Energy Capital Podcast

I speak to energy experts from all facets of the energy industry and the one thing that keeps coming through in these conversations these days is the need for better planning to deal with rising load growth, extreme weather, higher costs and emissions. As I think about these problems, I try to think of people who I can learn from and that will help my audience understand these issues as well.My guest on the podcast this week, Hala Ballouz, has as much experience with these challenges as anyone I know. She's the president and CEO of Electric Power Engineers (EPE), and she's built a rapidly growing team of over 200 power system engineers and energy professionals with a singular focus, holistically forming the electric grid to enable a resilient, affordable, and carbon-free energy future. Hala envisions a future grid that is decentralized, incorporating microgrids, distributed generation, demand response, grid edge technologies, all enabling consumers to participate in energy markets and contribute to system reliability and resiliency. It's a very compelling and exciting vision and few describe it better than Hala. In our conversation, we talked about the need for better planning to integrate large loads and new supply and demand resources on the grid including AI data centers, but also distributed energy resources and electric vehicles, and other grid edge technologies on the demand side. We explore the challenges and opportunities in building a clean and resilient energy grid, highlighting necessary technology and regulatory innovation needed to address congestion and curtailment issues. Hala also underscores something that isn't often talked about in these kinds of conversations. It's not all technology and technocratic fixes. There's also an increasing importance and significance for stakeholder engagement and the need to redefine reliability and resiliency requirements in ways that are meaningful and understandable to the general public. I really enjoyed this conversation and I can’t wait to hear your thoughts about it. Don’t forget to check the show notes where we have links to Hala’s writing!Timestamps3:48 - Hala’s background, about Electric Power Engineers (EPE), and women in engineering6:20 - Changes to the ERCOT grid in the past 20 years9:40 - Expected loads and opportunities for load shifting 16:11 - What is the grid edge and decentralization of the grid20:04 - Reimagining the grid, bi-directional power flow, and distributed energy sources (DERs)23:35 - What are the barriers for tapping into DERs and increasing reliability and the importance of better grid planning29:27 - Importance of and trends in distribution resource planning, including “8760” analyses34:46 - Optimizing current transmission and planning for the future40:25 - Utilities turning down new loads outside the ERCOT market, how to avoid this in Texas, and challenges to central planning46:47 - Grid enhancing technologies (GETs)48:23 - Storage as a transmission and distribution asset 54:09 - Solving transmission congestion59:01 - Hydrogen1:00:13 - Existing government policies and regulatory structures that need to change for a reliable, clean grid and the importance of stakeholder engagement1:03:26 - Hala’s vision for the grid in 5 to 10 years1:08:13 - The need for strategy to reduce costs and engage ratepayers Show NotesHala’s Engineering Transition NewsletterA Thousand Points of Light by Hala BallouzElectric Power Engineers (EPE) This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

This is a free preview of a paid episode. To hear more, visit www.douglewin.comHi All: We initially distributed this episode on Wednesday. Unfortunately, due to technical issues with Substack, some of our subscribers did not receive it. If you've already downloaded the episode, there's no need to do so again. For those who have yet to receive it, we apologize for the delay and hope you enjoy the episode.To understand what's happening, you have to know how you got there. You need a sense of the history. That's one of the reasons I've enjoyed interviewing past Commissioners and Chairs of the Texas Public Utility Commission (PUC). At the Texas Power Podcast, I interviewed Pat Wood and Barry Smitherman, both former PUC Chairs. Here at Energy Capital, the very first episode I hosted Commissioner Will McAdams, who had just stepped down from the PUC a few weeks prior. These episodes remain incredibly valuable for anyone interested in Texas energy. Today, I have the pleasure of speaking with Becky Klein, who served as a Commissioner on the Public Utility Commission from 2001 to 2002 and as Chair from 2002 to 2004. Her tenure was pivotal as the restructuring of the Texas electricity market, initiated by the legislature in 1999, was being implemented. Becky played a critical role in this transformative period.After leaving the PUC, she served as both Vice Chair and Chair of the Lower Colorado River Authority, which owns several gigawatts of power plants. She is also an active board member for various water utility and energy companies And if all that isn't enough, Becky founded and serves on the board of the Texas Energy Poverty Research Institute (TEPRI), an organization dedicated to reducing Texans’ energy burden and ensuring energy is accessible and affordable for all Texans.There are few people better situated to help understand what's happening today, especially as we grapple with rising demand, a rapidly changing resource mix, evolving market design, technology breakthroughs, an affordability crisis, and much more. During the episode, Becky shared her past work on Texas energy and regulatory matters and her vision for the future of the Texas grid. We discussed her work with TEPRI and considered the challenges and opportunities in the energy transition to alleviate energy poverty. We also explored strategies for ensuring reliable electricity access, enhancing affordability, and the evolving role of oil and gas within the broader energy landscape.This podcast is for paid subscribers only and only the free preview will be listed publicly on podcast apps. For details on how to listen to the full episode on your favorite podcast app, please refer to this information from Substack. If you like the episode, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen. I look forward to hearing your thoughts; don’t hesitate to share them with me and fellow listeners in the comments. Thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.Timestamps3:02 - Becky’s background7:26 - How Texas’ market restructuring came to be 8:49 - The central problems facing the Texas grid and the importance of first principles 11:58 - What Becky believes are the principles guiding the ERCOT market today 14:39 - Becky’s views on what caused Winter Storm Uri and how that shapes our energy market and grid goals17:33 - What would are the most important things we can do to improve reliability and affordability23:49 - The need for more clean dispatchable or clean firm resources, energy efficiency, and operational flexibility26:48 - How can the energy transition benefit everyone not just some and the work of the Texas Energy and Poverty Institute (TEPRI)37:17 - What are the metrics we should use to assess the impact of energy efficiency programs for low-income households; Energy Poverty Index41:10 - Should Texas reinstate the System Benefit Fund?45:48 - TEPRI’s new program with the Bransfield Community Development Corporation48:00 - Current and expected trends in oil and gas during the energy transitionShow NotesThe Texas Energy and Poverty Research Institute (TEPRI)2024 Community Voices in Energy Survey – Statewide Report from TEPRIFebruary 2023 Senate Business and Commerce Hearing featuring testimony from former PUC Chair Becky Klein. Her testimony begins at 7:51.Burden of the global energy price crisis on households. Study published in Nature Energy.EIA Energy Insecurity Data

This is a free preview of a paid episode. To hear more, visit www.douglewin.comTo understand what's happening, you have to know how you got there. You need a sense of the history. That's one of the reasons I've enjoyed interviewing past Commissioners and Chairs of the Texas Public Utility Commission (PUC). At the Texas Power Podcast, I interviewed Pat Wood and Barry Smitherman, both former PUC Chairs. Here at Energy Capital, the very first episode I hosted Commissioner Will McAdams, who had just stepped down from the PUC a few weeks prior. These episodes remain incredibly valuable for anyone interested in Texas energy.Today, I have the pleasure of speaking with Becky Klein, who served as a Commissioner on the Public Utility Commission from 2001 to 2002 and as Chair from 2002 to 2004. Her tenure was pivotal as the restructuring of the Texas electricity market, initiated by the legislature in 1999, was being implemented. Becky played a critical role in this transformative period.After leaving the PUC, she served as both Vice Chair and Chair of the Lower Colorado River Authority, which owns several gigawatts of power plants. She is also an active board member for various water utility and energy companies And if all that isn't enough, Becky founded and serves on the board of the Texas Energy Poverty Research Institute (TEPRI), an organization dedicated to reducing Texans’ energy burden and ensuring energy is accessible and affordable for all Texans.There are few people better situated to help understand what's happening today, especially as we grapple with rising demand, a rapidly changing resource mix, evolving market design, technology breakthroughs, an affordability crisis, and much more. During the episode, Becky shared her past work on Texas energy and regulatory matters and her vision for the future of the Texas grid. We discussed her work with TEPRI and considered the challenges and opportunities in the energy transition to alleviate energy poverty. We also explored strategies for ensuring reliable electricity access, enhancing affordability, and the evolving role of oil and gas within the broader energy landscape.This podcast is for paid subscribers only and only the free preview will be listed publicly on podcast apps. For details on how to listen to the full episode on your favorite podcast app, please refer to this information from Substack. If you like the episode, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen. I look forward to hearing your thoughts; don’t hesitate to share them with me and fellow listeners in the comments. Thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.Timestamps3:02 - Becky’s background7:26 - How Texas’ market restructuring came to be 8:49 - The central problems facing the Texas grid and the importance of first principles 11:58 - What Becky believes are the principles guiding the ERCOT market today 14:39 - Becky’s views on what caused Winter Storm Uri and how that shapes our energy market and grid goals17:33 - What would are the most important things we can do to improve reliability and affordability23:49 - The need for more clean dispatchable or clean firm resources, energy efficiency, and operational flexibility26:48 - How can the energy transition benefit everyone not just some and the work of the Texas Energy and Poverty Institute (TEPRI)37:17 - What are the metrics we should use to assess the impact of energy efficiency programs for low-income households; Energy Poverty Index41:10 - Should Texas reinstate the System Benefit Fund?45:48 - TEPRI’s new program with the Bransfield Community Development Corporation48:00 - Current and expected trends in oil and gas during the energy transitionShow NotesThe Texas Energy and Poverty Research Institute (TEPRI)2024 Community Voices in Energy Survey – Statewide Report from TEPRIFebruary 2023 Senate Business and Commerce Hearing featuring testimony from former PUC Chair Becky Klein. Her testimony begins at 7:51.Burden of the global energy price crisis on households. Study published in Nature Energy.EIA Energy Insecurity Data

In April, ERCOT's Regional Planning Group published projections that ERCOT's electricity demand may double by 2030 compared to 2021. Initially anticipating a peak demand of about 90 gigawatts by the end of the decade, ERCOT now expects a staggering 152 gigawatts, up from approximately 75 gigawatts at the beginning of the decade. This would mark the largest growth rate in the decade since the post-World War II era. There are many factors driving the surge, but one of the most significant is the rise of Bitcoin mining and AI data centers. The size and speed and scale of AI data center growth that has emerged over the last year has been surprising to say the least, even to close industry observers.However, one company foresaw this trend and built its business model around addressing data center energy needs. That company is Crusoe and on today’s episode I had the pleasure of speaking with Cully Cavness, Crusoe’s co-founder, President, and Chief Operating Officer. He has a robust background in energy and, along with Chase Lochmiller, founded Crusoe in 2018.What sets Crusoe apart is their innovative approach to siting and powering data centers. They locate them near oil and gas drilling operations that have a lot of venting and flaring of methane gas. They also site data centers near constrained renewable developments. This means that they are using energy or power that would otherwise be merely wasted and instead converting it into useful electricity to power data centers. With the example of flaring and venting, this can reduce emissions by as much as 70%.I talked about all of this with Cully and more, including how data centers could be flexible loads, the efficiency of AI chips, reducing emissions through methane flaring. It was a fascinating conversation and I hope you enjoy it.I look forward to hearing your thoughts on this episode and on geothermal energy. Thank you for listening and for being a subscriber!Timestamps2:47 - About Cully and Crusoe8:47 - Crusoe digital flare mitigation (DFM) strategy and how they are reducing emissions14:54 - Crusoe’s digital renewables optimization (DRO), negative pricing, and how Crusoe is managing stranded wind power20:46  - Expected and current loads and load growth from data centers27:45 - Flexibility of data center demand and AI; training vs. inference functions in AI37:36 - Opportunities for greater efficiencies in AI chips40:34 - Trends in carbon accounting; location matching42:52 - Tally’s Law and the Energy Transition49:22 - Cully’s thoughts on needed policy/regulation changes for the energy transitionShow NotesCrusoe Energy Crusoe Careers PageTally’s Law and the Energy Transition by Cully Cavness The Extraction State by Charles BlanchardAI, Data Centers and Energy, Interview with Michael Terrell - Redefining Energy PodcastAI is poised to drive 160% increase in data center power demand - Report from Goldman SachsNuclear? Perhaps! - Interview with Jigar Shah on the Volts PodcastTexas Advanced Nuclear Reactor Working Group at the Texas Public Utility CommissionThe Energy Capital Podcast with Former PUC Commissioner Will McAdams"The Name of the Game is Flexibility," a Conversation with ERCOT's Pablo VegasTranscriptDoug Lewin Cully Cavness, welcome to the Energy Capital Podcast.Cully CavnessThank you so much for having me.Doug LewinReally looking forward to this conversation. Crusoe is really a fascinating company. You guys are doing some really innovative, interesting, and different things. So why don't we start with you, Cully? Tell us a little bit about your background and about Crusoe. Explain to the audience a little bit who you guys are as a company, if you would.Cully CavnessGreat. I'm excited to be here and share a little bit about what we're doing at Crusoe, where we came from, where we're going. In terms of my personal background, I grew up in Denver, Colorado. I went to Middlebury College in Vermont to study and I studied geology and economics thinking I was gonna go into oil and gas. But at Middlebury, anybody who's familiar with the school will know that the climate conversation was a huge theme and a huge focus in that student body. And it made a big impact on me.And so I actually, right after I graduated from college, I was awarded a Thomas Watson Fellowship, which is a program where you're sort of banished from your home country for a year and you get to go study whatever subject you really want to study for that year. And I wanted to think about this sort of morality of energy and the balance between energy and the economy and the environment. And so I was really fortunate to be able to go to Iceland where I worked with a lot of geothermal power and hydro producers. I went to China where I was much closer to coal. And then I went to Spain. I worked with wind and solar developers for the CFO of a large renewables group there. And then I went to Argentina and I worked with a hydroelectric engineer. And I got to really see a pretty broad survey of the global energy system, everything from finance to project development and management to engineering and operations. I saw power plants that had broken and were in stages of repair and learned a lot from that experience. And from that, I ended up going into the geothermal energy industry. I had a mentor who was the CEO of a company called Global Geothermal, and he took me under his wing. And for the first few years of my career, I was developing geothermal power plants, mostly internationally. And then sort of long story short, I ended up doing an MBA over at Oxford in England and came back to an oil and gas focused investment bank here in Denver. It was sort of the one energy focused investment banking role in Denver, primarily oil and gas clients. And that brought me back into the oil industry. I ended up being a Vice President of Finance for a private equity backed oil and gas company after that. And we were drilling some exploratory oil and gas wells in Eastern Colorado. That was sort of a step out from the core shale play, the Niobrara. We were miles away from the core of the activity. We drilled some wells that ended up being good oil wells, but there was no natural gas pipeline infrastructure in that area. And so the default then is, at least at the time was, all right, if you can't get the gas into a pipe, you put the oil into a truck and you send the truck to the refinery. That's how you sell the oil. And you can't do that with the gas, so you just light it on fire and you burn it. It's called a flare. And I thought that was pretty insane. And I was frankly, I was embarrassed about it. You know, just considering the path that I'd gone through and that I had really wrestled with that intersection of climate and environment on one side, but then the economic and human benefits of energy access on the other.Wasting the energy the uncombusted methane emissions. I had a big problem with that and I've been you know, I've been playing around with mining Bitcoin as a hobby in my basement and my wife was observing that you know, the there's like hot wind coming out of the basement and our power bill had dribbled and that's also a commercial problem related to energy and an environmental problem related to energy. And the insight was basically maybe one of these problems can solve the other. What if we could package a modular data center that could go to the oil field, actually sit on pad next to a flaring well site, capture that gas that was being flared, turn it into electricity, use the electricity to power the modular data center and basically new way to, we called it the digital pipeline. So a new way to take that gas molecule and convert it into value. The view was that it would be simpler and more cost effective to transport a bit than a molecule or an electron in these stranded gas locations. And that thesis really bore out.Doug LewinThis is really interesting. So, you know, you, what you're, what you're describing in Eastern Colorado was obviously a problem all over the place in the oil and gas industry. And obviously this podcast is very focused on Texas. It's a huge problem in the Permian and, a little bit less in the Eagleford though. It's still a problem down there too. There's just a lot more of a gas focus down there, but particularly in the Permian where it's mostly oil and what you're describing, as I understand it, is what is often called associated gas, right? You're really drilling for the oil. That's the valuable product.  Gas, depending on what's going on in the market, when today it's very low, right? 2022 is obviously, it was very high, but over the last six, seven, eight years, it's generally been very low. One of my favorite energy books is called Extraction State by Charles Blanchard, a History of Natural Gas in the United States. And he describes for those listeners that are Seinfeld fans, the famous episode of the muffin tops where they start this business. Like everybody only wants the top of the muffin. Nobody wants the bottom of the muffin. So they create this business and just sell muffin tops. And they end up in this huge problem because they can't dispose of all of the bottoms of the muffin that nobody wants. They can't get anybody to haul it away. And Blanchard in his book, Extraction State, likens the associated gas to the bottom of the muffins, the oil to the muffin top. So what you're describing is a very interesting solution to instead of, and you mentioned flaring as a matter of fact, like in Texas, an even bigger problem is the venting. Like people think when they see those flares, that's a problem. And it is, it's actually a bigger problem when you can't see it and it's being vented directly into the atmosphere. So what you're doing is trying to use that. Can you talk just a little bit and help me and the audience understand? Because I think for a lot of folks who approach this from a climate perspective, they're going to say, well, wait a minute, but you're still burning gas to power the data centers or the Bitcoin mines or whatever. That's still contributing to emissions. But what is the difference? And you don't have to get into great gory detail, but rough order of magnitude, the difference in the emissions, how much are you reducing emissions by actually using that gas for power rather than flaring or venting it?Cully CavnessYeah, some great questions. On the emissions reduction piece, so if we just compare the status quo, there's a big ball of fire, it's a flare situation, and we come in and we deploy what we call digital flare mitigation. That's what we call our technology. And we reduce that flaring volume. The important thing to know is that flares don't fully burn methane, and there have been a lot of studies on this over the years that have shown that probably 8 or 9% of the methane is escaping to the atmosphere, uncombusted from that flare. And it can vary. I mean, it can be as much as half in a really bad, poorly run flare, and it can be much more efficient, but that's sort of like a reasonable average to think about. And methane is 82 times as potent as CO2 over a 20 year timeframe. So when we talk about mid-century 2050 kind of climate goals, there's an 82 multiplier to take into account there. And our generators get 99.9% combustion of the methane. So dropping that basically to zero, it's absolutely true. We're still emitting CO2 from converting the gas through the combustion process. But by eliminating the methane, it's reducing about two thirds to 70% of the CO2 equivalent emissions compared to status quo flaring. The other way to think about that is that, you know, like of all the gas that does get burned into CO2 by the flare, the remaining residual methane is three quarters of the total CO2 equivalent impact of the flare. And so by dealing with that, you're dealing with like the majority of the CO2 equivalent problem, especially for those newer term climate goals, which I really do think about a lot because I think the crux of these climate goals isn't really actually about where do we get to from a parts per million perspective ultimately, like what's the right level in the atmosphere. Often there's a focus on it. We can't go beyond 450 ppm. There was an organization called 350.org that said we shouldn't go beyond 350. The bigger issue, I believe from a biodiversity standpoint, is actually the speed at which you get there. Because species just can't adapt fast enough to accommodate some of these faster pathways. And methane is kind of the key culprit in that acceleration and that speed side. So getting it from methane to CO2, it sort of buys time, I call it extending the climate runway. And it gives it literally a couple more decades for species to adapt. And you're moving from a semi-arid environment habitat to an arid habitat. Well, if that happens over the span of 10 years, you might go extinct. If it happens over the span of 100 years, there's a potential for a little bit more adaptation or migration for the species to be stressed but not extinct. And, you know, so speed really does matter in that context, which is why methane is kind of like the low-hanging fruit that makes a lot of sense to go for first. It's also something that we can do that's economic. So it turns out there's a virtuous cycle of this does make sense economically. We can provide basically a free solution for flaring that mitigates the methane. It provides us with access to a low-cost energy source that was previously being wasted and valued almost at zero. And there's an economic incentive to do more of that. So today we've deployed more than 200 megawatts of that across seven states, including your state in Texas. I was just in Midland and Hobbs, New Mexico earlier this week. And we've got kind of our fastest growing area of operations is down there in the Permian where there is a big flaring challenge, but hopefully we've got a solution that's going to make a dent in that really quickly. You know, I'd also just point out that we're also moving into a lot of renewables based projects as well. So we can talk about that later. And there are other forms of stranded energy that are on the other end of the energy transition where there's an inefficiency that needs to be dealt with and computing in a very interesting way can be the solution there as well.Doug LewinSo let's talk about that. But before we do, just really quickly on the, I think this is really important on methane, because I agree with you, the speed at which the climate impacts hit us, our species and other species, and affect biodiversity and all that matters. I think the other piece of that, Cully, too, is that, you know, if you're, if you can reduce the most potent greenhouse gasses, which, which methane is, is certainly in that group, CFCs and things like that go in there too. You're, you're also then, buying time for technological improvements to come along. Right. I mean, and I’m not am you know, I'm anticipating the criticism I'll get and it's, and it's legitimate criticism. I'm not representing some kind of techno optimist like view of this that like oh technology is going to save us. We've got a lot of things we got to do right. But one wedge of the pie is technology. And we have seen tremendous technological advancements in the energy and climate space. Just where we are right now with solar and storage, it would have been very hard to even 10 years ago, imagine the kinds of price declines that we've seen. Some people imagined it, but not many. So I think that that's part of it too, is you've really got to address that most potent piece. And so anything we can do on methane just kind of has an outsized impact. So let's do talk about renewables because there's sort of an interesting kind of corollary here, almost like the associated gas part of renewables or the bottom of the muffin, if you will, in that you have times and they're becoming quite common now, particularly in Texas, I'm not as familiar as with other markets, how much we're seeing this, but in Texas, the amount of curtailment and congestion that we see on the system is very, very large and rising very fast as we're not able to keep up with the transmission needs as generation is coming into the market. And so you end up with a lot of times where the renewable energy that is produced is not able to reach any place where it's actually used. So they're literally just curtailing, just shutting down wind or solar power. And it's not just wind or solar, there's actually other kinds of power that can get congested, caught behind a congested node and just not able to be used. So if I understand what you guys are doing, similarly what you're doing with the flares, where you're putting a data center next to it and capturing that flare and making a power plant, you can kind of do the same thing near congested nodes where you have a lot of renewable production and actually reduce energy waste and actually use that at the data center. Is that correct? And either correct me if I got something wrong and then maybe give us some more context and details around how that works.Cully CavnessYeah, that's right. So I mentioned we called that first business model DFM, digital flare mitigation. And the second model we call DRO, digital renewables optimization. Meaning you can bring a data center into one of these congested nodes, especially if it's really saturated with wind power where you have this intermittency effect. You can have 20% to 30% of the hours of a year in some nodes, and Texas is a good example, that are negatively priced. So that has a number of interesting knock-on results. One is that older wind farms that don't have the production tax credit… Let's back up and say how is something negatively priced? How is there actually a negative price on the grid? What's happening there is there’s so much wind power that the grid can't accept it all. Either there's a transmission constraint or there just simply isn't demand at the end of the lines and so people are effectively having to pay transmission and distribution fees and receive zero revenue because there's no bid for that power. And so you're getting like an all in price that's actually a negative price. And you can do that if you get a rebate from the federal government in the form of the production tax credit. So you could sell for negative one penny if you get two and a half pennies from the federal government, your net price is actually positive one and a half. Those production tax credits expire after about 10 years. If you're an older wind farm, you don't get that anymore. So when the price on the node goes negative, you actually just have to stop producing wind power, which is like the worst outcome from an energy transition perspective. You literally could be producing more renewable power, but for an economic constraint reason, it's just actually being shut off. Even for newer wind farms that are still receiving the production tax credit, this is obviously like a very frustrating problem. And it's like a breakdown in the supply and demand connection in the market. So our view again is that bringing energy to the data center isn't always the right answer. Sometimes you should bring the data center to the energy. And that's really our origin story is we've been bringing data centers out to stranded energy locations. This is just another form, frankly, of stranded energy. They're also hard places to operate. They're not your traditional data center markets like in Virginia and around Dallas, and the Pacific Northwest. This is, you know, to again use the Texas example, this is rough West Texas kind of desert territory without a lot of the existing infrastructure. However, if you do it the hard way, there's access to a lot of low-priced clean energy. I believe more in the location-based approach to emissions accounting rather than the market-based approach. The market-based approach would say, I built my data center anywhere, I bought renewable energy credits for all the megawatt hours, and therefore I have zero emissions. The location-based is more like, depending on where you located that load, what actually happened in the physical real world. And if you located in some areas, the answer is you spun up a coal power plant. And if you located in other areas, it's like you absorbed a lot of otherwise curtailed or negatively priced wind power and maybe drew some power from the grid as well but the average emissions of that location-based view leads you to some very different outcomes compared to the market-based approach to carbon accounting.And so we've really embraced that location-based energy first approach to how and where we locate our data centers. We've got projects going in Iceland, for example, the ultimate stranded renewable energy resource, a place that I spent several months of my life. And they've got gigawatts of potential of geothermal and hydropower and 300,000 people. And what are they going to do with it? When I used to live there, they were talking about running a power line to Scotland. So we're bringing AI training workloads to Iceland, and we're deploying what will be the largest computing cluster in the country of Iceland. And it will be serving AI customers with 100% geothermal and hydropower as another example of how this can work from a location-based standpoint.Doug LewinI do have questions about the location based and sort of some of this move towards 24/7, but before we go there, I just, I want to cover a couple of things that I think are really important to AI. Can you help again, me and the audience kind of understand the magnitude of the AI loads? This is like, obviously it's almost becoming cliche cause every conference you're at, it's all AI all the time. But I think to a certain extent, and this is one of the reasons I was so excited to have you on is, you know, you hear all these things floating around, but there's so many different sources of information. You guys are working on this very directly. Can you talk a little bit about just sort of like what size of data centers you're seeing? And we'll put a link in the show notes. There's a pretty good report a couple of weeks ago by Goldman Sachs, and they talked about 160% increase in data center power demand. I think it's very important when you're thinking about that too, to your point about location, that's not going to be 160% increase everywhere, right? It's going to be concentrated in areas where, you know, like Virginia, that's this well-known kind of data center hub, Iceland, you were just talking about, but Texas, I think will be one of those places too, because of the energy abundance and the general ability to get low cost power, which isn't super easy, but it looks like you guys have a big part of the solution to sort of make that happen. But anyway, talk a little bit about the size of these data center loads and what that means for an energy system. You could talk about it in different places, but in Texas, our peak so far is somewhere around 85,000 megawatts, a little higher. Anyway, yeah, talk a little bit about the size of the load, if you would.Cully CavnessYeah, maybe again zooming back like where's the load coming from? It's interesting to just think about physically what's happening in these AI data centers compared to a traditional data center. So traditionally a data center, you go inside there are racks, racks and racks of servers. And those racks traditionally were like seven kilowatt racks. That was a very standard, maybe 14 kilowatt racks. Those were kind of standard power densities. And the current kind of leading edge GPUs coming out of Nvidia, for example, are really optimal around a 50 to even 100 kilowatt rack. And there are prototypes that are not far off that they're being demonstrated at conferences that are hundreds approaching a megawatt in like a rack. And it's this incredible density of electrical and thermal cooling capabilities. So literally liquid cooling to every single chip on the server. There's an in and an out of cold water and hot water going to every single chip on the server. It's allowing them to just compress more and more computing power into smaller footprint. There's that going on. And then there's this insight, which is that the more GPUs can be networked together on the same cluster, the more performant that cluster will be at training, for example, a large language model. And there's a physical constraint element to that. So you actually have fiber distances that have to be considered, how far away can the farthest GPU on the cluster be away from the center of the cluster? And that leads you to wanting to have these really dense configurations of lots of computers close together so they can all be networked together on the high-performance networking. And when you play that out, what that's meaning is that what used to be a big data center was like a five megawatt data center, and then a 10 and a 20 megawatt data center. These were kind of beyond belief huge, even just a decade or two ago. Now it's sort of looking like we're going towards 100 megawatt data centers that have 100,000 GPUs all networked together in a single cluster. And perhaps that's even going to be small in the not too distant future. We might go to hundreds of megawatts and campuses that are going to be gigawatts. And there's this arms race of who can train the best models and who can operate the best inference off of that model. And it seems right now that size is going to matter and it's leading to a real land grab around access to megawatts, access to digital infrastructure. And our view is that it's really important how and where we kind of locate those megawatts on the grid and potentially even off grid. And so that's really where we take that energy first approach to development and construction and operation of data centers. We've got a piece of our business which is building the data centers, the 100 megawatt scale. We have our own design, which we think is really an optimized design around heating, cooling, those physical constraints and distances within the data center. And those can be essentially offered and leased to larger technology companies for them to host their own GPUs in there and do their own workloads. We also have our own GPU cloud product called Crusoe Cloud where we put our own computers in there. We rent them out by the hour, by the three-year contract. We have different models, but we actually are the cloud provider within the infrastructure as well in some cases. And we have two different ways to then basically take those megawatts to market. But it all starts with energy first locations that we can develop into that data center infrastructure.Doug Lewin Thank you for that. And so just to put that in perspective for some folks that may not be as in the weeds on power as others, when you talk about the old racks used to be 7 or 14 KW. A home on an average day might be using two or three KW, an average sized home, couple thousand square feet or something like that. On a really hot day, it might be five, six, seven. So, one rack would have been equal to like one home on a very hot day. I'm speaking in generalities, obviously it matters how much insulation and what kind of HVAC and what you're doing inside your house. If you're running multiple hairdryers or something at once, it might be different. But these Nvidia racks you're talking about, now you're getting up to 500 to, excuse me, 50 to a 100 KW. So right now you're talking about something like 10 to 20 homes. And when you talk about a data center that's a hundred megawatts and even clustered, and actually one of the previous podcasts was with ERCOT CEO Pablo Vegas. And he talked about how we're seeing 500 megawatt, I believe the numbers he said were 500 megawatts, 700 megawatts popping up on the grid, like all at once. So that's probably what you're describing as one of these campuses or clusters. Now you're talking about like small cities. It's like a small city popping up on the grid potentially in the space of 6 to 12 months, give or take. About right?Cully CavnessI think your order of magnitude is right. I used to think about a house as one KW. Doug Lewin Yeah, not in Texas. Everything's bigger down here. Cully CavnessBut yes, I mean, roughly that's right. I mean, these are huge sources of power demand when they come online at this kind of scale.Doug LewinAnd so can you talk a little bit about the flexibility of that demand? So this is becoming a bigger and bigger issue. In Texas, ERCOT has established a large flexible load task force, which spends a lot of time, has spent a lot of time thinking about Bitcoin, but is going to more and more need to be thinking about these AI data centers. And I've heard a lot of different things. There's no flexibility at all. There's a lot of flexibility. I've heard everything in between. Can you just kind of share your perspective on how much these can be flexible and if flexibility can be built into the design. You mentioned you guys are designing some for heating and cooling. Are you thinking about building flexibility in? And let me just, before I turn it over to you to answer that, I would imagine with what you guys are doing, that flexibility would be important because when you're siding next to a congested node, like you wanna be running as much as you can during those periods. But then when it's not congested and power prices are getting really high on the grid and there's actually not enough power, maybe you could move that wind or solar rather than using it, the data center, you could move it onto the lines and let it flow to Dallas or Houston or whatever. And the prices are higher than you would want to use less there. So maybe you do that through changing around how much cooling is going on or you site batteries there or if it's a large language model, maybe you're batching functions and not running them 8,760 hours, which is the number of hours there are at a year, but maybe 8,500 and even not needing power for even a couple hundred hours would make a huge difference. So can you talk a little bit about what flexibility there is or is not with AI data centers?Cully Cavness Yeah, I think it comes back to the customers that are using the servers. And right now, I think a lot of the market is still stuck in an old mental model of data centers need to be tier four, meaning 99.999% uptime reliability. And it seems to me that many of the incumbents still have that perspective as it relates to this new wave of AI data centers, it's not clear to me that all the use cases of AI computing require that kind of uptime. And I think that you actually had an insight, which I've been thinking about a lot, which is this batching idea. So you can checkpoint these models, meaning if the power goes out in a worst case scenario, you don't have to restart training the whole model. It kind of falls back to your last point that you saved the model. It's like if you're playing Mario and Bowser kills you, you get to start back at the beginning of the level. You don't have to go all the way back to the beginning of the game. And that's important, right? Because that means that, okay, maybe you would tolerate a certain amount of outage and it becomes an economic decision. If I can offer you a much lower price point per hour of training on average throughout the course of the year, provided that I can interrupt your workload 1% of the time or 10% of the time or something. Is that a trade that you're willing to make? I believe that for some percentage of the customers that will be a trade that they're ultimately able to make, the market hasn't really moved there yet. But I think some of the kind of frontier folks are starting to realize that. And we would really advocate for that because that would allow for more of the demand response feature that, for example, in Texas is such a big deal in you're deregulated market, you've got this really kind of beautiful, again, market-based incentive driven system to provide flexibility back to the grid. And when it gets really hot and everybody's AC is on, you can get paid to turn off if you're able to. And we need that economic signal to flow through to the customers that are doing the training workloads. I would say there's going to be a difference between training and inference. So broadly in this AI computing world, there's these two categories. Training is the very kind of it's a longer term, it can be days, weeks, months of running a model over large amounts of data to find the insights and create the weights and balances, weights and biases in the model that sort of builds the model, let's say. And then inference is once that's been built, it's using the model to do tasks. So it might be for a self-driving car to detect, is that a stop sign or a yield sign? That's like using the model to make one inference or for ChatGPT, it would be answering the question that you just posed in the chat box. That's an inference. And, you know, clearly that is a more, you need to be up and available to provide that service. Can these be federated across multiple data centers? So one can be offline at any given time if as long as another one is online. I think these are really interesting questions and it's just a totally new approach to the digital infrastructure and the kind of interaction of digital infrastructure and the energy infrastructure. It just, we need to get a lot more sophisticated on that. That's what I'm really excited about at Crusoe is we have a team that's a hybrid of energy professionals from grids and utilities, from upstream oil and gas producers, from renewables developers. And we have a team of really seasoned executives who have built and operated data centers and cloud products. And you know, we are sort of merging those two disciplines in a pretty special way that we're going to try to find and use these kind of insights of how digital infrastructure can and should interact with energy infrastructure.Doug LewinYeah, I think that's really, really interesting and a really sort of potent mix, one that is really needed at this point. We'll put in the show notes a link to, there was a podcast, I believe it was Redefining Energy did one with Michael Terrell from Google. And he was describing how they're not there yet, I think, if I remember right, he was talking about sort of where this might be headed in that with what you're talking about with inference, where the task needs to be done, you need to know, is that a stop sign or a yield sign? You can't wait till later, but they could move those functions. And you sort of suggested this just a minute ago, but just to dive a little deeper into it, you could move those functions to different data centers based on how much energy is available. And I was sort of getting this image in my head of like, there's the saying, the wind's always blowing somewhere, the sun's always shining somewhere. And so if you picture some of these data functions actually moving around the world with the sun, so that solar power is providing a lot of these tasks, but at different data centers. And you don't really care as a customer, as an end user, I don't care what's happening in Iceland or in Texas, right? It doesn't matter as long as when I need the information, it's there, right? And so you could kind of see some really interesting, and it's going to take this close integration of, as you're describing, this sort of energy expertise and the data center expertise for where is that possible, where is it not.Cully CavnessYeah, I think it's, you're probably more right than wrong. And if you think about what that means from an infrastructure build perspective, it's like a huge undertaking. It's like a global rebuilding of the digital infrastructure, the fiber infrastructure, and all the energy that has to go into it. I mean, we're talking about many trillions of dollars of capital investment. I think on that specific idea, there's this latency constraint, which is some things need to be really fast. Like that if it's a stop sign, you really need to know it's a stop sign and you need to know it immediately. There's other forms of inference that you probably could wait a couple hundred milliseconds to get the ping back from Asia. If there was, if it was sunny in Asia, it's nighttime here, you know, you could you could actually imagine that. Right now, most of the latency, if you type in a prompt into ChatGPT, is still the model itself doing the computing. But as they're getting more efficient, that portion is getting smaller and it's going to be the percentage that's borne by the networking latency is going to be a larger percentage as that happens. And so there will eventually be this interesting question of how close does the workload need to be to the problem? And for some, it'll have to be very close. And for others, it could maybe be anywhere on Earth. Doug LewinYou were also talking earlier about how much of these loads are actually cooling loads, right? And so there's probably also some demand flexibility there, I would think. I don't know. And so let me phrase it in the form of a question. Could you do, like for instance, as on the residential side, if you have a home that is well insulated, you can pre-cool your home. So Texas is a great example. It's going to be a hundred degrees basically every day this summer. We've already hit a hundred a couple times and we're not even as we're recording out of May yet. But you know, you have all these days that are a hundred degrees, tons of solar power, pretty low prices at two o'clock and three o'clock in the afternoon. It's really not an issue. The issue on the grid, the tightness is going to be seven, eight, nine o'clock as the sun is going down. So you pre-cool the home you use less in those evening hours. Is there the ability to do some of that at data centers too, where you're actually making it a little colder, or does it have to be like, it's got to be at this temperature and it can't vary?Cully CavnessIt's more of a run rate kind of problem. I mean, you've got just 100 megawatts of heat being produced 24-7, and that has to be evacuated on a very continuous basis. There's a little bit of thermal inertia if you were to pre-cool, but…Doug LewinNot as much as with a home.Cully Cavness Never say never. I mean, maybe you get a big reservoir of cool water and you kind of like pre-chill some big thermal mass or something. But in your normal data center, it's less of an opportunity. There's definitely a lot of efficiency opportunities. Having the most efficient chillers and being thoughtful on the designs, the engineering, there's a lot to do there. Doug LewinAnd there's efficiency in the chips as well, right? Can you talk about that? You were talking about the Nvidia chips and they're obviously, they use a lot of power right now, but I think Nvidia, at one of their last events did talk about how their chips are more efficient. Are you seeing that on the data center side?Cully CavnessThe chips are more efficient, but there's more chips and bigger chips. And so the power consumption of the server isn't necessarily declining. In fact, it might even be rising. I mean, again, if you back up to just kind of first principles of what's going on here, you've got the sophistication of making these chips has gotten to such an insane point that there has to be some kind of like tailing off of the efficiency gains. So just as an example of how these things are made. They're mostly made in Taiwan and there's a factory there owned by TSMC. A lot of people might have heard of this company. It's the largest semiconductor fab in the world. And they have this machine which is made by a company called ASML. And this machine costs something like $800 million per machine. And it's transported in like four jumbo aircraft to Taiwan.And they have 80 plus of these machines in TSMC, as far as I understand. Each one of these things is like a major installation engineering project to put this thing together. And then once it's there, the way it works is they're liquefying a droplet of metal that's falling into like a convergence of a bunch of lasers. These lasers are blowing up this droplet of metal into a very specific wavelength of ultraviolet light that bounces off a bunch of mirrors. And then it goes on to a piece of silicon that's like 10 atoms thick or less. Doug LewinWow.Cully CavnessAnd it's etching a pattern of circuitry into this and then another deposition of a substrate and another blast of this extreme ultraviolet light. And it's doing this like tens of thousands of times per second across this whole factory. When you're measuring things and just like atoms thick, you're running up against real boundaries of physics can do and I don't know how much you can just depend on the chips getting more efficient.Are there different versions of chips and different designs of chips coming that are definitely different approaches? Yes, absolutely. There's some new startups that have released some new chips that look like they could be way more efficient on the inference side, for example. The training piece, it's a little bit less clear that you've got huge gains that can still be made there. But again, never say never when it comes to technology. I'm just pointing out that they've been at this for like decades now and it's gotten really optimized. And there are certain pieces of it that might be kind of asymptoting.Doug LewinYeah. And it's a little bit of a law of diminishing returns, right? At a certain point, like you just, you reach that kind of limit where, I mean, we're seeing this like on, we're not there yet, there's still more cost declines in solar and storage, but when you see those curves and you can only get so close to zero before there, there wouldn't be any money left to be made in it. So at some point you hit that terminal point.Cully CavnessMaybe. I mean, I just worry when people say it's going to be solved by more efficient chips. There might be limits there.Doug Lewin No, that makes a lot of sense. That makes a lot of sense. All right, so let's come back to something you mentioned earlier. You were talking about carbon accounting and the location-based. There's, again, a lot of emphasis among some of the major tech companies, but I'm seeing this get talked about a lot more, what is often called kind of the 24-7. So you were describing this earlier. A lot of companies want to have 100% clean power, 100% renewable power. Sometimes they describe it different ways. But what they're trying to do is do like hourly matching. You were talking about location matching. Are you seeing more and more companies actually asking about that sort of thing, actually getting much more granular about carbon accounting? Obviously the majors, the Googles and the Microsofts and that are doing that sort of thing. Is it getting beyond those companies or is it still pretty concentrated in a few companies that are doing that kind of work?Cully CavnessI think it's still kind of early days on a bunch of this and they keep modifying the rules and editing them over time as I think people just realize there are better approaches to carbon accounting and the standards that go into it. You know, location matching is important, but it's also like really important like what's happening at that location. I guess that was the point I was trying to make is that when you add a load to a specific node, it causes a specific set of energy generation resources to get called up. And in some of those situations produce a lot more emissions than others would. So just kind of first being thoughtful about the location and the realities on the grid of what happens when you add load there. Then to me, the second thing is, okay, you're buying RECs and you're providing that economic incentive for the renewables to get developed, which is valuable. It's a great thing that we have that mechanism in the market. But to me, the bigger question is kind of that physical reality of where was the load located?Doug LewinFor sure. And you're starting to see, I think they're called TEAKS. There's like time energy attribute or something like that. There's a time-based attribute kind of accounting that is already going on. It'd be interesting to see if that could be extended to location as well. I think it's a really interesting idea. I actually hadn't, I'm embarrassed to say I hadn't really thought about it before, but it's a little bit embedded in the time thing because where you are would matter, but it's not explicit and it probably could be teased out more. It's really interesting.So I want to ask you just a couple more things before we wind down here. A couple of years ago you wrote an article on Medium. We'll put a link to it in the show notes. Tally's Law and the Energy Transition. Can you talk a little bit about, give people a little preview if they go and read that. What are they going to see? What's sort of your thesis in that piece?Cully CavnessYeah, I mean, this goes back to some of that early, my early experiences in the energy industry and wrestling with just the identity of wanting to work in the energy industry. I mean, I think it's the most fascinating industry. It impacts people. It impacts human lives in a lot of really positive ways. Just having access to any form of energy is huge and transformational for so many people. And back in the early 2000s when I went from Iceland to China, China's pretty wealthy, but in the mid 2000s, it was still pretty rough for the majority of the people there. And most of them could not care less if the power was coal or solar or wind or the climate impacts of any of it. And they just wanted to have the economic means to have another meal that day, you know, like to add protein to their diet, to upgrade from a bicycle to a motor scooter or from a motor scooter to a small car or something like that.And, you know, starting in Iceland, it's the exact opposite. It's like this abundance of riches of unlimited renewable power. And it's very easy to say, yes, we'll just have 100% renewable power. We only have 300,000 people and we have more hydro and geothermal than we know what to do with. So just two very different realities for those two countries at that time. And it led me to that framework of the triangle of ease, energy, the economy, the environment. And I sort of formed a formula of how I thought about the world along these lines, which was RT equals PQV. And people can look it up if they want to, but basically natural resources times technology on one side of the equation and population, quality of life, and environmental health on the other side of the equation. It's a mental model for like, if you change one of these five variables, what happens? So if you increase population or increase the quality of life of a population and you don't have any change on the energy technology side or the natural resource side, then the variable that has to fall is V, environmental health. And conversely, like if you can innovate with technology and increase the left side of the equation, you could increase population, you could increase quality of life without impacting environmental health. And, you know, there's more to it than that, but I think that's like kind of a simple way to summarize the viewpoint. And I guess I do take a little bit of the techno-optimist’s viewpoint. And well, in the sense that I do think technology will largely be the solution or it won't be, but we're definitely not shutting off the energy. And buying time, more time for technology to end up being the solution is really the most important thing we can do right now. So the low-hanging fruit being things like waste, things like methane emissions. Let's solve those now so we have more time for the technology to grow and increase the T variable so that we can continue to have better quality of life and more people without having a big climate impact. And I'm hopeful on that.  I mean, I think there are a lot of things that are on the horizon that look great. It appears carbon capture and sequestration is getting there. A lot of interesting things happening on batteries. Radia just came out with this new wind turbine that looks incredible. I don't know if you've looked into this company at all. You should have Mark on your podcast if you want to talk to a really interesting entrepreneur in the wind space right now.You can go on and on, all the nuclear stuff that's happening. There's a bunch to be excited about, but it's clearly going to take a while for this to mature and to really scale up. So again, back to extending the climate runway, we got to stop emitting all this methane just needlessly. We got to stop wasting energy. Let's stop curtailing renewables. Let's tap into the latent stranded renewables where we can, if we can locate a load in Iceland versus in the Eastern Seaboard where it's going to be much more fossil oriented. Maybe that's a good idea. So again, we're going to energy first, trying to be thoughtful about these things and extend the climate runway while still accommodating this wave of AI demand, which is clearly happening. So it's just sort of like, how can you influence it to be least impactful?Doug Lewin Yeah, I mean, it's happening and I think we're also gonna see increasing demand for all sorts of different things, including quality of life, right? There's still, like you're talking about China 15, 20 years ago, there's still a billion people in the world that don't have access to electricity and they need to get it. That's just wrong. We've got to figure out ways. So that formula you just described I think is really, really interesting. I'll tell you, I mean, I think we're all creatures of our experiences. And, you know, we have, obviously as any two people have had different experiences. I do think technology will play a big role in it, but I think there's this kind of interplay happening all the time between technology and markets and policy, right? And so if you're in a place where like you could have the greatest technology, but if the policy makers set up a system where they're favoring other technologies or just not allowing market entry, right? And there's this interplay between those things because you can only hold back, you know, the water, if you will, hold back the deluge so long and a technology will kind of like water flowing, right, will find its way to get in even where policy is trying to keep things out. But policy can really slow down or to put it more positively, policy can really enable markets to bring technologies in really quickly. Anyway, I just, while technology will have a big role, I do think there's always going to be this interplay and depending, I don't know if you have any thoughts on that, any place in particular that you're operating where you see like policy stands in the way or makes things easier. I kind of like this Texas market because what you were describing earlier with like, it's going to depend on the customer when I asked you about flexibility, right? We have a market that kind of accommodates that. Like if you're willing to pay thousands of dollars a megawatt hour, you can have the power whenever you want it, but everybody's going to have their price as to when they're willing to curtail. So there's an example of a market sort of enabling technologies and flexibility. That's mostly on the large customer side. We need more of it on the small customer side, but that's a topic for a different podcast.Cully CavnessThis isn't as close to our business, but I would really love to see a streamlining of nuclear permitting. I just think there's so much potential there and the fear of it has led to a permitting regime that makes it almost impossible to get anything done. And it's sort of disproportionate to the risks at this point. I think if you really talk to experts, they would say that, which I'm not a nuclear expert, but I've been to how many hundreds of energy conferences, I've heard enough to know that it's really, really safe. When it goes wrong, it goes really wrong, but other things go a little bit wrong all the time. And the actual impact on human health and the environment is probably worse from a lot of other energy sources than nuclear running very safely for 99.999% of the time and having a big accident even once in a while, which it does appear they're even getting better at really minimizing that outside risk with the new generations of nuclear reactors. And updating our framework to allow more nuclear to get permitted and built would be huge. Obviously, the grid transmission permitting is a big deal. At some point we might have to get a little bit more aggressive with like eminent domain or something. I don't know, you just can't let every potential objection, get in the way of building out the really critical infrastructure that we need for the whole country. And there's a balance. Personal property rights are essential. They're like the cornerstone of the country. But there has to be a practical solution to get things done. And these things really need to get done. And so that's a hard problem. But we've got to figure that one out.And I think, yeah, the Texas grid is a good example. I mean, you guys get a bad rap with some of the outages from some of the winter storms recently, sometimes. But I would say by and large, it is viewed as the epicenter of entrepreneurship and dynamic business models in the power industry because of the way it's been deregulated. And I think ERCOT’s being pretty thoughtful. It's like they're still regulating and controlling the really bad edge cases, right? There are like caps to power pricing. There are kind of like curtailment mechanisms to avoid the blackouts that things are changing so fast. They're clearly not perfect yet, but they seem like they understand the problem and they're moving in the right direction really fast. But in the middle range, like the normal course of business stuff, just let the free market operate and it'll tell you what kind of power resources and what kind of, you know, do you need battery storage? Do you need peaker plants? do you want more renewables? Let the market figure all that out and not picking too many winners there. That seems great and also kind of reducing the gatekeepers of the traditional grid players, the traditional utility players, letting all that kind of be a little bit more flexible so more participants can come in and find their niche, it just seems to be like it's on a really healthy track in Texas in general, despite some of the headlines, which, you know, look, I wasn't there when the power went out, and I know a lot of people were, got hammered by that in really bad ways. And maybe, though, in the ultimate grand view, it's like a price that was paid for making the grid a lot better in the long run and making it this kind of free market approach where a lot of really cool innovations can come in and make the grid much better 20 and 50 and 100 years from now.Doug LewinAnd I think for anybody listening that wants to dive more into Winter Storm Uri, we'll put a link in the show notes to the very first podcast of the Energy Capital Podcast we recorded, which was with former Commissioner Will McAdams. He was just a week or two out of the Public Utility Commission. We recorded it. And we talked there about what happened during Uri and how it really wasn't a quote unquote market failure. It wasn't like the... That was really if we weren't yet regulating, and I would argue we're still not yet regulating natural gas supply to be winterized. Power plants weren't well enough winterized. And we hadn't weatherized homes and buildings, so demand was kind of off the charts. And that's something TUC continues to look at and may do more on. On the nuclear piece, and we're going to have, there's going to be lengthy show notes for this one. This is good. We've covered a lot of ground. We will put a link. There is an advanced nuclear working group at the Public Utility Commission. Governor Abbott put Commissioner Glotfelty in charge of that. I'm really intrigued by nuclear. I think, you know, just today, the day we're recording, Secretary Granholm, obviously in the Biden Administration, was at a ribbon cutting in Georgia for the new nuclear plants. And she said, we need 200 more. We got two here. We need 198 more. It's one of the few areas where I think Republicans and Democrats seem to really want to kind of both pursue a similar solution. And to your point about the dangers of nuclear versus other energy sources, we'll put a link to a great podcast, Dave Roberts, the Volts Podcast did with Jigar Shah and comparing, for instance, the radiation of coal ash sitting around on coal sites compared to what's at a nuclear plant, far worse. What is just sitting around like basically uncovered in these coal retention ponds. Cully CavnessThat's what I was sort of referencing. I mean, there's this, people are afraid of crashing in an airplane much more than crashing in a car, right? Because the airplane crash, the mental model is so gruesome and horrible and the car crash seems like something you do every day. So it's not something to be as afraid of. But the reality is the car is gonna kill you a hundred times more often than the airplane is gonna kill you.Doug Lewin Yeah, it's like 40,000 deaths a year in automobiles or something like that and a very low number…Cully CavnessI think it's a little bit like that with nuclear. I mean, it's scary because you think of Chernobyl, but if you actually do the kind of risk math, it's not the scary one to be worried about.Doug Lewin Yeah. Cully, I really appreciate you doing this. The model Crusoe has with this, you know, really citing, big energy loads next to areas where there is abundant and so abundant that it's often wasted energy is really fascinating, really thrilled to hear you're in Texas and doing things here. We'll definitely want to follow your company very closely and encourage our audience to do the same. Is there anything else you'd like to say? Anything I should have asked you that I didn't that you'd like to talk about before we end?Cully CavnessYou know we're hiring and if anybody wants to join the team we'd love to have you. We've got a really special team of talented, entrepreneurial, hard-working, creative folks here and we need more of them. So check out our website, Crusoe.Ai  and look at the careers page. I'm recruiting for a Chief of Staff which I'm really excited about. So if anybody wants to check that roll out in particular I'm just starting to look through resumes right now. Yeah, I think other than that, we're just happy to introduce ourselves to your audience and we'd love to stay in touch and do it again sometime.Doug LewinThanks so much, Cully. And we'll put a link to the, if you send us one, we'll put a link to where that job posting is. And yeah, I can't think of, you know, I mean, it's gotta be on the short list of most interesting places if somebody really wants kind of a front row seat into the energy transition and AI data centers, rising load growth, all these things that are going on. What an interesting position you have open. So we'll be sure to, to put a link to that as well. I learned a lot from this discussion. I really appreciate you taking the time. Thanks so much, CullyCully CavnessMe too. Thanks for having me. 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

Cindy Taff discusses the potential of geothermal energy in Texas and Sage Geosystems' innovative approach to tapping into this energy source. Topics include enhanced geothermal systems, geothermal storage innovations, seismic concerns, technology integration, power generation cycles, investment potential for oil companies, cost competitiveness, and job growth in the geothermal energy sector.

One of the hardest things about energy efficiency is measuring it. It's difficult to do, but with increasingly sophisticated software platforms, it's getting easier and more precise. As homes and buildings begin to use more electricity for things like heat pumps and electric vehicles, and as solar and wind power continue to grow, there will be many times a day and most times of the year when it will actually be energy efficient to use more electricity. But at certain times and places, we'll need to use less or even send power from solar and storage, and even the storage in electric vehicles, at homes and businesses back to the grid. My guest this week was Carmen Best, Chief Policy Officer at Recurve, a company working to measure the time and locational benefits of flexible demand in the most rigorous way possible by actually measuring the end use changes and power consumed at the meter. Grid operators and policymakers are increasingly focused on dispatchable generation in Texas, sources they can turn on with a push of a button. But what they should be focused on is not only dispatchable generation, but dispatchable resources of all kinds, including demand side resources.To have confidence in them though, grid operators and utilities have to be confident they're deployed at the right time and in the right place. In this podcast, you'll learn the policies needed to truly scale demand side resources, including energy efficiency, demand response, and solar and storage, and how a leading company in this space is approaching the challenges. Carmen has spent over 20 years working on energy efficiency with much of that time focused on how to evaluate, measure, and verify energy savings.She's one of the leading experts on demand flexibility, energy efficiency, and the policies needed to make sure all demand side resources can contribute to reliability and affordability. I learn something every time I talk to Carmen, and this podcast was no exception. This episode is particularly well timed as today was the deadline for comments in response to the PUC’s energy efficiency questions. I answered some of the questions in this article. You can see the responses of over 20 commenters, including Recurve, here. I look forward to hearing your thoughts about this episode and about measuring and valuing energy efficiency. As always, thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.Timestamps4:00 - About Recurve5:00 - The challenge of measuring demand reductions and Recurve’s approach to solving that problem9:32 - How Recurve’s data can be used by system operators to manage distributed resources, improve system reliability, and empower consumers13:41 - The link between energy efficiency and demand response18:57 - How can we be sure energy efficiency delivers value?23:33 - System benefit targets vs. savings targets; how this impacts consumers, costs, and competition.27:42 - Shifting energy efficiency from a utility program to a competitive market35:06 - Using energy efficiency measurement pilots to better determine costs and benefits45:17 - Texas’ ADER (Aggregated Distributed Energy Resource) Task Force; the role and potential of demand-side resources in ancillary services markets52:35 - Utility shutoffs. Challenges and opportunities in programs targeted low-income customers 58:34 - Policies to prioritize to increase reliability and affordabilityShow NotesRecurve FLEXMarketMission:dataSmart Thermostat Pilot filing with the Texas PUCEnergy Efficiency Questions filing with the Texas PUCProject 56517: The energy efficiency docket (here you can see all the responses to the PUC’s questions)The PUC’s Efficiency Questions: A Potential Turning Point for Grid ReliabilityCommunity Voices in Energy Survey: Texas Statewide Report from the Texas Energy and Poverty Research Institute (TEPRI)TranscriptDoug LewinCarmen Best, welcome to the Energy Capital Podcast.Carmen BestThanks for having me, Doug.Doug LewinThanks so much for doing this. I am a big fan of yours and the work you do and of Recurve, have been following Recurve for a long time, but I suspect some of our audience will not yet be familiar with Recurve and what it does. Can you just start us off by talking a little bit about the company and what it does?Carmen BestYeah, sure. So, Recurve is a company that is focused on analytics and we're a software company. And we're contributing to the clean energy future by looking at energy consumption patterns in effect. So, changes in energy consumption are really important to distributed energy resources and demand flexibility. And we kind of got our start in the energy efficiency space. And one of the problems we were trying to solve was having standardized measurement and verification. And that our open source products have kind of evolved to be a broader swath of solutions that include being able to forecast where demand resources are going to be best suited for the grid, be that distribution or decarbonization initiatives, look at how they performed. So, utilizing that measurement verification interface of how well they did.And then the last part is really about settlement. If you have the information about how they performed, how does that track to the value that you want out of these resources and how do you pay folks for what they've delivered as opposed to just having fixed incentives for single technologies or something? We're really trying to build out a way for utilities and other entities to be able to buy demand flexibility direct from the market.Doug LewinSo much there. This is so exciting and so like music to my ears and hopefully to a lot of our listeners as well. So we, on a lot of the podcasts, we've had discussions in the Jason Ryan podcast and Will McAdams, Pablo Vegas, so on and so forth. I've been talking a lot about the distributed resources that are coming. And I use that word resources very explicitly because some of the resources are supply like solar, storage and the like. There's others as well: fuel cells, Bloom boxes, there's all kinds of different things that can be supply resources on the demand side. But then there's also the actual reductions of demand. And this is where it gets really tricky because you're kind of trying to measure a reduction as a, it's much easier to measure when you're adding something, it's kind of more difficult to measure the subtraction. Can you talk a little bit about how y'all do that and how you've evolved a system to do that?Carmen BestSure. I think at the crux of it, it's really about a counterfactual analysis. And this is something that's being done in lots of different industries to understand or academic spaces to understand what would have happened if we wouldn't have done what we did. Right? And it's not really an esoteric question. It is a quantifiable, answerable thing, but you need to be able to agree on a couple of important things like… well, what was happening and what was likely to continue to happen. We answer that by looking at past energy consumption and can make some assumptions about what energy usage would be in the future in a business as usual situation. And then the other component is having information of what changed. So how are you using energy after an intervention? And that intervention might be installing a heat pump, it might be upgrading your windows, etc. It might be an event-based intervention. So you did something in response to a call for load reduction or something like that. And you can be looking at that during a certain timeframe, maybe four hours or two hours or whatever the fact may be. But you're building that counterfactual analysis so you can see what that change in energy consumption was and then tie that back to the value that it was delivering during that point in time.Doug LewinAnd when you guys are doing that, Carmen, you're actually doing that measurement at the meter. So this is not a bunch of spreadsheets and slide rules and whatever else. This is not some grand estimate. You're actually measuring whether it's output of something like a solar panel or a battery or the reduction from something like a smart thermostat cycling, or like you said, a heat pump replacing some other system, right?Carmen BestYeah, we're typically looking at a whole building analysis, so be that a home or a commercial building and we're looking at their energy consumption at the utility meter, usually an hourly estimate. And then we have a timestamp of when an intervention, whatever we're tracking happened. And then we're looking at the energy consumption pattern after that intervention. It's also weather normalized. So you're factoring in how people typically respond to heat or cool or cold because that is one of the main drivers of our energy usage. And then more recently, we've been factoring in other big use cases like is there solar on the site? Is there an electric vehicle on the site, etc.? And those are other ways that you kind of have to factor in that site level energy consumption pattern either by backing them out or doing other analytics around how that change in consumption is happening.Doug LewinYeah. So just to take just one step back, we're going to go, we're going to go back into the, into the, you know, details here in a little bit. But if we take a step back, I actually want to go back to, and folks, if you haven't listened to this already after this podcast, you go back and listen to this other one with Pablo Vegas, where the CEO of ERCOT, and I asked him about his kind of ten year vision for where their ERCOT grid was going. And I, wasn't really sure what he was gonna say in that answer. Thought he might talk about, it could have been any number of different things, but actually the first thing he said was, and I'm quoting, “I see a future where there are distributed generation resources scattered throughout every community we live in. Those resources could be electric vehicles. They could be HVAC systems in your house that are connected to a smart internet connected grid thermostat.” He went on, he kind of gave this list of different things and said, I think this is gonna be one of the defining features of the grid in 10 years is all these distributed resources.So again, it's been a theme running throughout these podcasts and a lot of my writing on the Texas Energy and Power Newsletter and a lot of the discussions that are just happening at ERCOT, at the PUC, at the legislature and around the country and around the world is how do we orchestrate all of that stuff, right? We're going from a world where you had, you know, a few hundred really large power plants sending power one way. Now you're going to this world where you have thousands, even millions of tiny little points.And if I understand, and I'm not sure I do, so correct me if I've got this wrong, but I understand what Recurve is doing, you guys have built this kind of platform where all of these different resources can be on that platform and whether it's a utility or grid operator, essentially whoever's playing the function of the distribution system operator doesn't have to be somebody actually named capital D capital S capital O, but whoever is playing that function can then see at each of these nodes or whatever, what is happening and actually orchestrate all that tiny stuff up into something that is at a system level going to work to increase reliability, keep costs low, and deliver other values as well. So did I describe that right? Correct me where I got it wrong. If it is right, I'd love for you to talk a little bit more about that and some of the values that you can actually realize, because it's not just there's an emergency push a button. It is that, but there's a lot of other value streams in this, right?Carmen BestRight. I think a couple things that I encounter when I'm talking to potential customers or current customers. What you described of kind of that distributed world of devices is definitely one aspect of the future energy grid that we're looking at. And I think for folks to be able to understand how all those different devices are operating there's going to be different degrees of control that's going to be of interest to customers. Right? Some folks will want to allow their smart thermostat to be controlled, other folks might not. And what we're really offering to the market is being able to see where different types of interventions could have the biggest bang for the buck for that distribution system value. So you can use current patterns in energy consumption to understand where you might want to do a smart thermostat installations or heat pump installations, etc. And on the flip side, when those interventions have happened, be them an orchestration of a DER, maybe through a DERMS [Distributed Energy Resource Management System] platform, which we are not, we run alongside a DERMS and give that extra layer of insight of how did this actually deliver? How did it perform? And how did it perform not just for those devices, but in relation to the rest of the grid? We can do comparison analyses that are really insightful to be able to have that kind of bigger picture of how things are delivered. And then what that really enables is different types of aggregations that can be really valuable to the grid. So I think a lot of times when people are thinking about virtual power plants, or they're thinking about dispatchable devices, et cetera. They get really granular and they think about all the little widgets and how we're going to have levers, who can I envision, little levers all over the place that we're going to be able to control these things. But there's a lot of potential out there for just base load virtual power plants, right? Energy efficiency. And what we haven't really had is an ability to tap into that in a meaningful way that's really tied to the complementary grid value that you could get from installing technologies that are going to deliver a quote unquote shape that's going to be really grid beneficial for the wholesale grid, but then also for distribution systems. And also be able to be targeted to places where there may have been historical inequities, et cetera. So you can combine these different win-win propositions to values as they were to be able to deliver aggregations of systems and really optimize this ever increasingly distributed energy model that we have. So it can be bringing benefits to lots of different folks in the system, customers who are engaging with those devices, but then also all the rest of the people who are just trying to live their lives and have affordable energy in the world.Doug LewinYeah. And I love that you brought that back to energy efficiency, because it's funny. I like anybody who's listening to this podcast probably knows I talk about energy efficiency all the time. Some people get tired of me talking about energy efficiency, but I'm going to keep talking about it because it's incredibly important. But even like the way I asked the question, I was kind of leaving out energy efficiency, right? I'm asking about like, there's all these little resources that are able to respond at the push of a button. It's very easy for our minds to go there because that dispatch ability is important, but it's also important alongside, as you put it, these kinds of more long-term load shaping, right? That with energy efficiency, talk a little bit about, and you must see this all the time in the data, it's sort of how energy efficiency and demand response are actually not only complimentary, but almost kind of, maybe I'm overstating it, but kind of almost need each other.Carmen BestYeah, I think it's been one of the interesting evolutions of my career too, because I've spent most of my time in energy efficiency, not so much in demand response. Over my career, there are different people who have been working in demand response and energy efficiency, et cetera. One of the analogies that really has stuck with me is that demand response is really about building the fire station, as it were, making sure you're ready so you can drop load and be reactive very quickly. It can be a high cost for a really short event or for a really short intervention. Energy efficiency can be thought of as kind of pruning trees or making sure that you're mitigating the risk of needing to drop load at an immediate time. And how I see those really coming together in this modern context is that there are more and more devices that are controllable. So as we're investing in energy efficiency, like a heat pump, you're also getting the control value of being able to control that device in a DERM system to drop load, move load, whatever, in addition to the long-term kind of base load value of reducing a higher efficiency unit, right? Compliment that with insulation, for example, and having a shell that's also going to allow that heat pump to operate more efficiently and do pre-cooling and all that other stuff. Those two things can be coming together as well. Now where it gets interesting is how do we have programs and policy structures where we can be paying for both of those at the same time? Because right now I've heard folks say, well, I don't want us to do energy efficiency because then that's going to mean that I don't have as much load to drop when I need to. Well, sure, but you're also going to have less flexibility within the system to be able to manage the loads. And wouldn't it be nice if you don't have to drop loads in an emergency, but rather you're managing loads on a more regular basis. And I think for both historic demand response and historic energy efficiency to have a path for the future, which is really demand flexibility, they need to be able to come together and the value streams of that long-term avoided cost value from efficiency should be paid for and the short-term load reductions should also be paid for. Demand donation is kind of, I don't know if you came up with that term, Doug, but it's one that floats around our place a lot. If we're asking people to reduce load, they should be compensated for it. And when you can aggregate that all together with the different solutions that are out there, those two things can come together quite nicely and be able to create a system where you can really be bringing customers along on their own energy journey to optimize their own, improve their own resilience to be able to respond in emergency events, you know, extreme weather on either end of the spectrum of too hot, too cold, and also be able to address affordability at the same time.Doug Lewin Yeah, let's, so first of all, I didn't come up with demand donation. I like that. I often say uncompensated demand response, and I will give credit where it's due. I first heard Michael Murray of Mission:data. So folks should look up, we can put the link to that great organization in our, uh, in the show notes, but uncompensated demand response is usually the, the term I use, but I like demand donation as well.Let's stay though, for a little bit longer on energy efficiency. So in Texas, just a couple of days ago, we're recording at the end of April, just a couple of days ago, the PUC staff has created a new docket and put some questions out there. Looks like they are beginning to make some moves to implement Senate Bill 1699 by Senator Johnson, who was on this podcast a few weeks ago. Energy efficiency, I think it would be hard for anybody to argue the counter at this point. There's a lot more potential for energy efficiency in Texas right now. But we're kind of struggling to get over the hump of really sort of putting something bigger into place. And I think there's a few reasons for that, but I think one of those kind of comes back to, there's this kind of skepticism of what the savings are and are they really being realized? And I know we've already covered this a little bit, but I just wanna make sure we do cover it quite thoroughly because…Carmen BestIt’s my favorite subject.Doug LewinRight, because it's your favorite subject. This is one of the reasons why I asked you to be on this podcast. Cause this is really what I want to talk about is how do we really know the savings are materializing? And, and you know, the, the system that we use right now obviously has a lot of deemed savings that you basically, right, there's a calculation. If I do this, I replace this thing with this thing. I get X amount of savings. But what you all are doing is actually again, measuring that at the meter. But that means you're also just not getting this kind of like peanut butter, here's what it's saving over the course of a year. But here's what it's saving at, oh, let me just randomly pick a time, 7:30 or 8:00 on a summer evening or 8am on a winter morning, right? You can really see where the problems on your grid, where the savings are materializing or where they're not, where you might be spending dollars on energy efficiency and looks like this thing we said we were doing rather than having years and years of studies and reviews and all this, you have the meter data instantaneously. I'm going to let you respond. I'm so sorry. I asked really, really long questions, But there's one other aspect of this too, right, which is location, right? You can see where those are happening. So it's not just this kind of peanut butter throughout the entire Houston area, the entire DFW. No, there's a transmission constraint somewhere and we need, you know, not only demand response, but there's all this discussion right now of a transmission constraint that caused problems on September 6th last year, and they want to go after demand response. They could conceivably go after energy efficiency too, as long as, but the grid operator has to know that those savings are really there, right? Carmen BestRight. Yeah, I think, you know, the reason I say it's kind of my favorite subject is because I'm, as a former PUC staffer myself, I'm all about the accountability. This has been the trajectory of my career the whole time of like, how do we know this stuff actually showed up? And it's not always so popular to be the evaluator on the back end, but I think it's becoming increasingly important. And it's become a lot easier to be able to do that in effect because of our computing power and kind of enabling software and smart meter infrastructure, etc. that's available to us today. So there's really no reason not to use it in my humble opinion. I think we're even seeing states kind of move into a paradigm where they're like, measurement is our default. We're going to start with that and we'll make exceptions where we can't measure it. In those cases we'll use deemed savings estimates, which is just fixed estimates for a single technology. And I'm really encouraged by that, because I think it does just what you're saying. It allows you to align that measured savings impact with your end in mind. So if you know that you are going to have hotspots on the grid that correspond with solar turning off, four to nine, for example, that's kind of where things happen a lot, then you can make sure that the efficiency interventions that are being installed are going to be kind of aligning with that value and you couple that with controls that are also going to deliver a value at that time. What we've seen is when you set that up of here's what we need, when we need it, and where we need it and put an appropriate value next to it, aggregators and folks out in the market can definitely respond to that. That is no new news to Texas, I'm sure, because you've had markets out there for a long time, but I think that are constructed with that intention in mind of being able to drive down price, etc. But I think that being able to have that avoided cost curve that is aligned with grid value is a really important piece of the puzzle to have out there.The Texas PUC recently adopted kind of a new avoided cost, but I think it's not quite yet aligned with more of the distribution system value that might be out there to get a little more targeted for locational value that could be captured. The emissions value would be another thing that could be captured in there as well. And then we've also experimented and had some success with using adders for equity. So making sure that populations that have historically been kind of left out of the equation can be part of the solution going forward. And I kind of went off track there for a second. Let me come back to why measurement as a default is really important. It's important for us to know, like for the Public Utilities Commission to know and for ERCOT to have visibility, et cetera. But it's also what can drive business and appropriate incentives and compensation for the folks that are doing the work. When you have just an average for every technology that's installed, it really doesn't differentiate between a quality project and a non-quality project. You're kind of just counting widgets installed. And at the end of the day, you have this broad assumption of what they might have delivered, but you don't have that tied back to what they actually delivered.Sometimes when I first say this, folks say, well, how are they going to know or isn't that too risky, et cetera? And I think what we've found is as we've run what we call FLEXmarkets and put that price out there and ask people to respond, it maybe takes one cycle, maybe two for them to figure out kind of what the right projects are going to be to be able to deliver on that and start making a return on that. And it's so much nicer because they have so much more flexibility of how they can meet their customer and deliver products and services to the customer that are going to resonate. They don't have to deal with all the fixed incentives and that almost becomes like baggage versus being able to deliver a value stream that really fits into their business models and how they're delivering services to customers already.Doug LewinAnd when you're saying ‘their’, you're talking about the folks you're referring to would be like it could be HVAC companies, it could be energy efficiency implementation companies, it could be retail electric providers, who else? Carmen BestYeah. Well, those are the main ones. I mean, we kind of have this block of folks that we call aggregators, and they're really all the entities that have creative business ideas to go out and get these impacts, right? I hesitate to say savings because sometimes it's going up, sometimes it's going down, and really what we want is the value…Doug Lewin And sometimes we want it going up too, right?Carmen BestExactly.Doug LewinI mean, we're starting to have a system where we want to get more resources to come on the grid, but if those resources really don't have any value for many, many hours during the day, we actually may want to start driving energy use and demand up at certain points. And that's also energy efficiency.Carmen BestYep, exactly. And that's where some states are starting to consider moving away from savings targets and move into system benefit targets. Even in Texas, the performance incentives are really anchored with the system benefits that are delivered. No extra commentary on if it's the right amount at this point, but the concept of being able to set a goal based on system benefits that's inclusive of all the different types of benefits, not just the savings, I think is one that needs to kind of continue in the conversation because it actually normalizes across a lot of other things that could be out there and allows you to translate that back into a market price to go out and set up systems, simplified systems to go get energy efficiency and demand response potentially that doesn't have a lot of the centralized planning baggage that we've historically had with program design.Doug LewinSo yeah, not only is it not centrally planned, it's really, yeah, it can be almost exactly the opposite. It becomes a very open competitive free market with the thing that the regulator or policymaker or whoever's making that decision does need to decide is what are we after, right? Like what is the outcome we're trying to reach here? Is it reductions at a particular time of day? Is it trying to bend the cost curve for the cost of the distribution system, which has been rising very, very rapidly over the last few years and putting a lot of upward pressure on prices actually? I get asked this question all the time, right? Like why if renewables are so cheap aren't energy bills going down? And one reason is that while the cost of generation, at least this is true in Texas, the cost of generation has gone down, the cost of distribution has gone up a lot and has eliminated a lot of those savings so they don't show up. There's other reasons. It's not just that simple, but that is one of the reasons. So as long as a, whoever the policymaker is, in this case, it'd probably be the Public Utility Commission would say, here's the goal and the outcome we're after. And now we have, you would have a system where you're measuring the outcomes and then saying to the market, I don't really care if you do windows, thermostat, HVAC, solar, storage, EV charging. I want the outcome. You guys figure out how to get there and then these companies are competing in that market. Is that right?Carmen BestYep, exactly. So it creates more customer choice, which is a good thing for everyone. It should be able to drive the cost down. I think it's also appropriate for the state agency, at least in the early days, to lay out kind of a willingness-to-pay price of” this is how much we're valuing this avoided cost value”. And then the TDUs or Transmission Distribution Utilities could be including, along with that, the distribution system value that might complement the overall. Then you can stack as many other values on top of that as you might want to. But yeah, at the end of the day, you have this open platform that can also continue to evolve. So as you solve different parts of the grid challenges that exist today, you can shift that price to other parts or other components. It can continue to be factored into services and offerings and new technologies that we haven't even thought of yet that might be available to customers to manage their energy consumption or optimize their bills, meaning bring them down as low. In most cases, maybe there's folks who want to optimize their bills the other way. But all of those things combined can be much more streamlined way to get at that otherwise stranded resource that's out there. Folks don't do efficiency just on their own a lot of times because there are other barriers to adoption and timelines and things like that. It's totally appropriate to kind of build that into the grid value that is going to be coming from those interventions. And it should be something that utilities can really buy from the open market without having to have, you know, high cost programs or rate payer funded programs that don't really have that accountability. Let me touch on that point for a second too, because I think another component of accountability that I think really resonates with this sort of model. You can call it FlexMarket Model or the Market Access Model that we've been working on. Since it's a pay for performance model, that if the savings or the impacts are delivered based on what everyone's agreed to as the value and they match that measurement regime, i.e. they show up, then ratepayers are only on the hook for what's actually delivered as opposed to having to make a good faith investment in a program or a big construct of, we don't know necessarily if the program is going to deliver or not. But when you're deploying it like this with this open market model, it's scalable. If the price is wrong and folks don't show up, well, you won't get anything. If the price is not aligned with what the market is willing to deliver, then ratepayers are actually protected from not getting what they paid for, right? I don't know if that came out quite right…Doug LewinYeah, no, that makes sense. That makes perfect sense. I mean, you're, again, because it's actually measured and you actually know what happened, you're, I mean, it's pay for performance. It's paying for what actually happens. Carmen BestYou're paying for accountability. I think I wanted to add a couple of anecdotes too because it's been interesting for me. One of the great things that I like about working at Recurve is I get to kind of explore the whole country. Texas has been one place that I've been learning a lot about in the last year and a half. There's two other states that are kind of interesting that recently took this measured by default approach. It was really on the basis of this ratepayer accountability construct that they kind of, was in essence the tipping point. So Kansas in adopting their energy efficiency paradigm said, we want to make sure that it's measured on the basis of accountability. And Louisiana was the other state that did that recently. So they adopted a new statewide energy efficiency program paradigm. And they too said, we're going to measure it first. And that's one way that we can build that confidence that it was actually delivered.Doug LewinVery interesting. But they're doing that within the context of what you would still call a utility program, right? Or no? Carmen Best Exactly. Yeah.Yeah. Okay. So there is this kind of like a little bit of a threshold question. I think it's a really interesting one for Texas as to whether or not, and I think this is very much an open question in Texas right now. Maybe it's not an open question. It's certainly out there. Are the utilities the right place to have the energy efficiency programs, is there sort of a need to go maybe from quote unquote programs to more of a market based structure? And that's a little bit, little bit scary because nobody's really sure exactly what that means. Does it live at ERCOT? Like where does that market even live? So there's, there's a little bit of like a crawl, walk, run there, right? Of like, the first step is to within the utility programs, move to more of this pay-for-performance see how it works. I think a lot of people want to kind of jump to the absolute, but if you kind of take that crawl, walk, run, even if you don't move past the crawl, you've made some good progress because now you've made sure that there's accountability and more accountability. Not that there's not any, there's definitely, don't want to sound like, the programs right now are great for what they do. The EM and V that's there shows like $4 a benefit for every dollar spent. So this let’s be very, very clear there that the programs as they are today are good, but as with anything, there's always room for improvement. So if you look at this as kind of an evolutionary step of now we'll measure it, make sure that the things that are showing the biggest, again, I almost said savings, but the biggest impact that we're looking for are the things we continue to do. And as you're doing that, then that gives policymakers in Texas, that at least historically, maybe a little less so today, but hopefully still favor competitive markets, the opportunity to gain some lessons learned and look at how this might actually evolve from a program to a market.Carmen BestYeah. And I think there's two really interesting opportunities that are out there that kind of demonstrate that experimental stage as it were. One is, you know, Texas is obviously on the cusp of some reliability challenges. And to me it occurred... Doug LewinCusp? I think we're there. I think we’re past the cusp.Carmen BestOkay, we're there. The fact that Texas is facing some reliability challenges, I think there's an opportunity to take a no-regret step to carve out a space that could test this open market model and really position it to be incremental to the existing portfolio. This has been done in other states and all the tools and capabilities are readily available for the utilities or in partnership with REPs even to be able to go out and do this, set up an open market model, you can mirror it after the FLEXmarket model or the market access program design. Set that up and then give a little bit of space from the existing regulatory models of the performance incentives and kind of all the energy efficiency legislative mandate stuff and say, we're going to run this alongside in the interest of reliability. No regrets. Ratepayers are only going to pay for what’s delivered. Try it out and see how it goes. And then based on the data and the information that comes back, see if we want to scale it up, scale it down, get rid of it, whatever you need to do. I think that really aligns with the objectives of SB 1699. It could also align with the opportunities for federal funding that are present in the Inflation Reduction Act and the HOMES program, which allows for a measured pathway. So that would be the kind of space where you could have a residential pathway that is using this measured pay for performance sort of model, which could be synergistic with whatever the state energy office ends up doing with those funds, but it'd be effectively compliant with that IRA funding mechanism. And I think by having kind of a sandbox or a space in which you could be testing that out, you’d be able to, like you're saying, do the crawl, walk, run and kind of get a sense of, okay, what's the right value for this? That would definitely be something that would need to be figured out. And then, who's showing up to deliver it? How did they do? And do we want to do it again? And I think that could happen in the EEIP, in the efficiency proceeding. It might also be possible in the ADER task force where they're calling for more blocky resources. You know, first round of ADER injection resources, etc. I was fortunate to be on the task force and kind of contribute to that, but mostly witness kind of how it played out. And I think the next iteration I'm really hopeful that we can get to some of these longer term resources too that might not have that granularity in the data specifications that have to be SCED following, etc. But they're offering other resources like that long-term load shaping that can also be really valuable to the grid. So there's lots of places where it could be tested, and it's really a matter of which ones are going to resonate at this moment within Texas.Doug LewinYeah, let's, I want to come back to the ADER task force in just a minute. I do, I do want to talk about that, but before we go there, I just want to go a little further with what you're talking about there. So what you're suggesting is the, if I'm hearing this right, is you basically… So the PUC has this requirement right now it's in Senate Bill 1699 that says you got to reduce average residential load.  They have just put out some questions, hired a Director of Energy Efficiency. The energy efficiency programs, the way the timeline usually works is the utilities put in their plans on April 1 for the next year. So they've already put in those plans. Two PUC meetings have come and gone. The PUC hasn't, none of the commissioners, at least publicly in the meetings, have said anything to the utilities about their plans. Those are probably gonna be the plans in 2025. What they could do though, and there's two things that are really kind of top of mind for me here as far as something like you're suggesting, there's like an add-on. Like you do this market on top of your existing utility efficiency programs. There is this, um, looks like there's going to be an RFP for demand response. Again, what they're, what they're trying to do here is you have a, you have a major line from south to north. They are worried that line is going to be overloaded so they're curtailing generation on the south part. They need to reduce demand on the north part to keep everything balanced. So basically anywhere north of like somewhere south of San Antonio. So you're talking about San Antonio, Austin, pretty big areas. The value of that DR goes down when you get up towards Dallas, Fort Worth, but pretty valuable there in central Texas. They could put something like this in place for those areas and not limit it to demand response because to the point with this kind of measurement, you can actually see at the time the constraint is binding or whatever. When that is happening, they could measure, wow, that energy efficiency intervention we did delivered more than the demand response or delivered less. I don't know how that's gonna come out. We can all guess, we can all sit around and guess, but the point is to actually have the data and we can have that, right? So that was one example. I'm gonna give one more and then I'll stop talking. The other example would be, we're recording in the end of April, but like winter's not that far off. And if you wanna actually get after resistance heat, that could be, they could say, okay, rather than utilities change all your programs and focus on resistance heat, we're gonna do X number of dollars, take a $30 million day that we're gonna do this and like really go after resistance heat and we're gonna measure it so that we can see that all these people out there, the SPEER, the South-Central Partnership for Energy Efficiency Resource, American Council for Energy Efficient Economy, people like me that are always shouting about resistance heat, like let's get the data and see if these people are right. Maybe they are, maybe they aren't. There's one way to find out is to actually get a market going and measure and see. So those are two examples. Would those make sense to you? Can you think of others? Carmen BestYeah. Those to me, the first one in particular sounds a lot like a non-wires alternative sort of solution where you're saying, here's where the constraints are, go get it. It also occurs to me that the timelines for being able to deploy that are a lot shorter than being able to build other resources to fill that gap, right? So that was one of the reasons why the FLEXmarket was launched really quickly in response to summer reliability issues and within about six months, it was starting to deliver impacts. Now, did it meet all those obligations? No, but it was really a no regrets sort of investment to reduce load at certain times of the day. I guess I'd boil it down to, and then the second one on heat pumps and resistance heating. That's really looking at like there's clearly an opportunity here for reducing constraints. Those could be geolocated as well. In addition to the general no regrets technology targeted solutions as well, you could also target it to build impacts, I would say too, because there's probably a lot of folks who have resistance heating that are suffering from really high bills that don't need to. So that'd be another dimension that you could do that targeting. I think the main thing right now of looking at a potential pilot or an opportunity for standing up that type of FLEXmarket or open market model could be deployable in all of those different situations in my view. And it kind of boils down to three key things. One is setting measurement as a default. So if we're going to run these things, we're going to measure them. We've got the data to do it. Let's do it. The second one is let's make sure that we're not leaving resources out, demand flexibility resources. So if we're going to run demand response ops, let's put energy efficiency in there too, at least don't exclude it. Then the third thing being, let's use an open market model so that we can bring as many brains as possible to the creative technologies and solutions that could solve that problem, then just limiting it to one technology potentially. I think another one of the solutions that's out there right now is the smart thermostat pilots that were just proposed. I think they're a great solution for getting to summer reliability this year. I think that you could do more by saying, let's measure these impacts. And then let's also make sure that they're tied to a longer term solution. There's urgency now to get this done, but I also think that it could be tied to a continued partnership between TDUs and REPs, which is kind of illustrated in the proposals that are in front of the commission right now to really be going after these resources together and making sure that they're addressing reliability for the state and reliability, affordability, and sustainability too, because it also delivers a lot of emissions reductions.Doug LewinYeah, absolutely. And so, yeah, you're referring to the filing by the transmission distribution utilities. We'll put a link in the show notes so people can see that. Give a lot of credit there that they are, I'm critical a lot of times. I like to give credit when good things are happening too. They have proposed a smart thermostat pilot program. I believe Oncor is one of the four Investor-Owned Utilities within ERCOT that wants to implement that this summer, CenterPoint 2025, AEP-TNMP 2026. And the Retail Electric Providers put in comments in support of that too. Doesn't happen a whole lot where you see sort of TDUs and REPs, the Retail Electric Providers and the Transmission Distribution Utilities in Texas agreeing on something like that. So that is really exciting to see. And I think that's a great point that one could be a really big deal for this summer and could scale a lot faster if we really had the ability to measure where the results are happening. That makes a lot of sense. I do want to talk about the ADER Task Force a little bit. You mentioned you are on the Task Force. You have seen how that has evolved. In the beginning, it is really pretty focused on, I think as you referred to it earlier, an injection. That really is like storage injecting power into the grid. My understanding of this is that it is being set up such that aggregated load resources, aggregations of for instance, smart thermostats or sensors on electric hot water heaters or any number of other things could also participate there. And that is a value stream we really haven't talked about yet. We've talked about a bunch of different ones, but we really haven't talked about ancillary services, which have gotten a lot of attention over the last year for being very expensive. There's arguments about how expensive they actually are, but there's no doubt it's in the billions of dollars. And this is a potential to have more competition in those markets too, and for customers to actually earn some back. Are you bullish on the potential for demand response to actually participate in ancillary services or, because our listeners are probably going, well, of course she is, that's obvious. But I think the question though is, is that really the best place for demand to realize value? Or is that, because I think there's at least a potential, I'm not sure about this, I don't think this way, I'm just sort of putting it out, there's a possibility, is like, maybe there's other places where there's a lot more value that could be tapped into and sort of chasing after ancillary service markets, maybe that's better left to others and demand should really play somewhere else. I'm curious how you see that. Does aggregated demand response have a big role to play in ancillary service markets? And tell us anything else you wanna say about ADER Task Force and the pilot and where you think it might be headed.Carmen BestYeah, I mean, first of all, I'll just say like I'm a huge fan of task forces. I think just the timeline and the impact of that group in such a short timeframe, I've been involved in many working groups over my career, but this task force was like in terms of delivering on a promise quickly was really impressive. So I'll start with that. That's not self-congratulatory. It was more like to say that the team was really focused and got the job done. And having Commissioner McAdams and Commissioner Glotfelty at the helm really made a big difference on that front too. Now, where it goes, I don't know either Doug if that's going to be the best place for demand response to play. But I am generally a fan of open definitions on a lot of stuff, like trying to be able to consider all the different resources that can come to bear for different services that we might need and then be able to value them properly. So ancillary services, it's not something I've spent a lot of time in my career looking at. I think there is probably some value there, but I also think that isolated by itself, we probably won't tap into the full value that could be out there. So having kind of scaled options for being able to get, you could do an ABC of, okay, in some situations we're just going to have energy value, long-term value, and then in certain instances you'll also be able to be paid for the ancillary value. So in effect, if you can deliver more services, you'd be paid for, excuse me, paid a premium for delivering on that maximum value. Same with SCED following. If you can follow that …Doug LewinAnd go ahead and explain, because we do have some folks that are not as in the industry. So do explain SCED following if you would. Carmen BestOh gosh, now I'm going to have to explain that…Doug LewinWell, it basically is following a market price. It's following, right?Carmen BestYeah. In my simplified version of it, you have to follow basically the market price on a minute-to-minute, almost minute-to-minute basis, which is a pretty complex technical task that was achieved, might I add, and impressively so. Kudos for that.  But, that is not the threshold that every demand response or energy efficiency service needs to be held to because there's a lot of value to be had and to be seen on an hourly basis, for example. So all of that to say that if it can be delivered that way, I think it's appropriate to pay a premium. And then for the other resources you may pay less per unit, but the volume and the scale is where you're going to be able to do more comprehensive projects that are really going to extend the value of this distributed system being more effective all the way out to the endpoints, endpoints being homes, businesses, et cetera, and not just the injection of specific technologies, injection resources from specific technologies, et cetera. So that's kind of where I land on that one.Doug LewinYeah, so, if I were to summarize that, and I think this is where I fall on this too, is sure, like DERs, whether it's demand response or what have you, should be able to participate in the ancillary service markets, whether or not the aggregators that are serving customers are able to make that work or not, that's a market function. In other words, you need to enable it, make it possible. And then you see if the value stream is big enough to justify it or if, you know, maybe large battery operators are just able to do it more efficiently, from an economic perspective more efficiently, then they win that competition. And that's fine. And you look for places that demand response and energy efficiency can realize other values. But you don't foreclose that. You don't just take it off the table. You see what happens at the competition.Carmen BestWell, and I think that also brings up in my mind, Doug, some of the debates around like double counting or where you can participate in multiple markets. I think in most situations, we want to be able to enable folks to capture value streams from multiple services and solutions, within reason, obviously. We don't want people getting paid twice for the same thing. But in most cases, they're delivering different things and it's possible to segment the value streams for each of those things and therefore we can pay for them separately such that we can get more resources and more flexibility onto the system, which will reduce costs for everyone in the long term.Doug LewinMakes good sense. Speaking of reducing costs, you said something earlier that caught me and I wanted to follow up on. You were talking about the DR RFP that looks like it's gonna be coming out from a PUC or ERCOT, I guess it'd be from ERCOT sometime in the next month or two and about heat pumps. And you mentioned you could also have a focus on customers that are having trouble paying their bills. So we know in Texas, I believe it was a TEPRI study, the Texas Energy Poverty Research Institute, that 40% of Texans they surveyed were struggling to pay their power bills. That was down a little bit from 45% the US census had in 2022, but that's two different data points that tell us just shy of one out of every two Texas families are struggling to pay their energy bills.So with this kind of a model, you can also then, as you were pointing out, and I'd love for you to talk about this more, I don't know if it's happened other places, but in the state of Texas, and Texas is in a minority of states on this, the state of Texas does not even track utility shutoffs, or maybe it's tracked, but it's not reported. There's no place you can go on the PUC website or anywhere else and see that last month, X number of customers were shut off. But obviously the utilities know where those customers are because they're doing the remote disconnect. And I don't know exactly what the, in great, great detail, what the process is before you shut somebody off, but it seems like somewhere in that process, there should be a step where somebody looks at, oh, this person, I can see on a tax record, this person lives in a 1200 square foot house and their energy bill was $450 last month. Something's wrong, we probably should target some energy efficiency savings here, so they can actually afford their bill and not be shut off. What is the potential? I mean, there's potential for that in sort of usual, and maybe the answer is just, yeah, if you have a FLEXmarket and you have this sort of measured rather than deemed, sure it's possible, but it's no different than the other programs. Is there some additional sort of benefit of evolving utility programs to actually get the measured performance that extends to low-income customers at risk or who are actually about to be shut off?Carmen BestYeah, we don't have a lot of the intel on the about to be shut-off question because we just haven't deployed our platform in that respect. But effectively what we're doing is we're looking at those consumption patterns and then can match that to rates that align with low-income customer streams. If those exist, in Texas, you could be layering those two pieces of information together and then be targeting interventions for those populations or those individuals. The other component is obviously geographic targeting because since, for better or worse, poverty is usually concentrated geographically, that's also a pretty straightforward way that you could be looking at different pockets of the population and then be going out to offer services and solutions for them.Now, I don't have a long experience of low-income programs either, and I know they introduce a lot of unique challenges of delivering services from building infrastructure. It's hard to retrofit a home that's on the brink of falling over, for example. So I know other states though have used their public funds to be able to address kind of those basic issues and not have to jump over serving those customers, but be able to do the basic upgrades to their homes such that they can do the retrofits and really tighten up their homes, etc. So having those structures that are supporting customers to get to a place where they can reduce their energy waste is one of the solutions that I've heard. And I think it's in Missouri has a good example of that where they use those funds to do that.I think for the grid value though, those homes are wasting a lot of energy for the grid and for the individuals that are living in them. So there's no reason to segment who's benefiting from those or not benefiting from those homes being upgraded. All customers in Texas will benefit from those homes being better insulated, a more solid shell, et cetera, and reducing the cost for those individual customers will also reduce the cost for the whole system because there will be less energy that's wasted likely in the system. So I guess back to my point of like there's multiple value streams that should be recognized and captured. And there's been, just to give one example of where we've set up a FLEXmarket wherein we have the avoided cost value. That's kind of the base price for delivering the energy services, so you may do a retrofit. And then we have adders that are built into that market. If you're delivering to a customer that has a low income, you'll get a 2X incentive. If you're doing the work with a local contractor that actually serves that community, so there's local economic development benefits, you'll get another adder. So since you just have this market price, you can kind of stack these other components on top of it to draw people into places where you want them to be delivering services and getting value both for the customers and for the grid. And it doesn't have to be like a whole separate program, etc. You can really just be calibrating it to address the different needs that are out there in the market.Doug LewinGot it, that makes a lot of sense, that's great. I want to just ask you, you know, sometimes I started this podcast with the intention of asking every guest like the same three questions and it just hasn't really panned out that way because the conversations end up being really interesting to me and I run out of time. But I do want to ask you, because we talked about it a little bit beforehand, the two to three energy policies you think would have the biggest impact to increase reliability, lower systems costs, reduce pollution. I thought your answer is really good. I think it'll probably also work as a pretty good summary of this conversation. So what are the two to three policies you think would have the biggest impact?Carmen BestSo it kind of comes back to the core things that Recurve has been doing over the last years and that really is measure everything because we can. And it's not measurement just for the academic exercise, but really because it drives the ability to target and get to where the resources are going to have the biggest impact. Make sure that they delivered on those resources, and then also have fair compensation for quality projects. And that means fair compensation both for the folks doing the work, but also fair compensation for the customers that might be participating in demand response, etc. So that's kind of my number one, and that's been a thread throughout my career that I'm sticking with. And that's another thing that Recurve is really operationalizing in a way that's streamlined and accessible. It's not really that we invented measurement, not by a long shot, but it's where we're putting it into the process to make it accessible and actionable is really where we're trying to innovate on that front. So measure everything and make it accessible so people can act on it. The second one is really being like we talked about, making sure that demand flexibility is all-inclusive of energy efficiency and demand response when and where we can. So you have, don't leave one out of the other and definitely don't leave them competing with one another. Come up with systems wherein they can be operationalized together and the value streams that are delivered both from that long-term intervention and the short-term can be calibrated and managed with a common measurement framework. That's what we're doing in the Recurve platform. We can measure both of them using the same basic models. It's just different time horizons, which allows you to do both and not, quote unquote, eat each other's lunch, right? Doug LewinYeah, and before you go to the last one, I'm gonna mention this RFP that ERCOT’s gonna put out again, because I think it just shows where there is, in the grid operator mentality, and I can understand this, it's like I have to be able to push a button to get it, but you really have to take a step back and say, is that actually true? If I have reduced the demand, right? And the key is you have to know that it's there. And I think that's where, this is why I wanted to have this conversation. I hope this is becoming clear to the audience or was clear long ago, if not as clearing up now, because this is really what Recurve potentially brings is the ability to then measure that energy efficiency. So as a grid operator, a regulator, do I really care if it's demand response or energy efficiency? What I need is the demand reduction. And I totally get not being able to run a grid on a deemed savings, but on a measured savings, that's different, right? Carmen BestYeah. And it's really giving visibility to that end in mind. Like, what do we want? We want grid impacts. When do we want it? Now? That sort of theme, right? Yeah. And then I would say the last thing is really allowing for open market models to kind of thrive and answer these questions. I think you'd brought it up on a podcast a couple of weeks ago. When we have open markets, it allows us to bring all the brains together to be able to solve these problems. And I think as the grid is evolving and as technologies and customer journeys and energy are evolving from electric vehicles to all kinds of different technological solutions, our ability to adapt to that is going to be very limited if we're trying to pick each technology and design a program around it. If we have an open structure that's focused on the end in mind, we're going to be able to have a lot more fluidity in evolving the solutions in addition to having more accountability for driving towards those end goals. So that's really what the market access model and the FLEXmarket design was really all about. And having the tools, and solutions, and software to enable that transactive visibility and that end in mind is really what Recurve is all about.Doug LewinYeah. And it actually makes your head hurt if you do this sort of, you know, empathetic, you know, work of putting yourself in the position of a regulator who is like among everything else they've got going on. And they've got, you know, I think they said today at the PUC open meeting, they've got like 25 rule makings out of the last session alone, 25 out of the one before that. And now you need to like design, you need to actually work with utilities and stakeholders to design a program for EV charging for electric hot water heater sensors for HVAC cycling for, I could go on and on and on and on. You don't need to do all that. You need to set up one market where you measure the results and pay based on the results. And now, not only do you not have to design each of those individual ones, you've created a structure where when the next thing comes along, you don't have to design it. It can just come right into the market.Carmen BestRight. Yep. And you imagine all the vendors that are out there as well, like knocking down utility doors too trying to sell them the next greatest thing too. It's another way that you can kind of synergize across all those solutions and use it as a test bed as well. Like what does it deliver in this context? And then make decisions and resource allocations based on that as well. But also give more choice to folks so they can take their own journey into this next, this huge energy transition that we're all experiencing.Doug Lewin And they can really accrue to the benefit of customers. It gives customers a chance to be part of that energy transition, put some dollars back in their pockets. This doesn't have to all be a one way street from the customers to the energy companies for more and more, turn that flow around and let customers get some back too. Carmen BestYep. Doug LewinCarmen, is there anything that I should have asked you that I didn't?Carmen BestOh boy. I don't think so. I think this was a great conversation. It's really been exciting for me personally to get to know Texas and learn more about how things work. I have to confess, I was a little intimidated in the early years, but what I've found is people are really solutions oriented and really excited about trying to find solutions. And that's really inspiring and invigorating. So I've just been really honored to be part of the conversation at all and hopefully have contributed to the next solutions that might be viable for addressing reliability, affordability, and sustainability.Doug LewinYeah, you already have and I'm looking forward to see what's next. And I think you're right, like the ADER Task Force is a great example of where Texas can move really fast. And maybe what we need is, now like a demand flexibility spinoff of the ADER Task Force or something. Carmen BestAll right. Now you’re talking.Doug LewinStay tuned. All right, cool. Carmen, thanks so much for being with us.Carmen BestThanks, Doug. 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

For this episode, I had the pleasure of interviewing Zach Dell, who recently launched Base Power Company, the first and only retail electric provider in Texas to offer customers a home battery, monthly energy service, and installation all in one package. This episode demonstrates one of the things I most love about Texas’ competitive energy market. It has its flaws for sure, but we are seeing a lot of innovative offerings. And in that category, Base Power stands out. The goal of Base Power is to essentially operate as a Virtual Power Plant (VPP). When the grid is up and running, the batteries installed in participating homes will improve grid stability and lower costs. And when the grid goes down, these batteries will provide customers with backup power, avoiding outages or, in the case of a major outage like Winter Storm Uri, shortening their magnitude and duration. Just yesterday, ERCOT proposed generation hubs in far flung parts of the state. We should have storage hubs throughout population centers of the state. And the private market, with the right policy and regulatory framework, can drive the investment instead of government. People often forget that with the prominent exception of Winter Storm Uri, the vast majority of outages, over 90%, happened at the distribution level.When increasingly dangerous storms, hurricanes, wildfires hit the distribution grid, no amount of large central station generation will keep the power on; that will take distributed resources located at homes and buildings. Increasingly, homes and buildings will become part of the grid and part of our resource mix. During the interview, Zach and I discussed Base Power and its business model, what Base is offering consumers and how their home battery program works. We spoke about the challenges of entering a highly competitive market and how BASE is unique in its goal to build a distributed network of residential batteries. We also talked about the potential benefits of AI to deploy the batteries, BASE's software for managing the batteries, how current incentives and system costs impact companies working to develop distributed energy resources, the possibilities for reforming or a cut to be more conducive to dispatchable distributed batteries, and much more.If you like the episode, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen. I look forward to hearing your thoughts. Thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.Timestamps2:47 - About Base and its battery program6:26 - Why launch a retail electric provider (REP) business in the ERCOT market?8:56 - Initial areas Base serves and status of their rollout 11:26 - The batteries Base uses and their capacity13:19 - How does Base Power’s battery offering compare to other options for home reliability and backup power17:56 - Engaging customers in a competitive market, potential for working with small municipal utilities and co-ops23:42 - Building a distributed network with residential batteries, working in ancillary markets, and reaching low-income households27:59 - Blackouts and batteries31:34 - Challenges encountered in launching Base33:38 - AI’s potential benefits to the grid35:47 - Zach vision for the grid in 5 to 10 years38:28 - How regulatory structures and market incentives impact DER companies 42:25 - Possible regulatory and pricing changes that would benefit DER owners46:06 - Impact of the IRA46:44 - Energy addition rather than transition; rethinking categorizing batteries as supplyShow NotesBase Power WebsiteBase’s Twitter and LinkedInElectric Panel Upgrade Tax CreditElectric Co-Ops and Local Power with John PadalinoDoug LewinZach Dell, welcome to the Energy Capital Podcast.Zach DellThanks Doug, I'm excited to be on.Doug LewinSo excited for this conversation, really excited to learn more about the company. This episode is a little different than most I've done because you're CEO of a startup, a true startup, a few months in, and I'm really intrigued by the company and by your vision. Can you explain for our audience a little bit what Base Power is and how you think it's going to drive change both to the power grid and the power industry and to consumers' experience?Zach DellWell, I'm excited to join you on the podcast, Doug. Thanks for having me. Base is an electricity provider and battery developer in Texas. We started the company to get more storage on the grid faster. When Texans switched to Base, we install a free battery to protect their home from power outages. We own and operate that battery and use it to support the grid when it's up. And when the grid goes down, you get to use the battery to power your home.So really we're bringing home storage to those who can't afford or don't want to pay $20,000 plus for a traditional battery and generator setup. So we charge a $2,000 install fee roughly 10 to 20 times less than a traditional equivalent power home battery or generator. Really from the perspective of the grid as a system, we started Base to be the scalable storage solution for consumers and the grid. So I think we can all agree or many of us at least agree that the grid needs more batteries. And current instantiations of battery storage are a very good start, but really are limited by interconnect queues as been widely documented, and you've talked about in the podcast, and transmission constraints. So our strategy really is installing batteries where grid interconnection exists to avoid those long interconnection queues co-located with the power load to avoid issues with transmission and reliability. So we're able to get storage on the grid in a matter of weeks versus years for the traditional storage developers.Doug LewinAmazing. And of course, it's distributed storage, which I think has a particular value, right? Because that's, not that the large storage, you know, wherever it's located, it all has value. But having that closer to where the demand is, where the demand is closer to the customer has extra value, correct?Zach Dell Yeah, exactly. So storage lowers the cost of transmission by increasing load factor on the distribution grid. So the closer storage is to load, the higher the load factor of the lines between generation and load. So the lower the load factor, the higher the cost of the system. So distributed batteries, we think, are really the unlock to the energy transition.Doug LewinYeah, totally. And I think, you know, I always like to back up and kind of explain these terms, because I always want this podcast to be accessible to folks that aren't doing this kind of stuff every day. But there's so many people interested in the power grid these days. And we talk about load factor, really, we're talking about there's the vast majority of the hours out of the year, there's abundant, cheap power, we have a lot of extra power. And so storage, you can think of it as yes, it's providing power, when there's scarcity, it's actually also soaking it up when there's a lot of it. So it actually improves the economics of solar, wind, nuclear. I mean, anything that is, I mean, really it  improves the economics of all forms of power, right? But particularly those that are variable in their output, like wind and solar.Zach DellYeah, that's right. Batteries are particularly complementary to high cap-ex, low op-ex forms of power generation. So, marginal, low marginal cost forms of power like wind, like solar, like nuclear as well.Doug LewinSo back to Base Power you have set up the company as a retail electric provider. Can you tell me why and explain to our audience why you decided there's a lot of different ways you could go to market, as a storage owner, operator, developer, marketer, all kinds of different things. But you chose the route of a retail electric provider. Can you talk about why?Zach DellYeah, there's really two reasons. And I'd say to zoom out, we are a retailer. We are a retail electric provider, but we're really a retailer and a battery developer combined. And the retail part of the business is how we bid our behind the meter assets into the wholesale markets. And so at the core of this is the technology, the hardware, and the software to deploy distributed batteries and to aggregate them and bid them into the markets to support the power grid in times of need. And the retailer is how we do that behind the meter. The behind the meter aspect obviously is what allows us to deploy batteries on the order of weeks as opposed to years when it comes to the interconnect process. So that's reason number one. And then reason number two is really to build a relationship with the customer. If you live in Texas the last couple of years, unfortunately your power has become less affordable and less reliable. And we need to reverse that trend. And so that is really what we are focused on doing for our customers is making sure their lights stay on and their bills stay low.Doug LewinSo, I have a question about that. So on the website, in your Q&A, you talk about how, when folks do sign up, and it'd probably be good for you to give a little kind of status update about where you're at with your rollout and what areas of the state are available now and encourage folks in other parts of the state with retail competition to continue to kind of check if they're interested in this offering. But you say on there for the customers that can sign up right now, they're on a waitlist when it's time to come off the waitlist that's when they'll find out what their KWH is, their charge per kilowatt hour. They're energy charged. I can imagine some customers might be kind of nervous about that. Are you guys though, I assume there's a target. You said the grid has been less reliable and less affordable. You're trying to bring some of these power prices down. We've seen power prices pretty consistently for retail shoppers in the 14 cent kind of range over the last year, even post really high gas prices in 2022 and power prices were higher, stayed pretty stubbornly up there. And there's a lot of reasons for that. We could get into that if you want to, but can you talk about, I mean, what are you trying to get, what are you able to get to customers at this point, as far as that energy charge?Zach DellSo we launched our beta last month with customers in Oncor territory right outside of Austin. So Austin is where the company is based, where we're installing systems with customers today in Ground Rock, Pflugerville, Georgetown, Hutto, really the Oncor territory closest to us. We will very soon be opening up the product to Houston and Dallas and the greater area. So Fort Worth as well, kind of the area, really the broader Texas triangle.We're increasing our install rate as fast as we can and looking to work our way through the waitlist. And so if you do live in the competitive areas of Texas, you can go ahead and sign up today on the website, basepowercompany.com to reserve your spot on the waitlist. While we can't, pricing is really more of a function of market dynamics than it is individual reps and what they're doing on a day-to-day basis. As you well know, retailers are for the most part, outside of the Jim Taylor's, they're buying power in the wholesale markets and selling it to retail customers. So, your cost to serve really determines what you're able to charge the customers. Of course, different retailers bake in different margins to those pricing assumptions. So, our ability to price customers is partially what's happening in the market and then it's partially our ability to accurately predict how much power they're going to use when they're you're going to use that power. And that comes down to data science, algorithm software, which we're trying to get really good at so that we can provide customers with really accurate pricing, which really means more affordable pricing.Doug LewinMakes sense. You mentioned gen-tailers earlier. I just want to explain that for listeners that might not know. That's the companies that are integrated generation and retail. The biggest examples would be Vistra and NRG, but most companies now, Calpine, etc., have retail electric arms. And because they have generation and retail, they're able to do some different things with pricing that's different as an independent. You guys are kind of, you're not a gen-tailer, but you're kind of a little bit because you don't have generation, but you have storage. Would you consider yourself a gen-tailer or not really? Or just a different definition? It's an evolving market. It's one of the things I love about markets, right? Zach DellTotally. Yeah, I would think about us as a retailer and a battery developer. So we're a distributed battery farm that is enabled by our retail business. We big plans for the future and we'll roll out different products, different markets. And so the designation of what we look like might change over time. But for now, that's how I think about it.Doug LewinAbsolutely. That makes a lot of sense. If I may, I wanna ask you about hardware. Can you talk a little bit about the batteries you guys are using?Zach DellSure, so we, you know, when you look at the home batteries on the market today, what you find is that basically all of them are designed to back up solar panels. You really can't find a home battery installation that doesn't have solar attached to it. There are some out there, but they're rare. And so if you look at the systems, at the hardware, at the batteries and the inverters, they're sized specifically for the array that goes on the house, they're wall mounted, they're, you know, not really built for energy trading, supporting the power grid, discharging rapidly to the grid. They are, to some extent, built for ease of install, but it matters less if you can do a battery installation when paired with solar in three hours versus six hours, because a solar install, as most people know, takes a lot more than six hours, and so it's not really the long pull. And so a lot of the engineering work that we're doing as we develop iterations of our battery hardware is to make the system more performant for the use case. So designed to support the power grid as best as possible in times of need, both, you know, at first in the energy markets, and then eventually in the ancillary services markets. And then also to be installed easily, efficiently. And so it's really a product that is designed for behind-the-meter energy trading. It's not necessarily designed to back up home solar, although you absolutely can connect solar to our product. Now we're not taking on homes with solar literally today. It's probably the next product that we'll launch. And so if you're a homeowner in the competitive part of Texas, you can look out for that release. But yeah, in short, our system is a home battery setup that's designed for behind the meter energy trading.Doug LewinCan you also talk about how would this compare if I'm a customer and I'm thinking about different options for increasing the reliability of my home another thing that I might consider would be a gas generator. Can you talk about the difference between this system and a gas generator? I assume there's some things about it that are going to be better and some things that aren't as good, but yeah, can you do a compare and contrast?Zach DellSure, so the striking difference is going to be the cost. At equivalent power, so our Gen 1 hardware is a 20 kilowatt hour system with around 11 kilowatts of discharge capacity. Our Gen 2 hardware is a little bit larger, 30 kilowatt hours of storage and about double the discharge capacity. So for a generator system at comparable power output, you're going to spend 10 to 20 times as much as our $2,000 install fee. So the cost is really the biggest one. And then with generators, more regular maintenance on them. You've obviously got a good amount of noise. You've got some smell. So it's just a different technology. I think, you know, what's interesting is one of our first installations, the customer kind of said to us, they said, oh, this is like an electric generator. And we were like, I guess so. We hadn't really thought about it like that. But batteries really are electric generators in a lot of ways. Now they're different. You can't fuel them up with fuel. You have to charge them, right? And so it's a different mechanism, but they are quite similar.Doug Lewin So you said the Gen 2 is 30 kilowatt hours, and to put that in perspective for listeners that may not be as fluent in that, that's about what an average house will use over the course of a day, give or take, right? Or not quite?Zach Dell It's hard to say. Yeah, that’s about rightDoug LewinYeah. I mean, obviously it depends on the conditions, right? If it's 105 degrees, you're probably gonna use more than 30 kWh. If it's 70 degrees, you may use less, but on an average basis, that's probably about right. And you said a 22 kilowatt discharge. I mean, that's a lot, right? I mean, 22 kWh, an average home, 22, excuse me, KW, kilowatts. So that's the sort of the max output at a given point of time, right? And so a home, go ahead, I'm sorry, is it not? Zach DellYeah. So it's actually a little bit larger than that. And the way that we got to these system specs, we didn't just make them up, is that we looked at the distribution system and said, okay, well, what kind of system could we design for the grid? Right. Well, most homes have either 100 amp or 200 amp panel connection to the grid. So 100 amps at 48 volts can take 24 kilowatts of discharge capacity. If you have a 200 amp panel, you can take 48 kilowatts of discharge capacity. So our single stack product is really built around that 24 kilowatt discharge assumption. And then you back into the 30 kilowatt hours of storage based on 80% depth of discharge, which is really to protect the health of the cells, the LFP cells in our battery. And so if you have a 200 amp panel, we'll actually install two of these systems, and so you'll get double the capacity. And if you have 100 amps, you'll get one.Doug LewinNow, does that double the price they have to pay four thousand if they've got a 200 amp or is it still two?Zach DellIt doesn't, no it's a flat install fee $2,000 for everybody.Doug LewinOkay. And I believe there's a pretty significant tax credit to upgrade breakers, right, so that you can get to, like your electrical panels, so you can actually get to that 200 amp. We can run that down and put it in the show notes too. Cause I think that's important if that allows people to get twice as much, that's great. So again, to put that in context, 22, 24, whatever it is, KW, you know, and a home, even on a hot day is probably using somewhere in a five, six, seven KW kind of a range. So if you're discharging, this has benefits, not only for the person inside of that home, but potentially for the broader grid and, and just for neighbors within that neighborhood.Zach DellThat's right. Yeah, we really want to expand our capacity for power consumption. And we think the way to do that is to outfit the grid with additional capacity that's software enabled on the edge that allows us to bring on flexible demand and make the system more reliable.Doug LewinMakes sense. So let's talk a little, I've got, there's so many questions I wanna ask about software and we're gonna come back to that. Cause I think how it's deployed when the batteries are charged, when they're discharged is obviously a massive issue. So I know we're leaving that hanging there, but we're gonna come back to it. But I just kinda wanna stay on the customer side for a little bit. Cause I do think as I'm sure is not lost on you and probably isn't lost any listeners, you're in a very competitive retail market. This is going to sink or swim based on how good this is to customers. What is the and maybe this varies by customers so maybe you can't really answer this. But is there a standard contract commitment? Because this is one thing I hear from other retailers is like there's a bit of a barrier within the market for longer term contracts. But what you're doing is giving somebody this reliability and peace of mind that if there's an outage, they're going to be able to stay up. So maybe that desire overcomes what has been kind of a barrier in the market to get beyond like a two year contract.Zach DellYeah, you know, as you know, bringing products to market is a, or at its best is an iterative process. And so we're in the early days of putting things out there, getting feedback from our customers, iterating on the product. And I think over time, you'll see us experiment with different kinds of products based on customer feedback. So we're, you know, about a month in a little less than a month into a live product taking enrollments installing batteries kind of really pedal to the metal here. And I think you'll see us probably iterate on our product strategy over time as we hear back from customers.Doug LewinAnd what about co-ops and munis? I mean, you're a retail electric provider, so you can't as a REP, but you're also a battery developer. Do you see any potential in co-op and muni markets?Zach DellWe do. We're really focused on building the technology, the hardware, the software, the operational expertise to deploy distributed storage, software enabled distributed storage onto the grid to solve these hard problems that we have to solve for the Texas power grid. And that goes for the competitive markets that also goes for the NOIE [non-opt-in entities, or co-op and municipal utilities] markets as well. And so we have started conversations with some of those parties to work together to deploy our technology in their areas we're excited to have those conversations and collaborate with some of those groups and so we’re very much open to business on that front.Doug Lewin Yeah. And I think we had a podcast earlier with John Padalino of Bandera Co-Op and they're doing something similar to what you're doing, but within their service territory, I think there's going to be, you know, while co-ops and munis are monopolies within their service territories, they are not immune to competitive pressures. Customers can do things on their own. They exist in a broader market. And I think as, you know, people in Houston and Dallas start talking to their, you know, friends in co-op areas or in Austin or San Antonio where there's municipal utilities, customers are gonna want this, customers are gonna demand this.Zach DellYeah, and John is the total pioneer in this space and I'm a big fan of the work that he's doing over at Bandera. I think it comes down to the fact that  this is a cost saving exercise, right? We think that distributed storage lowers system costs. And so if you're a NOIE, a muni, a co-op, you're looking to lower your system costs and you can pass those savings onto your rate base, you're going to look to the latest and greatest technology to make that happen. And that's what we are looking to develop.Doug LewinYeah, and interestingly, and this gets a little nerdy, but I think we've got a generally pretty nerdy audience. And we talked about this on a few podcasts, there actually is even a greater value to the munis and co-ops for batteries because they are exposed to that four coincident peak pricing, which again, I've explained it before, but just for folks that may not know, it sounds very complicated, but it actually isn't their transmission charge, if you're a municipal utility, for the entire year is based on how much is used within their service territory during four 15 minute increments, June, July, August, September. So if they've got quote unquote behind the meter battery storage at their customers homes, if they're able to deploy it or if they're able to work with you and your software is deploying that and they can move that peak down, they actually, that is a very direct one-to-one where you can see not only that customer saving money, but everybody in that service territory. And I talked about that with John, but that 4CP effect for co-ops and munis, that's a, that's a huge one that doesn't apply in the competitive areas. I wanna also just ask you, and you've said you're gonna iterate, you're gonna figure things out as you go. So you may not have answers to this, but I just think it's interesting to think about. I would imagine there's a pretty large market here also for small commercial customers. I'm sure you got your hands full just dealing with a wait list on residential, but is that on the roadmap? I just gotta imagine there's a lot of restaurant owners and all kinds of businesses that like, even a blip on the power grid can really disrupt their business. So I got to imagine this is going to be pretty attractive to a lot of small business owners.Zach DellIt's absolutely on the roadmap. It's something we've spent some time on already. Yeah we're looking forward to rolling out some pilots. I think specifically, as you mentioned, the quick serve restaurant industry is kind of primed for a solution like this, given the inventory loss of a backup or an outage situation. So I think there's a lot of value in that. And then also just generally cost savings that batteries can drive for those customers are obviously very meaningful when you're running a business. So we are looking at that space. It's early days, but it's certainly interesting.Doug Lewin Yeah, super exciting. All the potential out there for us. All right, so let's do come back to the software because this is obviously incredibly important. And it really kind of touches on the business model. You're a retail electric provider and battery developers as you said. You have access to these batteries. So the customer gets the battery when the grid's down, if the grid's up, you're controlling the battery, right? So then you have to have software that is monitoring connected to receiving signals from the grid as to when to charge and discharge, right? So a lot of times that's called arbitrage but it's like buy when prices are low, sell when they're high. Can you talk a little bit about how you guys are managing that and what that software is doing sort of behind the curtain?Zach DellYeah, absolutely. So we are building a distributed network is kind of the way to think about it, to connect all of these assets and bid them into the wholesale markets. So we have compute modules in all of our systems that communicate with our cloud and that cloud communicates with the individual nodes on the network to determine when to charge, when to discharge, and since data telemetry back to our cloud, our network, a kind of management system to monitor the health of the system and make sure things are running smoothly.Doug LewinAnd so you mentioned earlier that you can arbitrage using energy spot market prices, but eventually these ancillary services markets can be opened up as well. And again, it's been discussed on this podcast a lot in the past. There is this aggregated distributed energy resource task force, the Public Utility Commission, ERCOT, and a lot of stakeholders have worked together to actually open up some of those ancillary service markets to distributed energy resources, which would include these distributed batteries. Is that something you're trying to take advantage of, or again, is that kind of on the roadmap for the future?Zach DellIt's definitely on the roadmap. We're obviously just getting the plane off the ground here. And so we're focused on what's right in front of us, which is bidding into the wholesale markets. But we are absolutely looking at participating in the ancillary markets. And I think the ADER Task Force and work being done led by Jason Ryan is a fantastic step in the right direction. And we look forward to being a part of that in the future.Doug LewinI think it's really important for this discussion because really, as this sort of moves forward and as hopefully more and more customers come into this, in order for this kind of offering to get to as wide a group as possible, and what I mean by that is frankly getting into areas of the economy where there's obviously a huge part of the population that doesn't have $2,000, even though that's way cheaper than a generator and way cheaper than just buying a Powerwall or whatever product you can just sort of get, still that's going to be a barrier. But if you can start to stack all of these values and get paid for them, yes, there's the energy market, but ancillary markets are expensive and having more competition and there's good for all customers helps lower the cost. There's also value in, there's a value that is brought to the distribution grid as well. Right? Because what we're doing here, what you're doing here, what anybody who is trying to bring batteries into the market is doing, is you are lowering those peaks that are really putting a strain on transformers and substations and all of that distribution grid.Is that something that, that you guys are hoping will materialize in the long term as well?I want you to answer that question. I also want to get your thoughts on low income customers and how do we, am I right that it's going to take adding all these different value streams or are there other ways we can make sure that these batteries are available to all even folks who don't have $2,000 to put out?Zach DellYeah, I mean, we are focused on bringing affordable, reliable power to all Texans. And so over time, you'll probably see us work on new products that open the market or open the offering to folks in a lower part of the market. That's kind of all I can say on that front today, but it's definitely something we're thinking about and focused on. And I've been lucky to come up the learning curve and spend time with the folks at TEPRI and other organizations that are focusing on these problems. And so we're excited to see what happens there. To your point on lowering system costs on the distribution grid, absolutely strongly agree and we think that batteries really just provide fundamental value to the grid. As we discussed, they increase the load factor on distribution lines, they stabilize the grid, they help with congestion, voltage control, they're very good for load shed. So these assets are actually an incredible tool in the tool belt of the TDUs and the PUC for what it's worth and so we hope that we can be a part of that solution.Doug LewinCan you talk more about what you just said there that they're very good for load shed? I actually, I mean, it's obvious, but I hadn't actually thought of that before, but because it's going to take some interface and interaction with the TDUs, which I guess you have, because you have to interconnect, right? So there's a process with them. So they know there's a battery there. Is there any indication they're actually building that into, I think, we're recording end of April. I think it's like September 1, they've got a due to the PUC as to how they're going to segment the distribution grid to roll outages. Obviously, that was a major problem during Winter Storm Uri, but could be a problem during other incidents as well. So yeah, is that already happening or is that more like a future looking thing where these batteries could help with load shed?Zach DellSo I'm certainly not the foremost expert on what the TDUs are doing. There are many of the folks who've been on the podcast before me are much more knowledgeable on that topic. But what I do know is that batteries are a very valuable tool that can take load off the grid, right? You have this battery in the home that can offset the load of the home. And so instead of pulling from the grid at times of peak demand, you can pull from the battery and it's a very efficient tool for that use case. So our hope is that over time, the fundamental value of batteries on the power grid is able to be realized. And I think to your point that will bring more access to this technology to more people.Doug LewinYeah, and look, I mean, if there is a particular area, I hope there are transmission distribution utilities listening to this, if there's a particular area of the grid that is overloaded, look, it's really hard to even get new transformers right now. There's like a two, three, four year backlog on transformers. If there's a place that's starting to get overloaded, you can actually put some additional incentive, help customers reduce that $2,000 upfront.As a matter of fact, the TDUs do have, I don't know if you're familiar with this, but we can put some links to where the different utilities offer this, but they have through their utility efficiency programs, REP offerings, they tend to be things like, Retail Electric Provider offerings, tend to be things like thermostats and things like that, but there's no reason they couldn't be batteries. Then you get to a point where you could actually reduce the cost of replacing infrastructure. And if you get to, God forbid, but you get to the point where there has to be an outage and there's load shed, you know this neighborhood, there's batteries all over it. That can be the first one you push because you know people there are still going to be safe because they've got batteries at their home, right?Zach DellAbsolutely, yeah, you're exactly right. I mean, as you know, we are laser focused on developing the hardware and software to address these challenges. And we know that we're going to have to cooperate with the TDUs and the existing players in the space to bring these solutions to Texans and we're excited to partner with them. So we're very much open for business on that front.Doug LewinCan you talk about, you've been out there for a little while now, it's still very new, but what in these initial days and weeks and months, like what are you starting to hear? Are there barriers that are out there that you wouldn't have anticipated? I mean, things like interconnection or permitting or I don't know, other things that might have come up that just are non-obvious.Zach Dell Well, we're early, so ask me in six and twelve months, and I'll probably have some war stories for you. But I think we're not naive enough to think that this was gonna be without its challenges. This is a complex coordination business, right? We have to be good at hardware, software, deployment, installation, permitting, financing, all of these things kind of at the same time. And so there are absolutely acute challenges in all of those areas, but they’re not insurmountable, and frankly they're the kind of challenges that get a team like ours really excited. I think, you know, this is where the fun happens. It's going up and trying to solve these hard problems and making real progress.Doug LewinAre there, you've talked about how what you're trying to do is create this network. In a lot of different places of the economy, you don't hear this maybe quite as much in the energy space. Though I think it applies, you hear of like network effects, right? That like, as, I don't know, does this apply here, as you get more and more battery storage onto the distribution grid? Is it not one plus one is two, but one plus one is three? Do you start to see that kind of thing happening, or does that really apply here?Zach DellWell, at the system level, there is value in more battery storage that allows you to bring on more intermittent supply. So we can build more wind, more solar if we have batteries to firm up the capacity that is available in times where maybe the grid doesn't totally need it and we have lots of production. And so at a system level, there's absolutely value in scale.Doug LewinYeah, that makes sense. Can you also talk a little bit, so I should have asked this question when we were talking about software, but we'll come back to software for a minute. Obviously everybody in the energy world and everybody they know, like to two degrees of separation, everybody's talking about AI these days, right? This is the topic du jour, and I don't think it's probably going to go away either. Obviously maybe the intensity and volume of the conversations will change, but this is going to be with us for a while. Usually when folks talk about AI, they're talking about, this is a great big load that the grid is going to have to serve. And oh my goodness, how are we going to deal with that? It was a big presentation at ERCOT Board meeting, just a few days before we recorded about this. But I think not talked about as much as how AI actually might help relieve some of the strain on the grid as well. That this intelligence can be applied to, as one example, when to charge batteries and discharge batteries. Can you talk a little bit about AI and how it might impact that, it might impact grid reliability?Zach DellThis is an optimization problem at its core. Price prediction is an optimization problem and AI is very good at optimization problems. I think we're already seeing companies implement large language models and AI inference in their production deployments of whatever their software might be. And I think you'll just see more of that over the next couple of years as these models get better, more efficient. And so absolutely, we will definitely see AI assist us in this optimization problem.Doug LewinWhy not offer solar too? I mean, I gotta think just like customers are really attracted to batteries, there's a huge attraction for solar. Why not include that in your initial?Zach DellaThere's a very mature market for home solar installations. There's not a mature market for affordable backup power. So that's really why we're focused there initially.Doug LewinYeah, that makes sense. That makes sense. All right. I wanna pivot a little bit and ask some bigger picture questions. You're obviously, you've got a vision of the future. Can you look ahead, go ahead and get out your crystal ball or whatever. Let's think like,  in that kind of five to ten year, we're not talking next year or two years, not talking generations out in the future, but five to ten years. What does the grid look like and how is it different for customers?Zach DellYeah, well, I think my crystal ball is probably a little cloudier than many of the folks you've had on the pod, but I'll do my best. Yeah, I think my take is not that novel, unfortunately, which is that, you know, everyone agrees that load is going up, right? Today, if you go to a dinner party and you ask people what they think penetration of EVs are for new cars in the US, they'll guess 20%, 25%, 30% because we all see Teslas and Rivians on the road all the time. The truth is it's closer to 5%. In Europe, it's closer to 17%. In China, it's closer to 25%. These are obviously leading indicators. So when that number goes from 5 in the US to 50, and everyone wants to charge their car at home when they get back from work at the same time, the grid is going to be under immense stress. Right? And then, you know, you also are seeing the increase in penetration of electric heat pumps. You're seeing the electrification of industry, obviously seeing tons of demand for AI data centers to power advances in AI. So you know, there are a lot of factors that are contributing to increased amounts of demand. People know it's coming. We're doing what we can to prepare the system for it, but at the end of the day, it's going to require new technology to absorb this coming demand.I think for consumers, our hope is that it's a future where power is more reliable and more affordable. Unfortunately, consumers in Texas have seen increased prices and decreased reliability over the last few years. So we need to reverse this trend. It's going to be hard. It's going to require a lot of work and innovation and cooperation, as we discussed earlier, from all of the players in the space. But you know Texas really should be the low cost energy capital of the world. It's in the middle of the sunbelt, it's in the middle of the wind corridor. We've got ports, we've got land, we've got infrastructure, we've got a free market. It really is, the stars have aligned here in Texas to build the energy capital of the world. And so we're looking to do our part to contribute to that.Doug LewinYeah, I think all that's right. You know, as you were talking, there was something I wanted to ask earlier that, I think something that stands in the way of that vision potentially, particularly on the low cost piece. Cause I agree with you with the sort of confluence of factors you have here, the natural resources, the market, all of that. It all makes a lot of sense that we should have lower power prices. I think there's several things missing there, but one particularly in the context of this conversation is, and I don't think the vast majority of people understand how their power bill breaks down. But what we have seen over the last 10 years is a steady decrease in the cost of generation as natural gas prices have been low and wind and solar come online. But an increase in distribution costs. So that, and a lot of people would say, well, that's transmission to connect renewables. Actually, if you look at the data, there is an increase there, but it's not nearly as much as the increase on the distribution system. And this is a place where price signals don't get through yet. If I'm, when I am, you know, using whatever power I'm using at three in the morning or at six or seven in the evening, peak power prices or lowest power prices, the price I'm paying to my transmission distribution utility in Houston or Dallas or Waco or Laredo or Corpus Christi or Lubbock, which is now in competition, it's five cents, basically. It could be four and a half, could be 5.2, whatever, but it's basically five cents and it doesn't move. That's gotta be a problem for, it's not just for you, it's not unique to Base Power, but for anybody trying to do this work to bring distributed energy resources That's a problem, is it not?Zach DellWell, I think, you know, incentives drive behavior, right? And so if the price signals aren't there, if the incentives aren't there, then the behavior won't follow. And so if you want to change behavior, you've got to change the incentives. Price signals, liquidity, these are flywheels, these are flywheel lubricants, right? The increase in price signals increases market activity, increases capital volume capacity. So I do think that more price signals, more liquidity is probably a solution to some of these problems for sure.Doug LewinYeah, and I wonder if, and the reason I bring it up in this context of a five to ten year vision, that's probably, the market probably needs to move that way to where there's some price signal. You're absolutely right on the incentives, right? There's a Charlie Munger quote I love where he says, “you show me the incentive, I'll show you the outcome,” right? And the incentive here is just like, use power whenever. If it's five cents whenever, you just use it whenever. Aligning that price signal with when there's actually scarcity on the grid, that will allow greater deployment of storage. That will widen the circle of people that could actually afford storage by changing the economics. So I think it's just an important one to flag in a five to 10 year kind of a vision. So that's one that I, if somebody asked me, what are the two or three policies that I think would have the biggest impact, I might put that on my list. I think time-of use-really matters. What's on your list? What policy changes could enable more customers to access batteries and to cause the grid to be more reliable and more affordable?Zach DellYeah, I mean, I think it's what we just talked about. It's price signals and incentives to change behavior, right? If you want to change behavior, you have to change the incentives. So, you know, there's obviously a concept of 4CP, Four Coincident Peaks that incentivize industrial loads to decrease usage during peak times. Some kind of concept like this for the resi space seems like a potentially valuable addition to the set of incentives that exists that influence how markets participate in times of grid stress. So, you know, that's an interesting topic getting a conversation that's getting started in some of these circles. On the topic of incentives, today, behind the meter, assets are not able to access normal pricing. So this means price signals that are available to these loads are not as frequent. In other words, it's a less liquid market for behind the meter market participants. So, as we discussed, liquidity is the ultimate flywheel lubricant. If behind the meter assets are able to access more price signals, it's likely that more liquidity and volume will enter the space. And this will hopefully ultimately lower prices and increase reliability for customers.Doug LewinThat's a really important point. And I want to explain it a little bit more. And then you jump in and correct me if I get any of this wrong, or you can explain it better, but we do have a nodal market in ERCOT where there are thousands of little points, but generators receive those price signals, right? Generators get the nodal price, but load is settled zonally. And the reason for that is there's a political reason for that. And I don't say that to be critical. It actually makes sense, where you don't want somebody who lives in a neighborhood, who happens to live in a neighborhood with a congested node, to have to pay two or three times as much as somebody who lives in a neighborhood on the other side of town. But I wonder if there's not a way for customers to have storage and want the economics to work, or solar storage, demand response, could be you could put anything in that blank, fill it in. EVs and wanna charge their cars at the right time. Couldn't opt in to some kind of a nodal, it's complicated, but I wonder if there's some way to help bring that price signal.Zach DellYeah, this market structure is a function of consumer protection, right? And to your point, not wanting to expose consumers to unfair cost structures. That said, we have developed a lot of technology in the last couple of years, hardware, software. We know what's a battery, what's not a battery, what's a DER, what's not. And so, yeah, I think there was potential there. It's worth mentioning, going all the way back to your point on the value of distributed assets, if you have a battery farm and all of those batteries are on different nodes that are responding to different price signals, your monetization capabilities are a lot better than if you're stuck on one node or one load zone. And so we're really excited about the opportunities to optimize our assets across different load zones, but also ideally eventually across different nodes.Doug LewinVery, very interesting. Yeah, yeah. Yeah, this has, you have my wheels spinning. I wonder if there's not like a way to start to get to where load could be settled nodally. There would have to be like a big transition and a plan for helping folks again, that don't have capital to put out to get assets to basically like retail electric providers and utilities would work together to make sure that customers had access to ways to mitigate that effect.But actually, if you look at it the other way, there's the risk avoidance of like, we wanna make sure people aren't exposed to higher prices. What you lose though, is the ability to actually lower the system costs and lower the price for everybody. So I wonder if there's a way to sort of square that circle, have a transition period, where everybody knows it's coming and there are policy supports to make sure nobody ends up sort of upside down on that deal. Be very complicated, but it might be worth working on.Zach DellYeah, as you know, these are very complicated issues and there are people who know a heck of a lot more than I do about...Doug LewinAnd a heck of a lot more than I...Zach DellMarketing design is not a trivial topic, that's for sure. Doug LewinYeah, yeah, for sure, for sure. Alright, so, one other, actually two other questions I want to ask you. Is there, there has to have be a change, has the IRA, the Inflation Reduction Act, made this easier? There is now a tax credit for the batteries, right? Has that enabled this that, if it didn’t exist, it would just be harder to do or impossible?Zach DellIt definitely helps. We are the battery owners, we do benefit from the IRA tax credit. We designed the business and kind of thought about the business model in its earliest days as, okay, well, what happens if this gets turned off? And we very much underwrote the opportunity to account for that. So it's a business that does work, so to speak, without the benefit of the tax credits.Doug LewinPerfect. And then one last question. What is something that is sort of commonly misunderstood, either among the general public or within the industry that as you've been building this business, you're like, here's something that just seems to be accepted sort of axiomatic as a truth and it's probably not.Zach DellWell, again, I'm still getting up to speed. So, bear with me here. And I actually used the phrase earlier, which is funny. The energy transition is an amazing thing. It's incredibly uplifting. It's the most exciting development of our lifetime. It is our path to energy abundance, which really is our path to human prosperity, right? If you look at the cost of power and GDP, those things are inversely correlated. If you can bring down the cost of power and make it more available, more reliable, you just wholesale make people's lives better. But the phrase energy transition, I think, is a misnomer.It is a transition in a way, but it's really more of an energy addition. Right? We are adding low cost capacity to the supply base, right? We are adding low cost wind, we're adding low cost solar. And so I think what we're seeing is not a wholesale transition of our supply stack. It's an addition of low cost capacity that's going to allow us to scale our power consumption and really power the growth of the economy, which is an amazing thing. But I think that if the phrase energy transition, if we started saying the energy addition, a little more accurate. The other thing that comes to mind is that batteries are commonly talked about as an alternative or competitive in some way to generation technologies like gas, solar, coal, wind, nuclear. I think this is just a symptom of fierce competition, which is a great thing and different groups wanting to promote their technology of choice. The reality is that batteries are more akin to transmission and distribution infrastructure than they are to generation assets. Right? Storage, as we've discussed, lowers the cost of transmission by increasing load factor on the distribution lines. So the closer the storage is to the load, the higher the load factor of the line between the generation and that load. So if we can lower, if we can raise load factors, we can decrease the cost of the system. So it's really a different asset class than the generation entirely. So, you know, batteries are the unblocked, the energy addition. And I think that's something that's a little bit overlooked.Doug LewinI love it. Yeah, totally. And yeah, it's sort of neither fish nor fall, right? It is, like you said, kind of its own asset class. It's not exactly TD. It's not exactly generation. It's its own thing. One thing on the energy addition piece, the my friends at Texas 2036, which is a great organization, sort of think tank based in Austin. They talk about energy expansion. They've put out a bunch of reports sort of about, yeah, and I think that's a good way to think of it. It is, there's just a, there is a lot more coming. There's no doubt. There's just no doubt about it. It's just, there is an expansion happening. Obviously, batteries are one of the things, but you know, you've got geothermal and you've got nuclear coming. You've got all sorts of different demand response, energy efficiency technologies, heat pumps, electric vehicles. I could go on. Zach, this has been great. You keep saying I'm new to this and I'll get more of it. I think you're selling yourself short. I think you've got a great vision here. I'm really excited to follow Base Power and watch its growth. Is there anything, I didn't ask you that you wish that I would have, anything you wanna add?Zach DellYou know, we covered a lot. I really appreciate it, Doug. Yeah, I'm very much coming up the curve here, getting up to speed as fast as I can. I've got an incredible team that I get to work with every day that teaches me so much. I've got incredible people that are outside of the Base team that we get to collaborate with and learn from, folks like you. Many of the folks who have been on the podcast, I've had the pleasure of getting to know, which has been awesome. I guess my message really is that we're open for business. We're here to develop technology, hardware and software to solve these hard problems. And, you know, like I said earlier, we know that we need to cooperate and partner with local regulators, utilities, policymakers, researchers. And, you know, we're all going to have to work together to, you know, deploy these solutions and bring affordable, reliable power.So I know that many influential industry leaders are listeners of the pod. And so if there's any folks out there who want to chat about working together, joining our team or otherwise, like I said, we're open for business. So you can reach out to me directly. I'm at zach@basepowercompany.com. You can find us online. And I'm excited to connect and work together to solve these hard problems.Doug LewinI encourage folks to reach out to Zach. And as he mentioned, they got a great team as well. We'll put some links to your website so folks can see the team you've assembled there, which is impressive as well. Zach, this has been a pleasure. Thanks so much for doing it.Zach DellThanks a lot Doug, really enjoyed it.  This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit www.douglewin.com/subscribe

This is a free preview of a paid episode. To hear more, visit www.douglewin.comIn 2020, at the Annual Meeting of the Greater Houston Partnership – the city’s powerful Chamber of Commerce and economic development organization with a heavy concentration of oil and gas companies – Bobby Tudor, the incoming Chairman of the Board, told the membership: “The oil and gas business is not likely to be the same engine for Houston’s growth over the next 25 years, that it’s been in the past 25 years.” He added further: “We can lead the energy transition. There is fantastic business opportunity for us in this effort; it’s necessary and it’s the right thing to do. Houston is about making things happen, and we can lead this energy transition. We should be driving the discussion… “As any person who follows Texas politics and the political economy of the state, Tudor’s speech signaled a major shift. An organization that represented some of the most influential oil and gas interests in the state made clear it would no longer be fighting the energy transition; instead, it decided to lead it. Following the speech, the Partnership launched the Houston Energy Transition Initiative or HETI to build on traditional energy skills and systems to leverage Houston's industry leadership to accelerate global solutions for an energy-abundant, low-carbon future.My guest today, Jane Stricker, is the Executive Director of the Houston Energy Transition Initiative where she leads a coalition of industry, academia and community partners to ensure 4the long-term economic competitiveness and advancement of the Houston region towards a net-zero emissions future. Prior to joining the HETI, Jane spent over 20 years at BP in a variety of roles and thus has considerable expertise in engaging and transitioning the oil and gas industries. During the interview, Jane and I discussed how the skills, knowledge, and resources from the oil and gas industry – and its workforce – can be leveraged to advance the clean energy transition. We dug into the opportunities for job creation, the need for workforce development and training, the potential and challenges of hydrogen hubs, the importance of engaging and responding to the communities that have been disproportionately harmed by fossil fuels, the necessity of innovation in business models and technology, and much more. This was a great discussion and I hope you enjoy it and learn a lot about Houston’s role, its risks, and its opportunities in the energy transition. This podcast is for paid subscribers only and only the free preview will be listed publicly on podcast apps. For details on how to listen to the full episode on your favorite podcast app, please refer to this information from Substack. If you like the episode, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen. I look forward to hearing your thoughts; don’t hesitate to share them with me and fellow listeners in the comments. Thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.Timestamps4:11 - About the Houston Energy Transition Initiative 9:31 - Opportunity and responsibility of Houston in the Energy Transition12:42 - Expertise, knowledge, and skills from the oil and gas industry and how they can be applied to advance clean energy and the energy transition20:18 - Why the Houston area has particular potential for the energy transition and technologies that are especially important23:29 - Hydrogen hubs and the role of hydrogen in the energy transition28:53 - The need for community engagement in the development of hydrogen hubs and the Climate Equity Framework35:14 - The need for innovation in all aspects of the work: business, communications, regulatory, and technology etc.36:41 - Electrifying the Houston region and expected demand growth41:11 - Industrial electrification and its impact on demand growth42:32 - Advanced nuclear44:06 - Collaboration between oil/gas industry and renewables in Houston; opportunities for economic and job growth from renewables48:08 - Reducing scope 1 and 2 emissions with renewables50:19 - Jobs, workforce development, transitioning workers from oil and gas to renewable jobs, and engaging young peopleShow NotesHouston Energy Transition Initiative (HETI)Houston Energy Transition Initiative MembersGreater Houston PartnershipClimate Equity Framework and Toolkit for an Equitable Energy Transition in Greater HoustonPerspective on the Energy Transition Capital of the World: Houston’s Opportunity to Win by Catalyzing Capital Formation - Report from McKinseyThe Oil and Gas Industry in Net Zero Transitions, International Energy Agency reportVideo and transcript of Bobby Tudor’s 2020 speech at the Greater Houston Partnership’s Annual MeetingDistributed Energy Resources and "all-of-the-above" energy solutions with CenterPoint's Jason RyanHow Americans’ attitudes about climate change differ by generation, party and other factors - Pew Research CenterGreater Houston Partnership Signs Memorandum of Understanding (MOU) with Argonne National Laboratory

My guest for this week is Megan Kimble. Megan is an extremely talented writer and her new book entitled City Limits: Infrastructure, Inequality, and the Future of America's Highways is a must read for anyone interested in climate change, transportation, or just how cities came to be the way the are: How did we end up with massive, noisy, smelly, dirty highways right in the middle of every major city? Kimble unpacks an extremely complicated history in a page-turner of a book. She tells the stories of those impacted by highway construction and expansion in the past and in present times, as active expansions in Texas will claim thousands of homes and businesses, and even schools and churches. And she brilliantly explains how none of these expansions will solve traffic problems. In fact, and this has been proven over and over again as we discussed on this podcast, they’ll make traffic problems worse. Megan is Austin-based journalist, author, and editor and the former the executive editor at the Texas Observer and has written about housing, transportation, and urban development for The New York Times, Texas Monthly, The Guardian, and Bloomberg’s CityLab.  Her new book covers the battle over the future of highways in Austin, Dallas, and Houston but could describe the battles happening all over the country. She also examines successful highway removals in places like Rochester, New York and successful efforts to stop highways including in Texas. We dove into all of that in the interview. We discussed the history of the interstate highway system, including original research Megan did at the Eisenhower Library that showed highways were never meant to go through cities, why the US has such meager public transit infrastructure, the impact of cars and highways on climate change and emissions, and much more. Kirkus Reviews called the book “a convincing case for removing highways and shaping cities meant for people, not cars.” Whether you think you agree with that or not, I highly recommend you read the book. If you like the episode, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen. I look forward to hearing your thoughts. Thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.Timestamps4:21 - Megan’s historical approach in City Limits; the Futurama Highways and Horizons exhibit at the 1939 World’s Fair in New York7:11 - Understanding the connection between highways and the energy system10:12 - Highway expansion, carbon emissions, and air pollution 12:08 - How and why highway expansion doesn’t work; induced demand16:32 - History of the interstate highway system22:35 - Funding for highways versus public transit27:05 - Inequality and highways 31:33 - Repeating mistakes of the past and North Houston Highway Improvement Project (aka the I-45 expansion)34:22 - How the negative effects of highways impact all of us39:30 - Example of highways being defeated and removed46:03 - A new vision for cities48:25 - Groups working to stop and/or remove highways in Texas51:35 - Book excerpt55:13 - Electric vehiclesShow NotesCity Limits: Infrastructure, Inequality, and the Future of America’s Highways by Megan KimbleMegan’s other work and writingsThe Sum of Us: What Racism Costs Everyone and How We Can Prosper Together by Heather McGhee Texas could spend federal funds meant to cut carbon emissions on highway projectsThe Top Ten Biggest Global Warming Polluters in Texas from Environment TexasStop TxDOT I-45Rethink35Coalition for a New Dallas Urban Austin Reads Book Club event with Megan at First Light Books in Austin on 5/17Megan’s Twitter FeedTranscriptDoug LewinMegan Kimble, welcome to the Energy Capital Podcast. Thanks for being with us.Megan KimbleThank you for having me.Doug LewinSo I love this book, your book is City Limits, Infrastructure, Inequality, and the Future of America's Highways. I really enjoyed reading it and learned a ton from it. I think where I wanna start is just with the kind of very complicated relationship Americans have with highways. And I love the way you unpack that and go into the depth of that in this. This is not, as might be suggested by the title, like this, you… you don't simplify this, right? You explore it in all its complexity and Americans, while we hate being on highways, we resent traffic… at the same time, if somebody suggests, I think to somebody who's not sort of read into this and following this in any great depth, if somebody says we should not expand the highway, people get pretty upset about that. They kind of, they, they want their highways. So it's this, it's very much this kind of a love-hate relationship, I think. So you obviously spent a lot of time thinking about highways and our relationships with them and wrote what again, I think it's really a masterful book. What do you think now kind of on the other side of this book and all of this research and all of these discussions about highways and our complicated relationships with them?Megan KimbleYeah, I mean, a lot of the book is rooted in history, and I did that very intentionally because I wanted to sort of begin from a place of empathy toward drivers, myself included. So the book kind of begins with the 1939 World's Fair, which had this exhibit called Highways and Horizons. It was sponsored by General Motors, very intentionally to sell cars to the American public. But this industrial designer named Norman Bel Geddes created this exhibit that people could kind of see the city of the future. This was in 1939 and the city of the future was in 1960. And it was like this clean, technologically oriented city with these wide, clean roads and skyscrapers and it was all efficient. And I kind of empathize with people who were captivated by that vision. Like the automobile was this miraculous invention. You could go wherever you wanted to go when you wanted to go. Like previous to that, people just simply did not have access to life outside the city. Cities at the time were like pretty crowded, pretty dirty. People's travel was sort of contingent upon transit lines that had fixed routes and fixed schedules. So like the automobile offered this amazing promise to Americans. We live in this vast wide open country and we were finally going to be able to like settle it. We were going to be able to get outside the city, have like an acre to each man and woman, which was Frank Lloyd Wright's vision. And like, I totally understand why that vision was captivating. And so I really wanted to begin in a place of like, it absolutely makes sense that people flock to buy cars, you know, that like, it was this amazing invention. I think beginning there, which is it is understandable that we did what we did. But now, fast forward, you know, nearly a century, 80 years from then… and we know better, we absolutely know better. We know the enormous cost of automobiles and highways to our cities, to our health, to the environment. And yet we keep doubling down on this form of infrastructure that it has been known really since the 60s and 70s has huge negative externalities in our cities. And so, but I really did wanna begin in this place of like, it's understandable that we built all these highways, but let's reevaluate them now knowing what we know.Doug Lewin Yeah, and I love your description of Bel Geddes’ Futurama, it was called right? It was at the 1939 World's Fair in New York, I think. It's a, it's an amazing description the way you, … I kind of got captivated by the you really did justice to the display and sort of describing it. I felt like I was, I was almost there. I want to, I want to come back to that. Cause you do say towards the end of the book that we need some kind of a new Futurama, but let's come back to that. I do want to talk about that as we go through. But let's kind of work our way through the book a little bit more. This is so this is the Energy Capital Podcast. And, you know, usually I'm talking about the electric grid and topics related to that. But, you know, highways, as you point out in the book, have just obviously a major connection to energy and to climate. Can you talk a little bit about that connection and how changing how we design and plan and build transportation systems could have an impact on energy and climate?Megan KimbleYeah, I love the question because it really motivated a lot of my reporting. So today, transportation is the leading contributor to greenhouse gas emissions in the United States. That changed in about 2016, 2017, it surpassed electric power generation. And that's largely because we are driving more, like it's, it's passenger cars and trucks that are driving that increase in emissions. Um, so I kind of knew that when I started reporting the book and then I discovered this statistic in a TXDOT, you know, report. that Texas on-road emissions are responsible for 0.48%, so about half a percentage of total worldwide carbon dioxide emissions. And that absolutely floored me. Like all of us drivers in Texas, all of these highways that we are expanding have a measurable impact on total worldwide carbon emissions. Like think of all the industries across the world, all of the emissions that are being created. And we in Texas, our drivers, have a measurable impact.And so that really motivated me, which is to say, like, if we don't expand these highways, we could also have an impact on reducing emissions. That there is like, the fight in Texas is incredibly important for the fight to decarbonize and move away from carbon emissions. So that really motivated a lot of the reporting.Doug LewinYeah. And you have a stat in there that, um, and I believe this was from a TXDOT 2018 report if I'm, if I'm getting this right, um, that by 2040, just the highway widening going on in Texas isn't construction of new highways, but the widening projects going on would increase, um, by, would increase greenhouse gasses by 30 million metric tons. And to put that in perspective, Texas, and we can link in the show notes to some charts that people can see this. Number one, emissions in Texas is actually industrial, but, uh, transportation was third for awhile. But as you said, nationally, transportation has gone above, uh, electricity and that's happened in Texas too. Those lines of cross as we've added a lot more, um, well, gas, displacing coal, but also wind and solar, um, has caused those, those emissions to go down. But the, the amount of emissions on the electric grid that have gone down, it might be right at about 30 million metric tons right in there. So it's just like all of the wind and solar and the coal retirements pretty much wiped out by highway expansions. I don't think people really understand the scale of that. If you want to speak more to that, I'd love for you to, but I also, all the other pollution that you got into this in the book too, the asthma and respiratory problems caused by highways. Can you talk about that a little bit too?Megan KimbleYeah, I will just say to your first point, that actually does not come from TsCOT. That comes from the Georgetown Climate Center and Rocky Mountain Institute that have done really great analyses of how highway widenings impact the climate. Because indeed, I do not think this is a thing that like major, like the mainstream of climate, philanthropy or news are talking about as highways as fossil fuel infrastructure, and they absolutely are, and you can measure it. And that report that found that, that stat that you just cited, like they say, the authors say like, minimizing further highway expansion is the most important lever to stopping the increase of carbon emissions in the transportation sector. So like highway expansions are have a huge consequence and a huge impact on greenhouse gas emissions. But indeed as you know like as you just mentioned they have other negative impacts besides just greenhouse gas emissions they are incredibly polluting so I include lots of research that shows when you live next to a highway, you have much higher rates of asthma and other respiratory diseases, particularly for children. So the pollution from tires and from exhaust has lots of other negative consequences. The highway expansion in Houston that I profile in the book will bring this massive highway interchange closer to a school, an elementary school called Bruce Elementary in Houston's Fifth Ward.And students at that school already are exposed to much higher rates of carcinogens and other air pollutants than elsewhere in HISD. And then it's only going to get worse as that highway gets closer. So it's like it's not just our future and climate change. It's like right now people and kids are getting sick from living and going to school next to these highways.Doug LewinYeah, so there's so many different angles of this to unpack, but I think as it will get into some of the others around cost and traffic fatalities. But I think it's important right at the beginning, though, to just get into how highway expansion actually doesn't work for what it's intended to do. So there's all these “externalities,” which is sometimes the way economists talk about this, like all these other like horrible things that happen like pollution and greenhouse gasses and increased traffic deaths and all those kinds of things. But what it's supposed to do is actually move people faster. And as you put in the in the very first chapter, the hundred largest cities spent $500 billion — they didn't spend it the federal government did — but, but there was that much money spent on the largest cities over, I think it was a period about 20, 25 years from like the mid 90s up until about 2020. And in those cities, traffic congestion increased 144%. Now, like some people might say, well, okay, we should have spent a trillion instead of half a trillion. But, but, and you said earlier on, we know that this doesn't work. We know that highway expansion, I think ,forgive me for the slight edit here. The better way to say it is the evidence and the data are there, but collectively we don't know that because we keep expanding highways and expecting we're gonna have less traffic. Yeah, can you talk about that a little bit? Because that was something that really stood out in this book. Like I think it's particularly for people that work in this space, it's like that is taken as just sort of, of course this is the way it is, but I think, I'm not sure I fully realized that until I read your book. And I'm a little bit embarrassed to say it, but hey, we're all learning. And so yeah, your book does a good service on that. But talk about that a little bit if you would.Megan KimbleYeah, I mean, I think that's a totally understandable reaction. You're sitting in traffic on a highway and you're like, boy, if this highway was bigger, I would get where I was going faster. And I had a urban planner describe it to me as like, you know, normal people and traffic engineers think of traffic at like a liquid. So if it gets clogged up, build a bigger pipe. And in fact, the evidence shows the traffic functions much more like a gas, which is to say it expands to take up, take up the capacity allotted to it.And that is a phenomenon known as induced demand. And that has been well understood since at least 1962, when an economist published a paper looking at all these new interstate highways we were building across the country, particularly in cities, and found that as we added car capacity, cars were filling up that capacity. And the reason is that people just drive more. That happens even controlling for population growth. So it's not just that there are new drivers on the road, it's that every driver is driving more.And so the poster child for the phenomenon called induced demand is the Katy Freeway in Houston. TXDOT about a decade ago, spent $3 billion to expand that to one of the widest highways in the world. It's nearly 26 lanes across, including frontage roads. And five years after they completed that expansion, rush hour traffic was worse. It took longer to get out to the suburb of Katy than it did from before that highway was built. And the basic reason why is like, more people moved to Katy and relied on that highway to get back to Houston to go to their job or school. People took more discretionary trips. They went to the grocery store more frequently. They went to visit their friends in Houston more frequently than they would have perhaps if that highway had not been expanded. So you can like measure the increase in trips taken and vehicle miles traveled when you increase the highway. And so in fact, it does not actually get people where they're going faster.And that has been shown again and again and again in study after study after study after study, so much so that like, I don't know, in 2011 or something, two economists published a paper called the Fundamental Law of Road Congestion. So this is like a basic tenet that has happened. It is, you can see it replicated in cities across the country, and yet here comes TXDOT, here comes almost every State Department of Transportation promising to fix congestion by widening a highway. And the fundamental question that motivated my reporting is why? Like why are we still promising to fix traffic by widening highways?Doug Lewin And that fundamental law is that if you expand the highway, you will fill it up with traffic and you'll end up worse than you were before, right? That is basically the fundamental law. Megan KimbleYep.Doug LewinAnd that's, that's 13 years ago. Yeah, and the evidence is so overwhelming. And again, you lay it out well, I want to go back into some of the history because this is, this is one of my favorite things about the book is, is the history that you present here because you know, how did we get here? How did, how did all this happen? Right. And, and the interstate highway system, I think most people know, goes back to Eisenhower, but I don't think many people know. And frankly, I think you were doing some original research on this, right, and maybe discovered it and have kind of put this out there for the first time. Can you talk a little bit about some of what you found at the Presidential Library, I believe, in Kansas, the Eisenhower Library, and some of the discussions that were going on within the Eisenhower administration about what highways were for and what they weren't for vis-a-vis America's urban centers?Megan KimbleYeah, I drove up to Abilene, Kansas, like sort of on a hunch that I would find some documentation around the implementation of the interstate highway program. And indeed found like a very rich history. And there was a pretty rigorous fight in the 1960s about what interstate highways were for. So President Eisenhower sold the interstate highway program to Congress as a national defense program. You know, it was the Cold War. And he was worried about people being able to evacuate cities in the case of nuclear attack, being able to move arms and munitions across the country, facilitating trade between cities. So it was very much sold as a way to connect the country. We have this massive country, we need to connect cities to each other, allow people to get out of cities. So Congress passes the Interstate Highway Program, it's a $25 billion Public Works Project, the largest attempted in American history. And that money flows essentially directly to states with almost no strings attached.So the kind of unique thing about the Interstate Highway Act is that the federal government agreed to pay 90% of the cost of construction of interstate highways. Because again, it was supposed to serve the national interest of connecting cities across the country. Well, that funding flows to states and what states start doing is using that money to build urban highways because cars were kind of flooding city streets, you know, we talked about highways and horizons, like people went out and bought cars, so car registrations went up, you know, from something like from something like 500,000 in the early 1900s to 25 million two decades later. So there were so many cars on city streets and so city and state planners were like, hey we need to build big roads to accommodate these cars.So the cost of the Interstate Highway Program was running significantly over budget by 1960. It was running about $11 billion over budget for a $25 billion program. And the federal government was on the hook for that over expense. So Eisenhower asked this guy John Bragdon to kind of look into the Interstate Highway Program, like how was it being implemented and why was it running over budget? So Bragdon looks into it and he produces this report. He asked Congress to look into like, hey, did you guys really want cities to be building highways right through the middle of their cores, or did you want this money to be spent connecting cities? Congress was like, yeah, this is actually not for urban highways. The intent of the program was to connect the country to serve a national interest. So, Bragdon produces this report, it's called the Interim Report, and he presents it to Eisenhower and other kind of higher ups of the Bureau of Public Roads, the Department of Commerce, in the spring of 1960.And I found the text of that presentation in the Eisenhower Library, like his literal note cards or like handwritten notes on them. And it's an incredible presentation. I mean, the interim report itself is an incredible document and then, you know, he kind of distills that to, Bragdon distills that to present to Eisenhower. And he is very clear. One, the National Highway Program was to serve a national interest and to build highways between cities, not through cities. Congress is clear on that. Number two all the experts say that the way to solve urban congestion is to build transit systems. Like this guy is a Republican, he's an engineer, this is not like a political statement, this is pure geometry, like it's easier to move people in buses and trains than it is in a car. It's much more efficient use of space in a crowded city. And that cities were actually using federal money to tear up transit systems and build roads in their place so that most transit systems, rail lines, trolley lines across the country were being demolished and replaced with road infrastructure. And, Brandon tells Eisenhower, you need to direct the Bureau of Public Roads to tell states to do something different, to not use our federal money to solve this newly created problem of urban congestion, but rather to focus resources on connecting the country. It's like an incredible presentation. I mean, it resonates today with a lot of what kind of transit activists are saying today in 2024. So he presents it to Eisenhower and Eisenhower's response is captured a few days later in this memorandum of the meeting and he says, you know, the matter of running interstate routes through the congested part of cities was against his wishes for the program and those who had implemented it so had done so against his wishes and desires. And so I had,  I kind of knew that memo and I was kind of like well why didn't he move? This was against his wishes?Well, his secretary has a note in her diary after the meeting that people were in for a meeting on the roads program and they think it would be murder to move in an election year. So it's an election year, it's a presidential election. Money has been committed to states and Eisenhower says something to the effect of the states would rise up in arms if we reversed course on this program, if we took back money or gave them stronger parameters for what they could spend it on. So nothing was done. Bragdon's report was shelved. I don't think it was ever released. And nothing changed.But to me that was, it really, I think it anchored the book because it wasn't supposed to be this way. The interstate highway system was not intended to build all these urban highways. People back in 1960 knew that, high up people, Eisenhower knew that, and yet. There was this inertia that was hard to stop. So nothing happened.Doug LewinAnd you found that diary entry as well from, uh, that's amazing. That's amazing. Um, yeah, that's a, that, that is, that is so neat to think that, you know, there's, there's a history like that to be discovered and you, and you found some of it, so this history is, is truly fascinating. So, um, at that time, so you're, you're in the, in, in the late fifties and early sixties, and am I right that at that time, I think I remember from the book you presented that the, are the the federal government's paying 90%, right? And on other projects, if you wanted to build transit, you're getting what? If you wanted to like build more trains in your city, or you're not getting 90% from the federal government, right?Megan KimbleYeah, you're not getting much of anything. The federal government had like dedicated transit funds. I don't recall exactly how much they were, but they were an absolute fraction, you know, pennies on the dollar of what was spent on the highway program. So like, for example, San Francisco, in San Francisco, citizens revolted after the Embarcadero Freeway was built. And they said, hey, we do not want any more freeways in our cities. In our city, there was like a popular protest. And as a result of San Francisco Board of Supervisors, like canceled this massive freeway and to build BART, which we all probably have heard of, the Bay Area Rapid Transit System, they had to raise, they had to tax their own citizens locally to pay for that. So they had to forego federal highway money and raise money locally to build a transit system.Doug LewinYeah, I, you know, again, as I said earlier, like I work a lot on electric grid type issues and there's, um, you know, uh, monopoly utilities, the poles and wires companies. And, um, I was talking to a colleague yesterday. She, she read me this quote. Um, if you show me the incentive, I'll show, I'll tell you the outcome. Right. So like in, in the electric, you know, utility industry, there's, that means certain things they're going to spend capital cause utilities get a guaranteed rate of return.Obviously in this case, if you've got the federal government to pay 90% or you want to go a different way and you've got to tax your citizens to pay for it, this really reveals like if you've ever wondered why are there highways in the middle of our damn cities? That doesn't make any sense. Like literally right there, all this traffic running by the buildings where there should be sidewalks and people walking around, this is why. Because it's this legacy of the 1950s and frankly, a little bit of an accident. It kind of happened because the locals were like, this is really expensive, we can get the feds to pay for it. And now we'll be drawing traffic into our cities, I guess, was their thinking. It was paid for, and it would bring people into the cities. But of course, really, the interstates, I don't know if you know any stats on like how many people are like if you're on I-35, you know, going through Austin, not that many people on I-35 are getting off in Austin, a lot of them are going, you know, somewhere between here and Duluth, or between here and South Texas or something, right?Megan KimbleYeah, I mean, these highways were sold as a way to like resurrect struggling downtowns, they were going to bring people back to the central business district. I spent a lot of time in newspaper archives and it was interesting to see how planners were kind of framing these highways initially is like they were going to bring economic prosperity. And so I think again, it's like understandable that people were compelled by that vision. It was like very, it was sold. It was sold as a vision of prosperity that like being able to drive to the central business district and then go home to the suburb was like a way to build the American dream.So most highways are paid for through the Highway Trust Fund and that was created when the Interstate Highway Program was enabled, and that funnels gas tax. So every time you and I buy a gallon of gas, there's a tax on gasoline, and that is funneled directly into the Highway Trust Fund, and that was used to pay for the interstate highway system. And so it was a sort of like user-generated financing system. Eisenhower wanted it to be kind of self-sustaining. Well, in the 1980s, there was this fight to allow money from the Highway Trust Fund to be spent on transit systems, because again, it was just like transit was sort of funded kind of off to the side and like occasional appropriations by Congress. And so under Reagan, actually, Congress raised the gas tax and opened up the Highway Trust Fund to transit, dedicating a penny of the five cent increase to transit systems. So that ratio of 80% of federal funding goes to highways, 20% goes to transit, remains today. So we are spending as federally four times as much money on highways as we are on trains. No wonder we don't have very good transit in most American cities.Doug LewinYeah. And you chronicle in the book really well, some of the fights to, to change that and how frustrating and, and stubborn, um, Congress has been on, on that, uh, issue. I want to dive into, so again, you know, your, your subtitle is infrastructure, inequality, and the future of America's highways. I want to dive into the inequality piece of this, cause at the time, the highways were, were really, it's sort of the peak of that um, highway building period, late fifties, early to mid sixties. There is no Civil Rights Act. There is no Voting Rights Act yet. So just about, you know, every highway, including the ones you focus on in City Limits. But this is, while this book is about three highways in Texas, this story is true across the country. I was just in New Orleans recently, and was at some of the museums and was seeing pictures of I-10, the same highway that went right through the Fifth Ward of Houston took out huge parts of Treme, a historically Black neighborhood. But again, so you could, you could take almost any city in America and the story is going to be unique because all those communities are unique. And the story's also kind of the same because the route is always going right through Black and Brown neighborhoods who basically at that time have no political power. So you've got inequality in the title. Can you talk a little bit more about that history and how that legacy manifests today? And the stories of the people you have in the book. You do such a great job, not only with the history and the memos from the Eisenhower Library, but the people. Maybe this would be a good time to bring in the story of either, I don't know how to pronounce her name, Onari Berluson, or somebody similarly situated.Megan KimbleYeah, yeah. So right, as you mentioned, it's very clear in the historical record that these highways were intentionally routed through black and Hispanic neighborhoods, neighborhoods that had been redlined a decade earlier by the federal government. And redlining means just simply because neighborhoods had black and Hispanic populations, they were denied access to credit and federally backed mortgages.So Houston's Fifth Ward is one such example. I talked to this woman, Onari Goodrie, whose family was displaced when I-10 was built through that neighborhood. It's a historically Black neighborhood. People walked everywhere they needed to go. It was like a self-contained community. Lyons Avenue was this cultural and commercial heart of the neighborhood that she and her mom would walk up to do all their shopping. Her dad worked at the downtown post office. He was one of the first Black people employed by the US Postal Service in Houston. He walked to work.But when she was in middle school, she sort of started hearing rumors about a highway coming through her community. And then one day her parents got a letter in the mail saying, hey, the Texas Highway Department needs the land that your home sits on. And you know, you have six months to move. And as you said, this was before the Fair Housing Act passed. Like a lot of neighborhoods were not open to Black families. And so they moved along with many displaced families in the Fifth Ward to Kashmere Gardens, which is north of the Fifth Ward. And she though was like, so she was in, I think, going into high school when this happened. And she remembers how distraught everyone in her family was. They lived in this contained community where they knew everyone, they could walk to access everything they needed, and suddenly they were displaced like three miles from their neighborhood. So her dad had to buy a car to get to work, and she was determined to graduate from Phillis Wheatley High School, which is this very renowned black high school in Houston. So she walked to school every day. She walked three miles to school, one way, three miles home.And so like that highway construction had this hugely disruptive impact on that community. It's not just that it took out three full city blocks demolishing about 1200 structures. It also split the community in half. So  Onari remembers having to walk over this massive trench, which is what the highway became on these like really narrow pedestrian bridges. Like bullies would kind of corner you in them. They became really dangerous, not just because of cars, but because of, you know, people in the neighborhood who took advantage of them. And the kind of area south of the highway became known as the bottom. It was like really very much separated from the kind of part of Fifth Ward through that highway. So, you know, I talked to lots of people like Onari who remember when that highway came through and how profoundly disruptive it was to the Fifth Ward. And like, you know, as a result, people like left the Fifth Ward. Families wanted to be, you know, as the Fair Housing Act passed and as neighborhoods opened up to black families, people simply left. So that neighborhood like really emptied out. And it doesn't have the same kind of vibrancy of people on the street, people you know walking around today as it did before that highway came in.Doug LewinAnd it's just stunning to hear this and to think of all that was lost. And then to fast forward to 2024 and it's still happening. We not only like haven't learned the lessons, we're actually repeating the same mistakes over again. So you, you also chronicle, um, you know, a number of people and homes and, and even an apartment, right? The ballpark, the lofts at the ballpark, like we're, we're in a bit of a housing crisis in Texas right now, and they're taking down whole apartments, removing, what is it, something like 1,000 homes for the I-45 expansion alone. It's just kind of stunning to think that these things are still happening in 2024.Megan KimbleYeah, we have not learned any of the lessons of the 1960s. So what you're referring to is this massive highway expansion called the North Houston Highway Improvement Project, people in Houston call it the I-45 expansion. But it actually impacts the entire downtown loop, including I-10, which goes through the Fifth Ward, I-45, I-69. And it will demolish, yeah, 1,200 structures. And TechStat's own analysis of the project says the impacts will be predominantly borne by low-income and minority populations. So, indeed, we are repeating the mistakes of the past. One of the people who were impacted by that highway expansion is this Black woman named Modesty Cooper. And her house is literally like two blocks from where Onari's house was. I mean, Onari's home. Like she took me over to kind of show me where her house was. And I was like, I don't understand. Where was it? She's like, where the cars are, Megan. Like literally where the cars are streaming, that's where I grew up. Like two blocks from there, Modesti lives. She's this woman. She built her like a home, a brand new house from the ground up. She bought like a vacant parcel of land and designed a home and hired a construction crew and, you know, built this home for herself. And then one day in 2019, she gets a letter, again, from the Texas Department of Transportation saying, hey, we need to land your home sits on. And in both instances, you know, those homeowners, Onari and Modesti really have no recourse. The authority of and the only thing they can do is try to get a better price for their home. But what Modesti did, because she knew that other people like herself were impacted by this project, is she filed a civil rights complaint with the federal government alleging that the project violated Title VI and then it disproportionately impacted Black and Hispanic people, which is illegal. And so the federal government in 2021 actually paused the project and said, hey, we need to investigate these serious civil rights concerns raised by people like Modesti. And that was like a totally unprecedented move.Doug LewinYeah, it was a bit of a shock. I remember when it happened. I was just kind of like, wait, what? That, that never happens.Megan KimbleMm-hmm. Mm-hmm.Doug LewinSo this, this brings me to something I think is a really important point that, and it's forgive me, it'll take a little while to describe it, but, but bear with me. So there's this great book sitting behind me right now. This, uh, Heather McGhee's book, The Sum of Us, and I bring, I've brought this book up and other podcasts too. I think the thesis of it is so powerful, which is, you know, there's basically this kind of, um, usually, not always, but usually unconscious thing humans do where we, you know, other a group of people. Sometimes it's very conscious and quite intentional. But I think a lot of the times it's just like, we as humans, we've evolved to kind of identify with a certain group, I'm part of this group, these people are part of another group. And so we think, I think a lot of people hear of these things and they're like, oh, that's too bad. But that's not my problem, that's their problem. Or that person's problem or that community's problem.But that's actually not true, right? We all suffer from this, right? We all are then gonna be caught on those highways. With congestion, our air pollution is going to be worse, right? It's obviously particularly acute for the school you described in the Fifth Ward, but other schools even a mile or two away from the highway, pollution's going to get worse there too.And so, you know, you get into this in the book too, that the average family in Houston, and this is not, unless I read it wrong, this isn't low income families, the average family in Houston spends 20% of their income on transportation. So I think sometimes in these conversations, people are thinking, well, that sucks for the people that live by the highway. It actually sucks for all of us. And then the inverse is true. If we can figure out a better way to move people and to have a better transportation system that just works better for people. That's kind of Heather McGee's thing in The Sum of Us. She uses the example in the 1950s and 60s as the desegregation order started to come. A lot of communities that had built great big swimming pools would just fill in the swimming pools rather than have them integrated. It's this very visceral example of a way that we're all hurt by this inequality. And I think highways are a really tangible example of that as well, right?Megan KimbleYeah, I mean, I love the Sum of Us. I'm glad you brought it up. Absolutely. Like, it's not just the people who live adjacent to these highways, the Black and Hispanic communities that have to suffer through air pollution and noise and traffic violence. It's all of us. Like, you know, 40,000 people die every year in their cars. 5,000 people die in Texas every year because of traffic violence. Like, that's an enormous impact that we have all just sort of accepted as this background noise to our life.I grew up in LA and I was very acutely aware because of my dad scaring me straight: the thing most likely to kill me was my car. It is an incredibly dangerous form of travel, particularly how we've built our cities that people just need to rely on cars to get everywhere they need to go. This book actually, I wrote a story for the Texas Observer where I used to work. And that's kind of launched a lot of the reporting for the book. And for that story, I talked to this woman, you know, like a middle-class woman who really wanted to buy a home and the only place she could do so was like in Round Rock outside of Austin. And that meant that she had to commute on I-35 to get where she was going, get back to her job. And she got in a terrible car accident one day on her way to work. And she was out of work for a year. She had this terrible concussion and she's still traumatized. Like she still is very scared to drive. It gives her a lot of anxiety. But guess what? Her job hasn't moved and neither has her home, and so she still drives to work every day. So there's a kind of real trauma around car dependency for a lot of people. But also, as you say, it's extremely expensive. It is a really expensive way to get around. Indeed, you're right, that in Houston, the median family spends 20% of their income on transportation, which means that Houston, which is sort of often touted as this really affordable place to live, on average when you combine housing and transportation is just as expensive to live in as New York City. Housing is really expensive, but most people can get around using transit, which is much more affordable. So, like car dependency impacts all of us. Like one reason I wrote this book is I moved to Austin from Tucson where I biked most places I needed to go and I moved here and I ended up driving two or three hours a day to work, to various places I was reporting. And I was like, this sucks. Like, I don't want to live like this. It's really impacting my quality of life to have to drive everywhere I need to go. So, so indeed like car dependency has, I think the highest negative impacts for low income populations because travel by car is very expensive. And so as we build cities for car dependency, we are, um, I think in increasingly burdening low income people, but we're burdening all of us through air pollution, through climate change. Um, like through quality of life, sitting in rush hour every day. Like these are, like car dependency is something that like impacts everyone.Doug LewinSo there have been examples in history, quite a few, where highways have been defeated. I love that you bring Robert Caro's, The Power Broker about Robert Moses, and obviously he built a lot of highways, but the one through was at Washington Square Park… he was trying to build a highway through, which is like crazy to think about. But it's not just New York City. Apparently in Austin, I didn't realize this history, the Highway Department had wanted to put a highway right along Lake Austin. So next time you're driving on, I guess it would be Cesar Chavez. I don't know if it's on the other side, but I assume it's Cesar Chavez. That could have been an interstate highway, but for citizens at Austin who organized and said, no, we don't want a highway around our lake. So can you talk about our river? We call it Lake Austin. It's really a river. But can you talk a little bit about some of the historical examples of where highways were defeated and where highways have been removed? And then some of the movements that are active right now in Texas to try to either remove highways or stop expansions.Megan KimbleYeah, I mean, there was a massive freeway revolt in the 1960s as all these highways that we talked about earlier, their planners sort of conjured using all this new federal money. They drew these lines on maps. And people saw them, and they said no. And in part because they watched as these highways were built through their neighborhoods and communities and kind of saw the air pollution, the noise, how divisive they were, how they split apart neighborhoods.And like tens of thousands of people in cities across the country turned out and revolted. So like in Baltimore, a biracial coalition stopped a massive highway expansion that would have demolished something like 28,000 housing units, like an absolute massive highway. Washington DC had a really robust movement. We talked about San Francisco. So like in almost every city, Austin is not alone. Citizens absolutely revolted and erased highway lines from maps before they could be built.And I think part of the power of that movement is that people knew something else. These highways were new to them, and they saw the kind of devastation they wrought, and they said, no, I don't want anymore. And the challenge today is most of us, myself included, have only grown up in cities with highways. I've never lived anywhere that was not wrapped in highways. I've never known an Austin without a massive interstate through the middle of it. It's really hard to imagine anything else.But I think one, so in the book, I go to Rochester, New York, which is a city that has recently removed its inner loop highway, which circles the downtown. And I wanted to do that because it really makes visible that another world is possible. These are just construction projects. We can construct something else. So the city of Rochester in 2017 got a federal grant to fill in its inner loop highway, which is like a sunken highway that circles downtown. And so they did about half of it. It's called the Inner Loop East Project, and they brought it up to grade. And they filled in that land and they made this like two lane city street with a bike lane and a big sidewalk and trees. And on the surplus land that was left over from the highway, they built housing. So there's now you can go to Rochester and walk along Union Street and see like three and four story apartment complexes. A lot of them are rented at affordable rates to low income families. And it's this like really remarkable transformation of the city that like, you can be walking on in a neighborhood and just like come to this… It just makes it more contiguous. It's really remarkable to see. And what is also really compelling is they have not yet finished removing that inner loop. They're working on the next section of it right now. But you can go to Rochester and see the contrast. You can go see the inner loop north, which just remains a big sunken highway, and walk a block south and see reclaimed land with people living on it.So Rochester is not the only city that has done that. Milwaukee has done it, San Francisco, Portland. You mentioned Robert Moses. The first elevated highway in the US is the West Side Highway in Manhattan, built under the watchful gaze of Robert Moses. Well, in the 1970s, that highway suffered, like a concrete trunk fell through it or ran into it. I can't exactly remember. But it got irreparably damaged and city leaders ultimately decided to tear it down and now it's just a city street.And in a lot of these examples, people in those cities were worried there would be like carpocalypse, like terrible traffic congestion, paralyzing traffic congestion if we remove that highway. And what happened in city after city that has removed highways is that traffic evaporated. Like just as induced demand is a phenomenon, which is to say you can induce more car travel by building more roads, you can also reduce travel by reducing the number of roads available to people. So, that's happened in San Francisco when the Embarcadero came down is that traffic volumes measurably decreased. People just drove less. And that is true in every city that has removed a highway.Doug LewinWhich is why it's so crazy that TXDOT will put out numbers about like the I-35 expansion here in Austin, where, which you cited the book that they say something like, if they don't build the project within a certain number of years, it will take, what was it like four hours to get from Kyle or Buda to Austin? And it's like, of course it won't take four hours. Nobody would take four hours. They would find a different way.Megan KimbleOh, that stat drives me nuts. And it, like, it speaks to the fact that, like, I feel like TXDOT assumes no one's going to read their environmental impact statements, but, like, they have it. It's not even Kyle. It's, they say it will take, so the I-35 central expansion, it goes from South Austin to North Austin, sort of like Ben White Boulevard to, um, to 290 in the North. It's an eight mile stretch of highway. They say if we don't expand this highway by 2045, that will take three and a half hours to travel.Doug LewinAs if somebody, yeah…Megan KimbleLike you just can think about that for a minute as if somebody would do that. I'm like reasonably fit. Most people can walk eight miles in three and a half hours. No one is gonna sit in their car to take that trip. They either won't go or they will go by a different mode. And yet that is just like presented as this incontrovertible fact. It's like science, it's engineering. And it's not, it's made up.Doug LewinWhat's the closest to, so we started this conversation by talking about, or you started this conversation by talking about Futurama and the display at the World's Fair in 1939, which again, I really encourage people to read the book, your description of it. You really feel like you're there and you can see it. And it is a compelling vision. These wide streets, freedom of movement. It's all very romantic and appealing. And I think you say in the book, we need a different vision.Have you, like what's the closest you've seen to that, to somebody articulating a different vision? And not just, I should say not even articulating, like I really think there's something to actually seeing it. That was the power of Futurama, right? Was people could actually, they didn't have to visualize it, they could see it. Has anybody done anything like that where people can really get an image of what a different way would look like?Megan KimbleI haven't really seen it. I mean, that's why I think highway removal is so compelling. That's why I went to Rochester twice is to like, that is the vision to me is like, we can erase these structures and build housing and let people live closer to where they are going. So anytime I've seen kind of renderings of that or like visions for how do you like, how do you make I-35 Boulevard and put housing next to it? I think that's really compelling. I also think COVID offered a pretty compelling vision. Our highways were empty for months as we were all quarantined at home and people reclaimed city streets. All these outdoor cafes sprouted on sidewalks. And it just speaks to, all of this has become so politicized, but it is a fundamental human truth that we like to be around each other. And highways make that impossible. The way we have built our suburbs make that impossible. And I think COVID really revealed like how desperately we wanna just be in conversation with each other when that was taken away from us. And so like seeing the massive empty freeways that kind of thread through our cities as we all stayed at home, I think for me, certainly revealed like what a waste of space this is. But yeah, to answer your question, like I actually have not seen… I haven't seen a modern Futurama for the highway removal movement and I think that is like the thing that, yeah I would love to see that. I haven't seen it.Doug LewinYeah, and I haven't either as well as the question, because I think, I think it is really important. And I, you do say towards the end of the book, like we should, we should, I'm quoting from the book. We should tear down urban highways, but how we tear them down also matters. Right. So like, I wonder if that Futurama, like it was one person in 1939, but if the, the folks that are involved in this movement actually can't get together and start to build some of these models of this is what it would look like if we didn't have that, including, here's other ways to get to the city, right? It's not like a highway. You can have highways, other places that lead up to the cities going back to that original Eisenhower vision, right? I wonder… there are, well, you talked just for just a couple minutes about the different groups working in the three different cities you have. You've mentioned them a few times, but the I-45, the I-35 coalitions, the one in Dallas as well.Megan KimbleYeah, so in Houston, there's this group called Stop TxDOT I-45. And they began literally by like people who heard about the I-45 expansion and were appalled and just like kind of printed some yard signs and started talking to people in their own neighborhood of like, hey, do you want this expansion? No, I don't either. And so it became this like pretty robust grassroots group. They went, they've gone door to door in neighborhoods across Houston and highway and neighborhoods adjacent to the highway expansion to let people know that it's happening, to let people know what their rights are, how they can get involved. And so they have really mobilized, I think like a pretty robust, again opposition to the I-45 expansion. And again, like I've gone door to door with them. A lot of people didn't know the highway expansion was happening, like people who were right in the footprint of it, people who might even lose their homes, didn't know it was coming and didn't know what their rights were within relation to TxDOT.So that's the group in Houston. There's a group in Austin called Rethink35. It was founded by this guy, Adam Greenfield. And their vision is to not, you know, oppose the I-35 expansion and their kind of vision is to turn I-35 into a Boulevard right in the middle of the city. I-35 used to be East Avenue, this like wide Boulevard with a big grassy median. And the idea is like, bring that back, you know, build bus rapid transit or something, some other form of transit along the I-35 corridor, reclaim that land for housing and people, and reroute all the interstate traffic that is currently coming right through the heart of Austin, around Austin on State Highway 130, which is a toll road that swings to the far eastern edge of downtown.Doug LewinAnd it's vastly underutilized by the way, like anytime you're on 130, there's like, there's no one there. Uh, not no one, but it's, basically…Megan KimbleIt is vastly underutilized. Lots of capacity could be added to that highway. And then in Dallas, there's a group that began as Coalition for a New Dallas, founded by an urban planner named Patrick Kennedy. And he basically kind of on his own, he and a friend, presented this vision of I-345 as an elevated highway that bounds the eastern edge of downtown Dallas.And it's, you know, it like is a really big sprawling highway. There's like this mess of lanes and it's just surrounded by like surface parking and public storage, like this is right in the heart of downtown Dallas. It's all this land that could be put to better use. And so he basically poses this question to the city of Dallas, like what if we got rid of it? What could we do with that land instead? And he found that, you know, the land, the highway impacts something like 350 acres of land, which could hold 25,000 housing units, lots of offices or parks or community spaces. And he actually got TxDOT to study removal as a formal project alternative. So those are the kind of the three grassroots groups that are like kind of form the backbone of the book.Doug LewinIt's really remarkable how much progress each of those groups have made. Just the, it is, this is so incredibly difficult because of that inertia again, which you described here and in the book. I actually just want to read one part of it. I just want to give the listeners just a flavor of your writing, which I think is just so it really is great. And this is there's a lot of them. I hope you're not like - I hope you liked the one I picked. I there there's so many great examples. You really do a great job painting the picture here, but this is, um, uh, sort of towards the end of the book, not right at the end, but towards the end of the book: “A highway is a hard thing to perceive. The physical structure is indisputable concrete and beams, struts and supports. The persistent rumble. On a city map, a highway is a contour line defining the shape of a place. This here is the edge of downtown. It is the artery that circulates energy, the skin that communicates an edge. But highways aren't designed to be experienced or absorbed at human scale. On a highway, we are our cars, contained in the hum and clack of suspended rubber wheels, speeding so fast that we can't absorb anything except paint on pavement and the giant green signs that announce where we are going. But highways are similarly hard to see outside our cars. The structures defy human scale. Overpasses soaring 125 feet above ground, the height of a 12 story building. A highway is a wall of noise, so loud it dulls every other sense. You can't ever see a whole highway. You can only pause above or below and consider some part of it. And once a highway is built, it is almost impossible to imagine it gone. For most of us, highways simply are. The essential shape of the built environment, never to be unbuilt. But cities have always been layered places, colonized and disputed and reclaimed. It's all just construction.” It's really striking. I love the writing. Again, there's a lot of other parts I could have picked, but will you talk a little bit about that and why you wrote that particular passage?Megan KimbleOh man, I love that you just read that. That was really very cool to hear. Um, I wrote that passage actually really early on before I had even sold the book. I went to see the high five interchange in Dallas, which is the first, like five level interchange built in the US. And just was like on this, like little pedestrian trail, like marveling at this structure above me. And yeah, I mean, in reporting this book, I spent a lot of time contemplating highways, you know, looking at them, examining them in a way that I think I had never done before. And most people probably don't do, you just drive on them. They just are. And I really wanted to capture the sense of possibility that like, these are not inevitable parts of the urban landscape. Like you just read, like these are policy choices. They're not mountains, they do not, they're not natural features. And that we can, we can do something different.Um, and like, yeah, like I just wanted to have readers start to look at these structures, particularly in Texas where they are so massively outsized. They are just like huge pieces of architecture, just like right in the middle of our cities. Like let's look at them. Let's think about, do we want this? Um, so yeah, thanks for reading that. But I actually like went to the high five and like came home and just like wrote that as just this kind of standalone contemplation of highways and then it, you know, I found a place.Doug LewinYeah, it really stood out to me. It's really, really well done. And look, the whole book is, is well written. Um, I hope folks will read it. Is there anything I should have asked you that I didn't, anything else you want to say?Megan KimbleWell I don’t know if you want to talk about electric vehicles since this is like a podcast that mostly talks about the grid.Doug LewinSure, of course I do. Thank you. Yeah, yeah, yeah. Tell us what you want to say about electric vehicles. I was struck by that part where you said, yeah, electric vehicles can help reduce emissions, but… So yeah, let's talk about that.Megan KimbleI mean, that's the argument TxDOT makes. That's the argument a lot of people make is like, well, electric vehicles are coming so like that will save us. Like electric vehicles will reduce emissions. So we can just have these highways and drive as much as we wanna drive because EVs are coming, right? But I think the like thing that I learned is like one, they're absolutely not coming quick enough. Like the fleet turnover time is a real bottleneck to decarbonization. So like most, I think it's something like 8% of the cars on the road today are EVs.And they like, and also, well, like the more we drive, the more power we need to fuel these EVs. And as we are transitioning the grid to renewable energy, like it just puts more pressure on that effort on the grid. And as you know, as your listeners know in Texas, like our grid is not doing great, you know, like it needs some help. You know, that's my layman's interpretation of what happened. Doug LewinIt needs some help. You're not wrong, yes.Megan KimbleYeah, so I think the idea that we can all just keep driving as much as we want, as long as we're in an electric vehicle, is like a real false promise. Like in order to reach like carbon goals that have been set by the US, but then have been committed to by the US, like we can't, we just simply cannot drive as much as we're driving, that like every extra mile we add to our commutes puts more pressure on electrification and the transition of the grid.  And so, I feel like this is the place to talk about EVs and haven’t gotten to talk about them on my tour.Doug LewinYeah, so a couple of thoughts on this. So one, I do think there is a lot of potential to decarbonize with electric vehicles. And I do think the piece with the grid that's so important, Megan, is that we have to charge the cars at the right time. So if everybody gets home from work, they're driving on these great big highways and sitting there for an hour and frustrated and whatever. And then they get home and they plug in their car. If everybody is charging at the same time, we're going to have further problems on the grid. If there is those smart charging infrastructure, right? You have to have a, a charger that has some software in it that basically has a signal from the grid and, and you plug in and it's going to charge the car when there's an abundance of energy, not right after the sun goes down. That might be when you get home. If there's a lot of solar power, it might be overnight when there's a lot of wind power. So that kind of thing is really important.And I think actually has the ability to potentially strengthen the grid if it's done right, which that if it’s done right, is doing a lot of work there, right? There's a lot that has to happen policy-wise for that to go into place. To me though, the bigger thing is, and I talk about this a lot with people, I obviously work on this a lot, and decarbonization is a massive goal. It is not the only goal. We need to decarbonize in a way that actually makes people's lives better. Right? This is, we, we live in a world where, you know, already 40 to 45% of people can't afford their power bills. Some of that is because of all the transportation costs. Um, but then, you know, you, you talk about in the book, we talked about earlier in this conversation, 40,000 people dying on highways every year. That's not acceptable. That's not, that should not be something we just like shrug our shoulders at. And like that 40,000, I mean, if 40,000 people were dying of anything else that was preventable, I would think we'd prevent it. But somehow we've all just decided like this, this is a bargain we're willing to make. And then all the lost time, all the expense that goes into driving all, all of those different factors are still there. If the only thing we do is go from gas powered cars to electric cars. We will have some, again, integrated with the grid in the right way. We'd have some less carbon emissions.But I just don't think we want to continue that Faustian bargain of road rage and traffic death and lost time and all of that. So, so it really, I think the, the issue that we want to focus at least I want to focus on is multimodal electrification. Like how we need more electric buses and electric trains. Um, and to rethink highways overall and all, all that. I mean, I think all of that comes into it.Megan KimbleYeah, yeah, I love that perspective. I mean, I just have heard from folks that's like, well, like electric vehicles are the solution, we can just kind of keep continuing to build our cities as we've been building them based in sprawling on car dependency. And it's like, there are all these negative externalities. And like, it's just simply not coming quick enough that we really have to kind of rethink how we have structured our cities to make this transition easier, to facilitate its arrival.Doug LewinYeah, and making sure we're also not perpetuating the inequalities that have existed all, you know, all these problems with highway expansion. If we, again, if all we do is go from gas power cars to electric vehicles, and we're just going to continue expanding highways forever, even if, and you're right to raise the question, like we're not sure emissions would go down because, because of grid impact. I think they probably would, but even if they did we don't want to continue to separate neighborhoods and take people's homes. And we didn't even talk about the school in Austin that's being taken out. Like they, these, these are outcomes that are, that are not acceptable. So yeah, I think you're absolutely right. The basic, the overall thesis you're laying out there that electric vehicles are not a panacea is absolutely correct. Yeah. Megan KimbleExactly. Doug LewinSo the book is City Limits people can find it wherever books are sold. I just happened to be yesterday trying to do more writing myself and I went to write at a, at a brewery where sometimes I write, don't judge me. And somebody was sitting there with your book on the table, so it's getting out there. And he said there's a, I think it's Austin Urban Books or something, a book club, and they're gonna be reading it. So folks, can you just tell folks where they can find you, your website, your Twitter handle, and if there's any book clubs people can join or things like that to read your book.Megan KimbleYeah, if you're here in Austin, there's a book club called Urban Austin Reads, and my book is the selection right now, so you can join the book club. It's at First Light Books in Hyde Park every Friday, and I will be doing an event there on May 17th, so folks can come out to that in Austin. And then you can find me online, just my name, Megan Kimble. So my website is megankimble.com. I'm on Twitter or X, whatever we're calling it these days, at Megan Kimble. Instagram, you can just Google me. I'm very findable on the Internet.Doug LewinMegan, thanks so much for doing this. This was a great conversation. Megan KimbleYeah, thank you for having me. 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

Before you listen: I will be hosting a mailbag episode in the next couple of weeks and am asking listeners to submit questions. Please send an email to douglewin@substack.com or leave your questions in the comments for this episode. Following Winter Storm Uri, the Texas legislature worked to identify proposals that can increase the reliability of the ERCOT grid. In this week’s episode, State Senator Nathan Johnson, representing Senate District 16 in Dallas and a member of the Business and Commerce Committee overseeing ERCOT and the PUC, shares insights into the proposals that are reshaping Texas energy policy.Central to Senator Johnson's efforts is the establishment of a fund aimed at creating microgrids at crucial facilities such as hospitals and police stations. This initiative, now part of the Texas Energy Fund via Senate Bill 2627, secured nearly $2 billion to bolster microgrid infrastructure after receiving approval from Texas voters in a constitutional amendment. Moreover, Senate Bill 1699, spearheaded by Senator Johnson, formalizes the collaboration between the Public Utility Commission and various stakeholders to implement virtual power plants and aggregated distributed energy resources programs, while also mandating the commission to enact measures for reducing residential energy consumption.Beyond legislative achievements, the conversation delves into pressing topics such as transmission policy, the evolving dynamics between fossil fuels and renewables, the imperative for innovative regulatory frameworks and incentives for utilities, and the pivotal role of energy efficiency in shaping Texas' energy landscape.I hope you enjoy this conversation as much as I did. If you like the episode, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen.I look forward to hearing your thoughts; don’t hesitate to share them with me and fellow listeners in the comments. Thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.Timestamps03:33 - Short and medium term predictions for the TX grid7:45 - Texas Power Promise, microgrids, and load management to avoid prolonged outages10:29 - Circuit segmentation15:36 - Distributed Energy Resources, Senate Bill 1699, Virtual Power Plant pilot18:20 - Conservation29:07 - Texas’s explosive load growth and importance of load management32:26 - Emerging technologies34:04 - Relationship between oil and gas and renewables36:53 - Transmission44:33 - Interconnecting ERCOT  and FERC jurisdiction in Texas48:31 - Geothermal50:17 - Incentivizing TDU’s to spend on energy efficiency, not just steel in the ground59:39 - Markets1:05:15 - Scapegoating renewables1:08:47 - Texas Energy Fund and natural gas investmentShow Notes"The Name of the Game is Flexibility," a Conversation with ERCOT's Pablo VegasText establishing the Texas Energy Fund - SJR93 / Proposition 7Text of SB 1699 - “An Act relating to the Participation of Aggregated Distributed Energy Resources in the ERCOT Market” Text of HB 1500 - includes language for the Circuit Segmentation StudyText of SB 415 - “An Act relating to use of electric energy storage facilities in the ERCOT power region”TranscriptDoug Lewin Senator Nathan Johnson, thanks so much for being with us on the Energy Capital Podcast.Nathan JohnsonThank you for having me on. I'm excited to have this conversation.Doug LewinAll right, well, I wanna start from a high level. I did this with ERCOT CEO, Pablo Vegas, and I kinda like the way it kinda sets the tone for the conversation. I'm gonna ask you the same question. Where do you think the grid is gonna be? Can you kinda describe your vision for what the electric grid in Texas, specifically the ERCOT grid, will look like in a five to 10 year timeframe? And I'm not, we're not talking 20 years where it's super futuristic and sci-fi and not you know, next legislative session.Nathan JohnsonWhich is fun, which is more fun.Doug LewinAnd we can do that. I'm looking forward to talking some of the sci-fi stuff too. I know you're a big thinker and a visionary, but let's keep to that kind of five to 10 years. What's your vision? Where do you think all this is headed?Nathan JohnsonThe first thing I'd like to say out the gate is I am very optimistic about the five to ten year timeline. It's the one to five that we're going to spend some time talking about today that I think is much more dicey. As to what it looks like, it's partly contingent on what we do in these next one to five years. It's going to be partly intentional, and there's going to be an unintentional factor. What we do know is that we are having, we are experiencing explosive load growth. And that is, I believe, going to continue. And I don't know anyone who disagrees, who has a different expectation. We have an aging infrastructure, and we have an infrastructure that at the moment can work okay for today. A lot of the stuff we did in response to Uri, I think, has stabilized things. What our current infrastructure definitely won't do is accommodate the load growth, the complexity of our grid, which is far more complex than it once was, and it's going to get more complex.And it will not meet the specific resiliency demands that we need of our grid. So it was gonna have to change. I expect we will see additional, traditional gas-fired generation, hopefully well regulated, that's putting out steam, not methane. And I think we can do that. But we're also gonna see a whole array of alternative, alternative forms of managing our load and our generation and our usage. The way we're going to meet the gap in the next one to five years is not by suddenly having enough quote steel in the ground, although that is a long term goal. There's no way in five years we're going to build our way out of the gap we are going to experience between load and generation. We're going to have to approach it three different ways. We're going to have to have other forms of generation coming online at the same time. We're going to have to manage the load.And we're going to have to manage transmission. And that breaks down into categories. Our generation is going to be making sure that our existing plants are up and operating. It's going to be making sure that we do get some new steel in the ground. We're probably talking about peaker plants in specific points of congestion, you know, strategically deployed. We are talking about very small sources like distributed energy resources. Those are forms of generation that we're going to talk about in this podcast.But there is a generation component, and it will not be all giant 1 gigawatt plants. We are going to see a much more diffused form of generation. That by itself in the one to five years will not get it done. Big Gen can't get it done because we don't have enough steel. We don't have enough transformers. We can't build it fast enough. There's no way we're going to Big Gen our way out of it in one to five years. That's why we're going to be looking at smaller resources.Load management is sort of the inverse of that. And I know your other guests know more about this than I do, but I think it's important to anyone who is listening to understand that a kilowatt saved is a kilowatt generated, right? And so when we look at demand response programs at the consumer level that might mirror what we've done at the industrial level, we can see gigawatts of power that's suddenly made available. So if we can pull two gigawatts down from the grid, that's two gigawatts we don't have to generate.If we can manage our transmission such that when you have, say, a microgrid backing up a particular region that experiences transmission congestion a few times a year, instead of having to deploy half a billion dollars building a new line, we put in a microgrid and then we can devote our resources somewhere else. So that's the transmission management, load management as demand response and virtual power plants, aggregated distributed energy resources on the generation side.It's a much more complex, much more granular grid. And then the two remaining components aren't physical. They're financial models. What market signals do we send in order to accommodate all of this one to five year change, as well as setting us up for that five to 10 year change? I think once we get all that in place, to answer your first question, I think we're going to see new steel on the ground at the large generation level, at the base load level. But I also think we're gonna see a huge proportion of our load growth be absorbed by solar and wind and other renewable forms that are paired with reliability mechanisms like batteries and other forms of energy storage. I think we're going to see very flexible relationships between load and generation, all managed by retail electric providers, TDUs, and the ISO ERCOT. So all these moving parts are going to create, I think, a much more, stable, resilient, adequate, affordable, efficient, and cleaner energy future in five to 10 years.Doug LewinIt's quite a vision. As my grandmother used to say, from your mouth to God's ears, right? Let's make it so. Nathan JohnsonWe all have something to aim for.Doug LewinNo, it's a great vision. I do think it is one that is realistic and frankly, probably necessary because as you talked about at the beginning of that answer, there is a lot of rising load growth. If we want to be able to meet that growth, we’re gonna need all these different resources. There's going to need to be some new gas peekers, a lot of storage, a lot of renewables, and a lot of, as you talked about, transmission, managing the transmission better, and the load side stuff, the demand side stuff, which, as you well put it, if there's two gigawatts less of demand, that's two gigawatts less of generation you need. You were instrumental in two pieces of legislation passing during the 2023 session, the last regular session.One of those established a fund for microgrids. I believe it's often referred to now as the Texas Backup Power Package or something along those lines. And this, it was a standalone bill you had, but then it was folded into Senate Bill 2627, I believe by Chairman Schwartner, and then became Proposition 7 that everyone voted on. And now has, I believe the number, something like $1.8 billion for microgrids.So I want to ask you about that. I also want to ask you about, and we'll take these in turn, the bill that you passed with your name on it, Senate Bill 1699, that was about distributed energy resources and had a requirement for the commission. And I'm reading the bill language, just one sentence. Don't worry, audience. The commission by rule shall establish goals in the ERCOT power region to reduce the average total residential load. This is a recognition that there hasn't been as much residential demand response. We have a lot of commercial and industrial.So I'd love for you to talk about these two different pieces of legislation. You could take them in whatever order you want, but the, the funds, the incentives that are there for microgrids and what its importance to this, to the grid will be both in the, in the short term and in this 5 to 10 year vision we were just talking about. And then also the energy efficiency and DER piece and Senate Bill 1699.Nathan JohnsonLove talking about the Backup Power Package, which is also known as the Texas Power Promise. And the promise that motivated the whole thing was that people aren't gonna be without power for long periods of time, hopefully ever again. And that's through load shed management. One of the problems during Uri is that the feeders in our existing structure, their legacy, they're old. And they overload and they're so big that if you cut one and turn one off and then cut that one and turn another on, we're moving such huge chunks of power, we're not sure that load and generation are gonna be sufficiently in sync to not blow the grid up. So it kind of left, it left our TDUs in the position of really not being able to take a chance. And so some people were without power for long periods of time. Other people had. That bothered me. So how do we manage that? One of the problems is that, if you've got a critical feeder with a critical facility on it, like a water treatment plant or a hospital or a fire station or an assisted living center, other things that are essential to the community, you can't cut it. And if you can't cut it, you can manipulate load shed a lot less. But if you put some backup power there, suddenly that feeder becomes rotatable and you can manage load shed a lot better. That was kind of the initial concept behind it, but it grew into something that I think is gonna have much broader influence on microgrids and distributed energy. And that is we are through all of the money that has been deployed at a very important thing for our state. You know, we've got almost $2 billion recognizing that we don't ever want water treatment facilities to lose power. And if they're too small to afford it, we want it to be there anyway. We are going to be kind of jumpstarting or catalyzing the market for developing microgrid technology by putting out there for bids, actually bringing to market and selling with state subsidies microgrid technology around the state. That is going to create ripple effects because the scale of this is huge and we've got all kinds of energy providers at the microgrid level very interested in participating in this program.So we think it's going to help with loadship management. We think it's going to help assure that critical facilities don't get knocked off. And we think it's going to accelerate the development of a very active and responsive microgrid market. At the same time, as we see other market forces pulling microgrids along with us.Doug LewinYeah. And let me just, so I just want to unpack a couple things there before we move on to 1699. So in that, within the funding for the microgrids, so in what you just said, you said there were the TDUs and I just want to make sure for our general audience, that's the Transmission Distribution Utilities, the poles and wires that are the regulated utilities. They are the ones that get the order, right? During Winter Storm Uri, they're told you have to implement this load shedding.So the change that you saw, that if we could put microgrids at these places, that would allow that rotation to happen, which of course, a lot of people listening to this would have experienced that during Uri. They either never lost power or like you said, we're without power for three, four, five days. The funding is, if memory serves, it's up to 2.5 megawatts per site.Nathan JohnsonThat’s right.Doug LewinSo that's a pretty good, I mean, that's gonna be like the size of a medium-sized hospital, or that would be the load of several big box stores to put that in perspective. And the bill also requires a mix of solar storage and gas, which I think is a really interesting way to do it, because I think a lot of times in these discussions, there's a lot of purity tests, right? It should be only gas, or it should be no gas.And I think this is a very pragmatic approach because if you only do gas, you have to get a very, very big turbine to meet that need where solar and storage are gonna help lower that. The same is true on the other side. If you had to have enough storage to last as the bill requires a 48 hour requirement, you'd have to have so many batteries, the costs start to become prohibitive. This is a mix that should utilize the best of each of those resources, right?Nathan JohnsonYeah, and it was really a good political moment because, as you just said, people get hung up on, this is only going to be gas or this is only going to be renewables. And the point of the things is to keep working for 48 hours. And requiring the mix is the thing that we thought was most likely to achieve that, not only for durability, but stuff goes wrong. And one of the components is not working well, the other one is. And that is the point. These are supposed to be rock solid backups.Doug LewinYeah.Nathan JohnsonThe other thing I wanted to mention, I don't want to suggest that these microgrids is suddenly going to alleviate all the load set problems. It's still a complex equation that the transmission and distribution, the poles and wires, people have to figure out how to, which feeder to cut. But not only that, there's something called segmentation. The feeders get divided into pieces so that you have smaller rotatable chunks. And there's no map for that today. So the other part of the bill in the form that we passed it out of the Senate was to require the transmission and distribution utilities to study how they can improve their load set management and to give us a report on that. In the legislative process, the two elements came out of the Senate combined in my bill. In the House, they were split into two and packaged into two other bills. But the whole thing did pass, and we are hoping that it works together, and it has the market effect that we want it to, the technological and innovation effect that we want it to, as well as the resiliency that we really all want.Doug LewinAbsolutely, and that circuit segmentation study, I believe the utilities need to turn those in by September, if I'm not mistaken. We could put a link to that in the show notes so people can see where that is in the bill and what the requirements are. But some of this stuff gets wonky and nerdy and detailed, but this is the stuff that really makes a big, big difference. God forbid there's ever some outage again. The utilities have to do a better job at rotating that because you know being without power for an hour or two is dangerous and difficult. Being without power for days is deadly, as we saw during Uri, and that just can't happen again.Nathan JohnsonIt's deadly, which is a huge moral problem for all of our consciences, and it's expensive. I mean, we had $200 billion in insurance claims. And so that's an ability we want the TDUs to have. Doug LewinAbsolutely, absolutely.Nathan JohnsonSo in a small way, we hope this contributes to that.Doug LewinYeah, the other thing I was going to say about the Backup Power Package or the Texas Power Promise, is that what it is? I always get these, I can never remember these names. I think I'd remember it by now. Nathan JohnsonMm-hmm. They're both in there.Doug LewinThere it is. So it's up to $500,000 per megawatt. So it's a nice incentive. And I do think, as you suggested a minute ago, will move a market. That'll really create, you'll have companies putting together those packages. And then even once the incentives are gone, there should be some learning curves around putting in those kinds of systems that hopefully we'll see these things scale. There's enough money there to fund gigawatts of that, but I think we'll see much more beyond that. So I'm really excited about that. Nathan JohnsonYeah, I'm hopeful once you put all these products up, once you put all these products on the shelf, they can be purchased by anybody, right? This is just out there. The state is going to be facilitating the development, the deployment and the purchase of these things on critical facilities. But once the technology is rolling and economies of scale are rolling, we really think it's going to be helpful. We hope so.Doug LewinTotally agree. And then, so let's talk about Senate Bill 1699. This is the one that does require the commission by rule to reduce residential load. Also had a lot in there about distributed energy resources. You know, I mentioned earlier the podcast with Pablo Vegas, and when I asked him about his five to ten year vision, the first thing he said was, I think we're going to see a lot of small resources out there on the grid. And what you did with that bill was helped to create, if I'm not getting it mixed up, I think this is the right one, right? That helped create in statute the ability for that, the pilot program, the virtual power plant pilot to continue going, but then also puts in place this requirement to do more on energy efficiency and demand response. Can you talk a little bit about your thinking behind wanting to work on that legislation and what you hope to see that evolve into?Nathan JohnsonAbsolutely. The distributed energy resources market is one that holds great promise. We talked about that five to ten year timeframe, maybe another, we're at 120 gigawatts or so of load on our grid. We could be at 250 in 10 years, maybe 300, maybe less, but those are the projections. And I don't think we're going to have enough distributed energy, small scale resources to add 100 or 200 gigawatts. But in the meantime, in the next one to five years in particular, they can meet local demands for resiliency and even environmental concerns when a microgrid is replacing a diesel array. And so my thought was we need a regulatory framework for this emerging market of emerging innovation and technology. Because when there's a regulatory certainty around a product, that's when people are willing to invest and really surge forward.And I think it's kind of a good lesson too in being hyper-prescriptive versus not doing enough because I think I had a version of a DER bill the prior session, I had a DER bill last session that did not pass, but the one that did pass is the aggregated DER bill. And that is, as you said, it clarifies. I mean, sometimes you just need a statute in place so that nobody's wondering whether or not the PUC has the authority to conduct this pilot program.Nobody's wondering whether the PUC has the authority to start directing markets to develop this kind of technology. And that's really what we did is remove any doubt. The PUC should do this. The PUC can do this. And sure enough, we have a pilot virtual power plant that makes use of these distributed energy resources. And for those listening, we're talking about rooftop solar. We're talking about the ability of consumers to participate in the energy market.We may be talking about microgrids. We're talking about other small points of generation. And now we can look at them in the aggregate as a single generation resource. And then when you're talking about a virtual power plant, you've got these aggregated distributed energy resources that are part of a virtual power plant. And then we have these demand response programs that at the same time can drop demand. And so we have this virtual power plant that's looking at dropping demand and rising energy that is able to also in real time respond to market signals using perhaps AI, which is going to be another issue in our discussion today, to optimize systems. And it's a whole new conception of available energy in our market. I knew we needed some sort of regulatory framework. Doug, I think we're probably going to need further legislative action on this. But the market is still young and being too prescriptive too early can kind of put up roadblocks to innovation and new ideas and participants. Not saying enough is inertia, nothing happens. So I think there's a ways to go but we are still learning in real time right now. The demand response component, I do want to mention that the initial demand response bill was filed by my colleague Senator Jose Menendez and it just didn't survive the legislative process. As with bills I've filed in the past, there were those who felt that it was too prescriptive and it got snagged. But there was general consensus, I think, that it's high time Texas has consumer demand response or small commercial demand response folded into its energy policy. So the opportunity came up to pick that bill up and put it onto my aggregated distributed energy resources bill 1699. And we took advantage of that and shepherded it through the process. So now while it's pretty modest, and there's people who are underwhelmed by the demand response program we've put into place, it's the first one. And things are already happening. And in fact, I think people are taking the development of demand response more seriously than was expected.Doug LewinYeah, yeah. And we're seeing this. So at the time we're recording, we're just after the utilities, the poles and wires companies, CenterPoint, Oncor, AP, etcetera, have filed their annual energy efficiency plans. And I haven't looked through all of them yet, but one, the utility for the area you represent, Oncor in the North Texas, Dallas, Fort Worth area, and out into of West Texas. They have filed for a new smart thermostat pilot that they put in their filing was partially in response to 1699. So we are seeing already, and then actually retail electric providers is one of the few cases where, cause a lot of times, not few I shouldn’t say that, there's a lot of times that the retail electric providers, I don't think this is a secret. Anybody who's in the industry listening to this will know this, the retail electric providers and the utilities don't always see eye to eye on things. On this they are in agreement that we need to have more smart thermostats in there, it's a potential way to reduce the risk of outages. Only for consumers that volunteer and wanna participate. So you were talking about aggregated DERs and you've got solar and you've got storage, but as you were talking about earlier, yes, you can inject power, but you can also reduce it and you start adding those up and you can get to some really big numbers. So we are starting to see that, it's already starting to come into the market from 1699.And I think the next step will hopefully be the PUC potentially even opening up a rule because to tie this all back to Winter Storm Uri, Senator, I mean, we had several problems during Winter Storm Uri and I want to dive into these, but you had gas supply was disrupted. You didn't have enough gas supply in the system. You had power plants that froze that caused major problems and you had demand that was extremely high.And all of those were problems. And if you only deal with one of those problems and don't deal with all of them, you're by definition only have a partial solution. So dealing with that demand side is just absolutely critical.Nathan JohnsonAnd there's a couple of things in there that made me wish I'd included them in my overly long first answer. But one of them was when you're talking about the multiplicity of factors and solutions, you know, what's your grid strategy? What's your grid vision for five to 10 years from now? It is the trite phrase, all of the above. But there's a reason that it's so many different things. It's because the complexity of our grid is beyond anything that anybody would have imagined 20 years ago even. And it's going to require a number of different approaches to overcome all of the different kinds of obstacles, to meet all the different challenges, to meet all of the different ways in which we get enough electricity at the right times to serve our basic needs. Oh something else I failed to mention, the things we're talking about with demand response and energy efficiency that you just mentioned. This is a word that people are sometimes afraid to use that covers both of those. It's conservation. Conservation will play a major role in the grid in the next one to five years, because it's quicker, easier, and cheaper. It will play a major role in the grid in five to 10 years. Conservation can be either active or passive. And I was talking with ERCOT CEO Pablo Vegas about this subject. And I think it's a very good way to think about conservation. It can be active in the form of smart meters, telling your heat pump to scale down, cooling your home early. You actively respond to a forecasted scarcity event, right? Or it can be passive where you have better insulated homes, more efficient appliances, which, you know, all the time are using fewer resources. And it can be cuts in consumption, but that again can be an active demand response program. And the reason people didn't like conservation calls is they weren't getting paid for it, right? Whereas at the industrial level, we wisely have a program that pays people to shut down when we need the electricity. Can consumers get that same thing? But conservation is part of this big complex package of solutions to our grid feature.Doug LewinYeah, for sure. I do think the language around this is so tough because conservation is now so caught up in the conservation calls that, as you mentioned, people really don't like. And I see this on Twitter and Facebook every time there's one of those. But I think even energy efficiency has a not great connotation, right? Like people are like, efficiency, whose, you know, efficiency isn't like a worm and a fuzzy word. People think of it as like, oh, you're going to lay somebody off at my company because there's efficiencies, right? It's like these words, though, that I sometimes wonder if we should be talking about, you know, energy waste reduction, even demand response. You know, I've heard people say, you know, when I'm talking to people that aren't like in the industry and talk about there's like, who's going to demand that I respond again? Right. Like I get questions like that. I'm like, oh, no, no. It's all it's all voluntary. You're getting paid for it. Oh, OK.So I do think the language around this stuff is pretty difficult and we have to probably come up with different words, but I obviously totally agree that somehow this active demand side, because really, if you look at all these different imperatives, Senator, you've got reliability, we can't have a Winter Storm Uri, resiliency, you've got storms and heat waves and droughts and all of this that's getting worse and worse. We gotta be resilient to all these shocks, I mean, wildfires, right? I mean, you might have to start, we had a horrific wildfire in the Panhandle earlier this year that was likely, we don't know yet, but likely caused by transmission lines. So you might have to start having shutoffs ahead of time. Affordability problems and sustainability. We need to reduce emissions. And you look at like, what are the things that can check all four of those boxes or even three of those boxes? And an active demand side does that increases reliability, increases resiliency, lowers costs, lowers emissions. There's very few things you can put into that category. Right? Nathan JohnsonOh, it's tremendous. It's tremendous. And it's still not enough to meet the projected load growth. Doug LewinYes. That's right.Nathan JohnsonSo then we get into the longer-term, larger scale generation. But even there, with this big load growth, we're still going to be talking about, in a sense, conservation in the sense of load management, where you require certain very, we're seeing big blocks of load. We're talking about data centers crypto and particularly what we call these AI data brain centers or however many words want to throw at it. Many of them are going to be co-located with generation resources, but they all have transmission requirements. They all have generation requirements. And it's unrealistic that we're going to be able to build infrastructure as fast as that stuff is going to be coming here. And so we're going to have to look at when are they running. Crypto itself is very price sensitive. When the price gets really high, they're going to drop out, whether we tell them to or not. That's part of their arbitrage, right? When you look at data centers, they need a continuous steady power supply. AI Brain Centers, I mean, I don't know how flexible that is, but we're going to have to build into our model the dispatch of energy and the consumption of energy in proportion to its availability at the time. It's going to have to be managed.Doug LewinYep. So, yeah, let's talk a little bit more about rising load growth. I do think it is, I was at CERAWeek, which is the big, mostly oil and gas conference, but they now are trying to call it energy conference to get much more into electricity. And we're seeing huge connections between the oil and gas industry and the grid, right? So you're talking about rising load growth. Yes, there's AI data centers. This was a big theme at CERAWeek and at any energy conference these days.But the oil and gas industry itself is rapidly electrifying, trying to connect to the grid as quickly as they possibly can, because it's much cheaper to connect to the grid than to have a diesel generation, like some mobile genset they bring out to a frac site and try to power it off diesel. That can be 10 to 20 times more expensive, is what I'm told. But then you get into, there's a lot of other large loads as well. Everybody in the energy industry is talking about hydrogen, whether or not that pans out or not, we don't know yet. But there's obviously a lot of investment towards it. Water desalination for a state that's going to 40, 45 million people the next 20 years, where are we gonna get the water from? That's a power hungry. Then you've got direct air capture machines, Oxy's completing a direct air capture machine set up west of Odessa, which they said at CERAWeek, they're about 70% done with, and they wanna do a hundred of these. All of those are major energy hogs. So when you said earlier, we might go to, what did you say somewhere around like 200 gigawatts? Like I think the people in the industry, they look at an 85 gigawatt max load this last summer. 200's unthinkable, but I actually don't think it's unthinkable at all. Who knows, right? It could be 200, it could be 100, it could be 300. Who knows? But the point is there's likely gonna be a lot of large loads coming. So we're gonna need all the power we can get in a very active demand side. I know you look at this stuff. I know you like to think about this stuff. Are there other large loads you're looking at? Or, you know, I said at the beginning, I wasn't going to ask you right away about the sci-fi stuff, but we could, we could talk about some of that too. Are there any new energy technologies on the horizon you're interested in that might help us meet some of that rising?Nathan JohnsonA couple of things. Let's start about that and then talk about the old energy. You know, we're talking about the relationship between the oil and gas industry and electricity. On the new frontier, I'm glad you mentioned the old frontier is something that is important and is going to be around for a long time. It's a massive explosion in growth. New technologies to meet, whether it's AI or air capture or traditional oil and gas. I am very interested as the Department of Defense in geothermal. I'm interested in small modular nuclear reactors, although as I understand it, they're not quite as rampable as say a peaker plant. They're kind of more of base load distributed, which require generation and planning and intelligence. So I think intelligent software maybe is one of the new technologies that we haven't discussed so far, because all of this optimization that is necessary for virtual power plants, for all of the smaller resources to come into play for the pricing signals, the demand response, all of this has to be managed in real time. And that software is coming onto market right now, but it's in a rapid phase of development, just like everything else. So it also comes back to the uncertainty of the five to 10 year, what will happen with any of these technologies? Will we have space based solar? I mean, right now, I don't know, it costs 80 times what it would cost to do it on land, which is prohibitive, right? And geothermal might be, I'm making up numbers 60 times. I don't know, it's all still prohibitively expensive. But we have pretty good track record of putting our heads to problems and figuring out ways to do it cheaper. I'm pretty excited about what the future holds. But I do wanna go back and visit the relationship between oil and gas, which power the globe, empower the state to a very large degree. And then we'll talk about the mass rise, the very positive mass rise of solar and wind and other renewable sources. But the electrification of the oil and gas industry, I think is one of the great ironies of Texas, particularly in the dialogue the last four years. You've had this punching back and forth between renewable energy advocates and oil and gas advocates. And the secret is that subsidized renewable energy generation has greatly benefited our traditional thermal generation and oil and gas markets as they electrify. It's this cheap, subsidized wind energy that is powering refineries. It's powering upstream, midstream, and downstream oil and gas operations. And when you recognize that, I think maybe it strips away a little of the silly demagogic arguments we've been having. And let's just figure out how to make this stuff work, which is where we need to go.Doug LewinYeah, absolutely. Yeah. There was a group of six, uh, oil and gas producers, six of the largest ones in the Permian. They hired S&P Platts to do a study for them of what their grid needs were. And they're right now it's something like four gigawatts or so of demand from oil and gas operations, which to put that in perspective is Austin's about three and a half gigawatt peak load. So about an Austin worth of load out in the Permian.But there's another like four or five, maybe even six gigawatts, something like that, that they're powering off of mostly diesel generation, which is mind boggling to think about, right? Almost like two Austin's worth. They wanna connect all that to the grid, and they think they're gonna continue to grow. So by the early 2030s, they expect, so we were talking about five to 10 years, right in that five to 10 years, they expect oil and gas demand to go from four gigawatts to somewhere close to 15.So I mean like a tripling in a very short period of time. And you're absolutely right. I wrote about this in a recent article on the newsletter that at CERAWeek Diamondback Energy, one of the largest producers in the Permian, their COO said, it's low cost renewables on the grid that we're connecting to. It's much cheaper than using… So I do think a lot of times in the popular thinking and in some of the conversations and some of the press articles, but certainly don't want to paint with too broad a brush because I think a lot of folks in the press do understand this. It's not oil and gas versus renewables. That's sometimes the way it plays out in the narrative, but in the real world, they're kind of dependent upon each other and leaning on each other.Nathan JohnsonYeah, and to the extent we want a reliable grid, we're going to be dependent on both.Doug LewinYep. I think that's right. I think that's right. And so, so let's from there, let's, there's a lot of different directions we could go, but I think let's talk about transmission a little bit because that is something that the oil and gas industry actually pushed for hard during the last session was House Bill 5066, which requires a study of transmission by the PUC. They're doing that study now. The PUC has approved new transmission lines. We're obviously going to need more transmission. You talked earlier also about better utilization of the transmission we have right now. We're experiencing a lot of congestion and curtailment. You obviously serve at Business and Commerce and have heard some of these discussions over the last few years. What is your thought both about all those things, utilizing the lines we have better, building new lines? And of course, you can't ask a question about transmission without you know, what are your thoughts about connecting ERCOT to other grids? Nathan JohnsonOh my gosh. Doug LewinI don't want that to be the only thing….Nathan Johnson…No, it's good. I want to try to keep these four pieces in mind. When we're talking about transmission, we're talking about utilization of lines. We're talking about building new lines. We're talking about possibly integration into the federal grid. But I think we're also talking about our microgrid technology, right? Um, in, in the near term, if you're setting up remote load, as many oil and gas operations will be, we may see investment. And there's some promising technology being deployed. We may see investment in microgrids that are cited out there that obviate the need for a new transmission line at that point at this time. Who knows where we're going? So I do think the microgrid is part of the transmission question because they will allow us to focus on different things. So that's one of the other answers. Better utilization. Once again, I think we're seeing software technology that will help us better utilize our existing lines. The way, as I understand it, they are often hooked up in parallel with kind of a backup line, and we rate the lines according to how much they can move. But we do that on a static basis, not in a real-time basis. And so we're not able to fully avail of transmission capacity of existing lines as we better utilize existing stuff, the necessity to build new lines, some of the pressure will come off of it. Still plenty of pressure to build. And so that brings us to, I think, another big promising technology. It's not brand new, but it would be new to Texas, and that is high voltage transmission lines. We have them for some certain DC connections out of the state, foreshadowing what we're going to talk about in a minute on the national grid. We have a few lines here and there.But generally, we do not have high voltage transmission throughout the state. We're talking about 765 kilovolts transmission instead of our existing network of 345 kilovolts transmission. And it's not merely a multiple of two point, whatever that is, it's about four times the carrying capacity. They're expensive, they're hard to build, it requires raw materials. But many people I've spoken to from different sectors are envisioning kind of a spine around the state of Texas of high voltage transmission, where we're able to move huge swaths of electricity very quickly from the generation source. You know West Texas might be going and blowing, but the Gulf Coast is not, or vice versa. The sun is shining here, but not there. We have a nuclear plant offline here, but we've got gas plants working there. To be able to move massive amounts of electricity around this state, I think, is going to be very important. It's going to require cooperation of a scale that we've not seen, really, I think in this sector between legislators, regulators, generators, transmission utilities, and everyone else. It's an exciting, difficult challenge that I think is going to be part of our, again, part of our future. Is it five to 10 years? Maybe. Doug LewinIt needs to be. And I think, you know, that's their, they're building the line that PUC approved a billion dollars to better connect South Texas. You were talking about South Texas wind and solar and, and there's a gas plant down there that used to serve Mexico. It has now been brought into ERCOT. There's a lot of storage happening down there. So that's happening, but we're also seeing, we've had one energy emergency since Uri that luckily did not result in rolling outages, but it was September 6th of last year. And on that day, it was mostly a problem of transmission. There was a lot of congestion on the layer. There was a lot of wind and probably gas or might've been coal caught behind that line. I'm not sure, but a lot of energy resources, particularly wind caught behind a congested part of the transmission line. And they made the decision to shut that down and that near not shut it down, but to reduce it significantly. And that nearly led to rolling outages. So there was some testimony recently where Woody Rickerson from ERCOT said, like in 2018 when we're planning, we undershot it. We didn't, we didn't think as much load was coming. Well, now we're sitting here in 2024, you and I are having this conversation. There's conversations going on all over the place about all this load that's coming. We can see it. We've got to build more transmission.Nathan JohnsonWe can absolutely see it. And we can, again, alleviate some of this with microgrids and batteries. But when we're talking about this scale, when we're talking about 100 gigawatts to 200 gigawatts of new load, we're going to need real high capacity transmission and additional generation. And fortunately, as people like to point to with either optimism or pessimism, I'm more of the optimism side on the, we have a huge queue of renewable energy, particularly solar. How are we going to move it around?Doug LewinYep.Nathan JohnsonHow are we going to make sure that it's available when it's needed? And that's through a combination of energy storage, thermal generation, and other forms of less intermittent controllable generation sources, maybe geothermal, but also increased transmission and demand response and load management and all those things. And thenDoug LewinAnd I do want to, before we get to the interconnection thing, I just want to just really just put a finer point on, I totally agree with what you said. I think this is lost on a lot of people a lot of times, on the microgrid piece. Sometimes people talk about microgrid and macrogrid. And if you do them both well, they support each other, right? You start to think of all these, the microgrids that contain storage, right? So when there's not as much renewables, you're storing up that power. When, if you do get, if you're able to site storage behind where there's congestion, you could soak up some of that renewables for when there's less. And it's not just about renewables. You're also storing it for times when the gas supply system’s struggling. Say when the temperatures get down to 10 degrees and not as much gas is flowing out of the gas fields in the Eagle Ford or in the Permian. You're, you know, storage is just a huge part of the equation. And so these microgrid sites sort of support the macro grid, if that makes sense. They support each other, right? So I think that's a really astute point.Nathan JohnsonEven on the pricing side of things, right? These batteries are buying power when no one else is. So they're pulling off excess supply. And then when things get really, really scarce, either because of a lack of power or because prices are just go stratospheric, they're able to deploy, which has a depressive effect on the overall prices as well as meeting the energy needs. So we have higher troughs and lower peaks.Doug LewinYep. That's exactly right. I want to come back to geothermal in a minute, but do you want to talk about interconnections?Nathan JohnsonYeah, I mean, just briefly, you know, we do have a federal bill proposing to mandate Texas interconnect with national grid systems. And I think it's a conversation starter is what I think. And the conversation has been going on. I think it's a conversation pusher. And I think that's important. And I think it's an important long-term goal. I do want people to understand that we cannot, there's not an outlet sitting over there in Louisiana or any of our other bordering states bordering Texas that we just plug into and say, okay, now we're interconnected, we can export our excess energy and import when we get a cold snap. It's not that simple. It's many billions of dollars invested at the state and federal level. It's going to require all sorts of cooperation, which is not, cooperation with the federal government, which the state doesn't have a particularly good history of lately. I think out of necessity, we will. And it's going to require raw materials and expertise and new transmission lines and new, all sorts of things that are going to take years, not just to do, but to figure out. So while I think it is not achievable in the short term, I think it's a good long-term plan to be able to export the energy that we generate and to be able to import energy when we need it, either because of emergency supply shortages or just pricing factors.But I think it’s also important to emphasize that there are benefits to kind of running our own shop here. And it is, you can drop the left-right ideology on this point. We have avid environmentalists and ardent proponents of thermal generation and everything in between that recognize the benefits of working within the ERCOT system where we're pretty nimble. You know, there's a reason we lead the country in wind and solar.It's because we're able to plan and move more quickly than you can at the federal level. So can we preserve the advantages we have of being an island? It's a pretty big island, but also avail of the economic and resiliency benefits of integrating in the federal grid and cooperate with the federal government. Great conversation to have, but we can't just plug in this week. So we need to keep doing all the other stuff we're doing right now.Doug LewinYeah, and as I like to point out in these conversations that I frequently do, but you know, there are two projects right now that are proposed. One already has a FERC jurisdictional waiver of the Southern Spirit that connects from the Panhandle into somewhere around like Mississippi, Alabama, something like that. And it's like three gigawatts. We only have one point, I think it's 1.2 gigawatts of interconnections right now total. So just that one project would quadruple the total load that’s connected. And it has a FERC jurisdictional waiver. And then there's another one that would connect. It's called Pecos West and it would connect from West Texas into El Paso. So it's an interesting project because it's intrastate, but then would connect to the Western Interconnect. And that one's like a gig and a half. So we have these projects that are there right now, it seems to me like we should have the conversations about full interconnection, but we should be moving these smaller but still quite large projects to be done, hopefully, day or to dream in that five to 10 year window.Nathan JohnsonAnd they've been going for a long time, particularly the Southern Spirit, was it 15 years?Doug LewinYep, yep, that's right. I think 2009 they filed their, yeah, so, yeah, just about, no, that is 15 years now. We're in 2024, it's 15 years, yeah, it's crazy.Nathan JohnsonWhich might tell us something about the difficulty of interconnecting at the FERC level. I'm very interested to see how those projects go and they're great projects to be undertaking. But our solutions, there's a much bigger set that we have to be working on.Doug LewinI think that's exactly right. With all of this stuff, it goes for all of it, whether it's new gas plants or new storage or energy efficiency or interconnection or any of it, there is no one thing that's gonna solve the problem. It's gonna take a lot. Just one quick note on geothermal. You mentioned that, and I'm really glad you did. I'm gonna have a podcast coming up soon on geothermal. It is actually coming down the cost curve pretty rapidly. And I do think we will start to see some geothermal projects. We're already seeing some that are just like pilot demonstration proving out two, three megawatts here, there. But I think we'll start to see on the scale of the hundreds of megawatts pretty soon. Starting to see this in the western part of the United States where the heat isn't as deep. And you do have to go down to like 12 or 13,000 feet in Texas to get to the kind of heat you need. But if there's something Texas finance people, workers, engineers are good at, it's drilling, right? Nathan JohnsonDrilling.Doug Lewin We should be able to figure this out in Texas, right? Nathan JohnsonYeah. And it's dispatchable.Doug LewinYes. Yes, it is. Yes, it is. Well, look, this whole, this whole notion of dispatchable, I think for some folks when they talk about dispatchable, there's one synonym and one synonym only, and that's a gas plant. And I think that that's, that's wrong. There's a lot of things that are dispatchable. Geothermal is dispatchable. Storage, battery storage is dispatchable. Long duration energy storage is dispatchable. And demand can be dispatchable too. Highly dispatchable, right? So there, there's a lot of things that sort of meet that category.Nathan JohnsonRight. Yeah, I guess that's one of the things we didn't even highlight about our demand response discussion. It's real time. Now, we can have longer. If we give them more notice, it can be even more effective. But yeah, these are very powerful tools that meet our grid management necessities as distinct from our overall load growth adequacy concerns. Geothermal could possibly address both.I hope I'm not digressing. It's when we were talking about the TDUs in 1699 and the action that they're already taking from an optimistic time frame, and I believe you've had this conversation with Jason Ryan, and I've talked with some other people. The way we are incentivizing energy efficiency as a form of conservation, and demand response as a form of conservation. I don't think adequately matches up to the technologies and the methods that we have available to us. And the TDUs have shareholders, and they're incentivized under statute to meet certain energy efficiency goals, and they're meeting them and exceeding them and being rewarded for it, and that's terrific, but they're pretty modest. And a blunt tool we have attempted to deploy, and I think well-intentioned is just increase the energy efficiency standards. But I think we can sort of be a little bit more precise in how we incentivize performance on the standpoint of the TDUs, because under the traditional model, they get paid for building stuff. They make more money if they build more stuff, right? How can we incentivize them to, instead of building more stuff or in conjunction with building more stuff increase energy efficiency or incentivize demand response? How do they get paid for participating in that? And they have to be participating in that because they're in that vertical stream that dictates consumer behavior or incentivizes consumer behavior, I should say. So I think we have more regulatory and possibly legislative work to do in engaging the TDUs and the power that they have to drive the results that we want from a policy standpoint.Doug LewinYeah, and if you think about the things that they do, right, they're generally called T&D utilities, transmission and distribution, right? We've been talking a lot about transmission and we need more of that. You start to think about the distribution side, costs have been rising much higher on the distribution side, a much higher rate. Actually, we've seen the cost of generation dropping as the cost of gas generally, 2022, notwithstanding the price of gas has been low. Price of renewables obviously is very low. So generation we've seen this compression, transmission spending's gone up, but distribution spending's gone up a lot, right? And so if you think of these distribution utilities looking at their system and going, oh, if there is a microgrid going in here because of the Texas Power Package, what is, I always mess it up, the Texas Backup Power Package is going in here. So we're getting all of these, microgrids here and we're getting batteries here and energy efficiency happening, they can kind of see that on their distribution grid, where these different assets are going. And you're absolutely right. How do we give them some incentive to manage that in a way that the default isn't just always build a new substation, get new transformers. You can't get transformers for a period of years right now because the supply chain and prices are very high.So how do we give them an incentive to manage that in a way that lowers costs? And this is something that I love talking about because I don't actually know the answer and I don't think anybody does. I don't think there's like, for so many things you talk about, it's like, oh, there's a ready-made answer to this one. I know this one is tough. It's really, you know, this is not, we're talking about changing a business model has been around for a hundred years or not maybe using the same business model, but somehow having that distribution planning mechanism, not just lead to, here's more infrastructure, here's more spending, but in some cases, the customers are bringing their own money into this picture and how do we optimize that in our system? Do you have any thoughts about how to do that?.Nathan JohnsonAnd well, no, I don't know how to do itDoug LewinYeah, I don't either.Nathan JohnsonExcept that this is one of those instances where markets have to be structured and managed in order to produce the results that we want. That's why we have markets because we deploy the power of private capital and private minds. And I think in this case, the way our markets are structured are not incentivizing the TDUs to solve this problem that we don't know the answer to or the retail electric providers.  And we need to have a structure that will incentivize a good relationship between those two levels of the system and causes people to think up ways to alter consumer behavior in a way that benefits consumers, involves a profit motive for each of these entities. And I think we can do that. And you said our system's been around for 100 years and it works pretty well.But it's a new game. It's a whole new game out there. And the rules have to be updated to go along with it so that I want to, it sounds so trite, but I want to unleash market forces to help figure out how to solve this problem.Doug LewinYou know, I think, you know, when you look at ERCOT, ERCOT is what we call a TSO, a transmission system operator. They handle things at the bulk level, right? And I talked with Vegas about this, that, you know, they generally don't deal with the very small things, but somebody has to, right? We have to get to some point where there is, you talk about markets, we have a very active, very competitive market at the large scale, right? So if you're a generator, you exist in a very complex competitive market. But at the distribution level, there's just kind of nothing. There's no, if I'm an aggregator, I mean, this is why the pilot that was put into statute in 1699 is so important, but why it needs to move beyond pilot fairly quickly, right? Is that if I'm an aggregator and I'm doing that work of signing up a bunch of small customers and creating something that equals a power plant, now what? I can try to fit that into ERCOT, but I'm competing against folks that are operating at a different scale. It's almost like we need some kind of a distribution level market. So you could even, as a distribution utility could say, we're gonna spend $10 million to make the substation twice as big and buy a bunch of new transformers, or is there an aggregator or group of aggregators that could come together and meet that same requirement for $8 million, $6 million, $2 million, right? And thus save everybody money, put some money back in the pockets of consumers that raise their hand to participate. So it might mean creating new markets. I mean, maybe that's part of the next frontier within Texas is what's the next level of competition.Nathan JohnsonI think it is, and I think it's going to involve the retail electric providers as well as the transmission and distribution utilities, as well as the PUC and ERCOT and the legislature.Doug LewinYep.Yeah, yeah. There was, by the way, there was a bill that I still don't think has been implemented. I wanna say it passed in, I think it was 2019. We'll put this in the show notes too, but it was Senate Bill 415, which allowed for what are called non-wires alternatives. So if a utility wanted to put in place, I think this was a bill by Hancock, if I'm not mistaken, that would have allowed the utilities, if they did these non-wires alternatives, sort of aggregations of DERs, and it obviated the need for infrastructure, they could treat that as rate-based. They could earn their 10% rate of return on something that wasn't actually a substation or a pole and wire or whatever, so that they wouldn't be sort of, you know, and I say biased against that. It sounds negative, but just from a logic point of view of your utility, you have shareholders, you're trying to maximize returns. It's trying to level the playing field and say, hey, you can earn returns from these other activities as well. And I wonder if maybe that's where we need to go with energy efficiency.Nathan JohnsonI think so, I think particularly in the load growth environment that we have that is going to require a huge build out by the TDUs, there's going to be, they're going to be building no matter what. For them to take a moment and also look at controlling demand and energy efficiency through active and passive forms of conservation. I think we need to, from a market structure level give them a reason to pay attention to that. And we currently do, we have these energy efficiency goals, but as I said, they're very small and there's no real incentive. I guess I shouldn't say none, there's very little incentive for the TDUs to try to exceed their goal. They don't get anything more for it. So if they could stand to benefit, similar to the benefit they get from building, as they do from encouraging conservation, I think they would be able to do that. I think we'll see the market serving our purpose better, which isn't to say there shouldn't be building. There's a lot of work to do. But conservation doesn't require new steel in the ground. It doesn't require new poles and new wires, right? It's just new modeling. I shouldn’t say just, it’s a big deal.Doug LewinYeah, it's a really big deal. And, you know, I think a lot of times in these conversations, Senator, people say, well, you know, if this stuff is so great, why aren't people just doing it? There's nothing to stop them. I really think it comes down to, you know, the markets that exist weren't created by nature, right? They don't exist like, yeah, they exist because people set them up. And so those markets then either they do certain things really well, and then there's other things they don't do as well. So one of the good examples that I think is a good reason why the energy efficiency programs exist and need to even be expanded. You mentioned the retail electric providers. They do a lot of demand response. They try to do more. They want to do more, but they generally can't sign customers up for more than two years. And that's just kind of a function of the market. Generally people don't want to sign up for a five year deal with their electric provider. So they want to get people smart thermostats, but they cost 200, 250 bucks. They can't necessarily recoup that cost on a two-year contract. So if you have an energy efficiency program, it helps drive down that price, but then allow the retailers to work with that customer to reduce their load. So these are the kinds of questions, is like, how can we find where the market failures are and try to create that structure where you're not... You're not… like you're not mandating it, you're not saying it has to happen, you're basically just saying, here's the structure under which this could work and how you could make money. Now go compete, right? And I think that can happen.Nathan JohnsonThat is, I think, what's missing from a lot of conversations about markets. There's people who say, you know, markets fail and we need this centralized control. That doesn't work. It wastes all of us as resources. But there are people who think that, you know, hands off, it's all going to take care of itself. No, all markets are a construct. And we look for ways. And we've been doing it with the ERCOT system, you know, all the way forever, but particularly since dereg in 1999. And the way we shape this market affects everything. And it's worked pretty well until the world changed and the world has changed and it's time for our constructs of the market to change too. So again, we have private market forces operating to produce the results that we need. And people make money in the process and people get reliable power in the process. But sitting back idly won't get it done.Doug LewinYep, that's right. And I think when you think of markets, take that one step further, if you think of the demand side, you say, if you even think of yourself and think of what kind of loads you have in your house, I don't have a pool. But let's say I had a pool, it'd be nice in these hot Texas summers. For a retail electric provider or a utility or whatever, if they said to me, would you take five bucks for me to control your pool pump? Your pool's gonna stay clean, the pump's still gonna operate, but it's just not gonna operate at 7pm as the sun's going down and we're in an energy emergency. We'd like to cycle it. Oh, that's, yeah, five bucks is probably plenty because I don't care. Why do I care when my pool pump operates, right? But if you want to touch my air conditioner, you're gonna have to pay me more for my air conditioner. Now, if they say, well, pre-cool your house and we'll never get above your set point, the point is people have different prices for different things. And this is what markets are great at. This is how you, this is how markets work is what's the cost? What's somebody willing to pay or be paid?Nathan JohnsonAnd then we get into a whole other layer, another word people are very afraid of, which is equities, right? But I think equity sometimes is the flip side of efficiency, where you have inequities, you usually have inefficiencies as well. So when we talk about smart meters and being able to control thermostats and pre-cool homes, that works really well on a really well insulated home. That's somebody who could afford insulation or has a newer home. Do we need the energy efficiency? We already have energy efficiency programs that make it possible for people to avail of new efficient technologies. We have some new affordable housing communities being built with new energy efficiency technologies. That's all great. But again, I think in constructing the market, you got to look at where's the leak in this thing? Where's the inefficient? Well, heck, only a small subset of the population can avail of this preheating and pre-cooling. So what could we do to make other homes able to participate? And that's not command and control, that's honing the market.Doug LewinAnd it's something that the market's not going to take care of on its own. You're not going to make homes more, you know, better insulated unless there's something done to kind of push that along. And I would argue it is, it is an equity issue. And we do need to help people that are struggling, you know, 45% of Texans self-reported in 2022, choosing between paying their power bill, paying for food, paying for medicine. And that's not, that's an all of Texas issue. It's rural and urban, and even in many cases, suburban and ex-urban. So addressing that helps the people that most need it, but I would argue it actually helps all of us because that's then reducing the load on these days when the system's really taxed and we're in scarcity conditions, and we all might experience rolling outages actually like helping people that are struggling with their bills to get more insulation helps them year round and helps all of us.Anything else you want to add? So let me, I do want to ask you, I want to ask you one other thing before I, before we start to wrap up here. You had said, I believe it was in a New York Times article that a lot of times in Texas in these arguments about the electric grid renewables are scapegoated. I believe that was the quote you had. Can you talk a little bit about that? I mean, we're talking about rising load growth. I think we're going to need, we're going to need renewables. We're going to need every megawatt we can get at this point. But there is this attempt to kind of scapegoat renewables in Winter Storm Uri and other contexts. Can you talk a little bit about that, why you think it's happening and what's your response?Nathan JohnsonYeah, I think it's a real unfortunate notion that many people have accepted. And I think we need to dispense with it, dispel that notion that renewables destroyed the Texas grid. I think what made the grid less reliable and less stable is the imbalance between load and dispatchable energy. Now that's not to say – let's say we're at a – a 100 gigawatt grid and we add 10 gigawatts of renewable energy, did we get less reliable? No, we have 10 gigawatts more energy in the same amount of dispatchability that we had. It didn't get less reliable. What makes it less reliable is when we have this huge load demand and the energy we have to meet it might be intermittent. But again, that's not the fault of building more renewable. That was just built in response to economic incentives.Where I think there is some truth is that you have less incentive to build the old, more less intermittent, and I say less intermittent, thermal generation, because it's more expensive to build than the heavily subsidized renewables. That again creates, I think creates this false sense of blame on renewables. That renewable energy is going to be there to meet the the coming load growth, it has been there to power the oil and gas industry. It has been there to power high tech in this state. It has been a tremendous benefit to this state. But it did slow the growth of investment in traditional thermal generation. And so a lot of what we're doing right now is figuring out how do we make renewable energy more reliable, more dispatchable at the same time as how do we incentivize the construction of new thermal generation on which we are going to rely, which can be very well managed if it's well regulated in terms of environmental effects. That's a conversation. No, it's a problem that we have to address. It's a challenge we have to meet. It's not going to be met by demonizing a source of energy that has been a tremendous economic and social benefit to the state.Doug LewinYeah, and I think if we come back to that example of the Backup Power Program, I think I got it right at that time, that you have this mix of solar storage and gas. You're not overly reliant on any one thing. And if we could just, dare to dream, get to a point in the state of Texas where different energy sources, the proponents of different energy sources aren't demonizing the other ones and trying to say this one has caused all of the problems or that one, all of the problems. It's a system. All of these resources have their attributes, they all have their detriments. Let's use what's best out of each of them. And yeah, I think that's the approach you've taken and it has been noticed and appreciated. I want to before we end, is there anything I should have asked you about, anything else you want to talk about that we didn't get to?Nathan JohnsonThere is the lingering question of will we have sufficient investment in new gas fire generation? And the legislature created the Texas Energy Fund. And of course, $1.8 billion of the $10 billion in that concept is for that backup power package, another billion for the non-ERCOT regions to make seriously important investments in their grid structures. But $7.2 billion is set aside through various financing mechanisms to invest in incentivizing the construction of new thermal generation. Will it be enough? As to the big 100, 200 gigawatt, 10 gigawatts more generation is not enough, but it gets things moving. So that's good. Some people wonder whether or not it's oversubscribed. What if everybody does sign up for this thing and $7 billion is not enough? And I think it's important to recognize that oversubscription is not really a danger. Just like when we look at how much solar or wind is in the queue and people say, oh my gosh, there's going to be so much more. A small percentage of what's in the queue actually gets built. So oversubscription is not the same as completion. And that's why the Texas Energy Fund bill contained a completion bonus so that if you sign up, you get your real money if you actually build the thing.And I know a lot of people had misgivings about that bill, and there's reasons to have misgivings. But it did make a commitment, and it is in recognition of the fact that we really do need this thermal generation in conjunction with all the other things we're doing. The lingering question is whether or not our long-term market signals are going to be sufficient for generators to make that investment irrespective of the financing available. And that's an open question.Doug LewinYeah, it's going to be really interesting to me, Senator, to see kind of what... I'm less interested in if it's oversubscribed. That's an interesting question too. And I'm more interested in what kinds of technologies are applying. And what I mean by that is like, I think what we're going to see, and I think we already see this in the interconnection queue, is very flexible, more peaker plants that'll likely be low capacity factor.And thus, for those that, and I think this is a very large number of people and growing all the time, folks that are worried about emissions, you probably have a fairly low emissions impact from those kinds of gas plants. But potentially, if fuel is available, which is a huge question, a potentially high benefit for reliability if that's the kind of plant that comes into the system. And so that's what, like in all these market design discussions I worry about is like, I don't think you really want a signal that is for combined cycle, like six, you know, intended to operate 60 or 70% of the hours out of the year. You want to bring the stuff that's going to operate 10%, 15% of the hours out of the year, cause that's really all you need them, because you'll have cleaner and cheaper sources other times of the year.So I don't know, it'll be interesting to see kind of what comes in as far as these applications.Nathan JohnsonIt is. It's exciting to watch the movie as it plays out. Doug LewinIt is. Nathan JohnsonBut my guess is it will be these smaller, more versatile peaker plants that are strategically deployed at points of congestion. We'll see. And then as far as the investment in the bigger operations, that's a longer term play that they're going to have to gauge. What is the cost return on these and whether or not we want to incentivize it? I think we need a little more information.Sometimes people talk about conservative as a virtue or as some sort of, the word is problematic, right, as is liberal. So I want to use it in a different sense than it's usually used. I want to use conservative in this sense of there's so many uncertain factors right now. There's so much happening in technological innovation and market design that moving conservatively, which is not taking big leaps before we really know what's going on, I think is a good idea. You know, we want to incentivize the market, we want to construct the market to go places, but we don't want to overstep. And I think right now there's a lot of things coming into alignment that a prudent approach of actively being involved but not arrogantly prescribing the future of the grid will serve us well.Doug LewinYeah, totally. I think it kind of comes back to markets, right? It's how do you get the right market signal out there to, because that way you're not, it's impossible for any of us to centrally plan this. We just, none of us are smart enough. We all like to think we're very smart, but we don't know what's going to, we don't know what technologies are out there. We don't know what loads are coming. So it really does, you know, I just fundamentally believe markets can solve these problems better. You do have to have the right structure around that. And that's really what we’re talking about here.Nathan Johnson That's right. And our job is to structure it so that many minds can contribute to the problem solving.Doug LewinTotally. Well, it's something I've always appreciated about your leadership. You obviously take in all the different perspectives, talk to a wide variety of people, and I really appreciate your perspective, your thoughtfulness in policymaking and your approach to all this. So thanks for all you do and thanks for taking the time to be on the podcast. Really appreciate it.Nathan JohnsonI'm honored to be in the conversation. 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