In two weeks, Texas will observe the five-year anniversary of Winter Storm Uri — the devastating 2021 freeze that drove electricity demand to unprecedented heights, froze gas lines and plants, and triggered a blackout that darkened nearly half of the state.

The anniversary will come just days after the latest arctic blast hits Texas; this coming weekend, people across the state will likely see lows well below freezing, as well as snow and freezing rain.

It’s meaningful that state leaders expressed confidence this week that “there will be sufficient generation to meet demand this winter,” thanks both to five years of weatherization efforts and burgeoning supplies of renewables, especially batteries.

But as this week’s Energy Capital Podcast shows, the defining grid issue in Texas is not simply whether it will survive the next extreme weather event.

It’s whether Texas can serve skyrocketing load growth without once again facing the systemic risk that Winter Storm Uri exposed.

Former Texas PUC Commissioner Will McAdams joined The Energy Capital Podcast to reflect on what really went wrong five years ago, how Texas legislators and regulators responded, and what has to go right next.

As McAdams notes, Uri was not a single failure — it was a cascading series of failures.

“There were a number of events that occurred that stacked on top of each other. You had generation outages, you had frequency issues, you had other generators tripping offline as they tried to arrest the frequency freefall of the system. And then that led to deep load shed, situations where power was curtailed to the entire energy system. So it was a series of dominoes that ended up falling.”

In the years since, the state has bolstered protections against extreme weather. ERCOT now conducts regular winterization inspections of generators, McAdams said, and the Public Utility Commission has authority to hold generators accountable.

“ERCOT has hired hundreds of inspectors that go out every season to inspect to those standards… the PUC can fine [generators] up to a million dollars per day per incident where they’re out of compliance.”

The state’s booming battery storage industry has also changed the game. In 2021, Texas had less than one gigawatt of batteries on the grid. Today, it has more than ten times that. McAdams said that dispatchable battery capacity can transform the way the system responds to a Uri-like emergency:

“If we had had the batteries that we have today during Winter Storm Uri, those batteries would have instantaneously reacted. They would have arrested the frequency freefall, stabilized the system, and bought time for other generation to respond. That doesn’t mean it solves everything, but it changes the dynamics dramatically.”

That helps ERCOT navigate extreme weather — and accommodate massive load growth.

ERCOT’s large load interconnection queue grew nearly 300% last year, with large industrial and data-center loads seeking service at a scale ERCOT has never managed before. But just as he expressed confidence about the state of the grid heading into next winter storm, McAdams said the state is well-positioned to serve the economic growth that’s coming.

“This feels unprecedented because of the size and speed, but Texas has gone through major load growth before. After World War II, with the buildout of air conditioning, we saw huge increases in demand. And we innovated our way through that. That’s what we’ve always done.”

Five years after Uri, Texas is more prepared than it was in 2021. The grid is bigger, stronger, faster, and safer. That will matter this weekend, helping keep the lights on when the cold temperatures arrive. It will matter even more down the road, as large loads come to Texas.

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Timestamps:

* 00:05 – Intro, Will McAdams

* 01:19 – PUC path, lessons from Uri

* 05:20 – Weatherization rules, what changed

* 07:33 – Demand growth, defining decade

* 09:38 – Building generation, lead times

* 11:45 – Why bills rose, T&D costs

* 16:32 – DERs and new grid tech

* 20:50 – ADER, dispatch at distribution level

* 22:38 – Flexible demand, smart load shifting

* 26:51 – Deferring wires, market incentives

* 30:31 – Batteries, volatility, price impacts

* 32:41 – Transmission vs DERs, politics

* 35:17 – What Will is doing next

* 38:52 – Final thanks and outro

Resources:

Host, Guest & Company

* Matt Boms - LinkedIn

* Texas Advanced Energy Business Alliance - LinkedIn

* Will McAdams - Linkedin

* McAdams Energy Group - LinkedIn

* Texas Lobby Strategies

Books, Articles, Reports Discussed

* The Value of Integrating Distributed Energy Resources in Texas - TAEBA

* Aggregate Distributed Energy Resource (ADER) Pilot Project

* Winter Weather Readiness - ERCOT

Related Podcasts • All Energy Capital Podcasts • Flexibility Driving Reliability and Affordability with Matt Boms• How AI Data Centers Can Go From Villain to Hero with Varun Sivaram

Transcript:

Matt Boms (00:00.0)

Hi everyone, I’m really excited to welcome Will McAdams to the podcast today. This is a really exciting chapter in our state’s energy history and I am very excited to be joined by an amazing guest today. So thank you so much, Will, for joining.

Will McAdams (00:22.156)

What a privilege, all right.

Matt Boms (00:24.088)

Will is a former commissioner at the Public Utility Commission of Texas. One of the architects of Texas’s modern grid reforms after Winter Storm Uri. At the PUC, Will helped establish some of the most stringent power plant weatherization standards in the country. He also led the creation of the ADER pilot program, the first program in the U.S. to allow virtual power plants to provide reliability services to a major grid. Will also represented Texas at the Southwest Power Pool.

Matt Boms (00:54.274)

shaped regional energy reliability policy, and he also served in senior roles in the Texas legislature. Will is also an Army veteran, and I want to thank him for his service on the podcast here, and really just for your leadership, Will, in the state of Texas, and just to say thank you on all of us who work in the industry, because we are all following your footsteps, and just thank you for playing such a pivotal role in our energy policy.

Will McAdams (01:17.784)

Glad I could help Matt. Thanks.

Matt Boms (01:19.714)

So I wanted you to take us back in time here. You stepped into a role in probably the most dramatic grid event in Texas history. We’re coming up on the five year anniversary of Winter Storm Yuri. So if you could just reflect on that and what was going through your mind in the first few weeks when you were appointed commissioner.

Will McAdams (01:39.554)

Yeah,

Will McAdams (01:40.034)

the first thing I had to do was try to figure out what happened. And, you know, there was information for public consumption and then there was information that we needed just to figure out the mechanics of the disaster, the crisis, how it unfolded, the sequence, how one step led to another that resulted in such deep and long lasting outages, which resulted in loss of life and property damage and just devastating economic effects for the state.

Will McAdams (02:09.695)

And we did that. So that first week was just a series of calling in, you know, former colleagues, friends that I knew in the industry and just asking them point blank in front of a dry erase board, what happened? And at some brutally honest answers, a lot of it was very fresh for them. A lot of them were picking up the pieces to businesses, to facilities that were damaged by the crisis, power generators that were wrecked.

Will McAdams (02:38.38)

We really had to rebuild the system, rebuild how the system operated together and take a look at how to hold people accountable and how to check that this never happens again.

Matt Boms (02:48.118)

Yeah. And obviously we’ve got a lot of folks now asking questions at the five year anniversary of how are we better prepared now than we were five years ago. And I can’t think of a better person to ask that question to.

Will McAdams (03:01.102)

Yeah, actually, I was speaking with a new commissioner not that long ago. And they asked me if I thought we were ready. And I said, point blank, absolutely. And the reason I said that is because in my experience in that first week, asking those questions, how did this happen? What happened? You got to remember how the event transpired. We had 14 days of...

Will McAdams (03:25.504)

weather forecast that showed that as that storm crossed the Great Plains, was building power, speed, force, temperatures continued to drop. As it moved into Texas, it brought freezing rain and we lost four gigawatts of power generation in less than 30 minutes, which is unheard of. That caused frequency variations and volatility on the system that ended up tripping up other essential generation as they were tried to arrest the frequency freefall of the system.

Will McAdams (03:54.464)

And then that led to deep load shed situations where power was curtailed to the entire energy system, the natural gas system that was moving gas molecules along the pipelines to power generation plants. And when those molecules stopped, when the power was cut off, they froze in place. And that led to even longer lasting blackouts. And we didn’t come out of it for another four days. So it was a series of dominoes that ended up falling. And I want to point out

Will McAdams (04:22.604)

Because of that frequency anomaly, because the stability of the system was the first trigger that began leading to the cascading outages, we only had one gigawatt of batteries on the system at that time. One gigawatt to 1.5 gigawatts. If we had had the batteries that we have today, then there would have been no frequency volatility on the system because those batteries would have instantaneously reacted. They would have arrested the frequency freefall, stabilized the system, allowed the gas fleet to catch up.

Will McAdams (04:52.722)

And we may not have had any outages at that time. mean, we don’t know. It’s really, you know, Monday morning quarterbacking five years later, but that was a critical capability that we did not have. And so today, instead of one gigawatt of batteries, we have 15 gigawatts of batteries, 11 to 15, many that are in development that will be energized in the next three months before summer.

Will McAdams (05:20.654)

And then, as you stated, we imposed the most conservative and stringent weatherization requirements in the entire United States in the aftermath of that. And we imposed an ambient weather temperature standard on our entire generation fleet, where if you’re in the panhandle of Texas, you have to weatherize your power plant to a minus 17 degree standard. That necessitates you wrapping pipes. That necessitates you putting up windshielding. That necessitates you putting in space heaters and making sure that

Will McAdams (05:49.428)

intake valves or steam vents don’t freeze up. You’re going to have to take steps and you’re going to have to have people there before these weather events to maintain them throughout the event. And our generators have done that. And not only that, but ERCOT has hired hundreds of inspectors that go out every season to inspect to those standards. And if those generators don’t meet those standards, there’s fines that start to apply. And the PUC can fine them up to a million dollars per day per incident.

Will McAdams (06:19.138)

where they’re out of compliance. That’s in the statute. So our power generators take this very seriously. The PUC takes it very seriously and ERCOT takes it deadly seriously. So you won’t have the catastrophic cascade of events like we had in URI. That sequence is disrupted. Now it’s not to say we’re not going to have outages in the future. We’ve got a lot of load growth. We’ve got a lot of

Will McAdams (06:45.664)

new industrial development in Texas, the economy is booming, it’s growing. And the grid hasn’t caught up to that. And it’s going to take years for that to catch up. So you’re going to, you may have temporary disruptions, but you will not have the long lasting outages like we saw in 2021.

Matt Boms (07:04.814)

Yeah. And so you hinted at this and we’re entering this new chapter in Texas Energy and it’s, think no one knows exactly where this chapter is headed. We have an idea of how much load is coming online over the next few years. Looking at the interconnection queue, about 2000 projects adding up to 435 gigawatts, which is more than five times the peak demand that we have today. And so the question I want to ask you is, are we entering

Matt Boms (07:33.452)

the most consequential decade in Texas grid history? Are these decisions gonna define what our grid looks like here moving forward?

Will McAdams (07:42.496)

Look, I’d advise everybody not to, you know, let the magnitude of the moment just cloud their perspective of history. We’ve seen this before. Load growth after World War II and air conditioners started becoming ubiquitous. It was pretty extreme. And Wall Street Journal has published graphs of basically the big spike in the 1950s and 60s after the home builders started building out all the ranch style homes for all the GIs coming back, settling in.

Will McAdams (08:11.66)

The middle class boomed and that drove large scale energy consumption growth for almost three decades, two and a half decades, 1950s and 60s leading into the 1970s. That’s why all the nuclear power plants were built during the 70s to satisfy all that load growth. But then globalization happened, industries moved overseas. We’re just coming off of 25 years of negligible load growth compared to that historic comparison.

Will McAdams (08:41.078)

And that’s why we think this is unprecedented, but we’ve seen this before and we innovated our way out of it. We grew our way out of it. And that’s what we’re going to do again. And that’s why you see the PUC policymakers, state legislature, and basically businesses of all shapes and sizes collaborating to become innovative. And how do we incrementally allow energy consumers to receive grid service over the next five years? And you threw out.

Will McAdams (09:10.146)

very large numbers, you know, the amount of energy consumers that we have in queue that want to receive grid service, they are not all going to be served in the next five years. There’s not enough capacity of either delivery capacity, like the wires capacity outside of your homes and towns, or the high line capacity to move power over great distances to serve that need at the moment. So we’re going to have to build that and it’s going to take time and there’s not enough supply right now.

Will McAdams (09:38.914)

So there’s not enough power generation units in the state to serve that amount of supply. So that’s going to take some time. Everybody’s going to have to be patient. And frankly, we need to be creative about old systems that we hadn’t, you know, looked at for efficiencies for 50 years. We’re going to need to reevaluate that and see if new technology can be brought to bear to more efficiently utilize existing systems in the intervening years. The grid that we have versus the grid that we will have.

Matt Boms (10:06.954)

Yeah. Well, I think on that point, we’ll take us through some of the load growth that’s coming because the one you hear most about is certainly data centers and AI. What you don’t hear as much about would be on the industrial side, on folks moving to Texas from other places. There’s a lot of other key factors here that are driving load growth in Texas, not to mention our booming economy. So the question I have is, do you have some really creative solutions for how you can meet that load moving forward?

Matt Boms (10:36.822)

And if you can touch on how you can limit costs to rate payers, think that’s going to be a really important piece of this, right? It’s like the pie is expanding for everyone. How do you keep the rates low for millions of Texans who ultimately have to pay their electric bills at the end of every month?

Will McAdams (10:51.916)

Yeah, everybody, and I was really sensitive to this when I was at the PUC, but all former commissioners are sensitive to affordability of power. And look, there’s two parts of the electricity bill. If you’re a Texan, there’s the energy and then there’s the delivery charge that it takes to move the power to you. Okay. The energy is by definition deregulated.

Will McAdams (11:14.786)

That’s basically going to be a combination of whatever the fuel cost is, know, whatever gas you’re burning to make the electricity to power your home or renewable energy, which is zero marginal cost. And it’s based on the market, wherever it settles. That’s what you pay. The delivery charge is regulated. Okay. So that’s based on how much that big power line cost over 30 years. You divide that up by 30 and you give a return on the investment to the utility to manage it.

Will McAdams (11:45.056)

And that’s what you see in the delivery charge on your utility bill. And, you know, that number stayed relatively constant with little blips over 25 years, but now we’re in a growth cycle. So we need new infrastructure. So the delivery charge is actually going to start to incrementally go up on people’s bill. Traditionally over the last 25 years, when we didn’t have big industries moving into Texas, other than oil and gas, which is traditional industries.

Will McAdams (12:14.712)

the big energy consuming industries. Basically, our load growth consisted of air conditioner based load growth of normal people living in their homes, turning on the AC at four o’clock in the afternoon in August. And they would get charged a lot of money for doing that because the energy is expensive and the delivery charges were applying. And there wasn’t a lot of other industries to spread the cost over. So there wasn’t a lot of other

Will McAdams (12:43.426)

Businesses to socialize the cost that average Texans were paying for because the average Texans were driving the need case for the new infrastructure. That’s how costs are assigned. So here’s where this moment is an opportunity for Texas. For the first time in a long time, we’ve got some big businesses moving in that are starting to put in some major pieces of investment. And they’re going to consume a lot of energy. And every electron that they consume, they’re going to pay a delivery charge on.

Will McAdams (13:13.792)

And because they’re consuming more, they’re going to socialize the cost of all the infrastructure that’s coming in across a broader base of ratepayers. Because of that, that should incrementally reduce the need for residential ratepayers to pay more of that regulated cost. It actually should bring down electric rates over time. But here’s the trick. You have to synchronize

Will McAdams (13:43.112)

grid of today and as they’re building out, you have to continue to allow those large industrial consumers to incrementally keep interconnecting and receiving grid service so that they can pay their regulated delivery charges and take the burden off of the residential consumer. And so there’s a tension there because you still need to safely integrate those large loads.

Will McAdams (14:09.43)

So you don’t want there to be a lag in the big new transmission lines being built and those costs being imposed on people and new loads coming in to help pay for it. And so that’s the situation we find ourselves in. We’ve never had loads of this size requesting grid service. When you have a facility that consumes as much power at a single point of interconnection, a single point of grid service,

Will McAdams (14:39.192)

that’s the same level of consumption as the greater Los Angeles area in California. That is something we’ve never seen before. And we are technically trying to figure out how to safely manage, that grid service to that consumer. And that’s something that our scientists, our industry, our researchers are all trying to figure out right now. So,

Will McAdams (15:07.714)

That’s why we, in these intervening years, in order to keep consumers’ cost down, we need as many innovative solutions as possible to support grid resiliency, to support grid reliability, to allow consumers to take themselves off the grid if they want to. That means solar panels on houses, batteries on the back of houses. Put that both systems on businesses.

Will McAdams (15:35.072)

allow them to take tax deductions, allow them to invest in the grid, and then create mechanisms like we did with the ADR pilot where they can participate in the market and help align their interests with the reliability and affordability of the system. And then hopefully, if enough of that starts to happen and allow technology to manage that, if enough of that starts to happen, that starts reducing costs in and around the concentration of those consumers for everyone else.

Will McAdams (16:03.17)

because they’re producing, storing, and discharging power when those people in and around that system most need it. And that’s the beauty of the sophisticated grid that we’ve built. There’s an opportunity. It requires our regulators and our grid operators to be innovative. And I know that’s a hard ask because they want to retreat to the means of providing power that they’ve known for the last hundred years. But we do have

Will McAdams (16:32.002)

brilliant new technologies coming into the system. We do see how these are being employed in other areas of the world. And it is supporting reliability and affordability. So we have test cases that we can follow. And frankly, Texas has always been a leader in these approaches and we need to continue that tradition.

Matt Boms (16:52.482)

That’s great. Well, and I was going to ask you about the AIDR program specifically. So I’m happy you brought this up. You played a really important role at the commission in spearheading the pilot program. It has grown to, I believe, seven aggregated DER pilots that are currently running over at ERCOT. And it feels like we’re at a pivotal moment now where it should be moving from the pilot phase to becoming just a fixture in normal ERCOT operations.

Matt Boms (17:20.907)

What do you see as the next logical step? mean, there were the discussions over telemetry, interoperability, all the technical hurdles, and it feels like we’re at a point now where most of those hurdles have been cleared, but is there some more unlocking that needs to be done as far as the real economic value of these distributed resources?

Will McAdams (17:43.04)

Yeah, I mean, especially now where you have these large industrial consumers coming in, that’s going to impact prices on a neighborhood by neighborhood basis on a very granular basis. right. And our market system in Texas is hyper sophisticated in that it receives price signals based on the substation that’s outside of your neighborhood. OK, that’s very locationally driven.

Will McAdams (18:10.274)

The ADR pilot was never able to receive what we call locational marginal prices, which is that nodal price at the substation that’s outside of your neighborhood. And the reason was, is because it’s based on aggregations. So you have a, could have a concentration of homes in disparate areas within a certain geographic territory. So take Centerpoint. Centerpoint covers what we call Houston zone. It’s the city of Houston.

Will McAdams (18:39.598)

3.3 million people, actually closer to four now. Most of the Houston Ship Channel, all that industrial activity, it’s the economic engine of the state. They only get a price point that’s settled on a regional basis. And that dilutes the overall value for anybody wanting to participate in the program. But if someone living in Pasadena, okay, right there on the ship channel, right there next to Exxon and Chevron’s industrial plants,

Will McAdams (19:08.782)

Those industrial consumers consume a lot of energy and the the nodal price at that substation is really high because they’re consuming a lot of energy and they need a lot of energy. So if someone was able to put solar panels and a battery in the Pasadena area next to the substation, next to the Chevron and Exxon refinery and produce more power, generate more power than they ultimately consume, if we had prices that were set just like we do on the regular market,

Will McAdams (19:38.346)

at that substation, that household would be able to make a lot of money. And that would demonstrate value for them. And that would demonstrate value for any of their neighbors who want to do the same thing. And then you have like a replicative effect across entire neighborhoods, cities, regions. And that is the system we need. And as these new loads come in that are so big,

Will McAdams (20:05.888)

If they should trip offline, if we have a system of batteries at every household or at every business that could help absorb the shock and help re-stabilize the system, those business owners and Texans are assisting in resiliency and reliability, which is the spirit of how the market’s to work.

Matt Boms (20:25.582)

That’s the competitive market that we have in Texas and that works so well. Yeah, so what’s stopping us from getting there? Like it feels like you can go down the list of categories that were number one and fill in the blank, number one in everything, but on distributed resources, it does feel like there’s more work to be done. It does feel like we could be setting the standard for the entire country. What is it going to take to get there?

Will McAdams (20:30.102)

a real world experience.

Will McAdams (20:50.754)

technology. ERCOT has been testing, expanding, and conducting exercises with new technology to see how safely they can settle aggregations of energy dispatch on these very small levels, in these distribution levels, to see if they can actually safely dispatch energy on a neighborhood-by-neighborhood basis, on an area-by-area basis.

Will McAdams (21:19.638)

so that they can actually apply those values on a nodal basis for the ADER. If they can, this opens up the entire distribution system for resource development. This would allow gas stations, warehouse owners and operators, apartment building complexes, residences of apartment buildings or cooperatives to experience the value off the energy system and tie the realization of that value

Will McAdams (21:49.518)

to reliability, resiliency, and energy security of the system. That co-optimizes and aligns everyone’s interests. And I think we’re right there. It is my hope in the next six months to 12 months, ERCOT is able to employ this technology and implement that.

Matt Boms (22:07.756)

Yeah, that’s really exciting. And I think it would set an example and a strong signal to the rest of the country because it shows that the free market, the competitive market works really well, right? When there’s an equal playing field and when customers have their resources set up, they’re able to generate their own energy. Essentially, they should be rewarded or compensated for that accordingly. So that’s, think we’re moving, we’re getting there. It’s going to take some time, but I think you deserve a lot of credit for the AIDR pilot program has come a long way since

Matt Boms (22:36.12)

when it was first launched.

Will McAdams (22:38.378)

I think we’re going to need this. Like I said, the numbers are just getting bigger. At single points of interconnection on what energy needs look like and are supposed to look like, that means we need to fully utilize every resource that we have at both the transmission level and the distribution level. We can’t leave any tools on the table now.

Matt Boms (22:59.34)

Yeah, I think that’s right. And the next logical question for you there would be, does the same principle apply to residential demand response or whether you have a smart thermostat, you’re able to pump up your thermostat a couple of degrees on a hot day in August. Should those customers also be getting some compensation if they’re able to have some more flexible demand than what we’ve seen traditionally?

Will McAdams (23:23.796)

Absolutely. So, here’s going to be the system that we see in the next two to five years. The system used to be, it would be down 90 % of the day, you’d have a system that basically ran at 30 % of your installed capacity. Consumers were consuming 70 % less than they normally would. Because during the morning hours it’s cooler, or in the winter the afternoon hours are warmer.

Will McAdams (23:53.346)

Your heating system or your cooling system would have to run less. But then as the sun rose and it got hotter or colder, depending on the season, all those appliances would crank up and they’d move up and the system would be very peaky. Now, with these consumers who consume energy all hours of the day, OK, the system is going to run much more efficiently. Those generation resources are going to try to produce power much more consistently.

Will McAdams (24:23.438)

70 % of the time, but the peaks are still going to be there because AC load is going to fill in right on top of that. So that’s going to present a value proposition for anybody wanting to participate in the energy market. And that’s where aggregations and most especially demand response are going to serve a vital purpose. It will allow us to shave off those peaks at the most critical time so that the impact of air conditioning load or heating load isn’t so acute on the system.

Will McAdams (24:52.972)

and grid managers can more accurately prepare for how those demand response systems are going to engage and assist the system through those tight moments. So they should experience value. The systems are already in place for them to be able to do that at ERCOT. But like the ADER, they just haven’t been allowed to settle on the most valuable points within the market. Once that is completed,

Will McAdams (25:23.192)

we’re going to have a lot more capabilities. average residential consumers should be able to be part of the value proposition of the system unlike today.

Matt Boms (25:32.172)

Yeah, it’s really exciting because what I hear you saying is customer empowerment and handing the keys over to the customer and saying, look, if you’re able to make your demand more flexible during these key hours, then you’ll be rewarded accordingly. If you’re able to have a battery in your garage or a backup generator, whatever it might be, they also will be rewarded. Right. So.

Will McAdams (25:54.24)

And the key thing between all of the capabilities, is why was it different a year ago for energy efficiency versus where it’s going next year? What I would say to that is technology. What makes this more dependable for ERCOT to count on today? There was the threat in the past when you said residential demand response that a consumer would override a thermometer.

Will McAdams (26:23.66)

that had been adjusted to take demand off the system. Technology is available now to manage that consumption over not just that consumer’s home, but across tens of thousands of consumer’s homes. So that whatever is provided to the utility and ERCOT, for ERCOT to be able to count on, they will build in a margin to where they know they are going to hit their number. And ERCOT can actually plan for that load to be reduced.

Will McAdams (26:51.522)

That will negate the need for future transmission potentially, distribution infrastructure, saving costs for every one of the ratepayers along that system.

Matt Boms (27:02.38)

Yeah, we just did a study on the value of DERs in ERCOT and it came out to about $1,850 per customer over the next 10 years in savings. So there’s a lot of money on the table potentially if you’re able to unlock that value and give customers, know, Texas don’t get enough credit, I think, because they’re extremely savvy energy customers compared to the rest of the country, right? We’ve got a competitive market where they already have an existing relationship with the retail provider.

Matt Boms (27:32.566)

And I think that what you’re saying is the retail providers are going to have to innovate, right? The free market forces them to innovate. That competition is good ultimately for the customer.

Will McAdams (27:40.95)

Well, so the system we’ve set up is after Yuri, people didn’t want to have to be savvy, you know, about the energy market. They didn’t like it. The energy market had harmed them because of that catastrophic sequence of outcomes that I described earlier. But the beauty of our system is they actually don’t have to be that savvy. We have entire industry set up to empower the consumer to share value with them, as long as they will empower that industry.

Will McAdams (28:10.018)

to act on their behalf. And that’s where you have retail electric providers. That’s where you have municipal utilities or cooperatives that can innovate as well that participate in the market on their behalf. They take on the risk, shielding the consumer from the risk in exchange for the consumer allowing them to use their capabilities on an aggregated basis to engage in that market. And that’s, again, like I said, it’s the alignment of interests.

Will McAdams (28:38.752)

And so that retail electric provider has an interest in taking power needs off the system so that they can pay less for the next incremental value of energy. And they’re well incentivized to do that. And they buy and sell and trade power all day long, every day, 365 days a year. And it helps manage their exposure to the risks of the market. And that’s just business.

Matt Boms (29:03.054)

Yeah. Well said, Will. Well, you mentioned batteries earlier and that being one of the main differences in our grid, if you compare what it looks like today to five years ago. And I mentioned that the Q, there’s about 160 gigs of solar, 174 gigs of battery storage, about 53 gigs of natural gas. All of the Q is rising, but what does it say that storage is now the single largest category?

Matt Boms (29:32.94)

when it comes to the interconnection queue.

Will McAdams (29:35.63)

I think it’s great. One, I was in a debate with the independent market monitor. Oh gosh, I guess it was 10 years ago now, a long time ago. And I said, why are all these batteries coming in? And she said, because that’s what the market is telling the system is needed. And the reason is, is because we have very granular pricing. If something bad happens to anyone, like if a load trips offline or if a generator trips offline,

Will McAdams (30:04.81)

Outside of a substation, want that substation to scream loud and clear that something is needed at that location and that sets a value. The price either goes sky high or the price goes rock bottom. Batteries are the Swiss Army knife of utility tools. right. They can be located outside of every substation. They can be located anywhere. They can be as big or small as you want.

Will McAdams (30:31.468)

And that battery either absorbs power or it discharges power. And so, in effect, what it is, it acts as like a shock absorber to the system. It acts as a shock absorber on price. It also acts as a shock absorber on physical stability. And so, if something bad happens, that battery can buy you time. The more batteries we have across our system, in every disparate location through Texas, they will actually solve for volatility.

Will McAdams (31:00.352)

And consumers don’t like volatility. And that’s a good thing for Texans. So a lot of grids have criticized Texas that we love volatility, we feed off volatility. We’ve created a system that at its core is volatile, but it attracts innovative solutions to help solve for volatility. And I know that may not make sense, but think about it, it does. And the cure for high prices

Will McAdams (31:29.622)

are high prices and batteries follow that. since 2021, matter of fact, since 2022, and we really crossed a real demarcation line on batteries, I think we had, we went from five gigawatts of batteries to 10 gigawatts of batteries. After that point, we haven’t hit the system wide offer cap, but like two times, or we didn’t in all of 2024, which meant prices didn’t shoot to the roof, but two times.

Will McAdams (31:59.456)

And the reason they didn’t shoot to the roof is because batteries were sitting there, ready to go. And every time a price went higher than the next value, a battery was sitting there dispatching into the system, solving the condition. That’s exactly the way Texas is supposed to work.

Matt Boms (32:14.126)

Yeah, well, I’m going to ask you then a controversial question, which is, you know, we’re building these high voltage 765 lines, the first of their kind in Texas. And I think the commission deserves a lot of credit for their advocacy and for pushing for the high voltage lines, because we’re not going to grow as a state if we can’t move these cheap electrons around more efficiently. And a lot of the lines are just overloaded, as you know, in South Texas and different parts of the state. my question is, you know,

Matt Boms (32:41.484)

while we get those lines built, it’s gonna take time, right? Those lines don’t get built overnight. Couldn’t a utility come in and put some batteries along one of those lines in Texas? Now they’re not allowed to deal in generation, right? But should they be, right? Like that’s a controversial question. So shouldn’t a utility be able to come in and say, look, we can do this for a fraction of the cost. We can line up batteries. We can get those electrons moving through distributed energy versus the more traditional capital expenditure.

Will McAdams (32:54.446)

how to own the battery.

Will McAdams (33:12.886)

Well, one, that’s a political topic. It’s a subject for argument, certainly at the Capitol. I think a position that we should all agree to is a distribution operator. A wires delivery system operator should have access to the technology of batteries. Whether that is through owning it or renting it, they need access to batteries because they are, like I said, the Swiss Army knife of utility tools.

Will McAdams (33:41.944)

They can do amazing things. They can act as a substation if they need to. Basically converting power flows up and down. Whatever that area of the system dictates is needed. And as we enter the, I call this the Jurassic Age of grid evolution. Because everything’s just bigger. Think of dinosaurs. My kids like Jurassic Park. Everything is bigger now. And you’re gonna need batteries to help stabilize the system when everything is bigger.

Matt Boms (34:11.084)

Yeah, I think you’re right. And it feels like we’re moving in that direction. And I love what you said about batteries answering the call because you can see other states looking at Texas as the example and kind of building the roadmap for how you manage those peaks and valleys with batteries charging and discharging. But the way we did it is so unique, right? Like it’s all with competitive markets and there are very few parts of the country that can really do what Texas did.

Will McAdams (34:36.448)

No, and our queue has responded to the sense of urgency so quickly. Our queue expanded so quickly because they saw the need and it was based on the market signals. And our market is criticized, but one thing our market is, is hyper efficient. And you can see 40 gigawatts of natural gas generation installed over 10 years. And then you can see 10 gigawatts at a time have a signal to retire.

Will McAdams (35:04.706)

But that is what the market is signaling. Now, we will debate whether we need insurance policies and extra money in the system. That’s a political argument, but we are efficient.

Matt Boms (35:17.878)

Yeah, yeah, that’s for sure. Well, I want to wrap this up. I don’t want to take up too much of your time, but I do want to mention that since leaving the commission, you started your own firm. So McAdams Energy Group, that’s the plug for everyone who’s looking for great energy expertise. And, you know, I’m working at a trade association. We both have those relationships with companies that are innovating. I want to hear from you from, you know, the commission to advising some of these companies.

Matt Boms (35:44.332)

which side is moving faster, right? Like what are you seeing in the private sector that maybe you weren’t seeing on the policy side and vice versa? Like what can you give us a little bit of, what are the differences there?

Will McAdams (35:55.43)

companies, people are bringing their own tools. So Matt, when we were working together and I was on the commission, what was put in motion in the aftermath of Yuri driven by fear. Okay. Fear of it reoccurring again has only picked up pace, but it’s not fear. It’s I need these tools. You know, I need to provide for myself or at least have the capability to provide for myself because

Will McAdams (36:21.952)

I know that that next factory is going to come in next door to me and they may change up the level of service that I experienced. I just need to provide for myself. So the beauty of ERCOT is we can align the interests of everybody in a given area very quickly with a price signal or a market-based mechanism. And that’s loads of all shapes and sizes. I see them all. I see a factory come in to Texas because they’re reshoring. I mean, this is happening.

Will McAdams (36:49.954)

because the United States wants to have their own capabilities here. And they are bringing their own capabilities. They’re putting in their own behind the meter generation. They’re putting their own batteries in. They’re putting their own solar panels up. And it’s all of the above. It is not a one trick cony. There’s not just natural gas. It’s natural gas paired with battery, paired with solar, all this stuff. It’s an amazing time. And the reason I’m out of the commission and I feel for the commission because they have a lot of

Will McAdams (37:20.014)

truly consequential decisions left to make. But it is fun being on the outside, being able to innovate, work on what is the optimal configuration of capabilities at a given location and how does that serve the greater good of that entire area around that. That is a good feeling and I’m blessed to be a part of

Matt Boms (37:41.164)

Yeah, I completely agree. Like the private sector moved so quickly and a lot of times the technology pushes the policy, right? So it’s fun seeing where the technology is at and then anticipating where the policy is heading over the next five to 10 years. Well, thank you so much, Will. I want to say thank you again for your service to the country, to the state. I think you deserve a ton of credit for all of your leadership during your time at the legislature, during your time as a public utility commissioner. And you really got us to the place we’re at now, which is a state that’s leading the charge.

Matt Boms (38:11.296)

and welcoming all of these new innovative businesses. So thank you so much and just looking forward to rolling up our sleeves and getting to work.

Will McAdams (38:19.968)

Me too. Good to be with you, Matt. Thank you.

Matt Boms (38:22.958)

Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make sense of the energy world, share the episode with a friend and hit follow on your podcast app. You can find us on Apple podcasts, Spotify, and all the usual platforms. For deeper analysis each week, subscribe to the Texas Energy Empowered newsletter at texasenergyempowered.com. That’s where you’ll find every episode, every article, and all of our latest updates.

Matt Boms (38:52.834)

We’re also on LinkedIn, X, and YouTube, where we post clips, insights, and ongoing commentary. Big thanks to Nate Peavey, our producer. I’m Matt Bombs, and I’ll see you next time. Stay curious, stay engaged, and let’s keep building a stronger, smarter energy future.

Texas is not short on energy.

Texas is short on time.

New load is arriving faster than the grid can plan, permit, and build, raising a question that will shape our state’s future: can Texas grow without sacrificing reliability or pushing costs onto the wrong people?

That was the backdrop for our first Energy Capital roundtable with Matt Boms, Joshua Rhodes, and Micalah Spenrath.

The Defining Story of 2025

When we talked about the biggest energy story of 2025, everything circled back to load. Not just more demand, but uncertain demand.

Planning gets harder when projections keep shifting. Transmission, interconnection, and long-term investments all depend on forecasts, and those forecasts suddenly feel less stable.

And yes, data centers are at the center of it.

As Josh put it, you almost cannot talk about energy anymore without talking about data centers. They are reshaping how fast demand shows up and where reliability pressure lands.

Markets still matter, but speed does too

Texas remains an energy-only market. Resources still need to compete on cost, reliability, and performance.

But markets only work if the system underneath them can move fast enough.

ERCOT and the PUC are working to plan for the future, but compressed timelines make responsible planning harder. Speed is no longer just a project challenge. It is becoming a grid constraint.

What constraints unlock

This is about more than just generation — ERCOT’s transmission system also is racing to keep up with rising load. Given such constraints, Texas needs to embrace fast, close-to-home energy strategies, including:

* Distributed energy resources (DERs)

* Demand response

* Backup power

* Energy waste reduction

As Josh noted, constraints force innovation. When the old approach cannot keep pace, the economics for flexibility get much clearer.

What we’re watching in 2026

Looking ahead, Micalah, Matt, and Josh kept returning to a few basic themes:

* Clean, firm power that can scale

* Backup power and resilience

* The untapped potential of DERs

These policy solutions sit at the intersection of reliability, affordability, and speed, which is exactly where the grid debate is heading.

Texas is going to build a lot of infrastructure in coming years. That brings real benefits, especially to rural communities, but also real impacts.

Micalah framed it simply: this is about balance and fairness. Growth works best when communities understand the trade-offs — and they trust that costs and benefits are being shared responsibly.

Closing Thoughts

Texas is entering a build-fast era where speed itself becomes a grid resource.

That does not mean cutting corners. It means prioritizing the highest-value infrastructure, being honest about who pays for what, and using every available tool to maintain reliability and affordability.

Moving forward, we’ll keep these conversations grounded, curious, and practical. If you have thoughts on what Texas should prioritize next, jump into the comments.

Timestamps:

* 00:06 – Welcome, roundtable kickoff

* 01:49 – Micalah origin story, policy path

* 03:54 – Josh background, technical roots

* 04:08 – Host reactions, early framing

* 13:19 – SB 6, PUC, building infrastructure

* 15:27 – Data centers, speed-to-power reality

* 18:58 – Siting, community benefits and burdens

* 20:37 – Pushback, bad actors, headlines

* 22:03 – AI hype, narratives, who shapes perception

* 24:12 – ADER, DER potential, batteries

Resources:

Guest & Company

* Matt Boms - LinkedIn

* Texas Advanced Energy Business Alliance - LinkedIn

* Joshua Rhodes - LinkedIn

* Webber Energy Group

* IdeaSmiths

* Micalah Spenrath - LinkedIn

Transcript:

Matt Boms (00:05.966)

Hi everybody, welcome to the Energy Capital podcast. I’m Matt Boms and I’m here for our first round table today with Dr. Josh Rhodes and Michaelis Benrath. I’m gonna ask each of you to introduce themselves and then we’ll get started. Josh, you wanna kick us off?

Joshua Rhodes (00:22.894)

Sure, sounds good. Hey everybody, my name is Joshua Rhodes. I wear a bunch of different hats. I’m research scientist at the University of Texas at Austin where I study electricity system, the grid, just energy writ large, CTO of Ideasmus, as well as commissioner for Austin Energy. And yeah, just excited to be here.

Micalah Spenrath (00:40.0)

All right. Hi, everybody. My name is Micalah Spenrath. I also wear lot of hats, but my main and biggest hat is that I am a Deputy Director of Policy and Energy at the Houston Advanced Research Center, where I spearhead our legislative and regulatory engagement, specializing in energy policy. So happy to be here.

Matt Boms (00:56.824)

Well, I’m really excited to be with you both. And we’ve been tasked with this enormous responsibility of co-hosting this podcast. And I’m happy that we all have the chance today to talk. And I want to get into each of your backgrounds and ask each of you to just explain kind of how you got into the energy world, what inspired you to get into this topic and kind of how did it all start? What’s your origin story? Josh, Micalah, whoever wants to kick us off.

Micalah Spenrath (01:21.758)

Mine was actually already previewed on LinkedIn. So I’ll give you the Spark Notes version. I actually did not intend to get into energy policy. It just happened kind of serendipitously. I went to grad school for engineering, dabbled in some law and policy courses and was really inspired. And then I got some guidance from a mentor who said you should really look into getting into policy. He didn’t specify which kind, but

Micalah Spenrath (01:48.888)

Considering I’m very interested in climate action and things like that, I figured energy would be a great place to plug in. So yeah, I got a job with Matt. And then that was years ago now, and I’ve just been getting such positive feedback from the community and the work is so rewarding and intellectually challenging. And yeah, why mess with a good thing? I think I’m going to keep this going for a while.

Joshua Rhodes (02:16.376)

Yeah, so I didn’t start out with the idea of getting into energy. Like I like science, I like STEM. My undergrad and master’s are actually in mathematics. It’s Stephen F. Austin in Texas A And really every time I kept getting out of school was like during an economic recession. And so there was like no jobs to be had. And it was kind of like, well, I’m pretty good at the school thing. So I guess I’ll just keep going. Cause I found that if you keep going to school, you don’t have to pay your loans back. Like they just keep going.

Joshua Rhodes (02:44.332)

And so I just kept going and going and going, but after I got to like the masters in math, was like, well, I just don’t want to do this for like the math stake anymore. So I switched to engineering to try to be a bit more applied when I came to the University of Texas. One of the first classes I took was a thermodynamics course. And it took the math that I had learned and like knew, and it put it in terms of real systems, how systems use energy, like how nothing’s a hundred percent efficient. There are no perpetual motion machines. Just kind of made it all make sense.

Joshua Rhodes (03:13.638)

And from then I started working with Dr. Michael Weber at the University of Texas who does a bunch of energy stuff and first got into like how buildings consume energy. Did my dissertation work, you know, based on that topic from like American recovery and reinvestment funds from ARA funds. And then when I graduated, kind of switched more to the supply side. So I’ve been doing more grid modeling and other types of stuff, but it’s just like, I’ve just always been fascinated with just how

Joshua Rhodes (03:40.898)

we do things and it’s like the energy side of things let me kind of put my interest in kind of how things work and the math side into like doing something good, doing something good for people, for society and all that. Here we are.

Micalah Spenrath (03:54.296)

sounds very similar to my story as well. And actually thermodynamics was one of my favorite classes in college. So I double click on thermodynamics, but we won’t dive too much into that.

Joshua Rhodes (03:56.632)

Yeah, absolutely.

Joshua Rhodes (04:07.608)

would love to actually, but we won’t. Man, that’s a rarity to hear to be honest with you. Matt Renison.

Micalah Spenrath (04:12.238)

All right, pitching it to Matt.

Matt Boms (04:15.534)

Well, it’s fun to hear how everyone kind of gets into energy through the back door. Like a lot of us didn’t necessarily intend to work in this industry, but here we are and we’re kind of neat in energy issues. came into it through economics, like trying to study local economic development and understand how some communities are left behind while others seem to thrive. And I think energy plays a huge role in that. think, you know, working in Texas, we have a first row seat to

Matt Boms (04:44.856)

kind of how the state has undergone this amazing development over the past few decades. And a lot of that is really, you can draw a straight line between that and energy, right? Just the abundance of energy that we have in Texas. So I wanted to ask both of you, in your experience, the way that people think about energy in Texas, what is the most common misperception or how do you think about energy and how is that different from how the average person thinks about energy in Texas?

Micalah Spenrath (05:14.54)

I can start with that because I used to just be an average person not too long ago. And quite frankly, I just didn’t even think about it. Outside of thinking about emissions and cost, of course, because we all paid utility bills, I really did not consider utility regulation. I did not think about reliability. I didn’t think about ERCOT, except when they were asking me to voluntarily conserve multiple times a year, which was fun.

Micalah Spenrath (05:43.64)

Having that frame of reference is completely a 180 to have, think, about energy now. In fact, I think it’s one of the most integral aspects that we can focus on to provide better futures for communities, for individuals, and for the planet if we really wanted to tackle decarbonization. So it’s right up there with transportation, if I recall correctly, in terms of sector emissions.

Micalah Spenrath (06:07.328)

If you really want to plug in to climate, the environment, and community wellbeing, it’s hard not to see how energy isn’t a player in that. So I think about it from a regulatory standpoint now. I think about it in terms of affordability and also legislation. So seeing how, you know, our lawmakers are basically setting the ground rules when it comes to how our energy system works. And that impacts my bill at the end of the day.

Micalah Spenrath (06:36.108)

So it really does behoove us to keep an eye on what’s happening. yeah, that’s pretty much where I’m at now, which never really appeared in my mind prior to getting into energy policy, but it is so important.

Joshua Rhodes (06:50.06)

I think most people used to really only to consider energy like gasoline because it’s the big number that’s kind of on billboards everywhere as you’re driving around. really in Texas, I think since, you know, when winter storm Uri hit, really shoved the electricity sector like front and center. I used to have to explain what ERCOT was, what the grid was. And then, you know, after that didn’t really have to. Sometimes when I said that I’ve worked on that, I’d have to duck afterwards. You know, energy is really kind of in the Texas psyche now.

Joshua Rhodes (07:19.298)

We’ve always been the energy state. mean, we produce and consume pretty much the most of all forms of energy. And we’d be in top 10, you know, if we were a country. But like, it’s so much more to the average Texan than it is to other, other folks. You’re just given, you how many people work in the industry, whether it’s the oil and gas industry or electricity or renewables or all these other kinds of things. Like, I think it’s probably more front and center.

Joshua Rhodes (07:41.28)

nowadays and it has been in the past and now even more so with things like all the data centers and electricity growth and like affordability, like it’s even becoming even more kind of front and center.

Matt Boms (07:51.416)

Yeah, you raised that Josh and I wanted to ask you both about as this year comes to an end and you know, what really was the top story in 2025 when it comes to energy? it, to me at least it feels like a lot has changed from this time last year and we’re in a completely different energy paradigm than we were a year ago. So for you both, what was the big story of 2025?

Micalah Spenrath (08:16.512)

Well, the biggest story for me was certainly the changes to federal policy related to a lot of different energy technologies, particularly wind, solar, but also batteries, looking at some of these large programs like the Solar for All program, which was intended to deploy distributed solar and storage in communities that were really energy burdened. And unfortunately, that has been a very bumpy road.

Micalah Spenrath (08:44.946)

And a lot of changes that aren’t necessarily positive have occurred based on the changes that we saw in the One Big Beautiful Bill Act. So that’s the biggest story for me is that federal policy does actually make a difference. And having an all of the above energy strategy within the state is of course advantageous. But having that mirrored on the federal level, we can achieve so much more.

Micalah Spenrath (09:09.762)

So I think for moving forward over the next few years, I’m really hoping that we can align those two visions between our state and the federal level and really make progress on a diversified energy strategy that brings down cost and enhances reliability and affordability. Cause I think both are important. So that was the biggest story for me. And even though the changes were fairly negative from a lot of the renewable side, I’m optimistic that, you know, markets will continue to work.

Micalah Spenrath (09:39.0)

consumers will continue to be heard and say that we want what we’re paying for essentially and we don’t want to have prices rising for ideological reasons, for example.

Joshua Rhodes (09:52.75)

absolutely. I mean, so much happened in Texas this year around energy. mean, I think one of the big ones for me, for sure, and this has been for everyone else is like, just watching the graph for the number of large loads and data centers just continued to like tick, tick, tick, tick, tick, tick, tick, like up faster and faster and faster. I mean, I didn’t even think the numbers last year were reasonable and now they’ve even just gotten more unreasonable. Right. And so just like how that’s going to impact everything that we are doing. It makes it hard to plan.

Joshua Rhodes (10:21.422)

It makes it hard to figure out where the system needs to grow. Our peak demand is 85 and a half gigawatts, but there’s 225 gigawatts of large load in the cube by 2030. And given the pace at which the utilities move and all this kind of stuff, there’s just no way we can triple the grid in five years. But at the same time, like we’re building stuff, right? Like we approve like these 765 KVA lines, these huge power lines to go out into far west Texas to electrify oil and gas operations.

Joshua Rhodes (10:48.334)

This kind of reminds me of the Cres lines that we built to like go get the wind out in West Texas. I mean, it gets a lot of things up in the air, but it’s a lot of big numbers and like a lot of us pointing towards good stuff, I think.

Micalah Spenrath (11:01.132)

Yeah, I do want to double click on that. Like in Texas, we are still building things and you cannot point to every single state and have that same perspective. So I think even with the uncertainty, even with the changes that we’re seeing, it seems that Texas by design is quite resilient. And I’m really optimistic that we’re going to continue our energy leadership and really show what we can achieve when you are tech neutral, when you are an energy only market, when you allow resources to compete.

Micalah Spenrath (11:31.45)

on cost and showing up and reliability and affordability, not necessarily if you’re a fuel-based resource or if you’re intermittent and things like that. So I think, yeah, I’m a bit optimistic about it.

Matt Boms (11:46.146)

Yeah, I agree with both of you. And I think, you know, when Josh was mentioning Winter Storm URI and you think about how far we’ve come in the last four years, right? Almost five years now. I want to hear if you both agree with me on this, but I think ERCOT deserves a little more credit than it normally gets. And the reason I say that is because a lot of the projections that came out of it was house bill 5066 that was allowing the utilities to essentially inflate the

Matt Boms (12:15.2)

load projections and ERCOT came in and adjusted those projections and took a serious look at how much of this load is legitimate. Like how many of these data centers are really coming to do business in Texas because just from an operations standpoint, they need a number to work off of and that determines how much generation we need to build out. And it also determines how much transmission we need to build out, which again, I think ERCOT and the PUC deserve a lot of credit for a more forward thinking.

Matt Boms (12:42.838)

mindset than we’ve had traditionally in Texas, at least over the past decade or so, trying to work with all this load growth, figure out how much of it is really coming to Texas and then what do we need in order to meet the new demand that’s coming.

Joshua Rhodes (12:55.182)

So you’re sticking with the transmission lines. I think to the state’s credit, these are economic enablers, right? There’s no one individual project or group of projects that would justify this, but you basically make the sandbox bigger for everyone to work. Again, if you build this infrastructure, it is going to benefit all kinds of energy across the state, from oil and gas to renewables and et cetera.

Micalah Spenrath (13:18.794)

Yeah,

Micalah Spenrath (13:19.164)

so my perspective is that we really have started to lay the foundation to integrate large loads in a much more sustainable fashion with Senate Bill 6. And the PUC is doing a lot of great work on that. They have several projects that are dockets that are open and they really are taking it seriously and they’re making progress with the capacity that they have available. So I definitely think the PUC does deserve some kudos, but ERCOT as well, because even before we had

Micalah Spenrath (13:46.048)

a finalized Senate Bill 6. They were already looking at the interconnection process for large loads. I forget the number of the MPRR, but yeah, so they were all really considering this and then getting the legislative direction just added fuel to that fire. And I think we are moving in a very positive way. There are things that we still need to hash out, right? So making sure that data center...

Micalah Spenrath (14:10.25)

load is met with sustainable outcomes, right? So we don’t necessarily want all data centers to just have their own natural gas plant. That would not necessarily be the best thing for air quality and community well-being for the communities that are located near these data centers. We do want them to be good neighbors. I think that there’s a lot of work to be done in terms of making sure the policies at the state and local level align to make sure that that can happen.

Micalah Spenrath (14:38.9)

And yeah, if we can encourage like using solar and storage to meet that load, I think that that would be a real significant movement in the right direction. You’ve seen other states like Oregon, they’ve passed a bill that does actually aim to have sustainable or renewable fuels, I should say, renewable technologies provide the energy for these data centers. And that’s something that Texas can certainly replicate if we wanted to.

Matt Boms (15:09.25)

Yeah. Then they’re the cheapest megawatts out there. And it feels like a lot of these data center companies are because of their own internal corporate goals. They’re going out there and trying to procure renewables and storage as the market is currently structured. Right. I wanted to ask you both. sorry, Josh, go ahead.

Joshua Rhodes (15:27.374)

You know, heard something mentioned the other day, a comment that like, you know, right now with data centers, it’s kind of speed to power. And so it’s kind of like whatever we can do to get the megawatts the fastest, but eventually they’re going to have to compete with each other once they get it. Right. And so like, they’re going to want that, you know, unit costs of energy to go down. Like such that they’re, you know, dollar per token, know, dollar per my students cheating on their homework goes down. Right. So, I mean, I think we’ll get there. is a weird time right now with like how fast things are moving and how, how much they’re willing to throw at it, but.

Joshua Rhodes (15:57.196)

I think long-term equilibrium, yeah, I think we do end up kind of with that lowest cost energy, which yeah, like you said, when solar in storage right now.

Micalah Spenrath (16:05.87)

But to your point, Josh, you mentioned something that was really interesting, which is what’s unique about this particular load is that they do move so fast and they are of such a great magnitude, right? We typically have not seen that before and it creates a lot of challenges when it comes to energy planning to a previous point. So I think that if there’s an opportunity to align how these loads actually materialize on the grid with our planning processes, we’ll be in a much better place. And I think that

Micalah Spenrath (16:35.33)

the acknowledgement that that’s needed is already there.

Joshua Rhodes (16:39.342)

I mean, that’s like where the, crux of like the affordability argument hits. We’re trying to build so much infrastructure so fast right now, but it’s also the fact that that infrastructure is really expensive right now, right? It’s like the top of the market for transformers and for poles and for power plants. Like with my commissioner had on like, know that, you know, natural gas power plants are two and a half times what they cost a few years ago. Transformers are, you know, double what they cost a few years ago. Lines, the wires cost way more than they did. And it’s just like, you buy your house at the top of the market.

Joshua Rhodes (17:07.48)

when the market corrects, like you don’t get to readjust that principle, right? If we buy a bunch of expensive stuff right now, we’re gonna pay for it for a long time. So we’ve got to look into like, how do we cost share this thing or how do we do this differently than we have in the past? It’s a big deal.

Matt Boms (17:23.0)

Yeah, it feels like unprecedented times. I wonder listening to you both, like, I agree with you, Josh, that we’re, building out the sandbox for everyone. However, this stuff has to get built somewhere and communities are already starting to push back against some of the 765 transmission build out. We’ve seen legislation the last three sessions in Texas against renewable siting. So.

Matt Boms (17:50.082)

My question would be for both of you, how much do you worry about that? And I think what can be done to make communities feel like this is the right thing to do for economic development in Texas?

Joshua Rhodes (18:01.646)

That’s a good question. So, I mean, I’ve done quite a bit of work on like the impact of renewables, renewables and storage. Someone, know, a wind farm is built in a certain community. What does that mean for like landowner payments and taxes? And generally it can be, you know, quite large. In fact, if you look at like the sum total of landowner payments and taxes that the existing and soon to be built fleet are looking to pay, it’s like $50 billion. It’s not a small amount of money. It’s a lot of money. A lot of that flows to rural parts of the state, right? And so it’s areas that don’t...

Joshua Rhodes (18:30.934)

normally get economic development and it can be helpful in terms of having longer term sources of energy. But transmission is harder, I will say. Transmission is harder, it’s more diffuse, it’s spread over more areas, it can be more visible. Yeah, I know there were fights during CREZ and I’m not surprised that there are gonna be fights during this one as well. It’s just compensating people for bearing the burden, right? It’s like we do that via the tax.

Joshua Rhodes (18:57.602)

benefits that communities get for like hosting this infrastructure and the landowner payments. and just making sure that those are commiserate.

Micalah Spenrath (19:05.582)

So when it comes to siting, the main thing that I think about is balance. So, and compensation, of course. So it’s very Texan to say, you know, let’s go ahead and do something, but compensate me fairly for it. And I think that that is very fair. Also risk management. So if we’re asking them to host this infrastructure and these projects, we want to make sure that they’re safe and secure. I think that’s absolutely valid as well. For me, it’s also a conversation about

Micalah Spenrath (19:32.692)

sustainable outcomes. So we do need to build a lot of things. And that’s no surprise to many people. But we need to do it in a way that preserves our natural resources to the extent possible. And I actually think a lot of rural stakeholders would agree. I mean, if you’re raised in the country, you know it’s a beautiful place to be. And there’s a relationship to the land that you may want to preserve. And I think that that should be honored and respected as well when we’re having these conversations.

Micalah Spenrath (20:00.268)

So I think that it’s all about balance, it’s all about trade-offs, and it’s all about optimizing emissions reductions with natural resource stewardship and community fairness and compensation.

Matt Boms (20:12.064)

I agree and it’s highlighting the positive stories because I think for every negative story out there, there’s a hundred positive ones that maybe aren’t spoken about as much. So some of this really has to do with communications and I think how some of these projects are interacting with communities, maybe highlighting the good actors as much as those bad actors get highlighted in the news. You know, we can always find out your positive examples for every bad one, but Josh, you were going to say something?

Joshua Rhodes (20:36.642)

Well, Matt, what do you think has been the biggest energy story this year?

Matt Boms (20:40.366)

I mean, this year’s got to be data centers. Like it’s unavoidable. And I think it’s not just a Texas issue. It’s all over the country, right? Like there’s no energy conversation now without talking about data centers. And I think it’s interrelated with everything else we talk about in energy. Like the whole conversation around the 765 lines, it did come from the Permian originally as far as oil and gas and electrifying those operations. But at the same time, you can’t really accommodate all this new load if you don’t have a

Matt Boms (21:09.196)

know, sufficient transmission infrastructure. And Micalah and I have worked on this in the past at the Capitol, at the PUC, at ERCOT, trying to push for transmission build out, but it didn’t quite happen until the load was really clear that this, this is this huge tsunami that’s going to hit us very quickly in Texas. And if we don’t build out transmission quickly enough, then we’re not going to be able to meet that demand. So for me, that was definitely the number one story in 2025. And then all the flexibility around like DERs, demand response, reducing energy waste.

Matt Boms (21:39.116)

All of that is now very much on the table in a way that it wasn’t this time last year. And I think that’s because of the AI data center growth.

Joshua Rhodes (21:48.232)

I’ve got a joke going around that like, can’t talk about energy for more than five minutes in this state without talking about data centers and all my energy newsletters have become AI newsletters. Yeah. I’m sure it’s vice versa on the other side. All the AI newsletters have become energy newsletters, et cetera, et cetera.

Micalah Spenrath (22:03.154)

Yeah. Matt, I have a follow-up question for you. So you work with a lot of advanced energy companies, some of which are solar and storage organizations. So what gives you the most optimism when it comes to renewable growth in the next year?

Matt Boms (22:18.69)

think it’s those private power purchase agreements that are happening. A lot of this stuff is happening in the private sector and doesn’t need the government to interfere. And I think that’s why a lot of these data centers are coming to Texas because they have deep pockets. And like you said, Micalah, the number one issue for them is not how much the energy is going to cost. It’s how quickly they can get their energy, right? So that flips the whole thing on its head. We actually do have cheap, abundant energy in Texas, but the key

Matt Boms (22:47.596)

factor here is the speed. I think they’re seeing that, you know, Google can come in and partner with any number of renewable companies that can get them up and running relatively quickly by building that co-located array of solar and batteries, right? In a way that you can’t really build it as quickly in other states. So that’s what I’m excited about. Like, I feel like we’re best positioned to meet the load quicker than any other state is, but I want to bounce that back to you and Josh and see what you both think about that.

Micalah Spenrath (23:13.086)

just look at our interconnection queue. You’ll get happy real fast. Well, that’s simplifying it, but I certainly find reasons for optimism when looking at our interconnection queue and also just how readily deployable solar and storage and some of these renewable technologies can be to meet load. Because speed is going to matter. Scalability is going to matter. And so I think that those are great assets of these resources and we should really lean into that.

Micalah Spenrath (23:42.158)

That’s my perspective, but you also mentioned DERs and circling back to my comment about balance, not every renewable project has to occur on a greenfield site on undeveloped land. It can actually be a parking garage roof. It can be commercial building roofs. And so I really am excited to see like how much we can do in that landscape when it comes to distributed energy, because I think there’s so much potential there if we could just tap into it. Josh?

Joshua Rhodes (24:12.418)

I think the thing that I’ve been really kind of excited about is like the distributed battery space with, you know, announcements from the ADER program with like the base and Tesla and Bandera that are finally kind of getting these, you know, more dispatchable assets at the grid edge. Like it’s been, there’s been a lot of movement really quickly. I feel like in the past year, year and a half or so, I’m really excited about that too. Cause like, you know, as we run into constraints on getting

Joshua Rhodes (24:40.494)

know, large loads and generation and all this stuff, you know, in greenfield sites, like we do have a lot of points of interconnection that could take small stuff. And finally, it seems like people are starting to get that business case to work out. And that’s really exciting for me.

Matt Boms (24:55.498)

Awesome. Maybe to close this episode, we can give one area of like one item that we’re looking forward to in 2026, whether it’s a policy, just an issue that you’re interested in, but like one thing you’re looking forward to next year.

Joshua Rhodes (25:08.866)

Yeah, so real quick, this year has also been a big year for Texas and critical minerals in the East, the lithium in the smack over to uranium in the panhandle, critical minerals, Brewster County, all these other places like all around the state. I just think that bodes well, bodes good for like Texas and our country as a whole. And so I’m excited to see where that goes kind of in the future.

Micalah Spenrath (25:29.048)

Clean, firm power. I want to see that grow and scale, and there’s a lot of positive indicators for it. So I’m really excited where it’s going to go in 2026.

Matt Boms (25:39.19)

Awesome. And I think I’ll go with backup power because I hope that that program will get off the ground next year. And I’m looking forward to that because that should be really fun to see how these technologies can play a role in backing up our critical facilities. So that’s something I’m looking forward to, but thank you both so much. This has been a really great conversation and I’m really looking forward to seeing the guests that you bring on the podcast next year and listening to those amazing conversations. And we’re definitely going to get together more frequently and do these roundtables next year.

Matt Boms (26:08.558)

And this has been the Energy Capital Podcast. I’m Matt.

Micalah Spenrath (26:12.386)

I’m Mikayla.

Joshua Rhodes (26:13.921)

I’m Josh.

Matt Boms (26:15.246)

See you time.

Matt Boms (26:44.77)

We’re also on LinkedIn, X, and YouTube, where we post clips, insights, and ongoing commentary. Big thanks to Nate Peavey, our producer. I’m Matt Bombs, and I’ll see you next time. Stay curious, stay engaged, and let’s keep building a stronger, smarter, energy future.

This episode is a little different.

As I wrote on Friday: this is both a transition and an expansion. Several folks will be stepping up to use this platform and I couldn’t be more excited to hear what comes next.

A platform, now with more places to stand

Archimedes said: “Give me a place to stand and I will move the Earth.” This podcast will become a platform for more people to stand.

The podcast is moving into a multi-host format, and one of those new voices is Matt Boms, Executive Director of the Texas Advanced Energy Business Alliance (TAEBA). Matt has been a leader on some of the most important energy work in Texas: distributed energy resources, affordability, energy waste reduction, grid flexibility, and much more.

How I got “bit by the bug”

Matt asked how I got into energy. The real answer is, slowly and then all at once.

My early work in energy policy was at the Texas Legislature, in a stretch (2005 to 2009) when a lot was happening and the instincts to build and expand were strong.

That period mattered because it shaped a belief I still hold today: Texas works best when we put pragmatism above ideology. Texas is a place to build and do big things.

The next frontier is the grid edge

One of the big themes in this conversation with Matt is that the “cheap electrons” story is true on the generation side, but bills keep climbing because transmission and distribution costs keep rising.

So if we’re serious about affordability, we have to talk about the distribution grid, and the tools that can help us defer (or avoid) some of the costs associated with building out the grid. We’re still going to spend a lot but can we avoid some of it?

That’s where distributed energy resources (DERs) come in, and where Texas has a real opportunity to lead.

Matt and TAEBA recently looked at what DERs could do in Oncor’s territory. The numbers are big, but here’s the one that sticks: about $279 per family per year in savings. If you want a sense of how big a difference that would make for many Texans, check out my discussion with Margo Weisz of the Texas Energy Poverty Research Institute:

There are two core value buckets behind these savings:

* Wholesale market value (DERs competing through aggregation, the work ERCOT is already moving through)

* Transmission and distribution deferral or avoidance (often the larger, currently under-valued piece)

If we get the policy design right, DERs can help lower system costs, enable load growth, and reduce the pressure that shows up on people’s bills.

Final Thoughts

If you’ve been listening for a while, let the new team (more announcements on that soon) know what topics you want them to cover next.

The next chapter is going to be great. I can’t wait to listen!

Timestamps

* 00:00 – Introduction

* 02:30 – Matt asks his first question!

* 04:00 – Doug’s first energy experiences

* 05:30 – * Beginner’s mind *

* 07:00 – Politicization of energy, what brings us together,

* 10:00 – The need to look for similarities first

* 14:00 – How do we meet Texas’ rapid demand growth? (Here’s the slide I was referring to:)

* 16:00 – How do we continue to grow the economy and electric demand?

* 18:00 – Distributed energy resources

* 20:00 – Matt’s work on demand side

* 23:00 – Distributed batteries can last a lot longer than an hour or two!

* 25:00 – The TAEBA study showing $2,000 savings per family in DFW from DERs. More on T&D cost avoidance and deferral here:

* 29:00 – The potential for Texas leadership

* 32:00 – What does Matt want to cover next?

* 32:00 – The under-discussed part of the Texas Energy Fund: the Texas Backup Power Package Program for critical facilities

* 36:00 – Matt’s thank you, Doug’s excitement to stop talking and start listening!

Resources

Guest & Company

* Matt Boms - LinkedIn

* Texas Advanced Energy Business Alliance (TAEBA) - LinkedIn

Company & Industry News

* The Value of Integrating Distributed Energy Resources in Texas’ Oncor Territory

* New Study Finds Oncor Customers Could Save $8.5 Billion With DERs

* Texas Energy Fund, Backup Power Package Program

Transcript

Doug Lewin (00:04.526)

Welcome back to the Energy Capital podcast. I’m your host, Doug Lewin. Today’s episode is a little different. The platform is expanding into a multi-host format. I’m really excited about these changes. I cannot wait to be a listener to this podcast and hear where it’s going. I’ve been working with your new hosts and there are several on the issues and topics and speakers they’re going to be inviting and I could not be more excited.

Doug Lewin (00:33.504)

about where this is gonna go. I put out a post this morning at the Texas Energy and Power newsletter called It’s a Transition and an Expansion. And that is exactly what it is. Change can be hard, but change can also be really good. And this is an opportunity for a lot of folks to use the platform that I have helped to build. There’s a famous quote from Archimedes where he says, give me a place to stand and I’ll move the earth.

Doug Lewin (01:03.768)

You all, dear listener, come on, it’s the Energy Capital podcast. Y’all, dear listeners, have given me a place to stand, given me a voice, and I’m deeply, deeply grateful for that. Now, other folks are gonna have this place to stand to move the Earth. Stand with them, help them through this transition and expansion, and I know you’re gonna be really excited to hear what comes next. So today, again, this is a little different.

Doug Lewin (01:31.2)

and thrilled to introduce one of the new voices who will be carrying this work forward. That’s Matt Bombs. Matt is the executive director of the Texas Advanced Energy Business Alliance, TABAA for short. They do some great work in Texas and Matt has done some great work, particularly around distributed energy resources. He was part of that aggregated distributed energy resource task force that has had a lot of success in Texas. He’s also part of the advisory committee on the backup power package program I talk a lot about. He was instrumental

Doug Lewin (02:00.138)

in getting the Texas Energy Waste Advisory Committee established here in Texas. So he’s done a lot of great work. He is an expert in his own right. He is very interested and curious about all this stuff, just like I am. And I’m thrilled that he’s one of the people that is going to be stepping onto this platform. So what you’re here today is me interviewing Matt and Matt interviewing me. A little bit of a retrospective looking back. I hope you enjoy this episode and I hope you enjoy all the episodes going forward.

Doug Lewin (02:28.364)

I can’t wait to listen myself and I know you’re gonna like what comes next. So with that, thanks for listening and let’s jump in.

Matt Boms (02:43.352)

Hi everybody, I’m Matt Bombs and I’m here with Doug Lewin on the Energy Capital podcast. Doug, it’s great to have you here on the podcast that you built. And now that I’m hosting the podcast with a few of my very talented and brilliant colleagues, it’s just a great opportunity to pick your brain and to hear more from you. I really do want to hear more about your story and how you first got into energy. What was the key factor that really brought you into this industry and how did you first get started?

Doug Lewin (03:11.522)

Yeah, Matt, before I jump into that, just want to say how thrilled I am to be able to take this platform that I think really is reaching a lot of people that are really interested in Texas energy. Texas is such a dynamic place and you’re such an important part of that ecosystem. And I’m thrilled that you’re excited to step into this role, like you mentioned with some others. So, you know, we, often joke in the energy world about energy transition and energy expansion. This is both, it’s going to be an energy transition and an expansion.

Doug Lewin (03:41.154)

You know, with, new hosts coming in and there’ll be multiple of them that’ll allow more exploration. And I’m just so thrilled you’re in that mix. So thanks, Matt. So to answer your question, it’s something I’ve talked about a little bit on the pod over the years, but not a lot. And yeah, look, I can’t even like tell you like, Hey, there was this moment or this, you know, day or week or month or year where it would like all clicked and like, this is what, like what I want to do with my professional life. It kind of happened over time.

Matt Boms (03:49.59)

Awesome. Thanks so much Doug.

Doug Lewin (04:09.614)

Certainly some of my first experiences with energy policy were at the legislature. And it was a time at the legislature, there was a really good time to be there. It 2005 to 2009. It was just a very different time over there, particularly related to energy policy. So like a lot of things were happening, right? 2005 Senate bill 20, which had an expansion of global portfolio standard, the big expansion of the transmission system commonly known as CREZ, but really that enabled a lot of the economic growth Texas had over the last 20 years.

Doug Lewin (04:39.758)

You know, that was passed in 05, 07, there was a major efficiency bill that was passed then. I had the privilege to work on that. That was with Representative Strauss before he was Speaker Strauss. And then, you know, 2000, when 2008, right, people forget this, but you had both Republican and Democratic candidates running on platforms that were extremely pro clean energy, climate action, all that kind of stuff. And obviously 2009, you had...

Doug Lewin (05:05.166)

President Obama and there was like RF funds and all that kind of stuff. So like, it was just kind of a fascinating time to be in there. Add to that, that like 2005, six Al Gore puts out inconvenient truth and Rick Perry fast tracked 11 coal plants. Now Perry was like, you know, pro wind and solar and pro transmission and pro coal. He’s got to like pro everything, but you know, 11 coal plants, right in the middle of that context of like this dawning awareness around climate change. It was just kind of, it was just a fascinating time.

Doug Lewin (05:33.932)

to be in it and I’ve always found the energy space to be dynamic and fast paced and interesting. And it’s just one of those subject areas that almost any subject areas this way, if you get bit by the bug and you’re into it enough, right? That there’s no like end to learning in it. I always feel that beginner’s mind thing is there that like any corner you turn, it’s like, wow. I didn’t know about that whole thing. Tell me about that. Right. I want to, I want to read up and get smart on that and

Doug Lewin (06:03.406)

after 20 years of doing this, I still have the same feeling. And to your point and your question, like that’s even more so now, right? The acceleration is accelerating, right? So like what I thought has always been a pretty dynamic space, way more dynamic now. And the amount of stuff that we all have to learn just to keep up, right? Not even get ahead, but just keep falling off the back of the treadmill. It’s, there’s so much right now. And I find that challenge of not just keeping up, but like,

Doug Lewin (06:32.962)

that challenge of really comprehending what’s going on, really seeing different stakeholders point of view and how do different entities view this very same problem so differently. So there’s this whole kind of social dimension to the work that I absolutely love as well. yeah, I can’t really like pinpoint a day or a year or something like that. It was just like the ledge through to be in the head of an energy efficiency organization to go into clear result. Everything throughout my career has just added to it and just sort of like.

Doug Lewin (07:01.398)

increased that passion every step along the way.

Matt Boms (07:04.866)

That’s really interesting, Doug, and I am really interested in hearing more about how things got more political. So you started in this role, you were working in the energy industry at a time where these different technologies were all emerging. And at a certain point, the technology itself began being painted as red or blue or whatever color of your choice. And I want to hear more about the politicization.

Matt Boms (07:29.718)

even leading up to Winter Storm Yuri, about how did that change happen and what was it like as someone who was actively working in the industry at that time?

Doug Lewin (07:36.61)

I

Doug Lewin (07:36.71)

think the politicization of energy, you know, is thankfully not as bad as in a lot of other areas, but it has at least tracked, if not equally, but sort of tracked the polarization that is happening in the countries and all. I’ll tell you, one of the, I’m proud of all the podcasts that I’ve done with Energy Capital Podcasts. And I’m going to be proud to hear all the ones you’re going to do. I’m so looking forward to being a listener going forward, but.

Doug Lewin (08:02.646)

You know, one of the ones I’m most proud of was with David Spence and it was about, you know, his book, brilliant book, Climate of Contempt, which sort of was the whole thing is about the polarization of climate policy. And I’ll say, I think that’s actually probably how it became so polarized was like climate change has become very polarized. The things that you wouldn’t have imagined 20 years ago could have become that polarized. know, McCain and Obama both running on doing something about climate change.

Doug Lewin (08:31.608)

Who would have thought like vaccinations would have become as politically polarized as they are. But I will say, I think this is an issue area where you see really, really interesting alliances, left, right, center. And I think it’s because if you can kind of step back and kind of focus on first principles, we all want a reliable and affordable and clean grid. Like I don’t care what your political ideology is. You don’t like air pollution. Like nobody wants to have polluted.

Doug Lewin (09:00.394)

skies and water. Like that’s not something somebody sets out to do. I think in this industry, people are actually pretty mature about understanding that there are trade-offs and that those trade-offs are quite real. And so I think as much as possible, Matt, what I have tried to do, and I hope you’ll continue to do this on this platform, is to dial down that temperature, to have discussions with...

Doug Lewin (09:26.996)

The first question of asking somebody to come on the podcast isn’t what political tribe are you a part of? It’s do you have interesting thoughts on energy? They may not be the same as my thoughts on energy. I actually hope they aren’t because if we’re only talking to people we agree with 100%, like what’s the point? I mean, you know, some of it is to explore differences. Some of it is just to learn from experts that know, you know, that’s been my great joy in doing this is having people on that know so much more than me that I can ask questions of.

Doug Lewin (09:57.014)

and get smarter and help the audience get smarter too. And I’ll tell you, I mean, I’m just so excited about some of the possibilities of, you know, cross ideological cross partisan. And I don’t even want to just say bipartisan. Like it could be all kinds of different beliefs that if you come to this from, want cheap, fast, reliable, clean power. Like

Doug Lewin (10:22.764)

Let’s talk about what are the things we can do to get all those. know, competition, right? That’s one of those places that like, you know, you get broad agreement in general, not a hundred percent, but broad agreement left and right that like competition is generally a good thing, particularly on the right, which has made things like really, really interesting in Texas. So I think as much as possible to depoliticize it, to dial the temperature down, to look for areas of commonality, you know, it’s interesting.

Doug Lewin (10:52.29)

Chairman Flores of ERCOT gave a speech at, I think it was at Gulf Coast Power Association where he talked about like, can we look for our similarities first and our differences next? And I just think that’s so powerful. And I’ve always tried to do that in my career, like connect with somebody first and then explore the differences. I think too many people are just leading with their differences. And like that’s on a human level makes it very hard to work with anybody.

Matt Boms (11:18.286)

Yeah, I completely agree with you. And that is not limited to energy, right? We’re seeing that across our entire society. And I think you said at the outset that speaks to kind of your curiosity as a person, but the fact that you’re not married to your ideas, right? Things change. We’re constantly learning. A lot of these concepts are new and emerging. AI is only beginning to emerge as this new pillar of society. We’re all going to have a lot to learn here.

Matt Boms (11:46.508)

moving forward. I think that at the outset, if we can just drop our prior set of expectations and maybe any biases that we have, that will help us all come together and work in a more productive way. And I certainly think that what you mentioned about competitive markets being, know, historically Republican principle in a Republican state, that was probably the single biggest factor in the renewable industry having success in Texas and continues to be right. So that will be

Matt Boms (12:16.334)

crucial moving forward. And I think that’s what’s bringing a lot of solar, wind and battery companies to Texas because of the competitive market that we have here. You don’t see that in other states. see even blue states having trouble with the renewable build out because of permitting problems or because of regulatory issues that they’re facing, because of the backlogs and interconnection that they have. And as a state, we’ve been able to leapfrog a lot of those problems. And there’s a whole bunch of reasons behind that that you can take us through.

Matt Boms (12:45.486)

But I think overall you’re right that the taking the ideology out of it and maybe focusing less on politics and more on practical solutions is probably how we’re going to move forward here and meet the load growth that’s coming. So that’s what I want to hear from you too is how are we going to possibly, some of the numbers are mind blowing. You’ve gone through this in previous podcast episodes. How do you see us meeting this next big challenge and this big tsunami of load growth that’s coming?

Doug Lewin (13:10.092)

Yeah. Well, first, before I get to that, I just want to back up to something you said just a minute ago, right? So like competition, yes, Texas has been a red state for a long time. When Senate Bill seven was passed, the house was still democratic. So it was a very bipartisan bill. Senate was Republican. Governor was Republican. House was democratic. And they had to find those solutions across, know, bicameral, bipartisan. And competition had strong support in the democratic house with Speaker

Doug Lewin (13:39.182)

Pete Laney, if I’ve got this right, and I think I do, it’s within a couple of votes, but I think it was 146 out of 150 voted for Senate Bill 7. So like, and again, I came into the legislature like a few years after that, and I think we’ve seen, there’s still a lot of bills that get that many votes, but not as many big bills. And that’s what I would hope we can start to get to is as a state, if we say these are the things we prioritize, right? Again, clean, cheap, fast, reliable, like,

Doug Lewin (14:08.81)

What are the things that kind of meet all of those things or most of those things? And how do we balance those using competitive market forces? And I’ll tell you, as far as the load growth goes, it’s really amazing. There was a study that Aurora did for ERCOT on the Dispatchable Reliability Reserve Service. There were a lot of different models they ran and there’s a lot of different results that came out. There was only one result.

Doug Lewin (14:34.776)

that had 0.0 gigawatts worth of load shed in a winter storm Elliott, which was the 2022 winter storm in December, right before Christmas or 2023 heat wave. There’s only one that had zero rolling outages. And that was the very high data center load growth scenario. That was the only one like, you know, you could spend all this money and build new ancillary services and capacity markets, capacity constructs, all that kind of stuff. And you would still have.

Doug Lewin (15:05.022)

some outages. The one exception was the high load growth. And what they were modeling was if we had high load growth and data centers are bringing their own generation and 60 % of them have flexibility in them, that would get you down to 0.0. So I think, again, no matter what your political persuasion is, the investment that could be coming to the state, the potential to actually get the most reliable grid possible, right?

Doug Lewin (15:34.398)

while spreading the fixed cost of the system out to more users. Like all of this is there right in front of us. And I couldn’t be more excited to continue to be working in Texas towards this vision of a clean, reliable, affordable, you know, power grid, which we’ve made huge strides over the last five years in this state. There’s just no denying it. We got a long way to go. And pretty soon here, we’re going to flip the mic around. I’m going to ask you questions, Matt, because I know you over the last several years.

Doug Lewin (16:01.986)

have been working on some of the very things that I think are like most essential to get to that clean, reliable, affordable grid. So yeah, we’ll do that in a second, but I don’t know. I don’t want to cut you off. had any other like burning questions you want to ask.

Matt Boms (16:16.716)

Well, yeah, what changes now, because for most of your career, you know, correct me if I’m wrong, we didn’t have the kind of low growth that we have now, right? So that’s right. That’s a huge, drastic change from how energy has functioned over the last few decades, right? So where do we go from here? Like, where do you see policymakers really changing their views and making sure that we’re bringing these businesses to Texas instead of turning them away because we don’t have enough power?

Doug Lewin (16:47.202)

Yeah, look, to me, there’s so much, right? This is so complicated. Obviously, there’s a long record there for people to go back and listen to, hearing all this stuff. But to me, this kind of boils down to three main things, right? You’ve gotta keep the conditions for new supply to want to come to Texas. We have built more supply here than any other state by far. It’s not close.

Doug Lewin (17:11.406)

And that’s because of the competitive market design. So I think being protective of that competitive market design, keeping those price signals, you know, at the ERCOT board meeting, there’s some discussion around, not getting enough gas built. The gas queue has tripled in the last 18 months because those signals are coming from the new demand, right? So I think keeping that where particularly solar storage and gas, like those are the things that are going to be built over the next years. Wind too, there’ll be some wind in the mix, but.

Doug Lewin (17:40.194)

you know, probably not as much as the other three. Transmission, to be able to move all that power around and to be doing it in a way that is not, it’s not always congested, driving up costs, causing reliability problems. Congestion is not just a cost issue. It’s a reliability problem too. If you’ve got generation in a part of the state and you can’t move it to where it’s needed, you got reliability problems, right? We’ve had that South of San Antonio the last several years and we got it, we got to get ahead of that.

Doug Lewin (18:06.702)

And think ERCOT’s work on building out a 765 system, we’re recording on a day when the ERCOT board approved the building of the Eastern half of the 765 system. So that I think is really key. And then the last one, and this is probably a good segue to flip this around. And let me start asking you some questions, is the demand side. And I know you, Matt, you’ve played a huge leadership role in Texas on demand side.

Doug Lewin (18:30.686)

Demand side to me, look, I’ve spent a big part of my career working on energy efficiency and DERs, VPPs before anybody knew what a VPP was. Well, a few people knew, but it wasn’t as talked about as it is now, right? And I think that for a long time, the perception was, those are interesting and nice. Sure, who’s supposed to saving some energy and getting lower bills? Those are nice, but it was always just kind of like, there’s a little pat on the head, great work.

Doug Lewin (19:00.334)

cool, but that’s not the real stuff. In this environment with rapid load growth, those demand side solutions become absolutely essential and central. There’s a big discussion going on right now in the Twitterverse around this. Matt Iglesias had an article out, which I haven’t read yet, so I probably shouldn’t talk about it. I’ve only seen his tweets. So I will go read the article, Matt Iglesias, and digest your whole argument. But what I can gather from the Twitter spats is like,

Doug Lewin (19:29.548)

there is this kind of debate going on of like, is it more supply or demand side stuff? we be like demand flexibility and energy efficiency just aren’t going to be enough to meet our needs. We need to build more supply. And it’s like, well, of course, like, but, that’s not a binary. You don’t have to choose one or the other of those things. And, and as a matter of fact, if you choose one or other of those things, you’re probably going to end up short. We’re going to need resources everywhere we can get them. And that includes demand side resources and supply side resources.

Doug Lewin (19:59.616)

I just think that is a false choice if ever there was one. So I really think building up energy efficiency, distributed energy resources. So if you’re okay, Matt, I’m start asking you questions. Is that all right?

Matt Boms (20:12.856)

Yeah, I think you just did ask me like five questions.

Doug Lewin (20:14.958)

Doug Lewin (20:15.359)

So talk to us about distributed energy resources and energy efficiency. Tell us a little about your work in that area and what kind of excites you about that, what you’re excited to be working on.

Matt Boms (20:26.36)

Yeah, well, I think the way I like to think about this is electricity is the backbone of our economy, right? Like I went to school, I studied economics and the feeling that I have is the electric grid is the backbone for local economic development. There are other countries that don’t have the luxury that we have in the United States of having an abundant electric grid. And there are countries where businesses simply can’t operate because they don’t have a stable grid.

Matt Boms (20:55.33)

to count on like we do here. They also don’t have cheap electricity, right, which is something that we take for granted, just generally speaking, right? We have some variations across states, across counties, but for the most part, Americans have access to reliable, affordable electricity. And those are the key words that we want to keep it affordable. We want to keep it reliable. And that’s, think, the challenge that we’re going to be facing now with all the new data centers that are coming to Texas. So I think my feeling on this, Doug, is also that it’s not black and white. It’s not one or the other.

Matt Boms (21:25.292)

You can make the same argument that I just heard you make when it comes to different technologies, whether it’s solar, batteries, gas, wind, DERs, energy waste, transmission infrastructure. We need all of that. It’s not going to be choosing winners and losers. It’s going to be all of these different technologies playing their role in meeting our energy needs moving forward. Yep. So the key piece for me is how do we keep it flexible?

Matt Boms (21:51.466)

And I think the flexibility is what’s going to drive affordability and reliability in Texas. I don’t think that we’re at a point now in ERCOT where we can say our grid is sufficiently flexible to meet all of the load that’s coming. I think we have a lot of work to do. I think you can see that through price volatility. You can see that in parts of the state where during heat wave or a winter storm, the price signals are exorbitantly high and

Matt Boms (22:19.852)

distributed resources aren’t being valued the way that they should, right? There’s no reason we shouldn’t be valuing battery storage or backup generators or smart thermostats for the value that they’re bringing on those days that we really need them. And that might only be 1 % of the year, but when we really do need to count on them, that’s where we’re going to have to think of ways to support those technologies. And by doing that, you’re going to bring the costs down for consumers, right? Because right now it certainly feels like

Matt Boms (22:49.282)

For anyone that owns a home in Texas that has looked into rooftop solar or batteries, the prices are still too high. They’re just not affordable enough. And I think that’s where the policy comes in because the policy creates the market that we need to set up for distributed resources.

Doug Lewin (23:05.25)

Yeah, I was just going to say like that is, you when you talk about yes, like power is more reliable here, or more, I should say more affordable, more reliable too. But your point was it’s more affordable here than is a lot of places in the world. A lot of places you just can’t get electricity. Important to acknowledge, and I know you do acknowledge this, you just started to talk about it there, that like for a lot of people, power is, is unaffordable, right? We have a, we have a large portion of the population.

Doug Lewin (23:30.808)

that is really struggling to pay their bills, 30 to 40 % that are making choices between paying their power bills, paying for food and medicine. So this is really where I think it becomes really important when you’re talking about flexibility, if we can bring those flexible resources, whether they be batteries or demand response, right, through thermostats, heat pumps that are connected to a thermostat and have variable speed, all of those kinds of things.

Doug Lewin (23:58.434)

that you can meet, just like you said, Matt, that 1 % of the year, maybe it’s 2 % some years if there’s a really bad heat wave, but you’re talking about, you know, a few hundred hours, right, during a winter storm, right, having those batteries that are on the distributed network. And a lot of people say the batteries only last for one or two hours. If you’ve got a battery in your garage, it could be configured to last a lot longer than an hour or two. This is a common perception I think we’ve really got to get after, that every battery is only a one or two hour battery. Not true.

Doug Lewin (24:27.958)

It depends how it’s configured and we can stretch them out and have all kinds of different configurations to them. And if we can do that, not only does that bring the price of generation down, that means in some cases we won’t have to do as extensive a build out of the distribution grid, right? Which is the biggest driver of higher energy bills right now is on the distribution grid. So I know

Doug Lewin (24:53.422)

You and the organization, Texas Advanced Energy Business Alliance, put out a study recently looking at the encore service territory and what DERs could mean for that. I think the number was something like eight and a half billion in savings over 10 years. Tell us a little about the findings and how could we actually get to those savings? What policy solutions might unlock some of those savings for consumers?

Matt Boms (25:16.43)

Sure, yeah, the calculation was around $2,000 in savings per rate payer over the next 10 years. And that’s a huge amount of savings for, like you said, folks that are struggling to pay their energy bills that really could use that relief, right? And might not necessarily have the capital to go out right now and buy a huge solar and battery system to install on their house. Or for a small business that frankly we’ve seen in Houston.

Matt Boms (25:45.272)

small businesses that after Hurricane Barrel went out and purchased backup generators because they can’t just accept a week without a business because a hurricane swept in and wiped out their power, right? And to your point, there are plenty of stories after Barrel of folks that did weather the storm through battery systems and through rooftop solar. So I think we have the arguments and we have the case studies to show that the technologies are working. You asked about what are the policies that could be put in place to solve the problem.

Matt Boms (26:15.054)

The way that the number was calculated as far as the roughly $2,000 per rate payer is on the one hand, you have the wholesale market value, right? So you have, if these technologies could compete in the wholesale market, how much potentially could we assign in value to those distributed resources? And that’s happening through the aggregated DER project, right? There’s a lot of work that needs to be done there, but it’s working its way through ERCOT.

Matt Boms (26:40.77)

The other half that is not at all being valued right now is through the transmission and distribution deferral, right? So for every distributed resource that’s put on the grid, you are ultimately deferring transmission and distribution that needs to be built out in the long-term, right? So that means an overloaded substation that might need to be replaced, but can you replace that with batteries or with whatever distributed technology works best for that particular location in Texas, right?

Matt Boms (27:10.614)

Right now we have a system set up where we are just building out poles and wires through our transmission and distribution utilities and we’re not assigning any value to DERs when they can be a more cost effective technology for rate payers. Because ultimately we’re trying to save money for rate payers through these technologies. So that’s where most of the value comes from, Doug. I know that you had Astrid Atkinson on your podcast recently who spoke about

Matt Boms (27:37.794)

The fact that it can be up to 75 % of the value of distributed resources could be attributed to that TND deferral, right? That’s the big piece here that we’re missing within the ERCOT system because that whole part of the value stack is missing currently in the way that our market is set up.

Doug Lewin (27:53.998)

Yeah, and the podcasts with Charles Hua, with Margo Weiss, like, you know, we see that the lines for generation have been relatively flat to some years down. Every once in a while you get a little blip like 2022 with the Russian invasion where like generation goes up. But generally, overtime cost of generation going down for two reasons. And when we talking about the competitive market earlier and you said, you know, it’s brought a lot of renewables, it also brought a ton of gas, right? Especially in the mid-aughts, right? Really cheap gas.

Doug Lewin (28:22.35)

cheap renewables have lowered the cost generation. Meanwhile, the lines for transmission and distribution are going up. Now I said earlier, I really do believe we need the 765 build out. It’s really important to be able to move power around more efficiently. Large amounts of power, those lines can carry four to six times the amount of the next voltage down. So we’ve really got to look to that distribution grid. And that’s really what I think this study is a really good one. We talked about it a little bit, I hope.

Doug Lewin (28:47.862)

Matt, you might be able to have Demand Site Analytics that did that excellent study. And I understand you guys are doing another one that is ERCOT wide that’ll come out at some point. So maybe that’ll be a good interview for you on the podcast going forward is really getting into that study and breaking down some of the assumptions there and how could those savings go bigger? How would they be smaller? What kinds of policies do we actually need to unlock those savings, right?

Matt Boms (29:10.584)

Yeah, that’s right. I also think this is an area where Texas could lead the country, right? Like it really is the new frontier. If you think about all the data centers that are being built and how they can contribute to that flexibility in Texas, that’s a huge opportunity. Like that’s the way we can unlock all of this load growth and the business opportunity in Texas, because all of a sudden you’re talking about dozens of gigawatts that are going to be coming online over the next few years.

Matt Boms (29:38.162)

And you have the capital to make it happen. You’ve got data centers that really the number one priority is how fast can I get power, right? It’s not about the capital that they have on hand. It’s about the speed that they can possibly get connected to our grid. So there’s an incentive there for making the grid more flexible and that enables more data center interconnection. So I’m hopeful that this will happen. I just think that we need to change the way we think about electricity, right? For those of us that have worked in this industry, we’re used to thinking about

Matt Boms (30:06.85)

the utilities delivering electrons to our homes and businesses. And something that is true, and like you said, we need those 765 lines to bring us cheap electrons from rural parts of the state. However, we also need to flip that on the table and say, well, these technologies weren’t around when the system was created, right? And so now all of sudden you have this great battery storage technology that can enable folks to generate their own power, right? And they should be rewarded for bringing flexibility to the grid.

Doug Lewin (30:34.862)

And you know what’s a great way to get like new resources onto the grid competition and markets. I actually got chills, Matt, when you said Texas could lead this, cause that has been a huge theme on this podcast, right? For years. And I’m so happy that you’re like grabbing the torch and going to keep that going forward. Cause that really is a theme here is Texas has a lot going for it. We have the elements here to put all that together. And I think you’ve got that vision.

Doug Lewin (31:04.66)

You can see that. You can kind of see that you got a puzzle in front of you. All the pieces are there. We’ve got the competitive market. You know, that means we’ve got competitive retail electric providers. We’ve got very innovative co-ops and munis as well. There’s a ton. I hope you’ll do some podcasts with, especially some of the co-ops. think I only did, I think it was only Bandera. Was that the only co-op? So like that’s kind of a big, big hole in this podcast that needs to be filled. There’s a lot going on at co-ops right now.

Doug Lewin (31:33.696)

in the competitive market, et cetera, Texas really has all those pieces to put together markets that send a price signal to these distributed resources to lower that distribution spending, bend the curve downward. And while we’re doing that, put those resources on people’s premises so that they have reliable and resilient service, even through those storms. Before we end, I just want to ask you just one more thing. And again, we’re teeing up like a bunch of different

Doug Lewin (32:03.768)

podcast episodes. hope the audience is getting a sense here, right? Dear listener that like there is no shortage of stuff to cover. There’s no shortage of people to cover it. I’m so excited to become a listener and hear where all this is going. But you’ve been working a lot on this Texas backup power package program, right? So this is this very innovative. think it instantly talk about Texas being a leader. Here’s Texas actually putting $1.8 billion towards

Doug Lewin (32:30.934)

Effectively microgrids, they may or may not actually be microgrids depending on how they’re configured, but effectively microgrids backup power systems at critical facilities like police stations and nursing homes, water treatment facilities, et cetera. You’ve been involved in that from the very beginning. Can you just share with the audience a little bit kind of a little bit more about what that is and why that’s exciting, why that’s been a priority for you over the last few years to work on and you know.

Doug Lewin (32:57.026)

what you might explore here on the podcast related to that really innovative program Texas has.

Matt Boms (33:02.062)

If we go back to the 2023 legislative session, this was part of SB 2627 that initially set up the Texas Energy Fund. think when folks hear Texas Energy Fund, they think of gas plants, That just automatically where our mind goes. But I constantly remind people that there’s the 1.8 billion allocated to the Backup Power Program, right? Of the 10 billion, 1.8 is for Backup Power. And so there’s a significant amount of resources that the state has allocated to this program.

Matt Boms (33:31.552)

I was surprised when it was first created that this hadn’t been done since Winter Storm URI. Like that was something that really stood out to me because you would hope that by now we would have backed up critical facilities. And I think it’s our obligation as people who work in this industry to make sure that hospitals, police, fire stations, nursing homes have power. If God forbid we have another Winter Storm URI event, we want to make sure that we’re taking care of.

Matt Boms (33:58.178)

our most vulnerable Texans, right? That’s something that we can all agree on. That’s not a partisan issue at all, right? We all want to protect vulnerable people in our state. So that was the impetus for the program. And I give a lot of credit to Alison Silverstein, who really put her blood, sweat, and tears into this program. And it’s something that we continue to work on with the Public Utility Commission. So I think the hope is that this will be launched next year.

Matt Boms (34:21.698)

This will be a program that ideally will bring in all the different vendors that are already manufacturing these technologies. It has to be a combination of solar, battery, and generator, right? It has to have those three. As an alternative, it could be electric school buses because those are essentially batteries on wheels, right? So those could be, if the load is small enough at some of these facilities, the electric school bus could absolutely power the facility for 48 continuous hours, which is what the statute says.

Matt Boms (34:50.082)

So I think what I’m looking forward to is the rollout of the program. I’m looking forward to bringing in private sector companies that are excited to roll up their sleeves and get these technologies out to rural communities across the state. And I think we also have to think about bringing in the critical facilities, making sure that they’re aware of this program, because, you know, it’s like when a tree falls in a forest kind of deal with if the critical facilities aren’t paying attention to this program, then they won’t know it exists. So I think we also have to support the program by bringing in all the different stakeholders and making sure that.

Matt Boms (35:20.12)

they’re aware that the program is here to support them. then hopefully next time a winter event or a summer event happens, these backup power packages will be in place to provide reliable power for those facilities.

Doug Lewin (35:33.902)

It’s such, such an important program. It’s such an important policy. And by the way, an example of where, you know, you had good bipartisan bicameral policy making happening. Like those are major policy decisions that take a lot of different input from a lot of different folks and kudos to the ledge for figuring that out. Now the PC is working to implement that and you’ll continue to cover that here. know that the backup power packages will be something also that could be talked about.

Doug Lewin (36:01.262)

at the Texas Energy Waste Advisory Committee, which you helped to get going. So we won’t talk about that one right now, but I’m just trying to tee up a lot of the different things that I know you’re gonna be talking about in the coming months. And I hope the audience is as excited as I am to get some different voices in here, explore some different topics that maybe I didn’t cover as much. And I just couldn’t be more excited about this next chapter. Matt, since we were interviewing each other, the question I always ask at the end, as you know,

Doug Lewin (36:29.704)

Is there anything I forgot to ask you? want to say anything you want to add? And then guess you can ask it back of me, but I’ll add, I don’t have anything to add. I’m good. Anything you want to add, Matt.

Matt Boms (36:39.15)

I just want to say that we’ll miss you and I know you’ll still be around. And I want to say thank you because you’ve been really an inspiration and source of so much knowledge and information that this podcast has served a lot of people over all the episodes that you’ve recorded. You’ve just been a wealth of knowledge and leadership and inspiration for me, Doug, and I know for a lot of my colleagues. So just want to say thank you and salute you. And I know you’re not disappearing, but just as this chapter comes to an end, I just want to say thank you on behalf of

Matt Boms (37:08.778)

of all of us that work in this industry, you’ve been really a great asset for so many of us.

Doug Lewin (37:13.598)

I appreciate that deeply. means a lot, especially coming from you, Matt. you, again, as I said at the outset, you’ve done some amazing work. so while I appreciate that and the look back, I hope everybody’s looking forward and as excited as I am for this next chapter of the Energy Capital podcast. Can’t wait to listen and discuss all the episodes with friends and colleagues. So thanks for agreeing to step up and do this. And yeah, man, can’t wait for what’s next. Thank you.

Matt Boms (37:39.566)

All right, thanks, Doc. Thanks for listening to the Energy Capital Podcast. If today’s conversation helped you make sense of the energy world, share the episode with a friend and hit follow on your podcast app. You can find us on Apple podcasts, Spotify, and all the usual platforms. For deeper analysis each week, subscribe to the Texas Energy Empowered newsletter at texasenergyempowered.com. That’s where you’ll find every episode, every article, and all of our latest updates.

Matt Boms (38:09.666)

We’re also on LinkedIn, X, and YouTube, where we post clips, insights, and ongoing commentary. Big thanks to Nate Peavey, our producer. I’m Matt Bombs, and I’ll see you next time. Stay curious, stay engaged, and let’s keep building a stronger, smarter energy future.

Everyone’s talking about the cost of power lately. But the Texas Energy Poverty Research Institute has been studying, talking, writing, and working to do something about it, for over a decade.

In recent research, TEPRI found that 65 percent of low and moderate income Texans are cutting back on essential energy use, often turning off AC in extreme heat. But their demand reductions aren’t necessarily saving them much money or supporting the grid.

Affordability is now a very high salience issue and there’s no one better to help us understand than TEPRI Executive Director, Margo Weisz. She talked about energy burden and affordability in Texas and the clearest paths to ratepayer relief.

TEPRI’s latest research shows bills increasing sharply over the last five years and again in the next five years: TEPRI Releases ERCOT Electricity Affordability Outlook: Forecasting Residential Electricity Prices and Burdens (2025-2030)

Energy burden is rising sharply

Energy burden is the share of income spent on electricity. In Texas:

* ~4.5 million households are low or moderate income.

* Their average electricity burden for a low income Texan is nearing 7% — that is, they pay 7% of their income for their power costs alone — and expected to be 9% by 2030.

* TEPRI’s modeling shows about a 29 percent increase in the cost of power over the last five years, with another 29 percent projected for the next 5 years.

* The biggest increases are coming from transmission and distribution utilities.

Wages are not keeping pace, leaving an average affordability gap of roughly $850 per year.

Because of this, households are taking risky steps — or getting shut off

As TEPRI’s survey shows, they are turning off or limiting AC in dangerous heat, skipping essentials to pay the bill, and accumulating arrears until shutoff notices arrive. And 12% were actually shut off. But Texas does not track disconnects so we don’t know if this survey matches actual shut-offs.

These actions point to system-level strain. They increase health risks and make reconnection more expensive for everyone.

Efficiency and distributed energy are long term solutions

Efficiency is the fastest, cheapest way to cut bills and peak demand. Weatherization and efficient HVAC could reduce load and permanently lower costs for the households who feel the most pain.

Distributed energy goes one step further. Community solar, batteries, and virtual power plants at homes and apartments can lower bills, reduce peak load and improve resilience.

Final Thoughts

Energy burden is the lived reality of the Texas grid. Millions of Texans are paying nearly 9 percent of their income for electricity, and many are already taking unsafe steps to stay connected.

But we have real options. Smarter enrollment for bill help. Scalable efficiency. Community solar and virtual power plants that lower costs and support ERCOT.

If this work matters to you, share it with someone who cares about Texas energy, and consider subscribing so we can keep tracking what works and where Texas can lead.

Timestamps

* 00:00 – Intro and why energy burden matters

* 02:00 – Margo’s background and TEPRI’s mission

* 04:00 – “energy limiting behaviors” often aren’t saving much money

* 05:00 – Community Voices Energy Survey and behaviors

* 06:30 – How Bandera Electric Co-op is helping their customers

* 08:30 – Texas does not track disconnect data

* 10:00 – “Sexy energy efficiency” and heat pumps; the split incentive problem

* 12:00 – TEPRI’s approach to applied research

* 13:30 – Defining and measuring energy burden

* 17:00 – the potential for energy abundance and what that means for low-income Texans

* 19:00 – Texas rates are lower but rising faster than the national average. Why?

* 22:00 – How do we allocate costs for socialized grid upgrades and storm recovery? (SB 6 implementation)

* 27:00 – What’s going to happen to bills in the next 5 years?

* 30:00 – Where some downward pressure for prices could come from

* 32:00 – What do we do about all this?

* 35:00 – Bill assistance and the future of LIHEAP

* 36:00 – Scaling efficiency and demand response in Texas

* 39:00 – Virtual power plants in low-income communities

* 41:00 – Enlightened self interest: helping those in need helps everyone

* 43:00 – Margo’s closing thoughts

Resources

Guest & Company

* Margo Weisz – LinkedIn

* Texas Energy Poverty Research Institute (TEPRI) - LinkedIn

Company & Industry News

* TEPRI New Report: “ERCOT Electricity Forecast Outlook”

* TEPRI Receives Outstanding Non-Profit Award at Texas Energy Summit

* TEPRI 10-Year Anniversary Celebration and Future of Energy in Texas

* Community Voices Energy Survey

* E4-TX Geo-Eligibility Tool

* Low Income Energy Assistance Program on TX System Benefits Charge

Related Podcasts by Doug

* Why Your Utility Bill Keeps Rising YouTube

* Creating a Distributed Battery Network with Zach Dell YouTube

* How Data Centers Can Strengthen the Texas Grid with Astrid Atkinson YouTube

Related Substack Posts by Doug

* The Affordability Crisis Deepens: Reading & Podcast Picks, August 31, 2025

* An Expensive and Unnecessary Capacity Market

* Energy Inflation

* Texas Has Never Had a Summer Blackout — Here’s Why That May Change

Transcript

Doug Lewin (00:05.548)

Welcome to the Energy Capital Podcast. I’m your host, Doug Lewin. And my guest this week is Margo Weisz. She is the executive director of the Texas Energy Poverty Research Institute or TEPRI.

Everybody these days is talking about affordability, and rightfully so. Affordability played a very important role in the recent elections in New Jersey, Virginia, and Georgia. And we are seeing increasing numbers of Americans and of Texans that are struggling to pay their bills, that are making that terrible choice between food, medicine, and their power bills. As high as 30 and sometimes 40% of Texans making those choices. TEPRI has done incredible work with their Community Energy Voices survey, where they surveyed 6,500 low-income Texans and found that more than 60% of them were engaged in energy-limiting behaviors. Translation of energy-limiting behaviors is, in some cases, particularly with medically vulnerable populations, extremely medically risky. This is a problem we’ve got to solve together. And as I talked about with Margo, who’s just a fantastic leader in this space in Texas, the solutions actually can help across the grid. One of the things TEPRI is working on is distributed energy resources at multifamily facilities. And one of the things we talked about there is how all of us benefit from implementing those kinds of solutions. It’s what I’ve referred to—I didn’t come up with this term; I’ve heard it in a lot of different places—but enlightened self-interest. If we are getting solar and storage and energy efficiency out widely, particularly to low-income Texans, that strengthens the grid for all of us while it lowers their energy bills. So looking for those win-win-wins is what Margo and TEPRI are all about.

I hope you enjoyed this episode and, as always, if you did, please share it with a friend, family member, or colleague and please leave us a five-star review wherever you listen. And with that, here’s my conversation with Margo Weisz.

Margo Weisz, welcome to the Energy Capital Podcast.

Margo Weisz (02:11.64)

Thank you, Doug. It is awesome to be here with you. Yeah.

Doug Lewin (02:15.662)

We’ve been talking about this for a while, but this is timely because you guys have a really important paper coming out that we’re going to talk through a little bit. But before we get into all that, can you just share with the audience a little bit about the Texas Energy Poverty Research Institute? What do you guys do? What’s it all about?

Margo Weisz (02:29.486)

Right, we’re a statewide nonprofit and we address the acute energy needs of people with low incomes. And we do it in a variety of different ways. As our name says, we do some research and we’re going to talk a little bit about that today. And the cornerstone of our research is a survey of low-income households throughout the state. And I know we’re going to get to that. We also do some pilot projects. So we take what we learn in that research and then we try to figure out some strategies to solve some of the challenges that low-income households face by doing a variety of different pilot projects on the ground. We also have some web-based tools that we use, that we’ve created, and we do a little bit of education as well.

Doug Lewin (03:09.134)

Great. Thanks for that. We’ll have information on the organization in the show notes. So folks that want to learn more about TEPRI, I encourage you to go check out their website. You just mentioned the Community Voices Energy Survey. You all surveyed 6,500 Texans who are low or moderate income. Can you talk a little bit about what are some of the key takeaways from that for you? What a fantastic exercise. Yeah. So what did you guys learn?

Margo Weisz (03:32.626)

Right. I mean, it’s so important for us to really have our work guided very much by the experience and the priorities of the people that we serve. So we focus on affordability, reliability, and clean energy. What are their behaviors around it? What are their priorities? What are their concerns? So that’s kind of—we just ask a whole variety of questions about their experience in a day-to-day environment with energy. It’s very illuminating for us.

Doug Lewin (03:59.756)

Yeah, and one of the things that really stuck out to me out of that was 65% of the low and moderate income Texans you surveyed said they engage in, quote unquote, energy-limiting behaviors. I mean, that to me was sort of an eye-popping figure. Can you talk about why that’s so important?

Margo Weisz (04:16.649)

Yes. So I think these are the ways that people try to lower their bills. So they think to themselves, “How can I lower my bills? I can turn off my air conditioning when it’s, you know, a hundred degrees outside, because it’s probably really expensive if it’s a hundred degrees outside,” or “I can turn off my heat or turn down my heat.” You know, those are the variety of things—unhooking their appliances. I think what’s most interesting, though, about that, probably not so surprising that low and moderate income people are doing that, but they may not be doing it in a way that really optimizes savings for them. And so I think the takeaway from that is that there’s a lot of opportunity with demand response for them to be using these behaviors in ways that not only more positively impact their bills, but also support the grid. So knowing that 65% of them are already engaging in these behaviors, well, if they had more information about... Don’t turn off your air conditioner in the middle of the afternoon.

Doug Lewin (05:16.62)

We have a lot of solar power. Power is actually really cheap.

Margo Weisz (05:19.106)

Zero-cost energy in the middle of the afternoon. You know, so you can have your air conditioner on, but maybe, you know, at five o’clock, especially if you could get a little text that your retail electric provider let you know, you could save $5 if you, you know, right now turn your air conditioner up by three degrees. So I think that is the piece of the Community Voices Survey that is most helpful: what are people doing now and what are they trying to do and is it achieving that or are there ways to help them do that better to meet their goals?

Doug Lewin (05:56.654)

Yeah, I can’t tell you how many times over the last 20 years working in this space, people said, “Oh, demand response isn’t for low-income people. You know, too many of them or they don’t have the right technology or they’re like older and they can’t really understand it.” And it’s like, look at the data. Like 65% of them are doing it right now. But to your point, they may not be actually getting paid for that. They may be saving some, but to your point, like three and four in the afternoon in Texas with 36 gigawatts of solar power, like that’s not the time to be turning down. You should actually, if you had the right rate structure and incentives in place, you could actually be using more at three or four, as long as you’re set up to use less.

Margo Weisz (06:39.714)

Right, cool down your house. And one of the really interesting kind of case studies that we’re looking at right now is Bandera Electric Co-op because they have fairly large, low and moderate income household membership. And they created some software that allowed them to have really efficient and effective communication with their members about their energy use. And what they found, and we’ll be digging much deeper into this in 2026, is that they were able to make tremendous impact on their members’ bills by feeding them the information about when they should be using those behaviors. And so they’re also doing a lot of other really interesting things that we’re excited to dig into at Bandera. But I think this software that allows them to communicate in real time with their customers has had a huge impact on customer bills. So we’d like to see that and figure out, is that something that could be replicated by other providers?

Doug Lewin (07:35.886)

I mean, yeah, it obviously can be replicated. It may not be the exact same in every place, but that communication is just so absolutely critical.

Margo Weisz (07:43.582)

Right, and it really speaks—like people are already doing this, they want to do it. They want to do it well, and they’re really concerned about their bills. We know that we keep hearing about that. So, you know, and I know we’ll talk a little bit about what can people do.

Doug Lewin (07:56.876)

Yeah, we are gonna get there towards the end, but I will say, because I think it’s appropriate to say at this point, one of the things we could be doing is more energy efficiency, because what is actually—when people are taking those energy-limited behaviors, depending on how they’re doing it and when they’re doing it, it can actually be unsafe. And then you’ve actually got, I think the number you guys had—we’ll quickly, I’m gonna have a link to this in the show notes so people can find the exact facts and figures—but something along the order of 30% of the low and moderate income folks you interviewed had received a bill of disconnect notice of some kind.

Margo Weisz (08:27.886)

Right, and 12% of them had actually been disconnected. And I think it’s really important to note that because other states actually track their disconnection data, but we don’t do that in Texas.

Doug Lewin (08:37.336)

Which I find just wild. Like, I mean, you can’t manage what you don’t measure. And we’re like literally—like it’s being measured, but it’s not being reported. So like, great, you’re measuring it, but nobody knows.

Margo Weisz (08:47.468)

Right, it’s not only costs for the households. There’s ripple effects throughout the whole industry. I mean, there’s bad debt expense.

Doug Lewin (08:53.681)

This is good for nobody. This is good for nobody. Nobody benefits.

Margo Weisz (08:56.514)

This is good for nobody. So to understand, like, well, what is the extent of the problem? So our survey shows that 12% of low and moderate income households reported—this is what they report—that they were disconnected in the last 12 months from the survey. So we’ll go out again and see, because we also know since we did the survey in 2023, that rates continued to go up. So it will be really interesting in 2026 to see, well, in the last 12 months, what percentage of low and moderate income households report that they were disconnected or received a disconnection notice.

Doug Lewin (09:28.11)

Yeah, and one of the things I would love to see happen is, not the reporting—you’re absolutely right. Like that should come first. Like we just need to have a better sense of the data in Texas. Policymakers, particularly legislators need to like demand that of the PUC and hopefully the PUC can like figure out how to just get that out there. ERCOT has that information. There’s a number of ways to get that information, but then starting to connect the energy efficiency programs to those that are being like—that is a way, like yes, you can do bill assistance and that’s really important, like a one-time bill assistance, but if you do energy efficiency, it’s actually lowering your bill every single month and making those energy-limiting behaviors, which we know 65% are doing, less risky for them. Because if you have better insulation and better equipment and things like that, that’s gonna make it more safe when you’re engaged.

Margo Weisz (10:15.202)

The least sexy thing to talk about is energy efficiency.

Doug Lewin (10:18.134)

The most sexy, damn it! If a listener, if you haven’t realized yet how sexy heat pumps are, please look into them. They’re incredibly sexy. They’re sexy. Go ahead. At least as sexy as solar panels and batteries. At least, if not more.

Margo Weisz (10:38.946)

Right. Way more sexy than virtual power plant technology. Let’s just say. I think the challenge with energy efficiency, which we also are huge proponents of, is that you really have the split incentive for landlords and for low and moderate income households. Just a very large percentage of them are living in rental housing and in urban areas in multifamily. So we need to be more creative. And when we think about it, it’s just not a straight-out incentive, but what are sort of the targeted incentives for multifamily and for landlords to really invest in energy efficiency? Because it’s gonna be a huge impact on people’s bills and keep them a lot safer when it’s really hot or really cold outside and they’re exhibiting these energy-limiting behaviors. Well, it won’t be so bad if their home is already cool enough, you know, and then they do that and then retaining that air conditioning. So we think it’s really important as well and would like to see those programs expanded. We have created a web interface tool that four of the utilities currently subscribe to because one of the challenges that they have with their energy efficiency programs for low-income people is that historically contractors go out, they knock on doors and they collect income information. Well, in this day and age in Texas, who’s going to pass over their income information to some rando that knocks on their door? So the customer acquisition cost for utilities was very, very high and people were very uncomfortable with the process. So TEPRI created a geo-eligibility tool where households are automatically qualified based on where they live. The four largest utilities currently subscribe to that program through TEPRI and their contractors use it. And so those customer acquisition costs should be significantly lower. And hopefully, as our colleagues go and advocate for more energy efficiency dollars, the issue of customer acquisition for low income should not any longer be an issue.

Doug Lewin (12:30.562)

That’s amazing. It’s one of the things I really love about TEPRI is you guys have these great research reports. You’re kind of that, you know, it’s a little cliché, but like the think and do tank, right now. Right. You guys are actually building these tools to make the experience—well, to increase the likelihood that you can actually deliver energy efficiency.

Margo Weisz (12:47.414)

Right, like the think part is really important because you can’t know if what you’re doing is right if you’re not doing the research, but the doing part is equally as important because then you have to say, “Well, let’s try these things out and get to that next level of learning of what are the obstacles.”

Doug Lewin (13:05.66)

It’s really like a virtuous cycle, right? Because you’re thinking, you’re doing, you’re thinking, you’re using. Like as you’re doing, you’re getting that feedback from the market, from actually what’s going on in the world that then informs the next research. I’ve always loved that about TEPRI. You guys are awesome. So I want to make sure we talk about energy burden. This is a phrase that I think is getting used more and the sort of literacy around what that means is going up, but I still think it’s actually fairly low. Can you describe what energy burden is and what you found from your survey about what energy burden in Texas is like?

Margo Weisz (13:36.63)

Yeah, sure. So energy burden is a term used nationally to describe the percentage of a household’s income that goes to their total energy costs. And in the industry, anything over 6% of your income going to your energy costs is considered energy burdened. And so we do find that low and moderate income people are disproportionately, as you would expect, energy burdened. I think most concerning is that we’re seeing that those energy burdens have gone up and are continuing to go up. In Texas specifically, and I know we’re going to get to this, 80% of somebody’s energy costs are derived from electricity. And so what’s going on with electricity prices is most consequential to their energy burden. So I know we’re going to talk a little bit about it. We are about to put out a paper on affordability, and we distinguish electricity burden, which is a TEPRI term, but just in Texas, sort of perhaps most meaningful. And we say anything above 5%, the way that we calculated it, is electricity burdened. And we’re seeing those burdens really going up over the next five years. And they have gone up over the last five years as well.

Doug Lewin (14:50.478)

So for the average low to moderate income Texan from your survey, the energy burden was just about 8% and electricity burden was 7%. And again, just to put a finer point on that, that means all the income a person is taking in—like I want people just to stop and let that sink in a minute. If you imagine, dear listener, whatever you make in income, if 7 or 8% of what you made was going to pay your energy bills, this is what the reality is like for, what is it, 40% of Texans that are low to moderate income? I mean, this is not a small number of people.

Margo Weisz (15:27.21)

I mean, about 4.5 million households in Texas are struggling, you know, or low and moderate income. So it’s a big percentage of that. And so what do people do to be able to afford their bills? I want to step back a second because I think when people talk about poverty and they talk about challenges, we often think a lot about homelessness, as we should. We think about people having food on their table. And I think this idea that energy is consequential to the way that they live is just not something that hits people’s radar screen. Yet, it’s really foundational to how we live in the modern world. You know, not only is it a health issue in that, you know, we have very, very hot summers, we can have incredibly cold spells in the winter. So, especially for people who are medically vulnerable, which again tend to be disproportionately low and moderate income. But it’s like if you work these days, there’s so much—you know, you got to take a virtual call at home. Schools for the students, this thing’s everything. When my son was in school, in high school, everything was posted that he had to find. So if you don’t—what do you have to do if you’re not hooked up? You know, you really actually need energy in your lives. And when you think about your refrigerator, I mean, food costs are really high, but if you can’t keep your food cold, it goes bad really quickly. These are huge costs for people. So I think a lot of times people don’t think about how foundational energy is in our lives. I mean, our communication systems. In the case of an outage, the thing that people were most concerned with was communication systems. I need to know what’s going on and I don’t have access. So I think when people sort of think through all the different ways that they’re using energy, it becomes clearer to them, “Wow, this is really important. If people can’t afford their bills, what are they going to do? They don’t want to be cut off.”

Doug Lewin (17:16.205)

Yeah, and this is where, I mean, there’s obviously a whole discussion and dialogue going on in this country right now—right, left, center, everything—about sort of abundance, right? This is like a word everybody’s talking about. Some of it because of, you know, the Ezra Klein and Derek Thompson book. But just in general, you’re hearing this again, like a lot of the—I mean, in Texas, there’s a group active called Abundance Institute, and they’re like, there is this potential, I think, in the moment we’re at right now with particularly this scale-up of renewables and storage going on, particularly if we can get the demand side right, which is a huge if, if we could do the energy efficiency and DERs, that we could get to a point where we actually are driving costs—at maybe overall bills, if not rates, and we’re going to talk about that—downward. And I think that it’s important just to really—what we’re doing right now, right, is like diving deeper into what does that actually mean? If you could, somebody who’s making $30,000 a year, I’m going to do math on the fly, that’s, yeah, so 7% is roughly like two grand a year. If you can drive that down even a percent or two, and you’re giving somebody with $30,000 a year an extra few hundred dollars in their life, that makes a big, big difference. So that’s why this is so important. Anything else you want to say about that before I start asking you about rates?

Margo Weisz (18:35.124)

No, I mean, I think that’s, yeah.

Doug Lewin (18:35.124)

So in the report, while we’re recording is not out yet, but hopefully we’ll get this all lined up right. And when this comes out, the report will be out. It’s called ERCOT Electricity Forecast Outlook. And you guys have done some fantastic research again here, just like in addition to the Community Energy Voices Survey, this is a real contribution to really—I get asked this a lot, like what’s going on with Texas rates and you kind of point to EIA data and all that, but you guys have really put this together in a great way. I appreciate you sharing it before this so I could dive into it. So what you found was Texas rates are lower than the national average, but are rising faster than the national average. And one of the stats you had in there was rates were basically flat from 2010 to 2020. It was a little bit of up and down, but like basically flat for that decade. And then up 29% from 2020 to 2025. That seems like a pretty extraordinary finding. Can you talk a little bit about what is driving that 29% increase in the last five years?

Margo Weisz (19:36.31)

It was several different drivers. I think it was gas prices going up. I think it was investments in transmission and distribution. So it’s been weather and having to really figure out how to pay for all of the damage and the upgrades from weather. So yeah, we saw starting in 2020, just this big kind of movement upwards. I think we’re also seeing that a larger percentage of bills, when you look at them, the composition of your bill is becoming transmission and distribution costs. So as we continue to make more investments in transmission and distribution, that’s having an increasingly bigger impact on the bill. So not only are our investments going up for a whole variety of reasons in transmission and distribution, but transmission and distribution has increasingly become a larger percentage of the bills. And I think people don’t understand that. They’re like, “But you know, we can get the costs of energy in the afternoon,” you know, the generation piece of it towards zero. But if 40% of your bill is transmission and distribution, and that’s going up at a quick clip, then you’re going to see some increases in your bill. So yeah, I mean, to your point, like we did see that electricity rates are generally lower than the U.S., but when we compared them to states with similar climates, they weren’t really any lower. In fact, they were a little bit higher than those states with similar climates. And then additionally, while we did see rates going up across the board, Texas was going up at a much higher rate and higher than the U.S. average. So that’s what’s concerning.

Doug Lewin (21:12.172)

Yeah, and it’s really, it’s a little bit of a catch-22 kind of a problem too, because what you’re talking about is like all the extreme weather—that is one of the factors, right? Natural gas was clearly a factor 2022, the Russian invasion of Ukraine. By the way, to be clear, when we’re talking about rates, we’re talking about the all-in rate, right? Because you said T&D is making up, and I think you had a number in there, again, dangerous to this from memory, but it’s something on the order of magnitude of like 10, 15 years ago, like 28% of the bill was T&D, and that’s all the way up to 39, almost 40%. But this is the all-in bill you’re talking about, and a lot of that driven by gas, but a lot of it driven by the extreme weather, which then leads you as a, naturally, as a policymaker or a regulator or stakeholder advocate, you know, nonprofit think tank, like whatever, it probably leads you to say, “Well, we’re gonna need some more investment in the transmission distribution grid, we need to be more resilient to these storms.” But now you’re...

Margo Weisz (22:08.974)

You don’t want people to have these outages. And they’re very concerned about these outages. And for good reason, because the outages usually happen when there’s inclement weather. And so bad time to have an outage. So it is, it’s a little bit of a catch-22, but these investments are very expensive. And I’m sure you might ask me about this, but like how we allocate those costs—of who pays for it.

Doug Lewin (22:30.35)

Let’s talk about that now. How do we allocate those costs? Who pays for it?

Margo Weisz (22:34.71)

So historically, there’s been a different way to allocate those costs to the residential and commercial sector compared to the industrial sector. And so I think that we’re looking at that. The good news is we’re going to look at that allocation. Currently, the residential sector carries a disproportionate amount of those costs. So it hasn’t been particularly fair. And the good news is that we’re finally taking a look at it. And by the end of 2026, there will be some sort of a draft plan that should hopefully address those sort of inconsistencies in how those costs are allocated and who’s responsible for those costs.

Doug Lewin (23:10.816)

Yeah. And that’ll all happen through the Senate Bill 6 implementation that’s happening at the Public Utility Commission. So that draft plan, there’ll be some sort of... We don’t know what form this is going to take. It could just be a report with options. It could be a recommendation. I don’t think...

Margo Weisz (23:26.178)

It could be nothing at all.

Doug Lewin (23:27.699)

Well, there’s going to be something because the legislature did say in SB 6 that they needed something from the PUC. They needed them to look at it and give them a report. So there will be something on paper go into the legislature, whether or not that includes recommendations or merely options we don’t know, but there will be something. And to put a little finer point—go a little deeper into that with the transmission cost allocation—we’re really talking about that four coincident peak pricing. So I’ll put some links in the show notes. I’ve covered this in other podcasts, but the basic point for this conversation is if you are a really large user, if your load is over 700 kilowatts, it’s like a really large big box store and up, and far up, right? Including big manufacturing facilities, big data centers, all of that. You have the ability by reducing your peak usage on four days, June, July, August, September, to get your transmission bill way down. So that 40% you’re talking about, there’s the ability of a large user to reduce that, right? As a residential or small commercial customer, you cannot. All you could do is just reduce during that hour, but it’s just the reduction for that one hour, whereas the large users can reduce their bill for the entire year just by turning down during these four increments. So to bring this back full circle to where we started, those 65% of low to moderate income Texans that are taking energy-limited behaviors, if they were large users, that would save them money all year. But for these folks, like it’s only saving them money on that day.

Margo Weisz (24:56.268)

Right, right, right. So probably not even saving them money because they’re not really optimizing their behavior to actually when they would optimize their bill savings. And as we know, the market really isn’t set up to currently make sure that they are getting compensated for their behaviors at the right times. That’s the future. That’s the hopeful.

Doug Lewin (25:16.198)

That is the future. And I think what I’m hopeful—one of the things that will come out of that 4CP, you know, whether they go to some kind of 12 CP and make it 12 months or 6 CP, there’s all kinds of different sort of proposals floating out there. And there was a workshop held on this. I talked a little bit about this, actually quite a bit in the podcast with Travis Kavulla of NRG. And one of the things NRG has been advocating for is make whatever it is, 4CP, 12CP, whatever it ends up being, make that something that the load serving entity is exposed to. You don’t want to expose the individual customer to that. They don’t have the sophistication of a big manufacturing firm or something like that with energy managers on staff. But if they want to participate in something and save on their bills all year round, they could do that through their load serving entity, through their co-op or retail electric provider. Right. You think that one maybe holds some promise? Have you thought that one through?

Margo Weisz (26:10.69)

I think it does hold promise and I think there’s a lot of innovation. I feel like one of the things that’s so fun about my job and probably your job is just like all this innovation and all this possibility that you see. I think innovation has happened pretty quickly and I think a lot of people are seeing this. I think there’s a lot of reasons across the board for us to start looking at this in terms of grid support and our ability to use sort of all customer markets to support the grid. So yes, I feel fairly optimistic that we will see more services coming out that will impact customers. So there’s also some things that could be positive and there’s things that could negatively impact customers too in the future. So, I mean, one of the things that our paper looks at, and we think it’s pretty conservative, is what’s going to happen to bills over the next five years. So you sort of talked about like we looked first at what actually happened over the last five years. We can see that. Well, you know, an almost 30 percent increase in bills has been, you know, an incredible burden for all people, but especially for low and moderate income people. So going forward, we’re seeing that bills are going to rise almost another 30 percent. And we think that that projection is fairly conservative because it’s based on things that we feel that we can build into a projection model. And yet we do acknowledge that there’s all sorts of things that could be impacting bills that we will have to come back in three or four years and take a more granular look at and re-project out because we’ll know more. I think that people were very fearful that as we lost a lot of support for renewables, that that would really impact bills. But the truth is in Texas, we have so much solar in our interconnection queue and the batteries are playing such a huge role that the generation over the next three years probably is not going to go up that much. We’ve got a lot. We’ve got a lot of supply.

Doug Lewin (28:09.814)

And a market that still has price signals for the lower cost resources. So I think it’s important to note that with that in place, that counteracts some of that rising cost on the T and D side. Maybe, maybe not a lot, but some—puts a little down.

Margo Weisz (28:25.166)

Yeah, it’s close to $90 billion of investment that’s been approved for transmission and distribution upgrades. That’s a lot of money. So that’s going to impact bills. And if it’s 40% of your bill or 39% of your bill, maybe becoming a bigger percentage of your bill, we’ll have to go back and look. Then somebody’s got to pay for that. Now, that doesn’t include, what if we have another weather event in the next five years?

Doug Lewin (28:53.09)

I mean, again, that’s a big part of what’s caused the rising bills over the last five years, right? All the Winter Storm Uri surcharges, the Hurricane Beryl surcharges, the Derecho surcharges, they all stack up.

Margo Weisz (29:02.862)

It’s looking like we’re probably going to have some unexpected weather that’s going to require us to make investments that we can’t see right now. That didn’t go into our projection model because we don’t know. We could have said, “We don’t want to be conservative. Chances are, let’s add some more in there.” But we didn’t. So this is going up almost 30% and we feel like it’s fairly conservative. We looked at what we thought we could predict. We didn’t think that over the next three years, generation was going to be constrained in a way that would cause upward pressure, but it could. It could. We did show some increases in those costs starting in 2028. So we did see upward pressure and that is built into our model.

Doug Lewin (29:45.558)

And some of that, right, is I would assume the tax credits going away. Because there’s a lot of safe harboring going on where folks are still doing the projects with the tax credits, but that only has a runway out till... Well, I think even in ‘28, you can have some safe harbor, but it starts to go away somewhere right around ‘29.

Margo Weisz (30:04.31)

2027. Right, so we sort of show that that pressure is gonna start around 2028, a little bit, and then kind of goes up 28, 29, 30. But again, we’ll have to come back in a few years and see what’s going on. It could look worse than we think, it could look better than we think. Sure, of course. You know, those are things we didn’t know. So that was not a huge driver in our projection model, but we acknowledge it could be. We might have some benefits from co-optimization. We might have some benefits because DER integration and technology really becomes commercialized and there’s an uptake in the market faster than what we think. And so we know that could be a positive, but we didn’t put it in our projection model because it’s hard to know. We call it out in the paper, we describe it, we know that these are drivers that might affect the model, but not things that were easy for us to understand how to predict.

Doug Lewin (30:54.766)

Yeah, and if you’re wondering what co-optimization is, we’ll put in the show notes a link to a podcast I did with Beth Garza a year or so ago where we talked about it, but this is the sort of co-optimizing ancillary services in the real-time energy market, and it will go live right around the time this episode comes out. December 5th is the go-live date, and ERCOT projects that will save a couple billion dollars. So it’s nice to have all these low-cost generation resources coming onto the grid. It’s nice to see batteries getting in there and competing in major ways and some of the really spiky days that normally we would have seen thousands of dollars a megawatt hour. Now we’re seeing a few hundreds of dollars because all these batteries are competing against each other. So we are seeing some downward pressure there, but not to lose the point, 29% increase the last five years, projected 29% increase the next five years with, you know, 65% of over 4 million Texans already engaging in energy-limited behaviors.

Margo Weisz (31:51.982)

And already 12% already reporting that they’re getting a shut-off in that they’re actually being shut off and a much larger percentage of those reporting that they at least received a warning for shut-off. So they’re not paying their bills on time.

Doug Lewin (32:03.982)

So we’re likely to see those numbers go up, which brings us, I think, to what is one of the most important questions I could possibly ask. What do we do about this? So as part of your research is what are the things that can be done to help folks that are struggling and maybe even potentially some of these things like strengthen the grid at the same time? You guys had a few ideas in your report. You want to talk through some of those?

Margo Weisz (32:26.668)

I do, but before we do, just really want to quickly point out that the other thing we look at in the report is how do these changes specifically impact low and moderate income households? And so what we see is you talked at the beginning of our conversation about what those percentages of energy burden look like. And so if we’re seeing in 2025 that the average low and moderate income household has an electricity burden—because we’re just projecting out, we’re just looking at electricity for this paper, which is again 80% of the average household’s bills—if their electricity burden is 6.7%, 5% is considered energy burden. So they already have an energy burden starting in 2025. What’s it going to look like in 2030? And we’re looking at that going up to almost 9%. So that’s like almost 9% of their income. And we do put into that model an income increase of about 1 to 2% a year, depending on the geography. So we took a look. OK, we’re already showing, well, there’s going to be some income increases that we’re projecting in there. Even with that, this is what’s going to happen to the bills. We’re going to see almost a 9% electricity burden. Huge. This is not even their energy bill.

Doug Lewin (33:35.772)

So for low and moderate income folks, imagine—again, if you are low and moderate income, you don’t have to imagine this. If you’re not low and moderate income, imagine whatever your number is, take a minute, picture it in your head. Now take roughly 10% of that and imagine paying that on your power bill.

Margo Weisz (33:51.63)

Just your electricity alone. Yeah, just your power alone. That’s crazy. The interesting thing about that is, so I’m just gonna—I can’t remember the exact number, but it’s about $850, a delta of what we consider affordable and what—there’s about $850 that you just can’t afford.

Doug Lewin (34:06.962)

So annually, if we lower the number by $850, it would move back into like an affordable, not quite energy-burdened kind of a...

Margo Weisz (34:14.156)

But it gets a little bit harder because when you say a low and moderate income household, well, that includes everybody who’s at 80% or below of area-wide median income. Well, some of those people are at 30% or below. So those people are seeing, you know, $1,500 deltas in what they can afford each year. So it can be much higher depending on what your income is. So we’re just giving you an average. It’s an average of about $850-ish, the delta. But for some people, it’s much higher than that. So as we go into what can you do about it, we’re really looking at kind of a tidal wave of a problem in terms of affordability for low and moderate income people.

Doug Lewin (34:57.334)

And so some of the things you outlined, we talked about some of them, but energy efficiency, distributed energy resources, these things can help. We probably need some form of just straight bill assistance. We used to have this in the state in the form of the system benefit fund, but it went away 10 years ago or so. So we haven’t had any statewide—there’s federal bill assistance.

Margo Weisz (35:16.17)

There is federal bill assistance. We still have the LIHEAP dollars, but currently most of the staff for LIHEAP have been laid off. So it’s sort of unclear what the future of LIHEAP is, but the money’s still there. The money comes down to the states. I mean, again, this is just my thinking. This is not coming from anything I’ve read, but because the LIHEAP dollars come down to the state, we might not need that many staff at the federal level. That’s sort of our hope. Maybe it doesn’t need that staff.

Doug Lewin (35:41.833)

Administered here through Texas Department of Housing and Community Affairs.

Margo Weisz (35:44.468)

Right, right, and then out to these community service organizations throughout the state. So that money is still there and we’re, again, hopeful that it will continue, but it’s hitting such a small percentage of people who qualify. Again, I think we may quote it in the paper, but I believe it’s something like 5% of the people who qualify for that money actually receive it.

Doug Lewin (36:05.98)

Literally only a couple. Yeah, we’ll look it up and we’ll put the citation.

Margo Weisz (36:09.672)

Yes, it’s a small percentage. Yeah. So yes, but we need more. We need that state-level support. I think some of the munis have some support, depending on where you are. There’s probably some local support. But yeah, there’s just a huge challenge. Outright bill assistance is needed. But what are market-based strategies that we can be looking at? I think we should just be from here on out calling it sexy energy efficiency. It’s just, you know, it’s sexy energy efficiency. It’s what it is. We need to rebrand it. Absolutely. I do think it’s the lowest hanging fruit. I think again, Doug, you will know the numbers better than me because I do not have them in my head. But years ago, Texas used to be, I believe, number one in requiring energy efficiency.

Doug Lewin (36:57.08)

We were the first state to have what was called an energy efficiency resource standard. There were other states that like California had been doing it before that, but we innovated that model. We were the first to do it. Now of all the states, I think there’s like 27 that have a resource standard, we’re dead last in the size.

Margo Weisz (37:11.564)

Yeah. I mean, you know, it’s time. Yeah. It’s time for us to put money into sexy energy efficiency. And so I’d say that’s the easiest and probably the most impactful strategy. However, as we’ve talked about, we really need to think about that split incentive and what are those incentives for multifamily housing developers at the front end? How can we support those kinds of—whether it’s building codes or some kind of credits, tax credits they get for putting heat pumps in to multifamily and to be doing energy efficiency? So I would say that’s always number one. I think demand response has, as we’ve talked about, I think there is a lot of potential for that because we’re already seeing those behaviors being demonstrated. So now how can we really hone in on those to make sure that those behaviors are optimizing their bill savings? I think there’s a huge opportunity. Again, I’m super excited this year to be doing that case study on Bandera Electric Co-op and just understanding—I always sort of joke, you know, that when I sit in meetings, especially when I started this job, you know, I didn’t come from the energy world. I came from the finance world. So when I started this job and, you know, the acronyms and the complexity, and we’re talking about five different markets, and I was just like, okay, I just got to listen really carefully here to get caught up. I always would say this industry more than any I’ve ever been in needs like communications people. We need a lot of communications people, and how are we going to take demand response technology and demonstrate the value proposition to customers? And I think it requires kind of a different or a bolstered skill set than we have today.

So, and I think if I had to say what are the biggest challenges, I think that’s one of the biggest challenges, but I also think it is one of the biggest opportunities. We are super interested, whether you call it distributed power plants, virtual power plants, in this technology because it’s potentially revenue-producing. I think it has a lot of potential for low income. It’s a little bit harder. I think it has a lot of potential for resilience. And we’re looking right now, we’ve just recently put some solar and storage on two multifamily sites and we’re talking to the REP about connecting these batteries, these commercial-sized batteries, to virtual power plant technology. And so again, I think when we got into this, it was much more nascent than we realized. We thought the technology just wasn’t being utilized for low and moderate income households. And we thought, you know, well, this is generating revenue and it supports the grid and there’s all these great opportunities for it. It can reduce transmission and, you know, it has all these layered benefits. This is the new best thing. And so as we’ve gotten deeper into it, which honestly is just a ton of fun, it’s like endlessly interesting, but it’s also got just a lot of kinks that need to be worked out and I often use the analogy as we’re just trying to like build a little trail of like how could this work, just like bang a trail out and then hopefully like that’ll be a pathway and that’ll become a road and then in the future there’ll be this like freeway where we have these distributed generation and it’s all just much more efficient and it lowers bills and provides support to the grid and that’s the future I think, you know, several people in the industry are hoping for.

Doug Lewin (40:30.156)

Love it. Love it. And I really do think that that’s a great sort of metaphor to use there because we do need to blaze some trails here. Like you said, it is early days with virtual power plants. And I would encourage everybody listening in whatever kind of role you’re in, whether you’re in energy or not, like to be thinking about these things because we’re going to need innovation from all different places. That comes from the nonprofits and NGOs and think tanks. It comes from the companies in the space. It comes from regulators, policymakers, and the general public. Like everybody uses energy. Like how would you like to see these products get rolled out to you? What kind of price points do you need? Like there’s so much thinking to be done here, so much innovation that is needed from all the sectors. And I’m thrilled you guys are playing a role. I want to say one more thing before I ask you if there’s anything else I should have asked you that I didn’t and give you a chance to say anything in closing. I want to also just frame this up that like there’s a phrase I kind of like here, which is enlightened self-interest, right? There’s a reason to help folks that are struggling that is just right and moral and just in and of itself. And we should do these things for those reasons. It’s in all of our religious traditions. We’ve all been taught this from a young age. It should be in all of our core, but we all know we live in the world and that is usually not enough.

The enlightened self-interest comes in when you think of all those apartments with all those split incentives, right? And to be clear, the split incentive is the landlord owns the building and doesn’t pay the energy bill. The tenant pays the energy bill, but they don’t own the assets. So when they leave, they leave that stuff behind. So we’ve got to solve that problem. If we can solve that problem, we’re not only helping people. Winter Storm Uri was a lot about resistance heat in apartments driving demand sky high. To replace resistance heat with a mini-split heat pump, the sort of one that goes, attaches to the wall, you’re talking about like a few hundred dollars per kilowatt reduction. A gas plant is a few thousand dollars per kilowatt reduction. We could have a more reliable grid. All of us save money. So it’s like, yes, you’re helping people that really need help and you’re helping yourself at the same time, right? And I think if we could, if policymakers could see it that way, like nobody, nobody wants to see another Winter Storm Uri. And I do think the state’s better off than it was five years ago, but we still have problems on the demand side. And we’ve got these multiple drivers, reliability and affordability. Like we would all benefit from taking these actions. So you can respond to that, add to that, and then whatever else you want to say in closing, you want to leave the audience.

Margo Weisz (43:05.718)

Right. I think it’s lucky. It’s not always the case that the strategies that will help low and moderate income people will help us all, you know? And so when we do a project, we really try to look at what are those layered benefits? What are the layered benefits for the household? But what are the layered benefits for the energy landscape at large? And I think maybe we haven’t talked about being in an enviable place, but in some ways we are in an enviable place because the solutions will benefit the energy landscape at large and for us all.

Doug Lewin (43:39.958)

Is there anything else you wanted to say? I really appreciate you doing this. I’m so excited about all the work TEPRI’s doing. Anything I should have asked you that I didn’t?

Margo Weisz (43:46.958)

I don’t know, I can’t think of anything. Thank you, Doug. I appreciate you.

Doug Lewin (43:49.183)

We covered a lot of ground. Margo, thanks for tuning in to the Energy Capital Podcast. If you got something out of this conversation, please share the podcast with a friend, family member or colleague and subscribe to the newsletter at douglewin.com. That’s where you’ll find all the stories where I break down the biggest things happening in Texas energy, national energy policy, markets, technology, policy, it’s all there. You can also follow along at LinkedIn. You can find me there and at Twitter, Doug Lewin Energy, as well as YouTube, Doug Lewin Energy. Please follow me in all the places. Big thanks to Nathan Peevey, our producer, for making these episodes sound so crystal clear and good, and to Ari Lewin for writing the music. Until next time, please stay curious and stay engaged. Let’s keep building a better energy future. Thanks for listening.

Thanksgiving Week RepostThis episode originally aired in June 2024. We’re resurfacing it because the core idea discussed here were timely then and even more timely now.

We’ve also refreshed the audio, with improved mixing and mastering for a clearer, smoother listen.

Crusoe has scaled dramatically since this conversation, including major new funding and new projects in Texas. With so much energy news focused on problems, it felt right this week to highlight solutions in action.

When most people see flares in the Permian, they wonder why all that energy is being wasted. Crusoe’s co-founders figured out how to put that wasted energy to good use. They started with cryptocurrency mining and have steadily moved to AI data centers.

Over the last few years, they have found themselves perfectly positioned to grow as the AI boom took hold. They’ve recently completed the 8th building at Stargate in Abilene for Open AI and Oracle. They’re also building facilities for Google near Amarillo.

In this conversation from May 2024, Crusoe Co-Founder, President, and COO Cully Cavness and I talked about the rapidly growing size of data centers, the flexibility of different kinds of data centers, and how large loads can increase grid reliability.

This was one of the earlier podcasts on these topics and I think it holds up really well. For those looking for more on the topic, here are some other Energy Capital Podcasts covering similar ground:

What Has Changed Since Then

When this episode first aired in mid-2024, Crusoe was already shifting from “flare mitigation plus computing” to a broader energy-first AI infrastructure model.

In the time since:

* Crusoe has become one of the most aggressive builders of AI data centers in the country. It is now described as an “AI factory company” with a vertically integrated cloud platform built around stranded and low-cost energy.

* Abilene, Texas moved from concept to centerpiece. Crusoe is building a 1.2 gigawatt data center at the Lancium Clean Campus outside Abilene — Stargate — as the first phase of a planned 5 GW campus.

* The company’s capital and pipeline exploded. Since 2024, Crusoe has raised hundreds of millions of dollars to scale “clean energy data centers,” then a further $1.3 billion in Series E financing, bringing total funding close to $4 billion and valuing the company around $10 billion.

In other words, the approach Cully describes in this episode has scaled — rapidly.

Why The Core Idea Still Matters For Texas

The heart of the episode is simple:

* Methane mitigation is still some of the lowest-hanging fruit in climate policy. Crusoe’s digital flare mitigation aims for 99 percent plus combustion efficiency, cutting the climate impact of flaring while turning waste into power.

* Curtailment and congestion are still big problems in West Texas. A “go to the energy” model lets data centers soak up low-priced or stranded wind and solar instead of forcing renewable operators to shut down when prices go negative.

* AI loads can be designed to help rather than hurt the grid. Some training workloads can be paused or shifted toward hours when renewables are plentiful. That kind of flexibility is exactly what ERCOT needs as large loads and renewables grow together.

Texas sits at the center of all three issues. We flare and vent more than we should. We waste clean power when transmission is full. We are a magnet for AI and industrial loads.

Crusoe’s solutions help with all of these challenges.

Final Thoughts

This episode is worth revisiting because it offers a concrete picture of one possible future for Texas: fewer wasted molecules, less wasted renewable power, and more large loads designed with the grid in mind.

If you listen again with today’s headlines in mind, I would be interested to hear what stands out for you. If you know someone working in oil and gas, renewables, or AI infrastructure in Texas, feel free to share it with them.

We will not get every siting decision right. But we do have choices about whether AI growth deepens our problems or helps solve them.

Timestamps

* 00:00 – Introduction

* 01:30 – Cully’s background and the origin story of Crusoe

* 08:00 – How digital flare mitigation works and why it cuts methane emissions

* 15:00 – Digital renewables optimization, negative pricing, & stranded wind power

* 21:00 – Data center and AI demand growth and what it means for the grid

* 28:00– Flexibility of AI workloads and how data centers can act as flexible loads

* 38:00 – Efficiency gains in AI chips and power density in modern racks

* 41:00 – Location-based versus market-based carbon accounting

* 43:00 – “Tally’s Law” and what it tells us about the energy transition

* 50:00 – Policy and regulatory changes that could accelerate this kind of solution

Show Notes

Host, Guest, & Company• Cully Cavness - LinkedIn, Twitter/X• Crusoe Energy - Crusoe Careers Page - LinkedIn, Twitter/X• Doug Lewin - LinkedIn, Twitter(X), Bluesky, & YouTube

Mentions in the Podcast:• Tally’s Law and the Energy Transition by Cully Cavness• The Extraction State by Charles Blanchard (book)• AI, Data Centers & Energy, Interview w/ Michael Terrell - Redefining Energy Podcast• AI is poised to drive 160% increase in data center power demand - Report from Goldman Sachs• Nuclear? Perhaps! - Interview with Jigar Shah on the Volts Podcast• Texas Advanced Nuclear Reactor Working Group at the Texas Public Utility Commission

Related Energy Capital Podcast episodes:• The Energy Capital Podcast with Former PUC Commissioner Will McAdams• “The Name of the Game is Flexibility,” a Conversation with ERCOT’s Pablo Vegas

Transcript

Doug Lewin

Cully Cavness, welcome to the Energy Capital Podcast.

Cully Cavness

Thank you so much for having me.

Doug Lewin

Really looking forward to this conversation. Crusoe is really a fascinating company. You guys are doing some really innovative, interesting, and different things. So why don’t we start with you, Cully? Tell us a little bit about your background and about Crusoe. Explain to the audience a little bit who you guys are as a company, if you would.

Cully Cavness

Great. I’m excited to be here and share a little bit about what we’re doing at Crusoe, where we came from, where we’re going. In terms of my personal background, I grew up in Denver, Colorado. I went to Middlebury College in Vermont to study and I studied geology and economics thinking I was gonna go into oil and gas. But at Middlebury, anybody who’s familiar with the school will know that the climate conversation was a huge theme and a huge focus in that student body. And it made a big impact on me.

And so I actually, right after I graduated from college, I was awarded a Thomas Watson Fellowship, which is a program where you’re sort of banished from your home country for a year and you get to go study whatever subject you really want to study for that year. And I wanted to think about this sort of morality of energy and the balance between energy and the economy and the environment. And so I was really fortunate to be able to go to Iceland where I worked with a lot of geothermal power and hydro producers. I went to China where I was much closer to coal. And then I went to Spain. I worked with wind and solar developers for the CFO of a large renewables group there. And then I went to Argentina and I worked with a hydroelectric engineer.

And I got to really see a pretty broad survey of the global energy system, everything from finance to project development and management to engineering and operations. I saw power plants that had broken and were in stages of repair and learned a lot from that experience.

And from that, I ended up going into the geothermal energy industry. I had a mentor who was the CEO of a company called Global Geothermal, and he took me under his wing. And for the first few years of my career, I was developing geothermal power plants, mostly internationally. And then sort of long story short, I ended up doing an MBA over at Oxford in England and came back to an oil and gas focused investment bank here in Denver. It was sort of the one energy focused investment banking role in Denver, primarily oil and gas clients. And that brought me back into the oil industry. I ended up being a Vice President of Finance for a private equity backed oil and gas company after that. And we were drilling some exploratory oil and gas wells in Eastern Colorado. That was sort of a step out from the core shale play, the Niobrara. We were miles away from the core of the activity. We drilled some wells that ended up being good oil wells, but there was no natural gas pipeline infrastructure in that area. And so the default then is, at least at the time was, all right, if you can’t get the gas into a pipe, you put the oil into a truck and you send the truck to the refinery. That’s how you sell the oil. And you can’t do that with the gas, so you just light it on fire and you burn it. It’s called a flare. And I thought that was pretty insane. And I was frankly, I was embarrassed about it. You know, just considering the path that I’d gone through and that I had really wrestled with that intersection of climate and environment on one side, but then the economic and human benefits of energy access on the other.

Wasting the energy the uncombusted methane emissions. I had a big problem with that and I’ve been you know, I’ve been playing around with mining Bitcoin as a hobby in my basement and my wife was observing that you know, the there’s like hot wind coming out of the basement and our power bill had dribbled and that’s also a commercial problem related to energy and an environmental problem related to energy. And the insight was basically maybe one of these problems can solve the other. What if we could package a modular data center that could go to the oil field, actually sit on pad next to a flaring well site, capture that gas that was being flared, turn it into electricity, use the electricity to power the modular data center and basically new way to, we called it the digital pipeline. So a new way to take that gas molecule and convert it into value. The view was that it would be simpler and more cost effective to transport a bit than a molecule or an electron in these stranded gas locations. And that thesis really bore out.

Doug Lewin

This is really interesting. So, you know, you, what you’re, what you’re describing in Eastern Colorado was obviously a problem all over the place in the oil and gas industry. And obviously this podcast is very focused on Texas. It’s a huge problem in the Permian and, a little bit less in the Eagleford though. It’s still a problem down there too. There’s just a lot more of a gas focus down there, but particularly in the Permian where it’s mostly oil and what you’re describing, as I understand it, is what is often called associated gas, right? You’re really drilling for the oil. That’s the valuable product. Gas, depending on what’s going on in the market, when today it’s very low, right? 2022 is obviously, it was very high, but over the last six, seven, eight years, it’s generally been very low.

One of my favorite energy books is called Extraction State by Charles Blanchard, a History of Natural Gas in the United States. And he describes for those listeners that are Seinfeld fans, the famous episode of the muffin tops where they start this business. Like everybody only wants the top of the muffin. Nobody wants the bottom of the muffin. So they create this business and just sell muffin tops. And they end up in this huge problem because they can’t dispose of all of the bottoms of the muffin that nobody wants. They can’t get anybody to haul it away. And Blanchard in his book, Extraction State, likens the associated gas to the bottom of the muffins, the oil to the muffin top. So what you’re describing is a very interesting solution to instead of, and you mentioned flaring as a matter of fact, like in Texas, an even bigger problem is the venting. Like people think when they see those flares, that’s a problem. And it is, it’s actually a bigger problem when you can’t see it and it’s being vented directly into the atmosphere.

So what you’re doing is trying to use that. Can you talk just a little bit and help me and the audience understand? Because I think for a lot of folks who approach this from a climate perspective, they’re going to say, well, wait a minute, but you’re still burning gas to power the data centers or the Bitcoin mines or whatever. That’s still contributing to emissions. But what is the difference? And you don’t have to get into great gory detail, but rough order of magnitude, the difference in the emissions, how much are you reducing emissions by actually using that gas for power rather than flaring or venting it?

Cully Cavness

Yeah, some great questions. On the emissions reduction piece, so if we just compare the status quo, there’s a big ball of fire, it’s a flare situation, and we come in and we deploy what we call digital flare mitigation. That’s what we call our technology. And we reduce that flaring volume. The important thing to know is that flares don’t fully burn methane, and there have been a lot of studies on this over the years that have shown that probably 8 or 9% of the methane is escaping to the atmosphere, uncombusted from that flare. And it can vary. I mean, it can be as much as half in a really bad, poorly run flare, and it can be much more efficient, but that’s sort of like a reasonable average to think about. And methane is 82 times as potent as CO2 over a 20 year timeframe. So when we talk about mid-century 2050 kind of climate goals, there’s an 82 multiplier to take into account there. And our generators get 99.9% combustion of the methane. So dropping that basically to zero, it’s absolutely true. We’re still emitting CO2 from converting the gas through the combustion process. But by eliminating the methane, it’s reducing about two thirds to 70% of the CO2 equivalent emissions compared to status quo flaring.

The other way to think about that is that, you know, like of all the gas that does get burned into CO2 by the flare, the remaining residual methane is three quarters of the total CO2 equivalent impact of the flare. And so by dealing with that, you’re dealing with like the majority of the CO2 equivalent problem, especially for those newer term climate goals, which I really do think about a lot because I think the crux of these climate goals isn’t really actually about where do we get to from a parts per million perspective ultimately, like what’s the right level in the atmosphere. Often there’s a focus on it. We can’t go beyond 450 ppm. There was an organization called 350.org that said we shouldn’t go beyond 350.

The bigger issue, I believe from a biodiversity standpoint, is actually the speed at which you get there. Because species just can’t adapt fast enough to accommodate some of these faster pathways. And methane is kind of the key culprit in that acceleration and that speed side. So getting it from methane to CO2, it sort of buys time, I call it extending the climate runway. And it gives it literally a couple more decades for species to adapt. And you’re moving from a semi-arid environment habitat to an arid habitat. Well, if that happens over the span of 10 years, you might go extinct. If it happens over the span of 100 years, there’s a potential for a little bit more adaptation or migration for the species to be stressed but not extinct.

And, you know, so speed really does matter in that context, which is why methane is kind of like the low-hanging fruit that makes a lot of sense to go for first. It’s also something that we can do that’s economic. So it turns out there’s a virtuous cycle of this does make sense economically. We can provide basically a free solution for flaring that mitigates the methane. It provides us with access to a low-cost energy source that was previously being wasted and valued almost at zero. And there’s an economic incentive to do more of that. So today we’ve deployed more than 200 megawatts of that across seven states, including your state in Texas. I was just in Midland and Hobbs, New Mexico earlier this week. And we’ve got kind of our fastest growing area of operations is down there in the Permian where there is a big flaring challenge, but hopefully we’ve got a solution that’s going to make a dent in that really quickly.

You know, I’d also just point out that we’re also moving into a lot of renewables based projects as well. So we can talk about that later. And there are other forms of stranded energy that are on the other end of the energy transition where there’s an inefficiency that needs to be dealt with and computing in a very interesting way can be the solution there as well.

Doug Lewin

So let’s talk about that. But before we do, just really quickly on the, I think this is really important on methane, because I agree with you, the speed at which the climate impacts hit us, our species and other species, and affect biodiversity and all that matters. I think the other piece of that, Cully, too, is that, you know, if you’re, if you can reduce the most potent greenhouse gasses, which, which methane is, is certainly in that group, CFCs and things like that go in there too. You’re, you’re also then, buying time for technological improvements to come along. Right. I mean, and I’m not am you know, I’m anticipating the criticism I’ll get and it’s, and it’s legitimate criticism. I’m not representing some kind of techno optimist like view of this that like oh technology is going to save us. We’ve got a lot of things we got to do right. But one wedge of the pie is technology. And we have seen tremendous technological advancements in the energy and climate space. Just where we are right now with solar and storage, it would have been very hard to even 10 years ago, imagine the kinds of price declines that we’ve seen. Some people imagined it, but not many. So I think that that’s part of it too, is you’ve really got to address that most potent piece. And so anything we can do on methane just kind of has an outsized impact.

So let’s do talk about renewables because there’s sort of an interesting kind of corollary here, almost like the associated gas part of renewables or the bottom of the muffin, if you will, in that you have times and they’re becoming quite common now, particularly in Texas, I’m not as familiar as with other markets, how much we’re seeing this, but in Texas, the amount of curtailment and congestion that we see on the system is very, very large and rising very fast as we’re not able to keep up with the transmission needs as generation is coming into the market. And so you end up with a lot of times where the renewable energy that is produced is not able to reach any place where it’s actually used. So they’re literally just curtailing, just shutting down wind or solar power. And it’s not just wind or solar, there’s actually other kinds of power that can get congested, caught behind a congested node and just not able to be used.

So if I understand what you guys are doing, similarly what you’re doing with the flares, where you’re putting a data center next to it and capturing that flare and making a power plant, you can kind of do the same thing near congested nodes where you have a lot of renewable production and actually reduce energy waste and actually use that at the data center. Is that correct? And either correct me if I got something wrong and then maybe give us some more context and details around how that works.

Cully Cavness

Yeah, that’s right. So I mentioned we called that first business model DFM, digital flare mitigation. And the second model we call DRO, digital renewables optimization. Meaning you can bring a data center into one of these congested nodes, especially if it’s really saturated with wind power where you have this intermittency effect. You can have 20% to 30% of the hours of a year in some nodes, and Texas is a good example, that are negatively priced. So that has a number of interesting knock-on results. One is that older wind farms that don’t have the production tax credit…

Let’s back up and say how is something negatively priced? How is there actually a negative price on the grid? What’s happening there is there’s so much wind power that the grid can’t accept it all. Either there’s a transmission constraint or there just simply isn’t demand at the end of the lines and so people are effectively having to pay transmission and distribution fees and receive zero revenue because there’s no bid for that power. And so you’re getting like an all in price that’s actually a negative price. And you can do that if you get a rebate from the federal government in the form of the production tax credit. So you could sell for negative one penny if you get two and a half pennies from the federal government, your net price is actually positive one and a half. Those production tax credits expire after about 10 years. If you’re an older wind farm, you don’t get that anymore. So when the price on the node goes negative, you actually just have to stop producing wind power, which is like the worst outcome from an energy transition perspective. You literally could be producing more renewable power, but for an economic constraint reason, it’s just actually being shut off. Even for newer wind farms that are still receiving the production tax credit, this is obviously like a very frustrating problem. And it’s like a breakdown in the supply and demand connection in the market.

So our view again is that bringing energy to the data center isn’t always the right answer. Sometimes you should bring the data center to the energy. And that’s really our origin story is we’ve been bringing data centers out to stranded energy locations. This is just another form, frankly, of stranded energy. They’re also hard places to operate. They’re not your traditional data center markets like in Virginia and around Dallas, and the Pacific Northwest. This is, you know, to again use the Texas example, this is rough West Texas kind of desert territory without a lot of the existing infrastructure. However, if you do it the hard way, there’s access to a lot of low-priced clean energy. I believe more in the location-based approach to emissions accounting rather than the market-based approach. The market-based approach would say, I built my data center anywhere, I bought renewable energy credits for all the megawatt hours, and therefore I have zero emissions. The location-based is more like, depending on where you located that load, what actually happened in the physical real world. And if you located in some areas, the answer is you spun up a coal power plant. And if you located in other areas, it’s like you absorbed a lot of otherwise curtailed or negatively priced wind power and maybe drew some power from the grid as well but the average emissions of that location-based view leads you to some very different outcomes compared to the market-based approach to carbon accounting.

And so we’ve really embraced that location-based energy first approach to how and where we locate our data centers. We’ve got projects going in Iceland, for example, the ultimate stranded renewable energy resource, a place that I spent several months of my life. And they’ve got gigawatts of potential of geothermal and hydropower and 300,000 people. And what are they going to do with it? When I used to live there, they were talking about running a power line to Scotland. So we’re bringing AI training workloads to Iceland, and we’re deploying what will be the largest computing cluster in the country of Iceland. And it will be serving AI customers with 100% geothermal and hydropower as another example of how this can work from a location-based standpoint.

Doug Lewin

I do have questions about the location based and sort of some of this move towards 24/7, but before we go there, I just, I want to cover a couple of things that I think are really important to AI. Can you help again, me and the audience kind of understand the magnitude of the AI loads? This is like, obviously it’s almost becoming cliche cause every conference you’re at, it’s all AI all the time. But I think to a certain extent, and this is one of the reasons I was so excited to have you on is, you know, you hear all these things floating around, but there’s so many different sources of information. You guys are working on this very directly. Can you talk a little bit about just sort of like what size of data centers you’re seeing? And we’ll put a link in the show notes. There’s a pretty good report a couple of weeks ago by Goldman Sachs, and they talked about 160% increase in data center power demand. I think it’s very important when you’re thinking about that too, to your point about location, that’s not going to be 160% increase everywhere, right? It’s going to be concentrated in areas where, you know, like Virginia, that’s this well-known kind of data center hub, Iceland, you were just talking about, but Texas, I think will be one of those places too, because of the energy abundance and the general ability to get low cost power, which isn’t super easy, but it looks like you guys have a big part of the solution to sort of make that happen. But anyway, talk a little bit about the size of these data center loads and what that means for an energy system. You could talk about it in different places, but in Texas, our peak so far is somewhere around 85,000 megawatts, a little higher. Anyway, yeah, talk a little bit about the size of the load, if you would.

Cully Cavness

Yeah, maybe again zooming back like where’s the load coming from? It’s interesting to just think about physically what’s happening in these AI data centers compared to a traditional data center. So traditionally a data center, you go inside there are racks, racks and racks of servers. And those racks traditionally were like seven kilowatt racks. That was a very standard, maybe 14 kilowatt racks. Those were kind of standard power densities. And the current kind of leading edge GPUs coming out of Nvidia, for example, are really optimal around a 50 to even 100 kilowatt rack. And there are prototypes that are not far off that they’re being demonstrated at conferences that are hundreds approaching a megawatt in like a rack. And it’s this incredible density of electrical and thermal cooling capabilities. So literally liquid cooling to every single chip on the server. There’s an in and an out of cold water and hot water going to every single chip on the server. It’s allowing them to just compress more and more computing power into smaller footprint. There’s that going on. And then there’s this insight, which is that the more GPUs can be networked together on the same cluster, the more performant that cluster will be at training, for example, a large language model. And there’s a physical constraint element to that. So you actually have fiber distances that have to be considered, how far away can the farthest GPU on the cluster be away from the center of the cluster? And that leads you to wanting to have these really dense configurations of lots of computers close together so they can all be networked together on the high-performance networking.

And when you play that out, what that’s meaning is that what used to be a big data center was like a five megawatt data center, and then a 10 and a 20 megawatt data center. These were kind of beyond belief huge, even just a decade or two ago. Now it’s sort of looking like we’re going towards 100 megawatt data centers that have 100,000 GPUs all networked together in a single cluster. And perhaps that’s even going to be small in the not too distant future. We might go to hundreds of megawatts and campuses that are going to be gigawatts. And there’s this arms race of who can train the best models and who can operate the best inference off of that model. And it seems right now that size is going to matter and it’s leading to a real land grab around access to megawatts, access to digital infrastructure. And our view is that it’s really important how and where we kind of locate those megawatts on the grid and potentially even off grid. And so that’s really where we take that energy first approach to development and construction and operation of data centers. We’ve got a piece of our business which is building the data centers, the 100 megawatt scale. We have our own design, which we think is really an optimized design around heating, cooling, those physical constraints and distances within the data center. And those can be essentially offered and leased to larger technology companies for them to host their own GPUs in there and do their own workloads. We also have our own GPU cloud product called Crusoe Cloud where we put our own computers in there. We rent them out by the hour, by the three-year contract. We have different models, but we actually are the cloud provider within the infrastructure as well in some cases. And we have two different ways to then basically take those megawatts to market. But it all starts with energy first locations that we can develop into that data center infrastructure.

Doug Lewin

Thank you for that. And so just to put that in perspective for some folks that may not be as in the weeds on power as others, when you talk about the old racks used to be 7 or 14 KW. A home on an average day might be using two or three KW, an average sized home, couple thousand square feet or something like that. On a really hot day, it might be five, six, seven. So, one rack would have been equal to like one home on a very hot day. I’m speaking in generalities, obviously it matters how much insulation and what kind of HVAC and what you’re doing inside your house. If you’re running multiple hairdryers or something at once, it might be different. But these Nvidia racks you’re talking about, now you’re getting up to 500 to, excuse me, 50 to a 100 KW. So right now you’re talking about something like 10 to 20 homes. And when you talk about a data center that’s a hundred megawatts and even clustered, and actually one of the previous podcasts was with ERCOT CEO Pablo Vegas. And he talked about how we’re seeing 500 megawatt, I believe the numbers he said were 500 megawatts, 700 megawatts popping up on the grid, like all at once. So that’s probably what you’re describing as one of these campuses or clusters. Now you’re talking about like small cities. It’s like a small city popping up on the grid potentially in the space of 6 to 12 months, give or take. About right?

Cully Cavness

I think your order of magnitude is right. I used to think about a house as one KW.

Doug Lewin

Yeah, not in Texas. Everything’s bigger down here.

Cully Cavness

But yes, I mean, roughly that’s right. I mean, these are huge sources of power demand when they come online at this kind of scale.

Doug Lewin

And so can you talk a little bit about the flexibility of that demand? So this is becoming a bigger and bigger issue. In Texas, ERCOT has established a large flexible load task force, which spends a lot of time, has spent a lot of time thinking about Bitcoin, but is going to more and more need to be thinking about these AI data centers. And I’ve heard a lot of different things. There’s no flexibility at all. There’s a lot of flexibility. I’ve heard everything in between. Can you just kind of share your perspective on how much these can be flexible and if flexibility can be built into the design. You mentioned you guys are designing some for heating and cooling. Are you thinking about building flexibility in? And let me just, before I turn it over to you to answer that, I would imagine with what you guys are doing, that flexibility would be important because when you’re siding next to a congested node, like you wanna be running as much as you can during those periods. But then when it’s not congested and power prices are getting really high on the grid and there’s actually not enough power, maybe you could move that wind or solar rather than using it, the data center, you could move it onto the lines and let it flow to Dallas or Houston or whatever. And the prices are higher than you would want to use less there. So maybe you do that through changing around how much cooling is going on or you site batteries there or if it’s a large language model, maybe you’re batching functions and not running them 8,760 hours, which is the number of hours there are at a year, but maybe 8,500 and even not needing power for even a couple hundred hours would make a huge difference. So can you talk a little bit about what flexibility there is or is not with AI data centers?

Cully Cavness

Yeah, I think it comes back to the customers that are using the servers. And right now, I think a lot of the market is still stuck in an old mental model of data centers need to be tier four, meaning 99.999% uptime reliability. And it seems to me that many of the incumbents still have that perspective as it relates to this new wave of AI data centers, it’s not clear to me that all the use cases of AI computing require that kind of uptime. And I think that you actually had an insight, which I’ve been thinking about a lot, which is this batching idea. So you can checkpoint these models, meaning if the power goes out in a worst case scenario, you don’t have to restart training the whole model. It kind of falls back to your last point that you saved the model. It’s like if you’re playing Mario and Bowser kills you, you get to start back at the beginning of the level. You don’t have to go all the way back to the beginning of the game.

And that’s important, right? Because that means that, okay, maybe you would tolerate a certain amount of outage and it becomes an economic decision. If I can offer you a much lower price point per hour of training on average throughout the course of the year, provided that I can interrupt your workload 1% of the time or 10% of the time or something. Is that a trade that you’re willing to make?

I believe that for some percentage of the customers that will be a trade that they’re ultimately able to make, the market hasn’t really moved there yet. But I think some of the kind of frontier folks are starting to realize that. And we would really advocate for that because that would allow for more of the demand response feature that, for example, in Texas is such a big deal in you’re deregulated market, you’ve got this really kind of beautiful, again, market-based incentive driven system to provide flexibility back to the grid. And when it gets really hot and everybody’s AC is on, you can get paid to turn off if you’re able to. And we need that economic signal to flow through to the customers that are doing the training workloads. I would say there’s going to be a difference between training and inference.

So broadly in this AI computing world, there’s these two categories. Training is the very kind of it’s a longer term, it can be days, weeks, months of running a model over large amounts of data to find the insights and create the weights and balances, weights and biases in the model that sort of builds the model, let’s say. And then inference is once that’s been built, it’s using the model to do tasks. So it might be for a self-driving car to detect, is that a stop sign or a yield sign? That’s like using the model to make one inference or for ChatGPT, it would be answering the question that you just posed in the chat box. That’s an inference. And, you know, clearly that is a more, you need to be up and available to provide that service. Can these be federated across multiple data centers? So one can be offline at any given time if as long as another one is online. I think these are really interesting questions and it’s just a totally new approach to the digital infrastructure and the kind of interaction of digital infrastructure and the energy infrastructure. It just, we need to get a lot more sophisticated on that.

That’s what I’m really excited about at Crusoe is we have a team that’s a hybrid of energy professionals from grids and utilities, from upstream oil and gas producers, from renewables developers. And we have a team of really seasoned executives who have built and operated data centers and cloud products. And you know, we are sort of merging those two disciplines in a pretty special way that we’re going to try to find and use these kind of insights of how digital infrastructure can and should interact with energy infrastructure.

Doug Lewin

Yeah, I think that’s really, really interesting and a really sort of potent mix, one that is really needed at this point. We’ll put in the show notes a link to, there was a podcast, I believe it was Redefining Energy did one with Michael Terrell from Google. And he was describing how they’re not there yet, I think, if I remember right, he was talking about sort of where this might be headed in that with what you’re talking about with inference, where the task needs to be done, you need to know, is that a stop sign or a yield sign? You can’t wait till later, but they could move those functions. And you sort of suggested this just a minute ago, but just to dive a little deeper into it, you could move those functions to different data centers based on how much energy is available.

And I was sort of getting this image in my head of like, there’s the saying, the wind’s always blowing somewhere, the sun’s always shining somewhere. And so if you picture some of these data functions actually moving around the world with the sun, so that solar power is providing a lot of these tasks, but at different data centers. And you don’t really care as a customer, as an end user, I don’t care what’s happening in Iceland or in Texas, right? It doesn’t matter as long as when I need the information, it’s there, right? And so you could kind of see some really interesting, and it’s going to take this close integration of, as you’re describing, this sort of energy expertise and the data center expertise for where is that possible, where is it not.

Cully Cavness

Yeah, I think it’s, you’re probably more right than wrong. And if you think about what that means from an infrastructure build perspective, it’s like a huge undertaking. It’s like a global rebuilding of the digital infrastructure, the fiber infrastructure, and all the energy that has to go into it. I mean, we’re talking about many trillions of dollars of capital investment. I think on that specific idea, there’s this latency constraint, which is some things need to be really fast. Like that if it’s a stop sign, you really need to know it’s a stop sign and you need to know it immediately. There’s other forms of inference that you probably could wait a couple hundred milliseconds to get the ping back from Asia. If there was, if it was sunny in Asia, it’s nighttime here, you know, you could you could actually imagine that. Right now, most of the latency, if you type in a prompt into ChatGPT, is still the model itself doing the computing. But as they’re getting more efficient, that portion is getting smaller and it’s going to be the percentage that’s borne by the networking latency is going to be a larger percentage as that happens. And so there will eventually be this interesting question of how close does the workload need to be to the problem? And for some, it’ll have to be very close. And for others, it could maybe be anywhere on Earth.

Doug Lewin

You were also talking earlier about how much of these loads are actually cooling loads, right? And so there’s probably also some demand flexibility there, I would think. I don’t know. And so let me phrase it in the form of a question. Could you do, like for instance, as on the residential side, if you have a home that is well insulated, you can pre-cool your home. So Texas is a great example. It’s going to be a hundred degrees basically every day this summer. We’ve already hit a hundred a couple times and we’re not even as we’re recording out of May yet. But you know, you have all these days that are a hundred degrees, tons of solar power, pretty low prices at two o’clock and three o’clock in the afternoon. It’s really not an issue. The issue on the grid, the tightness is going to be seven, eight, nine o’clock as the sun is going down. So you pre-cool the home you use less in those evening hours. Is there the ability to do some of that at data centers too, where you’re actually making it a little colder, or does it have to be like, it’s got to be at this temperature and it can’t vary?

Cully Cavness

It’s more of a run rate kind of problem. I mean, you’ve got just 100 megawatts of heat being produced 24-7, and that has to be evacuated on a very continuous basis. There’s a little bit of thermal inertia if you were to pre-cool, but…

Doug Lewin

Not as much as with a home.

Cully Cavness

Never say never. I mean, maybe you get a big reservoir of cool water and you kind of like pre-chill some big thermal mass or something. But in your normal data center, it’s less of an opportunity. There’s definitely a lot of efficiency opportunities. Having the most efficient chillers and being thoughtful on the designs, the engineering, there’s a lot to do there.

Doug Lewin

And there’s efficiency in the chips as well, right? Can you talk about that? You were talking about the Nvidia chips and they’re obviously, they use a lot of power right now, but I think Nvidia, at one of their last events did talk about how their chips are more efficient. Are you seeing that on the data center side?

Cully Cavness

The chips are more efficient, but there’s more chips and bigger chips. And so the power consumption of the server isn’t necessarily declining. In fact, it might even be rising. I mean, again, if you back up to just kind of first principles of what’s going on here, you’ve got the sophistication of making these chips has gotten to such an insane point that there has to be some kind of like tailing off of the efficiency gains.

So just as an example of how these things are made. They’re mostly made in Taiwan and there’s a factory there owned by TSMC. A lot of people might have heard of this company. It’s the largest semiconductor fab in the world. And they have this machine which is made by a company called ASML. And this machine costs something like $800 million per machine. And it’s transported in like four jumbo aircraft to Taiwan.

And they have 80 plus of these machines in TSMC, as far as I understand. Each one of these things is like a major installation engineering project to put this thing together. And then once it’s there, the way it works is they’re liquefying a droplet of metal that’s falling into like a convergence of a bunch of lasers. These lasers are blowing up this droplet of metal into a very specific wavelength of ultraviolet light that bounces off a bunch of mirrors. And then it goes on to a piece of silicon that’s like 10 atoms thick or less.

Doug Lewin

Wow.

Cully Cavness

And it’s etching a pattern of circuitry into this and then another deposition of a substrate and another blast of this extreme ultraviolet light. And it’s doing this like tens of thousands of times per second across this whole factory.

When you’re measuring things and just like atoms thick, you’re running up against real boundaries of physics can do and I don’t know how much you can just depend on the chips getting more efficient.

Are there different versions of chips and different designs of chips coming that are definitely different approaches? Yes, absolutely. There’s some new startups that have released some new chips that look like they could be way more efficient on the inference side, for example. The training piece, it’s a little bit less clear that you’ve got huge gains that can still be made there. But again, never say never when it comes to technology. I’m just pointing out that they’ve been at this for like decades now and it’s gotten really optimized. And there are certain pieces of it that might be kind of asymptoting.

Doug Lewin

Yeah. And it’s a little bit of a law of diminishing returns, right? At a certain point, like you just, you reach that kind of limit where, I mean, we’re seeing this like on, we’re not there yet, there’s still more cost declines in solar and storage, but when you see those curves and you can only get so close to zero before there, there wouldn’t be any money left to be made in it. So at some point you hit that terminal point.

Cully Cavness

Maybe. I mean, I just worry when people say it’s going to be solved by more efficient chips. There might be limits there.

Doug Lewin

No, that makes a lot of sense. That makes a lot of sense. All right, so let’s come back to something you mentioned earlier. You were talking about carbon accounting and the location-based. There’s, again, a lot of emphasis among some of the major tech companies, but I’m seeing this get talked about a lot more, what is often called kind of the 24-7. So you were describing this earlier. A lot of companies want to have 100% clean power, 100% renewable power. Sometimes they describe it different ways. But what they’re trying to do is do like hourly matching. You were talking about location matching. Are you seeing more and more companies actually asking about that sort of thing, actually getting much more granular about carbon accounting? Obviously the majors, the Googles and the Microsofts and that are doing that sort of thing. Is it getting beyond those companies or is it still pretty concentrated in a few companies that are doing that kind of work?

Cully Cavness

I think it’s still kind of early days on a bunch of this and they keep modifying the rules and editing them over time as I think people just realize there are better approaches to carbon accounting and the standards that go into it.

You know, location matching is important, but it’s also like really important like what’s happening at that location. I guess that was the point I was trying to make is that when you add a load to a specific node, it causes a specific set of energy generation resources to get called up. And in some of those situations produce a lot more emissions than others would. So just kind of first being thoughtful about the location and the realities on the grid of what happens when you add load there. Then to me, the second thing is, okay, you’re buying RECs and you’re providing that economic incentive for the renewables to get developed, which is valuable. It’s a great thing that we have that mechanism in the market. But to me, the bigger question is kind of that physical reality of where was the load located?

Doug Lewin

For sure. And you’re starting to see, I think they’re called TEAKS. There’s like time energy attribute or something like that. There’s a time-based attribute kind of accounting that is already going on. It’d be interesting to see if that could be extended to location as well. I think it’s a really interesting idea. I actually hadn’t, I’m embarrassed to say I hadn’t really thought about it before, but it’s a little bit embedded in the time thing because where you are would matter, but it’s not explicit and it probably could be teased out more. It’s really interesting.

So I want to ask you just a couple more things before we wind down here. A couple of years ago you wrote an article on Medium. We’ll put a link to it in the show notes. Tally’s Law and the Energy Transition. Can you talk a little bit about, give people a little preview if they go and read that. What are they going to see? What’s sort of your thesis in that piece?

Cully Cavness

Yeah, I mean, this goes back to some of that early, my early experiences in the energy industry and wrestling with just the identity of wanting to work in the energy industry. I mean, I think it’s the most fascinating industry. It impacts people. It impacts human lives in a lot of really positive ways. Just having access to any form of energy is huge and transformational for so many people. And back in the early 2000s when I went from Iceland to China, China’s pretty wealthy, but in the mid 2000s, it was still pretty rough for the majority of the people there. And most of them could not care less if the power was coal or solar or wind or the climate impacts of any of it. And they just wanted to have the economic means to have another meal that day, you know, like to add protein to their diet, to upgrade from a bicycle to a motor scooter or from a motor scooter to a small car or something like that.

And, you know, starting in Iceland, it’s the exact opposite. It’s like this abundance of riches of unlimited renewable power. And it’s very easy to say, yes, we’ll just have 100% renewable power. We only have 300,000 people and we have more hydro and geothermal than we know what to do with. So just two very different realities for those two countries at that time.

And it led me to that framework of the triangle of ease, energy, the economy, the environment. And I sort of formed a formula of how I thought about the world along these lines, which was RT equals PQV. And people can look it up if they want to, but basically natural resources times technology on one side of the equation and population, quality of life, and environmental health on the other side of the equation. It’s a mental model for like, if you change one of these five variables, what happens? So if you increase population or increase the quality of life of a population and you don’t have any change on the energy technology side or the natural resource side, then the variable that has to fall is V, environmental health. And conversely, like if you can innovate with technology and increase the left side of the equation, you could increase population, you could increase quality of life without impacting environmental health.

And, you know, there’s more to it than that, but I think that’s like kind of a simple way to summarize the viewpoint. And I guess I do take a little bit of the techno-optimist’s viewpoint. And well, in the sense that I do think technology will largely be the solution or it won’t be, but we’re definitely not shutting off the energy. And buying time, more time for technology to end up being the solution is really the most important thing we can do right now. So the low-hanging fruit being things like waste, things like methane emissions. Let’s solve those now so we have more time for the technology to grow and increase the T variable so that we can continue to have better quality of life and more people without having a big climate impact. And I’m hopeful on that. I mean, I think there are a lot of things that are on the horizon that look great. It appears carbon capture and sequestration is getting there. A lot of interesting things happening on batteries. Radia just came out with this new wind turbine that looks incredible. I don’t know if you’ve looked into this company at all. You should have Mark on your podcast if you want to talk to a really interesting entrepreneur in the wind space right now.

You can go on and on, all the nuclear stuff that’s happening. There’s a bunch to be excited about, but it’s clearly going to take a while for this to mature and to really scale up. So again, back to extending the climate runway, we got to stop emitting all this methane just needlessly. We got to stop wasting energy. Let’s stop curtailing renewables. Let’s tap into the latent stranded renewables where we can, if we can locate a load in Iceland versus in the Eastern Seaboard where it’s going to be much more fossil oriented. Maybe that’s a good idea. So again, we’re going to energy first, trying to be thoughtful about these things and extend the climate runway while still accommodating this wave of AI demand, which is clearly happening. So it’s just sort of like, how can you influence it to be least impactful?

Doug Lewin

Yeah, I mean, it’s happening and I think we’re also gonna see increasing demand for all sorts of different things, including quality of life, right? There’s still, like you’re talking about China 15, 20 years ago, there’s still a billion people in the world that don’t have access to electricity and they need to get it. That’s just wrong. We’ve got to figure out ways. So that formula you just described I think is really, really interesting.

I’ll tell you, I mean, I think we’re all creatures of our experiences. And, you know, we have, obviously as any two people have had different experiences. I do think technology will play a big role in it, but I think there’s this kind of interplay happening all the time between technology and markets and policy, right? And so if you’re in a place where like you could have the greatest technology, but if the policy makers set up a system where they’re favoring other technologies or just not allowing market entry, right? And there’s this interplay between those things because you can only hold back, you know, the water, if you will, hold back the deluge so long and a technology will kind of like water flowing, right, will find its way to get in even where policy is trying to keep things out. But policy can really slow down or to put it more positively, policy can really enable markets to bring technologies in really quickly.

Anyway, I just, while technology will have a big role, I do think there’s always going to be this interplay and depending, I don’t know if you have any thoughts on that, any place in particular that you’re operating where you see like policy stands in the way or makes things easier. I kind of like this Texas market because what you were describing earlier with like, it’s going to depend on the customer when I asked you about flexibility, right? We have a market that kind of accommodates that. Like if you’re willing to pay thousands of dollars a megawatt hour, you can have the power whenever you want it, but everybody’s going to have their price as to when they’re willing to curtail. So there’s an example of a market sort of enabling technologies and flexibility. That’s mostly on the large customer side. We need more of it on the small customer side, but that’s a topic for a different podcast.

Cully Cavness

This isn’t as close to our business, but I would really love to see a streamlining of nuclear permitting. I just think there’s so much potential there and the fear of it has led to a permitting regime that makes it almost impossible to get anything done. And it’s sort of disproportionate to the risks at this point. I think if you really talk to experts, they would say that, which I’m not a nuclear expert, but I’ve been to how many hundreds of energy conferences, I’ve heard enough to know that it’s really, really safe. When it goes wrong, it goes really wrong, but other things go a little bit wrong all the time. And the actual impact on human health and the environment is probably worse from a lot of other energy sources than nuclear running very safely for 99.999% of the time and having a big accident even once in a while, which it does appear they’re even getting better at really minimizing that outside risk with the new generations of nuclear reactors.

And updating our framework to allow more nuclear to get permitted and built would be huge. Obviously, the grid transmission permitting is a big deal. At some point we might have to get a little bit more aggressive with like eminent domain or something. I don’t know, you just can’t let every potential objection, get in the way of building out the really critical infrastructure that we need for the whole country. And there’s a balance. Personal property rights are essential. They’re like the cornerstone of the country. But there has to be a practical solution to get things done. And these things really need to get done. And so that’s a hard problem. But we’ve got to figure that one out.

And I think, yeah, the Texas grid is a good example. I mean, you guys get a bad rap with some of the outages from some of the winter storms recently, sometimes. But I would say by and large, it is viewed as the epicenter of entrepreneurship and dynamic business models in the power industry because of the way it’s been deregulated. And I think ERCOT’s being pretty thoughtful. It’s like they’re still regulating and controlling the really bad edge cases, right? There are like caps to power pricing. There are kind of like curtailment mechanisms to avoid the blackouts that things are changing so fast. They’re clearly not perfect yet, but they seem like they understand the problem and they’re moving in the right direction really fast. But in the middle range, like the normal course of business stuff, just let the free market operate and it’ll tell you what kind of power resources and what kind of, you know, do you need battery storage? Do you need peaker plants? do you want more renewables? Let the market figure all that out and not picking too many winners there. That seems great and also kind of reducing the gatekeepers of the traditional grid players, the traditional utility players, letting all that kind of be a little bit more flexible so more participants can come in and find their niche, it just seems to be like it’s on a really healthy track in Texas in general, despite some of the headlines, which, you know, look, I wasn’t there when the power went out, and I know a lot of people were, got hammered by that in really bad ways. And maybe, though, in the ultimate grand view, it’s like a price that was paid for making the grid a lot better in the long run and making it this kind of free market approach where a lot of really cool innovations can come in and make the grid much better 20 and 50 and 100 years from now.

Doug Lewin

And I think for anybody listening that wants to dive more into Winter Storm Uri, we’ll put a link in the show notes to the very first podcast of the Energy Capital Podcast we recorded, which was with former Commissioner Will McAdams. He was just a week or two out of the Public Utility Commission. We recorded it. And we talked there about what happened during Uri and how it really wasn’t a quote unquote market failure. It wasn’t like the... That was really if we weren’t yet regulating, and I would argue we’re still not yet regulating natural gas supply to be winterized. Power plants weren’t well enough winterized. And we hadn’t weatherized homes and buildings, so demand was kind of off the charts. And that’s something TUC continues to look at and may do more on.

On the nuclear piece, and we’re going to have, there’s going to be lengthy show notes for this one. This is good. We’ve covered a lot of ground. We will put a link. There is an advanced nuclear working group at the Public Utility Commission. Governor Abbott put Commissioner Glotfelty in charge of that. I’m really intrigued by nuclear. I think, you know, just today, the day we’re recording, Secretary Granholm, obviously in the Biden Administration, was at a ribbon cutting in Georgia for the new nuclear plants. And she said, we need 200 more. We got two here. We need 198 more. It’s one of the few areas where I think Republicans and Democrats seem to really want to kind of both pursue a similar solution. And to your point about the dangers of nuclear versus other energy sources, we’ll put a link to a great podcast, Dave Roberts, the Volts Podcast did with Jigar Shah and comparing, for instance, the radiation of coal ash sitting around on coal sites compared to what’s at a nuclear plant, far worse. What is just sitting around like basically uncovered in these coal retention ponds.

Cully Cavness

That’s what I was sort of referencing. I mean, there’s this, people are afraid of crashing in an airplane much more than crashing in a car, right? Because the airplane crash, the mental model is so gruesome and horrible and the car crash seems like something you do every day. So it’s not something to be as afraid of. But the reality is the car is gonna kill you a hundred times more often than the airplane is gonna kill you.

Doug Lewin

Yeah, it’s like 40,000 deaths a year in automobiles or something like that and a very low number…

Cully Cavness

I think it’s a little bit like that with nuclear. I mean, it’s scary because you think of Chernobyl, but if you actually do the kind of risk math, it’s not the scary one to be worried about.

Doug Lewin

Yeah. Cully, I really appreciate you doing this. The model Crusoe has with this, you know, really citing, big energy loads next to areas where there is abundant and so abundant that it’s often wasted energy is really fascinating, really thrilled to hear you’re in Texas and doing things here. We’ll definitely want to follow your company very closely and encourage our audience to do the same. Is there anything else you’d like to say? Anything I should have asked you that I didn’t that you’d like to talk about before we end?

Cully Cavness

You know we’re hiring and if anybody wants to join the team we’d love to have you. We’ve got a really special team of talented, entrepreneurial, hard-working, creative folks here and we need more of them. So check out our website, Crusoe.Ai and look at the careers page. I’m recruiting for a Chief of Staff which I’m really excited about. So if anybody wants to check that roll out in particular I’m just starting to look through resumes right now. Yeah, I think other than that, we’re just happy to introduce ourselves to your audience and we’d love to stay in touch and do it again sometime.

Doug Lewin

Thanks so much, Cully. And we’ll put a link to the, if you send us one, we’ll put a link to where that job posting is. And yeah, I can’t think of, you know, I mean, it’s gotta be on the short list of most interesting places if somebody really wants kind of a front row seat into the energy transition and AI data centers, rising load growth, all these things that are going on. What an interesting position you have open. So we’ll be sure to, to put a link to that as well. I learned a lot from this discussion. I really appreciate you taking the time. Thanks so much, Cully

Cully Cavness

Me too. Thanks for having me.

“Everyone hates data centers.”

That was the subject line on the email newsletter from Heatmap Daily the day before I sat down with Dr. Varun Sivaram, co-founder and CEO of Emerald AI. Communities see huge new loads coming onto the grid, hear about billions in new infrastructure, and worry that their bills will go up.

It doesn’t have to work that way.

Varun argues there are two paths. On the villain path, AI data centers drive up power bills and increase the likelihood of outages. On the hero path, they become flexible grid assets that help us use existing capacity better, absorb much of the cost of new grid infrastructure, and help residential and small commercial customers pay for distributed batteries, heat pumps, and more.

Texas and ERCOT are at that fork in the road.

Two futures for AI data centers

Varun calls this a “critical juncture.” If ratepayers have to pay more and grid reliability takes a hit, communities start pushing projects away and the U.S. falls behind in the global AI race

The alternative is the hero path, where data centers show up as flexible partners:

Data centers in this hero path are going to contribute to grid reliability and help us to avoid rolling blackouts. I think we can get there, but we’re not on that path right now and folks are right to worry. And this is the moment where we switch from the villain to the hero.

Texas has a chance to innovate — both technologically and with policy. Regulatory innovation is as important as technological innovation — maybe more so.

Turning AI load into flexibility

Emerald AI is a software layer that makes AI workloads flexible. Varun breaks it down into four kinds of flexibility:

* Temporal. Once you know what can move, you can shift it in time. Training a big model at 6 p.m., when ERCOT is tight, is very different than running it at 2 a.m. when prices are low and resources are abundant.

* Spatial. Many jobs can move across locations. If a Texas node is stressed and another region is fine, traffic can be shifted without changing the user experience.

* Resource. Some tasks truly need instant answers, others can wait minutes, hours, or days. Emerald deploys and optimizes onsite resources when necessary.

* Adjacent. Data centers can purchase flexibility — putting money into the pockets of residential and small commercial customers — from distributed batteries, HVAC systems, and other controllable equipment.

Put together, these layers make a data center behave less like a rigid block of demand and more like a flexible grid asset when conditions require it.

The Energy Capital Podcast is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

ERCOT’s stakes and the Texas choice

Varun shared a conversation with ERCOT CEO Pablo Vegas. Vegas said he did not just want a tool that jumps in during emergencies. He wanted something that keeps the grid from getting to an emergency. Don’t want for the flashing red lights; have data centers contribute flexibility when the lights are flashing yellow.

That is the heart of the hero path.

ERCOT was already dealing with intense load growth from industrial projects, crypto-miners, traditional data centers, increasing population, hotter temperatures, and now AI data centers. Texans will not accept anything less than high reliability and lower bills. If the PUC and ERCOT treat AI as inflexible, we will need to build a lot more capacity and infrastructure than we might otherwise need.

If we require and reward flexibility, we can serve more load at lower cost, then add new infrastructure when truly needed.

Final Thoughts

The hardware and software inside AI data centers means they are already some of the most controllable loads connected to the system. With the right tools, incentives, and market structures, AI factories can act as shock absorbers instead of stress multipliers.

Texas leads on gas. Texas leads on wind. Texas leads on solar and storage. We can also lead on making AI an ally to the grid, not a villain. That will take work but it is possible. It’s a choice we can make.

If you enjoyed this podcast, please share it with a friend or colleague or family member or neighbor. The more Texans engage with these decisions, the better chance we have for a grid that is reliable, affordable, and cleaner for everyone.

Timestamps:

* 00:00 – Intro, Varun bio, Emerald AI

* 02:15 – The villain and hero paths for AI data centers

* 05:30 – Phoenix pilot as a tangible example of the hero path

* 09:00 – California simulation of 2020 outages

* 10:00 – Possibility of doing a pilot in ERCOT, Pablo Vegas’s comments

* 12:00 – What exactly does EmeraldAI do?

* 14:00 – Breaking down four flexibilities: temporal, spatial, onsite resource flexibility, adjacent

* 20:00 – Emerald AI’s focus is on onsite flexibility

* 24:00 – Real-world stress test results

* 27:00 – What excites Varun about AI

* 32:00 – How AI can help lower power bills: the central tenet of the hero path

* 36:00 – Why ERCOT is potentially the global model for speed to power

* 40:00 – Connect-and-manage for loads

* 43:00 – A reference design for AI factories from a pilot in Virginia

* 46:30 – The hero and villain path for AI and emissions

* 49:00 – Optimizing the system to buy time until nuclear, geothermal, etc. are ready

* 51:30 – Getting a win-win-win: on affordability, on AI innovation, and sustainable, reliable systems

* 52:30 – Final thoughts: the Emerald AI team

Resources:

Host, Guest & Company• Varun Sivaram - Linkedin • EmeraldAI - LinkedIn• Doug Lewin - LinkedIn, Twitter(X), Bluesky, & YouTube

Company News• Sharing Our Seed Extension - Press Release• National Grid and Emerald AI announce strategic partnership - Press Release• How AI Factories Can Help Relieve Grid Stress - Press Release

Books & Articles •The Worlds I See: Curiosity, Exploration, and Discovery at the Dawn of AI by Dr. Fei-Fei Li•The Country’s Biggest Grid Has a Plan to Manage Data Centers’ Power Use. Everyone Hates It. - Heatmap News •The mechanics of data center flexibility - Catalyst Podcast (Latitude Media) •How the world’s first flexible AI factory will work in tandem with the grid by Arushi Sharma Frank in Latitude MediaPolicy & Reports • Report on disorganized integration of data centers - Texas Reliability Entity • 2025 State of Reliability - NERC• The Worlds I See - Dr. Fei-Fei Li• Arushi Sharma Frank’s ERCOT Planning Guide Revision Request• Retail Electricity Price and Cost Trends: 2024 - Lawrence Berkeley Labs• Rethinking Load Growth - Tyler Norris and Duke University• ANOPR on Large Load Interconnection - FERC• Emerald AI: presentation to ERCOT Large Flexible Load Task Force • PGGR 135: Large Load Interconnection Queue Process Revision

Related Podcasts by Doug• How Data centers Strengthen the Grid - Astrid Atkinson

• Texas’ Load Growth Challenges – And Opportunities, with Arushi Sharma Frank

• How Load Flexibility Could Unlock Energy Abundance with Tyler Norris

Related Substack Posts by Doug• AI Data Centers Aren’t Causing Higher Prices • Demand Side Resources Could Enable Load Growth• Can AI Data Centers Lower Costs for Residential Consumers?

Transcript:

Doug Lewin (00:05.154)

Welcome to the Energy Capital Podcast. I’m your host, Doug Lewin. My guest this week is Dr. Varun Sivaram. Varun is one of the most interesting guests I’ve had in the three years now I’ve been doing podcasts, both the Energy Capital Podcast and going back to the Texas Power Podcast. He is the founder of Emerald AI, a company which is transforming energy-intensive data centers into grid assets and grid allies. We talked about all the different ways that data centers, if integrated right... The Texas reliability entity brought this up in a report: the possible disorganized integration of data centers into the grid is one of the biggest reliability risks. I would argue, and clearly Dr. Sivaram argues, the counter is true as well. The organized integration of data centers can actually make grids more reliable and spread costs out to more customers.

We got into all of that. Just a couple of notes on Varun: He was formerly the chief strategy and innovation officer at Ørsted. He was the chief technology officer of India’s largest clean energy company, ReNew Power. He was a diplomat at the US State Department. He is currently a senior fellow at the Council on Foreign Relations. He was named as one of Time Magazine’s Time 100 Next for the next 100 most influential people in the world. MIT Technology Review named him one of the top 35 innovators under 35. You get the idea. He also has a PhD in condensed matter physics from Oxford. This bio is kind of ridiculous. Clearly one of the smartest people out there in this space, and this company, Emerald AI, is really doing some super innovative things with some really high-level partners, including NVIDIA and others. I think you’ll enjoy this conversation as much as I did. Please leave us a five-star review wherever you listen.

And most importantly, if you are not already a subscriber at douglewin.com, please go there and become a subscriber today. Your support for the podcast really makes it possible. And with that, here is my conversation with Dr. Varun Sivaram.

Varun Sivaram, welcome to the Energy Capital Podcast.

Varun Sivaram (02:19.256)

Thanks so much for having me. It’s an honor.

Doug Lewin (02:21.514)

Hey, it’s great to talk with you. I have been reading article after article about Emerald AI. I saw your presentation to the large load task force a couple of months ago in Texas and have been meaning to do this for a while. So thanks so much for taking the time. We’re going to obviously talk about Emerald AI. We’re going to talk about Texas and data center growth. We’re going to talk about all of these things, but I just want to start from a very high level, Varun. We are recording here on November 7th. Yesterday, Heatmap News had a very provocative headline: “Everyone hates data centers.” I don’t know that that’s actually true, but I know what they’re trying to say. There certainly is a lot of opposition to data centers right now. You are doing a lot of work, obviously, around data centers, data center flexibility, just from a grid perspective, thinking about affordability, reliability, lower emissions—all these aspects of data centers. Why should people not hate data centers?

Varun Sivaram (03:19.928)

Well, look, Doug, I think we’re at a critical juncture, and that juncture is between what I consider to be the villain path for data centers and the hero path for data centers. And I don’t think either one of them is preordained. I think that folks may be right to say that they’re worried about the impact of data centers in their community the way things are headed today, right? The average annual household power bill in Columbus, Ohio rose by $240 directly attributable to data centers in 2025. And you’ve seen NERC studies, for example, and other reports showing that the advent of AI data centers could cause grid reliability issues. So there is a scary villain path that I’m worried about in which data centers come to town and communities don’t want them. They raise rates, they destabilize grids, and as a result, you just have fewer data centers getting built. I think the villain path is not just bad for the AI industry. The villain path is very bad for America because America needs AI infrastructure and AI data centers to compete in the 21st century in the most important economic sector we’ve ever seen. And data centers can provide economic development, and they can help us to compete with China. So we absolutely need a lot more AI data centers.

The hero path is the one that I’m obsessed with getting us onto because I actually think AI data centers, far from being the thing that undermines the grid, can actually be the asset that saves the grid. And in that hero path, if we get on it, data centers come to town, they actually lower your rates, or at least they arrest the increase in rates because they’re more efficiently utilizing your existing system. We can connect far more data centers much more quickly to existing power systems and defer the massively expensive overbuild of infrastructure and more prudently expand our grid and expand our generation. And by the way, data centers in this hero path are going to contribute to grid reliability and help us to avoid rolling blackouts. I think we can get there, but we’re not on that path right now and folks are right to worry. And this is the moment where we switch from the villain to the hero.

Doug Lewin (05:25.878)

Yeah, I definitely want to talk a lot about both paths because I think we’re seeing elements of both of them. But obviously, to me anyway, the hero path is much more interesting. Maybe this is my sunny outlook on life or something, but I think that there really is an opportunity here when you see the scale of investment that you see, and we know that the grid has been underinvested in. This is an opportunity to bring a lot of investment to the grid.

Where I think I want to go next is I do want to ask you about Emerald AI. And I think the way I kind of want to bring that in here is this test you guys did in Phoenix recently. Can you talk a little bit about what you did there and connect that, obviously, to the hero path?

Varun Sivaram (06:10.528)

Absolutely. So Phoenix, Arizona: deployment one of now four Emerald AI deployments. In that first deployment, we went to Phoenix with a range of very credible and authoritative partners like EPRI, the utility association that runs DCFlex, Oracle, in whose data center we were operating, NVIDIA, who’s both our investor and partner in this demonstration, as well as the local utility Salt River Project. The goal was to prove that on a grid that faces summertime strain—let’s say you’ve got a peak moment sometime in the summer where a million air conditioners are straining in Phoenix, Arizona—that a data center can actually flex its power consumption. It can reduce its power consumption at that very moment to provide badly needed relief. And in doing so, that data center demonstrates the kind of behavior where you say, “This is one of those grid-friendly data centers that if one of these comes to interconnect to my grid, I would love to have this hero of a data center connect—not in seven years, requiring me to build out transmission lines and power plants, but right now in seven months because it can provide badly needed relief when I need it and it’s not going to raise my peak load unsustainably.”

And so we went out to Phoenix and we worked with our partners, as well as the chief scientist of Databricks, to design a representative set of customer workloads running on this cluster of NVIDIA GPUs—a representative set of workloads across inference, fine-tuning, training of large language models. We went ahead and said, “Is it possible that if we get a signal during the peak demand on that day from the local utility that we can then reduce the power consumption by 25% for three hours?” And those were the parameters set to us by our utility partners. The test succeeded. In fact, the test didn’t just succeed once, it succeeded many times. And we’re really pleased—I think this is the first time I’m sharing this publicly, Doug—we’re very pleased that those results have now been formally peer-reviewed and accepted for publication at one of the world’s top scientific journals, Nature Energy.

So we’re delighted that this is kind of an inaugural first demonstration of AI computational flexibility where the data center itself is changing the way it operates in a way that is supporting the reliability standards of the AI customers. We made sure that our AI customers and partners were happy with the performance of their AI workloads while at the same time, the grid got exactly the performance it needed—to see that reduction over a controlled ramp rate, that 25% reduction over a three-hour period, which is what the instruction to us from the grid was, and then a controlled ramp back and no snapback beyond the baseline energy consumption. That’s the kind of behavior that if you replicated across many data centers can save a grid from a blackout.

Just very briefly, I’ll say, Doug, we also simulated a real California event. A little over five years ago in August 2020, we simulated what happened in California where a 500-megawatt gas plant just tripped offline. Had we had Emerald AI deployed on data centers in that service territory, we could have avoided the rolling blackouts that ensued. And what we demonstrated in this trial—again, this was in Phoenix, but now responding to a CAISO emergency need—we demonstrated that we could first reduce the consumption by a little bit and then reduce by a further amount if that’s what the grid operator signals that we need to do. And so this kind of dynamic ability to respond to the grid’s needs as they evolve while protecting the performance of the AI workloads, the most valuable workloads in human history—that’s the dual optimization that Emerald AI enabled in this Arizona test. And it’s just the first of many deployments that we’re super excited about.

Doug Lewin (09:48.246)

Now you had, I think a few months ago, again at that large load working group, said you guys were at least considering doing some kind of a test in Texas. Is that happening or on the roadmap?

Varun Sivaram (09:58.996)

It is my deep desire to get that test up and running. You know, ever since the Arizona demo, we went ahead and did another commercial demonstration again with EPRI DCFlex, and we’ll be excited once we finish EPRI’s independent technical validation to present those results to the public. We have a test that’s been announced and that will be done in the United Kingdom, our first international expansion to London, with National Grid, the national utility there, and a large data center with the most advanced NVIDIA GPUs. And then last week we made a major announcement about our fourth deployment—happy to talk more about it—a commercial scale of nearly 100 megawatts in Virginia with NVIDIA. So there’s a lot of excitement for what’s to come.

I really would like to do this in ERCOT. And I’ll just share that one of the most impactful statements I have heard came from Pablo Vegas, the CEO of ERCOT, who shared with me, he said, “Look, I would like your technology not just to try and relieve the grid when we’re in an emergency moment—imagine, you know, all signals flashing red—but rather when they’re flashing yellow.” That’s right. When they’re flashing yellow and it looks like, you know, we might be approaching a scarcity event, that’s when our grid-friendly data centers can really help bring the grid right back to that green zone and therefore avoid ever coming into the emergency situation to begin with. It’s why I’m so enthused about this hero pathway. If you have grid-friendly AI data centers—and Doug, we should talk about why Nvidia calls them AI factories—if you have these grid-friendly assets, they help every day to keep you in balance and avoid you entering that emergency condition from which then you have to take drastic action to recover from.

Doug Lewin (11:39.542)

Yeah, so I think there’s a ton of applicability here. What I’m trying to think through, and I do want to come back to talking some about AI and why there are data factories and not data centers and all of that is really interesting. I just want to get grounded a little bit more in what the technology is. So I’m going to repeat it back and then you’re going to tell me where I got it wrong and/or expand on it. You’re certainly going to tell me where I got it wrong. I’ll get it wrong somehow.

But let me see if I can break this down. So with an AI data center or data factory or however you want to call it, you’ve got a lot of different things going on. You’ve got some inference that could be doing things like, for instance, routing calls to a 911 call center or helping an autonomous vehicle interpret that that thing moving across the street is a pedestrian and it needs to stop. So there are certain functions that you can’t shut off. Those need to run and they’ve got to run quickly. You can’t even necessarily move them to a different data center. Latency is a major issue for those kinds of applications. That’s kind of on the extreme end. On the other extreme might be a large language model that’s training over a long period of time. Could be done from anywhere, could be done almost any time. And then there’s like a whole lot in between there. And what you’ve done is developed a software that understands all of those different use cases and can, within those use cases, kind of move workloads around and even sort of maximize the efficiency of the chip performance. This part I don’t understand. This part seems like magic and maybe this is just the magic of the technology you’ve developed and maybe you don’t want to say too much about it, but it seems like from what I’ve read, you’re maximizing the efficiency of that GPU in that moment such that for those use cases where they can’t be shifted, you’re still getting the exact same output, but at less energy use, which is basically the definition of energy efficiency.

Okay, so if I got that all wrong, you could just start over and describe what you do. If I got it partly right, then you could correct the other parts I got wrong. What did I get right, what did I get wrong? Grade my paper, Varun.

Varun Sivaram (13:49.858)

Doug, you get an A. You did a great job there. I’m really impressed. We’ve got to bring you on staff here. Look, let me just go up a level just to explain the broad framework of flexibility here. I think of kind of four components of flexibility for a data center.

Component number one is what we call temporal flexibility. Within a data center, you might have, just like you said, Doug, you might have some really mission-critical time-sensitive workloads that you can’t pause or slow down. You might have some other ones that you can pause or slow down and everything in between. And temporal flexibility takes advantage of slowing or pausing certain workloads. And you can do that in many ways, and we take advantage of all of these different ways as we demonstrated in Arizona, whether it’s changing the clock frequency on the Nvidia GPUs or it’s rescheduling workloads, or it is changing the resource allocation—what’s called in the industry auto-scaling—the GPU utilization for particular workloads, et cetera, et cetera. So there are lots of different things you can do, but basically in one data center, temporarily over time, I can slow or pause to create flexibility, reduce the energy draw from the grid in time.

The second way is what I call spatial flexibility. This is a very unique trait that data centers have, but other economic users like electric vehicles don’t have. Data centers can move their workloads from one location to another at the speed of light over the fiber optic network. Again, this works for some workloads, but not other ones. It’s probably not gonna work for a large training run because there’s too much data to transfer, but it can work. You can move queries for an inference query, for example. You can move queries from one location to another so long as you had the model set up in multiple locations. So the second is spatial flexibility, where if you have a problem in Arizona, the grid is strained, you move your query over to Dallas, right?

Doug Lewin (15:39.438)

Before you go to the third one, just real quick on that. So, because I think that’s where a lot of listeners will have some familiarity and direct experience with AI. If you’ve done a ChatGPT or Gemini or Grok or whatever kind of search you prefer—all three—it will often say like on OpenAI, you know, it’ll say on ChatGPT, it’ll say “thinking,” right? And you get that little lag there, right? And sometimes you want to, you can, you can change that and optimize it to give you a real fast answer. Sometimes you want it to think more, but that thinking, you know, when you’re dealing with fiber optics, like that could go around the world multiple times in a second. Like you think 15 seconds is a long time or a short time or whatever you think it is. Like you could move that around the world a bunch of different times. So, and the reason I want to dive into that, Varun, is one of the things I hear so often in conversations with energy people about data centers is there just is no flexibility in these things. The data centers are paying so much for these GPUs. They’ve got to run 100% of the time, not even 99.999%. They just got to run all the time. And that is true for some use cases, but for some of them, and perhaps the ones that are the biggest use case, maybe you can expound on that a little bit, there is a lot of this spatial flexibility because somebody’s asking a question and 10, 15 seconds is a perfectly fine response time.

Varun Sivaram (17:01.462)

Yeah, absolutely. You make a great point, Doug. The latency or the delay that you’ll face if you move a query from Phoenix, Arizona to Dallas or San Antonio is not going to be a second. It’s going to be measured in milliseconds, right? You will not notice it. You absolutely will not notice it. And that’s important because AI workloads in many ways are different from the historical class of workloads that data centers used. And again, we should talk, Doug, about why we’re moving toward this paradigm called AI factories. Yes, a factory that’s optimized for converting electricity into tokens of artificial intelligence. Historically, data centers have done all kinds of heterogeneous or different things. Those include routing 911 calls, by the way. No one ever wants to mess with routing a 911 call. No one ever wants to mess with Doug Lewin trying to send a Venmo transaction to Varun. I know you haven’t done this yet, but no one wants to mess with—

Doug Lewin (17:51.446)

Do I owe you money? Are you trying to tell me I owe you money? Oh dear.

Varun Sivaram (17:57.848)

Sorry, inapt example. But no one wants to mess with a transaction like that, right? Going forward, the set of AI workloads, there are these new sets of flexibility parameters. If you’re fine-tuning a model, for example, you might have some temporal flexibility. It may be okay for that fine-tuning operation to pause for an hour or two. When it comes to inference, you mentioned these chatbots. Yes, the time to first token, which is the time you wait around waiting for that first response or that first word back to you from ChatGPT, that can take a second, it can take a few seconds. And so the few milliseconds of moving the query is not noticeable.

I’ll also say that although Doug, you and I interact with ChatGPT every day, that’s not the only use case for AI. There are lots of use cases. You might be a scientist, for example, and you might send a request for protein folding configurations and expect that request back in the morning or next week. Right? That is what we call a batchable request, which you might be able to pause again for an hour if the Phoenix grid is strained. So there’s a range of different ways we’ll use AI and almost all of them have some kind of temporal or spatial flexibility.

So again, we had four ways. I told you about the first two: temporal and spatial. They’re computational flexibility. The third one is what I call resource flexibility. This one’s intuitive. You might have some batteries on site and you’re able to reduce your grid draw because you’ve got fully charged batteries and for that limited amount of time that your batteries can run, you can locally power your data center or part of your data center. And the fourth kind of flexibility is what I call adjacent flexibility. Adjacent means not on site. You might have, for example, at the same transmission node, you might have neighborhoods with batteries or Nest thermostats, and you may be able to aggregate them all together and provide a little bit of flexibility to that substation, for example, and the utility might be willing to treat that as flexibility that counts toward the data center’s own flexibility.

So these are the four types. The first three are onsite. The first two are computational, temporal, spatial. The third one is onsite resource flexibility. And the fourth one is adjacent flexibility. You put all those together, and I sincerely believe we can make AI a flexible resource. And Emerald AI is the software layer that sits above and enables this flexibility. We are orchestrating the temporal and the spatial computational flexibility. We are co-optimizing that with the resource flexibility, the batteries on site, for example, so that you can best harmonize what you’re doing on the compute side with what you’re doing with the resources on site. And my sincere hope is over time, we will also harmonize all of this with adjacent flexibility and all the other resources that are offsite.

Doug Lewin (20:38.456)

So is your software already doing this or set up to do the adjacent part of it? Because that part I’m really fascinated with, because you talk about a hero path, right? The potential for data centers to pay for reductions from customers and, to be very clear, and people will get tired of me saying this, but I’m going to say it every time I talk about this: on a voluntary basis, nobody will ever be required to do this if you just want to pay a lot for electricity and you just don’t care. That is your right as an American and I will defend it. But if you would like to lower your bill by participating, like you could actually have data centers paying for thermostats and batteries, and this is what markets are all about, right? There’s a price for that. You figure out what the price is. What’s the price to add another increment of battery on site? If the price is lower to put money into the pockets of the people at the neighborhood just across the way and be a hero and save money, right? The data center... I mean, you talk about a win-win-win all around. I’m really fascinated by that piece. I’m really glad that you laid it out with, because I was going to ask about it, but you gave it without a prompt. I’m curious though, is that something that is like part of the software or is your software more like one and two—temporal, spatial—and then that’s done by somebody else?

Varun Sivaram (21:55.02)

So look, right now, if I’m being perfectly transparent, Emerald AI is focused on flexibility at the data center. So we’re doing temporal flexibility, spatial flexibility, and coordinating with onsite resource flexibility, right? Emerald AI makes it possible to co-dispatch an onsite battery alongside with your computational flexibility. So we do the first three, but I’m a big fan of all the different buckets.

Let me just say a moment on this hero path. Look, data centers are already striving to be heroes. My friend, Chase Lochmiller runs Crusoe. He’s an investor in Emerald. And they’re a standout example of a company that, when they come to town to Abilene, Texas, for example, they invest in the community, they invest in the workforce. Chase actually has this vision of building even more generation than the data center will need so that you’re actually reducing overall power system costs. And by the way, to your point, Doug, it would be wonderful if data centers, through their high willingness to pay for their compute costs, are also willing to therefore subsidize flexibility in the adjoining communities.

And another good friend, I was recently on a panel with Justin Lopez at Base Power. Base Power is an example of a company that is putting together a range of battery resources in a neighborhood or in a community, and they’re able to bid that in or dispatch that as an adjacent flexibility to data centers. So I’m just delighted that all of these great innovators are coming with solutions. Emerald seeks to be this glue that makes it possible for the data center itself to flex and to play nicely with all that adjacent flex out there.

Doug Lewin (23:24.928)

And so, okay, that’s super helpful. I appreciate that. And so it’s obviously like, you don’t necessarily need a company to do all pieces of that. I had Astrid Atkinson from Camus on recently and they do a lot of that like aggregation of the JSON you were talking about. There are lots of different companies that do that. I was just wanting to be clear on what you guys do, but you do those first three and I’m interested in how you think about, and I guess maybe it’s not you thinking about it, it’s the software, but you’re sort of training the software like, what are the kind of trade-offs between those things? I mean, it’s got to still be early days, right? There’s not a ton of information yet, I wouldn’t think, but maybe there is, about how to sort of stack those things against each other. We’re going to switch a workload, do a different data center. We’re going to move the time, or we’re going to use the resource that’s on site, or we don’t have enough resource on site. We need to put more. That, I assume, is what is going on with the tests you’re doing and the early deployments, is you’re getting the information to train the model to continue to refine it? Is that accurate?

Varun Sivaram (24:26.262)

Yeah, absolutely. Doug, you asked, you know, “Hey, Varun, are you doing the thinking here?” You better hope I’m not the one thinking because... Far too slow, far too slow to pull this off. The magic, the secret sauce behind Emerald AI—the thing that takes my breath away—is the autonomous intelligence, the closed-loop functionality, the way the Emerald AI set of agents actually just operate at scale. And so there was a recent test where, you know, we were just watching it, but it was kind of epiphenomenal. We had no ability to change it. We were just like watching the results pour in. And one of our partners was like maniacally changing the workload mix, starting and stopping workloads. And at one point, one of the workloads failed because I think it was improperly prepared. And the Emerald system did some behavior we had never seen it... We’d never designed it to do, but it was fascinating. It enabled the overall power draw to look to the utility like we were still very smoothly ramping down by 20, 25% and holding steady, even while under the surface, there’s this churn of all of these different workload behaviors. Some are starting, stopping, some are even failing, which we had never encountered before.

So I love watching the system autonomously and intelligently make these trade-offs in real time by taking into account, hey, what’s the user okay with? What’s the user’s priority level for these jobs? What can be tolerated in terms of temporal or spatial flexibility? And then to your question Doug, how does this stack along with the battery, right? Because the battery comes with its own set of constraints. It has a particular state of charge. You can dispatch a battery but you then need to recharge it before you dispatch it again. What if you get two back-to-back events without a recharge time in between? This is why we’re going to need a combination of flexibility approaches. It’s why compute flex is so impressive, right? Compute flex is powerful because we can do multiple events in one single day. We can do long events, even if you haven’t sized your battery to achieve an eight-hour event. Let’s say you’re in PJM and there is a long event. This has historically happened. Compute flex can really bail you out if you exceed the capacity of your batteries.

I like to think about a supply curve. There’s a supply curve along many dimensions of different interventions you’ve got at the data center. You’ve got your temporal flex, your spatial flex, you’ve got your batteries on site, maybe you’ve got a fuel cell. You’ve got a diesel generator that you’re only allowed to run for X number of hours because of the air permit reasons. And you’re stacking all of these interventions and intelligently and autonomously, you’ve got to make good decisions in the moment because, and we should talk about this Doug, the utility and ERCOT are counting on you not to screw this up, right? They’re counting on you that if there is a curtailment signal, you better perform. And so for the data center, the goal is to make sure you perform while protecting the sanctity of these customer workloads, which are again, the most economically valuable workloads in history. Don’t screw them up.

Doug Lewin (27:21.08)

So before we were going to talk about ERCOT in just a minute, before we do that though, I do want to just linger on this for a minute. I think there are two things I want to kind of unpack a little bit more because I think they’re just fundamentally important on just a kind of a foundational level. Because again, back to that Heatmap headline, “Everyone hates data centers.” Like I feel like there’s a disconnect with the general public here. You’re obviously like, I could just see you just like light up as you’re talking about this. Would you talk about some of the use cases of AI that excite you the most? I just finished reading, it’s sitting over there, The Worlds I See by—I don’t know how to pronounce her name—is it Dr. Fei-Fei Li, who’s one of your investors, right? It’s a beautiful book. I highly recommend folks read it. She gives some of those insights into how AI could actually improve healthcare outcomes. I feel like sometimes, and it is an energy podcast, so of course we’re gonna talk about energy, but we sometimes skip over and I think that’s some of the disconnect with the public. So just take a minute and just like on a human level, like what excites you about AI? It’s a big question.

Varun Sivaram (28:22.626)

Everything. The best way I can frame it is, you know, just last week, the King of England’s Coronet Awards just awarded this major prize to both Dr. Fei-Fei Li, our investor, as well as to Jensen Huang, the CEO of NVIDIA. NVIDIA is another big investor in Emerald AI, as well as to NVIDIA’s chief scientist, Bill Dally. Jensen says, you know, there is this paradigm shift we’re seeing. AI is different from other inventions. Other inventions have been tools. AI can actually use tools. This agentic AI future in which AI agents are using tools that formerly humans would use opens a whole new world of discovery.

It’s why I love Dr. Fei-Fei Li’s book that you just mentioned, The Worlds I See. You know, fine, putting my science fiction hat on, I fully expect that it’s AI that will cure cancer. It’s AI that will enable the end of road fatalities. Yes. As we have far safer transportation, road transportation, autonomous vehicles. It’s AI that will end the rigmarole of meaningless work and open up far more leisure activities for everyday working-class citizens who don’t have to do things that we can now automate. And for those worried about job displacement, it’s AI that I believe will create almost unbounded economic gains. They will, I hope, help the United States become more fiscally sound through this incredible economic growth and revenue. And I hope that they will create enough of an economic bounty that even ordinary working-class citizens just get to share in those rewards and live meaningful, productive lives.

But we do not get there unless we invest right now. I do fear that if we don’t take this seriously—first, if we’re uncompetitive with other countries in the world, and second, if we just slow our trajectory compared with what we could achieve—we won’t realize these rewards. And every year we go that we haven’t cured every kind of cancer is just a year of unnecessary deaths. I know I’m exaggerating in some sense, but seeing AI solve protein folding or solve... these are fundamental advances.

Doug Lewin (30:39.514)

I think about a lot, I haven’t talked about this publicly or, but my dad has Parkinson’s. It’s a devastating, just devastating disease that doctors just don’t, they just don’t know. Everybody just kind of like, it’s kind of a shrug. We don’t know what causes it. We don’t know really how to treat it. They can give you some medicine that does a little bit here and there, but my God, like if we could use AI to try to understand what causes that, I mean, just the amount of human suffering from Alzheimer’s and dementia and Parkinson’s. There was just a constitutional amendment in Texas to establish some additional Alzheimer’s research. Now, I don’t want to be Pollyannaish. We all know AI could be used for bad stuff too, right? But this is where, when you talk about hero path and villain path, there’s that on the grid, and then there’s that more generally. And all these things we should talk about, which is really important, is why we’re talking about it right now. But I think a lot of times people are not thinking enough about how much it can help.

You mentioned cars. 40,000 people die on the roads every year. I think the math is something like equivalent to like a couple of plane crashes every week where everybody on board dies. If that was happening, the public would be up in arms, right? We wouldn’t accept it. We absolutely would not accept it. But somehow with cars, we all just kind of go, “Oh well.” It is unnecessary. We’re already seeing with Waymo the crashes and they’re running around Austin all the time and they’re... the rates of both injuries and of even any kind of crash are down. I forget what the numbers are—70, 80, 90%, something like that. So anyway, okay. Anything else you want to say about that before we move on? So we’re going to go to ERCOT in a minute. The other piece I just wanted to, and this relates to the ERCOT discussion as well, but the other piece I wanted to dial down into just a little bit more, drill into a little bit more is affordability. So we were talking about that fourth bucket you were talking about—adjacent where data centers could pay for reductions. I’m real excited about that, but there is a more fundamental way that data centers actually can help lower costs, which is, and this was in that LBL study that’s gotten a lot of traction recently over the last couple of weeks that states that have higher energy use actually have seen their rates go down. Now that’s uneven. Rates are going down more for large users than for residential. And that’s something we need to talk about and work on.

But overall, like the math is pretty simple, right? You have a fixed cost of a system and the more you spread those fixed costs out over multiple users, the lower costs go. So I don’t know if you want to say anything about that, but it’s just something I want to put out there more and more for folks to think about. That’s sort of part of the hero path as well, is as long as we have the right regulatory systems in place and ERCOT will be working on changing some of the transmission cost allocation and all that, there’s a real potential for costs for everybody to go down just from that simple math equation before you get into any of the whiz-bang exciting things AI can actually do to make the grid more reliable or affordable.

Varun Sivaram (33:33.826)

Doug, you’ve nailed it, so I won’t spend too much time repeating what you said, but it is a simple equation, but it’s central to the hero pathway. Because if you have to build out infrastructure faster than you’re bringing on the revenue from new kilowatt-hours, in other words, if you have to pay for new kilowatts faster than you get revenue from new kilowatt-hours, then everybody’s rates go up. Today we have a cost allocation problem because peak demand is rising rapidly, you have to pay for all of these new pieces of grid infrastructure, transmission lines, substations, as well as generation. And there aren’t as many kilowatt-hours getting paid for in order to make the math work. And so we socialize the cost. And then we have arguments over, “Well, should data centers pay more or should communities pay more?” et cetera. You can sidestep a lot of that through data center flexibility that allows data centers to better utilize the existing infrastructure.

Look, I still think we’re gonna need more. We’re gonna need to build more grid infrastructure and to modernize it, we’re gonna need more power generation capacity, but we can build it out prudently. And so the pace of kilowatt increases is outpaced by the kilowatt-hours that we get productive revenue from and that pays for all of this. So you have less of a cost allocation problem because you don’t have to fund this and therefore, it’s less about “What should communities pay or should data centers pay?” It’s that, as you said, flexible data centers coming on the system should actually reduce costs for everybody because the new kilowatt-hour payments really ought to pay for more than their share of what the kilowatt capacity increases are. So that’s the simple equation that I want us to keep in mind as the central tenet of the hero path.

Doug Lewin (35:17.934)

Unless anybody think that that just sounds very futuristic, this has actually happened over the last two years in Texas where the peak demand, the highest peak demand we had in 2023, we did not reach in 2024 or 2025. But our minimums for every month, the minimum demand in 2025 is up every single month compared to 2024. Our electric use is up like 11, 12% over the last two years. EIA thinks it’s going up 14% next year alone. So usage, overall usage of the system is going up while the peak is not. So exactly what you’re describing, it’s not just a futuristic thing. It has happened over the last two years, whether we keep it going or not, is gonna depend on good policy and market structures and all that kind of thing. Which brings me to, let’s talk about ERCOT and good market structures. You made a presentation to the Large Load Working Group. You’ve talked in this conversation about Pablo Vegas, ERCOT CEO. I saw you describe somewhere else, a very visionary thinker. Texas passed Senate Bill 6. Let’s just start at wherever you want to start. What is most interesting about Texas? What are you kind of either watching or participating in as far as how large loads are dealt with in the ERCOT market?

Varun Sivaram (36:28.93)

Let me first say, Doug, and I’m not just saying this because I’m your podcast guest today and you’re in Texas. I am a huge fan of ERCOT. Just to give you a sense, I used to work in India. I was the chief technology officer of a big Indian power producer. And in New Delhi, when folks would ask me, “Hey, what electricity sector reform should we be doing?” I’d say, “Look at ERCOT first. That is the electricity system you want to emulate.” I didn’t say any other system. I said ERCOT. So I’m a huge fan and I believe ERCOT does a lot of things right, whether on the generation side, it’s connect and manage, whether it’s using market signals to drive investment. Customers in ERCOT both have a lot of choice. They also have lower costs than everywhere else where it’s not requiring mandates and government preferences to drive the way that you decide to get your own energy and giving you a lot of choice and flexibility in the process. I’m ideologically a very big fan of ERCOT.

So why do I think ERCOT’s a big opportunity here? Three reasons. First, I think data centers and tech companies want to come to ERCOT. It’s a great opportunity for economic development for the state and for Texas to be a leader in AI. And as you know, that’s been a little difficult as we run into constraints on connecting new loads. So that’s the first point. Second though is, I think there’s a lot of headroom in ERCOT. Look, let me try this experiment out and you tell me if I’m doing this wrong, but your video producer started me off like this. He said, “Hey Varun, look at all that headroom.” For those of you listening on audio, I just tilted my camera up. And so now my head’s in the bottom of the frame. And he said, “You need to reduce that headroom.” Well, this is ERCOT today. There’s a lot of headroom, right? There’s 10 gigawatts or 15, depending on how you read Tyler Norris’ Duke study. And this is what I want to do. I want data centers to be flexible enough to take advantage of all of that spare headroom. So, you know, point number two is I think there’s a lot of headroom. And point number three is I think ERCOT moves fast. And we should talk about some of the fast-moving proposals right now, but I think ERCOT has this unique governance ability to move fast and lead the rest of the country. I’d love to see large flexible loads, AI factories that are flexible take root in ERCOT first in the nation.

Doug Lewin (38:40.334)

Everybody’s talking about speed to power, right? And I said earlier, you know, a lot of conversations I have, I just hear this all the time, right? That like, there’s just not flexibility in these data centers. It’s not that, usually when I drill down, when I ask the follow-up, “What do you mean there’s not flexibility?” Typically the answer I get, Varun, is that chips are just so expensive, and the next chips that are coming out in 12 or 18 or 24 months or six months, right? Or three months, like this thing is moving so fast, you have to be able to maximize the investment you made in the generation of chips you have so you don’t have any flexibility. You’ve got to just run all the time. But as you were just talking about, there’s flexibility, temporal, spatial, resource, all the things you said earlier, adjacent, like there’s flexibility there. And then there’s also that like you might have the chips or a line to get the chips or whatever, but if you don’t have the power, those chips don’t do you a lot of good, right? So it’s kind of speed to power. And then to kind of connect that to something ERCOT does very well on the generation side, but I don’t think it’s doing very well yet on the load side, but I agree with you. I’m very bullish on ERCOT. I think ERCOT is doing things quite well, and let’s be clear, relative to everywhere else, right? It’s like you have to grade all this on a curve, right? Because there’ll be a lot of people listening, they’re like, “I’m dealing with ERCOT and I’m very frustrated.” Okay. But you’re probably less frustrated here than you are in MISO or PJM or New York or CAISO or other places around the world even. But this connect and manage on the generation side, I keep thinking like where we need to get to is connect and manage on the load side. That yeah, we’ll connect you, we’re gonna manage that while we’re building out transmission. And that’s kind of exactly what you’re doing. Does that concept work or is there something that’s just too simplistic about trying to apply that to load? It applies to generation, but it doesn’t quite work for load. What are your thoughts on all that?

Varun Sivaram (40:35.362)

Look, the inspiration is absolutely right, Doug. Connect and Manage has worked so well for ERCOT on generation that the rest of the country is trying to copy it and they’re stumbling over themselves to do it. And we’re so proud that on the load side, our Emerald AI Senior Advisor, Arushi Sharma Frank, has recently put forward and worked very closely with ERCOT to develop this planning guide revision request related to this concept, Connect and Manage for the load side, to enable a large flexible load like an AI data center to connect and provide this kind of flexibility as a controllable load resource and thereby reduce its interconnection time below a couple of years. I mean, you said it right, Doug. The largest value here is speed to power and energy is the critical bottleneck. It’s no longer chips in the supply chain. You can get your chips now, but if you’re stuck waiting in the queue, that’s billions of dollars. We actually have $4 trillion of investment sitting on the sidelines waiting to build these AI data centers and speed to power is by far the most important value proposition to get a faster and a larger power interconnection.

So we’re delighted with that proposal. We co-signed it and I actually urge you to take a look both at the filing at the reply comments as well from another Emerald AI senior advisor, Peter Hirschboeck at Impact ECI. He’s got this magnum opus coming out on the four pillars of flexibility. But what Arushi has done, she’s been a real leader in Texas at Tesla and we’re very lucky to get to work with her. I know she was on your podcast recently and she’s done some great work on this. But I will say, I will say Doug, not everything is analogous. It is the case that a generator that connects will be subject in the connect and manage framework to curtailment at any time. Right, right. And a load, a large load, a data center... Look, there are limits to what data centers are going to be willing to tolerate. You and I have talked now three times in this podcast, Doug, about how economically valuable AI is. You don’t want to curtail AI 2000 hours a year, right?

Now the good news is that 10 to 15 gigawatts of headroom in ERCOT is achievable just with very minimal curtailment with 25% reductions in load for a couple hours at a time for up to 200 or fewer hours a year. So it’s not a whole lot of curtailment, right? It’s on the order of 0.5% of curtailment is what Duke University found. And so connect and manage with some guardrails along the lines of, you know, a data center that connects in this way can expect that it still gets to, you know, operate normally most of the time. That’s a very attractive proposition for AI factories. And I think, you know, we’re so proud that we are working with Nvidia and with others like Digital Realty and Eprion in PJM, not yet ERCOT, but delighted to come to ERCOT and do this. We’re working with them in Virginia on the world’s first power-flexible AI factory. And that’s going to be a 96-megawatt, almost a hundred megawatt facility. But more importantly, it’s the reference design for future AI factories. So the next thousand AI factories will have this capability to be power flexible, protecting your users’ workloads, but also precisely meeting what the grid needs from you in order to get that early connection. And you’re seeing this connect and manage framework in ERCOT, we hope that Arushi’s proposal is taken forward. And in addition, you’re seeing federally, you’re seeing Energy Secretary Chris Wright directing FERC, the Federal Energy Regulatory Commission, to consider this new what’s called an ANOPR to potentially speed the interconnection of flexible loads. So I’m seeing this pop up everywhere. I think it’s a wonderful idea. And again, I hope the rest of the country takes ERCOT’s lead.

Doug Lewin (44:18.434)

Yeah, and a little bit more on that. Kristi Hobbs, VP of, I think it’s System Operations or something like that at ERCOT, gave a presentation to the PUC just a week or two ago. I’ll just read one sentence from her slide. This is an official ERCOT slide, we’ll put it in the show notes. “With an evolving grid, large loads that are willing to respond to system conditions could have an opportunity to interconnect if they can adjust their consumption until transmission and/or resource additions can be incorporated on the system.” The key takeaway from the slide: large loads who are flexible could utilize available transmission capacity if they’re willing to curtail under certain conditions. So like you said, they don’t want to just be curtailed. This notion of ERCOT with some big red button they’re going to press and shut it down isn’t going to work. But as long as there is telemetry that is measured and verified reductions that can happen on site, that should be able to speed the interconnection of some of these massive investments. Anything you want to add to that or amend?

Varun Sivaram (45:15.032)

Well, look, that’s so important. And I’ll just say, you mentioned a big red button. We need to do this in a way that is amenable to these data center operators, America’s critical economic infrastructure. So you really don’t want the data center to feel like at any given time a big red button is going to come down, the circuit breaker is going to be flipped. And that’s why at Emerald AI, what we’re building is what we hope to be an elegant interface between the data center and the grid, enabling the data center to credibly, verifiably, and enforceably control its own load in response to signals that it receives and to prove that it’s doing that. This elegant software interface should give the grid a lot of comfort that the data center is going to perform the way that it needs to perform. And the data center operator, a lot of comfort that, look, I and my cloud tenant and the AI users of the compute are all comfortable that our workloads are going to continue at the level of stringent performance requirements that they demand. If you have any other inelegant solution, you threaten to drive away data centers from your service territory. And then you’re on neither the hero nor the villain path. You’re on the path where AI just doesn’t get better. And that’s the worst path of all.

Doug Lewin (46:28.812)

Yeah. Yeah. So I just kind of want to cover this before we end, Varun. This has been great. And we’ve obviously covered reliability and affordability in a lot of different ways, but I don’t want to leave out sustainability, especially because I know you’re somebody that’s worked on climate issues throughout your career. And, you know, this is again, something I hear a whole lot in conversations is AI is driving up emissions and we do see AI data centers purchasing a lot of gas, and in a lot of cases just kind of like old refurbished turbines. From your perspective as somebody again that has worked for many, many years on climate issues and obviously deeply cares about these issues, what do you say to folks that are really concerned about climate change and worried about the impact that AI data centers will have on emissions? Yeah, what’s the villain and hero path on climate for AI data centers?

Varun Sivaram (47:23.318)

It’s the correct framing, Doug. Those folks who say, “Look, this is just not gonna matter,” I think are wrong. I think AI, because it’s so transformative, and Doug, I don’t have to convince you, I think AI could become the world’s largest energy user this half of the century. I think you could see AI within a decade, decade and a half, start to use 25% of power on the grid. And therefore, the villain path is one in which AI drastically increases emissions alongside increasing rates and reducing reliability. The hero path is one that I think is very achievable, again, with flexibility. And that’s one in which we first don’t have to radically overbuild our infrastructure. We also can integrate a wide range of energy sources, firm, dispatchable and clean sources, such as nuclear and geothermal that we’ve kind of bought ourselves the time to get to by first utilizing existing grid capacity and second, variable and intermittent sources, including solar and wind, which are cheap and abundant, but unreliable. I will grant that they are unreliable. Well, if AI data centers are a little bit flexible. In the future, I believe that as they act as giant shock absorbers on the grid, they make a system with more variable renewable energy more stable.

So the third way of course is by turbocharging AI innovation itself, AI can help to advance clean energy systems. And we’re seeing this in a small way at Emerald AI. It’s our AI intelligence that makes it possible for these AI data centers to be orchestrated, to be flexible. And at a large scale, AI, I think, will make a very big impact in operating very efficient grids, which are, again, great for affordability, but also great for emissions. So AI’s ability to intelligently use tools, to invent new materials, to invent new clean energy technologies, and to operate very efficient grids only comes about if we improve AI itself. And so this is extremely meta and recursive, but Emerald AI is an AI for AI to make better AI.

Doug Lewin (49:32.972)

Love it. And look, we haven’t even talked about this yet, but like just things like dynamic line ratings, just using the transmission system better, right? I mean, the impacts of AI, we talked a little bit about through the adjacent stuff on the distribution grid, just optimizing devices around your house when your hot water heater actually heats up. You probably don’t care when it heats up as long as when you turn the shower on, it’s hot. There’s so much intelligence that can be brought to stuff that there literally is no intelligence. The example I love to use is like on a hot Texas summer when the sun’s going down. Now, thankfully, solar’s kind of solved the summertime problem as far as 4 PM. But when the sun goes down, you may get, you know, sometimes where energy is scarce. How many pools are in the Dallas and Houston area? All those pool pumps just running at seven o’clock. Like it’s really kind of a dumb grid. Like we’ve got all these devices just running whenever.

AI can do a lot of optimization there too. And I love the way you put that, Varun. I was actually, as far as the nuclear and geothermal and buying time, I was at the Texas Energy Summit this week and the ERCOT chairman, Bill Flores, spoke there and he was asked a question about nuclear as often happens at these energy summits. Everybody’s talking about nuclear these days. They said, “How quick do you think it can be?” He’s like, “Am I most optimistic? I’d love to see it be five years. I think realistically it’s probably 10.” And I think that’s probably right. Like who knows, right? We’re all guessing, but somewhere in that five to 10 year range. But if you can actually optimize the system that you have now, using what you have now, speed to power with solar and wind and some gas, a lot of batteries, and then buy that time to get to some of those clean, firm dispatchable technologies, I think there definitely is a hero path that I can see for AI data centers. I know everybody’s not seeing it, but I would encourage the audience, especially those that are particularly concerned about climate, to be open-minded and to work towards that, to engage with data centers wherever they are in your community, to say, like, we need you to be as low emission and reliable for the grid and affordable for consumers. Like, those things are possible. But it’s going to take a lot of discussions, a lot of participation, involvement from a lot of different thinkers to get to that future. So I’m going to let you respond to that. And I also want you, Varun, as we’re wrapping up here, is there anything I didn’t ask you that you wish that I would have? I’d love you to speak to that and anything else you want to leave the audience with in closing.

Varun Sivaram (51:56.842)

Absolutely. I’ll say just two things. The first is it’s rare in life to find these triple wins, right? You don’t get free lunches very often and politicians that tell you otherwise are probably wrong. There are real trade-offs in life. I started Emerald AI because I was astonished that there was a real win-win-win here. You could win on affordability. You could win on AI innovation, getting data centers built way faster. And you could win on sustainability and reliable power systems and you get it all at the same time. In fact, you don’t even have to care about emissions. You just get it for free if what you’re focused on is getting data centers connected really fast and making sure that rates don’t skyrocket through AI flexibility. So, you know, I feel blessed to have stumbled upon a win-win-win and that’s why I’m making Emerald AI my life’s work.

But the second thing I’ll say is it’s not just my life’s work. I’m the talking head, Doug. And Emerald AI is an intelligence, a superintelligence that’s doing its own thing, but in between is the extraordinarily committed team. I talked to you about some of our senior advisors, Tyler and Arushi and Peter, but in addition, we’re also so grateful to have just the world’s best team. Our chief scientist, Professor Ayșe Coskun, who spent over a decade building grid-friendly data center technologies at Boston University. Shayan Sengupta, who came from Amazon, ran a million GPUs. Aroon Vijaykar, who ran virtual power plants at Sunrun and so many other PhD AI scientists and others. So let me just thank them for making it possible for me to be the talking head to talk to you, Doug. And thanks to you. I know the work you do is amazing. ERCOT is the most exciting place in the land to work on energy issues. And I can’t wait to come down and do our next demonstration there in ERCOT, or ideally a big commercial deployment, because as you know, everything needs to be bigger in Texas.

Doug Lewin (53:44.962)

Let’s make it happen. Let me know how I can help. And Varun, I’m just so delighted by this conversation, so excited about Emerald AI and to watch as this company develops—an incredible team you put together, incredible technology. We’re all rooting for your success because your success will be all of our success in making all this stuff work. And with that, thank you so much for being on the Energy Capital Podcast.

Varun Sivaram (54:07.118)

Thank you, Doug.

Doug Lewin (54:09.112)

Thanks for tuning in to the Energy Capital Podcast. If you got something out of this conversation, please share the podcast with a friend, family member or colleague and subscribe to the newsletter at douglewin.com. That’s where you’ll find all the stories where I break down the biggest things happening in Texas energy, national energy policy, markets, technology, policy—it’s all there. You can also follow along on LinkedIn. You can find me there and on Twitter, Doug Lewin Energy, as well as YouTube, Doug Lewin Energy. Please follow me in all the places. Big thanks to Nathan Peeby, our producer, for making these episodes sound so crystal clear and good, and to Ari Lewin for writing the music. Until next time, please stay curious and stay engaged. Let’s keep building a better energy future. Thanks for listening.

This is part 2 of my conversation with Nat Bullard. Check out Part 1 here:

We talk a lot about the grid of the future. The truth is, that future is already showing up in Texas.

Batteries are being built at record pace, data centers are chasing cheap and reliable power, and Texans are adding gigawatts worth of backup systems in homes, schools, and factories.

I sat down with energy analyst Nat Bullard to ask a simple question: if we look at what is actually being built — not the rhetorical arguments happening online, but what is actually happening around the world — where are energy systems headed?

We started with a comparison of batteries and gas peakers. Batteries respond in milliseconds, don’t rely on fuel deliveries during a freeze, and can make money all day providing grid services between scarcity events. Increasingly, duration is less of an issue as prices fall.

As Nat reminded us, during Winter Storm Uri it was “largely things in the thermal fleet” that failed. Winterizing batteries is likely much less onerous and complicated than winterizing gas plants.

Behind-the-meter systems are also booming. One- to ten-megawatt batteries can turn schools or factories into mini-resilience hubs. If Texas keeps adding storage at this pace, we could end up with the equivalent of dozens of peaker plants—only more responsive and decentralized.

Nat concluded with a description of his family as a mix of, a ground source heat heat pump, a mini split, and a Franklin stove. A small hybrid system built to ride out different conditions.

That is a good picture of where ERCOT is headed: a mix of gas and batteries, large wires and local resources, data centers and smart devices. The question is whether we design structures to speed up that hybrid grid on purpose or stumble along and end up there eventually anyway. The first path costs a lot less.

The more we learn from what’s actually happening — the focus of Nat’s excellent annual decarbonization presentation — the more cost effective our decisions will be for Texas.

Timestamps:

* 00:00 – Introduction

* 01:30 – Price and attributes of batteries compared to gas peakers

* 03:45 – The optimal generation stack; a portfolio approach

* 07:00 – “Ruthlessly practical” developers

* 09:00 – Distributed batteries and community resilience

* 12:00 – Australia’s rapid installation of distributed storage

* 15:00 – Texas Energy Fund’s viability

* 16:30 – Global solar scale and trends

* 21:00 – Electrifying countries without electricity

* 23:00 – The absurdity of arguments against distributed energy

* 25:00 – Automated flexible demand; using buildings as thermal batteries

* 30:00 – Winter problems in ERCOT

* 31:30 – Primary energy is a deeply flawed metric

* 35:00 – Looking ahead to Nat’s 2026 Decarbonization slideshow

Resources:

Guest & Company

* Nat Bullard - LinkedIn

* Halcyon - Company Website + LinkedIn

* Nat Bullard’s Famous 200-Slide Presentation

* Nat’s NY Climate Week Presentation (From Disparity to Data)

Referenced in this Episode:

* Energy Capital Podcast with Bill McKibben

* The Energy Capital Podcast with Zach Dell

* The Energy Capital Podcast with Bret Biggart:

* The more recent podcast with Zach Dell et al.

Studies & Policy Documents

* GridStrategies Report on Data Center Demand

* International Energy Agency Solar Projections

Doug’s Platforms

* LinkedIn

* YouTube

* X (Twitter)

Transcript:

Doug Lewin (00:06.422)

Welcome to the Energy Capital podcast. I’m your host, Doug Lewin, and welcome to part two of my conversation with Nat Bullard. Nat, as you heard last week, is the co-founder of Halcyon. He is also the one who puts together a fantastic energy transition and decarbonization presentation that comes out every January, which we talked about in this podcast. All around, one of the great experts on all things energy transition and decarbonization. I learned a ton from talking to Nat. I couldn’t let him go after the usual 45 to 50 minutes. We ended up going long, so we split it into two parts. This is part two.

As usual, please go to douglewin.com and subscribe. Please become a paid subscriber if you are not already. This is a free episode, but it is not free to produce, and your support is extremely important to us. And you’ll get all kinds of benefits: access to the entire archives, grid roundups, reading and podcast picks, special episodes of the Energy Capital podcast that are paid only, like those with John Arnold and Dan Barcelo from T1, Rudy Garza from CPS Energy, et cetera. And please leave us a five-star review wherever you listen to your podcasts. Please enjoy part two with Nat Bullard. Thanks for listening.

So that kind of leads me to where I wanted to go next. You obviously do a whole lot of tracking of batteries. We’ve been talking about electric vehicles a lot. Obviously batteries first started their performance improvement and cost declines because of their use in computers and phones. But now we’re seeing them go into cars on a mass scale and now onto the grid in a really mass scale. I mean, how do you think about that as far as the price comparisons for batteries, particularly gas peakers? Combined cycle, I would almost put in a little bit of a different category because you’re talking more about something that’s going to have a much higher utilization. These days, I think there weren’t a lot being built. There were very few being built, particularly in Texas, but I think just about anywhere with data centers, I think we’ll see some more built.

But still in Texas, for instance, in the Texas Energy Fund—this is obviously the subsidy program the Texas legislature put in place a couple of years ago, $7.2 billion in subsidies for gas plants—something like 80% of the projects that applied and were chosen, I think it actually is closer to 85%, were peaker plants. And that’s because we do have an energy-only market. Like you said, in a market, people respond to incentives. The incentives are for short bursts of very high prices. And when you start to stack the peakers up against batteries, and of course the old thing was, you can only go an hour or two, an hour or two is enough for 90, 95% of the high prices in the market. And for the rest, now we’re starting to get to where batteries are going to four or five, six, even longer hour durations. So how do you think about both the price comparison and then the attributes? How do you think differently about the attributes of a peaker versus a battery? Are they really doing the same thing?

Nat Bullard (03:13.294)

What’s so funny—we had this four-hour standard, more or less. And what’s fascinating about that to me is that is largely an artifact of regulation, not of anything technical. In California back in the day, all you would get paid for was four hours worth of storage. So guess what? Everybody optimizes around this artificially binding constraint that I think we’re starting to see people move past. Again, energy-only market—if there was any place that is going to be ready to do more, or for that matter, to do less, it would be Texas. And also to combine things. When I talk to the biggest of the developers, what their view is, is to meet, let’s say a 500-megawatt load for a data center, the quickest path, the critical path is probably going to be mostly renewable electrons. And within that almost entirely, probably solar, a bunch of batteries. And then you have a combustion turbine to serve the rest of the purpose, but it comes in kind of after the purpose served, obviously, by the generation, but also by the storage.

And that kind of stack is the one that seems to be moving the quickest, probably at the lowest cost, and probably the best fit for anybody who’s out there operating. It’s also the one in the future that, if you want to think about future-proofing it, you’re not talking about having to rip out 600 megawatts of solar and 3,000 megawatt-hours of batteries or whatever you might be doing. You’re talking about keeping those, improving them with software, with new hardware, and then altering the final step at the end. If you were to make this a zero-carbon or zero-net-emissions in the long run, maybe the combustion turbine is running on hydrogen. Maybe you’re doing some kind of durable binding, verified carbon removal to cover the cost of the emissions that are there.

So I guess my way of thinking is to be a bit more ecumenical about all of this and also watch what the smartest people who build stuff are already doing, watch how they’re going about it and thinking about doing this and viewing these things as generally part of a portfolio approach as opposed to either “if this then that” or an “either/or” approach. Not like if I’m doing this I therefore have to do that, but I’m doing that because it makes the most sense and not I’m doing this or I’m doing only that. Now there are constraints elsewhere. Again, Texas is a unique market where if you have the land and the wherewithal to go build a 500-megawatt data center, you probably can locate the land and have the wherewithal to do a similar amount of power generation. It is less the case in, say, Pennsylvania or in Maryland. So it’s going to be different elsewhere, but you all have a unique market down there for this kind of thing.

Doug Lewin (05:51.948)

Yeah, it’s incredibly challenging here too, but I think it is more doable than in those other places. I also think that there is too much kind of either/or. I think there’s actually benefits to having both on the system—gas peakers and batteries. Obviously batteries, whatever the duration is, they are duration-limited at some point. They’re going to run out. Now the sun will come back up and charge them or wind blows and charges them or turn the gas plant on and charge them, if you have enough power to do that. And we also get times when the gas plants aren’t working, particularly in extreme cold. We’ve had severe problems with that. Having a battery that can operate while you’re getting people to the site to figure out what’s going on with the gas plant to get it working, right? Or getting that gas plant turned on so the battery can recharge. There’s actually, I think, a bit of a symbiosis there.

And from the emissions perspective, if gas peakers allow you to displace other much more higher emitting baseload plants and still have the capabilities of those thermal units, you may not get your system to zero, but if you get it damn close, because we’re nowhere close to zero right now. So like, yeah, it’ll still be progress.

Nat Bullard (07:10.252)

That’s right. The best renewable developers I know are relentlessly practical people. I would argue that power developers in general are relentlessly practical, but renewable developers, maybe I should uplevel a little bit, are ruthlessly practical. And if this is going to be the path to market, then that makes most sense. As a quick thought experiment, when you mentioned about batteries, batteries operating until you can go turn on your combustion turbine is fascinating, right? If you think about during Winter Storm Uri, what assets had seized up was largely things in the thermal fleet that had seized up and were not able to provide this, that, and the other services at that time. If you’re a new battery, winterizing it is probably more straightforward than winterizing an existing thermal plant.

I remember at that moment, because I still had access to all this North America-wide data, during Winter Storm Uri, people were like, does this mean gas plants don’t work? And I said, let’s take a quick look at Saskatchewan right now, which is at the heart of the polar vortex that has dipped down to Texas. And it was like well below zero degrees Fahrenheit and everything’s running. But that’s because that’s within the normal design parameters. So a lot of this is thinking about how are we going to parameterize our future? And it’s a lot easier to parameterize brand new assets for something different than those that are already existing.

So I appreciate your practicality in thinking about this. I know that developers think that way. I know that given the capability that all grid operators want to think that way too. So let’s watch closely to see in an energy-only and competitive market, what moves fastest, what moves first, what has the most flexibility, literal and figurative, what’s the most supple in terms of how the capital markets are going to treat it, what has the most supply, what can provide the most capacity, you name it. All of these things, I think, will become more clear and less ideological one way or another over time.

Doug Lewin (09:11.342)

I want to ask you also just what you’re seeing. I don’t know how much you’re tracking this, but residential battery—we’re recording on October the eighth and today Base Power in Texas announced they just raised their Series C of a billion dollars. And by the time this podcast comes out, there’ll be another one out where Zach Dell was on a panel that I’d moderated at Gulf Coast Power Association, where he said they’re doing 20 megawatts per month at this point. It’s a small company on kind of a growth trajectory. And that’s just one company, right? Tesla’s doing batteries. I mean, I want to test this against you. I am very, very bullish on distributed batteries. We’ve also seen, by the way, there is some good data on this. Maybe this will make it into your slideshow in January. I’ll send you this slide.

There is a slide that ERCOT has on distributed energy resources in Texas. The fastest growing segment in Texas—well, the bulk battery storage is growing—but on DERs is between one and 10 megawatt batteries. There’s developers all over ERCOT putting in 9.9s, because when you get above 10, you reach a certain threshold where you change your status and the way you interconnect. There’s just tons of these 9.9-megawatt batteries. So between garages and this one to 10 segment, which literally doubled from ‘23 to ‘24, I really think this is going to be a mega trend and one that is really, really good for the grid for the very things we were just talking about, these reliability and resiliency problems, having batteries scattered all over. Is that something you’re tracking? Have any thoughts or stats or anything like that on?

Nat Bullard (10:49.526)

At Halcyon, we’re tracking now—we just set up another subscription to cover this—is going to be looking at the grid-tied battery and energy storage systems. So those that, again, go through a kind of public certification and necessity process. The speed with which these things are happening is fascinating because it’s consumer-led. Obviously, policy and regulation informs it. But there are other dynamics at work. There are neighborly dynamics to it. As we know, if you’re the only house on the block that’s got power during another winter outage, your neighbors are going to notice. And hey, you’re going to invite your neighbors over to charge up.

My folks when they were still with us, when they had a farm in coastal Virginia and they had a gen set because hurricanes would come and knock things out for like a week at a time. And just as an anecdote, the only thing that they ran their gen set for was the chest freezer full of meat and fish that people would give them in exchange for cords of firewood. And so people will find a way to put power to use and do something with it and help each other out.

I would say that the one to 10 megawatt—was that the battery size that you quoted?

Doug Lewin (11:58.666)

Yeah, yeah, exactly.

Nat Bullard (12:00.814)

So again, listen, why is it 10 megawatts? No reason, except there’s a tripwire and regulatory above that at which you shall not pass. But I mean, I’ll give you something fascinating. So I was looking recently at some data from Australia, smaller in every way than Texas, and they have a new incentive for batteries. So Australia has installed just under 800 megawatt-hours of batteries residential only in two months under a new support mechanism. Like these things go really quick and you can watch how people optimize up to their limit. And what’s really cool was that they do it with smart providers who are ideally looking out for their best interests, but they do it according to their ability and according to their need, according to their financial ability and according to their need for stored power. And that’s really cool.

What other models are going to get built on top of that? I think is a really good question for us to be thinking about and to be asking. But also it’s one that we can observe. We’ll be able to see that as markets take off and start to ship more and do more. It’s funny, I can’t remember who it was. I was listening recently talking about vehicle to grid. I think it was on Shayle Kann’s podcast and the discussion was like, we should think about rebranding it from vehicle to grid to vehicle to home. Vehicle to grid—I’m supporting the abstraction of everybody. Vehicle to home—I am in a blackout, but I can watch telly. Like that’s different.

Doug Lewin (13:26.006)

Absolutely. And like you said, help your neighbors. I think that’s really—people want to do that kind of stuff. Some people will—there are people, I’m not doing that as long—if it came to it, of course you’d help your neighbors and you’d be happy to do it. I just actually recorded a podcast with Brett Biggart. He’s the CEO of Freedom Solar, which is the, or one of the largest installers in the state of Texas. And he said, attachment rate in Houston right now is 90%. So 90% of the solar installations they’re doing—for new systems, 90% of the systems they’re installing include storage at this point, which kind of makes sense, because if you’re in Houston and you just lived through Hurricane Beryl and you’re worried about the next hurricane, why would you get solar without storage? So I really do think we’re going to see this more.

Nat Bullard (14:10.22)

And you know, I’m also fascinated to think of this not just as an installation, but as the beginning of a relationship in the sense that’s not just a relationship with a vendor, but a relationship with how you think about power and the grid. Like if you’ve even done this, you were probably not going back and you’re going to have somebody come to you in four or five years, buying your old battery off of you and getting you twice as much storage for the last money or whatever it might be. There’s a lot of different ways we could cut this. But for people to come in and be like, do you want to get much more for the same dollars or do you want to pay less and get the same as you’re getting right now? Like there will be a lot of things that come in here and there’ll be a lot of innovation in terms of getting these things to market for everybody. And let’s see what happens.

It’ll be done, I think, in a—it’s definitely not permissionless because you literally need permission to do this—but it will be done in a much more literally distributed fashion than the Texas Energy Fund. This isn’t the Texas Energy Fund approving $7 billion that goes out to what, no more than 30 entities. How many total plants are gonna draw funding from the Texas Energy Fund?

Doug Lewin (15:22.798)

That’s a good question. I think it’s 15 to 20 or something like that. Yeah, right. The sizes vary as some of them drop out and others get in, but we’ve seen some as big as a gigawatt, some as small as 100 megawatts. I think it’s like, because they’re trying to get 10 gigawatts, it’s probably about 15 to 20.

Nat Bullard (15:38.04)

But we’ll see that much equivalent instantaneous storage capability deployed probably by the same time that the Texas Energy Fund plants have been built. And into what market? This is another great question for those of you who are thinking from a market’s perspective. When the Texas Energy Fund assets are fully commissioned at whatever price point it is, what market are they competing in? Are they competing in a market that’s installing a gigawatt-hour of distributed storage a month in Texas? It’s entirely within the possibility that that will be happening four or five years’ time. And then what? Right?

One of the things that you do such a good job of, and I would hope to be able to do, is ask the next question for people, which is if you’re in the combined cycle business in Texas, are you watching what the Base Powers of the world, the Freedom Solars of the world are doing when they’re watching battery installation or their attachment rates because an electron is an electron. Obviously there’s plenty of other qualitative things that come into it, but it’s really worth keeping an eye out on this stuff as it goes.

Doug Lewin (16:34.734)

It absolutely is. All right. So you, if I’m not mistaken, you started your career as a solar analyst, right? At NEF?

Nat Bullard (16:41.5)

I did.

Doug Lewin (16:42.5)

So solar, obviously we’re in a moment right now as one of your slides showed, I think 600 gigawatts of solar installed in 2024. Is that about right? It looks like we’re probably trending higher. Chinese capacity, again, one of your slides crested over a terawatt. I believe last year or maybe in 2023 they have a terawatt of capacity that they could produce. That is astounding. I think most of the audience probably knows this, but just to be sure to put that in perspective, the entire installed base of the United States of America is about 1.2 terawatts. So the Chinese could produce that entire amount in a given year. So when you’re talking earlier about exporting to Africa and other places, right? Latin America, Southeast Asia, et cetera, they’ve got plenty of capacity to do that.

Let’s talk a little bit about the outlook for solar. Are we going to reach a point where we’re like, okay, yeah, 600 gigawatts, 800 gigawatts, like that’s where it’s going to stop? Or do you see that that kind of growth is going to continue as we pick up with data center load growth and that kind of thing?

Nat Bullard (17:47.158)

It is a fascinating technology that I think confounds other ways of thinking by analogy. And you just have to sort of YOLO it and think about the incentive of building for the manufacturing side, Red Queen style. You’ve got to run to stand still. You’re always competing against more efficient plant, more efficient models. Your equipment depreciates very quickly. So there’s no such thing as like a 15-year-old solar manufacturing line that I know of that anybody would pay anybody for. So everybody’s doing more constantly. There’s always an urge to sort of tap these companies down so that they can make more money. It never seems to work in a durable fashion, but like the upstream issues of solar manufacturing are meaningless to the downstream advantages of anybody trying to buy and install and build comfortably within capability that we’re shipping a terawatt of PV modules every year, which would account for, currently there would be like multiple single-digit percent of total electricity demand every year being added from just solar electrons.

The question is, to my mind, less how much of that can be built and more what’s the rest of demand going to be? And how much demand inception is there going to be by this? Like if I think about all these exports to sub-Saharan Africa, for instance, that’s providing electricity that didn’t previously exist. It’s not displacing demand for electrons. It is potentially displacing potential future demand for thermally generated electrons, but it’s not displacing some existing demand. That’s only happening in places that have a grid. That’s more of an example as your guest Bill McKibben talked about in Pakistan. So I just think we should watch carefully how the rest of the world is approaching this and think as well about how a system will begin to design itself around the kind of native conditions of very, very low cost, but variable as available electrons with this generation profile and just lay that in. This is a truth. And now what?

Either what are you going to do to match your demand to that supply or what are you going to do to mitigate it? What are you going to do to smooth it, store it? How are people going to sort of configure themselves around that? And that’s where flexibility on the demand side is to me, the more interesting question for the future than it is. How much solar are we going to manufacture? That’s a question that is honestly, it’s almost like hilarious. Like it’s fever dream stuff for me as an analyst almost two decades ago, right? The IEA would come out and be like, there’s no problem meeting that narrowly defined net zero goals of solar already to the middle of the century, because there’s just so much being made and there’s so much capacity. Like you just have to sort of take that as a given and then start to think more creatively and constructively about every other thing that happens to outstrip that.

Doug Lewin (20:48.238)

Totally. I think that’s exactly right. And I think also your point about Africa is a really good one, right? And again, you have this slide of 10 or 12 different African countries and some of them as much as 57% of their power is coming from—these are countries that—and this is one of the things that drives me crazy about some of the crowd that is pro-fossil fuel and anti-everything else. I don’t mind people that are pro-fossil fuel. I do mind people that think that somehow emissions and pollution just aren’t a problem. Like even if you didn’t believe in climate change, we’ll put that aside. There’s pollution that obviously impacts human health from fossil fuels, and we should at least take that into account.

But the people that are just pro-fossil fuel and anti-everything else are like, if you hurt fossil fuel production, Africa will never get electrified. And I’m like, how long have we been producing fossil fuels? Stop kidding yourself that the United States or anybody else is going to fund the buildout of a macro grid. You’re going to build central station plants and you’re going to build high voltage transmission lines and you’re going to build an entire distribution system in Burkina Faso. No, you’re not. But you might put solar panels and batteries and LED light bulbs, just like the Pakistan example Bill McKibben gives, right? They’re literally—forget this about solar—they’re solar modules. They are modular. You could do one at a time and add to them. And the fact that it is producing power in concert with what is one of the most important energy uses for human health, which is air conditioning, which still a lot of the world does not have to any appreciable measure.

Like solar and air conditioning go so well together. And to think that somehow if we don’t fully develop fossil fuels, Burkina Faso is not going to get electricity. It’s insane. And it kind of drives me crazy. So I do think this is one of the places where solar will really stand out is really bringing power to billions of people around the world that just don’t really have it in any appreciable way.

Nat Bullard (23:03.872)

And one other thing to add on that, and it’s brought me back to my point about thinking about distributed storage in Texas is to ask the permission framework on which this happens. No one that’s importing solar modules from China to Zambia or to Mongolia is looking to whatever policy and politics-driven examples are happening elsewhere and saying, well, if this is being said in the United States, then I guess I shouldn’t do this. They don’t care. There’s essentially no overlap there whatsoever. And so another way to view this is that these are rhetorical discussions that we tend to have that are becoming increasingly academic.

And so it reminds me of the old joke about the French philosophers that that’s all well in practice, but how does it work in theory? Like this is sort of how these arguments are now starting to go. And so I would urge us all to be as observational as possible about all of this. And to also remember what is being observed and what is being adhered to elsewhere. Like, I don’t really think that there are a lot of solar module importers in Algeria who are following policy and politics-driven discussions elsewhere at the moment and using those as the basis for their business.

Doug Lewin (24:25.9)

Right. They’re just buying Chinese panels and batteries and electric vehicles as fast as they can.

Okay. So you talked about flexible demand. I want to talk about that next. And this might be a good last segment for this, coming back to where we started. The load projections for data centers, you have a great slide. I think this is the first time I saw this slide. I think Grid Strategies had a really good report that had something like this too, because I hadn’t seen quantified the data center demand in Texas, and you had a slide on this that in 2023 it was about 22 terawatt-hours. I would imagine in your next iteration of the slideshow, that number is going to be much, much higher.

And one of the things that is really interesting that is happening here right now, Nat, we talked earlier about the 85.5-gigawatt peak. That was in 2023. In 2024, it was a little less. It was like 85.1 or something. This year, throughout the summer in 2025, we were right at about 84. Now, it wasn’t as hot this summer as it was the last few, but it was still—people around here say it was a mild summer, but they’ve got recency bias. It was actually in the top third for hottest summers ever recorded compared to the last three years before that, which were all top six, not even top 6%, top six out of 150 years. It seemed cool.

So we’re seeing this lowering of the peak, but a significant increase of the minimums. Every single minimum this year is higher, and some of them, some months 20 to 25% higher. Some of that is driven by climate change, because even though it’s not as hot in summer, the nighttime lows aren’t as much. But a lot of that is being driven by data centers, and it’s being driven by flexible demand. So there’s flexible demand on the bulk side of data centers, crypto miners, those kinds of entities using power more off peak. I’d love for you to talk a little bit about the potential you see there, but then also that flexible demand on the smaller sites. We’ve already talked about residential batteries. That is like the ultimate flexible demand, right? You’re going to fill those batteries when there’s plenty of power, but we can also think about homes, if they have some minimum level of insulation at least as thermal batteries and actually moving demand around to create a system that has higher utilization, lower peaks, lower net peaks. How do you think about that? How are you tracking that? And yeah, what do you see as some of the trends in that space?

Nat Bullard (27:06.678)

I’m not tracking it much yet, but I’ll walk through my thought process on how I consider this, which is there’s no one who wants to go and set this up on their own. There’s also no one who wants to have no control over things. So there needs to be a really subtle, well-designed behavioral economics sort of modality here to have people saying like, yeah, use my home as one way or another, a thermal asset for the grid. Crypto mining—great. Like that’s a pretty clear incentive structure for people to be like, do this now, don’t do that then. Homes and consumers are a little bit more subtle, a little bit more fickle. Maybe it would be another way to say it. So I want to watch very closely to see what emerges that acknowledges that aspect of consumer nature. Right. How do you make it so people don’t feel like they’re getting surge priced, but they do want to opt out of something. How do people feel rewarded in a way that’s not just virtue signaling for doing something at the right time.

And you already alluded to it. How do you optimize other things around that? Well, if your house is a lot better insulated, then your thermal envelope is going to be better and your thermal battery capability, so to speak, is also going to be much better. Like if your house is essentially a leaky sieve, because it’s from the 1930s and it hasn’t been insulated, then you are going to pay a price for not cooling it at that moment. If it is insulated, then it’s much less of a big deal to you to go and do a ride through. This is why the classic old industrial and large commercial demand response was something like an industrial freezer, right? Things are chilled to well below zero degrees C. It’s not like a 30-minute ride through is going to make 80,000 pounds of beef rot instantly. Like there’s enough time for 30 minutes, whatever it might be for things to be okay.

You need a housing stock and a capability that’s better designed around that. That could be part of the package that goes into designing that to begin with, which is I’m not asking you to boil and bake here. What I’m asking you to do is in exchange for this, I’m also going to make sure that your house is more comfortable for everything. I do think this is a really important thing to consider. This is anecdotal data because I’ve seen it written about in multiple markets, but you have people in parts of the United States. It’s more common in Appalachia and in the mid-Atlantic who have an older home for which they have summer power bills higher than their mortgage. Like that’s not a state of affairs that we should be encountering. And how do we remedy that? It’s not just cheaper power. It’s a better thermal envelope. It’s a better business model to help shave the peak off for them or to pay people for not using it at certain moments.

But it’s very episodic. Not everybody’s like that, obviously. It can be very, very acute. But how do we, in a full stack, policy, regulation, society, behavior, business model, economics, finance, come together to make sure that we can meet all of those needs for everybody involved in a smart and quick and reliable way?

Doug Lewin (30:18.754)

That’s a huge question. Yeah, right? Look, it’s one that I’ve spent a long time on, I’m going to spend a lot more time on. You were talking about gigawatt-hour of batteries a month on the residential side. We could see that kind of scale. I also wonder if we can’t start to get to gigawatt scale of reduction of, for instance, winter peak in Texas. We’re worried about winters and Winter Storm Uri. We’ve got all this inefficient resistance heat. We know the heat pump technology is out there. I was really heartened in that conversation I had with the Freedom Solar CEO, Brett Biggart, that one of the ways he’s responding to the removal of the tax credits is he set up an HVAC company. Because he’s like, I have these relationships with people that have solar and storage. They probably have a really inefficient HVAC. Next time it breaks, I’d like to give them the high-efficiency heat pump.

If we can think about the integrated demand side, we can have a system that can take much more load growth. Again, not just data centers, it’s industrial electrification, transportation electrification, all of these things, which leads me to one other thing I did want to ask you about is one of the smartest people I’ve ever heard talk about energy. I am curious about how you think about primary energy. There’s been this big debate at the federal level around—it was Chris Wright, the secretary of energy said the other day, he doesn’t think in his lifetime we’ll ever get to 10% of global energy being solar. Now we were just talking about 600 gigawatts in 2024. He’s kind of playing a game there where he’s talking about primary energy as useful energy. Solar’s probably already pushing four or 5%, something like that. But this is where I think that the shift has to happen is we have to think about like, how do we use energy in the maximal possible way with as little waste as possible, then you’re really optimizing the economy.

Nat Bullard (32:12.568)

So the way that I think about that one is that the solar competition with primary energy is like, how good is it competing with 60% waste? How good is solar competing with mostly exhaust heat, rejected heat and emissions? To be less cheeky about it, what I think we’re likely to see is more and more things that are directly electrified by the final energy that is provided by solar and therefore changes the frame. So the good reliable modeling to think about the long future when it’s deeply decarbonized is that actually primary energy demand goes way down because you’re removing that waste heat rejection element of the equation. And you’re going to a world of even resistance heat in Texas that would be powered by solar directly. Like imagine it’s on your roof. You’ve got solar on the roof. You’ve got your battery. You have your even inefficient resistance baseboard.

What you do not have in there is the coal plant that’s maybe running at 30 to 35% efficient, all the transmission and distribution losses, all the conversion losses in the middle to then reconvert that into resistance heat. Like that’s something that is more cognitive at first than anything we need to think and imagine that that’s going to be the way that things go. But I would not bet against solar, particularly not in a lifetime fashion. That requires a suspension of disbelief in a way in the trend that was happening. It also is not using some very evidence-based imagination, I think, to think about what might be happening in the future and to be relatively neutral about all that kind of thing.

It’s a matter of what you’re competing with. And then as with any of these distributed technologies that get cheaper and better over time, not just what do they engage with at first and not just what do they displace. Well, what do they create? Like what different models are going to be created out of that process that changes the way that we think about this as the equivalent of thermal fired primary energy.

Doug Lewin (34:21.078)

Yeah. And on the piece of resistance heat, right? The bigger thing would be at night, right? When it’s really, really cold, you would have to then run your resistance heat with batteries where you would have some losses, but still far less than with fossil fuels. That’s of course partly why you’d want to have a heat pump because otherwise you’d have to size the battery to an absurdly high level. But your point remains, you’d have no waste.

Nat Bullard (34:45.235)

You know, my family farm’s frontier technology model for running the farm throughout very cold winters, ground source heat pump, one mini-split unit upstairs and a Franklin stove. Great.

Doug Lewin (34:58.853)

Yeah, that’s one way to do it. And it worked.

Nat Bullard (34:59.448)

The house was a little dry. Not going to lie to you. It was a rather low humidity house, but yes, price was right.

Doug Lewin (35:08.344)

There you go. All right, last thing. So earlier, I think at the beginning, I asked you one of those multi-layered three-part questions, and I don’t think we got to the third part, which is what’s coming in the 2026 slideshow? Drop a couple of nuggets to the audience of what they can look for that might be different in the 2026 slideshow.

Nat Bullard (35:27.682)

I’m not—if it’s going to be thinking about trade flows again, how that’s manifesting in markets outside the US. It will be thinking about pricing, how changes in electricity impacted pricing. I will be calling you up and asking you, Doug, what’s the very best ERCOT data set for me to pull in terms of volatility and prices here. I will do my best to look at other markets as I always do outside the US to try to help everybody see things as clearly as possible.

My one last thing I always hope is that I get a good clear view of the present moment. That’s my goal. That in and of itself, I think, helps us talk longer about the future. The challenge in thinking about the future is that a lot of people don’t even adequately understand the present moment. People are living in different, informationally living in a different present, not just a different future, but a different present. And how can I pull this in really quick? I had a couple of dinners in New York at Climate Week. Even people in the US are well informed. One of the arguments is like, look at India, India’s emissions are going to go crazy. I was like, India’s emissions from fossil fuels topped last year and were rather flat in the first six months of this year. Like I didn’t know that. It was like, well, I’m not saying you should have known it, but it’s something to know. Let’s put it that way.

I’m very accommodating in terms of what people know and don’t know because we all have areas of focus. We all have things we look at. My motivating pathology is to try to look as broadly as I can across all of these sorts of things. And in so doing, be as useful as I can to everybody in terms of the information.

Doug Lewin (37:04.94)

Yeah, and it’s always worth spending time with. I’m already looking forward to seeing the next iteration. Nat, thank you so much for doing this. Is there anything that I should have asked you that I didn’t or anything else you just wanted to say you didn’t have a chance to yet?

Nat Bullard (37:17.672)

Nope. I’ll drop a couple links in the show notes for everybody. Come take a peek at what we’re doing. Bring your custom curated hand-loaded list of docket IDs if you’re that kind of person directly to Halcyon.io and we will get you sorted out to go and dive in and start looking at what’s there.

Doug Lewin (37:35.539)

I’ll have a bunch of links for folks in the show notes to find you. Nat, thanks for doing this. I enjoyed it.

Nat Bullard (37:39.372)

My pleasure, Doug. Thank you.

Doug Lewin (37:42.126)

Thanks for tuning in to the Energy Capital Podcast. If you got something out of this conversation, please share the podcast with a friend, family member or colleague and subscribe to the newsletter at douglewin.com. That’s where you’ll find all the stories where I break down the biggest things happening in Texas energy, national energy policy, markets, technology, policy. It’s all there. You could also follow along on LinkedIn. You could find me there and on Twitter, Doug Lewin Energy, as well as YouTube, Doug Lewin Energy. Please follow me in all the places.

Big thanks to Nathan Peavey, our producer, for making these episodes sound so crystal clear and good, and to Ari Lewin for writing the music. Until next time, please stay curious and stay engaged. Let’s keep building a better energy future. Thanks for listening.

This is Part 1 of my conversation with Nat. Part 2 will be out next Wednesday. The Video is Live on YouTube

Texas has plenty of energy stories. The harder part is finding the signal through the noise of endless filings. That is why Nat Bullard’s new venture, Halcyon, matters. It turns piles of ERCOT and PUC dockets into something manageable. It’s AI that makes dense regulatory filings sortable and understandable.

Meanwhile, Nat’s annual presentation has become must-read material for anyone trying to understand what’s happening in the world of energy: the market forces, capital shifts, and technologies driving global change. He looks at macro trends like EV adoption, clean-tech capital flows, global cost curves.

We talked about one of the main takeaways from this year’s edition: China’s dominance in EV manufacturing and exports

The Texas Energy and Power Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

We also talked a lot about a recent study Halcyon did with GridLab to quantify the rapidly escalating costs of gas turbines. I asked what his biggest takeaway from compiling that research:

“The biggest one for me being at a $2,500 a kilowatt cost for a combined cycle gas plant. What other competing options are there for providing power?”

At that cost, there are many better options, including re-using older turbines as many of the data center developers are doing. Storage that can be sited quickly. Demand flexibility can meet much of the need. Solar is still going onto the grid at about a gigawatt per month. Targeted wires upgrades and fast local capacity can bridge the gap while long-lead assets work their way through the process.

I left this conversation thinking about how information itself is infrastructure. If we can see what’s changing — if the opaque can become more transparent — we can make better, more informed decisions.

Please share this episode with someone who will get something out of it and subscribe to keep the conversation going.

Timestamps:

* 00:00 – Introduction

* 02:00 – Guest welcome, Nat Bullard

* 03:00 – How Halcyon can find needles in large regulatory haystacks

* 06:00 – Relevance to the Oncor rate case

* 09:00 – Tracking changes in gas plant costs and across filings

* 10:00 – ERCOT vs. utility load growth projections

* 14:00 – Queue reality vs capacity

* 16:00 – Regulators’ role to align incentives and process

* 18:30 – Nat’s annual presentation

* 20:00 – How Nat builds his presentation

* 23:30 – China is the dominant EV manufacturer

* 26:00 – Will America ever import Chinese EVs?

* 27:00 – American manufacturing partnerships

* 31:00 – Can Tesla keep up?

* 33:00 – Permeability between EVs and power sector

* 34:30 – Gas turbine supply limitations and costs

* 38:51 – Closing note, turbine ask

Resources:

Guest & Company

* Nat Bullard - LinkedIn

* Halcyon - Company Website + LinkedIn

* Nat Bullard’s Famous 200-Slide Presentation

* Nat’s NY Climate Week Presentation (From Disparity to Data)

* GridLab White Paper with Halcyon on Natural Gas Turbines

Industry News & Podcasts

* Oncor Rate Case

* Odd Lots Stargate Podcast

Studies & Policy Documents

* Texas Senate Bill 6

* PUC Load Forecasting Docket 58480

* PUC Financial Assurance Docket 58481

Doug’s Platforms

* LinkedIn

* YouTube

* X (Twitter)

Transcript:

Doug Lewin (00:05.42)

Welcome to the Energy Capital podcast. I’m your host, Doug Lewin. My guest this week is Nat Bullard. Nat is and has been for a long time one of the smartest guys on energy issues. I know I have been reading his stuff long before I knew him. He does a now famous slideshow, highly anticipated by folks in the energy space that comes out every January. The last one, as many of the ones before, 200 slides long. We talked a little bit about his process for pulling all that together. He was at New Energy Finance before it was acquired by Bloomberg, wrote a newsletter that was read by hundreds of thousands of folks. He is more currently the co-founder of Halcyon, an AI-assisted research and information platform focused on energy transition. I have started using it a lot. It is great for those of us that are tracking regulatory dockets, sometimes with their many hundreds or even thousands of filings within a single docket. It is a great way to quickly summarize some of those documents. Highly recommend folks check that out. We will have a link to that as well as his famous slideshow presentation in the show notes.

This conversation did go long. I love talking to Nat. And so we split this one into two. In this first one, you’ll hear a whole lot of discussion of China. He’s based in Singapore, including a whole lot on EVs and the future of the automotive industry, a whole lot more. I think you’re really going to enjoy this and then come back next week to listen to the other one. Also, please don’t forget to give us a five-star review wherever you listen to the podcast and also to subscribe to the Texas Energy and Power newsletter and to the Energy Capital podcast. This is a free episode. It is not free to produce. Becoming a paid member at Substack really helps support our activity. So please do that today if you haven’t already. And with nothing further, please enjoy the Energy Capital podcast with Nat.

Nat Bullard (02:05.634)

Doug Lewin, thank you for having me. What a treat. I was just listening to you on the treadmill yesterday, and here we are in the flesh, so to speak.

Doug Lewin (02:14.868)

It is, I can’t tell you Nat how gratifying it was to get an email from you. I can’t remember when you sent it a couple months ago, six months ago or something saying, really enjoying the newsletter. I said to my wife, I’m like, I got a note from Nat Bullard today. Of course she’s not in the energy world. So she’s like, who? And I told her, you’re a big deal. She needs to know who you are. Nat, for anybody in the audience that doesn’t know, Nat does this, I think everybody probably will, but this amazing annual presentation. I’m sometimes asked by people, Hey, you seem to know a thing or two. Like what are some of the sources you learn from? And you’re one I always name, especially for folks that kind of want to get a global perspective. So we’re going to talk about that. What you’re doing with the presentation, some of the major takeaways, what you’re looking at for next year. But first you’ve got this new venture, which sounds super exciting to me as somebody who spends a lot of time reading regulatory filings and trying to dig through regulatory filings, ERCOT, NPRRs and all that kind of stuff. Let everybody know what you’re up to with Halcyon before we jump into the rest.

Nat Bullard (03:19.662)

With pleasure, Doug. So I spent a long time in the energy and the decarbonization research business. I was 15 years at the startup and then a company that got acquired by Bloomberg, New Energy Finance that became Bloomberg New Energy Finance became BNEF. And when I finished and took some time out on my own, I realized that I still have a real yen for the information business and the information in and around energy and changes in the system. And I also realized that it was a moment where technology allows us to do things that are different. And there are teams of people that are willing to deploy it and interested in building something new around it that viewed all of the stuff that you just described, you know, ERCOT, NPRR, or thousands of large generator interconnection agreements as a feature input for large language model and AI-driven capabilities, as opposed to a bug of people having to just read stuff by hand, so to speak, over and over and over again. And so about two years ago now, my lead investor, Andrew Beebe at Obvious Ventures, connected me with my co-founders, Bruce Falk and Alex Shuris, who are both veterans of building and operating companies and information systems at real scale, like really, really big. Billion dollar company revenue lines. Who only knows how big an information system in terms of that size, but real platforms. And we said to each other, like, what can we do with today’s new technology to answer questions and solve information challenges that we know exist?

And what we settled on is that actually it’s all of that stuff. It’s everything that exists in an unstructured, as the saying would go, fashion that is all text, that is all public, at least at the initial phases, but is, as we joke about internally, a denial of service attack on getting your work done. You want to read everything in ERCOT? It’s public. Go for it. Here you go. Here’s a fire hose of tens of thousands of pages a week per institution. And there’s 50 of them plus one if you include the District of Columbia. Start including all the other things you need to include. The federal layers, the other state layers. We’re talking about on the order of probably hundreds of thousands of pages a week of information. And within those hills, there’s gold. It’s just that it’s not often conveyed in a way that is readable by machine in our old classical way of thinking about it. But with today’s technology, with AI in particular, you know, we move from computers that can compute, that can add and subtract and multiply to machines that can read and can allow us to start extracting information that we really need. If you want to find the price of something, if you want to find a change to a forecast, if you want to find how did this number turn into that number. It often exists. It’s just that you would find it in say the third response to a request for information in this part of a proceeding in that state without any change log.

Doug Lewin (06:22.048)

Nat, I am so into that right now. So Oncor is in the middle of its rate case and there’s exactly that going on. Environmental Defense Fund and Google and a coalition of cities in their third and fourth requests for information. And within those long questions and long replies, there’s so much good information, but man, it is hard to like download every document and scan through there for what’s actually important. This is one of those use cases for AI. When people say, what are you actually going to use it for? This is one of the first things I say is like, my goodness. It makes what is just a, like you said, denial of service attack. Perfect. Like it’s just an impossible thing to do. This makes it possible.

Nat Bullard (07:06.286)

It does make it possible with a couple of other wrinkles on it. One is that it’s all in one place. So what tends to happen is you have people that specialize for good reason in a market, a jurisdiction, a service territory, an interconnection, whatever it is. And they tend to know all of that. But their ability to compare across jurisdiction, service territories, whatever it might be, is essentially nil. They don’t have the literal or figurative information architecture to do that. That’s something we built. You want to go search Texas, you can do it just the way you search Oklahoma, you can do it just the way you search Arkansas. It’s all in one place. It’s all there. You can draw comparisons across these jurisdictions. You can also, and this is something we began building in the last three or four months, abstract it up a layer, if you will, into something that has structure. So our way of thinking about it is when we have search and query capability, which we do, that people are welcome to try out, when you begin to have repeated queries from different parties about the same thing, that’s an indication that you should begin systematizing and programmatizing this into something that has a subscription basis. So that’s why the first thing that we built was, just go in and tell me what’s actually happening at the verified, costed, priced, disclosed level in the universe of building gas plants in the US.

You know, when everybody’s there trying to basically debug what somebody said on stage at CERAWeek, we can get to the number. I realized we have sources for that, right? We have places that we can go and find that. And every month we run that as a set of routines. We run that as a data science project that then manifests into an actual output that has all the numbers in it. And it’s got more than the numbers, it’s got the text updates on like this date has been pushed back a little bit or so and so is making an objection or whatnot. And it’s all put into a fashion that matches the other use case, which is not discovery, not I’m curious about what’s going on, or I want to find what I need to know more about, but rather I know exactly what I’m looking for, just give it to me. So we’re sort of attacking information in these two planes. One is sort of open with free structure for people to come in and search. The other is defined and deliberate and delivered for them on a cadence. Where the AI and LLM element comes in on that is just speed. Like this is the kind of stuff that back in the day you might’ve been able to do quarterly because you’re trying to go find out what’s new, trying to find out what’s update, trying to in your head, maintain a change log of it. Now we do it monthly at the moment in the future. The goal will be that this is essentially a continuum, right? That this lives and breathes essentially in terms of what’s been updated and what’s been changing, what’s happening right now.

Doug Lewin (09:49.518)

Yeah. And you mentioned the tracker for gas plants. We’re going to talk about that as we get into there. But what I first wanted to talk to you about was the slide deck that you did, which if folks haven’t looked at it, of course, there’s the annual one in January. If you haven’t looked at that, definitely go look at that. Just a wealth of knowledge there. And you did, I don’t know if it’s a mid-year update or just like a separate thing. It’s kind of, I think a separate thing. Was it discontinuity, disparity, data, if I’ve got that right?

Nat Bullard (10:15.512)

You got it.

Doug Lewin (10:18.988)

You did it at New York Climate Week and you had a slide in there as you do in your annual slide deck. You had several about Texas. You had a couple in this one about Texas too. And it was something that is the topic of a whole lot of conversations in Texas, which is the wide disparity between what ERCOT is projecting for load growth and what the transmission system providers, the utilities are putting out there. So first of all, talk about that slide and what you found in your research. And again, how hopefully it’s going to become much easier to kind of track these things going forward.

Nat Bullard (10:51.832)

This is one of my favorites, and it’s one of those things that’s sort of hiding in plain sight, if you will. To its credit, ERCOT has great information availability. Mapping that information can sometimes be a little bit tough, but it’s pretty good about updating stuff frequently and publicly. One of the recent things that ERCOT did was show how the transmission service providers in Texas, and then the grid operator itself, is thinking about future load, what’s going to be added to the system. And what I love about this is that the sort of the general shape of these charts is roughly the same until you get to the data center element of it. And ERCOT itself says we expect about 22 gigawatts of new load by 2030 from data centers, which in and of itself is a very, very big number. Let’s be clear. The TSPs on the other hand say we expect 78 gigawatts. Now, one of these things is not like the other one. A nearly 4X larger forecast for data centers and transmission service providers is noteworthy. It also seems to be perhaps a bit of a stretch. What is the current summer peak right now in ERCOT? 85, 87?

Doug Lewin (12:00.174)

85.5.

Nat Bullard (12:03.446)

Okay, I was close enough. This assumption would say we’re going to reach 90% of the current summer peak load just from data centers by 2030. Now, when we put it like that, that seems to be aggressive, but it’s a good lesson in how the TSPs, transmission service providers versus the grid operator, think about this. Because as your previous guest, Travis Kavulla, pointed out, there are incentives in place for those who build infrastructure to want to build more to accommodate more growth. Indeed. Yes. There are equally incentives on the part of ERCOT to keep things, as they used to say, to least cost and best fit, to best adequately reflect the reality, but also to do so at the lowest cost and with the highest reliability. And what I enjoy about this is that these are both official in their way. It’s not that like one of these is like the shadow version of it. And it’s not that like one of these is like a rebuttal. These are both essentially official ways of looking at the same information and making the same, drawing the same assumptions, but also with different purposes in mind. And yes, to your point, there is all to play for in essentially taking this one and making it look like that one. In the long run, they do have to collapse into one frame that would be reality.

And the question is, which one of these things is going to have to do either the expansion or the contraction? It is possible that ERCOT’s forecast is too low. I would wager that the transmission service provider’s forecast is probably too high. But that’s because they’re given the incentive to assume that much growth and to try to build according for it. And what we need to do in the future is to do a lot of things. One, we need to follow these things just as the data evolve. And again, ERCOT’s very good about doing that. Watch what actually has been approved for energization, change over time. Watch what’s going into the study. Watch what’s going through approval processes. The other, and this is a bigger informational challenge that I look forward to digging into in the future, is what I would call deduping. A lot of the things that are in the TSP assumption are probably assets that are being either planned in multiple parts of the state, or say the same finite amount of compute is being planned in multiple places, or it’s being planned across jurisdictions, which is an even more complex thing to try to de-duplicate. It’s a development business after all. And I think your audience of all will know exactly what I mean, is that this is what developers do. It’s a feature of good development to go out and keep multiple places live at one moment on the assumption that not all of them will come through.

Doug Lewin (14:41.73)

Yeah. You know, it’s interesting, and this is one that will be a place to look for more information and folks can go and try out Halcyon to see what it brings up for you. But there’s 58480, I believe is the PUC control number. I’m doing this by memory. You can go look at the show notes and I’ll have the correct one in there. But I believe it’s 58480 is the load forecasting docket that is open at the PUC right now. The legislature passed Senate Bill 6 to kind of deal with this because during the session, they were getting testimony from ERCOT. And some of ERCOT’s own, right, they have this kind of range of projections anywhere from 22 up to, you know, I think they have one projection that puts it like at 138 by 2031 or something. So there’s even within ERCOT’s own projections, there’s sort of this range. And then they were getting information from the transmission system providers. It was going to be much higher to your point.

So they said, Hey, we need to actually like figure this out. We need to know how much of this is real. So there’s a load forecasting docket. There’s another one, which is I believe 58481, which is actually a financial assurance. They’re going to make the project developers and data centers actually put some money down to actually have an official study and then show some kind of documentation is still going to be worked out through rules that it’s actually a real project, some kind of spend somewhere along the way. And they have to report to your point Nat, if they are investigating multiple sites. So I think what we’re going to start to see is that queue start to come down to more like realistic levels, still rapid growth, right? But probably not doubling in the space of three to five years.

Nat Bullard (16:26.518)

And what you describe is the regulatory institutions doing their essential work. And I mean this like I’m delighted to see this happening. This is something that actually is not within the gift of companies themselves to do. Markets respond to incentives and the incentive here is created by the regulatory body to say, go ahead and do this. And it’s interesting. If you think about this as a leading indicator of where other markets and jurisdictions might go is the forced disclosure of duplication is fascinating. And that’s probably something that I can only imagine happening first in Texas because of its size and breadth. That could happen in some other big states. It probably scales according to the physical size of the state and the size of the electricity system, which means guess what’s going to be first?

It’s going to be Texas. But a great effort that, again, I would hope to see picked up by other regulators elsewhere over time. And in the process, something that we just need to drive through information channels as much as possible to do and bless you for going directly to the docket number for people who are looking it up. This is one thing I’ve had fun explaining. I’ve had fun explaining to some of my colleagues. I was like, when you reach final boss level of people who do this for a living, they’re going to go to a prompt and just punch in a number. They’re going to go to a state and a number. And that’s how they’re going to think. And that’ll be amazing when we get to that point. We have people working on both planes. One come in and tell me something about X. Another is an incredibly detailed and nested question pointed directly at a docket. I will give you a for instance here, while catching up on our Discord chat with the engineers, they’re like, somebody is firing in some crazy informed queries right now. I was like, that would be Doug. I looked at the querying log, and I was like, that would be Doug. So more of that, please. Okay, many such examples, please, from all of you out there listening.

Doug Lewin (18:22.766)

Definitely. No, I love that you guys have created this tool. I’m looking forward to using it. Cause yeah, like we’re just talking about it takes a lot of time for these things. Okay. So switching gears just slightly. Again, I am just a huge fan of your annual presentation. I obviously spent a lot of time with it in January when it came out. I’ve referred back to it several times since, but I actually took a good chunk of the day, went through it all again. It was just sort of, again, just blown away by the breadth and depth, but really the breadth of this 200 slide presentation that you put together every year.

Can you just talk a little bit about, I guess this is kind of a two-parter, my audience will be used to this, I usually ask like five part questions, Nat. But a couple different things here, one kind of your process for putting it together, because I think it’s again, just kind of, you’re obviously not putting it together the week before it comes out, you must be gathering this stuff all the time and like kind of fascinated with your process. Interested if there’s anything that stands out in your head as like, just sort of a major takeaway because I would imagine, because you have so much in there about what’s going on around the world, some of which is just really stunning, this stuff about Vietnam and just things that are happening around the world that we aren’t necessarily hearing about in American news media or European or wherever listeners might be. And then of course, I asked the question I think any Nat Bullard fan would want to ask, what’s coming in the next one? What can we look for? It’s only a couple of months away from the next iteration. So can you give us a sneak preview?

Nat Bullard (19:57.55)

Sure. Thank you for that nested two-part question. I’m going to take the first part first. The way that I do this process is probably not going to be the most satisfying answer for people. I keep a giant running file of screen caps, snips, tables, links, anything that I have seen come across as catching the eye, a point of takeoff, a point of inflection, something where there has been a big headline or a change and I deliberately apply no taxonomy to it at first. So when I sort of hit wrap on my intake process last year, I had 385 slides that I took down to 200. And in the process, I probably took it down to about 170 and then built it back up with things that I know I needed to fill in. So I’m just going out there and I’m doing this live. It’s one of my favorite things to do, but it’s also like a subroutine. It’s not in real time, particularly active. Sometimes I’ll sit down on like a Saturday or a Sunday morning and I will start assembling things into sort of a more full frame. A lot of them I’m just flagging to go check on later. So, you know, where there’s higher frequency data, if it’s interesting in April, I should probably go check and make sure that it’s still valid in November. And so I put it all together into one place and then starting right about now, I start to kind of layer the themes on top of it. And so that’s sort of 80% observational. These are the things that I’m seeing. And then it’s about 20% aspirational in terms of what do I want to have come in and fill in the rest of this? And it’s funny. It’s probably because they’re the last slides in the deck.

Nobody actually looks at them. But the things that I enjoy most are my slides that are data driven, but sort of asking a question or a look ahead for us at the very end. When I do a retro on this, those are the ones that I tend to be the happiest about because I’ve raised the question further up the ladder. They don’t tend to be the ones that people come in and ask me about in the process. But I’m in the flow of just assembling sort of with no fear and with no favor the things that I find interesting from a pretty broad brush. So I get a lot of things from socials. I get a lot of things sent my way, by referral. I routinely check certain sources to see what’s interesting. And I try to learn as much from smart conversations with other people that might direct me to go out and find something. That’s the aspirational part. You should go look at this. You should take a closer look at that. And I’m always looking for novelty in the truest sense of the word. Is this new? Is this something that might not be well known? And that, I think, is where people one way or another entrust me with information. That’s the part where I hope to have the most value is, let me bring you something that you didn’t know. You know, there are things that are well priced. You know trends, you know, we know the cost of the solar module. That’s well priced. Less well priced, trade flows of Chinese solar modules into Africa. So that’s an example of where we can move from well priced to less well priced, so to speak, informationally. Or thinking too, in terms of adjacency, what are markets or technologies or business models that potentially become more relevant over time? So that’s the part one. Now part two, if I recall correctly, is like, what am I looking ahead to? What am I thinking about? Is that right?

Doug Lewin (23:25.09)

Yeah, I’m also just wondering some of those that kind of stand out that like people, particularly even like astute American power observers might, you know, look at your slide deck and be like, Whoa, man, if there’s nothing that pops to mind, we could also just talk about what’s coming next.

Nat Bullard (23:40.782)

There is so much. One is the Chinese auto complex, which is how I refer to it in the last deck. Yeah. There are only 11 countries in the world that have a full stack of doing an auto business, basically every capability from soup to nuts. China is now first among them. China makes something like 40% of the world’s vehicles.

Doug Lewin (24:00.726)

And that is, I know this from your slide, I think like 20 years ago, it was like three or four percent.

Nat Bullard (24:05.494)

Yeah, it was at the beginning of the century. It was less than 5%. I want to say it is the world’s biggest maker of all vehicles. It’s the world’s biggest maker of cars. It’s the world’s biggest exporter of cars. It’s the world’s biggest maker of EVs. It’s the world’s biggest exporter of EVs. This trend is not reversing anytime soon. And it is resonating outward to pretty much every other large auto market in the world, with the exception of the United States. And I would also say Japan. And this is something that I bring up because there are many, many things folded into this. It is trade flow. It is trade balances. It is national competitiveness. It is national champion industries. Automobility has been a classic way to move a country’s industrial capability upwards and with it, cohorts of an economy into the middle class. What happens if that’s no longer going to be the case? Or is China going to be the way Japan was of manufacturing in Kentucky, in North Carolina? You know, are we going to find that kind of path that’s driven by a combination of policy and incentives, but also market access?

Or is China just going to dominate? I’ll give you an anecdote. I live here in Southeast Asia. I was recently on a family trip in Thailand. The drive from Suvarnabhumi Airport into downtown Bangkok is quite long. And the rest of my family was sound asleep. I was not, because I was just counting billboards. I want to count all the car billboards between the airport and downtown. And I did not see a single billboard on this nearly hour long drive that was for a non-Chinese company. And of those, only a couple that were not for an EV. And one of them that was not for an EV was for a, like essentially an extended range hybrid, so small internal combustion, very big battery car. Kind of like the inverse of the plug-in hybrids that we have in the US. This is one thing that I think is really important because a lot gets wrapped into this. And it is for many reasons kind of outside the frame of what we think about in the United States. We have a huge auto business. We sell a lot of autos to ourselves. We do export, but not nearly to the scale that like Japan or Germany does relative to output. And we’ve optimized our full stack of automobility for America essentially, and for other countries that want to buy cars in the fashion that we do. China does everything else. And that’s something that I think is largely invisible, but I will put a question to you and to your listeners. Like when’s the first time you’re going to see an extended range Chinese electric pickup on somebody’s ranch in Texas? You know, when is the street going to find a way that one of those things is going to show up to someone’s like, I’ve got 400 miles of battery range and I can run 220V power in the bed.

Doug Lewin (26:53.742)

I think we’re a long, long way away from that. To me, Nat, the more interesting, that’s an interesting question, but one I wouldn’t even hazard a guess for. I think the more interesting question is when will we see some sort of Chinese manufacturing? And that’s probably a long, long way away. I sort of lost the thread. There was that CATL factory that was going to be co-located with, was it Ford or GM in Michigan? And then that got squashed, I think.

Nat Bullard (27:22.822)

I’ll give, that was the case. I’m not that positive. Yeah.

Doug Lewin (27:25.368)

That may be if America wants to export to the world, you’re almost at this point, gonna have to do it with China? Like this kind of stuff to the point of why I think your presentation is so good, because it does lead you to thoughts that otherwise you’re not really thinking about, right? You’re just like you said, like we have this American manufacturing industry, it’s mostly here, it’s sort of like internal. So we just sort of stay protectionist and we just sell to ourselves. That’s probably what happens, honestly, for the next 10, 15 years. Probably the most likely outcome.

Nat Bullard (27:58.222)

It is. It leads me to ask a couple of things, which is like how well optimized will our vehicles be for different future paths, right? For exporting to somewhere else where people want smaller, longer range EVs, for instance. How much are we exposed to the technological frontier? You know, it was Jim Farley at Ford who had imported one of these vehicles, Xiaomi’s vehicles, sorry, in order to test and he was like, this is a great car. You know, it is.

Doug Lewin (28:23.082)

And it was probably like $20,000, had like entertainment screens all over it. I mean, I don’t think we’re probably gonna be able to compete with that. And that is the thing that like that whole incident, just terrible, right? The Georgia plant, the Hyundai plant with, you know, Korean workers being put in chains and stuff like that was a path for the United States and maybe still is if there’s some amazing diplomatic work done somewhere, but like Korean technology and like an American and South Korean obviously partnership could have maybe put us in a way to compete, but now that’s looking less likely too.

Nat Bullard (29:03.092)

It’s important that you mention that because this is an industry in which it’s more than just setting up a distributorship. This isn’t paint or televisions even. This is an industry wherein you need to have a great deal of integration almost at a country level and certainly at a country immigration policy level in order to do this kind of work. And is the willingness going to be there? This is something that the US encountered in the 1980s with Japan, with Japanese companies setting up. And it took time and it took a sense of durability for it to happen as well. Yes. I think you raised the right question, but like what other parts of that supply chain could you have companies setting up and doing before it’s a full vertically integrated factory stack? And then the other question is even when that’s done, at what point is it going to really be worth the tariff to just import something? Because it’s at a price point, the quality is there, the market is there.

You know, I give Singapore as a fascinating auto market because it is tiny. Astonishingly expensive to get a car, well disclosed and visible and with data updated every month. And in December, 2021 BYD had 0.1% market share here in Singapore. It is now the biggest single brand retailer of cars in Singapore. So in less than four years, bigger than Toyota. And that tells you something. My building is full of them and increasingly other Chinese brands are showing up as well. But it’s interesting to watch a market that, look, does not have an embedded auto industry. It only has importers and distributors. Wherein with that kind of uncovered level of competition, you see the interest in stuff like this happening. And you see it differentially elsewhere in, you know, in Sub-Saharan Africa, in parts of the Middle East, certainly in Southeast Asia, even in Australia, you know, the interest from these companies coming in with a competitive product at a competitive price and seeing where that meets the market.

Doug Lewin (30:57.582)

I want to jump back to power stuff, but before we do that, this is just a really interesting thread to pull on. We’ve been talking about electric vehicles for seven, eight, nine minutes, whatever. We haven’t mentioned Tesla. We’ve been talking about American manufacturers, right? Like Tesla obviously is still one of the largest manufacturers in the world, but you do have some slides about they seem to be kind of peaking in the last year or two. Now there’s a lot that is bound up obviously in politics and the, you know, controversies that Elon has gotten himself into. You know, Tesla is still this huge question mark because the, I think the cars are still great. They’re moving towards autonomous vehicles. He’s making all these MegaPacks. There’s all these connections to the grid. You know, it’s the Energy Capital podcast. I focus on Texas, a Texas headquartered company doing some lithium mining and processing in Texas. So hard to have that discussion, I think, without at least bringing up Tesla, but I don’t know, it raises a lot more questions. It makes me scratch my head because I don’t know, I don’t know what the trajectory of that company is.

Nat Bullard (31:54.828)

You know what? There’s many, many of these questions and I actually look back to only one, which is how new is the lineup? You know, we have new trims for some of the existing models, but we don’t have a brand new mass market model in quite some time. Yeah. The Cybertruck is brand new. It’s not mass market. No, the Model 3 and Y are relatively venerable at this point. They do have updates and because they are software driven, they have a way of, you know, sort of improving themselves over time, but it’s different than the cycle time of some of the other manufacturers in the US and certainly the manufacturers elsewhere in terms of how frequently they’re updating brand new models, not just trims, but like totally new models, new chassis, new everything. And that’s my only real question is like, how do we think about it from a brand perspective? This is the trickiest thing to do. You know, every other car company, you have to talk about it like a brand. Tesla has sort of always been more of like an identity and with all these other things wrapped into it. I try to keep it very spare and just think about it from a car perspective. You know, as a car company, which is still what it is primarily, how are those cars being received in the market? And with only updated trims of late, and especially with the sunsetting of the EV credit, how is this going to play in a market that is increasingly supplied with lots of other options?

Doug Lewin (33:08.332)

Yeah. And of course, they’re looking more and more to the power sector. MegaPack is becoming a bigger and bigger part of the company, which may be a good segue to get back into the power sector. I do think I love that whole discussion because to a certain extent to our detriment, we think of these things as being really distinct. Like here’s the auto industry and here’s the power industry. But these days, as transportation becomes electrified, those lines are quite blurred and we’re kind of talking about the same thing when we talk about this stuff. So it’s getting interesting, right?

Nat Bullard (33:38.336)

It is. I’ll give you one last thought on that and then we can move it forward, which is that I’m going to ask you a question. So I did this annual presentation. What percent of my viewers of it are in the US? Do you think?

Doug Lewin (33:50.35)

I would guess 50%.

Nat Bullard (33:54.094)

43% last year. There’s a big world out there. There are lots of people from the US who want to look outside. From the outside, look into the US. And there’s a lot of people that want to look essentially mathematically in chords on a circle compared to the way that you and I are having a conversation right now. They’re in Brazil, and they’re very interested in thinking about what’s happening in Australia or vice versa.

Doug Lewin (34:16.075)

Yeah. No, I think a lot of times, obviously Americans, I do this myself. S**t, as a Texan, I do this a lot. Just think like this is where things are happening. It’s one of the things I love about your presentation. There is a great big world out there. And I do try to write about that at the newsletter too, right? Especially China and what has happened there. All right. So let’s get into some of the stuff that was in this latest slide deck, Discontinuity, Disparity, Data. And I believe you did the report right with GridLab about the prices of natural gas. So one of the things you had in there is this great slide that kind of shows the prices combined cycle gas turbines, basically averaging over $2,000 per kilowatt. Then you’ve got combustion turbines, much less somewhere in the $1,200 to $1,400. Now, one of the things we’re seeing that, and I’m wondering how much you’re tracking this or even can track this. I’m hearing more and more about this just from talking to people, but even the podcast Odd Lots last week got into this a little bit. Their guest put a drone over the Stargate facility.

Nat Bullard (35:09.746)

Stargate, yeah.

Doug Lewin (35:13.55)

They had seen the types of gas turbines that were there, and they’re pretty much like used, I don’t know what vintage or era, but they were like smaller, I assume, aeroderivatives, like Caterpillar turbines or something like that. I’ll add one more bit of data before I ask the question. Mitsubishi announced they’re gonna double their capacity of gas turbines. Do you see the gas turbine constraint kind of lifting anytime soon or do you think we’re really looking at like all the way through like 2035 these very elevated prices for new gas or used gas as it were?

Nat Bullard (35:52.34)

So I’ll start at the back. Do we see this easing? No, the demand is way in excess of supply and even Mitsubishi’s commitment. You don’t snap your fingers and magic up like rotor casting. Okay. Like, you know, these are some of the most complicated things in the world to possibly make with lots of lead time and in an industry that is rightly, I think, judicious about its expansion plans, having done this in years past, in eras past.

Doug Lewin (36:24.43)

20 years ago, right? And having a big old bubble burst.

Nat Bullard (36:27.788)

Wildly oversupplying a market for quite a long time. So that’s to my old saw here about, you know, markets responding to incentives. The incentives are complex and companies will react accordingly. The type of turbines that are being moved are fascinating. Yeah, like things that are aeroderivatives that have traditionally in these companies been sold by the oil and gas group. They were used offshore. They were used for field production. They might’ve been put behind the fence for LNG or something like that. Now being used as primary power production. There’s a move to buy used plant and move it around. I mean, that’s, you know, sure. Why not? That’s going to be of finite catchment in the long run, I think. And as far as price point goes, it’s funny because I put this slide up and the first comment I got was somebody’s like, I’m building those things and my prices are like three times higher. I’m like, show me your prices. And he’s like, I’m not doing that. I’m like, all right then.

Doug Lewin (37:24.654)

I’m not putting you in my slideshow.

Nat Bullard (37:26.222)

Yeah. Well, but also part of the purpose of building it this way, the reason that we wanted to work with GridLab on that white paper and the reason that our clients at Halcyon want this information is the rigor with which it’s sourced, which is I know that y’all are paying higher prices, but what I have here are the things that are in the regulatory disclosure. They have what’s called a CPCN or certificate of public convenience and necessity or the equivalent. Therefore, they kick into a process where we have visibility on cost, volume, time, conditions, all that sort of stuff. And that’s what we’re recording here. And also the full data set serves a broader purpose. A lot of people use it for physical trading. So they’re trying to say like with this asset coming online here and with my assumptions on asset utilization, what does that mean for demand at this node? You know, what does that mean for demand on this strip, that kind of stuff? So yeah, the numbers that we have here are lower than what people are probably getting quoted. In fact, I know they’re lower than what people are getting quoted.

But they are the revealed cost. Again, back around to my earlier comment, this is why we run this thing pretty much continuously to continue to get more sunlight. And in the long run, having come from a background where we did this quite usefully, would be to do a survey capability of it. I’d love to be able to do bids and asks here and get a sense in the long run of where people are at. We’re not quite there. It takes, having built this sort of thing before, it takes a little bit of time before you can get there. But if you’re out there listening and you’d be willing to start sharing bids and asks with me in terms of like when you’re getting quoted for combustion turbines, I’d be happy to talk. I want things that are only official. I don’t want anecdotes and I don’t want anything that’s non-verified. So that’s the purpose of doing this. But yeah, the numbers are striking to say the least. And there’s just, there’s a lot of future uncertainty about it. I mean, the biggest one for me being at a $2,500 a kilowatt cost for a combined cycle gas plant. What other competing options are there for providing power?

Doug Lewin (39:27.096)

So that kind of leads me to where I wanted to go next…

Thanks for tuning in to the Energy Capital Podcast. If you got something out of this conversation, please share the podcast with a friend, family member or colleague and subscribe to the newsletter at douglewin.com. That’s where you’ll find all the stories where I break down the biggest things happening in Texas energy, national energy policy, markets, technology, policy, it’s all there. You could also follow along at LinkedIn. You can find me there and at Twitter, Doug Lewin Energy, as well as YouTube, Doug Lewin Energy. Please follow me in all the places. Big thanks to Nathan Peavey, our producer, for making these episodes sound so crystal clear and good and to Ari Lewin for writing the music. Until next time, please stay curious and stay engaged. Let’s keep building a better energy future. Thanks for listening.

Most solar panels are imported from China which now has the ability to manufacture over a terawatt (1,000 gigawatts) of solar modules every year — roughly equal to the entire installed base of generation in the US inclusive from every energy source.

America makes less than 1/20 of that amount and even less when it comes to the more difficult task of manufacturing cells.

But Texas is known for manufacturing and T1 — short for Type 1 civilization — is building solar manufacturing in Texas that could change the game.

This is about energy abundance that is reliable, local, and affordable.

As T1 CEO Daniel Barcelo told me:

“I’ve been working in oil and gas and I am an old oil and gas guy who has run oil and gas companies globally. At the end of the day, it’s really about providing the lowest cost energy in whatever form it is and delivering that energy at a cost-competitive basis to the customer. That drives the philosophy at T1.”

T1’s plan is straightforward and ambitious: a multi-site Texas footprint that connects a domestic solar manufacturing chain from materials to finished modules. The company has a module assembly plant in Wilmer in the Dallas area, and is developing cell manufacturing in Rockdale in Central Texas. Upstream, they’ve lined up domestic polysilicon supply from Corning to feed those lines.

While T1 scales up supply, demand for power is surging.

Texas electricity use is rising rapidly, driven mostly by oil and gas demand, cryptocurrency mining, industrial electrification, and data centers. Texas demand is up 23% in the last four years; most of that new demand is being met by solar power.

When more of the equipment is made here, projects move faster and carry less supply-chain risk. And solar can be scaled very quickly to meet near-term needs.

“AI needs energy. Data centers need energy. They need it now. It’s great to build nuclear plants in 2030. That’s awesome. But the world’s not waiting. And the big tech companies are not waiting. And right now, solar and storage can deliver it.”

This is not either-or. Texas has long succeeded by adding the next tool that works. Solar plus storage are tools for growth and we should use them.

Domestic manufacturing creates jobs and strengthens our energy security and global competitiveness.

Texas has never waited for someone else to build our future. If companies like T1 can stand up the full stack here, we get more than panels.

We get speed, security, control, and the ability to match ERCOT’s needs with Texas-made solutions.

If you found this episode useful, share it with a colleague. If you want more Texas-first, reality-based energy coverage, subscribe and join the conversation.

The Texas Energy and Power Newsletter is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

Timestamps

* 00:00 – Introduction

* 02:00 – T1’s Texas footprint overview

* 04:00 – U.S. solar chain, Corning partnership

* 05:30 – Jobs and polysilicon-to-module flow

* 07:00 – Building U.S. cell capacity

* 09:00 – Timelines and receptivity of Texas political leaders

* 11:00 – Demand growth requires gigawatts per month

* 13:00 – Competitive advantages of building in Texas

* 15:30 – Oil and gas demand growth met by solar and wind, saving $1/barrel

* 20:30 – When King Coal tried to kill natural gas and why gas won

* 23:00 – Political economy of varying energy sources

* 25:30 – Can the US build enough solar to meet domestic need and export?

* 31:00 – Solar trade investigations, tariffs, anti-dumping rules, FEOC

* 35:00 – Solar and manufacturing tax credits under OBBBA, “stackability”

* 38:00 – How and why tax policy benefits all energy, including oil and gas

* 42:00 – Will Texas continue to blaze trails and attract new energy companies?

* 45:00 – Distributed power is “sovereign energy”

Resources

Guest & Company• Daniel Barcelo — LinkedIn • T1 Energy — Company Website + LinkedIn

Company & Industry News• Reuters: T1 Energy and Corning agree to fully U.S.-made solar supply chain• PV Tech: T1 Energy–Corning “landmark” U.S.-made poly/wafer/cell deal• Manufacturing Dive: T1 to establish $850M solar cell facility in Texas• T1 Energy IR: Corning deal accelerates ‘Made in America’ solar • T1 Energy IR: Strategic investment in Talon PV

Related Articles & Podcasts• How Batteries Are Reshaping the Texas Grid (with Suzanne Leta) • Beyond the Tax Credit Cliff (with Freedom Solar CEO Bret Biggart) • Creating a Distributed Battery Network (with Zach Dell)• The End of Solar & Battery Manufacturing in America?

Studies & Policy Documents

Doug’s Platforms• LinkedIn • YouTube• X (Twitter)

Transcript

Doug Lewin (00:05.25)

Welcome to the Energy Capital Podcast. I’m your host, Doug Lewin. My guest this week was Daniel Barcelo, the CEO and chairman of the board of T1 Energy. We talked about how they got their name in this episode. I think you’ll enjoy that. This is a fascinating company, headquartered in Texas. They are building out a full end-to-end manufacturing of solar in Texas. They started with the acquisition of a manufacturing plant, five gigawatts of solar module assembly in Wilmer, Texas, just south of Dallas. They are currently building in Rockdale, Texas, about 60 miles north of Austin, a cell manufacturing facility. So obviously cells are much more complicated to manufacture, much more complex than the module manufacturing. They are also in partnership with Owens Corning to get the raw materials actually sourced here in America. So that when they are done with that process in a year or two, they will have end-to-end American solar manufacturing. So we talked a lot about the potential for American manufacturing of solar, how big it is now, what its potential is to maybe counterbalance China, which is really dominating electricity supply chains throughout a whole number of different components, including all parts of the solar supply chain. They’re dominating that globally. Can America be a counterbalance? One of the things I really enjoyed about this conversation is Daniel has a great perspective, having worked in oil and gas for much of his career, really at the broad spectrum of energy. So I think that really comes through in the interview. I think you’re going to enjoy that.

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Daniel Barcelo, welcome to the Energy Capital Podcast. I am very excited to talk to you. T1 is making a whole lot of waves, people in Texas talking about the company a lot. Why don’t we just start from the beginning. What is T1 and tell us about the Texas operations you guys are standing up.

Dan Barcelo (02:31.8)

Great. First of all, Doug, thank you very much for having us. We’re always excited to talk about the T1 story, something we’re really passionate about as energy operators, managers, investors, historically. T1 Energy is building a domestic solar and battery supply chain that we want to invigorate America with clean, scalable, reliable, and low-cost energy. This is all about advanced manufacturing. This is about how do we bring advanced manufacturing capacity to unlock the most scalable resources we have. That’s what we’re doing. We’re doing this with our core foundational assets. We own and operate our five-gigawatt solar module plant just south of Dallas. That’s called G1 Dallas. And we are also building our five-gigawatt solar cell plant north of Austin called G2 Austin. Those two assets are foundational. The other part of the investments we’ve made is we also own a supply chain of polysilicon from Hemlock. Coupling that polysilicon supply chain coupled with the cell plant, coupled with the module side, we have a tremendous capacity to unlock what we think is a very scalable, renewable power asset we have available right now.

Doug Lewin (03:42.39)

Yeah, it’s pretty exciting because I see the vision of what you’re trying to do here, right? Because what we have in the United States right now, if I’m not mistaken, and you correct me on any of this I get wrong. This is your world. But my understanding is we’ve got something like 50 to 60 gigawatts of capacity of solar module manufacturing. So that’s sort of the last phase where you’re bringing the assembly, kind of bringing it all together. But you guys are going way upstream to raw materials. And you mentioned something just there. I’m not sure I heard what you said, but I do want to get more into this. I think you guys announced a deal with Corning, right? For some of the raw materials. Not sure if that goes through to the wafers, but I do kind of want to break that down a little bit, Dan, because I think the audience will really appreciate it.

It’s very important. I think it’s very important that the United States have the full end-to-end capability for manufacturing. And it looks to me like you guys are doing that with the partnership of Corning upstream, then actually making the cells, correct, in Rockdale, which is what you’re calling the G2 Austin plant, close enough, like 50 miles or so from Austin. I believe near the old Alcoa site, we could talk some about that. And then putting it together in Wilmer, south of Dallas. So you’re really kind of doing that like soup to nuts end-to-end, full supply chain, no?

Dan Barcelo (05:04.034)

Yeah, look, when we acquired these assets at the end of last year, what we acquired was, at that point in time, the world’s most modern solar module manufacturing facility. And that’s operational, that’s up and running.

Doug Lewin (05:17.954)

That’s Dallas, right?

Dan Barcelo (05:20.162)

Dallas. That is this five-gigawatt solar module manufacturing G1 Dallas. It is one of the world’s most modern facilities up and running ready for business. Highly automated yet also employs a good number of people, over a thousand people workforce and a very large payroll as well in the South Dallas community.

Doug Lewin (05:39.378)

Dan, that thousand jobs is current or that’s projected?

Dan Barcelo (05:43.064)

That is current. Currently, a thousand Texans employed in South Dallas. That’s correct. We’re currently over 1,200. And with the acquisition, we also acquired a polysilicon supply agreement to supply gigawatts of polysilicon to be the initial part of the chain. Now we did announce earlier that we have the arrangement and the contracts with Hemlock to convert that polysilicon contract in part to wafers. So in order to complete the chain, you’re basically taking the polysilicon, which is ingots and then wafers. Then you’re taking the cells and then you’re taking the modules to the module of the solar panel. So when you think about the solar chain, you’re going from the polysilicon, ingots and wafers, cells, and modules. What this acquisition did was we purchased the module plant, which just gets us to the end customer use. You mentioned the market size of 50 to 60 gigawatts. This plant is about 10% of the U.S. On the polysilicon side, we wanted to secure American polysilicon in order to supply an American module plant. Until we have our solar cell plant up and running, we currently are sending our polysilicon to Southeast Asia in order to make wafers and cells and then bring those cells back to the United States. By the fourth quarter of 2026, we anticipate to have our G2 Austin site up and running. And at that point, what we’ll be doing is taking wafers from Corning, bringing those wafers to G2 Austin, and then making the cells and then taking those cells to G1 Dallas to make the modules.

Doug Lewin (07:17.838)

Amazing. And my understanding, and this may be a couple months old, but I don’t think it’s terribly out of date, there’s really only like a gigawatt or maybe two of solar cell manufacturing in the United States. When you say you’re 10% of the module assembly in the Dallas plant, that Austin plant, when it comes online, will represent... Maybe by that time there’ll be others and maybe I’m missing some or I’m just getting it wrong, but that’s a huge percent of the entire capacity of the United States, right?

Dan Barcelo (07:46.376)

The cell capacity is higher. It’s above 10 gigawatts. There are differences in that capacity. There is capacity from different technologies which are non-silicon based. There’s also technologies of cells that are older PERC style. This will be TOPCon technology based and is one of the most modern and most energy efficient technologies.

Doug Lewin (08:08.302)

So that’s First Solar is like the other 10 gigawatts basically, right?

Dan Barcelo (08:12.33)

That’s correct. First Solar and then there’s others on the PERC side and that technology. But on the silicon-based TOPCon, this will be one of the first. So with that TOPCon technology, that provides better efficiency, it provides better in terms of what customers want, in terms of energy density, in terms of deployment. So that’s our focus.

Doug Lewin (08:32.716)

Okay, incredible. And I will put some links in the show notes, stuff like this. The capacity of China is orders of magnitude more. Like I said before, I think this is really important that this start to happen in the United States. It’s going to take a while for this to all scale up, but this is obviously a huge step in the right direction. What is the reception in Texas? You’re obviously, I’ve seen you post on social media various visits to the plants by various elected officials. You know, obviously there’s a notion out there that at least, well, and it’s true, that some in Texas political leadership are hostile to renewables. But I think by and large, there’s an awareness out there that oil and gas and renewables actually can have kind of a symbiotic relationship. Curious, you’ve written about that on LinkedIn, so I would love for you to talk about that. So there’s really two questions there. Sorry I do this, I do these multi-part questions. But really, what is the reception from political leadership been and what do you see as sort of the future of Texas energy with sort of the coexistence of oil and gas versus renewables? Where do they compete? Where are they symbiotic?

Dan Barcelo (09:39.64)

Sure. Well, first of all, the reception has been phenomenal. Whenever anyone’s bringing in a large payroll, a large labor force, and also bringing in newer, advanced manufacturing jobs, that is something I think everyone across the political aisles can agree on and see as a good thing for the United States. Bringing supply chains back to the United States are also very important, and I think all of that is resonating. There’s the obvious tensions and competitive tensions we all see and read about with China versus the USA. So having more of the energy manufacturing and having more of the energy security based in the U.S., that’s all positive. So it’s resonating from Washington to the state, to the local levels. So that has been very, very clear and very consistent. Now, I kind of grew up in the oil and gas sector. Since the early ‘90s, I’ve been working in oil and gas and I am an old oil and gas guy who’s done capital markets on that and run oil and gas companies globally. At the end of the day, it’s really about providing the lowest cost energy in whatever form it is and delivering that energy at a cost-competitive basis to the customer. That drives the philosophy at T1. I almost shrug or shudder when I hear the word renewable sometimes. I think it’s done a disservice to the solar industry. It’s done a disservice to the wind industry. This is just conversion of materials to electrons to enable power, to enable electricity. And I think that solar and solar plus storage can be an incredible competitive advantage versus other sources of fuels. I spent years drilling natural gas wells in order to get gas to create power, the power from the generators, right? This is very similar to me. Now we’re spending years and capital to create machines that from the silicon sources of polysilicon create the machines and the panels to make electricity. So it’s either drilling or finding the gas to feed the turbines to make the power, or it’s putting up the machines and finding the silicon, the polysilicon to make the electrons. So in my mind, this is all about delivery of energy to the market and the market needs it.

The demand growth right now that we’re seeing in the U.S. is unprecedented. It is driven by small amounts of residential growth, but it’s driven by industrialization and it’s obviously driven by the rise of AI and data center loads. The only source of power that can match the ramp that AI wants is solar and batteries, at least for the next four years. If we’re going to be very competitive over the next four years, as hopefully people a lot smarter than me try to go for the AGI and try to get to that level of where we can be as a society, the gigawatts per week, gigawatts per month is what everyone’s talking about. The plant we have at G1 can produce five gigawatts a year. If I had the demand signals, I could create another plant like this within a matter of another year. We are able to deliver gigawatts and gigawatts of solar. Some will say, well, it’s interruptible power. Well, you know, when you look at where demand is, demand is kind of interruptible too. As we know in Texas from three o’clock to seven o’clock, it’s a very different load profile than three o’clock to seven o’clock at night. So the matching of demand is something I think that does a disservice. And once you put batteries and grid level batteries on, we see it in ERCOT all the time. We see it in CAISO in California all the time.

The grid is more robust when batteries and solar are part of the grid, full stop. So we think that batteries, and to be clear, we used to do batteries, we have paused on the batteries now, we aim and strive and have ambitions to batteries in the future. Right now it’s all about the solar and it’s all about supplying that supply chain. The last part of this is all of that’s great, but I believe that we can build this in the United States. And I don’t believe this is anything we’ll say less competitive or that we don’t have versus other places. Let me just expand on that in a moment. When we look at the automation of the machines we’re buying and the ability for these machines to run, fundamentally we’re turning silicon to polysilicon to wafer to a cell to a module. This is just the transformation of materials into something that collects photons to create electricity. The largest conversion costs of all of that has to do with water, has to do with electricity. There’s some specialty gases. There’s in the case of the modules, there’s frames and there’s glass. But fundamentally, these are all very commoditized products. Texas is very lucky to have extremely competitive electricity prices, extremely competitive water prices, extremely competitive specialty gas prices, and extremely competitive natural gas prices.

So what this is getting distilled down to is a labor cost differential. Given the high automation, both the module plants, the cell plants, the wafer plants, that labor component is less and less and less. So I believe that we’re actually seeing a competitive advantage now where these machines can be here. There’s still a higher labor cost structure than in other parts of the world. That goes to the wages America pays its employees and the good wages and the living wages. It probably also ties into a bit on how wastewater is treated, which is probably much more important when we talk about what the impact the solar industry or data center or other people can have is the immediate impact right now on wastewater. So those two parts are probably the highest differential in cost relative to the rest of the world. When I build, for example, in G2 and Rockdale, those machines that come in and that are building there, those machines don’t know if they’re in Egypt or Turkey or Nigeria. They have no concept of where they are. Those machines just know they need power, water, and they need wafers. So that’s where we get to how we can be more competitive.

Doug Lewin (15:23.8)

You mentioned load growth from AI. In preparing for this, I missed it at the time, but I’m going to follow your LinkedIn more closely now. You had a post a couple months ago that I thought was really extraordinary. It was specifically about oil and gas. So yes, we have a lot of load growth from AI that is already hitting the system and more to come. The far west zone in Texas has tripled its energy consumption over the last eight years, a tripling in eight years. And some of that is Bitcoin, cryptocurrency, there’s probably some initial AI, but there’s a whole lot of oil and gas load as well that is connecting to the grid.

And a few years ago, six of the biggest oil companies operating in Texas went in together on a study from S&P Platts and showed their kind of demand growth curves that there’s already, I think, four gigs or so of grid-tied oil and gas sort of fracking operations, but also compressors and all the rest, that that could go as high as 10 to 12. And this was just in the Permian, I believe just in the Texas. You were writing about this. And again, you referenced that you and other executives at T1 have spent much of your careers working in oil and gas. And you put in there that last year more than 88% of the electricity produced there, meaning I believe you meant in Permian, you may have meant far west zone, was from solar and wind farms, according to an analysis of the actual electricity production last year.

That is extraordinary. I’ve never seen that number before, but it kind of makes sense when I sometimes will post on social media or in my articles, like the overlay of where the Permian is geographically, obviously in far west Texas, sort of where the right angle of Texas and New Mexico meets, kind of just to the east of that and to the south of that. And then if you look at that right next to maps of where the sunniest parts of America and the windiest parts of America are, it’s all right there. Can you talk a little bit more about what you’re seeing in the oil and gas? Are you having conversations with people in that industry that are like, we’re trying to purchase more renewables. Can you get some of your solar panels out here? Are you hearing that kind of chatter from folks you know that are still in that?

Dan Barcelo (17:33.11)

Look, part of it is geography. Southern and Western Texas, all the way to California is blessed with a lot of great solar in terms of radiation levels. And in terms of wind, you have straight down the center and through West Texas, you have wind. So you have a lot of overlapping wind and solar power and it makes West Texas extremely, extremely valuable in terms of that resource. So again, I almost would drop the word renewable. This is as simple as according to, I think we use Rystad in that study. There’s about a dollar per barrel in terms of BOE equivalent of savings that companies could make by removing their power from the grid and using electricity rather than running gas turbines or diesel generation, which is expensive. So the idea is how do you produce and sell more of the product you’re making rather than use it to run your turbines with your diesel. So by using power from the grid there, there was a savings about a dollar per barrel. When you look there, I think the numbers there were growing to around eight gigawatts today. And according to Rystad, there was an increase of a further three gigawatts on the Texas grid just from the Permian. So it’s just making an example that in order to produce even the oil and gas, in order to lower operating and lifting costs, the switch is to go to grid power, which is primarily renewables, which is primarily wind and solar.

And again, this goes to just the cost nature of it. So even oil and gas, which in that area, a third to half of production of the U.S., it’s phenomenal levels of production. Those resources can be produced. Those resources can be used for better energy and chemicals and plastics in the United States, or they can be exported, so to speak, to export American exceptionalism in that form in terms of energy exports. So I think there’s a lot of combined ability for it. The benefit the ERCOT grid gets from solar and even from wind is it’s driving energy costs lower. And you mentioned this before that maybe there’s some biases in terms of left and right, in terms of wind and solar versus oil and gas. But if you look at Texas, it’s just making an example of what can be built now, what’s economic, how do we build it fast? So I think those are the key drivers. So we flag that as, it’s a great example of how it’s just energy and the cheapest forms of energy and the most efficient forms of energy are there supporting the largest forms of exports of American oil.

Doug Lewin (19:48.622)

Yeah, I actually love that framing or reframing that we often get so much into the label that goes in front of the word energy, the adjective, the modifier, instead of focusing on the energy itself. And this is what is great about Texas is you do have this system of economic dispatch and it’s going to be the lowest cost energy. And that typically happens to be wind and solar, but it’s not because it’s wind and solar. It’s not because it’s renewable. It’s not because of some attribute other than it’s cheaper. That is really what kind of is driving its adoption. So that’s fascinating. A dollar per barrel is not insignificant. That could be even a couple of percent when we’re down in the $50 to $60 range.

Dan Barcelo (20:31.982)

So when I started my career in the early ‘90s, it was the era of FERC 636 with open access for natural gas. That was when coal dominated all electricity production and King Coal tried to kill natural gas.

The full video is on Youtube

Texas isn’t just projecting future load growth; it’s happening now.

Maura Yates of Mothership Innovations set the stage for our discussion at GCPA’s Fall conference earlier this month in Austin.

“We are looking at meters that are 800 megawatts on a single meter… that’s crazy. We used to think 10 megawatts was a big deal…”

She also cut through the headline noise: “The next three years are really critical… This is the them we are hearing at this conference: it’s a near term discussion… We have a big, urgent discussion ahead of us.”

How much of the 200 gigawatt large load queue is real and how much will actually come in the next few years?

Hayden Stanley of Good Peak brought the developer’s eye to the near term. He sees a “whole new layer of infrastructure” coming as the grid gets smarter and more coordinated, but warned that SB6 complexity and behind-the-meter buildouts can slow timelines.

Tom McGinn with EnergyWell focused on “lifting the system load factor” with tools people don’t have to think about, built on “optimizing interval-level usage to respond to price signals.”

He added a sober note: in the next few years, mass-market customers could get squeezed by rising load in the short term, though he thinks in the longer term, Texas will have continued investment in the grid and new technologies and abundance for consumers.

Zach Dell of Base Power Company reframed things taking a much longer view:

You’ve got to make large investments with a long-term time horizon. And I think there are really strong precedents for this kind of orientation in other parts of technology. You saw Uber do it in transportation, Amazon in commerce, SpaceX in aerospace. We’re taking a similar approach to energy where we’re making 10, 20 year investments, both in terms of the technology that we’re developing, but also in terms of how we think about policy.

Base has added 100 megawatt-hours in the short time it’s been in business and is now adding 20 megawatt-hours per month.

Large loads are coming but so is innovation across the grid.

Timestamps

* 00:00 – Opening

* 01:00 – Guest introductions

* 03:30 – Load growth happening now much faster than expected

* 04:30 – Critical discussions are about the next 2-3 years

* 07:00 – Smarter grid, higher load factors, new infrastructure layers

* 09:00 – Potential bearish load growth over the next few years

* 10:30 – Thinking long term about resiliency and costs

* 12:00 – Is ERCOT still working to remove roadblocks? Are process changes needed?

* 17:00 – Smart meters enable design innovation and response to price signals

* 19:30 – Demand-side flexibility from batteries: “price down, reliability up”

* 22:00 – Base Power’s scale, the new factory in Austin

* 24:00 – Gigawatt scale virtual power plants (VPPs)

* 25:00 – Inflation Reduction Act repeal

* 26:30 – The advantage of distributed, smaller scale (<10MW) battery projects

* 28:00 – Senate Bill 6 and the case for a more bearish demand growth case

* 30:00 – What could slow down load growth

* 33:00 – Data problems with large load demand response

* 34:00 – Audience question: Data center water use, closed loop design

* 36:30 – Audience question: Doug’s one top policy change, would it be a carbon tax?

* 37:30 – Audience question: Zach- when will you expand to California?

* 38:30 – Audience question: Will grid tech still advance if there’s not load growth?

* 40:30 – Closing

Resources

Panelists & Company

* Maura Yates LinkedIn, Company Page & LinkedIn

* Hayden Stanley - Bio, Company Page & LinkedIn

* Zach Dell - LinkedIn, Company Page & LinkedIn

* Tom McGinn - Linkedin, Company Page & LinkedIn

* Doug Lewin - LinkedIn, YouTube, Twitter, Bluesky, and Threads

Books, Articles & Podcasts Discussed

* Load Growth: What States Are Doing to Accommodate Increasing Electric Demand (EPRI) PDF (Clean Energy States Alliance)

* NRG’s Gigawatt VPP in Texas with Travis Kavulla (Energy Capital Podcast)

* Shape Load Perfectly, Inject Energy Optimally with Sonnen’s Blake Richetta (Energy Capital Podcast)

* The Year the Texas Legislature Changed the Energy Game Forever by Russell Gold (Texas Monthly)

* ERCOT CEO Pablo Vegas Board Presentation:

Transcript

Doug Lewin (00:06.464)

It’s great to be here this morning. Hope everybody’s doing great. It’s been a great couple of days. Really want to thank Gulf Coast Power for again putting together such a great event. I think my first Gulf Coast Power was like 15, 16 years ago. This is the 40th anniversary. It’s amazing to see you guys still going so strong. This has been a great conference. I’ve learned a ton, caught up with a lot of people. I am Doug Lewin. I do a couple of different things, but one of the things I do is I host the Energy Capital podcast. We are recording this today and we’ll release it as an episode. For those that are listening later, we are in Austin at the AT&T Conference Center at the Gulf Coast Power Conference. So I have four amazing panelists here. I can’t wait to get into this discussion. We’ve got a lot to talk about, but would each of you just briefly introduce yourselves and your companies so folks kind of know who you are. You want to start at the end? Go ahead, Zach.

Zach Dell (00:58.366)

Hey everybody, I’m Zach Dell. I’m co-founder and CEO of BASE Power. BASE is a retail energy provider and battery developer based here in Austin. Started the company about three years ago. Our mission is to lower the cost of electricity for all. And we do that by developing technology solutions, hardware, software, and the like to help rebuild the infrastructure here on the power grid in Texas and beyond.

Doug Lewin (01:20.458)

And I’ll just say I did record a podcast with Zach. It was like a year ago, more than a year ago now. Two years ago. Was it really that long ago? Wild. So for those that want to know more about BASE, you can go back, whether you’re in the room or listening later, you can go back and listen to that one. Go ahead.

Tom McGinn (01:35.16)

Hi, I’m Tom McGinn. I’m Senior Vice President of Energy Trading at EnergyWell. EnergyWell operates a few different load-serving entities in competitive markets in the US, along with offering software and consulting services to other market participants. I’ve been working in competitive markets for almost 20 years now across all the competitive ISOs in the US, kind of at the intersection of the wholesale and retail functions in those companies. So yeah, happy to be here with everyone.

Doug Lewin (02:03.694)

Thanks Tom. Hayden.

Hayden Stanley (02:05.486)

How’s it going? My name is Hayden Stanley. I’m the co-founder and COO of GoodPeak. We’re involved with building out distributed generation assets in ERCOT. We’re vertically integrated. And we’ve recently also entered the digital realm with data centers. So excited to be here today.

Maura Yates (02:22.466)

Maura Yates, the co-founder and CEO at Mothership Energy and Mothership Innovations. We are a retail electricity provider and ERCOT market service provider to large loads and load-serving entities across ERCOT. So everything from billing and operating services to QSE services, but again, really focusing on large complex loads across ERCOT.

Doug Lewin (02:44.61)

Such a great panel, so much knowledge and experience and lots of different experiences and different businesses represented here. So let’s just start at a very high level with a question I like to ask on the podcast. Zach, I don’t remember if I asked you this one two years ago. I probably did, but it’d be interesting to compare and contrast your answers if I did. It’s one of my favorite questions, which is just to kind of look ahead four or five years. You know, sometimes I think 10 and 20 years is like too far. Who knows? It’s anybody’s guess, but four or five years far enough away that we’re not talking about tomorrow or next week or even next year. You’re looking like a 2030 kind of view. What do you think is really going to change in this Texas market? What are the technologies you’re kind of most excited about? And I think even let’s talk a little bit about what are some of the roadblocks and obstacles to getting to that vision. You want to start?

Maura Yates (03:32.526)

Sure. So for those who know me in the room, they know that I’ve participated in the market for a while and done everything from resi in the kilowatts all the way up to now megawatts and gigawatts. So we’ve seen this really crazy, interesting evolution, especially the integration of renewables into ERCOT. And I was reflecting with somebody last night about where we saw the market in 2013. 2025 was so far out. And did we see where we were, you know, 12 years ago? And I think in general, we kind of had a sense, yeah, this is where we were going to see a lot of renewables come online. We had a good idea of where generation was going, but I don’t think we had a good idea of where load was going. Obviously the latest incentives to move business to the state have really helped drive that. And not only did we not see where load was going, we didn’t see the scale at which load was going there. Like we are looking at meters that are 800 megawatts on a single meter. That’s crazy. That’s insane.

We used to think 10 megawatts was a big deal. Now 10 megawatts is like, I don’t know if we have time for 10 megs. That feels really small. So I mean, we’ve seen this really, really rapid shift and this change in trajectory in terms of where we’re seeing this market go. And so when we talk about the next five years, it’s really interesting. It’s going to be, I think, much faster the rate of change than what we’ve seen perhaps the last five years. We saw the last five years coming. I don’t know if we saw the next five years coming. So when I think about what’s going to happen, I think the next three years are super critical. The next three years will dictate what happens in five years. So when I really think about what I’m focusing on or where Mothership is focusing, we are focusing on the next two to three years and say, what is going to happen in the next two to three years? Because that will absolutely determine what we see in ‘28, ‘29, ‘30. And again, I think this is the theme that we’re hearing at this conference, largely a conversation about the queue and what’s going to happen with large loads, what’s happening as a result of SB 6. This is the conversation. It’s a very near-term discussion. It doesn’t mean that all the other discussions don’t need to keep happening. We need to keep having the conversations around how do we manage our really elastic peaks with residential volatility.

We still need to have those conversations, but we have this really big urgent conversation in front of us of, what do the next two to three years look like? Because that will then dictate the tale after that. I mean, 190 gigs in the queue, we know that’s not real. Like, that’s not what our future looks like in the next five years. What part of that is real? Maybe 5, 10%, maybe 10%, maybe 15%, maybe 20%. What do we actually think generation can keep up with? What is practical? What is feasible? And so I don’t know what’s going to happen in the next five years. Every month we get closer to that five-year benchmark, I’ll be a little bit more willing to wager. But right now, I see the conversation of, we have a jam. We can’t get to the numbers that we’re talking about by 2030. We’re too jammed up. If I think maybe another 10, 15 gigs by 2030, maybe in the next two to three years, three, four or five gigs, I don’t know. It depends on again, how we handle and how we manage through the stuff that’s jamming up right now. I think this gets to the innovation conversation that we can talk through more later, but yeah, two to three years.

Doug Lewin (06:42.956)

Yeah, before we go to Hayden, just kind of a thread to pull on there a little bit is, you know, there’s 190 gigs in the queue. I think part of the problem we’re having is everybody is talking about the gigawatts and not necessarily the gigawatt hours or terawatt hours, right? And we started to see that shift at the ERCOT board meeting last week, Pablo Vegas, CEO. And yesterday here, ERCOT Chair Bill Flores talked about the very same thing, showed the same slide that we are seeing increased use and consumption while demand has actually not increased the last couple of years. Part of that’s weather, but I think part of that is changing use patterns, which is something I think we’ll talk about a lot here, is like freeing up some headroom for some of those AI data centers. Hayden, what are you looking at for 2030?

Hayden Stanley (07:28.686)

Well, I mean, I think over the next five years, we’re certainly in a race to win the AI race. You know, that’s ultimately going to be enabled by power. You know, power is maybe one of the largest waves created by AI. Interestingly enough, it does enable it. So I think that that’s paramount that we achieve some of these goals. You know, when I think five years from now, I think that there’s going to be a lot of innovation that’s going to play a really big role. I think that there’s going to be a lot more, the grid’s become smarter, there’s going to be more communication, more alignment. You’re mentioning, like demand not increasing, but a lot more consumption that just seems like efficiency to me. And, you know, I think things like that are amazing. I think that we’re in a situation where I look at infrastructure maps a lot and I think there’s going to be a whole new layer added on. I don’t know if you guys play with those, but you turn on one layer, another, another. I think there’s a whole new layer of infrastructure that’s about to be added to the map. And it’s really exciting how all of that gets to be thought about and created and developed. So happy to be a part of it and try to help.

Doug Lewin (08:30.382)

It’s a fun time to be part of it. I love the way you said that, that just sounds like efficiency to me. Because I think part of what is happening with discussions on energy efficiency is that actually using more electricity can be energy efficient, right? Particularly if you’re using it for industrial purposes or transportation electrification. Like it’s a good thing to use more as long as you’re using it at the right times and as long as we can move it around. Tom.

Tom McGinn (08:53.686)

Yeah, I mean, I think we’re talking about just kind of lifting the system load factor as a whole, which, you know, hopefully has benefits downstream for recovery of system-wide costs. You know, I think maybe to take a slightly more pessimistic view of what the next five years might look like. You know, we heard previously the backlog around getting new thermal generation online, system loads going up. We’re likely to see kind of increased just base load heat rates at least just through the higher system load factor. Resiliency seems like it’s going to be a continued household concern. Part of me is concerned about what happens to the mass market in this kind of wave of new load. Are they going to get run over for lack of a better term? Are they not going to have adequate representation at some of these policy settings where they don’t have the sophistication to manage load like some of our other large load customers that we talked about today? Yeah, I guess I’m short term a little concerned about what that looks like. I think long term with the continued innovation and the investment in the grid and other technologies kind of coming down the pike here that we would expect to see kind of a return to the abundance that Texas consumers have enjoyed thus far.

Doug Lewin (10:12.224)

Yeah. And I appreciate that little dose of, I wouldn’t even call it pessimism, just like realism, right? That there are concerns for residential consumers. I don’t know. And it’s actually, I think it’s very smart. I wrote down something Chairman Gleason spoke here at this conference on Monday. And he said, we need to make sure consumers are empowered, not just protected. Right? So like consumer protection is in the DNA of every PUC, but how do you actually think about consumer empowerment? Consumers want to save on their bills. They want to be more resilient, as you said, which is probably a great tee up for Zach. Your customers want to be more resilient. Zach, no, just kidding. Start with the 2030 question. Yeah.

Zach Dell (10:52.462)

I’ll be honest, I and the team at BASE, we think a lot more about 2040 than we do about 2030. And there’s plenty of good reason to think about ‘26 and ‘27 and ‘28 and the near term, but our mission as a company is to drive price down and reliability up. And we’re not talking 5% improvements, we’re talking 50% improvements, right? I’m using round numbers here, but we want to make a really big impact on those two metrics. And so to do that, you’ve got to make large investments with a long-term time horizon. And I think there are really strong precedents for this kind of orientation in other parts of technology, right? You saw Uber do it in transportation, Amazon in commerce, SpaceX in aerospace. We’re taking a similar approach to energy where we’re making 10, 20 year investments, both in terms of the technology that we’re developing, but also in terms of how we think about policy. And I think that this long-term orientation, this long-term planning, whether it’s building factories and building engineering teams and working on new technology that’s never been done in this industry, or it’s kind of mapping the policy roadmap to what is the grid of 2040, 2050 look like. That’s where we spend our time less about the 18 months, 24 months, 36 month timeframe. So that’s kind of how we think about the problem.

Doug Lewin (12:04.014)

All right. So let’s come back to this side, Maura. I want to ask you something. I saw a quote you gave in Texas Monthly. It was an article about restructuring that Russell Gold did. He quoted you as saying, ERCOT doesn’t put up roadblocks, it removes them. Do you remember saying this?

Maura Yates (12:20.642)

When was this article? I might have a different response.

Doug Lewin (12:23)

‘23. That’s what I want to ask you. Is that still the case? And I’m curious, like what are the emerging technologies you’re working on? Where are there roadblocks that are actively being removed and you’re excited and where are there roadblocks that actually we need? There’s been a lot of talk here last couple of days about stakeholder process, collaboration, and I think ERCOT is a great place for that. So what are some of those roadblocks that need to be removed to get these next emerging technologies to market?

Maura Yates (12:47.628)

Sure, and I certainly don’t want to point fingers at ERCOT. ERCOT has a lot on their plate. I am not one of the projects that’s in the queue directly impacted by some of the stuff going on. It’s a broader issue outside of ERCOT. I think ERCOT is also sometimes maybe doesn’t get the right direction or other things. So certainly don’t want to take a controversial position on that. In terms of where these roadblocks are, I think the roadblock largely right now is in my eyes a process-driven roadblock, right? We again work on a lot of large load projects. Some of these large loads are located behind the meter, private use networks. Some are just large loads trying to get interconnected that might have been further along in the interconnect process and now are going through a restudy. And when I think about the challenges to getting our portfolio done, it’s really just clarity on what do we need to do? Like, what are the steps to get there and what is the process to get there? And it sounds like a very simple resolution, but I think everybody here who’s stuck in that would probably say, yeah. That’s what I don’t understand is what’s the process to get there. So it feels as if there needs to be some effort to really look at, again, I know I’m pointing out the obvious, people work on this every day, an overhaul to the process and how we approach this problem. You know, we’re going through standard or normal means, whether it’s the standard rulemaking process or other, I understand that there are regulatory requirements, but perhaps we approach this challenge differently. Everybody’s confused on how to move forward. Nobody’s quite sure on where projects stand. That seems to be the challenge right now, a large challenge. Maybe we look at that differently because it doesn’t seem like we have resolution in sight. And to us, that’s the biggest question. That’s the question of how many of those gigawatts get built, right? Like, that’s the question we’re all asking is what’s going to get built? And the question of what’s getting built is, I don’t quite know what’s getting studied or how I have to get this studied to understand what capacity I have so that I can actually go get lending and actually get it built by 2027 or by the timeline that I need. So to us, this is a process conversation. Like the innovation needs to happen from how we are deploying and how we are understanding what that process is to get a large project built.

Doug Lewin (14:56.674)

Yeah. And obviously when you said that a couple of years ago, right? Like these new data centers were kind of a gleam in everybody’s eye. It was starting to be talked about a little bit, but only barely.

Maura Yates (15:05.006)

Yeah, the technologies I was worried back in 2023, we were working a lot with everybody on the stage and having conversations about residential-sized technologies and how do we get an integrated home into the market, right? Something that wraps in the electricity bill, very similar to the value proposition Energy Well and BASE are offering. Like, how do we get those types of technologies into the market? To me, ERCOT still is the great playground to have those conversations. I think ERCOT and the DG, the DER space and the work that we’ve done over the past decade has been a really great welcoming space to bring these technologies.

Tom McGinn (15:40.344)

Smart meters are leaders to that, usually enabling technology that a lot of other markets don’t have.

Maura Yates (15:45.922)

We’ve done a great job at that and ERCOT’s done a great job at that and they have allowed a lot of innovation in that space and I love working on those technologies with these people for that reason. The challenge that we have again is back on large load right now and large load is shifting this market so dramatically because one data center is the equivalent of a huge aggregation.

Doug Lewin (16:05.646)

Yeah. And Tom, let’s actually go to you next sort of picking up on that. You were saying, did you say smart meters and Smart Meter Texas? So this is something I’ve been kind of obsessing about lately. I did a podcast with Sonnen and Blake Richetta, he had this great phrase where he said, shape load perfectly, inject energy optimally. I’ve been thinking about that a lot because that’s really what is going to happen on the resi side. There’s so much, I think in the common understanding and even in industry circles, they’re like, customers aren’t going to do this stuff because you’re asking them to do something when you’re talking about shaping load. A lot of that is going to be done by the very AI we’re talking about trying to accommodate. Can you talk a little bit about the innovation in mass market retail? You have a lot of experience in that area.

Tom McGinn (16:53.496)

Yeah, just to pick up on the thread that Maura started earlier, the smart meter ubiquity throughout the market, the way that ERCOT transparently settles load to those meters enables a lot of product design innovation, at least in our market. I think what we’ve moved to now, I think early product design that leveraged Smart Meter Texas was really build design-driven or, you know, things like TOU products, index products. We’ve moved past that. I think there’s some interesting learnings there, but you know, the future of leveraging this type of technology is I think going to be done by physical products that make the market participation of mass market customers effectively effortless or invisible to them. You know, Blake’s point about perfectly shaping load and optimally dispatching is I think kind of echoing the earlier point about lifting the system load factor. I think just more efficiently using the grid that we have. You know, Zach’s going to be able to go into much more detail about the specific battery operations behind a company like that. But I think they’re all related and whether it’s whole home batteries or whole circuit batteries that are starting to come to the market or smart thermostats or smart EV charging or any of the things like that. They’re all kind of sitting on the same baseline technology of optimizing interval-level usage to respond to price signals.

Doug Lewin (18:28.462)

And these are resources that we’ve barely tapped at all. Like even on cars, I’m kind of amazed at, this thing gets talked about a lot, but there’s more than, that’s a rough back of the envelope, but there’s probably about 20 to 25 gigawatt hours of batteries rolling around on four wheels in the state of Texas right now. And we’re just like charging them whenever.

Tom McGinn (18:46.19)

This is an opinion, but I think part of the reason we haven’t seen more done with that data is just that for the most part, people don’t want to think about this stuff. They get home from work and they turn on their stove or have to do their laundry. They don’t want to check the app for price signals. And so we’ve been lucky to have this kind of multi-year environment with a couple of hiccups of very low pricing, especially relative to the rest of the country. And so it hasn’t spurred the type of innovation that you may expect. I think recent challenges around resiliency and some concern about what future volatility looks like is leading to kind of a different approach now where we’ll see more physical products come to the market.

Doug Lewin (19:26.99)

So Zach, I think that’s like a perfect tee up to ask you about, you know, again, the last couple of days, there has been a very consistent theme through all the different sessions. It was in Hollub Blues’ keynote yesterday, flexibility, flexibility, flexibility, right? And so the demand side has this enormous potential. You guys are focused on that residential mass market. Can you talk a little bit about the flexibility that you’re bringing to market? Pick up on those themes of what are you seeing consumers actually want out of this? And also, I’m just interested also from you in kind of how the go-to-market is working as far as competitive versus vertically integrated, because I know you guys are doing some in both. So if you have a mind addressing that too.

Zach Dell (20:06.2)

Couple of questions there, I’ll try to touch on all of them. I think the panel kind of touched on this, what do customers want? This is a pretty simple question to answer. They want their bills to go down and their lights to stay on, right? So, price down, reliability up. And that’s really our North Star as a business. How do you achieve this kind of flexible, reliable outcome at the max? You have the biggest possible battery on the home. Right? So we make the biggest battery in the market. Our next generation battery will be an even larger battery. Right? So why? Well, because we want to add as much capacity to the grid as possible. That capacity can be used to take the home off the grid in times of high prices. That capacity can be used to serve the grid in the same times, but more capacity is better. Right? So that’s really how we think about it. I think it’s pretty straightforward in terms of go to market. The way we think about this is we have one technology stack, hardware, software, firmware, we can talk about that. It’s vertically integrated and we’re building a factory and all that fun stuff, but the whole technology stack is aimed at these North Stars of price down, reliability up. That’s true in our deregulated gen-tailer business, and that’s true in our utility partnership business, where we go provide that same technology stack, the hardware, the software, the firmware, to regulated utilities, and then they get to go deploy that technology in their service territory to do what? To drive prices down and to drive reliability up, right? So it’s the same value proposition, same technology stack, different business model. We think that the long-term future of the company actually is more so focused on being a technology vendor to the utilities than just a deregulated gen-tailer in Texas. And we’ll grow the gen-tailer business in Texas. We’ll do it in other markets. We might do it in other countries. But the vast majority of the grid in the United States and the world is regulated and for good reason, right? And we can talk about why. And so we want to be the preferred partner to those utilities and really their outsourced R&D function. So the technology is the same, the value proposition is the same, the business model is just a little bit different.

Doug Lewin (22:09.582)

And you just, I don’t know if you can’t answer this, can’t answer it, but the size of the batteries, you said they’re getting bigger. Like, what are we talking about?

Zach Dell (22:15.394)

Yep. So our current product is a 25 kilowatt hour system that we primarily, if there’s room and the customer wants it, which they typically do, we install in parallel. So it gets you to 50 kilowatt hours.

Doug Lewin (22:24.908)

You get a couple days even in fair weather.

Zach Dell (22:27.634)

Our next generation product is a 40 kilowatt hour battery that we again install in parallel often to get you to 80 kilowatt hours. So that’s massive amounts of capacity on a per home basis. And then we’ve recently announced our generator integrated product. So we actually have a portable generator integration for our current product where you can take a $500 portable generator that you can buy on Amazon and you can plug it into your BASE battery. Obviously that portable generator isn’t able to power the whole home, right? But the BASE battery is and you can use that generator to charge your battery to keep you powered through a long duration outage. So we’ll continue to develop new technology like this to extend duration, add more capacity on a per home basis, which we think really is the way to solve kind of both of these problems that you’re highlighting.

Doug Lewin (23:09.324)

Before we go to Hayden, just also just want to give folks a sense of the scale of this, because I sort of hear this a lot is like, well, we’re doing so many batteries on the bulk side. What is the demand side? Can you talk about the scale you’ve reached so far and kind of the pace you’re going at as far as adding this? Yeah.

Zach Dell (23:23.15)

We’re growing fast. We’ve got over 100 megawatt hours on the grid here in Texas, rapidly approaching 200 megawatt hours. We’re adding over 20 a month. We think around this time next year, we’ll be on the order of 100 a month. So we’re building a factory here in Austin, capable of four gigawatt hours a year. That’ll be our first factory, which is really kind of not a prototype factory, a way for us to, we think about things in terms of crawl, walk, run, right? So develop the technology, test it, then make sure it works, then scale it up. Factory one will be sizable, four gigawatt hours is not small. Factory two will be much larger. And we’re already thinking about that and making some investments in that direction that we’ll be able to talk more publicly about soon. Yeah, I mean, I think we’re the fastest growing battery developer in the state, certainly, and probably the country. And we’ll continue to grow at that deployment rate over the next couple of months.

Doug Lewin (24:11.022)

And part of my reason asking that question is just, I’m hoping to the audience in the room and to those that are listening to the podcast, the scale of this is really starting to, I’m hoping it’s starting to take hold with folks. Like the podcast I have coming out tomorrow, Travis Kavulla from NRG, they’ve got a one gigawatt VPP they’re working on. He said on that podcast, they were at, I think at 150 or something like that, 100, 150 somewhere in their megawatts already. You’ve obviously got Tesla out there, Swell and Octopus. We are starting to see gigawatt scale. There’s already six gigawatts of distributed assets already out there that ERCOT has measured. So when we’re talking about these large numbers of growth on the bulk system, we also need to be thinking about the distributed system as scaling. All right, Hayden, I want to ask you something sort of obviously related, but a little bit different and actually hasn’t been talked about a ton at the conference here, but you know, it’s a big deal in Texas and nationally is the repeal of the IRA. What does that mean for you guys and your changing business and sort of the pace and economics of building new gen in ERCOT?

Hayden Stanley (25:17.652)

Sure. Well, that’s a really easy one. I’ll take that one head on. Sure. So, you know, there’s probably folks that are on both sides of it, you know, on one side, you know, we want large degrees of security, on the other side, there’s a lot of people who just don’t want the rules to change. Yeah, you know, I understand both sides of people who want it and don’t want it. I’m really glad that I get to be in the position of someone who gets to respond rather than having to make the decision on the legislation. So I get to, you know, Monday morning quarterback over here, but you know, I think that ultimately what happens is it levels the playing field and in doing so it creates more competition and it allows there to just be a lot of innovation and the best business model wins and you get to figure out what that is. And that’s happening in real time and it allows, you know, smart and agile teams to be really creative and push innovation into the space. I think ultimately customers win whenever there’s a lot more competition. So that’s great. I think that, you know, in doing so we like to be highly competitive ourselves. The best way you can do that, serving power is you can either figure out ways to make more money or you can figure out ways to save money. And so figuring out ways that we can synergize our operations, we are vertical, we do our own EPC. We try to have the lowest net build cost out there. And so that’s really something that we really focus on. It’s easier to save a dollar than it is to earn one because earning one’s risky and other things.

Doug Lewin (26:41.432)

So you see one of the main things about the repeal of the IRA being sort of driving efficiency.

Hayden Stanley (26:44.85)

Driving efficiency, you know, that’s on one side. Efficiency is on one side of it. Cost savings is on one side of it. You know, another thing is, you know, we really focus on the DG level. So we’re deploying 9.9 megawatt assets and you know, would I rather have a 100 megawatt or 200 megawatt asset or 10, 10 megawatts or 20, 10 megawatts? I think I would take seven 10 megawatt sites over one 100 just because you get diversification of risk and the portfolio effect. But with that being said, we’re more so looking at this 9.9 megawatts of interconnection capacity as a resource. And, you know, the prior business models of the past are not set up for the future. And we are pairing resources. We are stacking advantages to be prepared for these non-scarcity years, such as 2024, 2025. We’re really focusing on the intrinsic value of the assets that we’re building. And if they’re not underwritable from an intrinsic view, it’s not something that we’re interested in. So we’re really trying to create more value and being more innovative in our own deployments in order to survive those years. You know, we somehow entered the data center space. We really couldn’t help ourselves. We came by, came across a site that has literally everything you need. 138, 345 kV lines, plus three natural gas pipelines, 20 minutes from a major metro area with a lot of acreage, right? It’s something that we’re like, hey, we’ve got to get involved with this. And even with everything on site, the data center world, it’s complex. It’s a very complex animal. And having to bring all the power behind the meter and the complexities of SB 6 and how the TSPs are viewing load versus co-located generation, it’s creating a scenario where you have to paint this power story and these systems are complex, especially getting them online. And so I think that I may have a view of ERCOT where, you know, maybe the demand story isn’t so bullish and maybe it’s a bit more bearish because there’s potential for delays for regulatory compliance and things of that nature. And what happens with all of these things, you know, it’s a lot of demand, but they’re all bringing really big plants behind them. What does that really look like? So we’re having the view into kind of that demand side with still building generation assets. We’re really preparing for non-scarcity years and really focusing on intrinsic value. And that’s kind of how, you know, a repeal of a certain regulation just kind of forces you to think differently across your entire business portfolio.

Doug Lewin (29:20.302)

All right. So in just a couple of minutes, we’ll go to questions from the audience. Before we do that, though, I want to also ask you, Maura, related to that, right? Hayden’s talking about a lot of the complexity that could really slow that down. I know that’s a lot of what you guys are dealing with. So you guys are putting together a dashboard to kind of look at all the different things that are going on. So what do you see as you’re talking to people out there as far as, what are those roadblocks? If you take more of a bearish case, you look ahead to 2030, like we haven’t built out as much data centers as we all maybe hoped or thought, what’s kind of got in the way. And that way we can sort of anticipate it and hopefully not let it happen.

Maura Yates (29:57.816)

Sure. So if we get to 2030 and we’re kind of cruising along still seeing the same steady load growth, I think one of the things we need to clearly continue to evolve is our data use and our data around some of these more remote sites. So one of the challenges we have is we’re seeing a lot of load growth in remote areas. And as a result, we don’t have the same quality of data that we were talking about earlier. We have wonderful quality of data on our residential loads, which is great because they drive a lot of the volatility in the market. We want to see how those behave. And again, the real-time behavior is really important on those. But at the same time, we also have a lot of these large loads and—sorry for being the large load voice on this panel—but we have a lot of these large loads where we don’t have data visibility and granular visibility into what’s happening. Not all these loads have an EPS meter or the right metering infrastructure for us to see that data even, you know, five days in arrears if they don’t have the telemetry or a QSE on site.

And so I think as we continue to move forward, we have to understand how we use data better and we get good data off really important assets. Again, that sounds like a really obvious point, but it’s not working well enough right now. So we need to continue to work on how we get data off some of these larger assets in the market. I think one of the other things that we want to be thinking through is also just—we spend a lot of time in legal and in contracting and how you create contracts that are nimble and grow and evolve with the market as there are uncertain times. I think, again, through all these large loads and working through contracts that perhaps have tenor that extends beyond this five years that we’re talking about. So how do you create a contract that is de-risked for all parties, able to go get lending, that also recognizes and acknowledges the market’s going to change in the next five years and we don’t know, and the market’s specifically going to change around things that impact your load? And so I think the other thing that we’re trying to focus on is the perfection of contracting and how you create the right contract and document set for a very, very boutique product. Every site has different needs. Every site has different lenders. Every site has different operations. So how do you evolve that contracting structure so that five years from now, you’ve got all these participants in the market who have been trying to get in for five years, but in a structure that supports reliability, supports performance, and doesn’t drive bankruptcies and a whole other kind of next generation of problems to solve.

Doug Lewin (32:22.04)

That’s really interesting. I think most people think about the data problems as being more on the residential side. Maybe it’s just me, maybe I’m just totally off base on this. I think of the big customers—data is something everybody’s got. But it’s a brave new world, right? These are developments, like you said, 800 megawatts. We haven’t seen anything like this.

Maura Yates (32:41.902)

We just launched a platform that we built off of our own internal operations because it’s how we look at data and we really care about how these large loads behave. And we really care about it at an interval basis. And when you don’t have that data at an interval basis, what’s the other data you need to look at? So it’s something that we think is super important and we’re trying to lend our learnings to the market to also have access to the best data available today.

Doug Lewin (33:06.584)

So before we go to the questions, anything y’all want to say in response to each other?

Tom McGinn (33:09.558)

I have a question about what you just brought up, if you don’t mind. So are you saying that, let’s say you have a very large load that is committed to be price responsive or something like that, let’s say you have a price spike, the large load curtails, but your initial data is going to show what?

Maura Yates (33:27.918)

Sometimes it shows in our large loads that that load never curtailed in our initial settles. And again, I’m not trying to put ERCOT in a hot spot, so please don’t take it that way. But sometimes based on the load profile, based on, again, the meter and the communication available at that site that’s available to the TDSP—it might not be the TDSP’s fault—that load, we won’t get actual meter data until that meter is read 30 days on the 30-day mark. And that’s when we actually see how it behaves. So our initial settles might not reflect the price-responsive load actually curtailing. It might actually be settled off of a profile settlement, which is, when you think about it, these are really large loads, a big piece of...

Tom McGinn (34:04.716)

Huge dollars on the initial settle, but you’re working capital flow to support that.

Doug Lewin (34:10.446)

All right. Okay. So let’s go to some of the questions here. Let’s see. So I’ll go with the one that’s upvoted the most in the room. No one seems to talk about the water issue. There seems to be a lack of water, which will prevent generation from coming online. It’s also—there’s water associated with data centers, obviously. So that’s a really good point. Water is often sort of overlooked. Does anybody want to take that one?

Maura Yates (34:30.893)

There’s a reason we haven’t talked about it, I guess. None of us want to—I’m not a developer. I’m going to absolutely punt to the developers of those assets. But I do know through the permitting process and through a lot of the AHJs, they’re looking at the water requirements. And I think there’s a lot of technical evolution in terms of cooling technologies out there to require less water.

Zach Dell (34:51.534)

Yeah, I’m certainly not an expert on this topic. There are some very smart people working on water problems in Texas. In fact, my sister is working on this and spending a lot of time thinking about it. Our generation technology requires 0.0 gallons of water. So there certainly are—I think the cooling point, Maura, is a good one. And that was a challenge that data centers face. If you’re looking—I mean, why is Northern Virginia a place where all these data centers go? There’s a bunch of things, there’s permitting things and real estate implications, but a lot of it is the climate. Texas is very hot, as we all know. You do have to cool down these GPUs and that does take a lot of water. But not all generation technologies do require water. Obviously data centers are not necessarily generation, they’re load obviously. So, but yeah, it’s a complicated problem and I certainly don’t have any...

Doug Lewin (35:32.12)

I do think it’s a really important point. It’s not actually talked about a lot with renewables and storage—that there really is minimal water there. Obviously water use is mostly agricultural and the power sector is a slice, but it’s—other than washing some panels and stuff like that, you do get major water savings from renewables. Do you want to say something on this one?

Hayden Stanley (35:53.006)

Sure. Yeah. A lot of the data centers are moving to closed-loop designs to alleviate that. They’re building these things in the desert, but on the power gen side, a lot of the behind-the-meter thermal—I mean there’s certainly a requirement where you need water to operate those.

Doug Lewin (36:09.056)

And I think the trade-off there, right? If you’re reusing the water, you’re going to use more power because you’ve got to keep that water cooled, right? So there are these trade-offs.

Hayden Stanley (36:17.964)

Right. And some assets use more than others do. So if you’re using different types of thermal, they require different levels of steam.

Doug Lewin (36:28.962)

All right, somebody’s asking a question of me that got upvoted. Is this a tough question? Should I ask myself? What would be your one policy you’d implement in Texas if you could? A carbon tax? No. Incentive for clean dispatchable resources? There has to be some ambitious policy post-IRA. What is it? So I would think probably half this group can probably guess what I’ll say, which would be a real focus on getting rid of resistance heat and putting in high-efficiency heat pumps. And I’d like to see that done with market-based solutions where we actually have some price discovery, where it’s not just like pick a price and pay this incentive. We don’t know, are we paying too much? Are we paying too little? Introduce some competition into the demand side. I’m supposed to be the moderator. Any—y’all want to say anything about that?

Tom McGinn (37:13.422)

I’ll echo your point. I agree with you. I think the resistance heating or just inefficient heating in general in the mass market space is a serious issue that we see in risk management and load forecasting and stuff like that. So I agree completely.

Doug Lewin (37:26.528)

And it very much relates to what we were talking about earlier with shaping load, perfectly adjusting energy optimally. You’re not shaping load perfectly if in the wintertime a house is using 10 kilowatts and an apartment’s using five kilowatts all through the night. We’re not shaping that load. And it’s those peaks that we’ve got to be able to manage to be able to bring data centers and all kinds of other stuff on. Okay. There’s one for Zach. Zach, when are you expanding to California?

Zach Dell (37:51.468)

We’re working on it. We will share more about our expansion plans outside of Texas in the coming months, but we’re talking to regulated utilities in a number of states that have expressed interest in our technology, California being near the top of the list. So I don’t have a firm date for you. My hope is 2026. I’m pretty confident that we’ll be able to—I’m quite confident that we’ll be moving outside of Texas in 2026. I’m hopeful that California will be one of those states because California is a place that obviously has a massive need for batteries given the penetration of solar.

Doug Lewin (38:19.662)

This is a question from the audience. The panel’s outlook is pretty bearish about demand growth in ERCOT, but bullish on the technological innovations on the supply side. Will the technology be deployed without the demand?

Maura Yates (38:29.39)

I think so. That’s what ERCOT is known for. Back to that earlier comment that I still stand by from 2023. ERCOT is the right place for experimenting with products and technology and testing how a market responds. I think as we introduce new price signals, we’ll start testing other ways new technologies behave with the RTC plus B. What does that do? Does that introduce new technical innovation? But I think we continue to be really right for that.

Tom McGinn (38:54.38)

Yeah, I don’t think anyone’s bearish on load growth. Load growth is already here, right? And so, I mean, the existing infrastructure is aging, load growth has happened. There’s questions about how much future load growth there will be, which I think are valid given the state of the interconnection queue. But yeah, I just wanted to push back on bearish load growth.

Hayden Stanley (39:15.33)

Yeah, I think that the projections are what? A hundred percent increase by five years or something crazy. So, I mean, I think that it’s the relative nature of it—maybe where we should backtrack the pace of this—but the growth is still going to be very, very, very high relatively. So I wouldn’t say the outlook is bearish.

Zach Dell (39:35.758)

Yeah, I would add, I would go back to the first point I made, which is we think more about 2040 than 2030. So yeah, we are going to continue building technology to drive price down and reliability up. And what happens next year and the following year matters, but is not really where we’re focused. We’re making long-term bets. And I think my hope is that other technology companies take the same approach because that has worked out really well in other industries.

Doug Lewin (39:55.982)

Yeah, I think the only bearishness you’re probably hearing is just like, how are all these rules around SB 6 going to get worked out? There’s a lot of uncertainty. Is that going to kind of slow things down? But to your point, a 25% increase—we were like 400 terawatt hours four years ago. We’re probably going to be just short of 500 terawatt hours in 2025. Again, I think we need to think big, like, you know, maybe even doubling that number in a six to ten year kind of a horizon, but really managing that peak. If we get to where we’re double the peak, but not triple the consumption, then we’ve done something very wrong. All right. Maura, Hayden, Tom, Zach, thanks for being here. Please join me in thanking the panel for a great discussion.

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