Energy Capital Podcast

Eric Wilson, an expert in heat pumps, discusses the importance of replacing inefficient heating units with high efficiency heat pumps to reduce outages and save money. The podcast explores the impact of heat pumps on the Texas grid, electric rates, workforce challenges, the transition from gas to electric for resilience, and the efficiency and performance of heat pumps in different climates. It also discusses maximizing energy efficiency, year-round bill savings, and the role of rate design in electric utility decisions.

This is a free preview of a paid episode. To hear more, visit www.douglewin.comFor this week's episode, I had the pleasure of interviewing Andy Bowman. Andy has been developing renewable energy projects around the US for 25 years, which puts him back to the 1990s and some of the earliest wind projects in Texas. And while he's developed all over the US, he says ERCOT and Texas are his favorite place to develop. And we got into why.Andy was the founder of Pioneer Green Energy and Renewable Generation Inc. and worked for E.ON, now RWE, and Entricity in executive roles. He's currently the CEO of Jupiter Power, an energy storage company backed by BlackRock, which currently operates 1,300 megawatt hours of grid scale battery projects and is developing another 11,000 megawatts worth of new projects from California to Maine and including in Texas. Andy also teaches a class at the University of Texas Law School called Climate Change and Entrepreneurialism. In his book, Andy notes that the potential for clean energy today is equal to that of coal and oil in the 1700s. We're at the start of a new age of energy, and Andy and I talked about what that will mean for Texas. We covered the economics of solar, and concerns on whether or not Texas solar will cannibalize itself and mitigate future growth in the industry. We also talked about rising demand in the form of data centers, carbon capture machines, electric vehicles, and lots of other large loads coming onto the system, which is currently having a transformative effect on the grid. And finally, we discussed whether or not capitalism is up to the task of dealing with climate change, an important conversation that is subject to endless debate.This podcast is for paid subscribers only and will not be listed publicly on podcast apps. For details on how to listen to this podcast in 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.Timestamps3:10 - About Andy and Jupiter Power5:38 - Why Andy prefers the ERCOT market structure compared to other grids in the US7:51 - Solar as a market dominant technology12:16 - Financing and economics of solar; Power Purchase Agreements25:01 - Scale of the energy transition and load growth28:04 -  Large flexible loads and AI32:28 - Capitalism’s role in addressing climate change37:18 - Central planning vs market solutions 42:16 - Lessons from history that can help us tackle the climate crisis; carbon budgets and pricing47:43 - The Inflation Reduction Act51:45 - Next generation solar and storage54:31 - Current direction of the ERCOT grid; where it will be in 5-7 yearsShow NotesThe West Texas Power Plant That Saved the World by Andy BowmanJupiter PowerI’m in Texas to see the future by Bill GatesThe Obstacle Is the Way by Ryan HolidayNet Zero by 2050: A Roadmap for the Global Energy Sector from the International Energy AgencyFreedom's Forge: How American Business Produced Victory in World War II by Arthur Herman

Electrons and molecules don't usually mix. Power grid people and gas supply people don't talk to each other much, nor do they much understand each other's worlds, languages, or businesses. The Federal Energy Regulatory Commission (FERC) cited this lack of gas and electric coordination as one of the causes of the Winter Storm Uri outages.However, it's not just a problem for reliability and energy security. People who work in the power and gas industries need to communicate because their worlds are becoming increasingly and inextricably intertwined. As just one example of this, more and more, hydrogen will be made by clean electricity. In a previous Energy Capital podcast, I spoke with Michael Webber and we delved briefly into the basics of hydrogen and its role in the energy transition. However, with Texas securing one of the seven Department of Energy Hydrogen Hub awards, the passage of two hydrogen-related bills by the state legislature last session, and the unveiling of numerous high-profile green hydrogen projects on a gigawatt scale by various companies, I recognized the need to dedicate an entire episode to this subject.There’s no one better to talk with about hydrogen in Texas than Dr. Emily Beagle, a research associate with the Webber Energy Group at the University of Texas at Austin. She works on energy policy and pathways to decarbonization of the global energy system with a particular focus on the and use of hydrogen to reduce emissions and the hardest-to-abate sectors. In this episode, Dr. Beagle breaks down why hydrogen isn't a cure-all in the energy transition and explains the importance of targeting hydrogen use at hard-to-abate sectors. She also spoke about the current uses of hydrogen and how they’re likely to change, hydrogen incentives in the Inflation Reduction Act, how some of the unique aspects of the Texas electric market are ideal for hydrogen producers, the potential of hydrogen for long duration energy storage, the water requirements for green hydrogen and how they compare to oil and gas water use, where demand for hydrogen will come from, and much more. 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.Timestamps3:23 - About Dr. Beagle5:06 - Hydrogen in context. How much is produced today?7:33 - What is the future of hydrogen and potential growth for hydrogen in the next 5-10 years?10:16 - What are the priority uses for hydrogen?15:30 - A fully decarbonized system will still require molecules19:46 - How hydrogen is produced and the various hydrogen colors24:00 - Hydrogen as a Large Flexible Load27:43 - How the IRA tax credit and recent Treasury Dept guidance will impact hydrogen33:15 - Comparison of water needs for green hydrogen to other forms of energy35:55 - Potential to use brackish water or produced water for hydrogen production40:09 - Concept of hydrogen hubs and explanation of HyVelocity Hub in Houston45:18 -Is there enough demand for hydrogen?46:21 - Difficulties of transporting hydrogen, usefulness of hubs where transportation need is limited50:56 - The Gulf Coast has three of the six existing salt dome storage caverns in the U.S.54:18 - Need for policies that deal with regulation and standards for hydrogen56:09 - Natural and other forms of hydrogen; issues with using color classifications for hydrogenShow NotesWebber Energy Group at the University of Texas at AustinThe HyVelocity HubHyVelocity Selected by U.S. Department of Energy to Develop Gulf Coast Hydrogen HubIEA Path to Net ZeroRenewable Electrolysis in Texas: Pipelines versus Power LinesClean energy experts break down hydrogen hype and hope from Canary MediaSeparating Hype from Hydrogen – Part One: The Supply Side from Cleaning Up PodcastTranscriptDoug LewinDr. Emily Beagle, thanks so much for taking time to be on the Energy Capital Podcast.Emily BeagleThanks for having me here, Doug.Doug LewinIt's my pleasure. I'm really looking forward to this conversation. Obviously a lot of discussion, a lot of excitement around hydrogen these days, really excited to go deep on that. There are a lot of great podcasts and articles out there on hydrogen in different parts of the world. We're gonna really focus in on Texas today. Why don't you go ahead and tell folks a little about yourself, your work at UT, and how you got to be there?Emily BeaglePerfect. Sounds great. Happy to. As you mentioned, I'm Emily Beagle. I'm currently a research associate with the Webber Energy Group out of the mechanical engineering department at the University of Texas at Austin. I'm originally from Wyoming, born and raised, proud graduate of the University of Wyoming, where I got my PhD and a number of other degrees in mechanical engineering. And I've also spent several years in DC. I was a congressional science and technology policy fellow, so the opportunity to work in the Senate on developing energy and climate legislation before coming here to the University of Texas at Austin. I now lead a lot of work for the group as it relates to hydrogen. We're sort of traditionally a group that is focused a lot on the energy system and energy infrastructure and supply chains, specifically looking at ways to decarbonize while maintaining energy services and reliability. And hydrogen, as you mentioned, is a really key part of that. So I'm sort of working on a number of projects as it relates to that. And I know we'll, we'll talk about some of those projects that I'm involved in throughout the podcast today.Doug LewinMost definitely, what years were you working at Congress?Emily Beagle2020. So what a year to be there.Doug LewinInteresting, right? I'm sure you have many stories to tell of 2020 in Congress, but we'll forsake those for now. All right. So yeah, let's, again, like I said from the beginning, obviously it's the Energy Capital Podcast. We focus on Texas. Can you just, let's start by talking about what is hydrogen used for now? How widespread is its use? Yeah, let's start there. And then we kind of want to like segue into like, where is this all heading? What is it likely to be used for in the future?Emily BeaglePerfect. Well, currently, hydrogen is primarily used, we can break it down into talking about the industrial sector and also in the refining sector. Primarily it's used as a feedstock for ammonia, which is used then as a feedstock for fertilizer. So that's one of its, about half of its use would fall into that category, sort of as a chemical feedstock. And the other refining category of current hydrogen use would be as a feedstock and sort of product of other refining and chemical processes that are happening. So those are the two main ways that we use hydrogen now.Doug Lewin And, what is the scale at this point? How much hydrogen roughly is produced in Texas?Emily BeagleIn Texas, we produce about three and a half million tons a year, and that's about a third of all of the hydrogen produced in the U.S., about 10 million tons a year across the U.S., which is about a tenth of global hydrogen production. I think in 2022, globally 95 million tons or so of hydrogen was consumed.Doug LewinSo about a third of all the US and is all of that or most of that along the Gulf Coast, all of it, right?Emily BeagleAll of it. Yeah.Doug LewinOkay. And most of that in and around Houston with maybe some Beaumont, Port Arthur, some Corpus Christi.Emily BeagleI think so, that sounds right. Yeah, yeah.Doug LewinYeah. Okay. And as of now, all of that would be what is called steam methane reforming, and we'll get into talking about the various colors of hydrogen and the potential problems of using colors. But what is referred to these days as gray hydrogen, meaning there is no carbon abatement or anything like that from it. Is that correct?Emily BeagleYes, that's correct. Yeah, essentially taking natural gas and splitting that into hydrogen and then also getting a byproduct of carbon dioxide.Doug LewinOkay, so where do you think this is heading? So we're at three and a half million tons today, one third of the production in the United States. Do you expect that will grow? And if so, will it remain steam methane reforming, as you just described it, without any abatement, or will it be something different? Will it continue to be half ammonia, what did you say, half chemical, likepetrochemical refining, things like that, or do you foresee sort of other use cases in the, let's say medium term? So not thinking like 20 years out, but not next year either, maybe in a three to five year kind of a window.Emily BeagleYeah, yeah, I absolutely expect it to grow. We're seeing a lot of indications for why there would be a lot of interest in using hydrogen, particularly as a decarbonization tool. I think that's where a lot of the growth is going to come from. We may see growth in hydrogen consumption for its traditional uses, growth in demand for ammonia for fertilizer, for example, or in refining.But absolutely a lot of the area where we're expecting to see growth in hydrogen in these alternative uses, sort of as an abatement for fossil fuels to reduce emissions. And because that new demand is drawn by a need to reduce emissions, that means we'll have to consequently also reduce the emissions associated with the production. And so we can't be building new kind of unabated steam methane reforming hydrogen production that has emissions while simultaneously using that hydrogen to meet other goals. So I expect that new growth and hydrogen production will be low carbon, lots of incentives for that we can talk about. But yeah, that's where we're heading.Doug LewinSo if we're at like three and a half million tons now, and I'm not asking you to make a specific prediction, but I'm just trying to understand the order of the scale, the order of magnitude here. Are we talking about, like a doubling in five years, or would you be, again, not asking you to make a prediction, but would you be surprised if we had like a 10X in five to ten years, that amount, or is that not enough or is that too high? Like what's the general order of magnitude we're looking at?Emily BeagleGosh, 10x in five to ten years I think would be pretty high. Maybe 1 and ½  to 2x with a lot of that needing to be challenging. I think the IEA's most recent report looking at announced global clean hydrogen projects expects just under 40 million tons of clean hydrogen by 2030. So we wouldn't even still quite get to the full kind of 95 million tons.That's global hydrogen production. We have some incentives in the United States for clean hydrogen production that I think might start really accelerating the announcements of those types of projects. So we might see more than that, but that's kind of what's expected right now based on projects that have already been proposed.Doug LewinSo that's interesting. So like even a doubling is pretty dramatic. So is it in the exact same sectors right now? It's just more ammonia, more use of chemicals refining. Do you see it expanding? There's a lot of different use cases for hydrogen. What do you think hydrogen is good for and perhaps equally as importantly, what is hydrogen not great for and we probably shouldn't be looking to hydrogen as a solution?Emily BeagleYeah, great question. So hydrogen is sometimes called the Swiss Army Knife of decarbonization tools because it can be used in almost every sector that's very versatile. You can use sort of burn it and combust it for heat and so replace it with some of our traditional fossil fuel natural gas. Applications for that you can use it as a feedstock in the way that we're using it here. You can use it as a fuel to produce other fuels. And so there's potential ways to use hydrogen, sort of, in all of our big sectors, industrial sector, industrial heat, or as a feedstock for steel, for steel, and the transportation sector as a fuel across all different types of vehicles. You could potentially use it for power generation, either with fuel cells or in a turbine, you could potentially use it for residential and commercial heat. So lots of different ways that you could use it, but I like to talk about hydrogen use prioritization, especially if we think that we'll have a limited amount of clean hydrogen that we can use in those applications.  So being really intentional and mindful about using it in the hardest-to-abate sectors, or the sectors where we don’t have the other alternatives. And those I would consider the industrial and the heavy duty transportation sectors. So how can we use hydrogen for things like steel or how can we use hydrogen as a fuel in aviation, in shipping, or in heavy duty transportation.And it could take a number of forms even within those sectors. So for example we could have hydrogen used to produce ammonia for its traditional application now of producing fertilizer. Or hydrogen as a feedstock to produce ammonia which in some applications is a better fuel for say maritime shipping or hydrogen to use or to produce sustainable aviation fuel, hydrogen in the steel sector, so even within those sort of three narrowed down sectors still a lot of pathways that hydrogen can be used and help reduce emissions.Doug LewinThat makes a lot of sense. So what you left off that list was heating. I mean, you said it in your full list, but as far as like in your prioritization, you left out heating for residential and commercial. You said transportation, but heavy duty, so not medium duty or light duty.  You didn't put power generation on that list. So all of those, you put kind of lower on your prioritization. Emily BeagleYes, yes.Doug LewinOkay, interesting.Emily BeaglePrimarily because we have alternatives. So EVs in light duty transportation are sort of winning and perform better for a number of reasons. Electrification of home heating is far superior both in terms of efficiency, ease of use, and cost compared to trying to put hydrogen into individual homes and actually build the distribution system to move the hydrogen there because there's some of the reasons for that prioritization that I offered.Doug LewinAnd on the power generation side, is it your view from studying this and being in the weeds and in the numbers that like for what is often referred to as sort of clean firm, you know, obviously we're going to have a lot of hours out of the year where it's wind and solar and storage can help balance out the variability, demand flexibility can do a lot of that. And then you've got nuclear, potentially gas with carbon capture, geothermal, all of these things, in your view, you would kind of come before hydrogen as a fuel in the power sector. Is that accurate?Emily BeagleYes, and I think where I see the most potential for hydrogen in the power sector would be for long duration energy storage. So when we're talking about needing to store renewables over the scale of weeks or seasons, as opposed to over hours or days, like what we can provide with the battery storage that we have now. But there's so much growth of buildout of some of these other technologies, geothermal, wind and solar, that we can continue to do before we start needing vast amounts of that type of long duration storage to support the system that we should be using the hydrogen that we're starting to produce now in some of these some of these other sectors. But that's also an avenue that's being explored and has some potential as well. We're even thinking about hydrogen as a way to transport renewable electricity. Maybe there are some cases where it's easier to build a pipeline and move hydrogen than it is to build a transmission line to move electricity when we're talking about situations where we have renewables where the demand isn't and the question of well, how do we move it?Doug LewinVery interesting. Have, have, and you've seen or participated in studies on that particular question or they're just being done?Emily BeagleI did not participate, but the Webber Group did put out a white paper comparing moving sort of West Texas renewables to the Houston area via hydrogen pipelines or via transmission lines.Doug LewinGot it, got it. I am familiar with that one. Okay, good. We'll try to link to that one in the show notes. It's coming back to me now. All right, so I want to, before we, there's a few different directions I want to go, but before we kind of get more specific, I do want to stay high level for a minute here and just kind of paint the picture as we're in this amazing energy transition right now. Things are really changing quite quickly.So the IEA in their Path to Net Zero report talked about how we are currently at about 20% of global energy needs are met through electricity. To get to net zero by 2050, that would bump up to 50%. That's a really obviously a dramatic and large increase, but that still means that 50% of global energy is not electricity. And I can't remember, it's been a while since I read that report, I'm presuming they're not thinking that a lot about, like, biomass for cooking is staying in the mix. So the other 50% is molecules. Can you talk a little bit about electrons versus molecules and the sort of, you know.I think there's a lot of people that think because they hear electrify everything, yes, you can electrify a lot of things, but in the end you really can't electrify everything. Can you just talk about that a little bit before we go into some other specific areas?Emily BeagleYeah, absolutely. Yeah, so I think electrify as much as we can, as long as that electricity is coming from low carbon renewable sources. But there certainly are areas where we can't electrify where molecules are needed. Some of those and that's one of the criteria that I use for the hydrogen use priority prioritization. So things like heavy duty industrial heat, there are just temperatures that we can't get to without a fuel or with electricity, there are certain processes that we can't do just with electricity. So they're just some of these chemical processes where we need molecules or fuels. And so it's less about the energy and more about some of the chemistry that happens in some of these processes. Heavy duty transportation, when we're looking at the range and the weight that we need to move when we're talking about trucking or when we're talking about needs for aviation, particularly transatlantic flights, the energy density of batteries, which are electricity, compared to our standard fuels that we're using now, jet fuel, are just not able to deliver the same services that we need and are expected to in some of those applications. And that's why we have to be looking to alternatives and essentially green, low carbon, clean molecules to be able to deliver those same energy requirements where electricity just won't cut it.Doug LewinI think just a lot of the rhetoric I hear out there these days is like, these things aren't really necessary. You hear a lot of discussion around false solutions and things like that. I just think it's important to level-set that even the IEA and its very ambitious pathway to net zero, you're probably not going to be above 50%. Even if they're wrong, even if they're wrong by a lot, there's still a whole lot of molecules in the mix even 30 years from now in a decarbonized system.Emily BeagleYeah, absolutely. And not just true for the IEA, but certainly every net zero, robust net zero scenario that I've looked at has that similar breakdown of electricity, clean electricity plays a big part of it, but it's not everything we need. We need molecules. We also need efficiency and conservation.Doug LewinSo we've talked a lot about the sort of use cases for hydrogen. Let's also talk about how hydrogen is produced. So typically these are talked about in terms of colors. The things that I hear the most are gray, which we've already talked about, which is really what it is today. Blue which is using, I think it's still steam methane reforming, but you're capturing the carbon on the backside and then sequestering it. Then there's green where you're using electrolyzers, you're using wind and solar to do electrolysis, you're splitting water and its component parts. So you've got hydrogen H2 and you've got O. So oxygen is basically your pollution there. Sometimes people talk about pink, which is nuclear.Can you talk a little bit about where, what, what do you think the mix of these things are gonna be going for? And I understand you think it's a little problematic to use these colors. So if you'd indulge me for a minute and talk about the sort of advantages, disadvantages of each one, and then definitely wanna hear your thoughts on maybe why the colors are not the best way to think about this.Emily BeaglePerfect. Well, you spelled it out exactly right in terms of sort of the three main colors that we talk about being gray, green, and blue. And so one of the ideas is that since a lot of our, in the United States, nearly all, mostly all of our hydrogen production is that steam methane reforming and natural gas based pathway that adding carbon capture and storage to that either existing facilities or sort of building new facilities that take advantage of our knowledge of how already at scale how to produce hydrogen with that process, but then adding the carbon capture and storage is a big advantage. That would be a big advantage for Texas as a state that produces and have ample resources of low cost natural gas as well. Some of the challenges with that, or I would say criticisms of that, of if you're looking at the carbon intensity or the full life cycle emissions of that as a process you have to look at the upstream methane leakages missions as well. So any criticism or concerns about natural gas pathways and leakage and the climate effects of that released methane into the atmosphere would stay true for any pathway that is reliant on so-called blue hydrogen. The other place where we see this coming up a lot in the discourse is a geopolitical issue that we're seeing over in Europe as they're looking at how they can respond to the Russian invasion of Ukraine where not only are there concerns about continuing natural gas reliant pathways in a decarbonized world from the emissions perspective, there are now very real concerns about where does that natural gas come from and will they be able to have that. And so there have been some very interesting and dramatic changes to the EU's requirements or their standards or what they're putting forward as their hydrogen policy as they're thinking about natural gas and the very real geopolitical and resource risks that are associated with that as a pathway. So that's one of the concerns, or I should say two concerns, about the so-called blue or any of the fossil-dependent pathways. For green hydrogen, which is the electrolysis powered very specifically by renewable electricity, the biggest concern would be where is that renewable electricity going to come from? How much are we going to need? Are we potentially scavenging renewable electricity capacity from places where it would otherwise be able to be used in addition to that makes the hydrogen very, very high in cost. So how can we make that hydrogen, that green hydrogen cost competitive with not only existing hydrogen production, but blue hydrogen, which is lower cost than what we're expecting for green hydrogen.One of the other, one of the criticisms that I have, the colors you also brought pink hydrogen, because is pink hydrogen – electrolyzers powered by nuclear energy – a form of green hydrogen because nuclear is zero carbon or not? So one of the, you know, there's disagreement about whether green hydrogen includes nuclear hydrogen or nuclear power. And that's one of the challenges about policies that define hydrogen production based on these colors is some of those inconsistencies as well.Additionally, and we’re seeing this about some of the discussions of the hydrogen in the tax credit in the United States, which I think we'll get a chance to talk about our grid connected electrolyzers because the carbon intensity or the life cycle emissions of that as a way to produce hydrogen is dependent upon the intensity, the carbon intensity of the grid that you're drawing that electricity from. And so, which can double the carbon intensity depending on your grid of unabated SMR. So it's can really add to the carbon emissions associated with hydrogen production if you're using grid electricity to power your electrolyzer. So it's really important to have low carbon electricity as the source within your electrolyzer, but there are challenges with electrolyzer technologies if they try to respond to variable profiles. So it's not as easy as sort of plugging it directly into a wind turbine or into a solar panel that could impact the longevity of your electrolyzer, that it could impact the hydrogen production that could cause hydrogen leakage and purging within the system. A lot of unknowns as well still, a lot of research to be done to best understand and improve technologies to respond to variable inputs in electrolyzers. So those are some of the concerns with those pathways.Doug LewinSo my understanding of the electrolyzers is there are, there's a class of them that are being built now that are being built specifically to deal with that kind of variability, that they become what, in effect, in the parlance of ERCOT these days would be an LFL, a large flexible load. Most of the discussion in ERCOT around large flexible loads these days is around Bitcoin mining, and it's very controversial and all that. But whenever somebody asks me about, what do I think of Bitcoin mining on the grid? I'm always like, I'm actually much more interested in these other large flexible loads that are coming, including electric vehicles, including direct air capture machines and including electrolyzers. So are you, are you hearing some of that though, that some of these electrolyzers will be able to be more variable so they can actually you know, ramp down when there's scarcity on the grid or when the grid is really dominated by fossil fuels, which really those two things are kind of the same now, right? When the grid is dominated by fossil fuels, it's expensive. When the grid is very renewable, it's very cheap. So they would run, oh, anyway, are you hearing that kind of technology is coming or not so much?Emily BeagleYes, absolutely. And I think in some ways that technology already exists. But we're talking about electrolyzers that have been on the scale of megawatts. And now we're talking about gigawatt size installations. So there's still some research and sort of lab or field testing to show, yes, we have some idea this technology is being developed so that they can respond and then just to actually show at scale and out in the real world that they perform as expected and as the way that they've been designed. But lots of interest in thinking about, and I think opportunity, particularly in environments like what we have here with Texas for electrolyzers to serve as those large flexible loads on the grid.Doug LewinYeah, and really the economic opportunity, that's pretty extraordinary because you'd be talking about, and we'll come back to this a little later, but the very low energy cost from wind and solar, which is, I haven't looked today, but every day this week, we're talking in February, has been basically zero dollar energy cost in ERCOT basically every day this week.We're obviously still building a whole lot of solar, some wind, a lot of storage. And then the way we do transmission costs, if you're a variable load, you can actually have zero or near zero transmission costs as well. And then you're adding a $3 a kilogram tax incentive from the Inflation Reduction Act on top of that. Plus whatever, if you are selling the power back to the grid in a period of scarcity, there's money to be made there. So, the economics of green hydrogen specifically in ERCOT are looking particularly favorable. If you want to talk more about that, I'd love to hear your thoughts about that, but also want to understand that $3/kilogram tax credit, what's called the 45V tax credit. There's some guidance from the Treasury Department recently on this, which does require, you were talking about earlier, one of the potential problems with green hydrogen is you're using renewables that would have gone other places, or you're pulling from a grid from a dirtier mix. My understanding is this guidance does put in place some safeguards against those things happening. So yeah, if you want to talk about the ERCOT economics, but also the 45V, I would love to hear it.Emily BeagleYeah, absolutely. I'll say that this last summer when some of the news about the amount of money that Bitcoin mines were getting just because they turned off during those periods of high demand, my colleagues and I sat down and said, well, what if electrolyzers could do that? So we're in the process of trying to better understand the economic potential for electrolyzers, specifically in the context of Texas and some of these large flexible loads and demand response programs that ERCOT has. So we don't have the full results on that but I would expect that given, as you mentioned, that as an opportunity unique to Texas, coupled with the tax credit, an opportunity unique to the United States will be very impactful in addressing the economic challenges that green hydrogen has and coming within the system. In terms of that tax credit, so that was the 45V Clean Hydrogen Production Tax Credit that was passed in the Inflation Reduction Act. It's a really neat tax credit, I'll say, as a policy, a little bit of a policy nerd, a policy wonk myself, because it is tiered in value in that the amount of credit that you get changes based on the emissions intensity of your hydrogen. So hydrogen, by definition or standard here within the United States, becomes, quote, “clean” if its carbon intensity is less than four kilograms of CO2 per kilogram hydrogen. So the way that 45V tax credit is structured is sort of the lowest or the highest emitting eligible hydrogen, which I think is between two and a half to four kilogram CO2 per kilogram hydrogen can earn up to 60 cents a kilogram hydrogen. And then between one and a half and two and a half kilogram CO2 per kilogram hydrogen, they can earn up to 75 cents. It's between 0.45 and one and a half, it can earn a dollar. And then that lowest emitting tier, which is where everyone is really focusing on, so hydrogen that has a carbon intensity of less than 0.45 kilogram CO2 per kilogram hydrogen can earn up to $3. So there's a really big jump even just from that $1 to $3 between those two lowest emitting tiers, but also a lot between that 60 cents and $3. The other thing that I'll note that I think is missed a lot is that those values, that $3 includes hydrogen that meets the bonus tax credit requirements, which for 45V are prevailing wage and apprenticeship programs, I believe. And so projects would have to meet both of those requirements as well as being able to show that they have life cycle carbon intensity of hydrogen production of less than 0.45 kilogram CO2 per kilogram hydrogen. So pretty stringent standards, both in terms of the bonuses, but also in terms of that life cycle emission intensity. And that is really impactful and pretty stringent for both main production pathways, both abated fossil gas and electrolyzers, even with renewable electricity.Doug LewinAnd then didn't they also put out some guidance around like hourly matching and new sources have to be built in the last three years, I think. Is that right?Emily BeagleYes, yes, that's right. Thank you for reminding me of the rest of your question there. Yes, so the Treasury Department released their initial guidance, so their proposed guidance for this tax credit, specifically for grid-connected electrolyzers, because there were a lot of producers that were concerned. There are a lot of limitations to areas with renewable resources and concerns about trying to directly tie. So they issued their guidance for grid-connected electrolyzers to be able to show that they are using low-carbon electricity to qualify for the tax credit and the three criteria for that guidance.The first is, and they're calling it incrementality, but it's basically additionality, which is the more common term in the electricity space, which essentially is that any renewable generation used for the hydrogen must be additional or new to the system. So in the case of this guidance, I believe it has to be built within three years of the hydrogen production coming online. So sort of new renewable electricity is the first standard.The second standard is a geographic requirement. So the electricity has to be produced in the same region as the hydrogen. And then the third requirement is the temporal requirement. So the renewable electricity has to be generated within the same time as the hydrogen production. And that starts as an annual requirement, and then in 2028 transitions to an hourly matching requirement.Doug LewinSo interesting. So this hourly matching in the 24/7 clean energy, Google has done a lot of work on this. It's gonna be really interesting. I think that this is gonna give an even bigger push to that. And yeah, there's a lot of ways that could play out and I have a million follow-up questions, but there's so many different things I wanna ask. So I'll stop there.I do wanna talk to you about the HyVelocity Hub. But just one other question though, before we go there, when we were talking about the challenges and potential drawbacks of green hydrogen, you may have said it and I may have missed it, but isn't water one of those as well? You do need a lot of water, right? That's your feedstock, I mean, wind and solar, but you're using, you're splitting water and you have to have fresh water right? Or can you use brackish water? Talk about the water impacts of green hydrogen and how much of a barrier that is, or are those concerns overdone? I don't know.Emily BeagleYeah, yeah, that is a really great point because water is an important feedstock for both pathways. So in the case of electricity, electrolysis, water is what we're actually splitting to get the hydrogen from. But in the case of steam methane reforming, steam is water. So there's water needed for part of that reaction in that process as well, as well as water that is consumed for cooling in those processes. So water for both of those pathways is required to produce the hydrogen. In the case of the electrolysis pathway, it does need to be very high quality water because it's going into the electrolyser and it's what we're actually splitting, which is different from the water requirements for steam methane reforming. The water consumption for hydrogen is, I think, an interesting and important issue that I'm glad to see being brought up as part of the discussion. It's something that we're thinking about and doing water quantity required even for electrolytic hydrogen production and particularly compared to the amount of water we currently use in our energy system, I think a lot of people don't realize how much water we currently use in the way that we produce energy both with produced water that we have from extraction of oil and gas and then water that we use at cooling thermal plants and all of that. So, compared to the amount of water we currently use for our fossil energy system the water quantity required by a future hydrogen economy is pretty small, in some cases negligible. However, water quality is an important part and water resource availability is very regionally specific. So I think there's one area of taking a global estimate of the amount of hydrogen that we would need and the amount of water to support that hydrogen and saying, oh, it's small compared to the amount of hydrogen we use for fossil systems, and we're replacing those fossil systems with hydrogen. So theoretically, we wouldn't be consuming more water, we might get water benefits by switching to hydrogen because we replaced lower water consumption. However, that becomes very different when you start proposing projects in places like parts of Texas that are subject to drought and saying, we're going to take your fresh water in a time of drought and use it to produce hydrogen. So getting to those more regionally specific considerations of hydrogen production and the water consumption required for it is an important part of conversations with communities and regional areas where these projects are being developed.Doug LewinSo this may be too far out there, and this may just be a terrible idea, but I'm wondering if this comes into the discussions. I mean, could you not conceivably, you talk about areas of the state where there's not a lot of fresh water, but there's a lot of times in those areas, a lot of brackish water. Could you use wind and solar to effectively, like desalinate, clean up that water, then feed it into hydrogen, feed it into your electrolyzer, create hydrogen and sort of create this loop or cycle where you're purifying water and then using that water to split and make more hydrogen.Emily BeagleYeah, I think so. That's some research that we're looking at. We're looking at possibilities of reusing produced water from the Permian Basin in Texas as a feedstock to produce hydrogen in that area, since that's the area where we also have the best renewable resources. From some initial analysis that we've done, it looks like the cost of water is such a small part of the total cost of producing hydrogen. The biggest costs are the capital costs of the electrolyzer itself, and then the cost of the renewable electricity.So you could pay a lot more for water by adding pennies to the dollar on the total cost of hydrogen. So if you think about costs of treating brackish water or costs of treating produced water, hydrogen might be easily able to absorb those without having a meaningful increase on the final results of hydrogen. And so that's one exciting opportunity to explore, which sort of both lends as a way to add a value to produced water, which is an in of itself a problem in parts of Texas, managing that as a waste, while also providing that critical feedstock for a future hydrogen economy in that part of the state as well. So we're excited to see and continue some work looking at that as a possibility.Doug LewinYeah, that just seems like one of those areas that's just really ripe for some creative policy thinking because like you said, it's solving multiple problems at once. The problem, produced water sounds so benign, but we're talking about water that has, it's not produced, it has all sorts of toxic stuff in it. And if you could clean that up and then put it to good use, that's a win, win. You could keep going down the line, right?Emily BeagleYeah, yeah, absolutely, absolutely.Doug LewinYeah. Okay, great. All right. So you mentioned just a minute ago, electrolyzers and how that's the largest cost for green hydrogen. Are we seeing any kind of a learning curve? It's probably just too early because there really aren't many deployed yet, right? But we do expect there to be some kind of reduction hopefully following the path of like solar and storage with like a 90% decrease, but is that too optimistic? Do we think this is gonna be a much slower or we're all just guessing, we don't know.Emily BeagleThat's the hope and the expectation from what I've seen. Very significant cost declines in electrolyzer CapEx curves, for sure.Doug LewinOkay, all right, let's talk about HyVelocity. So this is the hub, one of the seven hubs the DOE has announced as the winners of what was a very long and difficult competition. And I know you had some involvement there. Can you talk a little bit about both the HyVelocity hub, what it is and what you expect to kind of come out of there? And I'm also interested in this whole concept of hubs, right? I mean, there was a great discussion, and we'll link to this in the show notes, that Michael Liebreich and Jesse Jenkins had on a Canary Media podcast where Michael Liebreich, who's written a lot about hydrogen, separating hype from hydrogen, he calls it, and really trying to, like you were doing with the prioritization, get clear about what hydrogen's good for and what it's not, he really emphasized that like, hubs are where it's at, because you need to have these sort of ecosystems of production and demand because you don't want tax credits just creating something because there's a tax credit that doesn't have a use. So you need these hubs where it can be put to use. So I'm interested in your sort of thinking around these hubs. Do you share Michael Liebreich's view that they're really important for that reason, are they important for other reasons, but also just, yeah, what is HyVelocity and what do you expect?Emily BeagleYeah, absolutely. Well, maybe I'll start with the high-level discussion of the concept of hubs and the US federal regional clean hydrogen hubs before talking about HyVelocity specifically. So the regional clean hydrogen hubs program $8 billion that was allocated in the bipartisan infrastructure law to create this program and then went to DOE. And there are a number of requirements, the first of them being that they're required to take this hub design, which in that legislative language means that the production and the demand need to be co-located. So you're essentially creating this hub, this ecosystem, you're eliminating the need for extensive distribution infrastructure where you have production and consumption co-located in this hub sort of environment.And across the full suite of hubs that the DOE is supporting they're required to demonstrate hydrogen production from renewable energy, from fossil energy, and from nuclear energy. They're also required to demonstrate, so at least one hub must demonstrate hydrogen use across our four key sectors, so heating, industry, transportation, and in the power sector. And then they're also required to be in different regions of the United States, and at least two of them need to be a natural gas producing region.If you look at the total portfolio, those seven hubs that were selected last October to be award recipients from the DOE, you can sort of see that they meet. They're all in different regions on the map of the U.S. And you can see that across them, they meet all of these different requirements. And so, as you mentioned, Texas got our hub, our HyVelocity hub, which will be centered around the Gulf Coast area. As you also mentioned, and I'll disclose, I was a member of, UT is a part of that, hub and I was a member of the UT team that worked on putting that application together. So very excited not just as a researcher who is interested in expanding the hydrogen economy but specifically because of the work that I did on that application to see that the Texas hub was selected. We've alluded already to a number of reasons why Texas is a fantastic place for a hub which was a strong part of its application including we already kind of have an existing hydrogen hub within the state with all of the production and consumption that we have in that Gulf Coast area where this hub will be located. So that hub was awarded $1.2 billion and I suppose I should put a caveat that we don't have any of that money yet. We're still in negotiations. There are a number of phases. So this is not a program where the hub is just going to get a cut, a $1.2 billion check from DOE, but that was the amount of money put forward or suggested for the HyVelocity hub. It's expected that the HyVelocity hub will create over 45,000 jobs and reduce over 7 million tons of CO2 each year. It will have multiple hydrogen production pathways, so it will demonstrate hydrogen production from both kind of that traditional abated SMR plus CCS or that “blue” pathway, and also will have renewable hydrogen in there as well, so we'll get both of those within the hub.And then it's also looking to use hydrogen, sort of across all four of those sectors for heating, for transportation and industrial applications, and also in the power sector. So it will be really exciting to see. I think there are seven or so main project partners and projects that are part of that hub, members such as Orsted, ExxonMobil, Chevron, Sempra, Air Liquide, and others as well as sort of GTI Energy, UT, and HARC are all partners on that hub, and hundreds of other supporting partners, so a really extensive coalition, all coming together with the focus on catalyzing a hydrogen economy in Texas. So very excited to see that go forward.Doug LewinThat's incredibly exciting. I didn't realize, so you're saying HyVelocity is actually gonna hit all four of those: heating, industry, power and transportation, or you're saying the seven, just the one hub is gonna hit that.Emily BeagleYeah, HyVelocity, yeah. All of the hubs will hit hydrogen in multiple different sectors, but at least, and I should maybe caveat that as well, at least with the publicly available information that all of the hubs have released about their plans. So what I've been able to find, it seems that HyVelocity is the only one, to my knowledge, that we'll have across all four of those sectors.Doug LewinAnd when you talk about heating, we're talking about heat for… like steelmaking or other industrial uses, not for homes or buildings, right? Emily Beagle Yeah. Doug LewinOkay. Great. And on transportation, similarly, we're talking about trucking, which I guess makes sense because there's a lot of trucks coming in and out of the ship channel. Emily BeagleYeah. Doug LewinOkay, great. That is super exciting, I mean, that mix of industry partners is really compelling. One of the things on that, that Canary Media event I was talking about with Liebreich and Jenkins. One of the things on that, the event that Canary did that I was just talking about with Liebreich and Jenkins that they had raised concerns about, particularly Liebreich had, is the demand side of this. Given how beneficial this tax credit is, there was just a lot of discussion around the incentive is all around the supply. Do we need to do anything to incentivize the demand or do you think that's just going to come? Is that something you worry or think about?Emily BeagleYeah, and that's been pretty interesting. I'd say in the last five years or so, it started five or four years ago, when I really started getting into the hydrogen space, that the biggest concern was, are we going to have enough clean hydrogen production? And then in the last maybe year or two, it has become a conversation of, we don't have enough off-takers for all of these planned clean hydrogen facilities that are being proposed and are being built. And then also within that same timeframe, we had this tax credit in the United States, which is a production tax credit, so incentivizing the production of clean hydrogen. There are requirements to sell that hydrogen, so we're sort of prevented from having the case where, you know, facilities produce hydrogen, invent it and say they've produced it, they get the tax credit, they do have to sell it. Doug LewinIs that requirement within the Treasury, within this new guidance that just came out, or is that actually in the law?Emily BeagleI think that's actually in the law. That's one of the, yeah, eligible facilities must demonstrate sale of the hydrogen, would perhaps be some of the legislative wording there. Yeah, so it's been interesting to see that shift. I'll say that the regional clean hydrogen hubs program was allocated $8 billion and DOE awarded about $7 billion to these seven hubs and took that remaining $1 billion to create a demand side program. And so they're doing a lot of work looking at creating the demand side of it as well. So there is recognition that this is maybe one of the rather unexpected bottlenecks is the offtakers when we're talking about a lot of the new sectors where we're expecting the use of hydrogen are new sectors, it's not huge growth within the way that we currently use hydrogen so we have to be simultaneously building up all of this clean hydrogen production, while also building out new sectors to consume it while also building out any of the required distribution to get it to those new sectors. So we'd need development of hydrogen fuel cell or hydrogen internal combustion engine, heavy duty trucks. We need to be building either, you know, ships to move the hydrogen if we're going to export it, or we need to be building the ships that can actually use hydrogen as a fuel, or it looks like we'll be using maybe ammonia or maybe methanol as a fuel. It's still sort of unclear when we're talking about maritime shipping. And so we need to develop the technologies to use hydrogen for steel production because we can't just replace it. It's not a drop in fuel for some of these current applications so all of those need to happen in tandem and sort of paired with each other. And so yeah, that'll be a big challenge.Doug LewinI know you've done some work on distribution and how hydrogen will actually move around. That is, as you just alluded to, no small challenge. You can't just drop hydrogen into a natural gas pipeline. You can in some mix or something, but only up to a certain level. You're going to probably need new pipelines or you have to truck it. How do we overcome that? It does seem to me like with the water, sometimes these things are, we lose context. Yes, there's a real concern there and it's a valid concern, but just like you point out with water, you need the broader context. Part of the broader context here is three and a half million tons of hydrogen already used in and along the ship channel along the Gulf Coast. We start there. We produce hydrogen, we use it there.But thinking ahead a little bit, with the acknowledgement we have some time to solve these problems, it's still a problem, right? If you're going to make it in West Texas, how are you ultimately going to get that hydrogen where it needs to go?Emily BeagleYeah, yeah, that's one of the big questions. We do a lot of modeling work within the group, trying to understand that broader infrastructure and hydrogen system build out, but a little bit unclear. You can move it by pipeline, you can move it in truck. If you're moving it by truck, you can move it as compressed gas or you can move it as liquid hydrogen. You can transport it via ship as liquid hydrogen or as ammonia, there are also a number of other hydrogen carriers. So lots of questions that relate to the costs that relate to the efficiencies of these whole processes for every conversion that you have, if you have to liquefy it and then move it and then regasify it and then use it, you have losses, costs, increasing the cost of the hydrogen. So, so I don't have the answer to what that will look like other than to say that it's a really important question. And one of the reasons why starting with these hubs is such a critical point of it because we can eliminate the need to have that long distance distribution or connective infrastructure question answered or make a decision on that. If we sort of start with the hubs and prove out these commercials and then that will give us a chance to then later on get and maybe have a better understanding of what that broader nationwide or global distribution infrastructure should look like.Doug LewinYeah, I think that's exactly right. I think this is like a crawl, walk, run kind of a thing. And a lot of people want to, as I just did with that question, jump to the run. But I think it's important to acknowledge there's going to be steps along the way, and we'll phase up to it. One other question on this, and this also relates to HyVelocity, it is, in addition to being in an area where there is a lot of demand, where there is a lot of existing hydrogen infrastructure and pipeline, many of the pipelines are there. There is also a good bit of geologic storage, right? We store a lot of natural gas in that region, but hydrogen could also be stored there. Is that part of what the folks around HyVelocity are thinking about as well?Emily BeagleYeah, there are three existing hydrogen salt dome storage facilities in Texas in that Gulf Coast area, and I think that is three of only six total in the whole world. So absolutely the geology of Texas and its suitability for hydrogen storage and also for CO2 storage is one of the many advantages that Texas has when we're thinking about good places or ideal places to start developing a hydrogen economy. You'll need some of that geologic storage if you're talking about storing hydrogen, particularly for long duration power storage or for any other applications. But you also need CO2 storage if you're going to have hydrogen produced from natural gas coupled with CCS. So that's definitely an advantage that the state has.Doug LewinYeah, I could really see this is, it's all kind of starting to take shape, at least in my mind. I don't know if other people are seeing it the same way. But if you, again, if you start to have, particularly on the green hydrogen side, if you have electrolyzers that are set up to be flexible loads, you are, as we were talking about earlier, using the very low cost, often zero, sometimes negative cost power, right? Sometimes the prices go negative, you're actually paid to use the power. But even if it's not, zero or less than $10 a megawatt hour, which is a penny a kilowatt hour, then because there's that flexibility, you're avoiding your transmission charges because you're taking a transmission voltage. So you've got the Four Coincident Peak pricing program where basically your transmission bill is based on how much you use during four 15-minute increments: June, July, August, September. You avoid those four. Your transmission bill is at or near zero. Then add to that you've got $3 a kilogram. Then add to that you're making hydrogen, which you're storing in a cavern, and then you're able to actually use when those power prices are super high, plus any wind or solar that you have, maybe the high power price periods are only during the night, so your solar's not doing much for you on that front, but wind might be and then you're, and the hydrogen itself is being used as a power source, all of a sudden the economics of this start to look quite good, which I think is I guess the reason why we're starting to see more and more announcements around this. And that is a that is a uniquely Texas story that does not work in California. It does not work if you're in PJM or you're in Duke or Southern Company or where you could, it's a what the list is as long as any area and the United States or potentially the world, but Texas has all those elements, right?Emily BeagleYeah, absolutely. Yeah, it's exciting.Doug LewinAll right, so before we end, can you just give us a sense? I always like to ask a few questions sort of towards the end. Are there any particular policies that you think are needed at this point, whether they are local, state or federal, that could, you know, usually ask this just generally, right? To reduce costs, increase reliability, lower pollution. You can answer it in the general sense specifically to help low emission hydrogen get to market.Emily BeagleWell, I’ll say that Texas has been already at the state level, fairly proactive with hydrogen. One of the things they did in the recent legislative session was sort of give the Texas Railroad Commission the authority to regulate jurisdiction over hydrogen, I think, in pipelines and maybe one other use or distribution. So the sort of foresight to say, we see that this is coming. We don't want to, when it's just burgeoning, get to the question of who has that kind of regulatory jurisdiction, as boring is talking about, who has regulatory jurisdiction might be is. So I think that was good. So more policies like that in other places of the state to make sure that we aren't hindering the development of this industry trying to deal with some of those questions. And also just the importance of thinking about the regulations and the appropriate standards, not just for safety but other environmental concerns as well. As it relates to water, I think the water issue related to hydrogen is another area where policy and sort of appropriate communication and understanding working with local communities will be an important aspect of this as well.Doug LewinYeah, the legislature also created a hydrogen council as well, right? So I think that's great too, that there will be an entity that exists to get together and work through some of these problems.Emily BeagleYeah, yeah, absolutely.Doug LewinOne other question, I'd love to get your thoughts on it. We've talked about a bunch of them, so you can absolutely feel free to repeat one of the answers you gave earlier just to put a finer point on it or something we haven't talked about yet. But I like to ask folks, what are the sort of common perceptions within the energy world that you think are wrong or just overdone in some cases, not necessarily wrong, but thinking about him in the right way maybe.Emily BeagleWell, one thing I would love to talk about, which I think sort of answers this question, we haven't talked about natural hydrogen at all yet. And so maybe the misconception is that there are only two pathways to be able to produce low carbon hydrogen. So everybody is talking about green hydrogen and blue hydrogen. And because everybody loves the colors so much and green and blue sounds so nice, they don't talk about any of the other hydrogen pathways. So methane pyrolysis is another pathway, I think in the rainbow that's turquoise hydrogen, but we'll just say methane pyrolysis. Another potential pathway that eliminates the CO2 emissions associated with removing the hydrogen from that methane, from that CH4. So that's another potential pathway that's still energy and resource intensive. But natural hydrogen, or geologic hydrogen, is hydrogen that has accumulated in geologic formations that we could potentially tap into and sort of extract and use in much the same way with a lot of similarities to oil and gas. Mali in Africa has been doing this. They found a natural hydrogen deposit and they've been using hydrogen to produce electricity since 2012. So it's not totally unheard of. We just haven't been looking. I heard this at a conference this last week that had a panel on natural hydrogen, so I cannot claim credit for this great expression, but I'll use it now anyway. We haven't been looking for hydrogen in the right places with the right tools.So we don't yet have an assessment, but what has been done so far estimates that there could be an incredible potential of natural hydrogen accumulations. And then that would eliminate all of the need for talking about competition with renewable electricity sources. It would eliminate the need to create sort of decades of industry reliant on natural gas pathways. It could potentially be cheaper and cleaner than any of these other ways that we're talking about actually producing or manufacturing hydrogen, and it would be a primary energy source that we're just sort of mining, extracting, getting the same way. So I think that's one of the biggest new exciting stories, one of the scientific breakthroughs that could really upend the way we're thinking about the hydrogen system in a very positive way if it comes to fruition.Doug LewinPerhaps we just need to give it a color and then everybody will talk about it.Emily BeagleOkay, so since you brought it up, that's one of the reasons I think, no really, so white hydrogen is the color that natural hydrogen is given. And so we didn't talk about one of the other hydrogen pathways, which is coal gasification, which is brown or black hydrogen. And one of the biggest examples of why we shouldn't use the colors is because we can imagine the problem with having a system that says we don't want that dirty brown or black hydrogen, we want that clean white hydrogen. So we just shouldn't do that. We just shouldn't use the colors.Doug LewinInteresting. Is there any, I won't say white hydrogen, is there any naturally occurring hydrogen in Texas or do we think there's some likelihood that there is? Not likely.Emily BeagleI would think that there's likelihood that there is. I'm not off the top of my head familiar if they've looked for any and have found any, but so much of the geology of…Texas is such a big, big state. I certainly wouldn't put money that there is no natural hydrogen in Texas.Doug LewinThere’s gotta be some somewhere, right?Emily BeagleI would think so, yeah, yeah. There's the potential to actually like regenerate it. A bunch of really cool science happening with geological reactions to stimulate and produce hydrogen naturally and certain types of formations that are suited to that. It's really cool.Doug Lewin A potential new TV show, Hydrogen Hunters. I love it. This is going to be great. Emily BeagleYeah, yeah, yeah. Doug LewinAnything else you want our audience to know about or think about? Anything else you want to say before we end?Emily BeagleNo, I think that's great.Doug LewinThank you so much for taking the time. This has been great. I've learned a ton and I'm sure our audience has too. Thank you, Dr. Beagle.Emily BeagleThank you so much 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

In this episode of the Energy Capital Podcast, I had the opportunity to speak with Pablo Vegas, the President and CEO of ERCOT. There was a time when very few Texans knew what ERCOT was or what it did. Those days are long gone. Texans pay close attention to the grid following Winter Storm Uri and the ensuing outages. And the 13 conservation calls over the last nine months or so have kept ERCOT very top of mind.Vegas joined ERCOT in October 2022. Previously, he worked with NiSource, an electric and gas utility in Ohio, before returning back to Texas. From 2008 to 2010, Vegas headed AEP Texas, a regulated poles and wires utility serving Corpus Christi, Laredo, and large swaths of South and West Texas. There are likely few jobs as complex and as difficult as leading ERCOT. The problems facing ERCOT are enormous and incredibly complicated. We dived into many of them. Without a doubt, Pablo is thoughtful and open-minded, two of the most important qualities in any leader. He shared his thoughts on a wide range of topics, the need for more flexible resources, the need for more transmission, the challenges and the benefits of renewable energy, and the role of storage, which he called one of the most innovative changes to energy since the invention of the electric grid. Vegas sees a lot of distributed resources — sources of power located at homes and buildings — as one of the defining features of the grid of the future. He was particularly engaged and animated on the issue of the demand side, the need for energy efficiency and demand response, as well as distributed solar and storage. Vegas talked about the need to address inefficient heat and also the potential of what he calls “active energy efficiency,” the ability to “flex up and flex down” to use more power when there's an abundance and less when there's scarcity.This podcast is free but about half of our podcasts and some of the posts are for paid subscribers only. Please become a paid subscriber today, if you’re not already.If you like the episode, please don’t forget to like, share, and leave a review. Time stamps and a transcript are below. I look forward to hearing your thoughts on the episode in the comments section.Timestamps03:12 – How Vegas thinks distributed energy resources (DERs) will define and transform the grid of the future7:46 – What will ERCOT’s role be in managing DERs?10:48 – The role of a Distribution System Operator (DSO)14:02 – Energy efficiency: tackling traditional the “low-hanging fruit” in Texas15:03 – Expanding from passive energy efficiency to active energy efficiency21:28 – Conservation calls vs demand response26:46 – Ways to align retail market incentives with grid needs, including time-of-use rates30:44 – The potential need to change four coincident peak (4CP) pricing34:07 – How the environment, market, and economy determines energy supply and demand41:20 – The need for more transmission, including discussion of the transmission issues on September 6, 2023?46:45 – What are the solutions to transmission issues and how does system planning need to change given massive new loads like data centers?52:11 – Is the Performance Credit Mechanism (PCM) necessary?59:26 – The value of flexibility; achieving emissions reductions while maintaining reliability1:02:44 – Would “firming” requirements potentially backfire by pulling resources out of the market and raise consumer costs?1:06:55 – Should Texas interconnect ERCOT with other grids?Show NotesThe Future is DistributedTexas Grid Roundup, February 16, 2024Why is the Smart Grid So Dumb? by Travis KavullaTranscriptDoug LewinPablo Vegas, thank you so much for being on the Energy Capital Podcast. Really appreciate it.Pablo VegasGreat to be here with you, Doug. Doug LewinWhy don't we start with something just kind of high level here? I'd like to just ask you, what is your vision for the grid? Not like in one year, two years, but a little long and then not, you know, a generation out, but let's say like a five to ten year window. And how do we increase both reliability and affordability kind of in that timeframe.Pablo Vegas Yeah, I love that question because it's really where I try to spend as much time as I can keeping my horizon view on that five to ten year outlook. And I think most CEOs and companies are trying to make sure that while the business of the day is in hand, that they're guiding the business in a direction that makes sense for the organization and for the grid. And I think ERCOT, and you know, I don't know, ERCOT is very different from a lot of grids in the United States, but I think a lot of grid operators are seeing kind of similar opportunities on that five, ten year horizon. And it's a much more interactive electric grid than I think what people have been used to before. I think that there's a couple of characteristics of that grid of the future. One is I think that there's a lot more participants in the day-to-day operations of it.And what I mean by that is not only do I think, of course, traditional resources, generators and customers will continue to grow and expand, but I think the role of what a customer does and how a resource, a generation resource performs is going to continue to change and get more and more granular over time. And what I mean by, so to be specific, I see a future where there are distributed generation resources scattered throughout every community that we live in. And those resources will be electric vehicles. They will be the HVAC systems in your house that are connected to a smart internet connected grid thermostat that's connected to the internet. It could be the rooftop solar. It could be a Bloom Energy Bloom Box that's part of a community commercial development.All of these assets are going to play a role in terms of distributing and utilizing electricity. But what's going to be different about the grid of the future is that the grid operator is going to be interacting with them too. Today, they're all present, but we don't interact with those resources very much today. It's typically kind of behind that distribution substation. And we don't see a lot of that on a day-to-day basis at the grid level. Most of what we can see sits up at that wholesale power, wholesale transmission level, that bulk electric system. And I think the grid of the future is going to get down to that premise level where these resources will be acting and participating in grid activities to the benefit of everybody. I think that's where we start to see improved resiliency and potentially improved reliability because of how we can leverage these resources. I think these resources start to change the economic thresholds or frontiers and the decision making around whether it makes more sense to build a large station kind of sized power plant versus leveraging a lot of distributed resources, those questions start to be analyzed a little bit more seriously. And so you start to get to different economic trajectories because of that. So to me, that's what the grid of five to ten years down the road looks like. It's more participative, it's more granular. It engages consumers and businesses in ways that they're not fully engaged today. And because of all of that, I see the opportunity for reliability, resiliency, and for the economics to get better over time.Doug LewinSo in that future, and I share that vision with you, I do think we're gonna see a lot more distributed resources. We're seeing them already, right? I mean, it's not like this is solely in the future. It's already starting to happen. In fact, I wrote one of my articles at the Texas Energy and Power Newsletter, I called “The Future is Distributed”, it's happening. The future is starting to be here now. The question I have for you on that, Pablo, what… So like you said, you guys work at the wholesale level. You're a transmission system operator. You're talking about very small devices. You're talking about thermostats or a sensor on an electric hot water heater or a pool pump or an electric vehicle, smart charging system in somebody's garage. Do you think that ERCOT will have, and none of us really know, but we're talking about vision, right? A little ways out. Do you see ERCOT actually having a role sort of connecting there or is there some other entity in between, whether the transmission distribution utility or something else altogether?Pablo VegasWell, that's what's really, I think that's what's really cool about ERCOT is that that's probably the answer to that question is probably more of a market driven answer than necessarily a regulatory or policy driven answer. Now, not to say that it's not going to be important. There's not a lot of policy and regulatory considerations in this transition, but what we've seen in ERCOT develop and develop faster than in other grids in the US are competitive and innovative solutions to electric market problems. And that happens because we do have a very open market where virtually, you know, anybody who believes they can offer a great retail alternative or a great supply alternative has an opportunity to prove that and to put their money where their mouth is, invest in the, you know, in the assets and bring it to the market and where they're right, they succeed and they grow. Where they are wrong, they, you know, they pay the economic consequences. So I think it'll be largely an economically answered question. If I were to prognosticate today, is ERCOT best positioned to build the technology and the interfaces to get to that level of granularity? I'm not sure that we're wired and structured that way today to do that. And there could be, that could be a whole segmentation that develops in the ERCOT market around how to leverage these very distributed assets in such a way that it becomes simpler for the transmission operator, the distribution operator, and the grid operator to leverage and analyze and model and forecast and plan all of these assets without necessarily it having to be developed by ERCOT. And so I'm not saying that I'm not willing to invest and build the capability if that's the way that it makes the most sense to get there. But because we have such a competitive market I would be surprised if a market competitive player didn't come up with a better widget on how to do this and figure out how to plug it into our ERCOT market and be successful.Doug LewinYeah, that is really interesting. So yeah, I think ultimately the question there is: who is that distribution system operator? Maybe what I hear you saying is you guys might have a sort of a layer of ERCOT that is interacting with that without actually operating the asset. But there still needs to be, in my view, and a lot of people disagree with this, but I still think there needs to be something, some entity deploying, dispatching these tiny little sources, because otherwise you could get some really negative results, right? Where, like, too many batteries are charging all at once, or too many are deploying all at once. And I'm a big believer in markets. I think there should be some market function there, but there is a policy question as to who is that distribution system operator and what are their roles and responsibilities? So a lot to work out there.Pablo VegasYeah, I agree with you, Doug. And I think, frankly, I do see it being important for ERCOT to get to a capability where they can see distribution level electric information. So load demand changes at a level below where we are today. I do think that's going to be important. And I think the question is, does that go all the way to the water heater in your house? Do I need to have that as a node on my grid, kind of on my control system where I'm taking direct signals from that? That's a different question, I think. But I do believe you're right. I believe you're right. There's a level of orchestration that happens at the distribution level. That's gonna become really important, especially as we start to get to the same, I'd say, circumstances, and we'll probably talk about this in this conversation, where when a grid starts to get tight, you start to see the seams of that grid in different ways, right? You start to see issues emerge that are challenges that you have to overcome and you have to plan through. And at the distribution level, that's absolutely going to happen as we see more proliferation of distributed resources, right? You're going to, as you start to see electric vehicles filling up garages in residential communities and rooftop solar, the distribution wires and transformers and substations and all of that, are gonna have to expand and grow to accommodate. And where they don't, there's gonna be stresses that are going to emerge and challenges are gonna have to be worked through. So I think it's really important to have a holistic view of a grid at the distribution level and the transmission level to try to get ahead of that and to try to be able to anticipate where those problems are going to emerge and then plan in advance so that you don't trip over them.Doug LewinSo very related to that because one of the distributed, if you think of it in terms of resources, a resource that can really benefit the grid, both from reliability, resiliency, and even affordability perspective is energy efficiency. And energy efficiency, I think, you've been talking about it a lot lately, which I have noticed and really appreciate. I obviously think it's very important, but I also think the definition of energy efficiency is kind of changing. In a world where there's a lot of hours, where there's a lot of abundant and cheap power, you start to get these curves. I don't think Texas is quite a duck curve, but you've got some kind of curve in the middle of the day where there's a lot of solar. And you want to charge, you want to electrify, right? It's a good thing to bring these cars onto the electric grid. It is more energy efficient to do that. There's not waste from burning gas in internal combustion engines. So all that's good, but how you charge it matters.Can you talk a little bit about energy efficiency, both as it's traditionally thought about heating and cooling on the residential side, being a big, big driver of a lot of the system stress, but then also kind of, you know, this next evolution of energy efficiency, where it's really kind of, you could think of it as like demand flexibility, where we need to use more at certain times and then less at certain times.Pablo VegasYeah, yeah, I'd be happy to. And you're right, I am talking about it a lot more because, you know, there's always been, I'd say, you know, kind of three core elements to kind of the traditional grid construct. You've got your supply, you've got your interconnected transmission and distribution system, and then you've got your consumers. And those consumers are, you know, wide and varied, you know, in terms of what they, who they represent. And in order to plan a grid really fully, you have to anticipate and understand the needs of each of those segments over time and as things change. And so as resource mixes change on the supply side, what does that mean to the T&D system? As consumers have more sophistication and start to develop decentralized tools and products, what does that mean? And so starting with the kind of the traditional. There's a lot of low hanging fruit out there, Doug. I really believe that there's low hanging fruit in the energy efficiency space that I think we need to be just plucking. And that gets to, you know, resistance heat, resistance heat in there are areas throughout the United States, you know, in the southern hemisphere of the southern portion of the US that there's a massive energy efficiency opportunity around replacing resistance heat with more efficient air sourced type heat pumps. And that's something that I think we need to go after hard.I believe that to capitalize on the investments around that, which I think will happen because effectively it's going to be more cost efficient and cost effective to replace all of these types of heating units when they fail with something much more efficient. But to harness that value, you've got to step into the other traditional part of energy efficiency, which is home insulation. If you don't have a well insulated home, you are still just throwing the dollars out the window, even if you have very efficient appliances. And so you have to couple those two together. They really are two sides of a coin. And I think we've got to invest on both sides of that to maximize the traditional efficiency opportunities at the commercial and at the residential level. And I think that's a big opportunity in Texas. Texas certainly is, they started out strong early on with energy efficiency programs and have recently lagged. And I think there's an opportunity to get back into a leadership position there and there's good value to be obtained in doing so. So that's something that I would look forward to doing. Go ahead Doug, this is a good place for you to jump in. I was gonna talk a little bit about the next evolution, but please interject here.Doug LewinNo, and I do want you to talk about that. I was just going to say, though, I think it just ties in, I think, perfectly to that next evolution. There's sort of a virtuous circle here, right, where you were just talking about insulation and air source heat pumps and these newer heat pumps that are all-climate… a lot of people are calling them cold-climate. They can heat your home down to zero or even below zero. But they're also, and this is very hard for people to understand because it's called a heat pump, it actually will make your house cool too, right? So it has benefits in the summertime too. But with a well-insulated home with a high efficiency heat pump, most of those at this point, the high efficiency heat pumps have inverter compressors, right? So they have an inverter that can actually respond to a signal. So now you've not only brought down the overall use, you have the ability to say, oh, wow, it really looks like, for instance, does this sound familiar to you? 7:30 tonight's gonna look really dicey. Let's go ahead and make that house cooler at three, four, five o 'clock. A lot of solar power available. Power is generally pretty cheap. Let's go ahead and use more. That only works if you've got the insulation. It only works if you've got the HVAC that can take a signal. Pablo VegasAnd the way I think about it is it's kind of, it's going from passive energy efficiency to active energy efficiency. So it's the same. It's all energy efficiency, but there's one that's more active because it's actually utilizing real time information in order to help optimize the efficiency of whatever it is we're talking about: the building, the home. And so that's where the active opportunity is coming in because we now have access to data like we know it's going to be tight at seven o 'clock tonight because it's a very hot day and we're not going to have the availability of solar resources. So we know we'll have a scarcity period. So we can start to make decisions early on and it's about, you know, flexible demand. So I can flex up my demand in the hours leading up to that point in time to make sure that I'll be comfortable and then flex down significantly during a peak period, which both makes economic sense because when there's abundant solar in the middle of the day, power should cost less. And then when there's scarce power later when it's tight, power will cost more. And so there's natural economic incentives and we can work our way through that without really having to do a whole lot of things to make somebody uncomfortable. And that's the opportunity with active energy efficiency. And I think that's really exciting. And it applies to, like you said, vehicle charging. It can apply to hot water heaters. When does a hot water heater cycle and when does it run? There's all different kinds of applications to this that I think are really exciting. And we're just at the point where we can do this today, right? This is available today. Part of that five to ten year vision is these appliances and components will come with software embedded in them that will do it automatically. And that won't even need to be set up or have a person say, okay, I need to work and time this with my utility company or have my retailer, you know, do this on my  behalf. It will do it by itself. That's where we're headed. And it's really just about integrating all of these pieces and parts in such a way where you look at what the objective is, which is leveraging the resources we have cost effectively and leveraging where there's abundance, you know, flex up. And when there's scarcity, you flex down. And those principles can be coded so simply into appliances.Doug LewinIt's so fascinating and I think hopeful for the future of the grid. I mean, one of the things I'm hopeful for, Pablo, and I'm sure you are too, is that in the future, you know, conservation calls, they're not actually like what they are today. A conservation call is basically, you're basically calling for people to use more. Like, I say this all the time to people. I'm like, if I said to you, would you be a little colder inside your home in a Texas summer and get paid for it, right? So that you could use less during that net peak, right? At the time the sun's going down where the, just like we saw this last summer in August and September, that's when the conservation calls were going out, right? It was a 6 to 9 period and it was like 7:30. So a conservation call isn't really a conservation call anymore. It's people have already raised their hand and said, for this amount of money, I'll be colder inside my home earlier. I'll let it ride up to that set point, the highest I'm willing to let it go, it's my choice. Won't go any more than that. And there's a lot of Texans that won't want any part of that. And that's fine. As long as some people opt in, we all have a more reliable system and less of a chance of having conservation calls.Pablo VegasYeah, you're absolutely right. And that's something that, you know, today there are retailers and some of the non-opt-in entities, like the municipal power authorities and such that offer a lot of really flexible demand response type of offerings for their consumers, where, you know, some of them are, it's basic thermostat, you know, adjustments and they offer an incentive to allow that to happen and others, it's, you know, they just, you know, they just communicate directly with customers and say, Hey, this is how, you know, we're in a conservation period. Can you respond? What I'm thinking about is how can we put a framework around all of that? Maybe an umbrella service around all of it that allows consumers through whatever, whatever provider that they have to participate and be part of that economic incentive. To me, that's kind of the next frontier for Texas on the demand response. Because today, you're right, we are asking for a favor. We're asking people to change their behavior and to do something that they perceive today as a discomfort step in order to help alleviate a risk, a risk on the electric system for the good of the system. And to be perfectly honest, it's not something that we ever want to do. We recognize that it is perceived as an inconvenience for people. But I have to say, people have been responsive. It's really been incredible, the amount of response we have gotten when we do ask for it. And so there's wonderful people that really do help out. That being said, this is one of the most competitive electric markets in the world. We can come up with a way to incentivize this that reflects the actual economic cost of these demand response opportunities and let everybody participate in that. And we do it today on a macro level for larger industrial customers. There is no reason we couldn't do that on a more granular level with residential consumers. And so that's something we have to spend some time on this year figuring out how to move in that direction.Doug LewinAnd I'm wondering if you have any thoughts yet, and it sounds like you're in that kind of ideation phase of trying to figure it out, and that's fair. There's a lot of details to work out here, and it's certainly not simple. It's incredibly complicated. You know, I was actually reading recently and highly recommend to you and to all listeners, a great paper that Travis Kavula of NRG wrote for ESIG, the Energy Systems Integration Group, did a great series on aligning retail incentives with system needs. And his paper, I thought the title was great. “Why is the Smart Grid So Dumb,” he called it. And as great as the title is, I think the paper's even better. And one of the things he talks about is, a lot of times we try to use demand, as if it were supply. We compensated for the energy or for the ancillary services. And this is where I think we're going with the Virtual Power Plant pilot. And that's a good thing that it can work as supply, but he's making the point in this paper that we also need to let demand be demand. Almost every other market has two sides of it. There's supply and demand and people can decide, hey, the price for that is too high. I'm not willing to pay it. And so it's not just about putting into the ERCOT market, though I do think that is very important to be clear, but there's other value streams and other ways that demand can respond. So a couple of things that he recommended in there, one is there, you could have time varying T&D rates, transmission/distribution rates, right? That would be one way to send an additional signal to demand. Another one is, and you were referring to the municipals like Austin Energy and CPS Energy and co -ops, they to ERCOT look like one meter. So they have the 4CP, the Four Coincident Pricing on the transmission side. So what that means in effect, for those that are listening, I do try to make this, I think most people listening to this are kind of into energy policy, but I do want this to be accessible to the general public. So just really quickly, Four Coincident Peak is a large customer, a manufacturer or a big box store or something, or a municipal utility. Their transmission is gonna be set by how much they use during these four, 15 minute increments, June, July, August, September that coincide with the system peak. What Travis recommends in this paper is why not give that to all the load serving entities? He understands and he talks about this in the paper that like, you know, it doesn't make sense to expose small customers to those kinds of swings, but a load serving entity is already responsible with managing the use, right? To make sure that they're shielded, they're hedged against high prices, right? So how do we also then have that transmission signal and that value? So what do you think of those ideas and do you have others that not necessarily saying this is the way we're gonna go, but things that could be considered at this point?Pablo Vegas Yeah, I think the T&D time-of-use type of rates based on the actual economic cost of the supply at that time, I think is really smart. I think especially today with such granular variability in the supply base, there are very significant swings. From a given day, you can have wholesale pricing go from $0 to $5,000 literally in the same day based on what's happening and who's supplying the power. And so I think it's very smart to think about that. And I think like what we talked about, there's now a lot more software and smart appliances that could easily leverage that information so that it wouldn't be a large burden on a consumer to take advantage of that. That they could essentially, their house could help manage that for them. And that's something that I think is really not that far -fetched of a concept even today.So I like that. With the concept of 4CP, so I actually have been thinking a lot about how, is 4CP the right measure today given where the stresses on the grid are? And is it the coincident peak that really is the appropriate measure of how we wanna try to manage that? Or is it really the coincident net peak that we're really trying to think about at this point in time because of the change in nature of the resources providing power. And are the four months of the summer the only times that we're really going to be experiencing the stress and the need to invest? I think we're getting to a place where our peaking is going to start to, our winters and our summers are going to challenge each other for the most challenging times of the grid. So maybe we need seven or eight periods throughout the year to better reflect the changing nature of how the grid needs to be invested in and the overall supply chain around it. And we could start thinking about ways that match the true economic impact of utilization to the circumstances that it's realizing. So I think that's maybe some things we should start to think about. And I think you could, sorry, I meant to say, and yes, beyond industrial, beyond large consumers, there's, I think, the load serving entity concept. I think it's an interesting one because they are sophisticated participants in the grid and are already having to manage a portfolio of how to best serve their end-use consumers. So, no reason for them not to potentially be a part of that.Doug LewinI mean, if they're not doing it already, they're probably not going to be in business very long anyway, right? So I mean, I think most of them, yeah, most of them are doing that anyway. And I literally had on my list of questions to ask you about 4CP versus 4NCP. So you anticipated that question. We're thinking alike there. I did not have on my list to ask about like going to an eight. So, and again, for listeners that may not be as in the weeds on this, and you correct me if I get this wrong, but what I understand, Pablo, what would mean by that is that you would go to a four net coincident peak. So that's load minus wind and solar, although there could be different definitions. You could say minus wind and solar minus thermal outages or something. Beause even if you add those in,it's a little harder for entities to predict that you can see wind and solar a little better than you can anticipate a thermal outage. So there's a definitional question there that would be important. But the way it works right now with 4CP, you could have, and I don't know that this is happening. I don't know if you've seen evidence that this is happening, but you could have a situation where you're getting a lot of load reduced at 4:45/5 PM, which looks like the coincident peak. And then it comes back at 6:30 or 7:00 or 7:30, which is really the tighter timeframe. That was the time we were in emergency conditions on September 6th, for instance. Yeah.Pablo VegasYeah, you're right. And we actually have seen that happen because if a customer is not a price responsive customer, think of an industrial customer that is not price responsive, they have no incentive to curtail during that net peak when the grid is the tightest, when the load minus the wind and solar is at its highest point. But they have every economic incentive to curtail at the gross peak, which is at four or five in the afternoon when we have potentially plenty of solar and plenty of capacity. And so the grid isn't really at its tightest point. So the way the economic incentives are set up today, it may be misaligned with what we're trying to accomplish in terms of where investment will be needed in order to manage reliability. Because right now, the investment is already coming in the way that deals with the gross peak in the summer. We're getting strong, strong renewable development in solar facilities. We're seeing really strong partnerships with batteries in both standalone and with solar facilities that are coming online. And I believe that those are going to be very influential in helping the traditional peak periods in the summer. And eventually with enough batteries, also the net peaks, I think.  But for now, it's the gross peak period is becoming less worrisome in many ways than the net peak is. And then the winter, the gross peak and the net peak are almost the same because when we hit our highest demand in the winter, it's typically when we don't have solar and it's coldest in the early, early morning before we do have those additional renewable resources. And so the true peak then is still the true peak in the winter. And so it's a little bit different for that. And that's where I think the idea of expanding the 4CP into the winter period is because we're stressing the grid and the investments necessary to support reliability during those periods should be aligned with where those economic incentives are. And right now we don't measure that. It's only in the summer.Doug LewinIt’s only June, July, August, September. Yeah. So, and just to anticipate what I'll, I'm sure I'll get some comments to this podcast, people saying, you know, it's, just to be clear, I mean, this summer was the last one where, and I know you haven't been at ERCOT for that long, but you obviously study this stuff and talk to people and you've been in the industry, so you know this anyway. That as recently as 2019 when we had a really hot summer and things were tight, everybody was worried about four or five. So it's not a bad thing that we have the solar. It's just, it's a different challenge. It has moved the hours. But luckily, the demand is lower at seven or seven to eight. It's just still very high in a growing state with all this industrial load and all that. So I just want to be clear. It's not like and this is and this is part of this, but part of what I want to talk about as well. Right. I mean, I think the communication around all this, there's just been so much over the last few years from people on all different sides of this stuff about this thing's to blame, that thing's to blame. It's a system. We've all, we just got to make it work together. And this isn't like solar's causing problems. No, like the sun goes down. That just happens every night.Pablo VegasYou're absolutely right. And it's become a highly politicized topic on, through so many different lenses. And it doesn't need to be. I mean, there's a role and a need for the politics of it because of the policy side. So I don't want to, you know, I don't want to minimize the importance of that. But from a physical operation and to really say, look, we want to… The name of almost any business game is optimization. Optimize your resources to the benefit of consumers. If you have shareholders for shareholders, you're trying to optimize. And it's no different than the grid operation game. We want to optimize the resources that we have. What we don't have, like in Texas, we don't have a lot of control over what supply resources show up. So it's a truly open market. The economics of the market determine what supply resources show up. On the demand side, same thing. We don't get to pick the type of load that comes to Texas. It's really the environment and the economy in Texas that dictates who comes here and then does what. And right now, that's a lot of people coming. The economy is doing great. The policies in the state are very conducive to growth across almost every facet. So, what we're seeing is, that the market side, and this is what I've been trying to be clear on, I can point out a reality without it being a political statement. At least I intend to. That may be a very naive perspective to have, but that is my intention. To say that subsidies for certain resources help them economically, and because of that, their investment in those resources reflect whatever the economic circumstances they have. So if you have a benefit that one resource has and another one doesn't, well, you may see more of the one that gets the benefit. That's not a political statement. That's just a fact. And so I'm not saying whether that's right or wrong. I don't really have an opinion on that because that's not a policy issue that I can really do anything with. All I can do is explain why it's happening. So to say that because we're seeing more development of solar, more development of batteries, more development of wind than we are of traditional thermal generation. That some would say that that is a reflection of a failure in planning or policy. It's really just the result of an economic construct is all it is. And that's why it happens the way it happens in Texas. And so then, well, what's the implication of that? Well, the implication of that is we need to think about how to manage all the variables of the different resources that are showing up. And that's our challenge is to help to explain how to best manage and optimize that. And that's where I've been trying to be very consistent to say, look, we benefit tremendously from the renewables, the solar and the wind. We are benefiting hugely from the batteries. They are bringing something to the table that is so different and unique than any other resource. It's probably one of the most complex and innovative things that has happened to the electric grid since the invention of the electric grid. And then, you know, and so we leverage and value those resources, but they don't bring certain facets, certain characteristics. In the case of batteries, today they don't bring a lot of duration. In the case of renewables, they don't bring consistency. And so what we have to do is offset that then. We have to offset the duration. We have to offset the consistency. And there are other resources that do do that. And so that's been the story in terms of the supply side discussion, the same, everything brings its own set of characteristics. We're getting a little out of balance on some of them. And because of that, it's getting harder to manage the grid in certain circumstances. So that's why we advocate for bringing more balance back so that we have more resources on the supply side to manage some of those circumstances. And I know you're thinking this, so I'm going to say it. And we get lost in these supply discussions, right? It's kind of so we get, it becomes the whole conversation and we forget that, hey, there's also energy efficiency and smart demand response and flexible demand considerations. There absolutely is. We got to keep that in the conversation. And then there's transmission. You can do amazing things with transmission to alleviate some of the issues around kind of where generation shows up and where load shows up. So we have to keep all of those three legs of the stool always in the conversation and not get lost in any one of them.Doug LewinLet's talk a little bit more about transmission. I mean, there's a lot on the transmission side, right? We've had over the last two years, I think somewhere on the order of $5 to $6 billion worth of transmission congestion. There is more transmission being built at the South Texas project, more in the Permian. So I guess, let me ask a couple of questions here. One, how big a problem is that and what is being done to deal with it? And then I do also want to ask you about, I mean, September 6th was a really, so there's this sort of two-part question. You got the general, like, you know, do we need more transmission? How are we going to get it? Can we build it fast enough? Then there's a specific question around September 6th, right? So on September 6th, there was a manual curtailment, right, of a line that came from South Texas and up into sort of the populations, the main population centersPablo VegasThe San Antonio area, yep.Doug LewinRight, okay. And on that one, it's a double line, right? You got a tower, you got two lines strung, but you're operating it as a single contingency, as if there's not two lines. And I heard Dan Woodfin say to the ERCOT Board when he was asked, should you have been doing that? He said, there's risks on both sides. And I want to explore that a little bit, because if you don't operate it that way, there's a risk there potentially overloading the line but if you do operate it that way, you're not getting as much. And on that particular day, which is the only day we've had emergency conditions since Uri, there was additional generation behind that wind, yes. But I think there might've been some thermal plants or batteries behind there too. So I think my question here is heading into the next summer where there's at least a decent chance we'll see another day like September 6th. Are you looking at that and how you might operate it differently? Are there any? And I don't ask this, Pablo, I hope… we don't know each other super well, but I hope you know me well enough. I don't mean it as any kind of a gotcha question. This stuff is super, super important. And I feel like particularly September 6th isn't talked about enough because frequency dropped… we got down to like 59.77. So I'm not saying ERCOT's to blame. ERCOT did things wrong. I'm saying, that was a really interesting event. We really ought to make sure we're learning from it. And it just seems to me like everybody just kind of moved on like it didn't happen. And hopefully internally there's a lot, but I'm wondering if there's a different operating posture as you're heading into the next summer.Pablo VegasYeah, so let's talk about it in the sequence. And so I'll start with your first question, because I think it's a relatively simple answer. So we need a lot more transmission, and we have to come up with, I'd say, a different way to plan, because the speed at which both load and supply can come onto the grid has fundamentally changed the name of the game. We're seeing data centers that can be built that are 500, 700 megawatt data centers in a year. That's unheard of in terms of grid planning time scales. And historically, you've always been able to have years to contemplate a massive manufacturing facility coming online and the potential supply then being able to be built to support that and then the transmission to support it. Today, it's a whole different paradigm. So we need to be able to plan and invest in transmission based on reasonable and prudent forecasts of where load is going to grow. And it doesn't take a rocket scientist to see that we've got very rapidly growing load centers in Texas that are continuing to grow. And we need to just, we need to get in front of that. We need to get in front of that with more transmission. So the answer is yes. But we do have to adjust our planning cycle in order to reflect the different pace at which supply and demand is coming onto the grid. Does that make sense? So I think, and it's a key part of the answer, a key part of the answer.The line between San Antonio and South Texas. So, that line was pretty overloaded on that day that it operated on September 6th. And you're absolutely correct. There was generation that was available in the South Texas area that, because we had reached an overloading status, that it forced us to curtail some of that generation, which then got us to a place where the frequency ended up dropping. We had to jump to EEA2 immediately to leverage some of the load side ancillary services we have available, the rapid response load service, in order to alleviate some of that pressure on the system. And the control room, just to be perfectly blunt, did an amazing job anticipating and recognizing what was going to happen because of this transmission constraint that started to become an issue. So then the debate as to whether or not it should have been operated double or single, you know, it's a, I think we can debate that all day long. I think in the end, the control room did what they felt was the best thing to do given all of the circumstances available to them and the other tools they knew they had in the toolbox, like demand response, rapid response, available to be able to deal if they got to a place where they saw us getting into a frequency and a scarcity issue. And that's what they did. They felt that it would have been better to use those resources than potentially compromise losing a line, that if we lost that line, it could have had catastrophic effects and a separation of the grid if something had gone really wrong with the loss of that line. Going forward, you know, we just published a market notice that talks about that line becoming a new GTC in the system. And effectively, we're going to have to operate it as an IROL, which is an Interregional Operating Limit, has an operating limit on it. And the reason is because it's such a critical line that carries load across the system. And if one of those lines fails, then what the risk is and what the team was dealing with back in September, and has been working through to today is if that line fails, it could cause a cascading effect of outages.Doug Lewin Thus the risks on both sides, as Dan put it. So there's both. You could curtail it and cause a problem, but if you don't curtail it, it could cause a problem as well. So…Pablo VegasA bigger problem. Doug LewinA bigger problem. So can you also, you said GTC, that's a generic transmission constraint. Can you describe if it's possible in plain language what that is?Pablo VegasIt's basically when there's a stability risk if you on one side of a on one side or another of a transmission connection that's based on the … essentially the flow of electricity and the and the potential imbalance that gets created because of either having too much, an example could be there's a ton of Wind coming out of the West. There's not enough demand in the West to consume all of that and so it's trying to push its way through the transmission system to where the demand is. And you get to places where you have, you reach limits on what the transmission system can do in a stable way and maintain a stable grid. And so that's called a… and so you have to limit the flow that can go in order to not create a stability risk on the transmission system. That's the simplest way I can think of describing it.Doug LewinAre there, you know, there's a lot more talk these days of grid enhancing technologies, right? There's a whole bucket of these. Can those solve some of these problems? And also storage sometimes gets talked about as a solution to some of the transmission problems, because you might put storage there, soak up some of that extra generation when it's there, and then deploy it on the other side. Are those solutions to that, or is it really just we need more transmission or all of those things. What are the solutions to those problems?Pablo VegasYeah, I think it's a little bit of all of those things, Doug. I think, you know, certainly some of the smart, smart bulk electric system grid components that are being developed can certainly help with optimizing. What they really help to do in a lot of cases is help to optimize the flow of power in real time. So rather than, you know, having to kind of manage that at a grid level, it actually gets managed at a component level. And so that can certainly be part of the solution.But it gets back to what I was saying earlier when we started this conversation. We're getting to a place where we're reaching scarcity points on a regular basis. And, you know, in multiple seasons, we're getting it, you know, in the summer, we're seeing it in the winter, where when you get to scarcity points, potential weaknesses in the grid will get exposed. And that's what we're starting to see, that there are potentially weakness areas that when you're at a very tight, tight, level of operation that those weaknesses end up getting exposed and you have to then manage and deal with that and mitigate those risks. And so I think we're going to see more of this happen over time. And what the solution is, getting in front of it with, you know, transmission planning, getting transmission developed, anticipating where load is going to go. And frankly, I think we should start talking about, you know, a broader kind of system planning. What I mean by that is, you know, we don't really plan where generation goes in the grid. We don't really plan where load goes in the grid. And there's only so much control you can have on both sides of that. But what if we could have a little bit more influence on where we like if we economically incentivized supply to go into certain areas of the grid differently than in other areas because of the benefit that it offered the grid, because it alleviated congestion, because it optimized the transmission system that was already there better. If there were ways we could use economics to help guide the planning and the build out of the grid, we might get to better outcomes than at least more efficient outcomes than what we have today. And so I think we need to start thinking about our planning a little bit differently because of the fact that we're kind of reaching a lot of the limits of what the grid can support without a lot more investment. And so we need to be as prudent as we can with every dollar that goes into it.Doug LewinYeah, and it does kind of bring us back to where we started because when we were talking about that five to ten year vision at the beginning and you talked about a lot more interactive grid and distributed resources, those distributed resources can help a lot with these problems, right? Because on the other side of that line, you had a lot of load up in Dallas-Fort Worth. On other lines, you have a lot of problems with Houston needing 60% of its power imported at peak. So having those generating resources and batteries and all of that that are within and demand response, the demand flexibility and all of that within there, can actually help balance that out. So we did just kind of come full circle there, didn't we?Pablo VegasAnd I really believe, and I want to state, I mean, when I talk about the fact that, you know, we're reaching these scarcity events more frequently, I don't want to alarm anybody. I'm not trying to be an alarmist. I'm not trying to say that, you know, we're at a precipitous, you know, point here where we're on the edge. But what I think what everybody can see, is where we are reaching peaks, new peaks on a regular basis. And it's not just because of weather. Weather is certainly part of it, but the economy is growing and when the economy grows, you have to invest in the infrastructure to support that. And that's, it's not just electric, it's everything, right? We have to be building roads and schools and hospitals and everything else, housing stock. And so this is not a unique circumstance. It's just we've just been so successful in Texas these last 10 years and growing the economy. We need to continue that trajectory on the infrastructure side. And that's what I'm talking about. And we are. And policymakers recognize that, regulators recognize that. We're starting to see the market respond to some of the things that have changed recently. So I think we're going to be able to work our way through this. It's just a pressing need and we have to be urgent and purposeful around it.Doug LewinSo you talked a lot about planning. There's planning for sure. You got to look out and you got to have the right signals there to get transmission because it takes six or seven years to build it. But then you've also got markets and market signals. And we've talked about that some with time varying pricing and distribution. But let's also talk about the wholesale market, right? Because there are changes. There was just a filing from ERCOT just the other day on the performance credit mechanism.So I don't want to have just a general conversation about the PCM. I'm wondering if you think it's changing and in what ways it's changing. And I'm also curious, because people smarter than me keep telling me that what happened during the legislature with a $1 billion cap and with renewables not able to earn, with $1 billion cap and renewables not able to earn performance credits, there's a little bit of a logjam there because if you exclude renewables, the price is probably going to be high without any additional reliability benefit. Is that a circle that can be squared? Is it going to take more legislative changes? We just don't know yet? I mean, what's going on with the PCM?Pablo VegasYeah, so basically, I believe the PCM is still a very relevant and important part of the conversation because it gets back to the very simple equation that we talked about a little bit earlier, which is how do you bring balance into the supply growth at ERCOT? So we're really just talking supply here really largely. Although you can, I mean, certainly demand response could potentially be part of this as well. So let's not ignore that. But let's just, for simplicity, this is a supply conversation about something that can on and off switch and be responsive. So I think there's a rationale for renewables not participating in the PCM because the purpose of the PCM was to efficiently, at the lowest cost possible, funnel revenue into creating a little bit more balance on the supply side. If the revenues go towards renewables, which we've already all agreed, they've got an advantage today. They've got an advantage in that they already get subsidies in order to perform and to be economically viable. So I don't think that the intent was to give them more help. The intent was to help bring some of the balance in to fill out that supply portfolio appropriately. And that's not being anti-solar or anti-wind. It's just saying, hey, wind and solar, have got a lot of wind at their back, we need to get a little wind at the back of some of the duration thermal dispatchable generators in order to bring balance. And that's what the PCM construct was intended to do. So with the billion dollar cap, does it fundamentally change the value of it? It definitely changes the value of it. And I think we're going to have to assess whether it changes it to a degree that it can't support reliability that we need or if it's still an important part of the conversation. And that's still to be determined ahead of us. So right now, what we've filed is essentially here are the key design decisions that have to be determined around PCM. And then once we kind of get a strawman design in place, which we believe we should be able to do by the middle of this year, then we got to do an evaluation of does that design deliver reliability benefits at a value that makes sense.That's going to be the question to be answered. That's what the legislation requires us to answer. And if the answer is, you know, it really doesn't, then it may not be the mechanism, the right mechanism to continue to pursue. If it does, then it's hopefully one more piece of the puzzle that we introduce into the market that helps to fill out the, you know, the broad reliability story that we're trying to, that we're trying to write.Doug LewinSo I mean the fundamental thing here is really how do you get the price signals to those periods of scarcity? And I just wonder if those price signals aren't coming through pretty strong in the energy only market right now. It's a price signal that excludes certain kinds of resources, particularly on the demand side. So you could argue that the PCM actually would do more for the demand side. But it sure does seem like with the Operating Reserve Demand Curve, which again, for our like non in the weeds folks, basically a price adder at times of scarcity, there's a lot of money flowing into generation. I know we're in this sort of a ‘how do you get the longer term signals’? And I wonder there, if like, ‘26, ‘27, though the state is going to put a lot of subsidy towards, right, five billion dollars in taxpayer money is going towards the plants there, too. So that has to somehow you got to put that on the scale and weigh it, too. Right?Pablo VegasYou do, you absolutely, that's an absolutely fair point. And you're right. And it's the energy only market is creating, you know, true strong price signals on a more frequent basis, just as we've been talking about, you know, we've had more periods of scarcity, which correlates with periods of high pricing. So… but what is lacking though is predictability to it. And that's been the challenge I think so far. But I want to point out that we're seeing data in the last year or two that is starting to show that, kind of that feast or famine construct is getting a little more stark, where there are more periods of time, like during the day, middle of the day, where we have zero or negative pricing in the wholesale power market than we've ever seen before. And the reason being is what you would expect. We're seeing more zero variable cost solar, you know, showing up on the grid. And we saw periods, we've seen that in the evenings, historically, because of wind, a lot of wind blowing at night, not a lot of demand. So you have very low or negative pricing. But we're starting to see that during daylight hours and we're seeing the preponderance of them growing rapidly. So it exacerbates this feast or famine phenomenon. And we have to think about, I mean, this market is complex, Doug. Doug LewinIt is, it is, it is.Pablo VegasIt really is. And so we have to think about, how do we have the right signals that incentivize the right outcomes without being too heavy handed on the, on leaning on any one aspect of the scale. It's not an easy thing to do. It's not for the weak of heart.Doug LewinYeah, for sure, for sure. I know we're almost out of time, but I'll just... On this point, and then I just want to ask one more thing before we end here, if it's all right.Pablo VegasYeah, and if I could ask you too, I'd love to get the opportunity to maybe clarify a point of view on, Doug LewinSure.Pablo VegasI don't know if you heard some conversation that I had at the Board meeting this week around connecting the ERCOT grid to other grids and how that was heard versus maybe what was intended, but I'd love to spend just a minute on that if you've got a minute.Doug LewinLet's absolutely do that. Let me go just to close the loop on this other point. So you guys on the first of the month, you put out your generator interconnection status. It's fresh out just an hour or two ago. And I looked at it, you've got 16,000 megawatts of natural gas in the queue at this point. Of course, not all that's gonna get built, but some of it will. And out of that 16,000 megawatts, somewhere around 13, 14,000, over 85%, are basically peaker plants. There's only two or three thousand of combined-cycle. I don't know though, given that whole conversation we just had about an interactive grid and these times of scarcity, but even as many times of scarcity as there are out of 8,760 or in the leap year, 8,784 hours in a year, you've only got a few hundred. Even in a year with like a Uri, right, there's only a few hundred where you're really at scarcity. So I wonder, though, like, again, if the market isn't sending the signal to the kinds of resources we need, there's in addition to the 13 gigawatts of peaker thermal plants, there's what, 130, I think, gigawatts of storage in the queue. But those, you know, those peakers and the batteries, I mean, there are whole businesses that are built around a few hours out of the year, right? The NFL doesn't try to play a game every single day of the year. And as far as I know, the NFL is very, very, very profitable, right? I mean, like you can build a business around just running on a certain number of days out of the year. So if these thermals or the dispatchable storage can make a mint on a few days a year, maybe that's really what the system needs.Pablo VegasNo, I think you're absolutely right, Doug. And the name of the game right now is flexibility. And that's what batteries are. They're flexible. That's what peakers are. They're flexible. The grid is valuing flexibility right now. And that's something that I think also aligns with kind of our long-term discussion about wanting to be able to flex into whichever resource gives you the best value for what's needed at the point in time, and whether that's a car charger disconnecting or if it's a, you know, aero-derivative peaker, you know firing up. It's those kinds of real-time decisions that are going to become the grid of the future. So having very flexible assets is what's going to be the name of the game. But there's also a more fundamental issue I think at the core here too, which is as we talk about the whole gas/electric coordination challenges, which we could do another whole podcast just on that topic. But we're headed towards a future where we are seeing less, there's a desire to have less carbon dioxide emitted through the process of generating electricity. We want to have cleaner energy. And so there's a future where there's going to be fewer and fewer periods of time where gas molecules are going to be wanted in order to create electricity. But at the peak, we're going to need more of it than we've ever had before. Right during those peaks, we need not only what's available today, but we actually probably need to invest in that infrastructure in order to meet some of those peaks potentially down the road. So how do you invest in 30, 40 year assets that are critical for peaks when you expect to use them much less frequently? And it gets back to your core question like the NFL. And so the challenge goes all the way to the wellhead and flows all the way to the gas, to the gas peaker, or to the combined-cycle. You know, those decisions and investment questions are needing to be answered up-and-down the supply chain. And it's a really complicated issue that we're going to have to work through because as we go through this energy transition, that's going to be, I think one of the bumpiest parts of it is how do we make sure that we maintain that reliability and think about the role of  the gas system throughout that.Doug LewinI definitely am going to invite you back because there's at least I've got a, I got a list here of like 10 things we didn't get to, but I'm going to ask you one more if it's okay. And then we'll talk about the interconnection question. I do just want to ask you about, um, firming. This is something that gets talked about a lot. When you were in front of the legislature last spring you said that if we had some kind of a firming requirement we could “lose energy resources in the short-term… Resources that cannot be economic under the new cost burden put in place by firming would pull out of the market.” We could have “an energy deficit.” And you also said “eventually consumers will pay for that, generators will pass it down to customers.” It doesn't seem to me, I talked to a lot of different people involved in the market, you talk to more than I do. I haven't found anybody who's like in the market that's like, hey, this is the thing we need. Could you just talk a little bit about what firming would do and why that would potentially pull some resources out of the market and raise costs for consumers?Pablo VegasYes, I mean, it's, if you could almost… in the most absurd example I'll use, which is not what is being proposed anywhere, but I'll use it just to illustrate the point. You could say a solar facility isn't producing its rated power at night. So it needs to resolve that issue and have to deliver. So if let's say the, I'll give you an example, with every different resource type, there is what's called an Expected Load Carrying Capability, an ELCC or capacity. And so that is determined based on the type of a resource it is. So for a wind farm, it's based on the average wind in the area where it's developed. And for a solar facility, it's based on the average intensity of solar in that area. So then that ELCC is often being used as kind of the benchmark or the ruler to say, OK, if you are building a resource, a building a facility, whether it's gas, solar, wind, anything. That ruler says you should deliver on average this much megawatts based on your type of resource you are. And if you don't, you're going to have to make up the difference yourself. And that will be a cost that you'll have to incur either by building a backup capability, getting into a contract with somebody that will fill it in for you, having some kind of a met way to do that and incur a cost to do that and putting that burden on the supplier, the supplier resource. I think it's an inefficient way to solve what they're trying to solve, which is an intermittency problem. So what we have is an intermittency problem. The sun sets at night, the wind doesn't blow all the time. Rather than trying to put that on the resource, value the resources that can fill in those gaps in such a way that they come into the market and deliver that service. And that also then opens the door for demand to participate in that. Because demand might say, hey, I might use less during a period of time if because of my flexibility, I am offsetting the intermittency of the supply side. And so now you can have a lot different costs of different participants coming in. And you can say, let's take the lowest cost option on how to deal with this intermittency versus assuming we just want to fill in to get the power up to that ruler level at this one source, at this one location. And so that's where I think it's just an inefficient way to do it. There's more cost-effective ways to do it. And so the reason why it might push somebody out, because if you have a, let's say you've got an older facility that doesn't have the ability to deliver at their ELCC at every hour of the day, and they have to take on a cost to do so and don't have market options for recovering that cost, they might choose to say, well, I'm going to have to retire because I become unprofitable with this new cost burden. And so I think it's smarter to say, let's incentivize new resources to come to the table, fill in those intermittency gaps, and solve the problem that we're trying to solve.Doug LewinYeah, and really ancillary services kind of work that way on a system wide basis, right? And you also have, I mean, there's, you get into some absurd results. At the ERCOT Market Summit some folks were talking about, I think it was, it might've been Caitlin Smith of Jupiter was talking about, and I think Bob Helton was talking about this too, of Engie, that you end up with like 500 mini-ERCOTs. Like every generator has to be their own ERCOT procuring their own reserves. And so you get this massive economic efficiency, which would add billions and billions and billions of dollars of cost to a system, which I can't imagine is anybody's actual goal.Pablo VegasYeah, I understand the intent and if the intent is let's deal with the characteristics of the resource mix we have, I think there's just more efficient ways to do it.Doug LewinThat makes a lot of sense. You've been very gracious and stayed longer than I originally asked you to, but let's address the point you wanted to address there, clarify whatever you'd like about interconnecting ERCOT to other grids or not interconnecting ERCOT to other grids. Yeah, what is your point of view on this?Pablo VegasMy point of view is that it needs to be studied through every decision point around it. And the problem is we generally, what I hear and what I read, is it's talked through in a very limited way. So the question is, should we interconnect ERCOT to other parts of the US grid? And you can do it for DC connections or even all the way to full alternating current real-time synchronous connections.But however, whatever the strategy, what I typically only hear discussed is: it would solve all the reliability problems. If we had been interconnected during Uri, we would have been able to have a much better outcome. We wouldn't have gone into emergency conditions if we had connections to other parts of the grid. And my answer to that is, I don't dispute that there is likely reliability and resiliency benefits to having interconnections. But, there is a cost to do it. And so is that the best cost to get the reliability and resiliency you want? It's kind of like your firming question. Does firming solve the intermittency issue? Yeah, it does. But does it do it at a good cost? That's a good question. That's the right question. So does connecting the ERCOT grid to other parts of the system, does it improve reliability? It does in many cases. I'm sure it does. But it might do it at a cost that's unreasonable compared to other alternatives.And so that's really the core point I wanted to bring up is to say, let's just evaluate it. Let's evaluate it. And it's not a simple one because you have to look at the market economic impacts. You have to look at what happens when prices are lower in ERCOT and higher in other regions and when the inverse is true. What happens when significant weather events are affecting Oklahoma and Louisiana in addition to Texas? And do we get the reliability value for this big investment? And if we don't, then what is it serving? You have to ask all these questions and you have to kind of go through a pretty intense analysis that frankly, we don't even have models developed to do it today. They don't exist. And I think we need to develop those. We need to ask those questions and answer them. And that was my point. I'm not against doing it and I'm not for doing it. I'm saying, let's see if it's the right answer to the problem that's trying to be solved. And if that problem is, improve reliability, improve resiliency, and perhaps optimize the economics of the ERCOT market, well then let's really explore that through all the different facets that are necessary. And that was what I said at the Board. I don't have any ideological perspective on it one way or the other. I just think that it hasn't been fully analyzed yet and we need to do that before we make any recommendations.Doug LewinSo there are some models that are running on this. When you said that, I got on Twitter and hit like Chris Klack and Michael Webber and some of these people and they're like, yeah, there's models, we're running them. So once I get that from them, I'll send it back to you. There are some models. But I think the bigger point, I agree with you in the sense that like, this is not a small decision. There needs to be a lot of modeling and analysis and there needs to be a full understanding of what the economic consequences are, what the regulatory consequences are as well. One of the things I try to say to people too is like, there's probably a middle way here. If you look at their status quo, there's full asynchronous connection of both grids. In between, we do have a proposal on the table from Southern Spirit that's been in process for 15 years with a jurisdictional waiver already from FERC to get three gigawatts from West Texas over to like Mississippi, Alabama, exporting, but then importing into reliability. And then you've got the Grid United proposal too, which is another gigawatt and a half. So there's ways to get more interconnection that aren't full. Can I ask you one more question about this? I know I've now said that like four times. But in your view, what are the biggest downsides of FERC jurisdiction over Texas?Pablo VegasI think probably one of the most significant is the agility that we have in being responsive to market changes and market needs. So we are able to make adjustments to the wholesale power market. And we are also able to site transmission and approve transmission at a speed that's, I mean, it's vastly faster than what other grids experience in the US. To me, that's one of the most significant benefits that we have. And I would hate to lose that. And I think that would become, that could be at risk if we had full FERC jurisdiction over the Texas market.Doug LewinYeah. And I think there's a real potential to have more interconnections. This is hopefully a place where, dare to dream, some political compromise and people working together we can figure out how to get more interconnections while keeping that independence. I think all of that is possible. Like I said, I literally have 10 more just written down, not including all the questions that came in my head while we were talking. So I hope you'll come back in the future, but Pablo, I really appreciate you taking time to be on the Energy Capital Podcast. Thank you.Pablo VegasThank you, Doug. I really enjoyed the conversation and I look forward to continuing to work with you and the other deeply invested stakeholders in this market to help chart that path forward and get to that optimal cost-effective, reliable grid that's going to serve all the needs that Texas has. So thanks for the opportunity to talk about this.Doug LewinThank you, Pablo, appreciate 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.comAt a winter preparedness workshop at the PUC held in October of last year, Commissioners asked several presenters if they could bring more resources online by Christmas. Of course, you can't build a big power plant that fast, but small distributed energy resources (DERs) — batteries, demand response, solar, etc. — can be added quite quickly. Still, most presenters said there simply wasn't enough time.John Padalino of Bandera Electric Co-op, a member of the PUC's Aggregated Distributed Energy Resource (ADER) Task Force, said he thought it might be possible. This was a pleasant surprise for the Commission. What was even more surprising was that five days before Christmas, Bandera Electric Cooperative submitted a one-page filing with the Commission announcing the launch of a battery lease program. Here's a snippet from that filing: Operating under the energy-as-a-service model, cooperative members can now subscribe to a service where Bandera Electric provides a comprehensive battery energy storage system capable of sustaining homes during outages. The first subscriptions are now fully energized and able to support the grid and members of the cooperative.After reading this filing and hearing John speak, I invited him to be on this podcast where we talked about the details of Bandera Electric Co-op's innovative work, including this battery lease program. John discussed Bandera's high impact energy efficiency and demand response programs and how Bandera helps their members afford critical efficiency upgrades. We discussed why Bandera is a leader in the energy efficiency space, how this is reducing costs for their members, and what is stopping other co-ops from adopting similar programs. We also chatted about the future of the grid, Bandera’s role in managing DERs, and the potential of a more interconnected grid in Texas.This podcast is for paid subscribers only and will not be listed publicly on podcast apps. For details on how to listen to this podcast in 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.Timestamps3:17 - Background on Bandera Electric Co-op and role of electric co-ops11:02 - How Uri changed the electricity service landscape; Texas as a winter peaking state; addressing the demand side and energy efficiency21:22 - How Bandera’s energy efficiency programs work and what they prioritize on the demand side25:26 - Member engagement and co-operative financing for heat pumps27:42 - Bandera’s demand response filing and getting these types programs off the ground at larger scale38:38 - Why more co-ops don’t (yet) have programs like Bandera’s45:14 - Potential of future connections among co-ops and investor owned utilities49:13 - The distribution system operator (DSO) model and how providing electricity service is evolving and will evolve at Bandera. 51:21 - Evolution of battery storage and how Bandera’s battery lease program works1:02:02 - The Lower Colorado River Authority (LCRA) and their role in reducing costs / improving reliability1:05:42 - Importance of collaboration and Texans showing up for one another

One of the areas where we see the biggest injustices and the clearest manifestations of modern day racism is with pollution. Ports, refineries, fossil-fuel power plants, chemical manufacturing, landfills and more are, to this day, disproportionately cited in communities comprised mostly of Black, Latino, and/or Indigenous people. One of the very first researchers in the world on this topic is right here in Texas, Dr. Robert Bullard of Texas Southern University and the eponymous Bullard Center for Environmental and Climate Justice. His groundbreaking research in the 1970s showed that over 80% of landfills in Houston were sited in Black communities, even though the population of Houston at the time was only 25% of the total population. He extended his analysis to Dallas, to Cancer Alley in Louisiana, and beyond, and found the same pattern. Dr. Bullard and I talked about his efforts to address historical injustices and environmental racism. We discussed the importance of multigenerational movements, and his hope to not only pass the baton to the next generations, but also be their cheerleader. He shared his thoughts on ways to approach the subject of environmental justice that broadens the tent, and brings people in instead of putting them on the defensive, including focusing on the benefits to everyone that occur when environmental injustice is addressed. We also discussed the incredible work Dr. Bullard and his team are doing at the Bullard Center for Environmental and Climate Justice at Texas State University. Dr. Bullard detailed the exciting opportunities that a recently awarded Thriving Communities Grant has opened up for the Bullard Center, and how they plan to build capacity and support on-the ground organizations fighting for environmental justice in Houston and throughout the Gulf Coast. He also gave a thoughtful overview of how and why justice must be centered in all aspects of the energy transition. I learned a lot from this conversation and hope you do, too.  This podcast is free but about half of our podcasts and some of the posts are for paid subscribers only. Please become a paid subscriber today, if you’re not already.If you like the episode, and I think you will, please don’t forget to like, share, and leave a review. Time stamps and a transcript are below. I look forward to hearing your thoughts on the episode in the comments section!Timestamps3:36 - About Dr. Bullard5:37 - Growing up in Alabama during segregation8:36 - How growing up in Jim Crow shaped his path and career 16:30 - Dr. Bullard’s initial research on landfills and toxic waste facilities in Black neighborhoods22:24 - Writing and getting published the first book on environmental racism27:05 - How has the field and conversation on environmental racism changed25:55 - Recent landfill win in Carverdale, Houston, and the Texas Commission on Environmental Quality (TCEQ)32:16 - Concept of the “communiversity” and how HBCU’s have been on the frontlines in understanding and combating environmental racism36:29 - Recent Thriving Communities Grant program award received by the Bullard Center. How this program is enabling the Bullard Center to help smaller organizations build capacity, deepen their work, and access more funding. 43:50 - Scope of community needs that need to be addressed48:32 - Importance of centering environmental justice in the energy transition and opportunities for Microgrids and community-based solutions55:22 - How lifting up the most marginalized benefits everyone 59:21 - Growing and expanding the movement for racial and environmental justice; importance of “passing the baton”1:03:27 - The need to keep fighting and to save our democracy and right to voteShow NotesBullard Center for Environmental and Climate Justice at Texas Southern UniversityDumping In Dixie: Race, Class, And Environmental Quality by Robert D. BullardHow the Word Is Passed: A Reckoning with the History of Slavery Across America by Clint SmithThe Sum of Us: What Racism Costs Everyone and How We Can Prosper Together by Heather McGheeThe Warmth of Other Suns: The Epic Story of America’s Great Migration by Isabel WilkersonWhere Do We Go from Here: Chaos or Community? by Dr. Martin Luther King, Jr.Achieving Community Tasks Successfully (ACTS)Texas’ environmental agency says Sunset Review recommendations would create a burden for the agency, Lucio Vasquez, Houston Public MediaSouth Central Environmental and Energy Justice Resource Center, New Mexico State UniversityDeep South Center for Environmental JusticeTranscriptDoug LewinDr. Bullard, welcome to the Energy Capital Podcast. It's a privilege and honor to have you here. Thank you so much.Robert D. BullardThanks for having me.Doug LewinLet's start just by, if you could just explain to the audience your work, your purpose, your mission, what do you do and what have you done throughout your career?Robert D. BullardWell, I am a sociologist by training, and I'm an environmental sociologist. And my appointment at Texas Southern University is in the Department of Urban Planning and Environmental Policy. And for more than four decades, I've worked on, researched, written about, worked with communities around the issues of environment, health, issues around land use, planning, etcetera. And my first job out of graduate school, as a matter of fact, in 1976, way back then, was at Texas Southern University. And my concentration back then was housing and residential segregation, and looking at the access to opportunity. And so what I've tried to do is to marry research, facts, data and science with action. And that's what I've tried to do. And over the last four and a half decades I've written 18 books and I tell everybody it's just one book but don't tell anybody.Doug LewinOne book, 18 chapters, but really long chapters.Robert D. BullardYes, long chapters and it covers the idea that fairness, justice, and equity, whether I'm dealing with housing, transportation, climate, the issues around health, you name it, it's connecting those dots.Doug LewinWill you tell us a little bit about, you were born in Elba, Alabama, about 80 miles south of Montgomery in the late 1940s. So your formative years, your childhood were during the 1950s, obviously with the bus boycotts and the civil rights movement. I mean, you were growing up right there. Can you talk a little bit about that experience?Robert D. BullardWell, yes. I grew up in Alabama in a time when segregation was the law of the land. I was born in 1946 and in the second grade, 1954, Brown v. Board of Education declared Jim Crow segregation unconstitutional. And so in my elementary school, my middle school, and my high school, it was segregated. It was all Black. I had all Black teachers, very good teachers. Some of my teachers had Master's degrees and a couple of them had PhDs. But it was a period of time when the Civil Rights movement was in its heyday. You know, the Montgomery bus boycott in the 50s and I graduated from high school in 1964 and went to Alabama A&M University.Elba is at, on the bottom of the state of Alabama, close to Florida, right, you know, about 40, 50 miles from the line, Florida line. And I went to Alabama A&M University, which is a predominantly Black university, HBCU, located in Huntsville, 300 miles north of Elba. So I had to pass Troy State University, which was 29 miles from my house, Auburn University is about 65 miles, University of Alabama Tuscaloosa is about 95, 100 miles and going all the way up north. So it was segregated. And so the idea of growing up with the idea that we were taught to excel. We were taught to read books and to get a good education. That was my grandparents, my mother and father really instilled in us education is something that no one can take away from you. And to have good work ethic.Doug LewinYep. So, and I just want to talk just a couple of minutes more about this, partly because I'm reading this excellent book by Isabel Wilkerson right now, The Warmth of Other Suns about the great migration from the South. And I just want to, I want to dive into this a little bit more because I don't think people often understand. We hear about segregation and we watch the documentaries when we're in school and stuff like that. This wasn't like segregation almost like Jim Crow segregation was something else, right? I mean, you had to… step off the sidewalk, you couldn't look at somebody the wrong way, lynchings were common, just violence for random infractions was severe. Did you experience anything like that growing up or see anything like that growing up? And I'm also interested how those experiences growing up in Alabama sort of led you to the work you've done throughout your career.Robert D. BullardWell, you know, I didn't experience any lynchings or see any of that horrific kinds of killings, but it was there. And the idea of you are part of a larger movement. My grandmother voted because we owned land, you know, ten years out of slavery, 1875. My grandmother, my great grandmother and great grandfather were able to acquire 240 acres of timberland in South Alabama. So we had land, we had property, and my grandmother and my parents voted and they were Republican. And they would put on their Sunday clothes and vote, but everybody couldn't vote. And it was a period of time in Elba where we could vote because we were not in that concentrated Black Belt like in Selma and Perry County and Sumter County in that area. Coffee County, Blacks only made up I guess about 10-15% of the population. We were not a huge population so I guess we were considered not a threat per se. But in terms of having books that were two years old with other kids names in them, secondhand books or second editions. I couldn't go to the library because the library was for whites. I couldn't go to the swimming pool because the swimming pool was for whites. There were no paved streets in my neighborhood or street lights or sewer, water lines. So it was segregated to the core. But my parents, as I said before, instilled in us that education is a key. When the school closed, the library at our school closed. But that didn't stop some of us from excelling, learning, and understanding that we have to achieve, we have to do better, and we have to overcome. So instilled in me in an early age is the idea of wanting to be somebody and to do something in a way that you excel. During my sophomore year at Alabama A&M University, Vivian Malone left Alabama A&M and went to the University of Alabama to integrate the University of Alabama. She came from Alabama A&M University…Doug LewinWhat year was that?Robert D. Bullard …that was 1965 and that was the same year that the 1965 Voting Rights Act, you know, in the Edmund Pettus Bridge, I was in college during all of that time. And we would participate in marches and demonstrations. But at the same time, the whole atmosphere around us was one of horrific oppression. During my senior year, I graduated in May of 1968 and Dr. King was killed in April 4th, 1968. And of course there were all kinds of protests, demonstrations, there were riots. And seven days after Dr. King was killed, President Johnson was able to get the Congress to pass the Fair Housing Act of 1968. So there were the 1964 Civil Rights Act, 1965 Voters' Rights Act, 1968 Fair Housing Act. So there were a lot of movement, a lot of breaking down those artificial racial barriers as it relates to the law. But it was still, even though I graduated from high school in 1964, and ride the Greyhound bus from Elba, Alabama to Troy, Alabama, to Montgomery, Alabama, to Birmingham, Alabama, to Huntsville, Alabama. The signs that said Black / White in the bus station had been taken down, but the fact that it was still segregated. The signs were down, and the white waiting room and the Black waiting room and the signs had come down from the water fountains, but those signs remained through the 60s. The invisible signs, not the written out signs, but in terms of on the buses, in the train stations, in the waiting rooms. I mean, it was a period of time when you know that you had to resist. Now that's the era that I grew up in. In 1968, I had graduated from Alabama A&M. I got a job in St. Louis because I could not find a job in Alabama. And so I had to go, I went all the way to St. Louis and I taught school from August until December and I got drafted and I spent two years in the United States Marine Corps and got out of Marine Corps in 1970, went back to school, got my master's from Atlanta University and got my PhD from Iowa State University in 1976 and I moved to Houston.Doug LewinLet's talk about the move to Houston. Before we do, I just want to say, and I think it's really important as a setup to this conversation for folks to understand, because I think too often, particularly young people, and you can define that however you want. Even I was born in the, and I'm not young, I was born in the 1970s, right? So growing up in the 80s and 90s you don’t see the overt racism. And so sometimes the under… let's call it more, sometimes it's not subtle at all, so maybe that's the wrong word, but the more sort of systemic racism, you don't necessarily see it, it's not often pointed out. But to think that you are a man who has lived a quarter of your life before the Civil Rights Era, a lot of times people think this is so long ago, it's not that long ago, it's in the course of history, it's like, it's just a minute ago, right? Robert D. Bullard Yeah.Doug LewinSo this is, I think, what has, in my view anyway, what has defined your career is bringing this awareness that there are patterns of discrimination. So you talked about housing. There's obviously even into the 80s and 90s and some places even to today, there's restrictive covenants that keep people from living in certain places. Robert D. Bullard Yes.Doug LewinAnd then that of course leads to environmental racism where there are facilities that nobody wants around them that are concentrated particularly in Black communities, Black and Brown communities, Native American communities, etcetera. So you come to Houston in the 70s and you're not there very long, in 76, and you're not there very long before this landmark case in 1979 about landfill sites. Can you talk a little bit about, I'd love to hear about the case, but also Houston in the 1970s. What brought you there? What was the environment like? And then talk a little bit about this case, and which I think is what kind of brought you into the environmental justice work, which that didn't really exist as a term maybe at the time. But anyway, talk a little bit about Houston in the late 70s, if you would.Robert D. BullardYeah, well, uh, Linda McKeever Bullard and I, my wife at the time, moved from Michigan in, uh, 1976. I'm from Alabama and she was from Michigan. It was cold up there. I'm an Alabama boy. I want to come back south. And so I convinced her to, uh, let's move to Houston. And I got a job at Texas Southern University, um, as an Assistant Professor of Sociology and I convinced the university to give me a split appointment, half-time teaching and half-time research, the Director of Research at the Urban Resources Center that was directed by Dr. Neal Meladdee at the time. And so my area, as I said before, was housing and residential segregation. And that was 1976. And three years out of graduate school, 1979, Linda came home one day and said, Bob, I've taken a lawsuit and I've sued the City of Houston, Harris County, and the state of Texas. And I said, ‘you did what’? And she said, yeah, I sued the state because this company is trying to put a landfill, get a permit to put a landfill in the middle of this predominantly Black middle-class suburban community in Houston, northeast Houston. And I said, you sued the state of Texas. I said, you know, I work for a state university? She said, yeah. And so she said, I need, she said, I just, I just filed a temporary restraining order to try to stop this permit. And I need somebody to do a study and look at and find where all the landfills, incinerators, garbage dumps are located in Houston from the very beginning. I need somebody to put it on a map and then where the facilities are, and then tell who lives around those facilities. I said, you need a sociologist. She says, that's what you are, right? And I said, yeah, but… And so she convinced me to do the study. I had 10 students in my research methods class at Texas Southern University, and I told my students, I said, students, we have a research project. Now understand, Linda developed the legal theory behind environmental racism. It was Bean versus Southwestern Wage Management Corporation. Bean, Margaret Bean et al. But the Northwood Manor was the neighborhood. It was a middle class suburban neighborhood of homeowners. 85% of the people owned their home. It was not a ghetto or poverty pocket. This was a really stable Black middle class neighborhood. Nothing out there except trees, houses, and Black people. And this company was planning on putting a landfill out there. And so they hired Linda. And I got drafted, arm twisted, into doing the study. And there were no GIS Mapping. There was no database. There was no Google. There was none of that. There was no laptops, iPhones, iPads. It was ancient. And I developed the research design, the methodology, we went through old archives, old records. We did, we had maps, census maps. And we used the system of magic markers and pens and color coding. Yellow is yes, yellow marker is coloring the census tract or the block groups, less than 10% minority. And green, less than 25%. And then all the way up. 50% or more was red. And so it was unusual as a sociologist to find something so amazing, so incredible in terms of, this was not random. In terms of all the pens that were the map pens representing landfills and incinerators and garbage dumps located in the red. And the short version of this, when we looked at city-owned waste facilities, five out of five of the city-owned landfills, six out of eight of the city-owned incinerators and three out of four of the privately owned landfills were located in predominantly Black neighborhoods.So 82% of all the waste dumped in Houston from the 30s up until 1978, the waste was disposed in predominantly Black neighborhoods, even though Blacks made up only 25% of the population during the period of time of the study from the 30s up to 1978. Now that's an aha research in your face. We're in federal court. It went to court from ‘79 to' 85. It went to court in 85. We lost in court and went on appeal in 1987. We lost on appeal from the Fifth Circuit. But the idea of losing in court, not able to show intentional discrimination, but to have articles and research documented in referee journals showing that this was not random, this was significant in the way that that you can't just show that this was just accidental. And because it was such overwhelming evidence, you know, I said, no, this has to be carried on and expanded beyond Houston. That's how Dumping and Dixie came about.Doug Lewin And I highly recommend this book to everybody, whether you're in this field or not, it is accessible to a general audience. I got my copy right here, all marked up. And this was really the first book, if I'm not mistaken, Dr. Bullard, this is the first book specifically on environmental racism, is that right?Robert D. BullardThat's correct. That book, that book was the first book and it was not an easy lift to get it published. I finished that book, when I said, I'm going to take the Houston case and see is this just Houston? Because Houston is very unique. It's the fourth largest city and the only major city that doesn't have zoning. And I say, is this just happening in Texas? And I went to Dallas and I looked at the lead smelters in Dallas. And it's just so happened the lead smelters, just happened to be located in Black and Brown communities. Then I said, let's go to the Black Belt, the nation's largest hazardous waste facility, located in the Alabama Black Belt in Sumter County, in Emelle, Alabama. That's 95 Percent Black. Then I went to Louisiana Cancer Alley and found the same pattern in Louisiana. And then in ‘82, 1982, there was this huge explosion in Bhopal. And then I went to West Virginia and found the same chemical plant that was the prototype for the Bhopal plant in West Virginia, Union Carbide plant. And so I had Institute West Virginia and a lot of people didn't even know there were Black people in West Virginia. Well, Black people in West Virginia, in that little area in the Kanawha River Valley had been there since the 1860s when West Virginia broke away from Virginia and was not to become a slave state, and a few Black people followed freedom. So West Virginia, Cancer Alley, Dallas, the Alabama Black Belt, and Houston, that formed the basis for Dumping in Dixie. I finished a book in 1989, I couldn't get a publisher. I got nasty notes back from publishers saying, well, there’s no such thing as environmental racism. The environment is neutral. And that everybody is, it’s experienced the same. Everybody is treated the same. And then I lucked out. I guess I say luck, but it was to be a publisher in Boulder, Colorado, Westview Press. And if you've never been to Boulder, there's something different about Boulder. Mountain high air, bean sprouts, tofu, marijuana. They published my book and Westview Press made it a textbook and it got adopted across universities and colleges across the country. And it took off as the book for the issue around environmental justice, environmental racism. That was 1990.Doug Lewin So I think there's a lot of people that would listen to this or listen to you and say, okay, well, that was 1990. Obviously we're only a decade or two removed from the Civil Rights Era, but here we are in 2024. Clearly this kind of thing doesn't persist through to the present day. And I want to read you a quote. It was a year and a half ago, before the legislative session, for folks that don't know about this, there is something called the Sunset Advisory Commission. And they look at every state agency top to bottom and they do a review and they looked at the Texas Commission on Environmental Quality, the state level EPA in Texas. And they wrote their report saying too many people feel that the agency is not responsive to the needs of the people. It's too protective of industry. And at the hearing where they presented some of their findings, a lot of folks came from Houston to testify and they talked about environmental racism. And the Chairman of the TCEQ got up to speak and was asked by the Senator from Houston, Boris Miles, about environmental racism. And he did acknowledge, and the wording is interesting here, “a history of discrimination, right?” The suggestion being history, it's in the past. And then he said, “Environmental racism, I'm not sure what to do with that term.”And I found that really striking that after 40 years of scholarship on this, and it's obviously not just you, you're a leader in this, but there's scholarship all over the place at almost every, you know, I mean, not just institutions of higher education, but in, I mean, there's wide awareness about this. And it was kind of striking to me that the head of the environmental organization for Texas didn't know what to do with that term. Can you talk about A, what would you say to him? And B, how is environmental racism different and how is it the same from what you saw when you were starting in this field in the 1970s?Robert D. Bullard Well, Doug, we have to understand that environmental racism occurred in Houston in the 70s when we were looking at the Houston solid waste landfill studies and it exists today in 2024. And it's taken different forms. And if you track the segregating housing, the racial redlining that occurred in the 30s, and you take those same maps and then you overlay which communities are more prone to having more industrial pollution and health threats, the areas that are more prone to flooding, the areas that have more permitted facilities, and the areas that have less green canopy, green space, they are called urban heat islands, the areas that have fewer grocery stores. This is real. And I think the fact that TCEQ, even to this day, does not acknowledge the policies and practices that have been put in place over the decades and how when they grant permits and oftentimes those permits get approved and it's almost as if somehow TCEQ has never met a permit that it didn't like or didn't say was approved. Just a week or so ago, there was a permit application for an expansion of the Hawthorne Landfill in Carverdale in northwest Houston. And that permit was being favored to be granted by TCEQ. But the Carverdale residents and their allies had a public, there was a public hearing in 2022 in June. And a number of us testified and I presented testimony to TCEQ Commissioners that said Carverdale had hosted, involuntarily, a landfill. It was a construction and debris landfill, C&D landfill, type 4 landfill. For 45 years.45 years.And here this company wanted to get an expansion permit to extend it for another 46 years. So they're talking about 91 years for this community to have lived with a landfill. And we looked at the track record of permitting and of facilities across the state and across the Houston Metro Area particularly. And it seems that permit after permit have been granted by TCEQ. And I asked the commissioners point blank: I=if a hundred permits had been presented to you with all of the I's dotted and the T's crossed in terms of permit, and if all those permits, of those applications, were being proposed in Black and brown communities, would anything on their radar be triggered to say, well, something is wrong? And the response was, we don't have anything that would somehow stop us  from granting permits in Black and Brown communities in perpetuity and we would just have to grant the permits. We said, well isn't there a Civil Rights Act of 1964 that's supposed to somehow prohibit discrimination and permit you know governmental agencies from taking federal funds and somehow discriminating? And they said that we would need a new law in Texas and that there's nothing that they could do.We said no to that. As a matter of fact, because so much pressure was being placed by community organizations, by the Carverdale community and their allies, civil rights groups, and others, that the company withdrew the application. Withdrew the application, not TCEQ looking at it and saying this is discrimination and that we will not grant this permit.So, Houston, we got a problem. And the agency that's supposed to regulate and enforce environmental protection doesn't see its mandate as in doing that in a non-discriminatory way. That's a problem.Doug LewinThat's a major problem. So let's, I think that's a good segue to talking about Texas Southern University and the work you have done and continue to do at TSU. And I love the way you and others at TSU talk about the, the communiversity that you have this, uh, community of academics that are in touch with and, and working with folks in the community. Can you talk a little bit about your sort of conception of the university and its partnership with communities?Robert D. BullardYes, you know the fact that this communiversity model was developed and actually was born, developed, tested and deployed in the 90s. And it's no accident that the first environmental justice centers at universities, all five of them were at HBCUs, Historically Black Colleges and Universities. The Deep South Center for Environmental Justice was at Xavier University. The Environmental Justice Resource Center was at Clark Atlanta University, that I started. The Environmental Justice Clinic, Legal Clinic, was at Thurgood Marshall School of Law. There was an Environmental Justice Center at Hampton University and Environmental Justice Health Institute that was at Florida A&M University. Our Centers were developed to be an anchor and a resource to communities that were on the front line. And we developed, what's called today, it's called Community-Based Participatory Research. That's what they call it now, research to action. That's what they call it now. But we didn't have a name for it. Our name was, our universities, because we were founded out of struggle. Our Black colleges and universities were founded out of struggle. Texas Southern University was founded out of struggle. Thurgood Marshall School of Law was founded because human sweat. A Black man was not allowed to go to the University of Texas. So we have a special mission and that mission is service in the pursuit of excellence and the pursuit of justice, equality, and fairness. So it's no accident that I do what I do at Texas Southern University, even though I've worked at the University of California at Berkeley and Riverside and UCLA. When I left the University of California, I went back to my alma mater, Atlanta University, Clark Atlanta University, and started the Environmental Justice Resource Center in 1994. So that's the, I guess the underpinnings of why we do what we do at Texas Southern University in the Bullard Center for Environmental and Climate Justice. Now I was doing this before we had a center at TSU. I came back to Houston in 2011 as Dean of the Barbara Jordan - Mickey Leland School of Public Affairs I did that for five years and then we got a call from a Foundation to say we want to give you some money for you to start a center and we want the center named In your honor and I said, okay and so our Center basically do the things that we were doing at Clark Atlanta University in Atlanta, but on a more expansive basis. And the idea that you can do a lot with money, you'd be surprised how much you can do with money. And you can have good staff, good graduate students, post-docs, good community university partnerships, develop a consortium of HBCUs. We developed this consortium at HBCUs and the anchor university is Texas Southern..Doug LewinYeah, it's interesting, you know, in sort of like common language when people say, oh, that's that well, that's just academic, right? In the pejorative sense, it's like, well, that doesn't really have any connection to people's on-the-ground reality, which you're really trying to do. And I think in fairness, a lot of academics try to do this is connect your work to outcomes to people's quality of life, which I think is, in that context, let's talk a little bit about the recent award that TSU and the Bullard Center just got, the Thriving Communities Award from EPA, the Environmental Grantmakers Award. Can you talk a little bit about that and what that means for the people of Houston and for the, I think for the region, right? It's a regional grant? Yeah.Robert D. Bullard Yeah. Well, you know, the concept of the Thriving Communities Grant Markers Award is that, when we were working with the Biden Administration, we were talking about how is it that we can get resources in the hands of organizations and develop these partnerships and build that capacity? And knowing that government applications for grants, it's so cumbersome, it's so complicated, it's so, I guess, hard.Doug LewinYeah.Robert D. BullardAnd so the idea is how can you streamline a process, how can you place an organization or institution in the position of becoming a grantmaker to work with communities that they have worked with for many years and decades and to show how we can get the kinds of transformative results and change. And so the EPA using the Inflation Reduction Act funds, $600 million for this Grantmakers Program, and each of the entities would get $50 million to represent a grantmaker and to make awards in the regions. And so TSU, the Bullard Center applied for one of those regional awards. We got it. And we have partners with ACTS, which is a community-based organization, an environmental justice organization in Pleasantville. We have relationships with some of our other consortia organizations, the HBCU Climate Change Consortium and the Gulf Coast Consortium and the National Black Environmental Justice Network. So the organizations and the networks and the community-based organizations that we've been working with all along, we have, partner with them to assist us in trying to shape a grant making program that can really get to the organizations and the community that need it most. And it's a five-year program. It's substantial funds. There's never been a $50 million grant program or no, $600 million grant programs for environmental justice. Never been anything like that. The Inflation Reduction Act provides lots of monies for that. And so it places our university and our Center in a role, a very responsible role, of being able to stand up a grant making program, and to get the kinds of advisors, of reviewers, and to set up a streamlined application process similar to private foundations. Their applications is nothing like government. And to work with the TCTACs, the Thriving Communities Technical Assistance Centers, and they are all across the country. For Region 6, it's New Mexico State University and Deep South Center are the TCTACs for our region…Doug Lewin Deep South Center is in Louisiana, right? Deep South, yeah.Robert D. Bullard New Orleans. Yeah, it's in Louisiana. So the idea that we'll be working together in partnerships and that organizations that need technical assistance and support will be applying to the Thriving Communities Technical Assistance Centers to get the kinds of capacity and assistance in developing the proposals, etc. So it's a partnership kind of thing. And we have been allowed enough time in years, not a one-year grant, but we got five years to move this into action and our communities have been needing this, frontline communities have been needing this for decades. And this is the opportunity that we see happening today and we're just proud and blessed that we are sitting in the position to make awards to well-deserved organizations and institutions and groups that are out there doing fantastic work.Doug LewinYeah, absolutely. And so, you know, there will be now grant opportunities that haven't been available on anywhere near this scale for, for instance, organizations that are doing work, you know, around, near the very same landfills we were talking about before. You know, still to this day cited predominantly in communities of color. You mentioned ACTS, Achieving Community Tasks Successfully, that if I'm not, if I'm not getting it mixed up, is near the Port, right? It's kind of focused on.Robert D. BullardYes.Doug LewinSo again, if you look at where the Port is and the communities that are around the Port, those are communities of color that have been subject to the pollution, the higher incidence of asthma and all sorts of things, right? The community, famously though not famously enough, that was near the Union Pacific Rail yard, right? The cancer cluster right there in Houston. These kinds of communities that just haven't had the kinds of resourcing that commensurate with other parts of society now, potentially will with your help. It's pretty exciting.Robert D. Bullard Yes, so the idea of building the capacity, assisting in the grant writing, and then building the kinds of community organization infrastructure to manage the grants and to grow their programs, to leverage the resources. And we've worked with some of our organizations for a decade, like ACTS for example. And ACTS has been able to leverage a private foundation, apply for EPA grants, get monitoring grants. This program that we will be making grants for include a number of those kinds of activities in terms of community monitoring programs, looking at issues around clean energy, issues around health assessments. You talk about workforce development, training. The idea that we have a lot of opportunities to fill those gaps and for those organizations that can access this federal grant making pot of money can also build their capacity in a way to also apply for these foundation grants that are now being creating these funding hubs to work public-private partnership kinds of funding. So this is exciting times. We didn't have anything like this in the 70s in Houston or the 80s or the 90s. And so this is an opportunity to grow young people in terms of mentoring programs for developing climate and environmental justice core opportunities for high school kids and for college students, internships. I mean there's a lot of need that's there that were under-resourced and underserved. Now it sounds like a lot of money, but when you look at it, it's still not enough given the size of the challenges that face many of our communities, whether it's dealing with transportation or dealing with housing, dealing with water issues, infrastructure issues, dealing with flooding. I mean, when we talk about these issues, all those issues converge. As we define the environment, the environment is everything. Where we live, work, play, learn, worship, as well as the physical and natural world.Many of our communities, there's no green space, there's no tree canopy. It's hot in those neighborhoods. So we mean, so there are all kinds of opportunities to address those issues. Some of our neighborhoods, it's prone to flooding. So we have to make sure we start building and making our communities more climate resilient. It's cold right now. And so it means that we have to plan for these cold spells and have these heating, you know, these heating stations. And when it gets so hot, cooling stations. And we have to build for climate resilience hubs in neighborhoods. There’s money for that, for organizations that want to develop that in partnerships with city/county government. So that's what we are looking to have these programs as they stand up in terms of the regions, in terms of region six, but also their national programs that's funded under those programs where the national programs got $100 million. So there are other programs where people, organizations can apply in that big pool of money, that $100 million. So that's the kind of, I guess, opportunity that we will be advertising, that we'll be speaking to, get people, organizations, local city governments to understand in terms of our school boards, in terms of the school infrastructure, money to implement that, in terms of clean buses, you know, in terms of getting away from this, in terms of the Port, you know, getting our ports cleaned up so we're moving away from the dirty diesel and getting electrifying, you know, those kinds of facilities as well as vehicles. That's the kind of thing that we're talking about, environmental, climate, energy, justice.Doug Lewin So, so exciting. There's so much there. So where I think I wanna go next, cause I think you're right, like the $50 million over five years, it's a lot of money, it could do a lot of good, but to be successful, it's going to have to leverage other things going on in the world, right? Not as certainly other grant sources, but also just things happening in the market, right? Happening in energy markets, happening with new technologies that are coming in, right? So as we look at these, compounding threats from climate change. Obviously the experience of Harvey was devastating for the Houston area,and not just Houston, Beaumont, Port Arthur, so on and so forth. The experience of Winter Storm Uri, devastating. We just continue to see these traumas upon trauma, these climate impacts that are sort of like added one on top of the other. And we also are in, and this will be a subject of this, many episodes of this podcast, we're seeing sort of this explosion of small resources, right? Solar, storage, energy efficiency, that can be sited at, you were talking about schools, school districts are great places to put solar and storage that people have a place to go if the power goes out or if there's a hurricane or whatever it might be. Churches and synagogues and mosques and in people's individual homes. But as you know, and I'd love for you to talk about this a bit, if we aren't very intentional about how the energy transition happens, we will almost certainly repeat the patterns of the past. It is about communities of color, but it's not just about communities of color. It's a broader issue, um, about people who are poor to middle income, not being able to access the technologies that others are. So, uh, yeah, can you talk a little bit about the energy transition and where its overlap, particularly these distributed resources and how those can provide resilience, and where the intersection with your work on environmental justice is?Robert D. BullardYes. If we look at the Inflation Reduction Act, it's a $369 billion initiative, the largest climate program funding in history of the U.S. And there's $60 billion in that carved out for environmental justice, another $60 billion for clean energy transition. Now, so when we talk about clean energy renewables and the transition we have to place justice at the center. Because as you said, we don't wanna reproduce this old system where you have this inequity. And so that means that we have to plan for and we have to be intentional about this work.For example, there was a Solar For All grant that came out for organizations to apply for. And it meant that financial institutions, uh, pretty much had to be the person or the organization applying for it.Doug Lewin This is, Dr. Bullard, this is for like the, for the Green Bank part of the Greenhouse Gas Reduction Fund.Robert D. BullardYes, the Green Bank. That's right. Greenhouse Gas Reduction Fund. And, and it was sent out and then organizations would apply. The Bullard Center, at Texas Southern, partnered with the Green Fund of Texas, the Green Bank of Texas, and applied for, and the Green Fund of Texas applied as the, as the organization, applied for the, for the grant, $250 million. Now we don't know if we're gonna get it, but the idea was, is that we have, uh, a partnership with the Green Fund of Texas and, and the fact that relationship is one that's real. And in turn, what we were proposing is to look at our current infrastructure working in the Gulf Coast and the organizations that we work with and our HBCUs and, and using our consortium concept to have our HBCU consortia and the organizations, the community-based organizations in the cities that we are found to be the, the framework for, for building out, uh, this clean energy transition in terms of that particular process. And one of the pilot projects that we're talking about is developing a pilot between Texas Southern University and Cuney Homes, which is a public housing development that's next door to TSU, and the community centers in Third Ward, the elementary schools, etc. To have that as a project to be a microgrid that would provide solar for the campus, the public housing development, community center and the schools to work in partnership. So that means the Houston Housing Authority, the HISD and some of the community centers that the city. And there are examples in other parts of the country that have used that model such as the Bronzeville Community Microgrid in Chicago, and there's other projects in California. And there's, of course, Microgrid at University of Texas in Austin. The idea is that we don't have to invent the wheel, reinvent the wheel, but we do have to show that there's community involvement, that there's a project that could be a ready project. And again, if we get the grant, that would be one project, a pilot that could show how this could be transported in other places in our region, in the Gulf Coast, to do something like this. And then there are other examples that we were talking about rolling out, but we need something that could show quickly. Texas Southern University has a Memorandum of Understanding, MOU, with Brookhaven Lab, which is in New York, which is a DOE lab, which has expertise in doing something like that. So we have all the pieces in place to work on something like that and we have a relationship with National Argonne Lab through our HBCU Climate Change Consortium. So it means that there are opportunities to do something like this with our students, with our universities in terms of saving money. One of the largest expenses on, not just HBCUs, but college campuses is utilities. And so if we can get that down, that means the money that would be spent on utilities paying out could go to scholarships or could go to other kinds of enhancements.Doug LewinYeah. And you know, so, um, as, as we're talking just, just a day or two ago, I put the first episode of Energy Capital out. It’s with the former Commissioner of the Public Utility Commission Will McAdams. And he talked a lot about, our conversation was a lot about these distributed energy resources. I think Dr. Bullard, this is a really interesting sort of like test case for people.We can see hopefully the broader public and policy makers of all different kinds can hopefully understand this, that what you're talking about is very good for those communities that will get the benefits directly, right? The churches, the school district, you're talking about third ward. It's also good for everybody because the more of these resources we have sited locally, the more resilient and reliable the grid is for everybody.I really love Heather McGhee's book, The Sum of Us, which really talks about how racism and let's just say the outcomes of racism, right? I'm not talking about somebody's individual attitudes, but the systems that are a legacy of slavery and Jim Crow, which again, as we talked about earlier, weren't that long ago and the impacts are still with us, hurt everybody.And as we put these kinds of programs into place, and as we're dealing with people's high energy bills and the lack of reliability or resiliency, it definitely will benefit those communities and it will benefit the entire state of Texas as well. It was a little bit of a speech, but if you want to add to it, please do. Any thoughts you want to add to that?Robert D. BullardNo, no. Yeah, no, you're exactly right. The whole idea is that when we lift those who have experienced the greatest amount of inequity on the bottom, and then we talk about bringing them into this whole energy, environmental, health, equity, economic justice, we're talking about basically making our society much more livable for everybody.When we talk about using, electrifying school buses and getting our schools to become green schools, the kids learn. All kinds of studies show that as you start greening the schools, the kids learn. And we start reducing the pollution, kids learn better. And so as we start building out, you know, trees and green canopy and parks and green space and nature, kids learn. I mean, it has a lot of impacts. And when we talk about behavioral issues in terms of calming kids down, but also reducing crime. We have, I'm a sociologist and we have lots of data on this, so that we save lives, we make communities healthier, and we make for a much more secure America. So it's the best interest of the whole country to do this now and to do it right and to make sure that those benefits accrue to those who historically have been left out and left behind, and also make sure that we look to the future in terms of becoming a much more just, fair, and equitable society.Doug LewinYeah, that's right. And it's ultimately not a zero sum game. I think that's what Heather McGhee's point in the Sum of Us is, is actually these things are additive. If Third Ward is doing better, that doesn't take away from anybody else to the contrary. That actually makes everybody else stronger too. I don't know, dare to dream. I hope we're gonna be able to understand this. As a society. I wanna just ask you about something before we end. And I think this is important as we go forward and as we are going to continue to talk about environmental justice and environmental racism, we have to be able to not only solve that problem, which needs to be solved, not that it will ever be solved, we need to continue to get better and better at it. But also because so many of our problems in society are bound up in this, right? How we talk about it is important and how we bring people in is important. There was a part in, um, Clint Smith's brilliant book, How the, How the Word is Passed, where he talks about when people challenge, he was talking about Thomas Jefferson. And when you, you know, bring up the fact that Thomas Jefferson owned a lot of slaves. And you bring up the inherent racism of that. He says: that you're in fact challenging not just Jefferson, but the conception of themselves, people's conceptions of themselves. So when we talk about environmental racism and we hear somebody like Chairman Niermann say, I don't know what to do with that. I think a lot of times, and it's not just him, I don't wanna pick on Chairman Niermann, I think there's a lot of people that have this reaction that's like, well, I'm not a part of that. I didn't do that. It's not my fault. You're challenging their identity. You're not doing this, but the way people hear it, right, is you're calling me racist. That of course is not what's happening, but how do we deal with that to try to bring more people into this as opposed to sort of drawing, you know, starker dividing lines between people?Robert D. BullardYeah, that's something that those of us who've worked on these issues for decades have been trying to meet this challenge. And early on, people would say, oh, I didn't own any slaves. I would say, that's not what we're talking about. I'm not a racist. That's not what we're talking about. There are institutional and structural barriers that somehow we must break those artificial walls down so that we can see clearly. And the idea that the understanding that the quest for justice that we're talking about is not a sprint. I mean, it's a marathon. And as a matter of fact, it's a race that doesn't exist, a marathon relay. You know, it's like you run your 26.2 miles and then you pass the baton to the next generation to run the 26.2, but you don't stop. You don't just pass baton and then sit down. You have to cheer the person on, be a mentor, and as I said, a rallier, a cheerleader, all of that, to say that we must get to this finish line in a way that we bring everybody to clarity about what these artificial barriers is doing in terms of holding us back, not releasing the greatest energy in terms of our minds and thinking about what could be. And keeping us from reaching that whole idea and justice for all. And again, some people will see this as not a message that's somehow directed at them, calling them a racist, or somehow saying, well, your white privilege is somehow stopping me from getting this. I think looking beyond that personal individual, but looking at the collective. And that's how we have been trying, our movement has grown as our ideas of who gets the benefits from this. We all get the benefits in the end. It's just that some people may not realize that they're getting a benefit from regulations that make our air cleaner because there's no White air, no Hispanic air, no Black air. There's air. And most of us don't say we're going to stop breathing next Wednesday. We have to breathe air. Drink water, and eat food. And we have to fight to make sure that it's all safe for everyone. Now that's how I see it. And that's what's kept me going.Doug LewinYeah, I hear you. And that's a perfect example because if we're able to reduce pollution, like you said, that air doesn't just stay in one place. It is more concentrated. It more impacts communities of color, for instance, near the port, but it doesn't just stay there. It drifts over to West Houston and North Houston and everywhere else around the region. So we all benefit from cleaning up. Just the last thought, just to sort of end on this note, we're recording just a couple days after Martin Luther King Day. I particularly love his Where Do We Go From Here? Chaos or Community. And he writes in there, and I think this is just as true today as it was in 1967 when he wrote it, “The racism of today is real, but the democratic spirit that has always faced it is equally real.”What is your outlook? Do you agree with that? Do you think that is still true today? And do you kind of have hope that there, that like you said with that marathon, we're passing the baton? Are we bending that arc towards justice? Is it happening?Robert D. BullardYeah, I think our movement is bending that arc. It's still long. And I think the idea of the generational mobilization, intergenerational mobilization. I'm a Boomer, proud of it, still standing, still fighting. But Millennials and GenXs and Zoomers, they outnumber my generation. And they are much more inclined to want to get it right and dismantle some of those artificial barriers that's holding us back as a people and as a nation. And so I'm optimistic. I think we have to keep fighting. We have to understand that environmental justice and energy justice, transportation justice, racial justice, and justice for all also means saving our democracy. Basically fighting for the right to vote and the right to have our votes count. And that voting is, that's one of the pillars of a democracy. And if we lose that, we lose a whole lot. And so it's, you know, our justice movement is bound up in civil rights and human rights. And so we just have to fight for those rights and not let anyone or any organization somehow take it away from us or convince us somehow that that's not important. It's very important. My grandmother knew that. And when she dressed up in her Sunday go-meeting clothes and voted, and voted Republican, because the Republican Party back then was much more progressive than the Dixiecrat Democratic Party.Doug LewinThe courage of that action is almost unfathomable. And I see that courage in you. It's been an incredible honor to talk to you. Congratulations on all the success with the Bullard Center, having your name on there, well deserved. And thanks for all you've done over 40 years. Here's hoping you got 40 more. You look like you're younger than me, and so hopefully you continue to carry this torch forward. And I know you're handing it off to a lot of younger people at TSU as you're continuing to do the work yourself. Looking forward to seeing what you continue to do, and thank you for all you've done and continue to do.Robert D. BullardThank you very much. 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

When Texas lawmakers restructured the electric markets in the late 1990s, they left one part of the business fully regulated: the poles and wires companies. In Texas, CenterPoint is the second largest of these entities and serves Houston and most of the surrounding area. They serve about one-fourth of the total peak demand even though they cover only 3% of Texas’ landmass.It’s been a theme on this podcast and will continue to be: who’s going to be the orchestrator of all the small sources of power on the distribution grid — who will be the distribution system operator, or DSO. My guest this week, Jason Ryan, is Executive Vice-President of CenterPoint and he makes the argument that the operator of the distribution grid is already and should continue to be the utility. Jason is forward thinking. He chairs the Aggregated Distributed Energy Resource (ADER) Task Force established by the Public Utility Commission and has helped the PUC and ERCOT launch a successful virtual power plant pilot (VPP) program. He has been vocal about the need for an “all-of-the-above” strategy which includes distributed resources and energy efficiency particularly as transportation and industrial sectors are electrified. Jason talked about research showing that CenterPoint will double — or even triple — its load in the next few years. To put that into context, Houston, covering only 3% of Texas, will add a New York worth of power (not New York City, New York state) in the next two decades or so, as vehicles, the massive Port Houston, and the industrial consumers along the Ship Channel electrify. The pace of change is staggering and we’re struggling to keep up. CenterPoint is also a gas utility in multiple states and Jason also talked about the evolution of the gas system as the energy transition picks up speed. I learned a lot as I always do when I talk to Jason. I hope you do, as well. This podcast is free but about half of our podcasts and some of the posts are for paid subscribers only. Please become a paid subscriber today, if you’re not already.If you like the episode, and I think you will, please don’t forget to like, share, and leave a review. Time stamps and a transcript are below. I look forward to hearing your thoughts on the episode in the comments section!Timestamps3:30 What the grid will look like in the near and long term future and how that will be different for consumers6:30 The Aggregated Distributed Energy Resource (ADER) Task Force and the virtual power plant (VPP) pilot, and why Jason chairs the Task Force10:00 Why does CenterPoint want to see DERs and VPPs in their service territory? Why are many other utilities less enthusiastic?16:30 Utility concerns about losing investment opportunities from DERs and CenterPoint’s stance 19:00 Impact of electrification on load growth, including industrial loads in Houston.25:00 The challenges of managing load growth31:00 The need to increase energy efficiency using data to maximize opportunities and compare demand side solutions with supply side solutions39:00 The need for distribution resource plans (DRPs) created by utilities and ERCOT42:30 Finding the balance between planning and markets45:30 Distribution system operator (DSO) model50:00 How has resilience improved since Uri/Harvey and where and how can we can continue to improve55:45 The future of natural gas utilities in the energy transition, CenterPoint’s experience in Minnesota59:00 Are we doing enough to build transmission? Can we build more transmission based on economic criteria and not only reliability criteria1:07:30 The most important policy to increase reliability, lower costs, and lower emissions in Jason’s viewShow NotesPodcast with Former PUC Commissioner Will McAdamsCommissioner Cobos quote on transmission cost tests: "Today's economic problem is tomorrow's reliability problem."TranscriptDoug LewinJason Ryan, welcome to the Energy Capital Podcast.Jason M. RyanDoug. It's great to see you again. Happy New Year.Doug LewinYes, to you as well. So glad we're having this conversation. Really been looking forward to this for a while. Let's just start. Can you just let the people know who you are, what you do, and tell us a little bit about CenterPoint Energy.Jason M. RyanSure, so I grew up on the legal side of our gas and electric utility business, started working for the company about 23 years ago, and currently lead our regulatory and government affairs group. At CenterPoint, we own and operate gas and electric utilities throughout the Mid-Continent. I think we'll spend most of our time today talking about our Houston area electric utility, where we're the transmission and distribution system operator.Doug LewinYes, and a gas utility in Houston as well, right?Jason M. RyanWe have the privilege to serve almost 2 million homes and businesses with natural gas service around Texas, yes.Doug LewinYep. All right, great. So I want to start with a general and wide ranging question that can let you go in lots of different directions. And I'm really curious to hear your answer to this one. What do you think the grid is going to look like? And you can pick five or 10 years somewhere in that range. So not next year, not 20 years from now, but somewhere in that five to 10 year range. And how will it be different for consumers?Jason M. RyanGreat question, and you're right. I think we could go lots of different places with this. So I'll start out by saying, nobody knows for sure, but I think you can start to see some trends. You certainly are seeing more distribution level generation resources, right? People at their homes and businesses having some kind of generation, whether it's solar with batteries, you know, whatever the distributed generation is. So you're seeing more people use the distribution system not only to receive power, but actually to put power on the grid to benefit their neighbors and communities. So I think you're gonna continue to see more of that. The trends that we've been seeing is that continues to grow. The growth here recently has slowed down a little bit versus in the last couple of years, but there's still significant growth in that. So I don't know that you can tell that there's a trend in the slow of growth, but we have seen that. I also think that customers will continue to use the grid more, right? So usage continuing to increase as things get electrified, especially in the industrial sector, especially around electric vehicles with fleet. Right? So not only are we using the distribution grid more for this generation that's distributed literally thousands and thousands of different places along the grid, but we're going to be using the grid even more in terms of our usage. So lots of exciting policy initiatives come out of those two things. So I'll stop there because I think we can we can dive off in a couple different places.Doug LewinYeah. So you talked about just now about distributed generation and how you think there's going to be a lot more of that. You are the chair of the Aggregated Distributed Energy Resource Task Force, the ADER task force in Texas. Obviously talked with Will McAdams in the first podcast about that quite a bit, but I'd love to hear from you, your perspective as chair.Can you describe a little bit for folks maybe that didn't hear the earlier podcast, what it is? Why are you leading it? Why? It's obviously a big time investment for you and for your company. So why is that important to CenterPoint? Jason M. RyanSure. And I appreciate Commissioner McAdams' leadership on this topic. He, along with Commissioner Glotfelty, have really been leading the way to get industry to figure out how to get off go with aggregating all of these distributed resources and having them participate in the market in concert as if they were one large power plant. So I also like to call it a virtual power plant just for ease and avoid the ADER, but they're one of the same in my mind for purpose of this discussion.So the task force was formed by the Texas PUC in August of 2022, and it is comprised of 20 different companies and organizations and nonprofits, a very diverse group of interests coming to the table to figure out how to make this work. And by the way, this is being done all over the country and all over the world, right? These trends that I mentioned before of assets at the premise level that could put power on the grid is not a Houston trend, it's not a Texas trend, right? This is happening everywhere. But nobody really has moved as fast as we have here in Texas and I give a lot of credit to the Commission and ERCOT and the members of the task force all working together with a clear vision of where we wanted to go. And that is to figure out how to make this work with existing systems, with existing requirements to participate in ancillary services to the greatest extent possible and get going. So, the reason why I was honored to be asked to chair this is because it is consistent with our goal at CenterPoint to have a more resilient distribution system. Right, so we sit here on the coast in the greater Houston area, we have hurricane risk, we have flood risk, all things that are foundational to why we're making investments to have the distribution system hold up just as well as the bulk transmission system in the face of these threats.That becomes even more important when customers are using the distribution system, not just to get power, but also to put power on the grid. So, plus as the entity that has to work to interconnect all of these devices, it just makes sense that we're sitting at the table. So a lot of different reasons why I think it makes sense for a utility to be at the table leading the conversation in terms of what the utilities role is, but also, you know, I try to facilitate the discussion more than lead people to a particular outcome, because since we are the poles and wires company, we're a little more neutral to where the group wants to take this. And so I see my role not steering us in the direction that I want it to go but making progress every waypoint to make sure that this conceptually continues to move forward, looking for progress, not perfection in terms of how we move forward. Again, the goal being to have Texas lead in this and have other states and other places literally around the world looking at us to figure out how we made it work.Doug LewinYeah, it's really interesting. So there's a lot there that I want to unpack and dive into. And I just want to first, because you did a great job doing, what we always try to do is make this accessible for people that are new to these topics. Everybody's interested in the grid post-jury, right? And to energy professionals that are in this space. You mentioned virtual power plants. In case folks haven't heard that before, we're talking about enough small resources that actually add up to the amount where they could equal a large power plant, thus virtual power plants. And so virtual power plants and distributed energy resources to you are kind of the same. I'll say, Jason, and I think for particularly for those that are in the industry and have been following these issues for a long time, it's interesting to see a utility leading that ADER task force. The general I think assumption of folks that have been around these spaces for a long time, regulatory spaces, is, utilities generally, and I'm speaking in generalities here, and I want to be clear for everybody listening, Jason and CenterPoint, Jason specifically and CenterPoint generally have been great in this process of making sure that there is an avenue for these distributed energy resources to get into people's homes and garages and buildings and into the market. In general though, utilities have not been, I think this is fair to say, huge champions of distributed energy resources, partially there's a logical sort of financial reason, which is if people are generating solar on their roof, they're using less of your product. You guys exist as an investor-owned utility. You have a requirement to your shareholders and the less energy you sell, the less money you make. Help square that circle for us. Why does CenterPoint want to see more of these distributed energy resources and virtual power plants out there within your service territory?Jason M. RyanSure, so I think there are a couple of reasons that drive that. Number one, unlike other parts of the country where the utilities are making investments in generation themselves and earning a return on that investment and that's how they're growing their business to meet their financial goals and to meet their customers' energy needs, right? That's not the case in ERCOT with the investor-owned utilities. Right? We own the poles, the wires, the substations, the meters. We deliver power that's generated by others. And we are indifferent to who those others are. They could be large power plants. It could be wind, solar, gas, coal, nuclear, geothermal. It can be large or small. And in the case of ADER, it can be extremely small. And so, as a delivery company, we deliver the energy. I think it gives us more flexibility than perhaps some of our peers in other places that are looking for their own investment opportunities and generation. That's not being overly critical of them. It's just a different business structure. So I think that's one reason. I also think that given the, we talked about this at the beginning, given the incredibly significant growth and usage that we are seeing happen on the grid today, that all indications are will continue materially in the future. I think we need an all of the above approach to meet Texans energy needs, right? So we need sufficient capacity on the bulk system from a generation perspective. We need generation at the local level, if customers are investing in their own equipment that have the ability to put power on the grid when it's needed most, and they're doing that thousands of times over on the distribution grid, we absolutely have to figure out how to make that work in the most efficient and effective way to aggregate it and have it be the equivalent of another large power plant, right?We also need to do more on energy efficiency, demand response, right? So it's part of an all of the above approach to meeting Texas energy needs, keeping energy affordable. So it really does check a lot of the boxes that we're interested in seeing as we look for ways to most effectively serve our customers.Doug LewinI think there's a lot of utilities, and obviously not saying this is the way CenterPoint sees it, but I think there's a lot of utilities that look at all these ADERs, these distributed resources like solar and storage and even energy efficiency and demand response and say, well, okay, if this is done right, this could actually reduce the need for investment in the distribution grid. And that could hurt our bottom line.But it seems obvious to me you guys don't see it that way. Is that right? I mean, do you think that if, A, do you think that assumption is correct, that if these are deployed the right way, take for example, any given street ends up with five, six, ten Ford Lightning electric vehicles on it. That's a hundred KWH battery. It's going to more than double the load of each home there, that could take a whole lot more infrastructure, which would be an earnings opportunity for you, but would also cost a lot of money to all of your customers, or they could be integrated with smart charging software, maybe not as many upgrades are needed. Are you worried about losing investment opportunities, or do you see it otherwise?Jason M. RyanI think it may change how we design and operate the system, but I don't think the system goes away, right? If that makes sense. So a long way of saying no, I don't see it as competing with our investments in the grid. In fact, I see it quite the opposite, that if we are ever more relying on the grid for what we do in our everyday lives, increasingly in transportation, increasingly to put power back on the grid to serve others, not just meet our own energy needs and make our investments in these things that we're putting in our homes and businesses even more economically beneficial to us, right? That means I need to have a more resilient grid, I think that which, requires the investment, right? So I think that it may be that if the system's being operated in the most efficient way, which means not charging your vehicle in the peak of the day, but moving that charge to off-peak, maybe it does impact how I invest in the system, but I don't think it overall means we don't need the grid to the, to the same extent as we need it today. We actually need it to perform almost always on, right? Even in extreme events, which is gonna drive investment.Doug Lewin Yeah, I think that's right. And I think that that's why it makes more sense to view it that way. And I think also Jason, and I know this is something I've heard you talk about before at conferences, even if, and we're going to come back to energy efficiency in a minute, but even if we get much more energy efficient in the sense that we're reducing, for instance, heating and air conditioning loads in some sectors is dropping, it's not only electric vehicles. There's going to be all sorts of other forms of electrification going on as well. Can you talk a little bit about where else you see electrification coming and what that means for load growth, particularly in the area you serve in Texas, the Houston area, obviously an industrial center?Jason M. Ryan Yeah, so just to orient folks to Houston, although a lot of your listeners will know this, we are the fourth largest city in the country on pace to become the third largest in not too many years. We have the largest petrochemical complex on the planet here, so a lot of industrial load.We have the largest port in the country in terms of foreign tonnage. We have the largest medical center on earth right here. And we are home to, I think it's around 25 Fortune 500 companies headquartered here. So we are extremely small geographically in Houston. We make up probably less than 3% of the total landmass of the state but we use about a quarter of the state's electricity right here in Houston. And so as you see the port electrify, as you see industrial electrification projects, you are necessarily going to see much more significant usage in an area where there's already significant usage, right? So that's gonna, that's what's really driving that. We need all of the above.We need more transmission. We need more power plants, virtual or otherwise. We need more energy efficiency, right? Because I think, and there's a study from Greater Houston Partnership that should be coming out first part of this year that will go into more detail on what I'm talking about, but it really shows the likelihood of significant stair-step increases in industrial usage associated with electrification.Maybe I'll just give one example. So currently, at many ports around the world, and this is certainly true of ours, ships come in. And while they're loading or unloading, they're running on whatever fuel they're using to run the ship. Once you have that ship plug in and run on power at the port, diesel or whatever it is that their fuel is, you not only get the environmental benefit of cleaner energy use while the ship is in port, but you get significant increase in load at the port, right? So those are some examples of electrification of existing facilities that will really stair-step up the usage.So I think industrial electrification is going to be the biggest driver. And I think what you're going to see over the next 10, 20 years, is that that's actually going to be what moves the needle in load growth, less so electrification of our transportation sector. That's still significant, but it's going to be dwarfed by like, by a lot. The industrial electrification that we see happening here in Houston. And again, that's not a Houston phenomenon. You're going to see it across the state. You're going to see it across the country and across the world eventually, right?Doug LewinYour peak load right now is roughly what, 20 gigawatts give or take?Jason M. Ryan20 yes. And so if you think about the possibility of doubling, tripling that load as we get between now and 2050, I think that's what you'd see if you pull some studies that are looking at this. And by the way, those are not max electrification cases. Those are kind of mild electrification cases.So and even if you, and so they're predicting the doubling or tripling of electric load in Houston over the next 25 years with a lot of those projects front-end loaded in that timeframe, you could start to see Houston's load approaching what the total ERCOT load is today. And again, Houston's not the only one that will experience that. So, that's the future that I think we have to be looking at. And look, Doug, if you only get half of that mild case, you're still significantly increasing the electric needs of Houstonians and of Texans more generally. And so that's the challenge that I think we as an industry need to start taking on. That's the context in which we have advocated for energy efficiency to a greater extent, load management to a greater extent, transmission lines getting built faster, ADER as a real tool to help power our communities. So again, that's the kind of the context around the all the above approach that we're taking.Doug LewinJust to put another frame of reference on what that kind of growth would look like, in a mild case, the electric demand growth in the Houston area alone would be like adding a New York State worth of power over the next couple of decades. That is just wild. And we're not talking about the growth of the Metroplex, the growth of the Valley, the growth in Austin, San Antonio, all of these, the growth in the Permian Basin, like all of these places have explosive growth. And we're just talking about Houston and we're talking about adding a New York. So this, I think leads us to, it's going to lead a lot of different places, but it leads me to a couple of different places. One, you can have significant growth in energy if you're able to effectively manage that peak. You can have significant growth in energy demand and actually not have decreased reliability or decreased environmental performance or, you know, another way to say that, you wouldn't have increased emissions, decreased reliability, increased costs. You can avoid those bad outcomes if you are managing that.And then the inverse of that is true filling that valley. So those times of day, which are most times of day and most times of the year, when there's not a, you know, supply and demand are not getting close, there's plenty of excess capacity. So that really is what this ADER task force and the virtual power plant and all these things is to create some kind of a market or a mechanism and have some entities coordinating that, that you're reducing the peak and filling the valley. Because if your only strategy is to build enough capacity to meet those kinds of peaks, adding in New York just to the Houston area in the next couple of decades, you're always going to struggle to keep up, correct?Jason M. RyanThat's right. And I think that's where, when you take an all the above approach, you can achieve those kinds of outcomes, right? If all we were going to do was to build to an ever increasing peak, you know, that is one approach, but you've got other tools in your toolbox and we need to make sure, I feel you need to max out every tool in the toolbox. And as we move forward, if we discover that there are tools that we need, we need to work from a policy perspective and make sure that we get those tools. This is a, especially in our business, you can't just build the infrastructure overnight, right? These are long lead time projects and it's significant infrastructure that needs to be built. It's significant programs on energy efficiency that you have to get customers to participate in.So the time to address this problem is now, so that we can continue to see the Texas miracle that we've been experiencing over the years. So you mentioned adding a New York in terms of usage. We have been adding to Houston the equivalent of a Corpus Christi every two years just in terms of population growth or adding a Waco every year, right? However you want to think about it, we are adding about 50,000 new meters every single year. And so if you think about what we've been doing then to accommodate that, is we've been essentially building the same kind of grid that you would need to serve Corpus every two years. We're building the grid all over again. So, just think about how extensive of a project that is. We've been doing that year after year leading up to this, right? And I think that trend continues, right, in all the forecasts. And on top of that, you've got the industrial electrification. So while it sounds far-fetched that you might add something like the state of New York's power consumption, I don't think it's far-fetched at all. We've been seeing significant growth just in population.And none of the people that move here bring infrastructure with them. So that means we have to be ready to accommodate it in advance of it happening. Right. So just it requires a lot of long term planning. That in order to keep up with it, so we don't have to tell people we can't we can't let you open your new manufacturing facility. We just can't interconnect you. We can't serve you. That would be a bad outcome, right.Doug LewinYeah, no, not an option. Yeah. I mean, I guess it is an option. It's a really horrible option. I agree. And, you know, it's interesting because I do hear this a lot, right? People, we got a lot of people moving here. They can’t bring their own water. They can’t bring their own roads. They can’t bring their own power. And sometimes I go, actually, they could bring their own power. We do have solar storage, energy efficiency, but your broader point, of course, is correct because they, even if they bring their own power, they need to be able to connect to the grid. There are, to your point earlier about the grids not going anywhere, the distribution grid is going to continue to serve. Sure, it's possible for people to do cord cutting like they do on TV and all that, but we've spent so much on the grid. It is the National Association of Engineers called it the greatest invention of the 20th century, the electric grid. I mean, think about that above the, the telephone and the internet and computers like the electric grid was number one. It would be a shame for people to have to like build enough redundancy to do it all themselves. We need the grid to be robust. So your broader point is well taken. I do want to, and you may want to respond to that and you can do it in the next answer, but I do want to ask you about energy efficiency. You brought it up a couple of times and it is absolutely critical and CenterPoint plays an important role for those that may not know in the restructuring bill, Senate Bill 7 in 1999, there were established by the legislature goals for the transmission and distribution utilities of which CenterPoint’s one to reduce energy efficiency. In fact, the original goal was expressed as a percent of growth of demand for some of the same reason you're talking about. We need an all of the above, we need to work, we’re a growing state, we need to meet some of this through energy efficiency. That goal was then, it was then increased again in 2010 by the PUC and then that was codified in 2011. And then really nothing over the last 12 years as far as sort of a major increase in goals. Is it time to increase those goals? What should be done from your perspective on energy efficiency at this point?Jason M. RyanYeah, so I'll cut to the conclusion, and then we can maybe unpack it. I would like to see us investing in energy efficiency based on data that compares it to other things that we could do to meet Texan's energy needs, right? And by saying that, it necessarily means that you're going to part from the framework that was set up in the ‘99 Restructuring Act and that's been modified over time, I'm not critical of that framework. We needed a place to start. I think it's good that it's been modified over time to increase the importance of energy efficiency as a tool in our toolbox. But today, it is divorced from the cost of other alternatives. So a percentage of your load growth may be the right way to look at it, but it's hard for me to believe that the same percentage is the right percentage for every area of this state. And again, we don't look at the cost of the alternative versus maybe doing a little bit more or maybe a little bit less. I'm guessing it's going to show we should do more.But at the end of the day, I want it to be based on data. And I think that's where we've really struggled at times in the State House is, is your percentage better than my percentage when they're both divorced from data that would suggest what we should really be doing. So that's why I think modifying the existing framework is not a bad path. I just don't think that's the best path.Because the facts are just very different. Texas has been growing for a long time. That's not necessarily new. But there's just explosive growth in the last decade versus the decade before when this framework was set up. And if you're looking forward to solving for Texans energy needs over the next couple decades, I think a framework that's based on cost benefit analysis, that's gonna necessarily be different depending on the geography of the state that you're talking about, is a better way to have the energy efficiency discussion. Because then, Doug, I can say I should invest more in weatherization of existing structures versus build a new power plant versus build a new transmission line versus whatever.Or maybe if there's an area on the grid that would need some additional infrastructure, I could maybe meet those needs with energy efficiency if that's the lower cost option. Today, once I max out under the current framework, I stop, even if it makes sense to do more because there are cost caps in today's structure that, again, are kind of divorced from the benefits of the program once you hit that cap, right? That's why I think the framework needs to change so that we make decisions based on data and analysis versus just hitting a threshold that was set and been modified over time. Again, not critical of that structure. It made sense at the time. I just think we need to move away from it.Doug LewinI want to suggest a way forward and then get your reaction to it. So every year, the transmission distribution utility CenterPoint, Oncor, AP, TNMP, and actually the investor, the vertically integrated investor owns within Texas as well, El Paso Electric, Xcel, et cetera, put in a plan for the year. It goes in on April 1st.I wonder if in the short run, because it does take time to do the kinds of analyses you're talking about, I totally agree they're needed and we should be doing those a thousand percent agree. In fact, the PUC before they increased the amount back in 2010, they did a potential study. That was the last potential study, energy efficiency potential study the state of Texas has done. That was in 2008. LEDs barely existed. You had to pay 25 bucks for an LED back then. And we haven't done potential study since then. Obviously, technology has changed. I mean, the iPhone was barely out at that point, much less smart thermostats. So it is definitely time to do that. But that does take time and we never know when the next major winter storm is going to come. So I wonder if having a strong focus on heating and air conditioning, which are residential heating and air conditioning, small commercial, these are driving the peaks in both the winter and the summer.Insulation, which because if you only change out the heating and air conditioning and you don't do anything about insulation, your benefits are not going to be not only not optimized, you may not get much benefit at all because the house is so leaky. And then smart thermostat, so that customers who want to and it's always voluntary and opt-in can enroll in programs that are like pre-cooling their homes and getting paid to reduce during peaks with good insulation, with a good HVAC, and with a smart thermostat. They're not sacrificing comfort, but they could be paid. That contributes to the reliability of the system. What I would suggest is we do those things quickly, ramp those things up quickly. There's also some funding gonna be available from the Inflation Reduction Act, already available in the form of tax credits, soon to be available in $690 million coming to the state to help people who don't have a tax burden replace their HVAC and get insulation and things like that. So like make the utility programs in concert with that funding. Do that in the short run as we're doing these broader potential studies to compare efficiency, broadly defined, including electric vehicle charging and demand response and all these things to compare, do the kind of cost benefit analysis you're talking about.React to that? What do I get right? What do I get wrong? Is it pragmatic? Is it possible? What are your thoughts?Jason M. RyanYeah, and so all good thoughts. And again, I appreciate Commissioner Jackson, who's really held a lot of discussions around energy efficiency and continuing to keep this ball moving forward. I don't think there's one right answer. However, I'll throw something maybe back at you. And that is, in many other parts of the country, utilities do an integrated resource plan. And again, those are more for integrated utilities that actually have generation in their portfolio. We don't. But what that does is it is data-driven analysis of what should we do to meet the energy needs of our customers of this utility, right? And it stacks up all kinds of generation, but it also stacks up energy efficiency. And it is there to guide you on how much of each of those things you should do to meet the energy needs of your customer base over thousands of future scenarios. Right? I think that the, if the utilities and ERCOT were to do that kind of analysis and use it to justify how much on energy efficiency they're going to do, how much on all the other things they're going to do, how much new transmission, how much ADER do we really want? What kind of incentives might we place there to meet energy needs? I think that kind of an analysis done by the utilities, I think put the burden back on us to do that analysis and then look at it at the statewide level, right? Of course, but each utilities area is going to be unique, and that's going to drive different outcomes. And maybe let me just unpack that for a second. You know, Houston, there's not sufficient generation in Houston to power Houston. So on the hottest and coldest days of the year, we have to import almost 70% of the power that Houstonians are consuming, because there's not sufficient generation here locally to power Houston. That means we're taking from other parts of the state, building transmission lines, bringing it in. That set of circumstances is going to necessarily impact a data-driven exercise as to how much energy efficiency I should be doing, how much you could justify economically. And that would be different than an analysis of an area of the state where I'm actually taking the power from. Maybe they need less there because you can economically justify less because they've got plenty of power. So that's just maybe one example of why I think each utility taking into account the unique nature of the area that they're privileged to serve should do that analysis and it should be subject to all kinds of scrutiny and participation by other interests. But that's a good starting point. And that's maybe explaining it that way helps to understand why I think the current framework of just giving us all a percentage and statute to hit. It's a one size fits all when we're not all one size. And so I think putting the burden on the utilities to bring forward the analysis maybe makes some sense.Doug LewinYeah. I think there's a mix though that's needed here, Jason, because you could be the greatest planner with the best data sets and the most diligent teams, and you're going to get things wrong because that's just the nature of planning, right? You can't... And this is where I think markets really have a role. And we have markets obviously on the bulk side, the bulk generation side.But this is where I think it could get really interesting to have markets on the distribution side where you can actually see what those prices are instead of having a planning team. And I'm not saying the planning shouldn't happen. It should. And people should take their best guess at it, particularly right now when we don't have the markets, right? We're going to do the best we can. And I appreciate what you're saying. And I think distribution resource planning makes so much sense in so many different ways. And that planning process would be better informed if there was actual data from actual resources competing in a market to see how much does it cost to deliver reductions from insulation and HVAC? How much does it cost to deliver reduction from a smart thermostat program, from an EV charging program, from an electric hot water heater demand response program? I could go on, right? Let all of these things compete.That's how markets work. You see where the price is, and then you know kind of what that bogey is. Like, okay, I can see here's the price, and I know this is what it costs for transformation. I know this is what it costs to build a new natural gas plant. I could see how these resources compete and what's under the cut line and what's not. Right?Jason M. RyanIndeed. Yeah. And yeah, I see our role as the utility, you know, to oversimplify it, we throw extension cords to people to hook them up to a larger network. Increasingly now putting power both ways. It's not just, so it's a two way extension cord. But we're here to enable the market to do what they want. And I think that you're right as it relates to if you once you have some basis and to form a new framework, I absolutely agree that we need to enable the market to actually implement the solution. So it's really just about how do you even know what good looks like when, foundationally, we don't have any data to start from and we have a framework that doesn't allow us to think differently.Right. So I absolutely agree with you that you have to layer that on top then what's the role of the utility to enable the market to do what the market needs to do with the information and signals that it may now have under a different framework than what we have today.Doug LewinAnd that's where I wonder about this distribution system operator model. And I'm agnostic on this. I'm not sure who the right entity this is. I like to ask this on just about every podcast. I hope the listeners don't get tired of it. But I think it is one of the most dynamic areas in the electric grid, which is incredibly dynamic. So I say that fully aware that that's actually a high bar. There's a lot going on in the grid right now.But what entity is responsible to coordinate and orchestrate all of these distributed resources? There's definitely a role for the utility in there, whether that's as the distribution system operator or something else. I don't know yet. I don't know if that's something you want to comment on or weigh in on or not.Jason M. RyanYeah, I think there probably isn't a single right or wrong answer because we're so early stages. And I like to approach problems with an open mind as to what the solution is. And so I can't tell you, Doug, that this is the silver bullet. There's no silver bullet in life. I'm not sure there's one on this one either. I wouldn't discount the utilities role, especially in these early stages.Yeah, we do operate the distribution system today with fairly sophisticated information about what's going on with our infrastructure. You now have to layer on to that, and this is why I think it's a very good question of who should do this, thousands and thousands of other things interacting in the market. It’s not just infrastructure that's feeding electricity to a meter and we keep up with how much is being consumed there and we report it to the retail provider who then sends a bill. Right? That's not all that's happening today. But I wouldn't say that the utility has no role in that. I think we have to decide as a market, what do we want? To what end do we want a distribution system operator? And I think that… you'd get different answers from different people on that. And as a result, I think you get different solutions because we're all approaching it slightly different. I think this is a conversation that needs to evolve. And I don't know what the forum is for that evolution.Doug LewinMaybe it's this podcast. Jason RyanIt could be if you're asking everybody what they think. Piece it all together. Yeah, yeah.Doug LewinSo I do want to ask you about a couple of things. These are related. So obviously, Winter Storm Uri was a traumatic event pretty much for the entire state, certainly for some more than others. But it's not only Winter Storm Uri. Obviously, Harvey was particularly traumatic for the Gulf Coast and Houston, right in the center of that.Can you talk about where you think resiliency has improved, whether in a Harvey or Uri context specifically, or if you want to speak more generally, open to however you want to address this, where have things improved, and what do you see as kind of the next wave where things could get better, where we are making improvements, but we need to focus and make more improvements? Because I want to be clear. And I hope everybody sees it this way. I don't think there is an endpoint where we just sort of wipe our hands and say, great, now we've got this fully reliable, resilient grid, it's done. It's dynamic. As we were talking about earlier, there's more load coming in. The weather's getting more extreme. We're going to continue to get hit with these punches of these extreme storms. So it's going to be a process of continuous improvement.So in that spirit, I'm curious where you think the focus and the effort needs to be, but I also want to hear about where the improvements have already been made.Jason M. Ryan Yeah, I think resilience is an incredibly important topic, and I'm glad that word is being used more and more often now as it relates to the utility infrastructure, and even more broadly across the spectrum of all the market participants. But I like to start out talking about resiliency in terms of what in the world do I even mean by that word? Because I think it's also a word that means something different to a lot of different people. I think about it as taking a punch and getting back up quicker. And Winter Storm Uri and Hurricane Harvey are examples of those punches, right? Where we have to get back up quicker to the benefit of our customers, our communities. And so maybe before I talk about the go-forward, I can talk about a little of the examples of what's already been done. And I think that will prove the value of being able to get back up quicker. So maybe take Hurricane Harvey. Tremendous flooding event in the greater Houston area, more than 50 inches of rain in a very short period of time. So we had for the first time a substation that flooded during that event that obviously knocked out power to the area local to that substation. We fortunately had invested in a mobile substation. None of this is easy, so I'll talk about it as if it were easy to do. But we basically brought a substation on wheels, parked it in a parking lot near the old substation, recreated a grid that could tie it into the local distribution system there, and tied it back into the transmission system and operated in the parking lot of a church next to our substation that was underwater. So that is an example of taking that hit and getting back up quicker versus waiting for the water to recede, then rehabbing the substation that was underwater. That would have taken weeks or more versus days, right? That is taking a punch, getting back up quicker. So the utilities have been making those kinds of investments in the past, preparing for events that are maybe in the tails of the probability curve just so that you're ready. We tend to be in the tails of the probability curve more and more often now. So that’s why I’m glad resilience is getting renewed focus, right? The legislature last year passed a law that enables utilities to come forward and bring resilience investment plans to the commission. For the commission to have that visibility for parties to look at it, understand what we're doing, understand the cost and benefit of what we're doing. Because the, I think that will then enable us all to learn from what all the utilities are doing on the resilience side and make good collective decisions on what we should be doing to manage the various risks in our communities. You know, when we invested in that mobile substation, I don't think there was great visibility in the industry, at the commission, into that investment. It was something that we felt was necessary. We used it. It paid off with the benefits of getting that community back up. But these plans that utilities will file starting this year, I think, will really raise the bar of visibility into resilience projects. You'll be able to compare and contrast what the various utilities in the state are doing. And ultimately, you'll get the most beneficial projects that are moving forward bringing those benefits to customers so that the next time we take a punch, you've got that resilience investment that's gonna pay off. That's when you'll see those benefits. The good thing is that many projects that bring you better resilience also bring you better reliability, even on blue sky days. So a lot of these investments that I think you're gonna see the utilities talking about will not only pay off in those significant events where we need better outcomes, but will reduce duration and frequency of outages even outside of major events, right? So I'm excited about what that's going to look like. I think it's remarkably forward thinking by the legislature, the PUC's rule implementing it has been passed. They did that in a very short period of time. I think it all underscores the need for us to get going with more resilient outcomes for Texans after these major events.Doug LewinYeah, makes a lot of sense. So I want to ask you just a couple more questions before we end. One, you guys are also a gas utility. And I know we're mostly talking about Texas, but I know you're also operating in states where there's a real push to electrify everything and not have as much gas and that. And I believe you guys are doing some interesting projects with like… is it geothermal loops in some of those other states? Can you just talk briefly about what that looks like in those states and then more generally what the future of a gas distribution utility is? Because I think those are, it's not something we've talked about on this podcast yet, but I'm interested.Jason M. RyanSure, so I appreciate that question. At CenterPoint, we are one of the largest natural gas utilities in the country, especially by miles of pipe in the ground that we operate to serve our customers every day. And we are the second largest gas utility in Texas. We're the largest gas utility in the state of Minnesota, which is where we've got the proposal that you mentioned on geothermal. We also have the privilege to serve customers in other states throughout the mid-continent with natural gas.Let me talk about Minnesota. So legislation was passed there in 2021 called the Natural Gas Innovation Act. And that Act set up a framework for the Minnesota Commission to consider proposals by natural gas utilities on doing new and different things to meet the energy needs of customers and at the same time reduce emissions and meet some environmental goals that our customers also have and our communities share. And so, we're in the business of moving energy through pipe. And if you can meet energy needs of our customers using ground source heating and cooling and move that around in a networked system, we should be looking at that, right?That's part of what the Natural Gas Innovation Act allows, is for us to bring new ideas to the table and get input from other stakeholders, have oversight by the Public Utilities Commission there to make sure that it makes sense for us to make that investment. And so I'm excited about that project. Yeah, we also have a hydrogen project up there where we are blending hydrogen with traditional methane in the system. Again, to reduce emissions. There are other, I think we proposed 18 different projects under that act and a couple of R&D projects as well. All aimed at achieving the goals of our customers and all aimed at doing things that we can learn from before you try to do it at scale. You know, I think that that's exactly what that legislation was meant to accomplish. And I look forward to continuing that discussion with stakeholders up there.Doug LewinFascinating. We could probably do an entire podcast just on that. I have so many other questions, but I'm going to ask you one more question then we're going to end, just asking you what policy changes you think would be most impactful. But before I do that, I do want to ask you about transmission because you guys are a transmission distribution utility. Building more transmission seems to be, it gets more and more attention these days. People talk a lot about interconnecting ERCOT to other grids. We had an incident on September 6th, the one time that we've had an emergency alert, I believe since Uri, right? I think it's the only time we've actually had an energy emergency alert was September 6th. And a large part of it was because of transmission congestion and a manual curtailment by ERCOT of a line to South Texas. You and I both know, and I think a lot of our listeners will know, the PUC did approve more transmission to South Texas. That's being built by AAP and others.But it takes six years-ish, right? Five, six, seven years to build these big projects. Are we doing enough right now to build more transmission? I know there was a long period where there wasn't a lot being built, at least in my view. What is your view? Are we moving fast enough, again, knowing that there's these long lead times and what you were talking about earlier with Houston getting 70% of its power imported? Critical, we do distributed energy resources, but this isn't an either/or.It's not like just build small sources or transmission. We're going to need to do both. It's going to be all the above. Are we moving fast enough? And if not, where's the log jam?Jason M. RyanYeah, I think what I'd like to see more of is transmission projects that are based on economic criteria moving through the system and getting approval to be built. And so maybe unpack that a little bit. Historically, we, and importantly, look at reliability as the justification for new transmission lines, right?How do we make sure we can keep the lights on with new transmission line? That's an incredibly important factor to take into account. But it's now not the only factor, right? So legislation was passed three years ago now that enables transmission projects to be approved based on economic factors, reducing congestion costs, reducing other costs, right? Those projects that could be justified on economic criteria today, many times will be the projects that are based on reliability criteria five years from now. So to your point of how do you get earlier transmission lines built before it becomes a critical reliability issue is by building more lines based on economic criteria, which makes all the sense in the world, right?. If you could build a project, there's obviously a cost of building the project, but if it is net beneficial to customers economically, then you should do it every day. If economics is your only criteria, right? And I know it's not. None of it is as simple as what I just said. But it addresses the issue that you brought up of how do you get these long lead time projects built with sufficient time before they become problematic.Not knowing what the situation is going to be. A lot of situations could create the problem, right? So I think if we what continue to work to implement that legislation from a couple years ago, I Think you'll start to see improvement there. I also think we should look at higher voltage transmission projects DC transmission projects, I think I think all the above again in terms of what should we be looking at should be on the table, but I would start by implementing the economic transmission line concept more robustly than I think we've done so far.Doug LewinYeah, I'm paraphrasing here, but when they were considering the South Texas line, I believe Commissioner Cobo said something along the lines of today's economic sort of problem or, you know, the line that is, it becomes tomorrow's reliability problem, right? If you don't move forward, on the economic basis and you wait till it's a reliability problem. It will become a reliability problem and then you have to take six years to build it. So I mangled her quote. I'll put it in the show notes. She said it far better than I did, but the basic point is if you don't move forward with those economic lines, you're setting yourself up for reliability problems.Jason M. RyanThat's right. That's not going to always be universally true, but I think there's a lot of truth in the vast majority of cases, right? That you can address the reliability problem a lot sooner than when the problem is staring right at you and you have just enough time to build the transmission line to solve it, right? We should get out of the mode of operating that way when there are other options within the regulatory framework for us to use. We just have to shift there and it takes time, right? But it's time to make that a priority.Doug LewinYeah. And am I not mistaken that for that economic calculation, you have to be able to show that the total cost of the project, which could be amortized over 30 or 50 years, has to pay back within a, like a six year period?Jason M. RyanYeah, I think there are different ways that you could look at it, but conceptually you're correct, right? That there are sufficient benefits to justify the project versus the cost of that project. And so you look at it from a customer cost perspective over a relatively short period of time, and does it make sense to go ahead and do that now versus waiting for a critical reliability issue to be identified and then building perhaps that same line much later on a just-in-time basis, which again, you could do it that way. But if you've got a better way to do it, we should continue to transition to doing it that better way and bringing those economic benefits to customers today and avoiding that critical reliability issue that could come up some years from now. Right? The infrastructure will already be there when it, and avoid that reliability concern.Doug LewinYeah, because just-in-time works great for consumer goods. It doesn't work great for big construction projects that have all sorts of difficult barriers and regulatory proceedings and that have to happen. And just, yeah, the construction, the supply chains, all of that have to be managed. It's just, it's not a just-in-time thing.Jason M. RyanRight. And it gets back to the, you know, we kind of end where we began in terms of the importance of this, because as I mentioned at the beginning of our discussion, the tremendous amount of electrification in the industrial sector in an area that already imports a significant amount of power to serve our customers, getting in front of those transmission needs in advance of those significant stair steps up in usage, it all kind of works together. So building it from an economic criteria today so that you're ready for those stair step increases and demand that we're gonna see over the next couple of decades is incredibly important. That's exactly the type of long-term planning discussion that I think we need to continue to be having to serve our customers most effectively.Doug LewinI completely agree. Last question, Jason. You can pick one or two or three, whatever number you want, most important policies that you think could make the biggest difference to increase reliability, lower costs, and lower pollution?Jason M. RyanYeah, so maybe I'll take that answer in a slightly different place than where we've gone today, and maybe we can have another discussion. But I think that how utilities fund the projects that they're investing on behalf of their customers is an increasingly important topic that I look forward to continuing to have.And so what I mean by that is this. With the significant amount of investment that we're making, we have to go borrow money from a bank or go exchange a share of our stock with a shareholder in exchange for money, right? Those are two primary sources of how we get funding to invest in this business.And the investment is more than the cash that is coming in the door from the business itself. So I'll make up numbers, but the order of magnitude is generally right. So assume you have a utility that clears $500 million a year after expenses, but is investing $2 billion a year in infrastructure in a growing environment. That leaves a billion – even if you take everything that you cleared after your expenses and reinvest it, you still have a billion and a half dollars that you need to invest this year. And that's why you either have to go to a bank or go to a shareholder to get that money. The business isn't generating enough money to fund the capital requirements. You want to make sure that the utility is able to access those dollars in the most affordable way because the cost of those dollars is going to be passed on to consumers.So if the utility is not able to access the lowest cost debt for whatever reason, we need to be looking at those reasons and see if we can eliminate those reasons on why the debt might cost more. So I don't want to get too nerdy right here at the end and introduce completely different topics. But at a high level, it's going to be increasingly important because if a utility is paying even a slightly higher debt cost than what it could otherwise get with a small tweak somewhere else, with these large cost, long-term projects, that is long-term bad for customers. So I think we need to have that discussion on a go-forward basis as we continue to increase the amount that utilities are investing in the system. It may be 20 years ago when that fictional utility that I mentioned maybe was spending a couple hundred million dollars a year on projects. Maybe it was not as important to address than when it's spending billions of dollars a year on projects. I think that trend is where we've seen. We've gone from utilities making significant, but affordable investments to now requiring a lot more from our utilities, from an investment perspective. And as you do more resilience projects, it's gonna continue to increase. As load increases, that's gonna continue to increase. I just think we need to address that affordability of capital costs for our Texas utilities.Doug LewinAnd how does that get addressed from a policy point of view?Jason M. RyanSo in many ways, it relates to the assumed cost of capital that's put in a utility's rates, right? So the capital structure component of a rate case is where that occurs.Doug Lewin And you guys have a, CenterPoint does have a rate case this year. So is this the kind of thing that could be addressed in this rate case? Are you talking about like future rate cases for eight years from now?Jason M. RyanNo, I think rate cases are exactly the right forum to have this discussion. And it really just ensures that that component of a utility's rates is set based on, again, real data, understanding the ramifications of assuming a lower cost of capital than what that utility is actually incurring. Because you could otherwise get into a situation where a utility is actually losing money on every dollar that they invest because they're recovering in rates a lower cost of that dollar than what it actually cost them, which means that when the utility goes to the bank, they have to explain that I'm going to lose money on every dollar you give me to invest. Doug LewinNot a great conversation with a banker.Jason M. RyanAnd the bank may say, well, then I'm going to charge you higher interest as a result, right, which is not crazy. Versus a utility that can say, I recover, I'm not gonna lose money on every dollar that you give me to invest. That's a different conversation. That would be a different conversation in our own personal lives too. If you go to the bank and you're asking to loan money and you know you're gonna lose money, but hopefully the business more generally will make it up, you're a more risky customer to loan money to than somebody that doesn't have to explain that.And so that's an incredibly important policy discussion so that we can hit that affordability mark that you mentioned in the question.Doug LewinExcellent. All right. Well, as usual, I always have more questions and want to dive deeper, but we have gone long enough for today. I'll have to have you back in the future. But Jason, thanks so much for taking time to be on the Energy Capital Podcast. Appreciate it.Jason M. RyanThanks Doug, it's always a pleasure to talk to you. This is a public episode. 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This is a free preview of a paid episode. To hear more, visit www.douglewin.comThere are massive changes happening to electric grids around the world, including here in Texas. Millions of devices, appliances, and increasingly vehicles are grid connected and could, with the proper systems in place to receive price signals, make grids more reliable, bring down energy costs for consumers, and make electric markets more competitive. But it's early days and there's a long way to go. We need practical examples of distributed energy resources and efforts to reduce energy waste. And we can find them at Pecan Street. Pecan Street is a research organization that collects billions of data points on heat pumps, solar panels, electric vehicles, connected appliances, thermostats, and much more every single day. Pecan Street also conducts groundbreaking research on energy, water, transportation, and agriculture, which we reference throughout the episode and you can find more information about in the show notes.For this episode, I had the pleasure of talking with Anissa Rodriguez -Dickerman, the CEO of Pecan Street, and Scott Hinson, the Chief Technology Officer at Pecan Street. Anissa has more than 20 years of experience in nonprofit leadership and is in charge of leading Pecan Street's efforts in partnership development, strategy development, and ensuring program delivery.Scott Hinson, as the Chief Technology Officer, directs the research efforts of the labs, which are focused on integrating renewable energy, electric vehicles, connected devices, distributed energy resources, and the software that enables it all. Both of them are a wealth of knowledge and we're a joy to talk to. We talked a lot about electrification and heat pumps. We talked about the need to mainstream smart technologies and how all of these technologies will be managed. We got into workforce development and the implications there. We talked about Pecan Street's recent award of a grid resilience innovation grant from the Department of Energy. We talked about multi -point charging of electric vehicles, the integration of big data, the need for change in energy policy, and much, much more. This was a great discussion and a deep dive. Thank you for listening and have a great day.I really enjoyed this discussion and hope you do too. This podcast is for paid subscribers only and thus won’t be listed publicly on podcast apps. For details on how to listen to this podcast in 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.Show NotesFor more information on Pecan Street and to view all White Papers visit: PecanStreet.orgSmart Cooling: Leveraging Technology and Behavior to Stay Cool and Reduce Energy Demand, published by Pecan StreetIn Nation’s Energy Capital, 45% of Texans Cut Spending on Basics to Pay for Energy Bills, Dallas Morning NewsThe Energy Capital Podcast, Episode 1 with Former PUC Commissioner Will McAdamsTIMESTAMPS3:06 - About Anissa5:55 - About Scott8:26 - About Pecan’s data collection and what that teaches us about EVs and grid management12:38 - What Pecan has done and is doing, including information on the data port they invented to measure residential energy use and optimization17:00 - Major learnings about electrification, heat pumps, and smart technologies in homes21:28 - What we need to mainstream smart technologies and who will be managing these devices and their communication with the grid25:26 - Reaching and addressing communities disproportionately impacted and low-income folks/ making programs for energy optimization and DERs accessible. 27:14 - Workforce Development 29:40 - Increased emphasis on community benefits plans in federal grants 33:08 - Addressing needs of rural communities so they can access benefits related to DERs, EVs etc.37:08 - Future projects and areas of research including multipoint charging, hydrogen, and water 42:45 - Efficient heating and cooling, energy efficiency, and how EE is different from demand response. Discussion of reg up reg down and what it is.48:17 - Newer inverter compressors in heat pumps52:22 - Big data: how Pecan Street uses it and hopes to in the future to understand and find solutions to major problems, such as heat islands55:35 - Future of the grid59:55 - Most important energy policies for the future

Dr. Michael Webber is one of the best known energy experts in Texas. He’s the John J. McKetta Centennial Energy Chair at the University of Texas at Austin, an author of multiple books on energy, and the Chief Technology Officer of Energy Impact Partners, a cleantech venture fund. Michael has a way of explaining and breaking down even the most complex energy concepts and topics into terms that are understandable and engaging to novices and experts alike. We started the conversation with Michael’s views on common misconceptions about energy and what Michael sees as the future of the grid in Texas. We explored the role of fossil fuels and oil and gas companies in the energy transition; talked through the history of energy transitions (there have been several) and what we can learn from the past; and went over the steps to achieve decarbonization. Michael also went into some detail on energy efficiency, demand response, baseload power, hydrogen, heat pumps, electric vehicles, and much more. 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.Show NotesPowering Humanity: Essays on Energy and Society by Michael WebberPower Trip: The Story of Energy by Michael WebberPower Trip: The Story of Energy documentary seriesThe Webber Energy Group at the University of Texas AustinYou Should Be Getting Paid to Prevent Heat Wave Power Outages, New York Times Op-Ed by Michael WebberThe Innovator's Dilemma: When New Technologies Cause Great Firms to Fail by Clayton ChristensenThe Obstacle is the Way by Ryan HolidayHow ExxonMobil Is Planning For A Future Of EVs: Interview with CEO Darren WoodsMore about Michael:https://twitter.com/MichaelEWebberhttps://michaelwebber.com/https://www.energy101.com/ Timestamps3:39 Michael’s roles at UT and Energy Impact Partners4:37 History of energy, PBS series, and books6:12 Conventional wisdom regarding the energy system that is wrong and/or misunderstood. 8:11 Where the Texas grid will be in 10 years and what he hopes will happen11:27 Carbon pricing 14:34 Why oil and gas companies should not be worried about the energy transition, what role they can play, and political dynamics in Texas17:45 The Four Steps to Decarbonization19:30 What role oil and gas companies will play in the energy transition future and political dynamics in Texas26:40 History of energy transitions and sources in the US31:51 Environmental, labor, and national security benefits and challenges of renewables, including precious metals36:18 Unpacking baseload power42:51 Energy efficiency and building codes, challenges for investing in energy efficiency and need for policy51:41 Heat pumps and resistance heat: market signals, effectiveness, challenges, and benefits. 1:03:47 Residential Demand Response and the need for market innovation1:08:16 Hydrogen explainer 1:13:40 Interconnecting ERCOTDoug LewinMichael Webber, welcome to the Energy Capital Podcast.Michael Webber Thank you so much for having me. It's good to be in a conversation with you in this format after all our conversations in person over the years.Doug LewinYeah, I mean, one of the reasons I so wanted to do this podcast just to have conversations like this, I always enjoy talking to you, but I'm not, I'm not sure we've ever just had an hour to talk. So this is, this is great. I've been really looking forward to this. And just before we jump in, you know, just want to acknowledge the influence you've had on me and so many people around the state and around the country. I think it was your, was it Energy Policy and Technology short course back in like 2000? Michael WebberYeah, energy. The energy technology policy, which you took like in 2008 or something? It was a while ago, so yeah.Doug Lewin I think that's right. That's right. And that was one of the first times that I really felt like I could really understand this stuff. Your ability to kind of translate really difficult concepts into plain language and help dumb people like me understand it is so appreciated. So thanks, and thanks for being on the podcast.Michael WebberOh, my pleasure. And thanks for the kind words. It's exciting to be a collaborator with you after all these years.Doug LewinLet's start just with, if you would, just kind of describing in your own words, who you are and what you do.Michael WebberSo that’s great. So I'm a professor of mechanical engineering at the University of Texas at Austin. So I do research and teaching on energy and the environment, really at the convergence of commercialization, technology and policy. I'm really an engineer. But I say the words describe me are engineer, entrepreneurship and energy, the three E's, so to speak, and maybe add the fourth E of environment. I'm also Chief Technology Officer at Energy Impact Partners, which is a four billion dollar cleantech venture fund. And I was formerly Chief Science and Technology Officer at NG in Paris, France. So I was there for about three years, 2018 to 2021. So I was an executive in charge of research innovation for one of the world's largest multinational electric and gas utilities. So I've got a lot of corporate experience, some venture and entrepreneurship experience, and a lot of academic perspective.Doug LewinYeah, and also just this kind of quintessential, like public intellectual, right? Talk also about, just for a minute about the PBS series, because I want people to be able to find that if they want to learn more after this conversation.Michael WebberYeah. So I'm a public intellectual, which means I mouth off in public. I write op-eds and give speeches and publish essays. I've written several books. And one of the books, Power Trip: The Story of Energy has been turned into a 12 part PBS series over two seasons. Season one came out in 2020 and season two just came out a few months ago. It has 12 hour long episodes on energy. You can get it on PBS and Amazon prime and Apple TV. And if you fly American Airlines, it's in their in-flight entertainment. Season One is, you can watch it while you're captive on the tarmac or something.And then I've got a new book coming out on Valentine's Day called Powering Humanity: Essays on Energy and Society, which is a collection of like 65 of my 200 plus op-eds and essays I've written over the last 15 years. And that one's a fun one because I go back and actually assess when I was wrong or when I was right because I made a lot of predictions about the future in those essays. So that's my upcoming book.Doug LewinYes, and you were gracious enough to provide me an advanced copy and I love it. I've been looking through it over the last couple of weeks and it's great, highly recommended to everybody as well as Power Trip: Thirst for Power. Anything Michael's ever written or recorded is worthwhile. All right, let's start with, usually Michael, I save a few questions for the end to kind of wrap up conversations, but I actually wanna invert the order today and start with these because you are an expert in such a wide range of different topics related to energy.I'm really curious to hear what your answers are to these, and I think that'll help guide our discussion. So I wanna start with this question that I ask on most of the podcasts. What is something that's conventional wisdom among energy people that you think is wrong or commonly misunderstood?Michael WebberThere's, I've got so many, there's like three things that come to mind that are conventional wisdom that I think might end up being wrong. One is that, to decarbonize economy, we have to get rid of oil and gas, or oil and gas companies. And I can see a lot of ways we could decarbonize economy with molecules still in the mix, and with those companies still in the mix. Another piece of conventional wisdom is that we will have to have base load power in the future. And I think the whole concept of base load actually is going to go away. And we're going to replace it with dispatchable. But that means dispatchable on and dispatchable off. So we could talk about demand response for things you could turn off, as well as power plants or batteries or things you could turn on. So the concept of base load, I think, is just going to feel very antiquated. And then a third piece of conventional wisdom is that hydrogen or other clean options will always require subsidies to be cost competitive. I don't think that's true. I don't even think it's true today for wind and solar. And I don't think it's gonna be true for hydrogen in the near future. I think instead, what we'll do is instead of subsidizing one form of energy another, we'll quit letting emissions pollute for free. I think like you think of like a dumping waste in the atmosphere for free is a form of subsidy. I think if we eliminate that subsidy, then we'll move towards the right answer and won't need to subsidize the clean stuff. So there's this notion like, oh, we gotta have hydrogen tax credits, that kind of thing, make hydrogen competitive. Not really, we maybe just can't let people pollute for free anymore.Doug LewinWe're going to come back to all three of those as we go through. Those are great ones. As I suspected, your answer would be interesting there. Another question I like to ask, and this isn't like asking for big predictions, but just kind of in general, what will the grid look like in 10 years and how will it be different for consumers? Just for people that don't think about energy every day, but obviously depend on the grid, rely on the grid, and pay for it. What's it going to look like in 10 years? How will it be different for them?Michael WebberI've got a couple thoughts and I've got to be careful to be honest and I'm mixing partly what I wish for and what I actually think will happen. So what I think will happen is coal will continue its decline. Coal's already dropped like 60% in the last 15 years. I think it drops another 50% from where it was in the next 10 years. So coal about a decade from now will be about 10% of where it was in 2006. And that's really phenomenal that coal will end up dropping about 90% in two and a half to three decades. A lot of that's because of the natural asset life of the coal plants. The coal plants are coming up at their end of life retirement window and we just won't replace them. There are a few newer coal plants that might hang in there, but most of the coal we use in America will be for like steel and cement, not for power. It'll be very limited coal and power. And I'm pretty confident that will happen. A thing that I kind of wish will happen, but I don't know if it will happen, is that we pass through a lot of the market reforms we've done on the wholesale side to the retail side. So if you look at places like Texas, there's a lot of competition on the wholesale side. A lot of new power plants can come in like wind and solar or clean gas or whatever it is. But most of us on the retail side still pay bills the same way we did 10 or 20 years ago. Our bills look kind of the same. And I think we need to have a lot of evolution there where we can be paid to turn off our power certain times a day. We can be paid to sell power back to the grid if we have solar. We'll have much more net metering, we might even have peer-to-peer markets where we can sell power to our neighbor. There's a lot of things that could happen on the distribution end of the power sector that haven't happened yet. That would be great if they happened, but that's my wishful thinking. Like that's what I wish will happen in a decade. I don't know if that will really happen or not. And then the thing that I do think will happen and I wish will happen is I think we'll have a lot more distributed generation, a lot more rooftop solar panels. However, as a warning to everybody, that distributed generation will also include natural gas generators, maybe fuel cells and things like that, it won’t be just rooftop solar. But I think we're going to have a lot more distributed generation, a lot more generation at the end of the line because of all the difficulties we're having building transmission and for other reasons. So that's kind of a mix of things I think will happen and things I kind of hope will happen. In that middle one, this evolution of having more sophisticated and efficient markets at the distribution end would really enable that third piece of distributed generation.Doug LewinYeah, that's right. I think it's interesting, you mentioned both solar and gas. And of course, I think storage will probably be part of that mix to battery storage would be part of that mix to whether any of these are on the wall. Yeah.Michael WebberAbsolutely, and that battery's, exactly. And we actually, when we remodeled our house a decade ago, we built it a place in a crawl space for battery storage, like a power wall or something. And we will probably never use it because the battery in my electric vehicle is so much larger than whatever power wall I could have bought.Doug LewinYeah, yeah, a lot happening in that space. All right, good, we'll come back to all of those things as we begin to talk too. And then the third question I like to ask when we have time, and I knew if we started talking about other things, we'd never have time. And I wanted to ask you these questions because you do teach a class on policies and technology. So what are the two or three, one, two or three, whatever you like, energy policies that you think could have the biggest impact to increase reliability, lower costs for consumers, and reduce pollution?Michael Webber That is a great question. So I kind of give a hint at this with the first question and part of my answer, which is I think we need to put a price on pollution. Like if I think of the policy we need that's missing today is we allow people to pollute for free. They can dump their greenhouse gas emissions in the atmosphere for free and use our atmosphere as a common dumping ground. That is inappropriate for so many reasons. It's inappropriate economically and ethically and morally and environmentally, you name it. And that's the one policy I really wish we had. And if you ask like 99 out of 100 economists, they would say, put a price on carbon. That's the most important thing you do. And that carbon emission is a proxy for some of the other problems we have around domestic security of our energy sources, reliability of everything else, because that CO2 ends up driving climate change, which becomes a forcing function of strain on the grid. So if we put a price on pollution, it will lead us to cleaner, domestic mix of sources that will end up being more reliable. And then the counterpoint to that is we should have a reliable services price, like a market for reliability services. And we have some of that, like in ERCOT, we'll have spinning reserves and non-spinning reserves and reg up and reg down these different types of markets that pay people for the reliability services they provide. And I would like to see a more enhanced, bigger market for that. Most of the market is just for buying and selling electrons or electricity in the power markets and a little bit of the market is to do so reliably. And I think the reliability part of the market should grow and will grow. And that will incentivize not only more capacity to more things we build, but more things like storage and demand response and dispatchable, firm, clean power and this kind of thing. And so I think having a price on pollution so you can't pollute for free anymore and a value or reward for reliability, those two things hand in hand will do a lot to solve our grid.And we don't really put a price on pollution at all. There's sort of a price on some of the pollutants like NOx and SOx, but not CO2. And we have a little bit of a price or a little bit of value that we attribute for reliability, but I think we need to do more of those.Doug LewinYep. All right, so this is great. I think my instincts were good on this. Asking these questions sort of tees up, because as I was preparing for this, there's like so many things I wanna ask you, but kind of getting a sense of where you wanna head is helpful. So I actually wanna go back to the first thing you said about what is commonly wrong, taken as conventional wisdom, that, the decarbonization requires the end of oil and gas.I want to talk more about that. So obviously you and I both live in Texas. This podcast is focused on Texas. Texas has, back to spindle top, taken a very large share of its wealth. It's not as much now as it was 80 years ago or whatever, but it's still a very large share of the wealth generated in the state. The tax revenue in the state is tied to oil and gas. So I think a lot of people that either... have derived well from that continue to, or tax revenue or whatever, get very worried when they hear energy transition. Why should they not be worried? Why do you think that it could continue? Is this even potentially an opportunity as well as a risk?Michael WebberIt's absolutely an opportunity for oil and gas companies if they choose to be part of the future and not all oil and gas companies wish to be part of the future to be very clear about that. Some of them are at war with the future and I think the future is going to win, frankly. But there are a lot of companies that feel like they have a role to play. There are a lot of solutions in the decarbonized economy that require subsurface expertise. Might include geothermal energy or below ground storage of hydrogen or even extraction of hydrogen from natural reservoirs.It might include CO2 sequestration. It might include pipelines that move different molecules around, including CO2. It might include offshore solutions like wind or solar. It might include a lot of the things that the whole gas industry already knows how to do better than anybody. And so there's like a certainly a skillset that oil and gas has a capability that we're going to need in a decarbonized future. And that includes things as basic as project finance and project management. And how do you do complex engineering projects in hostile environments and make them work? That's something oil and gas knows how to do. So there's a skill set that's very valuable and the people they have on the team, the geologists, the engineers, you name it. In addition, the product they sell, the molecules might also be important. Now the molecules might be different in the future and they might be sourced differently. The methane might not come from below ground fossil reserves or if it does, it might be converted into hydrogen or it might be methane that's manufactured from biological processes like decomposition of animal manure or something like that, or might be other molecules like ammonia, formic acid, or hydrogen methanol, you name it, but the world of moving molecules around and converting molecules is something that oil and gas knows very well. So these molecules might play a role. And then as you especially think about the molecule of CO2 and removing it from the atmosphere and putting it somewhere else, that's something oil and gas companies might know how to do. So that I just feel like there's a bucket of incredible capability and expertise and assets like rights of way and pipelines and platforms and ships and welders. There's… welding equipment, there's a lot of assets as well as skill sets that can be really useful. So that's kind of my view, but you don't have to take my word for it. You can listen to ExxonMobil CEO Darren Woods, who said on the record in the middle of 2022 in an interview that his view and therefore ExxonMobil's view, because this was on the record, is that 100% of light duty vehicles sold in the world in 2040 will be electric. So this is a man who sells gasoline for a living saying…the new cars that you buy by 2040 will be electric and will not need gasoline. And he said, that's okay. Those cars are gonna need a lot of lightweight materials like plastics and other base materials. Well, we make those materials, we'll be fine. And so if one of the world's biggest sellers of gasoline says the market for gasoline will disappear, but that's okay because we'll make the materials those cars need, for example. He didn't say this, but they'll also produce the natural gas that will make the electricity for those cars. They're fine. And so that's one view. Another view tends to be like smaller independent oil and gas companies who don't care and are gonna ride to the fossil tail. Like they're just gonna ride the curve down and make a lot of money before they retire and that kind of thing. So they're not gonna switch to the future, but some of the big ones, the multinational companies for sure are switching to the future. So that's my view and that's their view, frankly. But the way I put this in sort of a logical hierarchy of decarbonizing is it's kind of a four step process. Step one is efficiency. We should make things as efficient as possible. Light bulbs, cars, homes, you name it. We need to reduce the height of the hurdle we have to clear or reduce the height of the mountain we have to climb, whatever your analogy is. We have to use less. That is the best thing we need to do. By the way, that's a very hard thing to invest in as a venture capitalist. And so efficiency doesn't always get there with market forces alone. It's a great place for policy, especially around building codes and fuel economy standards and that kind of thing. But efficiency is where we start.The second thing is electrification. We need to electrify as much as is reasonably possible, especially light duty vehicles are a great example. Building heat for new buildings in mild climates is really obvious, we should use heat pumps, this kind of thing. And those light duty vehicles and the heat pumps actually help fulfill that first goal of efficiency because the light duty electric vehicles and the heat pumps in mild climates are more efficient than your alternatives. Then the third priority is clean molecules for the parts of the economy that are hard to electrify. And I'm thinking industrial heat, maybe building heat in cold climates in old buildings, aviation, marine shipping chemicals. And then the fourth one is carbon management, which is to remove the carbon that we couldn't avoid through clean molecules and electrification. So, like the first few steps are kind of like do your best, and then the fourth step is, clean up the rest. So that's kind of saying “do your best, clean up the rest.” So the four steps, efficiency, electrification, clean molecules, carbon management.Well, those last two, clean molecules and carbon management are in the molecules business, probably gonna be oil and gas companies or oil and gas adjacent companies. And those clean molecules could be biomolecules, biomethane, it could be fossil molecules, a carbon capture, that looks pretty expensive to me. Could be hydrogen from a variety of sources, ammonia, methanol, formic acid, you name it. There's a variety of ways to get clean molecules. But in our analysis, if you wanna get to zero carbon or net zero as quickly, affordably, reliably and equitably as possible. It's cheaper, faster, more reliable and equitable to keep molecules in the mix and to exclude them. If you have to go 100% electrons, it delays the path, makes it more expensive and might make it more fragile or less robust because you have single point vulnerabilities and that kind of thing. So that's kind of my long sweet, I think molecules have a role and I think it's in our interest that molecules have a role and I think it's certainly in our interest for the companies that know molecules to be on board with decarbonizing and we can sort of map out a pathway, here are all the ways an oil or gas company might make money in a decarbonized future, because I'd much rather have those companies on board with the future than against it.Doug LewinYeah, I think two things are true here. One, electrifying everything possible, everything that makes sense from an engineering and physics and financial perspective. That's good. There generally is energy efficiency, as you pointed out, right? The electric car is what, you're the engineer, what 80, 90% efficient versus an internal combustion engine car that wastes so much heat, right? And is only 30 or 40% efficient. So that's great.It's also, I think, important for people to understand that at this point, only 20% of all energy is electric. Even in International Energy Agencies’ net zero scenarios, at the very high end of the spectrum, you're talking 50 to 60% electrified energy. You still have a lot of molecules. Having those molecules be clean molecules, whether it's 40% or whether it's 70%, that's still a lot and they need to be clean, right?Michael WebberIt's a lot that need to be clean and even beyond that, we want those companies who know how to do it to be a partner for all the other things we need them to do, drilling and offshore and everything. So it's the same companies often. And I see this role for molecules in the future. Now, another way I'd say it is, I think the total volume of molecules is gonna be much lower in the future because we're gonna replace a lot of molecules with electrons. But the use of those molecules will be more valuable.And so when I talked to oil and gas, I was like, okay, would you rather sell more oil and gas or molecules, or would you rather sell fewer molecules, but more profitably because you're selling them for very valuable procedures or processes, making cement or whatever it is, or doing backup power if you have no other options. So you're only using it for really critical times or valuable times or valuable goods. I think like, backup power is a great use of molecules. But when you need backup power, the prices tend to be very high. So that's a very profitable time to have natural gas for a natural gas power plant. But if you're using natural gas when it's really windy and sunny, well, that's a pretty dumb time to use natural gas because it doesn't really add value to society and you're not making money off the gas itself either. So we burn a lot of natural gas that we don't really need to burn when we could be using wind and solar. And so I'd rather save the gas for the high value critical times. And I think that's better for the gas sellers too. I think they'll make more money.Doug LewinYeah, I think it's really interesting on this question of oil and gas companies and what their role in the energy transition is. You know I named my company Stoic Energy. I'm very into Stoic philosophy and for instance, the books of Ryan Holiday, a fellow Austinite, or nearby in Bastrop. He wrote a book where the title is The Obstacle is the Way. And I think there's something really true there… a lot of people view this as oil and gas companies are in the way. And sometimes that's quite true.But some of them are trying to figure out how to get through this transition. And I think the ones that just continue to be stubborn and intractable, eventually there's gonna be a decline there. This is like Clayton Christensen, Innovator's Dilemma stuff. They have to look around for the other things that are gonna start to grow. Clean molecules, hydrogen, carbon capture. Exxon bought a lithium mining operation, right? Not long ago. I mean, it's fascinating what is starting to happen and it's slow. It's too slow. There's probably a lot of people listening right now that are like, “What are you talking about?” and are frustrated by this. And I acknowledge it's too slow, but that's not the same as saying it's not happening at all.Michael WebberWe actually, the good news is we're making progress. The bad news is we need to pick up the pace a lot, right? It's just way too slow. On the oil and gas companies, there is a big distinction between the multinationals and then the independents, the smaller mid-majors or domestic producers. And even among the multinationals, there's a distinction between the European multinationals and the American multinationals. Although the American multinationals are catching up to the European multinationals. European multinationals, Equinor, Total, others are fully on board. They're investing money. They have ambitious plans to ramp up their electrons business, to decarbonize their molecules business, that kind of thing. Equinor is really doing it. Orsted we think of as an offshore wind company. Orsted used to be Danish oil and gas company, right? That's a European oil and gas company that is now fully on board with offshore wind and electrons. So I think we can look to the European multinationals for leadership on this. The American multinationals, you mentioned ExxonMobil, but there's others like Chevron and others who are also doing it.The smaller invaders tend to be the laggards on this. They don't have the resources for it, but sometimes the leadership is just not on board philosophically with this. Or they're in a position where like, I'm gonna retire in 20 years, that sounds tough. I'll just kind of ride the tail and make a lot of money in the next 20 years and not worry about it. So there's a myth that, the oil and gas industry is not quite monolithic on this. There's a lot of disagreement within it. And it's fascinating to me as a Texan, I think you see the same thing. The multinationals in Texas, are not influential with Texas government, which is kind of a fascinating thing that the local independents have much more say with the Governor, Lieutenant Governor, other people than the ExxonMobiles. And that's not true for ExxonMobil, I would say in every other place where they're active, they're probably very influential. So we have some unique to Texas experience that might inform our opinion on this too.Doug LewinIt is a fascinating dynamic here, as so many things in Texas are. I want to back up and just kind of widen the aperture here. In your book, Power Trip, you talk about, and I'm kind of a student of history, I love talking about history, I love taking sort of this broader view, and you do this so well, sort of the evolution of energy sources and how we have seen better and sort of better, however, you can define that different ways, more energy dense, I guess, would be the best way to define that in this context, but cleaner as well, sort of one after another supplant energy sources before them. Can you just kind of run through that and bring us up to where we're at right now with the energy transition?Michael WebberYeah, and the history teaches us that transitions are common in energy, and there tend to be episodes where transitions happen faster. So I think we're 10 years into a 30 year transition right now. And we've had them before with the rural electrification from like 1930s and 1960s, with the second industrial revolution in the 1800s, the industrial revolution of the 1700s. So we have these episodes where innovation happens more quickly, innovation on the energy conversion devices, making new machines like a steam engine or gasoline car or electric computers, we have new devices that convert or consume energy and new forms of energy available. And when you have rapid convergence of changing forms of energy and changing uses of energy, that's an energy transition. So we're in one, this is to my eye, at least the fourth or more. So they're more common than we think and the prior ones instruct us on what to expect. If I take just one example, in the United States when we cut down most of the virgin forests in America, we deforested and cut down these trees to get the wood as both a building stock and material for fence posts on the prairie and also to build our homes, but also for heat, for cooking, home heating, as well as industrial uses. We would like use the wood to make industrial heat, but also to do coking, to make different charcoal or different things. So we use wood as a fuel and a feedstock for materials and energy. And we cut down so many trees. We did so much environmental damage that trees became very expensive. So if you go to Maine today, they're a beautiful forest by the way. Those are all second growth and regrowth forests. Those are not the original forest, we cut them down. And as we cut down the forest in New England, then the Eastern Seaboard, we moved further west through Pennsylvania. Eventually we cut down most of the trees in the upper Midwest, like Wisconsin and Minnesota. Well, it's getting harder and harder to cut down the trees and move them to the markets. The markets being Philadelphia, New York, and Boston. The trees are farther and farther away, and you have to go longer and longer distances to get the trees. That wood became very expensive.Meanwhile, coal in Pennsylvania is closer to market. Coal is a higher performing fuel than wood. It gives you more energy density per pound and it burns more cleanly than wood. It gives off less smoke and generates less ash and gives you less CO2, frankly, per unit of energy as well. So coal comes along and it's closer to market. It's higher performing, it's cleaner and it's cheaper. So we start to use a lot of coal in the 1800s and that leads us to stop cutting down the trees and the forest grow back. It's an incredible environmental solution at the time.Same kind of concept with whale oil as an illuminant, where we used whale oil, we'd kill these whales just to get the blubber, to get the whale oil as an illuminant, as a lighting fuel. And we killed so many whales, whale populations declined so rapidly, it became much more expensive to get the whales and therefore the whale oil, the expeditions would take like two years instead of two months. And so whale oil became more expensive. Meanwhile, Pennsylvania comes to the rescue again, drill for oil in 1859 in Titusville, Pennsylvania, and we get the oil out of the ground. And if you refine or distill, think about it that barrel of oil, the middle slice the middle distill it is kerosene, which is a great illuminant, and it burns brighter and more cleanly and without the pungent smell of whale oil. And it's closer to market and it's cheaper. So with wood to coal and whale oil to kerosene we went to these fossil fuels because they were cheaper, cleaner better higher performing closer to market and that let whale populations recover and let the trees grow back. And that was a great environmental solution. But now we're trying to clean up those messes. So one of the lessons here is there are solutions. We tend to move towards cleaner, cheaper, higher performing options. We tend to introduce new problems with those solutions. So coal and kerosene were solutions, but now are problems. And now we're trying to solve that with electricity or wind and solar, which is great. But if we do a lot of solar and a lot of wind at scale, they will introduce different problems, land impacts or mining or blight on the land or whatever your concerns might be. So you have to think about how to avoid those problems of doing them at scale and what we might do in the future to clean up whatever problems they introduce. And by the way, wind and solar are cheaper and cleaner. And I would say even higher performing in a variety of ways. They're not dispatchable the same way, but they're domestically located and they have all these security benefits, which is China and Vladimir Putin can't turn off the wind or the sun, right? So they give us some other performance benefits. So that's where we're headed. But because they all have their limits, we'll do more than wind and solar. We'll do… these clean molecules or geothermal, or we'll have other options because they all have their different upsides and downsides. So that's kind of the story of energy transition is they happen quite often. It gives us some lessons. We typically move to a better place.Doug LewinYeah, and there's a couple different places I want to go from there, but let's actually, there's something you just said there that was really interesting at the end, and I do want to ask you about this. So, yes, China can't turn off the wind or the sun, but something like 90 plus percent of solar panels are coming from China. There was a major change in US policy in the Inflation Reduction Act, which I've heard described as not so much a climate bill as an industrial policy bill.Are you starting to see, I know you, again, through not only being a professor, but with Energy Impact Partners, you see things going on in the market. Are you seeing that have an impact on manufacturing here in America?Michael WebberAbsolutely. So first of all, the wind world is different because most of the wind turbines are made by Vestas or GE or Siemens. So these are Danish, German or American companies. So the wind turbine manufacturing is not dominated by China the way solar panel manufacturing is. And one of the reasons why solar panel manufacturing is dominated by China is partly because of the mines for the silicon, the raw materials. The bigger concern I have is the, I don't know, lithium or cobalt, or different, name your material material. China probably dominates the market for the upgrading and refining of it, if not the original extraction. So China has a stranglehold on particular materials that are very important. And those materials might go in that wind turbine made in Germany, but they will go into things like batteries and solar panels as well. So there is a national security risk for these new options, but it's a capitalized risk. Like it's a risk in the manufacturing, not in the operation. So China might be able to turn off the flow of solar panels, but won't turn off the sunshine.And so, they could disrupt our ability to build solar, but they don't disrupt our ability to operate solar. That's a pretty important security benefit. So there's still some security risk. It just shifts in terms of scale of disruption and where in the supply chain or the lifecycle of a facility it might be impacted. And because of that concern, and this is not a new concern, I was at a briefing in 2007 or 8 with the Department of Energy where they were talking about this back then. They're like, we're really concerned about molybdenum and yttrium and erbium, like these different rare earth materials, as well as the silicon, the lithium, the cobalt, and graphite and things like that. So they've been concerned for a while. They've been raising the flag of concern. So there's been a while to look at it and bipartisan interest in solving this. And the latest policy push with the Inflation Reduction Act and others has these domestic sourcing requirements or supports for domestic manufacturing capacity. In effect, there's been tremendous uptick in domestic manufacturing capacity of electric vehicles and batteries and things like that. Probably won't go to solar panels that much, frankly, it'll be a little bit for solar, but. It's more likely on the other materials. And where my venture capitalists had, we're seeing some producing startups on domestic sourcing capabilities for new alternatives to graphite or new ways to manufacture anode, geocathodes for batteries, that kind of thing. We absolutely see startups that are ready to solve this problem. And not only is there like a federal policy support potentially for the startups, but there are a lot of buyers who are willing to pay more for a shorter, more secure supply chain. But it's just like they wanna have a supply chain that works.Doug LewinMichael, is that specifically about cobalt or are there other issues? When you talk about anodes, cathodes and the, and the different ways of…Michael WebberGraphite. I think like so there might be ways to do the lithium ion or the graphite to produce you want. Cobalt's fascinating. Cobalt, there it's less about China more about the Congo for example. Where, in there it's more of a labor justice issue than environmental justice. You have to worry about both: you have to worry about dirty minds, extracting materials that pollute the environment. You have to worry about labor justice issues which might be 12 year old boys in these mines in Africa getting cobalt out of the ground. Or prisoners or slave labor in China making solar panels.You also worry about the security risks of bad actors turning off the supply of the materials we want to make things. And China has already said they're gonna do that. So these are all real risks. Cobalt's a little interesting, different to me in my perspective. When I was at NG in Paris, we were very sensitive to labor issues. And for NG, it was easier just to find an alternative to cobalt, like use a different material than it was to find an alternative cobalt source. So you could either find a different place to mine cobalt so you don't have the child labor issues or you just find an alternative to cobalt. And companies are looking at, okay, how do we avoid that material? Or how do we avoid that country or that mine or that company, that kind of thing? So you can do a combination of the two, but there's some materials like graphite and lithium there. It's going to be hard to avoid those materials. And frankly, of all the things I just said, the one I'm actually worried about the most in terms of total volume is copper. I don't know how you avoid copper in an electrified future. And I'm less worried about the environmental labor risks there, but more just the… volume, like is there enough and can we get it at a price that's manageable without depending on countries who hate us.Doug LewinI want to come back to something else you were talking about earlier. One of the things you thought that was wrong or commonly understood is the need for base load power. That's interesting, because I do think there is a very, very common perception out there, like maybe 90%, even to people still in the industry, that you gotta have base load power, you gotta have stuff that's always on. Why is that wrong?Michael WebberI think it is hard for people to let go of that term because we've built up the concept of it over a century plus. The way we built our grid in the United States and elsewhere is to be load following. So you and I, we're turning on our lights on and off, we're turning things on. So people like you and me, multiplied by hundreds of millions in America, we're turning on or off our loads. And then we ramp the power plants up and down to follow the loads. So we set up the power sector to be load following. The loads change, however the loads change based on the weather or temperature or time of day, whether we're at work or home or how big our refrigerator is or whatever, and the power plants must follow. So it's load following. And then there's certain minimum load that happens throughout the year. We call that the base or the base load, and we have enough power plants that are on all the time to be base load to meet that minimum demand. And then we have peakers or mid-merit dispatch or other things we ramp up and down to meet the variability in the load above the base load. We built up that concept over a hundred years and we had trouble letting go of it. We need baseload power plants. And we might need baseload power plants, but we're moving into this new world where we don't just have variable load, you and I changing our habits and patterns during the day with light bulbs, things like that, but variable supply, because we have more supplies that depend on meteorological or astronomical conditions, like the weather or position of the Earth relative to the sun with wind and solar or hydro and that kind of thing. So add to the mix variable supply and variable load. I think load following doesn't make as much sense. In fact, I think we probably need supply following loads. Rather than turning power plants on and off to match when the load is, we should turn the loads on and off to match when the supply is. And those loads could be some non-critical data centers, water treatment, certain types of steel mills. There's a lot of things, cool pumps, water heaters, a lot of things we can turn on and off to match when the power is available, rather than turn the power on and off to match when the load is desired. So I think we need to switch our mindset from load following to supply following. And then if you do that, base loads are a ridiculous concept.The way Brad Jones used to say it, and I miss Brad dearly, and I'm really sad that he died not too long ago. Brad was just a great executive in the power sector. He was a public servant at ERCOT. He was a public servant in New York, ISO, and at New York Power Authority. Then he came back to ERCOT, just as a gentleman to be an interim CEO after Winter Storm Uri, and recently died. And the way Brad would say it, and I really liked it, he said, I need things I can turn on and off. He didn't use the word baseload.And it's like, it was way, almost like the way he was addressing this, like we need to change our thinking and our language even, because I need dispatchable things. And a thing that I can turn off is dispatchable and a thing I can turn on is dispatchable. And Brad would say nuclear power plants are not dispatchable because I can't turn them down. Months are all on their own. At least that's true for American nuclear, by the way. French nuclear is very different. And so we would talk about nuclear as baseload because it's on all the time, it serves its need, but Brad would not call it dispatchable, and I agree, frankly. And so we need to get to this dispatchability, things we can turn on and off. And I think that's the future and the dispatchability terminology should replace the base load terminology. And by the way, designing nuclear power plants to turn on and off is entirely possible. We do it in other places around.Doug LewinYep. And I think it's dispatchability. I think it's also important to consider, right there next to it, like a twin, flexibility. Right? Michael WebberFlex, absolutely. Yeah, agility, absolutely. Yeah, that's right.Doug Lewin Yeah. Right. So and if you start to think about, I mean, you went through a list of the sort of demand that is flexible. It's, I'll just add a few to it because we were talking earlier about carbon management, you know, big carbon dioxide capture machines, right, can be flexible. You don't need to run them 100% of the time. If you run them 90%, that's more carbon than we were capturing before, right? Michael Webber Totally.Doug LewinFlexible loads, green hydrogen you were talking about, or you just talked about hydrogen generally, the green hydrogen desalination. There's all these different things. And actually, I think it's important for us to start thinking of storage itself, not only as supply, but as a flexible load, right? Michael WebberTotally. Yeah.Doug LewinBecause a lot of people say, well, yeah, like data centers are this big growing demand, but they're not very flexible. A, that may be wrong, because there's certain kinds of data centers that will be flexible, but there's others that aren't. But if you put storage there, right, now you do have a flexible load and a supply. So I really think that in many ways, battery storage is sort of the ideal, dispatchable and flexible demand and supply, right? It works both ways.Michael Webber I agree. In fact, the way I think about it is electric vehicles will either save the grid or destroy the grid entirely, depending on what time of day you charge them, because they are this flexible load. And if we all charge at peak times, it can break the grid. But if we all charge it off peak times, it will save the grid because it will help us amortize our entire cost of grid across more kilowatt hours and therefore lower the cost for all of us and give the money we need to do the investments to modernize upgrade. So.And that's because the battery inside is very flexible. You can charge it easily. You can turn it on and off. You can do it at different times. Batteries have a response time of like 100 milliseconds. So they're really fast. So batteries are an important part of that flexibility, dispatchability, both on and off. That's really great. Some things we can only turn on or things we can only turn off, right? So it's nice to have the two-way capability with the battery.Doug LewinYeah. And in many ways that then becomes a battery storage and its ability to be a flexible demand matched up with supply. It becomes another form of energy efficiency. And you talked about efficiency earlier when you said there's kind of these, these four steps, efficiency, electrification, clean molecules, and then carbon management. And efficiency is number one. I know you've done a lot of work on this. You've done a number of studies on energy efficiency. You, you've read a lot and talked a lot about energy efficiency.Can you talk a little bit about its importance, specifically in a Texas context, right? We've just come through another winter cold blast. Obviously, Uri is only three years in the rear view and I don't think is getting much further from anybody's memory, even the further we get, it's still sort of with us in all these conversations. But talk a little bit about energy efficiency and how it also plays into this flexibility discussion we were just having.Michael WebberIt's great. And from the United States perspective, the two biggest opportunities for efficiency are the building stock, our homes, especially, but homes and businesses. And then second is our vehicles, our cars. And those are the two biggest opportunities. There are many other things. Light bulb efficiency, for example, has been very dramatic for the United States. Our energy consumption has dropped as a nation, partly because of the switch to LED light bulbs, which are much more efficient. But the light bulbs are much smaller than gasoline combustion engines and cars or how much energy we consume in our homes. Light bulbs are part of the homes, but truly heating and cooling is a dominant part.And so efficiency there, we'll do a variety of things. And efficiency of the home could be better installation, better windows, better design, not having your windows face south in an unshaded manner if you're in Texas, but maybe face south unshaded if you're in a Northern climate. So you can think about how you design your house, how you orient your house, the materials you use, the type of installation, the type of windows in a lot of passive things. And then you can think of the active devices, the heaters or coolers and what kind of device and how efficient they are. Are they modern vintage with high efficiency ratings? Are they pretty old and unreliable and more energy-consumptive? There's a lot we can do there. And I mentioned earlier that I think that's a place for building codes. Our building codes are non-existent a week in the United States compared to, say, France, where I was for a long time. France and Germany have much stricter building codes. They tend to have national building codes. In the United States, it tends to be either a state by state or city by city. We don't have a national efficiency code really, other than maybe for the devices like light bulbs. California has some strict building codes. They've avoided a lot of energy consumption over the last few decades. They call it the Rosenfeld effect because Rosenfeld really pushed for these efficiency rules. So the building stock in California is much more efficient. It's also a milder climate. And so they save energy, but their energy consumption wasn't as high to begin with. In Texas, our climate is less mild. We have drought and freeze and flood and heat wave, we tend to have it all. And we don't have strong building codes, maybe City of Austin does, but it's not universal across the state. If you have a stricter building code around the devices and the passivity with which you design the home in a way that keeps it more efficient, you reduce how much energy you need dramatically. And therefore you can have a smaller air conditioner, for example, and if it's a smaller air conditioner, it costs less, you can afford to pay more for a more efficient one. And then the safety benefits are remarkable. If the power goes out, your home will stay cool for longer. So you have this human health benefit and this quality of life benefit where you're less likely to die if you're a retiree and you're in a home that doesn't get as hot as quickly. And this happened in places like France in the 2003 heat wave, tens of thousands of people died, especially the elderly, because their homes were designed to stay hot in the winter and they could not shed heat in the summer. So even there with their efficiency, their envelope was so tight, it actually kept the heat in. They didn't design around cooling. So elderly people can die if it gets too hot.That's a risk in Texas. Or if it gets too cold and the power goes out, like in Winter Storm Uri, your home will stay comfortably warm for longer. So efficiency has the benefits of saving the consumer money, making it easier to increase your efficiency again. They get these amplifying gains of a more efficient house, needs a smaller air conditioner, which becomes more efficient. So it can be smaller again. And then you get better safety. That's a huge opportunity for us in the United States. We just aren't tackling it. And the analog is lightweight. You think of major airplane manufacturers. If they go to a lighter design by removing redundant components, then they can have a smaller fuel tank. And if you have a smaller fuel tank, the plane is lighter again, which means you have smaller engines. Well, if you have smaller engines, you don't need as much fuel. And you can just get this, like, accelerating gains as you improve that way. Efficiency has the same kind of amplification or acceleration. The other one is gasoline cars. And going from gasoline cars to electric cars is a huge step in the right direction. And going even further, not just cars, but mass transit, walkable cities, bikeable cities, and the e-mobility or micro-mobility, e-scooters and e-bikes, that's really where you get efficiency gains. And that’s, you might call that more conservation because it's more about the design of the system rather than just the individual device. But between conservation, how and where we lay out our transportation networks and homes with urban planning, and then the efficiency of the devices, the installation, the drive train or whatever, we can save a lot of energy. That solves our problems, that avoids a lot of CO2 just in the reduced energy consumption. Then if you decarbonize the energy, you get additional gains, and then it saves money for consumers. So it's just like win-win-win while improving resilience. So this is the obvious thing to do, but I will tell you as a venture capitalist, it's hard to find investable startups in this space. It's a very awkward business case, and that doesn't mean it's impossible. There's certainly business cases for the industrial sector where they have really big energy bills and they have dedicated experts on staff just to look for cost savings in energy. It is already cost effective and market based for like school districts, but for an individual homeowner efficiency can be hard to get to. So I think that that's where you have an opportunity for policy.Doug LewinYeah, there's so much there. It is difficult because it's such a diffuse market, right? By definition, you're talking about, what are we, 11 million residential units in Texas or something like that? It's just…Michael WebberYes, and the payoff is delayed. So the big mismatch right now is, because we don't put a price on pollution, the cleaner things, which are often the more efficient things, cost more upfront. You pay more CapEx, more capital expenses. But they cost less to operate. So your OpEx or operational expenses go down. And so we're doing a more expensive thing upfront to have something less expensive along the way. And an EV today often is more expensive than gasoline engine, but cheaper to operate. Triple pane windows are more expensive to install, but cheaper to operate. More efficient air pressure is more expensive to install, but cheaper to operate. And if you are an individual, you're gonna be pretty price sensitive to that upfront price. If you're at the University of Texas, or if you're the federal government who owns a bunch of buildings, or if you're ExxonMobil with a refinery, you can do that trade-off of CapEx versus OpEx, because you're pretty sure you're gonna be at that site for decades. But if you're a homeowner, you might leave in three years, and your payback might be in four years.And so it's harder for us at the individual level to make that trade off. Also, we're pretty bad at math in general, but even if we can do the trade off, that doesn't mean we can get the loan for the extra $10,000 on the house price. So there's some pretty fundamental…Doug LewinAnd even if we could get the loan, it's like, do we really want a loan for that?Michael Webber Yeah, exactly.Or would we rather upgrade the kitchen or a bathroom? And everybody deals with this…Michael WebberExactly.Doug LewinSo you are a mechanical engineer. I wanna ask you about heat pumps and resistance heat. So you were just talking about efficiency, right? And I think a lot of times when people don't understand about efficiency, still a lot of people's perception of efficiency is you're asking me to suffer, but it's actually the opposite. You're getting the same output or sometimes better output, but just using less units of energy. So LEDs are just a great example of this. You're using 1/10th or even 1/20th the amount of energy, but the light's actually better. It's dimmable, it's programmable, you could control it. It's all of these added features and it's using less.Michael Webber And it lasts longer. Now it lasts 20 years instead of eight months too, right? So you design how's it with light bulbs, with the expectation you're never gonna change the bulb. It changes the way you might design things.Doug LewinSo let's talk about that in a heating and cooling context. I mean, you were talking about how hard it is to invest in these companies, and you just have this mismatch in the economics here, right? So most homes are built with an air source heat pump that will heat it down, because we're 60% electric in Texas. So most homes are built with that heat pump that is only going to heat the home down to about 32 degrees and then have resistance heat as a backup. My understanding from talking to folks in the industry is that you can install resistance heat for a couple of hundred bucks. But on the power grid side, to build generation to serve that $200 resistance heat can be 10 or $20,000, right? But the homeowner, the builder, whoever's paying the bill for that resistance heat isn't thinking about that, understandably so, right? But we’re all going to pay for that power generation to serve that resistance heat. There are now resistance heaters that are cold weather rated, that will go down to zero or even below that. And I think to a lot of people, it's like, well, how does that even work? How can it still be efficient? And of course it gets less efficient the colder it gets, but can you give just a brief tutorial on, again, you're a mechanical engineer, so heat pumps and why they're so magical and how the sort of newer generation is changing things?Michael WebberI think it's great. So the heat pump technology, and also will vary on where you are. So its value in Texas might be different than Vermont or France. Not gonna walk through all that. So the cold weather heat pumps get better and better every year. But if you're a homeowner, you're at some point confronted with a choice, do I wanna get the heat pump that can keep the house warm when it's 32 degrees outside, like you said, or the one that works even when it's 15 degrees outside? And the difference in price might be a thousand or $2,000. Okay, do I pay a thousand or $2,000 more for the cold weather heat pump, or do I just get the sort of cold weather heat pump and add a couple hundred bucks of resistance heating? And for the homeowner, the resistance heating feels a lot cheaper, right? Looking at math, that's saving me 800 bucks or whatever it's saving me. But then your electric bills will be more than $800 higher over the next 20 years. But that's really hard math to do. It's hard to imagine, you don't know how long it'll be in your house as well, but how much higher will the rates be for electricity because I and all my neighbors are adding resistance heaters, therefore, we need to build more power plants. The cost of those power plants are spread across my bill and others, and I'm gonna pay for it one way or another. And so that heat pump for the cold weather rating, even though it's more expensive, is probably cheaper across the system, though it might not be cheaper to you in a very direct, obvious way. So that's part of the challenge. And I would say, without a doubt, in mild climates, heat pumps for new construction are the way to go. They will save you energy, they're cleaner, they don't have the fumes, they're more reliable, all that kind of thing.If you are in a cold climate like Vermont, you can argue a little bit more about whether it makes sense. And if you are doing a cold weather heat pump, they exist now, you can extol them, they work just fine. We know people have them, they work fine. It costs more and that heat pump is probably instead of fuel oil, which is particularly expensive and dirty, so you might not mind paying more for the heat pump because you're off this expensive fuel.However, your other option might be natural gas furnace. The natural gas will be cheaper and cleaner than fuel oil as well, but not as expensive as a heat pump. So in many ways, like it gets more complicated in cold weather environments, especially if it's a retrofit. So if it's a new house you're building in Vermont or Maine, you can build the panel the right way and all that kind of stuff through the heat pump. But if it's a retrofit, or you don't have a big panel, and you could just swap out gas or propane for fuel oil and you're changing the tank for 400 bucks and you're getting cheaper fuel versus having to upgrade the panel… For cold weather retrofits, going to a cleaner fuel will be cheaper and cleaner, but not as clean as a heat pump, but it'll be cheaper than a heat pump. So you have to distinguish between is it retrofit building stock or is it new building stock? And is it cold climate or mild climate? And certainly for new buildings and mild climates, it should always be heat pumps. Probably for new buildings and cold climates, it should be heat pumps. For retrofits and cold climates, that's kind of complicated. So we just got to talk. Oh, the other thing is like, we start moving a lot of power on those cold climates through the wires and you can move more energy by pipe than by wire. So it might be cheaper just to decarbonize the fuels and use synthesized methane from hydrogen or something like that. And that's the case in France, probably. So France is a cold climate situation that they have trouble upgrading their panels in those old buildings, but they already have the pipes for gas. So probably cheaper for them to do biomethane.However, in France, you get a different benefit. If you install a heat pump, you get air conditioning. And most of those homes don't have air conditioning. So in France, there's a movement for heat pumps, not so much because it improves the quality of heating, but it's hot in the summer, they kind of want the air conditioning you get for free. You also get the benefits of avoiding Russian gas, that kind of thing. So the motivation between a Texas new building versus old building, Vermont new building, old building versus France will be kind of different based on what you already have.Doug LewinSo, let's talk about Texas a little bit more since we're focused on Energy Capital on Texas. I think there's, a lot of the heat, no pun intended, in these discussions is around electrifying everything and converting from gas to electric, and that's its own conversation, but let's set that aside for one second. We are more than 60% electric heat in Texas. So as somebody's HVAC is breaking and they're considering a replacement, a heat pump that has that cold weather rating, which like you said, will cost a little bit more. And you've said this before too, but I wanna just drill into it a little bit more. This is the place where policy comes in because it is a clear market failure in the sense that to the individual homeowner, if you just let the free market, and I'm generally a free market guy, I do believe in the Texas competitive electric market, I believe markets are very powerful to drive change and to improve lives and all that stuff. But there are places where it just doesn't work because the incentives don't line up. Me as a homeowner, like you were just saying, it's just cheaper for me just to have that heat pump down to 32 and let resistance heat do the rest. Well, if I do that, I'm now using four times as much in my home as I am on a hundred degree day and just leaving it to ERCOT and power generators to figure out how to supply that 15kW. How did that turn out for us during Winter Storm Uri? And, and even if you do figure it out, it's expensive and now I'm leaving it to everybody else to pay that. That doesn't mean I'm a bad person for making that decision. I'm making a logical financial decision. It’s cheaper for me to pay the 200 bucks. So that's where government comes in and, and the utility programs can come in. The Inflation Reduction Act can come in and close that gap down to zero to make that decision easy for people. Is that, does that all make sense or did I miss something in there?Michael WebberNo, no, I think you got exactly right because there's this mismatch in economics speak and I'm not an economist so I might get this wrong. It's really called like mixed agency or you have an agency problem The people who are making a decision about what to pay are not the only people who are affected by that decision. This happens a lot with landlords where landlord has to pay for the new water heater, but it's the tenant that has to pay the electric bill for the water heater. And so the landlord doesn't want to pay for a $3,000 water heater that's better, when you can pay for a thousand dollar one. They don't care because it’s someone else. So there's a mismatch.When you're doing your resistance heating tape, you're not really fully aware of all the costs you're imposing on the system. Because it's not directly exposing. It might show up to you indirectly later on, blend it into your bill in a way that's hard to decipher. So maybe your bill's $10 more a month for many months in the future because of that. But that's hard to anticipate or know or even decipher once you get there. And so that's part of the system cost problem. The other thing I'll say is with a heat pump, if you get down to 30 degrees Fahrenheit, whatever, your electricity's 10 cents per kilowatt hour, say at home. That's not that big a deal. But if you're turning on that resistance heating tape below freezing, usually that's a time when it's really cold and electric prices are really high. So you're paying 10 cents a kilowatt hour at that time because you're on a residential rate. But the actual cost in the system is more like several dollars per kilowatt hour, which means someone's paying that, which might be you indirectly at some point or industrial customers or someone.And so we're not exposed to how steeply the price is increasing. The more you're using resistance heating, the more likely the prices are to be higher than normal. So there's a great non-linearity that happens or exponential rate increase. And you're not exposed to that. So that's a real problem. If you're, you don't see any benefit for doing the better thing, other people are bearing the cost of you having made that choice. That's a great place for policy to rectify this market failure, either putting the full price on the system onto you with that decision or whatever it is or doing low cost loans or incentives to just install a better system because there's some system benefit to it. This, I mean, the market fails in many ways on this. Part of it is because we have mixed timelines. The power plant has a 50 year timeline or maybe 25 year timeline if it's solar wind. Your HVAC system has a 10 to 20 year timeline. You're making a decision in the next 10 minutes because it just broke and the technician's there and you gotta decide. So there's operational decisions in a crisis in minutes. Heating, cooling over days or seasons, asset life's mixed from one decade to five. It's hard to make that all bridge together in one market.Doug Lewin Yeah, and I think that almost ironically, those that are just sort of like ultra-fanatical and religious about markets end up doing damage to them because if you just have that small help to the consumer to make that right choice, then the market has a better chance of actually functioning and working. It's just too much to put on the market to create that really expensive power in those times of scarcity for the 4 million homes that have resistance heat. It's just, it's too much to put on the market. You can, you can, it's like a release valve, right? It's like, just let some of that pressure out so the market can work.Michael WebberIt is so hard, and ERCOT doesn't know who's got what, right? So they can't see beyond our meter and know what we have, and they also don't know how we're gonna behave. They can do some models, this kind of thing. And if you look in the past, they really under-predicted what the demand was gonna be when it was cold, because probably they don't see how many of us have these resistance heaters. And so people yelled at ERCOT, hey, you need to improve your modeling to account for all the resistance heating that kicks in when it gets really cold. So then ERCOT did update a modeling that showed the demand was gonna be much higher than it really was.And so it's easy to be wrong where you're too low, or easy to be wrong where you're too high. And I'm very sympathetic to ERCOT, because I don't know how you model this thing where you don't have the data or can't see it. But that's part of the lack of transparency. They don't know what we have. But also there's human behaviors involved behind the meter. And it might be, they were correct with the high estimate of 85 gigawatts of load. And we all saw that and thought, holy crap, I'll do my part. Who knew, maybe we responded behaviorally, we don't know, right? So it might be everyone's bad at projections or might be we are responding to correct projections and therefore the projection gets adjusted. We don't really know, but it’s the, resistance heaters just make it harder because it's such a big load that kicks in all of a sudden and it’s invisible to ERCOT until it's already happened.Doug LewinYou know, so there's two more things I want to talk about before we end. And one is you talked earlier about one of the things that'll be different, you know, a decade from now as they'll be, you know, you hope and predict, there'll be more sort of retail competition. You talked about more distributed generation and solar. I think one way this could go is we could start to see sort of markets for dispatchable, dispatchability and flexibility. Flexibility markets would be one thing you call them on the distribution side. And if you actually have markets for that, you can start to see, you just said, ERCOT doesn't know what's going on beyond the meter. If there are markets where people could be paid to reduce, right? Then you start to see how much are you using, how much are you reducing, and the retailers can start to see, they already have some awareness of this, obviously already, but I don't think it's very granular, who's got that really inefficient heat that maybe I can target some incentive to help. And by the way, that's gonna make them more comfortable. It's gonna lower their bill. And they can always say no, that's how markets work. It's voluntary. You wanna pay a higher bill and be less comfortable? Have at it, freedom, right? Great. But if you wanna participate in this market, here's the potential to get paid for that flexibility. And you wrote a great op-ed in the New York Times about how Texas has these very advanced systems for paying large users, steel mills, Bitcoin miners, big box stores, but really hardly any on the residential side. How do you see that kind of playing out? Is it, I mean, it's kind of opaque, it's hard to tell, but is it just retailers offering more products and services, some of these upstarts in Texas like Tesla and Octopus, David Energy and Ohm Connect, the list goes on.Or do we need some kind of more organized market where buyers and sellers can find each other on the distribution side? Or is it something else entirely I haven't thought of yet?Michael Webber I don't know and I'm surprised it hasn't happened yet in many ways. We do have retail competition in many parts of Texas where you can choose who your retailer is. So we have that level of competition. And there was some market innovation within that where people for a while used to do free nights and weekends or lower rates or different things or lower overall rate. You're exposed to the market volatility and that really caused some people to lose a lot of money and go bankrupt. So there was some market innovation, but not a lot. And it was mostly just competing by brand loyalty and fidelity. Do you like my company’s logo or do you like me or not. So there's some competition, but not a lot of competition. And that competition is mostly on who is sending you the bill for the electrons you got, maybe some differentiation of whether it's green choice or clean energy or that kind of thing. But I feel like there's more, and I just can't explain why there isn't more aggressive competition there. I think the next piece, and this makes a lot of people, now when I say that, especially distribution utilities, is to open up the distribution wires and poles the way we've opened up the transmission wires and poles.So when deregulation happened before that, it was integrated. A power company would own the power plant, the transmission lines, the distribution lines, and then they would own sort of the retail customer. But they broke that up. So now there's competition at the front of the wire. It's regulated for the wire, moving it from the power plant to the customer. Then you can choose who your retailer is. But we haven't done that kind of opening up of the distribution service areas. Think of the different parts of Texas where there's owners of the wires where I can participate. And over these wires, I could sell my electrons to my neighbor. I'm going to be out of town for a month. I got solar panels, boy, I'd sure love to sell that power either to my neighbor or local utility or whatever it is. So those kinds of peer-to-peer markets or those distribution level markets don't happen. And it might take regulation to do that where those wires become common carriers. Think of like what happened with AT&T where AT&T had to open up its wires for telecom in the eighties and all of a sudden you had Sprint and T-Mobile, a bunch of other companies popped up, so we have more choices and that drove down the cost of long distance. Same kind of thing happened, but I think there might have to be some opening up of who owns the distribution, not just the transmission. How do you make that accessible to everybody? And how do you let even individuals participate? Then you get some more innovations that will happen then. And because there are a lot of people like, well, yeah, I'll put a battery in my basement if I can sell it to my neighbor in the summers when I'm in Colorado or something like that. You might get more active participation that way.Doug Lewin Yeah, there's obviously more resistance than openness to that from what I've heard…Michael WebberYeah.Doug Lewin…in the transmission distribution utility world, but I think there's starting to be a little opening there partially because the utilities are understanding how big this challenge is, Michael WebberYes.Doug Lewin … and they also live in these communities and see the reliability problems and see the cost going up. And I think there's becoming more of an openness. I think the other thing, Michael, the reason why there might be some openness to that is because there is such demand growth happening from electrification of transportation, new things like hydrogen or industrial heat being electrified. Their growth opportunities are so much that I think some of that, maybe somebody else is doing some of the smaller stuff, doesn't scare them as much as it once did. That's my hope anyway.Michael Webber Right, me too. So we'll see, yeah, we'll see how it goes. But I think there'll be some changes there. And we talked about distributed generation. If you have distribution level markets, it'll be easier for people to invest in distributed generation at their home. And you can kind of get to there with net metering, but net metering is a partial solution, but that's not quite a competitive market in the distribution level.Doug Lewin I got to ask you just one more thing, and this is kind of just a 90 degree turn, but I tried to loop it together there with the electrification piece. I don't know. It wasn't very elegant, but maybe I connected it, is hydrogen. You said earlier that one thing you think is wrong is that hydrogen will forever require subsidies. So you think hydrogen's coming down the cost curve pretty fast. I know you've done a lot of work on hydrogen and you're doing some work now right on some of these natural seams that exist for hydrogen. You think this kind of big thing.Talk a little bit about where you think hydrogen's going.  Maybe just talk a little bit about the difference between what is commonly called green and blue hydrogen, and there's other kinds too. But what do you think is most promising? Why do you think it's not gonna need the subsidy? And how much are these natural seams gonna play a part?Michael WebberIf you talk to the companies that make hydrogen, they're happy to have the subsidies, frankly, right? Who doesn't like to be paid extra for the thing they're already gonna do? And the reason why I think hydrogen will eventually not need subsidies is just like all the other industries that might've received subsidies for a while. Once they develop maturity and a more robust supply chain, costs come down with learning. And hydrogen can be done at a variety of scales, small scale or large scale. We'll just do a lot of it, and as you do, more costs will come down. The ways you can make it include electrolysis using electricity to split water to get the hydrogen out. Some people call that green hydrogen, especially if it uses like wind or solar. You can use nuclear electricity or geothermal, whatever clean electron you want to split the water. You can use steam methane reforming with carbon capture. We start with methane, convert it into hydrogen in a synonymous carbon wave, you have carbon capture. And if your methane system is not leaky, you can also do pyrolysis. We start with methane and then you use plasma or catalyst or some sort to strip out the carbon. You get the hydrogen, but there's no CO2, you just get carbon black. And that carbon black can be used for graphite or solar memos, that kind of thing. And pyrolysis looks really efficient and clean and lets you leverage existing infrastructure like natural gas pipelines, that kind of thing. So that's really interesting. There's photolysis and photobiological techniques and photoelectric techniques. My father looked at photodiodes to get hydrogen with xenon lamps out of water in the 1980s, as a chemistry professor, there's just a lot of pathways.And the one you mentioned is natural hydrogen or geological hydrogen. There are places where the Earth makes it. You can make hydrogen by reacting water with iron rich or magnesium rich rocks under the right conditions. And we have those kinds of conditions many places around the world. And then you just have to extract the hydrogen from the Earth or capture it from these seams. And then it doesn't take all this natural gas or electricity to get it. And so it ends up being cleaner and cheaper and less water intensive and doesn't impact the land. It just looks like there's a lot of it, and that's gonna drive down the cost a lot. So there's some surprises on the horizons, and the headlines are really focused on electrolysis, but we just wanna remind people there's a lot of ways to make hydrogen. The markets haven't chosen the winner, and the winner might look a whole lot better in the future than it does today. It reminds me a little bit of where we were with computers in the 1990s, where every year computers got cheaper and better. So it actually became a problem. Like I used to buy computers for my research at grad school. I could buy a $1,500 computer, or if I waited six months, I could get a $1,500 computer that was like 50% faster. And this happened like every six months. I feel like we're entering one of those curves for batteries. We've been on that curve for batteries for maybe a few years, but we're about to enter that curve for hydrogen where every six months or year, it'll be a little bit better and prices might come down. And eventually that means the subsidies really aren't necessary. Maybe they're good to get the industry started. And I would say, as long as you let other people pollute for free, you got to do the subsidy, bring it into balance. I think that won't be necessary at some point.Doug LewinWhat do you think hydrogen is mostly gonna be used for and what do you think it's not gonna be used for?Michael WebberI think hydrogen will be used primarily as a building block for high value chemicals like fertilizer. And I think we might want more fertilizer and if we use more fertilizer, we might need less other forms of energy to reap our crops and protect our foods and refrigerate and that kind of thing. So I think we'll have more agrochemicals and hopefully not the kind that are cancer causing and that kind of thing, but the kind that help us lead to food abundance. I think we'll use hydrogen as a building block for things that are hard to electrify like aviation fuels, for like long haul aviation, short haul aviation maybe we can electrify. Probably for marine fuels, and that might be ammonia or methanol or something like that we might build from hydrogen. You can also get there from alcohols by the way, if you ferment bio matter, you might be able to get to the jet fuels or marine fuels. And then industrial heat, there's certain applications where you need high temperature heat, where we burn gas today, burning hydrogen instead would be better. Some of the industrial processes can be electrified, but a lot of them just want heat. So that might be hard to get there with a heat pump, for example. And then maybe for long haul, heavy duty trucking, I mean, there's a battle right now between electricity and hydrogen, or not necessarily hydrogen, but hydrogen as a building block for diesel. Long haul trucking might be another place where hydrogen is valuable. So, there are a few places outside of the power sector, but then the power sector, hydrogen itself might be a good backup fuel because you can store it more easily than a battery for long duration. And I think that's a pretty good use of hydrogen. I wouldn't want to use hydrogen for around the clock operation of the power sector, but there are episodes where it's neither windy nor sunny where it'd be nice to have a power plant that you could turn on. So I think that will be either backup or peaking times for reliability purposes in the grid. So that's it. I mean, I think, I don't think it'll be light to any vehicles and I don't think it'd be home heating. I think a lot of things hydrogen won't do.Doug LewinYeah, and with that backup piece, you can actually make the hydrogen with the wind and solar when it's abundant and then use it when the wind and solar is not.Michael WebberYeah, yeah. Especially for island communities where it's so expensive to bring in diesel that they have abundant sunshine or wind, they would use electricity to make a storable form of electricity, say, with hydrogen, that they can then use to make power later on.Doug LewinI know I said that was going to be the last thing, but when you said island communities, I have to ask you about interconnecting ERCOT. You've talked about this a lot. We need to interconnect. This will be the last question, I promise. I need to let you go. But yeah, we got to talk about that. Do we need to interconnect, Michael?Michael WebberI mean, yes, if we interconnect, it will make us money, it will save us money, it will reduce pollution, and it will improve reliability. Like it's the most obvious kind of thing we need to do. And this is where Texas jingoism and nativism and patriotism gets in our way, where we don't wanna do it because we don't wanna deal with the feds or something like that. But we deal with the feds for natural gas exports, liquefied natural gas exports, crude oil exports, refined oil exports, wood pellet exports, you name it. We deal with the feds for a lot of exports of energy because it makes us so much money. So we're willing to deal with the tedium of federal regulators if it makes us money. But for some reason, we decided, well, we're not going to do it for electrons. We don't want to make billions of dollars a year. We don't want to save billions of dollars a year for consumers. We don't make landowners royalties. And we don't want to improve the reliability grid because we'd rather just build gas plants here. But if all we did was build gas plants here, which is the preferred policy solution in Texas, that will be much more expensive and dirtier. And we sort of cut off our ability to export a lot of clean wind and solar to other states who would like it but can't build it. Like California is running out of room to build stuff. They would love to import solar wind from Texas. So I just think it's silly that we haven't done it. I know there are groups trying to do it with DC ties, different, like Grid United and other people are trying to do projects to do these interconnections. It's a great idea. I'm really amazed we're taking this long to make this much money.Doug LewinMichael, thank you so much for doing this. Anything you wanted to say that you didn't get a chance to, and also where can people find you on social media or the web, your books.Michael WebberYeah, regrettably, I'm very active on Twitter and LinkedIn and just my research group at UT is WebberEnergyGroup.com and I'm also at Energy Impact Partners and there are a lot of ways to find me. My email is pretty easy to find, so send me a note. Really appreciate the conversation with you. You've become really one of the important thought leaders in this space. And despite it all, we end up often at the right answers in Texas, even if it doesn't look like we're going to get there. But we're kind of making our way towards the right answer, which is good news.Doug LewinWe take strange paths, but we sometimes end up in the right place. Michael, thank you so much. Appreciate it.Michael WebberThank you. 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.comFor the second episode of the Energy Capital Podcast, I spoke with Beth Garza the former Independent Market Monitor (IMM) for ERCOT and current Senior Fellow at the R Street Institute.Throughout the episode, Beth did a great job breaking down complex concepts to make them more easy to understand. We talked about the challenges of the changing supply and demand mix, and how the societal trauma Texans experienced during Uri complicates these problems even more.Beth emphasized the need to increase ERCOT’s interconnections to other grids, the legal challenges to doing so, and how increased interconnection could have helped mitigate past outages. We also talked about who will need to help with the integration of demand side resources and how it can be done. Beth also provided listeners with a helpful explanation of real-time co-optimization, an incredibly important ERCOT initiative that’s necessary for a well functioning electric market. Beth and I delved into the dangers of an unwinterized, barely regulated gas system in Texas and how its current set-up undercuts market competition and shortchanges consumers. Of course, given her background as the IMM, we talked about market design and some of the controversial proposals to alter it, including the Performance Credit Mechanism (PCM) and ERCOT Contingency Reserve Service (ECRS). We wrapped up our conversation with a discussion of ways the energy industry needs to shift its approach to communicating with the public.I really enjoyed this discussion and hope you do too. This podcast is for paid subscribers only and thus won’t be listed publicly on podcast apps. For details on how to listen to this podcast in your favorite podcast app, please refer to this information from Substack.If you like the episode, and I think you will, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen.I look forward to your feedback on the episode. Thank you for listening and for being a paid subscriber! Transcript and timestamps are below. TIMESTAMPS1:58 - About Beth 3:32 - The role and responsibilities of the Independent Market Monitor5:57 - Understanding and managing the challenge of a changing supply mix combined with increasing demand13:54 - Real time co-optimization: what it is and why it’s important19:13 - ERCOT and interconnection with other grids24:00 - How increased interconnection could have changed the outcomes during Winter Storm Uri28:45 - Natural gas system36:20 - The role and potential of smaller distributed energy resources as a competitive force in the market42:30 - Do we need a new entity to be a distribution system operator (DSO), or could utilities or ERCOT play that role?46:00 - Texas’s market design and ideas for improvement, including discussion of PCM53:10 - Discussion of the ERCOT Contingency Reserve Service (ECRS) and the IMM’s analysis of its costs59:52 - Conservation calls and shifting public communications strategies