The Utilities Want $1.4 Trillion. The Hyperscalers Want a Gigawatt. Nobody Did the Math.

PGM is basically saying that like, we are no longer going to honor that consumers can do whatever they damn well please and we have to meet that requirement, right? We're gonna set standard such that consumers can't just do whatever they damn well please. And that's how we achieve a more cost effective grid. (humming) Hello, my name is Jigger Shaw and I'm a clean energy entrepreneur. Thanks for joining us on Energy Empire. As you may have noticed, my co-host Jamie Nolan is not here for this part of the podcast, mainly because it's her anniversary. So I wish her a happy anniversary. But I just wanted to give you guys kudos for all the great questions we're getting in the Ask Jigger segment. We've already gotten fantastic questions. I've already answered several. Some of them were, I think what you would expect me to say and some of them weren't. And so hopefully you found them entertaining. I think we also had a pretty spicy back and forth on Reddit. So thanks for all of those who participated on the Reddit side. This week we have a fantastic episode from my good friend Catherine Blunt from the Wall Street Journal. She has been leading the charge on originally the PG&E bankruptcy, which is how I met her. But more recently she's been really leading the coverage on Alphabet or Google. And you can imagine that the hyperscalers and their load growth and what's happening with the regional transmission operators like the PGM and how many data centers do we need? There are one gigawatt and size. All of that stuff came up in our conversation. I think she tried hard to pass the buck back to me, but I kept it on her. So super exciting conversation and I hope you guys enjoy it. Energy Empire is powered by octopus energy. I hear it at every conference. We need more generation, more transmission. You're saying we don't? We do. But we're ignoring something faster, sitting in people's homes. And EV is basically a 60 kilowatt hour battery, idle most of the day. Across the US, that's gigawatts we're not using. Utilities have pitched demand response for 20 years and it still hasn't scaled. Why is this time different? Because we're not asking customers to change behavior or automating it. The grid trees customers like demand that actually distributed infrastructure connect those assets and you can shift load overnight at scale. So the constraint isn't technology. It's coordination. The solutions already deployed. We just need to use it. Thanks Natasha. That was Natasha Crow. Vice President of Marketing and Combs for Octopus North America. If that's the version of the grid you want, check them out. The link is in the show notes. [MUSIC - "Ladie Empire"] Catherine, welcome to Energy Empire. I was looking around and it's not clear to me that you've done a lot of podcasts. I think I've done a fair number of them, but I haven't known a while, so I'm surprised. Well, you certainly did a lot when your book came out, California Burning, which I mean, to this day is sort of the book that all of the books I think on the Electric Utilities sector are compared to. It came out with just extraordinary fanfare. I think Patty Poppy said that she made it required reading, I think, when she became CEO. Yeah, that was really gratifying, right? It's just like, if it even helps, like, when you know one person's decision making or understanding of the challenges, that feels really good. Well, now there's like 500,000 people who, I think, are cosplaying electric utility experts in the AI industry. And so I think there's a lot more people who need to, like, to read your book. So it hopefully sails "Spike Care." I wanted to start with part of what you talk about in your book is that PG&E really focused more on shareholders over their ratepayers for a long time, and that really caused a lot of their challenges. Today, you know, the Electric Utility industry seems to be doing the same. I mean, they're sort of at, you know, I think there were a $20 billion a year of catbacks in 2003. There were $178 billion of catbacks last year. They're going to be at $2.15 next year. The Edison Electric Institute said that from 2025 to 29, they were going to spend a trillion dollars. They just updated that number to $1.4 trillion from 2026 to 2030. You know, like governors or like Apple PlacDec, right? They're just sort of like, why are we running in a race where we have to talk about electricity costs? And so like, I'm wondering whether anyone has learned a damn thing from your book? Yeah. So it's a fascinating, extraordinarily challenging time. And I think when you think about catbacks spending, right? I mean, some of this needs to be done. The grid's old stuff needs to be like replaced or upgraded or whatever. But yeah, I mean, what an opportunity to generate returns for shareholders, right? And in sort of justifying massive spend because of this AI boom and AI race and trying to make it happen for these companies that are saying like, we absolutely need this. We needed it yesterday. How fast can you deliver? And I mean, it's a fascinating convergence. Two of these industries. One, that is notoriously slow and backward looking. And like, just really can't move quickly. Risk averse versus, you know, the AI giants that are not risk averse. Trying to move, trying to move mountains in the span of days. Move fast and break things as. Move fast and break things. Although the thing this time is the grid. I feel like that's not something you want to break. Yeah, you don't want to break that. And I think that, yeah, the challenge is that I've been, I've been very interested in what's going on in PJM these days. This seems to be, you know, ground zero for some of the challenges you'll you'll begin to see elsewhere as the days in our buildout continues. And I'm curious on the politics side. It feels like when PG&E went bankrupt, Gavin Newsom sort of made it his mission in life to get them out of bankruptcy and back to investment grade status. Yeah. Today, it doesn't feel like the 36 governors running for election, Republican or Democrat, right? Like, want to protect the electric utility. And now, with all of this anti-datacenter sentiment, it's not even clear whether they think it's right for them to protect the AI data centers, right? And so, like, I'm curious in this moment, you know, where the governors, you know, because I mean, they didn't get reelected, right? They didn't get elected. So, where does this sit politically in terms of, you know, whether folks really want to see all this spending? Yeah. So, to tough question to answer, because, I mean, I think it kind of varies by region. But, I mean, certainly within PJM, just the incredible spiking capacity cost has made it so that, like, people are thinking about electricity prices, PJMs rolling that, what roll the marketplace. I mean, I, like, you know, three years ago, five years ago, no one outside this business had any reason to even know what PJM was, right? Much less like what it was. But I don't know what PJM is. And they still, and even if they try, they probably don't understand it. But, yeah, you saw it in Virginia. You saw it in New Jersey, right? Like, just like this rallying cry to bring down electricity cost, which of course is not an easy thing to do by any means. And, you know, PJM has a role in this, but I mean, state policy has a role in this. So, I mean, just like, it's just the, like, so many things in the space, it's just the convergence of so many challenges over many years. And then you layer on top of that, what's supposed to be extraordinary demand, possibly inflated projections, who knows, right? It's just like, well, most certainly inflated projections, right? And we, isn't this the story of the 1990s when MCI World calm basically said, we need to build like, you know, 12 coal plants a month or whatever. Yeah, I mean, very well, very well could be. But, you know, I sometimes say, and this is, this is not a popular thing to say. It's like, I think we've moved into an era in which electricity necessarily has to cost more. Just because like the grid needs to be upgraded for all different kinds of reasons and just stuff is stuff is old, right? I mean, especially, and is that your conclusion that like out of all of that reporting you did that the next generation of technologies, virtual power plants, grid enhancing technologies, globalization, et cetera, just isn't enough. I don't think it'll completely offset. I think it could, that could be meaningfully, it could meaningfully mitigate the need for some massive cat-back spending. I think, what, what do you think about that? I mean, I obviously served in the US Department of Energy for four years. I think we showed through the lift-off reports, et cetera, that you actually could get far more utilization, return back to the 1970s level of utilization, right, through flexing demand with the same level of dexterity that we currently only flex supply. And you could get to, you know, much cheaper rates for everybody, right? And I think, but like, one of the big challenges I see is that that requires a level of coordination between the utility, between the data center, between the governor/public service commission, that, you know, just rarely seems to happen. Yeah, yeah, no, that's exactly right, I think. I've been very interested too in various proposals to require flexibility of data centers. Of course, the AI companies say like, "Oh, we're happy to flex, but we'd like that to be a voluntary requirement." Right. You know, like Google is hired Tyler Norris, and so he, yeah, he now works there in South-Eight. Yeah, I was talking to Jesse Jenkins the other day, and he was like, "Oh, I think, Most of my friends work at Google at this point. When's Jesse moving over? Although he's got that company that he works with now right from up. He's got that gold on. Yeah. Yeah. I mean, so you've moved beats from PG need to alphabet Google. There's a lot of overlap here. There is. But talk a little bit about that move and why you made the move from PG need to alphabet Google. Obviously, there are a five trillion dollar company, but you know. It's about just about double. Yeah, I was about a year ago that after seven or six years covering utilities, I just thought it would be interesting to take on a new challenge to try to do a different kind of corporate reporting. But I was also, and I made clear in making the jump that I really wanted to continue to keep an eye on the AI power and nexus. I mean, Google and everybody else and what it and that pushed to build out these massive facilities and like what it means to even have half the projected demand growth for these utilities. And it's been, it's been very interesting. I mean, talked about PJM, but you may have seen it elsewhere. I mean, gosh, I think that there's two projects in Wisconsin right now, one for open AI and one for for Microsoft. And I think it's going to double the overall demand on the system for that utility, like just those two sellers, which is like, it's remarkable, right? And it has been really interesting too to try to like understand and track the ways that utilities are trying to design new tariffs to protect other customer classes. But as with everything like the devils and the details, how's this going to work, especially in an allocating transmission spending? So it's it's so yeah, I can't even imagine being a reporter in this moment just because I feel like these are esoteric concepts that matter, right? I mean, it is what's driving inflation. It's what's driving the GDP growth of our entire country. It's certainly booing the stock market. So it matters, right? But when you think about the patients that people have for reading about these things, I mean, when you think about like the structure that Google created in Excel, Minnesota is territory and then alliance elites territory, where you know, they really went to the utilities and said using Google tapestry, we're going to teach you how to do this better in a way that actually will reduce rates for everybody in Minnesota by like I think was like 1.7 billion dollars or something is what they filed with their ESAs or energy savings agreements, I think. And you know, but like, like I don't even think there's been any reporting about the anatomy of how that deal came together and sort of what that should. Right. But I mean, like, and what that means, right? For like the fact that meta did nothing at all in the negotiations with energy down in Louisiana or and what does that mean for meta and Microsoft? Are they just lazy? Does it mean that like they actually should do the same amount of work as Google? Because I think everyone sort of suggests the data centers are good load growth, right? But it feels like it's only good load growth if people like coordinate. Yeah, I would say that has the potential to be good load growth eventually. It's just like how do you manage the upfront costs of integrating them into the system? And it's you make a great point about Google. I think that an ever-writtenness Google has assembled one of the smartest teams, I think in the space on energy. They've been in close attention to this for a long time. And I think their understanding of the system really outshines most other competitors. And I think it'll allow them most likely to get stuff moving more quickly because they like actually have answers to some of the hurdles, right? Whereas I think the competitors, it's better to be slower to try to come or to reach the same sort of understanding and certainly don't have the same bench of talent. Yeah, the other part that I think is so confusing and for everyone is what's true and what's not true? Like when I try really hard to figure out why do we need one plus gigawatt data centers? Why can't we have a network of 100 megawatt data centers, which you and I both know would be a lot easier to fit into the grid? You know, people say to me, well, you know, for the final training runs, we need the chips to be right next to each other. Otherwise, they can't work in synchrony and, you know, and get everything done, right? Fine. So then I'm like, great, how much of that do we need? And it turns out a lot less than I thought, right? The current models sort of use like 200 megawatts worth of power to, you know, run the models. I mean, they think that by 2030 they're going to need maybe four gigawatts of capacity to be able to run one of these final training models. And then when I dig in deeper, I hear, well, the R&D runs don't need to all be with chips right next to each other. The R&D runs that they do are batchable and they can sort of like farm them out to 100 megawatt data centers. So I'm like, great. So then, so then what's the answer? Like how many, how many one gigawatt plus data centers do we need for training, right? And everyone's like, I don't know, but I'm lazy. I'd rather all of them just be one gigawatt plus data centers, even for, you know, inference or whatever. And I was like, but that would break the grid. They're like, that our problem. We don't care. And I just like, I'm curious like how transparent these companies are about these big questions. Like how many mega data centers do we need? And like, because Jensen Huang has been talking about inference and how he's got five megawatt data centers with prologists. And now he just did a test with span, right? And Pulty Holmes. And then he's like, no, no, this stuff can be spread everywhere. Infraints can be done easily. You know, like I just, if the electric utilities are going to say we need to raise rates on all these people to like upgrade all of their facilities, they're by definition sort of assuming that these inflexible very large loads are the way that we have to serve AI data centers, right? And it doesn't seem like there's any answers coming from anybody that I can say. Yeah, that's a great question. I think like, I don't even know if anybody really knows the answer to that or has given it a lot of thought. I think right now there's just such a scramble. There's just been this movement building bigger and bigger data centers. There are other ways to do it as you were just discussing or alluding to. I am not smart enough to tell you like exactly what loads are reporting for years. So I know that you're smart enough. Well, I appreciate that. I wish I had better answers as to like, you know, what is the actual need for like a super science data center versus something that's more, you know, small workloads aggregated, right? I mean, it makes sense. And it's not that you have to have all the answers. I'm the, my question is really who's supposed to have all the answers? Like, you know, with all of these smart people working at Google, should they be revealing these answers to you? Like, what about like epoch AI research, which seems to be this nonprofit that like publishes everything? Or is it the US Department of Energy or EPRI? Like, it just feels like someone should be on top of all of this stuff with a PhD telling me what like the answer is. Totally gosh. When you think of like, who has any actual oversight over any of this? I mean, is it ferk? Is it at the state level when the utility comes forward with being like, we have to serve this one gigawatt data center and then should the regulators ask like, does it need to be all situated on that plot of land or is it possible that it could be, you know, broken up into 16 pieces, aggregated, right? I don't know. It's like, but it's imperative that we begin we, I mean, not me, well, me as a reporter short, but like also like as someone at the regulatory level or within the administration or something, right? Basically being like some sort of stress test or some sort of like analysis as to like, is this is this the most prudent way to do things? You got to ask that question because it's untenable what's being proposed, right? It can't, it really can't happen. I think so, but I feel like the utilities are pushing their way through. You know, one of the organizations I'm a part of contemplate action, you know, paid for some polling and you know, you saw that Josh Shapiro wrote that letter and, you know, and basically got a utility to just withdraw their entire rate increase. And so it does seem like the polling is suggesting massive majorities of voters in California are saying, PG&E shouldn't get any rate increases at all until they've demonstrated increased grid utilization, right? And using the grid that we've already paid for more cost effectively. I mean, it just feels like there's a trust breakdown now where electric utilities are looked at and saying, is your stuff old? Does it need to be replaced? Do you said that five years ago? You said that two years ago. Now we're paying 44 cents a kilowatt hour. We went bankrupt. We had wildfires, like, like, I don't know that I could trust it. If they use say, like, I'm just trying to figure out how you think about operating in this environment where these utilities are coming to the regulator, asking for these rate increases. There's really no transparency as to whether the AI data center companies really need one plus gigawatt data centers. And grid utilization is that historic lows. The ability for utility companies to use technology is heroically, you know, like something that they're not good at. How do you view this trust breakdown? It's been happening for a very long time. And then with the AI build out, it just comes in exactly the wrong moment, right? It's like, it's a really bad time to try to make this happen. I mean, sometimes when the utility comes forward with a, you know, re-increaser spending, sometimes the answer is yes. Some of that spending is prudent and necessary. I mean, we all know, though, that sometimes it's not. And it's, it's very hard for, you know, overworked regulatory staffers to, like, parse every single project and figure out whether it's you know, gold plating a substation or actually making it upgrade that's going to be beneficial for the entire system, right? And so with PG&E in particular, I mean, they've just had such an awful run of it over, you know, 20 years, capped by the awful pliers in 2017 and 2018 and the bankruptcy. And it is so eye-wateringly expensive to live in California as it is. I mean, gas right now is a seven bucks. I think I paid $7 for premium gas the other day, right? And it's just like, no one wants to live in California now. Like, I mean, you're eating the dog food here. Yeah, totally. And I'm lucky living in San Francisco that like I can mostly keep the windows open and I've got it, you know, I don't really need to run the electricity all that much, but for folks in the Central Valley, I mean, we're heading into summer, right? It's like, it's those are some really significant power bills. So PG&E lost the trust of customers a long time ago, just because of like certainly the extent of the disasters. Other utilities have had major disasters as well. I mean, we're also living in an era of, you know, changing climate and different stress on the grid, right? And this is a backward looking industry that like there's a- Well, look at George. I mean, George O. with the Volga nuclear plan. I mean, two of the longstanding Republican public service commissions can have voted out by like 20 points. Like in a, in a arguably red state, right? And so, you know, that's crazy. I mean, but what do you think is the right way to build, rebuild trust? I mean, should regulators force the utilities to demonstrate and to prove that they're using the- this stuff they've already paid for more efficiently before they ask for more polls and wires? Like, I mean, you know, you've covered that dynamic, right? Yeah. I think that should be- that should be part of the solution. And there's- there's a lot of companies right now that are trying to work on that problem, right? To figure out how to find change into the couch cushion, so to speak, right? Like to find the ways in which you can slot stuff in here and there and like, you know, what's not being, you know, from a transmission standpoint, what's actually not being used at this time, like all kinds of ways to- like you say, like just to make better use of what's already in the ground, it would be great, I think, to see greater interest in that as part of the suite of solutions. And like from a regulatory standpoint, I think it does make sense to ask the question, for sure. What do you think? Well, I mean, I've just been shopped by- in the polling, the voters are not mad in a vague way, right? Like they actually support like super specific things, like saying we should tie executive pay to, you know, some of these metrics, right? I mean, I guess what I'm trying to figure out is with- with your reporting, what is required to rebuild trust, right? Because I just think, you know, when you look at Georgia and the Vogel Nuclear Plant, when you look at like Duke Energy and the fact that, you know, they got credibly accused of really dumping coal fly ash into the waterways during hurricanes. And now they're asking for 15 percent rate increases when you look at PSENG and New Jersey who credibly got dinged for gold plating all of their infrastructure posts sandy, you know, now that investor owned utilities are at 30 percent above the cost of rural etrocoops and municipal utilities, right? Like what is sensible, right? Like what can voters expect or what are ratepayers expect to like achieve accountability? I mean, should we be putting this into executive pay? I don't know the answer to that. And I don't frankly know the answer as to how some of these companies rebuild trust after everything that's happened. I think that like, you know, rightfully so ratepayers, voters are wary of massive projects or spending or really anything that has the potential to let go south become stranded asset, be, you know, be cost overruns a la the nuclear plan, Georgia. I mean, that was massive, right? Or like, you know, what are you doing with all this catbacks? And then what are you doing with O&M? Right? That's the PG&E story, which is that they were focused on, you know, anything that could add value to the system and not paying as much attention to doing the day to day inspections and maintenance that would have made their, you know, pipeline safer and San Bruno happen made their transmission line safer. The campfire happened. The thing though, and I think that people are becoming more aware of this interestingly. I mean, gosh, the number of regular people I see intervening in rate cases these days is really pretty remarkable, right? And they didn't all find their way there by themselves. Like there's certainly groups that point people to raise to make comments and things like that. But utilities and I sometimes say this somewhat joking leave is not a joke. I mean, they do actually write everything down seriously. Like, I mean, like most things can be found in various regulatory repositories if you know where to look. And so it's just like this question of like oversight and asking more creative and probing questions about the necessity of any of this and like what the alternatives might be is imperative. And like, I mean, as the system as it stands, that means that has to come from the probably state regulatory level and for probably has a role to play to. Are we going to see that meaningfully change? I don't know. So if you were to write a story on PG&E now given that you're a PG&E customer, is the story basically that, you know, people hate their utility or is the story that the old utility model is breaking down and that it is going to have to be sort of replaced in order to gain voters trust? I mean, I think it's very fair to say that the old way of doing things doesn't work in this new environment. When I try to think about it pragmatically and how difficult it would be to change, you know, do some sort of wholesale change, right? I mean, after PG&E's bankruptcy that was talk about trying to make it into a co-op or would the state take it over? And I don't think that meaningfully solves the problem, honestly, I don't. And I think that there's the most pragmatic way to think about it is like, I mean, how do we identify the points that need to change the most within the way that it already works? Like, how do we make the current system work better, ask better questions, have better oversight? You know, maybe like reduce our OE, right? Maybe like that's probably an obvious one that I think should probably should definitely be explored in this environment. If they're proposing to spend however much you said 1.4 trillion through, right? Yeah, all of the EEI utilities across the country. Yeah, it doesn't have to be 12%. I would say no. Right. And often, I mean, they're able to exceed that sometimes. Should that be allowed? Probably not. What additional risk will shareholders take on? Right? That's a difficult question. We saw PG&E. I mean, they were supposed to in a, you know, perfect world, shoulder to liability costs of the fires, but that didn't happen, right? They all cut and run. And how do you reduce, like reduce costs and reduce risk to the residential customer class, as you have like these massive commercial interests coming in and wanting all kinds of things built on their behalf? I mean, that's that's the big question. How do you do it in a traditional way? How do you do it in a novel way? And these are questions that I hope people are asking. And I can ask, but I have no power over whether it happens. No, no. I mean, I'm asking just mostly because you covered them for so long in your book was so comprehensive. I think moving to the next sort of section, there's been this whole conversation around cost allocation, right? And who pays, right, between the utility and the AI data centers, right? I mean, PJM just announced the largest upgrade to their transmission system in a very long time of $12 billion, half of which was peanut buttered over all of the rate classes, right? And so part of what I'm trying to understand is on the one hand, you've got the data center companies who've made pretty big sort of promises, right? Not to shift costs to consumers. But then on the other hand, you're like, you just like shifted six billion dollars with the transmission cost to all the repair said, had them all pay their fair share. Like how do the AI data center companies do this and on media and comms perspective? Like how do they convince, you know, voters that they've actually succeeded in meeting the pledge? Yeah. Yeah. I think frankly, all of the companies are trying to staff up in this regard and trying to tell that story differently, just based on what I can tell. It's been interesting. So I've written about this a few different times now. And I would say even like a year ago, when you looked in the various filings related to, you know, creating these large, the quote, unquote large load tariffs, right? Everybody, Microsoft, Google, Amazon, we're like, really? Do we actually have to pay more? I don't know. Like that doesn't seem very fair. Like we're, we're, all these upgrades are going to be beneficial for everybody. And like that, that's what we're used to being on the economic development rate. Right. Right. And so there was a lot of, not too long ago, there was quite a bit of resistance to some of these new measures that were meant to, you know, guard against the risk of stranded costs, guard against the risk of like massive cost shifting. I think they got wise pretty fast and realized that that's not really a tenable position to hold. And also like, as they began printing more of their own money, so to speak, they're like, whatever, like we'll just, whatever costs will pay. But to your point, transmission spending in particular is going to be the toughest, the toughest thing to address as it relates to cost allocation. PJM is a good example, but there's other, I mean, massive transmission spending plans that are going to be largely in service of the AI companies. But, you know, you can make some sort of argument that it's going to be an overall system upgrade. It's just like, by like to what extent is that actually necessary. That's a very difficult question to answer. Yeah. And, you know, part of this actually then contrasts with the electric utilities and their conservatism, right? I mean, because they don't necessarily want to take advantage of demand flexibility. Like not all the utilities have actually required data centers to sign interruptible rates, right? So that they can mandate that in a period of most stress, they have to turn down. I mean, it got so bad in Texas that the legislature passed SB6, right? And said, no, we're passing a law that requires you to sign interruptible rates on these data centers. - Great to meet you, if I'm wrong, but I think that's the only place right now in which it's a requirement. I'm pretty sure that's the only place where it's a requirement. In California, obviously PG&E's got the Flex Connect for distribution and then T Flex for, and so there's lots of utilities who are moving that direction, but it's not mandatory. - They're trying to make a minute. - Right, they're like, faster and they're connected. If you agree to interruptible service, at least for a period of time. - Yeah. I think that's right. I mean, it's basically because when you look at the way in which utilities have adopted the NERC best practices, right? The National Electric Reliability Council. Like these acronyms get me to, there's a lot of places on the grid, right? The grid care and Google tapestry and Kamu and Think Lab and others have identified. They can accommodate these load growth opportunities on the existing grid during normal situations, but then what the normal utility standard is is that if this line goes down what happens, if this generator goes down what happens, if this happens, if that happens, this sort of N minus 1 minus 1 sort of standard, right? And so then what they find is they have to magically spend $8 billion worth of upgrades to be able to meet that standard, right? And so if they can get data centers to sign interoptible tariffs, then they can say, well, we'll do the best we can, right? But ultimately if worse comes to worse, then we're gonna have to get you to shut down because like we have to save the grid. But in the meantime, you know, like I think, when you look at PG&E's T-Flex standard, the way that they're implementing it, you would only have to turn down your data center once in 10 years, right? And so it's not like it's gonna happen for 200 hours a year. It's view backtested, it rarely happens. But that really simplifies the way in which the utilities can do the measurements, but then it reduces their rate base, right? It reduces the amount of money they can spend on their system. - Yeah, it does. And I mean, it'll be interesting to see what happened in California, I think that like, for the most part, I think tech companies would mostly prefer to go somewhere else just because it's electricity costs are so high. - But sometimes they can't. I mean, California does need compute, right? - Sometimes they can't. Yeah, I mean, a huge thing that complicates all of this is the fact that real expertise on the way the grid actually works is very hard one. And as people get more up and arms about it, they're paying closer attention, but they don't necessarily understand the better, right? That's something that motivates me in my reporting and trying to at least just help people understand why the thing isn't working. You know, I wrote a story about PJM back in, a long one back in January and just like, it wasn't, you know, this like colorful yarn. And it was just like a long story about why PJM is pretty close to being in shambles, right? And it was like, I think they are officially in shambles. They put on a white paper shambles. - I think they put on a white paper last week that basically said, "I read it." "This doesn't work anymore." - What was fascinating, I was a fascinating white paper. It was, it did start off saying, like this doesn't work anymore. And here's three ideas that we might explore or combine going forward. And the first one, and the third option of each sort of like somewhat confusing and convoluted, but the second one is very easy to understand, which is that we might move into an era in which reliability is not guaranteed for anybody. And like, how do we figure out who loses power when-- - Which is-- - Which is just foreign, which is like so politically unpalatable, right? - Well, but it's just a glass half empty way of saying what I've been saying that's glass half full. The way that I say it is, "Hey, for people who want to opt in to demand flexibility and to allow their thermostat to be varied by two degrees or to let their water heater be controlled by the utility or let their Tesla power wall and their garage be, you know, flexed by the utility, they should get paid to something for it, right? - Yeah. - They should have paid that thing, right? That's just the other way of saying what PJM said, which is, PJM is basically saying that like, we are no longer going to honor that consumers can do whatever the damn well please and we have to meet that requirement, right? We're gonna set standard such that consumers can't just do whatever the damn well please and that's how we achieve a more cost effective grid. - I mean, if you put it strictly in the terms of like DR, like then that's fine, right? It's like, I think though, I mean, it's been a while since I really dug into this, but it's been interesting how challenging it's been to like get good demand response programs on the residential side integrated in different market structures, right? - We had 75 case studies in the VPP lift off report that we published in January 2025. I think they have them. I think the problem is that it's culturally like unacceptable right now. Like, I mean, what Tyler Norris said in his work, right? Is that for, I think it was like 74 hours of grid flexibility with no event being more than two hours, right? You would capture like 74 gigawatts of additional capacity on the grid. - Yeah, yeah, yeah. - That's pretty staggering. - Yeah, but I'm just saying like right now the standard is no hour left behind and so like we will spend whatever it takes to not have 74 hours of demand flexibility. I mean, that's basic, what PJM I think is saying in that white paper is they're saying, maybe we should allow for 74 hours of demand flexibility and then we'll allow each state to set their own standard. If Ohio wants to spend on godly amounts of money and let the utilities rate base it to not have those 74 hours of demand flexibility, they can do that. If Virginia does want to do that, then they can do that. If certain states want to add a bunch of batteries, they can do that. If certain states want to add this, they can do that. Like I think, I mean, I think that's what PJM was saying is it will provide you a certain standard of reliability which is not 100% 8760. And you at the state level can decide whether you want to fill in that gap or not through demand flexibility or whether you want to over build your system. - Yeah, I mean, I think that the question is like, how bad might it get, right? Does it get to the two point in which there is some sort of actual need to, I don't know, make it more, more dire than that, right? More so than like there's, meaning do we still need generation and transmission upgrades? - I just mean in terms of like what the prospect is for like the need for outages in different regions. Could it get worse than what you're saying? And is it all addressable through some combination of like, you know, investment and demand response? - Well, I think it's very obvious that we need investment, right? We've got 250 gigawatts of solar, wind, and batteries towards that have been safe, right? So that stuff's gonna get built by 2030 because no one put all that money aside to safe, far bird to not build those projects. So that's happening. You've got natural gas power plants obviously that are happening because they're sold out through 2031. So those projects are gonna get built, right? You've got $12 billion for the transmission upgrades that PGM pushed through. So those projects are gonna build. But I think when you look at like reliability, like you look at snowcree that occurred like in what was it January, February, like I've got PTSD. So I can't remember the PGM did fine through snowcree, right? Like it went like we didn't have any power outages. And so my sense is that what modern technology allows us to do is to ride through this stuff, right? And you know, I mean, the DOE at that time said we should be able to run backup diesel generators and backup natural gas generators, right? To be able to ride through snowcree. And in the end, they didn't need them, except for maybe Maryland and the Maryland didn't end up needing them either. So I think there's actually a lot of near-term data that shows that PGM did just fine through one of the worst crises that it could have had, right? In the polar vortex where people needed heat for, you know, 10 or 12 days in a row. Yeah, well, we'll see what happens this summer. (laughing) I like it. I like it. So last question I had was, I mean, what should the Trump administration do, right? I mean, like so they passed this, you know, like sort of, or they announced this, you know, rate payer protection pledge, right? But the DOE has the right through the 2005 and 2007 energy policy acts to mandate certain critical transmission lines get built. They have the right to actually unlock all those backup utility generators, right, through EPA and other things in a formal capacity. They have the ability to do all of that modeling work we just talked about, right? They could just give grid care or Google tapestry or chemo energy or think lab $50 million of cold, hard cash and just say, you know, run this analysis for free for all governors in the country so that they are not sitting in the dark, right? Like, what is it that the American people or the Wall Street Journal reader should expect that the US government should do with all of its national laboratories and, you know, expertise? Yeah, so what do we have going on right now? So with the rate payer protection pledge and also the, gosh, I can't remember the formal name of the, the edict that they came out with in January, trying to push PGM to do an emergency backstop option. But there was a cost allocation piece in that as well as with everything. And this is so complicated, right? It's like that the government can come in and but with the cost allocation pieces are related to the backstop. stop auction. I mean, making sure that that's overseeing appropriately is at each state level within PJ, right? And like it's not, that's not within PJM's purview. Is this sort of like out of market action necessary and appropriate? I don't know. It's never been done before. But it's interesting. And like the new CEO of PJM certainly has a big challenge and figuring out how to implement that within a matter of months, right? It's supposed to be no, sorry, can you hear my dog barking? I love the fact that your dog is into our conversation. So into it. PJM, yeah. But it's a great point in terms of like what should the government be supporting right now? I mean, I think the grid cares the fascinating company. I think tapestry is super interesting. I think they're all interesting. And I think like trying to figure out how to expand or you know, incentivize some of these more novel solutions to unlocking capacity in different places. I mean, it makes sense to me. All right, I'll put you on this spot for one last question. So with all of your extensive reporting on PG knee and now your extensive reporting on alphabet Google, what is the one thing that you think could be mandated, right? Not just volunteered or whatever that could make this entire situation around AI load growth easier, more palatable, more tolerable. Yeah, I mean, I don't think it's going to be an eruptable service. I don't think it's even going to be bring your own generation. Like I don't know. But like maybe, maybe it's having the analysis that we've been talking about this entire time, right? Does it have to be one giga lot? Could it be one giga watt aggregate? Could it be 500 megawatts here? If I ever make a watch there, does it have to be five nine's reliability? I don't know. Like what does it have to be the most extreme thing that everyone seems to be proposing? And I think certainly in at least some cases the answer is no. So like, could we sort of mandate that as being even part of the interconnection study? Maybe, what do you think? Well, I mean, I'm all in on team interruptible tariff because I think that like as soon as you just mandated an eruptable tariff for everybody, then they start thinking, okay, what do we do to not get interrupted? Do we do everything? Do we do the analysis differently? Do we be more honest with you about like our form factors? Do we like put behind the meter gas in, right? Do we build long duration energy storage like Google did with form energy in Minnesota? Like, yeah, like what do we do to not be interrupted? Right? You're like, great, that's on you now. Like, you know, because you've signed an interruptible tariff. Like I, I just think that with all of the resources of the data center companies, it's shocking to me how they just shrugged their shoulders and go, I don't know, what was me? I don't know how to do any of this stuff. Yes. I hear you. Let's see what happens. Let's see, let's see who's the next to mandate it outside of Texas. Well, with that, Catherine, it's always been a pleasure to talk with you. And I know your family has a place up in Deep Creek, Maryland, my family has a place up there. So maybe I'll see you there this summer. Yeah, I can't wait. It's always great to talk to you. So see you soon. Take care. Right. Energy Empire is supported by S2G investments. If you haven't checked out their podcast, I highly recommend it. They have a great recent episode on the long term effects of the Iran War and the blockade of the Strait of Hormuz. In the episode, Sunjeev Krishnan, Franco Sullivan, and Bala Nagarajan make a compelling case that this disruption could be the most powerful accelerant for renewable energy in a generation. And in future episodes, they'll be exploring how those forces are reshaping our food systems and ocean intelligence. Sound interesting? Go find the S2G podcast and start with the global energy order has changed. Now what? Welcome to Ask Jigger, a weekly segment on energy empire where I answer your energy questions. Ask Jigger is supported by our friends at octopus energy. If you want to submit a question, the link is in the show notes. All right, let's get into it. Our first question is from Diane Boss. You are proponent of nuclear energy development, but I never hear you talk about nuclear waste. I'd like to hear your thoughts about that. It's an important question. For many years, we've talked about Yucca Mountain is the repository that obviously never came to pass today. A lot of our nuclear waste from our government nuclear waste is stored in New Mexico. When we were in the Biden administration, there was a process called consent based siding, which meant we asked people whether they actually wanted the economic benefits of storing nuclear waste at their site. That process has led to a lot of interest from the folks in New Mexico, but other places around the country to store nuclear waste. It is a big deal. It's a great question and one that really should be talked about more. But I think we want to put this in perspective. The total amount of nuclear waste that we have in our entire country is so small that we actually can fit most of it at existing nuclear sites, which is what we do now. It probably, I think, fills up an entire football field of space, something on the order of around 15 feet high. It feels like a lot, but that's the amount of waste that's produced by a coal power plant every hour from coal fly ash. It really is night and day in terms of how much waste is there. The value comes from the fact that 20% of our entire grid is produced by nuclear power. I think there are really good solutions that we're on track to implementing those solutions, but agree that it is something that should be talked about more. One of the other options that people have been talking about for years, the French, of course, do it now is recycling nuclear waste. We have been avoiding that for a long time because President Jimmy Carter was really against recycling nuclear waste. Today, I'd say that many people are thinking about it again. There's a lot of innovative approaches to how you take the useful part of a nuclear fuel rod and put it back to work, just to put it in perspective for you. When you have a used nuclear fuel rod come out of a nuclear power plant, less than 10% of the potential energy in that nuclear fuel rod has been used. It really is mostly unused. It is a travesty that we don't recycle nuclear waste. I think you're seeing a tremendous amount of movement now out of the current administration to revisit recycling nuclear waste. Next question is from William Bonagura. What's the best way for retail investors to actually support the development and deployment of clean tech? There are all sorts of green and ESG funds out there, but their impact is murky at best. They mostly seem to invest in large cap companies that say the right things. I think there's a significant number of high-income earners who'd accept slightly lower returns on a portion of their investment if that money were actually leading to projects being built. It's a great question. One that I've tackled and wrestled with myself, so I've never invested in a green or ESG fund. Mostly, it's because I agree with you. It mostly sounds like you invest in large cap companies that talk about their green investing, and so I don't find that to be that interesting. I mostly just put money into the S&P 500 and go with low fees from Vanguard. But there have been some great opportunities recently. There was a great effort done by Greenbacker several years ago to let retail investors invest directly into funds. There have been other areas where accredited investors could invest in angel investing or things like that. The most recent one that I've been investing in that's interesting is a group called EnergyA. EnergyA actually owns solar projects from other countries, so I think Colombia or Brazil or parts of Africa or India. They're actually giving people 8, 9, 10% interest on investing in those things. You can pull your money out at any time. There's a lot of people that have been putting money in there. I think they have over $450 million now of money that's been invested by mostly high net worth individuals into those types of things. One of the things I've done is I've owned solar projects on churches and schools and things like that in my community. Those have been fantastic investments. They seem very similar to people who buy real estate and rent it out to people. Obviously, to your own due diligence, I'm not here to give you investment advice, but I agree with you that just investing in a broad G.S.G fund is not the way that I prefer to invest. I like to invest in physical assets and there's a lot of platforms that are out there that let you invest in physical assets. Next question is from Nicholas Sweeney. Is the U.S. equipment supply chain, transformer switch gear, bus bar, gen sets about to become the binding constraint on the energy transition, or is manufacturing capacity catching up in time? A trillion in hyper-scaler cat-backs doesn't matter if the equipment can't be built and delivered. This is such a good question and such a timely question. Look, I think that in general, many of us lived through COVID and during the COVID period, there was a run on toilet paper. People were asking whether we were short toilet paper. And the answer is people were not using more toilet paper as much as they were hoarding toilet paper to be able to try to keep through what they thought was going to be a period where they couldn't get any. And I think you see a similar issue happening in the supply chain. Yes, there's an increase to demand for transformers in switch gear and bus bar and gen sets. But in general, what you're finding is a lot of people have bought these pieces of equipment before their hyper-scaler, you know, data center has actually been installed, right? So Tesla famously has many transformers sitting in a lot in Austin, waiting to be used in some of their future projects. Gen sets are the same, right? A lot of people have bought gen sets, believing that their data center is going to go into service in the next 18 months only to find out that they're delayed by three years. And so you see a lot of hoarding. So there is an increase in demand. And there is, you know, some new manufacturing coming in place to catch up. But I would suggest to you that we actually have plenty of manufacturing capacity. And we also have a lot of excess manufacturing capacity in places like India, in other places you're starting to see companies bring that capacity over to the United States to try to meet the backlog, you know, people are four years behind right now on transformers. But I would suggest to you that we're not structurally short transformers and switch gear, bus bar and gen sets as much as there's a lot of hoarding going on. And I think if we really took a longer view, you're going to see that there's probably over capacity in these areas, probably six or seven years from now. The next question is from a user on Reddit. The user name is spelled DJIIVU. Thanks for your question. You're asking, what do you think is the gateway drug to renewables? And why is it balcony solar? I think when you say the word gateway drug, I think you're talking more about residential installations as opposed to commercial or utility scale. Balcony solar is a great choice. And what that is is there's a lot of folks who are buying two panels with batteries and just plugging it in to an outdoor wall socket. This really originated out in Germany has taken a life of its own. And now you've got I think over 15 states in the United States that are passing laws to make balcony solar legal, Utah started the craze. Virginia has passed a law recently. I think other states are starting to pass laws as well. So very exciting times. In general, I would say that what's more exciting is that there are companies who are now making manufactured solar arrays that can be placed on the ground and be drop shipped to your home with a battery installed within it. And those systems are going in at roughly $2 a watt. So like 14, 15 kilowatt systems going in for $30, $32,000 all in installed. And at that price, you're at below $0.10 a kilowatt hour delivered to the home. And so I think for a long time, the United States really has been a high cost place to do distributed renewables. Right? There's just a lot of margins and aggressive sales tactics and other things that have been happening. But I think what I'm really excited about is that solar plus storage at least you're seeing specific companies going to market later this year with a packaged solar system that is much cheaper than what's been offered before, really breaking that $2 a watt mythical area. And not only do you save a lot of money on your electric bill, but if you have a battery, then you can participate in virtual power plant programs, which many utilities are starting to offer around the country. And that means that you can get even more revenues. So some markets, you can get $10,000 over a five year period just on virtual power plant revenues. So super exciting times. That's it for this week's Ask Jigger. Thanks to our friends at Acta push energy for supporting this segment. If you've got a question you want me to answer, send it in. Thanks for listening. As always, you can find us an Apple podcast, Spotify, our YouTube channel where we'd love for you to subscribe. And you can see our back catalog there as well as on energy empire.fm. Thank you.