"I’m A Republican All In On Solar" Featuring Neil Chatterjee, Former FERC Commissioner

For our COBT viewers and listeners, it's Maynard, Mike, and Jeff here with a real treat. It's a holiday treat, and it's right here in the office. Today, we're going to get to talk to Neil Chatterjee. He's in Houston having some meetings. He's going to join us. later at our holiday party. You will remember Neil has been a commissioner on the FERC. He was also a chairman of the FERC.

And, you know, he's doing a lot of things now in the private sector. He's thinking, he's commenting, he loves policy. He's our kind of guy. So, Neil, we're delighted that you would come by and visit with us. talk about all these crazy issues going on in the energy and power world thanks for having me looking forward to it well we're excited okay mike brett mike we didn't even uh i didn't text you this morning but we're both vests and white shirts good job

We are so insane. Yeah, that's it. Yeah. You know, I think we've talked about this for the last couple of weeks. This week is all about the FOMC meeting. That's going to be happening tomorrow. What we've seen here is bond yields were around 4% about two weeks ago. Now they're at roughly 4.17%. I think people are losing a little bit of faith.

Not that we're going to have a 25 basis point cut tomorrow. We're probably going to have a 25 basis point cut tomorrow. But how many more cuts after that? And I think what we're going to find out here is that... When we have the FOMC meeting tomorrow, we're going to cut 25 basis points. But the important part is, what is Powell going to say? And obviously, most people realize that he's going to be going on the way out. And my guess is he's going to talk about...

what it looks like for in 2026 rate cuts, but he's also going to talk about probably Fed independence as well. And so that's probably what we're going to hear tomorrow. So we'll see what happens.

In regards to that, I mean, if you think about the equity markets, equity markets have been saying this for the last two weeks, too. They've been kind of going sideways and right because everyone's looking to see what is the Fed going to be doing tomorrow. And so I think what's going to be interesting, you'll probably have a lot of volatility around that.

But if we don't see any volatility, we don't see markets rally. I think what you're probably going to say is that basically equity investors are basically packing in for the holidays. And so I think that's probably the most likely scenario.

We're not going to really talk too much about crude prices. We've been talking about those for weeks and weeks and months and months. Crude oil is at $58, $59 a barrel. Obviously, this overhang, oil surplus overhang is out there. We've talked about it many, many times. Don't really need to explain more of that. I think what's really interesting here from a commodity standpoint is natural gas. Natural gas has really, really moved up. We hit 550 and M last week.

We're down to around 475 NM on gas. And so if you think about natural gas right now, it's really moving on weather patterns. You know, gas storage, we're going to probably have 175 B. which is raw in storage this week. It's going to be the biggest one that we've seen in a while. We're going to put storage year over year at a deficit, but we're going to be right around five-year averages for natural gas.

You know, what's really interesting was when I think about natural gas, U.S. gas is getting all the credit. But if you look at what's going on in Europe, right, the gas equivalent in Europe, we're around 950 in M. And that's the lowest, you know, that we've been in since like March of 2024.

So US gas prices are up around 30%, 35% this year, and gas prices in Europe are down about 40%. And that's even with gas storage in Europe being really, really low at this time of year. So really kind of interesting phenomenon that's working in those markets.

As far as just energy news, electricity news, it's going to be interesting to talk to Neil about this, but NextEra had their investor day yesterday. They basically talked about the golden age of power demand. really, really extensive slideshow there. But I think what they're trying to basically say is that, okay, yes, electricity demand is going to be growing. We know that. But they're also talking about trying to basically...

you know, accelerate and build out their natural gas platform. So that was a little bit of a nuance that we hadn't heard before. I would say from a next year standpoint, they're ahead in a lot of things, but I'd say from the gas standpoint, I feel like they're a little bit behind. And so they're doing a little bit of catch up.

They really focused on that yesterday. You know, as far as the E&P, we're starting to see some M&A. Northern New Orleans Gas yesterday basically did a deal with Infinity. You had... Ontario Energy do a deal yesterday. And so we're starting to see this M&A starting to accelerate again in EMPs. And last thing I'd say is today, ExxonMobil basically hosted a sort of a corporate update.

They raised their basically cash flow and their earnings estimates by about $5 billion a year out to 2030. But that's when the new CapEx increases. The stock's up 3% to 4% today. I think good news is being rewarded. The interesting thing about Exxon is Exxon, with all the stuff that's going on in oil and gas and oil being at $58, $59 a barrel, Exxon is within 5% of its all-time high.

It kind of is leading the pack, and so I thought we'd end it with that. You know the other one, copper. Copper's up a ton, right? Copper's at an all-time high, yeah. Yeah, fascinating. Jeff? Yeah, I don't want to drag this on too long because I'd love to get Neil sitting here with us.

You know, power is such a dominant theme in and around everything and around energy. I would just encourage everyone to take the half hour, hour and go through the Nextera slides. It's thorough. No, that's great. And I like what you said on that, Mike. Maybe we'll attach a link to the Nextera. roll out the deck as part of this distribution. Well, Neil, all our energy and power friends say this has got to be the greatest time to be involved in everything that's happening.

I'm guessing you feel that way too. Yeah. Look, it's exciting. It's challenging. It is not without its stresses and complexities, but yeah, it's definitely. I couldn't have imagined when I took my seat at the Federal Energy Regulatory Commission, this kind of wonky, nerdy, technical agency that we would find ourselves, my now former colleagues.

at really the epicenter of not just energy and power but you know the the economy right now and uh a lot really and and throw in this national security thing you've got a double whammy going on it's significant energy security is national security and uh that's where again first boring role of overseeing the reliability of the grid has suddenly come to the forefront

Would you mind, because those of us who haven't been in government, much less, you know, a commissioner on the FERC, tell us a little bit about the mechanics of how the thing works. Yeah, that's a great question. And the mechanics are actually pretty important. And if you see them changing. That's why I'm hoping that the mechanics are maintained, because I do think it is important. So, FERC.

is an independent agency with a pretty awesome responsibility. It's responsible for the oversight of the reliability of the grid, as I mentioned. So when Americans hit the switch, we want to make sure the lights come on. It also has the responsibility to oversee applications for energy infrastructure, everything from natural gas pipeline.

permits, liquefied natural gas export facilities, sets rates, terms and conditions for oil pipelines, sets return on equity for transmission lines, approves hydroelectric facilities. um it really is the country's foremost energy regulator would you mind while you're in that list because everything's in the list what does it not do i mean that's the thing

I used to joke around with then Secretary Rick Perry. And so since I'm here in Houston, there might be some taxes on this distribution stories about Secretary Perry. I used to tell him I thought the Department of Energy was misnamed.

that it really should be called the Department of Science, because that's what DOE's purview is, is oversight of the national laboratories and the nuclear fleet. But Furek really does energy. He just rolled his eyes at me and dismissed me in his very... texas way but yeah i mean uh ferk is very much the the country's principal energy regulator and we we had the um

The head of the North American Reliability Council on? Yeah. So does that report into FERC as well? It doesn't report into FERC, but we work very closely with NERC. FERC, you know, sets the standards that then NERC enforces in terms of maintaining that reliability and security. Okay, so I'm just, you were at the FERC.

in the trump one administration and since then it's wild right like we went through the biden era ira transition focused energy policies and now we have swung and we are seemingly all focused on just all the above we're in full all the above territory what's your impression of how FERC has been managing through that because as i recall at one point in the biden administration they had added you know like

emissions impact or some other, they had put some new criteria on improving things that wasn't previously part of FERC. I assume they've pulled those out, but maybe talk to us about that roller coaster as far as you can tell what's happened.

I actually generally think that FERC has been a beacon of stability in an otherwise volatile regulatory landscape. And it kind of gets back to the structure. Actually, I didn't get into the. structure of the commission as much. I talked about what its responsibilities were. So FERC has five commissioners when it's at full strength. No more than three can come from any one political party. The White House appoints the chair.

And then each of the individual commissioners serves a staggered five-year term. So ostensibly, you could outlast the president that appoints you. And that structure is really important because it's intended to provide. stability. You look at U.S. EPA, for instance. EPA went one direction under the Obama administration, completely different direction under the first Trump administration, whipsawed back again under Biden.

and now is flipped again under Trump 2.0. And I got to tell you now, working in the private sector, I'm in some roles where we're responsible for deploying capital. it is maddening to try and peg investment decisions to the political pendulum swinging wildly back and forth like that this is the number one is probably the number one sentiment we bump into it's you can't you can't do that frustrating

FERC has been stated, did the agency go in a different direction under my leadership than my predecessors in the Obama administration? Of course. But it wasn't a dramatically different direction. With a few notable exceptions, I think early on in the Biden administration, FERC did get a little bit off the rails in proposing some of the policy changes that I think were very controversial.

That led to a change in leadership at the commission because Joe Manchin and even President Biden were uncomfortable with the direction FERC was heading. And it stabilized again. And I think once it stabilized. Did they do things differently than I did when I ran the agency? Absolutely. But not dramatically different. And now here we are in Trump 2.0. We've had now it's December. We're our third chair.

uh in 2025 that may seem very unsettling but it's not the agency continues to kind of get its work done in a a prudent sensible manner and rises above politics

And I think that's so essential in this time. So you mentioned your relationship with Rick Perry. You know, Doug Bergman, Chris Wright, that's a... potent one-two punch, maybe add in Lee Zeldin. I mean, you've got a unique alliance, if you will, or partnership between those guys. How did they, as FERC, how did they interact with FERC?

Yeah, they've done a really good job. I think there were some concerns early on about agency independence and about this unitary executive theory. And the Supreme Court actually took up a case on this yesterday. regarding a commissioner at the Federal Trade Commission that was removed by the Trump administration and whether or not these independent agencies should exist or whether they should report.

to the White House. When it comes to FERC, I really have been impressed with how the Energy Dominance Council and Bergam and Wright and Zeldin have kind of handled the agency. So there's a really, really significant order in front of the agency right now. It was a directive from DOE under Section 403 of the DOE org act guiding FERC on how to navigate.

large load interconnection. That may seem like a really weak term. We should attach that order when we send it out as well. It's a huge deal. It's basically this conundrum that FERC has been wrestling with for some time. over how do we meet this coming surge in demand for power being driven by data centers to support AI, but also by cloud computing and quantum computing and streaming services and vehicle electrification.

building electrification, reshoring of manufacturing. There's huge pressure on the system right now. You just tick those off better than anybody I've ever heard. That was well done. I appreciate it. I think about this stuff a lot because it's new, right? We have really been the beneficiaries in this country of relatively flat demand for electricity over the better part of the last 20 years. The consequence of that is we've allowed some of our policy muscles.

to atrophy. And I don't think we're quite ready yet to deal with this coming surge in demand. And what FERC has really been struggling with, and it's a complex question, how do you meet the surge in demand while keeping energy not just reliable, but also affordable. And, you know, we don't also want to dramatically backslide on our decarbonization goals.

And that's a really complex Gordian knot that needs to be unwound. So what DOE did, they sent this order over to FERC, where they kind of indicated... The outcome that they want, which is they want to win the AI race, and they want these data centers to be plugged in, understanding that winning the AI race for national security purposes is going to involve a tremendous amount.

of electric power. But they respected First Independence and they left enough latitude for the commission to basically use its expertise to try and solve this problem. And I think that is very appropriate. Now, a bunch of people immediately wanted my response to this because the last time DOE used this authority in a significant way, Secretary Perry was at energy. I was chair of FERC.

And he had a proposal to compensate baseload power plants, mainly coal and nuclear, for having the attribute of on-site fuel. And I'll be totally honest, I bungled it. He raised a serious question. I had just spent almost a decade as energy policy advisor to Senator Mitch McConnell, representing his constituents, which largely comprise of the coal industry in Kentucky. And I was still struggling.

with making the transition from partisan legislative aid to independent regulator. And I botched it not necessarily in the actions I took at the commission, but it's how I kind of carried myself. I handled the proposal much like a politician would, not a regulator. And I injected politics into something that was a much more substantive, serious issue. And that exercise was posterized as like a very...

partisan political thing. So now you fast forward to this new directive from DOE to FERC and people's immediate reaction was, oh my God, here we go again. DOE is trying to push FERC around. That's actually not the case here. What this proposal from DOE is, it was very elegant. It was well structured. It was well thought out. And they're giving the commission the latitude to really utilize its expertise on.

one of the things i like about this issue is it rises above politics i do think that in this period of relatively flat demand for electricity we've allowed

politics to infect energy policy. And we've kind of become mired in this really antiquated notion that if you're for fossil fuels, you're of the political right. And if you're for clean energy and climate solutions, you're of the political left and it's led to bad outcomes in my view and i actually think ai is going to be the thing that busts us out of it that We've got to do a better case of explaining to the American people.

that ai isn't just about making goofy cat videos or enabling high school kids to cheat on papers that there's a genuine although that's very important i mean that's you know um because the chinese High school kids are doing it. We got to get our kids doing it. But we do need to win the AI race. We cannot allow an autocracy. We're joking around about it, but we don't want an autocracy in the Chinese Communist Party to control.

I believe warfare in the late 21st century, AI and drones will dominate that space. So it is important that we win this AI race against China. That's going to require some trade-offs. For the political left, I think there has to be a recognition. We cannot possibly win the AI race and keep energy affordable and reliable without fossil fuels.

That we're going to need, you highlighted very clearly in your opening, the important role that natural gas is playing right now. We're going to need natural gas to win the AI race. We're going to need more gas infrastructure. Can I ask you one thing? you when you layer on the ai race yeah you know it's like okay but even if you didn't layer on the ai ray isn't that what you said which is we're gonna have to have blended systems we're not getting rid of fossil fuels

Isn't that where we were already and AI is a layer on? It's waking us up to it. I think we've made decisions that are counter to that. Look, some of my colleagues... My successors at the commission during the Biden administration took steps to, in my view, artificially suppress capacity prices to accelerate the retirement of older.

fossil generation, namely gas, peaker plants. I now think we are regretting those decisions because we're now facing this surge in demand and we're realizing, oh, we needed those generators. We needed those resources. We actually haven't been as cognizant of that need. Now, I'm being very critical of the Biden administration, the steps they took to suppress fossil deployment. I honestly think the Trump administration is making the same mistake.

We can't possibly win the AI race and keep energy affordable and reliable with fossil fuels alone. We're going to need solar and storage and geothermal and nuclear and wind. But we're also going to need megawatts, things like energy efficiency, demand response, virtual power plants, grid enhancing technologies to squeeze maximum efficiency out of our existing infrastructure.

uh distributed energy resources the trump administration by canceling product uh projects by kind of scaling back tax incentives by really demonstrating outright hostility towards clean energy, I think they're making the same mistake at a moment in time when we need every available electron. You got to remember negawatts. That's the first time I heard that that's a great expression.

maybe i could ask you mike and jeff jump in please uh i'm in charge of getting this warmed up neil and yeah they come in you know off the ropes with some big tough questions um the the the criticism that we hear the most of what the trump administration has done around win in particular is that you have rescinded what were otherwise approved projects

And so this was very bad for investment because nobody likes to think I can be all the way down the aisle and then the wedding's canceled. So that's the first criticism you hear. You know, the second one is... more the one you just said which is like i think that was some more supply like why you know why are you doing that do you mind unpacking both of those and maybe help us understand what what is the

Is this part of the negotiation? I'm going to pull back wind and then I'll give it back to you once you give me blank. Is this a negotiation? Is this a sentiment? Is this a policy-based? Why do you think they've been doing some of that? I don't like to speculate about motivations. What I will say is- Oh, we do that all the time around here, Neil. No, I'm joking. That's a good answer. No, what I'll say is the administration is very much executing on what the president campaigned on.

It's not like this should have been unexpected. I think he was very clear from the get-go, from the campaign, from the early days of the administration. that they were focused on drill baby drill and and this was going to be a heavy fossil fuel based economy they he referred to clean energy policy uh as the green new scam i think he was referring to the inflation reduction act and those incentives but you know

Probably really hostile towards clean energy. And, you know, they're kind of doing what they said they were going to do. I think for folks like myself and others, the reason we were surprised we shouldn't have been. Like they're literally doing what the president campaigned on. But I kind of felt like, all right, they're coming in with the drill, baby drill ethos. But once everyone gets seated, once we got.

not just the secretaries in place, but the deputy secretaries and the undersecretaries and people who have been experts in the energy space, that they would quickly realize Donald Trump made two promises to the American people when it came to energy. One was to win the AI race for national security purposes with an understanding that we're taking a tremendous amount of electricity. And two, to bring down the cost of electricity. He promised 50% reduction in electric bills within 18 months.

Those are seemingly antithetical goals, because if we're going to win the race and we're going to see demand spike, we're going to need more power. Look, they are taking steps to keep coal online. which is fine. And they were actually vindicated. There were a couple of coal plants that were slated to be retired. DOE stepped in, used its emergency authority to keep those plants operating. And you know what? During the heat wave this past summer, they were dispatched. So that...

to me, vindicates DOE's approach. But nobody, maybe there's been some scuttlebutt in my home state of Kentucky and elsewhere that TVA or other utilities might build new coal, but I don't. think anyone is anticipating a surge in new coal buildup so but it is interesting it seems like most people we were talking about this yesterday most people think reasonable probability you see a new coal plant in the next few years Maybe, but again, it's not going to dramatically add a bunch of electrons.

It's not additive. It's just so dramatically different than where we were, I think is why we talked. It is a dramatic switch. But again, I don't think it solves for the math problem that we're dealing with. Keeping existing coal on, adding a little bit of new coal, not necessarily. really additive. Gas, we've been talking about is huge, but gas is sold out. And probably because of supply chain issues, we're maybe looking 2029 before we can get new gas on the grid.

I'm a huge believer in nuclear power. I love it. I think it's our single greatest form of carbon-free baseload generation. And it pains me to say this. I'm deeply skeptical that we're going to see. the significant projected breakthroughs in advanced nuclear. I think we're a decade away from new nuclear being added into the equation. And is that sub-SMR or you've got SMRs in there too? I think...

SMRs, advanced nuclear, whatever you want to call it, it's still a nuclear bomb that has to be protected 24-7. It's still costly compared to alternatives. There are still cultural and political obstacles to it. People still have their concerns about nuclear. Nobody wants nuclear in their backyard. It's hard. I want to see it thrive, but I'm nervous. that it won't materialize. So new nuclear is a ways off. Gas, tough to see new gas coming online before 2029. Coal, again, not...

additive. It's preservation of the existing fleet. Where are we going to get the electrons to meet this coming surge in demand? And time, time to market really matters because we are in. an AI race. So we need power quickly. And to me, the most obvious solution, and I'm just waiting for the administration to kind of embrace it, and I believe they will. And I think...

I did not see the NextEra slides from yesterday, but NextEra had in their earlier this year, first or second quarter earnings report, they nailed it. It's solar plus storage with gas peakers.

to balance the grid that is what next arrow was projecting earlier this year and i think they were spot on they had a slide in their first or second quarter earnings that went viral in my world because it nailed it that is what we need from a time to market standpoint to get power onto the grid quickly curveball as we go to mike fuel cells i i don't know enough about it i'm not confident enough to to speak to it i know um

you know uh bloom energy the cool company uh kr sweetheart is a good friend of mine uh i worked with them closely at ferk um you know they're doing some pretty exciting things now i trust kr but I'm not competent enough in it to speculate on the viability, but I do know Bloom is currently thriving and it's pretty exciting. Mike?

yeah it's hard to it's hard to give up i know i know i've got 35 questions i'm gonna try to wrap up in one question um you know on this sort of next energy theme uh from yesterday i think i heard the the term byog a hundred times in their conference call. And they're really leaning into BYOG is bring your own generation is what they're talking about. And the way I've been thinking about this for the last two years, there's been this battle between, you know, in front of the meter.

and behind the media what is it going to look like and a lot of companies have changed and how they're going to be dealing with it so my question first of all is which one or do both win number one number two how does that affect you know

deciding on behind the meter, the front of the meter, how does it affect transmission and generation in transmission? Because all we hear about is generation. We don't hear about T and D whatsoever, but it's a big, big part. And you're starting to see people, you know, starting to spin on that. What are your thoughts on how you basically balance those two? And are we not talking about the transmission and distribution as much as we should be?

You weren't kidding about these guys coming off the top ropes with the tough questions. They're ready. I mean, I was just getting you comfortable, Neil, that we're nice guys. And, you know, here comes the cavalry. That's the trillion dollar question. So really the challenge here initially. I was intrigued by this idea of doing a behind the meter co-location deal. It kind of made sense to me that.

proposal that was before FERC that was Talon, AWS, Amazon, Talon, TPL, Susquehanna come together. They have this proposal. You're going to build a data center in the footprint of an existing nuclear plant. You're going to get carbon-free power to the data center. You're going to do it in a timely manner, which the data center wanted. It seemed like a win-win-win for everybody. And then you started to unpack it a little bit. And the challenges...

that emerged when you started to dig into this idea of going behind the meter were twofold. One was a cost issue. You've already got limited capacity. Prices are through the roof. a slice of that already limited capacity behind the meter and out of the market, now you're spreading out even higher costs amongst fewer consumers, further exacerbating the affordability crisis.

That's management. To me, that's a math problem. You can throw money at it and address affordability. The more complicated question that FERC wrestled with was resource adequacy. That if Talon, AWS had been a precedent setting deal, let's not kid ourselves. While Talon and AWS were the first people to put something before the commission, there are who knows how many parties.

negotiating similar deals that were ready to come forward. And if you suddenly had a flood of these applications, now you might be looking at a real resource adequacy challenge. And therein lies the dilemma. The problem with front of the meter and to your TND question, and this is what the DOE directive to FERC really centers on, is who pays, right?

one of the controversial components of what DOE sent to FERC was this idea that on the surface makes sense, that we should make the hyperscalers pay for system upgrades. Well, the incumbent utilities who get a guaranteed ROE... on system upgrades, they don't like that. Their view is like, if you're going to plug into the transmission system and you're using it, you got to pay for it. And those costs, because system upgrades benefit all consumers, everybody should have to bear those costs.

As an academic exercise, I kind of see where they're coming from as a political one. That's a tough, tough argument to make. But then the other issue. You know, basically the utility say, wait a minute. we don't want just the hyperscalers to pay. We want everybody to pay. So grandma needs to pay. I mean, that doesn't, it's ugly, but it's their business model. And this is like fundamentally upending their business model.

But there are some valid points about jurisdiction as well. Again, you're kind of getting into the legal weeds a little bit, but this would be a massive expansion of FERC authority to give it...

jurisdiction over large load interconnections that had historically been handled by the states. So, I mean, there's some just really, really thorny issues here. The way I describe it in the simplest terms to people who aren't. FERC nerds who study this stuff all day. So right now I live in Northern Virginia. I am in the footprint, the shadows of data center alley. Today, my neighbors and I are loving these data centers.

because they're contributing a huge amount of tax revenue to our tax base, and they're not adding to traffic. Because once these things are built, there are not a lot of people that work there. And so my 13-year-old daughter... If you saw the soccer facility where she trains, the U.S. women's national team doesn't have as nice of a facility as my daughter's 13-year-old team does. It is awesome.

And my neighbors and I, well, we are seeing a slight uptick in our utility bills, no doubt. We're okay paying a little bit more because we're seeing the benefits in our parks, in our schools. You know, Fairfax County, where I live, you know. they usually don't redesign, rebuild a high school maybe once every 50 years. They're accelerating it now. We're seeing these improvements to the schools, to roads, to bridges, to our infrastructure, and we're digging it. Can I ask your cost of power?

uh i don't know it off the top of my head but it's not it's not one of those states where it's like it's not crazy um i have a pool that i heat throughout the winter so i'm a bad example uh i'm not the person to ask about this uh it's my own selfishness i'd like to swim in february but um and i don't live in houston it's cold in uh in northern virginia uh but

Where it's going to be an issue, I don't think it will be cost if we continue to see these data centers built in our region. When I was at FERC, there were about 10 hours a year, about six days a year that I was most concerned about. three hottest days of summer, three coldest days of winter. What I'm nervous about is on those three hottest days of summer, three coldest days of winter, the grid operator has to choose to send power to a 24-7 data center to support AI.

or residential consumers for heat or air conditioning, I can tell you with 100% certainty it's going to the data center. And that's when the pitchforks will come out. When I don't have air conditioning on the hottest day of summer, and it gets hot in Northern Virginia.

My neighbors and I are going to be pissed. I thought you were going to say just the reverse just then. I thought you were going to say we're cutting that data center off because these other people, these are our constituents, voters, etc. That's the brilliant tradeoff. So what DOE... is directing FERC to do. The exchange for having the hyperscalers bear the cost of system upgrades, for giving FERC this jurisdiction over large load interconnection, the trade-off is...

The data centers have to be willing to be flexible. And this is what makes the politics of this proposal so elegant. you suddenly have a bunch of constituencies that haven't really been that favorable towards policy coming out of the Trump administration on the demand side.

that are like wow like this is flexibility's moment this is curtailment's moment so suddenly demand side resources are like they're like really encouraged by this proposal you've got strange bedfellows they're kind of supporting what the trump administration is trying to do this sounds like tremendous marketing because it's like okay mr data center hyperscaler guy i'll let you pay for the power and because i'm letting you pay for the power

I get to curtail you. Like this is, you know, I guess that he gets the speed, the hyperscaler gets the speed and the flexibility that they want. The expedited interconnection, the trade-off. It's on his purpose. It sounds like, oh, you get to pay for it and we get to cut you back. It's like.

Yeah. Well, I mean, that's- But you get to beat. The onus is on them. And I think that's the trade-off. Time to power versus that. Flexibility. Probably a unique window to strike these deals. We got to strike them now. And there's a bit of a precedent for this. We've seen it at the state level with crypto and Bitcoin miners. Now, it's a little bit different there.

They've been able to demonstrate flexibility. They just don't make money during those periods of time. It's a little bit different when you're talking about the security implications of these data centers for AI. But I do think... that it is incumbent upon these hyperscalers to demonstrate more flexibility. I don't think it's sustainable that...

that will use as much power as is currently being projected. And that is actually one of the kind of core issues that we're wrestling with is we don't have a firm grip on how much power.

AI is going to require. The kind of rule of thumb that I've heard from experts in the space is that today, a simple chat GPT search takes about 10 times as much power as a simple google search but that's what today's ai with advanced ai it'll be a million times as much power well how much is that and is that practical and and what does that mean what are the implications for the grid

We just got to get smarter about it. And I think we saw earlier this year how fragile, if you will, our load forecasts are. The Chinese Communist Party, I think, in a piece of propaganda, put out a press release basically saying that DeepSeek was able to do AI in a much more energy efficient manner. And again, I think it was propaganda.

designed to chill investment in AI in the US. But it worked because overnight, if you look at the publicly traded independent power producers, your constellations, your talents. your Vistras, their stocks plummeted overnight because the growth in their valuation was based on this notion that there would be this huge demand that would need to be met. And now you're starting to see more and more questions pop up about, is there an AI bubble?

This is the thing that we got to get right. We don't want to underinvest and find ourselves with capacity shortfalls or falling behind the AI race or having resource adequacy challenges or prices soaring through the roof. But we don't want to overinvest. have the AI bubble pop, and then suddenly be stuck with a bunch of stranded assets. And this is where it gets complicated with consumers. And this is where the utility position is tougher is if you over invest.

And then the AI bubble pops. It is going to be grandma that is picking up that tab. And therein lies the complexity. I wanted to tie a bow around this large load thing. So the, you know.

We need demand response. So how do the hyperscalers offset? Is that... backup generation on site, or is it actual flexibility? Yeah, virtual power plants, utilizing demand response, utilizing energy efficiency, really taking advantage of these flexible resources. And that's what I like about it. It's kind of an elegant thing. And it's an opportunity for, you know, like one of the FERC orders that I was proudest of during my tenure at the convention was FERC order 2222.

which opened up competitive wholesale power markets to aggregated distributed energy resources, essentially virtual power plants. I've been frustrated to date at how slow adoption of these policies has been in the various RTOs and the ISOs. I think this could be the unlocking mechanism that really opens up VPPs and these hyperscalers can utilize that in these moments of peak demand.

And we're going to go back as well to your comment on next year, the kind of the solution, you know, solar plus battery plus peakers. Is that, you know, this moves in waves. Is that... Is that a five-year solution, not a structural one because it's supply chain bottlenecked? Or do you see that as a next 10 or 15-year solution? I think it's longer term. I do. And look.

It does sound like it has a little bit to do with the speed of the moment. Speed of the moment is part of it, but I also think the economics of it are pretty good. That's really what I was trying to sort through. Is it a supply chain comment or is it an economic? Look, I'm a conservative. I worked for Mitch McConnell. I was appointed chairman of FERC by Donald Trump. I'm a Republican from Kentucky.

I'm working in the solar space right now because I really believe in it. I believe in the economics of it. The big two knocks on solar that I have faced throughout my time in government, my political career. We're concerned about intermittency and reliance upon tax incentives and subsidies, right? I think both are being addressed. I think as we are seeing growth in the deployment of batteries, we're seeing higher.

attachment rate of storage and solar. You're answering those questions about intermittency. And then the economics, quite frankly, as electricity prices go up, well, I don't love it as an American. that we're going to see our electricity bills go up. As someone who's, you know, really believes in solar and the deployment of solar, this is solar's moment because solar is going to start to look really attractive even without.

these tax incentives. So the OBBBA, the One Big Beautiful Bill Act, actually treated solar, I thought, quite fairly and gave solar a runway. to demonstrate that the industry can get off of dependence on government policy. And I actually think that's very good for the industry. I think for...

for businesses to be truly investable, they can't be dependent on government policy. And I think the good and successful companies will utilize... this runway to bring down costs to lower the cost of customer acquisition and to demonstrate that they can be successful without the tax incentives and unfortunately higher prices are going to provide that that opportunity i think suddenly

Solar is going to look really attractive because it's an alternative to skyrocketing utility bills. One of the things, and we're here in Texas, I love making Texas references while I'm here locally, during the negotiations.

regarding some of these tax policies during the OBBBA debate this summer, one of the individuals that really stepped up for... the residential rooftop solar industry was Senator Ted Cruz, because he bought into the notion that, you know, ResiSolar was an alternative that gave... energy freedom to his constituents, that in the face of high bills, if they could utilize a leasing product to get residential solar on their homes, it kind of...

displaced this notion that residential rooftop solar was just a toy for wealthy people to virtue signal. That suddenly you have a lease component in place, you democratize it. And now... the average Texan can get a lease, get residential rooftop solar on their home and be insulated from skyrocketing electricity bills. Senator Cruz bought into that as like kind of a populist conservative argument. And I think he's right.

Can I ask you on that? Because a rooftop solar, I might mess this up, but when the Lazard guys have come on and done their LCOE thing, and you go through all their analytics, one of them that always comes out. poorly is rooftop solar just in terms of the cost and what it produces but and that's who i'm asking the question the structure of how you're paying for it and the market around it

I think this is your point, is particularly important as to whether or not it makes sense. Like California had some problems with it. But do you mind just unpacking rooftop solar for a minute? Yeah, I think when it's a toy of rich people, they pay for it. But if the state reimburses them or whatever, now they're not paying for it. I think that's been some of the reason that the model has been.

challenged i think that's changing i think some of that is just technology improvement efficiency bringing down costs um some of that is you know recognition of opportunity you know, one of the things that I thought was really cool is when I moved this FERC order 2222, one of the first people to come out in support of it was a founding member of the Tea Party in Georgia, super conservative.

who saw it as an opportunity for farmers in Georgia who were being hurt by the trade war with China, but who were patriots, who were willing to engage in the trade war with China to support America. is an opportunity for them to use their property, put solar on there, and put that power back onto the grid and have not just a reliability and cost scenario, but also an income stream.

So I just think that the business case is improving and it's improving on its own. And so the growth in solar to date has definitely been enabled.

by government policy at the federal level and at the state level. I think that's changing, and I think the core business case is improving. So one wild card for you. We had a guy on from think it was called resilient societies and he was just talking about how we're getting closer to blackouts like the risky moments that have happened uh in the country have gone up and he made this uh case for we have a lot of

diesel generators that sit on standby sort of in the case of emergency and i i think the the the punchy summary is he said let's go ahead and declare the emergency and let's get these diesel generators. If you have one, turn it on. And I think we've seen some similar messages out of DOE.

what do you think of this proposal does that make sense to you what do you think of the risk of us having blackouts like what's your what are your thoughts on that yeah look um uh is there merit to the idea of course you know does it have to just be diesel no i think there's you know i mean any storage resources yeah that can be a part of it as well um

We have had blackouts. You guys experienced a devastating one during winter storm Uri here in Texas. I was still at the commission when that happened. We're getting better at managing them, but it's a challenge. And I think the surge in demand is going to test us. And that's why I get back to kind of my core point of we got to take the politics out of this and just be smart about energy.

Policy, like I make a joke in speeches. People say, Neil, this is really complicated stuff. What's the solution? I say, I'm not saying this to be funny or flippant. The solution is to make energy policy boring again. energy policy has gotten too exciting politicians and celebrities and you know yeah everybody's in and see are too interested in it i want to re-empower the nerds

When the nerds are in charge and you get the engineers and the economists making decisions about complex issues like resource adequacy, you get constructive outcomes without any of the ancillary drama. And so, yeah, like I think this idea of backup power. being deployed, I think of finding greater efficiencies with the grid. We don't do as an effective job as we should. We can do better.

and i just want to allow the engineers to plot that path forward and that not have politicians interfere with it so one thing mike let's come back around um

So you just kind of hit on something that we feel like we noticed, which is the tension between utility models and market models. And what you just said there, you could interpret... It's almost the case for both because, you know, if you plan it out right and everybody's at the table and you can make a utility work great. The market with business people and investors and we're only doing things that make sense.

you know we've pulled some of the subsidies that can work fantastic like it seems like in this environment where power prices are going up we're starting to debate those models in which rush right and mike always likes to talk about governor shapiro said maybe we're out of pjm like some of these models are like we're do you see us fighting about

the models in the next year or making some constructive changes or what what do you see in that space i do and i'm worried about it um i'll be honest with you so i'm a big believer in markets i think um the the markets that ferk oversees have shown tremendous benefits to consumers, to the economy, and to the environment, quite frankly. Do you have a favorite power market? You probably can't do that. It's like your kids. I live in PJM.

You know, there were so many significant issues at PJM during my tenure at the commission, but we had issues in New York ISO, New England. While FERC doesn't directly oversee ERCOT, obviously situation around URI. you know they're you know my zone spp do a great job like yeah you're right i can't pick amongst markets but i think they're in their own way you know they've all been you know effective in uh i think their design that said

I grew up in Kentucky, a vertically integrated state for the most part. We have a couple of generators who are in PJM and we had a couple of utilities that had been in MISO and stepped out of MISO. We saw a movement towards a market in the Southeast with the SEAM proposal. I'm generally in favor of markets. We're in a scary place right now as a proponent of markets.

where both the political left and the political right have arrived at the same conclusion for very different reasons. The political left, I think, views capacity. We're worried that they agree for the first time. But for totally different reasons. The political left doesn't like capacity markets because I think they view capacity payments as elongating the lifeline of certain fossil generators that they want to see retired. The political right thinks that there's too much.

interference, that these markets are basically algorithms layered upon algorithms. They're not pure markets. And there's too much state policy interference. And that in the absence of a pure market, you might as well go back to

kind of vertically integrated, traditional rate recovery models. And there is a real fight now about which is the superior model. And as we're looking at how to win the AI race while keeping... electricity affordable and reliable there's a debate now on whether it is the market structure or whether we should go back to you know the the old school pre-market you know uh uh vertically integrated

Model. I think in certain regions of the country, the old way works, right? You can't argue with the success that. Southern Company and its utilities have had over the years and keeping costs relatively low for consumers in the Southeast while maintaining reliability. But I've seen huge benefits from the independent power producers and what they're doing in various regions. So I, for one, is our existing system perfect? Absolutely not.

Do we need to make constant iterative changes? We do. I will tell you for all the complaining that we do here domestically in the US, our grid is the envy of the world.

One of the cool things for me, when I took my seat at a domestic energy regulator, I didn't think there'd be much of an international role.

for me as chairman of FERC. I thought maybe because we had the responsibility for reviewing applications for liquefied natural gas export facilities that there'd be some foreign engagement to make sure that you know the counterparties were actually going to off take the lng before we approved them here domestically what i didn't anticipate is our allies and the state department uh uh

Did a really good job of this in the first Trump administration when I served. We use a form of soft power. I signed MOUs with India, with Japan, with Brazil. you know throughout eastern europe with singapore during my tenure because our allies wanted to learn from us and our experience with markets our allies wanted to understand how we have been able to deploy power in this country, keep prices down, have world-class reliability, and squeeze carbon out of our power markets.

How the heck did we figure that out? So is our system perfect? Absolutely not. The world wishes they had our grid. Neil, I think pre my Enron days, just sort of pre... 2000 what i saw in the market was sort of a converging a convergence of electricity and natural gas we kind of got away from that more more from a utility scale standpoint it seems like we're getting back to this convergence again

So maybe we've talked a lot about the generation side. Maybe talk about the pipeline side of sort of the FERC and maybe state level. What's going on there? How does this fit into this? I mean, do we need to do some changes here? How do we accelerate this? We saw like.

you know, the governor of New York basically say, yeah, we might be able to allow some infrastructure to be built. Where do you think that is? And do we need to have that, the basics? So this whole thing just works, you know, or is that going to be a piece that if it doesn't work and we just can't get to the. promised land of basically ai dominance it's huge in order for us to to weather this we really need federal legislative permitting form in this country because honestly it's not fair

to put this on FERC or on state regulators. Because the reality is nimbyism, not in my backyard-ism, is not political. It's not ideological. Americans don't want energy infrastructure coming through their backyards, whether it's a pipeline to deliver gas or transmission line to deliver clean energy. It's just way too hard to build things in this country.

And I do think if we don't find ways to more efficiently build, as you noted, and we're seeing this increased interdependence with natural gas and electricity, we've spent... you know, the bulk of this conversation talking about, you know, how we're going to need every available electron and natural gas is going to play such a critical role. We need more infrastructure. But it's hard. These questions are tough. People don't.

want to see them. Now, FERC, I think, has done a pretty good job with some help from the courts on kind of stabilizing its review process, but you still have a lot of state-level opposition to pipelines. transmission lines. In order for us to really utilize all the resources that we have, we need to build a heck of a lot more electric transmission. But it's hard.

And I've had state regulatory counterparts during my time at FERC come to me and say, Neil, when it comes to citing a transmission line, we would love it if you just overruled us, if you just rolled us. And I'm sitting here like, what the heck? I like to go on vacation. I might want to come to your community someday. Why do I have to be the bad guy that forces this transmission line down the community's throat? Why don't you make a tough decision and justify it?

But look, these are hard decisions. The easiest way to get new infrastructure built would be to use existing right-of-ways, to just build where we've built before. But that raises real moral questions about going to these communities and saying, hey, we're sorry. We're going to build through your yard again. And as an academic exercise, I think...

I could make the case to people in this community like, hey, we're sorry, we're going to build through your backyard again. But in this instance, we're going to build a transmission line that is going to enable the retirement of a higher polluting source of generation.

And over the course of time, your air and your water will get cleaner. Academic exercise, maybe I can sell that. As a real world exercise, very, very hard to tell these people we're going to do that again. And then the bigger issue is kind of who pays for it. So say you've got state A that has a ton of renewable energy. You have state C that has huge demand for that power. What happens to state B and consumers in state B?

As an academic exercise, again, I think I could make the case to consumers in state B that you will receive a genuine benefit in the form of alleviated transmission congestion. And I think transmission congestion is one of the biggest. flaws in our grid system right now and alleviating that congestion would be a true benefit to those consumers and stay big play out right now within pgm where pennsylvania is saying we got all this gas for our generation

We're standing power somewhere, because you guys don't do this. And so there seems to be this battle now within these ISOs. of guys are saying why should we you know you're even seeing it in europe it's like yeah no worries like why are we going to be sending you our electrons when we're going to need them but we're going to need them ourselves i mean it's

It's like a NATO fight. Like, hey, one or two of the countries is paying too much. It's that kind of thing. But again, this is where markets matter. If you can demonstrate the benefits. Right. And we can do this efficiently. If we get this right, everybody should win. Everyone should benefit. We shouldn't be getting into these collective.

battles where we're nervous about it. But that's where, again, a big region like PJM, which covers 13 states and the District of Columbia, you've got so much variety amongst the states.

The politics in New Jersey and Maryland are wholly different from the politics in Ohio and West Virginia and Kentucky. And trying to balance all those interests is really tricky. And it kind of falls on FERC to do so, which. can be challenging at times. As we get close to the end, we've talked a lot of macro, mentioned empower the nerds. What's your favorite nerdy wonky energy technology or topic?

I'm really excited about distributed generation and kind of moving away from the sort of centralized system of power generation. distribution and consumption that we have today. I think there's real cool opportunities there. And you layer over, like we haven't even touched on cybersecurity and issues there. I think we've seen so much innovation in the distributed space that I'm optimistic that over the course of the next decade or two.

we will kind of move away from the traditional utility model to more distributed just generation. It'll be tricky, but it'll be kind of cool for consumers. We do so much off our phones nowadays. I think people have a greater understanding of their energy usage than they used to. And I think tech and AI and greater computing giving Americans the ability to better control their energy.

is kind of sexy it's kind of interesting it's uh uh it is boring and wonky and technical but if we can make it sexy i think that'll be uh that'll be exciting

That's a great place to end. But I only have 10 more questions, guys. Help us with one last thing. So you mentioned NIMBYism and everybody's used to that and nobody wants a transmission line in their backyard. We all get that. There's also this... And you'll hear it when people talk about regions of the country. There are differing opinions about economic growth. And there are differing opinions about...

because America needs it type mentality. So how do you deal with that component of the debate, which is, yeah, we're really not that interested in growth. Like that's a... That used to be taken for granted. We all wanted to grow. A chicken in every pot, a car in every garage. It was part of the ethos. And somewhere along the way, growth got a bad name. Economic development got a bad name.

and it shows up in some places more than others like how can we get off of that one yeah we got to do a better job of uh communicating it and educating it and i think it's important for political leaders c-suites NGOs, academic institutions, to all kind of make the case for why this is important. Because that's where living standards show up, which is obviously affordability is.

you know, the buzzword of the day. And this stuff is hard, right? Affordability is an issue, but also, again, part of the reason folks in my community are loving these data centers. is because they were built in kind of more rural parts of loud and fairfax county so i don't see them but you know the folks near the data centers they don't like uh you know they're they're big they're

depending on who you talk to, not all that attractive. They use a lot of water. They use a lot of power. They're noisy. And you're starting to see more community opposition to it. And it'll be very interesting to see how this plays out. So I've got...

Two residences in Virginia, one in Northern Virginia, the footprint of data center reality where people have really embraced data centers. I have a house in Williamsburg, in the historic area around Colonial Williamsburg. And there are some proposed data centers in James City County right now.

and man the community there is very okay and i kind of get like about that idea yeah so this stuff's hard it's there's no doubt about it if it was easy we would assault you know this was awesome conversation we can't thank you so much for joining us today we're going to have a lunch with you we're going to see you this afternoon and tonight so i guess that's my way of saying um you're stuck with us all day i love it this was a great conversation we loved it enjoyed it thank you for having me

Awesome. Thanks everybody.