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On Today's Bloomberg Intelligence Show, we dig inside the big business stories impacting Wall Street and the global markets.
Each and every week we provide you inp research and data on some of the two thousand companies and one hundred and thirty industries our analysts cover worldwide.
Today, we'll look at what earning some of the world's largest alternative asset manager tell us about the health of financial markets.
Plus, we're going to discuss how energy companies are working to satisfy high demand for power.
But first we dive into the eb space and Tesla. This week Tesla announced it is slashing headcount by more than ten percent. CEO Elon Musk cited duplication of roles and the need to reduce costs.
We also heard that senior vice president Drew Baglino and Rohan Patel, vice president of public Policy and business Development, have also departed. So for more on this, we were joined by Steve Mann, Bloomberg Intelligence Global, Autos and Industrial's research analyst.
We first asked Steve for his take on this week's news.
It's actually worse than I thought I thought. You know, the first quarter sales drop was you know, hopefully close to the end, but you know, there's seems to be the light at the end of the tunnel is not really here yet. And it looks like their plans are running just pretty much well below capacity at the moment, and there's still a lot of cost headwinds facing them. They're trying to balance a lot of things in terms of deliveries, production, they're raising prices. I don't know how
long that's gonna last. So execution is key for the company in the next you know, six to the nine months.
Steve, where are we now or where is the market? When you talk to investors in terms of getting a sense of where EV demand is in the US and then maybe globally.
Well, EV demand is waning. I think the interest rate is not helping, you know, it's uh they're looking to you know, as you know, the FED is probably not going to cut rates anytime soon in the next couple of months, next quarter or so, so that's going to condude away on big purchases like automobiles. We're seeing that across the board in the US as well as in China. Trying is a little bit worse for Tesla because there's
so much new competition there. But you know, sales is slowing for GM, sales is slowing for Ford for just had to cut production of their lightning recently announced about a couple of weeks go. So I think this year will be tough for the industry. Now, you know, we probably won't see any improvement until as far as I'm concerned, in twenty twenty six.
Steve, Why twenty twenty six, Why is it going to take that long?
Yeah?
I think what the EV market is is facing today is that we had early adopters, especially on the high end, they're you know, they're pretty much tapped out. You know, they've they can buy only so many the market is relatively smaller than the mass market. I'm looking at twenty twenty six because if you look at the Inflation Reduction Act, it's bringing in on shoring a lot of the EV battery production in the US. Hopefully it will cut costs.
And at the same time, in twenty twenty six, where we're looking at more affordable evs coming into the market, that's going to expand the addressable market for EV's And that's why we're we're thinking, you know, twenty twenty six will probably be a better, better time for the EV market than it is today.
So how about profitability in that scenario, Steve, It's tough to make an argument that, you know, these evs can be profitably manufactured at a higher price point. How are they going to adjust their cost structure to get be profitable at maybe a lower price point, I don't know, thirty thousand dollars or something like that.
That's a good question. I think if you look at the EV startups in the US, the only one that's really still profitable is Tesla. You saw Fisker being delisted. There's risk of them filing bankruptcy. Both Lucid and Rivian will need, you know, billions of dollars just to get them through the next couple of years. We're not sure if they're going to get that money given the slowdown and the EV market. But on a bright side, I
think Tesla is still generating cash. You know, they're making some of the cuts today I think really to maintain cash generation so they can continue to invest for the long term, you know, for them, I think what's really important for them is the AI, the FSD, the full self driving a system that they're trying to build out. That that's gonna be the future of the automotive industry. It's really those software based subscriptions that's going to drive revenue,
not so much of the automaking. So if they're trying to get there, trying to maintain cash, maintain some level of profitability to make those investments to get them there.
Let's go to the SVP departing. So Drew Baglino leaving the company, as I mentioned, senior vice president. Who is he? Do we care? Like how big a deal he was in Tesla? What did he do walk us through it?
He looks like to be the right hand person for Elon Musk. So it's a big loss for the company, no doubt about it. But you know he's he's a powertrain engineer for the most part, energy engineer, so he's you know, he's really involved in the battery if you saw him on battery day. I think, you know, if you look at Tesla and what Elon Musk have been saying about Tesla's future, which is on AI, which is on full self driving, is it a big loss. I mean, you can you can argue that, hey, you know, Tesla's
moving on to the next phase. It's not about building the motors, not about building the batteries. They've gone through that process over the past fifteen eighteen years. You know, I think, you know, looking forward, they probably need somebody more people around AI. You know, developed them algorithms for the future of the car.
Our thanks to Steve Man Bloomberg Intelligence, Global, Autos and Industrials research channels.
We move next to the world's largest alternative asset manager, Blackstone. Blackstone reported higher quarterly earnings than expected, and the firm also collected more fees from big retail funds and credit strategies during the first quarter and all of this helped compensate for a slower pace of deal exits.
For more, we were joined by Paul Goldberg, Bloomberg Intelligence senior equity analyst. We first asked him for his take on the latest coutally results.
The numbers, I would break them up in three buckets. One the fee growth, which was fairly decent, but not the double digit bracknate growth that we've seen in years prior to the painful twenty twenty three and late twenty twenty two. The second one is key themes, and those things are getting better. So you do get a private credit business that was working pretty well. You have a wealth management business that you mentioned that's working pretty well.
They've reached two hundred and forty billion dollars in assets in the wealth management with their goal of to fifty, so they're pretty much at their goal. And lastly, the painful part is the deal activity in terms of deployments and particularly realizations that produce performance fees, and that sort of becomes still a pain point for Blackstone and that's a drag on their earnings.
Paul, what have they been saying about that, because again, you're right, we haven't seen a lot of m and a activity. We haven't seen a lot of IPO activity types of exit events that would allow them to realize some returns on their investments. What are they saying about the next six to twelve months.
Well, I would actually look a little bit beyond that, because on the call they were really talking about twenty twenty four and before they were really hopeful for the second half of twenty four to get better. But then Jonathan Gray was actually unplumber tivity. He kind of mentioned that the more activity, return of activity is probably going to be more of a late twenty four and into twenty five matter. So I would look a little bit beyond the next six months, maybe the next nine to twelve.
If they have a hard time exiting investments, how do they then raise more money for new funds? How does that work?
Well, I think it's the issue not just we're kind of very focused on the private equity when we talk about that, but the third of their business is private equity. The third of their business is real estate, and there are still there are some opportunities, and performance in real estate gotten a little bit better, so they fundraising came back to some extent, the b read b cred the retail funds. The outflows kind of stopped there, so perpetual
vehicles are doing pretty well for them. And the last category, the credit category, that had just been a very strong grower and that's reached out about a third of their assets at this point.
Paul.
Yeah, you mentioned real estate, and of course historically Blackstone's been a big, big player in the real estate business. What is their call on office A Do they have a lot of exposure there? And B how concerned are they about it?
There was nothing discussed in terms of office really on the cold they have about one or two percent of total assets in commer in office space, maybe even less than that, so it's a fairly small amount. They are super focused on the multifamily. During the quarter they made it ten billion dollar deal for air communities that take private deal, so they're still very focused on that. That've
been for over the last ten to fifteen years. They also tooked gave some specific numbers around the logistics and infrastructure. So there's about fifty billion dollars of investments in that already we're talking about. That's five percent of the total assets just in that private credit.
Paul, what's Blackstone say about this business. It's obviously just a booming business. Assets under management is skyrocketing. There's some calls for maybe some greater transparency, maybe in some regulation of the private credit business. What's the Blackstone take on that part of the business.
It's been very strong. As I mentioned, it reached about thirty of their assets three hundred plus billion dollars. They do have a lot of different vehicles there that do a lot of direct lending, but they also have the largest business development company which is geared towards retail b cred that's a huge vehicle for them. There was a lot of growth first quarter. There are actually some questions because you had a syndicated loan market with blending from
the banks. Come back to some extent reclaim in some of the module that the private credit got last year. But it's a long term game, so over time there's still a lot of opportunity for private credit. We ran some numbers, but think if you think of investment credit potential for replacement, especially for those insurance companies, it could
be a forty trillion dollars addressable market. When private credit is we're talking about one point six one point seven trillion right now, So there's a lot of opportunities still to take the incremental one two three percent of that market still.
Before we let you go. So Blackstone set the tone. What do you think the other big asset managers are going to come out with.
It's a little bit difficult because the earnings for them kind of idiosyncratic to some extent because these are private investments, they're large, and sometimes they move in different different directions. There's about two weeks until the next one report, so there's most of them reforced over the end of April
and early May. I think from what we've seen from Blackstone, the private credit is going to hold fairly well, which is a positive for companies like Apolla and error private equity realizations exits is still a little bit more difficult, so it might give some pain to the guys like Carlisle KKR. They actually pre announced their realizations a few weeks before the end of the quarter, so we know the numbers were pretty light, so that's not going to be a surprise. But on the other hand, the rates
is stained higher for longer. They brought out the Global the rest of the business from Global Atlantic, so the insurance business is going to do well and provide them some earnions in that area.
Our thanks to Paul Goldberg Bloomberg Intelligence Senior Equity ANAST.
Coming up, We're going to discuss how energy companies are working to satisfy a high demand for power.
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This week, Bloomberg Intelligence Radio visited Bloomberg a neipp's annual Energy and Climate Summit in New York. The summit brings together corporate executives, government officials, and industry leaders.
This year, speakers at the event covered topics ranging from clean power, trade, federal US policy, hydrogen and climate technology. We begin with power and we were joined by David Crane Undersecretary for Infrastructure at the US Department of Energy.
David says, the demand growth of power in the US is going to be more than we thought. So for the last ten years, power demand was up just fifty basis points a year, and now we're looking at five to six percent a year. And we first asked David, what all of this means.
Well, five to six percent in our world is huge.
I mean that's like tiger economies from the nineteen nineties. And because of the long lead time of most things in the electricity sector, those five to six percents per
year pile up if you're not getting after it. So what it means is and what's very important all this as we look at these transitioning to the clean energy economy, all these new technologies, is you always have to ask the time question, what you need and what time frame and what are the solutions that fit that land within that time frame.
You know.
A couple of summers ago, my summer read was the grid Frame Wires between Americans and our Energy Future. I read that on the beach and people are laughing like a geek. So I feel like I know what I'm talking about here, and what I know is we need constant investment in our energy grid. And if Alex is right, the energy demand is going to keep increasing. That's even more so. What are some of the key issues that you need to tackle or trying to tackle at least in the short term here.
Well, first of all, I need to tackle what your summer reading is, beach does Paul, I think you got to get a life exactly?
If that's what.
I think, Well, I mean one big one, the missing link, and I mentioned this on stage as well, is permitting reform. The I mean, we're very supportive permitting reform. It takes a lot of different permutations. I'm personally not a policy person.
I'm the implementation person. But we just need to do things faster because just the scale of infrastructure that exists under this new legislation, just in my area, by the end this year, we will have invested in over one hundred infrastructure projects that are over one hundred million dollars each and so we're straining the system in many different ways.
But permitting it should not be the bottleneck.
So to break that down a little bit, when we say permitting, what are we talking about? And I say that in terms of like are we going to have to move power lines underground? For example? Do we need more transmission lines if we're going to set up that hydrogen hub or a new nuclear facility and we need to get that to the grid. Does it mean we need to just kind start over and like do a new grid. Like there's a lot of ways that infrastructure can be used. What does it actually mean for you?
Well, of the two that you mentioned specifically, any of them, okay, I would leave aside undergrounding wires because that's more of a climate mitigation thing.
It's where you need to do it. It's very important.
But in terms of solving the demand issue, the transmission thing breaks into sort of two parts, and the answer is yes and yes we need both. One is we need more transmission lines to move the energy around the
country or at least around regions. But then we also need this thing which is grid innovation, which is a series of technologies which are not in the popular mindset, things like reconductoring where you basically take in existing rights away in the towers and you take down the ceramic circular things and in some cases the wires, and you what we call reconductoring, and you can get two to three times the amount of power over the same line, and you don't need a right away. It's cheaper and
that's good for rate payers. And we just in fact publish a report about this at the DOE called Grid Innovation Lift Off Report, And so there's that, and there's a host of other things. But basically we need all of the above right now.
And is this a federal funded issue or is this a federal end state issued How local does it get? Because I think of Texas with its own grid, and I'm wondering how should they be integrated, for example, for the national grid.
I mean, we're not gonna want that, Yeah, exactly, Yeah, Paul, that's what I'm not touching. I mean, there's a reason that Texas is a sovereign onto itself when it comes to their electric system. But we have a lot of financing tools in the tool chests, but most of them are set up as sort of matching funds. We put up up to fifty percent against fifty percent coming from basically anywhere else that's not federal government. So we say
fifty plus percent from non federal sources. And if it states, if it's the private sector, that's all good.
With us, and that's what you need to see in order to commit the money after that. Yes, yeah, So how does this all square? So stuff you're talking about, like reconstituting the grid like that, like that's not sexy cool stuff like clean tech and hydrogen. Right, how much of your job is on the energy that we're gonna need in fifty years and how much of that is how do we get more transmission mechanisms? How do we get that plug that we can't get so we can change the grid?
You know, Alex, I was getting a little hung up on what's actually sexy in the world of electricity, But I'm glad that you can distinguish between hydrogen on one in transmission. But what I'd say is, first of all, nothing that if I thought that what I was doing was just affecting things in twenty fifty, like you know at my age, I wouldn't be doing it.
But we are.
We're aiming for the Biden administration goal of zero carbon electric sector by twenty thirty five, and so the premise of your question is correct because of this new awareness of demand issues. I would say that what I've been focused on my two years at the DOE is what does the system look like sort of between twenty twenty eight to twenty thirty five first of a fast following commercial But because of this new concern, I think we're going to be even looking at more.
Three to five year solutions.
And that's where things like the grid innovation is important, because that's a three to.
Five year solution.
Our thanks to David Crane, under Secretary for Infrastructure at the US Department of Energy and.
Staying on Power at Bloomberg's Any App Annual Energy in Climate Summit, we were also joined by Pedro Pizarro, President and CEO of Edison International.
Pedro discussed the transition to clean energy and how to satisfy the demand for power that we're seeing right now. With regards to demand, we first asked Pedro just how high it is and who's calling.
I can tell you from a Southern California Edison perspective, our utility we had had flat growth for the last fifteen years. We're now seeing something like two percent load growth and in our state a lot of atas transportation electrification. I'm also chair of the Edison Electric Institute, which represents the investor owned utilities across the country. About seventy percent of the load two years ago. EI members. We're forecasting something like a two percent load growth over the next
years ahead. The most updated numbers are four point seven percent, and I have colleagues in some states that are seeing five six seven percent. So who's who's calling it? Is electrification in places like California more broadly across the country, but I think we're more leading edge there. It is data center growth that you read a lot about that.
And then it's also the repatriation of manufacturing. You know, the bipartisan Infrastructure Law is working and it's bringing back a lot of of you know, manufacturing into the country, and that's another source.
Oh interesting, So can you, being your company and your industry, can you handle that increase in load?
Yes? There will be there, yes, and there will be some bumps in the road.
Right.
I was sharing with Alex earlier that it's not the first time in our history of the industry we've seen this, right, rural electrification, air conditioning load. So we've lived through these periods. It's been the last fifteen years or so that it's been fairly flat. So how do we handle it in the near term?
Right?
You see a lot of focus of utilities working in their various regions, power companies, working with regional transmission organizations, and working with customers to make sure we're using every tool available. Demand site management is important. Energy efficiency is important, but so is making sure that we can maintain and in some cases expand existing resources, and ultimately we need to add new resources to the system.
How do you pay for that? Because as yields have moved higher, stock moves lower and then it's more expensive to borrow. How do you do it?
Well, you know, it is an investment in infrastructure that's needed, and this is an industry that's been investing for a long time. Our members at EI have invested over a trillion dollars over the last decade on infrastructure, one hundred and sixty eight billion dollars last year alone.
Right, So it eventually the rate pair, right.
It isn't eventually the rate pair, right, and so we have a responsibility to make sure that that investment is economics being done thoughtfully. It has been doing done efficiently. But importantly, this investment has multiple uses.
Right.
There is the near term need to keep up with demand, but there's also the longer term need for investing towards the carbonization. Right, then the industry's been going as clean as we can, as fast as we can, but while maintaining reliability and affordability. And so those investments are the same investments that are needed to build out the transmission grid, to add renewable resources, to add storage, and that helps
with climate change mitigation. There's also investment that we're needing to put in to deal with climate change adaptation, right, the effects of extreme weather, the effects we've seen initially in California and now across the country in wildfire. Right, So my own company has been investing billions of dollars to redesign the system to harden it against wildfires. Other
colleagues are having to do that now. So all of these investments accrue to the customer, a customer benefit, whether it's to keep the system safer, keep community safer, and also to support the demand growth that we're seeing.
Alison I spoke to David Crane, under Secretary for Infrastructure the Use Department of Energy, and he said one of his major goals over the next several years is to make permitting easier, presumably to allow companies like yours to make these investments. And maybe in a quicker manner, are you seeing that or what do you need to see?
Absolutely needed? Okay, And so if you gave me a magic one, then gave me one wish for the industry, it would be that.
Okay, I don't blame you, all right, And.
We have other challenges supply chain, labor availability, but it's really siting and permitting the needs the most help. Just to frame it for a little bit, Paul, the analysis that we've done as Edison for California and what we will take to the carbonise the whole California economy by twenty forty five. You know it stays ned zero goal still feasible, right, but it will require significant investment for renewables, for storage for the grid, three hundred and seventy billion
dollars of investment state wide through twenty forty five. That analysis, by the way, from an affordability perspective, back to your comment earlier, Alex, we do see that will put pressure on the electric rates and bills, but because it's a transition, right, a lot of that electrification will be removing uses in the economy that they are using combustion processes with fossil fuels. These are more efficient technologies, right, The electric car is
more efficient than an internal combustion engine car. We see the total energy bill for our average customer electric plus gas plus gasoline going down by forty percent in real turns between now and twenty forty five. So that goes to these investments having a co benefit of affordability. As we look at how we proceed with this kind of investment, you know, we have to keep in mind that it has those.
Multiple benefits, so all of it has to work at the same time for that to be that forty percent decline.
Absolutely, and we need to be able to get the steel in the ground through setting and permitting, and so part of our analysis showed that the rate at which we add transmission will need to be four times the annual rate that it's been historically. The rate at which we add distribution the lower voltage wires will need to
be ten times a rate. So when David Crane talked about its heading on permitting, absolutely needed and it's help that we need at both the federal and the state and even the local level.
Our thanks to Pedro Pisado, President and CEO of Edison International.
Coming up on the program a conversation with Jeff Gustavsen, president of Chevron New Energies. He believes the future of energy is lower carbon.
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We continue with some of our best interviews from Bloomberg's nef's annual Energy and Climate Sumit in New York.
The summer brings together corporate executives, government officials, and industry leaders. This year, speakers at the event cover topics ranging from clean power, trade, federal US policy, hydrogen and climate technology.
We were joined by Jeff Gustavisen, president of Chevron New Energies. Now he believes the future of energy is lower carbon. He thinks that energy should be affordable, reliable, and ever cleaner. We first asked Jeff what Chevron's new Energy unit actually does.
We launched these new businesses about three years ago. This is actually our third full year and it's a suite of businesses that support our lower carbon strategy as a company. There's two pieces to that. One is lowering the carbon intensity of our traditional oil and gas business. The other part is growing new low carbon businesses and solutions to scale, and that's what Chevron New Energies is. We're focused on renewable fuels, carbon capture, utilization and storage, hydrogen, carbon offsets,
emerging technologies, and everything in between. This is something that's always been a passion of mind, the energy transition and low car energy. I love oil and gas. I grew up an oil and gas but now shifting seeing a company like Chevron with the capabilities we bring to this space growing these new businesses, I couldn't be more excited about this role.
Jeff, what is I don't know. If you fast forward five years from now, ten years from now, how do you guys think about sustainable energy as a part of the overall portfolio of Chevron. What percentage do you think that might look like?
Yeah, good question. And we when we launched, we announced that we were, you know, allocating or guiding to spending ten billion dollars over an eight year period. Right, this would be twenty twenty one, twenty eight, And that's just the starting point. So these are already a significant part of our capital allocation strategy. We have a very large oil and gas business, which requires a lot of capital to maintain and grow that business to meet global demand.
But these these businesses are We're spending you know, anywhere from one and a half to two billion a year to support these new businesses. And my job and our job as a new segment is to find the right opportunities that are investable so we can grow this business even further.
You're based in Houston, Guys like you, the new Energy people are Are you guys welcome in Houston?
Like the oil bar, like the oilman's bars taken.
Like the cowboys, guys who stick like a pipe in the ground and get oil. He's thinking those people, Are you welcome in those bars?
Yes?
And I love being referred to as a New Energy person, but no, I mean this is I think this. Look, there's three things that we're that we really need to see in order to accelerate the growth of these businesses. And that's a greater collaboration between private companies, between private
companies and policymakers, between governments around the world. It's lowering the cost of these new technologies and solutions so customers, large customers, large businesses or individual customers will buy them. And it is bringing capabilities to bear the right capabilities. And that goes to your Houston question. The energy industry possesses a lot of the capabilities, technical, operating, commercial capabilities that are required to grow these businesses profitably, to scale.
So absolutely, you know a lot of this, a lot of activity in Houston, a lot of companies engaged in this. So Houston it's an oil and gas capital, that's how its thought of. It's also a new energy capital.
So where are we in terms of I've been reading a lot on this, Alex, she knows that she's the expert. I've been reading up a lot on this over the last several days. It seems like the US government's putting a lot of money into this. That's the good news, as Alex mentioned earlier, but I've also heard here of the last couple of days, it's still not easy doing business with the government. I'm thinking permitting for certain projects
and things like that. What's been your experience there is to is the government doing the best it can to kind of facilitate some of these investments in transition.
Yeah, So collaboration between the private sector and the public sector's fundamental here. It helps lower the cost those are you know, advocacy understanding politics, not just in this country but around the world. Is a strength of our company of energy companies, you know, more broadly, so it fits one of our existing capabilities. But that is one of the starting points here. You know, you need the right policy support, the right incentives to get the private sector
investing even more heavily in this space. That will drive the technology forward, That will drive innovation, that will drive to building large scale projects which will lower the cost, make it more consumable for the world, and that is a cycle that will then you know, continue. So it starts with policy, but it really is sustained by the investment by the private sector in technology. Government's a very
important partner. We've seen We're having really constructive conversations with the government, But you mentioned permitting, there's still a long way to go to make all of this come together. We've shown some progress, but there are many steps in front of us.
You know, paul O. To your point, it seems like the good part of this is that energy companies in the new energy world are in the room talking to people, typically the government and oil and gas of a contentious relationship at best in certain administrations, and it feels like in this area maybe that is dissolving a bit, which would be helpful. Something that I've noticed too, is that I think it was like three hundred and three billion dollars has been spent I think it was last year
on all these new energy stuff. What I'm also hearing is that demand is a forgotten problem. Like all the money is being spent, all the money, but the money being spent on supplying the stuff and getting that cost down, but not enough. It's being spent on demand to incentivize a company signing up with you for ESAF, for something along those lines. Is that true?
There is a lot of money being spent in these in these new businesses. It's actually one point seven trillion dollars globally compared to about one trillion dollars spent in the traditional energy business last year, and we need even more to grow these businesses to scale. And you hit on a very important point. It is, and I'll use hydrogen as an example. It's not hard to produce hydrogen.
It's harder to produce low carbon hydrogen at a low cost, something that we're working on using natural gas as a feedstock or using electricity and renewable power as feedstocks to produce low carbon hydrogen. But transporting hydrogen to the market,
you need policy support in order to do that. You need tech, technological innovation to do that to lower the cost, and then importantly encouraging consumers to buy a hydrogen making it easier for them to transition from a traditional product that they're using today to a lower carbon product that comes at a higher cost. That's where demand incentives and policy support will also be required.
Our special things to Jeff Gustavsen, president of Sevrun New Energies.
Staying at Bloomberg and eif's annual Energy and Climate Summit, Let's have a look at Constellation Energy. It's an American energy company that provides electric power, natural gas, and energy management services.
It also operates the largest nuclear reactor fleet in the United States. So for more on the company, we were joined by its executive vice president and chief strategy Officer, Kathleen barn and we first asked her about some of the other things that the company is doing in the energy transition space.
Well, one of the opportunities we see ahead of our country is to find ways to decarbonize. It's really hard to find a way to run steel, manufacturing, agriculture, aviation, long haul shipping on electricity, right, so we have to find another way to decarbonize that sector and find a liquid or gases or a solid fuel that we're going to have at the ready at any moment to power those industries. And hydrogen has emerged as an opportunity for the US now that the Inflation Reduction Act has passed.
There's a production tax credit for hydrogen in that act. And we see nuclear and hydrogen as an ideal pairing because, as you pointed out, nuclear is clean, but it's also firm, it's reliable, it runs twenty four to seven, and so it can be a steady source of power to run into an electrolyzer split water into oxygen and hydrogen and then create that clean molecule that can power industrial applications.
What color clean fuel, Well, we're trying to discourage the rainbow of colors and just talk about clean versus emitting. But it is called pink for.
What it's for just to work clear, yep.
So I was fascinated to not just I didn't know much about your company. Your company has the largest or the biggest nuclear fleet in the country with twenty one reactors. What is the future of nuclear energy in this country as we again think about more green types of energy sources.
You know, it has changed a lot, even just in the last few years in terms of public acceptance for the technology it makes. I mean not just our fleet, but the nuclear fleet generally generates twenty percent of the electricity that runs through this building we're in in our economy every day. People don't really realize that, but it is the backbone of the power sector, and it is carbon free and as we just talked about, very reliable.
It operates around the clock, no matter the weather, sun, wind, brainstorm, it's still operating, and we operate twe reactors. We own twenty three and so that's about a quarter of the US fleet and the beauty of these machines is that they can run for a very long period of time. Most of our assets are sort of in the thirty forty fifty year old time frame, but they can run up to eighty years according to the Federal Safety regulators
in Washington, and so they are constantly being rebuilt. We put in about a billion and a half a new capital every year, and we're replacing the components. It's kind of like an old car that's having its parts replaced regularly. So these machines can run for a very long time. They abate about five hundred million metric tons of carbon every year, so it's in the nation's interest to keep them running. In at this growing public acceptance, we're seeing
interest in corporate procurements, We're seeing interest from governments. We're seeing people valuing this thing that we don't have enough of, which is a clean firm megawont hour.
So when we talk about the hydrogen stuff, so pink so basically you would get the power to split the hydrogen from the oxygen and the electrolyizer using nuclear stream. Does that mean that if I'm building a hydrogen facility, I have to go where your power plant is or are you going to be building a power plant, a small modular power plant near me, or are we running like a big tube of something in between me and you.
So what we're talking about is using the existing reactors to power an electrilizer. As you said, split the oxygen
and the hydrogen. You could do that right up next to the power plant, so you put the electricity right into the electrolyizer, or you could put your electrolyizer next to your manufacturing plant or whatever process you're trying to use the hydrogen for, say you're making sustainable aviation fuel, and we can shift the electricity over the transmission line to your electoralizer with a dedicated power purchase agreement, that sort of hydrogen by wire configuration. So either co located
with the plant or through the transmission line. Either way you're going to have that steady source of zero carbon electricity going. It's the electrolyizer every hour.
Can I go out and build a nuclear power plant in this country today?
There is no reason why you can't, But thank you, Alex. There are a bunch of reactor technology developers who have new designs. You mentioned small modular reactors that are in the process of getting licensed, and there are some utilities who have created relationships with those technology developers for sort of codevelopment or you know, an advanced commitment, but none of them are under construction just yet. Some of them
are going to be starting soon. For example, in Canada that the Ontario Power Generator has partnered with the GE three hundred megawatt reactor design and they think they have been through regulatory approvals and they will start construction sooner. But in the US we're just we've lagged. I mean, this is happening in Candide's happening overseas, and we don't
have that market poll here. We don't have commitments as much as we should to get those new reactor designs through licensing and into construction and pass that first of a kind cost cycle.
All right.
Thanks to Kathleen Baron, Executive vice president and chief Strategy Officer at Constellation Energy.
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