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Robinson Meyer:
[1:26] It is Friday, February 27th. I’m Robinson Meyer, the founding executive editor of Heatmap News. Since Zohran Mamdani’s campaign in New York City last year, the watchword of progressive campaigns everywhere has been affordability. And now lots of climate groups are getting in on the act too and talking about affordability, inflation, particularly electricity affordability. And this question of, are power bills too expensive and what can be done to bring them down? And I get it. Listen, there were moments last year where electricity prices were increasing twice as fast as inflation, and that was before the tidal wave of new data centers came online. But is it a mistake to anchor climate politics, this big global issue, so tightly to these questions of domestic electricity affordability? Well, joining us today to talk about it is Jane Flagle. She’s done everything. She’s been everywhere, and she’s someone I always like to talk to about the wide world of climate and energy policy. In 2021 and 2022, she was Senior Director for Industrial Emissions at the White House Office of Domestic Climate Policy. She’s since then worked in climate policy at Stripe. She was recently executive director at the Blue Horizons Foundation, and she’s now a senior fellow at the Searchlight Institute and the States Forum. Jane and I have a big fun conversation on this show about two different philosophies of how to run the power grid, what we can learn from Texas and France, at least in the rest of the United States, and whether affordability is the wrong way to talk about climate politics. All that and more. It’s all coming up on Shift Key, a podcast about decarbonization and the shift away from fossil fuels.
Robinson Meyer:
[2:54] Jane, welcome to Shift Key.
Jane Flegal:
[2:56] Thanks so much for having me, Robinson. Great to be here again.
Robinson Meyer:
[2:59] Jane, you’re always someone who I like to talk to who’s thinking about different topics in climate advocacy. We always check in. Now we’re doing it for Shift Key. I’m going to just start off by asking, over the past six months, in some ways since the Mamdani campaign in New York, there has been this massive stampede of advocacy dollars, of progressive communications, of climate communications to talking about affordability. And that’s had some interesting secondhand byproducts. We can talk about how that happened. But do you think it’s a mistake to focus on electricity affordability as much as everyone is now focusing on electricity affordability?
Jane Flegal:
[3:37] Yeah, it’s a good question. I mean, in a way, it’s like it’s about time that the climate community focus more squarely on electricity affordability, not least because, all of our visions for decarbonization depend on rapid electrification of the entire economy, which means that every other sector of the economy then becomes a consumer of electricity. And quite obviously, that won’t happen if the prices of electricity are too high. So A, I think some people have been claiming to be advancing affordability in the climate domain for a long time, but now everyone’s doing affordability.
Robinson Meyer:
[4:17] Everything is an affordability policy.
Jane Flegal:
[4:19] Even if the policy is exactly the same as it was before, before the articulation of affordability as the rationale. And so because I do think that like it is an imperative for like a politically sustainable transition to an electrified economy, and not just an electrified economy, one where electricity is powering significant economic growth and new industries, leaving aside AI, right? This would be a huge challenge for our country.
Robinson Meyer:
[4:48] Right. At the same time, we’re talking about electricity affordability. There’s all this attention devoted to load growth and the fact that electricity demand is increasing. And that would have been happening now anyway, even if artificial intelligence remained a glimmer in Dario’s eye or Sam Altman’s eye, we would still be beginning to grapple with electricity demand growth again, because the reason we haven’t had growth since 2005 is because everyone was transferring from incandescent lights to compact fluorescent lights. Then we had a recession and then everyone transferred from compact fluorescents to LEDs. And now LEDs are, they’re probably in more than half of fixtures across the country. And so we kind of got all the juice we could out of that particular efficiency squeeze. And so we’d be seeing load growth anyway.
Jane Flegal:
[5:36] Totally. And if we are lucky, we will see electricity load growth, right? Both for our climate objectives and for like the functioning of our economy. Like load growth is good. Like it is good. Now, one can litigate the social value of particular industries or the behavior of particular industries, whatever. But as a matter of energy policy, That is just true. So for that reason, I’m sort of like, it is an imperative for all of us who care about climate to make sure that electricity is affordable so that we can electrify everything else. It is also critical that we have a lot of affordable electricity to electrify everything else. And I guess where I feel a little tied up in knots myself right now is like the conversation about what affordability looks like is highly focused, and narrowly focused, I would argue, on this like very short-term acute concern about meeting data center demand and like making more efficient use of the resources we already have to meet that demand. If we weren’t imagining a world with load growth at the scale we want to imagine that might be fine but like.
Jane Flegal:
[6:47] No amount of efficiency, of demand response, of getting more out of the grid.
Jane Flegal:
[6:52] We cannot like VPP our way to 2x-ing the grid in a decade and a half. You know what I mean? So like we are going to have to find a way to thread the needle here between cost constraining measures in the near term, including getting more of what we’ve already built, with the like actual very real imperative to build a lot more stuff very quickly.
Robinson Meyer:
[7:14] Let me go back and just gloss some of what you said, because you said initialisms that I think are familiar to you and me that I would imagine are familiar to many of our listeners, but perhaps not all of them. I believe the big one was VPPs, which are virtual power plants. A virtual power plant, as you could read on Heatmap, we’ll stick in the show notes, and my colleague Katie Brigham’s recent story, is a set of residential rooftop solar panels, residential batteries, residential HVAC systems, residential appliances, maybe EV charging, all strung together in a big software organized system that can respond to either demand fluctuations in the grid or price action in the grid to make sure that all those things are either sucking up power from the grid when it’s cheap or when clean energy is abundant or putting it back in the grid or at least reducing the amount of energy that homes are pulling from the grid during moments of peak stress. And I think what you’re implying is that
Robinson Meyer:
[8:16] We are watching a moment in the electricity sector where gigawatt scale facilities are beginning to come online, where we are going to need gigawatts of new demand to meet growth. And the playbook that is being deployed is one focused perhaps on making sure that we get the most out of all the generating assets, the power plants, the poles and wires, the transformers that are already out there to basically shave those moments of peak demand so that they don’t stress the existing system. And you’re saying, yeah, that’s important. But for the amount of growth that we’re seeing and for the amount of growth that we need to see, we actually need to be ready not just to shave those moments of peak demand, but to grow the grid at an infrastructural level and prepare for serious, serious load growth, which may be the tools that we’re using, such as and Trying to get homes in these virtual power plants, trying to get people to time their EV charging, either through incentives or through software, so that it doesn’t stress the grid at its most congested moments is like not enough to meet the challenge that we’re seeing.
Jane Flegal:
[9:29] Yeah, I think that that’s right. And that’s not to be dismissive of that set of interventions. I just think it is potentially necessary. Although, to be honest, I think there are real questions about the barriers to scale for some of these things. Like VPPs do not exist at the scale that we are imagining them to exist at in the same way that like small modular reactors don’t, right? Like these are all kind of imagined future states. And so like I just get anxiety about betting the climate on like one of those things.
Robinson Meyer:
[9:59] By the time we release this episode, we’ll put out this conversation I just had with Peter Freed, his former head of energy policy at Meta. And one thing he was saying is that all these data centers are basically not preparing to receive power from the grid until 2030. And so they’re all building giant on-site gas generation, basically with batteries to prepare just to be able to operate until they can get a grid hookup. Which number one suggests that a moratorium on data center grid connections would not be a very useful policy because that just means they’re going to burn 100 gas rather than whatever you can public policy your way into making the local grid but number two actually does to me, though, suggest that this set of tools that might be coming on online in 2030, maybe large scale VPPs, but also next generation nuclear, or at least a new fleet of current generation nuclear reactors.
Jane Flegal:
[10:55] Or geothermal.
Robinson Meyer:
[10:56] Or geothermal. Suddenly those tools become things we should be thinking about, because it sounds like 2030 is actually kind of when we will begin to need these tools since data centers
Jane Flegal:
[11:06] Have evidently decided. That really bums me out. That really bums me out. And like, it also goes to the affordability question, right? Like the notion that we wouldn’t take advantage of near-term demand and near-term demand that seems quite willing to pay for energy, that we can’t find some way to like leverage that to do the kind of supply side investments we need to have without having it all be on the backs of rate payers. It actually could be an opportunity, but instead it’s all viewed as downside risk. We could be not just expanding the denominator, but redistributing who actually is paying for this stuff outside of just the rate payers if we were creative here, instead of just being moratorium on great connections or whatever. That’s part of the problem that I’m frustrated by right now.
Jane Flegal:
[11:55] I just think we need much more creative thinking on this set of issues.
Robinson Meyer:
[11:59] So stipulated that this conversation is not so you can announce your big policy playbook of tools and policies that will actually solve these problems, but what kind of policies are you thinking about that would solve these problems and that you would contrast to the demand-shaving, efficiency-focused policies that are maybe already out there?
Jane Flegal:
[12:19] I am really trying to think about this more seriously right now, and people smarter than me should actually be in charge of figuring this out. But I think one thing is like a.
Robinson Meyer:
[12:29] Call for papers. This is a call for papers.
Jane Flegal:
[12:31] Someone please, someone please write these papers. I think one thing is like, We need to lower the cost of capital for grid scale projects, right? And so like, I think this question of how do you better use public financing, like you don’t necessarily have to go to like full throated public ownership of grid and grid assets, but like some kind of like, how do we better leverage the public to try to get whoever, utilities or developers or whatever, to use more cheap debt and less equity. To finance energy projects, I think is like a really underexplored set of ideas. And I would love to see more creative thinking on that set of issues, like whether it’s bonding or I don’t know, I think there’s like a bunch of things that you could do there. And then another thing is just like much more effective grid planning. And the Federal Energy Regulatory Commission has this like order 1920.
Jane Flegal:
[13:31] Which is meant to force entities to not just plan for like the lowest possible load growth scenario in the next two years, but to plan over much longer time horizons and to plan for a range of scenarios, including like a high electrification scenario. I think improvements to grid planning, whether that FERC 1920 stuff can actually have teeth, whether it actually matters, I think is an open question, but it could be really powerful. And like tools in that category of grid planning for growth, not just grid planning for flat demand, which is what we’ve been doing for more than a decade, I think is really important. The other category of things is what a lot of people talk about, which is.
Jane Flegal:
[14:17] Citing and permitting challenges like we do actually genuinely have to do have to do permitting reform i continue to perhaps foolishly be bullish on federal permitting reform i think if you could get a federal deal that dealt with sort of what people are now calling permitting certainty you know the ability for the executive to like muck around and permits willy-nilly basically and something on transmission, like changes to the Federal Power Act that might help with this transmission planning and financing issue, and changes to NEPA and potentially the Clean Water Act. That, to me, would be very helpful.
Robinson Meyer:
[14:56] There’s something in there, too, that I want to just call out because I’ve been thinking about it as well, which is I think we made a mistake when we called the current House and Senate energy bill permitting reform and then grouped transmission under permitting reform, because permitting reform is primarily about things like the National Environmental Policy Act, about the kind of procedures you have to step through in order to build a kind of large-scale infrastructure project, who has the ability to approve those large-scale infrastructure projects. And for long-distance, large-scale transmission, there are key permitting barriers. However, there’s another part of the transmission package in front of the House and Senate, which is really not about permitting at all, and is usually called cost allocation. And I just want to emphasize that cost allocation is so important. Right now, if there are two utilities, even if they want to build a power line between their territories, they will have to figure out how to divide up the costs on a completely ad hoc basis, which is not how we fund other kinds of infrastructure.
Robinson Meyer:
[15:59] In a grid region. And what that means is that we actually don’t know the amount of transmission that would instantly finance itself in the country, were these rules to exist. Because with the lack of rules, nobody can go out and do a study on what transmission would be economical that we don’t have right now. Because we don’t know how the cost would be divided up. There’s no playbook on how that should work. And so I just want to emphasize that.
Jane Flegal:
[16:28] I think that’s totally right because the transmission section is really much more about like Federal Power Act reform than it is about NEPA, right? Then there’s like a separate set of issues around NEPA. And then like the last thing that I’ll mention on some of these like cost mitigation strategies is supply chain dynamics, which continue to be in a way that I always find surprising because I forget that we live in a physical world even after COVID. I’m like, oh, right, like, no one can get transformers. And like, I still am confused about whether anyone can or cannot get a gas turbine. And then certainly the tariffs and the foreign entity of concern requirements, there are all these ways in which we’re mucking around in like, the costs of our infrastructure for energy and other things like the tariffs are bad for energy infrastructure of all kinds, whether it’s oil and gas or clean energy. So I mean, those are all things that I think are worthy of further exploration for sure.
Robinson Meyer:
[19:04] I feel like there are two big schools of thought on utility matters right now. And I’ve been grouping them as ERCOT or EDF. So ERCOT is the Texas grid. It has an extremely competitive market-driven approach. Famously, its biggest market is this energy market. It allows prices to get extremely high in that market, thousands of dollars per megawatt, in order to make that market clear. It has an interesting structure where it has both a spot market for electricity on the moment-to-moment basis and also a robust set of rules governing two-party arrangements in ERCOT. It’s a very competition-based form of structuring a grid. Then you have EDF, which is a French utility that built a lot of nuclear power plants at the same time in the 1970s and 1980s and did so eventually very cheaply and now supplies extremely cheap and carbon-free electricity to the nation of France.
Robinson Meyer:
[20:11] I feel like people tend to go one or the other way when they are thinking about where the grid should go. There’s a set of ideas that say, actually, utilities should only control the distribution grid. And then you should be able to choose a retailer of electricity to sell you electricity, like you can choose a retailer of electricity in Texas. And some people say, no, no, no, actually, we want utilities to be big, to be full monopolies. We need to regulate them differently perhaps, but we want them to be able to embark on these big capital projects that where they outlay huge amounts of money on a forward going basis to make sure that a service area can meet its electricity demand for a decade or two decades to come, much like France did in the 1970s with its giant nuclear power plant buildout. And I would say there’s some evidence on the latter side in that the only There were a number of different offshore wind projects that were undertaken
Robinson Meyer:
[21:10] during the Biden administration. And the one that got to completion relatively early was this Dominion offshore wind project in Virginia, which is overseen not by a state entity, but by a monopoly utility, a regulated monopoly utility. Where do you come out on this debate?
Jane Flegal:
[21:27] Like any thoughtful policy analyst, I refuse to choose a side. I think there are lessons from both that are worth taking. Right. So I do sometimes wonder if I could rewind the clock. Do I really believe that restructuring was a good thing to do? I don’t actually know that I have an answer to that. For me, it feels quite complicated. There are for sure, and I’m sure this is true in the literature, efficiency gains associated with market competition on the generation side. But all of this has happened again in a time of flat demand growth, right? So like, fine, maybe that’s what you care most about when you’re not tripling the grid, right? You’re like, okay, cool. Like what’s most important is having the generators compete. One thing you give up is that you don’t have the same level of kind of like centralized planning and oversight that you have in a vertically integrated market with a public utility commission and a state setting policy objectives in overseeing these things. Now, Texas, I think there’s lots to be said about kind of the market logic there. But I think one of the things that I think is most important about the Texas model is the way that they’ve approached transmission.
Jane Flegal:
[22:43] So there are a couple of things about Texas. One, they have incredible natural resources. So they don’t have to mandate anything about renewables deployment in that state, right? And like, it’s just a very good latitudinal environment to build.
Robinson Meyer:
[22:59] And they have incredible natural resources, no matter what resource you count. So they have abundant oil and gas if you don’t care about carbon, and they have abundant wind and solar if you do care about carbon.
Jane Flegal:
[23:09] Exactly. And they have... Faster interconnection and siting than almost anywhere else, in part because they have streamlined their transmission siting process. And they did these, what is CREZ, competitive renewable energy zones.
Robinson Meyer:
[23:23] They basically centrally planned transmission.
Jane Flegal:
[23:26] Yeah, they like basically did the thing that I’m saying we should do at a national scale, which is like build it and they will come in terms of demand and customers and plan proactively.
Robinson Meyer:
[23:36] Back in the 2000s, Texas built out this giant transmission line out to West Texas, where at the time there was very little generation because it anticipated that people would eventually build wind turbines there. And then the cities in eastern Texas would benefit from cheap electricity from West Texas. What’s interesting, if you go back and read the press accounts of this decision, is that it was all about this gap in timing where people said it takes two to three years to build a wind farm, but it takes six to 10 years. Now it’s longer than that to build a transmission line. And so people will never build wind farms unless we start building a transmission line. So we should front run a transmission line and then people will invest in wind farms once they know that there’s going to be a transmission line between West Texas and East Texas. It’s an interesting case because it’s a, it is a centrally planned transmission line. And I think the Texas example speaks well of centrally planned transmission, but it’s done so with a kind of market failure logic to it where nobody’s going to invest in wind unless we build a transmission line first.
Jane Flegal:
[24:34] Which is fine. Like that’s fine. That’s fine as far as I’m concerned. Like that’s why I’m unwilling to pick one of your two paradigms. I’m kind of like some blend of these two things feels both like potentially politically plausible to me. And like you might be able to kind of navigate this such that you sort of get the best of both worlds. The other like crazy idea I’ve been toying with on this issue is like, In Texas, the thing that is supposed to make sure that you have reliability is that you have like scarcity pricing, basically, right? Like prices are supposed to go very high when you have a need for more supply and that’s supposed to bring more supply online. In other markets like PJM or whatever, you have capacity markets, which are a different way of trying to address this issue of getting like more supply online such that we have reliable systems. I think both of those are like not great like they’re both they’re both kind of like struggling in their own ways you saw with like winter storm uri in texas some of the frailties of their model and then obviously I genuinely don’t want to talk about PJM anymore but there’s what’s happening there if we really were to get away out of this like scarcity mindset on the energy supply side you could imagine a world where like I don’t know the federal government had a basically like.
Jane Flegal:
[25:51] Like strategic reliability reserve or something where like they were the government was actually like backstopping or financing this issue of like peak demand for reliability purposes.
Robinson Meyer:
[26:04] What’s interesting is the scarcity model is driven by the fact that ultimately rate payers that is utility customers are where the buck stops and so state regulators don’t want utilities to overbuild for a given moment, because ultimately it is utility customers. It’s people who pay their power bills who will bear the burden of a utility overbuilding. In some ways, the entire restructured electricity market system, the entire shift to electricity markets in the 90s and aughts was because of this belief that utilities were overbuilding. And what’s been funny is that, what, we started restructuring markets around the year 2000 for about five or six or seven years. Wall Street was willing to finance new electricity I mean I hear two stories here basically it’s another place where I hear two stories and I think where there’s a lot of disagreement about the path forward on electricity policy and that I’ve heard a story that basically electricity restructuring starts in the late 90s you know year 2000 and for five years Wall Street is willing to finance new power investment based entirely on price risk based entirely on the idea that market prices for electricity will go up. Then three things happen. The Great Recession, number one, wipes out investment,
Robinson Meyer:
[27:19] Wipes out some future demand. Number two, fracking. Power prices tumble, and a bunch of plays that people had invested in, including then advanced nuclear, are totally out of the money suddenly. Number three, we get electricity demand growth plateaus, right? So for 15 years, electricity demand plateaus. We don’t need to finance investments into the power grid anymore. This whole question of can you do it on the back of price risk goes away because it’s electricity demand is basically flat and different kinds of generation are competing over shares and gas is so cheap that it’s just whittling away.
Jane Flegal:
[27:56] But this is why that paradigm needs to change yet again. Like we need to pivot to like a growth model where, and I’m not, again.
Robinson Meyer:
[28:06] I think what’s interesting though, is that Texas is the other counterexample here because Texas has had robust load growth for years and a lot of investment in power production in Texas is financed off price risk, is financed off the assumption that prices will go up. Now, it’s also financed off the back of the fact that in Texas, there are a lot of rules and it’s a very clear structure around finding firm offtake for your powers. You can find a customer who’s going to buy 50% of your power. And that means that you feel confident in your investment. And then the other 50% of your generation capacity feeds into ERCOT. But in some ways, what the transit, the transition that feels disruptive right now is not only a transition like market structure, but also like the assumptions of market participants about what electricity prices will be in the future.
Jane Flegal:
[28:51] Yeah, and we may need some like backstop. I hear the concerns about the risks of laying early capital risks basically on rate payers in the frame of like growth rather than scarcity. But I guess my argument is just there’s ways to deal with that. Like we could come up with creative ways to think about dealing with that. And I’m not seeing enough ideation in that space, which I would like,
Jane Flegal:
[29:15] again, a call for papers, I guess. That I would really like to get a better handle on. The other thing that we haven’t talked about, but that I do think, you know, the States Forum, where I’m now a senior fellow, I wrote a piece for them on electricity affordability several months ago now. But one of the things that doesn’t get that much attention is just like getting BS off of bills, basically. So there’s like the rate question, but then there’s the like, what’s in a bill? And like, what, what should or should not be in a bill? And in truth.
Jane Flegal:
[29:49] You know, we’ve got a lot of social programs basically that are being funded by the rate base and not the tax base. And I think there are just like open questions about this, whether it’s, you know, wildfire in California, which I think everyone recognizes is a big challenge, or it’s efficiency or electrification or renewable mandates in blue states. There are a bunch of these things and it’s sort of like there are so few things you can do in the very near term to constrain rate increases for the reasons we’ve discussed. And also, by the way, just because we have an aging grit, like we just happen to be at like a year 60 in the investment cycle in the grid. And like we don’t really have a choice. Like we do have to invest in the grid, even if there wasn’t demand growth, you know.
Robinson Meyer:
[30:34] Warren Buffett says you can’t see who’s swimming naked till the tide goes out. And I feel like there’s a bit of an inverse problem that has happened here where a number of blue states paid for a lot of social programs off fees placed on the electricity bill. Some of those social programs, I think we could say are essential, like the retrofits that are happening in California. But in the Northeast, there’s a lot of other charges that appear on the bill that finance social programs that I think made sense in an era of declining electricity prices. And the issue now is that because electricity demand is going up and electricity prices are going up for reasons that don’t only have to do with data centers, for reasons that have to do with the natural gas got more expensive in 2022 after Russia invaded Ukraine and that pushed up prices particularly in new england which relies on more seaborne natural gas suddenly those charges which were not really noticeable and not really salient in a world where underlying electricity prices are falling suddenly become quite politically salient um last question do you think the path forward on these policies is to talk about climate. Or should Democrats, I don’t know whether it’s Democrats, I don’t know whether it’s think tanks, I don’t know whether it’s advocacy groups, should talk less about climate and indeed kind of sublimate their concern over climate into concern over things like, well, we need cheap electricity because that will ultimately help the cause of electrification.
Jane Flegal:
[32:00] Look, I think it is pretty obvious at this stage that climate does not have the cultural or political significance it had in 2020. That seems very obvious to me. I do not foresee that changing anytime in the immediate future. That doesn’t mean that no one should talk about climate change and we shouldn’t acknowledge the physics of the world in which we live. Fine. it’s pretty obvious to me that leading with climate is not going to be a winning strategy, my bigger concern is okay so then what do you lead with and how does what you lead with affect our ability to actually decarbonize and again that’s where it’s sort of like affordability is great if it actually is incentivizing the right things we need to incentivize not only to decarbonize, but I would argue to like power the economic growth of our country and deal with some of our biggest geopolitical anxieties right now. And like, that’s why I get so anxious about like, oh my God, if affordability becomes the only frame, what are we losing?
Jane Flegal:
[33:10] How do we find the right way to both like inject a consideration of affordability that is not so short term that we are like losing sight of the structural drivers of affordability in our economy, especially in the electricity sector. And, you know, another thing about the affordability piece is it’s sort of affordable to whom? So there’s lots of conversations about, for instance, rooftop solar in certain situations, being a cost effective strategy for an individual homeowner, right? That is not the same thing.
Robinson Meyer:
[33:45] It’s insane. It’s insane that we can talk about rooftop solar as an affordability strategy.
Jane Flegal:
[33:49] Yes, yes. And then I just think as a political matter, like, There’s a question for me of whether we’re overlearning the lessons of the end of the Biden administration where we very obviously did not take inflation seriously enough. But now it’s sort of like, are we becoming so inflation pilled that we’re not actually like substantively or politically leading with the most compelling strategies? If you actually looked at like the list of things that could potentially constrain electricity prices in the next two years, it’s not a particularly sexy or compelling agenda. In my view, it feels it’s giving it’s a little bit giving like Jimmy Carter put a sweater on. It’s a little bit or it’s at least an easy target for Republicans in that way. Right. It’s a little like efficiency, demand response. Don’t let utilities make money. And like all of these things may be good in their own right. So I’m not I’m not dismissing them as as tactics. But I think like having that be the kind of structure of the argument for Democrats on climate is like, I think we would make us very vulnerable.
Robinson Meyer:
[34:53] Anyway, Jane, we’re going to have you back on. Thank you so much for joining us on Shift Key.
Jane Flegal:
[34:57] Thanks, Robinson.
Robinson Meyer:
[35:01] If you enjoyed this episode of Shift Key, please leave us a review on your favorite podcast app. You can reach me as always at shiftkey at heatmap.news. This will do it for us this week. We’ll be back next week with a new episode of Shift Key. Until then, enjoy your weekend. Shift key, as always, is a production of Heatmap News. Our editors are Jillian Goodman and Nico Loricella. Multimedia editing and audio engineering is by Jacob Lambert and by Nick Woodbury. Our music is by Adam Kramelow. Thanks so much for listening. I’ll see you next week.
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Current conditions: The storms soaking the American South with as much as 10 inches of rain are tamping down the region’s wildfire risk • Cavite, the Philippine port city on a peninsula at the southern lip of Manila Bay, is facing its eighth straight day of temperatures nearing 110 degrees Fahrenheit • North Korean state media just issued a warning of a “severe” and “unusual” drought, killing off crops and threatening food shortages in the infamously famine-afflicted hermit kingdom.

Belgium has long ranked as the world’s No. 4 biggest user of nuclear energy as a percentage of its electricity mix, generating nearly half its power from fission. But the country passed a nuclear phaseout law in 2003. Since 2022, when Brussels started to weigh delaying the shutdowns, the European Union’s capital nation has closed five of its seven commercial reactors. The policy divided the government, with liberals fighting to preserve the reactors and Green Party officials, including former Energy Minister Tinne Van der Straeten, who previously worked at a private law firm that counted Russian gas giant Gazprom as one of its biggest clients, pushing for a full atomic exit. Now Belgium is halting the decommissioning of its last two reactors and nationalizing its nuclear plants in a bid to save the industry. In a Thursday post on X, Prime Minister Bart De Wever said his government had reached an agreement with the French utility giant Engie to “initiate the necessary studies for a full takeover” of Belgium’s nuclear industry. Engie owns all seven nuclear plants in the country. “This government chooses safe, affordable, and sustainable energy,” De Wever wrote, “with less dependence on fossil imports and more control over our own supply.”
France, which generates more of its power from fission than any other nation, followed a similar approach, fully nationalizing the utility Électricité de France in 2023 as part of a plan to shore up and expand the reactor fleet. Last month, EDF, as the French giant is known, announced a $117 million investment in a factory to build parts for France’s flagship nuclear reactor, the EPR2. On Wednesday, meanwhile, the Canadian government put out a statement vowing to develop “a transformative” new national nuclear strategy on Wednesday that would focus on the country’s natively-designed CANDU technology and burgeoning uranium mining sector.
America’s solar boom may look slightly dimmer since the Trump administration cracked down on permitting and eliminated key tax credits. But construction has begun on the 140-megawatt Iron Spur Solar project in Snyder, Texas, ensuring that the facility locks in tax credits before the phase-out in July, I can exclusively report for this newsletter. It’s the biggest U.S. project yet funded by Energea, a solar financing startup that allows investors to buy shares in networks of solar farms in the U.S., Brazil, Colombia, and South Africa. Iron Spur is expected to start producing electricity in 2029. Now that the company is looking for offtakers to buy the electricity, co-founder and managing partner Mike Silvestrini said “something has changed.”
“In the past, it was an ass-kissing process of communicating with guys at these big IT companies,” he told me. “It’s turned. All of a sudden, having the power production abilities gives us the upper hand, and we’re able to negotiate from higher ground than we ever have before. It’s a noticeable change. That’s going to continue.” With the tax credit going away, he said, “the cheapest source of new power generation is about to get more expensive. That pretty much guarantees that domestic energy rates go up after July 5, as there are no longer projects with that tax credit available.” In fact, he added, Energea is better off waiting to negotiate a power purchase agreement, offering some insight into how the solar market could change if Republicans don’t manage to pass legislation to salvage the tax credits. “It behooves companies like ours and projects like Iron Spur to be patient and see how markets respond to a now-finite number of investment tax credit projects,” he said.
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As I told you at the start of the week, the Trump administration is replicating the $1 billion deal it made with TotalEnergies to convince the French energy giant to abandon its two offshore wind projects in the U.S. Reporting by Heatmap’s Emily Pontecorvo later showed that the legal justification for the federal government’s cash offer was shaky at best, and that the actual text of the agreement contained no definite assurances that the company would invest any more than it had already planned to. Now Congress is getting involved. On Wednesday, as Emily reported, two House Democrats sent a letter to Total CEO Patrick Pouyanné announcing that they have opened a formal investigation into the deal. “We’re going to get every document, every email, every last receipt on this deal, and every person who had a hand in this is going to answer for it,” Jared Huffman, the ranking member of the House Natural Resources Committee from California, said in a press release. “What I have to say to TotalEnergies is this: Consider yourself on notice, we’re coming for you.”
A former official at the Department of the Interior told Utility Dive this week that the deals set a new precedent that could be abused: “You wouldn’t want to create a situation where you are allowing companies, for instance, to buy up leases for anti-competitive purposes and just not do anything on them for a period of time and then give them back and get their money back.” In Virginia, where Dominion Energy just started up its first offshore wind farm, Governor Abigail Spanberger signed legislation this week meant to support training and expansion of the new energy sector’s workforce, per offshoreWIND.biz. Total, for its part, isn’t eschewing renewables everywhere. The company just started construction on a 440-megawatt solar farm in the Philippines, PV Tech reported.
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More than 50 countries have agreed to work on trade measures to cut demand for fossil fuels. The pact came out of the Santa Marta climate summit in Colombia, in what the nonprofit Covering Climate Now called “a game-changing moment.” Climate scientist Johan Rockstrom told delegates at the First Conference on Transitioning Away from Fossil Fuels: “You are a light in the tunnel of darkness.” For all the reversals of decarbonization policies we’ve seen over the past two years, however, the world is rapidly looking for alternatives to fossil fuels as the war in Iran drives up prices. “We decided that the transition away from fossil fuels could no longer remain a slogan but must become a concrete political and collective endeavor,” Irene Vélez Torres, environment minister of Colombia, told the Financial Times. Notably, the six-day confab did not include the world’s biggest emitters: China, the U.S., and India, who are responsible for more than 40% of current emissions.
Rivian is set to produce up to 300,000 vehicles at its Georgia factory, up 50% from its initial estimate. The electric automaker announced the news Thursday as part of its first-quarter earnings call. The company said it had reworked a loan deal with the Department of Energy to borrow just $4.5 billion of the original $6.6 billion awarded under the Biden administration, TechCrunch reported. Overall, Rivan’s earnings beat analysts’ expectations, according to Sherwood.
Genetically modified crops are widely considered to be essential to feeding a growing human population on a planet with a rapidly changing climate. That’s especially true now with the Iran War causing fertilizer shortages at the start of the growing season. Now the EU, long a bastion of GMO policy, is authorizing four more genetically engineered crops for import and use in food and animal feed. The approval, per Fertilizer Daily, is for one new soybean variety and renewed approvals for one maize and two cotton products.
Rob chats with Ember’s Nicholas Fulghum about the think tank’s newest report.
Here’s some good news: Clean power met all electricity demand growth last year for the first time since the COVID-19 pandemic. That’s according to a new report on global electricity trends from Ember, a U.K. think tank that tracks energy data from around the world. The new review suggests that solar and batteries are continuing to remake the global power system — and outcompeting gas and coal in some of the world’s fastest growing economies.
On this week’s episode of Shift Key, Rob is joined by Nicholas Fulghum, the lead author of Ember’s new report and an energy and climate data analyst at the think tank. They discuss why solar keeps breaking records, whether India’s energy development trajectory has changed, and how the Iran War could change this year’s numbers.
Shift Key is hosted by Robinson Meyer, the founding executive editor of Heatmap News.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
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Here is an excerpt from their conversation:
Nicholas Fulghum: It’s not just the absolute growth there. It’s just also the speed of growth that we’re not really expecting from sources in the past. Usually when a source scales to this level, where you have a maturing technology that is dominating parts of the market, the growth rates come down. But with solar, what we’ve seen is that actually 2025 had the highest growth rate, with 30%, that we’ve seen in eight years. And that’s quite unusual for something that’s really reached scale.
Robinson Meyer: Why is it dominating now? Because you’re absolutely right, we’ve been talking about the story for so many years in a row. This is the one thing we’ve come to expect about the electricity system globally, is that we’re just going to add all this solar every year. So why did it accelerate last year?
Nicholas Fulghum: The solar story as a whole is essentially a story of technology, and the learning curve that solar has been on hasn’t really stopped. So we’re still seeing cost declines. And they are really accelerating the deployment further.
If you think about where the cost has come from, we have a decline of about 90% over the last decade. It really just completely changes the use cases and where solar is applicable. We now have seen rapid solar buildout in so many different contexts. We’ve seen it in big utility installations in the U.S. We’ve seen the sort of hybrid deployment that we see in Australia, where it’s both utility-scale and distributed. Same, very similar approach in Germany, as well, a mix between utility and distributed. But we’ve also seen the very grassroots, not very organized but equally rapid deployment in countries like Pakistan. And this versatility is not something that is applicable to any other electricity source — not just now, but in history.
You can find a complete transcript of the episode here.
Mentioned:
Ember’s Global Electricity Review 2026
Previously on Shift Key: Nobody in the West Knows How to Respond to the ‘Electrotech Revolution’
This episode of Shift Key is sponsored by ...
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Music for Shift Key is by Adam Kromelow.
This transcript has been automatically generated.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, or wherever you get your podcasts.
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Robinson Meyer:
[1:53] Hello, it’s Friday, May 1st. Happy May Day. And we have some good news for you today. The global electricity system became slightly less fossil fuel intensive last year. In 2025, clean power met all global electricity demand growth for the first time since the COVID-19 pandemic. That’s according to the new report from the think tank Ember, which is headquartered in the UK and has become one of the most important and interesting organizations tracking the energy transition over the past few years. You might remember last year we had Kingsmill Bond, one of their energy strategists, on to talk about electrostates and the rise of electricity technology.
Robinson Meyer:
[2:29] Transforming global industry in China and around the world. Their data, though, beyond Kingsmill’s work, has been central to understanding the inexorable rise of solar energy, of batteries, and of how clean power is now driving fossil fuels out of the energy system. You know, our tagline here at Shift Key, which I say every episode, is that we look at the shift away from fossil fuels. But lately, there hasn’t been as much shifting in what we talk about.
Robinson Meyer:
[2:54] So today, I thought we would look at the shift for once, at least and have some good news for once too. Joining us today is Nicholas Fulghum. He’s the lead author of Ember’s new 2025 Electricity Review. He’s also a senior energy and climate data analyst to Ember. I wanted to talk to him about the biggest changes in global power systems last year, whether what’s happening in California and Western Europe is the same as what’s happening in Southeast Asia, why solar in particular keeps growing in such an unstoppable way, and how the Iran war might change the numbers for 2026. I’m Robinson Meyer, the founding executive editor of Heatmap News, and it’s all coming up on Shift Key. Nick Fulghum, welcome to Shift Key.
Nicholas Fulghum:
[3:36] Thanks so much for having me.
Robinson Meyer:
[3:38] So you recently published this report, Ember’s Big Annual Report on the Global Electricity System. It’s an amazing document, as always. And I feel like the story that comes out just hits you right on the face when you look at it this year is the absolute growth of solar, this total dominance of solar in the electricity system. So why did solar dominate last year? And what is the story of the electricity grid in 2025 as you understand it as the lead author?
Nicholas Fulghum:
[4:06] Yeah, for those of us that have been following this story for a while, solar breaking records is not really a new thing. But what keeps happening every year is that the scale and just the absolute amount of solar growth just keeps edging up more and more. And in 2025, we got to the point where solar growth alone met 75% of the increase in electricity demand. Now, that brings it from just a fast-growing source by historical standards to really the dominant driver of any change in the global power sector. And that increase that we had, the 636 terawatt hours of new solar generation that was added in 2025, that’s equivalent to twice the UK’s annual electricity demand. So we’re really talking about system-level change now.
Robinson Meyer:
[4:58] So we’re adding basically two UK size electricity systems entirely made of solar every year.
Nicholas Fulghum:
[5:04] Yeah, that’s right. And it’s not just the absolute growth there. It’s just also the speed of growth that we’re not really expecting from sources in the past. Usually when a source scales to this level where you have a maturing technology that is dominating parts of the market, the growth rates come down. But with solar, what we’ve seen is that actually 2025 had the highest growth rate with 30% that we’ve seen in eight years. And that’s quite unusual for something that’s really reached scale.
Robinson Meyer:
[5:36] Why is it dominating now? Because you’re absolutely right. We’ve been talking about the story for so many years in a row. This is the one thing we’ve come to expect about the electricity system globally, is that we’re just going to add all this solar every year. So why did it accelerate last year?
Nicholas Fulghum:
[5:54] The solar story as a whole is essentially a story of technology. And the learning curve that solar has been on hasn’t really stopped. So we’re still seeing cost declines. And they are really accelerating the deployment further. If you think about where the cost has come from, we have a decline of about 90% over the last decade. It really just completely changes the use cases and where solar is applicable. We now have seen rapid solar build out in so many different contexts. We’ve seen it in big utility installations in the U.S. We’ve seen the sort of hybrid deployment that we see in Australia, where it’s both utility scale and distributed. Same, very similar approach in Germany as well, a mix between utility and distributed. But we’ve also seen the very grassroots, not very organized, but equally rapid deployment in countries like Pakistan. And this versatility is not something that is applicable to any other electricity source, not just now, but in history.
Robinson Meyer:
[6:58] Basically, what this means is that you have a situation like what I understand to be happening in Pakistan, where there’s now a lot of electricity available during the day, or are we seeing, we haven’t talked about batteries, but does the concomitant rise of batteries mean that actually this generation is not as time-locked as solar by itself would be.
Nicholas Fulghum:
[7:20] Yeah, historically, at least over the last few years, while solar has seen its initial rise, it’s been used in varying ways. So in Europe, for example, it’s mostly used to displace fossil generation in the middle of the day. And that’s also the case in the U.S. where in California is displacing gas generation. In a country like Pakistan, solar was deployed in a response to a failing state electricity grid. So it was about the actual availability of solar power. And increasingly, as you say, batteries now make that not just a daytime solution, but a solution that works around the clock. And we’re seeing that increasingly both on that very distributed level, but also on a utility scale.
Robinson Meyer:
[8:06] Is that where the solar growth is coming from? What part of the solar equation here is growing more? Is this mostly a story about developing countries adding solar because it’s a modular energy technology that individuals can purchase and then have access to electricity? Or is this a story about places like Texas or California or Western Europe just continuing to hammer their midday fossil share?
Nicholas Fulghum:
[8:31] Yeah, well, the interesting thing there is that the story is that it’s all of those things at the same time. Yeah, it’s both. So in China, for example, it’s a relatively evenly distributed amount of distributed generation and utility scale solar. And China is by far the largest contributor to solar growth globally. So more than half of the increase in solar generation in 2025 was in China. So we have both geographically a lot of diversity, obviously dominated by one country in this case, but also in the use case, it’s very much you have distributed solar and utility solar scaling at the same time at similar rates as well.
Robinson Meyer:
[9:14] Speaking of China, one of the huge findings you have in this report is that fossil generation fell in both China and India. It sounds like solar was responsible for that trend in China, but can you talk a little bit about how we know that and whether you expect these trends to continue?
Nicholas Fulghum:
[9:33] Yeah. So over the last two decades, people have become very familiar to huge increases in fossil generation year after year in China and in India. And together, they were by far the largest contributors to that fossil generation growth that was also still happening at the global level. But actually, if we look at the aggregate, outside of China, since 2018, fossil generation had actually already been flat. So if you take China out of the equation, but we still had fossil generation growth, even globally. So the question was, when is China going to turn? And 2025 is kind of that moment where we see what that turning can look like. Now, China and the world are very mirrored stories. In China, the reason that we didn’t have an increase in fossil generation is because clean generation grew enough to meet and exceed the growth in electricity demand.
Nicholas Fulghum:
[10:27] And that’s what we saw on the global level as well. So China is leading that trend and on the global level, turning the tide on fossil generation growth as a whole.
Robinson Meyer:
[10:38] I think one of the biggest questions about China is fossil generation fell in 2025. Obviously, now there’s this energy crisis caused by the closure of the Strait of Hormuz and the war in Iran. Do you expect this trend to continue? Let’s just start with in China, because looking back in the clock, right, in 2021 and 2022, they think there were big coal increases in China as the country kind of redoubled down on coal. Do you expect to see it respond to the current energy crisis in the same way? Or is it wrong to even understand that change in 21 and 22, like in response to Ukraine and the post-Ukraine energy crisis? Or was it all about internal Chinese power market dynamics?
Nicholas Fulghum:
[11:22] Yeah, I think what can help us understand the situation is looking at Dissecting the structural drivers, so the longer term trends from those moments in energy history, so to speak. So 2020, obviously everyone remembers COVID pandemic, demand destruction on a large scale, globally electricity demand, you know, growth tanks compared to previous years and years after. The same happened in China as well. So 2020 is actually a really interesting case because we didn’t have fossil generation growth at the global level. But the reason wasn’t large scale adoption of clean power, even though it was already growing quite fast. It was that demand wasn’t growing. And the big difference in 2025 is that demand growth is really robust. So 5% was the increase in China. At the global level, it was 2.8%, which is basically in line with the 10 year average. So both globally and in China, we have robust demand growth. And that’s where 2025 is really different, because that’s not something we’ve seen before. Robuster mangrove and falls in fossil generation. So that’s the structural element where clean power is just now growing fast enough. And in response to the crisis in the Strait of Hormuz, what a lot of people were expecting is we’re going to get a big shift back to coal.
Nicholas Fulghum:
[12:44] But that’s not a shift away from clean power. That is, if anything, a short-term shift within fossil fuels. If gas is really expensive, so LNG in that case in Asia, then maybe coal becomes slightly more attractive relative to that in the market. But what it doesn’t do is become more attractive than solar and wind, which is what China has predominantly looked towards to meet its additional power demand. So we’re not going to see a turn towards coal over clean sources.
Robinson Meyer:
[13:17] Can you say a little bit more about that? Because I feel like that countries don’t, especially China, I think doesn’t make decisions between clean and dirty when it’s kind of planning its energy system. It makes decisions between secure and insecure. And so why does gas being really expensive? I understand that China has relatively low LNG share, but why maybe when we look at Southeast Asia or outside of China, would we expect to see gas lose out to coal rather than kind of coal step up?
Nicholas Fulghum:
[13:46] Yeah, so if we go back to the previous crisis, and I guess this is also a separate point, is that we’re talking about consecutive crises every few years in the fossil fuel sector. If we go back to the previous one in 2022, we actually had sort of a double whammy with prices going up for gas and prices going up for coal at the same time. So you had power markets that were really dependent on imports like South Korea and Japan really suffer the consequences.
Nicholas Fulghum:
[14:17] And this time around, gas is significantly more affected just because the trade route through the Strait of Hormuz just has more gas exports. And as we know, some of that infrastructure in countries that weren’t actively involved in the conflict, like in Qatar, were also affected where some of the production capabilities might be inhibited for more than just a few months. We’re talking about years that some of that infrastructure needs to be rebuilt for. So that means that the price for LNG is rising. Surprisingly, it’s actually not risen as much as many people expected. And that might just point to some panic and illiquidity in the market where people are afraid to even trade some of those longer term contracts, given that these prices currently change on the daily with, you know, tweets coming out of the White House affecting prices, basically. So we don’t know the full impact of this specific crisis yet. But what we can say is that historically, power markets have been relatively flexible, especially in countries that have both of these sources available, so both coal and gas. But the overwhelming trend and the voices that we’ve heard from governments in South Korea, Japan, Indonesia, is that they want to double down on reducing their import reliance through renewables and away from coal and gas altogether.
Robinson Meyer:
[15:42] We’ve kind of hinted at it a few times, but what was the story in India last year? Because from an emission standpoint, I think actually several years ago, we passed the point where, you know, the OECD countries plus China are most of the emissions that we expect to see going forward, kind of the big questions about where the climate system is going to wind up and how much temperature rise we’ll experience in the 21st century is actually primarily a question about about India and Indonesia and the Southeast Asian and Sub-Saharan African countries. So India is like the country at the front of that pack, right? It’s the furthest along its development pathway. And it kind of tells us the most about how countries are choosing to develop at this moment. What was the story of its electricity system last year?
Nicholas Fulghum:
[16:27] Yeah, so India is super interesting because we have with China, we have a country that many see just a few years further that ahead of India in the clean power deployment journey. And in China, we’ve seen that break even point where they can meet new demand. Now for India, the question was how far behind are they on that curve? And in 2025, they did also meet all of the increase in demand with clean power, largely led by solar power, which increased by more than 50 terawatt hours, which was also a massive new record growth in India as well.
Nicholas Fulghum:
[17:03] India wasn’t really meant to get to this point so early. So there’s two things that were going on in 2025. The first one is this record renewables growth, which was twice as high as the previous ELE record. So this year was 98 terabyte hours increase for clean power or for renewables. And in 2022, which was the previous record, it was 49 terabyte hours. So a huge boost in clean power growth. And at the same time, we’ve had relatively mild demand growth. And the reason for that was simply that temperatures were quite low during the monsoon period when usually you need a lot of electricity for cooling. And that just didn’t really happen to the same degree this year. So you get this temporary relaxation and demand growth. And as a result, it surpassed demand growth actually by quite a lot. And we had a significant decline in coal generation and fossil generation as a whole. And if we look a little bit further back, that increase in renewables would have come close to meeting the demand growth in the last four years where we had much more robust increases in demand of over 5% and over 6%. So we’re really now at a point where we do expect next year to be probably a small increase in fossil generation again. But we’re just not talking hundreds of terabyte hours per year. We’re talking more about maybe 20, 30, 50 terawatt hours.
Nicholas Fulghum:
[18:28] And as we get closer to 2030, 2035, India is also going to get to this place where it can structurally meet all of its increase in demand with clean power sources and not grow coal generation further. And now that’s a vast departure from the projections that many people had five to 10 years ago.
Robinson Meyer:
[18:48] Do we have a sense, maybe it’s from China, maybe it’s from European countries, maybe it’s from California, of what happens in power markets and what happens in electricity grids as the fossil share begins to tip over? Because there’s been discussion of this in liquid fuels and transportation for a long time, where the idea is, you know, yes, you’re going to get a point where EVs penetrate further enough into vehicles that oil demand will be flat. And then the question is, is oil demand flat for a long time? Does it plateau? What kind of things happen in that plateau. In some ways, the UAE’s announcement this week to leave OPEC is actually very indicative of what we might expect to see in a world of flat oil demand. But there is a question about kind of how fast things begin to fall off and how long that plateau lasts. Obviously, it will be a different story in the electricity system. But what does China or, I don’t know, Germany, California, What do countries that are further down the chain here, or jurisdictions, tell us about what the future of the grid might look like in a world where clean is just straight up out-competing fossil, at least for the marginal electron?
Nicholas Fulghum:
[19:53] Yeah, so in Europe, for example, fossil power has been falling for quite a long time. Even in the U.S., the peak for fossil generation was in 2007. So this is a while ago and over that course, demand didn’t drop significantly either. So this is just direct displacement of fossil generation in the power sector. What we see at a more granular level, particularly with the introduction of solar, is that power markets change pretty significantly. You have much bigger intraday swings between the middle of the day when there’s a lot of solar power on the system and the evening peak demand hours. Now, one of the most famous examples for how to overcome this is the deployment of utility-scale battery storage in California. And there we’re now seeing that this solar profile, if you think about it, this distribution, very, very smooth distribution, the middle of the day, most of the output smooths out towards the evening, disappears for the night. That profile is now being stretched in both directions. So batteries are deploying and they’re not going to be able
Nicholas Fulghum:
[21:01] In the morning, when the morning peak demand is happening, and in the evening, during evening peak demand. And it’s essentially stretching that profile out. And if you follow it over the years, that stretch is getting wider and wider. So it’s really penetrating the evening and night hours as well now. At peak demand, it can now meet more than 40% of California’s electricity demand. And that’s just batteries, where 90% of those were installed in the last five years. So we’re really talking about a surprisingly quick pickup in a technology that basically wasn’t on the market five years ago.
Robinson Meyer:
[21:37] One big question I feel like in electricity right now is how exactly to think about the utility of a marginal additional solar panel. And so I think there are some folks who would say, and to some degree the like advocacy line, right, is that solar is basically always the cheapest form of electricity anywhere in the world. And it’s always better to add solar. And if you are not adding solar, there’s some other reason, there’s some other dislocation in the system causing you not to add solar. I will say I’m a little skeptical of that line. I think if that were the case, we’d be adding more solar in a lot of places. Obviously, we’re adding an enormous amount of solar, but there’s still reasons why solar might be tricky. And maybe it has to do with land costs, maybe it has to do with permitting. But like looking at the global electricity system, What is the right way to think about … We know solar is cheap. We know it’s an absolute powerhouse. We know it’s absolutely transforming the global electricity system. But what is the most rigorous way to think about how cheap it is compared to other forms of power and how countries are adding it to their electricity mix right now?
Nicholas Fulghum:
[22:41] Yeah, so bottlenecks are real. And I think it’s totally fair to acknowledge that, especially for technology that has risen in the market so quickly. It would be shocking if it was smooth sailing on all fronts. But we have some really good examples of what the second and third stage of that solar growth can look like. We already mentioned California, where the bottleneck did appear a few years ago already, where you had larger curtailment in the middle of the day. It was really difficult for rooftop solar installations to actually be used economically within the distribution grids. So there were real bottlenecks. Those are being resolved actively. So it’s kind of As we’re coming up to these technological hurdles, technology is overcoming them relatively quickly. And if you thought the falling costs in solar panels was quick in the last few years, the fall in costs in battery prices is even faster. At the pack level, those pack prices have come down 45% in 2025. And that’s on top of 20% in the year before and another double-digit percentage decline before that. So we have this huge drop in battery prices. If you think about it in the context of other applications in your life, what does a 50% reduction in price for other consumer electronics, for example, look like? If cars were half the price or twice the price, the application in the world would be completely different.
Nicholas Fulghum:
[24:06] That’s how batteries work as well. So that bottleneck is being resolved. The second point is that actually for most of the world, the system integration of solar isn’t as big of a problem yet. So at a global level, the share of solar generation is now 8.7%. Now, there’s a really nice way to illustrate what that actually means on a daily basis. So 8.7% is about 25% in the middle of the day. So that’s just for the global average. Which is quite an important milestone. So in May, for example, the biggest solar month, that’s when solar is meeting a quarter of global electricity demand in the middle of the day. So a lot of headroom to grow without significant flexibility concerns. But then if you go into the specific markets, that number can scale up quite quickly. So in Hungary, for example, which is the country with the highest solar share globally of 27%, during the peak month in June, solar is meeting 90% of the demand at midday. So it scales relatively quickly. You can do about 3x in your sunniest month is your actual penetration relative to your average penetration throughout the year. So it does create a bottleneck at that point. So for those systems, the fact that battery prices are coming down now is unlocking that bottleneck that was really fast, fast approaching.
Robinson Meyer:
[25:31] But it sounds like part of the story here is that solar is able to dominate because in some ways the global system on an average basis is closer to where California was maybe 10 or 15 years ago where you can just keep adding solar to that thing and it’s going to reduce your marginal costs and you can add batteries too and that’s awesome. But you’re not hitting these questions about ramping or firm power that I think we’re beginning to encounter in California and I also think a little bit in Texas now.
Robinson Meyer:
[26:02] How do we know? I mean, this is a methodological question about Ember, but, one constraint we’ve begun to run into in the United States, I think especially from big tech firms that do a lot of renewable buying, is that the accounting techniques that, previously were good enough to lower emissions, like saying, okay, well, we used 500 megawatt hours of electricity last year. So we’re going to go buy 500 megawatts of solar and wind production. And we’re going to say that’s close enough. If you try to match on an annual basis the amount of energy you’re using and the amount of energy that renewables are producing and you just go buy that renewable power in the open market, you’re actually still going to be producing a lot of emissions. And so when Ember looks at... The global electricity system and says the fossil share is declining or solar’s you know eating into fossil in this way like how do we know that solar is actually eating into demand growth or that renewables are actually eating into demand growth and not just that say solar is generating all this electricity in the middle of the day but if demand’s a little higher it’s actually just boosting fossil a little bit overnight there.
Nicholas Fulghum:
[27:10] Are two things here so one is at the aggregate level we can see this very clearly. So if we imagine a world where solar and wind power hadn’t been deployed, that demand would have had to be met. Maybe demand growth would have been slightly lower because of the higher power prices that would have caused. But still, that demand would have most likely been met by fossil generation, given that we don’t really have other sources that can grow quickly. Nuclear power is growing by 1% per year. Hydropower is growing by 1% per year. Those are not the growth rates that can give you 2% to 3% global electricity demand growth. It just can’t meet that. So historically, we know exactly what happens when solar and wind don’t grow. Because if you go back 20 years, it means that fossil generation increases every single year by a pretty significant percentage. So we know what the counterfactual is. And then on the specific reporting side,
Nicholas Fulghum:
[28:08] Fossil generation reporting is actually the most accurate reporting. The tricky thing with solar often is that we do get some really excellent national level reporting that includes estimates for rooftop solar. There are some countries that are doing a really great job with that. U.S. reporting of both utility scale and estimated rooftop solar is excellent, for example. But then for Pakistan, you do not get excellent national level data. So you have to estimate it based on the amount of solar panels that were imported over the years, the expected deployment. Some people are doing satellite estimation of what’s actually on the ground. So the solar side is a little bit more difficult to do. But there’s two ways we can figure out what’s going on here. We can look at demand profiles on a daily basis. We know exactly how solar power looks in the market. We know exactly the shape of it. So when we see that demand destruction in the middle of the day,
Nicholas Fulghum:
[29:06] we know where that’s coming from. So that’s one way to estimate this difference in where solar is coming from. And then the other one is we already know what fossil generation is.
Nicholas Fulghum:
[29:19] So the big power plants are much easier to account for. These are big coal-fired power stations in China, and China reports their generation pretty accurately. So that means we know that the fossil growth isn’t happening this year. That’s certain. The slight uncertainty is more in the size of the solar growth, but it does give us a little bit more certainty because we know also what kind of electricity demand growth we should expect. And those are the levels that we see when we combine that solar with the growth in fossil generation.
Robinson Meyer:
[29:54] Last question. We are constantly talking about solar and batteries. We have spent very little of this interview talking about wind. Should we stop talking about renewables at this point and just talk about a solar and battery story being the primary driver of global electricity decarbonization and say,
Robinson Meyer:
[30:11] yeah, sure, wind can be an important addition to that in some especially developed settings. But this is primarily right now a story about solar and batteries just absolutely driving decarbonization globally. And we should kind of stop talking about the renewable category as a category.
Nicholas Fulghum:
[30:30] It’s a fair point to the renewable category as a whole, where we also include things like hydropower, for example, which, as I said, doesn’t really have fast growth rates. I do think that wind is quite different there. So wind was still the second fastest growing source globally, at the second highest increase with 205 terawatt hours, so a really substantial amount. And if we didn’t have that increase in wind generation year after year, we would be quite a few years behind on the curve of bending down that fossil generation curve in the short and medium term. So wind is still really competitive with solar as well. It’s one of the lowest cost sources of electricity globally. And solar and wind together as of 2024, so that’s already more than a year ago, were the cheapest source of new power. Where they were installed in 90% of installations, it was cheaper than the cheapest fossil fuel alternative. That’s in 2024. Costs have since come down a little bit as well. So we know that wind is a really important piece of the puzzle. And if you think about the global distribution where people are living, a lot of demand growth is going to happen in countries that are very sunny.
Nicholas Fulghum:
[31:43] We compared in the report the growth in fossil generation that we’re currently seeing from countries where it’s still increasing. So countries like Egypt, India to some degree structurally over the last few years has still seen an increase, Indonesia, these are the countries where fossil generation is still growing. Almost every country with fossil generation growth has above average solar potential. Very, very few are actually in areas where solar doesn’t have high potential. But there are quite a few with a large stock of fossil generation, like Europe, like the U.S., that really benefit from a more balanced approach. Europe, for example, has incredibly good complementarity between summer and winter. and trying to get to a more decarbonized power system in Europe without wind is virtually impossible, at least on a low cost basis. The overbuild for solar to go solar alone in Europe is just not feasible at all. So wind gives the additional clean power piece that fits in really nicely with solar. And in regions where solar is so much cheaper just because of its abundance and high solar potential, they might need slightly less wind generation. But overall, there’s nothing that speaks against driving up the deployment for wind as well.
Robinson Meyer:
[33:08] Such an interesting conversation. We’re going to have to leave it there. But Nick Fulghum, thank you so much for joining us.
Nicholas Fulghum:
[33:13] Thanks so much.
Robinson Meyer:
[33:19] And that will do it for us today. We’ll be back early next week with a new episode of Shift Key. Stick around after the credits, by the way, for a message and a conversation with our friends at Salesforce. Very excited about that. Until then, Shift Key is a production of Heatmap News. Our editors are Jillian Goodman and Nico Lauricella. Multimedia editing and audio engineering is by Jacob Lambert and by Nick Woodbury. Our music is by Adam Kromelow. Thanks so much for listening. We’ll see you next week.
Mike Munsell:
[33:49] Hi, my name is Mike Munsell, and I’m the Vice President of Partnerships with Heatmap. Last week, I spoke with Sunya Norman from Salesforce about how they’re approaching AI and sustainability. Today, we’re diving into a specific piece of that, AI and water. So in our last conversation, I know you talked a bit about Salesforce and its AI energy score and how it’s thinking about sustainability as it pertains to AI, but I’d like to really dive deeper into this conversation and looking at what is Salesforce’s relationship to data centers and in particular water, as I know that’s become something pressing of an issue.
Sunya Norman:
Sustainability has been a core value of Salesforce’s for a very long time. And we think at the highest level about how we make our entire operations more sustainable. And one of the things I love about sustainability is it’s a field where you always need to be evolving, adapting, and learning. And one of the things that we’re all collectively learning in the field is how important water is, especially for the technology sector.
Sunya Norman:
[34:53] Just looking at the data and grounding folks in where fresh water is used, it’s primarily dominated by agriculture and industrial use and the cities where we all mostly live. And so for a long time, the technology sector didn’t think that water was the most material issue for us. However, now with data centers and compute and the data showing us that there’s likely to be this hockey stick in AI demand in terms of energy and accompanying water, water has really risen in importance and prominence. And especially when you overlap maps that show water-stressed regions with AI infrastructure. So really important to understand how to mitigate the impacts on local watersheds and communities from AI infrastructure. Salesforce is not at all the first company to recognize the importance. I’ve really learned a lot from following our hyperscalers. Folks like AWS, Google Cloud, Microsoft, many of them have water positive strategies and are making strategic investments in the communities that surround their data infrastructure.
Mike Munsell:
[36:08] Can you talk more about some of those watershed initiatives that Salesforce is backing?
Sunya Norman:
So we see climate and nature as two interconnected crises. And when you look at our water program, it focuses on three things. It’s about resilient data centers, resilient power supply, and resilient watersheds. The initiatives that I wanted to share with you, our most recent investments, are in that resilient watershed bucket. And it’s about looking again at water stress regions and seeing how we can support communities in making sure that we can reverse or at least slow down the trajectory of water stress that’s really local. You know, it’s specific watersheds. In Brazil, we supported a project from Conservation International, and it’s focused on a river basin that’s actually a water source for 9 million people in Sao Paulo. So just think about how critical that water is and that water basin is. Everything from clean water for drinking to sanitation to industry, very, very important and also critical for the ecosystem.
Sunya Norman:
[37:22] Mexico is another area where we’ve made an investment. Similarly, around the watershed of Mexico City. I wasn’t aware of this before we made this investment, but that area around Mexico City and this wetland, it’s known for something called floating garden farming. This has been something that the community has been practicing since the Aztecs. Something that deserves to be preserved, an ecosystem that’s really critical, not only ecologically, but culturally.
Mike Munsell:
[37:53] Do you see a future where water usage becomes a reported or regulated metric for AI, similar to carbon disclosures?
Sunya Norman:
Yeah, I think the top line thing to know about water is it’s significantly undervalued. All experts and scientists agree, from the UN to World Wildlife Fund, the true cost of water is consistently much, much higher than what consumers pay in terms of utility pricing or what businesses pay when they purchase water. And it’s only in the last few years that even the sustainability space has really been paying attention to how critical an issue this is. Specific to AI, as I mentioned, this is really closely linked with compute. So I think the tech sector must remain laser focused on compute because when you address that compute, you’re actually addressing the energy impacts as well as the water impacts from cooling. In terms of the type of regulation we might see, I think it’ll start first with carbon and energy, because those are the most mature spaces. But I think it’s incredibly encouraging that companies like Salesforce, who traditionally haven’t felt like this is the core focus of their strategy, are waking up to understand how all these issues are interconnected.
Mike Munsell:
[39:01] On the impact side, how is Salesforce thinking about its investments in water generally?
Sunya Norman:
One of the things that I’ve really been excited to learn more about is an initiative we’ve been supporting for several years called the Mangrove Breakthrough Initiative. Mangroves are this incredible species of tree that sits at the intersection of water and land. They not only buffer coastlines from storms, flooding, and erosion, they filter out pollutants, they create safe space for all sorts of species to breed, and they store three to five times more carbon than your average terrestrial tree. So they’re just this incredible nature-based solution. And essentially, the initiative is reaching out to the main countries that have these mangrove ecosystems to get commitments of conservation. And then what Salesforce has been funding is best practices around that conservation or in areas of mangrove loss, how to actually reforest those mangroves and revitalize those ecosystems because so much of coastal economies is wrapped up in these ecosystems.