Energy Capital Podcast

Everyone’s talking about the cost of power lately. But the Texas Energy Poverty Research Institute has been studying, talking, writing, and working to do something about it, for over a decade. In recent research, TEPRI found that 65 percent of low and moderate income Texans are cutting back on essential energy use, often turning off AC in extreme heat. But their demand reductions aren’t necessarily saving them much money or supporting the grid. Affordability is now a very high salience issue and there’s no one better to help us understand than TEPRI Executive Director, Margo Weisz. She talked about energy burden and affordability in Texas and the clearest paths to ratepayer relief.TEPRI’s latest research shows bills increasing sharply over the last five years and again in the next five years: TEPRI Releases ERCOT Electricity Affordability Outlook: Forecasting Residential Electricity Prices and Burdens (2025-2030)Energy burden is rising sharplyEnergy burden is the share of income spent on electricity. In Texas:* ~4.5 million households are low or moderate income.* Their average electricity burden for a low income Texan is nearing 7% — that is, they pay 7% of their income for their power costs alone — and expected to be 9% by 2030.* TEPRI’s modeling shows about a 29 percent increase in the cost of power over the last five years, with another 29 percent projected for the next 5 years.* The biggest increases are coming from transmission and distribution utilities.Wages are not keeping pace, leaving an average affordability gap of roughly $850 per year.Because of this, households are taking risky steps — or getting shut offAs TEPRI’s survey shows, they are turning off or limiting AC in dangerous heat, skipping essentials to pay the bill, and accumulating arrears until shutoff notices arrive. And 12% were actually shut off. But Texas does not track disconnects so we don’t know if this survey matches actual shut-offs.These actions point to system-level strain. They increase health risks and make reconnection more expensive for everyone.Efficiency and distributed energy are long term solutionsEfficiency is the fastest, cheapest way to cut bills and peak demand. Weatherization and efficient HVAC could reduce load and permanently lower costs for the households who feel the most pain.Distributed energy goes one step further. Community solar, batteries, and virtual power plants at homes and apartments can lower bills, reduce peak load and improve resilience. Final ThoughtsEnergy burden is the lived reality of the Texas grid. Millions of Texans are paying nearly 9 percent of their income for electricity, and many are already taking unsafe steps to stay connected.But we have real options. Smarter enrollment for bill help. Scalable efficiency. Community solar and virtual power plants that lower costs and support ERCOT.If this work matters to you, share it with someone who cares about Texas energy, and consider subscribing so we can keep tracking what works and where Texas can lead.Timestamps* 00:00 – Intro and why energy burden matters* 02:00 – Margo’s background and TEPRI’s mission* 04:00 – “energy limiting behaviors” often aren’t saving much money* 05:00 – Community Voices Energy Survey and behaviors* 06:30 – How Bandera Electric Co-op is helping their customers* 08:30 – Texas does not track disconnect data* 10:00 – “Sexy energy efficiency” and heat pumps; the split incentive problem* 12:00 – TEPRI’s approach to applied research* 13:30 – Defining and measuring energy burden* 17:00 – the potential for energy abundance and what that means for low-income Texans * 19:00 – Texas rates are lower but rising faster than the national average. Why?* 22:00 – How do we allocate costs for socialized grid upgrades and storm recovery? (SB 6 implementation)* 27:00 – What’s going to happen to bills in the next 5 years?* 30:00 – Where some downward pressure for prices could come from* 32:00 – What do we do about all this?* 35:00 – Bill assistance and the future of LIHEAP* 36:00 – Scaling efficiency and demand response in Texas* 39:00 – Virtual power plants in low-income communities* 41:00 – Enlightened self interest: helping those in need helps everyone* 43:00 – Margo’s closing thoughtsResourcesGuest & Company* Margo Weisz – LinkedIn* Texas Energy Poverty Research Institute (TEPRI) - LinkedIn Company & Industry News* TEPRI New Report: “ERCOT Electricity Forecast Outlook”* TEPRI Receives Outstanding Non-Profit Award at Texas Energy Summit* TEPRI 10-Year Anniversary Celebration and Future of Energy in Texas * Community Voices Energy Survey* E4-TX Geo-Eligibility Tool* Low Income Energy Assistance Program on TX System Benefits ChargeRelated Podcasts by Doug* Why Your Utility Bill Keeps Rising YouTube* Creating a Distributed Battery Network with Zach Dell YouTube* How Data Centers Can Strengthen the Texas Grid with Astrid Atkinson YouTubeRelated Substack Posts by Doug* The Affordability Crisis Deepens: Reading & Podcast Picks, August 31, 2025 * An Expensive and Unnecessary Capacity Market* Energy Inflation* Texas Has Never Had a Summer Blackout — Here’s Why That May ChangeTranscriptDoug Lewin (00:05.548)Welcome to the Energy Capital Podcast. I’m your host, Doug Lewin. And my guest this week is Margo Weisz. She is the executive director of the Texas Energy Poverty Research Institute or TEPRI. Everybody these days is talking about affordability, and rightfully so. Affordability played a very important role in the recent elections in New Jersey, Virginia, and Georgia. And we are seeing increasing numbers of Americans and of Texans that are struggling to pay their bills, that are making that terrible choice between food, medicine, and their power bills. As high as 30 and sometimes 40% of Texans making those choices. TEPRI has done incredible work with their Community Energy Voices survey, where they surveyed 6,500 low-income Texans and found that more than 60% of them were engaged in energy-limiting behaviors. Translation of energy-limiting behaviors is, in some cases, particularly with medically vulnerable populations, extremely medically risky. This is a problem we’ve got to solve together. And as I talked about with Margo, who’s just a fantastic leader in this space in Texas, the solutions actually can help across the grid. One of the things TEPRI is working on is distributed energy resources at multifamily facilities. And one of the things we talked about there is how all of us benefit from implementing those kinds of solutions. It’s what I’ve referred to—I didn’t come up with this term; I’ve heard it in a lot of different places—but enlightened self-interest. If we are getting solar and storage and energy efficiency out widely, particularly to low-income Texans, that strengthens the grid for all of us while it lowers their energy bills. So looking for those win-win-wins is what Margo and TEPRI are all about. I hope you enjoyed this episode and, as always, if you did, please share it with a friend, family member, or colleague and please leave us a five-star review wherever you listen. And with that, here’s my conversation with Margo Weisz.Margo Weisz, welcome to the Energy Capital Podcast.Margo Weisz (02:11.64)Thank you, Doug. It is awesome to be here with you. Yeah.Doug Lewin (02:15.662)We’ve been talking about this for a while, but this is timely because you guys have a really important paper coming out that we’re going to talk through a little bit. But before we get into all that, can you just share with the audience a little bit about the Texas Energy Poverty Research Institute? What do you guys do? What’s it all about?Margo Weisz (02:29.486)Right, we’re a statewide nonprofit and we address the acute energy needs of people with low incomes. And we do it in a variety of different ways. As our name says, we do some research and we’re going to talk a little bit about that today. And the cornerstone of our research is a survey of low-income households throughout the state. And I know we’re going to get to that. We also do some pilot projects. So we take what we learn in that research and then we try to figure out some strategies to solve some of the challenges that low-income households face by doing a variety of different pilot projects on the ground. We also have some web-based tools that we use, that we’ve created, and we do a little bit of education as well.Doug Lewin (03:09.134)Great. Thanks for that. We’ll have information on the organization in the show notes. So folks that want to learn more about TEPRI, I encourage you to go check out their website. You just mentioned the Community Voices Energy Survey. You all surveyed 6,500 Texans who are low or moderate income. Can you talk a little bit about what are some of the key takeaways from that for you? What a fantastic exercise. Yeah. So what did you guys learn?Margo Weisz (03:32.626)Right. I mean, it’s so important for us to really have our work guided very much by the experience and the priorities of the people that we serve. So we focus on affordability, reliability, and clean energy. What are their behaviors around it? What are their priorities? What are their concerns? So that’s kind of—we just ask a whole variety of questions about their experience in a day-to-day environment with energy. It’s very illuminating for us.Doug Lewin (03:59.756)Yeah, and one of the things that really stuck out to me out of that was 65% of the low and moderate income Texans you surveyed said they engage in, quote unquote, energy-limiting behaviors. I mean, that to me was sort of an eye-popping figure. Can you talk about why that’s so important?Margo Weisz (04:16.649)Yes. So I think these are the ways that people try to lower their bills. So they think to themselves, “How can I lower my bills? I can turn off my air conditioning when it’s, you know, a hundred degrees outside, because it’s probably really expensive if it’s a hundred degrees outside,” or “I can turn off my heat or turn down my heat.” You know, those are the variety of things—unhooking their appliances. I think what’s most interesting, though, about that, probably not so surprising that low and moderate income people are doing that, but they may not be doing it in a way that really optimizes savings for them. And so I think the takeaway from that is that there’s a lot of opportunity with demand response for them to be using these behaviors in ways that not only more positively impact their bills, but also support the grid. So knowing that 65% of them are already engaging in these behaviors, well, if they had more information about... Don’t turn off your air conditioner in the middle of the afternoon.Doug Lewin (05:16.62)We have a lot of solar power. Power is actually really cheap.Margo Weisz (05:19.106)Zero-cost energy in the middle of the afternoon. You know, so you can have your air conditioner on, but maybe, you know, at five o’clock, especially if you could get a little text that your retail electric provider let you know, you could save $5 if you, you know, right now turn your air conditioner up by three degrees. So I think that is the piece of the Community Voices Survey that is most helpful: what are people doing now and what are they trying to do and is it achieving that or are there ways to help them do that better to meet their goals?Doug Lewin (05:56.654)Yeah, I can’t tell you how many times over the last 20 years working in this space, people said, “Oh, demand response isn’t for low-income people. You know, too many of them or they don’t have the right technology or they’re like older and they can’t really understand it.” And it’s like, look at the data. Like 65% of them are doing it right now. But to your point, they may not be actually getting paid for that. They may be saving some, but to your point, like three and four in the afternoon in Texas with 36 gigawatts of solar power, like that’s not the time to be turning down. You should actually, if you had the right rate structure and incentives in place, you could actually be using more at three or four, as long as you’re set up to use less.Margo Weisz (06:39.714)Right, cool down your house. And one of the really interesting kind of case studies that we’re looking at right now is Bandera Electric Co-op because they have fairly large, low and moderate income household membership. And they created some software that allowed them to have really efficient and effective communication with their members about their energy use. And what they found, and we’ll be digging much deeper into this in 2026, is that they were able to make tremendous impact on their members’ bills by feeding them the information about when they should be using those behaviors. And so they’re also doing a lot of other really interesting things that we’re excited to dig into at Bandera. But I think this software that allows them to communicate in real time with their customers has had a huge impact on customer bills. So we’d like to see that and figure out, is that something that could be replicated by other providers?Doug Lewin (07:35.886)I mean, yeah, it obviously can be replicated. It may not be the exact same in every place, but that communication is just so absolutely critical.Margo Weisz (07:43.582)Right, and it really speaks—like people are already doing this, they want to do it. They want to do it well, and they’re really concerned about their bills. We know that we keep hearing about that. So, you know, and I know we’ll talk a little bit about what can people do.Doug Lewin (07:56.876)Yeah, we are gonna get there towards the end, but I will say, because I think it’s appropriate to say at this point, one of the things we could be doing is more energy efficiency, because what is actually—when people are taking those energy-limited behaviors, depending on how they’re doing it and when they’re doing it, it can actually be unsafe. And then you’ve actually got, I think the number you guys had—we’ll quickly, I’m gonna have a link to this in the show notes so people can find the exact facts and figures—but something along the order of 30% of the low and moderate income folks you interviewed had received a bill of disconnect notice of some kind.Margo Weisz (08:27.886)Right, and 12% of them had actually been disconnected. And I think it’s really important to note that because other states actually track their disconnection data, but we don’t do that in Texas.Doug Lewin (08:37.336)Which I find just wild. Like, I mean, you can’t manage what you don’t measure. And we’re like literally—like it’s being measured, but it’s not being reported. So like, great, you’re measuring it, but nobody knows.Margo Weisz (08:47.468)Right, it’s not only costs for the households. There’s ripple effects throughout the whole industry. I mean, there’s bad debt expense.Doug Lewin (08:53.681)This is good for nobody. This is good for nobody. Nobody benefits.Margo Weisz (08:56.514)This is good for nobody. So to understand, like, well, what is the extent of the problem? So our survey shows that 12% of low and moderate income households reported—this is what they report—that they were disconnected in the last 12 months from the survey. So we’ll go out again and see, because we also know since we did the survey in 2023, that rates continued to go up. So it will be really interesting in 2026 to see, well, in the last 12 months, what percentage of low and moderate income households report that they were disconnected or received a disconnection notice.Doug Lewin (09:28.11)Yeah, and one of the things I would love to see happen is, not the reporting—you’re absolutely right. Like that should come first. Like we just need to have a better sense of the data in Texas. Policymakers, particularly legislators need to like demand that of the PUC and hopefully the PUC can like figure out how to just get that out there. ERCOT has that information. There’s a number of ways to get that information, but then starting to connect the energy efficiency programs to those that are being like—that is a way, like yes, you can do bill assistance and that’s really important, like a one-time bill assistance, but if you do energy efficiency, it’s actually lowering your bill every single month and making those energy-limiting behaviors, which we know 65% are doing, less risky for them. Because if you have better insulation and better equipment and things like that, that’s gonna make it more safe when you’re engaged.Margo Weisz (10:15.202)The least sexy thing to talk about is energy efficiency.Doug Lewin (10:18.134)The most sexy, damn it! If a listener, if you haven’t realized yet how sexy heat pumps are, please look into them. They’re incredibly sexy. They’re sexy. Go ahead. At least as sexy as solar panels and batteries. At least, if not more.Margo Weisz (10:38.946)Right. Way more sexy than virtual power plant technology. Let’s just say. I think the challenge with energy efficiency, which we also are huge proponents of, is that you really have the split incentive for landlords and for low and moderate income households. Just a very large percentage of them are living in rental housing and in urban areas in multifamily. So we need to be more creative. And when we think about it, it’s just not a straight-out incentive, but what are sort of the targeted incentives for multifamily and for landlords to really invest in energy efficiency? Because it’s gonna be a huge impact on people’s bills and keep them a lot safer when it’s really hot or really cold outside and they’re exhibiting these energy-limiting behaviors. Well, it won’t be so bad if their home is already cool enough, you know, and then they do that and then retaining that air conditioning. So we think it’s really important as well and would like to see those programs expanded. We have created a web interface tool that four of the utilities currently subscribe to because one of the challenges that they have with their energy efficiency programs for low-income people is that historically contractors go out, they knock on doors and they collect income information. Well, in this day and age in Texas, who’s going to pass over their income information to some rando that knocks on their door? So the customer acquisition cost for utilities was very, very high and people were very uncomfortable with the process. So TEPRI created a geo-eligibility tool where households are automatically qualified based on where they live. The four largest utilities currently subscribe to that program through TEPRI and their contractors use it. And so those customer acquisition costs should be significantly lower. And hopefully, as our colleagues go and advocate for more energy efficiency dollars, the issue of customer acquisition for low income should not any longer be an issue.Doug Lewin (12:30.562)That’s amazing. It’s one of the things I really love about TEPRI is you guys have these great research reports. You’re kind of that, you know, it’s a little cliché, but like the think and do tank, right now. Right. You guys are actually building these tools to make the experience—well, to increase the likelihood that you can actually deliver energy efficiency.Margo Weisz (12:47.414)Right, like the think part is really important because you can’t know if what you’re doing is right if you’re not doing the research, but the doing part is equally as important because then you have to say, “Well, let’s try these things out and get to that next level of learning of what are the obstacles.”Doug Lewin (13:05.66)It’s really like a virtuous cycle, right? Because you’re thinking, you’re doing, you’re thinking, you’re using. Like as you’re doing, you’re getting that feedback from the market, from actually what’s going on in the world that then informs the next research. I’ve always loved that about TEPRI. You guys are awesome. So I want to make sure we talk about energy burden. This is a phrase that I think is getting used more and the sort of literacy around what that means is going up, but I still think it’s actually fairly low. Can you describe what energy burden is and what you found from your survey about what energy burden in Texas is like?Margo Weisz (13:36.63)Yeah, sure. So energy burden is a term used nationally to describe the percentage of a household’s income that goes to their total energy costs. And in the industry, anything over 6% of your income going to your energy costs is considered energy burdened. And so we do find that low and moderate income people are disproportionately, as you would expect, energy burdened. I think most concerning is that we’re seeing that those energy burdens have gone up and are continuing to go up. In Texas specifically, and I know we’re going to get to this, 80% of somebody’s energy costs are derived from electricity. And so what’s going on with electricity prices is most consequential to their energy burden. So I know we’re going to talk a little bit about it. We are about to put out a paper on affordability, and we distinguish electricity burden, which is a TEPRI term, but just in Texas, sort of perhaps most meaningful. And we say anything above 5%, the way that we calculated it, is electricity burdened. And we’re seeing those burdens really going up over the next five years. And they have gone up over the last five years as well.Doug Lewin (14:50.478)So for the average low to moderate income Texan from your survey, the energy burden was just about 8% and electricity burden was 7%. And again, just to put a finer point on that, that means all the income a person is taking in—like I want people just to stop and let that sink in a minute. If you imagine, dear listener, whatever you make in income, if 7 or 8% of what you made was going to pay your energy bills, this is what the reality is like for, what is it, 40% of Texans that are low to moderate income? I mean, this is not a small number of people.Margo Weisz (15:27.21)I mean, about 4.5 million households in Texas are struggling, you know, or low and moderate income. So it’s a big percentage of that. And so what do people do to be able to afford their bills? I want to step back a second because I think when people talk about poverty and they talk about challenges, we often think a lot about homelessness, as we should. We think about people having food on their table. And I think this idea that energy is consequential to the way that they live is just not something that hits people’s radar screen. Yet, it’s really foundational to how we live in the modern world. You know, not only is it a health issue in that, you know, we have very, very hot summers, we can have incredibly cold spells in the winter. So, especially for people who are medically vulnerable, which again tend to be disproportionately low and moderate income. But it’s like if you work these days, there’s so much—you know, you got to take a virtual call at home. Schools for the students, this thing’s everything. When my son was in school, in high school, everything was posted that he had to find. So if you don’t—what do you have to do if you’re not hooked up? You know, you really actually need energy in your lives. And when you think about your refrigerator, I mean, food costs are really high, but if you can’t keep your food cold, it goes bad really quickly. These are huge costs for people. So I think a lot of times people don’t think about how foundational energy is in our lives. I mean, our communication systems. In the case of an outage, the thing that people were most concerned with was communication systems. I need to know what’s going on and I don’t have access. So I think when people sort of think through all the different ways that they’re using energy, it becomes clearer to them, “Wow, this is really important. If people can’t afford their bills, what are they going to do? They don’t want to be cut off.”Doug Lewin (17:16.205)Yeah, and this is where, I mean, there’s obviously a whole discussion and dialogue going on in this country right now—right, left, center, everything—about sort of abundance, right? This is like a word everybody’s talking about. Some of it because of, you know, the Ezra Klein and Derek Thompson book. But just in general, you’re hearing this again, like a lot of the—I mean, in Texas, there’s a group active called Abundance Institute, and they’re like, there is this potential, I think, in the moment we’re at right now with particularly this scale-up of renewables and storage going on, particularly if we can get the demand side right, which is a huge if, if we could do the energy efficiency and DERs, that we could get to a point where we actually are driving costs—at maybe overall bills, if not rates, and we’re going to talk about that—downward. And I think that it’s important just to really—what we’re doing right now, right, is like diving deeper into what does that actually mean? If you could, somebody who’s making $30,000 a year, I’m going to do math on the fly, that’s, yeah, so 7% is roughly like two grand a year. If you can drive that down even a percent or two, and you’re giving somebody with $30,000 a year an extra few hundred dollars in their life, that makes a big, big difference. So that’s why this is so important. Anything else you want to say about that before I start asking you about rates?Margo Weisz (18:35.124)No, I mean, I think that’s, yeah.Doug Lewin (18:35.124)So in the report, while we’re recording is not out yet, but hopefully we’ll get this all lined up right. And when this comes out, the report will be out. It’s called ERCOT Electricity Forecast Outlook. And you guys have done some fantastic research again here, just like in addition to the Community Energy Voices Survey, this is a real contribution to really—I get asked this a lot, like what’s going on with Texas rates and you kind of point to EIA data and all that, but you guys have really put this together in a great way. I appreciate you sharing it before this so I could dive into it. So what you found was Texas rates are lower than the national average, but are rising faster than the national average. And one of the stats you had in there was rates were basically flat from 2010 to 2020. It was a little bit of up and down, but like basically flat for that decade. And then up 29% from 2020 to 2025. That seems like a pretty extraordinary finding. Can you talk a little bit about what is driving that 29% increase in the last five years?Margo Weisz (19:36.31)It was several different drivers. I think it was gas prices going up. I think it was investments in transmission and distribution. So it’s been weather and having to really figure out how to pay for all of the damage and the upgrades from weather. So yeah, we saw starting in 2020, just this big kind of movement upwards. I think we’re also seeing that a larger percentage of bills, when you look at them, the composition of your bill is becoming transmission and distribution costs. So as we continue to make more investments in transmission and distribution, that’s having an increasingly bigger impact on the bill. So not only are our investments going up for a whole variety of reasons in transmission and distribution, but transmission and distribution has increasingly become a larger percentage of the bills. And I think people don’t understand that. They’re like, “But you know, we can get the costs of energy in the afternoon,” you know, the generation piece of it towards zero. But if 40% of your bill is transmission and distribution, and that’s going up at a quick clip, then you’re going to see some increases in your bill. So yeah, I mean, to your point, like we did see that electricity rates are generally lower than the U.S., but when we compared them to states with similar climates, they weren’t really any lower. In fact, they were a little bit higher than those states with similar climates. And then additionally, while we did see rates going up across the board, Texas was going up at a much higher rate and higher than the U.S. average. So that’s what’s concerning.Doug Lewin (21:12.172)Yeah, and it’s really, it’s a little bit of a catch-22 kind of a problem too, because what you’re talking about is like all the extreme weather—that is one of the factors, right? Natural gas was clearly a factor 2022, the Russian invasion of Ukraine. By the way, to be clear, when we’re talking about rates, we’re talking about the all-in rate, right? Because you said T&D is making up, and I think you had a number in there, again, dangerous to this from memory, but it’s something on the order of magnitude of like 10, 15 years ago, like 28% of the bill was T&D, and that’s all the way up to 39, almost 40%. But this is the all-in bill you’re talking about, and a lot of that driven by gas, but a lot of it driven by the extreme weather, which then leads you as a, naturally, as a policymaker or a regulator or stakeholder advocate, you know, nonprofit think tank, like whatever, it probably leads you to say, “Well, we’re gonna need some more investment in the transmission distribution grid, we need to be more resilient to these storms.” But now you’re...Margo Weisz (22:08.974)You don’t want people to have these outages. And they’re very concerned about these outages. And for good reason, because the outages usually happen when there’s inclement weather. And so bad time to have an outage. So it is, it’s a little bit of a catch-22, but these investments are very expensive. And I’m sure you might ask me about this, but like how we allocate those costs—of who pays for it.Doug Lewin (22:30.35)Let’s talk about that now. How do we allocate those costs? Who pays for it?Margo Weisz (22:34.71)So historically, there’s been a different way to allocate those costs to the residential and commercial sector compared to the industrial sector. And so I think that we’re looking at that. The good news is we’re going to look at that allocation. Currently, the residential sector carries a disproportionate amount of those costs. So it hasn’t been particularly fair. And the good news is that we’re finally taking a look at it. And by the end of 2026, there will be some sort of a draft plan that should hopefully address those sort of inconsistencies in how those costs are allocated and who’s responsible for those costs.Doug Lewin (23:10.816)Yeah. And that’ll all happen through the Senate Bill 6 implementation that’s happening at the Public Utility Commission. So that draft plan, there’ll be some sort of... We don’t know what form this is going to take. It could just be a report with options. It could be a recommendation. I don’t think...Margo Weisz (23:26.178)It could be nothing at all.Doug Lewin (23:27.699)Well, there’s going to be something because the legislature did say in SB 6 that they needed something from the PUC. They needed them to look at it and give them a report. So there will be something on paper go into the legislature, whether or not that includes recommendations or merely options we don’t know, but there will be something. And to put a little finer point—go a little deeper into that with the transmission cost allocation—we’re really talking about that four coincident peak pricing. So I’ll put some links in the show notes. I’ve covered this in other podcasts, but the basic point for this conversation is if you are a really large user, if your load is over 700 kilowatts, it’s like a really large big box store and up, and far up, right? Including big manufacturing facilities, big data centers, all of that. You have the ability by reducing your peak usage on four days, June, July, August, September, to get your transmission bill way down. So that 40% you’re talking about, there’s the ability of a large user to reduce that, right? As a residential or small commercial customer, you cannot. All you could do is just reduce during that hour, but it’s just the reduction for that one hour, whereas the large users can reduce their bill for the entire year just by turning down during these four increments. So to bring this back full circle to where we started, those 65% of low to moderate income Texans that are taking energy-limited behaviors, if they were large users, that would save them money all year. But for these folks, like it’s only saving them money on that day.Margo Weisz (24:56.268)Right, right, right. So probably not even saving them money because they’re not really optimizing their behavior to actually when they would optimize their bill savings. And as we know, the market really isn’t set up to currently make sure that they are getting compensated for their behaviors at the right times. That’s the future. That’s the hopeful.Doug Lewin (25:16.198)That is the future. And I think what I’m hopeful—one of the things that will come out of that 4CP, you know, whether they go to some kind of 12 CP and make it 12 months or 6 CP, there’s all kinds of different sort of proposals floating out there. And there was a workshop held on this. I talked a little bit about this, actually quite a bit in the podcast with Travis Kavulla of NRG. And one of the things NRG has been advocating for is make whatever it is, 4CP, 12CP, whatever it ends up being, make that something that the load serving entity is exposed to. You don’t want to expose the individual customer to that. They don’t have the sophistication of a big manufacturing firm or something like that with energy managers on staff. But if they want to participate in something and save on their bills all year round, they could do that through their load serving entity, through their co-op or retail electric provider. Right. You think that one maybe holds some promise? Have you thought that one through?Margo Weisz (26:10.69)I think it does hold promise and I think there’s a lot of innovation. I feel like one of the things that’s so fun about my job and probably your job is just like all this innovation and all this possibility that you see. I think innovation has happened pretty quickly and I think a lot of people are seeing this. I think there’s a lot of reasons across the board for us to start looking at this in terms of grid support and our ability to use sort of all customer markets to support the grid. So yes, I feel fairly optimistic that we will see more services coming out that will impact customers. So there’s also some things that could be positive and there’s things that could negatively impact customers too in the future. So, I mean, one of the things that our paper looks at, and we think it’s pretty conservative, is what’s going to happen to bills over the next five years. So you sort of talked about like we looked first at what actually happened over the last five years. We can see that. Well, you know, an almost 30 percent increase in bills has been, you know, an incredible burden for all people, but especially for low and moderate income people. So going forward, we’re seeing that bills are going to rise almost another 30 percent. And we think that that projection is fairly conservative because it’s based on things that we feel that we can build into a projection model. And yet we do acknowledge that there’s all sorts of things that could be impacting bills that we will have to come back in three or four years and take a more granular look at and re-project out because we’ll know more. I think that people were very fearful that as we lost a lot of support for renewables, that that would really impact bills. But the truth is in Texas, we have so much solar in our interconnection queue and the batteries are playing such a huge role that the generation over the next three years probably is not going to go up that much. We’ve got a lot. We’ve got a lot of supply.Doug Lewin (28:09.814)And a market that still has price signals for the lower cost resources. So I think it’s important to note that with that in place, that counteracts some of that rising cost on the T and D side. Maybe, maybe not a lot, but some—puts a little down.Margo Weisz (28:25.166)Yeah, it’s close to $90 billion of investment that’s been approved for transmission and distribution upgrades. That’s a lot of money. So that’s going to impact bills. And if it’s 40% of your bill or 39% of your bill, maybe becoming a bigger percentage of your bill, we’ll have to go back and look. Then somebody’s got to pay for that. Now, that doesn’t include, what if we have another weather event in the next five years?Doug Lewin (28:53.09)I mean, again, that’s a big part of what’s caused the rising bills over the last five years, right? All the Winter Storm Uri surcharges, the Hurricane Beryl surcharges, the Derecho surcharges, they all stack up.Margo Weisz (29:02.862)It’s looking like we’re probably going to have some unexpected weather that’s going to require us to make investments that we can’t see right now. That didn’t go into our projection model because we don’t know. We could have said, “We don’t want to be conservative. Chances are, let’s add some more in there.” But we didn’t. So this is going up almost 30% and we feel like it’s fairly conservative. We looked at what we thought we could predict. We didn’t think that over the next three years, generation was going to be constrained in a way that would cause upward pressure, but it could. It could. We did show some increases in those costs starting in 2028. So we did see upward pressure and that is built into our model.Doug Lewin (29:45.558)And some of that, right, is I would assume the tax credits going away. Because there’s a lot of safe harboring going on where folks are still doing the projects with the tax credits, but that only has a runway out till... Well, I think even in ‘28, you can have some safe harbor, but it starts to go away somewhere right around ‘29.Margo Weisz (30:04.31)2027. Right, so we sort of show that that pressure is gonna start around 2028, a little bit, and then kind of goes up 28, 29, 30. But again, we’ll have to come back in a few years and see what’s going on. It could look worse than we think, it could look better than we think. Sure, of course. You know, those are things we didn’t know. So that was not a huge driver in our projection model, but we acknowledge it could be. We might have some benefits from co-optimization. We might have some benefits because DER integration and technology really becomes commercialized and there’s an uptake in the market faster than what we think. And so we know that could be a positive, but we didn’t put it in our projection model because it’s hard to know. We call it out in the paper, we describe it, we know that these are drivers that might affect the model, but not things that were easy for us to understand how to predict.Doug Lewin (30:54.766) Yeah, and if you’re wondering what co-optimization is, we’ll put in the show notes a link to a podcast I did with Beth Garza a year or so ago where we talked about it, but this is the sort of co-optimizing ancillary services in the real-time energy market, and it will go live right around the time this episode comes out. December 5th is the go-live date, and ERCOT projects that will save a couple billion dollars. So it’s nice to have all these low-cost generation resources coming onto the grid. It’s nice to see batteries getting in there and competing in major ways and some of the really spiky days that normally we would have seen thousands of dollars a megawatt hour. Now we’re seeing a few hundreds of dollars because all these batteries are competing against each other. So we are seeing some downward pressure there, but not to lose the point, 29% increase the last five years, projected 29% increase the next five years with, you know, 65% of over 4 million Texans already engaging in energy-limited behaviors.Margo Weisz (31:51.982) And already 12% already reporting that they’re getting a shut-off in that they’re actually being shut off and a much larger percentage of those reporting that they at least received a warning for shut-off. So they’re not paying their bills on time.Doug Lewin (32:03.982) So we’re likely to see those numbers go up, which brings us, I think, to what is one of the most important questions I could possibly ask. What do we do about this? So as part of your research is what are the things that can be done to help folks that are struggling and maybe even potentially some of these things like strengthen the grid at the same time? You guys had a few ideas in your report. You want to talk through some of those?Margo Weisz (32:26.668) I do, but before we do, just really want to quickly point out that the other thing we look at in the report is how do these changes specifically impact low and moderate income households? And so what we see is you talked at the beginning of our conversation about what those percentages of energy burden look like. And so if we’re seeing in 2025 that the average low and moderate income household has an electricity burden—because we’re just projecting out, we’re just looking at electricity for this paper, which is again 80% of the average household’s bills—if their electricity burden is 6.7%, 5% is considered energy burden. So they already have an energy burden starting in 2025. What’s it going to look like in 2030? And we’re looking at that going up to almost 9%. So that’s like almost 9% of their income. And we do put into that model an income increase of about 1 to 2% a year, depending on the geography. So we took a look. OK, we’re already showing, well, there’s going to be some income increases that we’re projecting in there. Even with that, this is what’s going to happen to the bills. We’re going to see almost a 9% electricity burden. Huge. This is not even their energy bill.Doug Lewin (33:35.772) So for low and moderate income folks, imagine—again, if you are low and moderate income, you don’t have to imagine this. If you’re not low and moderate income, imagine whatever your number is, take a minute, picture it in your head. Now take roughly 10% of that and imagine paying that on your power bill.Margo Weisz (33:51.63) Just your electricity alone. Yeah, just your power alone. That’s crazy. The interesting thing about that is, so I’m just gonna—I can’t remember the exact number, but it’s about $850, a delta of what we consider affordable and what—there’s about $850 that you just can’t afford.Doug Lewin (34:06.962) So annually, if we lower the number by $850, it would move back into like an affordable, not quite energy-burdened kind of a...Margo Weisz (34:14.156) But it gets a little bit harder because when you say a low and moderate income household, well, that includes everybody who’s at 80% or below of area-wide median income. Well, some of those people are at 30% or below. So those people are seeing, you know, $1,500 deltas in what they can afford each year. So it can be much higher depending on what your income is. So we’re just giving you an average. It’s an average of about $850-ish, the delta. But for some people, it’s much higher than that. So as we go into what can you do about it, we’re really looking at kind of a tidal wave of a problem in terms of affordability for low and moderate income people.Doug Lewin (34:57.334) And so some of the things you outlined, we talked about some of them, but energy efficiency, distributed energy resources, these things can help. We probably need some form of just straight bill assistance. We used to have this in the state in the form of the system benefit fund, but it went away 10 years ago or so. So we haven’t had any statewide—there’s federal bill assistance.Margo Weisz (35:16.17) There is federal bill assistance. We still have the LIHEAP dollars, but currently most of the staff for LIHEAP have been laid off. So it’s sort of unclear what the future of LIHEAP is, but the money’s still there. The money comes down to the states. I mean, again, this is just my thinking. This is not coming from anything I’ve read, but because the LIHEAP dollars come down to the state, we might not need that many staff at the federal level. That’s sort of our hope. Maybe it doesn’t need that staff.Doug Lewin (35:41.833) Administered here through Texas Department of Housing and Community Affairs.Margo Weisz (35:44.468) Right, right, and then out to these community service organizations throughout the state. So that money is still there and we’re, again, hopeful that it will continue, but it’s hitting such a small percentage of people who qualify. Again, I think we may quote it in the paper, but I believe it’s something like 5% of the people who qualify for that money actually receive it.Doug Lewin (36:05.98) Literally only a couple. Yeah, we’ll look it up and we’ll put the citation.Margo Weisz (36:09.672) Yes, it’s a small percentage. Yeah. So yes, but we need more. We need that state-level support. I think some of the munis have some support, depending on where you are. There’s probably some local support. But yeah, there’s just a huge challenge. Outright bill assistance is needed. But what are market-based strategies that we can be looking at? I think we should just be from here on out calling it sexy energy efficiency. It’s just, you know, it’s sexy energy efficiency. It’s what it is. We need to rebrand it. Absolutely. I do think it’s the lowest hanging fruit. I think again, Doug, you will know the numbers better than me because I do not have them in my head. But years ago, Texas used to be, I believe, number one in requiring energy efficiency.Doug Lewin (36:57.08) We were the first state to have what was called an energy efficiency resource standard. There were other states that like California had been doing it before that, but we innovated that model. We were the first to do it. Now of all the states, I think there’s like 27 that have a resource standard, we’re dead last in the size.Margo Weisz (37:11.564) Yeah. I mean, you know, it’s time. Yeah. It’s time for us to put money into sexy energy efficiency. And so I’d say that’s the easiest and probably the most impactful strategy. However, as we’ve talked about, we really need to think about that split incentive and what are those incentives for multifamily housing developers at the front end? How can we support those kinds of—whether it’s building codes or some kind of credits, tax credits they get for putting heat pumps in to multifamily and to be doing energy efficiency? So I would say that’s always number one. I think demand response has, as we’ve talked about, I think there is a lot of potential for that because we’re already seeing those behaviors being demonstrated. So now how can we really hone in on those to make sure that those behaviors are optimizing their bill savings? I think there’s a huge opportunity. Again, I’m super excited this year to be doing that case study on Bandera Electric Co-op and just understanding—I always sort of joke, you know, that when I sit in meetings, especially when I started this job, you know, I didn’t come from the energy world. I came from the finance world. So when I started this job and, you know, the acronyms and the complexity, and we’re talking about five different markets, and I was just like, okay, I just got to listen really carefully here to get caught up. I always would say this industry more than any I’ve ever been in needs like communications people. We need a lot of communications people, and how are we going to take demand response technology and demonstrate the value proposition to customers? And I think it requires kind of a different or a bolstered skill set than we have today. So, and I think if I had to say what are the biggest challenges, I think that’s one of the biggest challenges, but I also think it is one of the biggest opportunities. We are super interested, whether you call it distributed power plants, virtual power plants, in this technology because it’s potentially revenue-producing. I think it has a lot of potential for low income. It’s a little bit harder. I think it has a lot of potential for resilience. And we’re looking right now, we’ve just recently put some solar and storage on two multifamily sites and we’re talking to the REP about connecting these batteries, these commercial-sized batteries, to virtual power plant technology. And so again, I think when we got into this, it was much more nascent than we realized. We thought the technology just wasn’t being utilized for low and moderate income households. And we thought, you know, well, this is generating revenue and it supports the grid and there’s all these great opportunities for it. It can reduce transmission and, you know, it has all these layered benefits. This is the new best thing. And so as we’ve gotten deeper into it, which honestly is just a ton of fun, it’s like endlessly interesting, but it’s also got just a lot of kinks that need to be worked out and I often use the analogy as we’re just trying to like build a little trail of like how could this work, just like bang a trail out and then hopefully like that’ll be a pathway and that’ll become a road and then in the future there’ll be this like freeway where we have these distributed generation and it’s all just much more efficient and it lowers bills and provides support to the grid and that’s the future I think, you know, several people in the industry are hoping for.Doug Lewin (40:30.156) Love it. Love it. And I really do think that that’s a great sort of metaphor to use there because we do need to blaze some trails here. Like you said, it is early days with virtual power plants. And I would encourage everybody listening in whatever kind of role you’re in, whether you’re in energy or not, like to be thinking about these things because we’re going to need innovation from all different places. That comes from the nonprofits and NGOs and think tanks. It comes from the companies in the space. It comes from regulators, policymakers, and the general public. Like everybody uses energy. Like how would you like to see these products get rolled out to you? What kind of price points do you need? Like there’s so much thinking to be done here, so much innovation that is needed from all the sectors. And I’m thrilled you guys are playing a role. I want to say one more thing before I ask you if there’s anything else I should have asked you that I didn’t and give you a chance to say anything in closing. I want to also just frame this up that like there’s a phrase I kind of like here, which is enlightened self-interest, right? There’s a reason to help folks that are struggling that is just right and moral and just in and of itself. And we should do these things for those reasons. It’s in all of our religious traditions. We’ve all been taught this from a young age. It should be in all of our core, but we all know we live in the world and that is usually not enough. The enlightened self-interest comes in when you think of all those apartments with all those split incentives, right? And to be clear, the split incentive is the landlord owns the building and doesn’t pay the energy bill. The tenant pays the energy bill, but they don’t own the assets. So when they leave, they leave that stuff behind. So we’ve got to solve that problem. If we can solve that problem, we’re not only helping people. Winter Storm Uri was a lot about resistance heat in apartments driving demand sky high. To replace resistance heat with a mini-split heat pump, the sort of one that goes, attaches to the wall, you’re talking about like a few hundred dollars per kilowatt reduction. A gas plant is a few thousand dollars per kilowatt reduction. We could have a more reliable grid. All of us save money. So it’s like, yes, you’re helping people that really need help and you’re helping yourself at the same time, right? And I think if we could, if policymakers could see it that way, like nobody, nobody wants to see another Winter Storm Uri. And I do think the state’s better off than it was five years ago, but we still have problems on the demand side. And we’ve got these multiple drivers, reliability and affordability. Like we would all benefit from taking these actions. So you can respond to that, add to that, and then whatever else you want to say in closing, you want to leave the audience.Margo Weisz (43:05.718) Right. I think it’s lucky. It’s not always the case that the strategies that will help low and moderate income people will help us all, you know? And so when we do a project, we really try to look at what are those layered benefits? What are the layered benefits for the household? But what are the layered benefits for the energy landscape at large? And I think maybe we haven’t talked about being in an enviable place, but in some ways we are in an enviable place because the solutions will benefit the energy landscape at large and for us all.Doug Lewin (43:39.958) Is there anything else you wanted to say? I really appreciate you doing this. I’m so excited about all the work TEPRI’s doing. Anything I should have asked you that I didn’t?Margo Weisz (43:46.958) I don’t know, I can’t think of anything. Thank you, Doug. I appreciate you.Doug Lewin (43:49.183) We covered a lot of ground. Margo, 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 Peevey, 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

Cully Cavness, Co-founder and COO of Crusoe Energy, specializes in transforming wasted energy into computing power. He shares insights on how Crusoe repurposes flared gas and curtailing renewables to fuel modular data centers. With the rise of AI, their facilities now support tech giants like OpenAI and Google. Cavness discusses emissions reduction achievements, the challenges of thermal management in data centers, and innovative grid reliability solutions. He also emphasizes the importance of location-based carbon accounting in energy optimization.

Varun Sivaram, co-founder and CEO of Emerald AI, shares his expertise on AI-enabled data centers and their role in the energy grid. He discusses how these centers can shift from villains, raising costs and causing outages, to heroes that enhance grid reliability and affordability. Varun highlights the innovative Phoenix trial that cut power use while aiding the grid and emphasizes the importance of regulatory innovation in Texas. He also explores transformative AI applications and the potential for flexible load systems to reduce emissions while integrating clean energy.

Nat Bullard, energy analyst and co-founder of Halcyon, dives into the evolution of energy systems in Texas. He discusses how batteries are outpacing gas peakers due to their rapid response times and resilience during extreme weather events. Bullard emphasizes the growth of distributed energy storage, such as residential and school batteries, which could replace traditional power plants. He also highlights the importance of planning for cheap solar and flexible demand to optimize energy systems, urging a focus on real-world deployments over political debates.

Nat Bullard, an energy researcher and co-founder of Halcyon, dives into transforming dense regulatory filings into actionable insights through AI technology. He discusses the rising costs of gas turbines and shares a striking analysis of combined-cycle plants costing $2,500 per kilowatt. Nat also highlights China's booming EV manufacturing and its impact on the global market, alongside exploring Tesla's recent model updates. This engaging conversation sheds light on the convergence of transportation and power sectors, illustrating the rapid changes shaping the energy landscape.

This is a free preview of a paid episode. To hear more, visit www.douglewin.comMost solar panels are imported from China which now has the ability to manufacture over a terawatt (1,000 gigawatts) of solar modules every year — roughly equal to the entire installed base of generation in the US inclusive from every energy source.America makes less than 1/20 of that amount and even less when it comes to the more difficult task of manufacturing cells. But Texas is known for manufacturing and T1 — short for Type 1 civilization — is building solar manufacturing in Texas that could change the game. This is about energy abundance that is reliable, local, and affordable. As T1 CEO Daniel Barcelo told me:“I’ve been working in oil and gas and I am an old oil and gas guy who has run oil and gas companies globally. At the end of the day, it’s really about providing the lowest cost energy in whatever form it is and delivering that energy at a cost-competitive basis to the customer. That drives the philosophy at T1.”T1’s plan is straightforward and ambitious: a multi-site Texas footprint that connects a domestic solar manufacturing chain from materials to finished modules. The company has a module assembly plant in Wilmer in the Dallas area, and is developing cell manufacturing in Rockdale in Central Texas. Upstream, they’ve lined up domestic polysilicon supply from Corning to feed those lines.While T1 scales up supply, demand for power is surging. Texas electricity use is rising rapidly, driven mostly by oil and gas demand, cryptocurrency mining, industrial electrification, and data centers. Texas demand is up 23% in the last four years; most of that new demand is being met by solar power. When more of the equipment is made here, projects move faster and carry less supply-chain risk. And solar can be scaled very quickly to meet near-term needs.“AI needs energy. Data centers need energy. They need it now. It’s great to build nuclear plants in 2030. That’s awesome. But the world’s not waiting. And the big tech companies are not waiting. And right now, solar and storage can deliver it.”This is not either-or. Texas has long succeeded by adding the next tool that works. Solar plus storage are tools for growth and we should use them. Domestic manufacturing creates jobs and strengthens our energy security and global competitiveness.Texas has never waited for someone else to build our future. If companies like T1 can stand up the full stack here, we get more than panels. We get speed, security, control, and the ability to match ERCOT’s needs with Texas-made solutions.If you found this episode useful, share it with a colleague. If you want more Texas-first, reality-based energy coverage, subscribe and join the conversation.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.Timestamps* 00:00 – Introduction * 02:00 – T1’s Texas footprint overview* 04:00 – U.S. solar chain, Corning partnership* 05:30 – Jobs and polysilicon-to-module flow* 07:00 – Building U.S. cell capacity* 09:00 – Timelines and receptivity of Texas political leaders* 11:00 – Demand growth requires gigawatts per month* 13:00 – Competitive advantages of building in Texas* 15:30 – Oil and gas demand growth met by solar and wind, saving $1/barrel* 20:30 – When King Coal tried to kill natural gas and why gas won* 23:00 – Political economy of varying energy sources* 25:30 – Can the US build enough solar to meet domestic need and export?* 31:00 – Solar trade investigations, tariffs, anti-dumping rules, FEOC* 35:00 – Solar and manufacturing tax credits under OBBBA, “stackability”* 38:00 – How and why tax policy benefits all energy, including oil and gas* 42:00 – Will Texas continue to blaze trails and attract new energy companies?* 45:00 – Distributed power is “sovereign energy”ResourcesGuest & Company• Daniel Barcelo — LinkedIn • T1 Energy — Company Website + LinkedInCompany & Industry News• Reuters: T1 Energy and Corning agree to fully U.S.-made solar supply chain• PV Tech: T1 Energy–Corning “landmark” U.S.-made poly/wafer/cell deal• Manufacturing Dive: T1 to establish $850M solar cell facility in Texas• T1 Energy IR: Corning deal accelerates ‘Made in America’ solar • T1 Energy IR: Strategic investment in Talon PV Related Articles & Podcasts• How Batteries Are Reshaping the Texas Grid (with Suzanne Leta) • Beyond the Tax Credit Cliff (with Freedom Solar CEO Bret Biggart) • Creating a Distributed Battery Network (with Zach Dell)• The End of Solar & Battery Manufacturing in America? Studies & Policy Documents • S&P Platts 2022 Study On Electrification of the Permian Basin • Rystad Study on $/barrel savings • FERC Order 636 • Section 232 Investigations • Foreign Entity of Concern Guidance | Dept. of EnergyDoug’s Platforms• LinkedIn • YouTube• X (Twitter)TranscriptDoug Lewin (00:05.25)Welcome to the Energy Capital Podcast. I’m your host, Doug Lewin. My guest this week was Daniel Barcelo, the CEO and chairman of the board of T1 Energy. We talked about how they got their name in this episode. I think you’ll enjoy that. This is a fascinating company, headquartered in Texas. They are building out a full end-to-end manufacturing of solar in Texas. They started with the acquisition of a manufacturing plant, five gigawatts of solar module assembly in Wilmer, Texas, just south of Dallas. They are currently building in Rockdale, Texas, about 60 miles north of Austin, a cell manufacturing facility. So obviously cells are much more complicated to manufacture, much more complex than the module manufacturing. They are also in partnership with Owens Corning to get the raw materials actually sourced here in America. So that when they are done with that process in a year or two, they will have end-to-end American solar manufacturing. So we talked a lot about the potential for American manufacturing of solar, how big it is now, what its potential is to maybe counterbalance China, which is really dominating electricity supply chains throughout a whole number of different components, including all parts of the solar supply chain. They’re dominating that globally. Can America be a counterbalance? One of the things I really enjoyed about this conversation is Daniel has a great perspective, having worked in oil and gas for much of his career, really at the broad spectrum of energy. So I think that really comes through in the interview. I think you’re going to enjoy that. This is a paid episode. If you’re not already a paid subscriber, please become one today. You’ll get access to all sorts of things, roundups, reading your podcast picks, other paid episodes of the Energy Capital Podcast. Most importantly, you will be supporting the work of this podcast, the Texas Energy and Power Newsletter. They are not cheap to produce, and your six bucks a month or five bucks a month if you do an annual subscription is incredibly important, deeply appreciated. With that, let’s jump into the episode with Daniel Barcelo of T1.Daniel Barcelo, welcome to the Energy Capital Podcast. I am very excited to talk to you. T1 is making a whole lot of waves, people in Texas talking about the company a lot. Why don’t we just start from the beginning. What is T1 and tell us about the Texas operations you guys are standing up.Dan Barcelo (02:31.8)Great. First of all, Doug, thank you very much for having us. We’re always excited to talk about the T1 story, something we’re really passionate about as energy operators, managers, investors, historically. T1 Energy is building a domestic solar and battery supply chain that we want to invigorate America with clean, scalable, reliable, and low-cost energy. This is all about advanced manufacturing. This is about how do we bring advanced manufacturing capacity to unlock the most scalable resources we have. That’s what we’re doing. We’re doing this with our core foundational assets. We own and operate our five-gigawatt solar module plant just south of Dallas. That’s called G1 Dallas. And we are also building our five-gigawatt solar cell plant north of Austin called G2 Austin. Those two assets are foundational. The other part of the investments we’ve made is we also own a supply chain of polysilicon from Hemlock. Coupling that polysilicon supply chain coupled with the cell plant, coupled with the module side, we have a tremendous capacity to unlock what we think is a very scalable, renewable power asset we have available right now.Doug Lewin (03:42.39)Yeah, it’s pretty exciting because I see the vision of what you’re trying to do here, right? Because what we have in the United States right now, if I’m not mistaken, and you correct me on any of this I get wrong. This is your world. But my understanding is we’ve got something like 50 to 60 gigawatts of capacity of solar module manufacturing. So that’s sort of the last phase where you’re bringing the assembly, kind of bringing it all together. But you guys are going way upstream to raw materials. And you mentioned something just there. I’m not sure I heard what you said, but I do want to get more into this. I think you guys announced a deal with Corning, right? For some of the raw materials. Not sure if that goes through to the wafers, but I do kind of want to break that down a little bit, Dan, because I think the audience will really appreciate it. It’s very important. I think it’s very important that the United States have the full end-to-end capability for manufacturing. And it looks to me like you guys are doing that with the partnership of Corning upstream, then actually making the cells, correct, in Rockdale, which is what you’re calling the G2 Austin plant, close enough, like 50 miles or so from Austin. I believe near the old Alcoa site, we could talk some about that. And then putting it together in Wilmer, south of Dallas. So you’re really kind of doing that like soup to nuts end-to-end, full supply chain, no?Dan Barcelo (05:04.034)Yeah, look, when we acquired these assets at the end of last year, what we acquired was, at that point in time, the world’s most modern solar module manufacturing facility. And that’s operational, that’s up and running.Doug Lewin (05:17.954)That’s Dallas, right?Dan Barcelo (05:20.162)Dallas. That is this five-gigawatt solar module manufacturing G1 Dallas. It is one of the world’s most modern facilities up and running ready for business. Highly automated yet also employs a good number of people, over a thousand people workforce and a very large payroll as well in the South Dallas community.Doug Lewin (05:39.378)Dan, that thousand jobs is current or that’s projected?Dan Barcelo (05:43.064)That is current. Currently, a thousand Texans employed in South Dallas. That’s correct. We’re currently over 1,200. And with the acquisition, we also acquired a polysilicon supply agreement to supply gigawatts of polysilicon to be the initial part of the chain. Now we did announce earlier that we have the arrangement and the contracts with Hemlock to convert that polysilicon contract in part to wafers. So in order to complete the chain, you’re basically taking the polysilicon, which is ingots and then wafers. Then you’re taking the cells and then you’re taking the modules to the module of the solar panel. So when you think about the solar chain, you’re going from the polysilicon, ingots and wafers, cells, and modules. What this acquisition did was we purchased the module plant, which just gets us to the end customer use. You mentioned the market size of 50 to 60 gigawatts. This plant is about 10% of the U.S. On the polysilicon side, we wanted to secure American polysilicon in order to supply an American module plant. Until we have our solar cell plant up and running, we currently are sending our polysilicon to Southeast Asia in order to make wafers and cells and then bring those cells back to the United States. By the fourth quarter of 2026, we anticipate to have our G2 Austin site up and running. And at that point, what we’ll be doing is taking wafers from Corning, bringing those wafers to G2 Austin, and then making the cells and then taking those cells to G1 Dallas to make the modules.Doug Lewin (07:17.838)Amazing. And my understanding, and this may be a couple months old, but I don’t think it’s terribly out of date, there’s really only like a gigawatt or maybe two of solar cell manufacturing in the United States. When you say you’re 10% of the module assembly in the Dallas plant, that Austin plant, when it comes online, will represent... Maybe by that time there’ll be others and maybe I’m missing some or I’m just getting it wrong, but that’s a huge percent of the entire capacity of the United States, right?Dan Barcelo (07:46.376)The cell capacity is higher. It’s above 10 gigawatts. There are differences in that capacity. There is capacity from different technologies which are non-silicon based. There’s also technologies of cells that are older PERC style. This will be TOPCon technology based and is one of the most modern and most energy efficient technologies.Doug Lewin (08:08.302)So that’s First Solar is like the other 10 gigawatts basically, right?Dan Barcelo (08:12.33)That’s correct. First Solar and then there’s others on the PERC side and that technology. But on the silicon-based TOPCon, this will be one of the first. So with that TOPCon technology, that provides better efficiency, it provides better in terms of what customers want, in terms of energy density, in terms of deployment. So that’s our focus.Doug Lewin (08:32.716)Okay, incredible. And I will put some links in the show notes, stuff like this. The capacity of China is orders of magnitude more. Like I said before, I think this is really important that this start to happen in the United States. It’s going to take a while for this to all scale up, but this is obviously a huge step in the right direction. What is the reception in Texas? You’re obviously, I’ve seen you post on social media various visits to the plants by various elected officials. You know, obviously there’s a notion out there that at least, well, and it’s true, that some in Texas political leadership are hostile to renewables. But I think by and large, there’s an awareness out there that oil and gas and renewables actually can have kind of a symbiotic relationship. Curious, you’ve written about that on LinkedIn, so I would love for you to talk about that. So there’s really two questions there. Sorry I do this, I do these multi-part questions. But really, what is the reception from political leadership been and what do you see as sort of the future of Texas energy with sort of the coexistence of oil and gas versus renewables? Where do they compete? Where are they symbiotic?Dan Barcelo (09:39.64)Sure. Well, first of all, the reception has been phenomenal. Whenever anyone’s bringing in a large payroll, a large labor force, and also bringing in newer, advanced manufacturing jobs, that is something I think everyone across the political aisles can agree on and see as a good thing for the United States. Bringing supply chains back to the United States are also very important, and I think all of that is resonating. There’s the obvious tensions and competitive tensions we all see and read about with China versus the USA. So having more of the energy manufacturing and having more of the energy security based in the U.S., that’s all positive. So it’s resonating from Washington to the state, to the local levels. So that has been very, very clear and very consistent. Now, I kind of grew up in the oil and gas sector. Since the early ‘90s, I’ve been working in oil and gas and I am an old oil and gas guy who’s done capital markets on that and run oil and gas companies globally. At the end of the day, it’s really about providing the lowest cost energy in whatever form it is and delivering that energy at a cost-competitive basis to the customer. That drives the philosophy at T1. I almost shrug or shudder when I hear the word renewable sometimes. I think it’s done a disservice to the solar industry. It’s done a disservice to the wind industry. This is just conversion of materials to electrons to enable power, to enable electricity. And I think that solar and solar plus storage can be an incredible competitive advantage versus other sources of fuels. I spent years drilling natural gas wells in order to get gas to create power, the power from the generators, right? This is very similar to me. Now we’re spending years and capital to create machines that from the silicon sources of polysilicon create the machines and the panels to make electricity. So it’s either drilling or finding the gas to feed the turbines to make the power, or it’s putting up the machines and finding the silicon, the polysilicon to make the electrons. So in my mind, this is all about delivery of energy to the market and the market needs it. The demand growth right now that we’re seeing in the U.S. is unprecedented. It is driven by small amounts of residential growth, but it’s driven by industrialization and it’s obviously driven by the rise of AI and data center loads. The only source of power that can match the ramp that AI wants is solar and batteries, at least for the next four years. If we’re going to be very competitive over the next four years, as hopefully people a lot smarter than me try to go for the AGI and try to get to that level of where we can be as a society, the gigawatts per week, gigawatts per month is what everyone’s talking about. The plant we have at G1 can produce five gigawatts a year. If I had the demand signals, I could create another plant like this within a matter of another year. We are able to deliver gigawatts and gigawatts of solar. Some will say, well, it’s interruptible power. Well, you know, when you look at where demand is, demand is kind of interruptible too. As we know in Texas from three o’clock to seven o’clock, it’s a very different load profile than three o’clock to seven o’clock at night. So the matching of demand is something I think that does a disservice. And once you put batteries and grid level batteries on, we see it in ERCOT all the time. We see it in CAISO in California all the time. The grid is more robust when batteries and solar are part of the grid, full stop. So we think that batteries, and to be clear, we used to do batteries, we have paused on the batteries now, we aim and strive and have ambitions to batteries in the future. Right now it’s all about the solar and it’s all about supplying that supply chain. The last part of this is all of that’s great, but I believe that we can build this in the United States. And I don’t believe this is anything we’ll say less competitive or that we don’t have versus other places. Let me just expand on that in a moment. When we look at the automation of the machines we’re buying and the ability for these machines to run, fundamentally we’re turning silicon to polysilicon to wafer to a cell to a module. This is just the transformation of materials into something that collects photons to create electricity. The largest conversion costs of all of that has to do with water, has to do with electricity. There’s some specialty gases. There’s in the case of the modules, there’s frames and there’s glass. But fundamentally, these are all very commoditized products. Texas is very lucky to have extremely competitive electricity prices, extremely competitive water prices, extremely competitive specialty gas prices, and extremely competitive natural gas prices. So what this is getting distilled down to is a labor cost differential. Given the high automation, both the module plants, the cell plants, the wafer plants, that labor component is less and less and less. So I believe that we’re actually seeing a competitive advantage now where these machines can be here. There’s still a higher labor cost structure than in other parts of the world. That goes to the wages America pays its employees and the good wages and the living wages. It probably also ties into a bit on how wastewater is treated, which is probably much more important when we talk about what the impact the solar industry or data center or other people can have is the immediate impact right now on wastewater. So those two parts are probably the highest differential in cost relative to the rest of the world. When I build, for example, in G2 and Rockdale, those machines that come in and that are building there, those machines don’t know if they’re in Egypt or Turkey or Nigeria. They have no concept of where they are. Those machines just know they need power, water, and they need wafers. So that’s where we get to how we can be more competitive.Doug Lewin (15:23.8)You mentioned load growth from AI. In preparing for this, I missed it at the time, but I’m going to follow your LinkedIn more closely now. You had a post a couple months ago that I thought was really extraordinary. It was specifically about oil and gas. So yes, we have a lot of load growth from AI that is already hitting the system and more to come. The far west zone in Texas has tripled its energy consumption over the last eight years, a tripling in eight years. And some of that is Bitcoin, cryptocurrency, there’s probably some initial AI, but there’s a whole lot of oil and gas load as well that is connecting to the grid. And a few years ago, six of the biggest oil companies operating in Texas went in together on a study from S&P Platts and showed their kind of demand growth curves that there’s already, I think, four gigs or so of grid-tied oil and gas sort of fracking operations, but also compressors and all the rest, that that could go as high as 10 to 12. And this was just in the Permian, I believe just in the Texas. You were writing about this. And again, you referenced that you and other executives at T1 have spent much of your careers working in oil and gas. And you put in there that last year more than 88% of the electricity produced there, meaning I believe you meant in Permian, you may have meant far west zone, was from solar and wind farms, according to an analysis of the actual electricity production last year. That is extraordinary. I’ve never seen that number before, but it kind of makes sense when I sometimes will post on social media or in my articles, like the overlay of where the Permian is geographically, obviously in far west Texas, sort of where the right angle of Texas and New Mexico meets, kind of just to the east of that and to the south of that. And then if you look at that right next to maps of where the sunniest parts of America and the windiest parts of America are, it’s all right there. Can you talk a little bit more about what you’re seeing in the oil and gas? Are you having conversations with people in that industry that are like, we’re trying to purchase more renewables. Can you get some of your solar panels out here? Are you hearing that kind of chatter from folks you know that are still in that?Dan Barcelo (17:33.11)Look, part of it is geography. Southern and Western Texas, all the way to California is blessed with a lot of great solar in terms of radiation levels. And in terms of wind, you have straight down the center and through West Texas, you have wind. So you have a lot of overlapping wind and solar power and it makes West Texas extremely, extremely valuable in terms of that resource. So again, I almost would drop the word renewable. This is as simple as according to, I think we use Rystad in that study. There’s about a dollar per barrel in terms of BOE equivalent of savings that companies could make by removing their power from the grid and using electricity rather than running gas turbines or diesel generation, which is expensive. So the idea is how do you produce and sell more of the product you’re making rather than use it to run your turbines with your diesel. So by using power from the grid there, there was a savings about a dollar per barrel. When you look there, I think the numbers there were growing to around eight gigawatts today. And according to Rystad, there was an increase of a further three gigawatts on the Texas grid just from the Permian. So it’s just making an example that in order to produce even the oil and gas, in order to lower operating and lifting costs, the switch is to go to grid power, which is primarily renewables, which is primarily wind and solar. And again, this goes to just the cost nature of it. So even oil and gas, which in that area, a third to half of production of the U.S., it’s phenomenal levels of production. Those resources can be produced. Those resources can be used for better energy and chemicals and plastics in the United States, or they can be exported, so to speak, to export American exceptionalism in that form in terms of energy exports. So I think there’s a lot of combined ability for it. The benefit the ERCOT grid gets from solar and even from wind is it’s driving energy costs lower. And you mentioned this before that maybe there’s some biases in terms of left and right, in terms of wind and solar versus oil and gas. But if you look at Texas, it’s just making an example of what can be built now, what’s economic, how do we build it fast? So I think those are the key drivers. So we flag that as, it’s a great example of how it’s just energy and the cheapest forms of energy and the most efficient forms of energy are there supporting the largest forms of exports of American oil.Doug Lewin (19:48.622)Yeah, I actually love that framing or reframing that we often get so much into the label that goes in front of the word energy, the adjective, the modifier, instead of focusing on the energy itself. And this is what is great about Texas is you do have this system of economic dispatch and it’s going to be the lowest cost energy. And that typically happens to be wind and solar, but it’s not because it’s wind and solar. It’s not because it’s renewable. It’s not because of some attribute other than it’s cheaper. That is really what kind of is driving its adoption. So that’s fascinating. A dollar per barrel is not insignificant. That could be even a couple of percent when we’re down in the $50 to $60 range.Dan Barcelo (20:31.982)So when I started my career in the early ‘90s, it was the era of FERC 636 with open access for natural gas. That was when coal dominated all electricity production and King Coal tried to kill natural gas.

The full video is on YoutubeTexas isn’t just projecting future load growth; it’s happening now. Maura Yates of Mothership Innovations set the stage for our discussion at GCPA’s Fall conference earlier this month in Austin. “We are looking at meters that are 800 megawatts on a single meter… that’s crazy. We used to think 10 megawatts was a big deal…” She also cut through the headline noise: “The next three years are really critical… This is the them we are hearing at this conference: it’s a near term discussion… We have a big, urgent discussion ahead of us.”How much of the 200 gigawatt large load queue is real and how much will actually come in the next few years?Hayden Stanley of Good Peak brought the developer’s eye to the near term. He sees a “whole new layer of infrastructure” coming as the grid gets smarter and more coordinated, but warned that SB6 complexity and behind-the-meter buildouts can slow timelines.Tom McGinn with EnergyWell focused on “lifting the system load factor” with tools people don’t have to think about, built on “optimizing interval-level usage to respond to price signals.” He added a sober note: in the next few years, mass-market customers could get squeezed by rising load in the short term, though he thinks in the longer term, Texas will have continued investment in the grid and new technologies and abundance for consumers.Zach Dell of Base Power Company reframed things taking a much longer view:You’ve got to make large investments with a long-term time horizon. And I think there are really strong precedents for this kind of orientation in other parts of technology. You saw Uber do it in transportation, Amazon in commerce, SpaceX in aerospace. We’re taking a similar approach to energy where we’re making 10, 20 year investments, both in terms of the technology that we’re developing, but also in terms of how we think about policy. Base has added 100 megawatt-hours in the short time it’s been in business and is now adding 20 megawatt-hours per month. Large loads are coming but so is innovation across the grid.Timestamps* 00:00 – Opening* 01:00 – Guest introductions* 03:30 – Load growth happening now much faster than expected* 04:30 – Critical discussions are about the next 2-3 years* 07:00 – Smarter grid, higher load factors, new infrastructure layers* 09:00 – Potential bearish load growth over the next few years* 10:30 – Thinking long term about resiliency and costs * 12:00 – Is ERCOT still working to remove roadblocks? Are process changes needed?* 17:00 – Smart meters enable design innovation and response to price signals* 19:30 – Demand-side flexibility from batteries: “price down, reliability up”* 22:00 – Base Power’s scale, the new factory in Austin* 24:00 – Gigawatt scale virtual power plants (VPPs)* 25:00 – Inflation Reduction Act repeal* 26:30 – The advantage of distributed, smaller scale (<10MW) battery projects* 28:00 – Senate Bill 6 and the case for a more bearish demand growth case* 30:00 – What could slow down load growth* 33:00 – Data problems with large load demand response* 34:00 – Audience question: Data center water use, closed loop design* 36:30 – Audience question: Doug’s one top policy change, would it be a carbon tax?* 37:30 – Audience question: Zach- when will you expand to California?* 38:30 – Audience question: Will grid tech still advance if there’s not load growth?* 40:30 – Closing ResourcesPanelists & Company* Maura Yates LinkedIn, Company Page & LinkedIn* Hayden Stanley - Bio, Company Page & LinkedIn* Zach Dell - LinkedIn, Company Page & LinkedIn* Tom McGinn - Linkedin, Company Page & LinkedIn* Doug Lewin - LinkedIn, YouTube, Twitter, Bluesky, and ThreadsBooks, Articles & Podcasts Discussed* Load Growth: What States Are Doing to Accommodate Increasing Electric Demand (EPRI) PDF (Clean Energy States Alliance)* NRG’s Gigawatt VPP in Texas with Travis Kavulla (Energy Capital Podcast) * Shape Load Perfectly, Inject Energy Optimally with Sonnen’s Blake Richetta (Energy Capital Podcast)* The Year the Texas Legislature Changed the Energy Game Forever by Russell Gold (Texas Monthly)* ERCOT CEO Pablo Vegas Board Presentation:TranscriptDoug Lewin (00:06.464)It’s great to be here this morning. Hope everybody’s doing great. It’s been a great couple of days. Really want to thank Gulf Coast Power for again putting together such a great event. I think my first Gulf Coast Power was like 15, 16 years ago. This is the 40th anniversary. It’s amazing to see you guys still going so strong. This has been a great conference. I’ve learned a ton, caught up with a lot of people. I am Doug Lewin. I do a couple of different things, but one of the things I do is I host the Energy Capital podcast. We are recording this today and we’ll release it as an episode. For those that are listening later, we are in Austin at the AT&T Conference Center at the Gulf Coast Power Conference. So I have four amazing panelists here. I can’t wait to get into this discussion. We’ve got a lot to talk about, but would each of you just briefly introduce yourselves and your companies so folks kind of know who you are. You want to start at the end? Go ahead, Zach.Zach Dell (00:58.366)Hey everybody, I’m Zach Dell. I’m co-founder and CEO of BASE Power. BASE is a retail energy provider and battery developer based here in Austin. Started the company about three years ago. Our mission is to lower the cost of electricity for all. And we do that by developing technology solutions, hardware, software, and the like to help rebuild the infrastructure here on the power grid in Texas and beyond.Doug Lewin (01:20.458)And I’ll just say I did record a podcast with Zach. It was like a year ago, more than a year ago now. Two years ago. Was it really that long ago? Wild. So for those that want to know more about BASE, you can go back, whether you’re in the room or listening later, you can go back and listen to that one. Go ahead.Tom McGinn (01:35.16)Hi, I’m Tom McGinn. I’m Senior Vice President of Energy Trading at EnergyWell. EnergyWell operates a few different load-serving entities in competitive markets in the US, along with offering software and consulting services to other market participants. I’ve been working in competitive markets for almost 20 years now across all the competitive ISOs in the US, kind of at the intersection of the wholesale and retail functions in those companies. So yeah, happy to be here with everyone.Doug Lewin (02:03.694)Thanks Tom. Hayden.Hayden Stanley (02:05.486)How’s it going? My name is Hayden Stanley. I’m the co-founder and COO of GoodPeak. We’re involved with building out distributed generation assets in ERCOT. We’re vertically integrated. And we’ve recently also entered the digital realm with data centers. So excited to be here today.Maura Yates (02:22.466)Maura Yates, the co-founder and CEO at Mothership Energy and Mothership Innovations. We are a retail electricity provider and ERCOT market service provider to large loads and load-serving entities across ERCOT. So everything from billing and operating services to QSE services, but again, really focusing on large complex loads across ERCOT.Doug Lewin (02:44.61)Such a great panel, so much knowledge and experience and lots of different experiences and different businesses represented here. So let’s just start at a very high level with a question I like to ask on the podcast. Zach, I don’t remember if I asked you this one two years ago. I probably did, but it’d be interesting to compare and contrast your answers if I did. It’s one of my favorite questions, which is just to kind of look ahead four or five years. You know, sometimes I think 10 and 20 years is like too far. Who knows? It’s anybody’s guess, but four or five years far enough away that we’re not talking about tomorrow or next week or even next year. You’re looking like a 2030 kind of view. What do you think is really going to change in this Texas market? What are the technologies you’re kind of most excited about? And I think even let’s talk a little bit about what are some of the roadblocks and obstacles to getting to that vision. You want to start?Maura Yates (03:32.526)Sure. So for those who know me in the room, they know that I’ve participated in the market for a while and done everything from resi in the kilowatts all the way up to now megawatts and gigawatts. So we’ve seen this really crazy, interesting evolution, especially the integration of renewables into ERCOT. And I was reflecting with somebody last night about where we saw the market in 2013. 2025 was so far out. And did we see where we were, you know, 12 years ago? And I think in general, we kind of had a sense, yeah, this is where we were going to see a lot of renewables come online. We had a good idea of where generation was going, but I don’t think we had a good idea of where load was going. Obviously the latest incentives to move business to the state have really helped drive that. And not only did we not see where load was going, we didn’t see the scale at which load was going there. Like we are looking at meters that are 800 megawatts on a single meter. That’s crazy. That’s insane. We used to think 10 megawatts was a big deal. Now 10 megawatts is like, I don’t know if we have time for 10 megs. That feels really small. So I mean, we’ve seen this really, really rapid shift and this change in trajectory in terms of where we’re seeing this market go. And so when we talk about the next five years, it’s really interesting. It’s going to be, I think, much faster the rate of change than what we’ve seen perhaps the last five years. We saw the last five years coming. I don’t know if we saw the next five years coming. So when I think about what’s going to happen, I think the next three years are super critical. The next three years will dictate what happens in five years. So when I really think about what I’m focusing on or where Mothership is focusing, we are focusing on the next two to three years and say, what is going to happen in the next two to three years? Because that will absolutely determine what we see in ‘28, ‘29, ‘30. And again, I think this is the theme that we’re hearing at this conference, largely a conversation about the queue and what’s going to happen with large loads, what’s happening as a result of SB 6. This is the conversation. It’s a very near-term discussion. It doesn’t mean that all the other discussions don’t need to keep happening. We need to keep having the conversations around how do we manage our really elastic peaks with residential volatility. We still need to have those conversations, but we have this really big urgent conversation in front of us of, what do the next two to three years look like? Because that will then dictate the tale after that. I mean, 190 gigs in the queue, we know that’s not real. Like, that’s not what our future looks like in the next five years. What part of that is real? Maybe 5, 10%, maybe 10%, maybe 15%, maybe 20%. What do we actually think generation can keep up with? What is practical? What is feasible? And so I don’t know what’s going to happen in the next five years. Every month we get closer to that five-year benchmark, I’ll be a little bit more willing to wager. But right now, I see the conversation of, we have a jam. We can’t get to the numbers that we’re talking about by 2030. We’re too jammed up. If I think maybe another 10, 15 gigs by 2030, maybe in the next two to three years, three, four or five gigs, I don’t know. It depends on again, how we handle and how we manage through the stuff that’s jamming up right now. I think this gets to the innovation conversation that we can talk through more later, but yeah, two to three years.Doug Lewin (06:42.956)Yeah, before we go to Hayden, just kind of a thread to pull on there a little bit is, you know, there’s 190 gigs in the queue. I think part of the problem we’re having is everybody is talking about the gigawatts and not necessarily the gigawatt hours or terawatt hours, right? And we started to see that shift at the ERCOT board meeting last week, Pablo Vegas, CEO. And yesterday here, ERCOT Chair Bill Flores talked about the very same thing, showed the same slide that we are seeing increased use and consumption while demand has actually not increased the last couple of years. Part of that’s weather, but I think part of that is changing use patterns, which is something I think we’ll talk about a lot here, is like freeing up some headroom for some of those AI data centers. Hayden, what are you looking at for 2030?Hayden Stanley (07:28.686)Well, I mean, I think over the next five years, we’re certainly in a race to win the AI race. You know, that’s ultimately going to be enabled by power. You know, power is maybe one of the largest waves created by AI. Interestingly enough, it does enable it. So I think that that’s paramount that we achieve some of these goals. You know, when I think five years from now, I think that there’s going to be a lot of innovation that’s going to play a really big role. I think that there’s going to be a lot more, the grid’s become smarter, there’s going to be more communication, more alignment. You’re mentioning, like demand not increasing, but a lot more consumption that just seems like efficiency to me. And, you know, I think things like that are amazing. I think that we’re in a situation where I look at infrastructure maps a lot and I think there’s going to be a whole new layer added on. I don’t know if you guys play with those, but you turn on one layer, another, another. I think there’s a whole new layer of infrastructure that’s about to be added to the map. And it’s really exciting how all of that gets to be thought about and created and developed. So happy to be a part of it and try to help.Doug Lewin (08:30.382)It’s a fun time to be part of it. I love the way you said that, that just sounds like efficiency to me. Because I think part of what is happening with discussions on energy efficiency is that actually using more electricity can be energy efficient, right? Particularly if you’re using it for industrial purposes or transportation electrification. Like it’s a good thing to use more as long as you’re using it at the right times and as long as we can move it around. Tom.Tom McGinn (08:53.686)Yeah, I mean, I think we’re talking about just kind of lifting the system load factor as a whole, which, you know, hopefully has benefits downstream for recovery of system-wide costs. You know, I think maybe to take a slightly more pessimistic view of what the next five years might look like. You know, we heard previously the backlog around getting new thermal generation online, system loads going up. We’re likely to see kind of increased just base load heat rates at least just through the higher system load factor. Resiliency seems like it’s going to be a continued household concern. Part of me is concerned about what happens to the mass market in this kind of wave of new load. Are they going to get run over for lack of a better term? Are they not going to have adequate representation at some of these policy settings where they don’t have the sophistication to manage load like some of our other large load customers that we talked about today? Yeah, I guess I’m short term a little concerned about what that looks like. I think long term with the continued innovation and the investment in the grid and other technologies kind of coming down the pike here that we would expect to see kind of a return to the abundance that Texas consumers have enjoyed thus far.Doug Lewin (10:12.224)Yeah. And I appreciate that little dose of, I wouldn’t even call it pessimism, just like realism, right? That there are concerns for residential consumers. I don’t know. And it’s actually, I think it’s very smart. I wrote down something Chairman Gleason spoke here at this conference on Monday. And he said, we need to make sure consumers are empowered, not just protected. Right? So like consumer protection is in the DNA of every PUC, but how do you actually think about consumer empowerment? Consumers want to save on their bills. They want to be more resilient, as you said, which is probably a great tee up for Zach. Your customers want to be more resilient. Zach, no, just kidding. Start with the 2030 question. Yeah.Zach Dell (10:52.462)I’ll be honest, I and the team at BASE, we think a lot more about 2040 than we do about 2030. And there’s plenty of good reason to think about ‘26 and ‘27 and ‘28 and the near term, but our mission as a company is to drive price down and reliability up. And we’re not talking 5% improvements, we’re talking 50% improvements, right? I’m using round numbers here, but we want to make a really big impact on those two metrics. And so to do that, you’ve got to make large investments with a long-term time horizon. And I think there are really strong precedents for this kind of orientation in other parts of technology, right? You saw Uber do it in transportation, Amazon in commerce, SpaceX in aerospace. We’re taking a similar approach to energy where we’re making 10, 20 year investments, both in terms of the technology that we’re developing, but also in terms of how we think about policy. And I think that this long-term orientation, this long-term planning, whether it’s building factories and building engineering teams and working on new technology that’s never been done in this industry, or it’s kind of mapping the policy roadmap to what is the grid of 2040, 2050 look like. That’s where we spend our time less about the 18 months, 24 months, 36 month timeframe. So that’s kind of how we think about the problem.Doug Lewin (12:04.014)All right. So let’s come back to this side, Maura. I want to ask you something. I saw a quote you gave in Texas Monthly. It was an article about restructuring that Russell Gold did. He quoted you as saying, ERCOT doesn’t put up roadblocks, it removes them. Do you remember saying this?Maura Yates (12:20.642)When was this article? I might have a different response.Doug Lewin (12:23)‘23. That’s what I want to ask you. Is that still the case? And I’m curious, like what are the emerging technologies you’re working on? Where are there roadblocks that are actively being removed and you’re excited and where are there roadblocks that actually we need? There’s been a lot of talk here last couple of days about stakeholder process, collaboration, and I think ERCOT is a great place for that. So what are some of those roadblocks that need to be removed to get these next emerging technologies to market?Maura Yates (12:47.628)Sure, and I certainly don’t want to point fingers at ERCOT. ERCOT has a lot on their plate. I am not one of the projects that’s in the queue directly impacted by some of the stuff going on. It’s a broader issue outside of ERCOT. I think ERCOT is also sometimes maybe doesn’t get the right direction or other things. So certainly don’t want to take a controversial position on that. In terms of where these roadblocks are, I think the roadblock largely right now is in my eyes a process-driven roadblock, right? We again work on a lot of large load projects. Some of these large loads are located behind the meter, private use networks. Some are just large loads trying to get interconnected that might have been further along in the interconnect process and now are going through a restudy. And when I think about the challenges to getting our portfolio done, it’s really just clarity on what do we need to do? Like, what are the steps to get there and what is the process to get there? And it sounds like a very simple resolution, but I think everybody here who’s stuck in that would probably say, yeah. That’s what I don’t understand is what’s the process to get there. So it feels as if there needs to be some effort to really look at, again, I know I’m pointing out the obvious, people work on this every day, an overhaul to the process and how we approach this problem. You know, we’re going through standard or normal means, whether it’s the standard rulemaking process or other, I understand that there are regulatory requirements, but perhaps we approach this challenge differently. Everybody’s confused on how to move forward. Nobody’s quite sure on where projects stand. That seems to be the challenge right now, a large challenge. Maybe we look at that differently because it doesn’t seem like we have resolution in sight. And to us, that’s the biggest question. That’s the question of how many of those gigawatts get built, right? Like, that’s the question we’re all asking is what’s going to get built? And the question of what’s getting built is, I don’t quite know what’s getting studied or how I have to get this studied to understand what capacity I have so that I can actually go get lending and actually get it built by 2027 or by the timeline that I need. So to us, this is a process conversation. Like the innovation needs to happen from how we are deploying and how we are understanding what that process is to get a large project built.Doug Lewin (14:56.674)Yeah. And obviously when you said that a couple of years ago, right? Like these new data centers were kind of a gleam in everybody’s eye. It was starting to be talked about a little bit, but only barely.Maura Yates (15:05.006)Yeah, the technologies I was worried back in 2023, we were working a lot with everybody on the stage and having conversations about residential-sized technologies and how do we get an integrated home into the market, right? Something that wraps in the electricity bill, very similar to the value proposition Energy Well and BASE are offering. Like, how do we get those types of technologies into the market? To me, ERCOT still is the great playground to have those conversations. I think ERCOT and the DG, the DER space and the work that we’ve done over the past decade has been a really great welcoming space to bring these technologies.Tom McGinn (15:40.344)Smart meters are leaders to that, usually enabling technology that a lot of other markets don’t have.Maura Yates (15:45.922)We’ve done a great job at that and ERCOT’s done a great job at that and they have allowed a lot of innovation in that space and I love working on those technologies with these people for that reason. The challenge that we have again is back on large load right now and large load is shifting this market so dramatically because one data center is the equivalent of a huge aggregation.Doug Lewin (16:05.646)Yeah. And Tom, let’s actually go to you next sort of picking up on that. You were saying, did you say smart meters and Smart Meter Texas? So this is something I’ve been kind of obsessing about lately. I did a podcast with Sonnen and Blake Richetta, he had this great phrase where he said, shape load perfectly, inject energy optimally. I’ve been thinking about that a lot because that’s really what is going to happen on the resi side. There’s so much, I think in the common understanding and even in industry circles, they’re like, customers aren’t going to do this stuff because you’re asking them to do something when you’re talking about shaping load. A lot of that is going to be done by the very AI we’re talking about trying to accommodate. Can you talk a little bit about the innovation in mass market retail? You have a lot of experience in that area.Tom McGinn (16:53.496)Yeah, just to pick up on the thread that Maura started earlier, the smart meter ubiquity throughout the market, the way that ERCOT transparently settles load to those meters enables a lot of product design innovation, at least in our market. I think what we’ve moved to now, I think early product design that leveraged Smart Meter Texas was really build design-driven or, you know, things like TOU products, index products. We’ve moved past that. I think there’s some interesting learnings there, but you know, the future of leveraging this type of technology is I think going to be done by physical products that make the market participation of mass market customers effectively effortless or invisible to them. You know, Blake’s point about perfectly shaping load and optimally dispatching is I think kind of echoing the earlier point about lifting the system load factor. I think just more efficiently using the grid that we have. You know, Zach’s going to be able to go into much more detail about the specific battery operations behind a company like that. But I think they’re all related and whether it’s whole home batteries or whole circuit batteries that are starting to come to the market or smart thermostats or smart EV charging or any of the things like that. They’re all kind of sitting on the same baseline technology of optimizing interval-level usage to respond to price signals.Doug Lewin (18:28.462)And these are resources that we’ve barely tapped at all. Like even on cars, I’m kind of amazed at, this thing gets talked about a lot, but there’s more than, that’s a rough back of the envelope, but there’s probably about 20 to 25 gigawatt hours of batteries rolling around on four wheels in the state of Texas right now. And we’re just like charging them whenever.Tom McGinn (18:46.19)This is an opinion, but I think part of the reason we haven’t seen more done with that data is just that for the most part, people don’t want to think about this stuff. They get home from work and they turn on their stove or have to do their laundry. They don’t want to check the app for price signals. And so we’ve been lucky to have this kind of multi-year environment with a couple of hiccups of very low pricing, especially relative to the rest of the country. And so it hasn’t spurred the type of innovation that you may expect. I think recent challenges around resiliency and some concern about what future volatility looks like is leading to kind of a different approach now where we’ll see more physical products come to the market.Doug Lewin (19:26.99)So Zach, I think that’s like a perfect tee up to ask you about, you know, again, the last couple of days, there has been a very consistent theme through all the different sessions. It was in Hollub Blues’ keynote yesterday, flexibility, flexibility, flexibility, right? And so the demand side has this enormous potential. You guys are focused on that residential mass market. Can you talk a little bit about the flexibility that you’re bringing to market? Pick up on those themes of what are you seeing consumers actually want out of this? And also, I’m just interested also from you in kind of how the go-to-market is working as far as competitive versus vertically integrated, because I know you guys are doing some in both. So if you have a mind addressing that too.Zach Dell (20:06.2)Couple of questions there, I’ll try to touch on all of them. I think the panel kind of touched on this, what do customers want? This is a pretty simple question to answer. They want their bills to go down and their lights to stay on, right? So, price down, reliability up. And that’s really our North Star as a business. How do you achieve this kind of flexible, reliable outcome at the max? You have the biggest possible battery on the home. Right? So we make the biggest battery in the market. Our next generation battery will be an even larger battery. Right? So why? Well, because we want to add as much capacity to the grid as possible. That capacity can be used to take the home off the grid in times of high prices. That capacity can be used to serve the grid in the same times, but more capacity is better. Right? So that’s really how we think about it. I think it’s pretty straightforward in terms of go to market. The way we think about this is we have one technology stack, hardware, software, firmware, we can talk about that. It’s vertically integrated and we’re building a factory and all that fun stuff, but the whole technology stack is aimed at these North Stars of price down, reliability up. That’s true in our deregulated gen-tailer business, and that’s true in our utility partnership business, where we go provide that same technology stack, the hardware, the software, the firmware, to regulated utilities, and then they get to go deploy that technology in their service territory to do what? To drive prices down and to drive reliability up, right? So it’s the same value proposition, same technology stack, different business model. We think that the long-term future of the company actually is more so focused on being a technology vendor to the utilities than just a deregulated gen-tailer in Texas. And we’ll grow the gen-tailer business in Texas. We’ll do it in other markets. We might do it in other countries. But the vast majority of the grid in the United States and the world is regulated and for good reason, right? And we can talk about why. And so we want to be the preferred partner to those utilities and really their outsourced R&D function. So the technology is the same, the value proposition is the same, the business model is just a little bit different.Doug Lewin (22:09.582)And you just, I don’t know if you can’t answer this, can’t answer it, but the size of the batteries, you said they’re getting bigger. Like, what are we talking about?Zach Dell (22:15.394)Yep. So our current product is a 25 kilowatt hour system that we primarily, if there’s room and the customer wants it, which they typically do, we install in parallel. So it gets you to 50 kilowatt hours.Doug Lewin (22:24.908)You get a couple days even in fair weather.Zach Dell (22:27.634)Our next generation product is a 40 kilowatt hour battery that we again install in parallel often to get you to 80 kilowatt hours. So that’s massive amounts of capacity on a per home basis. And then we’ve recently announced our generator integrated product. So we actually have a portable generator integration for our current product where you can take a $500 portable generator that you can buy on Amazon and you can plug it into your BASE battery. Obviously that portable generator isn’t able to power the whole home, right? But the BASE battery is and you can use that generator to charge your battery to keep you powered through a long duration outage. So we’ll continue to develop new technology like this to extend duration, add more capacity on a per home basis, which we think really is the way to solve kind of both of these problems that you’re highlighting.Doug Lewin (23:09.324)Before we go to Hayden, just also just want to give folks a sense of the scale of this, because I sort of hear this a lot is like, well, we’re doing so many batteries on the bulk side. What is the demand side? Can you talk about the scale you’ve reached so far and kind of the pace you’re going at as far as adding this? Yeah.Zach Dell (23:23.15)We’re growing fast. We’ve got over 100 megawatt hours on the grid here in Texas, rapidly approaching 200 megawatt hours. We’re adding over 20 a month. We think around this time next year, we’ll be on the order of 100 a month. So we’re building a factory here in Austin, capable of four gigawatt hours a year. That’ll be our first factory, which is really kind of not a prototype factory, a way for us to, we think about things in terms of crawl, walk, run, right? So develop the technology, test it, then make sure it works, then scale it up. Factory one will be sizable, four gigawatt hours is not small. Factory two will be much larger. And we’re already thinking about that and making some investments in that direction that we’ll be able to talk more publicly about soon. Yeah, I mean, I think we’re the fastest growing battery developer in the state, certainly, and probably the country. And we’ll continue to grow at that deployment rate over the next couple of months.Doug Lewin (24:11.022)And part of my reason asking that question is just, I’m hoping to the audience in the room and to those that are listening to the podcast, the scale of this is really starting to, I’m hoping it’s starting to take hold with folks. Like the podcast I have coming out tomorrow, Travis Kavulla from NRG, they’ve got a one gigawatt VPP they’re working on. He said on that podcast, they were at, I think at 150 or something like that, 100, 150 somewhere in their megawatts already. You’ve obviously got Tesla out there, Swell and Octopus. We are starting to see gigawatt scale. There’s already six gigawatts of distributed assets already out there that ERCOT has measured. So when we’re talking about these large numbers of growth on the bulk system, we also need to be thinking about the distributed system as scaling. All right, Hayden, I want to ask you something sort of obviously related, but a little bit different and actually hasn’t been talked about a ton at the conference here, but you know, it’s a big deal in Texas and nationally is the repeal of the IRA. What does that mean for you guys and your changing business and sort of the pace and economics of building new gen in ERCOT?Hayden Stanley (25:17.652)Sure. Well, that’s a really easy one. I’ll take that one head on. Sure. So, you know, there’s probably folks that are on both sides of it, you know, on one side, you know, we want large degrees of security, on the other side, there’s a lot of people who just don’t want the rules to change. Yeah, you know, I understand both sides of people who want it and don’t want it. I’m really glad that I get to be in the position of someone who gets to respond rather than having to make the decision on the legislation. So I get to, you know, Monday morning quarterback over here, but you know, I think that ultimately what happens is it levels the playing field and in doing so it creates more competition and it allows there to just be a lot of innovation and the best business model wins and you get to figure out what that is. And that’s happening in real time and it allows, you know, smart and agile teams to be really creative and push innovation into the space. I think ultimately customers win whenever there’s a lot more competition. So that’s great. I think that, you know, in doing so we like to be highly competitive ourselves. The best way you can do that, serving power is you can either figure out ways to make more money or you can figure out ways to save money. And so figuring out ways that we can synergize our operations, we are vertical, we do our own EPC. We try to have the lowest net build cost out there. And so that’s really something that we really focus on. It’s easier to save a dollar than it is to earn one because earning one’s risky and other things.Doug Lewin (26:41.432)So you see one of the main things about the repeal of the IRA being sort of driving efficiency.Hayden Stanley (26:44.85)Driving efficiency, you know, that’s on one side. Efficiency is on one side of it. Cost savings is on one side of it. You know, another thing is, you know, we really focus on the DG level. So we’re deploying 9.9 megawatt assets and you know, would I rather have a 100 megawatt or 200 megawatt asset or 10, 10 megawatts or 20, 10 megawatts? I think I would take seven 10 megawatt sites over one 100 just because you get diversification of risk and the portfolio effect. But with that being said, we’re more so looking at this 9.9 megawatts of interconnection capacity as a resource. And, you know, the prior business models of the past are not set up for the future. And we are pairing resources. We are stacking advantages to be prepared for these non-scarcity years, such as 2024, 2025. We’re really focusing on the intrinsic value of the assets that we’re building. And if they’re not underwritable from an intrinsic view, it’s not something that we’re interested in. So we’re really trying to create more value and being more innovative in our own deployments in order to survive those years. You know, we somehow entered the data center space. We really couldn’t help ourselves. We came by, came across a site that has literally everything you need. 138, 345 kV lines, plus three natural gas pipelines, 20 minutes from a major metro area with a lot of acreage, right? It’s something that we’re like, hey, we’ve got to get involved with this. And even with everything on site, the data center world, it’s complex. It’s a very complex animal. And having to bring all the power behind the meter and the complexities of SB 6 and how the TSPs are viewing load versus co-located generation, it’s creating a scenario where you have to paint this power story and these systems are complex, especially getting them online. And so I think that I may have a view of ERCOT where, you know, maybe the demand story isn’t so bullish and maybe it’s a bit more bearish because there’s potential for delays for regulatory compliance and things of that nature. And what happens with all of these things, you know, it’s a lot of demand, but they’re all bringing really big plants behind them. What does that really look like? So we’re having the view into kind of that demand side with still building generation assets. We’re really preparing for non-scarcity years and really focusing on intrinsic value. And that’s kind of how, you know, a repeal of a certain regulation just kind of forces you to think differently across your entire business portfolio.Doug Lewin (29:20.302)All right. So in just a couple of minutes, we’ll go to questions from the audience. Before we do that, though, I want to also ask you, Maura, related to that, right? Hayden’s talking about a lot of the complexity that could really slow that down. I know that’s a lot of what you guys are dealing with. So you guys are putting together a dashboard to kind of look at all the different things that are going on. So what do you see as you’re talking to people out there as far as, what are those roadblocks? If you take more of a bearish case, you look ahead to 2030, like we haven’t built out as much data centers as we all maybe hoped or thought, what’s kind of got in the way. And that way we can sort of anticipate it and hopefully not let it happen.Maura Yates (29:57.816)Sure. So if we get to 2030 and we’re kind of cruising along still seeing the same steady load growth, I think one of the things we need to clearly continue to evolve is our data use and our data around some of these more remote sites. So one of the challenges we have is we’re seeing a lot of load growth in remote areas. And as a result, we don’t have the same quality of data that we were talking about earlier. We have wonderful quality of data on our residential loads, which is great because they drive a lot of the volatility in the market. We want to see how those behave. And again, the real-time behavior is really important on those. But at the same time, we also have a lot of these large loads and—sorry for being the large load voice on this panel—but we have a lot of these large loads where we don’t have data visibility and granular visibility into what’s happening. Not all these loads have an EPS meter or the right metering infrastructure for us to see that data even, you know, five days in arrears if they don’t have the telemetry or a QSE on site.And so I think as we continue to move forward, we have to understand how we use data better and we get good data off really important assets. Again, that sounds like a really obvious point, but it’s not working well enough right now. So we need to continue to work on how we get data off some of these larger assets in the market. I think one of the other things that we want to be thinking through is also just—we spend a lot of time in legal and in contracting and how you create contracts that are nimble and grow and evolve with the market as there are uncertain times. I think, again, through all these large loads and working through contracts that perhaps have tenor that extends beyond this five years that we’re talking about. So how do you create a contract that is de-risked for all parties, able to go get lending, that also recognizes and acknowledges the market’s going to change in the next five years and we don’t know, and the market’s specifically going to change around things that impact your load? And so I think the other thing that we’re trying to focus on is the perfection of contracting and how you create the right contract and document set for a very, very boutique product. Every site has different needs. Every site has different lenders. Every site has different operations. So how do you evolve that contracting structure so that five years from now, you’ve got all these participants in the market who have been trying to get in for five years, but in a structure that supports reliability, supports performance, and doesn’t drive bankruptcies and a whole other kind of next generation of problems to solve.Doug Lewin (32:22.04)That’s really interesting. I think most people think about the data problems as being more on the residential side. Maybe it’s just me, maybe I’m just totally off base on this. I think of the big customers—data is something everybody’s got. But it’s a brave new world, right? These are developments, like you said, 800 megawatts. We haven’t seen anything like this.Maura Yates (32:41.902)We just launched a platform that we built off of our own internal operations because it’s how we look at data and we really care about how these large loads behave. And we really care about it at an interval basis. And when you don’t have that data at an interval basis, what’s the other data you need to look at? So it’s something that we think is super important and we’re trying to lend our learnings to the market to also have access to the best data available today.Doug Lewin (33:06.584)So before we go to the questions, anything y’all want to say in response to each other?Tom McGinn (33:09.558)I have a question about what you just brought up, if you don’t mind. So are you saying that, let’s say you have a very large load that is committed to be price responsive or something like that, let’s say you have a price spike, the large load curtails, but your initial data is going to show what?Maura Yates (33:27.918)Sometimes it shows in our large loads that that load never curtailed in our initial settles. And again, I’m not trying to put ERCOT in a hot spot, so please don’t take it that way. But sometimes based on the load profile, based on, again, the meter and the communication available at that site that’s available to the TDSP—it might not be the TDSP’s fault—that load, we won’t get actual meter data until that meter is read 30 days on the 30-day mark. And that’s when we actually see how it behaves. So our initial settles might not reflect the price-responsive load actually curtailing. It might actually be settled off of a profile settlement, which is, when you think about it, these are really large loads, a big piece of...Tom McGinn (34:04.716)Huge dollars on the initial settle, but you’re working capital flow to support that.Doug Lewin (34:10.446)All right. Okay. So let’s go to some of the questions here. Let’s see. So I’ll go with the one that’s upvoted the most in the room. No one seems to talk about the water issue. There seems to be a lack of water, which will prevent generation from coming online. It’s also—there’s water associated with data centers, obviously. So that’s a really good point. Water is often sort of overlooked. Does anybody want to take that one?Maura Yates (34:30.893)There’s a reason we haven’t talked about it, I guess. None of us want to—I’m not a developer. I’m going to absolutely punt to the developers of those assets. But I do know through the permitting process and through a lot of the AHJs, they’re looking at the water requirements. And I think there’s a lot of technical evolution in terms of cooling technologies out there to require less water.Zach Dell (34:51.534)Yeah, I’m certainly not an expert on this topic. There are some very smart people working on water problems in Texas. In fact, my sister is working on this and spending a lot of time thinking about it. Our generation technology requires 0.0 gallons of water. So there certainly are—I think the cooling point, Maura, is a good one. And that was a challenge that data centers face. If you’re looking—I mean, why is Northern Virginia a place where all these data centers go? There’s a bunch of things, there’s permitting things and real estate implications, but a lot of it is the climate. Texas is very hot, as we all know. You do have to cool down these GPUs and that does take a lot of water. But not all generation technologies do require water. Obviously data centers are not necessarily generation, they’re load obviously. So, but yeah, it’s a complicated problem and I certainly don’t have any...Doug Lewin (35:32.12)I do think it’s a really important point. It’s not actually talked about a lot with renewables and storage—that there really is minimal water there. Obviously water use is mostly agricultural and the power sector is a slice, but it’s—other than washing some panels and stuff like that, you do get major water savings from renewables. Do you want to say something on this one?Hayden Stanley (35:53.006)Sure. Yeah. A lot of the data centers are moving to closed-loop designs to alleviate that. They’re building these things in the desert, but on the power gen side, a lot of the behind-the-meter thermal—I mean there’s certainly a requirement where you need water to operate those.Doug Lewin (36:09.056)And I think the trade-off there, right? If you’re reusing the water, you’re going to use more power because you’ve got to keep that water cooled, right? So there are these trade-offs.Hayden Stanley (36:17.964)Right. And some assets use more than others do. So if you’re using different types of thermal, they require different levels of steam.Doug Lewin (36:28.962)All right, somebody’s asking a question of me that got upvoted. Is this a tough question? Should I ask myself? What would be your one policy you’d implement in Texas if you could? A carbon tax? No. Incentive for clean dispatchable resources? There has to be some ambitious policy post-IRA. What is it? So I would think probably half this group can probably guess what I’ll say, which would be a real focus on getting rid of resistance heat and putting in high-efficiency heat pumps. And I’d like to see that done with market-based solutions where we actually have some price discovery, where it’s not just like pick a price and pay this incentive. We don’t know, are we paying too much? Are we paying too little? Introduce some competition into the demand side. I’m supposed to be the moderator. Any—y’all want to say anything about that?Tom McGinn (37:13.422)I’ll echo your point. I agree with you. I think the resistance heating or just inefficient heating in general in the mass market space is a serious issue that we see in risk management and load forecasting and stuff like that. So I agree completely.Doug Lewin (37:26.528)And it very much relates to what we were talking about earlier with shaping load, perfectly adjusting energy optimally. You’re not shaping load perfectly if in the wintertime a house is using 10 kilowatts and an apartment’s using five kilowatts all through the night. We’re not shaping that load. And it’s those peaks that we’ve got to be able to manage to be able to bring data centers and all kinds of other stuff on. Okay. There’s one for Zach. Zach, when are you expanding to California?Zach Dell (37:51.468)We’re working on it. We will share more about our expansion plans outside of Texas in the coming months, but we’re talking to regulated utilities in a number of states that have expressed interest in our technology, California being near the top of the list. So I don’t have a firm date for you. My hope is 2026. I’m pretty confident that we’ll be able to—I’m quite confident that we’ll be moving outside of Texas in 2026. I’m hopeful that California will be one of those states because California is a place that obviously has a massive need for batteries given the penetration of solar.Doug Lewin (38:19.662)This is a question from the audience. The panel’s outlook is pretty bearish about demand growth in ERCOT, but bullish on the technological innovations on the supply side. Will the technology be deployed without the demand?Maura Yates (38:29.39)I think so. That’s what ERCOT is known for. Back to that earlier comment that I still stand by from 2023. ERCOT is the right place for experimenting with products and technology and testing how a market responds. I think as we introduce new price signals, we’ll start testing other ways new technologies behave with the RTC plus B. What does that do? Does that introduce new technical innovation? But I think we continue to be really right for that.Tom McGinn (38:54.38)Yeah, I don’t think anyone’s bearish on load growth. Load growth is already here, right? And so, I mean, the existing infrastructure is aging, load growth has happened. There’s questions about how much future load growth there will be, which I think are valid given the state of the interconnection queue. But yeah, I just wanted to push back on bearish load growth.Hayden Stanley (39:15.33)Yeah, I think that the projections are what? A hundred percent increase by five years or something crazy. So, I mean, I think that it’s the relative nature of it—maybe where we should backtrack the pace of this—but the growth is still going to be very, very, very high relatively. So I wouldn’t say the outlook is bearish.Zach Dell (39:35.758)Yeah, I would add, I would go back to the first point I made, which is we think more about 2040 than 2030. So yeah, we are going to continue building technology to drive price down and reliability up. And what happens next year and the following year matters, but is not really where we’re focused. We’re making long-term bets. And I think my hope is that other technology companies take the same approach because that has worked out really well in other industries.Doug Lewin (39:55.982)Yeah, I think the only bearishness you’re probably hearing is just like, how are all these rules around SB 6 going to get worked out? There’s a lot of uncertainty. Is that going to kind of slow things down? But to your point, a 25% increase—we were like 400 terawatt hours four years ago. We’re probably going to be just short of 500 terawatt hours in 2025. Again, I think we need to think big, like, you know, maybe even doubling that number in a six to ten year kind of a horizon, but really managing that peak. If we get to where we’re double the peak, but not triple the consumption, then we’ve done something very wrong. All right. Maura, Hayden, Tom, Zach, thanks for being here. Please join me in thanking the panel for a great discussion.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 could also follow along on LinkedIn. You can find me there and on 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. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

Watch the Conversation on YouTubeHeadlines warn that data centers are straining the Texas grid. The reality is more interesting: data centers — through their own flexibility and by supporting distributed flexibility markets — can strengthen the grid.I explored that topic and a lot more with Astrid Atkinson, CEO and co-founder of Camus Energy and former senior reliability engineer at Google. At Google, she led teams responsible for keeping the world’s search engine online, matching computing load to available capacity across continents. Her lessons from that experience translates well to the grid: reliability doesn’t come from scale alone. Reliability comes from flexibility and orchestration.Astrid calls it “grid orchestration” which means coordinating and optimizing both supply and demand in real time all the way down to homes and businesses, but starting with better data and better management of the distribution grid. We’re moving toward a more decentralized network of flexible resources: batteries, EVs, thermostats, and yes, data centers. We’re going to need a much smarter, much better orchestrated grid.Texas already has the raw material for this shift.Rooftop solar, batteries, and EVs are scaling faster than ever. We now have over 6 gigawatts of distributed resources in ERCOT, roughly the size of six large power plants.But they’re not well coordinated and that disorganized integration means we’re leaving cost savings and reliability benefits on the table. Part of the problem is that market signals aren’t flowing to distributed resources at a level near their actual value.That’s where data centers could potentially come in.If data center developers fund load flexibility, they could potentially put money into consumers’ pockets and increase their speed to interconnection. [D]ata centers fundamentally are not really budget constrained for getting these things built. They’re really time constrained. And so, I think in there is the opportunity to start thinking about off-market or kind of secondary market opportunities to get value for flexibility, both from the site itself, but also from you, me, batteries [and other DERs]… Astrid’s experience offers two key lessons for Texas:* Automation must be simple and local. The best systems don’t depend on constant central control. * The biggest savings aren’t in wholesale prices, they’re in avoided infrastructure. Flexible demand can defer costly upgrades to poles and wires, easing pressure on bills.We’re seeing movement in the right direction, ERCOT’s efforts to integrate distributed energy resources, electric cooperatives piloting new demand response tools, and increasing talk of creating distribution-level markets where buyers and sellers can trade flexibility directly.Texas has always led by embracing what’s next before anyone else believed it could work. This is the next frontier: flexibility, orchestration, and coordination of DERs.“There’s never been a more exciting time to work in this industry,” Astrid said. She’s right. We have the tools, the data, and the entrepreneurial spirit. What we need now is the will to connect them.The path forward isn’t about choosing between growth, affordability, and reliability. If we build smart, Texas can have it all.If this perspective resonates, share it with someone who cares about where Texas energy goes next and subscribe to stay part of that conversation.Watch the Interview Here:Timestamps:* 00:00 – Intro* 02:30 – Astrid’s background and Camus* 05:00 – Google reliability lessons* 06:30 – Texas load growth reality* 11:00 – Contracting flexibility, framing the problem* 12:30 – Internet-scale orchestration parallels* 14:30 – Major reliability event takeaways* 18:00 – What a flexible grid requires* 20:00 – Paying Texans for household flexibility* 27:30 – Visibility before control (DSO layer)* 31:30 – Intelligent automation, local control* 34:00 – Value is in avoided T&D spend* 38:00 – Co-ops and munis as testbeds* 46:30 – Edge markets and price signals* 56:30 – Bills down, capacity up, resilience* 58:30 – Closing thoughts Resources:Guest & Company* Astrid Atkinson (LinkedIn)* Camus Energy, (LinkedIn)Company & Industry News* “So What Does Camus Do Exactly?” (Camus Energy blog)* Camus wins Innovation Challenge Award at Data Center World (Camus Energy)* Access “Getting ahead of the EV tipping point” AES and Camus White Paper (Camus Energy)* Voltus “Bring Your Own Capacity” Announcement (Voltus)* ERCOT Selects GE Vernova to Help Drive Innovation in DERs Announcement (ERCOT)* ERCOT Grid Research, Innovation, and Transformation Announcement (ERCOT)* Community pressure mounts against CPS disconnection policy, rate structures (San Antonio Express News) * National Energy Assistance Directors Association. Energy Hardship Report.* Google’s new plan to keep its data centers from stressing the grid (Canary Media)* Texas law gives ERCOT authority to disconnect data centers in emergencies (Utility Dive)* Texas data center buildout, stranded-cost risks and planning challenges (Utility Dive)* MIT: Data center flexibility can cut costs, emissions vary by region (Utility Dive)Related Podcasts by Doug* How Load Flexibility Could Unlock Energy Abundance (with Tyler Norris)* Why the Old Utility Business Model Doesn’t Fit Anymore with Lynne Kiesling (Part 1)* AI, Outage Risks, and Market Opportunities with Lynne Kiesling (Part 2)* YouTube clip — Texas Grid Growth Depends on Data Center Flexibility: Related Substack Posts:* ERCOT and Texas Need a Different Kind of Growth * Demand-Side Resources Could Enable Load Growth* March 4, 2025: Data Centers, Nukes, VPPs, and MoreTranscript:Doug Lewin (00:05.356)Welcome to the Energy Capital Podcast. I’m your host, Doug Lewin. My guest this week is Astrid Atkinson. She is the CEO and co-founder of Camu Energy. The conversation was a really great one. We got into one of my favorite topics these days, which is how can data centers coming onto the grid actually increase the reliability of the grid and improve affordability for customers? So we talked a lot about data centers potentially actually creating funds to get demand reductions and demand flexibility in people’s homes and businesses that would put money back into their pockets while strengthening the grid, giving data centers speed to power. We talked about particularly the DSO model, distribution system operator model, and what that might mean in the United States. These are common in other parts of the world, but we really don’t have designated entities in the US that are DSOs. We talked about intelligent automation and how processes being automated can actually make it easier for human operators. The economics of DERs, distributed energy resources, so much of the value of DERs is the potential reduction in cost in the distribution system. Transmission distribution utilities have so many different investment opportunities, but how do you prioritize those to make sure that you are rate-basing the most important for reliability and expansion and all of the things that we need while also ensuring that where distributed energy resources might defer or even make unnecessary the need for additional investment that you are tapping those distributed resources. We even got into ERCOT’s demand response proposal, which is live right now at ERCOT, the ADER pilot in Texas. We covered a whole lot. Astrid is incredibly smart, brings a wealth of experience to this area and really enjoyed spending this hour with her. I hope you’ll enjoy it as well. Please like, rate, and review this wherever you listen to your podcast. Share it with friends, family, and colleagues. And thank you so much for listening.Astrid Atkinson, welcome to the Energy Capital Podcast. So excited to have you here. So excited to learn from you. You are a wealth of knowledge on so many of the issues I love to talk about and work on. Why don’t we just start, if you would, just tell the audience a little bit about yourself and Camu and also your background coming out of Google and how your work there kind of informed what you’re doing now.Astrid Atkinson (02:22.046)Hi, it’s great to be here. Yeah, absolutely. So I’m CEO and one of the co-founders for a company called Camu Energy. And we provide grid software primarily for grid operators, but also we work with folks that are developing assets that need to get connected to the grid as well. So thinking both about how we manage the grid, but also about how we plug people into it. My background prior to co-founding this company about six years ago was on the big tech side. I was at Google for a really formative period from about 2004 until I started the company in 2019. And that was a period of time during which Google and the tech industry went through a really massive period of growth and just a fundamental change in how we think about software, the role of software in the world, and also the physical infrastructure that we use to provide that. So I was really fortunate to be part of the original push towards data center scale computing and cloud scale computing when that was being invented. I was part of the team that helped build the internal cloud that powers all of Google’s public facing products today. And in particular, I spent the majority of my career there on a team called Site Reliability Engineering, which deals with basically the interface between physical and built infrastructure. So data centers, networks, et cetera, the computers and servers that actually do work for software systems, and then the software and data infrastructure that we use to operate and manage those. My team was responsible for about five years for Google’s public-facing web presence, Google’s homepage. If you went to google.com to see if your internet was working between about 2007 and 2012, I was running the pager-carrying team, carrying a pager myself, which was responsible for maintaining five nines of uptime for that service. And, you know, we’d get woken up at three in the morning if it went down. So really strong tie between like direct kind of hands-on operation, but also building the software and systems and data that made all of that possible on a distributed infrastructure of unreliable parts and thinking about the role of the network, the data center, computers, and also the software to make all of that go. So when we started Camu, a big part of the goal for that was to leverage some of what we had learned about running global scale distributed systems and put that to work and thinking about how we manage the grid. There are a lot of parallels.Doug Lewin (05:11.832)Yeah. I mean, first of all, Site Reliability Engineer, like, do you say that whenever you walk into a utility to meet with them? You’ve got to have like instant credibility because they feel seen, like you understand what their job number one is, right? You couldn’t have Google just like go down or crash. It had to stay up. And during that period, you’re looking at this kind of decentralization, right? Of infrastructure to actually, if I’m understanding right, to increase reliability, less sort of single points of failure, more distributed architecture for resiliency and reliability. It sounds a lot like what we’re dealing with on the grid.Astrid Atkinson (05:50.22)Yeah, absolutely. I will definitely say that the operations background has been really helpful when we talk to utilities. It’s actually part of the reason I was interested in working with utilities in the first place is that I really liked that part of my job, thinking about critical infrastructure, thinking about how you design systems in ways that can add complexity, but still also increase reliability and resilience. So that’s been actually one of the things I love most about working with utilities.Doug Lewin (06:16.034)So you guys are very focused on, if I’m understanding right, distribution grid, distribution side. Like how fast are we seeing distributed energy resources? I mean, that’s a lot of the work, right? Is this orchestration? Like what is the pace of change that you’re seeing out there?Astrid Atkinson (06:33.206)Yeah, well, I will firstly say that we have in the last year started doing a lot more work on the interface with the transmission side and transmission system change as well. And a big part of the reason for that is that we are seeing a tremendous pace of change and that’s coming from a bunch of different forces, but load growth is probably the most urgent piece of it.Doug Lewin (06:55.106)I’ve heard about that. It’s happening, right? Yeah.Astrid Atkinson (06:57.87)A lot of that’s coming in from the data center side. And that’s particularly interesting to me and to my team because we know data centers. Data centers are a friend of mine. We spent a lot of time thinking about how you build them, how you run them, how you build reliable systems on top of them. And probably upwards of 50% literally of my team’s time in any role that I held at Google was optimizing data center utilization so that Google could make the most possible practical use of their limited compute resources. So these questions around, you know, how do we get more power? How do we get more compute capacity? How do we do that really quickly? Were actually a really big part of my job on the tech side as well. And it’s been kind of fun and really interesting to see like those two worlds come together.Doug Lewin (07:56.91)Yeah. So we’re seeing big data center growth in Texas. I think the growth of what we’re seeing in distributed energy resources is a little slower, but still quite fast. We’re up to, as of the end of last year, the end of 2024 is the most recent data I believe I’ve seen. We were at like 6, 6.2 gigawatts, something like that. So obviously with a peak demand of like 85, it’s not quite 10%, but it’s, you know, it’s not nothing either. And the growth, particularly in the solar and battery sectors. Although distributed natural gas, as you’d imagine in Texas, right, a lot of like generators, particularly in Houston, growing pretty rapidly too. So we’re seeing all kinds of increase in distributed assets here. You work around the country and I believe even around the world, you’re from Australia, so you have a view there. Like, are we seeing kind of exponential kind of growth rates? Is this happening? And where are sort of the hotspots for DERs you’re seeing?Astrid Atkinson (08:52.694)I think the growth rate in the US obviously varies regionally depending on local incentives and kind of where the communities are at and those kinds of things. I would put the US on the lower end of DER growth relative to Australia being at the very kind of high end where in many parts of their market, they’re upwards of 50% of local capacity served from rooftop solar kind of at peak. Wow. The UK is sort of somewhere in between. They have really, I think, increasingly robust programs around leveraging flexibility, particularly thinking about using that to manage limited grid capacity. And then if you look at places like Europe, there’s a lot of quietly pragmatic innovation in thinking about how do you get big fleet charging sites connected to the grid? Well, of course you’d throw a battery in. And you don’t really hear that as part of the big conversation about like DERs. But even in our work in the US, in the last few years we’ve been increasingly focused on growth in the sort of larger end of the DER spectrum. Thinking about the role that flexible assets can play, not just thinking about like solar and rooftop solar and thermostats and those kinds of things. There’s definitely a place for demand side management. But starting to really look at whether there are opportunities to get more flexibility out of things like C&I solar or backup power, batteries that folks are putting in as part of the power portfolio, industrial sites, manufacturing, those kinds of things. Thinking about the role that really big flexible assets like data centers can play. And a big part of the reason for that is just that if you don’t actually focus on getting those things connected with flexibility, they just get plugged in as big dumb loads. We have a lot of issues with load growth. And every time we plug in a new industrial facility or site without contracting flexibility from the batteries that they also have on site for resilience purposes, like a butterfly loses its wings. Like God kicks a puppy.Doug Lewin (10:59.467)Yes, bad outcomes all around, yes.Astrid Atkinson (11:01.474)Yes. Yeah. Yes.Doug Lewin (11:02.989)So let’s talk for a minute. We’re definitely going to talk about data centers and orchestrating flexible loads and all that stuff. I want to start at a little bit of a higher level. And can you just describe, I’ve heard you use the phrase many times in past podcasts you’ve been on and conferences and things like that, talking about grid orchestration. This is a term I really love because we’re starting to see these very high penetrations of distributed energy resources, whether they be very large or very small, it does require some amount of orchestration. Can you talk about what that actually kind of means in practice?Astrid Atkinson (11:37.378)Yeah. So, you know, in its broadest sense, the idea of orchestration is the idea that there should be mechanisms for managing supply and demand in something like real time, used broadly at all levels of the grid. And so, you know, when we think about the mechanisms that we have for managing supply and demand on the transmission side, those are pretty mature and pretty robust. In a lot of ways, what an ISO is doing is basically orchestrating those things day ahead in real time to make sure that we’ve got reliable power supply.Doug Lewin (12:09.592)On the supply side.Astrid Atkinson (12:09.16)On the supply side, yes, treating demand as effectively like a constant. Yeah, okay. And so there’s been plenty of digital ink spilled on the idea that as we progress through the energy growth, energy transition, whatever you want to call it, adding controls on the demand side give us that much more optionality and flexibility in terms of how we solve that supply and demand matching problem. I want to give a little bit of perspective from my past work in this space, working at Google, because Google actually has incredibly robust systems for matching supply and demand in real time. And we actually started in a place very similar to where the grid is at today, where, believe it or not, demand was originally considered inflexible. It came in when it came in, usually result of people waking up, getting to work, using the internet, Googling stuff, and a lot of the system operation role was thinking about flexing supply to make it. We had some tools the grid doesn’t like, you know, computers don’t blow up if they’re underloaded, but they do crash if they’re overloaded. So you don’t have quite the same real time balancing problem that the electrical system has, but it’s not dissimilar either. It was like, if our hose of load is coming at you all the time, and then you have to think about orchestrating your resource mix, like this data center, that data center, like these server pools, these server pools to be able to meet that need. And if you get it wrong, the whole system crashes and then all your operators are really sad and you lose money. And so, you know, we kind of started in this place where demand was inflexible the same way that it is in the grid. And in order to meet the kind of scale and growth and system demand and load that we were seeing, which increased some probably 10,000 to a hundred thousand times over during the time I was working on these systems, we had to start thinking about moving away from a peak driven capacity planning model. This will sound really familiar.Doug Lewin (14:00.544)Yes.Astrid Atkinson (14:00.544)Where you’re thinking about N plus one, N plus two capacity for the service as a whole in every region, very statically provisioned. So like these servers might sit idle most of the time, but we need them for that like one day a year when demand goes up by like a hundred times for some, you know, Michael Jackson dying was actually really big. This is how long I’ve been doing this.Doug Lewin (14:28.91)2009, right? It was summer, summer 09, I believe.Astrid Atkinson (14:32.296)It was a big reliability event for us. And so the system is provisioned to that sort of peak, and plus two, so you could take a data center out for service, and you could tolerate a failure. And that was tremendously expensive. When I said that we spent a lot of my time optimizing server usage, a lot of it was about saying, hey, could we move away from the statically provisioned capacity model to one in which maybe we have some tools to flex demand? Maybe we could just shunt some of it off. Maybe we could shed some, maybe we could think about changing our capacity planning model so that we can distribute these statically shared resources today between multiple users. Maybe we can over-provision parts of the system. All of these things are going to sound really familiar to folks who work in the grid space.Doug Lewin (15:19.15)I mean, so, so, so familiar, right? Like, so many p-Astrid Atkinson (15:22.726)Yeah. And we had to do literally all of it. We did all those things I just described. We also moved a lot of resources to edge serving. So both what I think of as inner edge, which you could think of as being capacity and equivalent to capacity in substations. It’s still owned by Google, but it’s closer to where the user is. So you’re actually saving optimizing network capacity at that point that had to be done for video. And also third party edge, which you could think of as being like residential battery or something like that, where it’s like serving capacity that’s located off network, basically sacrificial capacity, but you can use it as a tool in different ways to kind of increase the steady state efficiency of the system. So we had to do a tremendous amount of work on this because of the volume of growth that we were seeing was so large that there was nothing to do other than get creative.Doug Lewin (16:14.72)I just love like in general the parallels between things that people aren’t necessarily connecting and actually there was the term, you know, implied parallel, but actually like connecting them. And that is just such a fascinating one because it really is so close when you talk about like static, what did you call it? Static capacity or something along those lines, like the move from that kind of static system to a much more dynamic distributed flexible system obviously is so, so close to a lot of the changes that we’re seeing. So I think one other thing I want to talk about and just kind of introduce to the audience, most of the audience will have heard this term, but I think it’s important to kind of define terms at the outset and something you’ve talked about a lot. Before, I do want to talk about data centers and their power needs much, much more, but there’s one more thing I want to talk about before that. You’ve written some papers on this on DSO, Distribution System Operator. Can you talk a little bit about what that concept is and how it’s relevant to the challenges that we’re looking at on the system? And then we can dive a little bit into sort of who in Texas is a DSO, but first, what is it?Astrid Atkinson (17:22.379)Yeah, so DSO is the idea of having a version of the system operator that applies at the distribution level. So, you know, there’s a few different models for what that could look like, but most typically we’d be talking about like the distribution utility taking on something more like a system operator role and probably optimizing locally for services within that grid, while also acting as part of a larger system is kind of the most typical version of that. You asked about definitions of orchestration. And so, you know, if the idea is to be able to have controls over supply on the one hand and demand on the other, and to be able to flex both of those intelligently against each other in real time and over time, which is the actual definition I’d give you of orchestration. You need an orchestrator, like something that can actually take an intelligent view of those system needs, and that needs to extend all the way into the distribution side because that’s where the demand is mostly connected. So if we think about what would it take to actually be able to flex demand in that broader system operator model, you’ve got to go to where the demand is. And that is in the distribution grid for the most part.Doug Lewin (18:29.388)Yeah, it’s interesting when I bring this up, you know, in like tweets or LinkedIn posts, I inevitably get some kind of reply that is along the lines of all this DER kind of stuff is just so complicated. We just need to build enough dispatchable generation and just have that meet load. Two problems with that. One, just as you were describing with Google, like when they were trying to do this for data center capacity, it is very, very expensive. And even for an entity trying to do this, Google.Astrid Atkinson (18:57.39)Tremendously expensive.Doug Lewin (18:58.698)Right. Even for an entity like Google, making a lot of money, obviously, like not terribly starved for cash. Like nobody wants to just waste money. That’s not right. Like we are supposed to be using, we’re supposed to have an efficient economy because that creates wealth, right? So A, it’s wasteful and inefficient. B, it is also in many important ways, not as reliable and resilient because again, you have more of kind of the single points of failure, which is one of the things that we saw during winter storm Uri is like a major problem on the gas system, gas plants freezing up, wind turbines freezing, like these big generators and big systems failing. If you had had more edge systems that could have continued to operate, particularly, and I think kind of in this, in some of the maybe, not first wave, probably already into a first or second or third wave, whatever, but in some of the early stages, making sure critical infrastructure, your hospitals, your police stations, your communications facilities and water treatment facilities all have those kinds of generating assets also makes the system more reliable and more resilient. But it is challenging, right? Because then you used to have a system where you kind of knew here’s where that generation is coming from. I can maybe not count on my hands, but like, you know, there’s like a hundred or 200 points and like, I know where they are and they’re telemetered and I know what’s going on at them. Now you’re talking about this world where there’s millions. So we don’t want to minimize the challenge, but if we do it right, if we get that orchestration piece right, we can have a lower cost, higher reliability system. Correct?Astrid Atkinson (20:33.838)Absolutely. And so firstly, I think it’s really important to keep that goal centered that we want a low cost, high reliability system. And so there’s going to be a bunch of choices about how we operate it that comes from that. But it’s certainly true that adding more local storage capacity that’s co-located with loads is a big way that we get that. I went through this myself. I’m in an area of California that saw a lot of power outages over the last number of years. We had one year that was so bad that we had 45 days of power outage between New Year’s and March 30th.Doug Lewin (21:07.982)You’re in PG&E service territory, right?Astrid Atkinson (21:09.97)I am. But it’s also a particularly challenging mountain region. And I will say, in PG&E’s favor, that the reliability profile has improved. But also, I own batteries now. Like many of my neighbors and many of your neighbors, one set of experiences with that kind of outage, even as a household, is enough to motivate investment in local storage. And when you look at that from the perspective of folks who have a real obligation to the community or there’s public infrastructure that’s dependent on having power, like water treatment facilities, emergency response, those kinds of things, they really kind of have an obligation to look at investing in those resilience capabilities. And so in some ways, yes, that makes the grid more complex. But on the other hand, that’s a complexity that we must embrace. But the good news is that if we think about it from a system design perspective that also provides us with all of these extra tools to think about increasing reliability for the system as a whole. So, you know, you sort of talked about the complexity of adding all this stuff, all these points of control. How do we think about managing them? One of the biggest things that we went through during that massive scaling period at Google was thinking about how to manage what we talked about as cognitive bandwidth for people building and operating the systems. Because if you’re going through, you know, adding hundreds, thousands, tens of thousands, millions of new like subservices, different components, I think we counted at some point that I had 10,000 different product teams that were customers of my shared infrastructure. The traditional way of scaling that and the place that we are in the utility industry today is to say like, look, we can add more operators maybe, but we can’t add them infinitely. Maybe we can put a halt to the complexity, but the only real way to cope with that is thinking about better tooling for the people building and operating within the system that manages that complexity down. And so there’s a really important critical role for intelligent automation within this system that is going to make it possible to deal with that kind of scale. You know, the scale that’s coming into the grid is significant, but it’s not the only place we’ve ever dealt with this problem, right? Like there are a lot of parallels to things we’ve dealt with within the kind of broader tech space. We have the technology. We don’t have the technology necessarily within the grid landscape today, but this is a tractable problem. We can get this done. But thinking about it from the perspective of managing that complexity so that human operators can continue to reason about the system and make good human decisions, I think is a really useful lens when we think about what kinds of solutions are most helpful.Doug Lewin (23:58.702)I think what you’re talking about and tell me if you were going in a different direction and I just missed it. But like, I think what you’re talking about effectively is like, effectively like using AI as a tool to make things better and in a sense, having some intelligence, you just said intelligent automation in the system, which is, I mean, there’s different ways of saying these things, but like, if you have AI that has sort of layered it, because again, you’ve got millions of little points. I think who knows if this is two years, five years, 10 years, 15 years away. But refrigerators with mini batteries, air conditioners are now starting to get sold with mini batteries in them. We’ve already got in Texas, and we’re way behind other states on EV adoption. Though EV adoption is happening here at a fairly good clip. I think we’re up to 400,000 vehicles, which is probably something like 25 gigawatt hours of batteries rolling around on four wheels in the state of Texas. To coordinate and orchestrate all that stuff basically needs to be done in an automated way enhanced by artificial intelligence with some human. Okay, go ahead. Yes, please correct me.Astrid Atkinson (25:07.84)So I actually want to put a pretty heavy caveat on the role of actual AI in the sense that people are thinking about it when they talk about that today in appropriately intelligent automation. And the big reason that the AI technologies that are literally really exciting people at the moment and driving a lot of this like load growth and the people think about when you say AI really mostly LLMs, they’re large language models. There’s a lot of things that people mean when they say AI.Doug Lewin (25:37.026)True.Astrid Atkinson (25:37.026)LLMs are not particularly useful for these types of operational problems because they make s**t up. Sorry, you might have to edit that. They make things up. So when I talk about intelligent automation, what I really mean is intelligent in the sense of intelligently applied.Doug Lewin (25:57.39)Okay.Astrid Atkinson (25:57.39)There is definitely a role for AI technologies. Some of them are very boring. Things like really effective forecasting, really benefits from AI technologies, right? For sure. Complex system modeling and anything that really requires complex pattern recognition is a really good candidate for having AI applied to produce much better results. And these are all critical inputs to operating these more complicated systems effectively. There’s also a really important role for applying intelligently considered system design in the sense that you can add relatively simple local automation that makes the big problem a lot easier. So for example, the challenge of building a centrally managed, centrally monitored, centrally controlled orchestration system that both manages transmission system capacity and your fridge, a very big one.Doug Lewin (26:36.224)Yes.Astrid Atkinson (26:36.224)Like that’s not something that’s easy to sort of do well in one central system. But if you take a slightly different view on that and say like, hey, maybe the fridge’s job is managing the fridge. Maybe what we need to do is give that fridge enough inputs just to know like, is there going to be a storm such that you need to charge your battery ahead of time instead of like operating in a steady state, just like charge and discharge. Now the job of the fridge is handled. You know, likewise household level controller can apply to that and can respond to that sort of signal. But if it’s cut off from the central brain, the house will just do the right thing in that case. And again, a lot of parallels to the way that we thought about this in terms of like data center scale computing. Like if a Google data center is cut off from the herd, it can continue to operate in steady state without access to the central brain. By doing the last sensible set of, you know, the last set of instructions that it got, which it gets periodically around how to distribute and serve load is usually safe to operate on in a steady state under most circumstances for most services. And most disruptions are relatively short. It can rejoin the herd later and go do the right thing again. And so when we think about designing control systems, thinking about layers of abstraction. This gets back to your question in a moment of who takes the role of system operator and what does that look like? It becomes really important because you can make this problem a lot simpler by taking kind of a layer cake view of it, right? Like your fridge battery manages your fridge, your house battery or control system manages your house. Perhaps your distribution system operator’s control system manages the distribution system and does things like intelligent load shedding in emergency conditions, manages things like charging and then dispatching localized battery, manages things like optimizing within local areas of the grid to maintain efficiency under most conditions, but then drop some stuff off if we really need that capacity back for a peak. Those ideas that are really human ideas actually, around like layers of abstraction and managing complexity, are going to be a really big part of that future system. Our AI LLM friends will have important small roles to play. But I think it’s useful to think about the system design piece first and then where you apply those technologies second when we think about the role they’ll play.Doug Lewin (29:09.102)No, no, that makes a lot of sense. And really, there’s different technologies that are going to be brought to bear, kind of a little bit on the different sides of the meter, I suppose. And is it fair to say you guys at Camu are much more focused on kind of the distribution utility side of the meter? There really isn’t. Yeah, I mean, I honestly, I think both sides need more focus. It makes a lot of sense to pick a focus and you could obviously do a lot worse than focusing on the distribution system, which seems to be behind a little bit. I mean, we’ve seen this, right? I mean, that was one of the biggest problems with Winter Storm Uri. You talk about intelligent load shedding. There was no, I mean, no is too strong a word, but it wasn’t very intelligent the way it happened, right? I think it’s fair to say.Astrid Atkinson (29:33.112)But yeah.Astrid Atkinson (29:50.679)Not very.Astrid Atkinson (29:56.962)I think we’ve all learned a lot from recent emergencies, whether it’s wildfires in California or Winter Storm Uri around the need for better tools for this.Doug Lewin (30:06.882)Yeah, and basically if you’re doing like a hierarchy of need, like the fridge battery is a cool concept, but like getting like load shedding on the distribution system right, that like people aren’t dying because they’re freezing in their homes is higher on Maslow’s hierarchy, you know, or however you want to say that. Okay, great. So I do want to talk about AI. You’ve been kind of teeing this up the whole time and like sort of large loads, how those are playing in sort of grid management and some of the opportunities that come from that. So let’s just start there, just start talking about what you see as the opportunities there. I have some ideas I want to bounce off you, but rather than lead the witness, why don’t you start with what your ideas are top of your head. Yeah.Astrid Atkinson (30:48.736)Yeah, well, you know, we started our company with a real focus on orchestration within the distribution environment. So thinking about orchestrating those end user resources, whether that’s thermostats or batteries or, you know, EV charging or whatever. And I think there’s a really important role that that’s going to play. You know, I mentioned the importance from a system design perspective of having levers of control on load. But one thing that makes it really hard in the market today is that the economics are just really not exactly there in most utility markets and regions to actually be able to pay for those flexibility services in a way that incents their creation, maintenance, and growth at very large scale. Most regions will have some sort of demand response program. It kind of pays for you to flex like two to 10 times a year. That is actually a really big help to the grid. But it doesn’t really provide the sort of financial incentive that you would need to get like everybody signed up, nor does it really provide like opportunities for system optimization that would allow the kind of really rich set of control points and kind of efficiencies of scale that let you do things like optimize substation utilization by, you know, turning all the knobs. That’s been like an industry goal for so long and we’re just not there. And a big part of the reason for that is that the economics aren’t there either. We’ve done this analysis with a few different utilities, but we published a white paper with AES a couple of years ago, their Indiana utility, basically analyzing the long-term impact of load growth as a result of electrification, particularly EV adoption in their case, in terms of the time to upgrade for every single component on the grid driven by potential EV load growth. Like when would you have to upgrade the conductor, the transformer, the substation, et cetera, for every component with the intention of effectively quantifying like, okay, well, if you could manage the growth, could you avoid the upgrades? How long and what would you save if you did? And that was really intended to kind of get at this core question about like, what is the value of flexibility? And is there more out there than we can reach through demand response type programs today? And what we found in that analysis was that about three quarters of the value of demand flexibility is locked up in basically capital deferral. There is a tremendous amount of value in being able to manage load growth, even down to the very edges of the distribution system, in terms of not having to update every transformer over the next five years, if you can manage those additions. And that’s cool. That could inform different programs that potentially incent people to participate in VPPs, demand flexibility programs, all of those sorts of things. But boy, we’re just like nowhere close to being able to do that in most utilities today. Like this is a pipe dream as it stands for most utilities today. There’s not a regulatory structure that really supports that kind of incentive. So we’re sort of stuck with this place where it’s like, okay, you can pay like pennies for demand response and then you have to pay something to the software provider and then to the VPP operator and then back to the people who participate. And it’s just like not there. And this is all a long way of saying that if you could figure out how to unlock the value that that flexibility provides from a poles and wires perspective, you actually might be able to use it in the way that it could be used. And so this is where I think the data center boom and large load additions are really interesting. And this is like kind of a long way around to that.Doug Lewin (34:29.214)So worth it.Doug Lewin (34:29.565)It is so worth the journey. Take your time. The beauty of podcasts. We’re in no hurry, Astrid.Astrid Atkinson (34:36.022)Yeah, so we simultaneously have this situation arising where suddenly a lot of people want to build a lot of data centers. And our ability to meet that need, both from an overall power supply perspective, but also from a like, poles and wires, and every part of the system perspective, it’s not yet clear how we’re going to do that. But asking those loads themselves to be flexible certainly gives us more optionality. And you’ve had a couple of recent podcast guests talk about different ways that flexibility can be an unlock for being able to add those resources more cost efficiently from a network perspective as well as from a capacity perspective, open the door to oversubscription on both sides, those kinds of things. And there’s also an incentive on the data center side, they want to get connected quickly. When I worked at Google, the reason that we were doing all that optimization for data centers was not because Google wanted to save money on building new data centers. It was because we literally couldn’t build enough quickly enough to meet Google’s organic load growth demand. Like there was no other way to scale Google services than becoming more efficient. And what we’re seeing playing out in the market now is that suddenly data centers are willing to consider flexibility. They’re like, hey, if I could flex, could I get connected sooner? And that conversation is starting to play out, especially in Texas.Doug Lewin (35:57.228)Yes.Astrid Atkinson (35:57.228)I think what ERCOT is doing on this is really, and the Texas legislature is doing on this is really interesting. But it’s also just really being driven by business need from the data center. But it’s tricky because the reason they want to build that capacity, same as back in the day, Google wanted that capacity, is so they can run their business. And the opportunity cost of not having that capacity available is very, very, very high. We estimate that it’s on the order of $7 billion a year for a gigawatt-sized site for a hyperscaler. And that applies both to delays in building, but also it does kind of apply to not using the site once built. So there’s this opportunity that data centers have maybe to get connected more quickly by providing flexibility, especially at the site and getting creative about the ways that they power that, whether that’s local generation, on-site storage, flexing within data centers to load those kinds of things. But I think there’s also a really interesting opportunity to leverage other kinds of flexibility. So we started to see this emerge. There was an announcement just this week from Voltus and Cloverleaf that they’re put together a third-party VPP program to provide flexibility basically alongside, but entirely separately from the data center itself to start offsetting some of that load. And I think that’s really interesting because data centers fundamentally are not really budget constrained for getting these things built. They’re really time constrained. And so like, I think in there is the opportunity to start thinking about like off market or kind of secondary market opportunities to get value for flexibility, both from the site itself, but also from, you know, you, me, my battery or your fridge, which I think is really new and interesting.Doug Lewin (37:41.27)So, so interesting. So many different questions based on that one. But I think one of the things I’m thinking about is, you said like off market or secondary market. I am generally obsessed with markets, but I’m now in a particularly obsessive moment about markets, largely because of the podcast I recorded with Lynn Kiesling and then her recommendation to read. Well, I think I brought it up as she recommended I read it, this Hayek biography and looking at like, you know, the time that he was sort of forming his economic theories in the thirties were like, everybody was into central planning. I didn’t realize until I read this book, like how much like Western Europe was like central planning is the thing. And again, like interesting parallels and connections to be made to what’s going on on the grid right now. And obviously you need some planning of a grid, particularly when you’re talking about things like high voltage lines and things like that. But there’s so much of this that could be done through markets. So one thing Astrid that’s going on right now that I think is a very interesting connection to what you’re talking about, literally today, the day we’re recording, October the 3rd, there was a meeting I haven’t listened to yet, but I will soon, the Wholesale Market Subcommittee at ERCOT was discussing a proposal that ERCOT put forward for residential demand response. And the way they did it was they said, we’re going to, we just want to pay $140 a kilowatt year for 500 megawatts. Now $140 a kilowatt year, right? Most houses have about a kilowatt of demand flex from their thermostat, maybe from one or two other things. Maybe it’s a kilowatt and a half, but that’s $140 per year that then the load serving entity has to somehow share with the customer. So that’s probably going to come down to $50 or $70 if it’s halfway, right? Then that’s 70 bucks for a customer to have their air conditioning cycle. That’s not per month, that’s per year. I’m talking about like five, six bucks a month. Like, I just don’t think that many people are actually gonna say, I don’t wanna be pessimistic. I wanna be real clear. I’m being careful to say this whenever I talk about this. I give a ton of credit to ERCOT for recognizing residential demand response, residential demand flexibility. These things are important. And that’s great. They made a really important first step there. But I think part of the problem they’re having Astrid, and frankly, I think they’re having this on the aggregated distributed energy resource pilot we have as well, which is a pilot to get stationary batteries in folks’ garages into the ancillary service market. Well, the ancillary service market is a tiny sliver of the overall market. So when I hear you say three quarters of the value from this AES study were in capital deferrals. Like if we can’t get after that part, if all we’re dealing with is the energy portion and the ancillary service portion, well in Texas, distribution rates, if they aren’t already half or a little more than half of the bill, they will be very shortly, right? The energy portion of the bill keeps dropping largely because of renewables, but also because of low cost gas. There’s obviously a multitude of factors and T&D keeps going up. So that’s just a long way. You gave a long answer. I’m asking a very long question, but basically I think the question is like, how do we get to that? And how do we get to the point where there is a price signal for the value that these distributed resources, whether they be on site with a data center or whether they be in this kind of secondary market, but that it is a market where somebody isn’t just picking a flat number per kilowatt year and a flat number of megawatts. There could be many times that number of megawatts available at a much lower rate, but we wouldn’t know it because they’re not really setting it up as a market. And this stuff is hard. I don’t expect you to have an answer to this, but I just wanted to kind of explore it more and unpack it more, because I think everybody’s trying to figure this out, including ERCOT.Astrid Atkinson (41:29.708)Yeah, I’d give maybe just like kind of a two part answer to your question, which is to say that there’s sort of a practical and technical component to this, which is like, is there an entity that wants to take on the problem of potentially forming such a market or incenting retail level participation in the broader optimization of the system in this way? And so that’s kind of one piece of it. And from that perspective, it’s actually really cool to see ERCOT moving quite seriously in that direction.Doug Lewin (41:58.316)Yes.Astrid Atkinson (41:58.316)There was an announcement just this week also that they recently did a procurement for software capabilities for real-time monitoring for DERs across the state. And I will tell you that from my operations background, visibility should always come before control. So I think that was something that we’ve been tracking for a while. We actually participated in that bid, although sadly we didn’t win it. But I think that definitely demonstrates concrete commitment from ERCOT to start really thinking about putting in place mechanisms that could answer the second part of your question, which is, could we actually use a market instead of these fixed incentives that we’re stuck with today? And I think this is where the potential role of the data centers comes in, because the market has two sides. The reason that construct that you just mentioned is kind of unappealing is because they’re not paying very much. When it’s hot and I’m running my air conditioner. I have to admit that having a smart thermostat and also not being entirely clear at various points with different programs going on, like what programs I might be signed up into, every time it’s a little warm in my house, I’m like, is Google turning down my thermostat? Even though I worked at Google and I know they’re probably not, except maybe by accident. So that problem of thinking about like, what would you actually have to pay for people to be willing and excited to participate in these programs is a very real starting place. And I think today that price is nowhere near being realized.Doug Lewin (43:30.254)That’s my sense, yeah.Astrid Atkinson (43:30.254)But, you know, markets typically do have two sides. Like, what would a hyperscaler bid to be able to, in the broader sense, potentially connect a load that otherwise would have to wait five to seven years because they’re buying gas turbine parts or waiting for a large transmission system build out or something like that. We know that in some cases, folks are willing to think about flexing their own loads, but a lot of data centers will also say that that’s not really feasible for them. Although I think the rise of co-locating generation assets or flexibility provides tools even for the folks who don’t feel like they can turn down loads. But there’s kind of a toolbox of mechanisms of flexibility where maybe data centers are willing to really self-manage this within their own site. But maybe they prefer to just worry about their own stuff and pay somebody else to reduce their load. And that’s where it’s not exactly getting to that capital deferral value of flexibility.Doug Lewin (44:32.17)We still gotta figure that part out.Astrid Atkinson (44:32.17)Part of the value stack. Maybe a new part of the value stack. But what you really have is this ability to turn opportunity cost into perhaps a direct-to-consumer payment. If you had the data center bid into the other side of that and be like, look, I’m willing to offer $500 for someone to flex a kilowatt year at this moment, now that’s more like a market. And I think that’s really interesting.Doug Lewin (44:58.262)I love this for so many reasons. I mean, number one, you know, affordability is a big, big, big deal, right? I mean, Texas has fairly low rates, though our bills, just as a function of it being so hot, so many days of the year, even with low rates, our bills are quite high. And we are seeing, there was an article, I’ll put it in the show notes so that if I get it wrong, people can look up exactly what it is and I’ll put it in there that I was wrong if I was wrong. But I think it was something like, I think it was earlier this year, CPS Energy in San Antonio said something like one out of six of their customers was in arrears.Astrid Atkinson (45:26.55)Yeah.Doug Lewin (45:26.55)And that is not uncommon, right? NASUCA, the state utility advocates organization had some similar numbers out last year. There’s a real problem. And you have a system in Texas, it’s different everywhere, but in Texas, you can really reduce your bills by moving your load around the four coincident peaks. And that’s probably going to change. But there’s also emergency response service. There’s all these different ways that large users, Bitcoin mines, big industrial manufacturers, data centers can reduce their bills. There’s a very small amount of residential opportunity there. So this would create that. This would help put money into people’s pockets, help the data centers, especially those that for whatever reason can’t really move their load around or markets or what’s that?Astrid Atkinson (46:17.484)Who care about affordability.Astrid Atkinson (46:20.218)There’s an argument being made for actually caring about affordability and overall system costs as well.Doug Lewin (46:25.408)Absolutely. And this is what markets are for, right? If you’re a data center developer and you’re like, okay, I’m going to put all this backup gen and storage and all this stuff on site. But if the next increment of that costs more than whatever this other distributed market is, and this other distributed market’s putting money back into the pockets of people living in this state, and I know I need public support to be able to build these data centers, it just kind of one of those, one of those sort of like stereotypical win-win-win-wins. I do want to talk about the capital deferral part, but anything else you want to say about that before I go there?Astrid Atkinson (47:01.678)Well, yes, actually, I would say that some of this is kind of speculative and forward looking, but the thing that I like about it is that there is a lot of motivation to get stuff done quickly in this space. And that’s a little bit unique in the sorts of changes that we’ve been managing in the grid and kind of power industry more broadly. We’ve been talking about local markets for forever, but they haven’t been strongly incented. And I think the thing that is potentially a little bit different about this moment is that there is a tremendous sense of urgency from those large loads. And so, you know, it’s a multi-part problem and a multi-part solution, but starting to really kind of socialize and fix the idea that like flexibility requirements when they connect and flexibility opportunities to connect more quickly could unlock a lot of good is a really helpful thing to have in people’s heads.Doug Lewin (47:50.036)Absolutely. And so let’s just extend that for just a minute to the distribution grid. Like you said, markets have to have like a buyer and a seller. So in the example you’re giving there, the data centers could be the purchaser, could be the sort of counterparty. What I’m thinking about on the distribution side is starting to get to a system where, and this has been talked about a little bit at the legislature, particularly post-Beryl, where there were some discussions around like performance-based regulation and aligning the financial interest of utilities with the financial interests of their customers, of having the Public Utility Commission, maybe with some assistance from ERCOT as they’re getting this, you know, their GE Vernova comes on and starts looking at, you know, getting them visibility into distributed energy resources, is to be able to stack up, like, what are the different investments you’re making on the distribution grid? To be very clear, distribution utility is still going to make a lot of money. Like the investor-owned utility is still going to, there’s so much investment needed here. We’re not having a death spiral discussion right now. Right? Like it’s not, it’s like, it’s not going to happen. Like the grid needs a lot of investment. Utilities are not starved for investment opportunities, but there could be some of those that could be obviated, deferred or obviated by smart orchestration of distributed resources. So maybe in that sense, you know, the PUC and ERCOT working with the utilities are identifying a couple of projects that look because of that visibility, they’re getting into the distribution grid. Like these are really high potential to have distributed energy resources meet the need. Thus, you’re not socializing the cost of tens or hundreds of millions of dollars. Instead, private capital is going in to pay for resources at people’s homes and businesses. It isn’t socialized to the whole system. So that’s preferable. And then there actually is some payment from the distribution utilities because while that is a payment, that payment would be socialized and rate-based. It could be far less than what they were gonna spend otherwise. And we know what that amount, we know what they’re gonna spend. Like that is a knowable, right? It’s an empirical matter. They’re going to recover it in rates. I don’t know. Could that work or is that just too complicated?Astrid Atkinson (50:01.998)Yeah, I think it could. So a couple of things on that. Firstly, local utilities or distribution utilities or all utilities, you know, they do have their own set of incentives for how they make a profit, you know, really focusing around capital expenditure and rate of return on that. And so, you know, on one of your previous episodes, Lynn Kiesling was talking about, you know, the alternate perspective of perhaps like a rate cap or usually referred to as a totex model, where instead of looking at just like CapEx, you’re actually looking at the whole cost structure for the utility and thinking about, you know, look, it’s the utility’s business to optimize between like operating expense versus like build out or whatever. You just have to, you know, basically provide a good service and, you know, we’ll think about the overall rate of return being a function of all of those things, which I think is very useful. But I don’t think we necessarily have to change everything about how we regulate utilities for there to be a really good case for things like investing in alternatives to physical infrastructure upgrades. The way that we like to think about this is not exactly capital deferral, but rather capital efficiency. So utilities don’t really have a shortage of opportunities to do upgrades at this point. To some degree, their business structure encourages them to do upgrades. What they have is more like a target rich environment that’s starting to cause issues with affordability, right? It’s like, there’s only so much you can pass along to ratepayers, reasonably speaking. And utilities now need to be increasingly careful about making sure that where they’re investing, it’s in places that have kind of the most public good or benefit the broader set of ratepayers. And so that does, I think, create inherent incentives to start thinking about ways to optimize, especially the very edges of the grid. And so I think it does create some incentives around things like managing edge resources and taking advantage of technology management stuff to think about how we can defer or even completely avoid local upgrades through more efficient edge management. And I think there’s a lot to be done there. What I will say is that a bigger blocker in my mind than the regulatory structure to doing this today is actually the current state of software and data capabilities within utilities. And now I’m a little biased on this because I run a company that provides software and data capabilities.Doug Lewin (52:25.71)I was just going to say we’re right back into your wheelhouse. So I see what you did there. No, but you’re right. It actually is a real issue. You can’t do this kind of thing without that really strong.Astrid Atkinson (52:35.138)Right.Astrid Atkinson (52:35.768)And most utilities today don’t have the data capabilities that they would need to be able to say, on a really robust and ongoing basis, this is exactly what we expect to spend on every piece. These are the potential efficiencies. This is the counterfactual if you managed it. And even looking at it on more of a kind of operations basis and thinking about moving towards a DSO, most utilities don’t have the ability to see even really what’s happening with rooftop solar, let alone kind of all the things that are getting plugged in. And the state of the art from a software perspective in the industry is not great. Most of these systems are coming from large legacy providers. They’re mostly running on-prem, even where they’re not. You know, they don’t really have the same kinds of scale and kind of robust large system capabilities that certainly we relied on when I was running large systems at Google and every equivalent provider does. When I was an operator at Google, I could see every one of the hundreds of thousands to millions of machines that were forming the collective fleet that were serving all of my web search requests. If we had a local outage, I’d get notified right away. I could drop into any single server and take a look at it. But I also had really robust tools to do things like analyze the flows of traffic across different parts of the network to drop into high performance analytics tools and say, there’s a pattern of outages here that are causing this system problem where this area has blinked out. Those kinds of capability, we are in the stone age in terms of what’s available to grid operators today to do those kinds of things. And I really think that without those capabilities, it’s very hard to envision a more dynamic way of managing like real physical reliability considerations like blowing up transformers, right? To trust software to not blow up a transformer is a really big change in the way that utilities do things. And it’s true that changing their regulatory structure to allow them to pay for software would be nice because that’s typically on the opex side today, which is not part of the rate base.Doug Lewin (54:50.444)Yeah, to put a finer point on that, like today, if they just take the transformer out and put a bigger transformer in or just add a second or third or fourth transformer, whatever it is, they’re getting 9%, 10%, 11% on every dollar they spend. If they go through all this trouble to upgrade their data systems and figure out exactly how these distributed energy resources are working and maybe even bring a few more onto the grid so that then they don’t need the transformers, congratulations, now you don’t get paid.Astrid Atkinson (55:18.466)Yep. Like even for a utility that absolutely wants to bring really intelligent solutions to saving money for ratepayers, that is a structural disincentive. That’s a real problem.Doug Lewin (55:28.938)Yes.Doug Lewin (55:28.938)So just one last thing on this, and I know we’re nearly out of time, but I think this is really important in the Texas context. So Texas is mostly a competitive market with monopoly, fully regulated transmission distribution utilities. Most of the conversation we’ve just had is sort of about that world, but also 25% of Texans or so are served by municipal utilities or co-ops. That’s not a small number of people. It’s like whatever, six, seven million people in the state. How does this look for those folks? Those are basically like vertically integrated, not exactly because there’s G&Ts and retail only co-ops and stuff like that. But basically in some ways it should be simpler, maybe not easier for all the reasons you just said, because the data is far behind and all of those issues. But at least in the sense that like, if you’re a CPS Energy, like you own generation, you own the poles and wires, you have the customer relationship. So with the huge caveat, you got to do a lot of work with data. Like you should be able to create a virtual power plant type of a thing within your service territory to save money on transmission distribution, save money on generation, put money back into your customer’s pockets, free up capacity so that then you can bring data centers into your service territory. What am I missing there and how are you thinking about that in Texas? And also just as part of that, I think you are doing work with a co-op in Texas. So it’d be interesting to hear about that before we end.Astrid Atkinson (56:53.142)Yeah, we currently do do some work with a co-op in Texas in the Dallas area. And so I think the situation for co-ops and munis is in some ways really rich with opportunity and in some other ways, I think really difficult. We’ve done quite a bit of work with co-ops. We kind of got our start working in that part of the market because they actually do have quite a bit of flexibility because they are vertically integrated and also because they have a very unambiguous charter within their community, they’re nonprofits, a lot of what they do is really directly tied to service to their member owners. And they have both the tools and the obligation to keep rates low within thatSo, you know, the things that they don’t have, they are typically really resource strapped. They’re usually small organizations. They don’t have a lot of time and usually, you know, functions that would have a 50 person team in a large utility might have like a fraction of a person’s time in a co-op. So it’s hard for them to take on challenges that are really resource intensive. On the other hand, we loved working and continue to work with folks in the co-op sector because if you can actually go in and help them out with the heavy lift of moving data around and getting it assembled and stitching over gaps and all of those kinds of things, they have all the same data sources and many of the same challenges that larger utilities do. And they can sometimes move a lot more quickly. Part of the thing that was great about us starting our work with co-ops is that we developed really robust capabilities for doing things like stitching together data sets. And we actually used a lot of like kind of small AI to fill in gaps within data and all of those kinds of things that helped us out a lot as we’ve begun working with larger utilities as well. The thing that’s really, I think, difficult for co-ops is that they can end up with the short end of the stick in situations where there’s a lot of risk or a lot of money moving around. And particularly like Winter Storm Uri put some of the Texas co-ops into situations where they basically went bankrupt because they-Doug Lewin (58:47.924)Yeah.Astrid Atkinson (58:47.924)Because they had contract structures in place that obligated them to pay for power that maybe wasn’t even necessarily available to provide service. And it’s a very complex situation, but they are not necessarily in a really fantastic position to benefit from the efficiencies of scale of things like the ERCOT market, but are sometimes in a situation where they end up bearing some of the costs. And we saw those impacts from Uri radiate up into Colorado and over into Arizona with gas shortages and price spikes and kind of all of the above. I think they’ve got their own challenges, but what is fantastic about co-ops is they’re very responsive to customer needs. And so, you know, that can show up in innovation and affordability. That can also show up in innovation and thinking about like how to bring on a large load that you could help offset like costs for everybody else on the system, maybe help that large load get connected more quickly. So I think we’re still going to continue to see a lot of innovation, perhaps disproportionately on the co-op side. There’s a lot of them and they could try different things, but I also think they’re managing, you know, some really significant increasing challenges around system costs as well that have to be balanced there.Doug Lewin (01:00:20.788)That makes sense. And I think it also speaks to why it might make more sense to have these distributed markets either linked to each other somehow or have like a broader market because you could get a data center going to a co-op territory and you could get some residential or just distributed demand side reductions in that service territory, but it also may not have that large of a load period. So like even if you offset 100% of the load, it might only be 100 or 200 megawatts. Like...Astrid Atkinson (01:00:48.398)Honestly, the data centers that we’re talking about dwarf most of the co-ops that I’ve worked with in terms of overall load.Doug Lewin (01:00:54.158)Right. So we need to make sure that those folks, if there is some kind of market, this distributed market, they have a chance to participate and lower their bills, period. And there might be others as well.Astrid Atkinson (01:01:05.614)Absolutely. And so this is where I think ERCOT has a really unique position.Doug Lewin (01:01:05.614)Yes.Astrid Atkinson (01:01:05.614)Because they are in a good position to do something like that.Doug Lewin (01:01:14.326)And they did, and we’ll put a link in the show notes announced just days before we recorded this, not only the data piece you talked about, but the launch of their, it’s called GRIT. I forget what the acronym is, but it’s innovations and they’re like research and innovation technology, something like that. And DERs were like, it was one of the first two or three things on their list of things they really want to get into. So I do think this is a really, really fruitful area. And we’re going to see a lot of growth, a lot of dynamism in, I think. Astrid, you’ll be at the center of it. Your thought leadership on this, the leadership of your company, I think is really interesting and I’m looking forward to keeping in touch with you and learning more about the company as it grows. Before we end, is there anything that I should have asked you that I didn’t or anything else that you’d just like to say in closing?Astrid Atkinson (01:02:00.29)I think it’s a really interesting time in the industry today, and I think we’re likely to see a lot of changes in the next couple of years. You know, there’s really, I think, never been a more exciting time to be working in this industry. I’m really happy to be part of the conversation. Thanks for having me on the show. I really appreciate it.Doug Lewin (01:02:16.844)Yep, thanks for all you do, Astrid. Appreciate you.Astrid Atkinson (01:02:19.832)Thank you.Doug Lewin (01:02:22.392)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. 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 federal 30% solar tax credit has driven demand for solar but it’s about to expire. And when it does, some worry the bottom will fall out of the market. But what’s actually emerging looks less like a collapse and more like a shift which could lead to bigger growth down the road.In this episode, Bret Biggart, CEO of Freedom Solar, offers a grounded look at how a major Texas-based installer is adapting in these uncertain times. Freedom Solar began in Austin and now operates across Texas, one of the fastest-growing residential markets in the country.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.Biggart notes that while the tax credit’s end will make sales more difficult, other forces like rising power prices and better financing tools are keeping solar within reach. New third-party ownership models are allowing companies to use commercial incentives to maintain homeowner savings, smoothing out the post-credit transition.That’s not the only shift underway. Consumer protection has become a growing focus for regulators after years of aggressive door-to-door sales and subcontracting issues. A recent Texas bill aims to bring more transparency to the process, ensuring buyers know who is selling, installing, and servicing their system. The Texas Legislature also made it easier to build with faster permitting. And storage is quickly moving from luxury to standard: 67% of Texans get storage with solar from Bret’s company now. The number is 90% in Houston. Freedom Solar is also expanding into efficient HVAC systems like heat pumps, which cut energy use and increase comfort.There are still challenges ahead. Equipment costs, tariffs, and permitting inconsistencies remain barriers and the ending of the tax credit is an undeniable headwind. But after Winter Storm Uri and Hurricane Beryl, Texans put a high value on resilience and the flexibility of distributed systems has massive value for the grid. Even as incentives fade, technology keeps improving, and Texans want reliable, resilient, and affordable power.That’s what this moment represents, not the end of the solar story, but its maturation.If you found this perspective useful, share it with a neighbor and subscribe for more grounded insights on Texas energy and policy each week.Timestamps* 00:00 – Introduction* 01:45 – Guest intro and background, origin of Freedom Solar* 05:00 – Importance of in-house salespeople and customer-first processes* 07:30 – Impacts of federal budget bill, end of tax credits* 11:00 – Long term implications for solar, rethinking the business * 13:30 – Third party ownership, pre-pay PPAs and other structures to lower costs* 17:30 – Transferring solar and solar payments when selling a house* 20:00 – Consumer protections and stopping bad sales practices* 25:00 – Some Texas bills that make it easier to build and install solar + storage, problems with implementation* 31:00 – Attachment rates of storage is up to 67% statewide and 90% in Houston * 33:30 – An integrated demand side: solar + storage + heat pumps* 39:30 – Difficulties for customers trying to get heat pumps* 43:30 – Heat pump cost differential from minimum performance HVAC* 46:30 – Supply chain, tariffs, domestic content* 51:00 – Two main variables for solar economics: cost to install and cost of electricity * 53:00 – The value of resilience* 56:00 – ClosingResourcesGuest & Company• Bret Biggart - LinkedIn• Freedom Solar Power + LinkedInReferenced During the Show• Solar legislation passed in Texas’s 89th Session (summary)• New law cuts red tape for rooftop solar and batteries (SB 1202) + Bill Text• TDLR: Residential Solar Retailers program (SB 1036) overview• Texas Legislature passes Residential Solar Retailer Regulatory Act (SB 1036)• Do Solar Panels Increase a Home’s Value? | The Wall Street Journal • Texas Energy Poverty Research Institute’s Community Voices survey• Sara DiNatale’s award-winning series on solar sales | San Antonio Express News• Heat pumps, heat pumps, heat pumps! NoahpinionRelated Podcasts by Doug• Resistance is Still Futile: Exploring Heat Pumps with Eric Wilson• How Load Flexibility Could Unlock Energy Abundance with Tyler Norris• Know Before You Go Solar with Sara DiNataleRelated Substack Posts by Doug• The End of Solar & Battery Manufacturing in America?• Rapid Demand Growth Outpaced by New Supply in Texas• Energy Scarcity• Helping the Grid by Helping CustomersDoug’s Platforms• LinkedIn• YouTube• X (Twitter)TranscriptDoug Lewin (00:05.87)Welcome to the Energy Capital Podcast. I’m your host, Doug Lewin. My guest this week is Brett Biggart. He is the chief executive officer of Freedom Solar Power. Freedom is one of the largest solar companies in the country, top 10 by size, around 500 employees, and probably the largest or among the largest within the state of Texas. I thought it was a good time to do an interview with a solar entrepreneur, given all the changes going on with the tax credits. But here’s somebody who’s employing a whole lot of people, is worried about the future of the industry, partially because of some of the changes made in DC, but is determined to innovate and is in fact doing that around financing where there are tax credits that can continue for leased systems for the next couple of years. Also innovating by starting up Freedom HVAC to complement Freedom Solar because HVAC is by far the largest use inside Texas homes. So linking that with the power generation for his business made a lot of sense. So we talked a lot about how companies can innovate. We also talked about some of the legislation that was passed during the session to remove permitting barriers, a bill that was passed to increase consumer protection, which Brett actually advocated for. We covered a whole lot of ground. I hope you enjoy the show. Please give us a five-star review wherever you listen, and please share the recording with anybody who you think might want to listen. That is one of the ways we grow fastest is through organic growth and sharing. So please like and share the podcast with anyone you know. With that, enjoy the show.Brett Biggart, welcome to the Energy Capital Podcast. Excited to have you here. Been reading your tweets and posts and seeing your name in news stories for quite a while. You guys are a pretty big deal in the solar space in Texas. You built quite a business over the last decade or so, a little longer than a decade. At this point, why don’t you just start by telling us a little about yourself, just briefly about Freedom Solar, origin story, size, scope, all that kind of stuff.Brett Biggart (01:47.704)Thank you for having me.Sure. I guess the short version of this is Adrian Buck and I started Freedom Solar probably around 15 years ago. And I had kind of come out of the sort of professional finance world after business school. I actually got sober—that was sort of the catalyst thing in full transparency. And I got sober and I was trying to figure out what to do with my life, as many of us come to those junctions. And I moved back to Austin where I’m from, where I grew up, and the idea of starting a solar company kind of came to me and I started to do some research and try to figure out sort of as a customer, what’s the value proposition for a customer trying to go solar. And I couldn’t figure out the answer to that question. You know, I couldn’t get people to call me back. I was sort of doing the math, you know, there were tax credits and there were local rebates and trying to think about kilowatt hours. It took me about two weeks to sort of get to the answer of like, what does this cost and what is the sort of payback, the economics of it.That was sort of a light bulb moment. Like, wow, there’s got to be other people out there that have a similar situation that are just trying to quickly understand the economics to make a decision. Does it work or not? And so Adrian and I—I met him and we sat at a Mexican food restaurant and I sort of said, look, I think I’m going to start a solar company and here’s why. Sort of fragmented. People don’t really explain it very well. Don’t know how to finance it, sell it. And I’ll never forget this. He sat across from me and he says, “Okay, I get that. Like I’ve been doing this for—I was the first NABCEP certified guy in Texas and I’ve been running installation crews and doing installs and designing systems for a while now, but I don’t even like people.” Okay. So this sort of behind the scenes, you know, profile of a guy who’s very technical and very detail oriented, doesn’t quite frankly like to deal with people. And so we sort of got together at that moment and started out of his garage.And so that was whatever it was 15 years ago.Doug Lewin (04:08.152)So him more on the technical side, you more on the people side, basically.Brett Biggart (04:11.852)Yeah, clearly. And so we were like, let me see if we can go put together a way to explain this to customers in a way that wasn’t explained to me, which is a clear kind of quick way to get to a yes or no, it either works or it doesn’t. And then his skill set to go install the solar and do a great job and sort of bend over backwards on the quality side. You know, we started building the business in the first year. We were like, okay, wait a minute. We just did a million dollars. Whoa. High five. Unbelievable. And then the next year we sort of did $8 million and we kind of high-fived and said, whoa, this is sort of growing.And Austin has always been sort of a leader, certainly in Texas, I would say, as it relates to renewable energy. And so they had a good program here. So it was a good place to start. And then we sort of expanded across Texas, San Antonio, Dallas, Houston, and then just grew the business and sort of realized what we did that was unique was everybody that works still at Freedom Solar is an employee. So we don’t subcontract the work. We manage the quality.And so our salespeople are W-2 employees and our installers are obviously the same. And so in an industry that is sort of gotten to a point where those two things tend to splinter, you have like sales organizations and install organizations. And I’ll speak to that later maybe, but that sort of creates an incentive structure that doesn’t put the customer first as maybe I had characterized. Yeah. I think we’ve seen that over the last five years sort of explode into a real problem.And so we kind of always stuck to our knitting of keeping it in-house, mainly just to control the quality. And so we’ve been real fortunate. You know, I feel like a lot of businesses being in the right place at the right time. And certainly to start the business, we were in the right place at the right time. And the interest level of solar just sort of grew with the business. And we were sort of the beneficiary also of being in Austin, Texas and in the state of Texas where the population was growing and people were coming and interested.And so we’ve sort of grown it into a pretty decent-size business. It’s sort of a $200 million top-line business. It was 300—count it at 200. And we primarily serve Texas. Got a commercial business that sort of does projects all over the country, but really heavily focused in Texas and then also Florida.Doug Lewin (06:22.626)And even within Texas, you’re doing both residential and commercial systems.Brett Biggart (06:26.702)That’s right.Doug Lewin (06:29.77)And roughly how many employees, how many installations, a few other just stats or...Brett Biggart (06:33.442)Yeah, sort of 500 employees roughly and 30,000 customers we have today and then 500-ish commercial installs that have been completed. So.Doug Lewin (06:46.64)That’s got to put you on the higher end of like solar as far as like the—if you were to like rank the size of solar companies, you’ve got to be up there on the short list, at least of those within Texas, right?Brett Biggart (06:55.968)Yeah, we’re—I think we’re probably top in Texas. In the U.S. we’re sort of kind of bounce around the seven, eight kind of size. Okay. Top 10, but sort of just right in there, depending on the year. Okay.Doug Lewin (07:07.822)Okay, so definitely want to talk to you about the sort of like culture and the sales culture, right? We’ll get into that. Sara DiNatale—I interviewed her for the podcast—did that award-winning series on some of the things going on in the sales world. So we’ll come back to that in a minute, but let’s actually just kind of start with like, okay, we’re recording end of September 2025. We are obviously now in this sort of post-O3B, the one big beautiful bill that has put this very aggressive sunset on the tax credits. Obviously that’s sort of like the obvious place to start, and the question I think everybody has on their minds: what is the biggest solar installer in Texas doing to kind of adjust to that new reality? So maybe kind of level set with like where we are. When are the tax credits actually going away? There are, if I’m understanding all of this right, and I follow this very closely and I’m still a little confused by it, but the third-party ownership piece, I think stretches for a couple of years. So talk a little bit about where the tax credits are and then sort of how you’re adjusting as a solar company and living and then hopefully thriving under the new rules.Brett Biggart (08:16.128)I’d say for those that don’t—I’ll just paraphrase the big, beautiful bill and sort of the biggest impact, which is the 30% tax credit going away at the end of this year for residential projects. So it’s sort of a dramatic cliff, right? If it’s not done by the end of the year, it goes to zero starting in January in terms of tax credits that are available. So I would say the expectation of what is going to happen to the market—if you read annual reports and people that really follow this, it sort of ranges between anywhere from like a 60 to 70% kind of cliff in terms of drop of demand starting in 2026. So that is certainly the scary big 800-pound gorilla that we deal with in business, which sort of adds to the complication of it is now everyone wants solar. So if you were on the fence and you were considering it, you were sort of in the pipeline for the last two years and you know, you and your wife are thinking about it, I don’t know—now’s the time to do it. Like definitively the time to do it. And so many people understand that and are kind of flooding us with projects. So you have this bad news situation followed by a huge increase in demand with a short runway to get it done, which is the end of the year. So from a business perspective, we sit in weekly meetings here at Freedom Solar and we’re like, wow, this feels like the good old days. Customer acquisition cost is low, close rates are good, people are interested, but it’s a sort of a short-term bubble, right? And so nobody can get—Doug Lewin (09:46.444)Sugar rush, right? It’s like all at once.Brett Biggart (09:48.918)Nobody can get too excited about it because we all know there’s something coming, you know, a couple months ahead. And so there’s been the ramp up right now. And then, you know, what I think about the impact of the tax credit going away, I would say as an immediate thing, it’s bad. I would say, because it puts too much of a halt on an industry that sort of—these are businesses, Freedom Solar is not a recurring revenue business. So, you know, if we do a great job for you and we install solar at your house, you won’t talk to me again for 25 years. That’s the reality of it. So every month you’re sort of hitting the flywheel, trying to make these businesses go with new sales. And so to have a 60, 50, 70% cliff is a very big drop. Not to mention that’s on the heels of a two-year run that’s also been a huge decline from interest rates, from, you know, consumer confidence, maybe be the best way to put it. But I think over the last two years, many people have said, you know, we’d rather go on a trip to Padre this summer or something rather than do solar. So that’s sort of all playing in the background. Then you get the beautiful bill, which kind of like puts a big hard stop and a date on it. And so then we have to sort of rethink our business a little bit. It’s sort of what we’ve been doing at Freedom Solar, which is what do you do and what do you think that cliff looks like? I would say long-term, I actually liked the idea of the tax credit going away.I long for a business that provides enough value and economic upside to customers that it doesn’t need any incentive. Yeah. So I’m actually pro that. How that happens, I would have chosen a slightly more, you know, step-down kind of process to it, but it is what it is. So long-term, I’m less worried about the implications of it. And why I say that is if you take all these renewable things offline, you think about utility scale and big solar projects and wind projects that move the needle—you cover ERCOT, you know how much this, you know, on a day-to-day basis contributes to our power. Yeah. In the power stack, it’s a meaningful amount depending on the day, right? 30, 50, it’s a real number. And so as you start to...Doug Lewin (11:56.166)The day we’re recording, like, solar was 40% for four, five, six hours today. I mean, it’s really—it’s very significant.Brett Biggart (12:03.758)People don’t know that. I mean, I think that the common misconception is it’s like a 4% contribution. You’re like, no, it’s—it’s 40. Not anymore. And so I think as projects sort of fall, the renewable stuff at scale sort of slows down and you are forced to use natural gas in most cases to go power much of the state. The price of power goes up. And so as the price of power goes up, you see this offset to the 30% tax credit that will happen at some time in the future. And so the question to me is sort of like, when does that happen? Every utility in Texas that we operate in estimates a 5% increase in electricity prices next year. I’m sure. And probably a lot more. But for sure, five even in municipal utilities like Austin Energy or CPS. And in Austin Energy, it’s a five-year, 5% step-up.And so you can sort of do the math there and figure out, okay, in a couple of years, we work back to a price of power being pushed up where the 30% tax credit is sort of offset. So, you know, how to get from here to there is sort of our tactical question as an entrepreneur. And the solar industry has done a great job surviving. I’ve been doing this for 15 years. So I feel like that’s maybe, I don’t know, 30 or 40 years in regular business life cycles, but there’s sort of a sort of a cockroach mentality. And I include myself in that sort of negative connotation, which is a will to survive, you know, no matter how difficult the situation may be. And I would say the way the big, beautiful bill was written and sort of a third-party window that was left open, so to speak, in sort of a burning house situation of like, okay, we’re taking away the tax credit, the house is on fire. But you’ve got this third-party ownership window, which sort of opens.And what does that look like and is there a ladder out and does that work? What I’d say today is there are lots of creative structured finance products that are coming to market that take advantage of the tax credit that exists on the commercial side for the next couple of years and allows that to flow through to the residential side. Now I don’t think that’s Trump’s intent personally, but that’s what’s going to happen. And if you were to look at the economics, this was sort of the aha moment for me. A project that is $18,000 after the tax credit in 2025, you take that exact same project in 2026 and you do the exact same project in Houston, Texas, for example. And you use a prepaid PPA. That project is $14,000. Because that project can take advantage of domestic content adders. There’s some regional areas like Houston where their traditional oil and gas industries get an additional 10% tax credit.Doug Lewin (14:59.154)Wait, that stuff is all still there? The like energy communities?Brett Biggart (15:02.398)That stuff is all still there. Wow. And you can take advantage of it through the commercial side. So if I’m a customer, I do a prepaid PPA, which means I buy the power on the front end. I pay $14,000. It’s a PPA. So a third party owns the system. They service the system. So they guarantee the production.Doug Lewin (15:23.246)Which is nice for the homeowner, by the way. Which is great for them. Yeah, you don’t have to worry about certain—they have to monitor its performance and all that and maintain it.Brett Biggart (15:31.074)That’s right. And they’ve got, you know, it’s actually more guarantee for the customer that the system will do what it’s supposed to do. And then at the end of the five-year period on year six, it transfers to the homeowner at no cost. So that’s just an illustration to show there are creative structured finance ways to go solve this problem. And so if I look at—back to the cliff again and we say, okay, well how steep is the cliff in January?I sort of don’t know the answer to the question, although I’ll tell you I’m less worried about the cliff today, given these new products that are coming online than I was two months ago. Because I think the economics to the customer are quite frankly, in the example I just gave you, not only are they the same, they’re better. Can a customer understand that? Those are all questions I don’t know the answer to. Mathematically, that’s the case.Doug Lewin (16:23.394)Yeah, and look, I think also, like, you know, when you’re talking about like 5% increases, typically, like, for instance, I did a podcast with Energy Innovation, and they did some modeling and showed that, like, residential bills were going up 20% over a—I can’t remember if it was five or 10 years, whatever the period was. But they made the point to say that’s 20% over and above what it would have been otherwise. So without O3B, like, bills were going higher just because of energy inflation, right? We’ve already seen everything’s getting more expensive from eggs to cars. And then you add tariffs to it and all that kind of stuff. Like you got even more inflation happening, more cost inflation of various goods and services, and then add to that now the tax credit’s gone. So I think that’s exactly right. I think we’re going to see much higher bills and having those kinds of structured finance and making that very intelligible to customers, helping them do that math and understand what that means. Brett, one of the things I wonder about is transferability. So like if you do that, you sign this sort of PPA and a third party owns it, and then you sell your house after two years or four years or whatever the period is, is it easier, harder or the same for then a new homeowner to like pick that up?Brett Biggart (17:39.104)It’s super easy. They’ve got the transferability. There’s sort of a pre-qualification piece to it, or you can just buy out whatever’s left on the lease or the loan, depending on what timeframe it falls into, but it is transferable.Doug Lewin (17:50.796)Yeah. You could buy it out, like, if you’re a homeowner and you’ve just sunk all that money in and then you leave in a period—I think this is one of the biggest barriers to a lot of homeowners. Like how long am I going to stay in the house and how long is that payback? What are you seeing with your customers? I understand what you said about like, we would sell them something every 25 years, but presumably you live in a community where you’re selling a lot of these. Okay. Are customers telling you, yeah, when I sold the house, I was able to get more money for the house because of the solar panels or they paid off the rest of it? Is it a mixed bag or some people saying it made it harder to sell? What are you hearing?Brett Biggart (18:25.742)Yeah. So it’s a little bit of a gray statistic, but the Wall Street Journal did a great article a couple of years ago about solar systems and the value that they provided in the resale to a home. And so if you had two homes that were identical on the same street and they’re just on the opposite sides of the street, one has solar, one does not—exact same home—the one that had solar on it was like $4,000 for every kilowatt that you put on the home in additional value to that. Now, I say that’s great because that’s California where you’re paying whatever, 26 cents a kilowatt hour.Doug Lewin (18:56.622)Oh, 26 would be a bargain in California. I think you’re paying like 35 or 40. Right, exactly.Brett Biggart (19:01.016)Yeah. And it peaked to me at 60, right? There is some increase in the value of the home, but I haven’t seen any studies done in Texas. Typically what happens is real estate agents contact us and say, okay, what’s the deal? There’s a solar system on this house. What does it do? And you sort of provide them with some modeling and say, look, this is going to save X amount over the remainder of the next 10, 15 years. And they sort of price that into the home.Doug Lewin (19:24.61)Got it, got it, yeah. So it is kind of a mixed bag, but yeah, I think that’s an interesting one, particularly as we start to get into talking about third-party ownership and these different kind of creative structured finance. I think as much as possible—as if the sales process and education process wasn’t difficult enough—helping homeowners understand that piece of it, because I think that is a big barrier for a lot of folks. I want to ask you also about—so we touched on this a minute ago, but I want to make sure we don’t lose this point, because I think this is very important for listeners, particularly those that are either considering solar themselves or know one of their family members or neighbor, whatever, friend from college, whatever. And a lot of the listeners of this podcast are in the energy industry. So they’re probably people that are getting a lot of these questions from their friends. And one of the things I tell people when I’m asked about this is ask the company, how is your sales structure set up?Is it commission-based? Are the employees in-house? Are they outside contract? Because some of the stuff that I read in that Sarah D’Natale series, it was really wild. I mean, some of the sales culture stuff is just terrible. Just selling people systems that were sized completely inappropriately for their house and all that kind of stuff. I know you were very outspoken when that series came out that like, your company is called Freedom Solar. You’re not a guy that wants big government regulation, but this is a clear case where consumers do need some protection. There was a bill passed during the last session, but you guys do things differently. Can you just talk about, A, what your company does, and B, a little more broadly from an industry perspective, what should consumers look for in a company to make sure they’re not going to be taken advantage of?Brett Biggart (21:09.644)Yeah. Let me start by saying to your point, you know, the name of our company is Freedom. I never thought I would be some outspoken advocate for regulation. You know, never in my wildest dreams. If you would have told me five years ago, you’re going to be very outspoken about demanding regulation in an industry that you operate in. But that’s what I was doing in the last year. And I would say the reason for that—I don’t, you know, it’s hard to put a finger on it and say, well, let’s give everyone the benefit of the doubt maybe for the sake of this comment, which is you have an industry that was set up with a very low barrier to entry. And so if you have an in-home sales organization, which are typically sort of aggressive by nature—think of selling you encyclopedias in the sixties. If anybody comes to your door is sort of an aggressive sales thing. I would never buy anything where someone came to my front door personally. Never. Never have. Never would. Right. And they’d probably get chased off. But there are people that do sort of shockingly. And those people tend to be the ones that are most taken advantage of, which is someone shows up at the door and sort of promises the moon in terms of what a solar system can do, how much it’s going to save you, sort of willing to say whatever it takes to get you to sign on the dotted line to commit to it. They’re paid 100% commission based on whatever the price of that contract is. So they’re incentivized to do one thing. They’re, you know, they came from wherever they were to Texas to go do this for a summer, for example.And they’re trying to make as much money as they can. So they’ll sort of, you know, the temptation to say a bunch of nonsense is there very heavily. They’re incentivized to get a bigger contract. And then they take that contract. Once you’ve signed it as a customer in sort of unknowingly, I think in most cases, they just turn around and sell that contract to a subcontractor to go install the work. So in its worst version, you have someone selling something that is incentivized to sell it as expensively as possible—Doug Lewin (22:34.944)Yeah, not good.Brett Biggart (22:35.362)—to say whatever it takes to do that, which is totally ridiculous. And then turn around and throw that contract to an install company who’s incentivized to do what? To install it as cheaply as possible to make whatever margin they can on it. In both of those cases, you have two outstanding opportunities to get your face ripped off as a customer. One on paying too much and two on getting a lousy installation. And that’s what’s happened.Right. And so that sort of happened in a prolific way. And so I think from a customer perspective, you know, you want to go look and look at reviews online, the sort of basic things that we all look at, and then also really understand who is doing the work. If I have a problem in two years, is there a throat to choke? Who is doing the work and who’s responsible?Doug Lewin (23:54.968)Are they going to pick up the phone when I call? Is there going to be somebody on the other end of that when I call?Brett Biggart (23:59.67)And so I, you know, hate to say, but the sort of idea of, you know, historical performance indicates some kind of future prediction kind of applies here, which is, you know, if you’re buying solar from someone who’s based in another state far away, it’s a sales organization. Your chances of those guys being around is pretty low. And so sort of some basic due diligence around contracting, who’s doing the work, making sure it can’t be subcontracted, warranty work, performance obligations, those kinds of things. And then just sort of a gut check, which is go online and read some reviews and see what people say and start with the worst ones. You know, I hate to say that, but that’s sort of, let’s just start at the bottom of the pile here and work my way backwards. Just doing that basic exercise will eliminate, in my opinion, sort of 80% of the people that are out there. Yeah.Doug Lewin (24:53.31)Yeah, that makes a lot of sense. So you said you’re pro-regulation on that one. I think that one was Senate Bill 1036, if I got it right. We could put a link to the bill in the show notes. There were also some that removed some regulatory burdens. And here’s where, you know, I’m guilty like every other human being sometimes of negativity bias, but let’s give the Texas legislature some credit for passing Senate Bill 1202 and 1252. I think it was 1202 was the one you were keyed into more, but you can correct me if I’m wrong, but both of them make it easier for homeowners and business owners that are trying to put in backup power systems. Can you talk a little bit about that? And I also think it’s just kind of fascinating, Brett, like the juxtaposition here. We’ve got a state government that’s trying to make it easier for people to get these systems while unfortunately on a lot of levels, maybe not with the tax credits a little bit on the residential side, but even the bulk solar level, you got all these federal agencies now trying to make it harder.So shout out to Texas for trying to make it easier for people to get energy resources at their place. But do you want to talk about 1202 and/or 1252 from the recent legislative session?Brett Biggart (25:58.542)Yeah, I think to your point, those were both sort of bright spots that came out of the legislature, which were—I think the intention here is about how to speed the process along in terms of a customer says, yes, I’d like to go solar. They sign a contract. I’m ready to move forward. What happens next? Most customers don’t know what happens next, but what happens next for a residential project is a lot of different steps, right? You’re involved with local jurisdictions. So AHJs, which 1202 addresses—Doug Lewin (26:26.15)AHJ’s authority having jurisdiction, right? So that’d be like your city or county or whoever. Not county usually, but usually—Brett Biggart (26:28.628)—utilities, rebates, paperwork, federal stuff in terms of tax credits to your point. So sort of federal, state and then AHJ, and add utilities to that. And then by the way, there’s also homeowners association. It’s usually a city. It’s like 653, I think, in Texas. Wow. So a lot of them. And so you have this weird mix to your point of like, okay, you’ve got basically every, you know, every level of sort of jurisdiction involved in one residential transaction—federal government, the tax credit, state here, and then, you know, a utility and an AHJ, and then maybe an HOA if you live in an HOA.So we kind of handle all that for the customer and going through that process. That process on average, if you said, yes, I want to go solar Brett, I’m going to buy—I’m going to sign a contract today, it’s roughly 120 days till the project is done. 120 days. That is all a function of sort of those hoops, submitting paperwork and permitting documents and you know—Doug Lewin (27:32.562)And this is for something, by the way, that like, you know, the United States, we’ve been installing tens, hundreds of thousands of these things for like a decade or more. Like we know how to do this. It’s fairly standard. Like this is not some big, massive engineering project. This is not a data center. Yeah. Yeah.Brett Biggart (27:50.23)This is a straightforward, you know, residential home improvement project. Yeah. But it takes 120 days. Why customers care about that to state the obvious is one, who likes to pay for something and have to wait 120 days? I don’t know about you, but I don’t. Yeah, no. More importantly, if you add to that in our business, hundreds and hundreds of projects a month that are on that sort of spectrum, you’re adding cost.And so it just drives the price of solar up. So how do you make this happen faster? And so I think the intent of 1202 is like, listen, on the front end, when you’re submitting a permit, there’s a quicker way to get a turnaround. There’s a sort of a required quick turnaround, but there’s a small detail to this. I won’t—I don’t want to get bogged down on it, but it’s a qualified person. You could use a qualified person in the AHJ to approve the permit. So that’s one part of 1202.And the second part is to conduct the inspection. So a third party could be involved. So if you’re in a little AHJ, they don’t have a lot of resources. They make a list of what is a qualified person. And that’s sort of the sticking point of this, which is if you’re an AHJ and you’re like, hey, wait a minute. I’m in Plano, Texas, for example. And I don’t want the state government to tell me what to do. We have our own process here by God and that’s what we’re going to do. They make the qualified person so difficult to qualify that they hold all the keys to the cart. So I think the intent was to make it go faster. I think there are some AHJs who are participating in that and doing a great job. And I think there’s others that are sort of digging their heels in saying the state government didn’t tell me what to do. We’re the local jurisdiction. And so we’re whatever we are, 25 days into that bill being adopted. So it’s a little early to tell, but I’ll tell you it’s sort of a mixed bag of jurisdictions that are like, oh yeah, of course, rubber stamp. That’s what the state said. And then others that are like, no, no, no, no, no, no, authorized project. Here’s the laundry list of things that that requires.Doug Lewin (29:53.142)Yeah. So kudos to Chair Schwertner, Vice Chair King for passing, respectively, those two bills. But it may be that the work is not done with those, that there may need to be some tweaks in the next session or just ironing out some of the implementation. I mean, like this is always the way with legislation, people. I think there’s this idea out there among the general population that if a bill is passed, then it’s just done. That’s just law. But there’s implementation, which is actually like 90%. Passing the bill is one thing, how it’s actually interpreted and implemented in the real world is often a whole different thing.Brett Biggart (30:26.112)You know, if you were to say though, if that bill in a perfect scenario where you have an AHJ that makes it easy to endorse what that bill says, it probably takes on average four weeks off the process, which is pretty good.Doug Lewin (30:39.97)Yeah. Yeah. That’s great. Let me ask you something just slightly different here. I noticed a couple of months ago, you guys launched Freedom HVAC. I’m really interested in this. Look, I think, you know, there’s a huge potential here. I think this has been missing for a long time, Brett, that you’ve got solar and storage. And I want to ask you about storage too, by the way. Maybe you could talk about that in the same answer. Like how much are you doing solar alone versus solar and storage? But to the point, to start to see the demand side as more of this integrated kind of thing as opposed to just solar on the rooftop, getting the storage along with it, and then having that heat pump that the solar is actually powering. Of course, you can get into like EV charging. There’s all these different ways that these kinds of things can go as these technologies are developing. But talk a little about your thinking behind being a solar company to now also being solar and HVAC. How much of that was sort of prompted by what you were seeing happening in DC with tax credits, how much of that was separate, and then a little bit of your vision for how those things fit together, solar storage on the one side and kind of HVAC and other things that people are using on the other.Brett Biggart (31:51.598)Okay, so I’ll start with storage for a second. You asked the question, what is—we call it attachment rate. How many customers that buy solar also buy some sort of battery backup system? I can answer that question. It’s about 67% across our portfolio.Doug Lewin (32:05.858)Wow. Now, is that over like the last year? Because I assume like five years ago it was nothing close to that, right?Brett Biggart (32:11.286)I was going to say five years ago, literally it was single digits. Yeah. I would go so far as to say that probably four years ago it was still single digits. Yeah. And then it started to kind of creep up and then all the things happened, right, that we lived through. Uri and all the kind of storm weather events and all of a sudden it sort of exploded. At the same time, a lot of advancement with battery backup stuff started to be released. So Tesla has a new Powerwall 3 that came out. So 67% attachment rate in Texas is sort of outrageously high. It’s really good. And so it tells you that people really care about resiliency and this backup power idea. And so we sell Powerwalls in most cases, but several different things. Enphase makes a battery as well. And so there’s several different things that we sell related to the product side, but the attachment rate is sort of—in places like Houston, in Houston last month, it was 90%. 90% of the people in Houston want some form of battery backup, which is...Doug Lewin (33:14.186)Those folks have been through Uri and Beryl. They’re, yeah, even more so.Brett Biggart (33:18.894)So it’s really become a big part of the mix. So we continue to like focus on that as it relates to battery backup. And then as we sort of think about the whole solution, what are we doing here? To your point, you know, we’re putting kilowatt hours on the roof through a solar system and okay, maybe you’re storing some kilowatt hours in a Powerwall. Okay, great. But you’re consuming the same amount of electricity in most cases. And oftentimes you’ve got an HVAC solution that is very old or antiquated. And so we started to look at the HVAC market and what’s going on here and sort of what’s the technology. And it became evident to me that we at Freedom Solar talk about sort of complicated things, microinverters and kilowatt hours and lifetime savings and degradation and sort of the world in kilowatt hours. And here you are with an HVAC and in many cases you have some builder-grade model that just turns on and turns off. It’s a single speed and it’s super inefficient.So, you know, the bad analogy I’d use is sort of like building a race car and putting a motor in this thing that’s got a souped-up motor, which would be your solar system, but then putting old tires on it and saying go burn a couple laps on the track. It’s like, well, it’s not going to go that great. It’s a little bit of the same thing, which is can you come inside the home, which on average is 52% of your electricity consumption is your HVAC.Doug Lewin (34:40.846)In Texas, yeah, easy, right?Brett Biggart (34:43.628)So what is happening in this world? And so we started to dig into that sort of at the beginning of the summertime. And I was sort of shocked that there are a lot of products that are available. You mentioned heat pumps is probably the best example. And that was actually the thing we sort of walked into, which is if you have an energy-efficient home, you have a solar system on the roof and a heat pump that’s heating and cooling it. And you’ve got a little backup storage. You got a great solution. You’ve got a really good energy-efficient solution that is going to take the worry of sort of storms, electric bills, all the things we sort of characterize. You’re going to solve that problem completely. And so is there a way that we could come into the home, so to speak, and solve this HVAC thing? And so 90 days ago we launched an HVAC division and there are parts about that business that I’m just like so giddy over. I don’t want to geek out on this call and tell you, like how I characterize—Doug Lewin (35:41.475)Please do. No, geeking out is all I do on this show. Yeah.Brett Biggart (35:45.686)I told you that the average day, the timeline for a solar system is 120 days. So yes, 120 days, we put a solar system on your roof. You have an HVAC problem. We come up with a solution, we solve it in the morning and we install it the same afternoon and it’s done. And so this whole speed-to-solution sort of timeline is like compressed into what I sort of used to say in the solar industry, it’d be a dream to sell it on a Monday and install it on a Tuesday. Like I couldn’t imagine a world where that takes place. Now in the HVAC thing, we get to do that. The other part to it is there are a lot of technology advancements that have happened in the HVAC world. Heat pumps, the great one, where you can have a very efficient electricity system running your heating and cooling, put a solar system on your roof, offset those kilowatt hours and you have a great 25-year savings sort of energy solution. And so there’s microinverters in these things. There’s all kinds of different variable speed solutions that are available. And most people just don’t know, you know, it sort of feels to me, at least like the solar industry did sort of 15 years ago. And I think that it sort of speaks to the customer because it’s a different dynamic in many cases, right? If you’re an HVAC customer, this happened to me. We’re sitting around in my conference room with smart lawyers and we’re talking contracts and risk and da da da da, paralysis by analysis about HVAC. I go on a trip and my HVAC goes out in the upstairs of my house. Do you know the only question I had? How quick can someone be here?Doug Lewin (37:23.672)I mean, especially like the vast majority—I don’t know what happened with yours, but obviously the vast majority of HVACs break when it’s super hot, right? Or super cold, right? Like what are the other—right? Like you need it. Nobody wants to wait. Nobody can wait. I mean, it’s just like unsafe to wait a week, right? You have to replace it as quick as possible.Brett Biggart (37:44.856)And then if you also kind of overlay that with our customer base of 30,000 people, they’ve all spent sort of $35,000 on average for a solar system on their roof. They already understand kilowatt hours and long-term savings and peak demand things and all of the sort of techy things that you need to kind of wrap your head around and make that big investment. So let’s go to those customers and explain to them there’s better solutions that are available for your HVAC.And so that’s what we’re doing. We’ve spent 90 days so far spinning it up and getting it going, getting it kind of fine-tuned in Austin. We launched in Houston, October 1st, and then go into Dallas. It just fits together perfectly in my mind in terms of the solution being sort of on your roof and inside your home. And then it sort of fits our skill set, which is we’ve been talking about solar, which is kind of complicated. We can apply those same things to the HVAC world to explain higher efficiency solutions that are available for customers. And our customers tend to understand that stuff. There are people that are probably on this call—Doug Lewin (38:47.942)—people that are just doing life.Brett Biggart (38:49.873)Yeah, that’s right.Doug Lewin (38:55.564)And we do have a good mix. We got some folks that aren’t like energy professionals too. So I will say just real quick on this, Brett, I mean, you know, heat pumps, for those that aren’t totally familiar, right, it is in some ways, it’s a new technology because it’s like coming down the cost curve and there’s advanced versions of these, like you were saying with the inverters in them so they can respond to a signal. The best way I think I’ve heard it described, it’s a little bit like continuously variable transmission, right? Where like it’s got infinite speeds as opposed to that on-off.But in some ways, it’s an extremely old technology. It’s what your refrigerator does. It moves heat around instead of actually creating the heat. The physics people will get really mad at me since it’s neither created nor destroyed. But basically, you’re moving heat instead of creating it. So I’ll tell you, Brett, I have heard from a number of people that have tried to buy heat pumps. And many of them did. But it was a very difficult process for them. I think you have identified an interesting thing here because a couple different friends have told me they had to go through five, six, seven different HVAC companies that they called, each and every one of them trying to talk them out of getting an advanced heat pump because basically because they’re not used to selling them, they don’t have a lot of experience with them. And I don’t mean to tar a whole industry here. Like these are people that have been working with a certain technology for a long time and they know it well and they’re good at what they do. But I would say—and this happens in every industry. It’s not just HVAC. Like when new things come onto the market, there is this kind of period of people trying to figure out. And it is hard for a customer that wants to get what I think is clearly a superior and highly energy-efficient technology. People are really struggling out there. So it’s exciting to know that you’re doing this and really kind of prioritizing the heat pump. I’ll tell you, I talk about solar and storage a lot.I think in this century, heat pumps are—you know, how do you rank these things? Maybe solar is more important than heat pumps, but like on anybody’s short list of technologies that are really going to transform energy, like LED lights were five or 10 years ago, like heat pumps are coming. They’re going down the cost curve. Their adoption rates are going up. I believe a year or two ago was the first year that heat pumps actually passed gas furnaces for installations in the United States. It’s kind of a moment for heat pumps right now.Brett Biggart (41:19.052)Yeah, I agree. And I had this very similar experience, which was, you think about solar complementary and a heat pump solution, it sort of fits perfectly, hand in glove, right? And we’re like, okay, well, why don’t more people not have heat pumps was sort of the question we were asking. And so we did the same thing, which was sort of secret shopped and kind of called around and had the same experience you just described, which is somebody shows up, “Well, we kind of know the builder-grade thing. And so, you know, it’s sort of like you’re on the side of I-35 with a flat tire, you know, just put a tire on here, any tire. I don’t care. Just get me back on the road.” But if you’re in a situation where you’re not in that dire situation, you’re not like sort of a gun to your head, have to make a decision. And you’re sort of a forward thinker, like many people I’m sure on this call are. And you make that investment thinking sort of long-term, it’s sort of a no-brainer. It’s sort of a no-brainer, no matter how you cut it. We say the same thing. We think the moment for heat pumps is now going forward and it’s really complements sort of what we do. So it’s a good fit.Doug Lewin (42:19.788)Yeah. I think the other problem I’ve heard from people that are trying to get heat pumps is even if they can get past that barrier with the HVAC company where they’re not trying to talk them out of it. When they get past that barrier, then they’re like, okay, great. We could move forward. We’ll have this heat pump for you in two weeks because like they’re not stocking them. They’re stocking the builder-grade stuff, code requirements stuff. I assume you guys are—you’re saying you can install it the same day. So are you guys—is that part of the business model is actually having the heat pumps closer and being able to install them quickly?Brett Biggart (42:51.63)Yeah, you know, on the first day of business school, my professor at Rice walks in and he says, “I’m going to teach you everything you need to know about business right now. Every company is either cheaper, faster or better. Pick two. You can only be two of those things at one time. No one can be three of those things.” You know, sort of basic things. You know, I have to retell myself the answer to those questions every day, which is speed is part of our solution, better quality and speed, which is to say, you know, the builder-grade solution is great for somebody that’s just not really our customer necessarily. So yes, we have them in stock and we can same-day those. So yeah.Doug Lewin (43:29.122)What are you seeing? And I know this is a hard question to answer, because it’s context and every house is different. It depends how you size it. There’s a million variables. But in the aggregate, on average, what are you seeing as far as the price differential between just the basic sort of it-meets-code-but-not-much-else HVAC system versus a heat pump? Of course, it gets even more complicated, right? Because it can do two things. It can replace both your furnace and your HVAC. So obviously, there’s a lot of variables here, but if you could speak generally about it, that’d be helpful, I think.Brett Biggart (44:00.942)I’m just in sort of a generalization, I would say it’s sort of a $13,000 solution—base kind of thing—to compare that with sort of a super efficient, also does your heating $20,000 solution.Doug Lewin (44:13.592)So wait, so $13,000 is what you would be doing. I’m sorry, which one was $13,000 and which one’s the heat pump?Brett Biggart (44:19.412)$13,000 is sort of the lower end or medium end, sort of just single two-stage kind of HVAC. Heat pumps are sort of around $20,000.Doug Lewin (44:26.784)Okay, okay, so about a 50% price premium at this point. That’s interesting. I would encourage folks to look at it, particularly if you’re in that place where the HVAC’s starting to give out, it’s struggling, get ahead of that, do your shopping, do your research. Now, whether you go with Freedom or somebody else, be ahead of that, get familiar with these technologies. And you got an HVAC that’s been eight or 10 years, you think you still got five years, watch this technology, watch that space, because I do think we’ll see learning curve. We are seeing that like price reductions in heat pumps, not as dramatic as like the 90% reduction in solar, 90% in batteries over 10 years, but still pretty significant learning curves as the technology progresses and as the manufacturers ramp up.Brett Biggart (45:14.67)No, I think you’re right on the money. And you know, the sort of savings is sort of 30, 40%, you know, as you think about heat pumps versus other things. So it’s just sort of the mentality of how you think about things. Do I want to just go on the car lot and buy the cheapest car on the lot? I don’t know many people that do that. I’m sure there are some, but you’re sort of solving for more things than that. Most of the time when you’re making a buying decision and your HVAC is sort of—should certainly be part of that calculus.Doug Lewin (45:42.53)Part of what it does too, right, is like the comfort. If you’re having comfort issues inside your house, a lot of that is driven by—there’s a lot of different things. That could be uneven insulation. It could be a million different things, but one of the things with the standard HVAC is it’s on or off. That’s it. So when it turns off and while the thermostat is waiting to register that the temperature has actually gone up before it turns on, you’re going to be uncomfortable for a little while. And if you’ve got a bunch of people in your house and there’s body heat, so that’s going to get even worse.With this, you have that continuously variable. So instead of 100 or zero, it might be running at 60% and then drop down to 40 and come back up to 50. You’re going to be much more comfortable inside the house with that. Brett, I want to ask you too about—and we’re almost at time, but I think this is something folks are thinking about. I’m certainly wondering about how a business owner thinks of this. Obviously, there’s just so much uncertainty right now, particularly with regards to tariffs. And I saw in a couple of articles you had talked about how you guys had, if I’m getting this right, I think you had procured some of your stock, like the solar panels, particularly ahead of time. That doesn’t last forever. But how are you thinking about managing that supply chain risk? I mean, you’re a large solar installer. You got 500 employees. You’re doing this scale of installation. Now you’re getting into HVAC. How are you thinking about tariffs and supply chain issues? It makes my head hurt even asking the question. I feel for you.Brett Biggart (47:07.246)As if the exterior market, right? The decisions of consumers is not enough volatility or incentives. Oh, well within here, there’s also a lot of volatility, which is how you procure equipment. And so I would say, I mean, this is my honest answer about it. It is so hard to predict what is going to happen in that arena. We got lucky is what I’ll say. And we procured a bunch of equipment, you know, from the beginning of the year, which lasted us through the end of this year. And then it’s going to be gone. And so then the question is, okay, well, would you like to bet on a horse? Is there some solution here for whatever the thesis is that you want to go spend whatever $10 or $20 million to procure equipment, just to bet against? I would tell you that I wouldn’t do that at the moment. I’m not doing that at the moment.Doug Lewin (47:57.56)Too much uncertainty, right? And that speaks to a bigger problem for our economy. If a lot of business owners are doing that same thing, they’re not spending money. That’s problematic.Brett Biggart (48:05.09)Yeah. And so it’s wild. I’ll just use an example, but the majority of the modules that we sell today are the ones I procured at the beginning of the year. There’s a handful that are sort of in leases because—here’s the other variable. There’s lists of ABLs that are required for lease products. So if what I just told you is true, which is 2026 will look more like a third-party owned solution for customers, then the list of what you can use is definitely constrained to what’s approved by those lenders. Yeah. Okay. Yeah. So that’s a shorter list. And then within that shorter list, what is considered to be U.S.-made because there’s an additional tax credit for U.S.-made. And what does U.S.-made mean to get the domestic content adder piece? Well, you know, it’s this, that—we changed our mind. We’re at different tax opinion. It’s sort of so gray at the moment that, you know, I just—I’m not taking a bet right now. And the price of modules right now at this moment just went through the roof because of all the demand that’s in the market right now. And so once that burns off, right, and we get to the end of the year, the tax credit goes away. There’s some sort of cliff, which is hopefully more like a slight downturn, but some decline of some sort. Who stays and who can make it?You know, the tide’s going to go out and you’re going to really see who can be there. And it’s sort of hard in this industry. You know, you’ve covered it. I’ve been living it for 15 years. SunPower, which was an investor in Freedom Solar, albeit a small one, less than 5%, was a $10 billion company three and a half years ago. $10 billion company. Filed bankruptcy, went from Chapter 11 to Chapter 7, sold its assets and is worth zip. Nothing.Sunova, financing business, Houston, similar situation. So you look around and you say, what are the characteristics of a company that’s going to last? And it’s sort of hard to navigate that at this moment, given what we’ve just seen, which is if you said, “Well, if they’re big, they’re going to last.” Well, that’s not true. Yeah. They might fall harder. And so the thing that keeps me coming to work every day and sort of still very jazzed about the solar industry is it feels a little bit like, you know, if you can make it through these as a business owner, these challenges that we’ve been faced with for the last two and a half years and sort of the big, beautiful bill was the last punch in the face. Hopefully if you can make it through these things, I feel like the horse has left the stable for solar. I mean, I still feel like the economics are good in most places. People understand that it’s the right thing to do by the environment. There’s a lot more reasons to say yes than no.That’s still true. The economics just went up by 30%. You know, it got 30% more expensive at face value in 2026. Do I believe that comes down? Yes. How quick? I’m not sure, but pretty quickly. And I think the industry is going to be forced to drive costs down. And I think panel manufacturers are going to have to be very sharp-elbowed and very competitive on pricing. And I think that along with what you mentioned, sales commission things, sort of like the soft cost stack of solar, what it costs. Because remember, there’s a super easy understanding of solar, which is the economics of solar are driven by two things. What’s the price to install it on a price-per-watt basis? And what is my price of electricity? Right. And so that’s it. There’s lots of other things in the middle that sort of, you know, maybe bridge a gap to finance it. But at the end of the day, that’s it. And if the cost to install it is consistently coming down and the price of power is consistently going up, that makes the economics better for people. And I think what I said on my left hand, which is the cost coming down is sort of bumpy, right? All of a sudden price of panels went up and there’s sort of some short-term volatility. The general long-term trend of that year over year is sort of being pushed down. And I think the tax credit going away forces that to really be pushed down—everybody in the value chain to provide a very efficient, cost-effective solution. So that means the price of solar is going down and the price of power is for sure going up depending on where you are. It’s a—if I sort of back up and say, okay, I mean, there’s a lot of short-term pain here, but is there something on the other side of this that’s really valuable or really consequential in terms of moving the needle? I think that’s what we’re trying to do here is just move the needle by putting solar on as many houses or locations as we can.I think that opportunity actually becomes really prolific in the years ahead.Doug Lewin (52:59.446)I think that’s spot on in the sort of two different lines. The cost of solar coming down, the cost of power going up, I think is a huge part of the story. And then I think the other major tailwind that particularly distributed solar and storage, and if you can integrate that with stuff like heat pumps that we were talking about, is that resiliency piece. And I was really struck by the Texas Energy Poverty Research Institute does this Community Voices survey. I’ve talked about it a few times on this podcast before. Interviewed 6,000 Texans, asked them what their top priority was between reliability, resiliency, affordability, and sustainability. And they defined reliability as the grid having enough supply to meet demand. Resiliency is the ability to take a punch. Like the extreme weather, you can keep power on at your house. Resiliency was number one. And reliability was actually number four. I think this is like the policymakers are all focused on reliability. Understandable because of Winter Storm Uri, it was such a traumatic thing. But the consumer, I think rightly, is seeing it as if there is a Winter Storm Uri, if there’s a Hurricane Beryl, any of those things happen. If I’ve got solar and storage in my house, I’m going to be all right. So that’s the other one that like there is a value to resilience. Like how exactly a customer values that is a really hard thing to pin down, but it sure as hell ain’t zero.Brett Biggart (54:17.814)No, I asked the question around this place probably a year and a half ago. And the question was, why do people go solar? And so a lot of scurrying around. It was hiring a consulting firm with a bunch of very smart MIT computer science guys. And so they did a bunch of surveys. And they finally came back to me. They said, “Okay, we have your answer.” I was like, “Wow, I can’t wait. I spent hundreds of thousands of dollars for this answer. Please tell me.”And the answer is not dissimilar from what you just said. Number one reason people go solar—energy independence. The idea that I can control my destiny is a really innate thing. And it’s certainly a Texas thing. Yep. And so that sort of changed my mindset a little bit about the business because I would have thought the answer was different, quite frankly. And so to hear that was sort of an eye-opening experience, which is like, okay, well, energy independence. Okay, well, how do we define that? You know, people buy generators every day. Texas is the biggest generator provider. Generac is an example in the country. There’s no payback on a generator. That’s just an independence thing. That’s it.Doug Lewin (55:33.582)You could say the resilience value for a whole lot of people is at least that $10,000 to $15,000 they’re paying for a generator. They’re willing to pay for it because they’re not getting any other benefit out of it. That’s right.Brett Biggart (55:44.034)That’s right. It sort of changed my thinking about what the motivation of people are, particularly in Texas, but it makes a lot of sense. I think there’s more and more stuff that’s becoming available to sort of suit that solution. It’s not just one thing. It’s sort of a combination of things in my mind. Yeah.Doug Lewin (56:02.336)And what is the value of resiliency. Well, this has been a lot of fun. We went longer than I intended. But Brett, is there anything I did not ask you that I should have? Anything else you want to say in closing?Brett Biggart (56:12.79)No, no, this has been super fun and I really appreciate it. Thanks for having me. I’m honored.Doug Lewin (56:16.856)Yeah, thanks for being on the pod, Brett. Appreciate you.Doug Lewin (56:21.784)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. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

Texas load is rising fast, supply chains are tight, and the cheapest near-term resource is demand we shape intentionally. But are the right economic signals there to bring this resource to scale?Texas has a highly competitive power supply market, but the demand side is severely underdeveloped. In my conversation with Travis Kavulla, former Montana PSC Chairman and current leader in retail innovation, we explored how Texas can unlock the cheapest near-term resource by shaping demand on purpose.Retailers now have both the data and tools to automate flexibility in homes and small businesses. That’s the fastest way to keep bills in check and the lights on during tight hours.“The incentives are there for sure… when spot prices rise above a flat retail rate, the incentive flips, and it’s valuable for both the retailer and the customer to reduce.”Smart Meter Texas enables interval settlement, and connected devices like thermostats, EVs, and batteries can now respond automatically. This is finally real.Retailers are competing not just on price, but on automation. NRG has moved its virtual power plant strategy to the center of its retail offering, pairing Vivint installations with demand response.“We announced a one-gigawatt goal… and hit 150 megawatts this year.”That flexibility hedges against the most expensive hours and brings value directly into customers’ homes. ERCOT has also proposed a program, capped at 500 MW, that pays households for reducing use in the tightest hours. It helps offset hardware costs and puts residential customers on more even footing with large industry.Our system should reward shifting, not just saving — using more when power is plentiful, less when it’s scarce. That avoids overbuilding while meeting growth from data centers, electrification, and hotter summers. Winter risk is just as much a demand issue as supply. Resistance heating drove massive spikes during Uri. Heat pump retrofits can improve reliability and affordability, but without targeted support, private markets may underinvest.Transmission costs are another sticking point. Large customers can avoid charges by guessing peaks, shifting costs onto everyone else. Residential customers use about a third of the energy but pay half of transmission, which rose more than 120% in a decade. Reforming 4CP so costs align with who drives grid build-out would be fairer.Texas can build a true two-sided market. Let competition automate flexibility in millions of homes, fix cost signals, and target winter risk directly. That’s how we keep bills manageable, stay reliable, and grow with confidence.If this breakdown was useful, share it with a friend or colleague, and subscribe so you don’t miss the next Texas-focused grid update.Timestamps* 00:00 – Introduction to Travis Kavulla* 02:00 – Introduction to NRG* 04:00 – ERCOT competition and demand side incentives* 06:30 – The importance of Smart Meter Texas* 09:00 – Innovation from competition, telecom and airlines analogies* 12:00 – Importance of demand flexibility both from AI and residential sectors* 15:00 – Rate design for shifting use* 17:00 – Increasing load factors, how using more energy can be energy efficient* 19:00 – NRG’s VPP with Google / Renew Home and their progress toward their 1 GW goal* 23:00 – Integration with smart home technologies* 25:00 – The potential for customers to lower prices* 28:00 – Sponsor: Aurora Energy Transition Forum* 28:45 – ERCOT’s residential DR proposal, why ERS doesn’t work for small customers* 32:00 – Why NRG has broken from other generators to support residential DR* 34:00 – REPs in Texas’ energy efficiency programs * 38:00 – Can we leverage markets to reduce wintertime outage risk through energy efficiency?* 41:00 – Part of the cause of Uri outages was extremely high demand, difficulty * 44:00 – Lack of focus from Utility Commissions on demand side* 46:00 — Sponsor: Intersolar and Energy Storage North America* 47:00 — Utilities are incentivized to spend on capital but not on operations* 52:00 – Why and how transmission cost allocation and 4CP should change* 57:00 – ClosingResourcesGuest & Company• Travis Kavulla: LinkedIn• NRG Energy: Website, LinkedInReferenced in the Conversation• Travis’ University of Chicago Syllabus: Utilities and Electricity Markets: Regulation in the United States • Book: Prophets of Regulation• Travis’ ESIG Whitepaper: Why is the Smart Grid So Dumb?An Audit Report on Critical Infrastructure Activities at the Railroad CommissionNRG’s filing post-Uri on wintertime demand with resistance heat 100% higher than summertime demand, referenced in my very first Substack article: 2022 Cold Snap Shows Resistance is FutileCompany & Industry News• NRG, Renew Home, and Google Cloud announce plan for a 1 GW Texas VPP • NRG to buy 18 gas plants from LS Power in $12B deal (Reuters)• NRG wins nearly $800M in Texas Energy Fund loans for gas plants (Houston Chronicle)Related Podcasts by Doug• The Name of the Game is Flexibility• Creating a Distributed Battery Network with Zach Dell📄 Related Substack Posts by Doug• Texas Load Growth, Challenges and Opportunities• ERCOT CEO says we need all resources• New Residential Demand Response Proposal in Texas (Grid Roundup #74)• Solar, Storage, Gas, and VPPs in Texas (Reading & Podcast Picks)🌐 Doug’s Platforms• LinkedIn• YouTube• X (Twitter)📅 Upcoming Events / Sponsor Information• October 21: Aurora Energy Transition Forum• November 18-19: Intersolar and Energy Storage North AmericaTranscriptDoug Lewin (00:05.656)Thanks everybody for being here and thanks Travis for doing this, really appreciative to SPEER for putting on this great event. As Liz said, I was director of the organization for—I was going to say several years. I think it was many years, five years. It’s great to see the organization growing and thriving and see all of you involved. For those that are listening to the podcast later, we are at the SPEER Industry and Policy Workshop in Austin, Texas. And I’m really thrilled today to have Travis Kavulla here. Travis, I’ve been meaning to interview you for the pod for a while anyway, and I think this is a great setting and crowd to have this conversation because I don’t think there’s anybody better to sort of talk about how retail electric providers, right? A really dynamic market here in Texas with how many different retailers are there?Travis Kavulla (00:51.534)80, 100? Many. Many. We love all of our competitors, we love competition, but there are a lot.Doug Lewin (00:56.682)Exactly. It’s a very thriving market. There’s a lot of different choice for customers, particularly in the Houston, Dallas, Fort Worth, Corpus Christi, Laredo, et cetera, parts of the state that are served by competition. And to really get into how energy efficiency and distributed energy resources can be advanced using competition and using retail electric providers, I think there’s nobody better than Travis for this. So Travis is vice president of regulatory affairs at NRG. He was commissioner and chair of the Montana—you guys call it the PSC there, ours obviously would be the PUC. He was also president, I believe was the title, of NARUC, National Association of Regulatory Utility Commissioners. So truly a thought leader in this space. Please join me in welcoming Travis Kavulla to the SPEER Workshop.Travis Kavulla (01:43.822)Thank you, Doug. Thank you, audience. We need those little things that say, “applaud” up here, I feel.Doug Lewin (01:50.318)I’ll just ask. We’ll just do that. It’ll be fine. All right. So first of all, anything before I get into some of the questions I’ve got for you, anything else you want to say by way of intro? As far as your background, maybe actually just like a brief word on NRG. I don’t want to assume folks know necessarily what NRG is. You guys are obviously a very big company, most probably do, but maybe give a little more background of yourself if you like and NRG.Travis Kavulla (02:11.342)Sure. So NRG is a retail electric provider in the state of Texas and all other states that allow customers of electricity and in some places gas, though not Texas, a choice in their provider. We’re also a power generator in the state. We sign a lot of power purchase agreements with third parties. And then we have a large natural gas marketing business. And relevant to this conversation, a smart home company that’s one of our most recent acquisitions called Vivint. So we operate basically across the United States, mostly in the competitive markets for power and gas. We have about 8 million customers across North America and a sizable chunk of generation as well. And then you got my bio down, Doug, but one of my passions is teaching. I teach, I’m a lecturer at University of Chicago as well, where I teach on—my syllabus is available for all of you to download for free. It’s a course on utility regulation and the design of electric power markets, which is sometimes not always intuitive. So that keeps me fresh with the youths, I’ll have to think.Doug Lewin (03:11.278)Clearly. You know, it’s funny you say that because I actually taught a semester at the LBJ School and I leaned pretty heavily on your syllabus, which is excellent. And anybody wanting to understand the history of regulation of the electric industry and how competition came about, like there’s probably no better place to look than your University of Chicago syllabus.Travis Kavulla (03:29.866)I’m pretty great, but I’m wearing the orange socks in your and the venue’s honor today rather than maroon.Doug Lewin (03:35.394)We much appreciate that. Thank you. All the Longhorns in the room want to clap for that? There’s only a couple of Longhorns. We’re at the University of Texas campus. Maybe they’re Aggies. So by the way, in the syllabus I used, your “Why is the Smart Grid So Dumb?” was in my syllabus. We’re going to talk about that paper you wrote, which is one of the best papers on this topic. But okay, but before we get into all that, and before we get into NRG’s own plans to have a virtual power plant, let’s just start at a little bit of a higher level. So ERCOT, I think it’s safe to say certainly in America, possibly in the world, and I’d actually be interested in your thoughts on that, is either the most competitive market or one of the most competitive markets. But there’s still a ways to go because what’s missing as you laid out in that great paper, “Why is the Smart Grid So Dumb?”—the demand side, there’s a lot of competition, obviously on supply, very fierce competition going on. There’s a lot of competition for getting the customer, for winning the customer on the retail side. But if you’re going to have this, as you talk about a lot, two-sided markets, supply and demand, that demand side isn’t really there yet. So can you talk a little bit about what is sort of working with ERCOT’s competitive market, how that kind of fits and compares to other markets and that kind of missing piece?Travis Kavulla (04:50.382)Yeah, so I always think about these questions in terms of is there an incentive and if there is, can people act on that incentive? So the incentives that are present in the ERCOT market are very real. Most customers in the competitive territory of ERCOT sign up for a flat rate plan of some kind. Some people sign up for time of use plans, but most people are on a flat rate and by that I just mean they pay a retail price of, call it 15 cents a kilowatt hour around the clock. Now the spot price of energy, the stuff we have to purchase to supply our end use customers, the spot price sometimes goes well above 15 cents a kilowatt hour or $150 a megawatt hour, if we’re defining it in megawatt hour terms. And when that spot price rises above the average retail rate of revenue that I would collect as a retail electric provider, the incentives switch over. We go from suddenly being a retail electric provider where I’m usually wanting to sell you more of the thing to make more revenue and more profit to having the opposite incentive. Suddenly, if I could, I’d like to actually not have you using that electricity because my cost is actually exceeding the amount of revenue I’ll collect from you. But that’s obviously not the typical thing. We’ve signed a contract and you have as a customer an unlimited option to use as much energy as you care to for 15 cents in my hypothetical example per kilowatt hour. But when that gap grows wider and wider still, it suddenly produces enough possible cost savings to make it worthwhile for me to rebate something to you to try to reduce your consumption. And it’s worthwhile for you, who would ordinarily probably be unconcerned about taking affirmative actions to reduce your use—it becomes worthwhile for you to do so. So the incentives are there for sure. And then the question is, can people really act on them? And in previous iterations of responsive demand, the answer would have been no. You didn’t have the metering to be able to register people’s consumption on any kind of a real-time basis. And then you wouldn’t have the back office settlement equipment software to actually process people’s bills on that kind of interval basis. That problem has been overcome in Texas. Smart Meter Texas retains and compiles a central repository of all smart meter data and you can read and settle people’s bills on that minute interval basis. Then the question becomes, well, do we have the technology? Is there sufficient automation in the system to allow people to do this so that they’re not having to take manual interventions that they wouldn’t do or would annoy them? But is there something automated in the system where, say, their smart thermostat can automatically respond or be subject to dispatch instructions from the retail electric provider to be able to adjust the temperature in a way that doesn’t require affirmative customer interventions, but with their overarching consent? That problem has also increasingly been solved. And we also finally see the flourishing of a lot more distributed energy resources in this market. Electric vehicles, home battery systems, rooftop solar, and other types of equipment that have turned consumers gradually from being kind of a passive demand side into being much, much more active. And the final ingredient to this is the fact that you do have this competitive retail market where suddenly retail electric providers are not just competing strictly around kind of the average retail price or on marketing, but on what kind of cool things they can get into your home and automate. That’s become a really important characteristic and in fact is the defining feature of certain REPs that we see entering into this market. And that actually, that last thing is what makes Texas really unique. You just don’t see that really nowhere else in the United States and only in a few places around the world. It’s pretty cool what’s going on here.Doug Lewin (08:45.198)Yeah, and I think a lot of that, Travis, and I know you obviously work all around the country, is a lot of the regulators in different markets are not sort of willing to kind of trust that function, that consumers can shop, that consumers can make informed choices. Obviously, you need consumer protection there and all those sorts of things, which I would argue Texas has. It can always be improved, can always be iterated on and made better. But at the end of the day, customers in Texas can now choose between, and I’m going to do something that’s like impolite and rude and name some of your competitors, but like some of them have been on the podcast before, Base Power, Octopus, David Energy, Tesla has its own retailer, right? So you see this—like there’s many, many more. I encourage people to go look at Power to Choose. You can see all the different offerings that are there, but what you’re talking about here, right, is this move from kind of a pure commodity, like I’m just delivering you a kilowatt hour and you’re competing to get one tenth or one one hundredth of a penny lower, to services—do you want a battery at your house? Because you’re getting tired of having outages. Are your bills consistently high and you’re worried about energy efficiency? Like retailers can offer those services and find that market fit. Right?Travis Kavulla (09:58.21)That’s right. And when regulators and policymakers decided to demonopolize these markets, they usually did so in tandem with telecom, which is, I think, a relevant example. And there were lots of debates. A lot of people skeptical of the demonopolization of AT&T, for example, questioned whether there would really be consumer interest and consumer protection. Why would people be interested in aggressively shopping around for long distance calling service? It just wasn’t that exciting. But we saw in the liberalization of the telecom market a technology revolution that ultimately ended in smartphones and a complete transformation of that industry. Electricity has well lagged behind that. But I think in the emergence of these distributed energy resource-based retail offerings, you’re beginning to see a trend line happening on the power side that has been consummated on the telecom side. So very exciting time to be in this industry for that reason.Doug Lewin (10:54.762)And you actually, I think through the University of Chicago syllabus turned me onto the book, Prophets of Regulation, P-R-O-P-H-E-T-S, Prophets of Regulation. It had a whole chapter, which is great, on Alfred Kahn from New York. And like people forget, I was talking to my kids about this the other day and I’m not quite old enough to remember this though it did happen during my lifetime. Many people in this room will remember this. There was a time when the government decided exactly how many planes could fly from point to point per day and exactly what the price would be. Right. And it was actually a Democratic administration under Carter that changed it. So we’ve seen in a number of different industries that competition can have all kinds of benefits. So what I want to get into next, Travis, is I think everybody’s hearing, if you’re around electricity, you’re around the electric industry, you’re hearing about data centers and this big load growth. It’s not just data centers, right? We’re seeing industrial electrification. Summers are getting hotter. So we’re seeing increased air conditioning use. We’re getting all of these different rising loads, transportation, on and on. But data centers is kind of the one driving the conversation and understandably so. I had a podcast with Tyler Norris a couple of months ago about his paper with his team at Duke that focused on if you had, I think the number was something like 1% of hours of data centers were flexible, you could free up a hundred gigawatts of capacity, like roughly 10% of the peak demand of the United States. In Texas, that number was 15 gigawatts, which is actually closer to 20% of peak demand. But everybody’s kind of focused right now, Travis, and not in a bad way, but I think maybe in a too limited, narrow way of not seeing some of the other possibilities, on the data center flexibility themselves. But the flexibility doesn’t have to just come from data centers. It could come from residential customers and small commercial customers. So take any part of that that you want, but I would love for you to talk about why at this moment with rising load growth is flexibility on the system, demand response, DERs, all those kinds of things, so important?Travis Kavulla (12:53.91)Yeah, I mean, we could have a long discussion about how much demand is going to grow, but we can probably stipulate for the purposes of this conversation that it will grow, right? And it has been growing, right? In most parts of the country, it’s a question of are we going to reverse a trend of decline and see growth? In Texas, it’s like how much more compound growth are you going to get year on year? And even if one-tenth of the ERCOT market forecast materializes, that is a step change in terms of demand growth in this industry. But then when you look to the question of what will supply that incremental growth? You know, it’s no secret that supply chain challenges, be it in the labor force, in turbine equipment, in batteries, is a real challenge. I mean, NRG is going to be bringing online new power generation, three gas plants over the next couple of years. But we were able to do that because we were paying for a place in line with one of the major turbine manufacturers for a good long while before that. So I’m confident that supply will eventually be able to catch up to demand, but the low hanging fruit really is then demand flexibility in the meantime. And you’re going to see emergent price signals from the ERCOT market that really begin incentivizing demand response in a big way. And to your point, it really, in a sense, it doesn’t matter where demand growth is arising from, because we’re all in this market together, right? So demand flexibility that comes out of a residential, a small commercial business, or a data center has the same rate of compensation, but different levels of obtainability, I suppose, within this market. And that’s what’s really created a focus for us recently on residential demand response, because we actually see that due to the technology transition I was earlier describing as being largely untapped relative to some of the larger commercial and industrial premises where demand response is a much more mature industry.Doug Lewin (14:52.566)And part of that is the incentive structure that exists right now. So, right? Like you were talking earlier about the 15 cent flat rate, right? So what is part of that for the customer and for the retailer that you cannot avoid is the flat rate for the transmission distribution charge, right? So it doesn’t matter whether it’s two in the morning, four in the afternoon, or it’s a winter morning or sun is going down and things are really scarce on the grid. Four or five, six cents, depending on what part of the state you’re in is flat for T&D. And you’ve written about that again in that great paper, which I can’t recommend highly enough. “Why is the Smart Grid So Dumb?” You had this phrase, “smart meters, dumb rates.” So, which I love. In Texas, like there’s some ability to deal with that with retailers and you see this, most of it’s probably nights and weekends, right? That’s probably the most common offering in Texas for those that are listening that aren’t from Texas. You can get these rates that are like basically free at night. I don’t actually live in a competitive area, so I don’t actually know, but something like that.Travis Kavulla (15:54.208)Buy a different house in a place that was competitive. I mean, come on. I know, that’s right. And to that point, I mean, there are some time of use offerings in the market. They tend to be free nights and weekends. But in general, rather than handing down the time varying price signal directly to the consumer, you instead have what we’ve seen in the retail market here anyways, is that you have properly incentivized retailers acting around the incentive that I earlier described, and they will take on the onus of automating sources of demand flexibility and try to capture that incentive, passing along savings then to consumers in the form of an adoption rebate or an ongoing rebate or a lower retail rate.Doug Lewin (16:36.194)Because I think really where we’re headed with this, and you were talking earlier about like if only one tenth of the demand projections of ERCOT, because ERCOT’s projecting I think 65-ish additional gigawatts of demand in the next four or five years, which is insane, right? Like an 85 gigawatt peak going to 150 in four or five years. But I think too often what we’re not talking about are the number of terawatt hours. So if we can start to—and this is where like the comparisons to some other industries get kind of interesting, right? Because when the airlines were fully regulated, it was very common to have 30 or 50% capacity. How many people have been on a plane lately with 30 or 50% capacity, right? Like they’re usually full, especially the longer you go, the fuller they are. So we need to be thinking about that. We have a system in ERCOT, which again, I think a very efficient market overall, still like 53% load factors. So really what we’re talking about here is designing rates that actually incent more use. And I know I’m in an energy efficiency crowd, I know this is a little bit—Travis Kavulla (17:35.982)Gonna get something thrown at you, Doug.Doug Lewin (17:39.352)But I would argue, and I am as big in energy efficiency, I’ll put my energy efficiency bona fides up against anybody. I am a deep, deep believer in energy efficiency. Part of energy efficiency is using more when that electrified use is more energy efficient. Transportation’s a great example. You’re not losing—and there’s all sorts of industrial applications. You don’t want to lose that waste heat. So really what we’re talking about here is trying to use more when there’s plenty and less when there’s not, so that we’re not going all the way up to 150 gigawatts in four years, but we’re still seeing all this growth in use, not necessarily peak demand.Travis Kavulla (18:17.89)Yeah, that’s right. So the system has a ton of fixed costs embedded in it, right? That don’t vary regardless of how much energy is used on the system. And there’s sort of a great division problem at the heart of utility regulatory economics. And it’s pretty simple. It’s math even I can do where you take the total dollars of fixed costs and you divide it by how much throughput there is on the system. And the quotient is the rate. That’s how much on a per kilowatt hour basis you’ll have to pay to recover the fixed costs. So the more volume you can use relative to those fixed costs, without tripping over and incurring a lot of additional fixed costs, the more efficient the system you have.Doug Lewin (19:00.842)Meaning lower cost because you’re spreading those costs out. Yeah. Okay. So that is all a big setup to, I think what I’m sure a lot of people in the audience and listening wherever they’re listening to their podcasts want to know about is NRG’s big plans for a virtual power plant. Because that really is like, that’s what a virtual power plant kind of is. It’s two things, right? It’s adding that supply in some cases, if you’ve got batteries or you can use an EV or that demand response can act as supply. But again, as you wrote in that, “Why is the Smart Grid So Dumb?”—part of the problem is we’re always trying to treat demand like it’s supply. And so part of what you’re also trying to do is treat demand like demand and actually shape it. The podcast I did with Jigar Shah, Blake Reketa said, “shape load perfectly, inject supply optimally.” Right. And so that’s really what a virtual power plant is kind of doing, like bringing up use during those lower points, bringing it down during the higher points, and where there is a battery or something like that, injecting it at just the right moment. So you guys are going down this road in a major way in a partnership with Google. You have a goal to get to a gigawatt by 2035. I’m hopeful you guys are going to hit that even way ahead of 2035. But talk about what is that offering and what it means for customers.Travis Kavulla (20:16.556)So since 2013, NRG has been allowing people to bring their own smart thermostats or to buy one as an incentive to join our retail electric provider’s demand response program. But candidly, it was always kind of a side program adjacent to some of our retail offerings. And last year we decided instead to put that really in the center of our retail electric offerings into the market, announcing this one gigawatt goal with Renew Home. And what really makes it work for us, I think, is the acquisition of Vivint, the smart home company that has a strong base of employees who can actually go out and install demand response-enabled smart thermostats into people’s homes. We’ve probably all had this experience. I know I’m enrolled in my utility’s energy efficiency program, which gives me like a free box of light bulbs occasionally that arrives on my doorstep, like in a FedEx package, whether I need them or not. And I hate to admit it, but the last box I received, I think four years ago, is still sitting there unopened and it’s now the stand for my laptop so that people are not having to look up my nose on Zoom. It is being used for its socially optimal purposes perhaps, but so being able to actually ensure that from the warehouse to people’s homes, you have this installation taking place gives us a lot more confidence in our ability to reach a goal like that. And then when we think in an increasingly supply constrained, candidly more expensive market environment for supply, we consider our virtual power plant really as a hedge against demand. Because you really, you know, when you begin thinking about this as a substitute for a gas peaker or for the purchase of an on-peak block of power that doesn’t actually fit very well against people’s air conditioning use trend, or against battery drawdowns, those things have an awful lot of capital expenditures behind them. And yeah, so do smart thermostats, but those smart thermostats look in some ways like a much better fit, a much better hedge against residential consumption than any of those other things, which are much more capital intensive. So to your point, you know, we started this, we announced this last year. This year we hit 150 megawatts of the goal, which is a ramp up several times our original expectations of where we would be in 2025.Doug Lewin (22:47.522)You’re already at 150 this year for 2025. That’s 2035.Travis Kavulla (22:52.334)I am prevented from making any statement as well. I mean, the current retail offering we have out there, and I think one of the reasons it has succeeded is that because people—I mean, we are all interested, I’m sure, in our smart thermostat and I have an app for my smart thermostat and I’m constantly adjusting it remotely. But most people don’t take the same kind of pleasure in just adjusting their thermostat all day long on their phone.Doug Lewin (23:20.098)You are a little different in that respect.Travis Kavulla (23:22.268)So our retail offering that’s in the market now we call Vivint Home Essentials. And in addition to getting the thermostat, people get a doorbell camera where you can watch people come and go for home security purposes or knowing when packages are arriving. And you get an app that, let me tell you, our engagement with that app, people check it on average more than a dozen times a day for the doorbell camera, but not for their energy use. But it is also the gateway into people taking a more active role in understanding their energy use. And it’s what gets people in the door to get that smart thermostat to begin with. And as long as you are an NRG retail electric provider customer, you get the Vivint Home Essentials package for free. So again, I think it’s one of these innovations you see arising from a competitive retail market, and it’s allowing us to gain trust and customer retention and value to customers, not just in the energy space, but across a wider economy of smart home in a way that plays back and adds value to them on the energy side and ultimately reliability to the grid.Doug Lewin (24:33.07)Yeah, that’s amazing. So 150 megawatts, obviously not a small number. That’s a good chunk. So, and yeah, 15% of the way to your goal for 10 years from now. I also just want to just dive a little deeper into the point you just made when you’re thinking as a load serving entity, because this could apply, by the way, also to municipal utilities and co-ops. They’ve got a load to serve. They’ve got to go to the market and find that block that is going to serve that customer in those really difficult to serve times. Maybe the sun’s going down and it’s 110 degrees out. It’s a winter morning, all those kinds of situations that cause a lot of panic and stress to people that are serving load in the industry. You can go out and buy that. You could build, buy. There’s lots of different things you can do, but this option, not only could it actually be better suited because you are bringing in this sort of untapped resource in the form of demand response. It’s also then that the customer is receiving some remuneration, whether it’s the thermostat itself or some ongoing payment. And one can sort of envision as this develops and becomes a more mature market, as markets are wont to do, you start to see where customers’ prices are, right? Some customers are just very willing to—like, maybe they’re not at home a lot. They travel a lot, you know, it’s just a very low price to reduce on that peak. Others are like, I have an elderly family member or whatever. There’s a price, but it’s going to be higher and maybe you’ve got to pre-cool my home for that. And those market preferences start to get discovered and all that’s interesting. But I think the main point I want to make is where that capital is flowing is then into the customer. That’s huge, right? Especially as, as you said, prices are likely going higher as we’re getting more demand on the system. Affordability is a huge problem all over. And Texas has pretty low rates, but we have pretty high bills because of usage. So are you guys seeing that? Are customers actually able to reduce their bills yet? Or at this point, is it more like get the device and then the savings are coming later? What are you seeing in that?Travis Kavulla (26:42.646)Yeah, I mean, people are able to monetize their demand flexibility right now. And it’s, you know, not just us, but other retail electric providers who are exploring ways to do this. But I agree with your hypothesis that we’ll see increasingly more depth into what people are doing in that way. For now, it has just been an important psychological change. I mean, to be fully candid, I started with NRG six years ago and, you know, I joined a company that thought of itself as a power generator. And our corporate DNA, whatever it once was, it really is not that anymore. I mean, we—very kind of quick change in our DNA. And I think now we view ourselves as just much more customer centric. And I think that will be to the great advantage of big interests in this market to stop thinking of themselves as people who are producing something for the passive consumption of a big group of customers and really thinking about what customers need, what they want, how you can more efficiently serve them in a challenging market environment.Doug Lewin (27:46.956)More energy services than merely energy supply. Absolutely. Okay. Before we get back to the conversation, a quick word from our sponsor. The second annual Aurora Energy Transition Forum is returning to New York on October 21st. Participate alongside senior leaders from utilities, finance, government, and technology to address America’s energy transition challenges and solutions. You can explore grid reliability, AI’s impact, capital flows, and strategic investments all in one high-level gathering. You can register now and also find Aurora’s excellent research, including several great presentations on Texas and Texas energy at their website, www.auroraer.com. That’s A-U-R-O-R-A-E-R.com, and we’ll have a link in the show notes. Now let’s jump back into the conversation. All right, so I don’t know how much folks in this room are following this, but ERCOT has put forward a proposal to get more demand response. So to its credit, ERCOT as an institution has figured out that in order to really have a—you can fill in the blank with a lot of different words—reliable, resilient, affordable, sustainable, you put a number of different words in there, you do need this two-sided market, you need demand. So they have proposed NPRR 1296. Can you talk a little bit about what that program is and what your thoughts are? Obviously, it’s going to go through different iterations. It’s going to change. But as it’s currently proposed, what are your thoughts?Travis Kavulla (29:18.71)Yeah. So ERCOT has an existing demand response product, ERS—Doug Lewin (29:24.558)Emergency Response Service.Travis Kavulla (29:35.058)Thank you, Doug. And it’s safe to say that even though it’s hypothetically open to all customers, that really it has been taken up by larger commercial and industrial customers.Doug Lewin (29:35.058)And as a matter of fact, at the ERCOT board meeting a couple days from when we’re recording, this will happen next week, 22nd, 23rd, something like that, there is a slide on ERS that shows where it’s all going and about half is Bitcoin. And then there’s lots of small slices. And I didn’t see any of those slices named residential.Travis Kavulla (29:52.962)Right. So the proposal we’re talking about is ERCOT’s attempt to make things, I think, a little bit more equitable and participatory for residential customers in their market. Candidly, it’s not a large proposal. It’s 500 megawatts capped, or if you translate it into volumes, 9,000 megawatt hours. But what it would do is make some kind of a payment when during the tightest supplied hours, the peak net load hours, residential customers reduce their consumption relative to a representative sample of customers. So because of smart metering, you have a very good sampling cohort of residential customers. And when the group of enrolled residential customers in this program reduce their use during tight hours of supply, their retailer would be paid a bonus in essence, augmenting the value of this demand response into the market. I think that’s an important step because it does put residential customers on a more even footing with the large commercial and industrial customers. It also addresses one problem that does exist in this market for residential demand response. And it’s a feature, not a bug. But, you know, of course the premise of competitive retail markets is that customers can choose and customers are frequently choosing to go back and forth between retailers. What that means for retailers who are making investments in smart thermostats is that if I give a customer a smart thermostat for free, pay for someone to install it, and then the next year the customer, as is their right, chooses to go to another provider, I’ve just stranded an asset. And maybe that year was a weak one in the energy market, so the smart thermostat didn’t actually pay for itself. You end up losing money. So this is a revenue stream that is an offset, I would say, against some of the hardware costs that are necessary to facilitate residential demand response en masse. Retailers are going to still have to bear a lot of their own program operating costs, a big chunk of the hardware costs. But this is sort of a nudge realizing that it’s unlike a power plant where, you know, the power plant can’t just grow legs and walk away from you. I own it for goodness sakes. But realizing that the capital stock in smart thermostats and other DERs doesn’t work the same way, this is a little nudge to get that over the hump. And, you know, looking at it, and we’ll have a study coming out soon, you would see a lot faster still adoption of enrolled smart thermostats in retailers’ programs. If we did this, it would probably double or triple the gross margin available to pay for program costs and to rebate to customers. So it’s a big step in the right direction. There are disagreements about it, and this is an example, frankly, of where NRG has departed from some of its generator brethren. I think if you’re looking at this as a pure power generator, you’re saying, well, wait a minute, that’s going to erode the scarcity prices in the ERCOT market that are intended to send me signals for my investment in power generation. And although I, to some degree, agree that it will have a somewhat erosive effect on those scarcity prices, I ultimately get myself on the side of this program because we are really in an all hands on deck moment. And I might not feel this way if we were not living in a moment of profound demand growth, but right now it seems prudent, is the word I would use, to really have programs like this. And I think ERCOT actually deserves some credit for not just having, as we’ve often seen, a bunch of little programs that function to funnel money to large customers or to generators without paying any attention to the possible contributions to reliability of residential customers. It’s really great to see them taking a leadership role in that respect.Doug Lewin (33:34.382)Yeah, I agree. So you said that program, it’s going to be 500 megawatts, right? I think they’re capping it at 500. You said with your VPP, where you aim to get a thousand by 2035, you’re up to 150 in the first year or second year, whatever it is. And you’re just one retailer. I think the main thing I’m thinking about with this is just as we need flexibility in the market, I’m hoping ERCOT will be flexible with its design because I think there’s probably ways to use those dollars even more efficiently to create and/or stimulate markets for load-serving entities, but you can’t learn unless you do. So I’m glad they’re getting started and not just like studying the thing to death. So that’s good. Related to that, again, we’re at the SPEER Policy and Industry Workshop. There’s a lot of discussion here about the utility efficiency programs. Texas has utility efficiency programs that have existed since the market was restructured back in ‘99, or maybe it started a couple years after that, whatever, 2002, somewhere in there. So, over 20 years, a couple hundred million dollars in spending. As a retailer, are you all able to access some of those funds to solve the exact problem you were talking about? It’s like, how do you get the devices in that serve the whole market, even if they leave you? Although, does the next load-serving entity use that? There’s questions there, it is difficult. But how is that working as far as like utilities working with the competitive providers who actually have the relationship with the customer? Because some things, and again, I’m mindful that some folks in the room aren’t from Texas and don’t work here every day. A lot of listeners are from different parts of the country or the world. In Texas, the bill is not generated by that regulated transmission distribution utility. When they get a bill, they see your brands like Reliant or Green Mountain or the others I mentioned earlier, or TXU or whatever the brand is. So that’s the one who actually is interfacing with the customer. What are you guys seeing as far as opportunities there? And what would you like to see going forward that maybe could stimulate more of these demand side resources?Travis Kavulla (35:37.966)Yeah, and you’re right. I mean, the whole premise of Texas’s restructuring is that the retail customer relationship is between the retail electric provider and customers. And companies that do distributed energy resources for a living, some of them have decided in their Texas exegesis to reinvent themselves as retail electric providers, even though that’s probably not the business model they would have anywhere else in the country. And that is, again, because of Texas’s leadership role and commitment to having this vibrant retail market. So I do think it’s important to channel activities through that market rather than have, you know, multiple different business models trying to serve people in a retail relationship. You know, credit to CenterPoint and Oncor over the last couple of years, they’ve included in their energy efficiency implementation plans some funding for smart thermostat hardware that channels through the REP. There are similar programs for some of the C&I efficiency programs as well. You know, just in my history of being a regulator myself, the thing that I’m always on the lookout for in these energy efficiency programs is a sometimes, and I’m not saying this exists in Texas and I don’t know much about Oklahoma, so forgive me, but I’ve definitely seen it in other places where energy efficiency and demand response providers working in these utility programs end up not seeing the actual end use customer as their customer because they view the utility as their customer. They’re a vendor to the utility or the revenue comes from the utility. It’s the utility who can hire and fire you as a supplier into that market. And that seems like the opposite of the model that you would want and not one that ultimately is going to produce good outcomes for customers. So I think in the way Texas designs these programs, because I agree with you, I think that there should be some level of public support to address what might be a market failure in certain respects, but I think it would be a mistake not to try to more leverage the competitive retail market and to augment that market and to try to kickstart it and get retailers thinking more about customer-centric solutions. So that’s the frame of mind that I approach those programs with.Doug Lewin (37:55.19)Got it. So for those that are interested in these utility efficiency programs and what ERCOT is doing, whether through the DR rollout that they’re just starting, the aggregated distributed energy resource pilot that’s been going on for a longer time, or any number of different issues, there will be meetings coming up over the next couple of years of the Texas Energy Waste Advisory Council. This was from a bill, I think it was HB 5323. It might’ve been a Senate bill that passed, but whatever it was, it will create this council to get into exactly these kinds of issues. Because I do think as we talked about earlier, I’ll read just a very brief quote from that, “Why is the Smart Grid So Dumb?” You said a lot of times the programs should move away from saving energy across all hours and focus on investments that can activate demand at times when energy is scarce. So I think of like everything we’ve been talking about, but also a sort of a pet peeve of mine that most in the crowd will probably know where I’m going next. Resistance heat and heat pumps. This is one of the biggest problems we have in Texas. And I talked about it here at this conference a year ago with Chairman Gleeson of the Texas PUC that we have this major problem of winter nights and mornings. It’s still a problem. And I want to be clear. I think if we got the exact same temperatures and system as Winter Storm Uri, the outages would not be as deep, I do think there would probably be outages. And one of the reasons I say that is there was a state auditor report just out last month about the Railroad Commission inspections of the gas fields. And out of 8,700 inspections, they communicated with exactly two people. Communicated. So that means even like not just violations, just like saying, hey, here’s something you could do better. They only sent two out of 8,700. I’m worried about the gas field still. I think that ERCOT and PUC, as you know, as a generator, have done a really good job with the power plant inspection piece. So there’s three main problems: gas supply, power plants, and then demand. And we still haven’t really addressed, in my view anyway, that demand piece. There are increased utility efficiency programs for heat pumps, but as of the last date I’ve seen, it’s a couple of years old. We’re talking about differences of going from like 10 megawatts of savings to 20. When ERCOT commissioned a study from—I know you’re wearing your Longhorn socks today, but shout out to our Aggie brothers and sisters—20,000 megawatts of economic potential is out there from heat pumps. So what I’m getting at is, is there a way while we’re doing this work on DR, ERCOT’s doing this work on DR, you guys have this VPP—is, I think it’s fair to say more focused on thermostats. Is there a way to leverage competitive forces to get to the permanent DR, the permanent demand reduction in the form of moving from resistance heat to heat pumps, which, and I’m going to turn it over to you. I know this is like the longest question ever asked, but which I would point out is not just a reliability improvement, but affordability too, because in those wintertime periods where you’re using resistance heat, if you’re in an apartment, that 5kW strip is just running. You’re using 5kW flat out through the night. It’s a major affordability issue too. So huge opportunity. So is there a way that we can use markets to actually drive energy efficiency investment and improvements?Travis Kavulla (41:20.418)Yeah. So to your point, I think sharp-shooting those summer peaks that tend to occur even within the same summer can produce a lot of savings opportunities year on year because of the design of ERCOT’s energy-only market. I don’t want to call that easy, but that’s something that’s very investable with some of the augments that we’ve talked about before from ERCOT and energy efficiency programs. You know, it’s a lot harder just from a kind of a private capital economics perspective, you know, to justify demand response investments to contour demand, to try to prevent an event that we hope will never happen again. But if it does, it’s likely not going to happen year on year on year. Thank God. And so, you know, when I look at problems of economics like that, that does seem to call for, you know, probably a different approach, more public spending, some kind of justification for some other way because it may not, other than consumers being willing to make private investments directly into heat pumps, you may not see at least the retail electric provider market form around that. But I do agree with you, Doug, that it’s a problem. And I know you looked at some of our load analysis after Winter Storm Uri. NRG studied 5,000 residential customers in the Texas north load zone. These were electric heat customers and they were not interrupted during Winter Storm Uri. They were some of the fortunate ones who were on circuits that were not interrupted, but it gave us the opportunity to see how much electricity they were using. Probably with resistance heat, and at the height of that storm, those customers were using something like two times the electricity that they would be using on like a 90, 95 degree day for air conditioning. So that is a huge amount of electricity usage. And when we look back at Uri, you know, it had two parts, right? It was supply going missing due to fuels and generation. It was also just demand soaring to astronomical levels and not being able to be supplied. So I share your concern and, you know, I don’t throw around the term market failure loosely, but it is difficult to get an energy-only market to make, you know, solid demand side investments to hedge against a one in 10, one in a hundred year, whatever we’re calling it event.Doug Lewin (43:49.9)Yeah. And this is something I’m hoping does come out through that Texas Energy Waste Advisory Council and the PUC. Now to its credit, we’ve given some praise to ERCOT. I’ll heap some praise on the PUC too for going from one part-time person a few years ago on energy efficiency to a division of three, three and a half folks working on energy efficiency. So if we can really kind of train those programs on what is that big weakness by getting the solution out there, heat pumps, which then also help in the summer too, right? There’s just, there’s all these check marks where no matter what the box you’re trying to check, heat pumps really check a whole lot of those.Travis Kavulla (44:27.639)And a shout out just because I come from a commission background. I know we have some commission staffers here today. Thank you for your public service. And I’ll say, you know, the Texas commission is in the unique position of regulating because it is an intra-state market for generation, both the wholesale market and ERCOT, as well as the demand side. But for people listening to this podcast elsewhere, I often encounter utility commissions and they seem so focused on basically making themselves into a stakeholder complaining about what an RTO that’s subject to FERC jurisdiction is doing on the market design. Sounds awful. And they spend like less than 5% of their time focused on demand side issues, which are exclusively jurisdictional to state governments in the United States, but have really not had an appropriate amount of attention paid to them. They have attention, and I’m getting on the soapbox, and this is the premise of the “Why is the Smart Grid So Dumb?” paper. They pay attention to them when it comes time to make capital investments in advanced metering. But then, and this doesn’t apply to Texas, but a lot of other places, then those advanced metering investments really don’t get used to transform the customer experience in any meaningful way. The capital productivity of those investments is very low.Doug Lewin (45:43.886)A quick thank you to our sponsor for supporting the Energy Capital Podcast. Hey, everyone. Doug Lewin here. I wanted to let you know about the InterSolar Energy Storage North America Conference and Expo, which will be happening November 18th and 19th up in Grapevine. On the first day of that, to open the conference, I’ll be on a keynote session, 18th in the morning. It’ll be called Power Policy and the Path Forward: Texas Legislation in the National Context. This is a great place to go if you’re interested in what’s going on in Texas, what’s going on nationally. This panel is going to be incredible. I’m excited to be on it, but I’m definitely bringing the average down. There’s going be all kinds of great speakers on that one. And throughout the two days, I will also be moderating a panel on Texas’s $1.8 billion program to put microgrids and backup power at critical facilities. That’ll be in the afternoon of the 18th and I’m staying through the 19th. So hopefully I will see you there. Let me know if you’re gonna make it. Look forward to either meeting you or catching up there. InterSolar and Energy Storage, North America, Grapevine, November 18th, 19th. Be there. All right, let’s get back to the show.Doug Lewin (46:50.178)On the point of talking about public utility commissions and what they do. You do these great presentations. Anytime you do them, I try to go through them, even though there’s some like repetition in there. It’s great as a reminder for me. And I was looking at one you did in, I think it was Virginia recently as different states are sometimes because the legislature tells them to, sometimes by their own volition, commissions are looking at what actually is performance-based regulation. And when you talk about “Why the Smart Grid So Dumb,” the utility, obviously the smart meters are rate-based, right? So you put out the device and you get your nine and a half, 10, 10 and a half percent on all of the smart grids that are put out there. Actually using the smart meters to reduce consumption, to help customers reduce their bill, to make the grid more reliable, those things aren’t necessarily incented though they could be. So can you talk a little bit about, let’s in the context of this conversation, like, are there elements of performance-based regulation that could actually help stimulate some of the demand side activity we’ve been talking about?Travis Kavulla (47:59.35)Yeah, I think so. It’s a long putt to get there because we’re starting from a situation, honestly, which looks very different from probably the ideal end state. But yeah, to put it simply, you’re correct. I mean, in most of the United States, basically nearly all states, you have a regulatory regime called cost of service regulation. And the premise is pretty simple. The more capital I spend as a utility, the more profit I make. Spend more, make more. Meanwhile, if I use the capital assets more efficiently that I’ve invested in, there is no additional profit for me. And what it actually might mean is that I obviate the need for future capital investments. So perverse incentive. Don’t want to do that. And there’s a whole family of incentives that are bad that flow out of this. I mean, you will never make more profit as a regulated utility than you will the very first year that you own something. Whereas of course in most ordinary businesses, right, you want to own it free and clear. And then it’s all cashflow from whatever you’re using that capital asset to do. So we’ve managed to bake our way into a system where the incentives are probably not well aligned with consumer outcomes. And in fact, over the years we’ve in certain states, we’ve almost made it worse because the one disciplining factor would have been a lag between the time a utility spent money on capital investments and when they could ultimately start getting it recovered from ratepayers. And nowadays, many commissions have cost adjustment clauses or trackers or factors that basically cause those investments to be recouped almost as quickly as they are made. And that further diminishes any incentive a utility might have to make operating expenditures patch in for what would otherwise be filled in with capital needs. And the final consideration, very relevant to this audience, to businesses like mine as well, because you earn no return on your operating expenditures under cost of service regulation. You get them recouped, but you don’t earn a return on them. It creates an incentive basically for the utility to own literally everything they would need to do rather than to contract with third parties for anything. And if, you know, ultimately they do have to contract with third parties, then they might come in and ask for margin on that too, but typically they would earn no return. So a better way of doing this, and it’s, I think, well documented in the literature, it’s what I had to say in Virginia, you know, is probably to try to put utilities on some kind of a budget and have them manage to that budget over a sequence of a number of years. And that would give them a profit motive, because I’m not saying we should just make utilities behave more efficiently. I’m a great believer in incentives. It would give them a financial incentive to engage in the same logic of trade-offs that every other business in the economy does, deciding whether to do CapEx or OpEx, deciding whether to do it yourself versus hiring someone else to do it. And I think ultimately that would lead to, you know, a much more customer-centric place. This is not to say that the grid doesn’t need a lot of capital investment. Clearly it does. But we want actors behaving and making trade-offs intelligently.Doug Lewin (51:17.794)And as I’ve talked about a lot on the pod and written about a lot, the fastest rising part of the electric grid as far as costs is distribution. So, and this is relevant to Texas. We don’t have to deal with the cost of service for generation, which is great, at least within ERCOT. There’s a very active thing, right? With Entergy and then PUC just put a cost cap on their generation in East Texas. But in ERCOT, we don’t have to deal with that on generation, but obviously do on distribution and transmission. So all of what you’re talking about there, those trackers, like all of that exists in Texas. So this conversation is very relevant here. The one last thing I want to ask you about, and it’s not a small thing, but we can at least kind of tee it up. And this is going to play out over the next year, year and a half in Texas, but is the 4CP system. So when you talk about transmission distribution utilities and how they’re actually collecting that revenue from customers, there’s a strong market signal to the very large customers to reduce their use during the four coincident peaks, June, July, August, September. If they reduce that down to zero, theoretically, they could pay basically no transmission distribution charge. You’ve written about this again, this is in that “Why is the Smart Grid So Dumb?” The idea that Texas policymakers had to not have residential customers exposed to that, right, is like, these are not necessarily sophisticated customers to your point. They’re looking at the front door on the app, not the energy use a dozen times a day, and they shouldn’t have to look at energy use a dozen times. They should have to look at energy use no times a day if they so choose. But there are entities in Texas that could have that price signal of reducing at peak. So we are going to go through a process because the legislature has basically told the PUC to review 4CP and possibly redo it, which is going to happen in the second half of next year. Can you just talk a little bit about, again, as a retail electric provider, actually, at least as I read your paper, wanting that exposure and risk because it could bring more of that two-sided market, bring demand into the market?Travis Kavulla (53:20.718)Yeah. And I think that might be kind of a future step from where the process is now, but I guess I’ll confine myself for the moment to just talk about the status quo, which I think is pretty unfair. And you’ve described it well, which is that we have effectively faced large industrial customers with an incentive that ranges between what amounts to $10,000 and $20,000 a megawatt hour that they’re able to avoid in costs if they correctly guess and get offline during those four 15-minute intervals of 4CP. And by and by what that has done is created a system where a lot of the fixed costs of the grid are effectively shifted onto other customers. And to your point, those customers have no ability, even if they wanted to, to avoid those costs. And that’s led us to a situation where residential customers in the competitive market in Texas use a third of the energy, but they pay for half of the transmission grid. And this is especially acute because the total costs in the transmission system have risen dramatically, like 120% over the last 10 years.Doug Lewin (54:27.448)Transmission and distribution, it’s both.Travis Kavulla (54:30.872)Yep. And so three times the rate of inflation. And then we’re now talking about spending another $30 billion in the transmission system, which will double the ERCOT transmission revenue requirement.Doug Lewin (54:43.246)So we have to fix that.Travis Kavulla (54:44.786)We have to fix it and the legislature deserves a lot of credit for including that provision in Senate Bill 6 to address large load issues and giving it to the commission to kick off. So the first step in this process I think is probably just to fix the upstream allocation of those costs to try to make sure and maybe it’s just going from 4CP to 12CP or something which would bring in—Doug Lewin (55:07.074)Winter months, which would be great.Travis Kavulla (55:09.051)And we know the grid is not just planned for the summer, right? It’s kind of a year-round thing we’ve got going on here. And so that broadens the base and would lead to a more likely outcome where transmission rates would still be tied in some sense to a demand-based allocation, realizing that some investments in the system transmission grid are related to peaks, but it would broaden the base substantially and lead to a more equitable allocation between residential customers and everyone else. I know it sounds wonky, but this topic is kind of the major affordability issue in Texas energy today because while I know we’re concerned about rising supply costs, ultimately supply costs work on fundamentals. And once you get supply, those costs fall. In my experience, I haven’t seen a lot of regulated costs go up and down over time. They tend to be unidirectional up. So while we’re busy fixing the incentives and trying to control some of those costs to begin with, we should also be very attentive to how those costs are getting allocated. And it’s especially acute. This is my last comment on the soapbox because so much of the incremental spending on the grid is being done on the premise that we need it to serve the growth in large customer loads. So it would be especially wrong to then have an allocation system where the very customers we are building out the grid for are allowed to avoid those costs. We cannot have that in good conscience.Doug Lewin (56:37.486)This will be one of the biggest issues at the PUC over the next year, year and a half. And just to go a little further on your comment about the legislature, I also give a lot of credit to the legislature for not trying to prescriptively handle this in legislation, which would have been a mess. So kudos to the legislature for tasking the PUC to do it. Sorry, PUC, but it’s an important job. All right. Thanks to SPEER for bringing everybody together. Please all join me in thanking Travis Kavulla for being here today.Doug Lewin (57:04.856)Thanks for tuning in to the Energy Capital Podcast. 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