Hello, and welcome to another episode of the Odd Lots Podcast.
I'm Joe Wisenthal and I'm Tracy Alloway.
Tracy.
Today we have a special episode of the podcast That's Right.
So we traveled to Austin, Texas. We were there for the Texas Tribune Festival, and we recorded a live episode with one of our favorite All Thoughts guests, Jiggershaw.
That's right.
Jigger is, as listeners may know, the head of the Loan Program at the Department of Energy. This is his third time appearing. The first time we talked to him was early twenty twenty two, when the loan Program's office was this sort of small backwater office within the DOE. Then we talked to him again about a year ago, right after the Inflation Reduction Act was passed, when his office got tons of money to lend out. And then this was sort of like a one year on at episode.
What are they doing with all this money at his office and what are the real prospects for sort of decarbonizing our electricity.
He's sort of in the groove now.
He's spending some of the billions of dollars that he's been authorized to spend by Washington and it's really interesting to see how he's actually putting that money to work and what's getting him excited in the energy space right now.
All right, so take a listen, Jigger.
We've talked to a couple of times in the past on the podcast about the Loan Program Office. What do we start just to like sort of a quick summary, and we've talked like about what you do, like real quickly, just what is the Loan Program Office for people who may have not familiar with it or past episode, and what do you do?
Well, thanks for having me back.
The Loan Program's Office was started in two thousand and five, and the whole point of it was that for a lot of this technology that Doe is awesome at inventing, it tends to not be able to get commercial debt for commercialization.
So a lot of these projects might be.
A billion dollar project and going to get debt from the commercial markets for a first of a kind project, you know, namely like you know, the Tesla's first loan or some of the large solar and geothermal projects we did, it was just not feasible. But what's more interesting is today our remit's been expanded substantially, so it used to be we had this innovation bucket, and then we had this vehicles bucket. Basically, today we have a tribal energy program.
We have this energy infrastructure refurbishment program, right, so figuring out how to take old coal plants and term of nuclear plants, or old transmission lines and double them up, or you know, figuring out what to do with old refineries or tank farms. And so we have a much larger scope today. So we've got, you know, a lot more resources today.
So how much money do you actually control now?
Because of course I've seen variable estimates and I get that a lot of it depends on how things develop. But you've been doing this for a while. Now, you have extended some loans. Do you have a good sense of whether it's four hundred billion or five hundred billion or six hundred billion.
I mean, what's a billion between friends?
What's a hundred million between friends?
Yeah? I think so.
When I first came into office, it was roughly forty billion dollars of loan authority. Today, if all of our loan authority was used, it'd be closer to four hundred billion. We have no idea whether it'll all be used, right, So the largest program there is this refurbishment program, which is two hundred and fifty billion dollars. Interestingly enough, it
really is taking off. So I think when we first started talking to electric utilities and oil and gas companies and others about using it, I think they didn't want any part of it.
They didn't really see how it was valuable.
Today, I think we've already got about fifty six billion dollars worth of loans either received or being actively prepared that we've seen early drafts of. So we are seeing a lot of interest in that program. So you know, whether we get to that number or not will be determined whether that program is successful.
Yeah.
The first time we ever talked to I think it was early twenty twenty two and someone said, oh, Jigger, he's someone you should talk to. He knows about energy, sort of an interesting.
Guy and knows about this stuff.
And then I think it was like about three or four months later and the Inflation Reduction Act passed and someone's like, oh, you know that guy, Jigger, you talk to. His office just got whatever six hundred Billion're like, oh, so what went from like the sort of I don't know, backwater is the right word, but fairly like modest division of the Department of Energy, you are now a key player and essentially this massive effort by the Biden administration to decarbonize our energy system.
Yeah.
Look, I think that when you think about my own background, having started Son Edison and then Generate Capital, I think I have a unique understanding on how this stuff works, which is that we have these extraordinary people who frankly bust their hump for ten years in obscurity before they get to.
Where the loan Program's office can help them.
Right when you think about a lot of these companies who have figured out green cement or green steel or you know, next generation transmission lines or next generation hydrogen facilities, I mean they were in a lab getting some like fifty thousand dollars grant like ten years ago, and then their thesis worked out, and then they decided to get
an a round and then a B round. Some of them may have spacked prematurely, you remember the time, and so you know, I think that the goal for me is not to you know, puff myself up, but to recognize that we have all these people and honestly the ecosystem that we have in this country. To take them from the technology works to connecting it to the American worker building the facility here.
Doing all this stuff here.
Frankly, we haven't done in forty years here, right, I mean most of our technologies went to Asia or went to Europe to get commercialized. And now I think with the Inflation Reduction Act, it's sort of my job to convince them to use these resources to stay here and to do it here, right, And I think a lot of that really means that we got to do a
lot more outreache. We've got to convince them that this is a place that wants them, because you know how hard it is, right, I Mean, you have to get permission from people, you have to get a permit, you have to get a governor who actually wants to put together an economic development package for you, right, And if you haven't done it in forty years, then it could be that, you know, it's a little bit harder to do it here.
Do you feel pressure to spend the money, like is there a sense of urgency here? And then how do you actually balance that with the need to make efficient and useful and ideally profitable investments.
So I definitely don't feel pressure to put the money out the door. I think that the money should go out the door if it, you know, deserves to gout the door. And we have three hundred people who work for us at the Loan Program's office, and so they are the ones actually evaluating and you know, doing the
work to get the loan to the finish line. I certainly have a lot of subject matter expertise, so I can be somewhat helpful, But honestly, the biggest part of my job is to get people to trust us, right. So getting the growth companies to trust us was something that was fairly easy for me because a lot of those people are my peers from my professional life. But getting the electric utility companies to use us, I mean,
that was not an easy task. And now I've got to get the oil and gas companies to get to use us, right, and that's not easy at all. Many of them feel like they're going to get stripped of their country club membership if they use the Loan Program's office right and so, but they're not going to do the right thing unless they do it right, because the numbers don't work without our debt, Like the returns aren't high enough without our debt, and so I need them
to come into the office. And so a lot of what I'm doing is trying to build trust.
So your company that you started, sun Edison, I mean it was a finance breakthrough, right, I mean the solar technology has existed, but you understood that there was an opportunity to finance the deployment of solar in a new way.
Can you just speak theoretically or big picture?
Why are there projects that can pay back the debt, but which private sector money is not there? Why is it important for the public sector balance sheet to be deployed for certain types of energy projects?
And then maybe we can get into some of these specifics.
There's a couple of reasons that I'll go through. Right.
One is the Department of Energy has ten thousand expert scientists and engineers on the platform. Right, most of the fundamental patents and these technologies were invented by one of those ten thousand people. So when you have a methane pyrolysis project like monolith materials that we give a conditional commitment to in twenty twenty one, like, there's somebody in
a national lab who actually invented it. And so when I go to him and I say, hey, you know, like, what do you think about this thing?
Right?
They're like, yeah, we've done like eighteen demonstrations of this project and we think this will work. And the way that they're approaching it's going to work, et cetera. There's nobody for JP Morgan to go to for that. They're going to be like this scares the crap out of me. I'm not going to do that. And so you can imagine that there's a lot of technology risk that is perceived by the banks that we can actually manage because.
We have all these experts on a platform.
The other piece of it, though, is that you know, with the Basel three rules, you know, passing up to the global financial crisis, for a lot of these banks, if they don't actually have investment grade off take agreements for some of these things, Like I'll give you an example, like for a lot of these critical minerals projects, there's no history whatsoever for someone and say you know what, I'll pay a fixed price for that lithium for ten years.
Generally speaking, it's like, well, whatever the lithium price is, we're going to benchmark to that price.
My lithium has gone down by forty five percent already this year, right.
And so so the government is actually willing to take that risk because we know that, you know, we're going to have all these electric vehicles purchased over the next ten years.
The world's going to be short lithium.
So even if in the short term lithium prices went down, in the long term, you're going to need these resources like that. That formula under a bank's rules would require a huge amount of Tier one capital to be set aside for that loan. So you can imagine them saying, I'm not making investment banking profits on this. I'm not going to use my Tier one capital for this, right.
Because there's a bit of a friction, right because on the other side you got the Federal Reserve and the OCC Commissioners who are saying that looks like a risky load if we're going to make you put more Tier one capital against it, right, And so there's lots of reasons why you have friction in the marketplace. But before we were active, most of these these companies had one
hundred percent equity finance everything. Right, they would just have to raise a billion dollars in the marketplace and then do that, and you can imagine there's very few companies that could do that. So then we were restricting innovation and restricting it's getting commercialized.
I realized I made an assumption in my previous question because I said, ideally you would make loans that make a profit, and that's probably true.
But how do you think about profit versus risk?
Do you have to make a profit or do you think there's a role for government to finance riskier projects that maybe have a public good or utility.
Yeah, a profit is a very strong word, right, because we don't really make a profit in the government, So I don't think about it that way. I think the way I think about it is Congress gives us a couple of things. So let me just maybe help you understand how the money flows. So you know, when we give somebody a loan, the US Treasury Department theoretically issues
bonds and then we issue that loan. So the US government has to pay back those bonds, and so there's a certain cost to the US government of that thing. So if I'm charging someone US treasuries plus thirty seven a half basis points, which is a lot of our loans are at that rate, then the money I'm getting in for the US Treasury bond coupon, I'm not viewing as profit, right say, because that's just going back out
the tour to investor. So it's the thirty seven half basis points that you know was coming in abovehand.
Right.
Separately, the US Congress gives us something called credit subsidy, and what we use that for is to put a.
Loan loss reserve in place.
So I might say, like our average loan is rated B minus, right, what you guys would call junk bonds. So so like you know, by definition, when we issue the loan, we are saying that it will likely have a default right of let's say, maybe a twelve percent risk of default or a twenty two percent risk of default, but it's not a one percent risk of default. And so then we put that much money to the side
and a loan loss reserve. So the Congress is saying, you have this amount of money to quote unquote lose, right, and that's the money that they.
Allocate through a budget process.
And what we've averaged today is that we put aside five dollars in loan loss reserve for every dollar.
Of actually realized losses we've had.
So we put together roughly five billion dollars of loan loss reserves and we've lost about one point zero three billion total. And so from that perspective, that's you know, four billion that the Congress gave us to quote unquote lose, that we didn't lose, and that we returned back to the taxpayer. So but I mean the other way I think about it, right, So that's strictly answering your question.
But the other way I think about it is it is clearly the case that Tesla is the best electric vehicle company in the world, clearly, and they will fully admit that there is no chance that they would have gotten the metals off the ground without our loan. And so what's it worth to dominate these industries into the future, not just electric vehicles, which happened in the first generation there,
but in the future. Right when you look at methane pyrolysis, what they do is they take natural gas, they split it into hydrogen and carbon. Carbon black is something you need to make tires, even electric vehicles used tires, and so we need to use that, right and so right now the largest exporter of carbon black in the world is Russia.
Right.
If this works, which I'm pretty sure it will, we will be the largest exporter of carbon black in the world. Right, and that's a really important market for us to dominate.
Right.
So the question really is like, you know, yes, there's you know, being good with taxpayer money, but the other piece is actually reaching real outcomes.
All right, So we sort of we've covered in the very broad strokes the bank that you basically run within the Department of Energy. Zooming out is part of this whole project. And we're here in Texas in Austin at the Texas Tribune Festival. This is a state of course where energy and the grid has been in the news a lot in the last few years.
And it seems to me like when we think.
About the grid, well, a few years ago, most of us weren't even thinking about the grid.
We just sort of took it for granted. It just worked.
Over the last few years in various states, we've had these problems. People want right, cheap electricity, they want reliable electricity and increasingly clean electricity.
Can we have all three?
We're delivering all three.
I mean, look at Texas, right, Texas is the like ground zero here, right, You're talking about the state that has installed more wind power and more solar power over the last five years than any other place in the entire country. I think it's number one in the country and wind and number two in the country in solar, and will be number one in the country in solar in.
Like eighteen months.
It's also number one in the country and on an
ongoing basis in installing battery storage, right. I mean, it's also the one that's actually like, you know, piloting these virtual power plants where there were Tesla Electric Company customers this last summer who had like negative six hundred dollars bills because they were selling power from their power walls into the marketplace at five dollars a kilo an hour when market prices dictated it, and so they were helping their neighbors, right, And so that that is not allowed
in California, like that is allowed here. So when you think about the level of innovation happening in Texas right now, it is at an all time high. And you know, I think that part of it is because Texas needs that level of innovation, right, I mean, their natural gas fleet didn't perform as well as they wanted it to during you know, URI and then some of the other issues. So they've recognized that they need to diversify where the electricity comes from, which is why they're building so much
solar and wind. But also they've decided to put two new semiconductor plants here in Texas. They have all this growth, All these companies are deciding that Texas is where they want to build stuff. If you fly into DFW Airport, there's all these roads and you're like, where the house is. They're coming in like the next eighteen months. There's so much load growth here. So now the question really becomes like, how do we build the grid of the future. And
they're figuring that out here in Texas. It's pretty exciting.
Well, setting the great state of Texas aside, and we are recording this live in Austin, so I feel like I should describe it that way.
Setting Texas aside.
I mean, it is true that you have seen demands on the grid rise, and in particular, I think I saw a statistic saying that something there was a forty percent increase in the amount of grid connection applications in twenty twenty two alone, And a lot of this is coming from you know renewable solar wind that need electricity and want to feed it back into the grid.
How do you solve that problem?
Let me back it up for a second and then like explain to you what's you know, where the friction points are, and then maybe we can talk about how we solve it. So, in general, you've got three major pieces here, right, You've got generation of electricity. You've got the transportation of the electricity to your home or business
or whatever is the transmission distribution grid. And then you've got the load itself, right, and so you've got a lot of load growth from new manufacturing facilities being announced because of the Inflation Reduction Act. You've got electric vehicles being added to the grid at record numbers. You've got heat pumps, all these other things. Right, So the main thing that I think you're asking about is the transmission grid. So you've got a whole bunch of people.
Wait, can we back up for a second. What's the difference between transmission and distribution.
So the transmission grid is generally at much higher voltages and you're transporting power long distances from where you know, like the Panhandle of Texas where they have a lot of wind down.
Here to populated centers.
Right, the distribution grid is what's in your neighborhood and is you know, basically having to manage, you know, making.
Sure that you have power for your four heir amp service.
Because if you plug in fifteen electric cars at the same time, then the distribution grid has to either be able to handle it or be able to throttle the amps to each home so that the distribution grid doesn't you know, get overloaded.
So what are the issues sort of facing the transmission aspect of the grid at the moment.
So basically what happens is is that you know, someone says, I've got a fantastic piece of land. I think I can put wind power on it or solar power. Mostly it's solar these days, there's a lot less wind in that transmission queue and they say, great, you know, like I'd like to apply to be able to use.
That transmission line. Now, there's.
Many different regions of the country, and each one of them does it differently. Texas is arguably the best region for this, and so what they do is they check to make sure it'll be safe so when you connect it to the grid, it won't actually make the grid like unstable and you know, and then take something down so they'll check that, But then they don't actually check necessarily that there's capacity for you.
They sort of say you.
Should just interconnect, and if there's too much on the grid any one time, we're gonna tell you to curtail. So we're gonna tell you to shut off. And you know, you can imagine you're not making any money when you shut off, right, and so but Texas is like, that's your problem, like you know, and then separ they actually calculate really well what the loss to rate payers are
for that congestion. Right, So if there's not enough transmission capacity, then the coal plant that's next to somebody's house has to turn on and be used more. That's more expensive. They say, Oh, if there was enough transmission capacity, then that would have been cheaper and better, right, And then that's what they justify paying Encore, which does a lot of the transmission distribution, to be able to build new transmission.
They're like, well, the congestion charges were so large that we should build new transmission to make sure that people.
Have lower bills.
So that is the ideal situation, and that's what Texas does, and you get a lot more movement. I mean, even Texas is clogged up just because there's so many applications, but they're the fastest. But places like the Northeast, or the mid Atlantic States or the Midwest States, I mean people are actually waiting like four to five years to get permission to interconnect because in those states they largely say, well, we we want to know that there's actually a piece
of transmission that's available for you. So we're waiting for this coal plant to cease operations with this natural gas plan before we allocate that transmission for you, because we don't want to do this curtailment thing. And so as a result, we we have twelve hundred megawatts twelve hundred gigawatts of like roughly like of generation.
In this country.
We have the same amount twelve hundred gigawatts waiting in queues for permission to be added to the grid right now.
Wow.
As soon as the Inflation Reduction Act passed and everyone got really excited about all of this new energy that was going to be in a wind and solar, et cetera, then immediately people started saying, oh, but we don't have the transmission capacity, and then there was this big fight we need permitting reform, and we need that because that's
the only way otherwise we're gonna have all this stranded energy. Like, are we at risk of having a bunch of government subsidized or government influenced energy that ultimately does not make it onto the grid because of some other fight that hasn't gotten taken care of.
You, So let me answer that question from the other side, Okay, but I will answer it. I think that in general, the question is why does any of this stuff matter?
Right? Like, I mean, why do you.
Care rather we actually interconnect all this sore and wind or new nuclear plants or a geothermal facility? You know, we want to relcense thirty seven gigawatts of hydro dams that are like from nineteen ten, Right, why do we even care?
It's because everybody wants to use chat GBT. Right.
Chat GBT is ten thousand megawatts of compute power by itself. Now you add like Google and all this other stuff, and then people want to let.
Your cars they like it.
You know, like my son yells at the car in front of me because it's like they have a tailpipe.
My daughter, you know, help my daughter does That's how.
It is right. So that's why we care about this stuff.
Like, we're not doing it because we're trying to like just make everything more complicated. We're doing this because Americans believe that using more electricity makes their life better. Right, whether it's like storing photos that they probably should delete, but they're going to keep them around anyway, right, and then paying like Apple another dollar niney nine a month.
Right, That's that's why we care about this stuff. Right.
So now the question becomes like, if we all care about this enough, right, if we all want this enough, what are we willing to do to accelerate it?
Right?
So you've got permitting, You've got the National Environmental Protection Act, and so people talk about NEPA and all this other stuff, and so do we want to make this stuff easier?
Right?
And you've got Bill McKibben, who wrote a big article about saying it's time to build. I mean, this is the guy who led the movement to like kill the Excel pipeline, right, and so even he's saying like we sort of need to build, right, And so now the question really becomes how do we build, and how do we do it in a way that's equitable, that like make sure that we're you know, paying people a fair
wage and all these other things. And what we're looking at doing is, like you know, is figuring out how we actually like check to make sure that things.
That we really care about are checked. Right.
We don't want to like, you know, just gloss over things and just say, ah, whatever, we should just lower
our standards. We're just saying that we might be applying the standards in an incorrect way for certain projects, right, because certain projects really don't have the level of toxicity within air pollution issues or local impacts or the things, and certain projects maintain those things right, like bring chemical plants or some of these other things, And so we just need to be more appropriate in the way in which we implement those rules.
Right.
So that's one piece of it. The other piece of it is, you know, we need to do things differently. Right for a long time, for twenty years, we have not had load growth in this country. Right, So we basically sell the same number of tarra wade hours today that we did in two thousand and three. And largely that's because.
There's a good reason that no one WI really paid much attention to this stuff.
There just wasn't the need for it.
There was no need for it, right, I see. But now everyone is like, oh my god, we got to grow again. That's a lot, right. But the beauty is we actually have solutions to all of it. Like the crazy thing is, like I'll like on the grid, right, there are all these things called grid enhancing technologies.
I'll give you an example.
Like the grid basically is operated by slide roll and so people say this, this thing basically has three thousand megawats capacity.
Right, That's actually not true, right.
What's true is that it the capacity changes based on the temperature outside.
Right, So there's less.
Capacity when it's like one hundred and two degrees outside, way, more capacity when the it's forty five degrees. Right, So you can put in dynamic load ratings. Right, guess who does that? Everybody but the United States? Right, and so, and we invented it. So the UK is fully deployed it, Belgium is fully deployed, all these other Brazil, India, Everyone's doing this stuff except for us. So, like this is
what I was saying. We have all the entrepreneurs who invented all this stuff, and we didn't deploy it here. We let them go overseas to deploy it right there?
Why it seems like a slam dunk.
Why why not impediment So like PPL was on a podcast the other day, which is Pennsylvania Powered Light, and they were saying, you know, basically they had this thing where they had to solve it. So they put in dynamic lotter rings. It was only like nine hundred thousand dollars to do it, but it saved fifty million dollars of upgrades. And they were like, we make money to deploy dollars, Like this was a terrible decision for our shareholders.
We did it because there was no other way for us to upgrade that line, and we had a customer that really needed it. And so to upgrade the entire United States of America with grate enhancing technologies to unlock thirty percent more transmission capacity would cost a total of
three billion dollars. Let's do it, right, But like, but you have, but you, but but you have like all these competing interests of people who are like, but Jigger, I was gonna spend twenty three billion dollars to upgrade the transmission grade that was going to be rate based for my shareholders. Why would I want the three billion, But you know what, all of that is evaporating away today because they're all just saying, we can't.
Keep up with load growth.
So we'll do the three billion, and we'll invest even more money because a lot of our stuff's fifty years old, so we kind of have to like replace it anyway. And so all of these traditional like loggerheads that we've been at for twenty years is really going away because people know that we need both.
I'm going to take a queue from a member of the audience and ask, like, how much interest do you see from the utilities themselves when it comes to your loan program?
Are they knocking at your door? Is there still a lot of reticence?
So when this when the Inflation Reduction Act first passed, we got this you know, energy refurbishment sort of program, and you know, I reached out to them all and they said, Jigger, we can raise money ourselves. We don't need to use your program. We're never, never going to
use your program. Then I was able to like recruit Leslie Rich, who's the most stock analysts on Wall Street for the electric utility industry from JP Morgan to come run the program and like, suddenly I've got like fifty eight billion dollars with a loan applications in the loan program's office. So you know, people really do matter, and so she's been able to convince them. She's like, well, you know, you kind of are a soft rate cap.
You can't keep raising rates ten percent a year and continue to like have a social license in your state, like you should actually figure out how to reduce rates for rate payers. And so the arguments are like, you know, filtering through. People are having these conversations. I do think that for sure, in twenty nineteen, people were not serious about the fact that we might have load growth again. Even when the Inflation Reduction Act passed. It's not clear
to me that people really had internalized it. Today, no matter where I go, people are actually actively interested in learning about how they should do things differently within the utility sector in all three areas, right, So generationsmission distribution, and what we call virtual power plants, which is actually you know, flexing demand with the same level of dexterity that we currently only flex supply.
I definitely want to talk about virtual power plants, but since you mentioned electricity rates just then, I mean both Joe and I live in New York. We are the slaves of con Edison in some respect. And every year, it seems con Edison will announce a rate hike, and a lot of that goes into not necessarily the price of electricity, but the distribution costs. And I think that's been a trend for a few years where you know, actual load demand or consumption of electricity has been pretty stable,
but distribution costs have gone up and up. Can you explain what's happening with that dynamic and how you know the DOE can help with that aspect of it.
Yeah, so let me start from first principles and then I'll answer your question directly. So in two thousand, right, the National Academy of Sciences said, you know, the most important machine in the whole world was the electric utility grid, right of the twentieth century. Right, And so they got this award for you know, the best engineering marvel of the twentieth century.
Right.
This engineering marvel has cost us over at trillion dollars to build right over time, and we use it forty percent of the time.
So, if you're a private center.
Company, which some of these utilities are, and you have a machine that you built, a cost a trillion dollars and you only use it forty percent of time. You'd be like, usually we're trying to maximize the like operational like, you know, capacity utilization of this machine.
We spend a trillion dollars on it, we should use it more, right, So.
The reason they don't use it more is when air conditioning came in in the nineteen seventies, right, then you had this peak, right, so whenever you have a hot day, you have its peak. And so they built the transmission distribution grid to handle air conditioning. They built a bunch of natural gas peaker plants to be able to power that air conditioning. And so the peak to trough youation,
like has gone bigger. Right, So now you're using one hundred units of energy at the top and you're using like twenty five units of energy at the bottom.
Right.
And so what they have said to homeowners or you know condo owners or you know renters, is you can do whatever you want with your demand, and we will make sure that the lights work.
Right.
That's really expensive, right, So every time you buy something, whether it's a hair dryer or an espresso machine or whatever, it is they have to upgrade the service to make sure that if all of you turn it on at the same time, or some reasonable amount of you turn at the same time, then you can be accommodated.
Right.
The other way for them to do that is to say, there are some loads that you just don't care about, right, Like your water heater. You don't really care whether your water heater turns on right after you finished taking a shower or whether it turns on like six hours later when there's excess capacity in the grid. And a lot of real electric co ops have controlled those water heaters for thirty years, so it's not new technology. But like if you flatten the load, right and you shift like
you know. And the reason this is coming back in a big way right now is because of electric vehicles. Right, Like, most people who have electric vehicles, they plug in their car when they come home from work or school or whatever, and they leave it plugged in for thirteen hours, but it's only charging for three of those thirteen hours, right, So people don't really care which three hours they're charging as long as it's charged by the time they wake up in the morning.
Right.
And so people are like, oh, like, we can actually accommodate a lot more electric vehicles if we do manage charging. And so now once you open that door, well, now you've got to allow water heaters and thermostats and all sorts of other stuff that you have an app for on your phone right to be able to manage charging. And so so the old paradigm was that kan ED just upgraded the distribution circuit every time you found some new thing that you want to buy. And now we're saying, ah,
that's kind of getting expensive. You should actually do managed you know, charge.
So we're about halfway done with our time with you here, and I want to like get into like some of the specific source of generation. We should talk a little wind and nuclear and all that. But before we do, there's this critique of the way entered infrastructure in the US has developed these days, particularly under that Biden administration. And the critique is basically, Okay, we have this mission to decarbonize the grid, add capacity, all that, but that
the administration adds all these other requirements social requirements. Oh, the companies have to provide childcare, and they have to do this or that, all these other things that maybe
didn't make it into the bill. And maybe other progress several liberal interests like want to squeeze it in somehow to how we build out, and they're like, we're never going to accomplish these goals of decarbonization if the company's building this or that also have to satisfy X, Y and z, you know, sort of liberal wish list progressive
dreams of whatever it is. Do you see that in your day to day that this is an impediment that things that are not directly related to building an electrification get in the way of new construction.
No, So, so in general, I'd say that we have statutory requirements. Right, so for our office, you have to pay Davis bake and wages. For construction, you have to use this thing called the Cargo Preference Act. But other than that, there are no other requirements of my office, and so we don't impose any other requirements onto, you know, our applicants. Now that being said, remember we haven't done
this in forty years, right. It's not like the United States of America has been like building manufacturing facilities, brand new.
Manufacturing facilities for four years.
We haven't.
And so you know, yesterday I was in Georgetown, Texas, one of our companies, Uh, Selling right is building their facility up there there to make these extraordinary wire harnesses for electric vehicles that are like ninety five percent less weight, which is amazing. But you know the thing is, and you would think wire harnesses are things that you know, you can only make in low wage countries around the world. But they have this innovative process and so they can
make it here in Georgetown, Texas. We asked them to put together a meeting right for you know, workforce. They have to hire about a thousand people, and so you know, how are you going to do that? Where are you going to go? Et cetera, et cetera. There were a lot of people came and you know, facilitated conversation.
There's no mandate there.
I wasn't suggesting that they had to hire you know, a good mix of this group or that group or whatever it is. It's more like, let's have a conversation, right. It was very clear to me that most of the people in that room were so appreciative of Selling creating a thousand jobs in that community, but had never had the chance to provide Selling any feedback about how they might recruit better.
Right.
Now, that's not because Selling's a bad company, right. Selling's a startup company that probably almost went bankrupt like three times.
And you know, think.
They're lucky stars that they got the capitol when they needed to to actually get to this point and now they're building a factory. They're like the American dream. So I'm not surprised that the number one thing that he's working on is not figuring out that his workforce issues, right, and number one thing he's working on is making sure that the Chinese don't steal his technology, and like that, he's continuing to like, you know, succeed on this stuff, right.
And so so he came up after me. His name is Kevin Cokeley, and he's great, and he said, you know, Jigger, this was super helpful.
I want to do right by these folks in the community.
I want to actually meet all these people, et cetera, et cetera like and so it was a good conversation. I didn't force him to hit some sort of metric or do this thing or whatever else. But you know, in general, what I find is all of the people participate in the program's office are you know, Americans who are quite proud of their country. They want to do right by their workers. They want to do right by
the communities. So they're in et cetera. But it's not surprising me that they're not experts in that part of, you know, building a company. They're experts in their technology, and so we do facilitate good conversations. I'll give you one more story. So there's one company that we provide a conditional commitment to. I'll try to keep the details sparse. So they're uh, you know, outing them. They are going into a state that has an extraordinary shortage of construction workers, right.
So and they said, look, Jigger, I'm just not gonna be pro union, like, that's not going to happen, right. Fine, So I said, well, but you should sign a project labor agreement. They're like, Jigger, that sounds like a union term, and so I was like, well, it kind of is a union.
Term, right, So you should sign a project labor agreement.
And what that does is it mandates and requires the union to do a couple of things. One is start training workers for you right now, right six months eight months before you actually need them. But two, if there's actually too much work and not enough workers, you get first in line right now. If you end up doing an RFP and you pick a non union contractor, right, that's fine. They would still pull from this union hall or not or whatever. Like union workers do a lot
of non union contractor work, right. He's like, Jigger, I never understood that. They never taught me that at Harvard Business School, Like, I don't know how any of this stuff works, right, And so he was appreciative, Like, you know, it wasn't like.
He was union anti union, like pro union.
He was like, I'm probably not inclined to go union, but like, I do need workers that are trained to like actually start working on my job site as soon as I'm ready, and this is going to make it easier for me to meet my schedule and my cost.
Yeah, I'll do that.
So you sort of suggested that some of these executives maybe they just hadn't thought about it before or weren't experts in it because they were focused on other things like competing with China. But just to press on the point, because I think it's kind of timely at the moment, especially given the UAW strikes.
But one of the arguments that you hear is if you.
Attach a lot of expensive conditions to the labor force within the US that makes it uncompetitive compared to places like China or Mexico, where the cost of labor is not only cheaper, but also not unionized and is probably not providing things like childcare.
How do you think about the competitive aspect of that.
As I said before, the Loan Program's office requires Davis Bacon wages for construction in general. That hasn't been a problem. You know, the in general, when you construct something, you want the folks who have the most training doing your construction is you know firstand and you know and so and so. You know, like that really isn't something that
we fight over. They're like, yeah, that makes sense. So we want the highest quality workforce so that you know, when we build this building, it last for thirty years and it'll be done properly.
Right, So, so that isn't really a problem.
There's no requirement for folks to go union for the operating jobs, like we're not requiring that. That being said, we're saying to people that these are particularly in the manufacturing space again, which we haven't done really in forty years. You know, these are craftsmen, right, Like they're actually like the more they work at that place, the better they get at that job, and they become more productive, and
they provide a lot of insight. I think when you hear Elon Musk talk a lot about this at Tesla, you know, they've sort of onshore almost everything that it takes to make a car, right, so they don't really import from you know.
One thousand different suppliers.
They do stuff here, and what they say is actually the folks who work on the line actually bring a lot of the best innovations to the table, right They're like, oh, this could be done smarter, this could be done better, this could do stuff like So in general, like you know, I feel like we're having these false arguments because this is like something that I don't know. It finds like certain tribes want one things or tribes want something else.
So it's a great fault line to create. But I think we all agree that you want workers who actually want to be there. You don't want turnover, you don't want like ten percent of your workforce leaving every month, and you know, you want you know, folks to believe that they can you know, feed their families and you know, support a community and all that stuff on that So
I don't think we're arguing over those things. And we're also not saying that one hundred percent of everything that America consumes, we consume a lot is going to be made in the United States of America, right, And so I think the administration has gone to China gone other
things saying we're not decoupling. So it's really but there's a lot of these high value innovations that we've invented out of the Department of Energy, and instead of licensing them to other countries, which is basically what we did for forty years, we're saying, why don't we tied to the American workforce and make them here?
Nuclear power?
Two questions, What is the role in your view long in terms of meeting all this demand of nuclear growth in the US. And is the reason we haven't had much nuclear expansion in the US because a bunch of people there's like some combination of anti nuclear hippies and people who watch The Simpsons too much.
I challenged the premise of your question.
No, no, no, I'm just asking is that the reason or not? Am I wrong?
I was?
I'm not necessarily assuming that, but I believe a lot of people there's a lot.
Of stuff going on. Let me try to unpack it for you. I think.
So basically, nuclear power really had its heyday sort of in the sixties and the seventies, right, that's when we built a lot of our nuclear parwer plants. In the seventies, it was already the case that nuclear power plants were becoming more and more expensive. You had the Nuclear Regultory Commission, you had a lot more regulation, and so, you know, so you were already getting people less interested in doing nuclear power by the time you got to the late seventies.
Then you had through My Island, Right you can imagine like that sort of scared people. And so no one died. Everyone's fine, Like, you know, nuclear is one of the safe technologies in the world, but you know, it's scared people. We basically didn't approve any new nuclear plants after that. We finished the Biron nuclear power plant, which I grew up next to in Illinois in nineteen eighty four, and then we finished watts Bar recently, and so we've had
a couple of nuclear plants come online. Vogel Unit three just came online. Vocal Unit furs should come online at the end of the year. Early next year, so in Georgia. So I think that in general, the nuclear power fleet that we have now was largely built in the nineteen seventies.
Right.
Nuclear power is one of those things where the frustration that I have, and I was on the board of Greenpeace for six years, is that they don't actually try to do it better, right. It's always someone else's fault. It's like nuclear power is just so damn complicated. It's so hard to build. This soul and win stuff is so easy. Like, we build complicated stuff all the time. We built like oil refineries, we built like there's like
a lot of semiconductor fabs or no picnic right. So it's not like we don't know how to build complicated stuff, right. But what I find is is that in nuclear power it's always something like, well, if the federal government would just do it, we should just get the Department of Defense.
To just do it right, you know, like Okay, but like.
That hasn't really worked for you since the nineteen seventies, so let's not try that because that's not working. So I think a lot of what we've done is right size the nuclear energy industry by saying, look, you know these ten to fifteen billion dollar nuclear plants. It's not something that.
Utilities want to build, right.
Like, In fact, if you look at like the last forty or fifty years of utility bankruptcies, like half of them were because of nuclear plets. So you know, I can imagine like a CEO of the utility company is like, I don't know, I don't want to do a nucleus.
I like my job maybe not exactly right.
And so now we have this thing called small modular reactors, which are neither small nor modular, but like, that's fine, but they basically cost two to four billion dollars, right, And in two to four billion dollars, the utilities know how to do two to four billion dollar projects, and they can find bonding for that and assurance for that. There's EPC contractors that have a balance sheet that's large enough to wrap a two to four billion dollar project, et cetera. So we now have a size that we
actually can handle. When you look at like Vogel three and four, Fogel four was thirty percent cheaper than Vogel three, right because the same workforce is working on the same reactor, and they did it better the second time around, which you can imagine.
So the way that these.
Small module reactors work is that you built four in one place. You build three hundred megawat reactors. You build four of them in one place, and so you have twelve hundred megawatts. The first one's probably going to come in the closer four billion, the second one thirty percent cheaper, the third ones twenty percent cheaper, the fourth than six percent cheaper. And so now you get to a place where it can be cost effective. Folks can handle it.
It's bite sized. You can end at any time if you don't want to build the third one or the fourth one. And so you're starting to see a formula that people are getting excited about. Not only are people gettingxcited about, they're getting excited about US designs, right because there's Korean designs and Russian designs and Chinese designs, and so you know, our good friends in Canada chose a US design, the Giataci BWX three hundred. So they're building
four of them at Darlington. The folks at Cinthos and Poland also chose the design. There's a lot of lessons learned. We're following those lessons learned. So I could go on and on and on an entire podcast about this. But I would say that in general, I don't think it's the fault of the environmental groups or the fault of the Nuclear Reglatory Commission, which everyone likes to blame, or
the Simpsons. I think it's the fault of the nuclear energy industry to not say, look, you know, modern finance works this way, right, Modern utility CEOs work this way, Modern public service commissions work this way. Let's create a product that actually works within the framework that we have in the United States of America.
And they've now done that.
So I think we now have a product that people can get excited about. And you saw the governor of Texas and now that he was directing the Public Service Commission to figure that out here. And you've seen announcements from Duke Energy, and announcements from Dominion, and announcements from.
The Tennessee Value Authority.
So you're starting to see utilities, you know, say, this is actually a really interesting approach, and so we'll see if it works. But I think that there's approach now that's fit for purpose.
Setting three eyed fish aside and other Simpsons references, I mean.
Can you talk a little bit more about how.
You see it developing, Like what are the hurdles to actually getting some of these smaller plants set up? Can you walk us through what the process would be and how you would imagine it unfolding.
So one of the challenges with the nuclear power industry is that there's no nuclear power industry. So so you have like the Nuclear Energy Institute, right, and they're made up of a bunch of utility companies that basically own nuclear power plants. But like if you ask the CEO of like Energy or you know, Doke or Dominion and say,
are you a nuclear power person? And they're like, no, we own nuclear power plants, we own reneal bunergy power plants, we own cold plants, we own natri gas plants, right, And so you can imagine like they're not necessarily like the driving force behind new nuclear.
Right.
So then you've got a bunch of other companies you've heard of, like New Scale, Oaklow, you know, Giataci, Hole Tech, Terror Power x Energy, Right, But they're also not the nuclear power industry. They are nuclear power designers. So that's like saying I have an architect, and then architect designed the beautiful house. Yes, they've designed a beautiful nuclear power
plant and it works. And you know when I say it works, like they've spent a lot of money at a supercomputer and told me that it works, right, So like it's not like they've actually built one of these things before.
So now you've got that.
So then the question becomes like who is the industry right And so in the case of the Giatachi b to b r X three hundred, right, Giataci is only a design firm. Ge does not make any of it.
They don't like.
All they do is design it right, and then they'll probably take it through the Nuclear Regatory Commission.
B to BXT is.
The company that actually has been hired to make it, and they are in the nuclear submarine and nuclear navy business, and so they make a lot of parts for the military, and so they have some knowledge of how to do this right, and so that's great, and so they're going to do parts of it. And then we have to now find an EPC contractor that wants to do this. Remember the ones who worked on Vogel went bankrupt, right, so it's not for the faint of heart for them
to decide to get into the nuclear energy industry. But we're you know, like aspirational, ambitious folks, right, and think about it from a national security lens, right. I mean, once a country chooses a nuclear power plant, let's say from Russia, they're tied to Russia for eighty years. You can imagine the national security complex with the United States would rather that country pick a US design and tie them to the United States for eighty years. So there's
a lot riding on figuring this out. So a couple things. One is that if you're a supply chain provider for a nuclear so you're making a forge or whatever it is, you can imagine ramping this whole thing up for one nuclear reactor is not.
Your idea of awesome.
So you're like, well, where are the ten reactors going to come from?
Right? So I've told you this one, where's the next one going to come from?
So in some ways, when I say that, like Duke has put nuclear into their Integrated Resource Plan and dominion, you know, the governor has been talking about it. And then you've got you know, the Tennessee Value Authority where Jeff Flash has talked about, you know, putting four reactors at Clinch River. And then you've got the Governor of
Texas directing the Public Service Commission to do this stuff. Well, now you've got like a critical mass of people that are saying we should do this, And then the question becomes, what do you need to go from this would be really awesome to do in our state to here's an
order right for the nuclear reactor. And so we wrote a lift off report at the Loan Program's office and the Department Entergy was led by Vanessa Chan at the Office of Technology Transitions and the Office of Planergy Demonstrations, which runs the Advanced Reactor Deployment Program.
And these are.
Very cool, by the way, I don't normally say this about government publications, but these ones are what I was.
Going to see the exact same thing.
They're all really worth reading, very readable, and really good entry points and just to understanding some of these technologies.
So well done on that.
Thank you, Thank you.
We like kept it down to like thirty pages or so, and then like it's uh, it was. It was a really an extraordinary effort. And then the woman who was a lead off there there, Julie Kosaraki, is like on a speaking circuit. She's going to all these places and figuring out how to get this person to move one inch this direction and this person to move one inch disrection. And so there's a lot of facilitation and technical assistance
that we're providing in this process. But the roadmap is there told to us by the industry in that Nuclear liftop report. So you know, I don't know whether we're going to get there, but like, those are some of the tenants, right, is you need a design that multiple people pick. You need to at least build ten, hopefully twenty of them, right. You need to make sure that
the supply chain gets built out. You need to have a trained workforce, right, which we have thirteen thousand people now that have been trained out of the Vocal Nuclear plant. You know, you need all these pieces in order to attempt this.
I just thought of a question, and I've been meaning, I've been wanting for like two years to do a whole episode on this that I just never happened.
So now I'm going to ask you this to answer this in one literally one minute.
I read the ISM Manufacturing Report every month and there's this section on things that are in short supply, and as the supply chain has healed over time, that list gets shorter and shorter. But the most persistent thing that is in short supply for manufacturers is just electrical components, and they complain about that, and it's been this issue.
What is going on there?
Do you know, like what the source of this bottleneck is and what is driving it?
Well, I don't know that I know for certain what the source of the bottle neck is, but I would say that in general, when you look at manufacturing companies, they're The dynamic with manufacturing is if you build it, they will come right. So like I build a factory and you buy one piece, and then the next week you buy one piece, and then you're gonna buy a piece, and then you're like, ah, I think I'm gonna wait two weeks and I'm gonna buy something, right, Like, I
don't know. That's not like a reassuring like model by which I want to stay ahead of the market. I like to stay slightly behind the market so that like I could charge a higher price and you know, et cetera. Right, And so for those folks who want us to accelerate investments in the supply chain, they need to make a long term order, right. And so for a lot of the electrical contractors or a lot of the utility companies who are wanting transformers or a lot of these other stuffs.
But think about it.
If you're running electric utility company, do you not have a predictable track record of how many transformers you install every year? Do you not have like an integrated resource plan that's as over the next ten years, I think we're gonna buy this many transformers. Well, then why wouldn't you just make an order for like ten years worth
of transformers this week? You and like ten of your closest friends, and then you build a transformer manufacturing facility in your community, and then they feel confident because they've got orders for the next ten years, and you feel confident because you've got a local supply of transformers. Instead, I got a bunch of people going, uh, jigger, we need to fix transformers. And I was like, you should give me an off take agreement.
I don't know. That seems like a lot of work.
And I was like, but that there's a formula to how this stuff happens. Like It's not like one of those things where it's like I wish I had an oversupply of the components that I want and I'm not willing to do anything to actually make that happen.
Speaking of bottlenecks, this is kind of a cliched question, but I'd still be curious to get your answer to this. If you could waive a magic wand and make you know, one aspect of the industry, or the political landscape, or the regulatory landscape go away to make the process of transitioning to cleaner, cheaper energy better, what would it be.
Oh gosh, this is definitely gonna get me in trouble, so maybe let me say it this way. I think, in general, as I've said before, we have all the technologies we need to not only tackle this problem, but dominate not only you know, the sector here, but then to export and dominate around the world, like whether it's hydrogen or transmission or you know, whatever it is, solar wind, all these other things. We have all those technologies, and
frankly we invented them. Everyone's like, oh, China makes solar panels. We invented all that technology right along with Martin Green at the Internasy of New South Wales and so like, you know, those are the two places where all came from, right, we were forced a license to them because you know, like
we weren't manufacturing here. And so one of my big challenges is that as we learn to build again, what we do in the nineteen seventies is basically divorce all politicians from knowledge in this area.
Right.
So all politicians basically have like an airport authority and.
They are diplomatically put by the way.
Right, and they have like a sewer authority, an electric utility and you know whatever it is.
Right.
So when you ask them, like, hey, how do we lead in this area, they don't know, right, And so they go to the guy who runs the sewer authority or the water authority or the you know, airport authority, and that person says, I want to do things exactly the same way as my grandfather did in the nineteen seventies, and we should replace everything exactly the same way. I
don't want to install new technology. I've already got people who are like trained in the old technology, right, And so why do we do this stuff?
Right?
And so we need to like come back together and commit ourselves to actually taking us technology and deploying it here.
Right. And the risk aversion is.
Like leading to a lot of increased cost because doing things the same way as nineteen seventies is crazy expensive. We have stuff that's ninety percent cheaper. But what happens is you go to the consultant who you pay, and they say, I don't know if that's gonna work.
I don't know, Like I.
Know it's been deployed like forty times in China and fifty times in the Middle East and like in Europe, but I don't know if it's gonna work here. We should do exactly the same thing we did in the nineteen seventies, and so it'd be nice to like figure out how to break that like sort of knowledge gap so that we're doing stuff here again.
One last question.
You know, it's kind of it's an exciting time and it's fun every it feels like every day or at least every week, there's some new announcement. Some of it comes from loan program office funding, like some new battery factory or some new technology or breaking ground on some new geothermal et cetera.
So much winning.
So we're getting tired of all the winning with all this, But like twenty twenty four, like what is what are we looking for? Are is twenty twenty four gonna be another year where there's just like ton more in the pipe, and we can expect a lot more out of EU. Of all these announcements, is there a lot more coming?
There is a lot more coming, some of which is predictable, right. You got the Hydrogen hubits announcement coming out later this year. You know, you've got the GRIP funding for like grid resilience coming out here pretty soon.
And so some of it's predictable.
Some of it's not predictable because like all the folks who've applied to my office are confidential. But you know, I think that the part that is the most exciting to me is that you're starting just starting to get mayors and county commissioners and others going, wait a second, how do we make our town or our county attractive to the next announcement?
Right?
And so like, you know, we have like I think less than one percent vacancy right right now in industrial properties, and so if you talk to brokers, they're like, we have no more properties left. I have like four applicants who are waiting to pick a site, and that's what's holding them up to like actually make an announcement.
Right.
But then, like I talked to this guy in Ohio, and he's like, oh, yeah, I have like five sites. We just forgot to like rezone them and we forgot to reregister them this way. And so now he's doing that and that property doesn't actually earn any property taxes right now because it's classified as a brownfield. They like are cleaning it up, putting it back into circulation and like you know, folks can pick it and then they
can like put jobs there. And also there's stuff we just like it's one of those weird things in the United States where like we have all this extraordinary wealth, right, wealth of innovation, wealth of like engineering talent, applied engineering, town all this stuff, and like we forgot about some of it. It's like just there, it's sitting there, and like so like there's all these pieces that we have
to get out. So part of what's going to make next year so successful is not just the announcements around you know, the funding opportunities and that kind of stuff, but also all these micro decisions that are being made by local towns and communities going wait a second, you're saying that that piece of property that's just been sitting there is actually like an asset. Yeah, it's an asset, like clean it up, let's put it back into use.
Like they have a rail spur that goes to them, there's actually there's actually on the river.
People want to like use that so they could transport their goods.
They're like, oh, man, I thought that was just an
eyesore in our town. And so like that to me is super exciting, right, And then we're starting to get a ton of people who are saying, maybe I don't have to go to a four year college and maybe I can go to Texas State Technical College and do a two year degree and like and make six figure income, like actually becoming really good at my trade, right, and also this stuff and that's bringing pride to people because for a long time people were like I like to
work with my hands, right, that was like a euphemism for I wasn't like a book person.
And but like we actually need a lot of people to work.
With their hands, right, and so like, like I find that what's most exciting is not the announcements we're making here, but like it's leading to a level of confidence in all these other parts of the economy where.
People are like, maybe we can't actually pull this off.
Jigger Shaw, thank you so much. This is a real thrill.
I always love catching up great not dand it on.
Thank you to everyone uh.
Texas Tribune Fest and appreciate everyone coming up. That was our conversation with Jigger Shaw. I'm Joe Wisenthal. You could follow me at The Stalwart.
And I'm Tracy Alloway. You can follow me at Tracy Alloway.
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