Sooner than you think, electricity is going to be cheap, abundant, and boring

[Music] Greetings, citations everyone. This is Vaults for May 20th, 2026. Sooner than you think, electricity is going to be cheap, abundant, and boring. I'm your host David Roberts. Late last year, up in Minnesota, the Power Utility Excel Energy proposed a new program called Capacity Connect that would have it deploy 200 megawatts of battery storage. Not in the form of large utility-scale installations, but in smaller chunks distributed throughout the grid, placed around commercial and industrial buildings like big box stores. It didn't draw much attention outside the energy world, but my guest today believes that it augers a fundamentally new chapter in the history of the US electricity grid, and for the US economy more broadly. Back in 2024, I talked with Pierre LaFarge, the founder and CEO of Spark Fund, about his vision of a utility-led distributed energy expansion. Now he's back to make an even stronger version of the case. What Minnesota foretells is that utilities are going to start deploying distributed batteries under conventional utility cost of service rules, and those batteries are going to solve all our grid problems. They will help utilities better utilize their currently wildly underutilized grids, which in turn will enable the addition of data center load that will reduce rather than raise electricity prices. Over time, with the addition of these and other batteries to the system, US electricity will become cheap, abundant, and boringly reliable. It is to say the least a provocative case, and I have put it in maximally provocative fashion to get you all going. Lots of people object, strenuously, to the notion of utilities owning distributed energy. Lots of people are skeptical that storage can really in practice substitute for lots more long distance transmission and generation. Lots of folks think raw materials or geopolitics will impose limitations on the number of batteries we can access. Lots of people think all kinds of things, and I'm going to talk with Pierre about all of them today. I have been looking forward to this. With no further ado, Pierre Lafarge, welcome back to Volt. David Roberts, thanks for having me. Great to be here. So, Pierre, I've been thinking about this episode for a while, thinking about how to structure it, and I think in my sort of mildly neurodivergent, adjacent way, I have come up with a structure for this episode that makes sense to me, may or may not make sense to anyone else, but I'm going to lay it out for you, and then we're going to do it. So, we're going to start with just the facts of Minnesota, what's happening in Minnesota, just the structure of it. And then from there, we're going to vault all the way up into the stratosphere and talk about batteries on the grid, what are the benefits of having a crap ton of batteries on the grid during a time of load growth and electrification. And then I want to back out from that, so what are the benefits specifically of distributed batteries? Why might we want those batteries to be distributed throughout distribution networks, rather than clumped up in large utility scale transmission-based facilities? And then thirdly, in so far as we do have some preference for distributed batteries, why is the way Minnesota is doing it, the way to do it as opposed to other alternatives? So, for all of those out there who have objections and complaints about this Minnesota program, we're going to get to them at the end, but I want to sort of work my way backward to it. So, we understand what we're aiming at. Let's start with Minnesota then, just tell us what is the capacity connect program? So, in Minnesota, the largest utility there is Excel Energy, as many of your listeners know. And what capacity connect was a program brought forth by Excel and filed as part of their integrated resource plan, which is basically their plan and how they're going to grow the grid in response to load growth and grid needs. And they put an item in there called capacity connect. It's an idea that SparkFun helped develop and bring to market broadly as a distributed capacity procurement, which is really pretty straightforward. It's just what it sounds like. It's a procurement of a bunch of distributed capacity because in Excel and the commission's view, you know, the grid can benefit from several hundred megawatts of batteries that can charge up when there's plenty of energy on the grid, dispatch when there's peak and constraint, and in doing so, actually help operate the grid more efficiently, sell more electrons over that grid, and make the grid stronger or reliable, more capable of handling intermittent renewables, and also make power cheaper if there's someone to buy it. So, Minnesota capacity connect was a 200 megawatt regulatory filing that was approved in, I think, a historic 50 vote several weeks ago at a commission hearing. That's significant, right? We should pause on that. That's not taken for granted at all. This was a long discussion indeed in contentious. No question and received quite a bit of pushback from in particular the distributed solar industry, but at the end of the day, it was also exciting to see a commission, ultimately evaluate a proposal to make batteries. Again, to use your relatively boring part as the next generation of distribution grid infrastructure, and they said, look, batteries have these properties that the grid really wants. We can use them to benefit every rate payer. So, let Excel invest in them, operate them to the benefit of the grid, and ultimately that's no different than transformers or substations or capacity banks. It's just the next type of distribution grid infrastructure. Right, and this, I think, is a key feature to understand here is that these are not GenCo, right? Excel is a restructured utility. It's only a distribution utility. It doesn't own generation assets. So, this filing treats batteries as distribution infrastructure, the same as if they were building transformers or power lines, right? And Excel is going to own the batteries. This is crucial. So talk about the sort of financial arrangement. Well, one correction Excel is vertically integrated and they source their power through competitive RFPs, right, from the market. They're part of my so, which is the regional operator power market. So they are vertically integrated, but it doesn't change the importance. I think the reason that this decision is historic is regardless of the regulatory structure or market structure of Minnesota. This is a commission saying quite simply that batteries fix so many of the problems on the grid. It helps us utilize it better. It makes it more reliable. It makes it better at handling and delivering intermittent renewable power. So it makes it cleaner. And most importantly, this is a commission saying, look, putting batteries all over the grid, hosting them at customer locations, paying those customers to rent their land, right? There's another really interesting element of capacity connect, which is that instead of a complicated bill savings or some, you know, a customer taking out debt. This is a model that lets customers and community groups all over Minnesota benefit from the wealth of infrastructure build that's used to support a growing grid. To just to clarify that the utility owns these batteries. So it goes to a facility, a big box store and basically says, can we rent your roof? Just treating the roof basically as a piece of land, just as if it went and put a field of batteries in some green field outside of town somewhere, the financial structure is basically the same. You're just renting a piece of land. That's right. The only financial deal that the big box store owner is involved in is he just gets a check every month, a rent check basically. Not involved with the energy doesn't own it doesn't operate it doesn't mess with the batteries. The batteries are owned and operated and maintained by the utility. That's right. And you know, we're renting sides of parking lots, back fields, unused land. It's a few thousand square feet. And you know, we're giving, you know, think about a church. One of our first hosts in Minnesota is going to be a local church and that church is going to get real money every month for 20 years. Ultimately to help them run their community programs and run their operations. So participating in infrastructure wealth, I think, always is best when it's unburdened by asking that customer who, you know, look, this is a church. They do a lot of things well in their community, but they don't have to think about they probably don't have an energy division. Yeah, you know, they're not meant to be taking complicated bets on long term energy arbitrage or regulatory structures or making sure that their price of debt is covered by their revenue, right. So these are people who wake up every day and participate in their community and go to their jobs and really focus on what they do best. And the utility in this case shows up. Rentsland gives them money that improves their core business and then the grid gets stronger and more capable of supporting growth. So when we talk about chunks of batteries, give the audience some sense of scale here. Like how big is a typical utility scale battery field and then sort of where is the line as you go down where you sort of cross into distributed. Quote, unquote distributed. Is there a line? Is there an accepted threshold? Yeah, you know, most utility scale batteries, which are connected to the transmission system and help smooth out the timing of power are called 150 megawatts to 300 megawatts. But even those big utility installations are built out of a lot of the same size one to two megawatt batteries. They're in shipping containers. It's all Legos. Yeah, stacking little Legos in a field and then they inject all at once and they look like a power plant from the perspective of the grid. And utility scale batteries are fantastic. They are absolutely part of why batteries are going to transform the grid. So utility scale batteries are the first to scale and a critical part of what I think you're going to framing in that. So look, these distributed batteries, they are one to three megawatts per location as filed. They are shipping container batteries. They are pre-packaged. They are engineering, templatized, they're standardized. So you get a lot of the critical cost efficiencies that you get from a utility scale battery. You've just broken it into little pieces. And 200 megawatts is a substantial utility scale contribution in aggregate. But it's put exactly where the grid needs it most at the local level. So the utility and Spark Fund are working to determine where on the grid will these batteries provide the best value to RayPairs. And when you incorporate them into the grid and you operate them 100% for the benefit of the grid, that is just the same as a utility investing in a new substation or transformer that ultimately delivers that value to society. And I think that's why this commission decision is so historic. This is the first moment that hundreds of megawatts of distributed batteries are going to be incorporated on the distribution grid as normal grid infrastructure. We believe it's the largest such deployment and largest such approval, right? So it really is a, I think, a big step. In the entire United States, last year in 2025, the country installed just shy of 200 megawatts of these sort of middle-sized commercial industrial battery installations called 191 megawatts in the entire country. So to see one state put a 200 megawatt deployment into play is a huge victory, I think, for what batteries can bring to the grid. Right. Okay, so that's Minnesota. And there are lots of questions about the model and about different models. But I just, for now, we're going to leave that there and we're going to rock it up into the stratosphere and then we'll slowly parachute back down here to Minnesota. So I'm running. Let's jump to the big question because this is why this all matters. Let's talk about our, I think, shared vision of a grid with crap tons of batteries on it. Let's put aside for now the question of where the batteries are located, how big the batteries are. Let's just talk about a grid with cumulatively a crap ton of batteries on it. Why do we want to get there? Well, I think the simplest way to put it is batteries are electron time machines. And why does that matter? Why do you need an electron time machine? We built our grid to peak, which means we built the grid to be big enough to handle the tightest, highest demand 50 to 100 hours of the year. And that wasn't a mistake. Right. A lot of people hear that and they're like, oh, that's, you know, you overbuilt the grid. You built the grid to be the size that gives us the economy and the society. We have the reliable power, the cheap power. So we built the grid to peak. And it's worth noting that America has the cheapest, most reliable power in the world, right. It's easy to forget that in these discussions. This thing works on a delivered basis and a reliability basis and a cost basis. But we built the grid to peak. And by necessity of the technology available, right, big centralized generation transmission distribution, that meant that for most of the hours of the year, you are almost by definition, not using much of the grid you just built. Yes. A familiar problem. Same with cars, same with a lot of big systems. It's kind of something that you don't really notice until you start noticing. Like with cars, you just look around. You're like, oh, right. Like most cars are sitting most of the time. Most roads are unoccupied most of the time. Exactly. And people buy cars so that they can go to the grocery store, but they don't go to the grocery store every hour, right. But it's very important that when you need to get somewhere that you have effective transportation. And it's interesting, and I might cut this because it's a real diversion, but I've been kind of thinking about it. It's interesting. We built electricity to the peak, meaning we have made a social contract saying, you can use as much as you want. And we will provide it. Period full stop, right? We don't do that with like highways or healthcare. With highways, we do restrict capacity. There are going to be times when there's congestion and you can't get to your destination in your preferred amount of time. Like we do restrict supply in almost every other system in our society. So this is a unique and interesting and different kind of system where we've just pledged use as much as you want whenever you want. And we'll build a system big enough to make sure it's there when you want it. That's a remarkable thing. It's a historic triumph. And I think it's core to this discussion. And a populist thing, I think this is what you're getting at, but like an incredibly egalitarian and populist thing. Absolutely. I think it's one of the great triumphs of American infrastructure. There's this element to this where there are several things in our society that we deem to be kind of to put it formally inelastic, which means people deserve to use as much of them as they need and not be limited in that quantity, right? And water is one of those things. You wouldn't have a water system that said, oh, sorry, it's hard to you for you to have drinking water now, or you just can't take showers this time of day. Sorry, let's do pricing to make sure only rich people get the water. That would be terrible, right? We would see that as a real political. Although that is the way it works in many places like using drugs. In any places? In any places. In any place that's-- In any place? Yeah, sir. And this is again, why I count it as a uniquely American infrastructure triumph because we live on a big abundant continent with a lot of resources. And we have, as a society, made some dramatic choices. And you can code them however you want. But they are a egalitarian choices to say, we are going to have enough power, enough water, clean air, right? Like we are going to make investments as a society with a cost to deliver things that help human flourishing and keep people safe, happy, and productive so that we can achieve that national goal. And power was one of the early-- it was before we invested nationally in our water system, right? We did this in the 30s. And even more than the commitment to have enough power for society's needs and growth to build a great nation, we also made an incredible decision of rural electrification that said, you have an obligation to serve. If you build a house or a cabin anywhere in the territory of a U.S. electric utility, that utility is obligated by law chartered in public purpose to deliver power to that cabin. String a line, cut down trees, get up the driveway. And that is just a staggering and now taken for a granted part of this conversation that shapes every aspect. One of the things I always say to people is try to imagine if we had a similar social compact around driving. If you want to drive, you should be able to drive straight to your destination without slowing down whenever you want to go, wherever you want to go. Imagine the scale of highways and roads that we would have to build to accommodate that. If we just told people you can do it whenever you want. And then if you did that, people would immediately start thinking, you know what? Maybe we should figure out ways of persuading people to drive at different times so that we don't have this enormous peak and we don't have to build this elaborate roadway structure. So, segwaying back to electricity, we've promised everyone electricity whenever they want it. And consequently, we have built a system that will provide the peak, as you say, the most anyone could want at any moment within a year. We've built that much infrastructure. And now we have a bunch of infrastructure that's not being utilized. This gets back to the grid utilization discussion. We're utilizing our grid at a rate of about 50 percent. So about 50 percent of all this money and investment we've plowed into this infrastructure is sitting idle because of this social compact. And this is where batteries come in. That's right. And we've deemed electricity to be an inelastic good, a natural monopoly, something that we want as much as we need for the purposes of our society. We've regulated it to make sure that the way in which that's done is balancing all of the real tensions between cost and availability as you described. It's really the job of a utility regulator is to determine in your metaphor how many. highways are enough to let society have the quantity of this good it wants. And maybe one further digression that you can remove if you want is driving is in the category of elastic goods. We think it's okay politically and societally to limit how much people drive. It is not okay to limit how much water they can get out of their faucet or how much electricity they can put into their house. And maybe one final note, this social compact about electricity is like incredibly significant and important, but is only going to get more significant and more important as more and more of the services we use in our day to day life are run on electricity and eventually as our entire economy is run on electricity. Then all of a sudden you can have as much as you want whenever you want it really starts to seem like a much bigger and more consequential pledge and then you really have to start worrying about over building right like if everything is electric the amount of overbuilding you know that you would have to do if you didn't care about peaks would just be insane. So we have to start caring about peaks again this where batteries come in. That's right from our daily lives to national security to critical infrastructure the grid is going to be one of the great foundational inputs of this next chapter of our economy as it was in the last and batteries have this really unique superpower which as I said before their electron time machines which has one simple function which is charge up when there's plenty in those periods of under utilization when the grid is not being stressed you can charge a battery you fill it with electrons and then you can wait and move them in time until the grid cries out for relief and you discharge that battery and when that battery is in the right place it at a physics level relieves the constraint on that grid it meets the peak in a more dynamic and locational valuable way and there you go you can sell more electrons over the same wires. Yeah so let's talk about that because this is something that people break their brains on and I think it's really important to understand with and this is an important caveat with sufficient batteries in place added load can reduce rather than raise prices furthermore and I'll make it more specific and more provocative we could accommodate all these data centers and they could lower rates that is a possible world explain how and why. I think this is why the whole debate which is now so politically hot around electricity is going to end up being pretty boring because cheap batteries and data center demand happening at the same time plus some normal building out of new transmission and generation we're going to need some of that too but you know those two things happening at the same time pretty much solve the grid. The cost of electricity is downstream of a pretty simple formula in most places which is how much did you spend on your wires to get the power to people and in most cases that's 60 70 or even 80 plus percent of all the cost of power right generations actually just a smaller piece. So it's the wires simply put you spend money on the wires and then the price of electricity is how many units of your product can you sell across those wires and if you can invest in a technology like batteries that just fundamentally at a physics level lets you sell more over the grid then the only other thing you need David is someone to buy those electrons which is why data center demand and demand from electric cars and home electrification are such good news because the more we buy over the same wires the cheaper power gets for everyone. Right so the premise here is and I think it's important to surface this additional load can bring down average prices as long as adding the additional load does not require you to add a ton of new infrastructure right if you're adding more load but using the same fixed infrastructure you're spreading the cost out over a wider customer base and thus per unit costs are lower. Exactly right. If you add load and in order to meet that load you have to build a bunch of new wires and transmission and generators then you don't get that effect. So this effect only is in place is if you're adding load without having to add new infrastructure to carry the load. Yeah or at least while you're having to you have to do both. You're adding batteries which are I guess technically the infrastructure but there's so much cheaper than than wires and generators that they're almost different in kind. Yeah and they have the effect of letting you sell more over the grid you have right and I think that ultimately we're going to need new transmission new generation. Yeah yeah I wanted to ask about that so like this effect adding load reduces prices presumes slack capacity on your system right you're adding load to soak up that slack capacity. That's what the batteries allow you to do right whenever you have generation capacity you just put it in the batteries and then absorb it whenever you need it. So new load absorbing slack capacity means that you can add new load and bring down prices right that's correct. But the question then becomes how much of that slack capacity you know what I mean I want to give people a sense of scale how long can you do that before you eventually have squeezed out the slack capacity and are forced to build more generators and more transmission lines because you need fundamentally more capacity. So like how much runway do we have before we need to build new stuff anyway. I think it's a really important question to ask for two reasons and one you know just a level set we have a grid that's about 1200 gigawatts of name plate. There are a lot of different ways to approach this and you know we've done some studies on it, utilized coalition has done some studies on it which sparkments are part of. I'd say that horseshoes and anger nades it's 200 to 400 gigawatts that you could get from increased utilization and you'd end up putting a couple hundred billion dollars of downward pressure on rates. It's significant it's more than the very near term demand from data center growth but it's not as much as the long term growth of electrification which is now becoming fundamental as you said to every aspect of our daily lives our economy or data structure. So this is just to sort of situate things. This gives us like I don't know call it 10 years call it a decade of runway where we can accommodate all this data center rush and lower prices without building a gigantic amount of brand new infrastructure which we can't do in the short term anyway as we know but the larger electrification of the economy. I mean never mind data centers as you say everything's coming on to the electrical grid. We are eventually going to squeeze out that slack capacity and we are eventually going to have to build more more more we are going to have to expand and the reason I'm making this so explicit is that as you probably are following there's a weird kind of very dumb fight happening in the green community between the sort of utilized people and the permitting reform people the people who say hey we need to squeeze out this slack capacity and the people who say hey no we need to build more more more and of course if you get anyone in a room and sit them down and talk to them reasonably everyone's going to agree you need both but I just want to sort of like frame this you acknowledge we need both and you're mostly pushing this as a short to mid term strategy right. That's right and it's not just eventually we'll need to build more it's starting right now we need to build as much transmission and as much new generation from gas to wind to solar to industrial like geothermal I mean we need as much as we can and the reason we need should do that is because exactly as you said it is hard and slow to build large centralized infrastructure projects it takes five seven sometimes ten years or longer for transmission. So utilization is a way to maximize the total energy abundance of the US electric infrastructure today to deliver on near term growth and do that in a way that specifically puts downward pressure on rates and makes power cheaper oh and by the way invest in a bunch of machines like batteries and grid flexibility demand response you know grid enhancing technologies that help the grid be stronger more reliable better able to resist weather and better able to deliver intermittent resources so it's a good thing to do now it's a good thing to do as much of it as we can but we need to be in parallel building as much new American power infrastructure as we can to win the future and I'd also like to point out that the standards by which utilities determine the engineering safety and requirements of the grid actually do matter we do not want the grid to melt I often say to people before you cast shade on the safety requirements of our public infrastructure imagine you're a parent and you have a car parked under a transformer or you have a house in a neighborhood if that transformer melts because those standards were not robust enough and that thing turns into liquid metal and drops on a car or on your neighborhood you hurt people you start fires right what if your kid was in that car think like a parent not an energy nerd and take a breath on this sort of endless optimization of infrastructure and remember. that some of the reasons we build these systems the way we do is because we want to keep people safe and we want a big economy that can grow and invent the future. Energy is for society. It is not just an optimization challenge of a bunch of very bright nerds. And I just want to emphasize this point one more time, which is I know there are people who are concerned that the current focus on affordability among Dems is pushing them toward degrowth and scarcity. Degrowth and scarcity, coded solutions. And so it's important to surface what you're saying here is that you can shovel all the data centers on the grid you want and bring down rates and serve affordability. Right, these are not in tension as long as you have a crap ton of batteries. That's it. Batteries and data center demands solve it. And the tragedy, David, is not only is that politics of degrowth and scarcity toxic and tragic. It's also just wrong in the merits. And you have this opportunity to have more and make things cheaper and we need to take it. It's responsibly managed growth. The thing is like the Democratic Party here it causes me such serous like they are in the right, like they're on the right side of history here if they would just argue for their side. But like you look out at the landscape and everything they're doing is basically everything they're doing in the name of affordability begins by conceding the premise of Republican attacks. Like they're rolling back energy efficiency programs now. I was like, oh, we've been arguing for decades that those things lower rates. And now you're going to concede to Republicans that they're raising consumer prices like that's your savvy affordability play. It just drives me mad. I can't get pulled down that road. So to summarize the point you're making here when you have a crap ton of batteries on your grid. A lot of batteries. It basically solves the affordability problem. It allows you to bring a new load in a way that uses slack capacity. Doesn't require a bunch of more building and reduces per unit costs. Reduces rates for everyone. And this is the future that you're looking toward is a future where the grid is filled with batteries. And consequently it's boring. It just works. It's cheap. You get electricity for pretty cheap. You get as much as you want. It works. It's reliable. And then Hallelujah. You can stop thinking about it and start thinking about other things you want to do with your life. Welcome to the age of boring. Cheap batteries, data center demand, and a few other good investments in the US Electric Grid will bring us back to where we've been for much of the last hundred years, which is the grid as public infrastructure. We don't have to think that much about. And we can go about our lives, build our economies and have our infrastructure and win the future in a way that I think is really compelling. So this is the vision of a grid with a lot of batteries on it. Right. A grid that goes from no storage to a lot of storage. Fundamental change allows accommodation of a new load without raising prices. It allows you to bring prices down. Solves these reliability issues. And with smart inverters I think also you know you get your ancillary services. You get your black start. You get your frequency regulation. You know you have a very safe electronically software controlled staple grid when you have a crap load of batteries. So the second question I want to address then is are batteries batteries? Is any battery on the grid as good as any other battery on the grid or is there any reason to prefer distributed batteries over utility scale batteries? That's a great question. And I'll answer it in two ways. One, I think it's just important to make the point that my view is that we are going to put batteries everywhere and of all sizes. Big ones in fields, medium size ones, which is what Spark Fund does for living in parking lots and in fields near churches and Wal-Mart and stuff like that. Then you're also going to have residential batteries in the home and garages. You're going to have embedded batteries in heating and air conditioning, right? Like what carrier is working on and others? Yeah, let me put an explanation point on that because it's huge and I think a lot of people don't see it coming, which is that ACs are going to start embedding batteries and there are a lot of AC units out there in the world. So once your HVAC has a battery in it, you're stove has a battery in it, you know, your water heater will probably have a battery and you're going to have batteries in every device, in every appliance, in every house, in every garage, in every car, in every field, in every parking lot, whatever. I would put out David, we already have them in every pocket and on every desk. It's not like the battery revolution we're pointing to is like some science fiction future. We're carrying. But let me ask, let me ask you why do that? Why not just put them all in utility scale installations in a big field somewhere and not mess with the rest of it? What performance or social advantage do you get from the distribution of them? So there are two big groups of batteries. One are batteries that are big enough and have specialized telemetry that utilities can see and operate in their control room today as true grid assets and utilities, you actually have an incredible amount of data about power plants, what a power plant's doing every second. Same with utility scale batteries. So batteries that are call it one megawatt and bigger, you can afford to build that telemetry onto them and you can show it and connect it into a utility they can operate it in their normal course today. That is a big part of capacity connect in Minnesota. These are utility controlled assets because they have the data quality and telemetry that allows a utility to integrate them into their control room. And when a utility can see a battery that clearly, it can dispatch it and it can accredit it, give it credit for the capacity it's creating on both the distribution and transmission system. It knows that it's not going to trip any thermal limits or voltage. You can plan around it, you can rely on it because it's yours. Well, if you can't see something, you can't use it in high critical environments like the grid, right? Stuff melts, fires get created. So that accreditation allows utility scale batteries and the distributed capacity kind of missing middle that spark fun I think is helping fill with these distributed capacity procurements. Those batteries I think will go first because they're the easiest to bring into the core of grid operations as they stand today. But the batteries we're putting near buildings have a really particular characteristic. They can be sighted on the distribution grid closer to the infrastructure that needs it most. And the closer the battery is to the load that it's serving and the infrastructure it's using, the more it can directly benefit that customer and that infrastructure. So if you have a residential neighborhood filled with houses that have EVs, electric cars, right, and a bunch of air conditioners that are now kind of Toyota Prius' right they their high ones, right? They can as they spin up and it gets cold in your house it's coming from a battery that charged up while there was plenty. Well, think about that. It's the same metaphor. They charged up when there was plenty when no one was using their electric appliances in that neighborhood. And then when everyone turns them on at once, they all self serve. So the proximity of a battery to load is, you know, in some ways a direct relationship to the value it has to alleviate that load on the grid. And that's actually why air conditioners are a great kind of way to think about this because it's like, okay, put the battery inside the air conditioner and it can directly alleviate the peak stress that that air conditioner puts on the grid. Same with, you know, the capacity connect batteries. You put them in a commercial industrial feeder or a part of the grid that has a bunch of coincident load and needs that stress relief. Well, you put a battery there and when the grid gets crowded and congested, you turn the battery on and alleviate that stress at the level of that distribution node or feeder. Right. So to rephrase this, people talk about the battery stack, the value stack of batteries, the different values they bring, the different benefits they bring. Right. You could say that utility scale battery installation in a field somewhere has certain benefits. But if you break them apart and put them on the distribution grid, you get the same benefits and then more benefits stacked on top. You get performance benefits, resilience benefits on top of the basic battery benefits. That's right. And something I think our industry needs to get more disciplined about doing and actually something we're working on. I think broadly, it's bark fund is mapping out the distinct revenue streams or value streams, right? Not all of them are revenue, right? But value streams that batteries and things like demand response and grid flexibility can provide. And I'd say there's like depending on how you splice it, seven or eight of them. And we need to make a list and just stack up which ones each company and each type of battery thinks they provide. Yeah. I mean, you think that kind of would have been somewhat formalized already. You'd take, and even worse, David, I mean, I think we're really suffering from a bunch of companies whose equipment does like one, two, three or four of those things kind of coming in and just talking about all of them. And then utilities and regulators and legislators get a little confused and actually sometimes feel a little annoyed when they realize they're like, wait, we've been spending a year talking about this and it like doesn't do the thing that I need it to do. And they're like, well, no, of course it doesn't. But if we changed a bunch of variables and how to turn it into software than it could. It could in the future do it and people are just disappointed because they're like, "Oh, I have a very urgent problem." Yeah, you know, I did a pod a couple of weeks ago about an attempt to do something like that for VPPs, you know, sort of like a rating system, like how close to an actual power plant is it. And I think something like that for batteries too, just like of the stackable value streams that batteries could potentially bring, how many are manifest in this installation. So let me ask you then, because Southern Company listeners will be familiar, big utility down in Georgia, kind of notoriously vertically integrated jealous of its territory, unenthused by climate activism, let's say, etc. They have gotten religion on batteries, but they are not distributing them. They are clumping them up in giant utility scale installations, but it sounds like they're getting a lot of the benefits out of them. You know what I mean? And as you mentioned, you now can't sell one of your distributed capacity procurements to Southern because the amount of batteries they've already installed as sort of as we mentioned before kind of reduce that arbitrage are opportunity to the point that you can't squeeze a lot more out with distributed batteries. So talk a little bit about Southern Company their experience and then just tell me like why, you know, if I'm a IOU executive, like a Duke executive or something, you know, and I'm looking at Southern Company and I was like, well, they just are building and owning large scale battery facilities and seem to be getting all the benefits they want out of that. Why should I thoughts about with distribution when I could just do that? Right. And to put some numbers to it, you know, in one of their integrated resource plans, they had something like, I don't know, 50, 60 megawatts of batteries over the next bunch of years coming onto the. That was just a few years ago. Yeah. And then, you know, in this latest update, they signed a bunch of contracts with large load customers and data centers, which will by the way put billions of dollars of downward pressure on rates for everyone who lives in Georgia, right? They are making power cheaper every time they sign a new data center. That's a thing if you just like take one thing away from this podcast, every utility, every state who signs a big data center will end up with cheaper power if that load is managed correctly. If they got a bunch of batteries and they manage the load correctly, which is a substantial if it is. But I think to your point, that's why this example with Southern is so compelling, which is this is a utility who is chartered in the public interest to spend money to invest in the grid to deliver the lowest cost, most reliable way to meet growth. So growth shows up data center asks for power utility planners go to work and it turns out right now based on cost and value, the answer is batteries. And by the way, the reason they're all utility scale is that the grid in the southeast is most constrained by transmission. It is not very constrained by distribution. So they put the batteries, like I said before, closest to the problem they have and the customer they want to serve. And batteries are just as good at charging up when there's under utilization and charging from a gas plant or a coal plant as they are from wind and solar. Battery is just smooth out electricity in time. That's why I call them time machines. And you end up getting more out of the grid you have, dividing the cost of the wires and you sell it to a data center. And everything gets cheaper and better for our kind of age of boring framing. And Southern company is a great example of a utility, a large IOU that basically did this overnight. Well, you forgot to give us the numbers. They had a few, I think it was like 2020. They had like 50 megawatts of batteries in their in their IRP. What is the latest? It's 6,500, 6,800, the thousands, right? 6.8 gigawatts of batteries or so. Yes. And I forget the exact number. Not a small, I mean, that's that bespeaks someone inside that utility, having a revelation of sorts, right? Like you don't go from 50 to 6,000 without somebody inside the it's 100x. I mean, but this is the thing is we spend so much time in this industry, David talking about, oh, how it utility incentives are broken. The thing that was missing is load growth. Like utilities have been sitting there the whole time saying, thank you very much. I'm incentivized to spend money to build infrastructure for America. And what my incentive is is build things society needs that the regulator says is the lowest cost most reliable way to do that. And when these machines get cheap enough and when load growth comes back and creates the need, a utility simply does the math and delivers the outcome. Well, a utility, not all utilities. I guess, I mean, Southern company is the iconic, you know what I mean? Like if people come up with examples of like, who's going to be the last to get on something clean or something progressive or whatever, they cite Southern companies. So the fact that this revelation has happened inside Southern company is quite significant. Should we assume that other utilities are going to be like, well, if Southern, you know what I mean? Like this is not Excel. This is not California. If Southern is doing this, surely it must be the obvious thing to do. Like is this going to unlock a similar 10x in other utilities? Age of boring, David. And, you know, I would say there are other examples like Indiana, Indiana and Michigan AEP just announced that with data centers and a bunch of flexibility and batteries, they're going to lower rates for everyone, right? PG&E said, every time we got a new giga lot of data center load, we're going to drop power prices by one to two percent. And guess what? The ones we've already signed are making power 11% cheaper than it would be. Now, California, you've got a lot of wildfires to pay for, so it may not get actually cheaper, but California's got its own problems. Yes. But the data centers are pushing down prices because of the batteries. I just, we can't say that often enough because it's so bounces against people's instincts. That's right. We're getting the politics and the grid discussion of data centers impact 100% wrong. We're getting it backwards. And every state that does not get data center growth is going to have an aging grid, they have to pay to replace. The cost of the wires are going to rise. They're going to be divided over two little new growth and power will get more expensive. Power prices have been going up mostly because of distribution costs for the last bunch of years. People say that all the time, but they don't then subset what are the inputs into that distribution cost. And a big chunk of it is that some of this stuff was installed in the 60s and 70s and entropy always wins the argument. And you got to replace it. And it's old. It's breaking. The second piece is that we've had a bunch of renewables come on to the grid that are cheap to generate, but require the grid to take the shock of intermittent power when it gets very windy or very sunny. So we've made some investments in things like capacity banks to handle that. And affordable batteries at scale are a new thing. That's right. That is a new category of distribution infrastructure that is now available to utilities. Hey there everybody. Don't worry. I'm not going to tell you about a new mattress or push a credit card on you. This isn't an ad. There are no ads on volts. It is supported entirely by listeners like you. Feeling delger me for a second. I'd like to ask for your support. I started volts because we're all surrounded by depressing news about climate change and misinformation about clean energy. And it's never been more important to share the stories of the real people on the ground doing the real work of transition and all the ingenuity, encourage, and public spirit they are bringing to it. People are hungry to hear these stories, to learn from and find inspiration in them. I've heard from people who change majors or careers after hearing episodes of volts. People using it in classrooms and community groups, even state legislators who have passed bills inspired by specific episodes. Sharing these stories matters. It makes a difference. If you have found value in it and want to help me continue doing it, I hope you will join the community of paid subscribers at volts.wTF. It's about the cost of a cup of coffee a month. If you don't like subscriptions, you can make a one-time contribution. We've a review on Apple or Spotify or just tell a friend about volts. I am grateful for any and all support. If you're already a paid subscriber, thank you. And now back to the show. The cost of a battery since 1999 has gone down by 99.5%. In the last five years, they've come down another 85%. And here we are looking at this future of massive load growth. Forget data centers, again, forget data centers beyond that load growth to the horizon. Transportation, heating and cooling, industry, load growth, load growth, and here we have, in our hands, a tool that renders load growth a mechanism of reducing rates. So here we have load growth and batteries in hand, being abundant energy for cheaper. Amen. Just going to emphasize that one more time. All right, so we've discussed the virtues of having a crap ton of batteries on the grid. and discuss a little bit when and where there are merits in distributing them versus clumping them. Like is your congestion in your problem on your transmission grid or is it on your distribution grids? You basically want to clump the batteries near the problem and in many places the problem is distributed and so you'll clump the batteries in a distributed way. So assuming then we want some distributed batteries, let's talk about the merits of the way it's happening in Minnesota specifically. So, you know, I guess the first thing I'd ask is how committed is Excel to this approach? I know the PUC told Excel, "Hey, you should also study the VPP model that they're doing in Colorado." So it doesn't like this is like one approach still among others. So I guess a lot of questions about this. Maybe the first one is just like compare this to a VPP. Why might this be preferable to a VPP? How do you sort of view this in relation to VPPs? And just the distinction for anybody who's not following it, these batteries that we're talking about in Minnesota are owned and operated purely by the utility purely for grid benefit. They are not operated for the benefit of the customer who is hosting them. I mean, except insofar as, you know, everybody on the grid benefits from grid stability. But they didn't get no specific benefit. Whereas a VPP is taking behind the meter, not in front of the meter, but behind the meter resources, and doing this dance where they're primarily operated for the benefit of the building owner, and then secondarily operated for the benefit of the grid. That's kind of what a VPP is. So I'm just curious your thoughts about how these two relate and the relative merits. In the world we're talking about, I think the best distinction is there are true grid assets, right, that are 100% operated for system benefit, every value dollar that's created for the grid gets socialized to everyone. And then there are assets that are paid for by customers, and therefore the customers have a right to get benefit from them. And so those assets primarily serve the customer value, but then also if they can be used for the grid, then the grid should pay them. And that's the difference between the VPP program in Colorado and the capacity connect program in Minnesota. You know, in both cases, this is Excel bringing a innovative proposal to their regulator and saying, here's a thing we could try to make the grid more flexible, better utilized. It's Excel in Colorado too, somehow I hadn't put together this. Yeah, same, same utility. They're trying different models to learn which one delivers the best benefit. And you know, look, I think that when utilities, like this industry is very quick to point out when utilities don't do things that they like, but when they do things that are innovative and forward leaning, they end up attacking them anyway for it. And Excel was attacked in both states for both of these proposals. And then they were attacked comparing the two to each other. And it just it's so bad and everything is broken and oh, you know, people say monopoly and forget to say public purpose regulated monopoly, right? Are utilities perfect? No, but the regulated compact in which they are allowed to invest private capital for public purpose to grow a grid that supports our economy is a pretty good system that really does matter. And this is a system operator coming to their regulator in Minnesota's case and saying, we now believe that batteries have the price dynamics and technical capabilities at this scale put in these places to be the lowest cost most reliable way. For us to handle, look, part of our grid's growth. I mean, 200 megawatts is big for distributed batteries, David, but it's tiny compared to the gigawatts and gigawatts. Sure. I mean, that's a, that's a fifth of one giant data center. Just tiny. So we have to remember the scale of the grid. This is a landscape scale machine. And I think the really the advantage of the capacity connect program is that it's asking the question. And hopefully if we in Excel do our job, it'll prove the point that batteries are just the next boring generation of distribution grid infrastructure. They're no different than substations, transformers, capacity banks. Right. They just have this new superpower, which is that they can move electrons through space and time. And you can put them next to the problem and deliver the value. But then I would say the central objection that people have had to the capacity connect program is that it puts utilities in charge. Utilities own and have a monopoly over these battery installations. And of course, a lot of people which excludes this sort of private model that currently rules where private providers go house to house, sell these things to homeowners, etc. And so there's a real question about democracy here about energy democracy, which I would like you to address. I know because we've known each other for a bit, I know you to be committed to local community and local democracies specifically. I know you value local democracy and a lot of people are coming to this with energy democracy with local energy democracy in their minds saying why shouldn't people own these things. Why shouldn't communities own these things? Why should we let utilities have a monopoly over these things? So just how do you think about the energy democracy question? Absolutely. And no, it's a funny part of my life. I spend much of my personal and political time advocating for locally led decentralization solutions and the abundance movement. And then you know, in energy, I'm advocating for decentralized batteries and people are like, oh, like this guy likes monopolies. You know, look, I think there's a difference between civic infrastructure for public purpose and just a generic monopoly. But look, I think that at the end of the day, the reality of of a grid is that it is public infrastructure in Minnesota. And this was very specific to the decision that the commission came down with, David, right? And this five zero vote and they put this intentionally and with great legal specificity. I encourage those among your listeners who are truly, truly the most wonderful nerds to go and look at the transcript, look at the hearing, right? This is public record. It's a civic process. And the commission said very particularly, legally speaking, the grid is owned by the ratepayers. Grid operators just take private money, Wall Street's money, they build the grid and then are given a guaranteed or partially guaranteed return so that everyone can use it and they use it by paying for power. And so the legal status of the grid is its own by the ratepayers and when a battery is installed on it, the utility compact says if it's used entirely for the benefit of the grid, if it's owned and operated only for that purpose, then the utility should own it because it's also hard to own things that you can't control. And ultimately, it's just a normal part of the public infrastructure that drives the grid forward. I really do think the word infrastructure or the concept of infrastructure is key here because we have been the conventional model to date is basically to treat distributed energy resources as a consumer item as a consumer market item, right? Like we sell to the consumers who want them. That is not how we treat infrastructure as financially. Into your point, I very much support and I think Excel supports and has a range of programs that are very specific to allow third party ownership. There's a program called battery connect where third parties can bring in owned batteries and get paid for the value they give to the grid. But remember, all those batteries are splitting their value between the customer and the grid. This program says these batteries are just 100% dedicated to the grid because now batteries are so darn valuable to the grid in the way that we've been talking about now on this episode. So the transition you're seeing is when batteries were more expensive and there was no load growth, customers had to pay into them to have batteries exist at all. And the grid could pay for a portion of the value based on its need. And you know, that should never stop. This is America. People should be allowed to own things. They should be allowed to invest in things. They should be allowed to participate with their money and just to pause here in Minnesota. Private distributed energy resource developers still exist can still sell their wares to customers. The PC, the utility is not preventing them from doing anything in particular. No, there are many existing programs that explicitly allow and not only allow, but are only for a third party ownership and participation. There's a huge community solar industry in law in Minnesota, right, almost a gigawatt of third party owned community solar. So I think frankly, one of the position points that I found surprising and somewhat disingenuous was that this one program, which is designed to test and validate the idea that batteries can become a core part of normal grid operating infrastructure. Right, the boring stuff on the grid was attacked on that ground by a group of advocates who I think have gotten a little bit lost in whether or not the grid exists to let them invest in and privately profit from the ownership of their assets or whether it's public infrastructure that under certain conditions of mutual value and coincident need those private owners can and should be allowed to apply to, you know, own assets and take some value if they can provide some value. I mean, I'm all for third party ownership and I think the trade of value is often good for the grid and good for the private owner, but it's not the point of the grid. Right. And another objection is if we allow private actors to make these investments, they then private investors take on the risk. And if the, you know, the domain. and forecast or the economics business model, whatever it is doesn't work out. It's private investors who lose the money. In this model, the utility takes the risks, but it's ratepayers who pay if things go poorly. This is another common criticism. How do you think about that? - Well, I think it comes down to value and risk, right? When private investors build assets and apply to participate in the grid, they take risk and they also take their opportunity for profit and upside, which is totally appropriate. And then the upside they create, they keep. The grid is operated by a regulated system, right? A civic compact that finds other private owners, right? The other weird thing about this is utilities are also private owners, right? It's always strange when one side says to the other, you have a capital incentive to deploy more money or have a shareholder incentive to give returns to your shareholder. It's like, do all companies not have shareholders and an incentive to grow their business? I've never quite understood why that's a ground for debate, but one private owner, the utility, is the regulated grid operator who gets a fixed return and then every value dollar, every dollar of value created above that return is socialized to the benefit of all ratepayers because again, legally, the ratepayers own the grid that the operator is chartered to deliver. And so that distinction, I think, is neither one is better or worse. Both should be allowed, both should be celebrated. Think about the beginning of our conversation when we were talking about how one of the foundational inputs into the future of America's success as a nation is from our daily lives to our national defense to have more electric power for more purposes. So we want all of it. This is like the grid growth version of all of the above. Like, let's go. Let's get this stuff out there. What about the idea if you're a private actor, you're somewhat disciplined by this risk of loss? Whereas if you have a guaranteed high return on investment, like the utilities do, the criticism goes, you're not going to get spending discipline. You're going to spend ratepayers' money profligately and without proper analysis because you're not disciplined the way the private market is. Do you think that high guaranteed return on investment removes discipline? I mean, do you buy that critique? Well, I think the thing it misses is that the regulator exists. And something that sort of bums me out about this is there's this whole group of civic servants and a bunch of staff who spend their whole day with legal power and charter from the state, making sure that the way in which these procurements are built and delivered meets a reasonable standard of prune C. Yeah, but we know that PUCs are of varying quality, varying levels of knowledge, varying levels of friendliness to industry. These are longstanding critiques of the regulators too. They are. And look, I think one of my other political beliefs is the next chapter of American politics needs to fall back in love with civic engagement and civic compacts. We need to pay regulators more. We need to have more staff. Administrative capacity. I wish I had one of those sound effect machines so that I could place some sort of-- [PLAYING] I'm not just pro-utility. I'm pro-utility regulated compact. And I think that that system-- you can debate the history and its individual decisions. But the point I actually wanted to make, which is more specific to your challenge of does a regulated system incorporate the dynamics of competitiveness and innovation. And the answer is yes, not because the regulator is perfect. Or all knowing or all powerful. But because the regulator can simply require, as it did in this procurement, that the way in which these assets are procured includes competition. Spark Fund's job in this capacity connect program is to build and manage on behalf of Excel a local competitive ecosystem of vendors, civil mechanical contractors, including union labor and local contractors. And we bid out-- and this is right in the filing. This is public information. It was in the filing every time. 80% of the value of this procurement of distributed batteries will be bid competitively in Minnesota. 80% of the value of this procurement will be bid competitively to local businesses in Minnesota. And the reason for that is that regulators and utilities build in market-based competition into these procurements. They do it for utility-scale power with all source RFPs when they procure wind and solar and gas. So you end up with constant rolling market-based competitive price discovery when a utility is incorporating distributed batteries onto its grid for public purpose. And I kind of think if you're in the DER business, I mean, they're probably going to yell at me for saying this. But you still get to bid on the job. But what you don't get to do is go out and find and sign up customers and structure financial deals with them. But that just sounds to me like the worst part of the job, the worst and the hardest and least rewarding part of the job. It kind of seems like if you're a DER person and you just get to skip straight to the part where you're doing the job, it kind of seems better. Yeah, look, I think a lot of the opposition in Minnesota, frankly, was downstream of that protecting a finance business model that requires that to have that part of your business model. And this is, again, alongside other programs in Minnesota that allow for exactly that. But look, the exciting part of capacity connect, it is a major utility doing a very forward-looking innovative filing that says we're going to make these machines part of the normal course of the distribution operations plan of our utility. And we're going to do that because we think everything we said in the first half of this episode is true, right? They'll charge up when there's plenty. They'll dispatch, right? They agree that batteries are going to be valuable. But if this model utility-owned distributed batteries takes off works, they like it, they spread it, they expand it, other utilities, grab onto it, it will have the effect of squeezing out business models that rely on third parties in between the utility and the customer. That includes VPP aggregators. It includes solar finance people like Sunrun. And I think it includes Spark Fund. Do you not think that all, like, to the extent this model catches on and becomes standardized and becomes boring? That all these third-party business models, all these middleman business models are going to get squeezed out over time, maybe including your own. Maybe when things go to scale and become normal course in big public systems, they tend to commodify and the value chain that deliver them changes. I think that's just true in economic history. So part of what we're debating here is not really about utilities or this filing or that filing. It's just about batteries and distributed energy having a moment where they're going to become a fundamental pillar of how we grow and manage our grid because our nation needs it. So yes, will there be change? Absolutely. And I think in particular, consumer finance-based models that initially were about helping customers buy these machines versus the public grid are probably more at risk. Well, let's not rush past that. Sunrun is very large and that's its core business model. So I know they were among the entities that opposed this in Minnesota. And I will assume they're going to fight you all the way down the line on this. Are they not? They will. And they spent more money than anyone fighting this in Minnesota. We were a little bit surprised in some ways. But also when a grid has more batteries, it also is better at handling and delivering solar energy. But look, people defend their business. But they're pivoting to batteries. I mean, they've said it a couple of times now. They and they're pivoting to batteries and they're doing this finance model. This finance model of selling batteries is now their core thing. And this model that Excel has adopted, if it became the default. Would shrink or eliminate that business model? I think that's right. And I think that's why they oppose it. It is a competition of business models, one in private financing and one in public infrastructure. And I also like to come back to VPPs. You made an important point. And then I also don't want to dodge the question about whether SparkFun will be necessary to the future of this. Well, talk about VPPs first. I'm curious what role you see them playing in this battery-filled future. Look, much more durable because I think most VPPs, as you I think, are tickulately defined it, which is largely behind the meter resources that in one moment serve customer value in another serve the grid. I think that that is really broadly speaking demand response. And I do not mean that dismissively. I think demand response assets are critical parts of relieving pressure on the grid and aggregate. And I think demand response is absolutely. One of, we've been talking about batteries today with a lot of focus. But I think that batteries are on a short list of grid flexibility creating assets, including demand response and grid enhancing technologies that really drive the future that we're talking about. I have a pod actually running. I think it'll be out by the time people hear this. We're in someone argues that what we ought to be doing is making price responsive appliances. Everything electric, basically. Everything, all these embedded batteries, all these electric devices you're talking about ought to just be price responsive. There ought to be a competitive retail price that is updated every five minutes and is location like time and location, depending on the situation. and broadcast such that every device can receive and know the retail price at every moment. And then the devices respond to the price on their own. And the benefit of this is that then all the value of the flexibility is captured automatically by the homeowner, by the owner of the devices rather than split 50/50 with a VPP, which is just kind of a middleman doing the same function in a slightly cruder way. It's interesting that there are other ways that you might eliminate the VPP model. And if then all the devices are immediately price responsive, then you don't need a VPP in the middle, then they sort of become much more directly grid assets, I think. Yeah, and what you're talking about there is really how much does an aggregator get paid as a share of revenue, which I think goes back, like that sounds like one plausible way that an aggregator could get paid less as the middleman. I think that the more important question though is, will demand response be a service the grid wants, and will it reach into customer devices to do that, and will there be benefits for the customer and the owner and the grid? I think the answer is yes. And nothing about deploying a bunch of big batteries changes that they're just both filling two different parts. Well, but why not though, like if you've got enough of these one to five megawatt chunks scattered around your distribution grid, you get your stability, you get your boringness. Why then do you need to go on and tackle the complexity of trying to coordinate consumer side devices? Is there not some possibility that this could prove so cheap and easy for utilities and so effective that it really sort of just like slightly moots the need for consumer side coordination? I think there is. And the question is how much does it moot it? And is it 100% gone? I mean, remember we talked about the value of batteries at every scale and every size being how close you can put them to the problem. And batteries in the home and flexibility devices in the home are closer to and easier to put in wait for it homes. Yes, but I guess the question is, is the sort of distribution level close enough? Yeah, it may be. And the reason, you know, someone very wise in this industry once said to me, you know, the reason the centralized planned grid has lasted for a hundred years is that many of these questions have been posed. This happened with post war industrialization. It happened with HVAC and air conditioning. And it turns out that often the lowest cost most reliable way to deliver these solutions is through more centralized assets than not. And the thing about is batteries that are slightly less centralized than 200 megawatts in a field, but are still shipping containers filled with batteries that are far beyond the scale of the home. You know, I think that we have to remember that the grid again is not built for individual value to come off of it. And I would say in the world in which every homeowner can perfectly participate in these dynamic real time pricing markets. And I would say that is not the only thing that I would say about who the citizens are who are likely to buy those smart enabled devices and get that value, right? They're going to be richer. They're going to be, you know, have more time after work to think about that. And one of the reasons we built the grid going back to our very first history point on this conversation, David, is that there is in a gallitarian sort of American infrastructure compact vibe to the US electric grid, which is that you want to plan things to be lowest cost most reliable so that you can share the benefits with everyone. Whether or not they have the time or money to think about it or not, right? I'm not against wealthy educated people participating in the grid. It's by the way how we've invented some of these devices and scaled them. That is a critical part of an innovation economy. It should never be disallowed or banned or limited. I don't want a ban third party ownership at all, but it is not the point of the grid. We did not build public infrastructure so that enthusiasts can take rents from it. Yeah, and this actually brings me back to another point I wanted to make about the energy democracy thing. I understand and am compelled by the merits of local ownership of energy assets. And I'm compelled by them in terms of energy democracy and in terms of local empowerment. But I think if you're measuring that against the benefits of the same community having reliable cheap ubiquitous electricity, even on the metric of local empowerment, the ladder wins. Putting cheap abundant electricity in people's hands is the most effective economic development tool on the planet. So like every bit that you make a community's electricity cheaper and more ubiquitous and more boring and more cheap, that is economic development. That is local empowerment. That's not an alternative. It's human flourishing. I love that, David. I really do. I mean, that's a beautiful way to say that. And I think it needs to be said more. And it's in this really important and under discussed category in our tribe of nerds, which is what is energy for? What is infrastructure for? And I think you just articulated exactly what it's for. It is for flourishing. So let me ask you about this. Do you not like one of the things, you know, I had Lorenzo Christoff on the pod, love him. One of the, you know, he's a big fan of local democracy, local action, local community, local resilience, self-sufficiency, all that kind of stuff in electricity too. One of the cases he makes, which I've always found pretty compelling, is that there are benefits to local communities being able to plan their power alongside planning local transportation policy and local building policy and local economic development policy. Like, power should be of a piece with that and should be integrated in that. And there's something artificial about all that planning being up at the utility level while all the other planning is happening at the local level. So do you not see, are you not at all moved by the idea that local community ownership of local energy assets carries some benefits? First of all, Lorenzo is brilliant and he and I've had some wonderful conversations about this. And I think we share a real passion for localism broadly as a basic idea of subsidiary, which is push the planning and the decision making down to the lowest competent level that also can efficiently deliver the outcome. And, you know, his point, I think one, I'd break between two things, where it's planned and where it's owned, which are two different but related questions. Ownership is important but really about who receives the rents versus the risk and the regulated compact was designed to smooth or socialize both the risk and the rents to all participants at all scales of planning. And then the next question is when you go smaller with infrastructure, do you have the equivalent vehicles of debt, financing and capital that allow you to do that at that level of aggregation efficiently? Right. And let me just put a finer point on that, you know, one of the things Lorenzo has envisioned and I think they have them in the UK now is what it's called DSOs basically like the distribution grid equivalent of the transmission system operators. The TSOs at the transmission level, basically a smaller entity devoted particularly to that community. So you get closer touch with the community, you get better knowledge of the community, you get perhaps greater investment in the community. But as you I think are getting at here, you might lose some of the financing benefits of size and scale. And if you don't, then I think there's a lot to like about that model and I think Lorenzo has an incredible again I really actually like and admire how he talks about this stuff. I think that the question really is that, you know, if you zoom back, the utility regulatory compact was designed to pull off a magic trick, which is take wall streets money, private money, give them like a three and a half percent net dividend every year, right? So every hundred bucks they put in they get three or four bucks and let a private operator who has some profit incentive build the grid, which is the foundation for our economy and human flourishing as we've just discussed. And then submit to a civically accountable regulator to control every one of its decisions actions and profits. And then you get to wall streets money, building public infrastructure and you don't by the way, this is that's easy to say the reason that's important David is that you don't have to choose in a public budget, a general fund or a town's budget between building the next real hospital or paying teachers or repaving roads and building a substation or a new transmission line. So you got the wall street money. Yeah, we did it. We got private money for public purpose regulated as best as can be done. Is that system perfect? No, does that system have flaws and imbalance incentives? Yes. Can you name me a landscape scale public regulated compact and institution that doesn't, but I'll tell you what's amazing about the utility compact is that it delivers its outcome pretty much a hundred percent of the time, right? And that's where the grid is only off 80 or 100 minutes a year and in most of our state's economies at the level of aggregation of debt and planning. The power is pretty cheap. The capital is super efficient. And what comes out the other side of that is that in a lot of states, the percentage of the economy that goes to pay for the infrastructure that lets us have as much power as we want anywhere we want it all the time is three or four percent of the total state's economy. And to kind of return to a point I made earlier, you could compare that three or four percent to the market value of the assets it has purchased and is deploying, and I think that will look pretty favorable. - Oh, incredibly. - But again, the market value of the assets is a small sliver of the value you get from having ubiquitous, reliable, unlimited, cheap power. Like the second and third order benefits of that are vast, vast, then they're not captured by the value of the transformers. - Right, and not just vast, they're the rest of the economy. I think it's easier to just assume, I'm sure you could do some dumb research paper, which is like what percent of GDP is not enabled by electricity, right? Like who cares? - And that's growing and growing and growing, as we said. - Yeah, all of it and more, uncaptured GDP, and that's exactly right. That is what energy is for, and the compact we have delivers it with private capital, and it powers a whole economy with most people not having to think about it. - Could a CCA do this in California? Or wherever there are CCAs, I know there are several other states where they are. - In terms of distributed batteries? - Yeah, yeah, just to implement and excel style programs. - Absolutely, we're having conversations with grid operators across municipal utilities, co-ops. - Yeah, munis could do it, co-ops could do it. And then I guess if a muni was doing it, you kind of moot some of the energy democracy complaints, I think at least, 'cause then it really is, like still locally owned, right? - Yeah. - Still local. - Batteries are gonna win the future, and we're gonna put them everywhere because they are time machines for electrons, and it's what the grid needs. And so I think what we saw in Minnesota is a simple case of a threatened business model, paying money to advocate to protect its business model in a moment of real transition, when these assets that used to be sort of, in their protected market camp, start to become a core part of grid infrastructure and it freaked them out. But that's, you know. - Well, that's, you could also flip that around. I mean, there are people have objections to this that are not just generic, not just business model exceptions, but like excel specifically. Like people have reasons specifically not to trust Excel. There are people who say Excel has had this distribution resources for a long time, they don't use them for public benefit. There have been a lot of price events where they could have used them for public benefit and they didn't. They've been dragging their feet on distributed energy resources. They got fined by the PUC for dragging their feet on distributed energy resources. In other words, I think there are reasons to distrust the utility and to believe why should we believe that this, you know, when they have betrayed the public trust in the past, why should we believe that this program will genuinely be run for public benefit? - Definitely true. We're in an age of distrust of institutions and the public institution of utilities and the regulators is no exception. And I think the only solution to that is to actually deliver the value and hope that the future we're describing, the age of boring comes true, which is that, you know, cheap batteries and data center demand happening at the same time, make power cheaper, the grid more reliable, and we can go on our merry way and work on other things. Okay, but that's not what you answer to the question. Like, I hope they do this, right? I mean, I guess, but you can imagine why people who've been burned by Excel or never gonna been fighting Excel for years and years or not do not just say, like, well, let's see what happens, do not find that particularly adequate. And they also say that this first tranche of these distributed batteries are not actually going to churches and hospitals and civic facilities. They're not actually being assessed and chosen based on community resilience benefits, at least yet, right now, they're just being placed purely for grid benefit. So again, like why shouldn't locals, why shouldn't they be suspicious and why shouldn't they look at what's happening and say it looks like Excel is just making the macro grid better and is not doing what we would do with distributed energy, which is specifically local benefits. - Well, something I think it's important to know about this one filing is it did actually and does have a robust energy justice portion. So there is targeting of those resources we categorize by EJ zones and that's why we got a lot of support from that community and from a bunch of local groups advocating, including advocates like fresh energy and CE and others that really, I think, engaged constructively in making sure we got that portion of the filing right. They were part of the hearing. They spoke at length. They offered decision options that were accepted by the commission. So they got to directly modify. So that literally just to put a point on this, the social justice and the energy justice community was at the table helping to write those requirements to their standard. And that's a commitment that Excel has, that Spark Fund has, and that the commission required. So I think that, you know, again, maybe we're going around a little bit in circles here, but like the fact that that has been such a common talking point about this and it's right in the order and a whole section is a bummer. (laughing) And it's, I don't know how else to say it, right? Like politics is a dirty game. And there's some real misinformation that's come out around this. And it's been a surprising journey, but I think it landed in the right place. And I think, frankly, the commission and its members, right? You know, it was genuinely impressive to watch, "Chair Seabind, operate a civic compact under that type of duress and really ask questions and get stuff on the record and challenge Excel and Spark Fund and advocates to explain and defend their positions and to provide evidence. And, you know, no civic process is perfect, but Minnesota is, you know, Minneapolis is like, Norway on the prairie, right? That civic compact is a strong and robust and, you know, chock full of civic nerds, as I've ever seen. (laughing) - Yes, we've all had occasion to celebrate Minnesota recently. You have said, I think, maybe being slightly, deliberately provocative, but you have said to me, and I think maybe in writing, that you think it is possible that the vertically integrated, the old-fashioned vertically integrated utilities might move faster on this and reach that exalted, cheap, abundant, and boring plateau before restructured areas. Why do you think that? - Well, I think that there is a U-curve of utility operator and market success. And at one end, actually, there's kind of things that are closer to pure markets, like Irkot and Texas, and they work really well. Irkot added a whole New York worth of electric load in just the last four years. - It's interesting. Right now, base power is down there in the Irkot operating on the retail energy model, right? There are retail energy provider, but they're actually going now to vertically integrated utilities, knocking on the door, saying, "Hey, look, we figured out how to get batteries on the grid faster than any other model wouldn't you like some of this, do you?" - That's right. And I think very interesting to see that. - What makes base such an interesting company is that they're not wedded to one business model. They're a put batteries everywhere, company. - Put batteries everywhere. - And I think that makes them a really durable part of this story, and they should bring it to other markets, right? They're like a residential version of what we're doing in the larger batteries. And I think it's great. The answer to your question, though, is that IOUs, right, if you're not going to have a full connect and manage market, that also, and this is really critical, Texas is superpowers has very, very permissive local permitting. You can build things really fast. - Yeah. - And I almost, like, there's so many details about this, David, that you know better than I do, but it's like, when you talk about PGM design, all this stuff, if you have bad local permitting that makes it hard to build stuff, it almost doesn't matter what your ISO rules are. You just can't build big power plants. Or even small ones, or even batteries. And so if you are a, like, at the bottom of the U-curve, is a restructured market that has like a weird mix of esoteric rules that make it hard to participate in your market and allow rent seeking, you know, auctions that guarantee capacity, because not enough people can participate, and no one can build things anyway. And are also still sort of highly regulated, and have lots of rules and lots of laws from states that want a bunch of things. Like, that is the thing. - Yeah, kind of a worst of both worlds. - Yeah, that's the worst of both worlds. The heart of the U-curve, the thicket of PGM's discontent, (laughing) which I should make T-shirts that say. But the, you'd really know who the nerds in the airport are if you walked through a terminal. But IOUs are not perfect, but they have this basic advantage in moments of great infrastructure need and build is that they can organize capital and conduct their planning at both the level of generation, transmission, and distribution as one integrated system. And I would point out that a lot of the advocacy that you and I and many people in our tribe have been on about for years is ultimately that thinking of the grid as a system, that seeing distributed assets part in that system will ultimately be a key part of growing the grid. And I think what we're seeing in capacity connect and others, it's just now large, vertically integrated utilities are doing the math and they're agreeing. And that is not because this was the absolute first moment that could have done that, but it is pretty recent that these batteries got cheaper, right? So I'm not going to pretend that big utilities aren't slow. And for some good reasons, in terms of safety, reliability, critical function, also some reasons of bureaucratic inertia and scale and slow regulated proceedings, right? Good and bad. But it is not very many years ago that batteries were not the cheapest. way to do this. I would argue that they're just barely becoming the cheap. No, I think we've crossed that line permanently, irrevocably, right? I think it's sort of the thesis of this pod. Is it like welcome to the age of boring because that has happened? But it only, you know, as the dude said, a new shit has come to light. Yes, indeed. Are you, this is totally orthodox, I know, to our whole point here, but I just want to get you on record. Are you among those people who predict a return to vertical integration in the US in part or in whole? Yes. Ah, what time frame? Let's get a date here. Ish, a date range. I think it's important to clarify what vertical integration is today, right? Most vertically integrated utilities procure generation competitively through big all-source RFPs from private owners and IPPs, right? So, you know, this is not your grandfather's vertical integration where a utility hires a crew and builds a power plant directly and operates it with, you know, its own union and its own pension, right? This is still, like I said, tucking market price discovery competitive delivered advantage, innovative designs and scaled private capital into a relationship with a public purpose infrastructure compact. So I think there's a little bit of a distinction without a difference, but do I think that vertical integration is important to allow for the proper planning of society's needs over time to deliver infrastructure that is, as we've discussed, the critical input into a nation's success into human flourishing, again, from our daily lives to our national defense? Yes, I think there are advantages that that type of civic compact has in a planning level that allow us to go faster, go further and make the sort of leap you saw Southern company make with those batteries. When those conditions merit the rapid scaled adoption of gigawatts and gigawatts of effective utility scale batteries is a good example of how to meet the moment when the nation needs to build data center infrastructure to fundamentally power the next chapter of the American economy. So I don't think that vertical integration has to be universal, I think ISOs and interoperable markets that expand the pools, I think IPPs will be a durable and critical part of competitively procuring supply and operating power that private capital is the whole point of the utility compact, right? It's Wall Street's money for public purpose and there is no market in the United States today where a political and societal judgment does not set the rules for how electric power infrastructure forms the foundation of that state's economy. Not Texas or Cot has a critical regulatory role, PJM has a critical regulatory and real making role every state in PJM has commissions. We have not thrown societal caution to the wind and just said let markets eat the world boomer bust on electric power because no one would suggest it. No one has ever said that one would suggest it. No one would suggest it. In any region, in any market, anywhere in the world. No. I love talking about this for a bunch of reasons but one of them is there are so many things new possibilities new opportunities around the world of clean energy where I find myself kind of on the edge of my seat, quite nuckling it thinking, God we've got to do this right. It would be so easy to do this wrong and screw it up generationally. But when it comes to this batteries, it's like if you put a battery on the grid, it helps. It almost doesn't matter who puts it or where or why or how they pay for it. It's almost impossible to do this wrong. Just put the batteries on the F and grid and they're going to improve the grid. We don't have to do this exactly right. We just need to do it at scale. We just need to do it big. We don't have to be precise about it. Every bit of battery helps. You almost can't screw it up. The age of boring. Okay. So final question then is like right now, I think probably conventional wisdom in our world is that we are currently facing a bit of a gauntlet. A bunch of new demand is showing up on the grid. We've got these old sleepy institutions, these old sleepy not fit for purpose, social and financial and political and regulatory arrangements. We've got 20 years of no growth that has kind of lolled everybody into hypnosis. We face this gauntlet where prices are going to go up and everything is going to be kind of shaky and not really work. Then like whatever, 20, 30, 40, 50 years, once we've made it through the gauntlet and we're able to start building the big transmission lines, we're able to build whatever big, geothermal plants, then we're going to recover and bring prices back down. I think you disagree. I think you think and tell me if I'm right. I want to get a date. Another date range from you. I think you think that batteries are going to solve these problems sooner than people think they will and that the grid will get boring and reliable and abundant sooner than people think it will. And I guess I would like to ask by way of wrapping this up. How soon? I think that the best way to answer that question is you're already seeing data center announcements particularly in IOU Territory but not exclusively, directly result in rate cases where the divided cost of energy goes down because you divided the fixed costs of the wires by more sales and power gets deeper. For example, give us a concrete example. PG&E in California, one of the hardest places to operate a grid anywhere with wildfires and stuff, said that for every gigawatted data center load, you get one or two percent cheaper power for everyone in their territory. And that to date, 11% cheaper rates because of the data centers that have come. Again, maybe not visible to the people in California because wildfire costs are simultaneously pushing rates up. Right. Indiana, Michigan, AEP has actually made power cheaper. Southern company, I believe, has actually made power cheaper. I believe about $100 a year per rate pair was their public filing number. Maybe it was 80 or something. But that's billions of dollars of cheaper power. And all of that was related to exactly this effect of managing the growth of large load customers to public benefit. And it's also important to say that data centers are sort of the hero of this story. It doesn't matter how much you invest in batteries or anything else. If you can't sell the extra power, if you don't have electrification and load growth and data centers, you're just spending money and you can utilize the grid better but no one's going to buy the power so it doesn't matter. But what about people who would say, "AI is terrible and we should be electrifying transport faster." Like we should be getting that boost of demand from somewhere else and in some sense by data centers eating up all the available new capacity we're delaying for their electrification. You don't buy that at all. No, I'll go once more to the dude which is that's like your opinion, man, right? That's way outside the scope. That's way outside the normative scope. And frankly, something I don't love. There's a lot of things I think that are really wonderful about the community of climate and energy nerds. They were both lucky enough to be a part of, right? These are system oriented, normatively engaged, really philosophically interesting people, right? And we care. And we've organized our careers around that. That's fantastic. And it's a great thing to be a part of. But one of our faults I think is sometimes we like breach the walls of the energy discussion and we imagine the grid is like this portal to just like unlimited social control and power and we're like, oh, let's use energy policy to determine, you know, should we have more electric cars or more data? It's like, that's not a job for this. Just take a breath, right? This is me back to my genuine, you know, localist decentralized, slightly crumpy. You know, it's like make less rules and trust that people can figure stuff out. And I think there's a real chance for an abundant America. And you think this phenomenon whereby data centers are going to create the new load that takes the batteries, new capacity and thereby reduces rates, all of that is going to happen automatically if they get on the grid. In other words, you don't need the extra step that a lot of people are talking about of basically making them pay extra, some extra fee to get on the grid, making them pay for some specific capacity. I mean, maybe you still think that's a good idea, but the effect you're talking about doesn't depend on that. Yes, that's right. And I think that it's very important, right? Brian Janis, it cleverly said this beautifully in a LinkedIn post, right, around the announcement of, you know, all data centers will pay their fairway, which is great. Look, it's good politics. It's good to make sure that we're saying that out loud. It is proper regulation and political governance to say out loud in one of the largest capital events in human history, by the way, that the participants and beneficiaries of that investment must pay into a public system appropriately. I think that is good and true. But the basic bond right principles, it took us this long to say bond right, by the way, is inherent to utility ratemaking is that all participants should pay their fair share. Is that always perfectly arbitrary? No, it's also complicated to get right and how you judge which cost was caused by what type of system growth, and then there's a storm or a fire, and then there's caught. But what about the idea? I think a lot of people have that like we need a bunch of spending on the grid, right? We have a bunch of needs right now. The public's grumpy power prices are high. They don't want to cough up for it. Along come the these wildly wealthy companies that desperately need to hook up quickly. Why not extract more than their fair share? Like they've got money coming out their ears. We need money. Why not extract a little out of them in the process of letting them hook up? Well, because it's no more fair to them than if they didn't pay their fair share, right? Fair share means cover the costs. And if you manage growth well with batteries and grid flexibility and other stuff, you'll actually spread the benefit of their participation to everyone. Just the fact that they're willing to buy gigawatts and gigawatts of new power over public infrastructure and participate in the grid as good grid citizens is the contribution. You do not need to penalize them. You do not need to tax them. You know, I think this is a broader philosophical point, but we're in this moment politically between moments. We don't have a kind of political order to guide our shared agreement, right? Nealiberalism is gone. And before we figure out what the next political order is, there's this real chaotic risk of villain politics. People are searching for villains. And I think what we're getting wrong with data centers and utilities is we're casting them as these satisfying villain characters for the like technocratic left. And it's we're missing the forest for the trees in it. We're getting the story, Ron. Or at the least, I think we should separate out the problem with these villain politics is that once someone gets the scarlet V, people just displace all their complaints. Right. On to the villain. So like we need to distinguish the effects on the grid, the physical, energetic, and economic effects on the grid. We need to be able to separate that in our heads from whatever you think the social impact of AI may or may not be like those are at the very least are separable questions. Yeah, the t-shirt I'd like to make or the sign I'd like to bring to a town hall where the community is determining whether a data center is right for them. And it's like not all communities want or need a data center. It's not right. There should be local control and local voices. But you know, the sign I would bring is this building is not a witch. That's you know, don't create a parasocial category that's hard to disprove and then imagine all of your worst fears flow through this one thing like villain politics sucks. And I think as Americans, we should challenge ourselves to build a politics of abundance actually be curious and kind and empathetic about how looks society is hard and participation isn't easy. But we can get this right. We can build American infrastructure. We can grow the grid. We can make it more reliable, more clean, and we can make it cheaper. And maybe it's the opposite of boring. Maybe we've gotten it all wrong. Maybe that's a really exciting place to end. Okay, well, give me my date then. When is US electricity cheap abundant in boring? When am I going to look up and say, you know what, I need to figure out something else to pot about 2030, just a few years. I think the narrative will be clear enough by 2030. Wow. That this trend is permanent and structural and inside the existing systems incentives that data centers are driving most of the near term electrification that makes it possible that electric vehicles and heat pumps and broader electrification is coming behind it. You may be factoring. Will average electricity rates in the US be visibly falling by 2030? Yes, I think so. In the states that have substantial data center growth, I will make that my hottest of takes. I think by 2030, in the states where there is substantial data center growth and other electrification, power will become cheaper in a nominal basis. Again, if you have a lot of wildfires, if you have terrible storms, there are other things that can make a landscape scale machine expensive for unrelated reasons. So I'll give myself one type of contextual hedge. But I do think that in many markets and many states that can get this growth moment right, power will be cheaper, the grid will be stronger, and will be on our way to a new chapter. That's a perfect place to leave it then. That's a prediction that's going to come up soon enough that we'll probably be able to talk about it on my pod. Ten-year predictions are so boring too. Ten years. I know everything's possible. The depth of the accountability boars me in predictions. I want to be clear, I have no particular information. I'm almost certainly wrong in countless ways, but it's so much more fun to say at least by 2030. 2030 it is. Thank you as always, peers, for fascinating. Fascinating to see with all the dysfunction around us in so many other areas. I really think it is important for listeners to absorb and take heart in the fact that electricity does really seem to be on a good path heading to a good place. So at least not 100% of things are awful. Let it be abundance then. Thanks David. Thank you for listening to Volts. It takes a village to make this podcast work. Shout out especially to my super producer Kyle McDonald, who makes me and my guests sound smart every week. And it is all supported entirely by listeners like you. So if you value conversations like this, please consider joining our community of paid subscribers at Volts.wTF or leaving a nice review or telling a friend about Volts. Or all three. Thanks so much and I'll see you next time.