Utilities and Big Tech lost trust. What will earn it back?

Latitude media covering the new frontiers of the energy transition. Pierre I see you're still in your hotel room at climate week still here. One thing I notice in New York is that batteries are everywhere on wheels like there are no regular bicycles anymore in New York everybody is on a battery battery powered bicycle. It adds a really interesting layer to New York which is that there are really four streets you have to look both ways to cross. I say that to myself all the time. There's the bike street now, the street street, and then there's a bike street again that go fast. I almost got destroyed. I was just saying we've this thing called the belt line in Atlanta. Really it's like the bird scooter drama from every single city is dealing with and you're walking with your kid and screaming there to watch out, watch out, watch out, watch out, watch out. It's kind of just trying to like navigate between like some drunk dude on a bird scooter and some like woman texting on the bike and then like the runner who's going to yell at you because you're not on the right side of the belt line and it gets overwhelming. I like the roller blade guys. I think the roller blade scene on the belt line is the under appreciated. I was in the 90s you would call an aggressive inline skater growing up and I just got myself a pair of speed roller blades and they're so fun yeah, no batteries, no batteries required. Yeah. Same mustache. Same mustache. Lots of neon. From latitude media this is open circuit. Across America people are screaming no, no to data centers, no to the big energy projects that serve them. So what gets people to a yes, perhaps an enthusiastic yes. This is what every company building infrastructure is desperately trying to figure out right now and our guest has thought long and hard about this problem and he's trying to prove that you can get to a yes through distributed batteries. So this week we're asking what emerging energy models can break the cycle of resistance? Can the grid earn the right to grow and can the energy industry serving that growth earn back the trust of local leaders? We're going to look at grid utilization distributed batteries and most importantly the way you pitch those models to the locals making decisions that's coming right up open circuit is brought to you by energy hub energy hubs, Durham's platform gives utilities flexible capacity they can stake their grid planning on coordinating batteries, EVs, thermostats and commercial and industrial sites through a single system utilities unlock a partner ecosystem that covers more than 90% of connected DERs in the market and integrates seamlessly into existing infrastructure. The scale is proven more than 230 utilities across North America trust energy hub to manage over 3.5 gigawatts of flexible capacity learn more at energy hub dot com. What if you gave your climate donations the same due diligence you gave your investments? That's what giving green does giving green research is the strategies and nonprofits best position to unlock the next big climate breakthrough and sends 100% of every dollar donated to the giving green fund directly to them maximize your impact per dollar no cuts or guesswork. Make your first gift before the new year and it will be matched up to $500 go to give in green dot earth slash circuit. I'm great. I'm great. The weather is turning and it landed too. I woke up yesterday, getty because it was like cool and I jumped and squealed and I was very excited. It's been warm here for far too long. And you're surprisingly relaxed because you did not have a week full of insane meetings that climate. It didn't have to go to climate week. Climate week is great. That's great. Love it. Well jigger is somewhere with a pillow over his head after his climate week and in his place is none other than Pierre Lephars the CEO of Spark Fund a company that helps build utilities build and deploy clean energy Pierre so good to see you to see you to when I glad to be here. Yesterday you were so full of energy you are you are an extrovert to the max climate week jungle gym. You either get energy from it or die trying. So Pierre is going to be speaking at our flex summit coming up on October 14th and 15th in Austin, Texas. If you like this conversation and I think you will or you have comments you directly want to make to Pierre you can meet him there and wax poetic about the future of the grid. I promise not to squeeze all the juice out of this episode here. I will leave something on the table for you for flex summit. I was going to hold something back for flex summit. So let's talk about energy models that can break through the cynicism and pessimism that's looming over what I think we all consider the greatest infrastructure build out in history. And I want to start by looking at the state of grid utilization and the role that distributed batteries can play and specifically the way Pierre thinks we should be positioning these solutions to local leaders. And then I want to step back and talk about the backlash itself, the root of the backlash. All of this can feel like it's something that popped up overnight, but it is the result of decades of people feeling like institutions have failed them. And I know that's something that you have thought a lot about Pierre on how to fix and Caroline it's something that we've talked about extensively on this show. So let's dig in and start with the concept of utilization, a framework for the grid. The hottest phrase in energy right now and clean energy is grid utilization. The electric grid is one of the most truly amazing machines that humans have ever built. And we're all plugged into it all the time now. But we don't actually use as much of it as you think, you know, on average the grid runs out at about half capacity. And so everyone's asking how we get more out of it. And there's this real fear of over building right now. And there's a lot of anger about electric rates that is sweeping through politics. And so the idea of using more of the grid that we've already paid for is very attractive, which is why this is getting so much traction. But are there limits to the benefits? How do we maximize its value? Caroline, I want to start with you first. You know, we had Brian Janus on the show. I think it was back in February talking about this Bratel Group report that we could save more than $100 billion through lower rates, through better utilization of existing infrastructure. Since then we've seen Virginia adopt legislation that mandates reporting on grid utilization. This conversation seems to have broken outside, you know, traditional clean energy circles into the broader political discourse. And there's now, you know, considerable debate about how far we can push it. So what do you think has changed the most in the last few months? Well, I think that it's a time value of money conversation at the end of the day. And not necessarily the economic equation, but what is the value of waiting for five years to get a new power plant on and what is the value of investing in something that's sort of a no regret investment for the grid? And how do you recoup your value on those investments as well? Like, what I think has happened over the past couple of years is that utilities accepted load grows and then they didn't have an answer for it at all. And they didn't have a grid that was capable of absorbing it or a supply chain that was capable of absorbing it, or a list of transformers ready to be installed, capable of absorbing it. And at the same time, they didn't want to lose the load growth because the load growth transfers into customers and it transfers into revenue and it transfers into sort of robust durable cash for their investor community. So the answer was, initially, let's just rent seek off the data centers at an astronomical rate, which I can't blame them for doing. And then that didn't go anywhere. And then the answer became, well, maybe we could try distributed resources, but that still has a backlog. And then I think then some very smart people realized, what if you just improved how much capacity you could shove through the existing wires, and then that became a conversation. And I actually, what's interesting to me is that it was the last thing that happened in the conversation over the past four years of the data centers screaming, like, there's not enough capacity. I mean, it was four years ago when at Google, we started telling our regulators, there's not enough capacity on the system for what we want to build. So it's a little shocking to me that it came at the end of the conversation. Considering the fact that 10 years ago, we had a ton of great cases all over the country trying for grid modernization. And none of this kind of came up. And I think that was more of an effort of there wasn't load growth. And so the utilities needed to make some money. So they decided to call what was day to day sort of grid operations and grid maintenance grid modernization, which of course it's not. But it is, it's been the last sort of piece in what I think has been an exacerbated puzzle of how do we find capacity on the system so that we don't lose customers that we ultimately want to capture long term for revenue. That's where we are today, and I think what you're seeing is that utilities are willing to do more if it means, or do more innovative things if they mean that they can, if it means they can maintain their revenue moat, right? And that's what is most interesting about this, to me, in Pierre, I'll be interested to see what you say, but someone who's worked in utilities for a very long time, we haven't seen that quite often, you know? So that's what I think has changed. It was just like, we finally got to the end of it, and we're like, okay, maybe some things that like, re-conductoring would work, or, you know, distributed storage would work. But it looks the same to me as New York-Rabbit did 10 years ago, to be honest, like, it looks like the same solutions. It's just now, load. - I hadn't thought about it this way, but I really like how you lay out the, and look, you've been lucky to really be part of so many of those pieces of the conversation, and the sequence really does matter it. You know, it's almost like for the last 10 years, starting with Rev, we were always looking at one piece of the puzzle at a time. It's like a table full of rocks. We would just like pick up one rock and be like energy efficiency, not enough. Like distributed capacity, well, still too expensive, hard fragmented. You know, and then you'd say, well, in the context of no load growth, we're worried that they'll never be load growth again. - Why would you do this, right? - Why would you do this? And then you come with load growth forecasts, and, you know, four years ago, you were like, it's coming, it's real, we need it. And the, you know, the whole system was filled with conversations about, well, do you think it could be more than 2% load growth a year? Well, that would really change everything, right? And, you know, then it was three, and now it's seven and 20, you know, it turned out to be real, and I was walking around back then with, you know, Dex saying, the grid's gonna double, just that's all you need to know, right? And people were pushing back and not sure the forecast. And so, when you look at one of those pieces at a time sort of each camera angle, I think the story feels incomplete and that no one piece itself is justifying a kind of clear path forward. I think what utilization has done at the end of the conversation here, and I'm sure there'll be more to come. But it really gives it a kind of system, a container, almost like a Tupperware for all those things. It lets you see that picture in one frame. And I think why utilization is having such a moment is 'cause it's good Tupperware to think about at least the first step of how we get more out of the grid we have, and I think important to say up front, we're gonna need to build a heck of a lot more wires in generation, right? To the actual quantity of load growth that's coming to these United States, we're gonna need to double or triple the grid. We should, you know, this is a century that's gonna be defined by access to abundant cheap electrons and the infrastructure that supports it. So utilization is really just, I think, a first step to start a conversation about restoring trust in that growth, actually. - Oh, it's interesting you say that it's about restoring trust. And I think it's also about shaping just a bit how creative you can be, right? Because we've been such a centralized grid for such a long time. And to be honest, it works, and it's easy. And you've got 50 years of workforce and know how to do it, right? And so I think it's also the first time the distributed energy space has to also think more creatively as opposed to just in pilot form. Like, you know, most renewables got on the system because of these sustainability goals for these hyperscalers, right? And that's an energy-only goal, it's a rec play. That's not, are you shifting peak, you know, that is not, are you firming and supporting congestion? Like, that's not what we were pricing them for. They could figure out how to do that on their own grade. But this is actually forcing, like, sort of a larger palette, I think, in the way that you think about technologies. And that's great because we've siloed technologies for a long time. - When you're sitting around tables with utilities, both of you, Pierre, what has changed in those conversations? - Well, maybe a bridge to that question, you know, kind of really, I think the framing of, you know, load growth coming back with such fire and fury is what is going to shape everything in these conversations, right, and we brought the growl clear on that. It's what justifies, I think, a increased focus on distributed capacity 'cause it's a way to move forward and get more out of the grid in the near term. It's also what justifies an increased focus and investment on decentralized resources. And interestingly, I think for a lot of years, the distributed industry was only sort of presenting itself as an optimization of the existing grid without load growth. We were saying, hey, here's a good way to improve carbon outcomes or handle intermittency or we do these different jobs or we could avoid infrastructure 'cause there isn't load growth to pay for all the things. I think the biggest challenge to the, and this a little bit, gets to your questions even about utilities and how they think about this, I think quite genuinely, is now that load growth is back, it is not clear that this problem is not actually easiest and most economically efficient to solve just with the original centralized playbook. There are enormous economies of scale of putting 1,000 megawatts of batteries in a field, utilities know how to contract for them. They, there's a full ecosystem to deploy them. And when you do big centralized things in large financial transactions, it's easy to put in billions of dollars to pay for those upgrades and put down their pressure on rates. So one of the ways I try to run my business, Spark Fund is really have respect for, we're now not only lucky to be in a moment of grid need, where distributed resources and distributed capacity might be just on the list of how to grow the grid, but we're gonna be the third thing on the list after transmission, centralized generation, maybe even operational flexibility of large loads and then distributed capacity. And if you don't understand the reasons for that rank sorting, I think you're gonna be talking past each other and utilities and regulators. - Yeah, and I think it's also 'cause that's what the investment community is asking for. I mean, at the end of the day, it's what they understand. It's how infrastructure capital is structured. And it also mitigates the human aspect of some of this, which we've talked about before. Like if you go build power out in the middle of nowhere and the transmission line could become a problem, but you're dealing sort of with less humans, right? And that's a part of this now too. And there's another conversation about this, which is that a lot of the utilities that are pro-grid utilization right now are either utilities that have the market structure where they can make returns on all layers of the stack or they are hoping that this gets them back into the generation game in some way, right? And so there is this, and I understand that. I mean, I don't agree with it, but like I understand it, right? Like if you're a utility that decided to divest of all generation, if you're a T&D utility, because there's no load growth. And like, you know, you decided to be a more simple revenue model. Now you're not part of the party. Like there's so people, base power is like growing everywhere. And then you've got X, Y, and Z behind the meter a gas turbine business with like $1 billion, several billion dollar market cap. And you're like, wait, I want to end. Like I want to be part of this. I don't want to just be stuck with the interconnection queue drama. And so you see this like shift, which was always sort of there, but I think what is most interesting to me, and I'm sort of stuck in the middle of, is like how this grid utilization debate is really uncovering a retail choice debate across the country. And it's like you see the utilities that are in it. And what we're going to do as a broader ecosystem around that. And that's where my head is focused most of the time. [MUSIC PLAYING] Utilities don't just hope flexible capacity performs. They need to be able to stake grid planning on it day in, day out. Energy Hub's Durham's platform is trained on over a decade of real event data from 2.6 million connected DERs. That means utilities can forecast available capacity with accuracy, optimize dispatch across any DER type or ownership model, and maintain visibility across their entire system. 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(upbeat music) So Pierre, let's talk about your approach to this. We have had discussions about the capacity connect program with Excel Energy to fund a couple hundred megawatts of distributed CNI batteries in Minnesota. This is something, this is the Spark Fund model. So I'm curious, I know you've been on lots of podcasts talking about this and we've had discussions about it. So let's kind of zip through it and just explain why strategically [BLANK_AUDIO] one to three megawatt battery in like parking lots and other free space is a grid utilization strategy. Well, look, grid utilization, regardless of what market model or regulatory model you use to pursue it, I think is a resource that can be harvested. You can go get it. And to do that you need to shave the peaks on the grid, particularly in the distribution grid and transmission to pull the substations off transmission. On transmission you need to smooth out the peaks to be able to deliver more energy. And then if you can have demands show up in the right load pockets and help customers target eb fleets and compute and electrification in the right places, that picture together really lets you harvest utilization. So one piece of that puzzle, right, they're sort of the flex piece and the demand piece to get it right. The reason you'd want to do both is that if you can sell more kilowatt hours faster than you grow the dollars that it costs to deliver that system regardless of the regulatory model, it's all the same equation, right? How much is the grid cost divided by how many units of energy you sell over it? It's basically the price of power. And we have various regulatory ways of explaining that to ourselves and setting the prices, but it's all really just a division problem at the end of the day about throughput and dollars behind it. So if utilization is a resource you can go harvest and the reason you want to do it is that you can both sell more energy and make power cheaper every time you sell more energy. That's a really compelling way to run and grow a grid. And batteries are one critical piece, right? You have the flex side and the demand side. And the flex side, you want resources that can almost act as an extension of the wires themselves. Batteries are not generation. I think it's really important to say that regardless of their regulatory treatment, they do not produce energy. They store it. In fact, they destroy a little bit of it with round trip efficiency. So they're like the opposite of generation. They're actually like incremental energy destroying machines. They just for the cost of that reduced round trip efficiency, they can move energy in time. And I've said this before, right? Batteries are electron time machines. When you're talking about the best type of flexibility, it would be flexibility both in space and time. And the beauty of batteries is you can put them where the grid needs the most. So you charge them up when there's plenty of energy on the grid, you dispatch them when it has constraints, both where the grid needs that relief of constraint and when it needs it, right? Because you're holding the electron safe until it needs to be dispatched. And running through that framework, you know, all of a sudden, the model that I think we're pursuing with Excel and others through distributed capacity, procurements, and it really very first principles approach to that. It's like, okay, if putting batteries near the grid constraints to be able to smooth them to improve the grid to improve utilization, then great, just go put them it reasonable size where the grid needs. And that can be done with Rezi batteries, right? You know, currently, you mentioned base power Tesla many, many players in that space are putting lots and lots of smaller batteries or, you know, all over the grid. Spark funds model is to put, you know, kind of three to five megawatt batteries at the edge of a parking lot. They're bigger. So you get a little bit of that economy of scale makes it cheaper to build per megawatt or per megawatt hour. And you put them working with the grid operator right where the grid has that constraint. And it also gives you an amazing opportunity for community wealth participation in infrastructure, because by renting that parking lot, you pay, you know, a church or a school or a fire station, a nice annuity for 20 years, because we need to build infrastructure and they're in the right place. We'll come back to that piece. I personally like the three to five megawatt model mainly because if you doork geek out for a second, if you think about like rate classes for CNI customers or residential customers, there's just more incentive. There's more incentive there. But, you know, here, one of the things that, and maybe we can talk about this a little bit, but one of the things that has always been, I guess, part of my career, like it was this concept of decentralizing power, right? And, and, and I agree with you, we're going to have to, if we're going to, if we're taken on this AI infrastructure, like if our country's going to do it, you're not going to do it without building more power lines and without building more power plants full stop. Like, there, so anyone who says that we don't need to, is frankly kind of, I think, causing more confusion and, and, and is probably deleterious to the argument. But, what I think is most more interesting here is the, and we've talked about this a million times on the, on the, on the pot Stephen, but like the data centers don't care where the power comes from. And I think that the other important part here is that the concept of being off grid was like really ramped up for the data center community for about six months in large part because Trump sort of set it. You know, he sort of endorsed this, this idea of like, just go build the micro grid data center and build data centers in space, which I stand by is still going to happen. But Google just did some tests this week, right? I told you, Jigger owes me so much money. So much money. Jigger, you're not on the pot. You owe me $10,000 for that bet. You know, so that's all going to happen. But the, you know, I worked in the concept of decentralized power, more in the developing world. And I'm going to come back to that for a second. But in a second, but what I think is interesting now is that in addition to the whole, you know, we want in on the spending spree. And I'll call it that, you know, from the utilities. There's also a real political recognition that like, well, if we can't provide this and all these data centers go do this really irresponsible thing, worst stuck with the political consequences of that, right? So there's this interesting motivation going on where sort of behind the meter, you know, decentralized power provision for the data centers became this really difficult thing to do, you know, power plants are hard. And also they were doing it really irresponsibly. And so now it's sort of shifting back like, oh, but we actually do want to be grid tied. We actually really want to be on the grid. Actually, the grid's really important. We want to do it. And it's opening up. Okay, well, if you want to do it in three years, we can't get you three gigawatts, but we could probably get you 250 megawatts. What can you do with 250 megawatts? And so when we were building data centers 10 years ago, even five years ago, if we came to the table and said we needed 200 megawatts, which was the most we would ever say ever, the answer would be like, no. But if we'd come back and said, well, we really need a 75 megawatts, the answer would have been yes. And so part of this is like the back and forth nuance conversation of how do you incrementally build power on the distribution system to match the incremental load ramp of the utilities. And that can really only happen with distributed resources, because you're not going to incrementally build a gas plant. You know, the economies of scale doesn't make sense. You're going to build it as big as you can, and with them smart, robust resilience, and with the cheapest output as possible. And that's what we'll get built in 2030. And that's what you'll run on. But in this like ramp rate, this is really the only way to build that like, you know, one for one block. So that's what I think is really important for people to understand in the new ones of this for why it's appealing to a data center ramp if we can get the structures right contractually. I totally agree. And I'm so glad that people say that because Duke is like. I think one of the big emerging themes from climate week from this market right now is that we're starting to get the contractual structures right companies like Baltis and base and Sparkvine are all I think centering around the sort of bring your own distributed capacity BIOC framework, you know, Google did a paper with Alliance of Safe Energy and AdHot Group. There's been a bunch of really great contributions. I think to the framework of how do we structure, transact, buy, and sell this stuff in increments that are both meaningful to their contribution to total growth right hundreds of megawatts or gigawatts at a time. But also how do you kind of divide up the value of who pays for what they want right data centers paying for premium capacity and resource adequacy above kind of ambient market but not enough to cover the whole asset price. And then you know, ultimately grid operators get and and therefore their customers and community members and or otherwise get discounted assets that make the grid better. So you know that that bring around distributed capacity model I think is really now the center of the fairway for this space and I'm excited as I've ever been that distributed capacity as a category is really arriving. Again, I think we're the third thing on the list of how to grow the grid but I think we're now we're now I think you're the third thing in the the totality of the gigawatts that have to be built but I I again like after the data center I don't say after the data center boom is done because that's you know a stupid statement but we still have electrification right we still have resilience issues with climate change where it's going to break down and we've talked about this before is like you've got this window here for contracting because you've got data centers are willing to do it because it also has the support ability lens it also has this good grid citizen lens of this community value you'll let which should be exploited and pushed as much as you possibly can through a bilateral negotiation. But the markets don't reflect this. So PGM's not valuing this. There's no signal yet in ERCOT for this. SPP unclear where that's going to go. So the long-term barrier to this is that we don't have an actual price signal for the value that this provides yet in an organized wholesale market. Unless the utility says, "I count this in my resource planning for the next 10 years, and therefore I am either A) reducing it from what I need in the market, or B) going to give it the accredited capacity that it's not going to receive from whatever operator. And that is the barrier. And if that doesn't get figured out, you could become less than a third in tools in the toolkit once the big power plants get built. And so I think that's what the focus needs to be on. Yeah, I know Pierre, you've been thinking a lot about this. Does that feel like the right gap in the market? Absolutely. We've been talking about it in concept, then two things become really clear. In a funny way, distributed capacity is most urgently related to building large loads connected to transmission. And also, that's the job that a lot of distributed capacity does the least well because it's not in the right place. It's not as electrically proximate as it needs to be to really take the constraint off transmission. So there's a lot of great work as a peak energy and base power study on this, the utilized coalition, which I'm a part of, has been doing work on this. There's some really good thinking on like, where do you need to put them? How do you need to operate them? What is the threshold of telemetry? How clearly does a grid operator need to see them to use distributed capacity? So I think you're getting two things at once in the context of how distributed capacity as a category can directly address and firm load growth in the transmission connected large load sense. And one of those is contractual, right? Carolina, to your point, you don't have a market signal. You don't have a clear regulatory structure. So how do you start connecting the economic flow of value? Large load tariffs popping up in multiple states. ESAs and bilaterals starting to add distributed offsite flexibility resources to those contracts and then bring around distributed capacity as a sort of umbrella category of a series of bilateral contracts where you can pay simply the premium that is valued by the offtake based on how much that acceleration and capacity is worth to them. But I think you also pointed Carolina something important, which is if it's true that, you know, it's sort of do or die for distributed capacity to be able to connect to this moment because the grid and the economy is largely downstream of the infrastructure cycle around data centers. I think we're going to get there. But I also think that when we look back 25 years, you know, in the future to this moment, we'll see that it was data centers that helped price structure and scale distributed capacity. It's the grid operators that will then build the new operational protocols, control room, dispatch signals and improvements that let them use it well, which is no small task. Grid was designed to grow, you know, to deliver power one way. So it's a non-trivial operational change. But when we look back, what we'll also see, I think, is that distributed capacity was even better at supporting the next waves of load growth that will go through electric vehicles and home electrification, which, you know, I was actually surprised even just the last couple of months to see graphs that even the eroded forecasts of electric vehicle penetration by 2040 are in most forecasts I've seen the same size as all the data centers. It'll be built for through 2040, right? So it's still a lot, you know, transportation is just a ton of energy. When you look at those old, like, you know, quad flow energy graphs, right, quadrillion BTUs, you know, cars take a lot of power to move around. So that's not something we talk about as much anymore, but it's going to be a long-term contributor. But it's hard to transact with. You can't do it by lateral contract with a million EV drivers as easily. I want to shift gears here. We could spend the rest of the time talking about contracting and frequency regulation and capacity accreditation. But I want to talk about why this matters. And there's a value exchange being created here. If we consider, for example, the capacity connect program that SparkFun is involved with, if we take a model like this here and do it in the right way, how do you create more local goodwill? I presume that you're not going to the customer site and talking about anti-slurry services and frequency regulation. So what are you talking about? How do you get these projects done? And ultimately, what is the goal to creating that local goodwill? Yeah, you touched on it earlier in a way that I really appreciate, which is the reason we're in a moment of backlash to major infrastructure proposals is not about any type of confusion or misinformation. In my view, a really, it's downstream of an authentic and real experience that a lot of Americans have of not trusting the institutions and the decision-making processes that in a lot of people's experience have just not delivered the results in their communities that they expected. And if they have delivered results, they've been hard to access or don't seem to reflect their sense of dignity and choice in terms of what their place should be. People of all types have a right to feel agent and participate in how these decisions get made. A lot of people just don't. And the decision-making processes and institutions that have been making these decisions for years haven't earned their trust, I think, for good reason. So what the data center backlash is, in my view, is a cry for control. It's a cry to say we're here. We have a franchise in our place and we want to express that in the world. And starting the conversation with that as a authentic lived experience that really is valid and real, I think leads to a whole bunch of other decisions. The way you would then tackle that, I think, is really different than if you think it's just confusion, misinformation or a lack of good PR. So with that framing, something I'm really proud of is that my belief is that what communities deserve is an engagement that creates an authentic exchange of value. So communities need to participate in the wealth of infrastructure creation, but they need to do that in a way where they know what they get, but also they know what you get. So our capacity connect model is a very small example of that. It's not the whole picture. There's a lot more work to be done in this space to build authentic exchanges of value in terms of how communities feel like they're participating in the wealth of infrastructure investment, but in the small act of renting the side of a parking lot to put a battery, you can, I think, create one of the clearest and best and most intuitive examples, both economically and politically of that goal. So I'll tell you a story in our capacity connect program in Excel. One of our first sites is a church in the Twin Cities. And the pastor who runs that church is great, a wonderful, wonderful fellow. And we're renting 5,000 square feet in the edge of his parking lot. It wasn't using it. And that's going to give that church over 20 years, you know, thousands and thousands of dollars a month for 20 years, right? That's a annuity that ultimately can go right to church operations, right? Hiring lay ministers or bringing new programs or food banks, right? So there's this really authentic exchange of, we're putting a battery in your place because we want to grow the grid. We want to power data centers. This was part of a program, right, that Excel brought to the PUC and was approved by the regulators. And then Google also was able to put money into to get capacity off the back end. So there's this clear participation model. And, you know, that, that community leader, that church pastor, can explain to himself, to his neighbors, to his constituents, we're part of this. Here's what we're getting from it. There's both an annuity to rent ground that's not a complicated explanation of bill savings or frequency rich or anything like that. It's just, you know, money for value. They know what we get. We get to build a battery. We make money on it. The grid grows. The data center gets built. They make money on that. And it also has a lot of great co-benefits, right? It can be proud to say that helping keep the lights on for his neighbors in that part of the grid, helping make the grid more reliable for weather events and better at handling renewable energy and intermittency. So there's really, I think, a good story of how to engage communities and have them see themselves in that story. Caroline, what does this represent to you? I mean, I know you're focused a lot on the distributed side as well. Is there a model here that you think is replicable and impactful in the way Pierre described it? Well, yeah, I just, I think that the, I think you have to break out the resistance to data center load grows. And it's a complex political conversation. And I think that there are, if you ring fence it to there are some people who rightfully feel like they don't have agency in what the country has set as our economic future, want to keep their sunset skyline, do not want lots of people driving trucks. in their neighborhoods. I don't think going to them and saying we're going to put a battery at your farm and give you a lower cost of electricity is going to get them on board. I think it is unclear to me what, well, and if they necessarily need to be, right? I think there is parts of America that should be allowed to say no. But then there is this interesting intersection of people who are both skeptical of the utilities engagement and highly skeptical of the data center hyperscalers motivations, right? Please use less power so I can use more, can be boiled down quite quickly. But in between these, there are motivated customers who I think, if they can see the broader benefits to distribute a capacity, can get on board with this. And I think that's sort of the overlap in the Venn diagrams that peers going after, which is that it's not politically tenable. And maybe it never should have been to say we need you to pay more so that these trillion dollar companies at this point of can meet their shareholder returns, right? So that their cost of power can be lower, or so that they can get online faster. And that's really what this has been articulated as. And I think that if you can insulate that portion, and that's really an urban portion, right? That's not the portion that's dealing with two gigawatt data centers rolling in next door. That's the portion that's dealing with, well, my rates are going up because two gigawatt data centers are rolling in 100 miles from the city center that doesn't make any sense, right? If you can isolate that portion, I think what's interesting about that, you know, going back to what we also said is like, that's also the portion you need for electrification and electric vehicles and resiliency plays, right? That's where you're going to start placing charging stations. That's where you're going to start seeing the ability for distributed capacity to meet those short-term signals. And so it plays nicely. I think what I would like, what I'm thinking about is like, how do you bridge this model to that reality? Because I do think it's short-lived in saying we're going to put this here that Google's paying for it or Microsoft's paying for whoever's paying for it. Your rates are going to go down and it helps them get online, but we're making a deal. We're cutting a deal here. And to already placing it into a future rate structure, market model that gets beyond the data center load growth onslaught. Because my fear is we're pricing things for a bilateral offtake. And we're going to be behind in like three years when electrification starts ramping up. And then we're going to be caught between having to repurpose or restructure or think differently about these pricing models again. So it's that bridge that I think about. But I think the Ben diagram is that's the right customer group to go after. It is not, of course, and I think Pierre would agree with this. It doesn't usage the nimbyism or the data center backlash of rural America, which is politically driving what's going on. Yeah. I'm kind of curious. I want to get your direct response to that Pierre. I also want to just use that as a segue into talking about what a playbook for local leaders could look like, which is something that you're thinking a lot about. So how do you start with like outcomes that community wants? How do you measure proposals against those outcomes being honest about the trade-offs? And so maybe respond to specifically whether this model, what this model does effectively and doesn't do. And then what the right framework looks like in practice? Absolutely. So society at its best is a weighing machine. And you get different groups who come to the societal scale and they put little pebbles and rocks and boulders depending on how much they care, how engaged, how upset, frustrated, worried, or excited. And that weighing machine is good. And it is not designed to have universal agreement or to kind of win it all. I think that the approach that I'm proposing is one where you would hope that by authentically engaging community members, right, churches, fire stations, schools, hospitals, small business leaders, with a exchange of value that's authentic and that's engaged with, you know, sort of what they get, what you get, you would build a constituency and a group that can show up in those societal conversations, not to say this fixes everything or, you know, we have no further concerns or we think our neighbor's concerns are invalid. But just to say, here's what we got. And that puts, you know, a little pebble, a rock on the other side. And sometimes in these civic processes, permitting zoning utility commissions, you don't need absolute agreement. You need a balancing of voices to show that there are trade-offs to your points, even, and that some people get value, but others have real concerns. And then it's the job of local leaders to try to do the hard, slow, patient work of working through the concerns, building structures that address them, substantively, and honestly. And then celebrate and tell the stories of the parts of the community that are really coming along, both in terms of wealth and value. Caroline, is America capable of that? And the midst of this AI frenzy? I think, listen, I think that, and I mean, I feel like I'm beating a dead horse here. I feel, I feel like the voter base that is utilizing AI, that sees the economic benefits of it is largely urban. And that is the voter base of which these type of solutions appeal to. And so yeah, that works. I think the voter base that doesn't think AI is going to make their life better because they are pig farmers. This doesn't appeal to. And so it is a weighing game. And the way we sort of structure our political lines right now, I don't know that there are urban AI users have some of the weight in some of these state races. So that's the difference here. And I like, I'd be the first person to say as someone who is actively trying to buy farmland, like, yeah, I wouldn't want to put a data center in my skyline view of the mountains and farmland, you know? So I think that it's, it is a question of agency. And I will also say this, I think it is interesting that the, the tools to get buy in into the economic value creation of AI are being relegated or delegated to small suppliers and innovative energy startups and are not being required of these large behemoth tech companies that are essentially running our GDP right now. I just think it's interesting that the entities that are trying to make this bridge that are trying to solve this problem are very low capitalized startup or energy supplier companies compared to the amount of money that's going into it. So I'll leave it at there and you can get a lot of YouTube comments on that one. And there's a cynical way to look at that. And then there's a hopeful way, which is that the great thing about an innovation economy is little companies come up with good ideas. Oh, no, sure. That wasn't, that wasn't a comment on, on the little companies. I think it's a strange little companies like, oh, I know, I heard it. Little companies are taking are doing some phenomenal work. And my question is, at what point do we as people be like, nah, you got to give some more buy in for this? Like, oh, no, I heard it that way. Yeah. My point was that the way that this history will be written will really determine, be determined by how much those big companies actually adopt those good ideas, how quickly they can sort. I think so. I think so. And say, okay, you know, that's right. I agree with you. But Steven, happy to go back to the point about, you know, starting with outcomes and what that looked like. That'd be good. Yeah. So very proud of the work that we're doing in this space with Spark Fund and distributed capacity and kind of that model we've described. But one of my side projects is a group called Abundant America, spending a lot of time for the last several years doing some of this work with sort of local leaders sitting down and doing dinners and workshops, thinking about how these decisions get made. And when we started that work three years ago, it was meant to be much longer term and less applicable to the current political cycles. It was really a curiosity about how local leaders could slowly but surely begin to restore faith in our institutions by bringing tangible results to their communities. And we think that the best way to restore trust in that process of shared politics is actually to start at the ground level and that the signal and the noise of American politics is sort of the presence or absence of results and how clearly you can communicate them. But. It's been interesting over these years of doing that listening work and shaping work. Giving ourselves a permission to slow down a little bit and hear those voices of mayors and town council people and state reps and county council folks, that the pattern that's emerged is how frustrating it is for them to be constantly in reactive mode to these big proposals and have so few tools to enumerate the benefits to engage the people. They love their places, they work for these people and it's so hard for them to be able to do their job when there's this incoming proposal that they didn't see or shows up into a zoning board or was under NDA and gets the covers taken off and it's frustrating. So we heard that again and again and what came from that was a series of working sessions with local leaders where we actually asked them to say what's hard, what's easy, what would make your job better and write that down. And we came up with a really simple, simple almost to the point of naive answer to that but it was brought to us by local leaders doing this work at the level of town council, state reps, rural places mostly and we call it the playbook for local abundance and the simple idea is start with outcomes, engage your community in listening sessions, put up a posted board in a town park, hold sessions in a library and ask some really intuitive simple questions which is what do you love about this place? What's been difficult? What would make it a better place to raise a family or have a job or start a business? What would you see that would make you excited about your town or county and when you have that input then it also gives you a leader an opportunity to talk to other leaders and say what's happening in your place, what's going well, what is what are you able to achieve right? And you know, how did you cut your property taxes, how did you double your school budget, how did you get a new county athletic facility, how is that gone? And if you start with outcomes then the second key phase of the playbook is commit as a leader to measure every proposal you get against how well it delivers those outcomes. That's the job that you want to do for your town or your place. I wonder what you're articulating is almost exactly what we should be expecting out of development from the data center industry as well as the power development that goes along with it. And that's sort of been, it's been lost and I think everyone agrees even the hyperscalers agree like they didn't do the work. They focused on a jobs number to maintain sort of their status for tax and that was, you know, when you had a dozen 200 megawatt data centers that was probably sufficient, right? And so like you're moving into this new space. But what you're really articulating is a valuation score for infrastructure and for the development of infrastructure, which has been reduced largely to two metrics, which is how much does it cost? Jobs, taxes. Exactly. Exactly. How much does it cost and how many jobs is it going to bring? And I think that that is really insightful and I also think that it's something that really should be, and you're seeing this in Texas right now, right? They paused everything, asked for this audit intuitively. If you look at this audit for the data center, if you look at this, there's like, well, there's no way you could really answer all of this unless you're one very, very far along in the development into, you've actually engaged your community, right? And that's essentially what I think Abbott is saying, which is that if you haven't had a town all and figured out if they want you there and what it's going to take for them to want you there, then you're probably not going to get through the political gauntlet of building a data center here. And so I wonder if all this nimbyism in insecurity about infrastructure, the first time we really had a lot of insecurity about building new infrastructure is going to create a new value system for what we think the built, broader built environment should do and bring beyond taxes and jobs. Because let's be honest, the jobs component is not part of this in terms of the data center space. They're not bringing the same sort of direct jobs, right? Well, and that's just not enough, renting more right jobs in taxes. If you're this type of nerd where the pillars of a neoliberal political order, it's gone. We're in a chaotic moment between moments. If you want to dive into that type of nerdy, you can go to our website, the button miracle will put the link somewhere. But you've got a great sub stack and you're writing about this occasionally. So everybody should check it out. We'll provide a link in the show notes. And I think that the, to come back to your point, Carolyn, yes, the best and most successful infrastructure development projects transmission has often done a great job at this. Sometimes not, but sometimes they have, they've shown up, they've had listening sessions, they've really authentically asked, what do you want for your place? The best data center developers have done it, right? Project Camilla down in Savannah, right? Fully transparent, yes, yes, yes. Right. With Georgia Power and OpenAI, I just did. So there's some, there's some good examples of that. But I also want to be clear that the work that we were doing with the button America and these local leaders had nothing to do with data centers. Most of the time you were talking about housing redevelopment or county roads or how to do, you know, you know, athletics centers or deal with school districts or build public pools. So I think that the reframing that we're offering is, if you go broader and think about this, not as about one particular type of infrastructure and also not as the job of a developer, because clearly they're not that good at doing it, despite a few bright spots. The people in the United States who are good at it, who have the local trust, the local knowledge, what we call gross restore accountability, right? People, I always say, you're a leader who makes a decision and you think there's even odds that someone stops you in the grocery store and says, Hey, let me talk to you about that. I think just first principles, you're going to make a better decision. And you also know more about what results your place actually needs. And so in those contexts, right, local leaders are the people in the United States who should be doing this work, who can be going through that playbook for local abundance and saying, what would make our place better and more flourishing. And in the end, you also have to be real about tradeoffs, right? Because if you do a housing project versus, you know, upgrade the local, you know, athletic facility or a water treatment plant or transmission or this and are all of those take time, money, space. So that's, that's the simple idea. Start with outcomes, commit to measure. Connecting the two and saying like, most the time where it falls down on the datacenter development piece is they just don't know what's going to make that community happy. And they don't have the time because, again, they're running on a different signal. So like, if that work is done and you're like, here, this is how we go. Here does here are outcomes. Not bought in community to a body community because we need this daycare. We need this training facility. We need our, you know, our, you need a new town hall. We need whatever it is that you need, like, having, well, they'll come up with things that a datacenter operator would never think of, right? Right. And that, and that we've talked about this before. But like, it is so key for a negotiation for both parties to know what they want. And the datacenters know what they want. And the cost of giving the communities what they want is usually negligible to what they could be risking by not being able to build their infrastructure. But the communities have to know what they want. And they have to be able to vocalize it. And I think that that is missing often. And in the absence of knowing what the communities want, they come in with their, with their PowerPoint presentation. I mean, this is a joke that Pierre was saying to me yesterday, which is like, they come in with their PowerPoint presentation and say, we're going to pay for, you know, this soccer field or this facility. And, you know, what, what, how did you describe it here? Like, usually when the person comes in with their fancy presentation and saying, we're just going to buy this for you that, like, people see that as the bad guy. Well, there are two points there, right? I mean, I grew up partly in rural Appalachia, partly in the south and partly in the north on the hybrid. And, you know, I can imagine my grandfather at the cattle farm in southwest Virginia, very few conversations in that community ever started with a deck or someone saying, let me run through a few slides before we get started here. It's normal too. So there's just this, yeah. And we built this very, you know, this is a very common thing in the, in a kind of professional, technocratic way. Yes. And so there's this date, first of all, this first principles, strangeness, when you walk into a room with a bunch of poster boards, and they're like, we're being transparent about information. I like, why do you all make all these graphics? This is cold. What do you want? Like, what is it? Well, why did you go to all this trouble? And then I think the more important point, and I see this really as a risk, genuine risk of getting this wrong, particularly from data centers, but also transmission, you know, I'm in conversations about how to navigate through this community, you know, engagement issue all the time. And one of the things I hear is, well, just increase the benefits and make them just so good they can't refuse, right? And we'll just, what do you just pay for the power bill of a whole school district? Just buy them like a stadium or pay for everything, right? Pay for the whole town who cares? And they're like, you know, from my perspective, I think this is, by the way, if your listeners out there, if you're from a certain part of the country, you're gripping a real area, this should just be like, I'm sure it's already in your head, but you're like. That's the bad guy. That's the one who wants something. I don't understand that. I just think that there's this tone mismatch that's, by the way, quite well-intentioned. I really think also having worked in the space that the good news is that these developers of transmission, of housing, of critical minerals, of digital infrastructure, all of them sincerely want to understand what these communities would need to be better, right? They want to be part of the story. They want to be the good guys. And some of the mistakes that they've made are simply because, frankly, these are good people who have their own cultural way of thinking about things and they're not used to being the bad guys. And so we're in this difficult moment where we're receiving each other across that gap. And yeah, I think that's the simple point. I think local leaders can really, if we give them the right tools and the right framework and we can really help them bridge that conversation. And like you said, kind of be more clear about what a community wants, whether it's housing in a grocery store or whatever it is. - Yeah, or they just want to say no. That's awesome. - Those want to say no. - That's right. - Yeah. - That's an outcome you can measure things against. - Exactly. (laughing) - Caroline, to wrap this up, I mean, you're in a unique position to answer this question because you've spent so many years at Google. You know, you have a significant local engagement at RG. What do you think, like let's take the tech companies as an example? What is missing? You know, having talked to them, they had these very robust community engagement teams. They do have all these positive stories about, you know, buying a school bus or a laptop program or a science program or whatever it is. And communities have historically been happy. But like, why are they falling short right now? And what needs to change to like get closer to this framework? So I think when, you know, three or four years ago, when the data center community writ large recognized just how much capacity was gonna be needed, also, the energy strategy shifted. The strategy for community and political validation did not shift fast enough. And it focused for a long time on defending rather than proactively engaging and creating buy-in. That's one variable. The second variable is when everyone started to realize how big the pie was, you got a flood of new two guys in a data center trunk entrance into the market. And Jigger said this a million times, the hyper-scaler community both needed those and hated those entities. Because we needed them for fungibility and optionality on a landbank strategy and in potential interconnection. But we hated them because they were irresponsible. They did not have political acumen and they were sort of running around creating a mock problem. And that division within the industry is severe and is shaping both the political headache for, I think, the larger tech companies who believe that they will be around for the next 100 years, right? And so they appreciate the necessity to get political buy-in even if they didn't build the machine to do it well. And those that are really looking to just flip and make a couple hundred million dollars and move on. And I think that the hyper-scaler community is not gonna rain in the two guys in the data center trunk. They're gonna try to differentiate and you kinda see that happening with the trade groups now. And so the two guys in the data center trunk world is gonna be left for the legislature and the governors and the county commissioners to decide. And then if they're smart and some of them are, the large tech companies will use that division to determine what responsible infrastructure looks like and box themselves into a solution and that community out of it. So Pierre to wrap this up, we're in this moment of just extreme tension and anger. And I'm hearing a lot of optimism from you. Do you see this period as an opportunity to flex the local muscles that you're talking about here in this interview? - I do. And I think it's important to recognize that while data centers have made this issue central to energy that made it more urgent. This issue existed long before. We were having this data center conversation. Right, which is why the work we started with the Monday America was before this moment. And it was about housing and rural infrastructure and transportation and things like that. And I think those issues were there before. They'll be there in the future. And the opportunity is really to recognize that we have this sort of civic fabric. I often say that one of the great tasks of the next chapter of American politics is to fall back in love with civic engagement as a task and fall back in love with that grocery store accountability and take real pride in. - It's very analog of you. - We started talking about roller skates, right? So, I think you're right. - But I do see that opportunity. And I think what's hopeful about it is it's decentralized. It's simple. If you're a local leader, town council person or a mayor listening to this, start a listening meeting. Ask your constituents what they want. Write it down, commit to measure proposals against it. And be honest about the trade-offs and publish the proposals you're seeing on a town website, right? Go make the website. With AI, ironically, the tools are in our hands. And this moment I think is it's operationally simple. It's hard, it's slow. We have to be patient. But it also I think can like many beautiful decentralized systems. If it started in enough places at once, all of a sudden become the normal way to think about knowing what communities want and how they can see themselves reflected in this incredible infrastructure boom and opportunity. - This is the only thing really bringing the right and the left together to sit down and hash out what they want in a shared future. Then like, I say let's lead to that. - That's right. That's one of my colleagues at work said, "Well, at least it means democracy is still kind of working." You know, and I think that's true. - To be clear, we started the work with a butt in America in Alabama and West Virginia where my wife and I live and say it's like New Hampshire and Minnesota and gone, done meetings in Texas and California, right? And so this issue resonates all over the country. Not just about business, but about how we can use local leaders and decision making to restore trust in these institutions. And you know, for Lucky, start to build an abundant America from the ground up. - Pierre Lafarge is the CEO of Spark Fund. He is the co-founder of Abundant America, having spent some time with Pierre and have him explain this platform that they're building at Abundant America. It is incredibly inspiring. And you can read more about his thoughts at Abundant's project at Substack and we'll provide a link to it there. Pierre is also going to be speaking at Flex Summit. So if you liked this conversation, you can come riff with him. He is a really good conversationalist. So come to Flex Summit on October 14th and 15th in Austin, Texas. And our podcast listeners get a 10% discount by using the code Pod's 10. So come, see us all and we really appreciate it Pierre. This was just such a fun conversation. Thank you. - It was a great conversation. Thank you for having me on. - Caroline Golan is the Chief Growth and Policy Officer at NRG. We're sorry to miss you, Flex Summit. - I know, it's okay. You've got Pierre and many other great speakers. - Good to see you. - See. (upbeat music) - Open Circuit is produced by Latitude Media. The show is edited by me, Sean Markwan and Ann Bailey. You can find all of our episodes anywhere you get audio podcasts, Apple and Spotify and whatever else you use. You can find our transcripts at LatitudeMedia.com. While you're there, subscribe to our newsletters, get all our industry coverage. We are covering the flexibility, utilization, debate and momentum at the website. So we've got lots of in-depth coverage there. And you can find all of our episodes to watch on YouTube at LatitudeMedia's channel. Thank you so much for being here. I'm Steven Lacey and we will catch you all next week. (upbeat music)