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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: Tropical Storm Edouard is making landfall over Texas and Louisiana, bringing flooding as it moves inland • Already facing a southwest monsoon, or habagat, the Philippines is now staring down Tropical Storm Pilandok • Intensifying flooding in South Sudan’s Sudd, the largest wetlands in Africa, is displacing families by the droves.
Oil prices surged north of $90 per barrel Tuesday as the United States exchanged fire with Iran amid the ongoing fight to control the Strait of Hormuz. West Texas Intermediate, the U.S. benchmark, rose nearly 2% to $91.74 per barrel. Europe’s Brent crude measure closed less than 2% higher at just below $97. Murban crude, the yardstick for oil out of Abu Dhabi, soared nearly 8% to over $106 per barrel. In a post on Truth Social, President Donald Trump said he was “not trying to force Iran to the bargaining table.” Rather, “I couldn’t care less if they sign a worthless, to them, agreement,” he continued. “I like our position now much better, with almost total control of the Hormuz Strait, and their economy totally collapsing.” Referring to the U.S. military as the “American terrorists,” the Tasnim News Agency, a semi-official outlet associated with Iran’s Islamic Revolutionary Guard Corps, reported that Tehran “had previously warned and promised” that “the Iranian armed forces will respond decisively and extensively to any aggression against our country’s territory and interests.”
Meanwhile, the Group of 20 — the club of 18 rich economies, plus the European Union and African Union — concluded its latest meeting with a joint statement that affirmed the necessity of central bank independence, called out energy affordability in the age of AI, and admonished “non-market economies” with “excessive and persistent external surpluses” that distort the global market. China didn't like that, U.S. Treasury Secretary Scott Bessent told CNBC, issuing a dissent.
If the sun were blasting onto all the solar panels in China all at once, the overall electricity output would top that of every one of the country’s coal plants firing at the same time. It’s a major milestone, Bloomberg reported, highlighting just how extensively Beijing has glazed its fields, foothills, and urban rooftops with photovoltaic panels in recent years. But the achievement comes with an asterisk. “No matter how you feel about solar or coal as an energy source, CAPACITY is not ENERGY,” energy analyst Nicholas Birkhead wrote in a post on X. “These solar capacity numbers way overstate the energy mix, which is what matters! I really wish we’d all just publish capacity numbers after they’re adjusted for capacity factor.” In other words: As significant as this seems, China is still burning a whole lot of coal more frequently than the midday sun is shining.
Last year, upward of $440 billion flowed into solar worldwide, while $540 billion went to upstream oil drilling. It’s a sign, according to a new report from McKinsey, that “markets are financing both fossil fuels and low-carbon energy simultaneously” and that “the system is not replacing one fuel type with another but rather building them in parallel.” Moving forward, the consultancy cautioned, policymakers and planners need to assess not just the cheapest available options for new generation but what best supports the performance of the entire energy system. Just look at what Ontario did when deciding to move forward with what’s expected to be North America’s first small modular reactors. Instead of looking at the upfront cost of the generating assets alone, the province-owned Ontario Power Generation considered the whole cost of transmission and backup generation that would have come in the fine print of choosing wind turbines over nuclear reactors. The example, as my colleague Matthew Zeitlin wrote, highlights the problems with levelized cost of energy, the widely used measure of the overnight costs of building new generation assets: “Everyone’s favorite energy metric is wrong.”
A long-awaited California bill covering state policy on wildfires, insurance, and utilities collapsed in the state legislature Tuesday. The proposal, called Senate Bill 492, had been the product of intense negotiations between legislative leaders and Governor Gavin Newsom. The deal was released on Saturday and included provisions to speed up payouts to victims of fires and nibbled around the edges of the vast payouts California utilities are forced to make to insurers when their equipment sparks a blaze. The legislators fractured because it failed to address the core issue of California’s strict rules around wildfire liability and insurance, where insurers can sue utilities to recover damages when, for example, a transformer or power line ignites dried brush. Instead, the deal would have tweaked the system, making it harder for insurers to sell claims to investors, pushing out payouts to victims faster, and limiting utility executive bonuses when their companies’ equipment causes a fire. These payouts can drag utilities into bankruptcy, as happened with Pacific Gas & Electric in 2019 following a series of wildfires, and end up elevating electricity rates. “The only solution is to return to fix the entire problem, not part of it,” Newsom said in a statement to Politico.
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Fervo Energy’s stock soared nearly 30% on Tuesday after the next-generation geothermal giant announced its biggest deal yet, to sell nearly 400 megawatts of electricity to Google. When Fervo starts up its Cape Station project in southwestern Utah sometime in 2028, the facility will become the world’s largest enhanced geothermal plant. In enhanced geothermal plants, the underground heat harnessed for power production comes from artificial wells drilled with fracking technology rather than naturally forming subterranean reservoirs of hot water. If Houston-based Fervo can bring down the cost of its drilling, the technology could enable construction of geothermal power stations in vastly more locations than the industry previously believed possible. “Even though right now we don’t have clarity yet on how this will serve a data center … we know that it will be a foundational building block of power generation for a data center presence in Utah,” Lucia Tian, Google’s director of advanced energy technologies, told The Wall Street Journal, which broke news of the deal.
Next-generation nuclear startups, meanwhile, are facing a looming challenge over plutonium. The material, which doesn’t occur naturally, was largely produced in the 20th century for weapons production. Now, however, developers of novel kinds of reactors are angling to use some of the world’s 571 metric tons of stockpiled plutonium for energy production. In a feature on the topic published this week, the Financial Times outlined the split between countries such as the U.S., which I told you in May was giving out plutonium to startups, and the United Kingdom, which opted to bury its material. “It’s like a car that runs on diamonds. Plutonium reserves are about the same size as diamonds around the world, which gives you an idea of how rare this precious element is,” a French official told the newspaper.

The Department of Energy is pumping $12 million into developing and manufacturing technology for solar panels that can be used in space. In keeping with the Trump administration’s skeptical position on the weather limits of wind and solar, the agency pointed out that, “unlike terrestrial solar energy systems, which are subject to regulate interruption by weather and the Earth’s rotation, space PV can deliver near-constant power.” The funding is aimed at projects that will enhance the durability and cost of solar cells for space and develop manufacturing methods that can provide “innovative, high-volume” processes for mass production. “The next frontier for solar PV power generation is in space,” Audrey Robertson, the assistant secretary of energy, said in a statement. “As demand for space-grade PV skyrockets, this investment will establish American leadership in next-generation, space-based PV, bolster our national security, and enhance our economic competitiveness.”
Investors are putting big G’s behind VPPs. Virtual power plants promise to ease stress on grids and direct power that might otherwise have been wasted toward all the new demand coming online. Amid the scramble to supply power to data centers, money is flowing into companies that can harness those distributed assets. On Tuesday, the VPP software maker Light announced a $46 million Series A. That same day, the British distributed energy giant Octopus Energy closed its deal to buy a majority stake in the VPP provider Uplight.
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Robinson Meyer:
Hello, it’s Wednesday, September 2. I cannot believe it is already September. Last month, it became clear we’re witnessing a new kind of natural gas build out in the United States. Just think of the announcements we got in a few days in the middle of August. First, around August 11, the market intelligence service Cleanview identified that Amazon was behind a 7.6-gigawatt natural gas plant in Texas called Gigawatt Ranch. So just for comparison, that is huge. That would be the country’s biggest natural gas power plant. In fact, it would be the country’s biggest power plant, period. It’s about half a gigawatt bigger than the Grand Coulee Dam in Washington State, the largest power plant in America for like half a century. Then, just a week later, we learned that OpenAI and Nvidia are working together on a 9.2-gigawatt gas plant in Ohio.
Robinson Meyer:
That plant would obviously dwarf the Grand Coulee Dam. It would be the biggest power plant in America by far. But it would also even rival the Jebel Ali Power and Desalination Facility in Dubai as the world’s largest natural gas power plant of any kind. It would be a truly gargantuan facility. My colleague Emily Pontecorvo recently tried to identify the scale of the ongoing gas buildout. And she found a number of power plants, of projects that I think weren’t on my radar, weren’t generally on people’s radar. It’s been interesting because we’ve been getting a sense of the scale of this buildout at the same time that it’s become clear that the data center buildout is enormously unpopular in itself. If you’ve been reading Heatmap News, you know that according to a Heatmap Pro and Embold research poll conducted also in early August, 75% of Americans are now opposed to a data center being built near where they live, including a majority of Democrats, Republicans, independents, rural voters, urban voters, suburban voters, basically any demographic you can think of. They don’t seem to want a data center near them right now.
Robinson Meyer:
I recently sat down with Emily, a Heatmap founding staff writer, to talk about her reporting on the gas buildout, how she identified the 10 largest gas power projects now under construction or being permitted or being proposed in the United States, and how to think about this messy period. Also, how to think about the fact that it’s tech companies, who often have some of the most ambitious climate policies in America, who are now behind, a natural gas buildout on the scale that could actually increase the country’s, greenhouse gas emissions from the power sector, or at least increase them compared to the baseline. How should we think about these net zero commitments from companies like Amazon, Microsoft, Google, when often it’s those same companies that are now building some of the biggest fossil fuel projects ever proposed in the United States? And what would a good net zero commitment or climate commitment look like from those companies? We get into all of it in this conversation. It was a really generative, really interesting conversation for me. I’m Robinson Meyer, the founding executive editor of Heatmap News, and it’s all coming up on this episode of Shift Key. Emily Pontecorvo is here. Welcome to Shift Key.
Emily Pontecorvo:
Thanks, Rob. Glad to be here.
Robinson Meyer:
So you recently wrote a piece for us about the scale of the natural gas buildout in the United States that’s happening to service data centers and to service AI. And I think it’s quite interesting because we will talk about this, but I don’t know if we understood just how large this buildout was going to be as recently as the beginning of this year.
Emily Pontecorvo:
Yeah, I think that’s right.
Robinson Meyer:
What I think back to is, we did our poll, our annual poll of climate insiders, which are kind of sources and experts and former officials and chief sustainability officers. And we asked them at the end of last year, do you think the AI build out is going to significantly slow down decarbonization? And most people said no. And at the time, I don’t know how I would have answered, but ... I feel like we’re much closer to a place where the AI buildout is slowing down decarbonization now than we were even eight months ago. And so just to start off, can you put the scale of this gas buildout in context for us? So how many plants have been proposed? How many of these plants are going to happen? What do we understand about the scale of this next generation of gas that is being planned across the United States right now?
Emily Pontecorvo:
Yeah, so I will say to start that a lot of this information is very slippery because there’s been so many announcements. The announcements are constantly kind of changing. And so we have some numbers, but they’re definitely estimates. So last week, the Global Energy Monitor, which is this group that tracks oil and gas projects all over the world, they put out a report saying that they counted 189 gigawatts of natural gas plants in the U.S. that have either been announced, that are in a pre-construction phase, like they have some permits, or that are under construction. And that is nearly double the amount that they found at the end of last year, which was about 97 gigawatts.
Robinson Meyer:
And is that entirely behind the meter plants, or are those any kind of natural gas plant being planned across the United States, kind of for any purpose on the grid or off the grid?
Emily Pontecorvo:
So these numbers, 189 gigawatts up from 97 six months ago, those are projects that are specifically being motivated by data centers. So some of them are being built on the grid that utilities are building to kind of meet new demand room data centers. And a lot of them are off-grid projects that are being directly tied to data centers.
Robinson Meyer:
And I guess you’ve kind of alluded to this already, but like, So it’s almost 200 gigawatts of gas plants coming online. Do we know, like, how large is the existing U.S. gas fleet?
Emily Pontecorvo:
Yeah, so I, you know, had to look this up for this story. But as of last year, the existing natural gas generation capacity in the U.S. was 512 gigawatts.
Robinson Meyer:
Wow. It’s like 40% of the gas fleet we’re going to add to our existing fleet. Like, this is not a small change to the size of the gas fleet. This is like a major expansion of U.S. generation capacity.
Emily Pontecorvo:
Yeah. And the thing is, the numbers I gave earlier, those are just projects that have some relationship to the data center build out. The report also gave an estimate of just total natural gas generation that’s being planned across the country. And that number is 378 gigawatts. So it’s almost, you know, nearly doubling what we have today. And what was really interesting was I went back and looked at when was a lot of the existing natural gas generation built? Was there a time in the past where we ... Natural gas plants this quickly. And there’s like a pretty clear kind of analogous time period in the early 2000s where we built, what was it, like nearly, it was like more than 150 gigawatts in just four years. I saw different estimates. It was like maybe closer to 200. But that was a very different build out where this time the plants are much, much bigger. And so many of them are being built off-grid.
Robinson Meyer:
It is actually crazy to me the scale of the build-out that is not being built to service AI, first of all, because I would have assumed that basically the number, that upfront number, was basically all the gas because all of it would be going to AI. So the fact that there’s another, what, 150, 140 gigawatts going to just general generation is pretty crazy.
Emily Pontecorvo:
Yeah, I will say it is possible that some of that is duplicative. Like I was talking to Brendan Pierpont from Energy Innovation. He is on their electricity team, and he was pointing out that they’re seeing that in a lot of cases, the developers will go to the utilities first and ask for a certain amount of capacity. And then when they see how long that’s going to take, then they’ll kind of turn to an off-grid project. And so it’s possible that both of those are getting included in this data, but it’s so hard to really pinpoint what the numbers are.
Robinson Meyer:
So how should we think about these 189 gigawatts? Because as you said at the top of this episode, like there’s a haziness to all of this because sometimes the same gigawatt, so to speak, of demand gets requested in multiple different venues, either in different grids or at different locations, or they ask for it on grid and then they try to build it off grid. At the same time, One through line of this AI story since the beginning has been the difficulty of getting any kind of bead on demand and on the scale of demand. And it seems entirely possible to me that these 189 gigawatts are not going to all get built, but that we are going to add 189 gigawatts because maybe there’s another 100 gigawatts of demand that’s waiting to be requested. And, you know, if we build 70% of these requested gigawatts and 30% of those requested gigawatts, we’re still hitting 190 gigawatts, we’re still hitting 200 gigawatts. And so how do you think about the likelihood that this demand becomes like real capacity in the economy?
Emily Pontecorvo:
I think that the demand is real. I don’t know that 189 gigawatts of natural gas fired power plants, and especially the particular list that this report comes up with, I don’t know that those are real. But I think between data centers and a lot of other kinds of demand that we’re putting on the grid, air conditioning, electric vehicles, manufacturing, like absolutely 189 gigawatts is real. I think that the really big question is how real are these natural gas projects and how quickly will they get built? What kinds of equipment, what kinds of technology they’ll use? So
Emily Pontecorvo:
I basically went through this exercise of trying to identify the 10 biggest projects. And my initial list and my final list are not the same because as I was like researching each individual one, everything felt like sand slipping through my fingers. Like I would see one press release and then one, you know, news article with rumors about XYZ. And then the company’s website said one thing and the permit said another thing. And it was really hard to get a good grasp of, here’s a developer with a project that they say can meet five gigawatts of demand someday. And yet, in the near term, they’re actually just going to build 150 megawatts.
Emily Pontecorvo:
And so, like, should we think about that? Right, exactly.
Robinson Meyer:
This is the case for the OpenAI facility. I wrote about this for Heatmap Daily, our daily afternoon newsletter that everyone should hopefully be subscribed to. But there is this big OpenAI Department of Energy data center that is being planned in Ohio. It’s being built on a kind of ex-nuclear site that the DOE owns. And I think one of the interesting things, I mean, there’s a lot of interesting things about this project. But first of all, it’s massive. It’s nearly 10 gigawatts. It would rival the largest natural gas power plants in the world. I think it’s going to be right now.
Robinson Meyer:
Neck and neck. If the whole thing gets built, it would be right around the same size as the Jabal Ali power and desalination gas plant in Dubai. And it’s all going to go to an open AI data center. It’s backstopped by Nvidia. We learned that last month, it’s really going to increase the likelihood that this facility gets built out. But what’s interesting is that the natural gas plant is going to be built on federal land, on Department of Energy land. It’s going to be owned by the DOE and financed by Japan as part of this Trump-Japan trade deal. Now, I think there’s still a lot of questions about how much this gets built. But to your point, what’s difficult about thinking about this plant is that they want to eventually build more than nine gigawatts of power. They plan to initially build 800 megawatts of gas, which is a lot of gas, but not like a Grand Coulee Dam’s worth of gas. That is a very large gas plant, but it is not a unprecedentedly large gas plant. And how do you assess the scale of that demand, right? Do you think of it as an 800 megawatt gas plant that could literally grow 10x over the next few years? Or do you think of it as a nine and a half gigawatt gas plant, and therefore the largest power generation project in American history?
Emily Pontecorvo:
Right. I mean, so there’s like so many projects that are in this data, that are in that 189 gigawatts, like Fermi America, the big project in Texas.
Robinson Meyer:
The Rick Perry associated project, yes.
Emily Pontecorvo:
Yes. And so they’re also aspiring to even bigger than the OpenAI project. I believe their stated total power generation for the site is like 17 gigawatts, 11 gigawatts of natural gas, plus a bunch of nuclear and some other stuff. Just completely pie in the sky numbers. they already have a permit for the 11 gigawatts of natural gas though or actually no i’m sorry they have a permit for the first six and submitted a permit for the next five but
Robinson Meyer:
Big plant that’s still a really big.
Emily Pontecorvo:
Plant it’s a really big plant and yeah there’s all these projects in the list that have these huge numbers but then what’s actually happening is they’re being built in phases and the first phase might just be a couple hundred megawatts or one gigawatt or between one and two is what I’ve mostly seen. And so whether that first phase is successfully built will determine whether the additional phases are built will determine how much of that 189 gigawatts.
Robinson Meyer:
Right. Well, and also like if the AI boom is still going strong in 2028 and 2029 and 2030, then they can keep building gas to service it. Who knows what the economy will be like by then? You and I will work for AI map or something.
Robinson Meyer:
Can we talk a little bit about like, why are companies building gas? Clean energy advocates talk a lot about how wind and solar, especially solar and batteries are the cheapest source of electricity. I would say when you talk to electricity traders, too, like when you talk to people in the market every day, they also talk about how cheap solar is. So why are companies building gas and not solar to service these facilities?
Emily Pontecorvo:
So there’s like, a lot of different reasons that are all kind of coming together. Maybe the biggest one of all are the bottlenecks to connecting to the grid, the transmission bottlenecks. And that’s really pushing a lot of these companies to look for off-grid solutions.
Robinson Meyer:
And specifically just to like play that out, because they cannot site enough acreage of solar on the site where they would put a data center to generate the power they need, which means they need a grid hookup. But if they need to generate their own power on their own acreage, then you need an extremely energy-dense form of generation, and that means you go to gas. Right, right.
Emily Pontecorvo:
And then I think that’s coming together with a bunch of political factors, like the Trump administration has a strong interest in pushing natural gas. They have gotten rid of the tax credits for clean energy. They’ve made renewable energy, wind and solar, really hard to build with all of these permitting freezes and permitting obstacles for renewables. I think another element is just like the extreme speed and kind of urgency that AI companies are expanding at and demanding power at, which I guess kind of circles back to the interconnection issue and just not wanting to wait to be connected to the grid. And then the last one that I think is important is this issue with affordability in data centers where people are really worried about the build out, increasing their energy bills. And a lot of data center developers are pushing this idea that by bringing their own generation, by building these gas power plants on site, not connecting to the grid, they’re kind of putting their project in a box and ensuring that it doesn’t have any impact on regular rate payers.
Robinson Meyer:
It’s interesting to me, the ratepayer protection pledge from Trump pledges that, data centers won’t make electricity rates go up. And the solution to this for a lot of these companies, as you were saying, when they look at the set of constraints that they’re working within that include acreage, cost, regulation, local grid interconnection capacity, speed to power, they solve this set of constraints by going with gas. And I mean, I think there’s a few interesting aspects about it. First of all, it’s not clear to me that it makes data centers any more popular. He recently did polling that made a lot of news that found that 75% of Americans at this point would oppose the data center being built near where they live. I’m not convinced that adding a fossil fuel power plant to a proposed data center project makes it any more popular because it’s taking a quasi-industrial site and turning it into a full-on industrial site. But that being said, one of the promises made by adding gas generation at the data center is that by generating your own electricity, you’re not increasing local demand for electricity and therefore not increasing anyone’s rates. Now...
Robinson Meyer:
There’s a whole separate conversation to have here about whether adding marginal large-scale loads to electricity grids outside of markets like the Mid-Atlantic, which are structured in a particular way where that jacks up everyone’s rates. There’s a whole separate question and discussion to have here about basically, if you add large customers to an electricity grid because of how electricity rates are designed, that may actually bring down everyone’s bills. But I don’t want to have that conversation now. But like, it’s not clear to me that they are actually like, companies build gas to protect everyone’s electricity rates from going up nearby. And whether or not that is a good idea, and whether or not that is true, what gets left out of that conversation is whether they’re protecting everyone else’s gas rates. And the natural gas system is also a fixed system. And unlike the electricity system where you’re moving electrons around, so to speak, and you can re-rate lines, you can up-rate existing transmission lines, like you are moving molecules around with natural gas. And one thing I have wondered is like, if we’re adding gigawatts and gigawatts of gas generation to an existing gas grid.
Robinson Meyer:
Are we about to see natural gas prices go up around the country, especially when you take into effect that LNG demand is also about to double over the next few years? And so there’s like we were already worried about LNG export driving up natural gas rates. Now we’re adding LNG and a nine gigawatt scale natural gas power plant is basically like a medium sized LNG plant’s worth of demand. You’re just exporting carbon dioxide into the sky and producing electricity right so like hyperscalers can protect electricity rates by building local gas generation it’s not clear to me they can protect gas rates.
Emily Pontecorvo:
Yeah I, I mean we’ve talked about this. I, I think it’s a ... I did talk a little bit about this with folks when i was reporting on this gas build out, and I think the natural gas international natural gas market is complicated, and it’s not like there’s like a one-to-one, you know, increased demand here prices go up here…
Robinson Meyer:
It’s also like when you talk about natural gas pricing like what drives natural gas pricing in the united states is like number one weather and then like ... dot dot dot ... like a gap as big as the grand canyon and then number two like, local supply constraints and then number three is like local demand you know like there’s the number one thing driving natural gas rates remains weather but I don’t know whether these.
Emily Pontecorvo:
Things wonder yeah like if any of these mega projects get built to this the scale that they are trying to and like will they be fighting with lng exports for capacity it’s hard to it’s hard to imagine
Robinson Meyer:
Of these 10 projects, like what surprised you most? Or what project kind of wound up on the list that you did not expect to see on the list at the beginning?
Emily Pontecorvo:
So, you know, going back to a few things that we’ve talked about, like, why is this happening? Why are why gas plants? There were two projects on the list that I was surprised to learn about that were, I think, have been sort of overshadowed by the OpenAI project. But there are two additional natural gas mega projects that are coming out of this U.S.-Japan trade deal that are going to be financed by Japan and owned by the U.S.
Robinson Meyer:
I think they’re financed by Japan, owned by SoftBank’s new energy subsidiary.
Emily Pontecorvo:
In this case, SoftBank is not involved. So NextEra is building a big project in Pennsylvania. They haven’t said where yet. And a big project in Texas, neither is like has a data center attached to it. It’s a little bit unclear whether there will be a data center attached to it. The Pennsylvania one might connect to the grid. But nonetheless, these deals have been advertised as being sort of motivated by increased data center demand. And so just going back to what we were talking about before, like, I do think that a significant amount of this buildup is the Trump administration wanting to build gas plants. Like, that’s nearly 20 between these three projects, the OpenAI one and the two NextEra projects. That’s nearly 20 gigawatts of natural gas fired capacity that the Trump administration is behind through this trade deal.
Robinson Meyer:
That’s crazy. Do we know for the 180 gigawatts built-to-service AI, for the hundreds of gigawatts that we think might be coming online for these 20 gigawatts, do we know what ... Kind of power plant they’re going to build. Because as we’ve discussed on previous episodes of Shift Key, there’s several different kinds of gas plants that are being built. The most efficient tend to be these combined cycle plants, which use the exhaust from generating electricity to then generate more electricity. And then that can kind of scale up through a peaker plant all the way to just basically now people are running jet engines to generate electricity. That matters a lot to the emissions profile of these plants because it matters a lot to their energy efficiency in just a very kind of classical sense. Do we have any sense of how efficient this nearly 190 gigawatts could be?
Emily Pontecorvo:
No, we don’t. In the case of these three projects that came out of the U.S.-Japan trade deal, it’s a little bit fuzzy still what technologies they’ll be using. I think in the case of the OpenAI plant, they said that they have the initial generation equipment secured, which maybe that just leads me to think that it’s combined cycle turbines since those are in shorter supply.
Robinson Meyer:
The hardest to get. Or maybe it means that they absolutely don’t have combined cycle turbines. Maybe, maybe.
Emily Pontecorvo:
But in going through this list, what I learned is that like, yeah, a lot of these projects are the ones that are permitted where, you know, you get really specific information about exactly what technology they’re using. A lot of them are using these combustion engines, just putting like dozens of them on site and,
Robinson Meyer:
Let’s ask the question that I think is nearest and dearest to both of our hearts. Like, what does this mean for U.S. emissions? Do we have any ability to estimate what a gas build out of the scale, what does this mean for U.S. emissions?
Emily Pontecorvo:
I tried to answer that question for this story, and I think it’s one that I’m going to continue to look into. It’s really hard to say at this point because so much of it is speculative. We don’t know, you know, is a third of this real? Is half of it real? Will it all eventually be real? What technologies will they end up using? How much of it will be on-grid versus off-grid? Like all of those questions will impact what it means in the long run. I think the best kind of estimate that I found was to look at the Rhodium Group’s taking stock report. They just put out their latest version of this last month. And this report they put out annually, it basically looks at, you know, if we take current policy, energy, technology trends, and we project them out into the future, what happens to emissions. So they found power sector emissions could decline 24 to 48% by 2040.
Emily Pontecorvo:
Compared to today, yeah. So, you know, that maybe it’s hard to tell, like, is that good? Is that bad? That is a significantly worse outcome than what they found two years ago when they did the same exercise and the Inflation Reduction Act was kind of in full swing. At that point, their estimate was power sector emissions would decline by at least 42%, so near the high end of the current estimate, by 2035, so five years earlier. Both of those reports did take into account lots of data center demand growth, but they did not, neither of them took into account the potential for a lot of that demand growth to be met with off-grid natural gas combustion engines. And so, you know, those are much worse from a mission standpoint. And the other thing, when I spoke to Ben King, one of the authors, and he was saying, you know, not only are these less efficient systems, these combustion engines and simple cycle turbines, but putting them off-grid also, they’ll be running around the clock. Whereas like if they were on the grid, you have this amazingly efficient system that’s, they’re being called upon when they’re needed, but they’re not necessarily...
Robinson Meyer:
Right, you have price-based dispatch.
Emily Pontecorvo:
Yeah, yeah.
Robinson Meyer:
What does this mean for corporate net zero goals? And to what extent is the AI high boom kind of turning corporate net zero goals into a dead letter?
Emily Pontecorvo:
So, you know, all of these companies, the biggest AI hyperscalers, Microsoft, Google, Meta, Amazon, those four specifically, they are still the biggest clean energy buyers in the world. Like Amazon has funded, you know, has more clean energy PPAs than any other company in the world. At the same time, Amazon is behind this natural gas power plant in Texas that’s going to be 7.65 gigawatts, depending on what else gets built, could be the biggest natural gas plant in the U.S. So it’s really hard.
Robinson Meyer:
For about a week, we thought it was the biggest natural gas plant in the U.S. And then this OpenAI project got announced.
Emily Pontecorvo:
Right, right. So yeah, it’s very hard to square these two sides of the coin where like these companies, on the one hand, seem to be totally throwing out their net zero goals and just trying to build as quickly as possible with whatever they can get. And on the other hand, they are still publicly stating their commitment to the net zero goal and still publicly signing power purchase agreements with clean energy. I don’t know that we have a good accounting yet of how much gas are they helping get built versus how much renewables. And I don’t know if that exercise is possible, but if you know, reach out to me. But there is something sort of absurd or like it just feels so implausible that these companies could still say we’re committed to go net zero and meanwhile be supporting these natural gas mega projects.
Robinson Meyer:
How many of these companies are still pledging to hit net zero by 2030?
Emily Pontecorvo:
Those four, the big, like Amazon, Microsoft, Meta, Google, the thing is
Robinson Meyer:
They all still have 2030 net zero goals.
Emily Pontecorvo:
They’re either 2030 or 2035. But I mean, on one hand, Google calls it a moonshot. And they have language like that, where they’re like, this is our guiding principle. This is our aspiration. But even that if this is your guiding principle how is it guiding you to support it
Robinson Meyer:
We did get to the moon, do you know what i mean a lot companies the government does this now too like public sector organizations they use moonshot to refer to something they want to do but are not probably going to do but in fact the whole thing about the moonshot was we did in fact get to the moon.
Emily Pontecorvo:
The thing is, like, is it still possible for a company like Microsoft or Google to hit net zero emissions by whatever date they choose on paper? Probably. That will maybe depend on the corporate standards that rise up in the next couple of years that determine what they are allowed to say on paper and how we account for certain things like carbon removal and clean energy purchases, those accounting rules can really change what these companies say they’ve accomplished. Will they have achieved net zero in the true spirit of trying to get the whole world to go net zero? I think that seems a lot less likely.
Robinson Meyer:
Well, this is, I mean, you’ve written about this too, but I guess what all this suggests to me is that corporate net zero goals and arguably even national net zero goals are not even the right thing to be training on because, and I’m not trying to make excuses for the tech companies here, because I completely agree with you that this gas build-out is not at all in line with their climate commitments. However if they were to basically give up on their climate commitments, and pull out their investments in all these other technologies that are crucial for global decarbonization and those technologies never got developed that would be a tragedy, like that would be really bad and to some degree if google, or microsoft with their investments that they’re making to meet their net zero goal, were to seed, a technology that is crucial to overall global decarbonization. To some degree, that is more important than whether Google is able to make a zero appear on its books in 2035 or 2040.
Robinson Meyer:
And I don’t mean to be too glib about this, but I do think we actually accept this logic in the case of other industries. I would argue, I think climate advocates would argue pretty forcefully that like the coal that was an input into the Chinese solar industry ultimately at this point has been overwhelmed by the emissions reductions from the Chinese solar industry, number one. But it was number two, it was like important because now we have the Chinese solar industry, which is able to produce solar panels at this unprecedented scale for global decarbonization. And setting aside the particular kind of security implications of that, it just seems to me that like, It is bad that these companies are doing this, but it would in some ways be worse for them to kind of stop.
Emily Pontecorvo:
I don’t know why one precludes the other.
Robinson Meyer:
I mean, well, just because I think that the charge here is not hypocrisy. I would rather they remain hypocritical, but doing something for net zero. I would like them to stop emitting. But if they are going to emit, I don’t mind that they’re hypocrites, I guess is maybe what I’m saying.
Emily Pontecorvo:
Sure. I mean, I do think that there is a potential problem with using net zero as the kind of defining goal.
Robinson Meyer:
Yes, yes. Right. In fact, the goal is a bad one.
Emily Pontecorvo:
Yeah, I mean, I would love for these companies to come up with a new set of commitments that continue to motivate them to make the kind of transformative investments that they’re making, but that don’t lead people to believe that achieving this balance of inputs and outputs is not only feasible, but is like for one company by itself to do that is important.
Emily Pontecorvo:
And it’s much more important to look at the kind of global picture.
Robinson Meyer:
How do you think about this whole build out in context of climate? I mean, at this point, Heatmap has written extensively about the unpopularity of data centers. It’s clear that some people hate data centers because of their emissions impact, but it doesn’t seem to be driving that trend. Though in some ways that trend is so big, so generalized, and so amorphous in some ways that like everything is kind of driving it. How has your recent reporting made you think about the AI build out broadly?
Emily Pontecorvo:
I mean, I’d come back to the fact that we really don’t know the scale of it yet, because there are so many unknowns. So much of this development is speculative. How much natural gas will actually get built? We don’t know. I think there are some other kind of exciting unknowns, like will we be able to speed up the development of geothermal and some nuclear and some other cleaner sources that could maybe displace some of this gas? And then I also started to think about some other questions, which are like, in a future administration that wanted to do something about climate or a future Congress that had more capacity to do something about emissions, what kind of new constituencies does this build? Like, I wonder if, you know, in the past, companies like Microsoft and Google have been supporters of emissions regulation and clean energy policy. But if they suddenly have all this natural gas on their books, are they going to still support regulating emissions? Like, they might have a vested interest in fighting natural gas power plant controls.
Robinson Meyer:
It’s been so fascinating watching the political backlash to data centers. And I think especially because data centers threaten to be this massive emissions bomb, right? But also because that doesn’t really seem to be what the backlash is about. And I am filled with a little bit of a sense of foreboding watching this because I know the scale of infrastructure change that is going to have to happen to decarbonize. And it is smaller than the data center build out. Now, I think we have a lot more to offer people in some ways than AI does. But I don’t know that, for instance, the faces of that decarbonization infrastructure change will be any more trusted than the faces of this infrastructure build out. And so, you know, Tom Perriello, former congressman, actually was in climate philanthropy for a long time.
Robinson Meyer:
Was a fairly important figure in climate philanthropy, is now running for Congress again. His odds aren’t great, but he’s running in this Republican district near Charlottesville, Virginia. And he just came out with an ad that was against transmission lines. It was against a transmission line. And it was also kind of against data centers because there’s an unpopular transmission line in his district. And listen, he’s a politician, right? He’s going to do what he needs to do to win that election. But like, if Tom Perriello, of all people, is willing to nod along to the threats of transmission lines, which are non-existent and, in fact, essential to the energy transition. I can’t look at the data center backlash and be entirely like, yes, only good can happen, to paraphrase our president.
Emily Pontecorvo:
Yeah. I mean, the one thing that I, when I think about comparing, if we didn’t have this crazy data center build out, and instead what we had was a huge surge of electric vehicles and heat pumps that created this energy crisis that, you know, where we needed to build a lot of power plants. I think the main difference in those two scenarios is the speed of it. Like, less the scale. I think the scale is somewhat equivalent, but it would at least have happened or it can still happen in the it might have been, people wouldn’t have been bombarded with a project in their backyard in every county in the country.
Robinson Meyer:
That’s not happening. And there’s an interesting angle here. We’ve talked about it on previous shows, but we always expected load growth to come back in the 2030s. In fact, we kind of need it to come back in the 2030s if we’re anywhere close to hitting climate goals. And if the economy not only decarbonizes, but modernizes in the way that we would like it to modernize, it will require load growth to go up. But I wonder if climate advocates are a little lucky that the people eating, the initial wave of load growth, the people who are kind of the clarions of load growth, as it were, are not decarbonization industries, but the big tech companies, which already had their own PR issues.
Emily Pontecorvo:
I don’t know. Well, a second ago, you were wondering if this doesn’t bode poorly for...
Robinson Meyer:
I think it ... I don’t know. I don’t know. I managed to feel bad about it either way. We’re going to have to leave it there. Emily Panacorvo, thanks so much for joining us on Shift Key.
Emily Pontecorvo:
Thanks, Rob.
Robinson Meyer:
And that will do it for us today. I hope you enjoy the dwindling days of your summer. Remember to stick around after the show for a conversation between Heatmap Labs and the sponsor of this episode, Verse. It should be really, really interesting. Until then, Shift Key is a production of Heatmap News. Our editors are Jillian Gibbon and Nico Loricello. Multimedia editing and audio production is by Jacob Lambert and by Nick Woodbury. Our music’s by Adam Cromelow. Thanks so much for listening. See you next time.
Mike Munsell:
My name is Mike Munsell, and I’m the Vice President of Partnerships with Heatmap News. In my last conversation with Seyed Madaeni, we talked about Versus’ business model helping data centers and large energy consumers connect to power. In today’s conversation, we chat about Versus’ recent Series B, and we go deep on speed to power. Let’s talk about speed to power. Why is everyone talking about this concept today, and how is Versus helping to accelerate that deployment? Very good question. And I think this is the billion dollar question, if not a trillion dollar question. So as we know, AI is compute, and compute needs power. So the first order of business, if you’re, I’m just going to use an example, if you’re developing 100-megawatt data center, the size of these data centers are measured in units of power. Let’s say for the sake of the argument when we talk about 100 megawatt data center if you apply for interconnection meaning that you want to power your facility so your chips start running and your AI models start training that takes a long time the reason that it takes a long time is utilities need to do planning studies they’re basically answering two questions one is there enough energy at the grid level to serve your consumption and your demand? Second, if there is, is there enough transmission and distribution wires to get the power to your location?
Seyed Madaeni:
Given this enormous amount of growth, the answer usually fails on both fronts. And as days go by and our grid becomes more and more saturated, the wait times are going to be even longer and longer because the world of power and energy doesn’t move at the speed of AI. It takes years to build transmission lines. It takes years to build power facilities. So how do we solve this problem? Is there a magic wand that we can use to accelerate the time for in a connection of these large loads the answer is yes in a nutshell is to bring your own generation to the mix and that is by deploying behind the meter assets behind the meter assets that are capable of
Seyed Madaeni:
Charging up energy giving it back to the grid like energy storage or solar or nimble gas plants. So really the solution is to pair your data center with these large physical assets such that when you are being studied by the local utility, you’re not no longer seen as a 100 megawatt fixed load that consumes electricity around the clock. You have the capability to shape and form your energy profile. But those physical assets, they’re not just going to drive themselves. They need software. Ironically, they need AI to solve the AI compute problem. And that’s where we come in. We control these assets on a second by second basis to, again, make sure the needs of the utilities are met, the needs of the data center is met. And then plus, we can give back to the grid and be grid grid citizens by participating electricity markets and really trying to offer that capacity to suppress electricity prices. That’s the solution that’s really being adopted. And we play a role in kind of controlling those assets on a 10, 15 year basis.
Mike Munsell:
And I saw you recently completed a Series B of which Nvidia and Google Ventures were big backers. Can you talk more about that and why Nvidia and Google are invested in versus success? And is it related to that speed to power equation?
Seyed Madaeni:
We just closed the Series B round. It was led by Bessemer Venture Partners. They’re an amazing group of folks, have more than a century of experience in investing. You’re absolutely right. Nvidia backed us. Also, Google Ventures, which led our Series A round. They also took part in our Series B round. Essentially, the value prop that we have in the investment thesis that these investors try to pursue is, can Verse be the entity to solve the grid problem so we can be good grid citizens and also simultaneously win the AI race? That was the fundamental investment thesis. and we managed to prove that we are the team, we are the platform. And as a result, they did participate. Now we’re working alongside Nvidia to integrate with their DSX platform and kind of be that part of the standard reference design, which we are working towards. Obviously, Google has a big need of data centers. Plus, we’re also serving a lot of hyperscalers and we have a deep backlog in the queue to kind of help contribute to bring these CapEx online.
Seyed Madaeni:
But we also have a very good angle that we can look back and not only we solve the problem, but we also help towards sustainability because believe it or not, solar and storage is the quickest and cheapest solution that you can deploy. We’re at the moment of time that CFOs like clean energy because it’s economic and clean, which gives us momentum to try to solve this problem.
Mike Munsell:
Let’s get into that. What is VERS deploying today? And what does the system look like when you integrate it with a data center?
Seyed Madaeni:
We as a company, we are AI software driven. So we are not really developing the physical projects. That requires financing, that requires a balance sheet, that requires expertise in EPC and construction. That’s why we have partners like Calibrand and And they’re top notch, not from the kind of physical development, but understanding how the systems work, holding the hands of these customers to understand what the value proposition is. Our work is mostly on the software side. Just think about it when you build an amazing car. That car needs a driver. And in this case, these assets need a driver, but it can’t be a human driver because you’re making decisions every millisecond, whether to fire up the battery, curtail the solar. Draw from the grid so we’re you need a autonomous self-driving car and this is like self-driving assets so ironically we’re using ai to train our models to control these assets but that’s the role that we play and in terms of the underlying assets that we’re seeing a lot of lithium-ion batteries systems from tesla influence and etc.
Seyed Madaeni:
A lot of solar and some nimble gas generators that can and be part of the mix and the solution. But we have integrations with a lot of these OEMs, SCADA systems, meters to be able to effectively control.
Mike Munsell:
And you mentioned Calibrand. Can you talk more about your partnership with them and how they’re helping you deploy today?
Seyed Madaeni:
Yeah. So basically, as we announced in our Series B, I would look at them, the OG of energy infrastructure development, and they’ve made significant progress in this field. So they’re deploying assets, they’re financing assets, they’re their owner and operator. And our partnership, our involvement is on the software side because this is not a software and AI problem. You can’t build amazing software like the one that we have and just use it up in the air. You need to deploy it on physical assets. And it takes a whole team to do that from people that understand hardware, understand financing, understanding project development, and people who understand AI models and software platforms, we fit in more of the latter camp.
Mike Munsell:
Can you talk more about your project pipeline right now and maybe how your Series B is helping to deploy technology faster, perhaps?
Seyed Madaeni:
Yeah, so basically our backlog is pretty deep. We are in the business of managing assets at the end of the day. So we have gigawatts on the management. We’ll soon come out with some press releases in terms of showcasing what those numbers are. And then our backlog, it’s on the kind of plain vanilla contract management, utility bill management, a lot of enterprises ranging from retail to hyperscalers to manufacturing, steel companies. But on the dispatch intelligence, which is part of ARIA, we have a deep backlog and commitment from a lot of blue chip hyperscalers that need speed to power tomorrow. So really, our mix of customer base is, I would say, enterprises that spend $100 million and above on electricity, which by frame of reference, some of them spend billions of dollars. So that’s really our target ICP. And so far, the traction has been amazing.
Mike Munsell:
That wraps up today’s conversation with Sayed Medini, CEO of Verse. Stay tuned after the next episode of Shift Key to learn more about Verse’s next five years and what Sayed believes is needed for U.S. energy policy.
Rob talks with Heatmap’s Emily Pontecorvo about how the data center boom is changing our emissions trajectory.
The United States is staring down a natural gas buildout of gigantic proportions.
Amazon wants to build what would be the country’s largest power plant in Texas — and run it entirely on natural gas. Not to be outdone, OpenAI is plotting an even larger power plant in Ohio that, if built, would become the world’s largest gas power facility. How should we think about this boom — and about the AI and technology companies behind it, who remain some of the world’s biggest buyers of clean energy?
On this episode of Shift Key, Rob is joined by Emily Pontecorvo, a Heatmap founding staff writer. They discuss what Emily learned identifying the country’s 10 biggest gas projects, what surprised her most, and what this means for the country’s climate trajectory — and Big Tech’s corporate net-zero goals.
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:
Robinson Meyer: Can we talk a little bit about , why are companies building gas? Clean energy advocates talk a lot about how wind and solar — especially solar and batteries — are the cheapest source of electricity. I would say, when you talk to electricity traders, too, like when you talk to people in the market every day, they also talk about how cheap solar is. So why are companies building gas and not solar to service these facilities?
Emily Pontecorvo: So there’s a lot of different reasons that are all kind of coming together. Maybe the biggest one of all are the bottlenecks to connecting to the grid, the transmission bottlenecks. And that’s really pushing a lot of these companies to look for off-grid solutions.
Meyer: And specifically, just to play that out, because they cannot site enough acreage of solar on the site where they would put a data center to generate the power they need, which means they need a grid hookup. But if they need to generate their own power on their own acreage, then you need an extremely energy-dense form of generation, and that means you go to gas.
Pontecorvo: Right, right. And then I think that’s coming together with a bunch of political factors, like the Trump administration has a strong interest in pushing natural gas. They have gotten rid of the tax credits for clean energy. They’ve made renewable energy, wind and solar, really hard to build with all of these permitting freezes and permitting obstacles for renewables.
I think another element is just the extreme speed and urgency that AI companies are expanding at and demanding power at, which I guess kind of circles back to the interconnection issue and just not wanting to wait to be connected to the grid. And then the last one that I think is important is this issue with affordability in data centers, where people are really worried about the buildout increasing their energy bills. And a lot of data center developers are pushing this idea that by bringing their own generation, by building these gas power plants onsite, not connecting to the grid, they’re kind of putting their project in a box and ensuring that it doesn’t have any impact on regular ratepayers.
Meyer: It’s interesting to me — the Ratepayer Protection Pledge from Trump pledges that data centers won’t make electricity rates go up. And the solution to this for a lot of these companies, as you were saying, when they look at the set of constraints that they’re working within that include acreage, cost, regulation, local grid interconnection capacity, speed to power — they solve this set of constraints by going with gas. And I mean, I think there’s a few interesting aspects about it.
First of all, it’s not clear to me that it makes data centers any more popular. We recently did polling that made a lot of news that found that 75% of Americans, at this point, would oppose the data center being built near where they live. I’m not convinced that adding a fossil fuel power plant to a proposed data center project makes it any more popular because it’s taking a quasi-industrial site and turning it into a full-on industrial site. But that being said, one of the promises made by adding gas generation at the data center is that by generating your own electricity, you’re not increasing local demand for electricity and therefore not increasing anyone’s rates.
You can find a full transcript of the episode here.
Mentioned:
The U.S. Is Building Natural Gas Power Twice as Fast as China
Emily on Amazon’s Gigawatt Ranch
Rob on OpenAI and the PORTS-Pike Technology Campus
This episode of Shift Key is sponsored by ...
Verse's software platform Aria helps data centers connect to the grid faster and optimize power operations in real time. Learn more at verse.inc.
RE+ 26 is the largest clean energy event in North America, happening November 16th through 19th at the Las Vegas Convention Center. Register at re-plus.com and use code SHIFTKEY20 to save 20% off a Full Conference pass.
Music for Shift Key is by Adam Kromelow.