July 2, 2025 • 33 mins
Natural gas is often referred to as a bridge fuel. Though some see it as a lower-carbon alternative to coal and oil for reliable electricity, others regard it as a methane-loaded detour to a zero-carbon future. In this week’s episode of ESG Currents, Bloomberg Intelligence Senior ESG Analyst Rob Du Boff sits down with Danny Rice, co-founder of Rice Energy and CEO of Net Power, a company that aims to generate cleaner power from natural gas. They discuss the challenges of finding clean, reliable and affordable energy, the importance of complementing renewables with baseload power sources, and the impact of AI on electricity demand.
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Episode Transcript
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Speaker 1 (00:09):
ESG has become established as a key business theme as
companies and investors seek to navigate the climate crisis, energy transition,
social mega trends, mounting regulatory tension, and pressure from other stakeholders.
The rapidly evolving landscape has become inundated with acronyms, buzzwords
and lingo, and we aim to break these down with
industry experts. Welcome to ESG Currents, your guide to navigating
(00:31):
the evolving ESG space, one topic at a time. Brought
to you by Bloomberg Intelligence, part of Bloomberg's research department,
with five hundred analysts and strategists working across all major
world markets. Our coverage includes over two thousand equities and credits,
as well as outlooks on more than ninety industries and
one hundred market indices, currencies and commodities. I'm Rob Duboff,
(00:53):
Senior ESG analyst for Bloomberg Intelligence. Natural gas is placed
in the energy transition is complicated. To put it mildly.
On the one hand, it is often referred to as
a bridge fuel, a lower carbon alternative to coal and
oil that can produce reliable, dispatchable electricity while renewable scale up,
but critics note that continued investment in natural gas supply
(01:13):
only delays the transition and also comes with its own
set of problems, mainly potential leaks of methane, which is
eighty times more potent than carbon dioxide in terms of
warming the climate, though has a much shorter lifespan, so
our natural gas in the fight against climate change mutually exclusive.
Perhaps there's no one better to ask than today's guest.
Danny Rice is a well known figure in nat gas circles.
(01:35):
He is co founder and former CEO of Rice Energy
before it's merger with EQT, where he still sits on
the board. He's also CEO of net Power, a publicly
traded clean energy company. Danny, Welcome to ESG Currents.
Speaker 2 (01:48):
Thanks for having me, Rob.
Speaker 1 (01:49):
Maybe let's start with a little bit more with your background.
You are CEO of one of the largest independent natural
gas producers in the country and now at least chat
GPT tells me you are a clean tech knowology enthusiasts.
So how does that happen?
Speaker 2 (02:02):
Sure? So, we were at the forefront of natural gas development,
really shale development here in the United States and the
really starting in the late twenty tents early twenty tents
going into the end of last decade, and so it
was really interesting when we had Rice Energy. You know,
we got into it because shale was really new. Shale
development was really new in the United States. The energy
(02:25):
was on the brink of being an importer of natural gas.
We were already an importer of oil, and then with
shale development, it really it really opened up an entire
new world of resource potential for us in the United States.
And so for Rice Energy, we were doing natural gas
development and one of the things that we really discovered
was with this new technology to be able to unlock
(02:46):
the natural gas that's trapped inside of these shale formations,
not only does it create an abundance of low cost
natural gas, but I think indirectly from it, and we
didn't really fully appreciate it at the time, it was
having a pretty fantastic environmental benefit because as you started
to introduce the use of more natural gas for power generation,
(03:07):
it displaces alternative sources of power generation. And the larger
source of power generation we were offsetting was coal fired
power generation, which has twice the emissions profile of natural gas,
and so our you know, what we would call that
transition journey to lower carbon future, it happened with doing
more natural gas, not less. So it's it's a little
(03:28):
bit different than when most people think of energy transition.
Most people think of energy transition as moving away from
fossil fuels. And I think our whole thing was if
you really understand like the full picture of all potential
sources of energy, it really becomes a sort of a
portfolio approach of which ones do you need to use
more of, which ones do you need to use less?
Speaker 1 (03:46):
Of?
Speaker 2 (03:46):
A natural gas For us, became just quite apparent that
using more natural gas can actually be beneficial to the
environment if you can offset alternative sources of power.
Speaker 1 (03:54):
So I joked about chat GPT, but artificial intelligence is
actually having a serious impact on energy markets. You mentioned
kind of what they talk about is the all of
the above approach to energy. Now, you know, I was
a former energy analyst, and you know a lot of
the demand, you know, demand really didn't have you know,
moved a little bit here and there. But with AI,
it's certainly, you know, expected to have a much more
(04:16):
dramatic impact on demand. Can you maybe talk about that
and what it means for the energy transition.
Speaker 2 (04:22):
Yeah, and so what we're really talking about specifically is
power generation, right, and so when we talk about power,
you know, in the United States, for the last ten
to fifteen years, power demand, which is commonly known as
load that load growth has been essentially flat in the
United States, and so there's people were starting to think
about just the energy transition and being able to move
away from baseload reliable sources of power like cold natural gas.
(04:47):
That was all in the face of you know, fairly
flat load growth. There wasn't any load growth. You know,
power demand was flat. With the advent of AI. What
we're seeing for the first time in over a decade
is we're seeing meaningful load growth and to show up
and that requires that's a sort of the power demand
profile of these data centers. It's not intermittent. This is
(05:09):
twenty four to seven, three sixty five power demand. And
the only source of power that can really support that
in a reliable way is going to be that basel
reliable power you get from really from three energy sources, nuclear,
natural gas, and coal. And the only thing that really
can be deployed at scale immediately is natural gas amongst
(05:30):
those three. And so for the first time in a
long time, we're seeing meaningful growth and new demand for
natural gas power generation because it's available, because it's scalable,
and I think most importantly, it's really really affordable.
Speaker 1 (05:43):
Yeah. No, I totally get that, and we do use
the phrase transition. You talked about it before. I think
the misconception out there, probably on both sides of the
political aisles, that means turning off all fossil fuels and
switching everyone's driving evs starting tomorrow. But it's not that simple.
Speaker 2 (05:57):
As no, it's and I think that that's the hard
place that I think people are starting to come to
the realization of this isn't something you can switch quickly.
And I think when most people think of energy transition,
they think we need to move away from fossil fuels
and we need only renewables. We can get there with
wind and solar and nuclear and batteries. And I think
what everybody started to realize over the course of the
(06:19):
last few years is it's not that easy and it's
not as inexpensive as people would expect it to be.
And so I think a lot of what we're doing
in the energy space is a more responsible way to decarbonize,
which isn't necessarily moving away from fossil fuels, but finding
ways with new technologies to be able to reduce the
(06:40):
environmental impact while still using the fossil fuels. Because I think, ultimately,
what we're trying to get to, and I think what
everybody wants, and this is what I think everybody can
universally agree on, is everybody wants clean, affordable, reliable power. Right,
everybody wants those three the challenges we don't have those
three characteristics and one single energy product on the planet,
(07:00):
otherwise we would all be using it, right, And so
you do have to create a portfolio of all these
things where there's trade offs from one energy source to
the next. But I think ultimately, right now, you can
pick two of those three. You can have clean and affordable,
but it's not going to be reliable like you know,
like wind and solar. You can have reliable and it
could be clean, but it's not going to be affordable,
(07:21):
which is nuclear. And then you're going to have something
like natural gas, which is it's reliable and it's really affordable,
but it's not as clean as the renewable alternatives. And
so our real approach to being able to deliver that
the energy trifecta is. We believe it is a lot
more economical to start with the lowest cost energy source
we have natural gas and decarbonize it. It's more expensive
(07:44):
than traditional natural gas, but compared to the alternatives to
deliver the energy trifecta that the data is really shown
in our technology. We're really on that mission to be
able to deliver that energy trifecta for a lower cost
form of clean and reliable power.
Speaker 1 (08:01):
I guess maybe next, tell me about net power. You know,
I've seen it described as this clean natural gas power company.
Can you explain what it is and how you expect
to hit that trifecta?
Speaker 2 (08:11):
Yeah, so what net power is. To take a step back,
you really need to understand the way power is generated
today from most combustion power plants. Where you take a
fuel source, it combusts with the oxygen that comes from
the air. So the air is about twenty five percent oxygen.
The other seventy five percent, approximately is nitrogen, which is
in inert gas that doesn't really do anything except take
(08:32):
up space. And so the fuel source in our case,
natural gas combusts with the oxygen and in a traditional
combustion turbine gas turbine power plant. The oxygen combusts with
a natural gas and it creates really four things. It
creates water, it creates a whole lot of energy to
spin that turbine to generate power, and it creates it
(08:54):
creates CO two, and that nitrogen that came in from
the air comes out of the back side with that
CO two, And that CO two is really hard to
separate from the nitrogen just because nitrogen is the majority
of that exhaust gas. So in a gas power plant,
only five percent of that exhaust is CO two, And
so there's companies out there trying to develop technologies to
(09:15):
separate that nitrogen from the CO two called post combustion
carbo capture. And when net Power does is something radically different,
which is, rather than trying to solve the problem on
the back end separating the CO two from the nitrogen,
we said, let's get rid of the nitrogen on the
front end. So let's do something called oxycombustion where we
separate the nitrogen from the oxygen and we're combusting the
(09:37):
natural gas in a pure stream of oxygen, so that
what comes out of the backside is a pure stream
of CO two that's sequestration ready, it's ready to be
utilized or disposed of. So we think it's it's a
more efficient and we think it'll be a more economical
way to be able to generate clean power utilizing natural
gas than some of the alternatives.
Speaker 1 (09:57):
And then what do you do with the carbon once
it's out there?
Speaker 2 (10:00):
So we're talking about a pretty meaningful size of CO
two that has to go somewhere. Now, CO two for
industrial uses, it's used everywhere. It's used obviously in fire
suppression with fire extinguishers, it's used in carbonation for beverages.
It's used in greenhouse to help grow plants. But the
volume that we're talking about of CO two coming from
these power plants that we want to develop with net power,
(10:22):
the most responsible prude in an economical place to put
that CO two is way deep under the ground where
that natural gas originally came from. So that's a process
called sequestration where you drew well specifically to inject the
CO two deep underground informations that have proven to be
able to contain and hold that CO two for millennia.
(10:42):
So it's really just oil and gas extraction reverse Wharrior
just injecting the CO two underground. And it's really interesting.
Not every place in the country has these types of formations,
Not every country in the world have these type of formations,
But in a lot of the places of the United States,
just like this country is geologically blessed with not just
resources like coal and natural gas and oil, we're also
(11:05):
geologically blessed where we have the sedimentary basins with formations
that can accommodate large volumes of CO two. So in
a lot of other places in the world, carbon sequestration
just isn't geologically feasible, it's not technically feasible. But in
a place like the United States, the United States has
enough CO two storage capacity to last us for thousands
(11:26):
of years. If we wanted to capture all the emissions
from every power plant in the country, we have enough
geological storage capacity for the next couple thousand years. So
the US is in like a pretty unique place in
terms of the natural resources we have that allow us
to do something like this that most other countries can't.
Speaker 1 (11:45):
So it's you know, this sounds like a very elegant
solution to that whole trifecta you discussed. You know why
isn't this something that's been widely adopted by a lot
of you know, if this is kind of the you know,
naturally skeptical, so you know, here something sounds a little
too good to be true. What are the limitations here?
I mean, you obviously just talked about some of the
geological limitations, but what are the current barriers to wide
(12:09):
scale adoption with technology?
Speaker 2 (12:10):
No, it's a great question, and I think that's like
the billion dollar question that everybody's really trying to figure out,
is how can we introduce cleaner, more reliable power to
the grid systems or just to society in general. And
I would say, like the big thing for us, it's
less on like the technology piece. You know, the company
over the course of the last decade we've gone out,
(12:31):
they've they've started investing in this technology back in the
early twenty tens, knowing that at some point in the
future folks are going to start to realize the importance
of clean, reliable power, because if you go back ten
or fifteen years, people were starting to think about it,
but people really weren't starting to demand it, and people
really weren't investing a lot of capital into advancing these technologies.
(12:51):
But you know, net Power in some of their early investors,
which are some of the largest energy companies in the
United States today, they were looking ten years, had twenty
years ahead to say, you know, at some point the
future clean reliable power is going to be really really important.
But at the end of the day, it really comes
down to the economics. You know, energy and power is
for the most part, it is a commodity where it's
(13:13):
really valued on its primary responsibility, which is deliver energy.
And all of the characteristics around it of where did
it come from, what's the environmental impact? These were tangential
to like the primary thing of how much energy is
this going to give me for whatever my need is?
And so at the end of the day, it all
comes down to the economics of it first and foremost.
(13:37):
And so that is one of the challenges with introducing
new technologies is are they going to be able to
compete with the existing technologies. Now, when you're talking about
taking natural gas power and decarbonizing it, where the process
like net power, it is inherently more expensive and it
will be inherently more expensive than the unobated natural gas
(13:58):
power plant, right, And so really for us it's not
about us being cheaper than the natural gas power plant. Really,
for us, it's we want to be the cheapest, the
lowest cost form of clean, reliable power. And so what
are those technologies that we're really comparing contrasting ourselves against.
And it's really there's really two that have the ability
(14:21):
to potentially scale. It's it's nuclear and it's renewables with
long duration energy battery storage, right to really farm up
that interpintent renewable power to make it farm and reliable.
And so our mission is really we need to demonstrate
that this technology using natural gas as the feedstock can
generate clean, reliable power at a lower cost than those
(14:45):
clean alternatives. And so that's that's that's the mission that
we're on right now. And ultimately, what we really need
to do is we need to get the cost to
a place where it's a small premium versus the carbon
emitting alternative. You know, there's there's folks that that are
probably a little bit detached from what is an appropriate
premium to pay for clean power. I would say most
(15:06):
people cannot afford to pay two x their electricity prices
just for it to be clean. People are very, very
price sensitive to the cost of electricity, and the cost
of electricity continues to go up as a result mainly
of not continuing to invest in building base load power
to keep up with this load growth that we're seeing
across most grid systems today.
Speaker 1 (15:28):
So circling back to AI, I know you've seen some
of the big AI players sign nuclear power deals. Is
that ultimately where you see yourselves, as you know, working
directly with AI company to power some of their farms
or is this more just going into the grid.
Speaker 2 (15:46):
I think it could be. It can definitely be both.
I mean, I think one of the things that natural
gas power offers that you really don't see from from
solutions like nuclear is the flexibility. And I think if
you look at just the US today, and especially in
places like New York City here now, I think on
days like this, people really come to appreciate the flexibility
(16:07):
that comes from natural gas power generation. Like we're sitting
here in New York and it's one hundred and one
degrees outside right and on a day like this, the
NYISO grid system, you know, a lot of the power
is coming from natural gas. More of the power is
actually coming from natural gas and diesel dual fuel power plants,
(16:28):
and so just that flexibility in dispatchability and reliability that
comes from natural gas power is unparalleled. And so you
really do see like the flexibility and the variability that
comes with being able to have an energy source that
can both be that base load behind the meter feeding
one single industrial customer, whether it's a data center or
(16:50):
a chemical plant. A solution like ours is being designed
to be able to do that, but at the same time,
it's also being designed that it can go up and
down based on what the grid needs, which also you know,
it allows us to actually like pair up really well
with renewables that when the sun shining, we can back
off our power generation, and then when the sun sets
at night and that solar power goes down or that
(17:12):
wind power goes down, that's when you can see a
quick ramp up in in the power generation that we
can deliver. So that sort of reliability and flexibility kind
of come hand in hand, and you really don't see
that in any other sort of energy source other than
from natural gas.
Speaker 1 (17:26):
So, you know what I'm interested in, what does the
future then look like for the oil and gas industry.
You know, I think we've seen a lot of you
mentioned carbon capture and storage and sequestration. I know, you know,
Exon's a big player in that. You know, are they
kind of buying into this model of natural gas, lower carbon. Yeah.
Speaker 2 (17:46):
I think everybody's trying to find ways to figure out
what's the future going to look like and what's their
role in the future going to look like. You know,
I think the traditional oil and gas industry has done
a fantastic job of evolving over the course of the
last couple decades. And it's been because of embracing new technologies.
You know, back to my point earlier on just the
Shelle Revolution and what that's done to the United States.
(18:09):
It's transformed us into the largest energy producer in the world.
We produce more oil than anybody else, we produce more
natural gas than anybody else. And it's really interesting because
if you look at where the world is today, the
world is using more of every single energy source in
history today than we ever have. The only source of
energy that we're using less of today is whale oil.
(18:30):
That's the only thing that's been phased out. But we're
burning more, not just more oil than we ever have,
we're burning more coal than we ever have. We're burning
more wood for power than we have in history, and
I think most people just don't fully appreciate energy demand
only continues to go up, and so I think it
is really really premature for us as a society to
(18:51):
start thinking about phasing out energy sources because demand is
still growing. And so I think what we really need
to be doing is embracing all energy sources that can
give us that reliable, affordable energy and then start to
prioritize the ones that give us even more affordable energy,
or more reliable energy or cleaner energy. But it has
to be from a place of additionality, not from a
(19:13):
place of we need to phase this thing out just
because we don't want it there. We really should only
be facing things out when we have a reliable source
to displace it. And while I think, you know, everybody
wants a cleaner planet, like, the reality is is we
need time for these technologies to develop, to mature, to
become commercialized before we can truly start to get to
(19:35):
a place where we say, well, we don't need this
energy source anymore. I think the world will eventually get
to this place where emissions are going down, But you know,
the United States has like a really really fantastic case
study of what happened last decade where we actually saw
a reduction in CO two emissions one of the only
countries in the world that's our reduction in CO two
(19:55):
emissions while energy was growing in it, and it wasn't
because of more renewables, because of natural gas displacing coal.
So so I think, you know, this is not a very
linear sort of solution of this is how we're going
to go from emissions today to lower emissions into the future.
I think some of those pathways could be very counterintuitive,
like more natural gas is actually better for the environment
(20:18):
if we're able to displace alternative sources of energy. That's
certainly what the usl Revolution demonstrated. And so with a
technology like net power, it really is a very conterintuitive
way to achieve the same thing, less on the access
to energy, but more on decarbonizing the grid of maybe
if we can use natural gas with new technologies like netpower,
(20:40):
that creates a better pathway to a lower carbon future
than trying to just pull the rug out from the
reliable energy that fossil fuels have provided for society today.
Speaker 1 (20:50):
And certainly besides just the combustion you know, I mentioned
this my introduction methane and methane leak, so that's obviously
you know, some people have called it low hanging fruit
that that we can use to certainly reduce emissions.
Speaker 2 (21:04):
What are your thoughts on Yeah, no, absolutely, I mean
it's in the natural gas industry is highly incentivized to
capture those emissions. You know, I think you know, in
my role as a director at iq T which is
the company that that our original company, Rice Energy merged
with than now my brother Toby is the CEO of
it's the first energy company I think in the world
(21:26):
to achieve zero scope to emissions, and they committed themselves
to we're going to reduce emissions. We're going to get
we're gonna fix all of those leaks, we're going to
replace all the dumatic devices on our wellheads where those
leaks originate from. And they did it, and you kind
of get the dual benefit of it prevents h emissions,
but that those emissions alternatively would be more natural gas
(21:50):
that you can actually sell. So there's so there's there's
both an environmental incentive and an economic incentive to be
able to make those investments. And so EKET is not
the only company doing it, A lot of them, A
lot of other companies have followed suit and said this
is the right thing to do for all stakeholders, for
the shareholders, for the for the environmentalists, for the communities
(22:10):
where we operate, and it's just good business. So I think,
you know, with that responsibility to just do the right thing,
companies are continuing to step up and do the right thing,
and the traditional oil and gas industry has demonstrated they
will do the right thing.
Speaker 1 (22:24):
I guess kind of maybe that leads to my next question.
I mean, business doesn't know. Maybe they're always doing the
right thing, but maybe not at the right pace, And
that's where kind of regulation comes in. And certainly government
incentives come in a few years ago with the passage
of the Inflation Reduction Act, the oil and gas sector
was actually excited. Had all sorts of incentives for technology
like carbon capture, hydrogen, methane emissions reduction, basically putting a
(22:48):
value on optimizing those molecules. That really played into the
industry's strength. But the car administration is looking to undo
some of the IRA. What's your take on IRA specifically
and the role regulation can play to help accelerate the
energy transition more probably. Yeah.
Speaker 2 (23:04):
I mean, the US is such an interesting place because
if you look at just the US versus most other
countries in the world, the US is one of the
few where private industries run. Private companies run the energy industry,
and so, like the federal government in the US, the
only real way they can play a meaningful role because
we don't have a state owned oil company, we don't
(23:25):
have a stand on gas company, we don't have state
owned anything. Right, It's all privatized industry. So the only
way that the government can really play a role here
is through regulation, and it's both by providing incentives with
like programs under the Inflation Reduction Act, where you have
things like the forty five Q that incentivizes companies to
capture and sequester the co two, as well as on
(23:47):
the permitting side with being able to issue permits to
either build more infrastructure, drill more wells, things of that nature.
And so the federal government does play a pretty large
role in being able to either throttle back certain things
by providing distancentives or creating more burdens or or barriers
for companies to be able to get permits and do things,
(24:07):
but they can also provide carrots. They can also provide
those incentives with programs under like you know, the forty
five KEY or the forty five Z, the forty five
Y and then certainly things like it C and PTC
for renewables. I think one of the big things that
they're really that the federal government has really taken a
hard look at, is really understanding like, well, when we
create incentives for one industry or for one solution, what
(24:29):
are the undertended consequences it creates for the other. And
I think that's become like a big focal point for
this current administration of you know, the last couple of administrations,
they've provided a lot of incentives for renewables, and I
think everybody everybody's happy to see, you know, low cost,
low cost renewables coming onto these grid systems when you're
(24:50):
starting to see shortages and new power to being developed.
But I think one of the things that that we've
kind of observed over the last few years is those
incentives for renewables. What that's in certainly done is it's
created a disincentive to build new reliable power generation, like
trying to build a new baseload power plant. You know,
a decade or two ago, you could underwrite that plant
(25:11):
being up eighty ninety percent of the time. And that's
that's sort of like the utilization rates you need to
see to justify building a new thirty year asset. Now
as we've started to see more renewables into these grid systems,
and a lot of it has been because of just
the incentives that the federal government has provided. What that
does is that eats into the utilization rates of those
(25:33):
existing plants, and it hurts like the capacity factor assumptions
you have to use if you're going to assess building
a new baseload power plant. And so where things have
gotten is it is really hard to justify building a
new power plant on speculation. You need a long term
contract and it's simply because you really can't predict where
(25:54):
those utilization rates are going to go because of just
the hyper competitiveness of renewables enter some of these grids,
and so that's kind of put the US and our
good systems in a little bit of a bind. Where
you see in the US, like the grid systems today,
the majority of them are deregulated, so they're competitive power
markets and anybody can go build a power plant and
sell their power into these grid systems. But even within
(26:16):
these competitive power markets, folks are saying, I'm having a
hard time justifying building a new baseload power plant because
I can't get the economics to work with only a
fifty or sixty percent up time assumption. And that's that's
quite scary because you have these system operators saying, hey,
we have all of this load growth showing up in
our good systems over the next couple of years, primarily
(26:38):
driven by data centers, but also from just reON shoring
of manufacturing and the electrification of everything that's happening. And
so we're seeing this massive mismatch where we're seeing all
of this demand start to show up in the forecast,
but we're not seeing anybody committing to build as much
new baseload power gen as needs to. Right, So, I
think the federal government has really taken a close look
(27:00):
at what can we do to ensure and restore reliability
of the grid today while ensuring that we're able to
continue to meet this load growth into the future. Knowing
that we're probably in the beginning of a super cycle
of load growth, and this is load growth that can't
be met with just renewables. We need a lot of
new baseload power generation to show up. So with programs
(27:20):
like the forty five Q, which benefit a company like
net Power, which is our power plan, is inherently capturing
that co two, that forty five Q is actually really
helpful for us because you know, back to my earlier
comment of this technology is going to be more expensive
than the carbon emitting alternative, programs like the forty five
Q are really really helpful to offset some of the
(27:42):
costs the higher costs associated with clean power technologies like ours.
Speaker 1 (27:48):
And I've heard also some folks advocate not just for
the incentive, but also maybe a tax on garbone and
that's that's something that really, you know, helps when you're
thinking about planning longer term baseload to really if you're
going to price that externality, you know, that leads to
maybe more efficient capital a location. What's your take on
(28:09):
a carbon tax.
Speaker 2 (28:10):
Yeah, I mean I think you can get there sort
of both ways. You can get that through the carrot
which is like the forty five Q like we have
here in the United States, where it's it's an incentive,
or you could do it with a stick like a
carbon tax, which is they have it and they have
it in you know, in Europe, and they have it
up in Canada where they have a carbon tax. And
I think both of them are meant to really stimulate,
you know, really one of two things, either encouraging new
(28:33):
technologies to get developed like ours, which is really what
the carrot incentivizes, or the stick, which is really meant
to it's really meant to disincentivize you from using fossil
fuels or things that that that emit carbon. You know.
My take is, I think the incentives is really what
you need to be able to invest in new technologies.
(28:55):
But I think you can get there. You can get
there both ways. The most important thing is if it
is going to be a tax, you need to make
sure that those tax dollars that you're going to be
collecting are going to be invested into those new technologies
that you need to advance to be able to to
increase new power generation. I think if the US was
in a decline on power generation, a tax probably makes sense.
(29:17):
But what we really need to be doing is we
need to be incentivizing new sources of power generation just
because we're in the in the beginning phases of of
of a load growth era.
Speaker 1 (29:28):
Great and we've focused a lot on the US, but
in terms of other parts of the world, you know,
you mentioned they have their own geological circumstances. There's also
you know, things other things like wind and solar that
that have impact different parts of the world differently. You know, how,
how do how should other countries think about, you know,
(29:50):
scaling up low carbon solutions if if maybe carbon capture
is not as optimal there.
Speaker 2 (29:54):
The first step in energy is getting access to it,
and then as you advance, then you can start to
figure out ways to make it more reliable. And then
the third and final step is we need to figure
out a way to make it clean. I think if
you can't deliver a reliability and affordability, the responsibility piece
is out of the question. So like as we think
(30:14):
about just establishing the foundation for a clean energy future,
that foundation is reliability and affordability. You have to build
clean energy on top of that. If you try to
build the clean energy piece first, it'll totally fall apart,
or if you try to do it prematurely, it'll fall apart.
And I think, you know, there's case studies kind of
popping up all over the place of what happens if
(30:36):
you pivot too hard to you know, renewables. Germany is
a great example. California is another example, and now they're
starting to rethink or starting to retreat back to we
need more coal power generation or we need more natural
gas power generation in the case of Germany. So it
needs to be done responsibly, right, But every single country
is in a different place, both in terms of where
(30:58):
their society and quality of life is, but also in
terms of where their proximity is to access to natural resources.
The United States is in such a unique position where
we have access really to all of the highest quality
and energy solutions on the planet. You know, we have
great solar radiation for solar power, we have great wind
power for wind, we have we've essentially invented nuclear, and
(31:23):
so we have great nuclear. But most importantly, we have
absolutely fantastic you know, reserves of coal and natural gas
in oil that provides that reliable, affordable power that enables
us to build that foundation for a cleaner energy future.
I would say a lot of other countries are still
really trying to figure out what resources do they have
that they can use to build that foundation and from
(31:44):
there really start to figure out about that clean energy future.
So for each country it should be different. So while
while I think the US certainly could have a playbook
for what it does, and some countries in Europe are
going to have their own playbook, and the Middle East
is going to have their own playbook, I think it's
all very very country specific, and it's really being able
to understand what natural resources do we have underneath our
(32:05):
feet within our domestic country, Let's utilize those first, Let's
let's build our economy around that, and then let's start
to figure out what things do we put around that
to really build a sustainable energy future. But I think
certainly like just having that perspective of where we are
in the United States, we are we are just very
(32:26):
very blessed to have the natural resources we have today
that have allowed us to grow the economy to what
the economy has become in this country.
Speaker 1 (32:34):
Fantastic. Well, thank you so much for joining us today, Danny.
Very interesting conversation.
Speaker 2 (32:39):
Yeah, thank you so much.
Speaker 1 (32:40):
Rob. This has been a blast, And for our listeners
you can find more information on sustainability issues and the
energy transition on bi space ESG go on the Bloomberg terminal.
If you have an ESG quandary you would like to
ask bi's expert analysts or learn more about our research,
send us an email at ESG Currents at bloomberg dot net.
And if you like this episode, please subscribe on Apple, Spotify,
(33:02):
or your favorite podcast platform,
ESG has become established as a key business theme as
companies and investors seek to navigate the climate crisis, energy transition,
social mega trends, mounting regulatory tension, and pressure from other stakeholders.
The rapidly evolving landscape has become inundated with acronyms, buzzwords
and lingo, and we aim to break these down with
industry experts. Welcome to ESG Currents, your guide to navigating
(00:31):
the evolving ESG space, one topic at a time. Brought
to you by Bloomberg Intelligence, part of Bloomberg's research department,
with five hundred analysts and strategists working across all major
world markets. Our coverage includes over two thousand equities and credits,
as well as outlooks on more than ninety industries and
one hundred market indices, currencies and commodities. I'm Rob Duboff,
(00:53):
Senior ESG analyst for Bloomberg Intelligence. Natural gas is placed
in the energy transition is complicated. To put it mildly.
On the one hand, it is often referred to as
a bridge fuel, a lower carbon alternative to coal and
oil that can produce reliable, dispatchable electricity while renewable scale up,
but critics note that continued investment in natural gas supply
(01:13):
only delays the transition and also comes with its own
set of problems, mainly potential leaks of methane, which is
eighty times more potent than carbon dioxide in terms of
warming the climate, though has a much shorter lifespan, so
our natural gas in the fight against climate change mutually exclusive.
Perhaps there's no one better to ask than today's guest.
Danny Rice is a well known figure in nat gas circles.
(01:35):
He is co founder and former CEO of Rice Energy
before it's merger with EQT, where he still sits on
the board. He's also CEO of net Power, a publicly
traded clean energy company. Danny, Welcome to ESG Currents.
Speaker 2 (01:48):
Thanks for having me, Rob.
Speaker 1 (01:49):
Maybe let's start with a little bit more with your background.
You are CEO of one of the largest independent natural
gas producers in the country and now at least chat
GPT tells me you are a clean tech knowology enthusiasts.
So how does that happen?
Speaker 2 (02:02):
Sure? So, we were at the forefront of natural gas development,
really shale development here in the United States and the
really starting in the late twenty tents early twenty tents
going into the end of last decade, and so it
was really interesting when we had Rice Energy. You know,
we got into it because shale was really new. Shale
development was really new in the United States. The energy
(02:25):
was on the brink of being an importer of natural gas.
We were already an importer of oil, and then with
shale development, it really it really opened up an entire
new world of resource potential for us in the United States.
And so for Rice Energy, we were doing natural gas
development and one of the things that we really discovered
was with this new technology to be able to unlock
(02:46):
the natural gas that's trapped inside of these shale formations,
not only does it create an abundance of low cost
natural gas, but I think indirectly from it, and we
didn't really fully appreciate it at the time, it was
having a pretty fantastic environmental benefit because as you started
to introduce the use of more natural gas for power generation,
(03:07):
it displaces alternative sources of power generation. And the larger
source of power generation we were offsetting was coal fired
power generation, which has twice the emissions profile of natural gas,
and so our you know, what we would call that
transition journey to lower carbon future, it happened with doing
more natural gas, not less. So it's it's a little
(03:28):
bit different than when most people think of energy transition.
Most people think of energy transition as moving away from
fossil fuels. And I think our whole thing was if
you really understand like the full picture of all potential
sources of energy, it really becomes a sort of a
portfolio approach of which ones do you need to use
more of, which ones do you need to use less?
Speaker 1 (03:46):
Of?
Speaker 2 (03:46):
A natural gas For us, became just quite apparent that
using more natural gas can actually be beneficial to the
environment if you can offset alternative sources of power.
Speaker 1 (03:54):
So I joked about chat GPT, but artificial intelligence is
actually having a serious impact on energy markets. You mentioned
kind of what they talk about is the all of
the above approach to energy. Now, you know, I was
a former energy analyst, and you know a lot of
the demand, you know, demand really didn't have you know,
moved a little bit here and there. But with AI,
it's certainly, you know, expected to have a much more
(04:16):
dramatic impact on demand. Can you maybe talk about that
and what it means for the energy transition.
Speaker 2 (04:22):
Yeah, and so what we're really talking about specifically is
power generation, right, and so when we talk about power,
you know, in the United States, for the last ten
to fifteen years, power demand, which is commonly known as
load that load growth has been essentially flat in the
United States, and so there's people were starting to think
about just the energy transition and being able to move
away from baseload reliable sources of power like cold natural gas.
(04:47):
That was all in the face of you know, fairly
flat load growth. There wasn't any load growth. You know,
power demand was flat. With the advent of AI. What
we're seeing for the first time in over a decade
is we're seeing meaningful load growth and to show up
and that requires that's a sort of the power demand
profile of these data centers. It's not intermittent. This is
(05:09):
twenty four to seven, three sixty five power demand. And
the only source of power that can really support that
in a reliable way is going to be that basel
reliable power you get from really from three energy sources, nuclear,
natural gas, and coal. And the only thing that really
can be deployed at scale immediately is natural gas amongst
(05:30):
those three. And so for the first time in a
long time, we're seeing meaningful growth and new demand for
natural gas power generation because it's available, because it's scalable,
and I think most importantly, it's really really affordable.
Speaker 1 (05:43):
Yeah. No, I totally get that, and we do use
the phrase transition. You talked about it before. I think
the misconception out there, probably on both sides of the
political aisles, that means turning off all fossil fuels and
switching everyone's driving evs starting tomorrow. But it's not that simple.
Speaker 2 (05:57):
As no, it's and I think that that's the hard
place that I think people are starting to come to
the realization of this isn't something you can switch quickly.
And I think when most people think of energy transition,
they think we need to move away from fossil fuels
and we need only renewables. We can get there with
wind and solar and nuclear and batteries. And I think
what everybody started to realize over the course of the
(06:19):
last few years is it's not that easy and it's
not as inexpensive as people would expect it to be.
And so I think a lot of what we're doing
in the energy space is a more responsible way to decarbonize,
which isn't necessarily moving away from fossil fuels, but finding
ways with new technologies to be able to reduce the
(06:40):
environmental impact while still using the fossil fuels. Because I think, ultimately,
what we're trying to get to, and I think what
everybody wants, and this is what I think everybody can
universally agree on, is everybody wants clean, affordable, reliable power. Right,
everybody wants those three the challenges we don't have those
three characteristics and one single energy product on the planet,
(07:00):
otherwise we would all be using it, right, And so
you do have to create a portfolio of all these
things where there's trade offs from one energy source to
the next. But I think ultimately, right now, you can
pick two of those three. You can have clean and affordable,
but it's not going to be reliable like you know,
like wind and solar. You can have reliable and it
could be clean, but it's not going to be affordable,
(07:21):
which is nuclear. And then you're going to have something
like natural gas, which is it's reliable and it's really affordable,
but it's not as clean as the renewable alternatives. And
so our real approach to being able to deliver that
the energy trifecta is. We believe it is a lot
more economical to start with the lowest cost energy source
we have natural gas and decarbonize it. It's more expensive
(07:44):
than traditional natural gas, but compared to the alternatives to
deliver the energy trifecta that the data is really shown
in our technology. We're really on that mission to be
able to deliver that energy trifecta for a lower cost
form of clean and reliable power.
Speaker 1 (08:01):
I guess maybe next, tell me about net power. You know,
I've seen it described as this clean natural gas power company.
Can you explain what it is and how you expect
to hit that trifecta?
Speaker 2 (08:11):
Yeah, so what net power is. To take a step back,
you really need to understand the way power is generated
today from most combustion power plants. Where you take a
fuel source, it combusts with the oxygen that comes from
the air. So the air is about twenty five percent oxygen.
The other seventy five percent, approximately is nitrogen, which is
in inert gas that doesn't really do anything except take
(08:32):
up space. And so the fuel source in our case,
natural gas combusts with the oxygen and in a traditional
combustion turbine gas turbine power plant. The oxygen combusts with
a natural gas and it creates really four things. It
creates water, it creates a whole lot of energy to
spin that turbine to generate power, and it creates it
(08:54):
creates CO two, and that nitrogen that came in from
the air comes out of the back side with that
CO two, And that CO two is really hard to
separate from the nitrogen just because nitrogen is the majority
of that exhaust gas. So in a gas power plant,
only five percent of that exhaust is CO two, And
so there's companies out there trying to develop technologies to
(09:15):
separate that nitrogen from the CO two called post combustion
carbo capture. And when net Power does is something radically different,
which is, rather than trying to solve the problem on
the back end separating the CO two from the nitrogen,
we said, let's get rid of the nitrogen on the
front end. So let's do something called oxycombustion where we
separate the nitrogen from the oxygen and we're combusting the
(09:37):
natural gas in a pure stream of oxygen, so that
what comes out of the backside is a pure stream
of CO two that's sequestration ready, it's ready to be
utilized or disposed of. So we think it's it's a
more efficient and we think it'll be a more economical
way to be able to generate clean power utilizing natural
gas than some of the alternatives.
Speaker 1 (09:57):
And then what do you do with the carbon once
it's out there?
Speaker 2 (10:00):
So we're talking about a pretty meaningful size of CO
two that has to go somewhere. Now, CO two for
industrial uses, it's used everywhere. It's used obviously in fire
suppression with fire extinguishers, it's used in carbonation for beverages.
It's used in greenhouse to help grow plants. But the
volume that we're talking about of CO two coming from
these power plants that we want to develop with net power,
(10:22):
the most responsible prude in an economical place to put
that CO two is way deep under the ground where
that natural gas originally came from. So that's a process
called sequestration where you drew well specifically to inject the
CO two deep underground informations that have proven to be
able to contain and hold that CO two for millennia.
(10:42):
So it's really just oil and gas extraction reverse Wharrior
just injecting the CO two underground. And it's really interesting.
Not every place in the country has these types of formations,
Not every country in the world have these type of formations,
But in a lot of the places of the United States,
just like this country is geologically blessed with not just
resources like coal and natural gas and oil, we're also
(11:05):
geologically blessed where we have the sedimentary basins with formations
that can accommodate large volumes of CO two. So in
a lot of other places in the world, carbon sequestration
just isn't geologically feasible, it's not technically feasible. But in
a place like the United States, the United States has
enough CO two storage capacity to last us for thousands
(11:26):
of years. If we wanted to capture all the emissions
from every power plant in the country, we have enough
geological storage capacity for the next couple thousand years. So
the US is in like a pretty unique place in
terms of the natural resources we have that allow us
to do something like this that most other countries can't.
Speaker 1 (11:45):
So it's you know, this sounds like a very elegant
solution to that whole trifecta you discussed. You know why
isn't this something that's been widely adopted by a lot
of you know, if this is kind of the you know,
naturally skeptical, so you know, here something sounds a little
too good to be true. What are the limitations here?
I mean, you obviously just talked about some of the
geological limitations, but what are the current barriers to wide
(12:09):
scale adoption with technology?
Speaker 2 (12:10):
No, it's a great question, and I think that's like
the billion dollar question that everybody's really trying to figure out,
is how can we introduce cleaner, more reliable power to
the grid systems or just to society in general. And
I would say, like the big thing for us, it's
less on like the technology piece. You know, the company
over the course of the last decade we've gone out,
(12:31):
they've they've started investing in this technology back in the
early twenty tens, knowing that at some point in the
future folks are going to start to realize the importance
of clean, reliable power, because if you go back ten
or fifteen years, people were starting to think about it,
but people really weren't starting to demand it, and people
really weren't investing a lot of capital into advancing these technologies.
(12:51):
But you know, net Power in some of their early investors,
which are some of the largest energy companies in the
United States today, they were looking ten years, had twenty
years ahead to say, you know, at some point the
future clean reliable power is going to be really really important.
But at the end of the day, it really comes
down to the economics. You know, energy and power is
for the most part, it is a commodity where it's
(13:13):
really valued on its primary responsibility, which is deliver energy.
And all of the characteristics around it of where did
it come from, what's the environmental impact? These were tangential
to like the primary thing of how much energy is
this going to give me for whatever my need is?
And so at the end of the day, it all
comes down to the economics of it first and foremost.
(13:37):
And so that is one of the challenges with introducing
new technologies is are they going to be able to
compete with the existing technologies. Now, when you're talking about
taking natural gas power and decarbonizing it, where the process
like net power, it is inherently more expensive and it
will be inherently more expensive than the unobated natural gas
(13:58):
power plant, right, And so really for us it's not
about us being cheaper than the natural gas power plant. Really,
for us, it's we want to be the cheapest, the
lowest cost form of clean, reliable power. And so what
are those technologies that we're really comparing contrasting ourselves against.
And it's really there's really two that have the ability
(14:21):
to potentially scale. It's it's nuclear and it's renewables with
long duration energy battery storage, right to really farm up
that interpintent renewable power to make it farm and reliable.
And so our mission is really we need to demonstrate
that this technology using natural gas as the feedstock can
generate clean, reliable power at a lower cost than those
(14:45):
clean alternatives. And so that's that's that's the mission that
we're on right now. And ultimately, what we really need
to do is we need to get the cost to
a place where it's a small premium versus the carbon
emitting alternative. You know, there's there's folks that that are
probably a little bit detached from what is an appropriate
premium to pay for clean power. I would say most
(15:06):
people cannot afford to pay two x their electricity prices
just for it to be clean. People are very, very
price sensitive to the cost of electricity, and the cost
of electricity continues to go up as a result mainly
of not continuing to invest in building base load power
to keep up with this load growth that we're seeing
across most grid systems today.
Speaker 1 (15:28):
So circling back to AI, I know you've seen some
of the big AI players sign nuclear power deals. Is
that ultimately where you see yourselves, as you know, working
directly with AI company to power some of their farms
or is this more just going into the grid.
Speaker 2 (15:46):
I think it could be. It can definitely be both.
I mean, I think one of the things that natural
gas power offers that you really don't see from from
solutions like nuclear is the flexibility. And I think if
you look at just the US today, and especially in
places like New York City here now, I think on
days like this, people really come to appreciate the flexibility
(16:07):
that comes from natural gas power generation. Like we're sitting
here in New York and it's one hundred and one
degrees outside right and on a day like this, the
NYISO grid system, you know, a lot of the power
is coming from natural gas. More of the power is
actually coming from natural gas and diesel dual fuel power plants,
(16:28):
and so just that flexibility in dispatchability and reliability that
comes from natural gas power is unparalleled. And so you
really do see like the flexibility and the variability that
comes with being able to have an energy source that
can both be that base load behind the meter feeding
one single industrial customer, whether it's a data center or
(16:50):
a chemical plant. A solution like ours is being designed
to be able to do that, but at the same time,
it's also being designed that it can go up and
down based on what the grid needs, which also you know,
it allows us to actually like pair up really well
with renewables that when the sun shining, we can back
off our power generation, and then when the sun sets
at night and that solar power goes down or that
(17:12):
wind power goes down, that's when you can see a
quick ramp up in in the power generation that we
can deliver. So that sort of reliability and flexibility kind
of come hand in hand, and you really don't see
that in any other sort of energy source other than
from natural gas.
Speaker 1 (17:26):
So, you know what I'm interested in, what does the
future then look like for the oil and gas industry.
You know, I think we've seen a lot of you
mentioned carbon capture and storage and sequestration. I know, you know,
Exon's a big player in that. You know, are they
kind of buying into this model of natural gas, lower carbon. Yeah.
Speaker 2 (17:46):
I think everybody's trying to find ways to figure out
what's the future going to look like and what's their
role in the future going to look like. You know,
I think the traditional oil and gas industry has done
a fantastic job of evolving over the course of the
last couple decades. And it's been because of embracing new technologies.
You know, back to my point earlier on just the
Shelle Revolution and what that's done to the United States.
(18:09):
It's transformed us into the largest energy producer in the world.
We produce more oil than anybody else, we produce more
natural gas than anybody else. And it's really interesting because
if you look at where the world is today, the
world is using more of every single energy source in
history today than we ever have. The only source of
energy that we're using less of today is whale oil.
(18:30):
That's the only thing that's been phased out. But we're
burning more, not just more oil than we ever have,
we're burning more coal than we ever have. We're burning
more wood for power than we have in history, and
I think most people just don't fully appreciate energy demand
only continues to go up, and so I think it
is really really premature for us as a society to
(18:51):
start thinking about phasing out energy sources because demand is
still growing. And so I think what we really need
to be doing is embracing all energy sources that can
give us that reliable, affordable energy and then start to
prioritize the ones that give us even more affordable energy,
or more reliable energy or cleaner energy. But it has
to be from a place of additionality, not from a
(19:13):
place of we need to phase this thing out just
because we don't want it there. We really should only
be facing things out when we have a reliable source
to displace it. And while I think, you know, everybody
wants a cleaner planet, like, the reality is is we
need time for these technologies to develop, to mature, to
become commercialized before we can truly start to get to
(19:35):
a place where we say, well, we don't need this
energy source anymore. I think the world will eventually get
to this place where emissions are going down, But you know,
the United States has like a really really fantastic case
study of what happened last decade where we actually saw
a reduction in CO two emissions one of the only
countries in the world that's our reduction in CO two
(19:55):
emissions while energy was growing in it, and it wasn't
because of more renewables, because of natural gas displacing coal.
So so I think, you know, this is not a very
linear sort of solution of this is how we're going
to go from emissions today to lower emissions into the future.
I think some of those pathways could be very counterintuitive,
like more natural gas is actually better for the environment
(20:18):
if we're able to displace alternative sources of energy. That's
certainly what the usl Revolution demonstrated. And so with a
technology like net power, it really is a very conterintuitive
way to achieve the same thing, less on the access
to energy, but more on decarbonizing the grid of maybe
if we can use natural gas with new technologies like netpower,
(20:40):
that creates a better pathway to a lower carbon future
than trying to just pull the rug out from the
reliable energy that fossil fuels have provided for society today.
Speaker 1 (20:50):
And certainly besides just the combustion you know, I mentioned
this my introduction methane and methane leak, so that's obviously
you know, some people have called it low hanging fruit
that that we can use to certainly reduce emissions.
Speaker 2 (21:04):
What are your thoughts on Yeah, no, absolutely, I mean
it's in the natural gas industry is highly incentivized to
capture those emissions. You know, I think you know, in
my role as a director at iq T which is
the company that that our original company, Rice Energy merged
with than now my brother Toby is the CEO of
it's the first energy company I think in the world
(21:26):
to achieve zero scope to emissions, and they committed themselves
to we're going to reduce emissions. We're going to get
we're gonna fix all of those leaks, we're going to
replace all the dumatic devices on our wellheads where those
leaks originate from. And they did it, and you kind
of get the dual benefit of it prevents h emissions,
but that those emissions alternatively would be more natural gas
(21:50):
that you can actually sell. So there's so there's there's
both an environmental incentive and an economic incentive to be
able to make those investments. And so EKET is not
the only company doing it, A lot of them, A
lot of other companies have followed suit and said this
is the right thing to do for all stakeholders, for
the shareholders, for the for the environmentalists, for the communities
(22:10):
where we operate, and it's just good business. So I think,
you know, with that responsibility to just do the right thing,
companies are continuing to step up and do the right thing,
and the traditional oil and gas industry has demonstrated they
will do the right thing.
Speaker 1 (22:24):
I guess kind of maybe that leads to my next question.
I mean, business doesn't know. Maybe they're always doing the
right thing, but maybe not at the right pace, And
that's where kind of regulation comes in. And certainly government
incentives come in a few years ago with the passage
of the Inflation Reduction Act, the oil and gas sector
was actually excited. Had all sorts of incentives for technology
like carbon capture, hydrogen, methane emissions reduction, basically putting a
(22:48):
value on optimizing those molecules. That really played into the
industry's strength. But the car administration is looking to undo
some of the IRA. What's your take on IRA specifically
and the role regulation can play to help accelerate the
energy transition more probably. Yeah.
Speaker 2 (23:04):
I mean, the US is such an interesting place because
if you look at just the US versus most other
countries in the world, the US is one of the
few where private industries run. Private companies run the energy industry,
and so, like the federal government in the US, the
only real way they can play a meaningful role because
we don't have a state owned oil company, we don't
(23:25):
have a stand on gas company, we don't have state
owned anything. Right, It's all privatized industry. So the only
way that the government can really play a role here
is through regulation, and it's both by providing incentives with
like programs under the Inflation Reduction Act, where you have
things like the forty five Q that incentivizes companies to
capture and sequester the co two, as well as on
(23:47):
the permitting side with being able to issue permits to
either build more infrastructure, drill more wells, things of that nature.
And so the federal government does play a pretty large
role in being able to either throttle back certain things
by providing distancentives or creating more burdens or or barriers
for companies to be able to get permits and do things,
(24:07):
but they can also provide carrots. They can also provide
those incentives with programs under like you know, the forty
five KEY or the forty five Z, the forty five
Y and then certainly things like it C and PTC
for renewables. I think one of the big things that
they're really that the federal government has really taken a
hard look at, is really understanding like, well, when we
create incentives for one industry or for one solution, what
(24:29):
are the undertended consequences it creates for the other. And
I think that's become like a big focal point for
this current administration of you know, the last couple of administrations,
they've provided a lot of incentives for renewables, and I
think everybody everybody's happy to see, you know, low cost,
low cost renewables coming onto these grid systems when you're
(24:50):
starting to see shortages and new power to being developed.
But I think one of the things that that we've
kind of observed over the last few years is those
incentives for renewables. What that's in certainly done is it's
created a disincentive to build new reliable power generation, like
trying to build a new baseload power plant. You know,
a decade or two ago, you could underwrite that plant
(25:11):
being up eighty ninety percent of the time. And that's
that's sort of like the utilization rates you need to
see to justify building a new thirty year asset. Now
as we've started to see more renewables into these grid systems,
and a lot of it has been because of just
the incentives that the federal government has provided. What that
does is that eats into the utilization rates of those
(25:33):
existing plants, and it hurts like the capacity factor assumptions
you have to use if you're going to assess building
a new baseload power plant. And so where things have
gotten is it is really hard to justify building a
new power plant on speculation. You need a long term
contract and it's simply because you really can't predict where
(25:54):
those utilization rates are going to go because of just
the hyper competitiveness of renewables enter some of these grids,
and so that's kind of put the US and our
good systems in a little bit of a bind. Where
you see in the US, like the grid systems today,
the majority of them are deregulated, so they're competitive power
markets and anybody can go build a power plant and
sell their power into these grid systems. But even within
(26:16):
these competitive power markets, folks are saying, I'm having a
hard time justifying building a new baseload power plant because
I can't get the economics to work with only a
fifty or sixty percent up time assumption. And that's that's
quite scary because you have these system operators saying, hey,
we have all of this load growth showing up in
our good systems over the next couple of years, primarily
(26:38):
driven by data centers, but also from just reON shoring
of manufacturing and the electrification of everything that's happening. And
so we're seeing this massive mismatch where we're seeing all
of this demand start to show up in the forecast,
but we're not seeing anybody committing to build as much
new baseload power gen as needs to. Right, So, I
think the federal government has really taken a close look
(27:00):
at what can we do to ensure and restore reliability
of the grid today while ensuring that we're able to
continue to meet this load growth into the future. Knowing
that we're probably in the beginning of a super cycle
of load growth, and this is load growth that can't
be met with just renewables. We need a lot of
new baseload power generation to show up. So with programs
(27:20):
like the forty five Q, which benefit a company like
net Power, which is our power plan, is inherently capturing
that co two, that forty five Q is actually really
helpful for us because you know, back to my earlier
comment of this technology is going to be more expensive
than the carbon emitting alternative, programs like the forty five
Q are really really helpful to offset some of the
(27:42):
costs the higher costs associated with clean power technologies like ours.
Speaker 1 (27:48):
And I've heard also some folks advocate not just for
the incentive, but also maybe a tax on garbone and
that's that's something that really, you know, helps when you're
thinking about planning longer term baseload to really if you're
going to price that externality, you know, that leads to
maybe more efficient capital a location. What's your take on
(28:09):
a carbon tax.
Speaker 2 (28:10):
Yeah, I mean I think you can get there sort
of both ways. You can get that through the carrot
which is like the forty five Q like we have
here in the United States, where it's it's an incentive,
or you could do it with a stick like a
carbon tax, which is they have it and they have
it in you know, in Europe, and they have it
up in Canada where they have a carbon tax. And
I think both of them are meant to really stimulate,
you know, really one of two things, either encouraging new
(28:33):
technologies to get developed like ours, which is really what
the carrot incentivizes, or the stick, which is really meant
to it's really meant to disincentivize you from using fossil
fuels or things that that that emit carbon. You know.
My take is, I think the incentives is really what
you need to be able to invest in new technologies.
(28:55):
But I think you can get there. You can get
there both ways. The most important thing is if it
is going to be a tax, you need to make
sure that those tax dollars that you're going to be
collecting are going to be invested into those new technologies
that you need to advance to be able to to
increase new power generation. I think if the US was
in a decline on power generation, a tax probably makes sense.
(29:17):
But what we really need to be doing is we
need to be incentivizing new sources of power generation just
because we're in the in the beginning phases of of
of a load growth era.
Speaker 1 (29:28):
Great and we've focused a lot on the US, but
in terms of other parts of the world, you know,
you mentioned they have their own geological circumstances. There's also
you know, things other things like wind and solar that
that have impact different parts of the world differently. You know, how,
how do how should other countries think about, you know,
(29:50):
scaling up low carbon solutions if if maybe carbon capture
is not as optimal there.
Speaker 2 (29:54):
The first step in energy is getting access to it,
and then as you advance, then you can start to
figure out ways to make it more reliable. And then
the third and final step is we need to figure
out a way to make it clean. I think if
you can't deliver a reliability and affordability, the responsibility piece
is out of the question. So like as we think
(30:14):
about just establishing the foundation for a clean energy future,
that foundation is reliability and affordability. You have to build
clean energy on top of that. If you try to
build the clean energy piece first, it'll totally fall apart,
or if you try to do it prematurely, it'll fall apart.
And I think, you know, there's case studies kind of
popping up all over the place of what happens if
(30:36):
you pivot too hard to you know, renewables. Germany is
a great example. California is another example, and now they're
starting to rethink or starting to retreat back to we
need more coal power generation or we need more natural
gas power generation in the case of Germany. So it
needs to be done responsibly, right, But every single country
is in a different place, both in terms of where
(30:58):
their society and quality of life is, but also in
terms of where their proximity is to access to natural resources.
The United States is in such a unique position where
we have access really to all of the highest quality
and energy solutions on the planet. You know, we have
great solar radiation for solar power, we have great wind
power for wind, we have we've essentially invented nuclear, and
(31:23):
so we have great nuclear. But most importantly, we have
absolutely fantastic you know, reserves of coal and natural gas
in oil that provides that reliable, affordable power that enables
us to build that foundation for a cleaner energy future.
I would say a lot of other countries are still
really trying to figure out what resources do they have
that they can use to build that foundation and from
(31:44):
there really start to figure out about that clean energy future.
So for each country it should be different. So while
while I think the US certainly could have a playbook
for what it does, and some countries in Europe are
going to have their own playbook, and the Middle East
is going to have their own playbook, I think it's
all very very country specific, and it's really being able
to understand what natural resources do we have underneath our
(32:05):
feet within our domestic country, Let's utilize those first, Let's
let's build our economy around that, and then let's start
to figure out what things do we put around that
to really build a sustainable energy future. But I think
certainly like just having that perspective of where we are
in the United States, we are we are just very
(32:26):
very blessed to have the natural resources we have today
that have allowed us to grow the economy to what
the economy has become in this country.
Speaker 1 (32:34):
Fantastic. Well, thank you so much for joining us today, Danny.
Very interesting conversation.
Speaker 2 (32:39):
Yeah, thank you so much.
Speaker 1 (32:40):
Rob. This has been a blast, And for our listeners
you can find more information on sustainability issues and the
energy transition on bi space ESG go on the Bloomberg terminal.
If you have an ESG quandary you would like to
ask bi's expert analysts or learn more about our research,
send us an email at ESG Currents at bloomberg dot net.
And if you like this episode, please subscribe on Apple, Spotify,
(33:02):
or your favorite podcast platform,
Host
Eric Kane
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