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Robinson Meyer:
Hello, it is Wednesday, June 17, and one of the most interesting experiments in carbon removal announced a big new project this morning. Frontier is a coalition of tech, finance, and fashion companies that provides what’s called an Advanced Market Commitment, or AMC, for carbon removal. It is a very interesting format. It commits to buy carbon removal credits from companies that are still building out their infrastructure, working on their technology, in order to make sure that carbon removal will exist in the future. It’s like a private version of Operation Warp Speed just for carbon removal. Its members include a lot of firms you’ve heard of, Stripe, Google, McKinsey, H&M, JPMorgan Chase, Salesforce, and others. Well, as of this morning, Frontier has raised a new round of more than $900 million to go into the market and keep supporting carbon removal that effectively doubles the amount of money it has on hand. It calls this new round a growth advanced market commitment or growth AMC, but it’s an invented term, but it says it will focus its next stage of buying on just a handful of companies who it thinks have the potential to remove billions of tons of carbon from the atmosphere. And there’s other news too. The AI lab Anthropic, who we haven’t seen a lot of climate commitments from, has now joined Frontier as well, joining Google and Shopify and all those other firms I just listed.
Robinson Meyer:
Now, Frontier, some of you may remember, launched back in 2022. I wrote about them at the time for The Atlantic. At the time, there weren’t a lot of sources of demand for carbon removal. And so when they committed about a billion dollars to do it, it was a big deal. They’ve since used that money to buy just under 2 million tons of carbon removal credits. Since then, as we’ve also covered at Heatmap, a whale in the market has come and gone. I reported earlier this year that Microsoft, which is the world’s largest historic buyer of carbon removal, they bought about 70 million tons of it, paused its purchases. Which is a big deal for the industry. It cuts off the primary source of demand, the primary customer for future carbon removal. So Frontier re-upping at this moment is a really big deal. To discuss that news and more, I’m excited to welcome the head of Frontier, Hannah Bebbington Valori. She was on Frontier’s founding team and joins us from the United Kingdom. We talk about this announcement, the future of carbon removal technology, and how to interpret Anthropic’s membership in the coalition, always a company people want to hear about. I’m Robinson Meyer, the founding executive editor of Heatmap News, and it’s all coming up on Shift Key. Hannah Bebbington Valori, welcome to Shift Key.
Hannah Bebbington Valori:
Ah, thanks for having me.
Robinson Meyer:
So... Today, this morning, Frontier announced a new $900 million raise. Can you just start off by telling us what you’re going to do with it?
Hannah Bebbington Valori:
Yeah. So today we launched what we’re calling the Frontier Growth AMC, which is an additional $900 million committed to bicarbon removal between now and 2040. So the buyers in this AMC are Stripe, Google, Shopify, Salesforce, H&M, and Anthropic. And this funding takes us to about $1.8 billion total committed across both of our AMCs. And I think what is important to note about this is really the question on everyone’s mind in carbon removal today is, is demand going to keep pace with the technology development? And even more than that, is demand going to scale to what the market needs to stabilize global temperatures or sort of gigaton scale, hundreds of billions of dollars a year?
Hannah Bebbington Valori:
So this growth AMC is really designed to, in part, answer that question and bring corporate buyers to market to keep buying carbon removal at scale and at pace. We’re going to, on the supply side, focus on a narrower set of portfolio companies, those who are highest potential, most promising, and sort of ideally get them to commercial scale. And then perhaps even more unique is really on the demand side, we’re thinking about prioritizing projects that have line of sight to robust long-term government-driven demand. So thinking about how do we as corporate buyers use what is still sort of a relatively small amount of money to really catalyze this space and pull forward that policy that is required to get the market to gigaton scale.
Robinson Meyer:
It sounds like as you go through these projects and technologies that you have some candidates already in mind. Are like the companies that will benefit from this purchase already kind of lined up and in the system? Or is this still open to other carbon removal companies?
Hannah Bebbington Valori:
The short answer to that is we’re still totally open. And what we want to do is spend this money most effectively. So on the best ideas, on the best projects, on the best teams. I think, though, the Frontier team has diligenced over 500 carbon removal companies. We have a portfolio of 60 companies today. And so we do know this space relatively well. As we think about the deployment strategy for this growth AMC, it’s really going to be likely a combination of, really high-performing, existing portfolio companies and new companies, larger, longer bets, and sort of across a diversity of pathways. And I should perhaps say that $900 million is at once a small and large number. So it is both a great step forward, meaningful for the carbon removal market, especially in this moment. And there will likely be projects that we cannot buy from who are also great and very high potential. So over the next couple of years.
Robinson Meyer:
Can you give us a sense of the technology landscape as you see it at the moment? Because I think one thing that’s notable about this announcement is that you kind of go through the technologies that you think are going to be able to deliver gigatonscale. And I do think this is something that’s changed from like the beginning of Frontier, and it was more of a wide open space. It seems like you have narrowed in on some of the technological options that will actually be able to remove carbon on the scale that will be necessary to actually meet our alleged global temperature targets. What are those technological options as you see them?
Hannah Bebbington Valori:
I mean, I think what has been really remarkable is the pace of technology development and carbon removal. So when we launched Frontier back in 2022, fewer than 10,000 tons of permanent carbon removal had been done to date. Most of carbon removal was really like an idea in someone’s head or in an academic paper. And we now have hundreds of companies building. We have real world data across most major pathways. And so, yeah, we are so much more opinionated today. We have so much more information about what that gigaton scale portfolio will look like. And at the same time, there are still so, so many questions about realistically how big and how cheap can these technologies get. But sort of with those caveats, we think of this market as having about five pathways that are on a spectrum and the spectrum being of sort of how relatively well understood and sort of well-bounded is this technology. And when I say relatively, everything in carbon removal is still pretty nascent compared to some other climate tech industries, but sort of within carbon removal. So on the one hand, we have things like biomass-based approaches, or often abbreviated to something like bikers, so BECCS and other biomass-based technologies.
Hannah Bebbington Valori:
You know, these are technologies that today are delivering tens of thousands of tons of removal. They’re relatively well understood. We have facilities that are building capacity on the hundreds of thousands of tons. They enjoy a lot of existing policy support. We have many different biomass-based approaches in our portfolio, Vaulted, Charm, Exergi, Hafslund Celsio.
Robinson Meyer:
This kind of ranges from like burning biomass, capturing the carbon, injecting the carbon below the ground, to the Charm approach where you create this bio oil from biological material that’s photosynthesized. And then you would just inject that deep below the ground. Lots of injection of biomaterial, but it kind of ranges from traditional bioenergy to...
Hannah Bebbington Valori:
More experimental like charm. Yeah, bioenergy with carbon capture obviously generating a stream of CO2, and then other biomass approaches, Charm and Vaulted, injecting some form of either bio oil or biomass flurry. This pathway is constrained by the amount of sustainable waste biomass that the world has and can aggregate and access in an economical way. And so we think, while very compelling, so likely to be cheap, likely to have a lot of political support, is going to deliver part of our gigaton scale portfolio. And sort of on this end of the spectrum, I would also put enhanced rock weathering and direct air capture, technologies that are relatively well understood being deployed in the field, but are capped in some way. Enhanced rock weathering, relatively capped in scale at the single digit gigatons, direct air capture likely capped by its total potential cost. So all three potential to be part of the gigaton portfolio, but not a winner takes all technology.
Hannah Bebbington Valori:
On the other hand of the spectrum, we have things like surficial mineralization, ocean alkalinity enhancement. These are technologies that we are super bullish about, have enormous potential, enormous scale potential, could deliver more than 10 gigatons a year at relatively affordable prices, less than $100 a ton, but have relatively less real world data. So these are still more in the conceptual phases. And a lot of the work that we are doing at Frontier is how do we get more startups working on these ideas, testing and refining these ideas in the field so that we can better understand what the true potential is here. So superficial mineralization, taking reactive rock either from waste rock piles at mines or mining it where you find a deposit, exposing that to air, likely piling it on a heat bleach pad. This is something that we think very, very high potential and yet we don’t know enough yet.
Robinson Meyer:
It seems like Frontier is approaching this round a little differently than the first round. I mean, I think when Frontier launched, it was like a classic advanced market commitment. I think the term I used in, I was working at The Atlantic at the time, but it was like buyer of first resort. You were going out into the market. You were supporting a lot of being the first customer for a lot of interesting technologies. What’s interesting over those intervening years is that Frontier has been in the market for a long time. I think you guys have bought, what, 1.8 million tons, maybe around there. Since 2022, an enormous buyer entered the market in the form of Microsoft. It bought 70 million tons, give or take like 5 million on each side. And now, as we recently reported here at Heatmap, it has paused its buying for the moment. And so it kind of was this enormous anchor buyer in the market, but now it’s gone. And so it’s a market that’s gone through a lot of convulsions. There’s a lot of good companies sitting out there that maybe were planning on a customer that has gone away. How is that shaping this round? And how are you thinking about Frontier’s role given that kind of, in some ways, we’re in this weird moment where it’s like we don’t need an advanced market commitment anymore. The market existed, but then the market kind of went away. And so how are you thinking about structuring Frontier’s market activity to support demand through the next several years.
Hannah Bebbington Valori:
Yeah, I think we think a lot about what is the role of the corporate buyer in carbon removal, especially the corporate buyer sort of at the Frontier scale, so buying millions of tons of removal today. And really the way that we answer that question is we think, okay, where does the carbon removal market need to be? Or what is the end goal for carbon removal? And how do we get there? And what needs to happen next to be on the right trajectory to scale. So when we think of carbon removal at gigaton scale, we are really looking at hundreds of billions of dollars of annual procurement spend. And that scale of market is unlikely to be delivered by the voluntary carbon market. That has actually always been true. The voluntary carbon market is sort of unlikely to get to that point. And so then you imagine that this market at gigaton scale is going to have to be government driven. Now, government driven can take a lot of different flavors and form factors. So it doesn’t necessarily mean government pays. What it means is ...
Robinson Meyer:
And this is true of all waste markets. I mean, if you think of carbon removal as a type of waste market, what happens is the government, I mean, we as taxpayers or the public in some kind of broad sense pays to remove the waste, but like the government comes and picks up our trash. For instance, the government does remove the waste from the water. You know, like if you think about this as a form of waste management, then it would be very natural for the government to take it over. Of course, it is different from other forms of waste management. Management, let’s say, in that it’s maybe thermodynamically and scientifically a little more ambitious than trash pickup.
Hannah Bebbington Valori:
Yeah. There’s a stat actually that we love that the world spends $1.4 trillion on waste management. And so as we think about hundreds of billions spent on carbon removal, it’s not unprecedented. It’s large, but we can see a path.
Hannah Bebbington Valori:
If we’re moving to government-driven demand, what that looks like to us is sort of likely one of three things. One is we have compliance markets or emissions trading schemes of some form. So really, corporates are paying for carbon removal to neutralize their residual emissions, but they are mandated to do so.
Hannah Bebbington Valori:
We can write carbon removal into existing industrial regs. So, for example, we could mandate that wastewater treatment plants use limestone to manage their pH, which actually might be better and easier and cheaper than existing chemicals that are used today. Or you could imagine direct funding of removal activity, and that could be direct procurement, direct buying of tons, and it could be things like tax credits and subsidies and so on. But the government can’t use taxpayer dollars to pay for stuff that is unproven or very risky. And similarly, it can’t mandate the use of technology that’s super expensive. And so before we get to that government-driven future, we really need to de-risk the technology. We need to pull it to commercial scale. And we need to make sure that it’s affordable and predictable and reliable. And that is the role of corporate buyers. So this is a long-winded way of answering your question. But really, we think of this growth AMC as saying, OK, what can we as corporate buyers do to pull that future into being? So to ensure that we are de-risking the most promising technologies, we are helping those technologies go to scale, and we are actively partnering with governments around the world to make sure that we are setting up this baton pass or even a public-private partnership whereby there is sustained and robust long-term demand for these projects once our off-take agreements expire.
Robinson Meyer:
And so what does that mean from a project buyer standpoint? How does that actually change how you’ll relate to companies or work with companies during this new phase?
Hannah Bebbington Valori:
Yeah, there’s a few different ways that this can look like. In short, it looks like we’re prioritizing projects that have line of sight to government driven demand or who we think that in buying from that project, we make it more likely that a jurisdiction gets excited about policy and carbon removal. So to give you a couple of examples, a great example of a project we’ve already done where we would love to do more like this is like the Stockholm Exergi facilities. Stockholm Exergi has a bioenergy facility in downtown Stockholm. It delivers most of the district heat to the city. They are installing a carbon capture retrofit to capture the carbon emissions off of that facility and injecting in the North Sea. Frontier and Microsoft were some of the original offtakers of this project. And in being an offtaker, we also allowed Exergi to qualify and then to win, an award from the Swedish state aid auction, which is filling out the rest of their offtake stack and sort of ensuring that this project is viable and can get built. A perfect example of a public-private partnership making a carbon removal project happen and paving the way for more of those types of projects to get built in places like Sweden and around that area.
Hannah Bebbington Valori:
If we could find more projects like that, so more projects where we either have a direct link to policy, where we can buy from a project, get that project FID, and in doing so get the local jurisdiction really excited about bringing more of that economic activity to their jurisdiction. Those are the types of things that we really want to see.
Robinson Meyer:
Does that mean basically not prioritizing projects in the United States because the U.S. is not a primary supporter of carbon removal technology at the moment?
Hannah Bebbington Valori:
This is everyone’s favorite question. In short, no, I think. So A, there are existing carbon removal policies that persist today in the U.S. Carbon removal has fortunately enjoyed quite a bit of bipartisan support. So things like 45Q is another great example of government-driven demand. 45Q pays for the injection of CO2 underground. So already not disqualifying. And I think for sure, if we could imagine a world of either expanding 45Q or having a more tech neutral tax credit, which has been considered in the past, that is like the type of direction of travel we would love to see for U.S. policy. And then I think more broadly, if you work in carbon removal, you are like inherently an optimistic and long-term thinking person. Otherwise, you would go crazy. And I think we really believe that sort of in the long arc of the future, the U.S. will be a meaningful player in building a carbon removal market.
Robinson Meyer:
I hope so too. And so one of the other big pieces of news that came out of this round is that Anthropic is joining Frontier. It’s quite interesting because I think this is really the first big climate program that Anthropic has joined. Unlike, say, Apple or Microsoft, they don’t have really notable public corporate climate. Can you give us any detail about the size of their contribution to Frontier or kind of what they mean as a coalition member?
Hannah Bebbington Valori:
Yeah, I mean, we’re just thrilled to have Anthropic in the group. It represents a couple of different things to us. So one is carbon removal is a really important part of any corporate climate program. And really like any national climate program. The reason why we care about carbon removal is because IPCC experts talk about how the world is going to stabilize global temperatures and the need to both radically reduce the emissions we emit and proactively scale a portfolio of permanent carbon removal technologies, because otherwise we’re not going to get to zero without both of those efforts. And so to us, someone like Anthropic signing up to Frontier is indicative of how organizations are thinking about building their overall climate programs, which is that carbon removal should be a pillar of the work that you do. I also think part of this and part of what is true of anyone who joins Frontier is like a love of sort of lowercase-f frontier technology and an optimism about the way that technology can help advance the world. And folks who join Frontier and who buy from these, really nascent emerging technology companies are really making a bet on human ingenuity and our ability to sort of create the world that we want to see in the future. And so we’re stoked. We’re stoked to have Anthropic on board.
Robinson Meyer:
But you can’t give us dollar amount.
Hannah Bebbington Valori:
I can’t give you dollar amounts. And actually, we, as a rule, don’t give anyone’s dollar amount. So this is not specific to Anthropic. But yeah, we keep it kosher with a top line number.
Robinson Meyer:
Well, can I can I just push a little further and say, I do think there are people who are going to see Anthropic join and say, Anthropic, complicated company, because on the one hand, I think it’s been the most If there’s any company, I think, that’s kind of pledged most among the frontier AI labs to uphold, let’s say, liberal democratic values, I think Anthropic obviously has to be top of the list. At the same time, they’ve partnered with xAI. They seem to be using a lot of compute at this Colossus Data Center, which is particularly carbon intensive in Tennessee. I think there are people who say carbon removal is kind of a delayist technology. It allows companies to keep emitting fossil fuels, to keep burning carbon and kind of promising to clean it up later, but not doing anything to reduce emissions in the near term. And Anthropic would be a great maybe example of this. What would be your response to that? Yeah.
Hannah Bebbington Valori:
Well, I think my response to that would be a couple of things. One is the moral hazard around carbon removal has really not come to fruition. This concept that companies buy carbon removal as kind of a way to get out of corporate climate commitments or other climate activity is like really not borne out in the data for a couple of reasons. One, the people who care about carbon removal are the people who care about the climate. And so those folks are often building broader programs that include carbon removal and other things. Two, these are all voluntary activities today. And I think they’re very, very expensive ones at that. So buying carbon removal today costs hundreds of dollars a ton. Like it is not, if you wanted a sort of get out of jail free card, Frontier and carbon removal is not that. There are many other ways to have a climate program or maybe have a broader sort of civic responsibility program that are much cheaper than what we do.
Hannah Bebbington Valori:
And I think this is borne out sort of generally in the data, like how much money we spend on carbon removal versus how much money we spend on decarbonization efforts. Rightly so is a fraction. And so the world as it stands is not replacing carbon removal with other decarbonization activities. Rather, buying carbon removal today is recognizing that this market will not turn on like a light switch in 2050 when we want it if we don’t invest today. And so folks who buy carbon removal now are really sort of playing that long game thinking into the future about what we want to exist and investing today to make that happen.
Hannah Bebbington Valori:
And then, you know, the other way to answer this question is like we should hold folks’ feet to the fire on this. So people who buy carbon removal, honestly, people who don’t buy carbon removal should be thinking about decarbonizing their emissions.
Robinson Meyer:
Where is OpenAI? They should be a Frontier …
Hannah Bebbington Valori:
Totally. You can call them and tell them that. We should be banging on the doors of these companies and many other companies to be asking them, what are you doing to decarbonize? And that is not just Anthropic. That is everyone.
Robinson Meyer:
You have this particular purge at Frontier into carbon removal. And as we’ve kind of been dancing about in this conversation, it’s been a tough year for carbon removal. I think the removal of Microsoft as a major corporate buyer is really devastating for some companies. And we were already expecting, I think, some kind of retraction or carbon removal recession. To some degree, climate tech’s been in a broader recession, I think, for the past two years. But this is really going to deepen and continue it for carbon removal. But you have a particular view of the industry at Frontier because lots of people come to you for money and they are pretty open book when they come to you for money and you learn a lot about their projects so what do you see in carbon removal that you feel like people haven’t realized yet or that nobody else sees about the industry like when you see other discussions of carbon removal. What do you think people are missing at the moment?
Hannah Bebbington Valori:
So, it’s true that the demand question keeps me up at night. It’s why we set out to raise this growth AMC, was to make sure that we are doing all that we can to put this market on track to scale. So, I do not, like, I do think that is a headline that you mentioned, and it is a headline that is so real. And so, I don’t want anything I’m about to say to sort of contradict that. I think the thing that people miss or perhaps undersell or under-celebrate is the technology progress is insane.
Hannah Bebbington Valori:
That we have gone from a space that really had a handful of companies, no deliveries, no third-party registry, no protocols, very little demand-side legislation in basically only one country, to so much more than that. So, you know, we have tens of thousands of tons being delivered. We have large scale facilities being built. We’ve like crossed approaches off the list, which in and of itself is amazing. And such as what an efficient way to spend money is in a very short period of time to be able to say there are a few things that we don’t want to concentrate our efforts on anymore and start to narrow our focus. I think the 2020s are really about technology development and shaking the trees to say, if we’re going to get to gigaton scale by 2050, we need to as quickly as possible learn what works and what doesn’t work and double down and make those decisions quickly and decisively. And I think we under-celebrate how far we’ve come along that journey in a relatively short period of time, honestly, with a relatively small amount of money.
Hannah Bebbington Valori:
Especially for some of the projects that don’t have a Microsoft offtake, we’re looking at quite an efficient use of capital.
Robinson Meyer:
Well, can you give an example of how the technology has come along in a way that people may not understand?
Hannah Bebbington Valori:
Yeah. So when we did, Frontier buyers were the first buyers to do a commercial scale purchase of enhanced rock weathering. And our first deal was Lithos. It was our biggest offtake agreement at the time, 60 million. When we did that deal, there was no protocol to measure the amount of weathering that was happening and the amount of carbon removal that was being generated by the practice. And so when we did that deal, it was like a big risk to write an offtake agreement with a fixed price and a fixed volume and a fixed delivery schedule for something that didn’t have a well-studied weathering curve and didn’t have a protocol for measurement. Today, we have multiple enhanced rock weathering companies who are delivering on isometric, on a third-party registry with an approved protocol. We have a much more robust data set for what those weathering curves look like. We have a much greater understanding of what the uncertainties are in the carbon removal drawdown process and how to quantify the enhanced rock weathering. And I think we’re getting on the order of tens of thousands of tons delivered this year from those contracts. And so it’s an example of a field that was really like an idea in 2022 and is now reaching a commercial scale technology. That’s like a five-year lifetime.
Robinson Meyer:
We previously touched on this, but of course, at the moment, the U.S. has been trying to spin up a carbon removal purchasing program for a little while. Congress has authorized it. The Trump administration has seemingly sat on it at the Energy Department. We do have a tax credit called 45Q that subsidizes the direct air capture of carbon dioxide from the atmosphere and its injection underground, but it doesn’t subsidize any other form of carbon removal. So it doesn’t, for instance, help enhance rock weathering or ocean alkalinity enhancement or any other alternative form of carbon removal technology, but look, there’s midterms later this year. There’s a presidential election in two years. Money’s, I think, going to be a little harder to come by than it was in 2021 during the first year of the Biden administration. Is there a policy that you think would be most important for the U.S. to adopt to support carbon removal technology going forward? Like what’s number one on your wish list?
Hannah Bebbington Valori:
Well, number one is actually a policy that has already been proposed and sort of since been shelved. But I believe it was Senator Bennet and Senator Murkowski put up a tech neutral tax credit. So basically taking the concept of 45Q, paying some portion of the costs of carbon removal from one technology and expanding that to cover a much, much wider swath of technologies. Something like that which has already been conceived of and sort of rolled around in the administration would be amazing for guaranteeing a price for carbon removal in the U.S. And for doing that across a variety of technologies and the other benefit of guaranteeing a floor price here is that you can really incentivize many different technologies to start to race to that price. What you can do then is you can sort of build a competition or sort of an arena of innovation, right, where folks are really saying, we want to get down to this price, both so that we can be competitive in the market, but also, you know, perhaps so that we can win or take all in the U.S., if you will. It’s not the only policy that would work in the U.S. And I think one thing that’s really important to stress about carbon removal policy is I think some people get fixated on certain ideas, a carbon tax, a compliance market, contracts for difference, an auction, a tax credit,
Hannah Bebbington Valori:
capex subsidies. Honestly, all of it is great. All of it works. And we’re probably going to see different form factors in different jurisdictions, kind of based on like what the ideological preferences in those countries.
Robinson Meyer:
Fantastic. Well, I think there’s so much more to talk about, but we’re going to have to leave it there. Hannah Bebbington Valori, thanks so much for joining us on Shift Key.
Hannah Bebbington Valori:
Yeah, thanks for having me.
Robinson Meyer:
And that will do it for this episode and this week of Shift Key. We’ll be back next week with at least one new episode. We have a run of amazing guests coming up, I have to say. Before you go, though, I just want to say, I don’t know if you subscribe to Heatmap Daily, which is Heatmap’s afternoon newsletter. It comes out every weekday. But if you don’t, you really, really should. I have taken over writing that newsletter. It’s really just me. I write it every afternoon. And it’s a place where I can share my analysis or observation or thoughts or reporting on the energy and climate and decarbonization news of the day. I’m having a lot of fun writing it. Honestly, a lot more fun than I thought I would. It’s become just a really cool space. And if you don’t follow it, I really recommend you should. Because if you listen to this show and you’ve made it this far in the podcast, you should be following this newsletter. You should subscribe. So we’ll stick a link in the show notes. You can find the link really easily too if you just go to heatmap.news. But we’ll take a look in the show notes, subscribe, Just go do it now. You’ll enjoy the newsletter. You’ll have fun. It’s free. I write it. That should be self-recommending if you’ve made it this far in the podcast. And thank you for doing that. Shift Key is a production of Heatmap News. Our editors are Jillian Goodman and Nico Lauricella. Multimedia editing and audio engineering is by Jacob Lambert and by Nick Woodbury. Our music is by Adam Kromelow. Thanks so much for listening. Enjoy the long weekend of you here in the U.S. And see you next week.
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A permitting deal seems closer than ever — but possibly delayed til after the election.
This is an edition of Heatmap Daily, an evening review of the day’s news written by our executive editor. Sign up for it here.
Good afternoon and happy Friday.
Let’s start with the news: The new episode of our podcast, Shift Key, is my full interview with U.S. Energy Secretary Chris Wright, which we recorded at Heatmap House in New York on Wednesday.
Listen to it here. You can find it on Heatmap’s website or wherever you get your podcasts. You don’t need to be a Heatmap subscriber to tune in.
My colleagues at Heatmap have covered a few takeaways from our conversation — including Secretary Wright’s prediction that there will not be a “blanket ban” on U.S. diesel exports, which he then hedged slightly — but we haven’t previewed everything, and I think the conversation is still worth your time. A few highlights:
We discussed the Trump administration’s lengthy war on wind and whether it might end in the future. “I do believe a successful permitting reform … changes the playing field for anything you want to build in this country, including wind,” Wright said. He also explained why he thought congressional Democrats should trust the administration’s word about that.
Wright hit on the Energy Department’s program to build a new fleet of nuclear reactors across the country, which could (if successful) bring roughly 10 gigawatts of zero-carbon electricity capacity online across five sites. There are now “well more than five” companies interested in entering the deal, he said, meaning that five will soon be selected. Allegedly there was a dinner last night to discuss the program, but we haven’t heard anything more about it.
Also up for discussion: whether the United States is leaning too hard into natural gas, how China has buttressed the global economy from the Strait of Hormuz oil shock, and why Wright thinks China is now the “swing importer” of oil globally and has successfully “taken off the peaks” of global pricing.
“If [China] were listening to me for their energy policy — and they are not — but if they were, I’d have them ramp up those refineries more rapidly because they have oil, the world has oil, but we’re very, very tight on refining capacity right now,” he said.
It was a fascinating conversation. Some of it pointed to ways that American energy policy will need to evolve in the future, regardless of which president or party is in charge. You can find it wherever you get your podcasts: Apple Podcasts, Spotify, Amazon, YouTube.
***
I’d be loath not to mention — at least briefly — all the movement in the past week on permitting reform.
When we last checked in on permitting over the summer, Daniel Palken, the head of infrastructure at Arnold Ventures, helped me understand the emerging outline of a bipartisan compromise deal on energy and infrastructure permitting. Senator Martin Heinrich of New Mexico also sketched the state of negotiations for us in August.
Since then, I had heard that Senate negotiators were making progress, but had not heard many concrete details. But this week we saw a flurry of activity. At the beginning of the week, the White House seemed to want to move quickly to seal a compromise, promising to allow stalled solar and wind projects to proceed in return for getting something inked before the midterm elections. (That said, actually getting a law passed before the November 3 elections would have required Speaker Mike Johnson to bring his caucus back to Washington, D.C.)
But late on Wednesday, Senate Democrats signaled that they want to slow down the talks and seemingly delay any deal until after November. “We believe there is a good deal to be had,” the lead Democratic negotiators, Senator Heinrich and Senator Sheldon Whitehouse, said in a statement today. But “getting that [deal] right has to matter more than election-year deadlines.”
As a reminder, any permitting deal will need at least 60 votes in the Senate in order to clear the filibuster hurdle. That means such a deal will almost certainly need to be bipartisan — and therefore that a deal can only come together in a political environment where legislators from both parties feel like they can plausibly prosper in the near-term by making it easier to build. Right now, it seems like both parties do feel that way, even if they’re bickering about whether to get a deal done before or after November.
I have been careful not to endorse any bill until I see it, of course. It will all depend on what’s in the final text. But it would be a mistake, I think, for House and Senate Democrats to let this legislating opportunity pass them by if they are indeed so close to a deal that the decarbonization hawks Whitehouse and Heinrich feel good about. Just because Congress reaches a deal now doesn’t mean it can’t reach another one in the future. As we’ve discussed on Shift Key, recent history suggests that when lawmakers adjust one part of the law or one statute, they feel more comfortable returning to it in the future, making further addendums as needed.
Remember: Because federal permitting laws chiefly constrain what the government can do, they act as a brake primarily on public infrastructure. It took years, recall, for state and local governments in New York to get the permits necessary to implement their own scheme to tax traffic congestion in New York City. If you want to build big new infrastructure in the United States, be it high-speed trains, transmission lines, or zero-carbon power plants — and if you specifically want the government to build public works faster and better than it has in recent decades — then you should want a different federal permitting scheme than we have now. Let’s hope congressional Democrats remember that in the days, weeks, and months to come.
Plus more on nuclear, EVs, China, and more, recorded live at our Heatmap House event at New York Climate Week.
Since taking office last year, the Trump administration has blocked renewable energy development and attacked climate change policy, prioritized fossil fuels and encouraged nuclear energy, and started a war that led to a global oil and gas supply shock.
U.S. Secretary of Energy Chris Wright has been the face of much of that policy agenda. For this episode of Shift Key, he joined Rob for a live conversation at our Heatmap House event, part of New York Climate Week. He answered questions about the Trump administration’s war on wind, a ban on diesel fuel exports, and how China has been able to buttress global oil supplies since the spring.
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, YouTube, or wherever you get your podcasts.
You can also add the show’s RSS feed to your podcast app to follow us directly.
Here is an excerpt from their conversation:
Robinson Meyer: Okay, let’s move to wind. So broadly, the Trump administration has seemed to have an issue with wind. It has taken a number of measures to block wind permits. I realize not all of these measures happened within the Department of Energy, but they have happened throughout the government. This has happened at the same time the grid is screaming for new sources of energy. So why wouldn’t a policy of American energy dominance embrace all forms of American energy, including wind?
Chris Wright: I would say it does. But there have been serious concerns in rural America and certainly in coastal America about development of wind farms. With the war in Russia, Ukraine, you see the change with drones. So there are legitimate national security concerns. I hope there’s mitigations and solutions to work it out. I suspect there will be, but I wouldn’t take all the administration’s activity as somehow like just to hamstring wind. There’s reasons for what’s going on behind the scenes. And I think you’ll see a robust development pathway going forward.
Meyer: Do you think that — I would say that it is hard to believe that, necessarily, when the president has been so personally vocal about wind?
Wright: He is not a fan of wind energy. I will give you that. But also when you talk about it, I’ll give you that 100%. The other thing I think you’ve got to look at is, what he cares about is grid security and affordability of prices in the United States. He wants to reshore modern manufacturing here. We want to lead in artificial intelligence, which means you’ve got to have a grid that’s affordable as possible and that’s secure. What matters for an electricity grid is who’s there at peak demand time.
You know, we had a very cold, very cold East Coast this year. On January 27 in the evening, peak demand time in New England, wind, solar, and batteries combined were 2% of New England electric generation. We got 3% from burning trash in wood. So, you know, when we talk about the average amount of electricity generated by sources, this and that, it’s not a realistic representation of what underlines and secures the grid.
Our main thing was 35 years of subsidies is enough. Let’s take the training wheels off and let things run from there. There are roles for different energy technologies in different places, but mandating things, forcing things on, and subsidizing things for decades, it just makes energy more expensive.
Meyer: So the subsidies for wind are going away. They were repealed. They were in the Inflation Reduction Act. They were repealed by the One Big Beautiful Bill Act. I think the level of obstacles that we’ve seen from the administration has exceeded kind of just subsidies. It’s been any kind of permitted delay. You know, offices that previously approved permits are now, we’re blocking them. Do you think that this, first of all, why kind of block things if the subsidies have gone away? And two, do you think that is going to change going forward?
Wright: So look, I’m not at the center of that. That’s Interior, that’s Department of War. Those are other issues really outside of my purview. You’re right. Wind has been very controversial, and there have been very spirited dialogues in the administration about this. I do believe a successful permitting reform thing changes the playing field for anything you want to build in this country, including wind.
You can find a full transcript of the episode here.
Mentioned:
Chris Wright Doesn’t Think We’ll Have a Diesel Export Ban
Trump Keeps Wind Farms Waiting Despite Court Ruling
Trump’s War Against Wind Energy: A Timeline
Previously on Shift Key: How China Saved the World From Trump’s Energy Crisis
This episode of Shift Key is sponsored by ...
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Music for Shift Key is by Adam Kromelow.
This transcript has been automatically generated.
Subscribe to “Shift Key” and find this episode on Apple Podcasts, Spotify, Amazon, YouTube, or wherever you get your podcasts.
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Robinson Meyer:
This is a special New York Climate Week edition of Shift Key. Earlier this week, Heatmap House welcomed climate and energy leaders, experts, and influencers to Heatmap House, an all-day summit in New York City. One of those leaders was current U.S. Energy Secretary Chris Wright. Secretary Wright is the former CEO of Liberty Energy, a fracking and oil and gas services company. He’s also a former board member of Oklo, a nuclear startup, and at Liberty led an investment in the enhanced geothermal company Fervo Energy, which we’ve talked about on the show. As Energy Secretary, he’s prioritized fossil fuels and nuclear energy while attacking climate policy and the Paris Agreement. He and I were able to have a lengthy conversation. So lengthy, in fact, that as you’ll hear, we got cut off on time. But we were able to cover a number of topics that you’ve heard about previously on Shift Key, including the Trump administration’s attacks on wind energy, its plans to build out a new fleet of nuclear reactors nationwide, and the Chinese government’s bailout of the global oil market after the Strait of Hormuz closure. Let’s go to the show now. This conversation was recorded in front of a live audience at Heatmap House at 22 Vanderbilt in New York City.
Robinson Meyer:
Hello, here we are at New York Climate Week. My guest today is Secretary Wright. As you know, I am aware that lots of people are going to disagree with maybe some of the things that come up today, and I would just ask that we have a respectful and civic conversation. And also, Secretary Wright, I appreciate you being here, and I appreciate you being here at Heatmap. We know you have a choice when flying, and we’re glad you could be here with us today. First of all, anything you want to say before we get into it, because there’s a lot of ground to cover. And I want to keep it high energy, but just...
Chris Wright:
Absolutely. No, just saying I’m here because I love thoughtful dialogues on energy, climate change, and human lives. That’s been a passion my whole life, and nothing will change that.
Robinson Meyer:
Excellent. Well, hey, thank you so much for joining us. So let’s just start. We’re going to try to hit as many fuels as we can in the next several minutes.
Robinson Meyer:
But let’s start with policy. So Politico reported that President Trump has agreed to move forward with the number of wind projects that are currently frozen at the Department of Defense permitting clearinghouse. Reaching any deal, I think, on permitting reform is going to require a credible commitment from the administration not to continue messing with permits. And so can you tell us what is the state of these wind projects? And after this long legal history of renewable projects facing so many obstacles during the Trump administration, many of which have been ruled illegal by the courts. Why should congressional Democrats, and I think especially Senate Democrats, trust you that this is the time and permits are now free to move forward?
Chris Wright:
Yeah, since I’ve arrived, and this administration is about permitting reform, our belief has been you need to be able to build big things in America again. We did in the old days. We made it increasingly hard to build anything. So I’ve been engaged with Democrats, Republicans, Senate, House governors on building things in the country the entire time. I think we’re – I think, I hope we’re very close to a deal that will make it easier to build everything in America. And I think that’s a huge plus.
Robinson Meyer:
Can you tell us what the status is on these wind permits specifically? Are they moving forward? Has the president committed to making sure these things are approved?
Chris Wright:
Well, we’re still in the middle of negotiations in a deal that hasn’t fully come across. And I’m not in the center of the negotiations. This is among Senators, House, White House. I’m involved, but I’m not the center of that. I don’t want to steal anyone’s thunder or give anyone’s positions. But I think things have gone very well. I think we’re going to see, I think, an enormously positive development come out of it.
Robinson Meyer:
Has the president blessed the idea of a deal? Does he want a deal to come together here?
Chris Wright:
Yes, he does.
Robinson Meyer:
OK, let’s move to wind. So broadly, the Trump administration has seemed to have an issue with wind. It has taken a number of measures to block wind permits. I realize not all of these measures happened within the Department of Energy, but they have happened throughout the government. This has happened at the same time the grid is like screaming for new sources of energy. So why wouldn’t a policy of American energy dominance embrace all forms of American energy, including wind?
Chris Wright:
I would say it does. But there have been serious concerns in rural America and certainly in coastal America about development of wind farms. With the war in Russia, Ukraine, you see the change with drones. So there are legitimate national security concerns. I hope there’s mitigations and solutions to work it out. I suspect there will be, but I wouldn’t take all the administration’s activity as somehow like just a hamstring wind. There’s reasons for what’s going on behind the scenes. And I think you’ll see a robust development pathway going forward.
Robinson Meyer:
Do you think that I would say that it is hard to believe that necessarily when the president has been so personally vocal about wind?
Chris Wright:
He is not a fan of wind energy. I will give you that. But also when you talk about it, I’ll give you that 100%. The other thing I think you’ve got to look at is what he cares about is grid security and affordability of prices in the United States. He wants to reshore modern manufacturing here. We want to lead in artificial intelligence, which means you’ve got to have a grid that’s affordable as possible and that’s secure. What matters for an electricity grid is who’s there at peak demand time. You know, we had a very cold, very cold East Coast this year. On January 27 in the evening, peak demand time in New England, wind, solar and batteries combined were 2% of New England electric generation. We got 3% from burning trash in wood. So, you know, when we talk about the average amount of electricity generated by sources, this and that, it’s not a realistic representation of what underlines and secures the grid. Our main thing was 35 years of subsidies is enough. Let’s take the training wheels off and let things run from there. There are roles for different energy technologies in different places, but mandating things, forcing things on, and subsidizing things for decades, it just makes energy more expensive.
Robinson Meyer:
So the subsidies for wind are going away. They were repealed. Here, you should take your drink of water and I can talk briefly. The subsidies for wind have been repealed. They were in the Inflation Reduction Act. They were repealed by the One Big Beautiful Bill Act. I think the level of obstacles that we’ve seen from the administration has exceeded kind of just subsidies. It’s been any kind of permitted delay. You know, offices that previously approved permits are now, we’re blocking them. Do you think that this, first of all, why kind of block things if the subsidies have gone away? And two, do you think that is going to change going forward?
Chris Wright:
So look, I’m not at the center of that. That’s Interior, that’s Department of War. Those are other issues really outside of my purview. You’re right. Wind has been very controversial, and there have been very spirited dialogues in the administration about this. I do believe a successful permitting reform thing changes the playing field for anything you want to build in this country, including wind.
Robinson Meyer:
Do you think we’ll see the president tweet that he is okay with wind as long as we get permitting reform? Can we get a message from the president? Because I think it would help.
Chris Wright:
I wouldn’t count on that one.
Robinson Meyer:
The Department of Energy, in one of the biggest initiatives under your secretariat, I’m not sure how you would describe it, is moving forward with this plan to offer $17 billion, I think, to build 10 new reactors across five sites across the country. It’s a big program. We haven’t heard an update on it lately, and I was hoping we could get one from you now. Do we have, is there offtake? Who’s offtake for these reactors? Do you have five customers lined up? What is going on with this program now?
Chris Wright:
There’s a dinner on this very topic tomorrow night in New York City. I can’t tell you where it is, and I won’t be at the dinner, but I was just on the phone with my colleagues. So there are multiple competitors, well more than five, that are interested in this. So now it’s a little bit of a selection process. So this is with utilities that are power developers. There are offtakers. These are like package deals of where’s the most viable place we can get nuclear moving soon. And yes, and it’s using debt credit to help order the long lead time part so we can speed it up. Nuclear just hasn’t moved in my adult lifetime, and we want to get that ball moving.
Robinson Meyer:
What’s interesting, I think, about this program, I mean, there’s a number of things. First of all, obviously, if it succeeds, it will have big climate benefits. Second of all, the administration has been very harsh on the idea of energy subsidies. I mean, we were just talking about it in the context of solar and wind. And yet, low-interest loans are a form of subsidy. And so why should nuclear be subsidized when seemingly no other form of energy should be subsidized?
Chris Wright:
So great question, and totally fair question. My view as a capitalist and passionate about energy is the government smothered nuclear energy. It came out of the gate strong, quickly got to 20% of U.S. electricity. We built over 100 reactors. We created the Nuclear Regulatory Commission, and in the last 30 years, we built two reactors. We made it virtually impossible to build a nuclear reactor. I would say renewables are part of the problem here, because when you pay three cents a kilowatt hour as a subsidy for wind, when the value of that kilowatt hour is you’re reducing the consumption of two cents of natural gas, you distort electricity markets. And they’re going to spin at all times. So they’ve got these little 15-minute price increments are negative. So by distorting the market for some climate reasons or policy reasons, we also killed the commercial opportunity for nuclear. Our thing is just to try to get it back on its feet and get out of the way. But you’re right. Is the government leaning in a little bit to help get nuclear moving? Yes. Is that a market distortion? It is. But I think we’re making up for decades, decades of hamstringing the industry, and then it’s got to run and compete on its own.
Robinson Meyer:
And why should nuclear get the subsidy when solar and wind shouldn’t?
Chris Wright:
Well, wind’s had it for 35 years and solar like 27 years. So they’ve had it for a very long time. But the bigger reason why am I personally, I worked in solar energy and solar energy has a future. Absolutely. Why am I way more bullish on nuclear? Two reasons. It delivers the form of electricity that people will buy, which means it’s there whether the wind’s blowing or the sun’s shining or the weather changes. It’s there 24-7, and only 20% of global primary energy is delivered via electricity wires. Like, electricity is awesome. I love it. It isn’t even the most important form of energy. The most important form of energy is heat. It keeps millions of people alive, and it powers the manufacturing of plastics and steel. You can’t build wind turbines and solar panels without massive amounts of process heat, which is why most of that stuff is done coal-fired in Western China with slave labor. You need massive amounts of process heat for a modern world. Nuclear can not only provide electricity in the form people will buy, it can deliver process heat. It can be a big deal in global energy in the decades ahead.
Robinson Meyer:
Can I ask, so this kind of effect in the electricity markets you’re describing where solar is competing with gas and solar is intermittent, so it runs during the date. Now, of course, batteries can hold solar energy and allow it to run overnight. But this effect that you’re describing where solar and gas are competing with each other and then nuclear is disadvantaged, that effect seems inherent to how electricity markets function to me, where electricity markets are always going to favor whatever the cheapest source in the merit order is at any moment. And so do you think... Long-term, because among the benefits to solar and wind and gas has been how they function within electricity markets. Do you think long-term how electricity markets function needs to change, or our country’s use of electricity markets needs to change?
Chris Wright:
I think we should have smarter design of electricity markets. As you well know, it’s very complicated. But electricity that’s going to be there when your kid’s in the incubator, you know, when it’s dark and still at night, that is the electricity we need. Paying the same value for a source that’s there some of the time and not there some of the time has led to these distortions. And to say just not just these theories, let me give the numbers. 10 states in the United States have closed all their coal plants. You know, that’s all justified in the name of climate action. If I compare the price of electricity in those 10 states, not cherry-picked, the average of those 10 states versus the 10 states with the highest existing concentration of coal on the power grid, their electricity is 79% higher. The more we build cheap electricity, the more expensive electricity gets. There’s obviously more to the store.
Robinson Meyer:
I was going to say the coal plants closed because they could be refired with natural gas often, right? Like the reason coal closed is because you can stick a natural gas generator into an old coal plant and run it cheaply. And you do better on various other kind of conventional pollution, conventional pollution measurements.
Chris Wright:
Agree with you 100%. So that’s a natural evolution. That’s how coal went from over 50% of US electricity to now third behind nuclear and natural gas is displayed at by market. But the places that have gone further and said, we’re going to close them by this date that have done it for not the rational business reasons you gave, but for climate or state political reasons, they have driven up electricity prices way beyond any natural evolution of coal.
Robinson Meyer:
Those are the 10 that you’re talking about, in other words.
Chris Wright:
Yes.
Robinson Meyer:
Let’s talk about natural gas. So one phenomenon that’s happening right now is that we are exporting, we’re getting ready to export more natural gas than we ever have before in this country. At the same time, we’re running this huge data center boom, basically on natural gas, often natural gas right at the site, because we’re generating electricity and then feeding it directly into data centers. At the same time, natural gas runs American industry. It is the source of process heat for a lot of factories and manufacturing operations. It seems like we are really leaning hard into natural gas. Should the United States be doing something to prepare for a natural gas price shock? Because right now we are becoming kind of single point vulnerable on the natural gas system. And when you talk to frackers, they know there’s supply, but they’re not sure they can continue increasing production to meat supply.
Chris Wright:
So, and I think that’s a little bit of optimism, right? If you’re in the business of oil and gas or wind or whatever business you’re in, you’re hoping higher prices and higher prices are about to come here. I think that’s an unrealistic view. 20 years ago, the United States had 1,200 rigs drilling for natural gas, and we were the largest importer of natural gas on planet Earth. Today, we have 125, 90% reduction in the number of rigs drilling for natural gas. We’ve more than doubled our production. where the world’s largest exporter takes one rig to support a BCF a day of production. That’s 6 gigawatts of electric generating. We have a gub-smacking amount of natural gas. We will never remotely come close to touching the volume of gas we had. But the U.S. has decades, truly generations of maybe not $2.50 gas, but if you get to $3.50 or $4, which is still in diesel equivalent prices like $0.60 or $0.70 a gallon, Just as far as the rest of your lifetime, it’s very hard to get domestic natural gas prices meaningfully high, only in local markets because of pipeline constraints.
Robinson Meyer:
So you’re not worried at all that we’re going to run into supply constraints on natural gas anytime soon? Because it does seem to me moving from $2 to $3.50 or $4, that is a small change in nominal terms. Of course, that would have big effects on the economics of any operation that relied on gas, right?
Chris Wright:
Now, I mean, look, gas was $8 20 years ago. The inflation-adjusted price of gas has continued to trend down. It’s been flattest the last few years. Maybe it’s flattest for the next five or 10 years. Does it escalate a little bit going out? Yes. Will it be the cheapest form of dispatchable electricity, at least for the next couple decades? Yes. I hope nuclear comes down. We can get the cost down someday so it can compete and outcompete natural gas, I hope. But that’s a tall order.
Robinson Meyer:
But you don’t see a strategic reason or an energy conservation or a diversification reason to move away from gas.
Chris Wright:
Now, right now, it is America’s energy superpower. You know, it’s high 30 percent of total primary energy production in the United States. It’s the fastest growing energy source on planet Earth in absolute terms of new energy added. It’s grown 3% compound annual growth rate for 50 years. Oil is growing at 1% because much more expensive than gas and it’s much less available. Oil has much more —
Robinson Meyer:
If all this is true, why invest in nuclear then? I guess I — I mean, I’m very pro because good for climate. But like, what is, yeah.
Chris Wright:
Back to your argument. Gas is, you know, in my lifetime, is going to be the American energy superpower for sure. But you never want all your eggs in one basket. You never want all your eggs in one basket. The future of the earth is long indeed. And nuclear is an energy source that will take time. But it eventually can come down at cost. It can deliver heat. It can deliver energy. And I don’t want all my eggs in one basket in natural gas. It is going to continue to grow. its market share, but it doesn’t mean you just bet on the one. We need multiple.
Robinson Meyer:
Can solar and batteries also help diversify the eggs in our basket?
Chris Wright:
They can, but I think the scaling possibilities, they’re much less. If you take all the batteries in the United States today, you can’t store five minutes of electric grid production. I love batteries. They have a key role in industrial technologies. They help in stabilizing the grid. But you said you can use solar and store it through the night. That is a monster amount of batteries. And so we got to keep driving battery prices down. But will solar and batteries play a role?
Robinson Meyer:
I think when you look at the queue for Texas or when you look at the queue for a number of grids, we are going to add a lot of batteries in the coming years.
Chris Wright:
Oh, 100%. No, I’m all in on batteries. And I like solar as well. Yeah, absolutely. Solar and batteries have a future, but their possible future is nowhere near as large as the possible future of nuclear.
Robinson Meyer:
I said we were going to try to hit as many fuels as possible. I’m going to keep it up.
Robinson Meyer:
Diesel. The president reportedly endorsed a diesel export ban yesterday. I want to ask you, because you’ve been critical of this idea in the past, should the U.S. ban the export of diesel fuels today?
Chris Wright:
Well, look, I always speak candidly, and I’ve seen stuff in the press like the energy secretary disagrees with the president. Absolutely not true. He didn’t endorse it. He did the same thing I’ve done when I’ve been asked about it. Are you open to that idea? We are open to any ideas that can lower energy prices for Americans. We have a continual thoughtful dialogue based on the facts on the ground of what are the most practical steps moving forward. And it looks like right now we do need to grow the diesel supply in the United States. This is more likely to be done entirely voluntary. We will not cease exports of U.S. diesel. But may there be some tweak in where diesel flows out of U.S. refineries. I think we’re going to see that because it can stop the rise in price of diesel.
Robinson Meyer:
If the U.S. were to ban diesel exports, wouldn’t it immediately hurt our reputation as an energy superpower, so to speak?
Chris Wright:
It certainly would have impacts. It certainly would have impacts. I don’t think there’s serious consideration, although there’s always been a dialogue about it, with the president across the cabinet about these things. Are we going to make adjustments with diesel? I think so. But no, I don’t think you will see a blanket ban on diesel. And yes, of course, we want to be the energy superpower supplying the whole world, and we care about that.
Robinson Meyer:
What’s your read? So from diesel to oil, remaining within the ambit of the Strait of Hormuz fallout, what’s your read of how China helped stave off the worst of the supply shock from oil? I was talking to someone in the industry yesterday, and they said, you are the only government official, not the only Trump administration official, but the only government official they saw, who explicitly has said Beijing released from its strategic supply to help buttress global, to help buttress its own oil supply. And so how large has that release been and how much longer do you think they can keep it up?
Chris Wright:
Yeah, so China has the world’s largest stores of oil. China has been very rational about energy for a long time, and they’ve been very aggressive on energy. And you’re right, early on as oil prices spiked up, China replaced the United States as the largest importer of oil in the world. Now we briefly were the largest exporter of oil in the world. China is still a huge oil importer, so they’re hurt a lot by high prices. They stopped building their inventories as the first thing they did. Then they drew from commercial stocks. They have abundant commercial stocks as well. And I think they’ve drawn a little bit from their strategic stocks, but they have an enormous amount of oil. The challenge today is not so much oil prices as refining capacity. So China turned down their refineries, drew from stocks. Now China’s increasing their refineries of oil and gas. If they were listening to me for their energy policy, and they are not. But if they were, all right, have them ramp up those refineries more rapidly because they have oil. The world has oil, but we’re very, very tight on refining capacity right now. That’s why diesel prices and jet fuel prices are so high.
Robinson Meyer:
I think their imports are still much lower than they have been historically. Do you know how long they can hold out not importing the level of oil? Because that’s basically saving the rest of the world from extremely high oil prices right now.
Chris Wright:
You’re right that it’s putting downward pressure on oil prices, but the world’s biggest problem for diesel right now is not oil prices.
Robinson Meyer:
It’s refining, yeah.
Chris Wright:
It’s refining capacity. So they’re helping push oil prices down, but their actions are helping push final product prices up, and that’s what consumers care about. So we want them to be a little less constructive on oil prices and a little more constructive on product prices, and that is the direction they’re heading. They are ramping up their refining, and they’re ramping up their exports of refined products, and I hope they continue that direction.
Robinson Meyer:
Do you think Beijing is now the swing consumer of oil in the world?
Chris Wright:
They’re the swing importer. It isn’t changing meaningfully their consumption, but they just have huge buffer stocks that they can reduce their imports rapidly, and they are the swing importer of oil.
Robinson Meyer:
Given that the current U.S. energy security policy is to drill as much as possible, and I would add has been for some time the idea that U.S. supply of oil is going to be key to U.S. energy security. Does the fact that China is now the swing importer of oil, let’s say, and the swing buyer on the global market and could seems to be shaping oil prices on a level that’s akin to how it shapes like global mineral prices? What does that mean for U.S. energy security?
Chris Wright:
Well, their behavior so far has like taken off the peaks. Yeah, they’ve prevented oil prices from going as high as the other would. That’s that’s, of course, quite a positive. They’re just very commercially minded. You know, if prices go high, well, you buy less. If prices go low, they buy more. You know, when oil prices are depressed, they fill their stocks faster. So they’ve just been very commercially minded in how they deal with oil markets. And overall, that’s a positive.
Chris Wright:
Yeah.
Robinson Meyer:
EVs, okay, next fuel. EVs are now more than 25% of new vehicle sales globally. They were more than half of new vehicle sales in Australia, our ally, in the month of August. Last year, the Trump administration ended consumer side subsidies for EVs. Given that EVs are important to manufacturing, to security, how can the U.S. Ever catch up without incentives, number one? But number two, just how can the U.S. ever catch up in this extremely important global industry?
Chris Wright:
Well, we had incentives for a long time. And first of all, we have Tesla, absolutely phenomenal company. They make phenomenal EVs. And they’re a global leader in EVs. And as we talk backstage, that has spinoff technologies to it. That’s fantastic. But look at the demographics who buy EVs. That’s well-off people that for their second or third car, mostly, not entirely. But it’s well-off people buying it. Should we have the broader America subsidizing, you know, the habits of wealthy people? I don’t think we should. Maybe it was OK to launch the industry, but the industry is going and around. When you force people to do something, as the Biden administration did, you know, GM and Ford, they’re going to go out of business.
Robinson Meyer:
I don’t think they forced anyone.
Chris Wright:
They said they were going to phase out. They had these strict goals. Believe me, Ford and GM, I talk to these people very often. They did not want to be forced to end their internal combustion vehicle, California regulations as well, and be forced to transition to EVs. And consumers told you have to buy something. If you impose something on someone, people immediately recoil from it. If you say, hey, there’s a cool new technology, do you want to buy it? People adopt that. This is the same thing we’re doing with the long-term spent fuel disposal in the United States. When they said it’s at Yucca Mountain, everyone in Nevada said, you’re not imposing on that. We said, who wants to host those campuses? 26 states responded, six have aggressive proposals. You want an opt-in on a technology. EVs are a cool, neat new technology. Let consumers choose what kind they want, what brand they want. Let the marketplace compete, and they’ll continue to grow and advance globally. But making people do them, particularly on the false premise that they’re a climate technology, it is every bit as carbon intensive to run an EV the life of an internal combustion vehicle
Robinson Meyer:
Because they’re so greenhouse gas. I don’t think that is true. I don’t think that is true. I think they are more efficient. You can run them off a coal plant and they are less carbon intensive.
Chris Wright:
They published the data on it. You have to drive a Tesla 80,000 miles on today’s US electricity grid to get your greenhouse gas emissions down to the level of an equivalently size. Volkswagen has published data on this. It’s two and a half times more energy intensive to make them.
Robinson Meyer:
I haven’t seen the data. I would say I hope Tesla can drive for longer than 80,000 miles because I would expect that from a car. I want to kind of lean in on this, though, because I think it sounds like what you’re saying is the U.S. forced Americans, you know, the government kind of forced Americans to buy EVs, and Americans were like, no, I don’t want EVs. Secretary Wright, thank you so much for joining us.
Chris Wright:
Thanks so much.
Robinson Meyer:
And we had to leave it there. As you heard, it was such a lengthy and lively conversation. We actually went well past the time that we had booked and had to just end things abruptly. Obviously, there was so much more to discuss. And obviously, I’d say we have to get Secretary Wright back on the show to talk about everything that we didn’t have time to discuss on stage. We’re going to be releasing more conversations from Heatmap House in the next days and weeks on the show. I’m very excited to share them. It was an incredible day. And if you were there, thank you for coming. If you weren’t there, hopefully we can get you into Heatmap House in the future. Until next week, Shift Key is a production of Heatmap News. Our editors are Jillian Goodman and Nico Lauricella. Multimedia editing and audio engineering is by Jacob Lambert and Nick Woodbury, who came all the way up to New York to record this conversation live. Thank you, Nick. Our music is by Adam Kromelow. Thanks so much for listening. See you next week.