September 30, 2025 • 39 mins
This week, Matthew and Eleanor speak with Eric Goff, founder of an energy policy advising firm, about the growth of wind and solar power in Texas and whether it will continue after recent federal efforts targeting the industry.
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Episode Transcript
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Speaker 1 (00:15):
Hello, and welcome to the Texas Tribune trip Cast for Tuesday,
September thirtieth, twenty twenty five. I'm Matthew Watkins, editor in
chief of the Texas Tribune, and joined as usual by
Eleanor Klibanoff Lawn politics reporter.
Speaker 2 (00:28):
Hello Eleanor, Hello Matthew. I have no banter for you today.
Speaker 3 (00:32):
Well, I think September thirtieth could be government shutdown day.
That's right, you know, we'll wait and see end of
Also the end.
Speaker 1 (00:40):
Of Q three, Yes, yeah, there you go.
Speaker 3 (00:44):
Do you have any goals for Q four?
Speaker 1 (00:47):
Just no legislative sessions.
Speaker 3 (00:49):
No legislative sessions. Yeah, that's my goal too. So let's
hope it's our good lawmaker's goal, our governor's goal.
Speaker 1 (00:55):
Yes, exactly, exactly. All right, Well, today we are going
to talk talk about renewable energy and the grid in Texas,
and we are joined by Eric Goff, a Austin based
the founder of GoF Policy and Austin based advocacy and
advisory firm focused on energy and infrastructure policy. Welcome, Eric,
(01:16):
thank you so much for having me. Thank you for
being here. Okay, so I want to set this up
just a little bit. We of course, all know, all
our listeners know that Texas is the fossil fuels powerhouse
in the US, and our state leaders for have a
long time been pretty publicly skeptical, if not aggressively opposed
to the idea of a transition toward cleaner sources of energy.
(01:38):
But a funny thing has happened in the past half
decade or so, which is amid all that opposition, Texas
has sort of become a renewable energy powerhouse as well,
at least for the United States. A statistic since twenty
twenty one, ninety two percent of the power supply capacity
that's been added to the grid has come from wind, solar,
(02:00):
or batteries, And in twenty twenty four, Texas produced about
fifty percent more renewable energy than California, a state that
you know, obviously its leaders are much more excited about
renewables than Texas. That growth has helped shore up our
power grid. You know, energy demand continues to climb in
Texas six percent per year since Winterstorm earned Uri. But
(02:22):
it is also you know, you know, the state. It
has basically essentially helped the state avoid having this summer
a single power conservation notice, which you know, is somewhat
rare these days. Of course, a somewhat mild summer helped
with that too, but it's been an interesting summer. The
(02:45):
legislative session kicked off with a lot of lawmakers filing
bills targeting the renewable industry. The people in the industry
breathed a sigh of relief when those bills bills did
not pass, and then a couple of weeks later, the
big beautiful bill in Congress passed and wiped out a
lot of clean energy tax credits and things like that.
And so we're going to discuss today the growth of
(03:06):
that industry and also what's going to happen to it beyond.
And Eric going to start with you, and I want
to look backward before we start forward. Can you just
talk a little bit, tell us a little bit about
how this renewable industry has grown so much in Texas
despite the fact that there's been, you know, some vocal
opposition from from the political power in the.
Speaker 4 (03:27):
State happy to do that. And it's a long history.
It starts with Governor George W. Bush and he pushed
for inclusion of some sort of wind credit or requirement,
and the original restructuring bill you know that opened this up,
you know, twenty five thirty years ago, and that initially
(03:52):
led to some investment and when but pretty soon federal
tax credits came in and made the much bigger difference
than the state program, and that led to an enormous
boom uh in which led to costs of the construction
and the components coming down pretty dramatically, solar battery when
(04:17):
price costs all came down, and and now the most
economically rational investment to make in many cases is solar
plus storage.
Speaker 1 (04:29):
Is that is that largely you know, early Biden infrastructure
bills that really kicked started it, or or.
Speaker 4 (04:36):
It went back even further than that. There's been a
long history, uh until recently of having federal tax credits
for production or investment in.
Speaker 2 (04:50):
And clean energy.
Speaker 1 (04:53):
Do you agree with sort of my assessment that I
made up front, that that a lot of that growth
has really helped put Argrid in a better position than
it was four or five years ago.
Speaker 2 (05:02):
For sure, solar keeps costs down.
Speaker 4 (05:07):
As you know, the fuel cost of the sun is
pretty low, and the cost of the equipment is also
coming down dramatically. It's fairly predictable, so you can plan
around it.
Speaker 2 (05:22):
The sun. We know what time the sun will set,
you know, seven.
Speaker 4 (05:26):
Years from now, and there is you know, variability, but
that can be accounted for pretty easily.
Speaker 2 (05:34):
What it does do.
Speaker 4 (05:35):
Is it pushes some of the issues around balancing the
grid until after the sunsets when that resource is not available,
and so as demand for electricity goes up after sunset,
that's still something that Arcot has to manage, and so
(05:55):
farther doing that with natural gas and batteries.
Speaker 1 (05:59):
Right, So let's let's talk about this because, like we said,
there's been you know, even as this growth has happened,
there's been a considerable amount of skepticism in our state
government around whether this is a good thing, you know,
whether it's sort of pricing out more fossil fuel backed
power that you know, some would argue is more reliable.
It feels to me like the two sort of criticisms
(06:22):
of this, and I'd be interested in hearing your perspective
on both, the first one being sort of what you
talked about. It's actually less reliable. Right, you have a
winter storm, the wind stops blowing, you know, not as
much sun during the day and all of a sudden,
we're in trouble. You can't turn the sun on at
three am if you're having this crisis. It seems as
(06:44):
though maybe batteries have helped with that a little bit.
But talk about that concern and is that still a
concern in twenty twenty five.
Speaker 4 (06:51):
For sure, it's still something that has to be actively managed.
But we have a choice of do we manage it
through like or you know control, command and control of
exactly what's happening, or.
Speaker 2 (07:05):
Do we manage it through market forces.
Speaker 4 (07:07):
And that's a key question that drives outcomes. Since when
a storm ury, we've been managing it with you know,
urcot command and control. But in principle, if solar is
not available when you need it, then it doesn't get
paid to the very high prices that happen when you
(07:29):
have a shortage of power, and so on average it
gets paid less than a dispatchable power plant that is
available during those high priced hours. So this, in my opinion,
there's not a need to fix anything. If solar wants
to earn money during those high priced hours, then they
add storage. There's a natural market incentive to do.
Speaker 1 (07:51):
That, and this idea basically is building big batteries, connecting
them to the grid, charging those batteries during this sunny,
you know, hot or whatever windy times, and then waiting
until you're in a situation where there's not as much
supply in the system, where the prices will go up,
(08:12):
and then you can make more money by right searching it.
Speaker 4 (08:15):
And that can be you know, tens of dollars per
making what hour on a you know, a normal day
or on a tight day, can be hundreds or thousands
of dollars per make what hour, which can make you know,
an investors whole year.
Speaker 1 (08:26):
It just very briefly, let's take a step back and
explain sort of the ERCOT system here. It's you know,
the the deregulated system, the system where you know, basically,
right power suppliers are paid to feed the grid and
they are paid based on how much demand and supply
(08:46):
there is at the time. So when say you're in
a winter storm and you know half the natural gas
plants are out of line, you're making tons of money,
right if you're able to supply that grid. Whereas if
it's a three o'clock on a windy day, in a
sunny day and there's all this you know, renewable energy
(09:09):
being fed in the amount that you're getting paid for
suplying that grid is significantly right.
Speaker 4 (09:14):
And I would argue that adds up to benefits to
consumers because there's this intense competition that drives costs down.
And the other side of that coin, when you said,
if you're available during the high priced hours and winners
from ury or some similar hour, you make a bunch
of money. If you had sold your power in advance,
which many power plants do, you were losing a bunch
(09:37):
of money because you sold and now you have to
fill in a gap that you don't have and you
have to buy it back for thousands of dollars. So
that risk of having to buy back that power also
creates a strong incentive to try to make sure your
power plants are reliable.
Speaker 1 (09:53):
It's basically the idea here is the invisible hand of
the market is.
Speaker 4 (09:57):
Yeah, and we see it happening. I know there's you
know a lot of people that here you know markets
and kind of get skeptical, but like, we have real
world evidence of it working in the power markets.
Speaker 1 (10:09):
Okay, So the other argument here has been essentially this
isn't a free market system because there has been so
much government government support for solar and wind and everything
like that, and that basically the government, the federal government
in particular, should sort of get its foot off the scale,
which would make it more cost effective for natural gas plants,
(10:32):
which they argue are more reliable because you can turn
them on in the middle of the night to create
a better system for Texas. What do you think about
that sort of argument.
Speaker 4 (10:43):
So there's something to it. When you subptionalize something, you
get more of that thing, But it doesn't change the
fact that, you know, when things actually get tight and
prices get high, it doesn't matter matter if you are
subsidized to exist. It matters if at that moment you're available.
(11:05):
If you're available at that moment, you can get paid
those high prices, and if you're broken down, you don't
get paid those high prices.
Speaker 2 (11:13):
So there.
Speaker 4 (11:16):
How you earn money in in that what's called the
real time market, which when those prices can get high,
directly contributes to whether or not you're willing to invest
in UH solar or storage or natural gas. And frankly,
it's been difficult lately for those prices to materialize for
(11:36):
a natural gas in part because there are more expensive
resource than solar and storage. We are seeing some new
natural gas now with all the enormous load growth we've had,
and so it's you know, policymakers that are looking for that,
you know, should you know, be happy to see it happening.
Speaker 3 (11:55):
Finally, I mean when you talk about these like the
foot on the gas idea of the federal subsidies. I
spent some time this summer on an unrelated story out
in parts of West Texas that are being just like
entirely sort of remade in some ways with these giant
wind farms and the batteries and and all of that.
And it is like there is obviously like a political
(12:16):
underpinning to this that people feel like there is a
part like generally, I feel like they feel like, oh,
the Democrats are more likely to subsidize, you know, these
sort of things. They want more subsidies for these renewable energy,
and in Texas that is often seen as a bad thing.
But I do feel like a lot for a lot
of you know, people in the industry, they're sort of like, well,
(12:37):
what's gonna what's going to get me paid a little bit?
Speaker 4 (12:40):
You know, Like yeah, and it's not just in the
industry about what's going to get me paid. But you
know these investments are you know, creating an enormous tax
space and rural counties that didn't have it previously.
Speaker 3 (12:53):
Right, it's like if it you know, it's ultimately good
for the consumer, you know, like benefits the consumer, benefits
some of these landowners, and if it's people working in
these industries, how much of that resistance is Do you
think it's like it's sticky and or just sort of
goes away if the money starts making sense, so.
Speaker 4 (13:10):
You know that, you know, maybe it's a good way
to transition to what happened last session where there were
bills that were filed that would change the way some
prior law that was going to increase costs for clean
energy would have worked. It was called firming, and firming
(13:31):
basically came out of HB fifteen hundred two sessions ago,
and it's.
Speaker 2 (13:42):
Really vaguely written.
Speaker 4 (13:44):
It's not totally clear what it means, but it essentially
means that they expect generators to perform above average during
times of low reserves. But the way it was written,
it was only for new generation for existing generation, and
so it would be a new requirement for new investors,
(14:06):
and generally that's a good way to do thing. Investors
don't trust you if you impose new costs on their
existing assets. They start to question whether or not you're
a reliable place to invest. Anyway, there was a proposal
the past session to make it retroactive, and that got
through you know, the relevant House committee. And the fact
(14:27):
that it you know, advanced, you know, surprise a lot
of people because there had just been a compromise two
years before. So it led to pretty much the whole
Texas economy coming out and saying, please don't pass this bill.
It would raise costs, it would not help reliability, we.
Speaker 2 (14:48):
Don't need it.
Speaker 4 (14:49):
And it was an enormous effort where you know, almost
every industry came out, you know, to express concerns about
the proposal. It ended up not advancing after you know
a lot of back and forth, but it forced people
(15:10):
to kind of go on the record because it almost passed,
so you know, that was interesting, and it also didn't pass,
and that's an important story.
Speaker 1 (15:22):
So yeah, and it's it's an interesting situation, right because
I think one of the things maybe we felt like
we learned about that whole process is that it might
make good politics to sort of bash the idea of
the Green New Deal or targeting fossil fuels in Texas
(15:43):
or you know, the hardcore environmental right, I mean sorry left.
But then when you get down to evaluating what is
the actual impact of these renewables where you know, once
you build them, once you build the solar panels, once
you are put in the wind farms, they're quite cheap
(16:06):
to you know, at generating electricity. And also there is
a major there are major concerns as data centers come online,
as bitcoin mining comes into the state, and also just
the state grows in general, that there's going to be massive,
massive needs for power over the coming years, and that
wind and solar might be the solution to this. And so,
(16:30):
you know, I think you had a lot of folks thinking,
you know, I might get a short term benefit for
saying we stuck it to those like liberal environmentalists, but
I also might face the long term frustration of my
constituents who are paying more for electricity, or worrying about
another twenty twenty one winter storm from happening.
Speaker 3 (16:52):
Or like had a chance to sell their land to
wind farm, or it's like seeing a you know the text,
you know, benefits from a big battery plant or something.
Speaker 2 (16:59):
Yeah.
Speaker 4 (17:00):
Yeah, when it came down to it, there's an opportunity
to pass you know, this bill that would have been damaging,
and the legislature, in a bipartisan fashion, chose not to.
But then yeah, so then then Congress happened, and so
(17:20):
there have been you know, one of the things that
President Trump said he would do is, you know, reverse
all of the Biden policies around you know, the Inflation
Reduction Act and has said, you know, the Green New
Deal is you know, not good for anybody, and you
(17:41):
know other things along those lines. And you know, one
of the things I've learned recently is you know, when
the president says you're going to do something, you should
believe him.
Speaker 2 (17:52):
And so the bill passed.
Speaker 4 (17:59):
You know, Democrats were hopeful that the way that Biden
structured it, by having a lot of the benefits to
crew in red congressional districts, would you know, inoculate it
against being overturned. That didn't happen, And there's now the
remaining tax credits. There's a scramble towards construction because in
(18:23):
order to get them, you have to have to demonstrate
the under construction in almost every case. The exception is
I think if you're under one point five megawatts, you
don't have to do that. That's small, and so the
other thing people doing is maybe doing more small projects
because that's easier. But in my opinion, what's happening is
(18:45):
there's actually a rush to qualify for the remaining credits.
Speaker 2 (18:49):
When did those expire? Gosh, that's a good question.
Speaker 3 (18:53):
Okay, soon soon, soon Again the fast approaching deadline.
Speaker 4 (18:58):
Yeah, the very fast approaching deadline, and the once they expire,
then we're going to be in a new world. Historically,
they've been set for expiration and then extended and extended
and extended, and I'm really curious to see what happens.
(19:23):
I still think we'll still see investment in solar and storage,
especially in places with load growth, because it's just a
fact that you can't consume a megawatt unless someone makes
a mega wat, and so that means that in order
to keep up the demand, we have to build new
(19:45):
facilities and solar and storage. Because the impacts that we've
had of those costs coming down for many years are
still in the money. It's going to raise the cost
of buying those because they won't be subsidized, But especially
in areas with load growth, I think we'll still see purchases,
(20:07):
maybe not to the same level, but at least enough
to keep up a load growth.
Speaker 1 (20:14):
This is maybe too complicated of a question to answer
in a quick but I'm curious whether you have any
insight on you know, once these credits expire, does it
flip the equation of whether it's more efficient economically efficient
to build a solar farm or a wind farm compared
(20:39):
to a natural gas plant.
Speaker 4 (20:40):
So it's not a black and white question like that.
We're seeing right now investment in both solar and storage
and natural gas as it relates to all of load growth.
Speaker 2 (20:51):
And that's because.
Speaker 4 (20:54):
In the wholesale market, the people that are responsible for
covering that load growth need to cover the possiabilities. So
solar and storage can take you a long way and
it's cheap, but you need to be able to physically
have enough energy to get you through whatever conditions you
know might arise. And so we're seeing investment in everything.
Speaker 2 (21:16):
Right now that makes sense.
Speaker 1 (21:20):
So one of the questions then, I have is what
does this mean for the reliability of our ur cut
grid moving forward.
Speaker 2 (21:31):
Right, So.
Speaker 4 (21:35):
Air Cut is kind of actively managing the problem of
how do we deal with data center growth that get
technical pretty quickly.
Speaker 2 (21:48):
So I'm going to set that aside.
Speaker 4 (21:49):
But they're doing a bunch of studies that will be done,
you know, later this year, and then they'll react to
whatever those studies say.
Speaker 2 (21:57):
But beyond that, there's.
Speaker 4 (22:03):
A question of whether or not Urkott lets the market participants,
you know, follow incentives and see what comes out of
that and just trust, you know that markets will lead
to the right mix, or for them to be heavy
handed and lean in. And ever since wenters from URI,
(22:26):
they have kind of had their hands on the reins.
And recently at an Urkott board meeting, the chairman of
the Public Utility Commission, Thomas Gleeson, said that it's time
to reconsider whether or not we kind of control the
market as tightly as we have, and that's called they've
(22:46):
been calling it conservative operations, and he said, maybe it's
time to reevaluate that. I'm excited by that because I
think it will lead to more investment and you know,
all kinds of capacity.
Speaker 1 (23:00):
Because one of the things that conservative operations has one
of the causes of that, or one of the effects
of it is it makes prices go up for the
average consumer.
Speaker 2 (23:12):
Well they not necessarily.
Speaker 4 (23:14):
They buy more reserves and so costs go up, but
prices don't necessarily go up.
Speaker 2 (23:20):
It's just a quantity issue, right.
Speaker 4 (23:26):
But what investors want to see is higher prices occasionally,
so that way they can earn those higher prices by
being available during those conditions. So by buying fewer reserves,
you're buying the total quantity and the bill goes down.
Plus this is the opportunity for these higher prices to
(23:47):
materialize that investors can earn. So it could, if they
do it right, result in lower costs and more investment.
Speaker 3 (23:56):
Are we moving off of conservative operations because like we
have strengthened the systems and we've learned our lessons and
things are better, or just because when the winter storm
is so far in the rear view mirror that you know.
Speaker 2 (24:08):
Yeah, it's a little bit of both.
Speaker 4 (24:10):
But the state has made significant progress on responding to
Winterstorm Muri. There was some real low hanging fruit on
what to fix weatherization of generators in the natural gas system.
There is a procedure to shut down consumers to match
(24:31):
apply and demand, there's not enough generation. That's called rotating outages,
and unfortunately, some of the outages that they rotated were
onto natural gas systems, and so it led to unintentionally
cutting off natural gas going into the power plants. We're
(24:52):
never going to do that again because we're like, oh,
that was a mistake, let's fix it. And so that
was that's a real easy thing to fix. Plus there's
been a number of new market design changes. I think
we're in a better place.
Speaker 2 (25:07):
Interesting. Interesting.
Speaker 1 (25:08):
One other thing that did happen during the legislative session
was the state putting I believe five billion more dollars
into the Texas Energy Fund RIGHT, which is a fund
that is specifically designed to give low interest loans to
natural gas plants, right, not renewable plants and things like that.
I think the total now is ten billion dollars of
(25:30):
the legislature has put in there in recent years. And
one of the criticisms of that was that just not
many companies are accessing that. At the time, there had
only been two I believe now there's been a third.
Right that happened this week or sorry, last week. There
was also an announcement separately from that and it was
the biggest loan ever, right, it was five hundred and
(25:50):
sixty two million dollars approved by for Energy to be
a plant. You also had Vistra Energy announcing I think
maybe yesterday that it was going to be build to
new advanced natural gas power units totally and I think
eight hundred and sixty megawatts, which is a major, major investment.
How much of that is the market responding and swinging
(26:14):
back to natural gas and how much of it is
just development that would have happened anyways.
Speaker 4 (26:20):
So one of the things that you know, in my opinion,
is interesting about the Texas Energy Fund is I've been
talking about incentives and it's you know, it's a lot
to take in, and the politicians realized that and needed
to be able to explain to you know, every day
voters that were doing something. And I think that's why
they created the find to say, here's this money, it's
(26:42):
going to new investment that's easy to understand, and it
makes sense because you know, they want to be able
to clearly explain the voters that they accomplish something. The
investment in natural gas and whether it's happening in the
Texas Energy Fund is interesting. There have been a number
of canceled projects and the Texas don't do fund you know,
(27:04):
where the applicant said that you know, they didn't have
a turbine available or it, you know, didn't you know,
make sense for one reason or another. But we what
the power plant investment in natural as we are seeing
not all of it, especially with this Vistra stuff, but
(27:25):
a lot of it is going co located at new
data centers. And you know that's because what those data
centers need is the physical ability to consume electricity. And
it doesn't matter about market design or incentives or whatever.
They just need enough megawatts in one location to you know,
(27:49):
do their business model. And so for that reason, it's
worth it to you know, install solar storage, natural gas
uh installed, you know, pay for you know, giant new
transmission lines because they have an infrastructure problem, not a
market's problem, and if they can consume a lot of electricity,
(28:14):
they're happy and they're willing to pay for the cost
of that.
Speaker 3 (28:17):
I mean, there was a like we've talked about sort
of the criticism on the right of you know, putting
your thumb on the scale or subsidizing renewable energy. This
obviously is like pouring money, a ton of money directly
into natural gas. I mean, do you see sort of
a conflict there in those two or is it just
sort of this as hell?
Speaker 5 (28:39):
Yeah, in many other markets, uh, you know, a market
for apples or t shirts.
Speaker 4 (28:50):
You know, it's not there's not a need for politicians
to weigh in and say, I think we should do
the T shirt market differently. But electricity is just so
fundamental to our daily existence that and this Historically it
was regulated very differently where it was, you know, very
much like all the decisions were made by the government,
(29:10):
and so it it makes sense why people you know,
went away and make sure that people get the lights on,
especially after the experience that we had. I would love
for the politics electricity to get boring again.
Speaker 3 (29:25):
Yeah, make electricity boring.
Speaker 2 (29:26):
Yeah, Yeah, it's funny.
Speaker 1 (29:28):
Just I think about like how many people didn't know
what urkot was in twenty eighteen or whatever. Now.
Speaker 2 (29:33):
Yeah, you know, it's like we didn't.
Speaker 1 (29:34):
Even have to explain it on this podcast because we've
all been talking about it for so long, right, Yeah,
one thing I wanted to ask, I mean, the other
thing driving this we've hinted out a little bit. Is
just this idea that all this massive amount of demand
coming on to the grid in the coming years in
order to power the you know, economy of the future,
the expected economy of the future. It's very complicated though,
(29:56):
right because we have this massive queue of data center
and bitcoin miners who want to join the grid, but
they're also you know, applying to join grids in other
states or other places around the states, and it's very
unclear how that's being built. Is that making it difficult
for regulators to know what to what they need to
(30:18):
be doing, and what they need to be accomplishing in
order to shore up the power.
Speaker 2 (30:22):
In the state. Yes and no.
Speaker 4 (30:25):
The yes is to know exactly what to do. But
the no is like they know, we need more investment
and transmission and we're going to need more generation.
Speaker 2 (30:34):
Right. The way it gets complicated is.
Speaker 4 (30:40):
There are only a certain number of companies that are
going to pay for these hyperscalar data centers, you know,
companies like Google and Meta and open Ai. And it's
not you know, going to be you know, a bank
(31:01):
that's running you know, their system, they don't need something
of that scale. They can use traditional data centers for
their business model, and a lot of people would love
to sell an enormous data center site to these giant companies,
and so there's a significant amount of speculation. One of
the things that SB six did last session is require
(31:22):
that data center developers demonstrate that they control the site
and also require them to post what will probably be
a substantial amount of money before the utility or acut
does any planning for them, and that prepayment will hopefully
filter out you know, some number of speculators, so it'll
(31:45):
be an easier problem to solve.
Speaker 1 (31:47):
I want to ask long term, I mean the numbers
I read at the start of this. You know, two
of the power supply capacity that's been added to the
grid has come from wind, solar, or battery since twenty
twenty one. And the trend line seems clear here of
what direction we're heading. Do you think that the actions
(32:12):
of Congress this summer will in the long term substantially
change the direction of that trend line? Like, is there
any is there putting? Can the toothpaste be put back
in the tube here? Or are we ultimately heading toward
a solar, wind and renewable future for a grid?
Speaker 4 (32:31):
In my opinion, the solar and storage is going to
be a key part of our future. No matter what
we will see changes, there's constant you know, invention that's
happening and the battery space and the solar panel space
to make them more efficient or longer duration for the batteries.
(32:55):
There's different kinds of batteries that are coming out all
the time. A lot of people are excited by clean
firm power, so that's you know, not necessarily natural gas,
but maybe natural gas with combon capture and storage, or
nuclear power, geothermal power, or you know, longer duration storage.
(33:19):
There's a lot of investors that are trying to make
all those things happen. Historically, the government you know, had
industrial policy around let's do what we can to reduce
those costs. And we might still be doing that for nuclear,
but but for nuclear that's not really happening.
Speaker 2 (33:41):
And so if.
Speaker 4 (33:44):
People want those to happen, then there's going to have
to be some sort of you know, risk sharing or
you know, other mechanism in order to make sure that
those first movers don't have huge cost overruns. And I
think there's gonna be active evident that space because people
want to see there's other technologies, see other technologies succeed
as well.
Speaker 1 (34:06):
So okay, let me this is a question that I've
been wanting to ask someone smart enough to have an
opinion on it for a while. So I'm going to
veer into the realm of fantasy and uh, pure speculator,
here we go. Yeah, here we go. So you know again,
I'll repeat it again. One of the big drivers of
this is AI, right, data centers, crypto to a certain
(34:31):
extent as well. Right, there is this massive rush by
companies to build as many data centers as possible in
order to power our AI future. Right, whatever you want
to call it, right, But something we know about technology
is that it gets more efficient over time. It You
know that the computer that took up a whole you know,
(34:52):
floor of a building, you know, seventy five years ago
fits in our watch today.
Speaker 2 (34:58):
Right.
Speaker 1 (35:01):
Is there a world where we're rushing to fill all
these this power demand? This technology will get more efficient
in the future, and then the super cheap to maintain
wind and solar and batteries will sort of be what's
(35:23):
left standing as demand drops elsewhere and we're suddenly looking
whether it's fifty years down the road or twenty five
years down the road, or whatever on a much much cleaner,
less fossil fuel dependent power supply, just because the demand
has changed so much. And these things we built in
(35:43):
this decade were are the ones that are going to
be the easiest to run into the future.
Speaker 4 (35:49):
So I think AI is going to change every job
and every industry. And because of that, there's substantial demand
and for the capabilities to make that happen. So we
are not anywhere close to the amount of data center
development we need to make that happen. It won't happen
(36:10):
all at once, but you know, that's that takes a
substance amount of electricity. It's possible that you know, the
next generation of that will result in like more efficient chips,
but what that could mean potentially it's just more chips
at one site too, right, And you know it's also changing,
(36:32):
you know, the way we think about national security. You know,
we've seen you know, the horrible videos in you know,
Ukraine where you know, drone strikes against people. You know, unfortunately,
you know, that's easier to do when you have when
you automate it, and and from even just from a
(36:53):
defense perspective, if the other guys have it, you wouldn't
have it too. That's also AI. So as we make
all these new investments, you know, even if AI drops
off or or if it doesn't, I don't think it matters.
Speaker 2 (37:10):
In my mind. There's a continual loop of.
Speaker 4 (37:17):
New load from new industry coming because they see cheap electricity,
which was made possible by solar and storage, because that's
how it gets cheap.
Speaker 2 (37:26):
That new.
Speaker 4 (37:29):
Demand increases prices, which increases the incentive for new solar
and storage.
Speaker 2 (37:33):
And that's the virtuous cycle.
Speaker 4 (37:35):
And I don't know what the next thing after AI
is going to be, but the access to enormous amounts
of cheap electricity will enable all kinds of potential.
Speaker 1 (37:50):
Yeah, that makes sense, all right, My techno utopian theories
might be a little optimistic there.
Speaker 3 (37:57):
It is just funny, like these are the things that
for all the politics we talk about and all the
like culture war stuff like, this is the stuff that
our elected officials really I think should be an often
are grappling with of like what is the future of our.
Speaker 2 (38:10):
World going to be?
Speaker 1 (38:11):
But also just like the power of partisan politics and
like fighting like might not have as much power over
you know, technological changes in the future we're going as
to as we think right, Sometimes the market is going
to push you in a direction whether you like it
or not. And sometimes a place like Texas, which you
know claims to be suspicious of this, will find itself
(38:34):
the market leader in the country.
Speaker 4 (38:36):
Well, and you know that happened just because Texas got
out of the way and let investors do what they wanted.
Speaker 1 (38:42):
To do right, right, And you know, the it's been
so funny to watch, you know, folks like the Abundance
people talk about how you know, these these sort of
liberal thinkers saying, California, you're doing it wrong. Look at Texas. Right,
It's so much easier to get the permitting. It's so
easier to much easier to get these projects off the
ground because they stay out of people's way and let
(39:05):
these things build up. You know, it's an interesting world
we live in right now.
Speaker 3 (39:09):
Yeah, it does remind me of the conversation we had
on this podcast about housing and things like that right
where it's like you know, things credit where credits do
some stuff is working here?
Speaker 1 (39:18):
Yeah, all right, Eric, thank you for walking us through this.
It's been a very interesting discussion. Thank you, Eleanor, and
thank you to our producers Rob and Chris, that's it
for it today.
Speaker 2 (39:30):
Talk to y'all next week.
Hello, and welcome to the Texas Tribune trip Cast for Tuesday,
September thirtieth, twenty twenty five. I'm Matthew Watkins, editor in
chief of the Texas Tribune, and joined as usual by
Eleanor Klibanoff Lawn politics reporter.
Speaker 2 (00:28):
Hello Eleanor, Hello Matthew. I have no banter for you today.
Speaker 3 (00:32):
Well, I think September thirtieth could be government shutdown day.
That's right, you know, we'll wait and see end of
Also the end.
Speaker 1 (00:40):
Of Q three, Yes, yeah, there you go.
Speaker 3 (00:44):
Do you have any goals for Q four?
Speaker 1 (00:47):
Just no legislative sessions.
Speaker 3 (00:49):
No legislative sessions. Yeah, that's my goal too. So let's
hope it's our good lawmaker's goal, our governor's goal.
Speaker 1 (00:55):
Yes, exactly, exactly. All right, Well, today we are going
to talk talk about renewable energy and the grid in Texas,
and we are joined by Eric Goff, a Austin based
the founder of GoF Policy and Austin based advocacy and
advisory firm focused on energy and infrastructure policy. Welcome, Eric,
(01:16):
thank you so much for having me. Thank you for
being here. Okay, so I want to set this up
just a little bit. We of course, all know, all
our listeners know that Texas is the fossil fuels powerhouse
in the US, and our state leaders for have a
long time been pretty publicly skeptical, if not aggressively opposed
to the idea of a transition toward cleaner sources of energy.
(01:38):
But a funny thing has happened in the past half
decade or so, which is amid all that opposition, Texas
has sort of become a renewable energy powerhouse as well,
at least for the United States. A statistic since twenty
twenty one, ninety two percent of the power supply capacity
that's been added to the grid has come from wind, solar,
(02:00):
or batteries, And in twenty twenty four, Texas produced about
fifty percent more renewable energy than California, a state that
you know, obviously its leaders are much more excited about
renewables than Texas. That growth has helped shore up our
power grid. You know, energy demand continues to climb in
Texas six percent per year since Winterstorm earned Uri. But
(02:22):
it is also you know, you know, the state. It
has basically essentially helped the state avoid having this summer
a single power conservation notice, which you know, is somewhat
rare these days. Of course, a somewhat mild summer helped
with that too, but it's been an interesting summer. The
(02:45):
legislative session kicked off with a lot of lawmakers filing
bills targeting the renewable industry. The people in the industry
breathed a sigh of relief when those bills bills did
not pass, and then a couple of weeks later, the
big beautiful bill in Congress passed and wiped out a
lot of clean energy tax credits and things like that.
And so we're going to discuss today the growth of
(03:06):
that industry and also what's going to happen to it beyond.
And Eric going to start with you, and I want
to look backward before we start forward. Can you just
talk a little bit, tell us a little bit about
how this renewable industry has grown so much in Texas
despite the fact that there's been, you know, some vocal
opposition from from the political power in the.
Speaker 4 (03:27):
State happy to do that. And it's a long history.
It starts with Governor George W. Bush and he pushed
for inclusion of some sort of wind credit or requirement,
and the original restructuring bill you know that opened this up,
you know, twenty five thirty years ago, and that initially
(03:52):
led to some investment and when but pretty soon federal
tax credits came in and made the much bigger difference
than the state program, and that led to an enormous
boom uh in which led to costs of the construction
and the components coming down pretty dramatically, solar battery when
(04:17):
price costs all came down, and and now the most
economically rational investment to make in many cases is solar
plus storage.
Speaker 1 (04:29):
Is that is that largely you know, early Biden infrastructure
bills that really kicked started it, or or.
Speaker 4 (04:36):
It went back even further than that. There's been a
long history, uh until recently of having federal tax credits
for production or investment in.
Speaker 2 (04:50):
And clean energy.
Speaker 1 (04:53):
Do you agree with sort of my assessment that I
made up front, that that a lot of that growth
has really helped put Argrid in a better position than
it was four or five years ago.
Speaker 2 (05:02):
For sure, solar keeps costs down.
Speaker 4 (05:07):
As you know, the fuel cost of the sun is
pretty low, and the cost of the equipment is also
coming down dramatically. It's fairly predictable, so you can plan
around it.
Speaker 2 (05:22):
The sun. We know what time the sun will set,
you know, seven.
Speaker 4 (05:26):
Years from now, and there is you know, variability, but
that can be accounted for pretty easily.
Speaker 2 (05:34):
What it does do.
Speaker 4 (05:35):
Is it pushes some of the issues around balancing the
grid until after the sunsets when that resource is not available,
and so as demand for electricity goes up after sunset,
that's still something that Arcot has to manage, and so
(05:55):
farther doing that with natural gas and batteries.
Speaker 1 (05:59):
Right, So let's let's talk about this because, like we said,
there's been you know, even as this growth has happened,
there's been a considerable amount of skepticism in our state
government around whether this is a good thing, you know,
whether it's sort of pricing out more fossil fuel backed
power that you know, some would argue is more reliable.
It feels to me like the two sort of criticisms
(06:22):
of this, and I'd be interested in hearing your perspective
on both, the first one being sort of what you
talked about. It's actually less reliable. Right, you have a
winter storm, the wind stops blowing, you know, not as
much sun during the day and all of a sudden,
we're in trouble. You can't turn the sun on at
three am if you're having this crisis. It seems as
(06:44):
though maybe batteries have helped with that a little bit.
But talk about that concern and is that still a
concern in twenty twenty five.
Speaker 4 (06:51):
For sure, it's still something that has to be actively managed.
But we have a choice of do we manage it
through like or you know control, command and control of
exactly what's happening, or.
Speaker 2 (07:05):
Do we manage it through market forces.
Speaker 4 (07:07):
And that's a key question that drives outcomes. Since when
a storm ury, we've been managing it with you know,
urcot command and control. But in principle, if solar is
not available when you need it, then it doesn't get
paid to the very high prices that happen when you
(07:29):
have a shortage of power, and so on average it
gets paid less than a dispatchable power plant that is
available during those high priced hours. So this, in my opinion,
there's not a need to fix anything. If solar wants
to earn money during those high priced hours, then they
add storage. There's a natural market incentive to do.
Speaker 1 (07:51):
That, and this idea basically is building big batteries, connecting
them to the grid, charging those batteries during this sunny,
you know, hot or whatever windy times, and then waiting
until you're in a situation where there's not as much
supply in the system, where the prices will go up,
(08:12):
and then you can make more money by right searching it.
Speaker 4 (08:15):
And that can be you know, tens of dollars per
making what hour on a you know, a normal day
or on a tight day, can be hundreds or thousands
of dollars per make what hour, which can make you know,
an investors whole year.
Speaker 1 (08:26):
It just very briefly, let's take a step back and
explain sort of the ERCOT system here. It's you know,
the the deregulated system, the system where you know, basically,
right power suppliers are paid to feed the grid and
they are paid based on how much demand and supply
(08:46):
there is at the time. So when say you're in
a winter storm and you know half the natural gas
plants are out of line, you're making tons of money,
right if you're able to supply that grid. Whereas if
it's a three o'clock on a windy day, in a
sunny day and there's all this you know, renewable energy
(09:09):
being fed in the amount that you're getting paid for
suplying that grid is significantly right.
Speaker 4 (09:14):
And I would argue that adds up to benefits to
consumers because there's this intense competition that drives costs down.
And the other side of that coin, when you said,
if you're available during the high priced hours and winners
from ury or some similar hour, you make a bunch
of money. If you had sold your power in advance,
which many power plants do, you were losing a bunch
(09:37):
of money because you sold and now you have to
fill in a gap that you don't have and you
have to buy it back for thousands of dollars. So
that risk of having to buy back that power also
creates a strong incentive to try to make sure your
power plants are reliable.
Speaker 1 (09:53):
It's basically the idea here is the invisible hand of
the market is.
Speaker 4 (09:57):
Yeah, and we see it happening. I know there's you
know a lot of people that here you know markets
and kind of get skeptical, but like, we have real
world evidence of it working in the power markets.
Speaker 1 (10:09):
Okay, So the other argument here has been essentially this
isn't a free market system because there has been so
much government government support for solar and wind and everything
like that, and that basically the government, the federal government
in particular, should sort of get its foot off the scale,
which would make it more cost effective for natural gas plants,
(10:32):
which they argue are more reliable because you can turn
them on in the middle of the night to create
a better system for Texas. What do you think about
that sort of argument.
Speaker 4 (10:43):
So there's something to it. When you subptionalize something, you
get more of that thing, But it doesn't change the
fact that, you know, when things actually get tight and
prices get high, it doesn't matter matter if you are
subsidized to exist. It matters if at that moment you're available.
(11:05):
If you're available at that moment, you can get paid
those high prices, and if you're broken down, you don't
get paid those high prices.
Speaker 2 (11:13):
So there.
Speaker 4 (11:16):
How you earn money in in that what's called the
real time market, which when those prices can get high,
directly contributes to whether or not you're willing to invest
in UH solar or storage or natural gas. And frankly,
it's been difficult lately for those prices to materialize for
(11:36):
a natural gas in part because there are more expensive
resource than solar and storage. We are seeing some new
natural gas now with all the enormous load growth we've had,
and so it's you know, policymakers that are looking for that,
you know, should you know, be happy to see it happening.
Speaker 3 (11:55):
Finally, I mean when you talk about these like the
foot on the gas idea of the federal subsidies. I
spent some time this summer on an unrelated story out
in parts of West Texas that are being just like
entirely sort of remade in some ways with these giant
wind farms and the batteries and and all of that.
And it is like there is obviously like a political
(12:16):
underpinning to this that people feel like there is a
part like generally, I feel like they feel like, oh,
the Democrats are more likely to subsidize, you know, these
sort of things. They want more subsidies for these renewable energy,
and in Texas that is often seen as a bad thing.
But I do feel like a lot for a lot
of you know, people in the industry, they're sort of like, well,
(12:37):
what's gonna what's going to get me paid a little bit?
Speaker 4 (12:40):
You know, Like yeah, and it's not just in the
industry about what's going to get me paid. But you
know these investments are you know, creating an enormous tax
space and rural counties that didn't have it previously.
Speaker 3 (12:53):
Right, it's like if it you know, it's ultimately good
for the consumer, you know, like benefits the consumer, benefits
some of these landowners, and if it's people working in
these industries, how much of that resistance is Do you
think it's like it's sticky and or just sort of
goes away if the money starts making sense, so.
Speaker 4 (13:10):
You know that, you know, maybe it's a good way
to transition to what happened last session where there were
bills that were filed that would change the way some
prior law that was going to increase costs for clean
energy would have worked. It was called firming, and firming
(13:31):
basically came out of HB fifteen hundred two sessions ago,
and it's.
Speaker 2 (13:42):
Really vaguely written.
Speaker 4 (13:44):
It's not totally clear what it means, but it essentially
means that they expect generators to perform above average during
times of low reserves. But the way it was written,
it was only for new generation for existing generation, and
so it would be a new requirement for new investors,
(14:06):
and generally that's a good way to do thing. Investors
don't trust you if you impose new costs on their
existing assets. They start to question whether or not you're
a reliable place to invest. Anyway, there was a proposal
the past session to make it retroactive, and that got
through you know, the relevant House committee. And the fact
(14:27):
that it you know, advanced, you know, surprise a lot
of people because there had just been a compromise two
years before. So it led to pretty much the whole
Texas economy coming out and saying, please don't pass this bill.
It would raise costs, it would not help reliability, we.
Speaker 2 (14:48):
Don't need it.
Speaker 4 (14:49):
And it was an enormous effort where you know, almost
every industry came out, you know, to express concerns about
the proposal. It ended up not advancing after you know
a lot of back and forth, but it forced people
(15:10):
to kind of go on the record because it almost passed,
so you know, that was interesting, and it also didn't pass,
and that's an important story.
Speaker 1 (15:22):
So yeah, and it's it's an interesting situation, right because
I think one of the things maybe we felt like
we learned about that whole process is that it might
make good politics to sort of bash the idea of
the Green New Deal or targeting fossil fuels in Texas
(15:43):
or you know, the hardcore environmental right, I mean sorry left.
But then when you get down to evaluating what is
the actual impact of these renewables where you know, once
you build them, once you build the solar panels, once
you are put in the wind farms, they're quite cheap
(16:06):
to you know, at generating electricity. And also there is
a major there are major concerns as data centers come online,
as bitcoin mining comes into the state, and also just
the state grows in general, that there's going to be massive,
massive needs for power over the coming years, and that
wind and solar might be the solution to this. And so,
(16:30):
you know, I think you had a lot of folks thinking,
you know, I might get a short term benefit for
saying we stuck it to those like liberal environmentalists, but
I also might face the long term frustration of my
constituents who are paying more for electricity, or worrying about
another twenty twenty one winter storm from happening.
Speaker 3 (16:52):
Or like had a chance to sell their land to
wind farm, or it's like seeing a you know the text,
you know, benefits from a big battery plant or something.
Speaker 2 (16:59):
Yeah.
Speaker 4 (17:00):
Yeah, when it came down to it, there's an opportunity
to pass you know, this bill that would have been damaging,
and the legislature, in a bipartisan fashion, chose not to.
But then yeah, so then then Congress happened, and so
(17:20):
there have been you know, one of the things that
President Trump said he would do is, you know, reverse
all of the Biden policies around you know, the Inflation
Reduction Act and has said, you know, the Green New
Deal is you know, not good for anybody, and you
(17:41):
know other things along those lines. And you know, one
of the things I've learned recently is you know, when
the president says you're going to do something, you should
believe him.
Speaker 2 (17:52):
And so the bill passed.
Speaker 4 (17:59):
You know, Democrats were hopeful that the way that Biden
structured it, by having a lot of the benefits to
crew in red congressional districts, would you know, inoculate it
against being overturned. That didn't happen, And there's now the
remaining tax credits. There's a scramble towards construction because in
(18:23):
order to get them, you have to have to demonstrate
the under construction in almost every case. The exception is
I think if you're under one point five megawatts, you
don't have to do that. That's small, and so the
other thing people doing is maybe doing more small projects
because that's easier. But in my opinion, what's happening is
(18:45):
there's actually a rush to qualify for the remaining credits.
Speaker 2 (18:49):
When did those expire? Gosh, that's a good question.
Speaker 3 (18:53):
Okay, soon soon, soon Again the fast approaching deadline.
Speaker 4 (18:58):
Yeah, the very fast approaching deadline, and the once they expire,
then we're going to be in a new world. Historically,
they've been set for expiration and then extended and extended
and extended, and I'm really curious to see what happens.
(19:23):
I still think we'll still see investment in solar and storage,
especially in places with load growth, because it's just a
fact that you can't consume a megawatt unless someone makes
a mega wat, and so that means that in order
to keep up the demand, we have to build new
(19:45):
facilities and solar and storage. Because the impacts that we've
had of those costs coming down for many years are
still in the money. It's going to raise the cost
of buying those because they won't be subsidized, But especially
in areas with load growth, I think we'll still see purchases,
(20:07):
maybe not to the same level, but at least enough
to keep up a load growth.
Speaker 1 (20:14):
This is maybe too complicated of a question to answer
in a quick but I'm curious whether you have any
insight on you know, once these credits expire, does it
flip the equation of whether it's more efficient economically efficient
to build a solar farm or a wind farm compared
(20:39):
to a natural gas plant.
Speaker 4 (20:40):
So it's not a black and white question like that.
We're seeing right now investment in both solar and storage
and natural gas as it relates to all of load growth.
Speaker 2 (20:51):
And that's because.
Speaker 4 (20:54):
In the wholesale market, the people that are responsible for
covering that load growth need to cover the possiabilities. So
solar and storage can take you a long way and
it's cheap, but you need to be able to physically
have enough energy to get you through whatever conditions you
know might arise. And so we're seeing investment in everything.
Speaker 2 (21:16):
Right now that makes sense.
Speaker 1 (21:20):
So one of the questions then, I have is what
does this mean for the reliability of our ur cut
grid moving forward.
Speaker 2 (21:31):
Right, So.
Speaker 4 (21:35):
Air Cut is kind of actively managing the problem of
how do we deal with data center growth that get
technical pretty quickly.
Speaker 2 (21:48):
So I'm going to set that aside.
Speaker 4 (21:49):
But they're doing a bunch of studies that will be done,
you know, later this year, and then they'll react to
whatever those studies say.
Speaker 2 (21:57):
But beyond that, there's.
Speaker 4 (22:03):
A question of whether or not Urkott lets the market participants,
you know, follow incentives and see what comes out of
that and just trust, you know that markets will lead
to the right mix, or for them to be heavy
handed and lean in. And ever since wenters from URI,
(22:26):
they have kind of had their hands on the reins.
And recently at an Urkott board meeting, the chairman of
the Public Utility Commission, Thomas Gleeson, said that it's time
to reconsider whether or not we kind of control the
market as tightly as we have, and that's called they've
(22:46):
been calling it conservative operations, and he said, maybe it's
time to reevaluate that. I'm excited by that because I
think it will lead to more investment and you know,
all kinds of capacity.
Speaker 1 (23:00):
Because one of the things that conservative operations has one
of the causes of that, or one of the effects
of it is it makes prices go up for the
average consumer.
Speaker 2 (23:12):
Well they not necessarily.
Speaker 4 (23:14):
They buy more reserves and so costs go up, but
prices don't necessarily go up.
Speaker 2 (23:20):
It's just a quantity issue, right.
Speaker 4 (23:26):
But what investors want to see is higher prices occasionally,
so that way they can earn those higher prices by
being available during those conditions. So by buying fewer reserves,
you're buying the total quantity and the bill goes down.
Plus this is the opportunity for these higher prices to
(23:47):
materialize that investors can earn. So it could, if they
do it right, result in lower costs and more investment.
Speaker 3 (23:56):
Are we moving off of conservative operations because like we
have strengthened the systems and we've learned our lessons and
things are better, or just because when the winter storm
is so far in the rear view mirror that you know.
Speaker 2 (24:08):
Yeah, it's a little bit of both.
Speaker 4 (24:10):
But the state has made significant progress on responding to
Winterstorm Muri. There was some real low hanging fruit on
what to fix weatherization of generators in the natural gas system.
There is a procedure to shut down consumers to match
(24:31):
apply and demand, there's not enough generation. That's called rotating outages,
and unfortunately, some of the outages that they rotated were
onto natural gas systems, and so it led to unintentionally
cutting off natural gas going into the power plants. We're
(24:52):
never going to do that again because we're like, oh,
that was a mistake, let's fix it. And so that
was that's a real easy thing to fix. Plus there's
been a number of new market design changes. I think
we're in a better place.
Speaker 2 (25:07):
Interesting. Interesting.
Speaker 1 (25:08):
One other thing that did happen during the legislative session
was the state putting I believe five billion more dollars
into the Texas Energy Fund RIGHT, which is a fund
that is specifically designed to give low interest loans to
natural gas plants, right, not renewable plants and things like that.
I think the total now is ten billion dollars of
(25:30):
the legislature has put in there in recent years. And
one of the criticisms of that was that just not
many companies are accessing that. At the time, there had
only been two I believe now there's been a third.
Right that happened this week or sorry, last week. There
was also an announcement separately from that and it was
the biggest loan ever, right, it was five hundred and
(25:50):
sixty two million dollars approved by for Energy to be
a plant. You also had Vistra Energy announcing I think
maybe yesterday that it was going to be build to
new advanced natural gas power units totally and I think
eight hundred and sixty megawatts, which is a major, major investment.
How much of that is the market responding and swinging
(26:14):
back to natural gas and how much of it is
just development that would have happened anyways.
Speaker 4 (26:20):
So one of the things that you know, in my opinion,
is interesting about the Texas Energy Fund is I've been
talking about incentives and it's you know, it's a lot
to take in, and the politicians realized that and needed
to be able to explain to you know, every day
voters that were doing something. And I think that's why
they created the find to say, here's this money, it's
(26:42):
going to new investment that's easy to understand, and it
makes sense because you know, they want to be able
to clearly explain the voters that they accomplish something. The
investment in natural gas and whether it's happening in the
Texas Energy Fund is interesting. There have been a number
of canceled projects and the Texas don't do fund you know,
(27:04):
where the applicant said that you know, they didn't have
a turbine available or it, you know, didn't you know,
make sense for one reason or another. But we what
the power plant investment in natural as we are seeing
not all of it, especially with this Vistra stuff, but
(27:25):
a lot of it is going co located at new
data centers. And you know that's because what those data
centers need is the physical ability to consume electricity. And
it doesn't matter about market design or incentives or whatever.
They just need enough megawatts in one location to you know,
(27:49):
do their business model. And so for that reason, it's
worth it to you know, install solar storage, natural gas
uh installed, you know, pay for you know, giant new
transmission lines because they have an infrastructure problem, not a
market's problem, and if they can consume a lot of electricity,
(28:14):
they're happy and they're willing to pay for the cost
of that.
Speaker 3 (28:17):
I mean, there was a like we've talked about sort
of the criticism on the right of you know, putting
your thumb on the scale or subsidizing renewable energy. This
obviously is like pouring money, a ton of money directly
into natural gas. I mean, do you see sort of
a conflict there in those two or is it just
sort of this as hell?
Speaker 5 (28:39):
Yeah, in many other markets, uh, you know, a market
for apples or t shirts.
Speaker 4 (28:50):
You know, it's not there's not a need for politicians
to weigh in and say, I think we should do
the T shirt market differently. But electricity is just so
fundamental to our daily existence that and this Historically it
was regulated very differently where it was, you know, very
much like all the decisions were made by the government,
(29:10):
and so it it makes sense why people you know,
went away and make sure that people get the lights on,
especially after the experience that we had. I would love
for the politics electricity to get boring again.
Speaker 3 (29:25):
Yeah, make electricity boring.
Speaker 2 (29:26):
Yeah, Yeah, it's funny.
Speaker 1 (29:28):
Just I think about like how many people didn't know
what urkot was in twenty eighteen or whatever. Now.
Speaker 2 (29:33):
Yeah, you know, it's like we didn't.
Speaker 1 (29:34):
Even have to explain it on this podcast because we've
all been talking about it for so long, right, Yeah,
one thing I wanted to ask, I mean, the other
thing driving this we've hinted out a little bit. Is
just this idea that all this massive amount of demand
coming on to the grid in the coming years in
order to power the you know, economy of the future,
the expected economy of the future. It's very complicated though,
(29:56):
right because we have this massive queue of data center
and bitcoin miners who want to join the grid, but
they're also you know, applying to join grids in other
states or other places around the states, and it's very
unclear how that's being built. Is that making it difficult
for regulators to know what to what they need to
(30:18):
be doing, and what they need to be accomplishing in
order to shore up the power.
Speaker 2 (30:22):
In the state. Yes and no.
Speaker 4 (30:25):
The yes is to know exactly what to do. But
the no is like they know, we need more investment
and transmission and we're going to need more generation.
Speaker 2 (30:34):
Right. The way it gets complicated is.
Speaker 4 (30:40):
There are only a certain number of companies that are
going to pay for these hyperscalar data centers, you know,
companies like Google and Meta and open Ai. And it's
not you know, going to be you know, a bank
(31:01):
that's running you know, their system, they don't need something
of that scale. They can use traditional data centers for
their business model, and a lot of people would love
to sell an enormous data center site to these giant companies,
and so there's a significant amount of speculation. One of
the things that SB six did last session is require
(31:22):
that data center developers demonstrate that they control the site
and also require them to post what will probably be
a substantial amount of money before the utility or acut
does any planning for them, and that prepayment will hopefully
filter out you know, some number of speculators, so it'll
(31:45):
be an easier problem to solve.
Speaker 1 (31:47):
I want to ask long term, I mean the numbers
I read at the start of this. You know, two
of the power supply capacity that's been added to the
grid has come from wind, solar, or battery since twenty
twenty one. And the trend line seems clear here of
what direction we're heading. Do you think that the actions
(32:12):
of Congress this summer will in the long term substantially
change the direction of that trend line? Like, is there
any is there putting? Can the toothpaste be put back
in the tube here? Or are we ultimately heading toward
a solar, wind and renewable future for a grid?
Speaker 4 (32:31):
In my opinion, the solar and storage is going to
be a key part of our future. No matter what
we will see changes, there's constant you know, invention that's
happening and the battery space and the solar panel space
to make them more efficient or longer duration for the batteries.
(32:55):
There's different kinds of batteries that are coming out all
the time. A lot of people are excited by clean
firm power, so that's you know, not necessarily natural gas,
but maybe natural gas with combon capture and storage, or
nuclear power, geothermal power, or you know, longer duration storage.
(33:19):
There's a lot of investors that are trying to make
all those things happen. Historically, the government you know, had
industrial policy around let's do what we can to reduce
those costs. And we might still be doing that for nuclear,
but but for nuclear that's not really happening.
Speaker 2 (33:41):
And so if.
Speaker 4 (33:44):
People want those to happen, then there's going to have
to be some sort of you know, risk sharing or
you know, other mechanism in order to make sure that
those first movers don't have huge cost overruns. And I
think there's gonna be active evident that space because people
want to see there's other technologies, see other technologies succeed
as well.
Speaker 1 (34:06):
So okay, let me this is a question that I've
been wanting to ask someone smart enough to have an
opinion on it for a while. So I'm going to
veer into the realm of fantasy and uh, pure speculator,
here we go. Yeah, here we go. So you know again,
I'll repeat it again. One of the big drivers of
this is AI, right, data centers, crypto to a certain
(34:31):
extent as well. Right, there is this massive rush by
companies to build as many data centers as possible in
order to power our AI future. Right, whatever you want
to call it, right, But something we know about technology
is that it gets more efficient over time. It You
know that the computer that took up a whole you know,
(34:52):
floor of a building, you know, seventy five years ago
fits in our watch today.
Speaker 2 (34:58):
Right.
Speaker 1 (35:01):
Is there a world where we're rushing to fill all
these this power demand? This technology will get more efficient
in the future, and then the super cheap to maintain
wind and solar and batteries will sort of be what's
(35:23):
left standing as demand drops elsewhere and we're suddenly looking
whether it's fifty years down the road or twenty five
years down the road, or whatever on a much much cleaner,
less fossil fuel dependent power supply, just because the demand
has changed so much. And these things we built in
(35:43):
this decade were are the ones that are going to
be the easiest to run into the future.
Speaker 4 (35:49):
So I think AI is going to change every job
and every industry. And because of that, there's substantial demand
and for the capabilities to make that happen. So we
are not anywhere close to the amount of data center
development we need to make that happen. It won't happen
(36:10):
all at once, but you know, that's that takes a
substance amount of electricity. It's possible that you know, the
next generation of that will result in like more efficient chips,
but what that could mean potentially it's just more chips
at one site too, right, And you know it's also changing,
(36:32):
you know, the way we think about national security. You know,
we've seen you know, the horrible videos in you know,
Ukraine where you know, drone strikes against people. You know, unfortunately,
you know, that's easier to do when you have when
you automate it, and and from even just from a
(36:53):
defense perspective, if the other guys have it, you wouldn't
have it too. That's also AI. So as we make
all these new investments, you know, even if AI drops
off or or if it doesn't, I don't think it matters.
Speaker 2 (37:10):
In my mind. There's a continual loop of.
Speaker 4 (37:17):
New load from new industry coming because they see cheap electricity,
which was made possible by solar and storage, because that's
how it gets cheap.
Speaker 2 (37:26):
That new.
Speaker 4 (37:29):
Demand increases prices, which increases the incentive for new solar
and storage.
Speaker 2 (37:33):
And that's the virtuous cycle.
Speaker 4 (37:35):
And I don't know what the next thing after AI
is going to be, but the access to enormous amounts
of cheap electricity will enable all kinds of potential.
Speaker 1 (37:50):
Yeah, that makes sense, all right, My techno utopian theories
might be a little optimistic there.
Speaker 3 (37:57):
It is just funny, like these are the things that
for all the politics we talk about and all the
like culture war stuff like, this is the stuff that
our elected officials really I think should be an often
are grappling with of like what is the future of our.
Speaker 2 (38:10):
World going to be?
Speaker 1 (38:11):
But also just like the power of partisan politics and
like fighting like might not have as much power over
you know, technological changes in the future we're going as
to as we think right, Sometimes the market is going
to push you in a direction whether you like it
or not. And sometimes a place like Texas, which you
know claims to be suspicious of this, will find itself
(38:34):
the market leader in the country.
Speaker 4 (38:36):
Well, and you know that happened just because Texas got
out of the way and let investors do what they wanted.
Speaker 1 (38:42):
To do right, right, And you know, the it's been
so funny to watch, you know, folks like the Abundance
people talk about how you know, these these sort of
liberal thinkers saying, California, you're doing it wrong. Look at Texas. Right,
It's so much easier to get the permitting. It's so
easier to much easier to get these projects off the
ground because they stay out of people's way and let
(39:05):
these things build up. You know, it's an interesting world
we live in right now.
Speaker 3 (39:09):
Yeah, it does remind me of the conversation we had
on this podcast about housing and things like that right
where it's like you know, things credit where credits do
some stuff is working here?
Speaker 1 (39:18):
Yeah, all right, Eric, thank you for walking us through this.
It's been a very interesting discussion. Thank you, Eleanor, and
thank you to our producers Rob and Chris, that's it
for it today.
Speaker 2 (39:30):
Talk to y'all next week.
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