The Future of Energy

is powered by Bloomberg New Energy Finance. I'm Pim Fox here with Lisa Abramwitz and you know, Lisa, our next guest. I would have not expected to see this gentleman here at a conference on energy. He bikes all the way here from California, that's right. And and you know what he doesn't he's on the bicycle most of the time.

Uh and um, well, he does happen to manage over two hundred billion dollars and he's right, and he is responsible to the retirees of the California State Teachers Retirement System. Chris Silman is the chief investment Officer and he joints us. Now, Chris, thanks for being with this, Thanks for stopping by. What are you I mean not that we don't love seeing you and having you around, but what are you doing here? Yeah? No, it's very unusual. I think I'm the only chief investment

officer that's actually here. I'm only the second number two pension plan and the whole world that's actually here. Has anyone talked to you? I mean, or you get to be up, you get to be anonymous? Now you guys? All right, Well, I actually came to I saw the radio station here's like, came here to say hi to you. Um. No, people don't know us very well here. We're actually kind of incognito, which is kind of nice. It's a great learning experience the second time I've been here. Um, the

future of energy is huge. The demand will continue to rise globally, and the sources of energy are going to really diversify. And so that's an investment opportunity. It's a risk and an opportunity to us. Although Chris, you were saying that we do not see other chief investment officers here,

certainly not of retirement systems. You have to wonder, you know, will there be a growing amount of demand from public pension managers such as yourself, and how big do you think that demand could be Oh, I think it's gonna be huge. Energy is already a giant part of everybody's portfolio. But if you think about power generation, it's very long term. It's going to show up on our infrastructure portfolios. It's

already impacting our real estate portfolios. It's going to show up in private equity in terms of new opportunities and new investment, and in the general equity portfolio. Energy power generations a big part of the US equity market. Well, but how much do renewable sources of energy already factor into your portfolio at all, or how much do you see the potential for that going forward. I've always been

really clear with people. We were an early mover into solar and in wind back in two thousand three, and an early being an early mover is not necessarily an advantage. I quote the late Joe Deer who said, you know, clean energy was a noble way to lose money, but it lost us money there. You know, it's like there's a really good noble but you know it definitely is

going to be part of the future. You're seeing clean energy show up as much as ten percent of the power generation Michael Leeverrick just showed a slide that said that in some countries it's of the power generation, so it's becoming price competitive. It's still subsidized in many parts of the country, but it's showing up in our infrastructure

portfolio a little bit in our venture capital portfolio. And what's interesting I'm learning here is that companies people like Alphabet, Amazon Um buy so much power more than some countries. They're actually going out and developing their own power generation because it's a critical need to them. When you think about clean energy, you have this whole supply chain that is different than burning fossil fuel of any kind. Having said that, when do we get to the point where

it's just energy? The cause the decision making process changes. As the head of a public pension retirement program, does it matter to your beneficiaries how you make the money for that? It does? You know? I think I represent California teachers and extent. If you lose a ton of money, nobody cares whether it was like nobly or not right exactly well, And our mandate first and foremost just is

to fully fund that retirement system over thirty years. So we have to be focused and on return, but representing California teachers. We hear from a lot of them. They are very concerned about how we make our money. But you know, I think him when you look at the future of energy, it's you know, it's going to be a long term trend. I need a big wave. So I'm a bike ridor, but we like to serve in California, so I need a big wave of an investment wave. It's going to stick around for a long time that

we can catch up with. And that's why we're here is to see it early so that we can ride this for a long time. And I think that we'll start talking about energy when there's actually a price on carbon. Right now, coal plants and natural gas plants can burn, and they've got a subsidized nuclear and wind and solar to be price competitive because the carbon plants don't pay for their waste. Al right. So Chris, you're biking, you're surfing. I love it. I love the California vibe coming to

us right now from Chris Amon. Uh. You know you said that it was a noble way to lose money to get in early with renewables. But now as you listen to the presentations, is there anything that's caught your ear as far as a promising potential investment that you're

gonna look more at. Let me get back to California. UM, the whole world distributed energy, the fact that with solar on rooftops you've got people generating electricity all over the place, and the big difference, and they talk about here kind of the holy grail is battery technology. UM is the ability to store all of that renewable because it comes during the day or only when it's windy, and you've got to hit it for peak time. So for us, I see this. You know, energy trans mission distribution is

an infrastructure play. Storage will probably become very much a strong infrastructure opportunity. Which companies are at the forefront of the battery technology well, obviously Tesla gets all the headlines to the giant right, but you know it's we don't spend a lot of time talking about what you gotta when you're gonna dispose of those lithium batteries. You know, I think we have to look long term. It's not always all all great, glorious, But we just saw a

couple of slides. The automakers are very interesting and if GM and four don't get their act together. People like Toyota and what in Voteswagon are actually gonna eat their lunch Internationally when it comes to UH electronic vehicles. Uh. You see a lot of electric cars in California, not so much obviously here in New Yorker in the Midwest, but you're going to see US companies, even the odds of Lockheed Martin. Right, Chris Alemen, thank you so much

for stopping by. Always wonderful to speak with you and hear about your fifteen mile bike right to work every morning. Chris Alman is Chief Investment Officer for California State Teachers Retirement System in Sacramento, California, with more than two billion dollars of assets under management. And he's not lonely anymore, even though he is probably the only uh C I O certainly of a retirement plan. Here at the Future

of Energy Summit. We are here at the Future of Energy Summit, which was powered by Bloomberg New Energy Finance, and we're lucky to be speaking with Ralph is O, Chairman, President and chief executive officer of Public Service Enterprise Group Incorporated that's otherwise known as p S E and G and Ralph I wanted to start with your capital investment program, which you have just recently laid out, and it includes a four point seven billion dollars of plan investments this

year that is the most ever in your history. What are you spending that money on? That's right, So it's primarily an electric transmission. We have an aging infrastructure that is in desperate need of replacement, both from a reliability and a storm resiliency point of view. A close second is in gas pipe replacement. We have the largest cast iron main system, you know, it's many of our pipes

approaching a hundred years old. And then probably in third place would be the fact that we're building three natural gas combined cycle power plants. So it's electric transmission, gas pipe replacement, and power plants um in addition to the portfolio. I wonder if you could speak a little bit about nuclear power generation. Yeah, so we've we've actively engaged in a policy discussion around nuclear power. We're concerned that short term market forces will push the system to a one

fuel only electric supply option, that being natural gas. We believe natural gas is abundant, we do believe it's low cost, and we do believe it's a comic fuel. But we just think that like tricity is so core to the economy and all quality of life that a lack of fuel diversity could be a serious problem from a system

interruption or resiliency point of view. And then, of course that doesn't speak at all to the environmental benefits from an air emissions point of view of nuclear, and nor does it speak to the fact that many nuclear plants are major employers and in different states. So what proportion of P S E n g's UH energy comes from renewable sources right now? And where do you see that

going in the next decade? YEA, So, so right now we are fifty seven percent of our output comes from nuclear, thirty five percent of our output comes from natural gas, about five percent from coal, and the remaining three or four percent comes from renewables. More important from a policy point of view is what percent of New Jersey's output

comes from those various fuel sources. And New Jersey gets about forty four percent from nuclear, about one percent from renewables, and fifty five percent from actual guest of the absence of nuclear would make New Jersey a single fuel jurisdiction,

which is just not a good idea. So what are some of the steps or what are some of the programs that you're involved with in order to make sure that, for example, plants stay open because I understand that you know some of them they're not making any money, and you've already said that unless there's some way to figure out how to make these cost effective, they could be shut down. So we're taking two approaches. PIM One is to say, if you look at organizing markets, there's a

missing money problem. Uh, it's it models the mind to think that a nuclear plant that takes in that courts anywhere from thirty to thirty five dollars a megawatt hour would retire and be replaced by a new combined psycho plant that estimates range would require fifty to sixty dollars a megawatt hour from a proven investment point of view, How can the market create that reality that a low cost plant would retire and be replaced by something that,

over the long term, should be more expensive. So that's getting FIRK to recognize that there's a price formation issue at the state level. What we're saying is, if we look at how you're subsidizing renewables, arguably you're paying anywhere from two to four hundred dollars a ton of carbon to get less than two percent of your electricity from rooftop solar grid connected solar. No one has ever estimated

to be carbon worth that much. Why would you want to let your nuclear power plants retire what you're getting paid zero for carbon today? So we're really approaching us at the policy level in two different ways. We're saying markets are not pricing the attributes of nuclear that are important, nor are states fairly pricing the attributes of carbon that they seem to be saying are reporting. I like that the missing money problem. I can say that I can come home and say to my husband, we have a

missing money problem after I went shopping today. You know, I do want to just go back to this fifteen billion dollar spending plan, capital spending program over the next five years. You know, we talk a lot about jobs, and you know President Trump has emphasized jobs with the fossil fuel industry. Will you be hiring more people in order to complete some of these projects? Yes, we we

we are actively hiring people to complete these projects. We think that there are some improvements that could be made in state regulation to make the hiring of these people are less lumpy, for lack of a better word. Right now, utilities are compensated by state regulators in a way that's a that's been going on for a hundred years, and we just think that it needs to be a more predictable system of state regulation that allows us to hire people,

train them, and keep them in the pipeline. Because an aging infrastructure isn't getting younger, right we so we will need to continue this investment profile out and for the foreseeable future. And right now, the way which we've we fund these programs is going back for incremental additions. So we hire a lot of contractors, and we hire people for short duration and what we'd rather do is hire

them for a long career. But that requires a more predictable regulatory system than the one that's in place now. Thank you very much for joining us, pretty much appreciate it. Propito is the chairman, the president, and the chief executive of Public Service Enterprise Group that are known as PEG. At least that's symbol well PG PG PEG where thank you? Yeah? Where that it's PEG and you're Lisa, okay, and yeah, well so far and we're broadcasting of course from the

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And here to tell us about energy policy and the world's climate situation is Barbara Buchner, the executive director of Climate Finance of Climate Policy Initiative. They're based in San Francisco and Barbara Buchner can be followed on Twitter at b Buchner thirteen. Barbara, thanks very much for being with us. Maybe just give people a little bit of an idea of what the Climate Policy Initiative is. Sure, and thanks so much for having me here. So Chemic Policy Initiative.

It's a non for profit organization be really focused on helping policy makers and decision makers how they can improve basically their policies around land use climate energy, but doing that with a specific focus on finance. So what dcs, We really want to advise them on how to use public policies and public resources most effectively in order to unlock more investment and really get us on the local climate recident passway. So you spend a lot of time

in Washington now with guests amongst other countries. We are a global organization. So do you find that, given the new presidential administration in the U S that you've gotten more pushback in Washington when you go and you talk

with different policy makers. Well, I do think you know that, and we've heard it also today at the summit here that there is a generally positive sentiment that is caused by the folly technology costs of renewable energies and so notwithstanding you know, obviously some delays or like some slow down in some of due to some two political developments. But BC is a very good, you know, general trend saying that the energy transition is irreversible. And I think

this is something that we hear also from policymakers. But obviously it is something where you know, we work a lot is the private sect in order to understand how we can make the case with policymakers on what the instrument should be in order to get the climate sector in So have you found that you've had to make more of an argument on a financial level, much more so than in the past, where you could talk about the actual science behind UH global warming, etcetera. I mean,

now it is it's sort of a finance focus. It's like, look, guys, you can save money, so do it well. To be very you know, this is something which you've done over the last year's already. As exactly, we work not only in the US, we have offices in Brazil, in India, in Indonesia, and you know wherever we go. What we want to do is really enable economic growth while reducing climate risk. And so that the narrative that we have is, you know, try to understand what's the incentives for the

private sector will come in. You know, given that the economics of renewable we see actually very positive trend there. At the same time as insaide like we've had not been We've had not that many discussions now here in Washington in order to see what's the changes. We have

not really seen any changes yet. Maybe just give an example of the kind of work and the kind of partnership that you have with states, because I know that you work with New York State on a renewable energy plan and also you put together what's called a carbon dashboard for California. What are those things? Yes, So the carbon dashboard, for example, this is really kind of to

provide the information to all market players. We are tracking the prices of the carbon market in in California and really try to kind of inform decision making by different stakeholders public sector, private sector. It's a statement, but you know what I would love to talk about a little bit more is our interactions not only with states, but with different types of stakeholders from like governments, from private sector, from commercial banks, um, institutional investors, and different types of

really investors, both for the public and private side. And we do that in the context of the Global Innovation lab for Climate finance that we manages the secretariat. The idea there is really to work with different constituencies and different stakeholders to come up with innovate definancial solutions that really can help use public money most effectively drive private investment. So as you talk with people in these finance arms,

do you encounter many climate change deniers? Um? Pause? Actually not really, I do see, you know, but that again, I think the narrative you're using is not only focused on climate change. We really try to show that, you know, I understand that, but I think that there is sort of this understanding that you know, the clock is ticking amongst sort of certain scientifics circles. So there's a certain

urgency to making changes. Whereas you know, if somebody doesn't necessarily buy into the argument that you know, human man made influences are causing global climate to uh change substantially, then you know, okay, maybe it saves me a few bucks. For what's the incentive to really make a make a big change right now? Well, I think the incentive is

that you can make money. There is a business case to invest in renewable energy, and I see you now we're seeing renewable energy costs go down and their competitive. It's almost all regions for almost all renewable. So I do think, you know, there is a shift in awareness that there is not only risks and you know it's like the unknown fountain, we have to stick to business as usual, but that there is a real opportunity to

go into new grounds. And you know, I think what we need to do is just to help scale that movement and make sure that we really feel you know, the gaping investment that we see at the moment. You

get us on a on a two degrees buthway. Now you have some your financial support from the German Ministry of the Environment, also Open Society right to George Soros, plus from the Norwegian Does having that government and that foundation level support, does that make a big difference in getting a project succeed, you know, to succeed give you that twenty seconds. Well, the support we received this from

multiple sources, not only the ones that you've seen. I think in the context of specific projects that we try try to you know, pilot there, we really need the initial seat funding from public sources. So yes, they're you know, funding from governments, from a foundations is really helpful to take off some of the races at the private sector, otherwise wouldn't be able to take Yeah, thanks very much. Um. Barbara Buchner is the executive director Climate Finance and Climate

Policy Initiative. Thank you very much for being with Thank you so much for having me. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio.