think that the supply chain will respond immediately and they will grow to help this market. The answer is no. And here's why: because if you are a manufacturer for high voltage equipment, you actually think about the horizon as well. How does this look over the next five to ten years? And if you think okay, the decision today based on what could pass today by the bill, but the next session probably will have a Democratic Congress with a blue Congress. They will change the dynamics and now the things will switch back. And therefore that investment that I thought about today, it's probably not necessary to be true in two years, three years down the road. So that's actually creating a problem for the supply chain. So people are not able to scale up their manufacturing.And again, I just give you the example on the gas side, similar really concern here. Because if you think about it in 2022, when you passed a major act that gave you a direction for the 10 years, you basically what you did after 2022 as a business leader, you went back to your board and you told them, look, we can do more investment here. We can bring more manufacturing here, right? Because we have this time horizon. It will take you at least a year, six months to get your own board approval. Later you get the financing to the table that will take you another year. Later you will get the contractor to put the buildings for you, I give the machines. It's year 2025, Doug. And now you hear the Senate and the House basically are discussing the fundamental of your thesis in 2022, which could pull the rug from under you, right? So that just happened to the solar industry today, but the same is true on the LNG and the gas as well. So it's big picture. This is, I mean, I'm saying this in every single podcast now. Guys, I think we should stay away from polarized decisions. I think we should make it as centric as possible because we just cannot undo each other. We just cannot make a decision today and undo it in two years from today, three years from today. Super harmful to the investment world. Super harmful. Yeah.Doug Lewin (26:25.27)I wonder, and this is probably way too optimistic or Pollyanna or whatever, but if there's not some ability in the Senate to pull some group of Republicans and Democrats together and to say, could we make some deal that if and when Democrats had control, you wouldn't undo what's done right now? And maybe, I'm curious, this is controversial. I have no idea what you think about this, obviously, but like phasing them out, but having a very gradual, I know there's some phase out in the Senate version, but it goes from like 60 to 20 to zero. So like, what about like a 90, 80, 70, like just 10% reduction every year, phasing it out 10 years? And maybe there's some ability, at least for those provisions, Democrats aren't gonna vote for the whole thing, because of the Medicare and the questions about, you know, tax rates on the rich and all that kind of stuff. But at least on those provisions, maybe if there was more of a tapered, smooth reduction, there might be some agreement from Democrats that we won't undo this. We would vote against undoing it as long as it is a very slow and predictable reduction. How would you feel about something like that as a manufacturer and developer?Sabah Bayatli (27:39.214)I'd like to believe we have really reasonable lawmakers in DC will make reasonable decisions in the end of the day. Yes, we have to end of this far left, far right, but I like to believe people will come to agreement. This is not about party. This is really about our country. Like what is the best decision that we can make today that we will not undo a few years down the road. I love to believe this will happen. Now things are evolving as we speak. We are really monitoring it.But exactly what you mentioned, look from the developer perspective, even the manufacturer perspective, people are not looking to subsidize this business forever. We are not looking for those incentive to stay forever. We're just making sure to your point, when we phase out, we really understand from the industry how we are phasing out. And this way we are not harming the industry because we're trying, if we truly trying to bring manufacturing, then we need to hear from the industry what's needed, how much time is needed. And therefore, like phases down systematically and this way we are not harming. In fact, we are bringing more jobs to the US. We are bringing the manufacturing. Those are like high tech jobs in the solar as well as on the battery side, by the way.So I like to believe people will reach out to that conclusion. The first draft from the Ways and Means Committee in the house, I think that was probably more reasonable than the version that passed the house. So I can tell, yes, there was certain House representatives dug their heel and they wanted to see their language. Very last minute. I mean, it passed by a narrow majority. We are talking about a single vote. Right. And now it's moved back to the Senate. I can tell you from Monday revision and we are digesting it as we speak. I love that they have my whiteboard, have a lot of numbers on it. We're trying to understand what's the implication, but I can tell you it's improvement. I can tell you there is a reasonable people on the finance side who trying to understand.Like how should we really allow this industry not to kill it, but to allow it to come to the US and integrate basically to the US without harming to the manufacturing jobs, without harming the all this capital investments we are trying to bring to the US. I think there is improvement. I feel there could be a better moment as to your point is like, can we phase it out slowly more? Like now the latest revision that passed from the Senate, it says basically if you start your construction 2025, then you have 100% of the credit. If you start in 2026, then you have 60% of the credit. And if you basically do 2027, then you are down to 20%, 2028 is zero. And I'm talking about solar and wind, right? So the good news, battery and a lot of other technologies they did not touch. I think kind of like stays as is from my rough reading here to the Senate bill.I think if we can smooth it out a bit more, probably if we can suggest, keep it 100%, 2025, maybe 75%, maybe 50%, maybe 25% and go to zero. Again, I'm really not in favor. We understand the big picture, guys. We have deficit, we have to balance. We have to balance. But also we want to bring manufacturing jobs so we can create economy basically to support extra revenue for the US government, right? So we have to find that balance. And that's really the big picture. So I think if we can probably more systematically phased out. I think that could work for the industry because right now what the Senate and that's what we tried to clarify in DC yesterday again like they released while I was flying to DC all the early next morning 6 a.m. We're trying to figure out how this plays out because we are meeting a lot of people but I think what they're trying to do to a project level they are phasing out from 160 to 20, but they are keeping the manufacturing credit, which is good. It sounds good on the surface. What is really missing is the manufacturing credit is only good if you are able to sell them to a developer. Right. So if the developer lose the value of their ITC and PTC and they are not incentivized to use it anymore, then basically what value the credit will give even if you are keeping it on the papers. Right. So.Doug Lewin (31:49.272)So Sabah, I want to dive into that because that's really, really important, right? Because if the tax credit is gone, the whole reason to use the domestic manufacturing was to get the additional tax credit. If that goes away, why not buy Chinese goods? Yes, there's tariffs, so there would be some consideration there. Or Vietnamese or wherever else it might be made, there's no incentive to use that American-made solar panel or cell, right?Sabah Bayatli (32:15.054)That is correct. So as project developer, if we start the construction this year, we'll get the full credit according to the latest Senate. Again, this is Wednesday, June 18th, right? And we are referring to the Senate bill that was shared and introduced to the Senate on June 16th night. So according to that, as a developer, if I start 2025, I get the full credit. If I start in 2026, I get only 60%. If I start in 2027, I get only 20% of the base credit and 2028 forward zero credit. I'm not allowed to get any credit if I start construction, right? So which means basically as a developer, I'm also because the developer is the customer for the manufacturing. So if you are a manufacturer in this state and if you are manufacturing solar panels, you have to sell them somewhere. And the somewhere is basically the US market, right? So, and if the developer is not able to purchase them from you because the value of the credit is going so low, it's not meaningful enough.I mean, this is a fact as well. If you produce in the US as a manufacturer, you have higher costs. Technically, your solar panel costs more than if you bring the panels from the outside of the US. So putting all these formulas and putting all these numbers inside the financial model as a developer from a developer's perspective now, at that time, you will make a decision. You will say, do I even need to buy domestic content? Yes, they have the credit as a manufacturer. But actually, that's not helping me as a developer because now the value I'm getting for this credit is very low. Therefore, developers down the road, probably just, again, this is a free market, this capitalism. You're trying to get the best, more efficient way. You want to improve your numbers, right? So you will just try to find the most affordable product available at that market today. And to your point, in the US, we are not, I mean, as a fact, we barely import anything from China today. I don't think we have anything as made in China's solar panel. It's probably very small percentage is imported from China. I'm talking about one to 2% roughly.Because what happened in 2011, this goes back all the way to 2011, they put 301 tariffs against solar panels at that time, create the huge deal. So after 2011, we're not able to import the panels from China anymore. So what happened, solar panels manufacturing actually jumped to another countries. And now we're talking about Vietnam, Malaysia, Thailand, Cambodia, Laos, Indonesia, all these countries become a solar panel manufacturers, they actually feed only the United States because we are not able to bring it from China. So we started bringing it from other countries. So now there is available manufacturing like outside China. And the question is like how we can bring it to the US and we make sure it's sustainable. So in this way we can bring manufacturing jobs to the US.Doug Lewin (34:59.138)That is so fascinating. Those other countries that you just said, first of all, I didn't realize that we're like, that's really interesting. So you're talking the entire American market is only one to 2% Chinese. And yeah, yeah, but it's small. It's small would be the point, whether it's one. In those other countries, you were just mentioning Malaysia, Vietnam, et cetera. Is that module manufacturing? Are they also doing cells and ingots and all that kind of stuff in those countries as well?Sabah Bayatli (35:26.996)Over time, they evolved to bring more supply. So maybe to give you an idea, so solar panel, you see those small squares inside it we call themselves. That's the one step before. Before the cell, you have another product called wafer. Before the wafer, you have another product called ingot. Before the ingot, you have the polysilicon. So kind of like a rough idea on the supply chain quickly. So yes.Now today, I think we see in a lot of these countries more basically manufacturing for the supply chain, upstream supply chain as well moving. And what's triggering it, Doug, was triggering the move to those countries is actually the US policy over the last 10 years, probably over the last 15 years, right? So 2011, you put 301 tariffs during Obama administration that kind of like technically took out China from the supply chain. And now you have to push your module to other countries.And later what happened during the last 15 years, you have other policies coming like the tariffs, the Uyghur act, right? And there is ADCBD against certain countries, right? Anti-dumping and countervailing duties because there's certain companies from China that start like basically circumventing by going to those countries and just like assembling it and sending it to the US. But the supply chain was built in the US. So the policy got evolved over the years and become very specific actually and say, if you are importing from Vietnam today, I'm just giving example, then X percent of your product has to be manufactured outside China, as example. The devil in the details, it's complicated, it's per product, but policy became very sophisticated as well. And if you zoom out to understand what's the purpose of such policy, it's actually to help the supply chain to move from China to other countries, to diversify the supply chain, if that makes sense.Doug Lewin (37:14.816)It does, and I just think it's so vitally important. The reason I want to talk about this here, and this podcast, I'm going to talk about it on a lot of others, is what we're looking at in the world right now, Sabah, right? Something like 80% of everything installed at this point on power grids globally is solar in storage. So in some ways, solar in storage potentially could become as big a strategic imperative and lever as oil was in the 70s.And if China were to be, and it's interesting to hear you say this, because that's a great historical perspective that this actually goes back to Obama through the first Trump administration. Biden kept many of those protectionist policies in place. Now in Trump too, there's this kind of continuation of we cannot let China control what is a very strategic lever.And what I worry about is that in a very short sighted way with this budget reconciliation bill, we could end up undoing a lot of that and actually like playing right into China's hands and actually strengthening their hand on what becomes one of the most, I won't equivocate, not one of, the most important, if you put solar and storage together, the most important power source for at least the next 10 years. Maybe at some point nuclear geothermal or hydrogen or fusion or who knows what in the late 2030s. But for this foreseeable future, it's solar in storage and we're about to like, not to shoot ourselves in the foot, but like shoot ourselves in the kneecap at this point.Sabah Bayatli (38:59.18)I share the same concern, Doug, as well. And that's why my advice, probably to the audience of this, to the listeners, to people who operates in the solar market and battery market today, please raise your voice. Speak to your House representative. Speak to your senator. Because I think people really need to understand their perspective as well on DC. Those finance committees, ways and means, under a lot of pressure. And you are probably not in your main radar, by the way. Like, they have a bigger problems to solve. First of all, deficit, right? That's the thing, right? Right. But you have the Medicaid, you have salt, like it's becoming huge problems. You are like one of the things inside this list of one-handed, right? So, I mean, factually, people probably don't understand exactly how they will impact you.So I think our job as industry leaders, go and communicate, really speak to them. I think people are reasonable. People try to understand. It's business perspective. This is really not about clean and renewable versus this is about energy affordability. This is more about energy security. That's truly it. So I think as a business leader, if you can indicate that your senators, your house represented, people will listen and they did. We spoke to a lot of Republicans in Texas, right? About the both senators thankful, thankful to them. They hosted us in DC yesterday. They listened to formalized, they took notes and people are responding.So it's our job really to clarify how this will hit the industry, right? So that's our recommendation. I share the exact concern with you, you have to understand the finance committee under a lot of pressure. They have a lot of things to solve and you are like few items on their list.Doug Lewin (40:35.18) Well, and this is where I think we need to help connect dots because whatever your concern is, as the senator or representative, obviously a lot of senators were on the Democratic side, though there's certainly some Republicans too, think about climate change a lot, but I think more so they're going to think about national security. They're going to think about American competitiveness, these would be China. They're going to think about the national debt. And whatever of those things is your concern, having a robust solar and storage manufacturing supply chain in the United States is a solution to that problem. On the debt piece, right? Stimulating that economic growth. Because really, I mean, at 38 trillion and counting with the interest rates going up on every bond deal that we're doing at this point, because countries are worried about our ability to actually pay back that debt, like without growth, we're screwed. And again, no growth without low cost power. So.Sabah Bayatli (41:29.966) One hundred percent, and I don't know if you had a chance—I shared with you over the email a couple days ago that energy consumption growth rate in certain countries, so it compares between China, yes, us, Europe, Japan and I think there was one more country there. So if you look at the curves for the US and European and Japanese, it's literally flat and probably shrinking toward the end, especially in Europe, slightly in the US. Just for the sake of the audience, I'm talking about how much energy we are consuming as a country in a calendar year, right? And this graph basically compares, like it goes back to the 1990s all the way to 2024. I want to paint a good picture for the audience. So all the curves for Europe, US, Japan is basically flat and shrinking. So we are shrinking even in our energy consumption. Yes, efficiency plays a role, obviously, and we are being more efficient and we have better lights today.Once you look into China's curve, you will see this exponential growth in the energy consumption happening since 1990s. My takeaway from that graph, Doug, was if we truly want to grow to your point and bring manufacturing back to the United States, we really need that curve. It's not an option. It's not an option. I mean, it goes beyond that. I mean, manufacturing on one hand, if you want to ensure them back to the state, you really need that curve. You need to grow it on the energy market. Otherwise the energy pricing will inflate and inflate very, very quickly in the U.S. And I can see it easily. But the second story here on the data center, everybody talks about the AI. For you to have an AI, you have to have large, humongous data centers, consume a lot of power, consume a lot of energy. If we reach out to the point that we are worried about not having data centers in our community because we don't have enough energy for them, this is a national security. Basically that means that we will force ourselves to send our data centers to other countries overseas to them. Like this is a national security. Like people need to understand the concern there. So it's like, honestly, people in DC need to understand we don't have an option. We need to bring every single resource online as soon as possible.Bring the solar, bring the wind, bring the gas, bring more batteries, guys. We need it. Because to your point, we want to grow and we need to grow.Doug Lewin (43:56.206) That chart that you sent me, and thanks for sending it, I will try to just put that in the show notes so people can go see it there. But it basically shows the US at like 4,000 terawatt hours. Texas is roughly at like a half a terawatt hour. We're at 460 gigawatt hours, so just shy. Though this year we're tracking to be right at about a half a terawatt hour. And that's roughly, like you said, flat over 20, 25 years, really going back to the turn of the century. China at that time was at like a thousand or 2,000 terawatt hours and now is at 10,000 terawatt hours. Twenty-five years ago, they consumed half as much power as the United States. Now they consume two and a half times the amount. And that means that they are positioned to serve that data center load in a way that we are not. And again, if this bill passes, we're cutting that off.I got two or three more things I want to ask you about before we run out of time. One, which is very confusing to me, I'm still trying to understand FEOC, foreign entities of concern. How has that changed in the Senate bill? So my understanding, let me lay my understanding out and then you set me straight, tell me where I got this wrong. That at least out of the House side, and I don't think the Senate necessarily improved this, but it was basically like you couldn't get a tax credit for a solar or wind or battery or any other project, I think. If there's even like one component, if you've got like bolts that are made in a foreign entity of concern, whether that be China or something else, you can't get the tax credit. Now—the whole discussion we've been having, clearly we need a domestic supply chain. There's also a process to do that. You don't jump to the absolute, you don't snap your fingers and now everything you need is made here. These things have built up over time. They're going to have to be solved over time. Have the FEOC provisions changed at all? And how much do those worry you? Where does that rank of all the concerns in this bill?Sabah Bayatli (45:47.212) Yes, for the version that passed the House, there was two concerns. One of them is the phase out or the cliff from project development perspective, the cliff by the end of the 2028. So if you complete your project, not start construction, if you complete, this is very important for the audience to know. And the version that passed the House, if you completed your project before 2028, then you could qualify for the full credit. If you complete your project after 2028, then you qualify for zero. We had a cliff.That was a big deal for the industry. That was one issue. And they had, in addition to this one issue, a subset of one. They had a 60-day of construction. So once the act passes, within 60 days, you have to stop construction and you have to finish your project by then, 2028. Otherwise there is no credit for you. That was issue number one. Issue number two was the FEOC, basically. And for the audience to know, FEOC stands for Foreign Entity of Concern, right? So to clarify, we are not against FEOC. In fact, we are in favor and we are supporting it. But again, systematically you have to design it properly because the way in the version that passed the House, the way they were expecting basically FEOC to work is simply not workable from the industry perspective.I will simplify this to the audience. What they were looking basically, and I give you this as just an example and you can take it to the solar industry and battery industry too. What they were asking for is like, think about your TV. And they were asking like, for you to get credit for that TV as an example, right, which is the solar farm, then you need to make sure that the entire supply chain that helps you to create that TV is completely decoupled from China overnight. The reason I'm giving China specifically because we are just listing four countries: Iran, Russia, North Korea, and China on the supply chain. Honestly, the only important one here on the solar and battery is China.So they expect you to be completely decoupled from China overnight, like switch like this. This is in our world today. Forget this all—in this city, for everything else in our life, it's probably semi-impossible. So think about the TV. You have components that make your TV. You have sub-components that make the component. You have sub-sub-components that make the component. You have the raw material to make those sub-sub-sub-sub-components. And you get the idea. And now I'm telling you, take China out from this entire supply chain. And you're like, wow, this is complicated. This is not going to work, guys.That's basically what passed through the House and until Monday, June 16. And again, today's Wednesday, June 18, until Monday when there's a finance committee and the Senate introduced a new bill. I think now we see improvement, Doug. Now we see improvement. Now, now I can't tell you there's reasonable people. They're trying to listen and trying to. So on that second problem for you again, to clarify, we're not against, we want it. So that will incentivize to bring manufacturing back to the state. We just want to make sure it's systematically implemented.I think they are using percentages now. And that's really what I have on the whiteboard now. We are digesting it. But what happened is at project level, again, it works differently when you are at project and it works differently when you are a manufacturer for a product, a manufacturer for solar panel or manufacturer for a battery storage or battery product. So for project level, it basically asks you if you are developing solar and from 2026 forward, if you start construction, then you have to comply with FEOC requirement. And the FEOC requirement has two legs. One of them is first, it basically prevents you, if you are an owner of that project, you cannot really claim credit if you are controlled or if you are one of the FEOC countries, which is like, makes sense. We understand we don't want to give the credit. The second leg is where the industry is concerned about. It's called material assistance. And that's what the Senate, we think they are fixing.So they are introducing percentages there. They are saying they introduced threshold and they say technology neutral across the board 2026 forward. If you start construction for your project, the Senate bill is expecting you now basically to have at least 40% is manufactured in the state or outside FEOC. I should take that back. So let's take solar farm to paint the picture clearly.So all the equipment costs for your solar farm, not the capex of the solar farm, only the sum of the component that you sum the cost for modules, trackers, transformers, inverters and a lot of other ancillaries, right? You sum. And now you have to also ask every supplier of those components, go to the module, go to the inverter, go to every single device and ask them at your project, how much percentage of this is coming from FEOC country, technically how much percentage of this coming from China. And now you need to put this in a mathematical formula when you say total cost minus cost that's come from FEOC countries over total cost that no less than 40%. So that's how the Senate is introducing frankly improvement. I think we are digesting it as we speak, Doug. I think it will create some complexity as well because now you have to go back to every single supplier, ask him sure, give me what's the percentage of your product basically has Chinese percentage in it, and you have to put all these basically in a formula and you have to make sure that you are meeting this formula requirement. I think it's much better obviously than what passed the House, definitely improvement. Plus the Senate bill that passed on June 16 also kind of like allow you to, if you start construction in 2025, then you don't need to worry about this formula. I think that's also helping the market to take some time until they build the system.Frankly, again, I probably will change my mind tomorrow because we are digesting it. Everything is evolving. I think it's workable. I really think it's workable. It's better. It's definitely improvement. And again, we're trying to improve things as well and people are looking for feedback. We met multiple people in Senate side and House side yesterday and people are saying, look, digest it and let us know what's the recommendation. What do you think? What do you guys think? And frankly, we want to be reasonable as well because we're not seeking for those incentives to stay forever.Doug Lewin (52:11.862)That makes a lot of sense. Okay, so some improvement, a lot to watch in that space. I also, before we run out of time, obviously the attention appropriately for this conversation and for the sort of entire energy and economic development world has been on the budget bill in DC, but this is the Energy Capital Podcast. We focus on Texas. I'd be derelict if I didn't ask you about the Texas legislative session that just ended and your sort of takeaways from that. Obviously we saw some proposals advanced pretty far, particularly in the Senate, but some of them a little farther than in the past in the House. But at the end of the day, at least in my view, cooler heads prevailed and none of these bills that would have really restricted the market passed. What are your takeaways from that? And what does that mean for you as somebody trying to create jobs and manufacture solar in the state of Texas?Sabah Bayatli (53:06.99)In 2023, we were expecting 2025 session to be heated session. And in fact, it was, I think it was even more than what I was expecting. There was, and I think you followed them very, very closely and probably your audience read your articles. There were like multiple bills, right? Like very, very bad bills. It's simply like indirectly just simply killed the solar development and battery storage development. We're talking about the siting bill. The other one that was dispatchable generation is basically incentivizing certain things, but forgetting that actually there is no gas supply over the next five, six years that we'll have energy crisis, guys. So I think eventually, cooler heads will prevail and reasonable people will make good decision and I think we saw it in what happened in this legislation. Yes, I think it was very noisy. We were concerned about it. Our people, our team, we're in the capital. Again, same thing. You educate your own drive, you educate this and your senators and Texas and you basically allow them to understand what the concern is and people listened thanks to multiple associations thanks to you and multiple other basically people who delivered this message to the community right so i think eventually people reasonable people will understand the big picture quickly will correlate with what is the benefit what is the risk of certain bill if it passes and i do like to believe i think we have reasonable lawmakers and texas as well who eventually decided not to pass any of those bad bills. So I think that's my conclusion about Texas legislation.Doug Lewin (54:38.926)All right, well, we are pretty much at time. Before we end, I want to make sure I heard you right and just sort of maybe give you a chance just to kind of summarize. Obviously, most of this discussion was about the federal bill. What do you want to see? How could this land in a way? I think it's clear the clean energy incentives are going to be reduced and eventually eliminated in this bill. But what are you looking for that could happen that would make it workable. And I also just want to ask, cause I think I heard you say, but I just want to make sure I understand this. Like if the House version passed, are you guys actually able to continue manufacturing?Sabah Bayatli (55:21.166)If the House bill passes, then probably that will be into the investment I would say for any manufacturing. If the House version passes, right? Because it basically doesn't allow you to get credit after a certain year because it tells you if you finish your project by 2028, you get the credit. If you finish your project after 2028, then you don't have the credit. That simply means there is no incentive even for manufacturing to count because by the time the manufacturing come, it will take us a couple of years. By the time they will start producing, it will take them a few years. They need at least four, five, six years to cover their investment. So it's just like a simple put. I think that will be the end of investment for any manufacturing in the state related to those technologies.Doug Lewin (56:05.664)And Sabah, just want to, you said earlier, what, 800 jobs? How much, how much investment has OCI made in the state of Texas or going to make?Sabah Bayatli (56:14.232)So again, to clarify Mission Solar, our sister company, the manufacturer for solar panel, they actually announced plan to add cell manufacturing as well. This is south of San Antonio in the Brooks. Roughly, they are expecting 800 more jobs directly to be hired by the manufacturer themselves by this addition, by the cell. And you can imagine how much additional basically ancillary jobs this will take for community, how much economy will bring. And this is really a simple example.A single factory. If you look into Texas today and how many module factories we have in Texas, actually we have a lot. Like we have a lot around Houston, we have a lot around Dallas, we have some are coming around Austin. So it's actually benefiting. I mean, we are bringing new technology back to this state of Texas. We are developing it right here and we're trying, and not only solar panel, we're trying to bring more supply chain, right? So, I mean, we're talking about thousands and thousands of jobs, like thousands, thousands, really.I mean, more than 10,000, probably close to 20,000 only manufacturing. Honestly, if I just scale it up to the state of Texas, and what's nice about it, we are in like this manufacturing facilities are located in the state of Texas, but they are not only serving Texas, they are serving the entire US. They are selling panel to the entire US operation, right? So that's on the solar side. I like to emphasize, Doug, as well on the battery, we need to do the same thing on the battery. I mean, forget about the energy market.I think battery technology is something we cannot let go. We have to understand, we have to grow. It is about national security. We have, it's not about EVs, it's not about energy market only. It's about EVs, it's about energy market. But it's about national security as well. I mean, and I think we are seeing it in Ukraine today. We'll see it in Iran-Israel conflict today. People are using those for drones, for robots. Like we cannot let that technology go.Doug Lewin (58:07.052)We cannot be reliant on China to get batteries that are just powered drones. Like that is just not okay. Yeah.Sabah Bayatli (58:13.378)You just can't. You have to have good technical people. You have to have good skills in this country who's able to not only manufacture this for you, but do research and development and produce more and produce more and evolve. You need this capacity in this country. Otherwise, it's a truly national security deal down there.Doug Lewin (58:32.184)So Sabah in closing, and we do need to end. So just in like a minute or two, like what are the main things that the Senate could do that would allow these 800 jobs at your manufacturing plant, all the other manufacturing plants that stay open, but would also meet their goal of phasing out the incentives?Sabah Bayatli (58:49.586)Wonderful question. We are trying to resolve it today. Doug, I probably will have more clarity over the next few days, but now I think we do. Again, it's two elements, right? It is the phase out and the second is the FEOC. Those are the two things, super high level if you want to think about what's going on. So I think I would ask from the Senate based on the bill that was passed on June 16th, if we can just slowly phase out instead of like a dramatic drop from 100% to 60 to 20 to zero, if we can ask the Senate for more gradual. I think phase out, I think that will help. Frankly, not only to me as a developer and owner for storage projects and solar projects, it's only good for manufacturers because they need a customer, they need developer to buy their product eventually. So they need more like leeway. So that's first ask if we can be like a bit more gradual on the phase out. That's first ask.I think second ask about the FEOC, I think what they're presenting is workable. I can see how they are thinking. They're trying basically to bring manufacturing back to the state. I think it's question of percentages. I think the super high level in the approach is workable. I think it will create a lot of administration burden. I think people in the industry will probably hate me to hear this. It's workable. I think it will create some burden, but I think it's down to percentages. Can we really without breaking the supply chain? Can we comply with those percentages over the next few years? Because percentages start at X percent and increase by 5% or 10%, right? And it is project level different when you are manufacturing, producing the solar panel is different when you are producing batteries different. So everything is different. So I think as in this study, we have to look closely and we need to understand, is this implementable? Do we have any issues? If it's challenging, it's okay. We like challenge and we'll make it. That will motivate us to bring manufacturing back, but we just don't want to break it. That's really the big picture.Doug Lewin (01:00:47.918)Now that makes a lot of sense and dare to dream that maybe as we said earlier, if those things can be done, as you said, maybe there's some potential that there could be some bipartisan agreement to that so that we don't end up in this whiplash situation of like on again, off again, which is kind of the worst of all worlds. Sabah, thank you for this. Is there anything I didn't ask you that I should have or anything else you want to say in closing?Sabah Bayatli (01:01:11.606)Wonderful. Really, Doug, I wanted to give you really the credit. I love your podcast. I love the articles. I read them thoroughly. I think there's a lot of great people in our industry today who are communicating. I think what I appreciate, Doug, I love how you dive into the topic and simplify the topic to audience, probably not necessarily from our market or from our market, but they are not probably up to speed on certain terms. And so really thank you. Thanks for doing that.Doug Lewin (01:01:38.562)That means a lot. Thanks Sabah and thank you for taking time. Appreciate it.Sabah Bayatli (01:01:41.4)Thank you. Thanks so much.Doug Lewin (01:01:43.8)Thank you for listening to the Energy Capital Podcast. I hope you enjoyed the episode. If you did, please like, rate, and review wherever you listen to your podcasts. Until next time, have a great day. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

Texas is adding solar at a faster pace than any other state. Solar and storage are powering Texas’ manufacturing renaissance, creating jobs, and lowering customers’ bills; even the state’s oil and gas sector is an eager consumer of solar power.And renewables are also pumping tens of billions of dollars into local — mostly rural — economies in the form of landowner payments and tax payments. We’re on track to add another 8-10 gigawatts in 2025, after adding about that much in 2024.In this week’s episode, I sat down with Sean Gallagher, Senior Vice President of Policy at the Solar Energy Industries Association (SEIA), and Daniel Giese, SEIA’s Director of State Affairs for Texas. We unpack the forces behind this record-breaking growth and what could help keep it going — as well as what could stop it in its tracks.The federal budget bill would cripple the boom. Texas is seeing historic levels of investment, in large part because of the 10-year certainty provided by the IRA. These tax credits are bringing down capital costs, reducing risk, enabling longer-term project planning, and driving investments in solar manufacturing.As Sean points out, this policy clarity has helped drive a wave of new solar and battery projects. And Texas is leading the pack, thanks to our land availability, pro-development bent, and robust demand growth.But the same projects that are thriving today could be lost tomorrow if federal tax policy changes too abruptly.Policy risk is rising. And it’s already hurting deployment.Federal tariffs. Delays in domestic manufacturing. A growing push in some counties to ban solar outright. It’s all adding up. SEIA recently reported that more than 5 GW of solar capacity in Texas was delayed or canceled just this spring due to trade policy and market uncertainty.Add in the threat of repealing or rolling back the IRA, and the fragility of this moment becomes clear. Developers aren’t panicking, but they are cautious. And that’s enough to slow the pace of deployment at exactly the wrong time.Storage is the backbone of reliability and we’re just getting started.Storage is no longer a “nice-to-have.” It’s essential. It’s one of the main reasons ERCOT’s summer grid outlook improved from a 12% chance of outages in 2023 to less than 1% this year.Daniel and Sean both emphasized how solar + storage is becoming the new standard and how distributed storage, especially, can help strengthen resilience while reducing strain on transmission.If Texas wants to keep growing solar and maintain reliability, batteries aren’t optional. They’re the glue that binds the new grid together.Final thoughtsThe clean energy transition is already underway, but the friction between policy and politics on the one hand and markets and technology on the other, is starting to slow it down.Texas has the fundamentals to lead the next chapter of America’s energy story: land, load, labor, and sun. But the national and state-level decisions we make in the next two years about policy, infrastructure, and transparency will determine whether we keep that lead or fall behind.This conversation with SEIA was timely given all the activity in Austin and Washington DC. Timestamps and relevent links are below.This was a free episode but your contributions support this podcast and the newsletter. If you’re already a subscriber, thank you! If you’re not yet a subscriber, please become one today and please recommend the pod to friends, family, and colleagues. The Texas Energy and Power Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a paid subscriber.Timestamps* 00:00 – Introduction* 02:00 – Breaking down the recent Texas legislative session* 03:30 – Rural benefits of renewables, why some legislators vote against their districts* 07:00 – How Texas rates nationally on solar & storage* 8:30 – Solar’s meteoric rise in Texas* 11:00 – Good bills that passed in the recent legislative session* 13:30 – How industry supported bills addressing recycling, consumer protection* 15:45 – The federal budget bill and its potential impact on manufacturing* 18:00 – Data center and AI companies’ support for renewable energy* 20:00 – Without solar & storage, the economy will slow* 23:00 – Winning the competition w/ China for electricity supply chain dominance* 27:30 – The three incentives that support domestic manufacturing* 29:30 – The impacts of the budget bill on Texas* 34:00 – Grid operators and regulators say we need continued solar development* 37:00 – Where will tax credits go from here* 39:00 – Problems with the budget bill: abrupt end of tax credits instead of ramp and Foreign Entities of Concern (FEOC)* 44:00 – Prospects for residential solar / distributed generation in Texas* 46:00 – Initiatives SEIA will be engaged with at the PUC* 48:00 – Support for solar power and SEIA’s call to action & how to get involved ResourcesGet Involved: Solar Powers AmericaSEIA Resources* Solar and Storage Industry Statement on Proposed U.S. Senate Finance Committee Reconciliation Text* Hundreds of American Solar Workers and Advocates Rally on Capitol Hill With a Message to Congress: “Don’t Kill Our Jobs”* REPORT: U.S. Adds 8.6 GW of New Solar Module Manufacturing Capacity, One of its Strongest Quarters of Growth in U.S. History* Solar Market Insight Report Q2 2025Other Podcasts, Articles, Websites Mentioned* Pakistan’s Solar Boom. Volts.* Energy Submission. Texas Energy & Power Newsletter* Impact of Limiting Solar and Wind Development in the ERCOT Market. Aurora Energy Research* CPS boss says taking away renewable tax breaks will just shift the costs. San Antonio Express News.* Gridstatus.ioTranscriptDoug Lewin (00:05.816)Solar was under attack in the Texas legislative session that recently ended. Now it's under attack in Congress. Why is this happening for resource that has delivered so much benefit? We dive into that in this episode of the Energy Capital Podcast. I'm your host, Doug Lewin, and this week I was joined by not one but two guests, Sean Gallagher, Senior Vice President of Policy for the Solar Energy Industries Association, and Daniel Giese, Texas State Director for SIA. A quick note, we recorded this pod last Doug Lewin (00:35.436)week before the Senate version of the reconciliation bill, the budget bill was released. So we got into what happened in the House bill. We talked a whole lot about what happened during the Texas legislative session. We talked about the meteoric rise of solar and what that has meant for the state of Texas. We got into all kinds of things, but not the Senate version of the bill. We will put in the show notes. You will be able to find there, a statement on the Senate bill, but we will not discuss it in this episode. Doug Lewin (01:04.728)This was a great episode. Really enjoyed talking with Sean and Daniel. think you're going to learn a lot from this. As always, please become a subscriber to the Energy Capital podcast and the Texas Energy and Power newsletter at douglouen.com. Please leave a five star review wherever you listen and please enjoy the show. Thanks for listening. Doug Lewin (01:27.608)Sean Gallagher and Daniel Giese. Welcome to the Energy Capital Podcast. Daniel Giese (01:31.256)Thank you Doug. Good to be here. Sean Gallagher (01:32.76)here. Sean Gallagher (01:33.175)Thanks for having us. Doug Lewin (01:34.872)You guys are doing great work at SIA on behalf of the solar industry. And obviously it is a fascinating time, too fascinating in my view, what's going on in the solar industry. Let us start with Texas. We are definitely going to jump to talking about federal and what's going on in Washington, DC, but it's energy capital podcast and I cover Texas. So Daniel, we'll probably start with you and maybe just kind of introduce yourself very briefly, but talk to us. You're obviously, Doug Lewin (02:04.62)leading things in Texas. Why in a state where solar is delivering so much value in the state are we still seeing these legislative attacks? I get asked this all the time and I feel like I'm really struggling to explain it. So maybe you could help me, Daniel. Daniel Giese (02:19.032)Sure. Daniel Giese (02:19.352)Yeah. So we had a, you know, session just ended this month. And, know, like you said, there's obviously going to be challenges in a legislative session. There's no limit on, you know, what types of bills, how many bills legislators can file. You know, this year we saw over 8,000 filed. At end of the day, only about 1,200 of those actually passed, but you have to keep them all serious. And so there was probably over 200 bills that, you know, I was personally tracking people in the industry tracking that dealt with, touched on our issue. Daniel Giese (02:47.252)Unfortunately, a lot of those were negative, but we made it out okay. It was actually a pretty good session for clean energy, for energy in general. Nothing bad happened to us. Other like past legislative sessions, there's been some more challenging legislation passed. This time around though, think cooler heads prevailed and legislators just looked at, they just did simple mathematics that you cannot meet the demand that this state is seeing. That's through population growth of people, growth of businesses moving in, the types of businesses moving in that are using incredible amounts of energy. Daniel Giese (03:17.038)They're going to need energy when they get here. They can't sit around and wait. So the simple supply and demand won out at the end of the day. And legislators, the cooler head prevailed and they just saw that the only way to meet the demand that's coming is through clean energy growth, energy growth in general, and all of the above. Doug Lewin (03:32.226)think that's right. And I just continue to wonder because, you know, and I put together a podcast and video that's on YouTube with some of the testimony during Senate Bill 819, right? You just see so many folks, particularly from rural, deep red districts, talking about what solar and wind, but we heard a lot of testimony very specific to solar, what it means for them thinking to the gentleman from Nacogdoches County, who's like, I'm paying for my kids' college with lease payments out of solar. Like, these benefits are... Doug Lewin (04:01.742)very, very real. mean, we're seeing landowners get millions and tens of millions of dollars in payments. We're seeing school districts getting huge amounts of tax base. But then you have some, and I appreciate the way you're putting this, and like, cooler ads prevailed and most people realized it's good. But there is this vocal minority that even when their districts are benefiting so much, seem to be very stridently anti-solar. Like, how do you explain where that's coming from? Doug Lewin (04:29.58)The answer I've been giving lately is algorithms. think people are spending too much time on Twitter and their feeds are giving them a bunch of misinformation. like, is that your answer or where do think that's coming from? Daniel Giese (04:39.938)You've kind Daniel Giese (04:40.328)of seen the issue wrapped up in, historically, you know, Texas has been in all the above state, gone all in on all types of energy. And that's just simply because it's good for the economy. Lower bills for constituents is popular with their elected officials. And, know, we've kind of been wrapped up maybe in some of the culture wars of to be this type of legislator, you need to be against this type of energy. You know, I think a wide majority of people don't see that, but obviously it's challenging when you're wrapped up in that. So we did a study. Daniel Giese (05:07.948)along with some other stakeholders at the beginning of session on the economic impact of renewables in Texas and found that nearly $30 billion in landowner payments coming from clean energy, $20 billion in local taxes paid. And these are taxes not going to the state. These are taxes staying within local counties, the county commissioner's court, the county hospital districts, local schools going to roads, and just infrastructure that's needed. Doug Lewin (05:32.756)is, Doug Lewin (05:33.347)I'm sorry to cut you off, I just want to emphasize that that is billion with a B. Tens of billions of dollars of benefit to the state and it still just baffles me that there's like opposition. Daniel Giese (05:37.934)That's with a B, Daniel Giese (05:47.662)And that's a lot of the clips that you put together on the hearing you mentioned on SB 819, which is really an amazing hearing and sort of not the traditional type of hearing you see in a Senate business and commerce hearing for people that follow the legislature. Just a vast diverse coalition of people, people who call themselves environmentalists, people who call themselves conservationists, people who don't care about that issue at all, but host these projects on their property. So it's just important that you private property rights. Daniel Giese (06:15.246)played out, and that the legislators heard from the constituents who that would affect, you know, that type of... Doug Lewin (06:20.814)I just want to read really quickly a quote you guys had put out as was on a press release you guys had put out, but it was a gentleman who I featured in that very video, Michael Looney, VP of Economic Development at the San Angelo Chamber. San Angelo is in Tom Green County and he says, this is a quote from Mr. Looney, the Western part of the county is challenging even for grazing, given the lack of water, trees and how rocky the terrain is. However, we have three massive solar farms that have been able to make it work. Doug Lewin (06:47.722)And there was a fellow from Armstrong County talked about we're dry land farmers. We don't have oil and gas. Like we really need this. Well, I guess we'll continue to puzzle over why it's actually happening. But I think the point you made is the right point, which is cooler heads did prevail. There were more legislators that understood this is actually a really good thing for our state. Sean, I want to go to you. You obviously are with CIA at the national level. Doug Lewin (07:15.212)You look around the country and see all the different states and what's happening in solar. I've talked about it on this podcast a bit, but it'd interesting to hear from your perspective. Like how does Texas actually rate nationally for what's going on with solar in this country? Sean Gallagher (07:30.574)Well, Texas has become hugely important to us. And one of ways we demonstrate that is we hired Daniel a year or so ago so that we've got someone on the ground there. Texas has been the fastest growing solar state in the country the last several years. Texas has installed more utility-scale solar than any other state, including California, which was a longtime leader. And I think Texas now has the most utility-scale solar capacity of any state. think if you add rooftop in California, may still be slightly ahead. Sean Gallagher (07:57.71)Texas has also been the fastest growing energy storage state in the country over the last several years and has among the most energy storage capacity in the nation. And that's been super important in meeting energy demand. mean, the peak demands you had even a couple of weeks ago. And I think what's also relevant is that the discussion nationally is very similar to the discussion in Texas, right? If you want to achieve energy dominance, if we want to meet Sean Gallagher (08:23.192)growing energy demand, if we want to do it reliability, we've got to do it with resources that are available, the resources that are affordable, the resources that can be brought in line in a timely fashion. So those are some of the points that we're trying to make to the Congress as we have that discussion. Doug Lewin (08:37.453)Yeah, you guys had actually put out some information that we are seeing a huge uptick in solar that is paired with batteries. And I think it's always important to point out that they don't actually have to be paired, right? They can be, you could have batteries on the system somewhere soaking up that solar power when prices are low and putting it back. It doesn't have to be co-located, but we are seeing, this is actually about residential, but I think the numbers, I've got a slide on the- Doug Lewin (09:07.342)screen for those that are listening that in 2019 it was what a couple of percent and now it's looks like it's somewhere around 30 % on the residential side. I think we've seen pretty similar on the utility scale side too. That's right. So that solar and storage pairing is pretty perfect. Sean Gallagher (09:23.254)Yeah, and you're right on both counts, right? Co-located solar and storage, very useful, particularly to the project developer who can sort of take advantage of putting out that power on the grid when it's needed the most. Storage, whether it's co-located with solar or elsewhere on the grid, super useful to the system and to its reliability because, as you say, it can soak up power either from the co-located solar or from elsewhere on the grid and deliver it when it's needed most. Doug Lewin (09:49.366)Yep. You guys also put out some information. Texas installed the most solar capacity first quarter 2025, 2.7 gigawatts. To put that in perspective, the entire Austin Energy Service Territory is about three gigawatts. So basically an entire Austin worth of solar in one quarter. That was 92 % more than the second rate state. We will have all sorts of links to these different reports in the show notes. Doug Lewin (10:16.056)Highly encourage folks to check out, see his materials. They're really great. I'm putting up on the screen for those that are on YouTube that we had a total consumption in Texas from solar reached just about 13 % in the first five months. That's compared to 9 % the same time period last year. So in the first five months of this year, basically one out of every eight units of power consumed on the Texas grid were Doug Lewin (10:43.424)Solar, that's 50 % more than one year ago. I mean, this is just like meteoric rise. And it's just continues to sort of, it confounds me that anybody wouldn't be just like celebrating this fantastic thing that is going on. Daniel, I want to come back to you, because I definitely like, there's all kinds of attention. And I obviously have talked about it a lot here about the bad bills. Doug Lewin (11:08.974)humans, have this thing, right, of negativity bias. I'm not immune to it. But there were actually some really good bills passed in the legislature too, and that, you know, it's like if it bleeds, it leads, right? So you just don't see as many news stories about the good stuff. Can you talk about some of the good stuff that just happened in the Texas legislative session? Daniel Giese (11:26.752)Right. And you know this, but sometimes you're judged on, you know, what doesn't pass, like sort of the most popular thing and people don't focus on the good stuff that did pass. But like really one of the bright spots of this past session was the popularity of DG rooftop solar. There was some good legislation to streamline solar permitting for backup power systems, know, batteries and solar on your house. We've seen, you know, a lot of red tape around different areas of the state, which puts up barriers to. Daniel Giese (11:52.814)allowing people to put their own energy independence into their own hands and do what they can to lower their electricity costs by putting backup power systems on their house. So Senate Bill 1202 will streamline the local permitting and gets rid of lot of that local red tape. I think that goes hand in hand as well with legislation SB 1697 to direct the PUC to create a consumer guide for homeowners that are going solar. Sort of similar to how the DOE has a guide to going solar pamphlet on their website. Daniel Giese (12:21.792)Unfortunately, we saw over the past couple of years some bad actors in the rooftop solar industry, but know, sort of what's different about our industry is we took that into our own hands and tried to get out bad actors and showed that the industry is really doing things to make things right. we SB 1036, which will strengthen consumer protection in the state requiring solar cells people to register with TDLR. Cause you know, these are products that people in Texas really want. So they need to be able to one, they need to be able to get it on their house. Daniel Giese (12:50.478)in a reasonable timeline. And they also need to be able to get into relationships with businesses, you know, that are reputable at the end of the day. Kind of going on that a lot of good decommissioning and recycling legislation, HB3228 and 3229, which will require recyclers to keep a database on what components they have and what plan they have to recycle these components. That's to ensure that there's not a lot of graveyards of devices that we've seen around. Additionally, HB3809 will create Daniel Giese (13:19.95)decommissioning standards for battery energy storage systems, and then HB3824, which will require battery systems to have fire safety plans. So it's just a lot of proactive steps, which, you know, a mature industry takes, responsible industry takes. So some people could see that and say, well, why are you doing these things, which make you do something, but that's what, you know, good actors do. And that's really what you saw this session was problem solving. Doug Lewin (13:43.17)Yeah, you know, it's interesting, Daniel, there's some folks out there, some legislators that say industry will come in and meet with them and try to work through things. But we really see on issues where legislators do reach out to industry and say, Hey, there's a real problem here and I want to solve that problem. think the evidence and the data suggests that regardless of anybody's opinion, you can look at the track record because all those things you mentioned were just this session, but there was wind decommissioning. Doug Lewin (14:10.094)2021, I think, and then solar decommissioning passed in 2023, battery decommissioning in 2025. The added recycling bills you just mentioned by representative Lambert, like those were all bills that I don't know the details. You guys probably didn't get everything exactly the way you wanted it, but you engage. That's what the process is about. And you reach some kind of conclusion that makes the bad actors come up. I mean, that's what I kind of look at on the residential side, but clearly there's some bad actors out there and nobody denied that. So let's, let's address that. Doug Lewin (14:39.65)but you do it in a way that addresses the problem and doesn't hurt the businesses out there, which is the vast majority of them that are doing things the right way. Most wind and solar companies are recycling their stuff where you have ones that don't, that's where you pass a bill, but make sure that you don't cause all kinds of collateral damage while you're doing it, Daniel Giese (14:59.15)Right, and I mentioned, you know, only 1,200 bills passed, 8,000 filed. So obviously it's easier to kill a bill than pass a bill. So a lot of bandwidth. And I'd mentioned a good amount of bills. That's a lot of bandwidth. That was a long list. Yep. Yep. A lot of bandwidth spent by the industry to get stuff done. Doug Lewin (15:13.538)Yeah. Sean, I want to switch back and talk about national stuff, but anything you want to add on Texas as far as what passed or what didn't pass? Sean Gallagher (15:20.75)Well, aside from the fact that Denny did a great job, I think what was clear in Texas this year was it was a real team effort. We've worked with a lot of organizations down there. I think we've done a nice job of aligning interest. And it was that kind of work that led to the hearing you mentioned earlier where we had landowners from West Texas coming in and telling their stories. And that was meaningful. So I'm really proud of the work that we've done and with the coalition that we built in Texas to try to educate lawmakers on the realities of these projects. Doug Lewin (15:48.866)Yeah. And I think that's actually a good segue to talking about the federal, cause I'm curious, Sean, like how is that playing out at the federal level? Like we did see in Texas, a very, very broad coalition that was inclusive of, like you said, lot of farmers and ranchers, but a lot of economic development, right? We saw a lot of economic development corporations, the statewide chamber of commerce, Texas association of business through to like manufacturers and oil and gas, like all kinds of different folks involved because everybody benefits from Doug Lewin (16:17.046)low cost power, think a lot of times in the sort of some of the way, not always, certainly, maybe not even a majority of the time, some of the time in the media it's presented as oil and gas versus renewables, but in the real world, it's not really, I don't think the way it's playing out. I'm not following what's going on in DC nearly as much as I follow what's going on in Texas. What's that dynamic like in DC right now, particularly in the context of the one big, beautiful bill act, as I believe is officially called? Daniel Giese (16:31.502)Yeah. Sean Gallagher (16:44.642)That is the official name of it. And yeah, we're working with a wide array of stakeholders at the national level as well. Of course, we're working with our member companies, with other clean energy trade associations. We're also working with, and I'd say very prominently, the tech companies and other large businesses that have shown over the last decade that they're real big customers of clean energy. So the Clean Energy Business Association we're working very closely with. Sean Gallagher (17:11.874)You might have seen the other day the data center coalition put out a letter to the Congress saying, you know, these clean energy tax rates are important to us. We need power. We need it soon. And we want to be able to procure this power. We're working with some manufacturing groups and others. And so I do think there's a similar breadth in the kinds of voices that the Congress is hearing from because it is an economic development issue. It's an economic security, it's an energy security, it's a national security issue. This isn't just about Sean Gallagher (17:39.2)our industry, although it is about our industry, it's about jobs. Doug, as you know, we've successfully ensured solar and storage manufacturing over the last three years, kind of in an incredible way. had over the prior decade lost a lot of that manufacturing capacity, primarily to Southeast Asia. In the last three years, we've seen tens of billions of dollars invested across the US, mainly in the Southeast, a lot of it also in Texas. Sean Gallagher (18:05.614)to build solar modules, to build solar cells, wafers, the racking equipment, steel, inverters, sort of you name it, all that manufacturing has come back to the US as a result of this sort tax credit ecosystem that we have. And that's been good for communities, it's been good for jobs, it's been good for the economy, and it's been good for energy. Doug Lewin (18:26.67)It's so fascinating because just here all the time for people that really don't like renewable energy, they'll say, you can't power the modern economy with renewables. You can't power data centers with renewables. They're 24-7 loads. But then when you actually listen to the folks that are developing the data centers and operating the data centers, they say, no, no, we really want renewables. Now, they won't say we're going to operate on 100 % renewables, but they want to operate with renewables as much as they possibly can. Doug Lewin (18:54.808)for the obvious reasons, it's a zero marginal fuel cost and you're insulated from the price shocks that happen with gas from time to time, right? And for other reasons too. like there's certainly sustainability reasons, but in my mind, I think with the data center folks, it's like cost is right up there near the top. It continues to confound me that people say you can't operate a data center on it. And then I talked to data center folks and they say, well, sure we can and we're doing it. Sean Gallagher (19:17.762)Well, Sean Gallagher (19:17.962)Daniel and I, in fact, were down at a ribbon cutting for a large solar facility north of Austin. It's a 900 megawatt solar project that's powering a Google facility outside of Dallas. So the proof's in the pudding. These kinds of projects are powering data centers, and these are the kinds of projects that those companies want. Daniel Giese (19:38.412)Yeah, just read the news. There's a story on PPAs being signed between these companies every day, a lot here in Texas as well. Doug Lewin (19:46.22)Absolutely. Especially in Texas, we're seeing this. And this is like, again, just sort of astounding because I hear all the time, and this is, think, cross-partisan, but you hear it a lot, particularly in Republican circles, that we really want to dominate AI race. And I just don't see how that's possible, particularly over the next three to five years. I could squint and say maybe in the mid 2030s, like maybe nuclear and geothermal and some of these things start. Doug Lewin (20:14.966)even gas carbon capture and some things like that start to pan out. like in the next five years with a turbine crisis and the other technologies I just mentioned not quite there yet, getting there rapidly, but not there yet and not going to be there in the next three to five years. This is what folks are building, solar and storage. Sean Gallagher (20:30.87)I think it's important for us to say and for your audience to hear like we're for all forms of energy sources. You know, we're advocating for solar and energy storage, but we're not against anything. But you're absolutely right. I mean, if we want to win the data center race, that we want to win the artificial intelligence race, we want to win the manufacturing race like the time is now. Data centers and artificial intelligence companies don't want power five years from now. They want power tomorrow. They want power next year. And as you've noted in some of the things that you've written, Sean Gallagher (20:58.382)80 some percent of all the new energy resources that came online last year nationally were solar and energy storage. 80ish percent of all the new resources in the queue that are most advanced, that are most ready to get built are solar energy storage resources. And you know, yes, you're right. There are challenges with gas turbines, high chain. If you don't have it on order, you're not going to get it for four or five years. And that's not the same thing against gas power plants. It's just that they can't scale at the pace that the economy wants. Sean Gallagher (21:28.108)power. So why would you do something to suppress or depress or repress the installation of energy resources when the economy is clearly demanding more power and more power quickly? Daniel Giese (21:39.424)That's what I would hope that Congress emulates what Texas did this past session is, know, we knowing what I know about our state leaders, our state legislature, it's they want growth and they want it now. And you're not going to sit around and wait and put economic development on hold to wait five, 10, 30 years. You're going to use what you can now to power and keep the Texas miracle going. Doug Lewin (22:00.846)And that is what the house budget bill would do. wouldn't, you know, I do think we would continue to see solar and storage built, but it would be less of it. It would be at a higher cost and that would slow down the economy. would set us back in the race to develop these AI data centers and all kinds of other things we need for the economy. It really would, if not put on hold, at least significantly not tap the brakes, but kind of slam the brakes on economic development. Sean Gallagher (22:27.362)You know, the implications of that tapping the brakes or slamming on the brakes is that, as you said, energy costs are going to go up. So customers are going to spend up to $50 billion more on energy costs as a result of the bill that's in the Congress right now, if it passes as it's currently written. Tens, or if not hundreds of thousands of people are going to get thrown out of work, and that's all avoidable. Doug Lewin (22:48.334)So I think where I want to go next is to something you were just talking about a couple minutes ago, Sean, is the manufacturing piece and see as an institution not being against other forms of energy production. It's something I've been thinking a lot about lately and just wrote an article called Energy Submission about that China as the Financial Times, I think they created this term. Nobody's told me I'm wrong yet. If somebody else created it, find me in the comments and let me know and I'll give whoever deserves credit credit. Doug Lewin (23:15.256)But they called China the world's first electrostate, right? Obviously we're familiar with the term petrostate, right? A Saudi Arabia or an Iran or a Russia, like, you know, deriving their wealth from oil and gas resources. China made a very conscious decision a little over 10 years ago, like we are going to dominate the electricity supply chain. So you were talking a minute ago, Sean, about over the last three years, a significant uptick in manufacturing of lots of different components in the solar and storage supply chain. Doug Lewin (23:45.42)What kind of baffles me is that people, know, so we've got some in the administration that say, well, we're just going to dominate oil, gas and coal. Well, fine. We're already dominating oil and gas, particularly in Texas. The Permian now is the largest producer of oil on the planet. Why not dominate both? Why have only one half of the equation? Like we're on this trajectory. I just, it seems to me, and I'm wondering if you're hearing this in conversations in DC. Doug Lewin (24:13.762)particularly if any Republicans are thinking this way, right? Like this can be their success too, right? I think there's too much of a perception that like, well, if any of this stays in place, it's all Biden's thing. Biden's gonna get all the credit. Like they have all the levers of government now. Everybody realizes that. If we continue to get an increase in manufacturing, they're going to be able to claim a whole lot of the credit for that too. It would be their success too. And maybe this is just old fashioned and hopelessly naive. Doug Lewin (24:41.602)But like, I would hope it would be like an American thing, right? Like truly America first, Republican and Democrats, this is something we should all agree on is like, we want to win these economic competitions. The 21st century is good for all of us. Sean Gallagher (24:56.238)Yeah, well, I think it's clear that the president and the leadership in the Congress do want to win this race against China, particularly around data centers and artificial intelligence. And look, we want to work with the Congress to give them a win that will enable them to say, yeah, this is our success, right? So we're not advocating to keep the Affiliation Reduction Act, every word, every comma. We want to work with Republicans to give them a bill that allows the industry to meet the needs of the economy, to meet the needs of national security. Sean Gallagher (25:25.422)And also allow them claim some credit because there is credit to be claimed. You're right. And what we want to see is these factories. We've got tens of billions of dollars of factories that are right now sitting and saying, do I build this thing or not? Right? Because one of the things that we were aiming for with tax credits a couple of years ago is let's bring solar module manufacturing to the U.S. first. Module manufacturing gets established. Then we got solar cell manufacturing. Cell manufacturing gets established. Wafers next. Palli's next. Sean Gallagher (25:53.696)Everybody's waiting in line to make sure that their customers are there so they can build the factory to sell those customers. And we can keep that going if we make some modifications to the bill that came out of the house. Doug Lewin (26:04.686)I just want to like double click on that a little bit more as to why that is so critical, right? Because regardless of what you think this country is going to do in terms of its energy policy going forward, it'd be hard to overstate like the rest of the world is moving to solar too, right? I mean, like the stories in 2024, Dave Roberts at Volts did a whole podcast on this. If I'm not mistaken, if I am mistaken, we'll edit this out. But I think, but I think I'm not mistaken. I think it was his podcast. Doug Lewin (26:31.104)It was Pakistan, right? It was like the fifth largest in the world for solar and they're getting like cheap Chinese panels. The world is going to demand this stuff. And if they're the only ones producing it, think of the power that gives China that we don't have an answer to. It's kind of terrifying. Sean Gallagher (26:52.046)That's why keep saying it's a national security issue as well as an energy security issue. You don't want the ability to produce electricity or energy to come from China any more than you want it all to come from the Middle East when it was oil, right? So we need to diversify the manufacturing base. We need to have at least a portion of it here in the US domestically. We've got the policies in place that have demonstrated over the past couple of years that we can do that. We don't want to shut that off. And it's important to note, Doug, Sean Gallagher (27:18.926)It's not just the 45X manufacturing tax credit that sustains those factories. It's the 48E, 45Y, and 25D installation credits that sustain those factories also because that's what creates the market for those factories to sell into. It's not enough just to have the manufacturing tax policy. You got to have the whole ecosystem. Doug Lewin (27:37.154)So Sean, to be clear, those different provisions you just said, those require domestic content in order to get, so it's not specifically a manufacturing provision, but to get the tax credit, you have to show you have the domestic content. Is that right? Sean Gallagher (27:52.59)Well, let me just put a slight modification of the way you said it. Sure, please. It's sort of a three-legged stool, all right? And what we did in 2022 is we created industrial policy for the first time in decades in the United States to sustain manufacturing. Three parts of it are there's the 45X production tax credit. So if you produce a solar panel, you get a specific tax credit for each solar panel or inverter or whatever you produce. There's the domestic content bonus credit, which means if you're a solar powered developer, Sean Gallagher (28:22.606)get an extra tax credit on your project if you buy domestically produced content. So that's the incentive for the installer to buy the domestic product. 45X is the incentive to the manufacturer to make the product. Domestic content bonus credit is the incentive to the installer to buy the product. And 48E and 45Y and 25D are the installation credits that help support the whole market so there's a market to sell those products into. Doug Lewin (28:48.482)Got it. So that's kind of the whole kind of wrap around it. You guys put out some stats recently. Daniel, I won't ask you to this from memory, but I'll say the stats and then you can add in other stats if you have some top of mind or put some context around this. So nationally, you guys did a study and said, if the, believe this was specifically based on the house passed bill, if the Senate were to pass it in that form. And I think I want to talk about this more. we'll come back to this after Daniel speaks here in a minute, but like, Doug Lewin (29:18.156)It's not going to pass in its current form. How exactly it's going to change, we don't know, but it seems highly likely, almost certain the Senate's going to change in some ways. But if it were to pass in its current form, $286 billion in lost investment. So that's a quarter trillion dollars in investment, over 300,000 American jobs, 330 factories shuttered, 51 of those factories in Texas. So that is like, what, 15, 20 %? Daniel Giese (29:41.153)in Texas. Doug Lewin (29:44.942)of the factories that would be closed are in Texas. That would include 34,000 Texas jobs. And then an additional $50 billion in consumer electricity costs. You could put any additional context or add any additional stats you want in there. I'm also just interested, Daniel, like, what are you hearing around the state from members, non-members, know, big consumers? Like, are we starting to see some of this activity already? Doug Lewin (30:13.08)go away because of the uncertainty? Are folks kind of hoping that cooler heads will prevail in DC and they're still moving forward with investment? Like, what are you seeing out there? Daniel Giese (30:22.454)You know, whatever happens, this is still a state that is going to have to meet demand by something. So I think you're still going to see energy growth happening. You just saw an announcement here. It's kind of near the solar facility that Sean mentioned, but T1 Solar Cell Factory manufacturing just announced $850 million investment in Milam County, know, a rural county, which is a big deal. And, you know, right now there's over 12,000 people in Texas that work in the solar. Daniel Giese (30:49.55)storage industry, like you said, by the end of the decade, if this bill passed as written, 34,000 jobs by the end of the decade would be lost, 51 factories closed. So it's a big deal. I mean, like I said, this is still going to be a growing state. And so we have to meet that energy demand somehow. Doug Lewin (31:07.158)Yeah. And I want to, for the folks that are watching on YouTube, pull up another, this is a chart that comes from Aurora Energy Research that shows the growth in solar. And we are seeing already, as a point I like to make a lot, Daniel, and I know you know this, but I want to make sure our listeners know it too, that we are already experiencing this demand growth. A lot of times the load growth stuff is talked about as a futuristic thing. In a lot of states it is futuristic. In Texas, it's not. Doug Lewin (31:34.734)Our load growth is over 5 % per year over the last three years, and it's 7.5 % so far this year. If it stays at 7.5 % this year, that'll be a 6 % growth rate over the last four years, which is territory we haven't been in since the 1960s. And I still just think one of the main questions that just has to be asked and answered by folks who are defending this bill is where is the power going to come from? Doug Lewin (32:04.074)not going to be building solar in Texas, and you've got hotter summers and AI data centers coming and got industrial electrification happening. You've got oil and gas wanting to hook up to the grid. Where are you going to get it from if not from solar and storage? I still haven't heard an answer to that. I don't expect you to answer it, but you can if you want. Daniel Giese (32:24.78)Yeah, we're waiting here too. Doug Lewin (32:26.998)Yeah, yeah. Sean, anything you want to add to that? Otherwise, I'm going to shift gears a little bit, but definitely don't want to cut this short if you have anything else to add. Sean Gallagher (32:28.043)Exactly. Sean Gallagher (32:34.914)I'd just say you're exactly right. look, 6 % low growth annually. Think about it. The last 20 years, we've been in 1 % low growth territory. this is unprecedented. It's the worst possible time to slow down deployment of new energy resources. Doug Lewin (32:49.122)Yeah, exactly. And by the way, less than people listening are like, well, this is just people that like solar talking. We have had a number of different times, and he continues to say this. fact, so ERCOT CEO Pablo Vegas was in San Antonio, I think it was this week, Serra di Natale, San Antonio Express News had some good reporting on this, that he's saying, look, we have to have more renewables on our system. The load is rising too fast to not have it. Chairman of the PUC in Texas, Thomas Gleason said, Doug Lewin (33:17.612)Solar and storage are key for reliability in this state. We need them to be successful. There's enough sort of validation out there. If the folks who are running your grid are telling you you need it, you probably need it. Daniel Giese (33:29.506)Yeah, they're the people tasked with balancing the demand and the load and everything. And they don't have the luxury here in Texas to, you know, I like these electrons, but I don't like these electrons. They need every electron that they can get on the grid to do their job. So, you know, that makes sense that they would say that. Doug Lewin (33:45.482)Exactly, and I don't want to misrepresent their position because they are also saying we need more gas, right? But you guys are saying that too. You're not saying we're opposing any gas plant. You're just saying solar's growing. Let it grow. Daniel Giese (33:56.078)Yeah, especially in the shoulder months where there's a lot of planned, unplanned outages of thermal generation. can see, you know, in the past there would have been conservation calls, like in 2022, people that lived here remember that. And nowadays summer's boring. And that's really because of the growth of. Sean Gallagher (34:10.158)Boring is good. Doug Lewin (34:12.792)Boring is so good. I love boring. It's great. Like I would love to not have conservation alerts and it's good for my newsletter subscriptions, but I will be the first to say I'd rather not have the energy emergencies and rolling outages. I'll take the lower subscriptions and the lack of drama any day of the week, twice on Sunday. Sean, you were trying to say something, go ahead. Sean Gallagher (34:33.111)Well, I was going to add that you've seen some similar comments from Jim Robb, is the CEO of NERC is the National Electric Reliability Regulator. And he's observed that the growth of wind and solar and solar and storage in particular are going to be absolutely necessary to meeting demand growth over the next several years and have been already critical in meeting heat waves and cold snaps, whatnot. It's not just Texas regulators, it's national. Doug Lewin (34:57.068)Yeah, yeah. And it's interesting, Daniel, that you mentioned the shoulder months because we are recording on, what is it, June 13th. And today I was looking at gridstatus.io, which is a great website, by the way, great for tracking grid conditions all over the country. I use it almost daily, probably daily. Who am I kidding? I think I have a problem. But thermal outages are up today significantly compared to what they were earlier in the week. And so what we're starting to see happen is... Doug Lewin (35:24.824)They're able to take longer maintenance because there is so much solar. So they're getting themselves ready for those periods on the grid where there is scarcity and we really do need them. And they're able to earn higher revenues, right? So like in some sense, the shoulder months are contracting because we're getting hotter springs and falls. But as you are able to add more renewables and then you get into these weeks where it's like, okay, demand's a little lower. We know we got all the renewables. They can take them back offline, do some more work on them. Doug Lewin (35:54.016)and get them ready to go. Really kind of a fascinating thing that's happening is showing how solar actually supports the grid. Daniel Giese (35:59.852)Yeah, that's what I want a lot of our congressional friends and people in other states to see that the resources in ERCOT complement each other. And you don't want to go all in on one type of resource. You want a diversified portfolio the same way. You're not going to throw your 401k into one stock. You're not going to throw your credit into one type of resource as well. So like you said, our resources just complement each other in ERCOT. that's really a good example of that. Doug Lewin (36:25.934)Sean, I want to actually come back and just ask you as well. Like, you've been at SIA a decade. You guys have a lot of history with these tax credits. Can you give us a little bit of historical perspective? mean, I know they used to sort of come in and come out a lot, but you guys played an early role in shaping them. And I'm sure through this period, this very tumultuous period we're in, you're going to continue to shape those. So I'm interested in a little bit of historical perspective on them and also kind of like Doug Lewin (36:54.466)future looking, not just in the context. I am certainly hopeful cooler heads will prevail. But what is kind of the long-term trajectory for these tax credits if we get through this period? They're probably not, I don't know. Are they around forever? Like oil and gas tax credits, the intangible drilling costs were established in 1913. We still have them today. I think we ought to be having conversations about oil and gas tax credits too. I'm not asking you that question, but I'm curious sort of. Doug Lewin (37:20.564)you know, the historical perspective on these tax credits and where you think they're going longer term. Sean Gallagher (37:25.102)Yeah. So the solar energy investment tax credit, which is the, you know, the one that most installers and developers use was actually enacted when president Bush was president, that's Yubi Bush, right in 2005. Those tax credits have been extended by every president since, in fact. So a lot of people think of these as, you know, the Biden tax credits, but fact, this tax credit has been around for 20 years. It was extended by president Trump in his first term. You know, and it has Sean Gallagher (37:52.268)really fueled the dramatic growth that we've seen in this industry over the last decade in particular. Where it goes from here, I think it's a really good question. mean, we talked about the bill as much detail as you want. I think what we're looking for from the Congress right now is something, let me back up a second. What came out of the House very abrupt, Turns the tax credits off effectively at the end of this year. That's going to strand a lot of investment. People have made plans. They spent billions of dollars. Sean Gallagher (38:20.878)and they're going to see that investment sort of wiped away. So what we're looking for is a reasonable business-friendly glide path or phase out or, you know, we need some more time so people can plan and make their adaptations so that people aren't thrown out of work immediately, so that factories don't close down suddenly, and that we can keep supplying the energy that the country needs. Doug Lewin (38:43.5)Yeah, let's do drill just a little bit deeper into what if the house bill passed, because I think my understanding is the two biggest problems with it. And you correct me if I'm getting this wrong or missing other elements of it. The 60 days after enactment, right? That you have to start construction 60 days after, which is like no runway at all. And then the foreign entities of concern that is really just, in my understanding, written extremely broadly to be like any component of a solar Doug Lewin (39:12.49)installation that had any part from a foreign entity concerned wouldn't qualify, which is extremely bureaucratic, a ton of red tape, and would effectively, I think some, I don't know if you guys called it this, I've heard some people refer to it as unworkable, right? It's not something that would actually allow any projects to go forward. So correct me on anything I got wrong and add anything else in that's concerning to you. Sean Gallagher (39:34.378)No, you're absolutely right. Those are two of the key concerns. And you're absolutely right that the VIAAC provisions, we refer to them, foreign initiative concern provisions, are unworkably broad and vague. And part of the reason is you just can't. It will be impossible for a developer who's the taxpayer and who's going to have to demonstrate compliance with the standard to go two, three, four, six, eight levels back up the supply chain and Sean Gallagher (40:01.248)have any certainty as to where a particular part may have come from. Again, I want to come back to the idea that we're trying to work with the Congress here on these issues. We understand their concern with the Chinese Communist Party taking advantage of American tax credits. We want to find a way to place some limits on that, some limits on the ability of projects with components from foreign cities of concern to claim American tax credits, but in ways that don't shut down the industry altogether, which is effectively Sean Gallagher (40:30.67)what the bill that came out of the House would do. So we're trying to find ways to do just that, to make it workable, to align the actual language with the sort of regional goals of the Congress. And then in terms of the 60-day place in service, again, just unreasonable restrictions, too fast, it's too abrupt, it doesn't allow for any business certainty, and that's the case we've been making to folks in the Senate, is that businesses need a little bit of certainty. Sean Gallagher (40:59.382)in order to make plans and the way that the Bill of Cuba House doesn't do that. And I think both of those points have been resonating. senators understand where the industry is coming from. I'm hopeful that we'll see some improvements when we see language from the Senate. Doug Lewin (41:14.284)It's really just kind of the dissonance here, right? Like you can't have anything from a foreign entity, but we're also going to take away the domestic manufacturing incentives. So like you can't manufacture here, but you can't buy stuff from other places either. Like it makes my head hurt. Sean Gallagher (41:32.59)Well, I think this is part of what happens when you do energy policy through a tax bill is, know, it's the energy policy is complicated, tax policy is complicated, putting the two together makes it really complicated. you get some kind of weird sort of crossover effects. So we're really just trying to work with folks to make sure that they understand what the implications are of the things that they're writing and that those things can be workable for the industries again, so that we can keep putting energy on the system and powering those data centers. Doug Lewin (42:04.558)And maybe we can dare to dream, get to some like real bipartisan policy making, has, you know, like it sounds, almost sounds like silly to be saying that in 2025, but I'm, holding onto that because we've done it throughout our history. Right. I mean, the various energy policy acts, Daniel, you look young. You may not have been around, but Sean, not that you don't look young. look very young, Sean. Sorry. Everybody on YouTube could see it, but I know you've been around a while. Like you've been around in some of these discussions, right? I mean, the various energy policy acts of the past. Doug Lewin (42:33.57)where we have had, there should be wide agreement around so much of this. And I really think there is, if we could somehow figure out a way to get people out of their sort of polarized echo chambers and actually dare to dream, have some rational policy making and decision making, I think that we could get to a place where we would see more gas peekers and nuclear and more solar and storage, permitting reform, all that kind of stuff. Doug Lewin (43:02.328)Probably energy efficiency, probably a lot of things have bipartisan support, but we just seem mired in these kinds of budget battles right now. Anything you want to say on that? I got a couple of things I want to ask about before we run out of time. Sean Gallagher (43:14.922)I think all I'll add on that is that I read something that a wise man recently said, there's no red electrons and blue electrons. There's just electrons and we need all of them. So let's put his bending on the Doug Lewin (43:24.942)I Doug Lewin (43:25.082)was not a wise man, but thank you. Yeah. Thank you for saying it. Yeah. Yeah. That's exactly right. And honestly, like the solar and wind electrons tend to be more red at this point, right? I mean, you guys have done a lot of research on that there. Daniel, maybe that's a good place to bring you back in too. Like in Texas and a ton of other states, right? We're seeing all kinds of development around this stuff. Well, here's what I want to ask you. can add, Daniel, Sean and I were just talking for a while. You can add anything to that you'd like. Doug Lewin (43:53.902)I do want to ask you though, before we run out of time too, you guys represent not only the large utility scale, but you know, developers, but also on the smaller, on the residential side, this is a place where Texas is kind of lagged. We've not seen as much residential development. It's happening of course, but not at the kind of pace and scale that some other states have experienced. What do you think as far as the prospects for residential? Doug Lewin (44:17.942)solar and do think that some of the things maybe the legislature passed might change that or some of the resiliency concerns around hurricanes? do see as the prospects for residential solar in Texas? Daniel Giese (44:27.264)Yeah, well, you saw, you live in Texas, so you know that we face basically every type of natural disaster known to man and probably some that we don't even know about that happened out in West Texas that nobody's paying attention to. So we have fires, tornadoes, hail storms, hurricanes. And you saw the, there was a lot of good positive stories about rooftop solar and hurricane barrel last year where the only houses that had power were that had solar and batteries on them. And, know, they were sharing power with their neighbors. You know, a very popular product and, know, actually during session, Daniel Giese (44:57.366)I was tracking a lot of bills that were filed or a lot of good positive bills regarding DG and rooftop that came from some very wide range of the political spectrum. So that just shows you that it is a very popular product with a lot of different types of people and different types of legislators with different types of ideas. So I'd hope that going forward, we will not focus on any of the market design stuff of the past or other sorts of permitting issues using the police power of the state to tell. Daniel Giese (45:26.508)people what they can do on their property. hopefully, you know, in the future, we will be able to see that there's a lot of more legislation done that will, you know, encourage rooftop solar, encourage demand response. Cause it's something that just is popular with everyone. gives people their own power to do at their house what they want and to lower their own electricity bills. Doug Lewin (45:46.082)I mean, you talk about there being no red electrons or blue electrons, like having solar storage at your house to be able to keep power on after a hurricane, or if we start getting to the place where there's power shutoffs ahead of wildfires or during ice storms or whatever it might be. can't think of anything that is less red or blue than that. To that point, there is a PUC docket right now. The PUC has asked for questions. Doug Lewin (46:13.282)podcast comes out will still be within that comment period to make it easier for distributed energy resources to interconnect. I don't know if you guys are involved in that one. What are you guys looking at? What is CIA in Texas looking at as far as PUC and ERCOT issues, whether that one or other ones during the interim where you guys will... Daniel Giese (46:30.264)why to engage. so we'll be involved in that DR interconnection rulemaking. know, now the session's over, that's when more work starts at the PUC. So there's going to be the 4CP cost allocation study under SB6. There's going to be, you know, the way that ERCOT looks at its load forecast. The firming rulemaking, which will be coming up as well, will take up a lot of time at the PUC, I'm sure. I mean, the rulemaking is from the different legislation that was passed this session. So it's going to be a Daniel Giese (46:59.79)a busy, regulatory world for everyone. Doug Lewin (47:03.054)And to make sure, cause listeners might be a little confused by what Daniel just said about firming, but for those that have been listening to podcasts and reading the newsletter, maybe really keying into some of the details, there was a firming provision in, I guess it was House Bill 1500, right? In 2023, there was a prospective firming. So obviously during the session, I wrote about a about 3356 and 715 that would have made it retroactive and would have moved up the deadline or rather the sort of implementation period, I should say. Doug Lewin (47:33.07)for firming. But again, there was a lot of negotiation, deal making around firming in 2023, and that is on the books. It's just prospective to 2027, 2028, but that's right around the corner. Daniel Giese (47:47.094)Yep, right around the corner. And that's for what the 715 and 3356 is where you saw sort of even bigger coalition of people against that legislation, probably more so than SB 819. Doug Lewin (47:59.234)Yeah, basically because if you have any sort of a contract in the ERCOT market, you are going to be affected by that. It was really a wild piece of legislation. All right, great. So we are almost the time. I have a bunch more questions, but I think I'm going to just ask you guys kind of just in closing, is there anything that I did not ask you that you wish I would have anything you want to make sure we share with the audience before we Daniel Giese (48:21.72)We'll talk. Sean Gallagher (48:22.154)If I can, I just want to make a couple of quick points. We talked earlier about provisions of the House bill, the Act Bill, the place in service. It's important for your listeners and viewers to know also that C has been active around the 25D residential credit as well. So residential solar really requires that 25D credit. It was pretty clear soon after the IRA was passed in 22, and as soon as the Republicans took the House in 23, Sean Gallagher (48:49.102)that the tax credits were gonna be on their sort of list, right? So we've been working really for two plus years to shore up support from Republicans both in the House and the Senate to preserve these tax credits. That's why you saw things like 21 House Republicans sign a letter saying, don't kill these tax credits. It's why you saw things like four senators sign a letter that said, don't kill these tax credits. We've been working around the clock on all of these issues for the... Sean Gallagher (49:17.538)the entire solar power sector, whether it's manufacturing or big solar projects out in the field or rooftop solar projects. We've had, I think, five different lobby days on Capitol Hill before this week. Actually, yesterday and another one next week. So that gets us up to seven. A lot of work being done here to try to protect the whole industry. And we can still use the help of local companies, of customers and others. Sean Gallagher (49:45.494)You can go to solarpowersamerica.org. That's where we are, sort of put our campaign to work on this bill. And it will tell your listeners or your viewers how they can get involved. They can write a letter to their congressperson. They can make a phone call. can hold the meeting if you're a solar company in Texas, hold a meeting with Senator Cornyn's district staff, for example. Those things are still important. We've still got some time to make some improvements to the bill and we want to leave it all in the field. So the time's now. Sean Gallagher (50:14.488)to do all those kinds of actions so we can help your viewers and your listeners do so. Doug Lewin (50:19.31)Yeah. And Daniel, before I go to you for the same question, I just want to say to, obviously the 21 House Republicans that sent the letter didn't sort of stick with that. We don't know what will happen in the Senate, but I would just make the point for 435 members of Congress and 100 senators for, know, 435 representatives, 100 senators. If we want to have any chance of getting out of the debt crisis we're in, you have to have economic growth. This is a point I tried to make in that article. Doug Lewin (50:48.846)I will probably be diving much more into this in the next few weeks because I think it's just a critical point that is often missing was that if you're going to get out of the debt crisis, if you want to maintain tax cuts, frankly, you fill the blank, whatever your goal is for this country, you've got to have low cost power. A lot of times the administration talks about we need a 3 % growth rate. Doug Lewin (51:14.766)want to get negative growth or maybe you can eke out 1 % growth, increase power prices by 10%, 15%, 20%. It's a great way to slow down the economy. So if the idea is to extend tax cuts while still paying down a deficit, you better have robust economic growth. Robust economic growth requires low cost power. Solar is the lowest cost power. Doug Lewin (51:38.05)The cost, may still be the lowest cost prior. They take the tax credits away. It's just going to be a lot more expensive than it was before. And that's going to be a drag on the economy. I appreciate you making the point. And say the name of the website again. We'll put a link in there because it is important people get involved. Like you said, all hands on deck, leave it all in the field. The website is again. Sean Gallagher (51:58.658)The overall website is CIA.org, but the campaign website is solarpowersamerica.org. Doug Lewin (52:04.942)We'll put a link in the show notes. Daniel, what would you like to say in closing? What else do want folks to know? Or if I did not ask you a question that you were wishing I would have asked, you can answer that now. Daniel Giese (52:16.492)No, Daniel Giese (52:17.122)I need to reiterate to go to solarpowersamerica.org, know, get that information about the reconciliation bill and how to get involved. But really to keep it, since I'm based in Texas, it's during this interim, if you're a company listening, if you're involved in a solar company whatsoever, you really need to get involved where you have projects, talk to the local officials all the way from state to municipality level. Cause it's so important that they need to hear about what you're doing in their districts. Cause I've talked to legislators who Daniel Giese (52:45.824)a lot of renewable activity in their district and they had no idea that that was happening. So we need to do better at telling our story about what we're doing and the economic impact in the communities around this state. Doug Lewin (52:57.738)At the end of the day, that personal connection, we're human beings, we're social animals, that human connection is really as important as anything else, if not more. Thanks, Daniel. Thanks, Sean. Appreciate you guys. We'll have lots of links in the show notes so that people can find more resources about SIA. Yeah, appreciate you guys being on the show. Thank you. Daniel Giese (53:17.07)Thanks, Deb. Sean Gallagher (53:17.794)Thank you so much. Great to be here. Thanks for having us. Doug Lewin (53:22.008)Thank you for listening to the Energy Capital Podcast. I hope you enjoyed the episode. If you did, please like, rate, and review wherever you listen to your podcasts. Until next time, have a great day. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

On Wednesday, I published Energy Submission, a piece on how the U.S. is at risk of abandoning the battle for 21st economic supremacy as China accelerates its energy dominance. I recorded this podcast episode to go a little deeper into the consequences of the House-passed reconciliation bill and what we risk losing if we dismantle the tools driving the energy future. It’s available on YouTube with full charts and visualsEnergy isn’t just one issue among many, it’s a foundational issue. In what the IEA has dubbed the Age of Electricity, if we don’t have enough of it, we enter the economic race to power the future with one arm tied behind our backs. That’s what makes the House-passed budget reconciliation bill so dangerous: it guts the clean energy incentives that are powering our present and could power our future. It dismantles the Inflation Reduction Act’s momentum just as the world is moving into a new industrial era, one that will be defined by who has enough affordable electricity to fuel growth.Let’s zoom out.Globally, energy investment is booming. In 2024, $3 trillion was invested in energy. Two-thirds of that ($2 trillion) is going into clean power: wind, solar, nuclear, storage, and efficiency. Only $1 trillion is going into coal, oil, and gas. China, in particular, is accelerating at breakneck speed, building 277 gigawatts of solar in 2024 alone. To put that into perspective, that’s more clean energy in one year than the entire installed capacity of Texas’s grid (~180GW).Meanwhile, the U.S. is considering a bill that would eviscerate the progress we’ve made. It would slash the tax credits that have driven private investment into renewables, energy storage, and domestic manufacturing, just as that investment is beginning to deliver. More than 270 clean energy factories have been announced since the IRA passed. If this bill becomes law, many of them will be canceled outright.This isn’t theoretical. Projects are already being canceled in Texas due to market uncertainty. This bill pours cold water on an area where the U.S. has been gaining ground in manufacturing, jobs, and grid reliability.And it’s happening just as we’re entering a new age of electricity demand. AI data centers, robotics, industrial electrification, and electric vehicles are pushing power use higher than it’s been in decades. Even Elon Musk is warning that we could see electricity shortfalls by next year.You cannot meet 21st-century energy demand with 20th-century thinking. And yet, that's exactly what some policymakers are trying to do by doubling down on fossil fuel exports, suggesting "LNG power plants" (which aren’t a thing) are going to power our grids, and pretending we can drill our way to abundance while dismantling the tools that are actually scaling our grid.In fact, LNG export facilities consume massive amounts of power, up to 700 megawatts each. If you want to power exports and data centers, and still have enough for people to use in their homes, you need a vastly more flexible, modern grid.That means a diversified portfolio: wind, solar, storage, gas, geothermal, advanced nuclear, and demand-side solutions. It means better transmission planning, smarter markets, and policies that attract investment rather than repel it.This isn’t just about clean energy anymore. Clean energy is now simply energy. It’s about competitiveness, reliability, affordability and national security.While we debate whether clean energy tax credits are “too generous,” China is becoming the world’s first electrostate, a nation that doesn’t just consume energy, but manufactures and exports the infrastructure to produce it. China isn’t waiting for the market to figure it out. They’re building fast, and they’re controlling and locking up global supply chains along the way.The U.S. still has the innovation advantage. We lead in software, in AI, in energy entrepreneurship. But without enough power to run it all, that advantage becomes a bottleneck. As David Friedberg put it recently, energy abundance is necessary for every other kind of abundance. Without it, AI, biotech, and automation all stagnate.This reconciliation bill would deepen that bottleneck and cut off any hope of growing our way out of our deficit.We cannot cut our way to energy dominance. We have to build.If you care about growth, if you care about leadership, if you care about national security, you should care about energy policy. And if you care about energy policy, this bill should concern you.We need the Senate to fix what the House broke. The tools are there. The economics are clear. The stakes couldn’t be higher.Timestamps* 00:00 – Introduction* 01:30 – China’s energy dominance by the numbers* 03:00 – What is an Electrostate? China's strategy to be the first* 04:30 – Some Republicans’ preference to surrender clean energy dominance to China* 06:00 – Doug Burgum on the All-In Podcast* 09:00 – Debunking the “LNG Power Plant” Myth* 14:00 – All-In Podcast: If the Senate fix the House bill, we’re in trouble* 16:25 – All In Podcast: The gating factor for abundance* 18:26 – What's Next: Senate’s role and the urgency and importance of this momentResources & ReferencesPodcast Episodes Referenced* All-In Podcast with Doug Burgum (May 3, 2024)* All-In Podcast (May 10, 2024)Graphs & Articles Referenced:* How Xi sparked China’s electricity revolution - Financial Times* China’s head start on clean energy is shaping the debate on the Republicans’ megabill - PoliticoU.S. & China Energy Stats* China adds 277 GW of solar in 2024 – BloombergNEF* U.S. Electricity Annual Capacity Data – EIALNG & Grid Power* Freeport LNG Facility Overview* Experts React: DOE LNG Study Highlights and Implications - CSIS* DOE Report on US LNG Exports: Implausible Scenarios and Flawed AssumptionsEnergy Demand, AI, and Growth* Elon Musk on AI & Power Grid Strain – WSJ* AI Energy Demand Projections – IEA* Robots are infiltrating the growth statistics - BrookingsLegislation & Policy* U.S. House Reconciliation Bill Text aka “The Big Beautiful Bill” * The Federal Budget in Fiscal Year 2024* Inflation Reduction Act Clean Energy Provisions – CEA* Energy Dominance Executive Order – Trump ArchiveGrid Reliability & Energy Mix* ERCOT Grid & Market Conditions Dashboard* Winter Storm Uri, Elliott, & 2025 Arctic Grid Outages – FERC/NERC Joint ReportFinancial Implications & Deficit* CBO Interest Rate Scenarios on U.S. Debt* David Friedberg on Energy as the Key to Growth – Twitter This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe