There are a few reasons for this; surging power demand from artificial intelligence and industrial reshoring, capacity market spikes in places like PJM, and aging grid infrastructure and the capital requirements are among the most obvious. So when a similar promise about AI surfaced during the period when ChatGPT became the most popular AI chatbot in 2022, it felt familiar. Abundant artificial intelligence. On tap. At a low, low price. For everyone. Every time. But that is not the reality we are experiencing.

While the price of a token has gone down about 60 to 70 percent, according to Goldman Sachs, we are spending more on AI. Expenditure on tokens, the building block of text that AI uses to read and write, has continued to go up as more advanced AI models are released and AI agents take over from simple chatbots. The reason for this increase has little to do with the technology itself and, as is the case with power, has everything to do with who is capturing the value the technology creates.

Despite my desire to move on from this topic, (I’ve told colleagues and friends the conversation about the convergence of AI and power has become stupid, a topic for another post), I cannot put it down. The stories of abundance (cheap power, cheap intelligence for all!) are the same story. It will likely end the same way if we do not understand why and create policies that ensure the little guys (you and me) do not get left holding the bag.

Read more

In the study, 80 megawatts of batteries would clear every transmission constraint created by a 100 MW data center near Burleson, Texas, on Oncor’s system. A battery beside a strained line relieves it about one-for-one, while curtailing a more distant data center may relieve half as much. Any battery near the line has that edge.

On this week’s Energy Capital Podcast, Joshua Rhodes talks with Chase Dowling, head of market operations for Austin battery company Base Power. The business model is Base Power retains ownership of the batteries it installs for retail customers, and homeowners subscribe to the service.Dowling puts the batteries’ reach at “80 percent, 85 percent of all of the constraints.” The rare failures that sever part of the system, he says, still need new transmission or generation.

• The limits: the battery fleet needed grows faster than the load, and West Texas lacks enough homes for large fleets. No market yet pays batteries to act as transmission.

• Who pays: Dowling proposes that a data center facing curtailment fund a battery fleet near its constraints, and the host homes get outage protection.

• Utility fleets: for El Paso Electric and CoServ, Base builds co-branded fleets and hands control to the utility. It now installs in Chicago, in PJM.

• Backup: Dowling says a portable generator can stretch a Base battery through a multi-day outage like Winter Storm Uri.

Dowling says the challenge now is getting ERCOT to model these fleets at the transmission substation, where planners can see them.

Chapters

00:00 – Chase Dowling and the new Base Power study
01:01 – What Base Power has built since 2023
02:22 – Manufacturing home batteries as a grid resource
05:10 – The homeowner value proposition
07:50 – Base Core's generator port and extended backup
11:43 – Deployment speed and what limits it
14:43 – Regulated utilities and who controls the batteries
16:28 – Lessons from Texas for PJM
18:23 – Flexibility Without Curtailment: the paper's premise
22:32 – Why location matters: 100 MW at Burleson Switch
26:52 – How 80 MW of batteries hosts 100 MW of load
28:47 – Bigger loads, the long tail, and the 80/20 rule
35:13 – Batch Zero, curtailment risk, and who pays
38:17 – Data center PR and how big this can get

Resources

People & Organizations

• Joshua Rhodes (LinkedIn)

  • Energy Capital (Podcast - LinkedIn - YouTube)

• Chase Dowling (LinkedIn)

  • Base Power Company (Website - LinkedIn - Base Core)

Company & Industry News

• Base Power raises another US$1 billion in Series D financing for US residential BESS

• Base Power brings cheap batteries to residents in power-starved PJM

• Base Power to launch 100-MW home battery network for Texas utility

Books, Articles & Filings Discussed

• Piq Energy and Base Power - Flexibility Without Curtailment

• ERCOT - Aggregate Distributed Energy Resource (ADER) pilot project

• ERCOT - Trending topic: new batch connection process for large electricity users

• Texas Legislature - SB 6, 89th Legislature, enrolled bill text

• El Paso Electric - El Paso Electric and Base Power install first home battery in El Paso as part of new reliability pilot program

• Farhad Billimoria and Conleigh Byers - The value of compute load: what cloud markets reveal about the potential for flexible data centers

Related Podcasts by Energy Capital

• Creating a Distributed Battery Network with Zach Dell

• How Load Flexibility Could Unlock Energy Abundance with Tyler Norris

• What batch zero settles and what it leaves open

• How Texas plans to serve infinite demand

• How Data Centers Can Strengthen the Texas Grid with Camus Energy CEO Astrid Atkinson

Related Posts by Texas Energy & Power

• $6.5 billion in transmission projects, batch zero closure, and the questions that follow: Texas Grid Roundup #93

• Flexibility and Speed to Power, Reading & Podcast Picks, December 7, 2025

Transcript

Joshua Rhodes: Hey everyone, and welcome back to another episode of the Energy Capital Podcast. I’m really excited to have Chase Dowling here from Base Power Company to talk about what the company’s been doing, as well as a new study they’ve put out looking at the impact of distributed energy resources on the ability to unlock firm load for places like large loads, data centers.

But yeah, really excited to have Chase here to talk about it. Chase has a PhD in electrical and computer engineering from UW, University of Washington. In and around there, he also worked 10 years at the Pacific Northwest National Lab, ending as a senior applied scientist before switching over to machine learning at Tesla.

Very recently, actually, as of recording this podcast, he’s a founding power systems engineer at Base Power Company. Chase, welcome to the Energy Capital Podcast.

Chase Dowling: Thanks, Josh. Sorry for the mouthful. Yeah. Ten years at DOE and then a couple years at Tesla working mainly in energy.

Joshua Rhodes: Yeah. Yeah. Well, energy’s kind of the thread that brings us all together these days, right? It’s like energy is AI, is transportation—

Chase Dowling: Is everything.

Joshua Rhodes: —is now politics too, which we won’t get into. So it’s been a while since Doug originally interviewed Zach about Base Power, and so, you know, a lot has happened since the last time we checked in. You know, you started as a pretty novel combination of retail electricity and batteries in Texas, but now you’re manufacturing your own hardware, working directly with utilities.

Kind of before we get into kind of the specific study, what’s going on at Base right now? Like, what are y’all working on?

Chase Dowling: Yeah, no, it feels like a while, but it’s crazy to say founded at the end of 2023 that we’re scaling up. We’ve got 600 MWh of batteries in the ground, and we’re just now speeding up.

We’re installing all over Texas, and we’re now entering our first new markets outside of Texas, installing in Chicago and trying to get at the capacity problems in PJM. But the biggest changes maybe since you talked to Doug or since Doug talked to Zach was we’re installing in deregulated territory as a retailer, but now we have a lot of regulated utility partnerships as well, where we come in and help facilitate the construction of a large distributed peaking resource for these regulated utilities.

But that’s the story since then, is that we’ve been scaling, growing, and installing resources faster.

Joshua Rhodes: I mean, you’re manufacturing these units in Austin. I know you’re looking— you’re also building a new facility out by the airport, but, you know, you’re currently in the old, you know, Austin American-Statesman building.

I actually took a tour of the place, I wanna say, like 7 months ago, and you had, like, you know, half of a line going. But I was there last week. I mean, you had multiple lines going, robots following magnetic tape all around, and lots of folks putting stuff together. Tell me about the manufacturing process and kind of what you’re doing, you know, here in Austin.

Chase Dowling: Yeah. So this is a big piece of being a vertically integrated designer, manufacturer, developer, and operator of an energy resource and how we build our kind of like technological advantage that we’re providing to the grid. And so manufacturing is like a key piece to the advantage here. If you look at distributed resources, and this is what we do as a company, we go and we install batteries on homes, residential batteries on homes, and we can talk more about like how this model works or what the value proposition to the homeowner is.

But we’re manufacturing these home batteries to be a grid resource first. If you go out on the market today and you look at, like, what are your options, you could buy a battery from Enphase, you could buy a Powerwall. These are very modular, very flexible consumer products that carry a margin for that manufacturer.

But we’re a grid resource first. And so to be a grid resource, you need to be robust, you need to be easy to install, you need to be capable of certain functionalities that you don’t necessarily need on, like, a consumer home battery. You need to be thinking about it here, like in Texas. You may have noticed it’s hot in Texas.

Batteries don’t like super hot and super cold, and so we have designed a battery that is exceptionally good at rejecting heat, and is gonna be available when the grid needs support from that peaking resource when it’s super hot outside and load is super high. And so in order to build such an effective resource, you need to control the destiny of the hardware that you’re deploying with.

And so by manufacturing, we’re able to assure that the batteries that we put out in the world are gonna be able to stand up to the Texas summers and the Texas winters, and now the Chicago winters. It’s like an important key piece of why manufacturing is so important. And what’s really cool about it being in the Austin American-Statesman building right across the street from the offices is that, for example, I work a lot on the software that does the grid coordination and the grid participation of the aggregate resource.

But whenever we notice a problem of like, oh, an inverter maybe derates under certain conditions, we just walk across the street and say, “Hey guys, check this data streams that we’re seeing. What’s going on?” And we can fix that problem right then and there. It’s a super incredible advantage to building a really performant resource.

Joshua Rhodes: Let’s talk about the value proposition to the customer, right? ‘Cause like you’re a grid asset, but you’re chasing a totally different interconnection than, say, you know, a multi-hundred megawatt battery that has to get maybe its own substation and its own gen-tie, maybe has to do all these different kinds of studies like on the system.

So like you’re chasing interconnections that already exist kind of at the home, and so what’s your value proposition, the Base model of getting those Base batteries into those connections at homes?

Chase Dowling: This is the best question. So I like to think of Base from the homeowner’s perspective first, either in a place with retail competition or on like a vertically integrated utility, like say here in town in Austin Energy.

So if I’m a homeowner and I look at Base, what is Base doing for me? In areas of retail competition, Base Power is a retailer, and we go to the customer and say, “Hey, sign up with Base. You can get a discounted time-of-use rate on your energy costs, and for an extremely low cost to get the battery installed, you don’t pay for the battery.”

Base pays for the battery. We install it on the home, and then the customer pays a monthly subscription fee. I think it’s like right now it’s like $12 a month in certain deregulated territories. But it depends a lot on where in the country you are. But a customer pays like a subscription fee to have that battery in their home, and it’s a very large battery.

Base retains the operations of the battery to offset the customer’s cost to serve, our cost to serve that customer. But then that battery’s quite large, where our Gen 3 Ma— our, our Base Core that we’re manufacturing at the factory is a 20 kW, 40 kWh battery. You know, a lot of consumer batteries that you see on the market today, they’re like 7 kW, 14 kWh.

This is a pretty sizable battery. You’re looking at like a small EV in terms of energy storage capacity. So it’s much larger than a typical single-family home that we would install on. A typical single-family home’s peak summer load is on the order of 4 to, 4 to 5 kW when you level out like the AC’s duty cycle. It’s a really big battery.

When we put it on that home, all of the members of the Base coordinated network, whether or not you have a battery, say, if you’re a Base energy customer, we use those batteries to manage cost to serve for everyone in that coordinated network. And so the value proposition to the customer that gets that Base battery is, “Hey, I’ve got a really, really low-cost backup solution, and I’m getting cheaper energy.”

And then what we do to make money as a business is we go and make that resource part of a coordinated network to manage our costs as a supplier.

Joshua Rhodes: Nice. One of the things I noticed different in, I think you said Gen 3, but you’re calling it Base Core. Is that right?

Chase Dowling: Yeah. Yeah. Yeah. A little slip of the tongue. We— our, like, product name, Base Core. Yes.

Joshua Rhodes: Okay. It was interesting seeing a little mock-up there as we were walking in. We actually got a tour from Justin and Zach, so it was like we got the C-suite tour, which was great. But one of the things that Justin was really interested to show, it had, like, a generator port as well, and it also connected to solar, right?

So if, like, you have a multi-day outage, like, he was basically saying, he’s like, “You can buy, like, you know, a cheap couple hundred dollar generator on Amazon that will charge the battery, that will then allow the battery to kick 20 kW out if it needed to or whatever,” which was really cool. It actually sounded like the concept for, like, an extended-range EV, but you were using it for, like, the battery for, like, the house. Did I make that connection right?

Chase Dowling: This is an excellent connection. I love this feature of the Core battery. It actually exists on a lot of our prototype hardware as well. This is such an important feature, so I’ll take a step back for a moment. So there is a generator port on the battery, and why? The value proposition of the battery to the customer is home backup, is peace of mind.

Texans lived through Winter Storm Uri, and the power was out for 4 days. And no matter what you do with a battery, there’s only so much energy in it, right? It’s only gonna last you so long. You can only ration that energy out for so long. You gotta be able to put more energy in to be able to use it to manage your cycling load.

But this is such a slept-on feature of the Core. I get so excited about it. What people are trying to do, when they get a backup generator for their home and they wanna make sure that their heating and their cooling is gonna run, they gotta size that generator to meet the demand of an AC pump, for example, you know, a 10 kW AC pump, a 14 kW AC pump.

And at that kind of power range, you need to get a pad-mounted generator that’s $12,000, $15,000 to meet that peak demand to turn that AC pump over. But if you ever, like, listen to how your AC runs, it only runs for a few minutes. The duty cycle of an AC is very short. And so what we can do with the 20 kW inverter on the battery is just push that pump over for a few minutes. And so long as you can charge the buffered-up energy in the battery at the rate equivalent to, like, your hourly average consumption, f— which on a home is, like, 4 kW, then you never actually run out of energy in the battery, and the inverter gives you that, like, oomph to get that AC pump turned over when you need it.

And a 4 kW genny on Amazon’s, like, 500 bucks. And so now what I need to do, if I subscribe with a Base battery, I pay my monthly fee, I get that discounted energy rate. I also get this generator port. I can get, you know, like, an unlimited duration of backup for 500 bucks for the cost of a portable generator to plug in.

And by extension, works with solar panels. The inverter can natively accept connectivity to solar panels, and a lot of folks don’t— didn’t realize that, you know, like, solar panels alone aren’t a grid-forming tool. They can’t back up a home alone. So just getting that inverter plopped on your house, that piece of power electronics, is such a huge power-up for all kinds of peripherals that you can attach to it.

Joshua Rhodes: Yeah. I mean, I was one of those Texans who lost power for 4 days too. I’m actually currently right now, like, I’m in Nacogdoches. I’m at my, my mom’s place, and she actually got a Generac in... She lives out in the country, and she got a Generac installed, like, 2 weeks before Winter Storm Uri hit. You know, lost power, but sailed through the whole thing.

Also burned 500 gallons of propane, which ain’t cheap. It worked. But you’re right, it’s like whenever that thing was running, it can only run at a minimum level so long, right? It can only run so low, and so I know it was sitting there burning, like, extra fuel that it didn’t really have to do if it were able to cycle and kind of buffer through.

And it’s really cool that the battery can do that. And so the value prop seems to be working out. I mean, it says, like, you’re currently is, you know, energizing roughly about 2 MW a day or so. Are you still on track for, like, a gigawatt by the end of this year? Is that, is that the goal or is that the stretch goal?

Chase Dowling: We set ambitious goals, but we set goals that are achievable, and we’re getting there. We’re a little over 600 MWh in the ground today. We won’t hit on a power basis a gigawatt till next year. We’re shooting for a gigawatt hour on the storage capacity. But we’re getting there, and it’s gonna be tight.

It’s been an exciting, exciting ride. That, that installation rate, 2 MW a day energized, that puts us at the top of the range. If you take utility-scale batteries and if you take what we’re giving to regulated utilities and what we’re bringing to the bulk power system as a bulk resource, if you take utility-scale battery developers, if you take a site, a 200 MW site, they take 3 years at best to get interconnected onto the grid, and you’re waiting those full 3 years for those 200 MW to show up.

And if you, like, divide up the time it takes to get those 200 MW online, that 2 MW a day that we’re energizing puts us at the top of the storage developers in Texas. Base is one of the fastest storage developers in Texas right now, and—

Joshua Rhodes: Yeah. If I do the math right in my head, which it’s easy math, so this is dangerous, you’re doing like 200 MW every 100 days. That’s a big battery every 100 days, every 3 months. You’re, I mean, you’re moving fast. What’s the limit now to moving faster? Is it manufacturing, in s— installing, customer acquisition, distribution, ERCOT rules? Like, would you wanna move faster, or is it just time? Like literally you’re just moving as fast as you can.

Chase Dowling: I think it is working on all of the elements of that flywheel simultaneously. On any given day, one thing may be the constraint. On any given day, it might be our ability to recruit enough trained installers in a particular geography, or on another day it might be part of our supply chain for our manufacturing that might be the constraint.

But then kind of being vertically integrated, we can work on these constraints independently, parallelize, increase the installations, like the net energization speed of the resources that we add to the grid simultaneously.

Joshua Rhodes: And when you say vertically integrated, I mean, you’re, you’re all the way down from manufacturing to, like, also the people who are installing these in homes, they work for you, right?

Chase Dowling: Correct. For Base, yeah. Through to the operations of the resource, the application that the customer sees, the maintenance of the installation of the hardware in the homes. And that’s actually an important piece when we go to our regulated utility partners that are looking to improve their peaking capacity in their portfolio. You know, like a regulated utility like Austin Energy, for example, needs more peaking resources on their system.

We facilitate a lot of these functionalities for them, and it’s just plug and play. Their ability to control the resource in the wholesale market, the ability to operate it like a grid-scale battery, just day one. Having control over each of those pieces allows us to offer that up as a resource to a regulated utility as well.

Joshua Rhodes: Okay. It’s a little bit more clear in, like, the deregulated space where you’re the rep and, like, you’re also bidding in ancillary services and things like that. When you’re working with a, with a muni or a co-op or other, are they controlling the batteries? Are y’all controlling the batteries? Is the arrangement different there?

Chase Dowling: Yeah, so for a regulated utility, they’re controlling the battery, and we’re almost kind of like EPC, but a very, like, well-instrumented EPC. So a regulated utility puts out an RFP, and they need peaking capacity, and they need it soon. And what are the options on the table? I could go out and get up a gas peaker.

I could go out and get a grid-scale battery. And as you know, a lot of these are hard to come by nowadays with the construction on the bulk power system. And what we’re able to do is we come up and say, “Hey, we take this utility-scale battery, we cut it up into residential battery-sized pieces. We help you. We build up a program with you to install it on your customers’ homes, and then we can give you the keys to that fleet. And the best part about it is that we can get you that 100 MW you need in 6 months, not 3 years.”

And that’s been a very attractive proposition to utilities that are facing acute peaking capacity needs on their system.

And so it looks like from utility to utility it’s slightly different depending on the problem they’re trying to solve. Say like El Paso procuring a fleet of Base batteries to manage a constraint on a particular substation versus CoServ procuring a large fleet of batteries to become part of their peaking, uh, resource portfolio.

In either case, the customer program that’s offered is co-branded with that utility. But we just simply hand the keys over to that utility through a control surface integrating into their EMS or ADMS, and they can facilitate the operations of that resource directly.

Joshua Rhodes: Well, that makes sense. I mean, one of the things about the energy sector writ large, I always kind of say, is like, if it doesn’t work in Texas, it’s probably not gonna work anywhere else since, like, a lot of folks kind of start and work in Texas.

You cut your teeth in Texas, so what lessons are you taking from Texas to other regions? Or have you found other regions that are maybe easier than Texas? What are you seeing elsewhere as you move into other areas?

Chase Dowling: Well, one of the markets that we’re going to right now, PJM, it’s all over the headlines that there is a significant need for capacity, and that capacity cannot be built fast enough.

So we’re just super excited to be stepping into that market with a new form of resource that can address those capacity needs. The lessons that I, I think that we have been taking away is building the muscle to build a resource that has never been built before at a scale that’s never been built before to solve a new kind of capacity problem.

The transmission system, the bulk power system, we spent 100 years building this giant synchronous machine, and we got really good at building it a certain way. And now with this, like, renewed voracious demand for energy on the transmission system, we need to find capacity everywhere. We need to put more dispatchable power generation wherever we can.

And so the lessons that we’ve been taking away from Texas are like a multitude. One, it’s like, how do you build up the warehousing capability? How do you manage truck rolls and device maintenance? How do you learn to work with the permitting authority in that geography? How do you integrate with that market or that utility? And exercising this muscle that works collectively such that when you show up to that new market, in one month, you know the list of problems that you need to burn down to start effectively putting that batteries on those homes and start energizing those resources quickly.

Joshua Rhodes: Yeah, that makes a lot of sense. But let’s turn to this paper that y’all recently put out, I think the beginning of September. It’s called “Flexibility Without Curtailment.” And so walk me through kind of the high-level executive summary of this paper, and particularly the title. What does that mean?

Chase Dowling: Yeah. I definitely wanna give credit to our partners for Piq Energy and Tom Nudell. They’ve been fantastic to work with on this paper, and it— they did a lot of that heavy lifting. And definitely credit to Tom for that title. That was his baby. But the title is getting at a contract that most balancing authorities in North America are beginning to realize needs to occur. We’re building these multi-gigawatt data centers that are being added to the grid, that, like, an individual data center, if it trips off grid, just the data center turning off creates material balancing and dispatch challenges for that balancing authority that needs to ensure stable frequencies, stable power supply.

So it’s kind of becoming accepted knowledge that, like, the data center needs to facilitate the safe operations of the data center. They become a responsible counterparty to it. And a lot of people have been talking about, like, well, they need to be flexible. They can’t just show up and operate however they please.

They almost become their own kind of resource on the grid. And when people think of flexibility on the load side, generally what they think about is like, “Oh, I can turn it down.” Texas, for example, has a history of a lot of steel mills being able to turn down when there’s severe shortages, and that was kind of a novel thing to add to the grid.

You know, we built a grid over the last century that just kind of assumes that load was inelastic. You designed the coordination of generation, dispatch, and transmission around meeting whatever demand was at the time that demand occurred, and there was no expectation that demand would be this fully equipped counterparty in the balancing of the power system.

And so that curtailment proposition, if you, like, dig a little bit deeper, in order for some of these data centers to curtail, their opportunity cost to curtail is tremendous. There was a recent paper, I don’t know if you saw it, by, uh, Farhad Billimoria and one of his colleagues, that looked at the value of lost load or the opportunity cost for certain data centers to turn down, and these numbers were upwards of $40,000 a megawatt hour, in some cases six digits, hundreds of thousands of dollars a megawatt hour to turn down.

If the only option was for a data center to turn down to ensure the stability of the grid, that hundreds of thousands of dollars of opportunity cost would be felt by ratepayers one way or another. And so what could we do to ensure that that opportunity cost doesn’t get dumped onto people who, like, we are privileged to pay for 4-cent-a-kilowatt-hour energy, right?

And that would just be a tremendous cost burden on ratepayers all over the country. So the core level is simply just add more resources to the grid, increase the operating envelope, and add flexibility to the grid directly. And that’s something that we showed in the paper where using this novel program that ERCOT has, the ADER program, which we could talk about, the advantage of these residential resources, these residential batteries, is because we can install them so quickly, speed to power is the name of the game nowadays, and so, like, this is one of the fastest resources to install.

And if we can install them at meaningful scales, those batteries aggregated at target substations can help facilitate the flexible operations of that grid and help make it more robust in the presence of these very large data centers.

Joshua Rhodes: Yeah, and I think my understanding for, like, a training data center is that it just can’t, like, stop for, like, a 15-minute interval, because if you wanna move all of those weights that you’re tuning from RAM to disk, it can take, like, 4 hours to, like, stop and then 4 hours to start again.

And so, like, for a 15-minute interval, it’s like an 8-hour interruption. The IT load is not inherently as flexible. I know that there are companies working on that, like Emerald AI and other folks, but at least I believe that that is kind of how a lot of that works. And again, I probably got the, the terminology kind of all wrong there.

But I think one of the things that I was really stoked about this paper was that it really pointed out that location mattered, right? Because these new large loads that you’re putting in places, like, they put an acute stress on particular pieces of infrastructure of the grid. The whole grid growing by 100 MW is, like, that’s just in a, a rounding error.

But, like, a couple hundred megawatts at this particular place, that has real implications for the system. So I was wondering if you could talk through those physics in hopefully relatively plain English. One of the things in their paper, you know, you talk about is if you put 100 MW of new load at Burleson Switch, which is, like, a particular bus, like, on the grid in just around the Dallas area, in the Oncor region. You put 100 MW there, what happens? What does the paper show that you’re trying to do?

Chase Dowling: Whenever you put a big piece of new load or new generation on a part of the transmission system, there’s a whole list of, kind of like a checklist of problems that you care about when you connect to this big synchronous machine.

But one of ‘em is, like, is there simply enough room on the transmission lines? And the way the TDUs and the way Oncor assesses whether or not there’s enough room on these transmission lines is they look at operating conditions, different times of year, and different failure modes. Those failure modes, we call them contingencies in the industry, and then they watch them.

They form what are called constraints on the system. Constraint is like a transmission line and a contingency. A contingency is like a power plant goes out or a meteor hits the Earth, and these sit on a spectrum of probabilities, right?

Joshua Rhodes: Hopefully the latter one’s at the tail end of that probability there, but okay, I’ll let you have it.

Chase Dowling: Super fun digression about solar storms, but it gets really interesting on the kinds of things that they’re monitoring on the contingencies. The short story here is that there’s only so much room on these transmission lines, and if I add a new big load, given that the system is coupled, if the load operates the way the load wants to operate, there may not be enough room on that transmission line.

Now a lot of constraint violations on the transmission system today are quite brief. Not all, but many are less than a couple of hours. And so when you add things to the transmission system, you affect a whole bunch of transmission lines all around you, not just like the one that you’re literally connected to.

So as you saw in the paper, if I add this 100 MW load to that spot, a whole bunch of constraints pop up, like, oh, this transmission line, that transmission line, that transmission line. And what we show is that when you put it in a spot, when you hit this transmission line, it doesn’t mean that like one extra megawatt of load at this data center site is one extra megawatt on every single one of these constraints.

It could be as few as, you know, half a megawatt or a third of a megawatt. This is, in the industry it’s called a, a shift factor or like the locational impact to all of the things around you. Now, that constraint, if it’s very far away, it might happen to be in a part of Dallas where there’s a lot of homes, a suburban part of Dallas where you can put a lot of batteries, where is really close to that constraint that cannot be ameliorated unless you were to increase the size of that transmission line or install new resources.

And those resources have like a mechanical advantage by being so close. One megawatt of injection from those batteries can realize 1 MW of relief on that constraint, whereas the data center perhaps a little further away, 1 MW of curtailment on that data center only realizes, say, like half a megawatt of constraint on that transmission line.

So as you saw in the study, there was an example data center in Burleson where a 100 MW data center, all of the constraints that it creates can be ameliorated by 80 MW of strategically sited batteries. And if you s— look closely, there’s like 10 to 20 MW pockets in a number of places that are all strategically dealing with the numerous constraints that arise.

And that’s kind of the short of it, what’s happening with the connection of the resource and what is preventing that resource from being operated safely under all the contingencies that ERCOT analyzes.

Joshua Rhodes: At the risk of getting too wonky here, please don’t answer anything that uses imaginary numbers, ‘cause even me as an engineer won’t be able to understand what you double Es do.

But you brought it up. This was 100 MW, like, additional load, but you only needed roughly 80 MW of resources to, like, effectively make that load okay to host. I mean, people might think of it as like, okay, if you put in 100 MW of load, you need at least 100 MW of stuff on the system, but you’re able to do it with less. How does 80 MW of resources allow 100 MW of new load?

Chase Dowling: Yeah, yeah, yeah. So if you look at the transmission system in Texas, there’s tens of thousands of buses where you can go and, like, install electrical hardware, and there’s not tens of thousands of buses that can host 100 MW of load.

You need the land. You need the high-voltage transformers. It takes a ton of space. It actually limits, like, where on the transmission system you can put these things. But the constraints are everywhere. They’re in the middle of the city. They’re in the suburbs. They’re in, out in the rural parts of the state where the transmission lines are running.

And you can place batteries physically closer to where the constraint is occurring, depending on where the data center’s being built. And so by very simple mental model that works is, like, by virtue of just being closer to where the electrical need is, not where the load was built, you can more effectively control the problem that’s arising.

It’s like I’m in a room, and the data center’s in the room with me, and we both need to shut off the light, and the data center is on the other side of the room, has, like, a stick to turn the light, and I happen to be right next to the light. It’s really hard to reach the light switch with that long stick, and I happen to be right next to it, and I don’t need to work as hard to turn that light switch and effectuate the control.

Joshua Rhodes: Okay, so one of the things I really also appreciated about this paper there is it didn’t stop there. It’s like you next go to a 200 MW case, and instead of less than 200, you actually need more than 200. You need about 300 MW to alleviate 25 of the 30 constraints. And to get to all of them, you would need like 1,200 MW.

So it was like the problem got exponentially harder as you made the loads bigger and bigger and bigger. And so, one, I appreciate you putting that in the paper to be realistic about it. Can you talk about, like, how did it work so well for that 100 MW? What became harder as those loads got larger?

Chase Dowling: Yeah. So there’s almost like two questions in here. Why does it work for some data centers, not others? And then why is there like a long tail? Why does it to— take such a large fleet of batteries to deal with all the constraints that materialize as the load grows? So with the first question, residential batteries aggregated at a load substation are not a panacea for all the problems, right?

Like if there’s a data center being built in West Texas, there simply aren’t enough homes in West Texas to aggregate a multi-hundred megawatt fleet of batteries. It depends a lot on like the local topology of the network, the available real estate to work with to put more resources on the system. It’s case by case.

But if you look at the data center map and where a lot of these systems are being constructed, that middle of the road, the 100 to 300 MW set of data centers, they’re getting built all around the exurbs of the major metropolitan areas, and a ton of them are getting constructed. And so there’s a ton of constraints that are gonna be able to be managed where there’s proximity to big residential communities where we can stack up tons and tons of batteries.

Now, is this gonna solve a problem out west of like Abilene, where there’s very small neighborhoods and not a ton of places to put residential batteries? Probably not. So one, it depends on the topology of the network and what’s available to work with. And then on the like tail of contingencies. Now, like the number of situations that the TDUs and ERCOT look at as failure modes on the transmission system are huge.

Like NERC has like this special ranking system for all the different failure modes that the transmission system can go through to the most extreme, where like our most important transmission lines outright fail, they fall down, they break. We saw a transmission line failure like that down in the Houston area not— about a year ago after a hurricane.

But those are exceptionally rare. And to deal with those constraints, it oftentimes severs whole parts of the system. And in those extremely rare occurrences when you sever that part of the system, you need to make up for all of that lost generation on both sides. And so to fully ameliorate that particular extreme constraint, you do need a ton of generation.

But back to that title, back to that recognition that there’s a realization that these enormous loads joining the system will have to form some amount of flexibility that can be offered to the balancing authority to deal with these extreme cases. I mean, this is kind of what SB 6 was getting after, where like in the most extreme cases, you gotta be able to help the grid from collapsing.

And you don’t need to spend a billion dollars to deal with the most common, the preponderance of the various failure scenarios where a breaker opens, a power plant trips, there’s some sort of problem. These problems happen daily on the transmission system, and they cause these shocks to price that we s— we all see on the grid status dashboard of the nodal price even just yesterday.

Those are things like transmission outages occurring, and breakers opening, and power plants tripping, and things like that. Quite common. And you can deal with a reasonable sized fleet of batteries that are much, much, much, much cheaper than a data center curtailing for several hours. You can deal with 80 percent, 85 percent of all of the constraints that are monitored, all of the contingencies that they map to, the very effective resource.

And so we wanted to show, which is really important, and not a lot of grid planners like think of the grid in this almost good enough way, but you can deal with a ton of the problems with so little work, with so little cost if you’re able to aggregate up these, these small batteries and manage the system more dynamically.

But as you point out in the paper, as you get up to those extreme ends, that’s kind of, I think, what’s on people’s minds when they think of like, what was SB 6 for? How do you deal with the most extreme failures in the transmission system that virtually never occur?

Joshua Rhodes: Yeah. That sounds like the 80/20 rule strikes again, right? You can take care of 80 percent of the problem with 20 percent of the effort or the resources or things. And so, I mean, I think that’s what your paper is kind of getting at. It didn’t take that next step, but it teed it up, I think, really well in terms of like, okay, we can aggregate these resources strategically placed to alleviate, you know, part of the issue, but it doesn’t take away the need that sometimes you just need to build new transmission. Sometimes you just gotta move more bulk power around the system. Am I summarizing that correctly?

Chase Dowling: This is totally accurate. There’s like a question of like, if I had just built more big transmission, maybe that’s an alternative to this problem here. But where all of the threads are converging to take a— another step forward, if we look at what the batch process is doing in Texas, the batch process is looking at data centers that are electing to be curtailable resources, provisional curtailable resources, and they don’t wanna have to do that. Sure. And if I’m signing up to be curtailable, that means I’m gonna do it all the time. I’m gonna have a large opportunity cost to do it. And we have this resource now, this resource that ERCOT can see in their dispatch mechanisms through the ADER program that we can build in less than 6 months to the data center that’s signing up for that risk of curtailment, oh, we can deal with most of the scenarios that you will— can be confronted with when being forced to curtail.

Now, yeah, there’s those extreme emergencies where for the safety of the state’s grid, we need to turn some things off that y— the only way to deal with it is to just build a ton more extremely expensive transmission, extremely expensive generation on both sides of a failure mode.

But if I have multiple hundreds of gigawatts of data centers electing to be curtailable, they’re taking on a lot of risk there for their business, and we can come in with these resources strategically and prevent the preponderance of that risk that they’d be taking on.

Joshua Rhodes: It sounds like, and this is probably work that’ll happen in the Lege coming around, is like, so you got the Batch Zero process, you got the PCLR, and I think what most of these loads want is actually a combination of both of those, so they’re able to, like, be flexible but have the generation also interact.

It sounds like you would need that combo, which may come in the Batch 1 process. I wanted to talk about these assets, you know, being able to allow more load, like who should be paying for that? Is there a business model you have or that you could develop that would allow the cost of these strategically placed assets to be borne by the data center who wants that 100 MW? Like, how would that work out?

Chase Dowling: There’s like two pieces to it, but this is where those threads in the batch process that I was talking about combine. If I’m a data center and I’m joining the batch process, and in order for me to get connected faster, I’m gonna elect to be curtailable, virtually any alternative form of generation to curtailing at hundreds of thousands of dollars a megawatt hour is good news for me.

And so the question on my mind is like, what generation can I pay for to prevent that curtailment? What causes the curtailment and how can I prevent it? And what we’re showing is that, like, the strategic siting of these resources can prevent that curtailment, and we can build them fast and cost efficiently.

And so that sets up a natural commercial transaction where the data center can pay for an aggregate fleet of batteries at these target substations to prevent their curtailment in operations. And so in this case, the data center would pay for the batteries. And there’s kind of like this fabled win-win-win-win-win-win where the data centers that are struggling with just general public concern over their impacts to the grid can pay for a resource that directly benefits the rate base, right?

We’re gonna put these batteries on home o— homes that are, you know, at risk of outage. Now we can offer you a tool that provides outage protection while also being able to recruit all those resources and prevent the very expensive curtailment of the data center, which would eventually land back on a ratepayer’s energy line item, right?

And then outcome there is that the grid’s more resilient, reliable, and data centers paying for that capacity that can deploy very quickly. So that’s what the commercial transaction would probably look like. The piece here, kind of the challenge and what the ERCOT is proposing as the fourth phase to the ADER pilot, is having these resources, these aggregations of batteries modeled and dispatched at transmission substation level so that they can be recognized at the transmission planning phase and in the operational phase when these constraints actually materialize.

Joshua Rhodes: That’s a very wonky point, but I think that’s really important, right? Because the location of these resources matter, you gotta see them in the SSWG files, the PQs for the thing, for the grid topology files. You gotta be able to see them, you gotta be able to model them. And to just pull a little thread on kinda what you said, the part about, like, the data centers and the PR, public relations, that is not great right now.

The value prop is more about just reducing loads. Like, it— you’re actually putting infrastructure at people’s homes. It’s not just, like, nebulous, it will reduce your bill, whatever, add it all together. It’s like now there’s this box on your house that gives you power whenever the grid goes down. Running short on time, so zooming all the way out, we got a lot of data centers coming to Texas, a lot of large load.

How large can this concept realistically get? Have you looked at that? Are you able to extrapolate from what you’ve done? How big could you go if you didn’t have annoying things like supply chains and time to deal with?

Chase Dowling: Yeah. Yeah, yeah. So if we’re looking just at Texas, the question is what is the opportunity space for storage acting as an energy resource or an ancillary service resource, or now, like, additionally as a transmission resource?

And backing me into a corner, no one is building batteries in a fashion as a transmission resource today. There isn’t quite, like, a market for that yet.

Joshua Rhodes: I don’t think you can. Like, transmission can’t own generation, right?

Chase Dowling: Right. But it’s gonna take us 10 years at best to get these 765 kV lines built to improve the availability of the transmission system, make it more robust.

I think the opportunity is quite large in Texas, definitely on the order of gigawatts. But to spread the good word of Base just a little bit, if you humor me, like, I think the aspiration of the company is we see these distributed energy resources and just the proliferation of power electronics onto the distribution system, a means to help electrify the entire world more effectively.

And so we see the upsize, the volume, how big can this go, to be extremely large. We built grids designed 100 years ago, and now we have the ability to reimagine how that grid is built. And so we’re viewing the upside as quite large, quite unlimited in terms of what we can build on the system today.

Joshua Rhodes: Awesome. Love to hear it. I think this is a good place to stop. Chase Dowling, thank you for coming on the Energy Capital Podcast.

Chase Dowling: Thanks, Josh. It was great to see you.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Federal Judge Rules Against Trump Administration Over Canceled Clean Energy Grants | Inside Climate News

A Trump-appointed federal judge ruled the Environmental Protection Agency’s termination of the $7 billion Solar for All program (of which Texas received around $450 million) was unlawful. That’s because the One Big Beautiful Bill Act repealed only unobligated funds, and these grants were already obligated.

The ruling means the EPA will have to release the funding, said Nick Torrey, senior attorney at the Southern Environmental Law Center.

“We have seen this administration try to resist and appeal and fight,” Torrey said. “They don’t have any excuse for sitting on this money anymore. They have to get this money out.”

The EPA argued the court lacked jurisdiction over the plaintiffs’ claims and that the claims were meritless. The federal agency told Inside Climate News it is “reviewing the decision and considering options for appeal.”

Gov. Greg Abbott broadens moratorium on data center approvals to include environmental permits | Texas Tribune

Earlier this week, Gov. Greg Abbott ordered the Texas Commission on Environmental Quality to stop issuing data center permits until the ERCOT and Texas Water Development Board audits are complete. That covers the behind-the-meter projects that bypass grid approval and applies to parts of the state outside ERCOT that his August grid moratorium missed.

“Because the information sought by the PUC, ERCOT, and TWDB is necessary to make informed decisions by each of those agencies, no other state agency shall move forward with regulatory approvals related to data centers until this information is acquired,” Abbott wrote in the letter to TCEQ Monday. “This action is consistent with my whole-of-government approach to ensure Texans’ natural resources and way of life are protected.

Read more

ERCOT recently took a step much further than other system operators have been willing to take; it sorted the interconnection queue between load that is real and load that is unlikely.

ERCOT sorted the queue into tiers and shared numbers, all true, that large load requests totaled about 474 GW (with around 90% of the requests from data centers, PDF Link). ERCOT placed 205 GW of that load into the batch zero study, classifying 66.4 GW, or 204 the projects as base load. Of that, 158 projects, 127.9 GW, met the qualification to be included as a studied load. And only about 3.9 GW of that load counted as large load peak consumption.

Late in 2025 Exelon applied a filter to its own queue of data center load requests with firm commitments, and found the portion of high-probability dropped to 40%. Reviewing 18 GW of power need at the end of 2025, Exelon Chief Financial Officer Jeanne Jones and her team saw the demand drop to 11 GW. The filter was a requirement to sign transmission security agreements backed by collateral and committed revenue and shortfall payments to be considered real.

That gap, the one ERCOT revealed with batch zero and the one Exelon calculated, is what we in the industry now call bragawatts. That is, announced capacity that may never get built. While the word captures the imagination (it is quite catchy), it isn’t a true reflection of what is actually going on. Bragawatts are not lies. Bragawatts are a predictable result of a rush to get an option on scarce grid capacity. A queue position is not a lie.

Read more

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Land Commissioner Buckingham Announces Push for New Energy Production on State Lands | The Texan

The Texas General Land office will open a request for information about developing geothermal, small modular reactors and natural gas across the state. Land Commissioner Dawn Buckingham sees these technologies as “very different approaches to the same challenge: producing dependable power right here at home.”

In a press release shared exclusively with The Texan, Buckingham said that “Texas built its economy by putting our natural resources to work, and we cannot afford to stop innovation now.”

“Our state needs dependable energy to power homes, businesses, manufacturing, and the next generation of American industries. We have an opportunity to look beyond traditional energy sources and develop the resources and technologies that can keep Texas powered for decades to come,” she said.

ERCOT to survey more than 400 data centers as part of Gov. Abbott’s audit | KERA News

The state’s power grid managers plan to launch a survey of 461 data centers’ water and energy usage as part of an audit ordered by Gov. Greg Abbott…

The survey’s participants include 247 large data centers, classified as projects that are requesting at least 75 megawatts of power from the Texas grid — enough to power 18,750 Texas homes during a hot summer day or cold winter night. It also includes 214 “medium” data centers, which are requesting between 25 and 75 megawatts of power from the grid.

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Michael Webber’s answer is that Texas has run this experiment. CREZ, the Competitive Renewable Energy Zone program finished around 2014, was primarily 345 kV and lowered costs, cut emissions and improved reliability. His case for 765 kV is right of way: more capacity per corridor means fewer corridors, and corridors are what landowners object to.

The same answer runs through most of what is moving on the grid. On this week’s Energy Capital Podcast, Joshua Rhodes talks with Webber, a professor at the University of Texas at Austin.

• The case for AI: Anthropic, OpenAI and xAI leaders called for a global slowdown in September. Webber says nobody has explained what the technology is for. “The case has not been made strongly.”

• Who is resisting, and why: degrowth politics on right and left, a youth movement against data centers, and law firms pushing associates toward AI while the partners who would have trained them work remote. Webber reads the water-and-noise objections as displaced anxiety about AI.

• Where the gas goes: a bigger grid lets Texas sell gas at $8 to $15 rather than burn it at $3, and lets Houston draw West Texas solar instead of adding gas plants to its airshed.

• Hormuz: about 20 percent of world oil moves through the strait, plus fertilizer and chip inputs. US diesel averaged $6.06 a gallon on September 11. Texas will be fine, Webber says; Bangladesh and Pakistan will not.

• Affordability in November: electricity bills creep up through distribution costs, transformers and wildfire hardening, while fuel prices move by the day. Webber expects an anti-incumbent mood.

• Scarcity and abundance: US electricity demand was flat for 20 years and is growing again. Webber wants data centers treated as a way through scarcity, not its cause.

• Plus: why the headline numbers frightened everyone inside six months, what the next six months hold, and why the grid needs helicopter pilots.

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Chapters

• 00:00 – Introduction

• 01:03 – Where Texas is building fast, and where it is not

• 02:19 – Why the data center mood flipped

• 05:18 – The AI slowdown letter

• 08:45 – Why younger workers are pushing back on AI

• 12:32 – Junior lawyers, junior engineers, and mastering the fundamentals

• 16:42 – Whether energy for AI is a social good

• 19:26 – The case the hyperscalers have not made

• 21:51 – The argument for 765 kV

• 26:34 – West Texas solar and Houston's peak

• 28:54 – Hormuz, molecules, and what Texas exports

• 33:00 – Affordability heading into November

• 39:05 – Scarcity, abundance, and a drama-free summer

• 42:02 – What the next six months hold

Resources

People & Organizations

• Joshua Rhodes (LinkedIn)

  • Webber Energy Group (Website - LinkedIn)

  • IdeaSmiths (Website - LinkedIn)

• Energy Capital (LinkedIn - YouTube)

• Michael Webber (Website - LinkedIn - X)

  • LBJ School of Public Affairs (Faculty page)

  • Walker Department of Mechanical Engineering (Faculty page)

• Kay Bailey Hutchison Energy Center (Website)

Company & Industry News

• Regulators approve controversial southern 765-kV transmission line

• Texas grid expansion splinters conservatives as data center backlash grows

• Facing an estimated 474 GW of interconnection requests, Texas hits pause on data centers

• The AI industry faces a bipartisan grassroots fight

Books, Articles & Filings Discussed

• Economic impacts of 765kV transmission development in support of Texas and Houston-area reliability

• ERCOT - Trending topic: 345-kV and Texas 765-kV strategic transmission expansion

• ERCOT - Reliability plan for the Permian Basin region

• PUCT - Approval of the first extra high voltage transmission lines in the ERCOT region

• Judges recommend regulators reject proposed 765-kV line

• Top regulator recommends remanding transmission project to administrative law judges

• Costs and emissions reductions from the Competitive Renewable Energy Zones wind transmission project in Texas

• Anthropic, OpenAI CEOs call for slowdown in AI development

• Using AI, mathematicians find hidden glitches in fluid equations

• EIA - Strait of Hormuz is chokepoint for 20% of world’s oil

Related Podcasts by Energy Capital

• Build Fast or Fall Behind with Michael Webber

• Texas competes on everything except transmission

• Inside the PUC’s Cost-Allocation Overhaul with PUC Chairman Gleeson

• What the Sierra Club wants from the Texas grid

• Texas Got Tested, Grid Stayed Upright

Related Posts by Texas Energy & Power

• Data centers say they pay their way; Texas will hold them to it

• More Generation, More Transmission, More Load, More Challenges: Texas Grid Roundup #90

• A Tale of Three Performance Reviews: Texas Grid Roundup #94

Transcript

Joshua Rhodes: Hey everyone, and welcome back to another edition of the Energy Capital Podcast. I’m really excited to have Michael Webber back. I think we’re probably gonna get on some kinda six-month rotation with him just to kinda talk about all things energy in Texas, ‘cause there is never a shortage of things to talk about related to those.

But for those who may have not seen the first episode that we’ve had about six months ago, we’ll put that in the show notes. But Michael’s a professor at the University of Texas at Austin, where he’s a Sid Richardson Chair at the LBJ School of Public Affairs, as well as the Cockrell Family’s Chair in Mechanical Engineering in the Engineering Department.

He’s also the former CTO at Energy Impact Partners, a former Chief Science and Technology Officer at ENGIE in Paris, and the founding partner of IdeaSmiths. Since then, has been— is now running an energy opinion column regular every couple weeks for the Houston Chronicle. His work sits at the intersection of energy, engineering, policy, and commercialization. Michael Webber, welcome back to the Energy Capital Podcast.

Michael Webber: Thank you. It’s always fun to have a chance for a conversation with you.

Joshua Rhodes: For sure. So about six months ago, you know, one of the big themes in the podcast when we were talking was that Texas needed to build faster or kinda fall behind, or one of your big things was Texas needed to build fast or fall behind.

So looking back since then, do you think we’re building fast enough? Or are we falling behind? Challenges changed? What’s really changed in the last six months?

Michael Webber: We are building quickly on some things. We’re building new power plants, especially solar and some power capacity like batteries and a little bit of wind and gas.

So we’re doing a good job building new sources of power. Doing a pretty good job building load, new factories, gigafactories, advanced factories or data centers. So that’s a good news story in terms of our ability to keep up with things. We are not as fast today at building transmission, although we have been fast in relatively recent history, so I’m optimistic we can do that again.

And we’ve had issues building gas pipelines and sometimes water facilities we’ve been slow at. So there are places where we have a lot of success on the power side, some success on the gas infrastructure side, but also some shortages on transmission and other things. So it’s like we got a mixed record, but still pretty good.

We’re better at it still than anywhere else in the United States and almost as good as anywhere in the world.

Joshua Rhodes: Absolutely. Are there two or three developments in the past six months that have maybe has challenged your view the way Texas is headed? You have any idea what they’d be?

Michael Webber: Yeah. The two big political things that have emerged that I see is sort of a anti-development or degrowth movement on the right and the left politically around data centers and transmission.

So we’re seeing non-traditional political bedfellows in opposition to getting some things done, so that feels relatively new, especially the flipped opinion on data centers. That’s gone from very exciting to data centers are gonna pay all our property taxes and save the world, to now a lot of suspicion and concern around data centers and also the environmental impacts or anything else.

So a lot of flipped mood on data centers, some of that’s rippled over to transmission lines. So that has changed. I haven’t really perceived that to happen as much for batteries and solar. We’ll see if that happens there as well. So some changes in the last six months since we’ve spoken before that I really didn’t see coming.

Joshua Rhodes: The conversation really kind of went pretty quickly from how do we attract these projects? And so I’m talking about data centers, like, how do we attract these projects to, can the grid actually accommodate all of this stuff that’s gonna come to, wait, do we actually want all that? Do we need to slow this down?

And that’s really kind of happened over the past kind of six months. What do you think is really happening there to really shift something so big, so fast?

Michael Webber: I think there are so many things happening, it’s hard to fully digest in real time what’s going on. But part of it, the pace of construction and the pace of the headlines is really jaw-dropping.

The headlines especially, and I don’t believe that we’ll build anywhere close to what the headlines say. So if we put numbers on it, data centers might require over 400 GW of new power. You’ve talked about that on your show several times already. I don’t believe we’ll build all that. We might only build 10 percent or 20 percent.

Even 10 or 20 percent is still a lot, but it’s really just incredible headlines. And so that has freaked people out, like, whoa, that’s a lot. Can we really do that or not? And we’re already concerned maybe about reliability of the grid or cleanliness of the grid or cost of the grid, and then you add in 400 GW of headline load, that is a challenge.

So I think that’s part of the change, just the numbers and this kind of this race to get things built has changed things. Another thing that’s changed is more and more sort of blinking red lights about whether AI is good or bad for humanity. I think there’s more concern about the ethical implementation of AI.

Will AI be good because it will help us get pharmaceuticals and cancer treatments, or it will be bad because it will lead to the devastation of the planet and the world? So I think we’re confronting the ethical sort of lack of guardrails on AI at the same time. And then there’s a tech villainy, like the tech villains and the oligarchs and the big companies, so a lot of suspicion around the companies.

So there are a lot of factors converging all at once around power, and I think we mentioned water, noise, and light, all the other issues. The headlines, concerns about the people, the individuals or the companies that are implementing AI, it all converges together, and now we have a campaign afoot with major races underway with elections already November.

And so it’s a campaign issue, and that means we’ll give more attention. So all these things are happening now in a way they weren’t six months ago, and I feel like that’s bringing a lot of attention to it.

Joshua Rhodes: Yeah, I mean, just recently as we’re recording this episode or kind of over the weekend, some of the big AI companies just kinda released a letter, yet a letter originally was coming from Anthropic, but signed on or at least, you know, given some cheerleading by OpenAI and even xAI to slow down, calling for a global slowdown in AI development.

You’ve had folks calling for this for a long time. Like, you’ve had a bunch of folks like talking about like the dangers of AI and other types of things, and we’ve had calls to slow down before, but we never have. But w— now we’ve got this other one. One, do you think this will slow down data center development at all if we slow down, like, you know, the development of AI?

Or do you think this is kinda like some of the previous ones where we’ll say we should slow down and then not slow down?

Michael Webber: I feel like this call for a slowdown is different because it’s internal. It is from the AI companies. It’s not the outside ethical watchdogs who are saying, “Whoa, you guys need to slow down.”

It’s people developing going, “We need to slow down.” It reminds me of the Manhattan Project and developing nuclear weapons, where there was a moment where the scientists basically came together and said, “Good God, what have we done? We’ve unleashed this new capacity that could end all of humanity.” And there was this really dark realization of that.

And this AI letter or this internal AI call to slow down its development reminds me of that, where they’re like, “Good God, what have we done? We’ve created this new capacity, and is this good or bad?” And frankly, I don’t think you can slow it down. I think the genie’s out of the bottle, so I think it’s too late.

However, maybe we can take their warning sign seriously, and I think it is serious, and it makes me wonder, what do they know that we don’t know? Makes me think that there’s something they are aware of internally that hasn’t made it to the news yet. So we probably can’t slow that down, but we could speed up the regulations, and we could speed up other things.

And so with nuclear weapons, once they were developed, the genie was out of the bottle. There was a race for other countries to get it. We couldn’t really stop it. Once the knowledge was available, the knowledge was available. It’s hard to go back to ignorance once you have knowledge. But we could speed up the development of strong international institutions and watchdogs and inspector groups and treaties.

There are other things we could do that would make us feel safer. It took decades, frankly, to feel safe. It took things like mutually assured destruction. These are horrible phrases. Maybe we need mutually assured AI destruction or something. But I doubt it we’ll be able to slow it down, but maybe we can speed up these other things.

And I would say if the internal experts are saying this is serious and we need to take it seriously, I think we should listen.

Joshua Rhodes: So what do you think the name of the movie’s gonna be about this? It was Oppenheimer

Michael Webber: for the nuclear scientist. Yeah. It was American Prometheus or something. What was the name of it?

Right? The person that stole fire from the gods. I r— can... I can’t remember. I’m mixing my different Greek mythologies. But I feel like there’ll be some movie about this for sure. There are already documentaries emerging. I don’t know if it’ll be about the character or the person, is it Sam Altman or someone else, or is it about the industry as a whole.

But the fear with World War II and weapons development during and after World War II was bad countries would have nuclear weapons, but now we’re not talking about countries. We’re talking about companies or individuals. It’s a little bit different in terms of who is developing, who has access to it. And I feel like that concern is part of the context that people are absorbing and expressing angst.

Like, AI, like AI as a tool, it’s really handy. I use it in my day to day life, but by the way, it might lead to the end of humanity, or it’s really bad for the environment. And so I think it’s, like, all wrapped up at the same time. These concerns from the AI tech leaders aren’t gonna make it easier to do it. Hopefully it’ll make it easier to develop the guardrails. I

Joshua Rhodes: mean, do you think, you were talking about genies out of... Genie is out of the bottle. Genies typically don’t go back into bottles, so we’re probably gonna, you know, continue to build this stuff. Yeah, I mean, that was some of the pushback. A long time in AI is, like, the last year, last month or so.

But, I mean, one of the things is, right, around some of the pushback against, like, data centers and siting is more than just about the infrastructure that’s in your community, but it’s about the thing that it’s creating, right? The AI. Is the AI gonna take 50% of white collar jobs away or other types of things?

Sometimes it feels like that’s what people feel like is the only lever they have to pull, right? Is to, like, push back against, like, this infrastructure. And so you hear these stories about, like, different firms and things around, like, you know, the older folks in the firms are maybe pushing for more AI use, and it seems like it’s some of the younger generation that’s kinda pushing back against, like, some of the AI use.

Like, I haven’t seen people pushing back against AI use in college. I feel like they’re using it as much as they possibly can, but maybe that’s a separate sphere. But, like— You... Different use case kind of.

Michael Webber: Yeah. This is fascin— Yeah, so there was a New York Times article a few weeks ago about how younger generation is among the loudest activists fighting against data centers, so there’s a movement.

It’s an anti-authoritarian movement. You know, every youth movement has some anti-authoritarianism structure. They don’t wanna be told what to do by other people, so now it’s around data centers. So there is a youth movement against data centers. You and I have been part of conversations with students we know who’ve been interns in the firms.

Elders are pushing AI, and the junior members of the firm are resisting that, which kinda jinks with what we find at the university environment, is students are using AI comprehensively. By that I mean every student’s using AI just about. They might not use it for every class or every assignment, but it shows up a lot.

So I look at younger students as AI natives who use it quite frequently, yet it seems like a lot of resistance to AI is also by younger generations. So I can’t quite square that circle. I don’t know what’s going on, but I think it reflects a variety of concerns around control and who gets access to what.

Does this democratize access to intelligence? Is this consolidated control around a government? You might be suspicious if the government has control. You might be suspicious if it’s the five oligarchs or the magnificent seven or whatever names we have for the companies and individuals. It’s kinda messy right now as people are finding their way.

I think it’s triggering every concern that people might have, so elderly people who retired in the rural areas might not like the way data centers are disrupting their way of life. Younger students or younger career entrants might be worried about AI taking away their power or sense of control. Other people might not like it because of who gets the money from all the AI.

Like, it might take my job and make someone else rich, and that person who gets rich might get even richer. So it’s like triggering every concern. It’s like a uniquely unifying part of society. Unifying in that a lot of people are resisting it. You and I have talked before about, we wonder, is this gonna undermine the ability for people to master the fundamentals of engineering and sciences, or just make it easier, right?

So we all have some of the concern. It doesn’t matter who you are, you’ll look at AI and go, “Yeah, there’s something in there that’s triggering some fear,” right?

Joshua Rhodes: There’s a couple things. So you know, you and I were talking to... Or hearing from the student who had the inter— who had the internship over the summer, where they were talking about the older folks wanting it, the younger folks not.

I was thinking through that. There was a couple things were kinda coming up. One is like, in this case, they were architects, right? And it felt like the younger folks, they wanna be architects, not computer scientists. They actually want to, like learn the craft and do the thing. And then there was like, typically in those types of environments, you have, like the younger folks doing a lot of the work, and then you have the older, more senior folks who come in and ask questions and like point out and say, “Why’d you do this?”

Or, you know, “Change this and that and the other.” And they’re expected to know what they did, right? I mean, there was no way to do it without knowing what you did. But now with some of these tools, you can do it without knowing what you did, which can be an awkward conversation if, like your superior’s asking you, like, “What did you do here?” Have you seen any of that with students?

Michael Webber: Yes. So I heard this similar a couple years ago in law firms, but it’s almost from a different sort of context. So law firms have two contexts that have changed in the last few years. One is the rise of AI and pressure to be more productive. And if AI makes you more productive as a lawyer, then you should use AI.

It’s like better for the client, better for everybody, better for the billable hours, for the firm, everything else. But also with COVID and beyond, not as many lawyers are working in the offices. A lot of them are working remote, especially the senior partners who are often wealthy, have a second house at the coast of Cape Cod or whatever.

So you have the senior partners working remotely more often and putting pressure on everybody to use AI more often, but they’re not there to mentor the junior partners. And so the junior partners are not getting the mentorship. A way to become a good lawyer is to get a lot of interaction with senior partners.

You can learn from their mistakes, you get a lot of guidance. And if the senior partners are not in the firm or not in the office because they’re at their coastal home or whatever, and they’re putting pressure to use... on you to use AI, so you’re not even mastering that through your own sort of suffering through the different cases and precedent-setting decisions that have been made.

That is like a double whammy for junior lawyers. So I think like the rise of remote work and AI is a double whammy for entry-level lawyers. And now that kind of thing might be happening for engineers, maybe not as much the work from home thing, but AI, where putting pressure on junior engineers and firms or elsewhere to be more productive, to move faster, maybe even in the research environment. But there’s something about taking the time to master the material that will lead to fewer mistakes, we hope.

So AI makes it easier to learn, makes it faster to learn, but might make it a little harder to master the fundamentals because you’re not as close to it. It’s a magic black box. However, the AI might have mastered the black box, like it might have mastered the fundamentals, and so actually mistakes might go down because there’s some calculations that are pretty standard across different settings, so this all might be fine.

And I don’t think I know, and I think we’re in that sort of awkward adolescence of AI where we haven’t quite gotten on the other side of it, so we don’t know if it made it better or worse. But I do worry that AI will make us think we’re smarter while making us dumber. So that’s the risk we have, right?

That we will have bridges and buildings fall down because we didn’t know we made a mistake and AI didn’t catch it. But we thought we were smarter because we were able to design the bridge or building faster. And so that’s like kind of this metaphor, yeah. And I know this is sort of an energy podcast, but it’s hard not to talk about those other elements because this is actually the anxiety that people might be having, but they don’t know how to express that, so instead they say, “Well, I don’t like the energy, water and noise and light and everything from the data center,” which is also a concern.

Not to say that those aren’t real concerns. Anyway, so I feel like you and I are grappling with this as instructors and mentors and researchers, like, okay, when is the AI tool appropriate because it’s accelerant and it’s a good check on our work? Where is AI inappropriate because it undermines the sanctity of our analysis?

Like, does it make our analysis worse or better? And that will come a time, I think, and we used to say the same thing going from slide rules to calculators and from T-squares and drafting tables to CAD or whatever. So these kind of technology transitions have happened. This one feels different because the pace feels faster and because it’s not replacing a tedious task, it’s replacing an intellectual task, a mental task.

So we’ll see. I’m apt to be an optimist on this, but it makes me nervous, frankly. I’m nervous about whether students in my classroom are learning. It makes me nervous about whether the students in our research projects are learning as well.

Joshua Rhodes: The pushback I always have against like that calculator slide rule thing is like, you know, that’s a deterministic thing and, you know, it doesn’t matter how you do it, the answer like is gonna be the same, you

Michael Webber: know? There is a right answer, and we know if it’s right or wrong.

Joshua Rhodes: Yeah, there is a right answer. Every other revolution just got you information faster, and this one is actually trying to, you know, approximate synthesizing that for you, which is definitely feels new to me. But yeah.

Michael Webber: Yeah, it’s a ca— Like if you do a calculator, you know, if you put in four times eight, it gives you the same answer every single time.

But if you ask an AI agent, platform, bot, whatever it is, a question, you might not get the same answer every time because there’s some natural variability by design. And so there’s not a predetermined fixed answer that it will give you, even though you and I might know what the right answer is, we could test it.

So, and also has hallucinations and everything else. So yeah, it’s not deterministic in the same way, and that’s one reason why this transition’s gonna be different.

Joshua Rhodes: So one of the things in the last time I taught my data analytics class is we actually trained a very small large language model neural network, and you could watch it go through like there was some randomness in the number of like, I’m blanking on the terms now ‘cause it’s been a while, but it would trim off pieces of the model as it was building, like randomly just to try to like add some of that stochasticity in there, like, so it’s not always getting you to the same thing.

I’m butchering that, but anyways, it’s one of the reasons why you never get the same thing. But we’re using this stuff. But this is an energy podcast, but it’s one of the things is like the big story in energy has been AI, but then, you know, now it’s kind of a whole like societal story and become a, like a political story.

Michael Webber: It’s worth asking these other questions because it does tie into is the energy provision or the energy made available for AI going to be a social good or not? And with all the other expansions of the energy system for the last 160 years, there was a very clear and obvious societal good that came out of it.

You got better steel or you got better railroads, you got cars and personal mobility, or you got heating and cooling a lot. Like, there are all these things you can say, “Yes, this expansion of the energy system gives me something that’s very obviously good that I crave.” The expansion of the energy system to serve AI is more nuanced because there are some certainly good things in there.

Like it makes my searches better on the internet. I can do a little bit of analysis here and there, and maybe it can help us accelerate the development of treatments and vaccines and everything else, but it has all these bad things with it too. And the societal good is not as obvious. The societal bad is really hanging in there.

The prior expansion of energy had a societal bad, really land impacts or water pollution or air pollution, but they were less visible or less obvious, or they’re far away, like the energy I’d feel in my home and that felt good, but the pollution was somewhere else. But with AI, we don’t have the separation of the downside physically the same way.

Like we’re just like, we see it with our algorithms or human. So I feel like this is part of the challenge is every prior expansion of energy came with obvious personal and societal good. This one, because of our suspicions, concerns, whatever it is, our skepticism about the companies and the people makes it more of a discussion, for sure.

And I think there’s maybe responsibility on AI companies to explain what the social good is, and not just better cat videos. You and I have joked about some of the tweets out there. They’re gonna use AI, a major airline now said they’re gonna use AI to extract more money out of travelers by fine-tuning their preferences, and that didn’t feel like a simple supply and demand argument of we’re gonna use price changes to fill our planes to get better performance for everyone.

It felt more like we’re gonna use everything about you to find your weak point and your vulnerabilities and manipulate you. This was something that a CEO of a major airline said. That doesn’t build a lot of confidence. And sorry, okay, what’s the social good here?

Joshua Rhodes: We were just both at the KBH Energy Conference this past week and ran into...

There was a bunch of different hyperscalers and things there, and we ran into one and were just having a conversation, and this is one of the things that I was a little blunt. I was like, “We’re waiting for you to make the actual argument for th—” Like, there’s a bunch of pushback. Why haven’t you made the value proposition? If you have one, why haven’t you made one?

Michael Webber: And clearly they believe there’s one. The level of CapEx is so high, so they believe that there’s something there, and maybe it’s just because they think there’s a lot of money to be made. But, like, we’re ready to be told or, you know, at least give them their best shot to make their pitch, right?

So I think we can be a willing audience for that. Okay, make your pitch why this is good. I’m listening. But in the meantime, we’ll fill it with our own stories.

Joshua Rhodes: Yeah. I mean, do you think they’re saying anything? You think good things are being said about it, but we’re just ignoring them because we’re, like, so fixated on the initial downsides?

Michael Webber: There’s some— I mean, there have been some pretty interesting mathematical sort of advances in the last few months. There’s been some development of better understanding of discontinuity in the Navier-Stokes equation. By the way, almost no one cares about the Navier-Stokes equation, but it’s a deeply important scientific principle of fluid mechanics.

It’s kind of cool that AI can help find a point where it doesn’t hold up the way we thought it did. There have been development of vaccines have been accelerated, so th-there’s some pretty interesting scientific stories and some pretty good advances. It gets coverage. There’ll be a news article and kind of people forget about it the next day.

So it’s not like there’s a steady drumbeat of successes, and that’s part of the problem because we feel the impacts today, but the successes come tomorrow. And so there’s a real mismatch in time between the negative impact and the positive benefit. There’s also a mismatch in location, at least for the data center.

The data center will impact a location where it’s built, and you and I might not feel that if we’re not living next to the data center, but we might use the AI tool or platform. So there’s mismatches in time and place for this, and that’s part of the problem. But I think the mismatch in time between the impact is felt today, the risks are felt today, but the benefits will be enjoyed tomorrow, that’s a problem.

And it’s almost like the opposite of climate change, where the benefits of energy are felt today, but the downside risk of climate change are felt tomorrow. So we have like a flipped problem with AI. And interestingly, AI could be an accelerant for solving climate change if we can do it. So I feel like the case has not been made strongly.

There are some positive examples. They’re here or there. They get a one-off story. They’re not going viral the same way as a noisy data center might, and that’s part of the challenge.

Joshua Rhodes: Yeah. Bringing things back to kinda like more core of Texas energy and infrastructure, one of the things we will need to build infrastructure to build the data centers, to site the data centers in terms of we’re gonna need to build transmission, but not just for data centers.

In fact, we’re still now trying to figure out how much for the 765 transmission lines that we’re gonna build in the state. I saw the Public Utility Commission just the other day approved another line. I think there’s two out of the three paths that are going out to the Permian have been approved, and the other one’s been kinda kicked back for reanalysis.

You just wrote an op-ed piece about transmission 765, like, what are you looking to make?

Michael Webber: The short argument I made is that we’ve expanded the transmission system before. We did it with CREZ, the Competitive Renewable Energy Zone program that was really launched in the 2000s and then came to fruition around 2014 or so.

We expanded the grid. It was good for us in terms of lowering the cost, improving reliability, which is not something people believe easily after Winter Storm Uri, by the way. But it improved reliability, lower costs, and lower emissions. Like, it really helped enable the rise of new power infrastructure that was good for all of us.

We did it before, then we had a slowdown, and I just basically say we should do it again. If we expand the grid, then we will get economic, environmental, and reliability benefits. But what we did with CREZ was primarily 345 kilovolts with some upgrades to the 138-kilovolt system, so we did upgrades on the legacy system, expansion of the newer higher voltage system.

This time we should go even higher voltage, 765 kilovolts, because you get more throughput or more capacity per right of way. And the thing that I’m most sensitive to and that I think a lot of landowners are sensitive to is the rights of way. The corridors where you’re gonna build this, they’re ugly, they’re impactful.

You take a lot of land. You might degrade the views or the vistas in different places. And so the fewer of those corridors we need, the better, and one way to get fewer corridors is with higher voltage. So I basically said, “Look, we’ve done this before. We know how to do it. We had a lot of benefits. Let’s just do it again, but let’s go even higher voltage.”

And then this will facilitate better performance, reliability of the grid, lower cost, more cleanliness. It also lets us inject more wind and solar into the grid, which is something I really like because that will reduce emissions and reduce water use while making more gas available for export, and I think that’s really important from a geopolitical and national security perspective.

But frankly, that’s actually one of the things some people are worried about. They want to burn more gas. They don’t want to use less gas. So this trigger is one of those things like, yeah, people have their preferred fuels and technologies, and I keep thinking our gas is most useful in Europe or China.

It’s not really that useful in Texas, but there are people who really wanna burn it in Texas. That’s maybe an aside, but I feel like expanding the infrastructure is something that’s good for us. We’ve done it before. We’re actually pretty good at it. We shouldn’t be afraid of it. We know what the outcome will be ‘cause we’ve seen this story before, and the sooner the better.

The data centers tie in because they are one of the high-profile sets of customers that really want this, in addition to oil and gas and factories and cities and just people with all our population growth and use of air conditioning and electric vehicles and everything else. So there are a lot of customers who want the bigger, better grid.

The data centers are the most visible ones, and they’re the richest, and so these stories get coupled together in ways that are sort of not obvious to a typical consumer.

Joshua Rhodes: Also really resonate with that argument about, like, having more, not necessarily getting more gas out of the ground, but putting it to better use, right?

It’s like, because we can’t really export wind and solar. Texas is an island of electricity, like we can’t export that really to anyone, anyone else, but you can export molecules. And so if we could have all the electricity that we need here, and also then be able to sell something to someone else who will pay more money for it, it makes a...

I don’t know. I’ve written op-eds on that. I know you’ve written op-eds on that, that it makes a lot of sense, right?

Michael Webber: I think it’s, like, why would we buy and burn gas for $3 in Texas when we can sell it for $8 to $15 to Europe or Japan? It’s like, they’ll pay us so much more. I know there’s transport fees, everything else, but I feel like the story of Texas molecules liberating countries was the story of World War II, where we had the Allies float to victory on Texas oil, and people say, “Let’s burn Hitler and Texas oil,” this kind of thing.

We can do it again by using Texas molecules and gas to liberate Europe from under the thumb of Vladimir Putin and Russian exports, or we can export to Asia to get them out from under the heavy environmental burden of coal. So there’s just, like, such high value from Texas gas. It’s so clean compared to some of those other options.

We’re so secure and safe compared to bad actors out there. And if we have a bigger, better grid, then we’ll have more gas to export, which means we need to improve the export facilities also. That’s the companion piece. You can’t export gas if you don’t have the facilities, but we’re building those. We just need to free up the gas for it, so to speak.

Joshua Rhodes: Yeah, totally. You and I are both on a report looking at the benefits of the 765, or looking at the impacts and the trade-offs, and we, you know, came across that it was, you know, had a lot of benefits to build out the entire, not only the western, but also the eastern, being able to better move that energy around.

It’s like Zephyr CREZ. We built the CREZ to nominally get the wind, and ended up electrifying oil and gas. And so now we’ve got the step or the 765 lines to nominally electrify oil and gas, but it does unlock a lot of resources in parts of the state that are currently, basically have no backbone, have no access, but have some of the best solar resources in the state, and they’re even further, you know, west than our current system, right?

So they’re, like, even better aligned with places like Houston’s peak and other places. So I think, yeah.

Michael Webber: That point’s really subtle but important, which is West Texas solar around El Paso or Pecos County or wherever it is aligns really well with Houston’s peak demand. Whereas solar in Florida does not.

It’s kind of the opposite. You wanna go further west for your solar resources to get better alignment with the peak. And so bigger, better grid lets us do that. And it makes much more sense for Houston to tap into western solar than in location solar. And also with Houston, with the airsheds as filled as they are with refineries and everything else, it’s not great to build natural gas plants locally either, because you don’t want to add even more pollution to a busy or full airshed.

It’s better to push your natural gas further out, which means you need a bigger, better grid. So the bigger, better grid lets us site resources where they are less environmentally damaging or lets us access resources where they are more naturally and abundant and at a more convenient time. So just all of it is good, and kind of no surprise that we found benefits from the transmission.

Most analysts find that if you make a better grid, a bigger, better grid, you get nice results out of that. Same thing’s true for natural gas infrastructure. If you have a bigger, better gas grid with more pipelines and more connectivity, you get more market efficiency. You tend to have less of the price spikes that happen on occasion and less of the glut where you have low prices or negative prices.

A bigger, better gas grid smooths out the volatility, improves the efficiency of the market. A bigger, better power grid does the same. We have gluts of wind and solar with curtailment that lowers the prices falsely, or we have price spikes in some locations where you have a lot of demand, but you can’t get the power to it. So having a better market system is really the result of an improved infrastructure.

Joshua Rhodes: Yeah, speaking of bigger, better grid, gas grids, getting gas to other places or pay more for it anyways, put it to better uses, like, you know, on the other side of the world, there’s also a lot of things going on in terms of like the movement of energy.

Like, you know, Strait of Hormuz has been kind of choke point for a while now. It looks like other straits are getting choked out with, you know, Houthis and stuff and blocking off access to the Red Sea. Can Texas molecules help in this? Are we able to tie anything there?

Michael Webber: It’s hard to sort of talk about. The disruption that’s happening right now is so large and so unprecedented because the Strait of Hormuz is like the worst possible closure you can have in the world because it’s like 20 percent of the world’s flow of oil, but you also have flow of gas, urea, and fertilizers like ammonia, sulfur, and helium.

There’s like so many things that come through that strait that affect certainly energy prices, but also food security, the ability to manufacture semiconductor chips, the ability to extract copper out of mines in Africa, like you name it. There’s so many things affected by that closure. Oil had some other routes they could use with the East-West pipeline, for example, through Saudi Arabia or the pipeline to bypass the strait through UAE, the United Arab Emirates.

But those pipelines are under attack, as you mentioned, or other choke points are getting attacked. So this looks like it’s going to be sustained. It doesn’t look like the negotiations are making progress between Iran and the rest of the world, so prices might be high for a while. The buffers that we had, strategic reserves at different countries, commercial reserves, the ability to change patterns with refining or switch to electric vehicles.

A lot of things happen to reduce demand and tap into those reserves, but those reserves are often hitting their bottoms now. Like they’re running out of additional capacity. That’s especially true in the United States. The other routes are getting attacked, and it seems like now we’re starting to see a lot higher prices.

Prices have gone up tens of cents per gallon for gasoline in the last few days alone, gone up like 5 to 15 cents per day. Like this is pretty dramatic for gasoline, even more for diesel. So th-this is very consequential for the world. The buffers in the system that we’ve had for the last six months have been very helpful.

Those buffers are running out of their capacity to be useful, so that’s a challenge. What does that mean for Texas? Well, Texas, as a major molecule producer, will feel this less than others, but we’ll probably make more money. There are a lot of oil and gas extraction companies that are making plenty of money because prices are higher.

Refineries are especially making money. The crack spread is like $100 a barrel. The crack spread is the difference between what you pay for the crude, say $100 a barrel today, and what you sell the refined products at. Diesel’s selling for $200 a barrel. So $100 per barrel profit on the diesel, but also other products and distillates is really across.

So this is a big moneymaker for parts of the Texas economy. The parts of the economy that depend on those outputs, say farms that use diesel or semiconductor manufacturing that needs helium, will see a lot of inflation in prices, but this will be bad for Texas. All in all, we’re still a major producer and exporter of molecules, so we’ll be okay in Texas.

I’m more worried about like Bangladesh and Pakistan, India, places where people will starve because they can’t get the fertilizer, and that might be millions or tens of millions of people. But Texas will be okay. This is one of the advantages of Texas having electrons and molecules, is that we can adjust our behaviors to match what the markets are making available to us.

Joshua Rhodes: Yeah, totally. I mean, one of the things I was, even kind of the beginning of some of these conflicts, was kind of talking was like, “Well, are you tired of the price of, you know, gasoline going up? Get an electric vehicle.”

Michael Webber: I mean, my prices for my transportation have not gone up in my electric vehicle, right? I got solar panels on my roof and my electric car, and that’s a very privileged situation, but that is no longer the, be the privileged situation. It’s gonna be the smart situation.

Joshua Rhodes: Yeah.

Michael Webber: And that’s the normal situation in Norway and China and other places that have electrified transportation specifically to get away from this price exposure to the volatility. So some of us in the United States, we’re a laggard compared to everywhere else in the world because we don’t have access to the cheaper EVs, or we don’t have the high prices for gasoline the way other countries do, or at least not quite as high.

So yeah, EVs are a great solution. Electrification in general of industrial processes will be one solution as well.

Joshua Rhodes: Yeah, totally. We’re heading into a political season. Feels like in the US we’re always in a political season. Yeah, I was like—

Michael Webber: Do we ever? Yeah, it’s like, it’s like when does the political season end? ‘Cause that’d be awesome if we had that.

Joshua Rhodes: Seriously, a break would be great. But it feels like there’s two... That energy is like front and center in political races, like all across. And we’ve seen this in other regions. I think, you know, Georgia flipped a public service commissioner seat from, you know, Republican to Democrat, a long-serving commissioner there.

But now there’s all this pushback against like data centers, infrastructure, people worried about electricity prices. I think diesel’s on average $6 a gallon. Used to $200 a barrel, $6 a gallon for like the first time, I think ever. And just it feels like there’s two big pieces of energy, like the two big ways that people consume energy, you know, electricity, you know, and transportation fuels, like are both kind of front and center in ways where we were both of them being at the same time, although maybe you can correct me if I’m wrong. But like how do you see this going into November?

Michael Webber: I think there will be political upheaval that happens November. It’s already happened. You mentioned the public service commissioner in Georgia. I mean, you and I follow those things closely because we’re energy nerds, so most people aren’t paying that close attention to who their public utility commissioner or public service commissioners are.

The fact that people were so mad they threw out a long-serving incumbent is a sign that people are frustrated. It’s mostly around the discussion of affordability. President Trump in 2024 ran and won on a platform of affordability. A lot of frustration with the Biden administration around inflation, for example.

So talking about and running on affordability helped his electoral chances, and I would say is a major explanation for why he won. It’s a major vulnerability for him now because everything’s gotten more expensive, so that’s a challenge. And so you’re seeing James Talarico running for Senate in Texas or Gina Hinojosa running for governor of Texas talk about affordability.

And so affordability is a political issue for sure. The incumbents are different, so the affordability story will play out differently now than in 2024 ‘cause now Trump’s not the insurgent, he’s the incumbent. Governor Abbott is the incumbent, has to defend his record on affordability. And the affordability shows up for the power sectors, the molecule sectors a little bit differently.

For the power sector, it’s been a slow-moving crisis where prices have been going up every year, mostly because of additional expenses at the distribution level. Distribution level being the wires and poles in your neighborhood or your homes. They’re expanding or replacing or updating transformers to accommodate new loads like electric heating or electric vehicles, accommodating solar panels, and that’ll drive up distribution costs, but especially wildfire costs, extreme weather costs have driven up distribution.

So higher costs for electricity has been a creeping story for a couple years now. And then you add in the sudden price spikes in gasoline and diesel. So oil and gas and diesel prices move much more quickly. You can see it every day as you drive by a gasoline station. The prices are very visible. They’re very large numbers and pronounced by, “Here’s our price today,” and you can remember what it was last week or a few weeks ago.

So the movement is much faster, much more obvious and visible. The movement in electricity bills is on a monthly rate with the bills. It kind of creeps up bit by bit, but a slow-moving crisis. So you combine the slow-moving affordability crisis of increasing distribution costs and electric bills, the very obvious and visible price spikes for especially diesel, but also gasoline in a visible way, and it’s all converging together.

And when that happens, people get frustrated and scared and angry, and it tends to translate into an anti-incumbent mood. We’ll see how it goes in November, what the outcomes are, but people look upset. And the way the political candidates are talking about it means that they see it’s something that people are concerned about, and so they’re talking about it. And especially the challengers are talking about it.

Joshua Rhodes: Yeah. What do you think on the energy front is a winning stump speech? Like, what does that look like?

Michael Webber: I’m pretty bad at politics, so I don’t know, but I just feel like there is room for a can-do attitude and optimism like, “Hey, we hear you. Affordability is a big issue.

Here’s how we’re gonna tackle it. We’re gonna tackle it by making the system bigger and better and cheaper by making it more reliable, ‘cause one thing that’s really expensive is outages. We’re gonna make sure the cheapest resources have a way to connect online. We’re gonna make sure that new customers, these gigafactories or data centers, pay their fair share and maybe even help subsidize the system to lower the cost.”

There’s a variety of ways to go about it, but I would say affordability can be solved, but the way to solve it is not to quit building stuff, actually. And this is counterintuitive because building things sounds expensive. Building transmission lines costs tens of billions of dollars. Building data centers costs tens of billions of dollars.

It all sounds expensive, but actually, if we build and operate it the right way, it will lower the cost for everybody. So I think there’s a story that if we work together to build it all and expand the system, it will actually lead to better outcomes and lower prices for everybody, ‘cause then you don’t have scarcity.

If you have abundance, prices go down. If you have scarcity, prices go up. And we’re in this kind of scarce moment, and I think we need to address that, and the way to deal with scarcity is expand the system. I’m actually kind of excited about the convergence of data centers and transmission because the data centers might pay to help us get through the scarcity.

We think of them as a cause of scarcity because they will demand so much power, but if they invest in expanding the system, they can help be a pathway to abundance. Let’s make sure they’re a pathway to abundance and not a pathway to scarcity. And I think that’s a challenge. People feel like power is scarce ‘cause we haven’t had to expand it very quickly in a long time.

Let’s do that. For the price spikes, volatility of oil and gas, the thing I’ve been saying for a long time is what you said earlier is like, well, let’s make sure you have options, that you have the option to have an electric vehicle or to work from home or to use mass transit or to have a walkable city.

There’s a lot of ways to deal with the exposure to the price spikes of gasoline, for example, for commuters, or the price spikes to diesel for an industry as a whole and logistics. That is harder, but we can think about more efficiency of the diesel trucks or electric long-haul heavy-duty trucking. There are other things we could do, and we’ll probably have to do all of it.

There’s gonna be no one solution. We’ll have to do every single solution we can. We’ll have to implement them all together.

Joshua Rhodes: When you bring up the concept of scarcity when it comes to electricity, can you unpack that a little bit? Like, what are some of the time those scarcity but help us get it to a time of abundance? What are you meaning there?

Michael Webber: So one of the challenges with electricity is that overall consumption in the United States hasn’t grown for about 20 years, and now it’s growing rapidly. And if we cannot expand the system as a whole to meet that growth, then we’ll have scarcity, which is we have more demand than supply, and if you have more demand than supply, then prices should spike.

We already have that a few hours of a few days of the year when it’s really hot outside and the air conditioning’s going, and we don’t have as much supply maybe, and so we might have scarcity then that may lead to price spikes. But if we expand the system really quickly, and we have abundant energy, and then actually prices should go down because then we have plenty of excess and plenty of spare reserves and everything else.

So part of it is the rate at which we expand. Part of it is the time and location. The scarcity only happens some times during the year. Most of the year we have abundance, so we have to think about what resources we build that are available at the times we need them, and with the summer cooling season with air conditioning, that tends to be solar.

With the winter heating season, that might be wind or some other option. We gotta think about what we’re building for which region based on what time of day we have scarcity or abundance. But there’s also the location of scarcity or abundance. We have parts of Texas where we have so much wind and solar that they get curtailed even though we might need the power in Houston.

And so there’s a location where we have abundance here, but scarcity there, or there’s constant negative prices in West Texas, but high prices in Houston. Well, that’s where the transmission comes in handy. We can mash the places of scarcity abundance together across great geographies, and then if we have energy storage or flexible workloads, we can match the time to scarcity abundance by time of day.

And so if we can bridge the gaps in scarcity abundance by time and location, that will be the great system. And that’s kind of what we’re moving toward. We’re building more storage, we’re building flexible loads, we’re building some transmission, but we kinda need to do all of it. And I think right now we’re acting as if there’s a scarcity mindset, like there’s not enough to go around.

I’m like, “No, no. Seek abundance mindset. Let’s expand and build and operate better.” We’ve had that mindset before. We had that mindset with rural broadband in the 2000s. In the Bush administration, we expanded rural broadband and fiber optics. We did that with highways in the ‘50s. We did it with canals and railroads in the 1800s.

We’ve had abundance mindset before, and I think it’d be good for us to have that mindset again.

Joshua Rhodes: I definitely agree. Looking at the grid this past summer, the grid, it grew for actually for the first time in a couple years, but it seems like there wasn’t that much drama around it.

Michael Webber: I mean, the best grid is a drama-free grid, right? You actually don’t wanna think about the grid. Yes, when you’re thinking about it, it’s because something went wrong or prices are high or failed and people are dying, so it’s nice to have a drama-free grid. And the primary reason is because we’ve been able to expand the number of power plants on the grid, which is great, primarily solar, but also some additional capacity support for batteries and then wind and gas.

And that’s a good news story that we’ve been building faster than demand has grown, and therefore hasn’t been a problem for the most part.

Joshua Rhodes: Absolutely. Okay, when I have you back on six months from now, what’s gonna be the big Texas energy story that we’re gonna be talking about?

Michael Webber: I think we’ll talk politics again because by then, the outcome of the elections this November will be known, and new officers’ position will be in place, or the same officers’ position will be in place.

Although there are some incumbents that are have retired, so we’ll at least have some change. But either the story will be the political leadership’s the same, and what does that mean? Or the political leadership is different, and what does that mean? So we’ll be talking about the new leadership at the state and federal level because I think that will be consequential no matter which way it goes.

I think we’ll talk about, in six months, a little bit of the winter heating season as we have the rise of solar, which is an excellent performer in the summer. We’ll wanna see how that performs if we have a winter cold snap. And El Niño and weather patterns will affect whether that’s a cold snap we need to worry about or not.

There’s gonna be a lot of growth in data centers by then that have broken ground will be connected to the grid. We might have a few data points, additional data points on whether those data centers are good or bad for grid performance and everything else. So I think we’ll talk with more data with a different season, a different political season for sure, and we’ll talk more about all those things and how they might affect Texas.

By then, we might have broken ground on some transmission as well. Like, with these approvals happening now, we might have shovels in the dirt for a few places by, say, March. So I think that’ll be pretty interesting. There’s always something we don’t expect. I don’t think you and I expected six months ago the change in attitudes around data centers.

So what will be the change in attitudes by six months from now? I guess that’s hard to predict as well. Maybe we’ll have a massive geothermal renaissance or nuclear renaissance. We’ll see. We’ll have plenty to talk about, that’s for sure.

Joshua Rhodes: Yeah, if they’re breaking ground on the lines, I wonder if, like on the, some of these by helicopter again.

Did you ever see that? Do you ever see them, like, stringing the CREZ lines by a helicopter?

Michael Webber: I did. I drove in West Texas once when they were stringing the lines by helicopter. This was not 2014 when they were doing the massive build out. It was a little later. I’ve seen that. They’ve also— I didn’t see this, but they had done hot live reconductoring, where you actually don’t de-energize the transmission and you lay new conductors.

And so they workers have to wear special Faraday suits to make sure they don’t get electrocuted. So some of those different approaches accelerate the development of the transmission lines. The hard part’s the permitting and approvals. But then once you’re going, it’s just a matter of years, really, a couple years to get things built. So we should see progress month by month, which will be kind of exciting.

Joshua Rhodes: Yeah. I remember seeing it. It was, like, in 2012 during the CREZ lines when they’d hook up a line to a helicopter, and the helicopter would almost turn, like, sideways and just, like, pull the cable or at least the leader line to, like, the next tower that they were, like, pulling through.

It was insane to watch. So if we’re gonna string long, long lines again, I imagine we’ll see some more of that, yeah.

Michael Webber: Incredible. Super skilled pilots, a lot better than doing a bunch of ladder trucks, especially as the pylons get so tall. So helicopter’s really, really specialized, really high risk, but really expedites the whole process.

So that’s one thing when I talk to, like, high schoolers and others, like, the energy industry needs everybody. You wanna be a pilot? The energy industry needs you. You wanna be an artist? Well, we need you as well. You wanna be an engineer? Okay, there’s places for engineers. But helicopter pilot is one of the places that’s a growing industry for the power sector.

Joshua Rhodes: Michael Webber, thank you for coming back on the Energy Capital Podcast.

Michael Webber: Thank you for having me.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

US Power-Demand Forecast Cut After Texas Pause on Data Centers | Bloomberg

Projected electricity sales growth in 2027 fell from 2.9 percent last month to 1.8 percent this month. Analysts say this change is a result of Texas’ paused data center construction.

The revision comes after Texas last month ordered an audit of proposed data center projects seeking to connect to the state’s power grid, a requirement that has effectively halted development. Texas’ grid operator is considering about 474 gigawatts of connection requests, more than five times the state’s record peak demand. One gigawatt is roughly equivalent to the output of a traditional nuclear reactor.

Disbanding city-owned utilities won’t lower costs, officials say | The Texas Tribune

On the campaign trail last month, Gov. Greg Abbot proposed ending municipality owned utilities, arguing that increased competition would lead to lower prices for consumers.

San Antonio and Austin have the state’s two largest city-owned electric utilities, which say they offer among the cheapest electricity rates in the state because they operate as nonprofit electric companies that send every dollar they earn back to their communities, city and utility officials said. That money funds city services like libraries, parks and first responder operations, and the governor’s proposal would actually drive up electric rates for customers and be costly to enact, they said.

Read more

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Texas’ halt on powering data centers reflects US reckoning over ‘ghost’ demand | Reuters

Nobody actually knows how much of the data center planning hitting grid operators right now is real. Drawing on Governor Abbott’s data center moratorium, Reuters looks at why this is a national problem, not just a Texas one.

The uncertainty around data center electricity use, said Tyson Slocum, director of the Energy Program at consumer advocacy group Public Citizen, raises the risk that utilities either under-build and threaten the stability of the grid, or overbuild to serve projects that never materialize, leaving average Americans footing the bill.

“I think part of what (Texas) is trying to do is to create some order, and impose some transparency, on an industry that in much of the country is still like the Wild West,” Slocum said.

Tesla ditches solar roof — and embraces regular solar panels | Canary Media

Tesla’s solar roof never really took off as the company anticipated. Canary Media reports the company is now putting its marketing behind standard solar panels instead, with a possible Texas factory in the mix.

Tesla’s Texas solar factory — if built — would be an enormous, though not inconceivably large, investment relative to the domestic supply chain. The filing does not disclose capacity figures, though it notes the facility would create nearly 10,000 full-time jobs. In May, trade publication PV Magazine reported that the U.S. had, in total, $14.5 billion worth of operational solar manufacturing facilities. Another $22.2 billion were under construction.

Read more

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

The Texas Grid Has Had a Boring Summer Thanks to Batteries | Heatmap News

This summer ERCOT issued zero conservation calls, compared with six in 2023. Massive discharge from batteries offered inexpensive supply when solar dropped and before wind picked up.

“We’re really seeing peak demand divorced from peak prices,” Joshua Rhodes, research scientist at the University of Texas, told me. This means that when demand is at its highest on a summer day — say around 4 p.m. this past Monday, when load was over 90 gigawatts — real-time prices were about $46 per megawatt-hour, according to Grid Status. At that time, natural gas made up about 42% of the grid and solar 36%. Compare that to the same time in 2023, when real-time prices were $85 per megawatt-hour during peak usage times and wind and solar combined made up around 20% of the grid.

As Abby Lestina, principal market analyst at Grid Status, put it to me, “The lack of pricing action would lead to the conclusion that the grid is more stable.”

Data Center Developers in Texas Plan Massive New Gas Power Projects | Inside Climate News

New data from Global Energy Monitor show Texas’ 12 largest planned power plants are all intended to run data centers, showing 50% growth in planned gas over the past six months.

“They must not take power from the Texas power grid,” Abbott said Sunday on ABC News. “They need to make sure that they are not disturbing neighborhoods or rural communities.”

GEM data accounts for 81.7 gigawatts of operating gas power generation, 99.4 GW in development and 22.4 GW recently announced.

Texas’ data center, transmission line pauses could be risky | The Texas Tribune

Industry leaders are continuing to react to the announcement of the pause on data center approval and ERCOT’s subsequent decision to pause its batch zero process.

Without the study, large-load users like data centers, along with traditional industry, do not know when they will be approved to receive power, creating delays in construction timelines. ERCOT officials testified to the House Committee on State Affairs on Wednesday that several projects have already dropped out of Batch Zero because of the delay.

Baker said the uncertainty goes beyond the data center industry because traditional manufacturers are stuck in the same queue with the hundreds of data centers that have disrupted ERCOT’s study process.

“It’s not going to be perfect, but (Batch Zero) is thoughtfully setting out how you narrow the funnel,” Baker said. “The key thing for all of these businesses is how to do that in a predictable and stable and credible way. Various wrenches being thrown in the process make that really hard to call it a predictable stable process.”

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The conversation now is all about hyperscalers and data centers. And, consequently, all the policy talk is about data centers. The North American Electric Reliability Corp. (NERC) projects peak demand rising by about a quarter over the coming decade. PJM is having to contract with said data centers to keep the lights on, and ERCOT hit record peak demand of 91.1 gigawatts in July.

But in the background, there are some new technologies (thermal batteries, grid forming inverters, direct air capture and advanced chip factories, which are related to data centers but their own unique vector) that will require serious policy consideration for the impact they will have on the power sector. By the time one of these becomes the next crisis, we might have lost the window to address it.

Any new technology added to the grid will have to serve some need. And those needs are shaving (even lowering) peak demand, improving reliability, cutting emissions and sharing the economic cost of upgrading our grid. So here’s some future casting for what these technologies are and what impacts they will have.

Read more

Rayburn is also putting batteries in members’ houses. Both run on the same logic: Rayburn generates the power and owns the transmission, so it earns on both. An independent power producer earns on energy alone.

On this week’s Energy Capital Podcast, Matt Boms talks with Christian Nagel, senior director of power supply and production at Rayburn.

• Home batteries as a transmission asset. Texas allocates transmission costs on four summer peaks, so discharging batteries then cuts Rayburn’s bill, worth more, Nagel says, than the energy.

• Telling real load from speculative. Rayburn screened data centers with its own questionnaire before ERCOT standardized one. Abbott’s audit has since pushed ERCOT’s Batch Zero study past April 2027.

• Plus: the 12CP fight and what comes after gas.

Whether Rayburn is a model or a special case turns on rules the PUCT has not written.

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Chapters

• 00:00 – Introduction

• 01:36 – Wind development and the landowner conversation

• 06:02 – The video that went viral

• 08:17 – Using your service to open doors

• 10:23 – The Atlantic Council years

• 12:19 – Her graduate research on energy and national security

• 14:44 – From Annapolis to flying Growlers

• 19:54 – Grounded, and the move to cryptologic warfare

• 23:59 – Why veterans run down their own service

• 30:08 – Advice for veterans trying to get into energy

• 32:56 – How to plug into Project Vanguard

• 34:49 – Closing thoughts

Resources

People & Organizations

• Matt Boms (LinkedIn)

  • Texas Advanced Energy Business Alliance (Website - LinkedIn)

• Christian Nagel (LinkedIn)

  • Rayburn Electric Cooperative (Website - LinkedIn)

Company & Industry News

• Rayburn Energy Station: A Cooperative’s Answer to Texas-Sized Risk

• ERCOT aims to complete Texas governor’s data center audit by December

• El Paso Electric and Base Power install first home battery under new reliability pilot

Books, Articles & Filings Discussed

• Governor Abbott Announces Texas Energy Fund Loan For 570 MW North Texas Natural Gas Power Plant

• Rayburn Electric Cooperative Breaks Ground on Rayburn Energy Station II

• Governor Abbott Directs Comprehensive Data Center Audit

• PUCT Project No. 58000 - Transmission cost allocation and the 12CP proposal

Related Podcasts by Energy Capital

• Inside the PUC’s Cost-Allocation Overhaul with PUC Chairman Gleeson

• Creating a Distributed Battery Network with Zach Dell

• How Texas decides which data centers to connect

• How will data centers pay for power?

Related Posts by Texas Energy & Power

• Hitting the Breaks on Data Centers

• Connecting the Regulatory Dots Shaping Texas Energy

Transcript

Matt Boms: Welcome, everyone. We’re here today with Christian Nagel. He is Senior Director of Power Supply and Production at Rayburn Electric Cooperative, where he oversees power supply strategy, generation planning, load forecasting, risk management, and participation in ERCOT. Before joining Rayburn, Christian held several trading and management roles at ACES, ultimately serving as Portfolio Director for ERCOT and SPP.

He began his career as a commodities trader and holds a degree in public finance and economics from Indiana University. Christian, thanks so much for joining us today.

Christian Nagel: Yeah. Thanks so much for having me.

Matt Boms: Well, I want to start by giving folks an introduction to Rayburn, and maybe for a listener who has never encountered a generation and transmission cooperative, what is Rayburn and what does it do?

Christian Nagel: Yeah. So we’re a generation and transmission cooperative, and really what that means is collectively with our distribution cooperatives, we are a vertically integrated utility within a mostly deregulated market. What sets us apart, I think, is that structure. And so Rayburn, as the G&T, we’re focused on the wholesale side of things, so we’re going to be managing all the ERCOT exposure for our members, all the power supply for them that’s on the grid scale, of course, and then transmission.

And so our members are then charged with the retail side and the distribution side of things. So collectively, you know, a vertically integrated utility within a deregulated market.

Matt Boms: It’s such an interesting setup, and we’re gonna get into the differences there between a co-op like Rayburn and the other utilities that are not vertically integrated, but we’ll get to that in a second.

For now, I wanted to stick with the Rayburn story and ask you more about Rayburn’s members and how is the membership model there different within a co-op like Rayburn compared to those IOUs that we were talking about?

Christian Nagel: Sure. Yeah. So we’re very community oriented, right? Because the members that we serve live in the communities that we serve.

And so we’re a nonprofit, of course, so all margins that are made, that’s what we call them in the co-op space, are returned to our members ultimately. So really our focus is 100 percent on member services, member benefits. So there’s no equity or no shareholders to be concerned with. So the community aspect is huge.

And, you know, with Rayburn, we do have a very collaborative and great relationship with our distribution co-ops, so I think that really plays well into our ability to be agile, versatile, and innovative at the end of the day.

Matt Boms: Absolutely. And for you personally, how did you end up at Rayburn? Like, I love talking about folks’ origin stories before we get into the energy, the tough energy topics, so-

Christian Nagel: Yeah.

Matt Boms: how did you go from being a commodities trader to finding yourself in this role?

Christian Nagel: I think it definitely was not the trajectory I thought I would take coming out of college. It was actually during the financial collapse of ‘08, ‘09. And really it came down to work ethic and being, you know, a hustler in terms of like showing that I was willing to go a step above everybody else, I think.

So, I started actually with internships just after my senior year of high school in Chicago. And so, you know, when you’re that young and cutting your teeth in that regards, really just efforts most of it, right? Showing dedication. So I would take a 4:45 AM train from Northwest Indiana, where I grew up, around Lake Michigan to Chicago that summer, and I think that’s really what set me above others in terms of especially coming out of a not-so-great financial situation in job market upon graduating high school, rather.

But then what really got me to the energy industry was just the fact that at the time, I was looking to maybe get out of the Chicago market and saw that there were some trading opportunities at ACES, and that’s really what got me into it. So the transition from more speculative trading and commodity trading to really just electricity and pure focus on energy.

And then I just sort of worked my way up from there, became more of a consultant role within ACES, and Rayburn was a client of ours at the time, and so really what led me to Rayburn was Winter Storm Uri. So following that event, got a call from the CEO about his interest in me helping to start a power supply group here at Rayburn, and that’s really my entry into it.

Matt Boms: That’s awesome. And I love what you said at the top because that’s what I tell young people who might be listening to this podcast is, you might be smart, but there’s a lot of smart people out there, and ultimately what separates you is your work ethic and how dedicated you are to your career. So I love that.

That explains where you are today, Christian. So one more question about your background. What did you learn when you were at the trading desk that still shapes the way you evaluate physical assets today?

Christian Nagel: Yeah. I think going back to the prop trading experience I had in Chicago, I always mention that even though it is a little step change, I guess, from where I’m at today, which is very much risk management, risk aversion type of setup with electrical utility, basically, right, a co-op.

But that gave me a great foundation for risk mitigation and really unique understanding of risk. And so when you’re kinda tasked with trading, right, you’re really kind of at the front lines of managing risks, right? You could be, whether you’re a trading desk that’s hour to hour or whether you’re looking longer term, right, you’re focused on kind of the frontline mitigation of risk, and that’s where contingencies happen in the real world.

You’re kind of there to make sure those risks are mitigated right up front.

Matt Boms: Amazing. So you get to Rayburn, and this is a very unique cooperative. My understanding is that Rayburn was created because a group of co-ops decided to challenge what looked like the default path for the industry. Can you talk to us a little bit more about the origin story there, and how does that still show up in the organization?

Christian Nagel: Yeah, I think it boils down to one of the quotes our, CEO always says, which is, “Status quo is not company policy.” And I think status quo, going back well before I was even born in ‘79 when Rayburn was formed by our cooperatives, I think the status quo probably would have been to go down that path, but that wasn’t the choice that the board at the time took.

And so they decided to form Rayburn and really kinda go about it in their own way as opposed to joining that alliance back then.

Matt Boms: And when Rayburn moved from contracting for power to owning major generation assets, what changed strategically? Like, what was behind that change in your mind?

Christian Nagel: Yeah. So it kinda started with our first entry into owning generation.

That was Freestone Energy Center, and that was in 2010 when Rayburn was still, I would say, considered mostly a paper G&T. We basically, even though we’re responsible for the power supply on the wholesale side for our members, we were contracting, you know, multi-year contracts with providers for that requirement service.

And so when we purchased a minority stake in Freestone Energy Center with Calpine, that was sort of our first entry point into it. So that gets us through the decade of the two twenty tens, right? And at that time, you know, ERCOT was putting in a lot of wind, and there was a lot of downward pressure on wholesale pricing, at least the, you know, the marginal pricing.

What Rayburn actually does, even though we’re not in the competitive space of ERCOT, we definitely track what the competitive market’s doing and use that as a benchmark to how well we are doing. And so Rayburn looks at it from the wholesale side, of course. So really we’re looking at all transmission costs and power supply plus our overhead combined.

What does that translate into in terms of a wholesale rate to our members, right? And then we take that wholesale rate, and we compare it to, you know, what is the average, like, 12-month Oncor rate, for instance. That’s the competitive spa— you know, area of North Texas. And so that difference between what the retail rate is and what our wholesale price is essentially what our members have to work with to remain competitive. Right?

And so you’re looking at a timeframe where there was downward pressure on pricing in the 2010s with a lot of renewables coming onto the system. Really outside of 2011, there were not very many blips in terms of severe weather. Of course, you’re gonna get the occasional hot summer or occasional winter storm, but really nothing to speak of in that pretty much decade between 2011 and Winter Storm Uri.

Really in the late 2010s is kind of what got us away from, I guess, the paper G&T model because we started to see that headroom shrink in what I was talking about between the wholesale price and the retail price. So basically that wiggle room that our members had to work with on the retail side started to shrink down.

So that’s when Rayburn start- decided to kind of go about it independently in terms of our power supply. We got out of those four requirements contracts, and then we started to manage our own supply. Now, getting back to your question about when did we decide to go from more contracted power to own generation, really that was Winter Storm Uri, right?

Because ultimately, we decided after Winter Storm Uri that the best way to kind of be in more control of your destiny is to actually have steel on the ground that you can control as opposed to leaning more on the market. So that’s really the difference in when we went from more of a, I know that’s long-winded, but paper G&T to contract, mostly contract only to an actual strategy change to owning our own generation.

Matt Boms: It’s a great answer. And for a lot of guests that we’ve had on this podcast, Winter Storm Uri was really a line in the sand, and there’s a pre- and a post-Uri. It’s really interesting hearing that from co-op and how that changed your perspective as far as steel on the ground within your territory. I wanted to ask you about the member model because as someone who runs a trade association, I can relate to having a lot of different members and a lot of different cooks in the kitchen.

How do you get all four member cooperatives to agree on different strategic decisions that you make? Some of them have different load shapes or maybe different views in the strategy that Rayburn should be adopting. So what does that process look like? That sounds like a really complicated and difficult job.

Christian Nagel: It can be. I will say we do only have four members, so that is something that is going for us. It really comes back to the way we set up our tariff with them. So we actually have a subscription-based model on power supply for our members, meaning that our members are allowed to basically come up with, in conjunction with us, a bespoke or customized power supply plan.

Of course, when it comes to the larger transactions that we’ve done and actual long-term investments, such as acquiring or building a power plant, that’s when it certainly becomes more of a challenge if we don’t have unanimous board support. But technically, as long as Rayburn has 100 percent backing by whether it’s one, two, or all four members on long-term investments, we can go ahead and move forward with those power supply acquisitions or development projects.

As it turns out, all the members were in unison when it came to Rayburn Energy Station and wanting to move forward with the acquisition of that following Winter Storm Uri.

Matt Boms: That’s great. And does the model mean that you can move faster than other utilities, or does the consensus become a limiting factor for the decisions that you’re making?

Christian Nagel: So far, it hasn’t been a challenge for us, right? I think we’ve been agile. I think, you know, I’ll speak to how quickly we did do the Rayburn Energy Station, the former Panda Power Plant up in Sherman acquisition. I mean, we were competing with a lot of private equity firms, right? And I’m not sure who all the suitors were for that plant, but certainly the fact that the cooperative pursuing that, you know, was able to stand up against those private equity firms and come out on top, I think speaks to how well we’re able to sort of get our ducks in a row at the time and come up with a great strategy in terms of how we went about the bidding process.

I’ll speak to the, it’s kind of the agility side and how quickly we move. Really, it’s what, you know, we- surprised we got this far into the podcast without mentioning data centers, but obviously there’s quite a bit of change happening right now as it relates to the data center front. But I can say that we’ve been working with several data centers and their consultants and, you know, they speak extremely highly of the way that we approach things as a cooperative, as opposed to, I think, a more rigid approach in terms of deregulated part, simply because it’s kind of all under one roof, right?

You’ve got the interconnecting entities, Rayburn, the power supply provider would be Rayburn, and the transmission provider would be Rayburn. So all that under one roof, and the fact that we, I guess, are a little bit, you know, quite a bit smaller than like an Oncor, very member-oriented in the way we approach our business is really, I think, what sets us apart, allows us to move much more quickly.

I think, you know, we’re definitely, again, oriented to be able to stop, get on the phone at a moment’s notice with these types of customers and members, and I think that’s really what sets us apart from the other models.

Matt Boms: No question. And we’re gonna get to data centers. Don’t worry. We- I got a bunch of questions on data centers and large loads for you.

When you’re planning the trade-off between near-term affordability and long-term reliability, can you walk us through what that looks like just from a day-to-day standpoint in how you make those decisions?

Christian Nagel: It’s definitely a huge trade-off, right? And you’re seeing sort of a disconnect happen right now in what’s happening since summer of 2023, right?

We’re setting record after record in the ERCOT market load records as we speak this summer with how hot it is. And you’re not seeing that materializing pricing, right? So you make a long-term decision to invest more and having steel in the ground, you’re definitely gonna have to make sure that you’re poised to mitigate years where that is more of a challenge, and the spot market is obviously where you’d like to be in situations like that.

That’s also the benefit of having newer technology, relatively newer technology, and really dispatchable power. You can call on that power when you really need it. But then you can also lean more on the spot market during times when there’s a lot of renewable penetration, ‘cause we continue to see that grow.

I know I mentioned wind when I was talking more about our power supply strategy shifts, but obviously solar is now the new thing in town, and then you’ve got also the amount of batteries that are on the system. So all those things working in conjunction together have really suppressed the price volatility in the markets.

The strategy still for us, looking long term, understanding that there’s gonna be ebbs and flows, and it’s not always gonna be our preference to have our own generation actually online around the clock to fill our load. And that’s where the- I think that it dovetails well with the energy-only market in ERCOT.

Matt Boms: It absolutely does. Well, let’s start getting into data centers. I wanna start with the load forecasting question because in light of Governor Abbott’s audit of data centers that has recently come down, I wanna ask you from the utility perspective, how much confidence can any utility place in a 10-year load forecast today, given all the fluctuations and all the changes that we’re seeing almost on a daily basis?

Christian Nagel: Yeah. The data centers just turned this whole world upside down in terms of load forecasting. I try to focus more on what we have direct control over and manage around that. So certainly when I’m looking at our data center queue, I’m able to have much more insight into what’s real versus what’s not, right?

When I look at that globally across ERCOT, you know, you can tend to get a little bit biased, right? Because I don’t know exactly once the Batch Zero process finally moves forward, what that number’s ultimately gonna look like. But I do know that for us, it’s looking very likely that we’re gonna see at least a doubling, if not a tripling of our actual peak load.

And then of course, I hadn’t touched on this yet, but we’re basically 90 percent residential in the makeup of our current membership, right? So because of that, there’s a lot of weather sensitivity, risk mitigation that we have to put into place. But the load factor of our actual load is low, relatively, because of how much weather sensitivity plays a part.

We don’t have a ton of base load, industrial or large commercial right now. The data center influx is really going to change that quite a bit for us. And so I think it comes down to what we can control, following along with sort of the goalposts as they move within the regulatory framework, and then just managing around that.

Matt Boms: Sure. And I think the utilities themselves have their own goalposts, right? So does Rayburn have its own criteria of, like, what makes large load real enough for you to plan around?

Christian Nagel: We’ve actually- We’re a little bit, in front of this. It’s becoming a lot more standardized now, but our engineering and transmission team, because of the, ultimately the interconnecting end, you know, from day one kind of had a questionnaire that they’ve used to kind of vet the veracity of these data centers from day one. And we’re very risk-averse, right?

We wanna make sure that these data centers, as they approach us, we’re definitely open to serving them, but we wanna make sure that they’re not gonna do any harm to our existing membership, right? Which again, is largely residential. So that questionnaire and that process really was our first way to vet how serious the data center was.

And it did come down to certain things like, have they actually gotten an engineering design done? Do they actually know, have they secured equipment? What type of equipment have they secured? Are they willing to upfront pay for the interconnection studies, right? Because really how our model works on the interconnection side, which I don’t think is that different from others, we’re not gonna float that risk on our balance sheet.

So we’re gonna make them pay for the interconnection studies. We’re gonna make them, once we get to the point of procuring long lead time items and the supply chain criticality there, we make them post financial security to that level so that as we’re going through the interconnection process from point A to point Z, we’re not at any time really holding the bag on any of that risk.

Matt Boms: Mm-hmm.

So on that question, like neither you or I have any skin in the game on this, and I’m just wondering if we play the devil’s advocate here, is there a way that these data centers could help lower costs for your customers? Is there a universe where that’s possible?

Christian Nagel: Yeah. I think, again, the what we can control is our tariff and the way we do rate design around these data centers.

We’re still working through that because, again, the rules are being set, and we have to make sure that we’re playing within those guardrails of how that’s gonna work. But in how we’ve structured these agreements up front, just us in a bubble, it should lower our members’ rates, or at least, I guess, stave off any increase in rates, so to say.

Now, what we can’t control, but we certainly are following along with, is, you know, kinda what’s happening on the regulatory front. So a big thing right now has been the transmission cost allocation approach that the PUCT and the legislature is trying to really undertake right now with the stakeholders.

So we’re definitely really keen on what’s happening there because that’s ultimately gonna decide, I think, how that approach is set, this large influx of load. Like, how does it actually impact the current ratepayer in Texas?

Matt Boms: Absolutely. I’m so happy you raised that rulemaking because it’s something I’ve been thinking a lot about, and to the extent that these data centers are flexible, and there’s a question mark there, you would want them to help out when we have some grid stress in Texas.

And for whatever faults there are in 4CP, and there are many faults with 4CP, it’s still the most effective form of demand response we have, right, as of today. So my concern is, if you just look at it from, like, a grid reliability standpoint, do you wanna remove the most effective tool that you have in the shed if you’re putting that flexibility at risk and saying, you know, maybe it’s not worth it for a data center to move to their backup power, right?

If we’re saying that there’s gonna be some minimum demand charges, the rule is still evolving. We don’t know what the final rule is gonna look like. But I guess this is an open question for you, Christian, as far as where is the balance? Like, you want these data centers to bring their own backup power and hopefully provide some flexibility to the grid.

That’s the ultimate goal here.

Christian Nagel: Right. It’s a very complex problem to solve, so I’ll put that out there up front, right? Because you have the enormous amount of investment that it’s gonna take to interconnect these data centers on one side. As you said, you want to have an incentive for demand response or some sort of grid flexibility, load flexibility to be there such that they are not adding to the stress of the grid at the most critical times, at least one for one.

But at the same time, if you go down that path and you think about what that actually does to private investment, right? If you’re backfilling everything you’re adding with required generation, you know, how does that impact downstreams the investment? And especially in the energy-only market where there’s not a capacity payment stream for private investment to have.

So that’s sort of like it’s a double-edged sword, right? Because you solve one problem and it’s kinda like a whack-a-mole. You solve one problem and then all of a sudden another problem’s gonna pop up. So it’s very complex problem to solve. I think load flexibility is key though, because we’re not gonna be able to snap our fingers and just add...

Let’s say we add 100 GW of load in the next five years, six years. I’m just throwing that number out there. There’s no way you’re gonna add 100 GW of supply within that same timeframe, right? You’re seeing what turbine lead times are from the major OEMs of these, gas turbines. And again, there’s also downstream effects to having a concentration in gas like that you can’t solve at all with simply a supply.

So I think load flexibility is key. I mean, we’re following along with some of the technologies that are happening in load flexibility. Emerald AI is a startup you may have heard of and some of the listeners may have heard of, but certainly they’re able to demonstrate some load shifting, and I hope that there’s further advances in that sort of technology because I do think that’ll really help bridge the gap.

Matt Boms: I agree with you, and we could spend another hour on data centers, so I’ll move off of it. But I agree with your main point, and you don’t want either extreme, right? So you don’t want all of these data centers just powering themselves essentially and not connecting to the grid, because then they’re not paying for the grid that we already have.

But then you don’t want the other extreme, which is none of them have backup power, and then none of them are flexible when we need them to be. So the idea is to get somewhere in the middle of those two. But I think probably neither of us has the solution, and we also don’t have the crystal ball ‘cause, you know, a year from now, who knows what the policy will look like.

This is all kind of unraveling in front of our eyes.

Christian Nagel: Yeah. It’s a very fluid situation. I think-

Matt Boms: Yeah...

Christian Nagel: obviously uncertainty’s a huge disruptor of progress, but I also understand that, again, I can’t speak to how important it is that from a policy standpoint, things get done right, because otherwise I think most people are in the policy front are focused on the impacts to the ratepayers.

And so I think that the pause here is, certainly warranted given the implications of the infrastructure build-out, and if it’s not done right and the incentives aren’t done right, then what the downstream impacts would be to the actual ratepayer in Texas.

Matt Boms: Yeah. Absolutely. Well, let’s talk distributed resources.

I know you mentioned that Rayburn is predominantly residential. I wanna know what value Rayburn sees in DERs for its residential customers, and how can that become a meaningful portfolio resource for y’all?

Christian Nagel: Yes. We’ve been going down this path for about three and a half years now in DERs. I will say the adoption rate has not taken off the way I thought it would, but we’ve learned a lot along the way, and I think it’s hitting a critical point, as I mentioned before, with the amount of load growth that we’re seeing actually hit not just Texas, but the entire US as a whole. There’s not a one solution fits all, right?

There’s no one panacea that’s gonna solve this entire problem. So DERs, I think, are in a good position right now to actually increase their adoption rate. Also, to mention, I think one of the other hurdles with DERs was just how expensive they were relative to grid scale technologies. And with how much those have gone up in cost, it’s certainly starting to converge on a good opportunity for DERs.

So Rayburn actually started with, I would say, low-hanging fruit here. Again, it makes sense. Don’t solve all the world’s problems on the first crack, right? But we started off with home standby units because a lot of these home standby units were installed following Winter Storm Uri, and really the work from home aspect that we saw following, COVID in our service territory.

So we knew of thousands of Generacs and other types of home standby units that were installed. So that was sort of our first entry point into it. I guess I would say, you know, one of our members here, Farmers Electric, they’ve been very pivotal in us investing in DERs and going down this path, so we certainly wouldn’t be to where we are today without their dedication to it.

They’ve had a thermostat program, Nest thermostat program for time, I guess, preceding this three-year time right now, just kind of spelled out. But that’s more passive, right? Really focused on more home, all home solutions is kind of our next strategy. So we started off with Generacs in that program, and ultimately it ended up being during the summer of 2023, so that was not a bad time to start because you saw high energy prices.

You know, what we found with home generators, they’re very dispatchable, but they also have a very high marginal fuel cost, right? Because you’re not talking about grid scale fuel, you’re talking about residential distribution level fuel costs. The marginal cost is high, but that gets back to our business model as a essentially a vertically integrated utility.

We’re able to see the benefits not just from the energy side, we’re able to see the benefits on really the most valuable aspect of DER right now, at least in my view, which is on the transmission cost side. So we’re able to deploy these assets during the peak times for coincident peak, which, you know, is evidently on its way toward the 12CP.

And so that strategy has worked out well for us. The end of last year, we started to look more at batteries, and we were kind of looking for our entry point there. We’ve talked with a lot of the major battery manufacturers, and we still have discussions going on with them, but we started to focus in with our member Farmers on Base Power.

And so we did launch a program with Base Power at the beginning of the year, and it’s so far been a huge success for us. Because of the fact that we are in the non-competitive areas, we had to structure it slightly differently than how Base Power is normal business model works. That’s a good benefit for us, right?

Because that allows Rayburn and our members to be more in the driver’s seat. It also allows for us to divest of any of the installation and maintenance and that side of thing, because that’s something that Base Power still wears the hat on. The batteries are much more deployable, I would say, from a utility perspective and from a grid solutions perspective so far than what we found the home standby units to be.

Matt Boms: And really a disrupting technology because they’re also working with El Paso Electric and have found success with this model specifically, right? In the vertically integrated utilities, it tends to work out really well. In the competitive areas as well, it’s just a different business model like you mentioned.

Where do you see that moving forward, Christian? Like, over the next few years, considering all the load growth that’s coming, do you see that DERs could help defer more transmission and distribution, especially distribution costs, right? Because a lot of this is, I imagine, translating into distribution savings for Rayburn, right?

If you know that a substation will be overloaded in the next five years, then maybe DERs could help with some of that stress.

Christian Nagel: Yeah, they certainly could. I hadn’t mentioned this yet, and I’m surprised I haven’t gotten to it, but with how fast we are growing just organically, we know we mentioned data centers and how much that’s certainly gonna change our world.

We’ve been at sort of the forefront of some of the most aggressive organic growth, I would say, across the country here in Rayburn, in our territory. Just for some perspective, the last nine years, 2017 through 2025, we’ve had a aggregate growth rate of almost 60 percent across our membership.

These aren’t small distribution co-ops to begin with, right? These are 500 to 600 MW peaking distribution co-ops. So that amount of growth, you mean a CAGR of 5.5 to 6 percent on average across that entire timeframe, you know, that in and of itself has had us— you know, led us to down a path of just constant substation adds and adding resiliency to the distribution system and to the transmission system within what we can control.

So it hasn’t quite yet translated into any sort of direct investment savings and upgrade savings like that. But I will say that with how quickly we’re seeing Base Power scale the program that we’re in, success story for me really looks like that scaling of that continuing within Farmers Electric and then we, you know, adding that to other distribution co-ops that we serve.

That in and of itself, that peaks shaving attribute and really that shorter duration battery deployment to kind of complement the more resilient, longer duration, more dispatchable technologies that we’ve current already invested on the utility scale side, I think that’s really gonna help us be a lot more diversified and a lot more versatile.

Matt Boms: Yeah, certainly for a vertically integrated utility, it makes a ton of sense because all the incentives are aligned there, right? Like it’s a no-brainer. It’s a little harder in the areas that are competitive and you don’t have utilities that are vertically integrated. That’s for another podcast, but it’s just good to hear that Rayburn is moving forward with these technologies, and ultimately it’s just about saving money for your members, so that’s great to hear.

Christian Nagel: Yeah. And again, the scalability’s been huge because ultimately the DERs, they’re just one home at a time, right? At least from our perspective. But the way that we— that Base Power and Farmers have worked together to, scale these at the distribution level’s been really quite impressive. And when you look about it— when you think about it over a timeline of otherwise choosing utility scale batteries, at the rate they’re going, by the time you get through the study process, the interconnection study process, you order the equipment, transformers, things that are multi-year lead times, I mean, I honestly think we’re gonna be scaling at, a comparative rate.

Then you add to it, like, you mentioned, that the vertically integrated benefit of transmission cost savings, it’s a, it’s a no-brainer to continue to scale that program for us.

Matt Boms: Yeah. If you add up all the megawatts, it’s pretty astounding what’s going on in Texas right now, right? And it’s easy to see in 5 to 10 years every home or business having battery attached to it, right?

So it’s pretty cool. I agree with you. It’s fun to see all this stuff getting deployed so quickly, especially in our state, ‘cause we’re just like, we’re known for speed. We do things quicker than other parts of the country. Well, I wanna talk Texas Energy Fund before we wrap up, because this was obviously a huge piece of legislation that passed back in 2023.

I know that Rayburn has been involved in the TEF, so I just wanted to give you a chance to talk about that and tell us what you’re building in Rayburn as part of the Texas Energy Fund.

Christian Nagel: Yeah. It starts a lot with our acquisition of Rayburn Energy Station. I know I mentioned that before, but I’ll maybe go a little bit deeper into that before getting to the new development project.

But so following Winter Storm Uri, we really took a strategic look at how we approach power supply. When I came on board in the summer of 2021, we just started looking at more dispatchable resources, and really, again, stealing the ground, being more in the driver’s seat of our power supply. And we looked at what types of resources performed well during Uri.

I know a lot of gas generation did not. A lot of that was due to, you know, improper potentially winterization, but a lot of it was just the actual gas supply itself. But Panda Sherman performed extremely well during Uri, and so when that came on the market at the end of 2022, we jumped on it. Again, it was a very competitive process with other private equity suitors. But we ultimately landed that and closed on that deal the first half of 2023, which was, you know, in hindsight, extremely well-timed with the summer we had that year.

But with how fast we’re growing organically, we had to start looking already, even after that major acquisition, right? It’s a 750 MW combined cycle. We already had to start looking ahead to what’s the next thing for us to do. And around that exact same time, right, they introduced that Texas Energy Fund in the legislature.

So we started on that process. We looked at what sort of technologies are deployable today, right? Number one, our board and Rayburn still were desiring a longer duration, more resilient types of technologies. And so that’s when we continued to focus on natural gas. But we had already a couple combined cycles where there were partial owner or fully owning in Rayburn Energy Station.

So we looked at diversifying, and so we came up with the solution of these Siemens SGT-800s. And so these are quick start, simple cycle gas turbines. A lot of synergies with RES today because it’s, first of all, it’s an add-on to the same site, so a lot of the infrastructure’s already in place at Rayburn Energy Station.

Control systems can speak the same, so our operators in the control room don’t have to learn new control systems. So a lot of those things really made sense for us to pursue this type of technology. Now comes the question of, is it feasible from a financial and rates stabilization side of things? And that’s really where the Texas Energy Fund fit into it.

So obviously, 3 percent rate on up to 60 percent of the cost of the project was huge. Initially, Rayburn actually had to work with the legislature to get some changes made to the way we were able to finance it. Really, that taking a step back, what that means, cooperatives, we finance it 100 percent with debt, right?

But the way the structure was at the time, the seniority of the Texas Energy Fund note had to be higher than supplemental debt we had to raise. So what we did was we worked with the legislature to allow for that to be all secured under our entire system, basically on even foot. Pari passu is the term for that.

I didn’t know that I would become fluent in Latin when I went down the endeavor of, working on this project, but you know, that’s the way things go. But we worked with PUCT, the consultants that they hired, and it was a two-year diligence project on this. We closed on the loan in June of this year.

Obviously, there’s going to be a lot of regulatory requirements when you’re getting a government loan. I think that’s a positive for the PUCT and for the state. It really was a rigorous process and very well vetted from the side of the PUCT and their consultants that they used to go through that diligence process.

So, you know, at the end of the day, I think that we’ll, we’re, you know, a 20-year note, 3 percent is really gonna end up, you know, putting us in a good position going forward with this project. So all in all, time will tell exactly how successful that project will be, but I certainly think we’re off to a good start just with the financing itself.

Matt Boms: Yeah, it sounds like it’s not a question of whether it will be successful, it’s just how successful will it be. And the criticism I remember back during that legislative session was that the barrier to more dispatchable generation was not necessarily a lack of access to capital in ERCOT. It was more supply chain issues, which I think are still true today.

But I can see how this is different because from the co-op perspective, the access to low interest capital was a really key, part of the decision for y’all, right? So it works a lot differently than in the competitive parts of Texas where these are just private investors coming to build their own gas plants.

So obviously they’ve got plenty of low interest capital that that’s not necessarily the barrier to growth.

Christian Nagel: Yeah. And honestly, we have a pretty low access to capital too. We’re investment grade rating. But I definitely s— the Texas Energy Fund in hindsight looking, it’s certainly more geared towards a util— a vertically integrated utility type model, and that’s why it fit us so well.

A lot of the IPPs, they look at returns on capital differently than we do. It’s just a different structure altogether. Again, we are looking for something that was dispatchable, something that looking ahead at our modeling and the way we perceive risk over here, looking for something that would stabilize and even lower our rate projections into the future.

From that perspective, the 3 percent note dovetailed with the lower cost of capital we had on the other 40 percent, and all in all, it really was

Matt Boms: I think a really exciting time for Rayburn, given all the different strategy decisions that you’ve walked us through today, Christian. Before we wrap it up, I wanna just hear your thoughts on where you go from here in an era of unprecedented load growth.

We talked about data centers. Where do you see Rayburn’s future, and what will be success for you over the next several years?

Christian Nagel: I think our main focus is still gonna be on member services, member benefits, and low stable rates. That’s really what’s driving us. We’re already looking ahead at next steps as it terms for power supply, whether that’s gonna be joint ventures with some of these data centers, and we’re certainly having discussions there on some opportunities.

Again, we’re mainly focused on what’s gonna add the most value for Rayburn, divesting ourselves from being tied to any type of technology. Again, we’re, gonna do what makes sense for us, what makes sense for our members, and what leads to the lowest rate possible for our members, but also understanding that with that, you have to have reliable solutions.

So we’re following along with a lot of the newer technologies. We’re not ready to dive in on them yet, SMRs, things like that. But I do think that what I mentioned earlier about there’s no one panacea to solve this load growth problem that we have, or I see it as an opportunity, honestly. You’re gonna have to look at all the above options.

You’re gonna have to be innovative, which is one of our core values, so that’s certainly something we’re gonna continue to march toward. And you have to look at, you know, what’s gonna ultimately lead to the most reliable low-cost power for our members long into the future.

Matt Boms: Absolutely. Well, huge credit to you and the leadership team at Rayburn.

It sounds like following Winter Storm Uri, you really took matters into your own hands and started building your own generation and coming up with new solutions to a really complicated problem. So just congrats and wishing you all the success moving forward.

Christian Nagel: Yeah. So thanks so much for having me on, Matt.

It really was a pleasure.

The latest reports and executive commentary suggest that large-load demand growth in Texas is continuing at a breakneck pace. All major Texas utilities or merchant power companies at the very least reiterated rosy earnings outlooks despite the sound and fury coming from Gov. Greg Abbott, the Texas state house and countless local politicians. Even as Texas legislators tap the brakes, Texas is still likely to surpass Virginia as the global leader in data-center power markets by 2030.

“In terms of robustness of the large-load backlogs [executives expressed] confidence in their ability to execute on those backlogs,” said Alex Kania, a longtime utilities analyst at brokerage U.S. Bancorp/BTIG. “There was a uniform sense that they felt OK about the political environment.”

The kind of double-digit percentage growth in revenue that was once unheard of for the steady utility business is now the norm, thanks to the artificial-intelligence boom.

Houston utility CenterPoint’s revenue rose 11% to $2.15 billion in the second quarter.

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In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

Texans, legislators debate transmission lines at hearing | Texas Tribune

“Republican legislators, Democratic statewide candidates, landowners from rural Texas and environmentalists” alike joined together Wednesday to protest the buildout of 765-kV lines across the state.

At the protest and nine-hour hearing that followed, lawmakers heard a variety of recommendations, including from local officials arguing for more local control of data center proposals and more time to reform the process behind approving transmission lines across Texas. Though discussed in separate hearings, landowners and protesters said the issues are connected…

Regulators have already been working through a new way to decide how much of the cost of building new transmission lines needs to be paid for by individuals and how much needs to be paid for by companies such as data centers. Experts said they believe the new system will lower the burden on residential consumers relative to the industrial groups.

Data-Center Backlash Leads to New Land Rush in Texas Oil Patch | The Wall Street Journal

While the data center protests rage, investors converge on the Permian Basin to build data centers powered by cheap natural gas.

“A lot of places you see all over the country they’re worried about water, they’re worried about power, they’re worried about transmission, and the Permian has all of those things in spades,” said EagleRock Chief Executive Greg Pipkin Jr.

Dallas-Fort Worth Dethrones Virginia as the World’s Top Data Center Market | Dallas Innovates

Two reports show growth in North Texas data centers despite political concerns about the industry.

Boasting five highly ranked data center markets, Texas is experiencing an explosion of data center activity. Long anchored by the DFW market, “the state is growing at a pace that could soon bring total installed capacity in line with — and potentially beyond — that of Virginia,” the Cushman & Wakefield report said.

A new report from commercial real estate services provider JLL takes a slightly different view, anointing Texas the top data center market in North America. Texas eclipsed longtime frontrunner Virginia based on the level of existing and under-construction data center inventory in the state as measured by gigawatt capacity. A gigawatt equals 1 billion watts.

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In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

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Where to find information about data centers in Texas | Texas Tribune

As the data center picture continues to complexify, a new guide from The Texas Tribune lays out where Texans can look for information about proposed data centers near them. They advise on:

How to find how much water a data center will use

How to find how much electricity a data center will use

Who owns a data center’s property or land?

How to find information about data centers through local government

And where planned construction projects will take place.

So Much Solar: Digging Into the List of Every US Power Plant That Went Online This Year | Inside Climate News

While utility-scale solar accounted for the largest share of new U.S. generating capacity in the first half of 2026, Texas has a mixed picture.

Three states account for about half of the country’s new generating capacity: Texas, New Mexico and Arizona.

Texas was the leader, with a power mix that leaned more heavily on batteries and gas than other states. The leading category in Texas was batteries, with 3,067 megawatts, followed by utility-scale solar, with 2,311 megawatts, and then natural gas combustion turbines or natural gas internal combustion engines, with 1,154 megawatts.

A chart from the publication shows Texas in the lead.

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On this week’s Energy Capital Podcast, Joshua Rhodes talks with Cyrus Reed, legislative and conservation director of the Sierra Club’s Lone Star Chapter, about what it means to run an environmental group in a state with no renewable mandate, and about nearly everything happening on the Texas grid this summer.

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The rest of the conversation:

• The routing fight: Reed says 765 kV is the right design and the process is the problem. Routes drawn from satellite imagery that missed homes and schools, landowners knocked out of the docket for filing a week early, a 180-day clock he says does not fit lines this long, and two potential legal paths for the PUCT: deny the applications, or remand them.

• Why Texas built more renewables than the mandate states: private property rights, an energy-only market, and what the Sierra Club defends now that the renewable portfolio standard is gone.

• The Lone Star Chapter’s platform for the 90th session: data center protections, distributed energy, county authority over codes and floodplains, and why Reed says the Sierra Club is “not an organization that’s been calling for bans and moratoriums.”

• Why ERCOT’s batch zero study depends on the lines getting built, and what a delay does to 400 gigawatts of large load. ERCOT postponed the study three days after we recorded.

• Non-disclosure agreements, mitigation fees, and community benefit agreements: why data centers keep losing the room, and what Reed’s members would accept.

• Behind-the-meter gas permitted one engine at a time, when Reed says the total would trigger major source review.

• The Sierra Club with Texas Oil and Gas Association against the Performance Credit Mechanism, the Green Tea Coalition, and the home builders on energy codes.

• Plus: ERCOT against the Southwest Power Pool, the fear underlying the artificial intelligence backlash, and the one plank he’d pass if he could only pass one.

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Chapters

• 00:00 – Introduction and guest background

• 00:46 – What it means to be an environmental group in Texas

• 02:50 – How property rights and an energy-only market built out renewables

• 06:54 – The Lone Star Chapter's platform for the 90th Legislature

• 08:48 – County authority, HB 40, and codes instead of bans

• 10:46 – How load growth, 765 kV, and data centers got tangled together

• 15:43 – ERCOT versus SPP, and who carries the risk

• 17:11 – Schwertner's letter and what the PUCT could actually do

• 20:47 – How a CCN works, and the 180-day clock

• 23:07 – A bigger grid and more oil and gas extraction

• 25:37 – What a fairer routing process would look like

• 29:18 – Batch Zero, the large load queue, and the disclosure problem

• 33:19 – Mitigation fees and community benefit agreements

• 36:02 – Behind-the-meter gas and the minor source permit threshold

• 38:33 – The Green Tea Coalition, unlikely allies, and the 2027 platform

Resources

People & Organizations

• Joshua Rhodes (LinkedIn)

  • Webber Energy Group (Website - LinkedIn)

  • IdeaSmiths (Website - LinkedIn)

  • Energy Capital (Podcast - LinkedIn - YouTube)

  • Texas Energy & Power (Website)

• Cyrus Reed (LinkedIn)

  • Sierra Club Lone Star Chapter (Website - LinkedIn)

• Other Orgs Mentioned:

  • LCRA - Big Hill to Sand Lake 765 kV Transmission Project

  • Base Power (Website)

  • Energy Empire (Website)

Company & Industry News

• Lt. Gov. Dan Patrick, Texas senators call for PUC to deny 765-kV transmission line applications

• Chairman calls for a halt to controversial state transmission line project

• Environmental Groups Contest Texas Data Centers’ Air Pollution

• Environmental groups threaten lawsuit over West Side San Antonio data centers

Books, Articles & Filings Discussed

• Sierra Club Lone Star Chapter - 2027 Legislative Policy Platform

• Public Utility Commission of Texas - Permian Basin Reliability Plan

• Texas House Bill 5066, 88th Legislature - Bill text

• ERCOT - New Batch Connection Process for Large Electricity Users

• Texas Commission on Environmental Quality - Texas Emissions Reduction Plan

Related Podcasts by Energy Capital

• Texas competes on everything except transmission

• What batch zero settles and what it leaves open

• Inside the PUC’s cost-allocation overhaul with Chairman Gleeson

• Why some large loads insist on paying their way

• Transmission takes a decade, load doesn’t

Related Posts by Texas Energy & Power

• Transmission Lines and Good Times, Reading and Podcast Picks

Transcript

Joshua Rhodes: Hey everyone, and welcome to another episode of the Energy Capital Podcast. I’m really excited to have Cyrus Reed here from the Sierra Club to just talk about what it means to be an environmental group in Texas and kind of how they see what is going on right now. Cyrus has a PhD in geography from the University of Texas with a focus on water policy and the dispute over the Rio Grande Valley, Rio Grande water with Mexico. Prior to becoming the legislative and conservation director for Sierra Club’s Lone Star chapter, he served as Sierra Club’s lobbyist on energy and water quality issues during the ‘05 and ‘07 legislative sessions, and he directed the Texas Center for Policy Studies.

Cyrus Reed, welcome to the Energy Capital Podcast

Cyrus Reed: It’s a pleasure to be here.

Joshua Rhodes: I wanted to have this conversation. A lot of times on this podcast, at least for folks that I’m tuned-- that I talk to, we get real technical into, like, real details and stuff, but I wanted to kind of, like, take a little bit of a s- a step out, a little bit of a step back, start talking about kind of what environmentalism means in Texas, and then maybe we’ll get into some of the current issues right now and kind of like where Sierra Club sees that, where Cyrus sees that, if possible, these types of things. But I guess, like writ large, what does it mean to be an environmental group in Texas?

Cyrus Reed: I think it means being very flexible and being very nimble. So I work for the Sierra Club, which is a national organization. The mission is the same: explore, enjoy, protect the planet, basically, and then there’s a bunch of other things in our mission statement, but it’s basically that. So that hasn’t changed. The values haven’t changed. But how I work here in Texas is probably different than how I might work in New York and California. Texas has always been a very, call it a property rights state, one where, you know, we have a right of capture on groundwater.

Joshua Rhodes: Right.

Cyrus Reed: We have our own independent grid, as you well know, and we’ve traditionally resisted federal mandates and sometimes even money. So it means the approach, the methods, the narrative we use have to be a little different in Texas. But we are, at the end of the day, a grassroots organization. We have members, and a lot of what we’ve been trying to do in recent years is get those members more engaged at the legislature or at the Public Utility Commission so people aren’t in their own little bubbles, right?

Joshua Rhodes: Yeah.

Cyrus Reed: And they’re actually talking to other Texans about these issues ‘cause at the end of the day, there’s more that probably unites us on the environmental front than divides us. And by that, I mean, most people want clean air, clean water, affordable energy.

Joshua Rhodes: Yeah.

Cyrus Reed: And so I think there’s a lot we can do. We might not lead with the same message we would lead in California or New York, but I think the values and what we’re trying to achieve is largely the same.

Joshua Rhodes: Yeah, and so, like, it’s interesting, a lot of times when I talk to media interviews and a lot of folks are like, “Texas, you’re an oil and gas state. What are you doing with, like, you know, all these renewables?” I mean, I think of as of, like, the first half of this year, we got about a quarter of our electricity from wind and about 15% from solar. And, and you mentioned, you know- Resisting federal efforts during certain administrations to pick certain technologies or other types of things like that.

So what is it that Texas has done different that would maybe not have worked in New York or California, but we’ve still ended up with a lot of renewables?

Cyrus Reed: Well, I think part of it is that private property rights.

Joshua Rhodes: Yeah.

Cyrus Reed: The idea that people can do what they want with their land, because, and I think it’s been a benefit to us, we have an energy-only market that’s fairly competitive. I mean, I guess it’s not totally competitive, but it’s fairly competitive. It means it makes a whole lot of sense in our market, which is based on the lowest cost resources getting picked first, for private landowners to lease their land for wind, solar, and now even batteries.

And so I think because we have that system in place, we’ve been able to get to these, you know, amazing numbers. We talk about in a few years 40,000 gigawatts of wind, 40,000 gigawatts of solar. I think we’re near already 20 gigawatts of storage.

Joshua Rhodes: Right.

Cyrus Reed: My friends that work for the Sierra Club in places like New York are... You know, they’d love to see those numbers. They’re not seeing them. And so ironically, somewhat ironically, even though we don’t have the mandates some of those states do, we’re actually achieving as much or more.

Joshua Rhodes: I’ll let you take credit for it if you want to, Cyrus. I mean, that’s fine.

Cyrus Reed: I don’t know that I can take credit for that. I have been around a while, but I really didn’t start with Sierra Club until 2005. So I was involved in the RPS expansion, but I wasn’t involved in the original dereg bill. But I like to say a lot of our work has just been defending what we’ve achieved. And so even as the state has now moved away from any kind of renewable mandate, we no longer have a mandatory RPS. We’ve done away with additional transmission specifically for renewable energy like we did, you know, a few years back.

But now we’re just trying to defend that market to make sure it keeps going forward, because I would rather that we build resources, at least when they operate, don’t create air pollution, and don’t use water.

Joshua Rhodes: Yeah.

Cyrus Reed: Because we have problems with air pollution, and obviously we care about climate change as well, and we also have problems with water. So the more we can have our electrical system be carbon-free and not be a big water hog, the better for all Texans.

Joshua Rhodes: Yeah, it makes quite a bit of sense. We recently put out a podcast with John Davis, who’s a landowner kind of out in, out in West Texas. He’s got some wind on his farm. He’s also a former Texas legislator, I think around the time that you were talking, so maybe you might have interfaced with him back then.

Cyrus Reed: Yeah, I definitely know him. We know each other. Yeah, he’s a good guy.

Joshua Rhodes: Yeah, he, he talked about how Texas doesn’t have a binding r- renewable portfolio standard right now, but at one point it did, put in by, you know, the left-leaning George W. Bushes and Rick Perrys of the world, apparently. But it is interesting what, like, Texas has done since then.

Cyrus Reed: Yeah, it’s an amazing story, and we have other stories in Texas. We have an amazing program run by TCEQ, Texas Commission on Environmental Quality, called TERP, the Texas Emission Reduction-

Joshua Rhodes: Right.

Cyrus Reed: Plan. Hopefully I got the acronym right. Where we’ve used a little bit of kinda sales tax and fees here and there to put into grants that help get cleaner engines on the road, and that’s made... We still have lots of air pollution problems, but it’s made a huge difference, and we’re kind of a leader on the creation of that fund and the use of it to clean up our airports and our train stations.

Yeah, where freight comes in and out, and just the heavy diesel equipment, getting it off the road. So we have some examples in Texas of things we’ve done, usually by working with industry, you know, usually not against industry, but we have some example where we’ve achieved some great things.

Joshua Rhodes: Yeah. And so let’s, like, dig into a little bit of working with industry, working with policymakers. I mean, the Lone Star Chapter, you just released your 2027 legislative policy roadmap, you know, for the 90th legislative session. So, you know, what are the top two or three, you know, priorities in there that you see?

Cyrus Reed: I’m only laughing because I’m the person that works for the Lone Star chapter who has about 50 different ideas, and then

Joshua Rhodes: Okay.

Cyrus Reed: They have to try to rein me in. So you’re asking me two or three. I mean, what we really did is we put it into four buckets.

Joshua Rhodes: Okay.

Cyrus Reed: Clean, affordable energy, clean air and water and, you know, projections for communities, land conservation, and then really, uh, sustainable water and climate resiliency. So within those four buckets, there are lots and lots of things, but to me, given what’s happening right now, some of the most important are really protecting us from data centers, and I don’t mean because of what data centers do, I just mean because of the impacts they have on land, water, and energy use

Joshua Rhodes: Yeah.

Cyrus Reed: And potentially air pollution to the extent they use, uh, gas plants. So putting in some common sense protections for that. Like I think you do, I would really like to see our market evolve even more towards, uh, smaller stuff, so distributed energy resources I think would be really important. And then the other area that I think is very important is giving counties a little more authority on some land use issues, but also on things like building codes. Just generally-

Joshua Rhodes: Hmm.

Cyrus Reed: Having better buildings, ‘cause that’s gonna help us in all those areas. If we have better buildings, we use less energy, we use less water-

Joshua Rhodes: Yeah.

Cyrus Reed: And hopefully we don’t locate them in places that flood a lot or get a lot of hurricanes. And I think we would avoid the millions and billions of dollars that get spent after every natural disaster. So those are three things that I think are really important.

Joshua Rhodes: Okay. No, yeah, no, I, I totally with you there on the efficiency point. Efficiency was my, you know, first love getting into the energy space and in Texas. Can you pull this little thread on the local authority part? I guess when someone talks about local authority issues, the example that immediately pops into my head is, you know, back at the beginning of kinda the fracking debate when Denton tried to, I think it was Denton, tried to outlaw or outlaw fracking in the state, like came over the top of them. Is that, is that the kind of thing you’re talking about?

Cyrus Reed: Yeah. And then we were a part of that debate and, you know, I’ve sort of come around to the idea there has to be somewhat of a balance.

Joshua Rhodes: Got it.

Cyrus Reed: Right? You can’t give so much power to local government that they can’t allow any development, because that’s also going in the wrong direction. There has to be some sort of happy medium, and they’ve really pulled back on the authority of counties. The legislatures basically said, “Unless we give you specific authority, you can’t do stuff,” is basically where we are. And it started with HB 40, but they’ve gone much further through the years.

Joshua Rhodes: Okay.

Cyrus Reed: But we think on certain aspects it makes sense for counties to have more authority, and things like codes and standards. So not saying you can’t do development, but if you do development, you’ve gotta adhere to certain codes that a county could set or a local government could set. Things like impervious cover and keeping development out of flood zones. So it’s basically the idea is yes, private property rights.

Joshua Rhodes: Mm.

Cyrus Reed: You know, yes, if someone wants to develop solar or wind or storage on their land, they should be able to do so. But the county can have some authority to say, “Don’t put it right next to the river,” or, “If you’re gonna build it, use better technology to use less energy and water.” So things like that is where we see a sort of a happy medium.

Joshua Rhodes: Okay.

Cyrus Reed: We’re not an organization that’s been calling for bans and moratoriums. We’ve been calling for kind of more reasonable regulations on things like data centers or, for that matter, transmission lines, et cetera.

Joshua Rhodes: Got it. Okay. Yeah. We’ll get to some of the-- I mean, might as well go ahead and get into some of that now.

Cyrus Reed: It’s complicated.

Joshua Rhodes: It really is, ‘cause it’s like the electricity sector, you know, I’ve been talking about this for a while. I mean, there’s just so many things going on right now in terms of like load growth was already happening. We, you know, had decided we were gonna build these, these big 765 lines to electrify oil and gas operations out in the Permian and Delaware basins. That was also gonna open up some parts of the state for, you know, more resource, but for some like more solar regions and things like that. And then came along, we taught the internet how to talk and all my students how to cheat on their homework, and now AI and data centers are, you know, data centers are getting wrapped up in this like whole thing.

It’s like it, it just turbocharged everything and there’s some causation in there, but a lot of it’s correlation, but that’s hard for people to flag. It just feels like a really big mess right now that we’re all trying to swim out of here.

Cyrus Reed: Yes, and it’s been interesting for me. I was at the hearing two days ago, Senate Business and Commerce hearing, and hearing all the individuals who came to Austin, and many of them are very concerned about transmission lines, and I understand why, because some of them are actually gonna be impacted directly. But in folks’ mind, everything is causing another thing, right, as you said. So Oncor is building these transmission lines not to meet the needs of the state or the oil and gas patch. They’re really doing it, well, because they’re gonna get a return on the investment, but also because of data centers and because they want renewable energy.

And of course, Oncor is simply a transmission company. They’re-

Joshua Rhodes: Sure.

Cyrus Reed: Building a line that’s been approved by the PUC. Yeah. And you know, I can criticize Oncor about how they’re doing it and where they’re choosing to place it, all those things are true. But in people’s minds, all of these things have come together. There’s some correlation, but it makes it somewhat difficult to know how to respond when people are against data centers, transmission, and renewable energy. And our position has been more we need some reasonable regulations on all those things, but it doesn’t mean we should stop them.

Joshua Rhodes: Yeah. No, I mean, I think... Like, I get asked to go to town halls quite often actually to talk about data centers and their impacts on, like, electricity and water consumption and things like that. But I also feel this under-- We’re getting way off into the weeds here and maybe off into left field, but we’ll see if we bring it back. I also feel like there’s just this undercurrent of just, like, also what we’re building this kind of stuff for, for the AI itself. Like, a question I’ve been asked before is, like, you know, “Why would I want something to come into my, my community that’s gonna take all the energy, take all the water, and then create the thing that takes my kids’ jobs away?” Or something like that.

Like, I mean, there’s this other bit of it there too, I think, that is that folks are, right or wrong, are kind of, like, afraid of what the actual thing that the data center create is gonna do. Are you hearing anything like that either?

Cyrus Reed: Oh, all the time. And-

Joshua Rhodes: Okay.

Cyrus Reed: You know, again, there’s a kernel of truth in it. Some of these technologies could take people’s jobs, right? And so I understand the fear. And then, you know, you hear about AI being used for military applications where AI is gonna start doing decision-making instead of our soldiers or our captains. And so it is a concern that we’re creating something-

Joshua Rhodes: I feel like we’ve seen this movie before, right?

Cyrus Reed: Yeah, like we’ve seen this movie before, yeah. So I understand it. So I think taking our time a little bit and pausing some things isn’t the worst idea. I was glad when ERCOT, and again, we can debate the particulars of it, but I think the Batch Study process, I’m glad they’re doing it-

Joshua Rhodes: Okay.

Cyrus Reed: So that at least there’s a process in place-

Joshua Rhodes: Yeah

Cyrus Reed: And we’re vetting, you know, some of those large loads. And so they really have to start thinking, “Well, if I’m gonna put this money in and go through this process, is this just speculation, or am I really gonna build something that’s gonna last?” So I think getting those rules right, getting the rules right around who pays for transmission can help assure that the folks actually coming are in our benefit ultimately. So I don’t know if I answered your question, but-

Joshua Rhodes: I don’t really know if I asked a question on that one. It, there’s just a bunch of that kind of thing, uh, got that kind of thing going on. So-

Cyrus Reed: Yeah, and the other theme I was hearing the other day was almost we need to go back to not an ERCOT-wide deregulated market, but a vertically integrated regional approach. I mean, a lot of people are saying, “Why are we doing all this transmission and connecting everyone?”

Joshua Rhodes: Hmm. “

Cyrus Reed: Why not just build a bunch of local generation?” And that usually means from the folks that are saying this, gas plants-

Joshua Rhodes: Yeah.

Cyrus Reed: In the region where the demand is, and then we don’t have to worry about these things going back, back and forth. And that it is very expensive to do transmission, but it’s probably ultimately more expensive to try to do everything locally, right? So...

Joshua Rhodes: Yeah. I mean, kind of as we sit, right, I mean, one of the things that I was also keeping tabs on was, like, that’s basically SPP’s model, so the Southern Power Pool, the grid that operates, like, Oklahoma up to North Dakota above ERCOT.

Cyrus Reed: Yeah.

Joshua Rhodes: And they’re having some issues right now with, like, ERCOT just set new peak demand records and, you know, was charging batteries on net during the peak. We’ve built so much stuff. Given how that, like, it’s private companies doing it and, like, they’re taking risk in market and this, that, and the other, and I think it’s one of the reasons we have for almost 40 gigawatts of solar. And I was being asked, like, “Why doesn’t SPP have this?” I was like, “Well, but they’ve got, like, these little fiefdoms everywhere, and if you make a poor decision, then it’s on your ratepayers, and you get hauled before the Public Utility Commission or Public Service Commissions.

But in ERCOT, it’s like if someone builds a wind farm and it doesn’t work out super well for them, well, that’s on your shareholders. Tough luck, right?”

Cyrus Reed: Yeah, and if you looked at those days, the 90,000 gigawatt days, the records we hit last week, the prices were low. I mean, they were-

Joshua Rhodes: Yeah.

Cyrus Reed: 30 to $50 per megawatt hour, so they weren’t your traditional kind of peak, you know, 1,000, 2,000 type. So it’s pretty good news.

Joshua Rhodes: Totally. I mean, I think those days are gone. I mean, uh, peak demand and peak pricing in ERCOT got divorced last year or the year before because it’s the same sun that’s like heating up the buildings that’s driving the air conditioning use that makes the electricity in the solar panels. Because we can do a lot of this in West Texas too, we’ve got like a solar hour later, it really kinda helps.

So recording this on July 31st, you said you were at a, a meeting at the Capitol the other day, and I’ll put you on the spot a little bit. I’ll- if you don’t wanna talk about this, then that’s fine ‘cause you haven’t, you might not have seen it. But I just saw today a letter from Chairman Schwertner. At the end, he says, “Accordingly, I’m calling on the PUC to deny the existing CCN applications. Any reapplications need to take into consideration concerns raised during the hearing. Legislature will reform the CCN process next session.” So you were at that meeting. There’s like three paragraphs in that letter, and I just read you the last one.

I mean, so you were at the meeting. What are you hearing from this letter that just got released today as we’re recording this?

Cyrus Reed: What I’m hearing... Well, first of all, let’s not forget that we’re in an election season.

Joshua Rhodes: Fair enough.

Cyrus Reed: So there are elections in November, and there’s a, I don’t know if Schwertner’s up for election or not, but the governor is, and the lieutenant governor is, and this particular is- these two issues, data centers and transmission lines, are bipartisan issues in that particular people in those areas being affected, but also all over the state-

Joshua Rhodes: Yeah

Cyrus Reed: Are pretty pissed off that they’re seeing all of this growth. They’re seeing at least reports that electricity prices could go up a lot-

Joshua Rhodes: Yeah.

Cyrus Reed: You know, whether that’s directly caused by this or not, and at least they’re taking to social media and saying, “You know, even though I’ve been a lifelong conservative-” I’m thinking about, you know, sitting this one out or even God help us vote for a Democrat. And so I think the members are seeing this and they’re wanting to be responsive to their constituents, and a lot of

Joshua Rhodes: Yeah.

Cyrus Reed: Schwertner’s constituents were there. His area includes some of these areas that would be intersected by transmission lines.

Joshua Rhodes: Yeah.

Cyrus Reed: So I think he’s reacting to that, whether or not his letter asking the PUC to deny these CCNs, whether they can do that or not, I’m not sure. Legally, however, they could remand them. Well, they could reject them, but they could also remand them and say, “You haven’t... There’s some things that were done in this process that weren’t done correctly. There were a lot of people knocked out of the process. There was very little time for people to do things like discovery and cross-examination.” So they could say, “It was an unfair process and we wanna remand it on these particular issues.” So I think there are things the PUC could do, and it wouldn’t surprise me if some of this gets delayed.

Joshua Rhodes: Okay.

Cyrus Reed: There are also a lot of people calling for the governor to call a special session right now. That is probably unlikely to happen given we have, you know, early voting starts pretty soon-

Joshua Rhodes: Right

Cyrus Reed: In October, so it’s probably unlikely. But this would then allow the legislature to talk about this, about transmission while these projects get reconsidered or are remanded or whatever. So I’m not really surprised by it given, you know, you had 207 people who signed up to give public comments-

Joshua Rhodes: Yeah.

Cyrus Reed: Two days ago, which is pretty rare for an interim hearing. Generally at an interim hearing it’s just the suits, you know, the people who normally lobby.

Joshua Rhodes: Right.

Cyrus Reed: But at both this one and there was an earlier hearing involving data centers and on the House side, and again, data centers are water. Over 100 people came and signed up to speak at that hearing. So I think there’s general anger in rural communities who tend to, you know, vote Republican.

Joshua Rhodes: Yeah.

Cyrus Reed: And the Republican leadership is responding, and they’re almost looking for an out. I don’t think Schwertner’s letter says we shouldn’t build 765 lines or we don’t need transmission. He’s just saying, “Reject these so we can consider some reforms.”

Joshua Rhodes: Got it. Okay. Yeah, just full disclosure, I was involved in one of the dockets on one of these siting things. I think there was like 6,000 things submitted, and like, I think broke a record in terms of like, you know, the poor PUCT exchange thing. And CCN stands for Convenience Su- Con- Certificate for Convenience and Necessity, right? That’s something that, like, the Public Utility Commission has to grant the transmission service provider in order to be able to get a regulated rate of return on that asset. Is that right?

Cyrus Reed: That is correct.

Joshua Rhodes: Okay.

Cyrus Reed: Every transmission project has to go through a process. Some of them require a CCN, some don’t. The larger ones generally do.

Joshua Rhodes: Okay.

Cyrus Reed: That creates another process, and one thing the legislature did is they passed a law saying all this has to occur within 180 days, and that is probably part of the problem in these cases. The transmission lines are so long-

Joshua Rhodes: Yeah.

Cyrus Reed: And it’s so complex with multiple potential routes that I think people are having a hard time even really participating, as you noted.

Joshua Rhodes: And that was based on HB 5066, right? Like, that’s where all of that’s coming from, right?

Cyrus Reed: I can’t remember if the 180 days was in that bill or another bill, to be honest. But yes, there was legislative action that session to make all of these transmission decisions fit within 180 days. And that may be fine for a 345 line or a 69... You know it. But these are really complex, these huge lines.

Joshua Rhodes: One of the things I remember, I think was in the analysis, is like if they decided to go the 345 route instead of the 765, it was actually more lines, maybe more right away, I don’t know, more fights.

Cyrus Reed: Yeah, I mean, honestly, the Sierra Club position, I don’t know that we opined on these particular lines.

Joshua Rhodes: Sure.

Cyrus Reed: But on the whole idea was 765 actually makes more sense. It actually leads to less land degradation and more efficiency on those lines. So it does make sense.

Joshua Rhodes: Yeah.

Cyrus Reed: Then there’s the question whether this particular process was fair, and we did file some comments in one of the cases and just say, “Hey, Oncor, why didn’t you just look at going a little further north along the existing highway instead of, you know, really cutting over the San Saba River nine or 10 times?” And, you know, it’s pretty complex terrain up there.

Joshua Rhodes: Yeah.

Cyrus Reed: So I think we’re actually for 765 lines, but this probably some routing and better public input should be considered.

Joshua Rhodes: Yeah. How do you-- I mean, if you don’t wanna opine on this, that’s fine. I’m just curious, like, I mean, one of the things that I see about the Texas miracle in particular is every once in a while, like we’re willing to build big tranches of like infrastructure that allow the economic engine to run. And one of those is we built the CREZ lines not only to get wind, but that also electrified oil and gas operations. The STEP line or the 765 lines, nominally to electrify oil and gas operations, but it’s gonna unlock a lot of like solar resources and just generally overall connect the state a little better.

I mean, it seems like to me, having more that infrastructure would help like the Texas grid be cleaner, also is probably gonna mean more like oil and gas extraction, maybe for LNG exports or other types of things like that. I don’t know. How do you see threading that needle with this infrastructure?

Cyrus Reed: I’m having a hard time-

Joshua Rhodes: Yeah. Yeah, me too,

Cyrus Reed: Man ... To be honest, because like you said, what’s it for? If at the end of the day it’s for data centers and AI, and they do lead to job loss, then is that a good thing or not? But I guess I have to go with, we can’t actually totally control the future and all things being equal. Having a more efficient, bigger grid is probably better for consumers-

Joshua Rhodes: Yeah

Cyrus Reed: In terms of the cost, as long as we can get the transmission part of it worked out so it’s allocated fairly, that’s probably better for consumers.

Joshua Rhodes: Yeah.

Cyrus Reed: And then I go back to y- your first love and mine, which is efficiency, which is if at the same time we do this big stuff, we can also do things on the smaller end, make sure that consumers who want can get access to on-site solar, on-site storage, or-

Joshua Rhodes: Yeah

Cyrus Reed: Make their houses more efficient or participate in demand response. Those are ways that consumers can participate, and also hopefully that would lead to less need for really big power plants, which then can have other impacts. So I’m for the big stuff and the small stuff, and I’m not sure quite how to thread that needle.

Joshua Rhodes: Yeah.

Cyrus Reed: But at the same time, as a grassroots environmental organization, we do care about process and making sure that there’s transparency, and people who want to contest permits can do so, whether that’s an environmental permit or a CCN, that’s important to us. So it’s not that we just wanna build stuff as fast as possible with no public transparency. We want the public transparency too.

Joshua Rhodes: Okay. So for this process in particular, like what do you think that would look like, if you’re willing to opine on that?

Cyrus Reed: So one thing, and I’m really reacting to the testimony I, I heard because I wasn’t involved in these cases, is There were a lot of people who came and said their map didn’t show my residency, or their map didn’t show the school I built, or the particular kind of terrain or the karst Edwards Aquifer, Trinity Aquifer, I might be getting my words wrong, wasn’t recognized. And I think a lot of this was done aerially with satellite imagery or drones, and there wasn’t a lot of ground testing-

Joshua Rhodes: Okay.

Cyrus Reed: As they looked at these routes. So I think requiring some actually kinda truth testing on the ground is important, and maybe being a little more flexible and allowing folks like Oncor, LCRA to have a wider swath of land they can look at, so-

Joshua Rhodes: Okay

Cyrus Reed: Not necessarily always going the straightest line, but also if there are existing highways with right of ways or other infrastructure that you could easily follow and therefore you’re not degrading as much new land, I think that would be important. And then just generally making it easy for people to participate and clearer. There were people who were knocked out of this case because they filed their protest, they said, “I wanna intervene,” and maybe they put their reason for intervening at the same time, and they were actually supposed to do it, you know, a week later.

Joshua Rhodes: Oh.

Cyrus Reed: But they were knocked out because they didn’t correctly follow the procedure. So I think some general education for people, including videos maybe in some cases, not everyone reads every word, right? You know, is gonna be important.

Joshua Rhodes: Terms and conditions.

Cyrus Reed: Yeah. Maybe allowing also county governments to get more involved in the process, saying they’re... If you’re a county government official or, you know, a groundwater district, you have the ability to also opine or enter as a party, I think could be helpful, ‘cause they’re representing multiple constituents, and they’ve gotta look out for the betterment of their county as well and what, how they want it to develop. So there are some things that can be done.

Joshua Rhodes: Okay.

Cyrus Reed: The other area, you know, I think we probably share this is, making it so utilities have to look at all alternatives, and by that I mean, and I don’t know if there’s an alternative to 765, that’s a big line. But some of these distribution lines, et cetera, making sure they’re looking at non-wires alternatives. Are there things we can do on distribution or through demand response or through locating storage in certain places? Can we avoid the need for building new lines or delay them? Or can we do reconductoring or use grid-enhancing technologies? Are there... Can we put that into our process at the front end so we’re not always going for the biggest thing that we think is needed and maybe it’s not?

I don’t know if that affects the 765, but the smaller stuff, it certainly could help.

Joshua Rhodes: I’m all for wringing every single megawatt out of all the capacity and things like that that we do build. But at the end of the day, if we need to build these lines, they’ve gotta go somewhere. We’re probably not gonna make-- Not everyone’s gonna be happy.

Cyrus Reed: Not everyone’s gonna be happy.

Joshua Rhodes: Yeah.

Cyrus Reed: Yeah, but if the one that’s going through the Devils River and that area, if we could put it along I-10, that might be better. I’m gonna draw a blank on the other highway, the one that’s going from Bell County out west. There’s a highway that’s being built a little north of there. Now I can’t remember which highway it is. I mean, there are some options they could look at. It just may not be the cheapest option or the most direct, but it might avoid a lot of that land.

Joshua Rhodes: Got it.

Cyrus Reed: And people’s ranches and homesteads.

Joshua Rhodes: Okay. So he talks about, we talk about transmission lines. We’ll talk about the other favorite topic, everyone, for a minute, for, uh, data centers, the two things that unite us all now, as you mentioned. So there’s also 400, or 90% of 400 gigawatts worth of large load that’s trying to connect to the system that are data centers. It’s one of the reasons why ERCOT’s setting up this Batch Zero process, which we’ve done a couple episodes on this podcast trying to explain and trying to figure out. Well, actually, before we get to data centers, I just had a thought. Like, if the 765 stuff gets delayed, this may mess up the Batch Zero process.

Cyrus Reed: It could.

Joshua Rhodes: Yeah.

Cyrus Reed: Because if you remember that Batch Study process, the study is, I guess, just beginning, but it’s supposed to come out next spring, and it’s really pretty dependent on building these lines or them being in service by-

Joshua Rhodes: Yeah

Cyrus Reed: 2031 or whenever, right? So yeah, that could mess that up. I’m sure there’s a lot of people who work for data centers who are very nervous right now.

Joshua Rhodes: Yeah. As we’re recording this on July 31st, that letter just came out today, so we’ll see how that plays out. But yeah, I mean, you know, the Batch Zero process is supposed to end up, if the numbers are still right, like a plan to the regional transmission group at the end of 2027, and then there’s like a five or six-year build-out process, which easily crosses into the 2030, 2031, where, which, which is when a lot of these, you know, 765 lines were supposed to be in service. That’s a lot of transmission to have to take out of a study, and that probably means a lot less large load is able to make it in.

So let’s stick with that thread a little bit, though. So the process around transmission lines, the other thing that is... For the 765 lines, the data centers came later, but they’re kind of all mixed in it together now. Like, one of the things that’s really surprised me is it feels like that the data center companies are not making a very good case for their value proposition. You’ve got leadership at Anthropic saying this is gonna take a bunch of white collar work away. Things like that. Like, which is not helping, like the general angst and, and anxiety around that.

But like, I’ve been shocked at how bad those companies have been in terms of like doing PR around this. I mean, maybe they’re doing stuff in the background that I don’t know of, but like, I mean, what are you feeling from like the folks that the Sierra Club, you know, talks to about data centers?

Cyrus Reed: Yeah, I mean, one of the things that is really pissing everyone off is just the lack of information.

Joshua Rhodes: Okay.

Cyrus Reed: And so A data center comes to a town or a county, there doesn’t tend to be a lot of information about it. Sometimes the information is later leaked, or they sign a non-disclosure agreement because they’re gonna get some sort of incentive from the county or city, so they sign a non-disclosure agreement. That really pisses people off ‘cause then they’re like, “We can’t even know who the company is, where the water’s gonna come from, where the energy’s gonna come from.” And so it creates -- whether they would want it anyway, they may not want it in their community anyway, but it just creates a lot of bad PR for them and just bad practice.

And we have a lot of members, you know, we have 20,000 members in Texas, and some of them are involved in fighting data centers in their communities.

Joshua Rhodes: Yeah.

Cyrus Reed: Whether that’s in, you know, Round Rock or up in the Fort Worth area, and they’re very upset by not having basic information, and then when there are these kind of public meetings, feeling like they’re being lied to or the full truth isn’t being given to them. So yeah, I think data centers and AI companies, for whatever reason, they may not have good community relations or know how to do community relations. But there’s probably some exceptions. I saw that, you know, the gentleman from Google that works here in Texas came to the hearing and mentioned some of the investments they’re making, and I don’t know if people are excited about their data centers or not, but-

Joshua Rhodes: Yeah

Cyrus Reed: At least they’re talking to the community about, “We’re gonna make these investments. We’re gonna do this training for folks.” But I’m not seeing that from most AI or data center companies.

Joshua Rhodes: Yeah. No, I mean, I think one of the, another podcast, I think it was Energy Empire I was listening to, or one of Jigar Shah’s podcast, he’s always railing also about, like, how bad like these hyperscalers are, have been in terms of PR. And he’s basically says like, “If you’ve gotten to this point where you screwed it up this much, you just gotta start paying people off.” What he means by paying people off is like investing heavily into the community.

I mean, just tossing ideas around, like putting solar and storage at everybody’s house, so they have like backup if the grid goes down or something like, and just paying for it. I mean, just maybe getting Base Power just bankrolled in for the next few decades or whatever to like do that kind of thing.

Cyrus Reed: I mean, it’s in our legislative platform, that idea that if we truly, and the governor did his letter to the PUC and said residential rates should not go up, they should go down.

Joshua Rhodes: Yep.

Cyrus Reed: But if we’re really gonna do that, we almost have to put some sort of a mitigation, either require them to do a community benefit agreement or put some sort of a mitigation fee, and I don’t know if it’s upfront or annual, that kind of pays for the water use or the energy use or the potential increase in costs by investing directly into the community. So that may be something the legislature should look at.

Joshua Rhodes: Yeah.

Cyrus Reed: If you wanna come to Texas, not only do you have to meet these interconnection standards, you’ve gotta do some investments locally that will mitigate against your natural resource use. And that, I think, would be a way... And maybe we leave it up to them. You can either do a community benefit agreement with, with local government-

Joshua Rhodes: Yeah.

Cyrus Reed: For X amount of money, or we’ll just charge you, and we’ll put it into state agencies that do the same type of things. So that could be a way to kind of force them to come to the table to communities.

Joshua Rhodes: Yeah, to keep environmentalisms going. So more than leave no trace, you know, like leave it better than you found it.

Cyrus Reed: Yeah, leave it better. Well, not environmental, that’s just basic Boy Scouts and Girl Scouts. I don’t know if you’re involved in scouting. But yeah, it’s, you know, leave it better than you found it. But it goes back to 1892 and John Muir and trying to protect the mountains and the vi- vistas, you know. In that case, we were the original Sierra Club founders were trying to prevent all these lands from just being dammed and overtaken, and protect it in some way. I don’t know that we can do that-

Joshua Rhodes: Yeah.

Cyrus Reed: In Texas right now. I mean, we did put some money into state parks. But there’s a lot of-

Joshua Rhodes: Yeah.

Cyrus Reed: Land that is obviously gonna be impacted by this development, so we might as well try to mitigate some of it.

Joshua Rhodes: Yeah, totally. And like if you don’t have any examples off the top of your head, that’s fine. But I was like, I’m just curious, when you’re talking to your members, particularly those that are kind of pushing back against data centers or other types of things like that, I was like, do you have a feel for like, I wouldn’t use the term buy them off. Do you have a feel for what your members would say, “Oh, that’s a good deal. Okay, I can accept this because of this other thing that I’m getting”?

Cyrus Reed: I do think it’s investments in the community.

Joshua Rhodes: Okay.

Cyrus Reed: The other thing that concerns us and concerns a lot of our members is, and it probably the thing we’re most concerned about honestly from data centers, is where they’re gonna get their energy from.

Joshua Rhodes: Okay.

Cyrus Reed: And if it’s building a bunch of new gas plants, it could mean all the efforts we’ve had all the, I’d say the wins we have in decarbonizing our market-

Joshua Rhodes: Yeah.

Cyrus Reed: At least here in Texas, would start to go the other direction. And some of the talk really concerned me the other day at Business and Commerce because they were saying, “We need to put more incentives into building gas plants, or we need to require them to bring their own generation, and they need to be gas plants.” Now what that means, if we’re requiring them to bring their own generation and then that generation is not interconnected, it means that’s just gonna run full blast locally and probably pollute a lot more, and, you know, we’re involved in some lawsuits on this. But we’re seeing some data centers just put lots of small engines-

Joshua Rhodes: Yeah

Cyrus Reed: Sort of next to each other, backed by diesel generators to back up that power, and running a l- probably a lot more than they should. Frankly, they’re using kinda some loopholes to say these are minor permits when the total amount of pollution is probably would make it a major permit and would mean you would need much better control technology. So I mean, I’m pretty concerned, a lot of our members are concerned just by that, that these data centers will come-

Joshua Rhodes: Hmm.

Cyrus Reed: And have local generation that will ultimately pollute folks. We would rather they get-- invest in bring capacity by investing in things like energy efficiency programs, and if they wanna also, you know, build cleaner energy sources that feed into our grid, that helps clean up the grid, and then they’re getting some of that energy. So that would be a far better outcome from our perspective.

Joshua Rhodes: I know. It’s, it’s a sticky problem, right? ‘Cause if you don’t want local generation, if you’re wanting to build the best wind and solar resources, that means transmission. That was part of our first conversation. You know, it’s like it’s not probably a tough seat to be sitting in sometimes there when you’ve got... For you.

Cyrus Reed: It is a tough seat. You know, I gave public testimony the other day, and I told the senators who are most in favor of base load, I said- It’s probably a mistake on my part, but I said, “I don’t think the answer is more base load power, big gas plants. We need flexible generation and we need flexible demand.”

Joshua Rhodes: Yeah.

Cyrus Reed: You know, we should try to incentivize that, and that should lead to a, also a cleaner environment.

Joshua Rhodes: Got it. Okay. So maybe this question will come back to kind of what we’ve been talking about. One of my favorite stories that I sometimes tell, it involves the Sierra Club. It’s not the Texas Sierra Club, but like in Georgia, I believe, the Sierra Club and the Tea Party got together one time to form the Green Tea Coalition to push for the ability to get rooftop solar in Southern Company’s area.

I think Southern Company just gave up. They’re like, “Okay, if we got the Sierra Club on, and holding hands with like, you know, the Tea Party right now, we just cry uncle. We’re done. There’s no way we can fight that coalition.” I was curious if in kind of the world in Texas or in Texas, like if you have what you would call like some interesting coalitions that you’re willing to-

Cyrus Reed: I do. I do know the folks in Georgia that were involved in that. In fact, we... Sierra Club gave an award to the kind of the volunteer who helped lead that effort.

Joshua Rhodes: They should have, yeah.

Cyrus Reed: He’s a good old boy in Georgia, yeah, because that was so successful. Now they had a common enemy which is Southern Company. That made it probably easier. You know, we’ve seen similar on things like making permitting easier for on-site solar and storage. We’ve had some similar coalitions in Texas. I’m not sure they’ve been as high profile. But then I think the other issue just a couple years ago when they did the PUC Sunset Bill, it was interesting for me to be on the same side as the Texas Association of Manufacturers, the Texas Chemistry Council, and TXOGA, the Texas Oil and Gas Association, and we were all saying, “Don’t change our energy-only market by adding some sort of a capacity type payment,” and that was then known as the PCM.

And so we all came together-

Joshua Rhodes: Okay.

Cyrus Reed: Worked pretty closely with leadership both in the Senate and especially the House to really push back against that idea.

Joshua Rhodes: Okay.

Cyrus Reed: And so I remember Todd Hunter stood up on the floor of the House. He had the main bill on this, on kind of energy market reforms, and he said, “I can’t believe it. I’ve got Todd Staples with TXOGA and Cyrus Reed with the Sierra Club on the same page supporting my bill.” He said, “I had to reread the bill just to make sure I was still for it.” But the point was, we were both against increasing cost to give extra payments to generators

Joshua Rhodes: Yeah.

Cyrus Reed: In this case gas generators, not because TXOGA’s anti-gas. They aren’t. They’re pro-gas, but because they’re pro cheap electricity, and so that’s an area where we did that. And we had a similar, uh, deal last session. We worked with the Home Builders and again, the Texas Chemistry Council to pass a bill. Now, the bill doesn’t do much. It just says SECO, the State Energy Conservation Office, should look at the latest energy conservation codes for new construction and consider whether to adopt them ‘cause they’ve been stuck, frankly, on standards that are 10 years old.

Joshua Rhodes: Yeah.

Cyrus Reed: And so we’re still waiting for the rulemaking, but it was a nice moment where the builders, the folks who make the products like insulation, the builders in the Sierra Club all said, “We at least need SECO to look at this and raise the standards on new construction in Texas,” because that should ultimately, again, save consumers money and also to help sell those more efficient products. You know, we’ll see if they actually adopt those codes, but that’s an area. So sort of unlikely allies.

Joshua Rhodes: Yeah.

Cyrus Reed: But I do think there’s a lot more we can do with conservatives on the idea of energy independence and being able to do what you want in your own home or on your own property-

Joshua Rhodes: Yeah.

Cyrus Reed: Be that on-site or even large scale solar and wind and storage. There’s more to be done there.

Joshua Rhodes: Awesome. Last question. We’re coming into an odd year, so you know, it’s always odd when the, uh, Texas Legislature meets, but we’re coming into an odd year. So, you know, if you could get one plank of your 27 platform enacted and had to sacrifice the rest, like which one would it be?

Cyrus Reed: One is hard.

Joshua Rhodes: I’ll give you a couple. Okay.

Cyrus Reed: Okay, I’ll do two. I think one is that mitigation fee idea.

Joshua Rhodes: Okay.

Cyrus Reed: The idea if data centers are gonna come, let’s make sure they invest in the local community. I think that would go a long, a long way. The second is, and this is something you’ll like, again, if we can get a real... You know, right now we’ve got, I’ll say, a small market and aggregated distributed energy resources. If we could really make that big-

Joshua Rhodes: Yeah.

Cyrus Reed: And enable a lot more consumers to get involved, I think that will help on all these things. It’ll mean less need for transmission, it will mean we’ll have a cleaner energy grid, and it will make ultimately everything cheaper for consumers. So I think those two things are what I’d like to see.

Joshua Rhodes: Awesome. I think that’s a good place to stop. Cyrus Reed, thank you for coming on the “Energy Capital Podcast.”

Cyrus Reed: Appreciate it.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

New Texas data center projects frozen until state audits them | Texas Tribune

This week’s big story is Gov. Abbott’s announcement of a pause on data center approvals.

Abbott’s letter to the PUCT and ERCOT directs them to conduct the audit on all data centers advancing through ERCOT’s interconnection queue, or the line for energy intensive projects seeking connection to the electric grid. ERCOT is currently tracking more than 1,800 projects in the queue, representing over 474 gigawatts of electricity, or more than five times the grid’s record for peak demand, according to ERCOT. Approximately 90% of the new power requests are data centers, Abbott said…

It is unclear how long the audit will take, but the effort is Abbott’s strongest effort yet to slow the development of these data centers statewide and underscores how little information members of the public, including state leaders, know about the facilities.

The order comes on the heels of the finalization of ERCOT’sbatch zero process, designed to make large load connection, primarily from data centers, easier. The batch zero process has since been delayed.

Texas data center pause puts 20% of US pipeline at risk of delay: Bloomberg NEF | Utility Dive

Analysis from Bloomberg NEF estimates the financial implications of the data center pause could be far greater than expected, risking huge losses to the total U.S. data center pipeline.

“Delays in energization over this period could thus put billions of dollars of data center leasing revenue at risk,” BNEF said. The firm’s analysis estimates AI computing capacity can earn around $1.76 billion per gigawatt per month.

“The implied revenue at risk for data centers runs into many billions of dollars if interconnection policy changes in the next term,” BNEF said.

Read more

The same model is going into a municipal utility’s fleet in Utah, an islanded truck depot in Los Angeles, dairy digesters in California, and data centers. It is still a gas-fired resource. The flameless reaction suppresses nitrogen oxide emissions, and the technology emits less carbon dioxide by virtue of using less fuel than natural gas-fired turbines.

In ERCOT, the product may arrive at a time when demand for power is rising among large loads and the grid operator is regulating growth. However, generation on a customer’s own site operates outside the new ERCOT rules. Gordon does not see his product as a substitute for building the grid, and he says the answer is both.

On this week’s Energy Capital Podcast, Matt Boms talks with Craig Gordon, head of business development for Mainspring, who heads global policy and regulatory affairs at Mainspring after 12 years at Invenergy. The conversation covers:

• How a linear generator works, magnets driven through copper coils 13 times a second, with no flame, water, or oil.

• Where the units are going, a 48 megawatt project for a Utah municipal utility and a Los Angeles depot charging 96 electric trucks with no grid connection.

• What it burns, natural gas today, with dairy and landfill biogas running in California at small scale. .

How much of ERCOT’s queued load ends up served on site rather than through the grid will shape what Texas has to build.

Timestamps

• 00:00 – Introduction and Guest Background

• 00:40 – From Ameren to Invenergy to Mainspring

• 03:43 – What Mainspring Builds and Why It Matters

• 06:19 – How a Linear Generator Works

• 08:39 – Why Customers Are Generating Power Locally

• 11:02 – Data Centers, DERs, and Grid Investment

• 12:16 – Ramping and Efficiency vs Engines, Turbines, and Fuel Cells

• 14:27 – UMPA's 48 MW Project and the Prologis Microgrid

• 17:28 – Maintenance, O&M Hubs, and Field Lessons

• 18:39 – Fuel Flexibility, Biogas, and Hydrogen

• 20:36 – Scaling to Hundreds of Megawatts, and Islanded vs Grid-Parallel

• 25:37 – ERCOT's Cluster Study and the Interconnection Queue

• 29:21 – Policy Barriers, Air Permits, and Behind-the-Meter Value

• 33:57 – Linear Generators in 10 Years

Resources

People & Organizations

• Matt Boms (LinkedIn)

  • Energy Capital (LinkedIn)

• Craig Gordon, Head of Global Policy and Regulatory Affairs, Mainspring Energy

  • Mainspring Energy (Linear Generator)

Company & Industry News

• Utah Municipal Power Agency Selects Mainspring for 48 MW Local Power Generation Project

• Mainspring Appoints Former Cummins Chairman and CEO Tom Linebarger as CEO

• PUCT Approves ERCOT’s Batch Zero Process for Connecting Large Electricity Users

• ERCOT’s large load queue jumped almost 300% last year

Books & Articles Discussed

• Performance Team and Prologis Launch New EV Truck Charging Depot, Powered by the Nation’s Largest EV Truck Microgrid

• Base Power partnership to mitigate price spikes, load peaks for South Texas co-op

• Xcel Minnesota proposes first-of-its-kind distributed capacity procurement

• Planned Texas data centers could emit significant pollution

• Innovation and Investment in ERCOT: Recorded Live from GCPA

Transcript

Matt Boms: Welcome everyone. Today we’re joined by Craig Gordon of Mainspring Energy, where he leads business development and policy and helps advance the company’s fuel-flexible linear generators. Craig brings more than two decades of power sector experience spanning utility operations, power trading, renewable energy development, and public policy. Before joining Mainspring, he spent 12 years at Invenergy and previously worked across several areas of Ameren. Craig, thanks so much for joining us today

Craig Gordon: Thanks, Matt. Happy to be here. Looking forward to the conversation.

Matt Boms: For sure. Well, I wanna start with your origin story, and if you can take us through a little bit of your experience and how you ended up at Mainspring. I love starting off these conversations with that because I think folks are just interested to hear how people got to where they are today.

Craig Gordon: Sure. I mean, it’s all by accident, of course. That’s how life goes. So I fell into the energy sector after finishing an MBA at WashU in St. Louis, and then it just so happened to coincide with the implosion of Enron and a lot of additional scrutiny on energy players, utilities, trading, et cetera. So I landed into a credit risk management role at Ameren St. Louis, and I did that for a couple years and realized that risk management’s cut out for some people, but I’d rather do other things, like be on the other side of the business equation and actually trying to get new things done. So I transitioned over to power trading on the unregulated side of Ameren and then worked my way up the desk, ultimately becoming a power dispatcher, then long-term power originator marketer. During that, the last couple years there, I was the person at the unreg side that was getting involved in renewable policy in Illinois. The RPS had just been passed, and, you know, there was obligations for the company to comply with that on the retail side. So I was the green guy, if you will, at Ameren. That’s where I was introduced to large scale wind, and that’s where I was introduced to Invenergy. And, you know, long story short, I ended up joining Invenergy because I was not able to actually win PPA at Ameren at that time. So I thought, well, I would just make the leap over, start doing renewables instead of what I was doing there at Ameren. And then 12 years later, lots of water under the bridge, lots of origination activities. We did the first, you know, renewable PPAs with corporates. You know, we did Google in 2015, Owens Corning, Equinix, a handful of, you know, those corporates. Some were physical PPAs, some were virtual PPAs, but I was running the sales and marketing team when we did those back in 2015. And then, you know, I also got involved in the policy side, state and federal policy, and by the time I was leaving Invenergy, I was leading the whole thing, and really with a focus at the time in 2022 of, you know, working with other industry companies, pure companies like the NextEras, the Clearways, the Intersects of the world to actually pass what became the Inflation Reduction Act in the summer of 2022. That’s how my stint at Invenergy ended, and I had been recruited actually to Mainspring by a former Invenergy colleague. It was at that time when Senator Manchin was on the fence as to whether or not he was going to actually move forward with the reconciliation bill that would become the Inflation Reduction Act. When he was leaning no, that I was being recruited, and I was like, “Well, man, I’d like to join this startup because their technology looks really cool.” So, I made the switch right as the IRA was being hashed out, and it became law the second day I was on the job at Mainspring, and I’ve been here almost 4 years since.

Matt Boms: That’s awesome. And I wanna jump into Mainspring and help unpack the technology for our listeners. When-- Listening to you talk about the IRA just makes me feel like that was eons ago. It’s just unbelievable how the time flies by. Can you help us understand the technology and, like, for someone encountering Mainspring for the first time, what does the company make, and why does it matter?

Craig Gordon: So for someone who hasn’t heard of Mainspring, and hopefully there’s just few people left at this point. For those who haven’t heard about Mainspring, what we’re actually doing, we’re building probably the most innovative piece of power generation that’s been invented in the last 50-plus years. So several decades have passed since something as interesting and category-changing as a linear generator has come to market. So, it’s this thing called a linear generator that we’re building, and it’s a fuel-flexible, f- providing firm power. It’s local, but it also has the efficiencies of large-scale utility assets like peakers, engines, aeroderivatives, better than aeroderivatives. So, uh- We’re kind of just entering the moment now of coming to market over the last 5 years, introducing our generation to a power sector which has largely not seen a whole lot of change, with the exception being wind, solar, and storage, over the last 50 years. So everyone’s very familiar with nuclear and coal and gas. Well, our category of power generation is also runs on gaseous fuels, but it can run on natural gas, it can run on hydrogen, it can run on biogas, it can run on propane. So our technology is actually fuel agnostic, which really separates us from other types of generation available in the market today.

Matt Boms: So was that the gap that Mainspring was designed to fill, Craig, back to its origin? Was it the versatility of having really any of those fuel sources that you mentioned?

Craig Gordon: I’d love to go back and get in the heads of the founders when they were first putting the technology, working on the technology, making it come together. I don’t know what they were thinking this was going to solve, but I’m pretty sure they were thinking, “This thing’s really cool.” And as they continued in the development cycle of the technology, they probably learned, “This thing can run on multiple fuel types. This thing is fully dispatchable. This thing actually can provide firm power, or it can provide backup power, or it can do anything in between.” It’s like, I don’t know that they fully understood at day one how powerful the technology was ultimately gonna be.

Matt Boms: Yeah. Well, when you say linear generator, I wanna break that down. If you’re talking to a smart high school student, how would you explain linear generator?

Craig Gordon: Okay. Well, I’m gonna break it down really simple, maybe too simply. A linear generator is just passing a magnet back and forth through copper coils. Back and forth. That’s all we’re doing. So if you take away all the mystery, the, you know, peel away the box, ultimately what we have are two translator tubes or oscillators which go back and forth 13 times a second. They have magnets attached to them, and they’re gliding back and forth inside of copper coils, and that movement is what induces electricity. You know, it’s hard to break it down any more than that. It’s pretty simple.

Matt Boms: I think you did a great job. And what were the technological advances that made the design commercially possible today?

Craig Gordon: So the cost of power electronics has really decreased over the last 10 to 15 years, and it’s really the combination of power electronics that are used in EVs, they’re used in solar and BESS, is the decline in cost of those plus, you know, the advancements in software that our software engineers were able to kinda build over the power electronics is really what enabled Mainspring’s linear generator to be the generator that it has become, which is pretty robust. The idea of having a linear generator has existed for decades, but the challenge with the concept and the reason why no one else could figure it out, you know, decades ago, was because the capability of marrying software and power electronics to really control the location of these oscillators with respect to each other in time and space. So if you think about it, you know, these oscillators really have to come together perfectly every single cycle, or they’re gonna get out of sync, and then the whole process falls apart. So our power electronics matched with software really control with a high degree of precision where these oscillators are with respect to each other, with respect to the reaction chamber where the magic happens, where the force is created, and basically that’s what we’re able to do that no one else was able to do beforehand.

Matt Boms: It’s really interesting, and I’m wondering what has changed in the market that makes customers more willing to generate their power locally because this is a trend that we’re seeing across a bunch of different technologies, right? Like not just linear generators. In your mind, is it just costs coming down, or is there something else happening?

Craig Gordon: Well, clearly, you have the cost of new technologies coming down. You know, we’re trying to rapidly bring down our cost of production year over year, so we’re becoming more and more economic. In fact, actually today, we’re probably a less expensive power purchase than a brand-new combined cycle. If you imagine a linear generator that, you know, fits in a box 20 feet long, 9 feet tall, 9 feet wide, has efficiency comparable to a massive combined cycle power plant, and we’re cheaper today, like, that’s pretty remarkable for a company that’s only been commercial for 5 years. What’s really opening the doors for us right now is the fact that, well, all those large combined cycles are already sold for the next 5 to 7 years, and if a customer needs power next year because their load is growing, their utility is likely not able to provide that extra capacity because the demand, the generation is already spoken for. So the fact that we have a pretty big mismatch between supply and demand right now is the perfect opportunity for Mainspring to come right in and fill that gap.

Matt Boms: Yeah.

Craig Gordon: And it just so happens that we do it very economically.

Matt Boms: Yeah, it’s an added benefit for sure. So does Mainspring, in your mind, are you solving a capacity problem? Is it a timeline problem, or is it a resilience problem, or is it just a mix of all three?

Craig Gordon: I mean, right now, it’s timeline and capacity- Mm-hmm ... for sure. Those are the first two. Like, you get resilience thrown in for free with us. Most of our projects aren’t just single-unit deployments or installations. We’re gonna have tens or dozens or hundreds of these things at a particular project site. So you’re getting capacity, you’re getting dispatchable capacity. You know, in the case of a data center, for instance, that needs three nines reliability, it’s very simple math for us to just say, “Okay, you have a 100 MW load. You need three nines or five nines reliability. We’ll just add a few more megawatts to the 100 MW, and we can guarantee you 100 percent uptime 100 percent of the time.”

Matt Boms: Yeah. No question. I’m happy you brought up data centers ‘cause-

Craig Gordon: And we can do it faster.

Matt Boms: Speed to power. And the data center thing, I wanna ask you about this because sometimes when we talk to backup generators or DER companies, it sounds like the argument is maybe we don’t need to invest as much in the grid because you have these new technologies for on-site power. How do you see that dichotomy of not presenting this as either/or, but it’s like we need to invest in the grid, and at the same time, we have these really innovative companies like Mainspring that can show up and power these businesses at a time where it’s really hard to get power?

Craig Gordon: Yeah. We’re not on any crusade that, you know, is out there to champion distributed resources over and above, you know, grid investments. I think it is a both/and. The grid needs to be reinforced. There needs to be large-scale capacity that’s added to it, and at the same time, you have very specific near-term needs that aren’t going to be solved with a 5- or 10-year grid investment plan. So we kinda need to do both. We’re not looking to pick a fight with the large utilities. In fact, we want the large utilities to be our biggest customers. I mean, it would make no sense for us to go down that path on a big crusade trying to champion DERs above all else.

Matt Boms: Yeah, for sure. It’s an all of the above decade is the way I see it. Yeah. So Craig, I wanna shift towards when you mentioned, you know, this is the most innovative technology in decades, what is it about the linear generator that outperforms engines, turbines, fuel cells, batteries, or maybe where does it not outperform? Like, can you kinda specify those differences and help the listener understand?

Craig Gordon: Well, I think I’ve touched on a couple of points already. Mm-hmm. When you have a combination of high efficiency, full dispatchability, quick ramping, doesn’t actually combust fuel in the traditional sense, there’s no flame in our process, so you have very low NOx emissions. We don’t require water, and we’re not loud. Like, the combination of all those things is pretty compelling, and we’re gonna be better than aeroderivatives on heat rates. We’re not gonna use water. We’re not gonna use oil. So looking at different fuel cells, for example, they take hours and hours to kinda get them fully started and up to where they wanna operate and park it in a, you know, high output range. Whereas it takes literally minutes for us to go from a cold start to being online, and then once we’re online, we can ramp to full load from minimum load in 25 seconds. Like, that’s more similar to a battery than anything else. No other engine, no other turbine, no other fuel cell can do what we can on a ramping basis. Battery can do that, but a battery needs to be charged every night. We don’t need to be charged. I think writ lo- no, those ideas writ large kind of differentiate us from different technologies, and I don’t wanna go one by one because we don’t have all day to do that. But I think when our customers are looking at us, they have their own pain points that they’re looking to solve. Some of them might be speed. How much capacity can you get that’s fully dispatchable? Can you give me a power system that I can have backup fuel on as well as taking natural gas off the pipe? We can do that sort of thing. Very few other technologies right now are able to deliver the multiple layers of value that we’re able to at this point.

Matt Boms: Yeah. Craig, I wanna get into the-- I know we don’t have time to go through all the different projects, but can you point to one or two of them to help our listeners understand some use cases and where the real-world deployments are happening, where the best case studies are, and what the commercial operations have taught Mainspring about reliability and maintenance in general?

Craig Gordon: All right. You may have to ask the second part of that question after I finish the first part, so my memory’s not that good. We’ll come back to that last part. So at this point, we have a full range of use cases. They’re on our website. You know, whether it’s utility scale, grid power. We’ve signed a 48 MW contract with Utah Municipal Power Agency, and that project will be built next year. I mean, that’s your classic utility asset, grid asset. It’s gonna connect to the wholesale market. It’s gonna be part of the generation portfolio of UMPA, and they’re very happy about that. If you wanna swing to the others, the other end of the spectrum of scale, then right now we can talk about our Prologis project in the Port of Long Beach in LA. And that project really came about in, let me just... We have 12 units there, 12 units that are paired with batteries, so I think there’s 18 MWh of batteries and about 3 MW of linear generators there. And the reason for that project was, well, Prologis had a customer, Maersk, who had ordered 96 electric trucks to run the containers back and forth from the port and, you know, distribution centers throughout the LA area. And the local utility there told Prologis that was all fine and great that you have, like, all these EV trucks coming, but we don’t have enough power to serve that load, and it’s gonna be years before we do. And when we do, we’re gonna charge you the millions of dollars it’s going to take in order to do those upgrades. So that is a clear case of a speed-to-power issue. You know, you have demand showing up. Demand is showing up on a boat in the form of trucks that need to be charged. So you have the speed-to-power issue, and then you basically have our first true microgrid application. And the system that we have with Prologis is fully islanded. There’s no electric connection whatsoever to that project, so the whole thing is linear generators plus BESS. That also kinda illustrates that our technology marries well with other inverter-based technologies, whether it is solar, BESS, or wind perhaps down the road. So two very different use cases, the same machinery inside the box. It’s just how it’s used is different. So that’s kind of the versatility that you mentioned earlier is really valuable ‘cause we don’t need to be making changes to our product based on what different customers need. So it’s one product that we have multiple use cases, kinda like the Swiss Army knife of power generation.

Matt Boms: Yeah. No question. And the second part of the question there, Craig, was on maintenance and reliability. So what have the commercial operations taught Mainspring about the importance of reliability and maintenance? Maybe some lessons learned there.

Craig Gordon: Customers always wanna have their power, right? So, the lessons are make sure that you have spare parts close by, that you have trained technicians nearby. It doesn’t take a highly trained technician to do the limited maintenance that a linear generator requires. But what we have found is when you do a project that’s 5 hours away from any other linear generator project. You’re gonna have a 5-hour delay in getting someone in the best of cases, and it could be longer, and then they need to have the replacement parts necessary to make the fix when they finally get to the site. So I think one of the things that we focused on the last couple years is making sure that we have a critical mass of customers within a circle, within a radius of kind of our different O&M hubs, if you will. So we have different O&M hubs, you know, at this point across the country, and they’re growing by the year as the projects grow. I think that was a big lesson learned, that you don’t wanna be too far away from your customer.

Matt Boms: For sure. I wanted to ask you about the fuels that these Mainspring units are running on, but I think you answered that already, which is pretty much all of them, right? All of the above.

Craig Gordon: Any gaseous fuels. We don’t take liquid fuels, so that’s not what we do. So gaseous fuels are generally okay. We wanna make sure that they’re clean enough to put in a linear generator. So, like, landfill gas probably needs to be cleaned up a little bit. You know, siloxanes, you know, can muck things up, so we wanna make sure that there’s at least some minimum level of pollutants or contaminants that are not coming into the system.

Matt Boms: Yeah. Like, for hydrogen or renewable fuels, I imagine that it’s a small percentage of the total share. So, like, what would it take for them to become a material share of the operating fleet?

Craig Gordon: I mean, I think we’re probably a long way away from there. We have multiple biogas customers at this point that are actually running. Actually, we signed a couple deals in the last week for some more. So you have a smattering of wastewater treatment gas, landfill gas, dairy biogas. So we have all of that, you know, and we have all of it in California, and we’re looking to do it in other places. Those use cases, those projects are relatively small compared to what we’re thinking about going forward, which is projects on the order of magnitude of 100 or 200 MW, not 500 kW to a megawatt. So when hydrogen’s price comes down a lot, there might be economic viability then, but at this point, there’s, first of all, not enough hydrogen to go around economically to even really make a-- even to try to make that work. There’s not enough interest in the market either at this point. The hydrogen hubs that have been pulled back, we don’t see that as a near-term market solution for us.

Matt Boms: Got you.

Craig Gordon: We’d love to see it when it comes around, but it’s just at this point, the costs are too high, the production of hydrogen is too low.

Matt Boms: Yep. Mm-hmm. Understood. That matches pretty much everything that I’m hearing out there. You mentioned the scaling of the projects and now entering into projects that are hundreds of megawatts. So how have the customer priorities changed as Mainspring has moved into those larger projects?

Craig Gordon: There are some, you know, similar themes that you would expect. How quickly can you get it? Delivering hundreds of megawatts is a different proposition than delivering 10 MW. So now you’re, like, thinking about my supply chain, like how long it’s going to take to get those parts, and how long is it gonna take to build this unit, how are we gonna... You know, how long does it take to ship it? You know, the whole supply chain, lead time, all that stuff becomes much more important as the project size grows. And then, of course, if you’re dealing with orders of that magnitude, your customers are pretty sophisticated at that point, really sophisticated, and they wanna make sure that there’s a high level of reliability associated with it and that you can stand behind any guarantees that they need in order to, in some cases, turn around and resell the power, you know, to a data center themselves. Definitely higher requirements on reliability, stronger real requirements, LDs for missing delivery dates, and that sort of thing.

Matt Boms: Yeah, that makes a lot of sense. And as far as like, you know, we’ve been talking to a lot of DER companies on the podcast recently, and the question of islanding and what it means to run in parallel, I wanted to ask for Mainspring, what changes technically and contractually for y’all when a project moves from grid parallel to simply islanded operations? Like, are there operational or technical changes that need to happen?

Craig Gordon: There’s nothing technical about the LGen that changes. It’s more the balance of plant design. You know, you gotta make sure that you have the right balance of plant design that can handle either being grid parallel or switching over to grid islanded, and that’s a level of technical expertise that I don’t have, so I can’t share with you exactly what that means. It adds some cost to be able to do both, but what really happens is your customers really don’t want you to fail, because if you fail, they fail. And so the credit requirements, the level of overbuild is going to increase when you move away from the grid, especially if you’re talking about a sensitive load.

Matt Boms: Right. Yeah, ‘cause you’re the line of last defense- You’re the only one. All of-- Yeah. Yeah.

Craig Gordon: Yeah, you’re the first and last line of defense- Right. ... to keep that thing going.

Matt Boms: Cool. Well, so when you talk about the intersection, like when we think about a microgrid and the role that linear generators could play within broader microgrid, like thinking about batteries, renewable generation, how do they complement each other? And maybe there’s some real world examples or even like theoretically, how do the different technologies complement each other within a bigger microgrid? And I’m thinking particularly like now with the data center question and speed to power, and I’m sure you’re seeing a lot of deployment across the country.

Craig Gordon: Yeah. I mean, I think- At the macro level, if XYZ hyperscaler wants to have on-site power or something quasi on-site power, but they also have pretty lofty environmental goals, they might be, you know, bringing in power from wind or solar either, you know, physically or virtually, and then they’re gonna have batteries on-site. And so if they’re really sophisticated and they really want to reduce their carbon footprint, you know, they could have linear generators on-site. They could use hydrogen, they could use ammonia, or they could use natural gas because, you know, that’s again, the go-to fuel at this point. And so our capability to firm that renewable power or to firm that power, recharge those batteries, I think sets us apart. We have a, the low environmental footprint. We have quick start times. Because of our ramping capability, we’re able to kind of naturally fill the gap where a large data center might otherwise have turned to a much larger technology or a different type of technology. And because we’re inverter-based, we pair well with the BESS that’s on-site or the solar that’s on-site perhaps as well.

Matt Boms: Right. Yeah, the pairing is a lot easier. Like for a data center customer, what do they need from a power solution that a typical commercial customer doesn’t? Like, what makes a data center customer unique in that sense?

Craig Gordon: Well, they just can’t afford to go offline, and they’re willing to pay to ensure that they don’t ever lose power. I mean, I think that’s gotta be the biggest difference that’s out there. I mean, power is power. It’s like, are you willing to have your lights go off at night on a super hot day, or do you wanna buy that extra layer of protection, that insurance policy by having on-site power that’s redundant, and so the odds of a blackout are whatever, like that, are almost neg-- no, almost zero.

Matt Boms: Yeah. And for someone like you that’s been working in this industry for a very long time and wearing different hats with different companies, how do you view this broader issue that, especially here in Texas, but I think it’s a national problem, where we have significant delays as far as interconnection and on-site generation is a responsible solution to that problem, but is it-- in certain cases, is it just moving that constraint elsewhere on the grid? How are you seeing that play out in real time?

Craig Gordon: I guess when I first got involved in the industry, you know, 20-plus years ago, didn’t really think too much about the grid. It was pretty much static. You know, “Don’t worry about the grid. Nothing’s happening. Nothing to see here, folks.” And so no one gave it much attention. And then renewables started coming in, and they started renewables plus low gas prices, plus no load growth basically meant, “Okay, now we just have substitution going on, and we’re gonna retire these old plants, so we’re gonna bring in these new things.” Net, there wasn’t a whole lot of need for brand-new transmission. Of course, ERCOT had the CREZ lines. Was it 2007? Like, that seems like eons ago. 2007 and 2012, like, what? $7.5 billion. I mean, that was a recognition that all this wind was coming onto the system, you know, out in West Texas, and there just needed to be a way to bring it into load. Look, nowadays there’s so much happening on the grid, whether it’s from data centers, whether it’s from developers building wind project or that solar project or this project. Like, everything is more dynamic now than it ever was before. So it’s really hard to isolate one distributed resource having, you know, shifting the congestion from one line over to another line. Everything’s at play now, hard to pin it down. ERCOT’s going this cluster process to study new loads, right? Like, everything’s a mess, and we’re trying to figure out like, “Oh, how do we make sense of this giant cluster of things happening simultaneously?” It’s not easy, and that’s why these-- you see FERC getting involved outside of ERCOT, of course, trying to create some clear guidelines on how the processes should work and prioritization of studies and who gets firm versus non-firm. So I’m not sure if I’m answering your question or just, like, going on, but I’ll just stop there.

Matt Boms: No, you definitely are answering the question. I think it-- we’re living in complicated times, not just in the energy world.

Craig Gordon: You put it much more succinctly than I did. So I- ... you should’ve said that. Wouldn’t have had to answer at all.

Matt Boms: No, I completely agree with everything you just said, and like, I think there is no silver bullet to any of these problems, right? Like it see- it feels like we’re living in a time of infinite demand, and everyone questions the queue right now because it just seems like an unbelievable number that we’re dealing with when you just add up all the gigawatts that are asking to be interconnected. But at the same time, a lot of that is real. We’ve been having this discussion on this podcast for the last three or four months with a bunch of different guests who are all pretty much saying variations of the same theme, which is like, ERCOT needs to do a better job planning for all of the loads that are coming. But at the same time, it can’t plan fast enough because the speed is unparalleled. Like, we’ve never seen so much load come online at-- so quickly all at once. Like, that’s the key problem. We could accommodate it, but the challenge is the time period that we’re dealing with.

Craig Gordon: If only there was something like AI to help solve that problem.

Matt Boms: Yeah.

Craig Gordon: Load it into the computer and let it solve itself. Like, I don’t know, maybe there’s something there.

Matt Boms: Yeah, the-- I think there is. That’s the irony of all of this, and we had Pablo on the podcast and asked him about that, and he felt like AI will be part of the solution moving forward. That was definitely interesting. But yeah, we’ll see where this all takes us. I think nobody knows where we’re headed. Well, Craig, when you think about, I wanna talk energy policy with you because that’s the space that we both work in, and for Mainspring’s technology, what is the biggest policy barrier that you’re facing across the country? Like, what’s having the largest effect on your timelines for the projects that you’re working on?

Craig Gordon: I guess, Matt, I’m very happy to say that we don’t have too many issues or obstacles, like from an air permitting standpoint. Even in places like California, we’re well known at this point, and air permits aren’t an issue, so we can get air permits relatively quickly, I think. We’ve received air permits in Texas, you know, inside of 3 weeks once upon a time. So like, that’s really not a binding constraint for us. You know, obviously, everyone struggles with getting interconnected. That’s really not been an issue for us either since until these days, until recently, we’re really not doing transmission-level interconnection, so we haven’t really been impacted by the huge queues and the waits in places like PJM or California. So like, that really hasn’t been an issue. Like, you know, we’ve been lucky, knock on wood, that there aren’t a whole lot of policy headwinds that are giving us fits at night. Nothing’s keeping me up right now on the policy side.

Matt Boms: Yeah, that’s good to hear. Well, so I guess I could reframe that question and ask you, do you think that the market rules today are assigning the value for behind-the-meter resources like Mainspring? Do you think that the value might be higher than what it is currently because of the market rules that we have set up? Of course, I’m thinking with the Texas frame, but you might have some other markets that come to mind.

Craig Gordon: And I’ll be honest with you, like, I don’t give that too much thought whether the markets are gonna give DERs the right value. They’re probably not, of course, right? So it’s really hard to value small distributed assets in the context of very large assets. And so, like, doing that is not a simple proposition. So I don’t know, companies like Base Power, maybe they’re figuring that out, how to make money in places like ERCOT with their technology. I hope they’re successful. And like Sparkfund, I hope they’re successful in doing their distributed capacity product. You know, I think their first project really is in MISO and with Xcel in Minnesota. Like, I wish them the best on that. Whether those check all the economic boxes, I don’t know. We haven’t spent a whole lot of time at Mainspring trying to get value for behind-the-meter assets just on the face of it. Like, we’re always trying to find customers who need power for other reasons, not to just get a high valuation, you know, in PJM or MISO or something like that. I think we are moving-- We are definitely moving toward a place in our company’s progression where we are looking at PJM, we are looking at MISO, and we are thinking about, well, how do we make sure that on an aggregated basis, you know, for a 50 MW project, we’re gonna be able to get a high level of ELCC. We don’t wanna be a technology that PJM has never heard of before and, as a consequence, gives us zero value of capacity. Now, we’ve already been in conversations with PJM. That’s not going to happen. The question is, where will we start off and where will we end? And I think a very similar conversation will be taking place at MISO. I mean, the great news about our technology and what we’ve seen so far in our limited time of commercial operations is our portfolio is performing at over 90 percent uptime. Nothing performs at that level that’s 5 years old. I mean, coal plants don’t perform at that level. Like most things, nuclear plant being one big exception. Our technology, although still in its infancy stage, is performing at a level that’s really unbelievable in some cases. And it’s just going to get better from here. So I mean, it’s really amazing what the technology can do and how it’s performing already. And we were able to attract our new CEO, Tom Linebarger, who had been the chairman of our company for the last, you know, year. But he was a chairman and CEO of Cummins. He was there for 30 years, and he thinks our technology is better than anything he’s ever seen. I mean, he came out of retirement to come lead our company to the next stages of growth. Like, that’s pretty compelling. That’s persuasive, and I think people are really excited about that.

Matt Boms: You got me fired up. I’m ready to go. That 90 percent number is really impressive. Yeah, you’re right. That’s unheard of in any-

Craig Gordon: It’s crazy high. It’s crazy high.

Matt Boms: Yeah. Well, I wanna take this, Craig, like to round out the conversation and wrap it up more forward-thinking and kind of where does Mainspring go from here. If Mainspring succeeds, in your mind, where will linear generators sit in the power system 10 years from now?

Craig Gordon: I really do think they are going to be pervasive throughout the power system. They will be locally sited at cold food storage locations. They’ll be on Long Island as peaking plants perhaps using zero carbon fuels. They’ll be on site at large data centers. They’ll be grid scale assets for large IOUs. Like, there’s no reason Mainspring technology can’t serve every customer class, solving the specific needs of that particular customer class or that specific customer. Like, it’s just a matter of time. We’re not gonna take over the world, and we have a lot of room to grow. I do think we’re gonna have a place all throughout the power system. The efficiency’s really good. The emissions are really low. There’s no water usage. It’s not loud. No big smokestacks. Like, the community opposition is nonexistent. So I mean, we have a lot of tailwinds right now. We have a lot of tailwinds.

Matt Boms: Awesome. Well, looking forward to seeing Mainspring continue to succeed. And thank you so much, Craig. Thanks for walking us through the technology and helping us understand what it’s all about. Looking forward to having you on again sometime soon. So thanks so much for your time.

Craig Gordon: Thanks, Matt. I hope I answered all your questions.

Matt Boms: You did. Thanks, Craig.

Craig Gordon: All right. Okay, excellent.

In addition to these R&P Picks, paid subscribers receive access to the full archives, Grid Roundups, and select episodes of the Energy Capital Podcast. Please subscribe today.

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Energy agencies want more authority over Texas data centers | The Texas Tribune

The Public Utility Commission and ERCOT are asking lawmakers for more authority to regulate data centers, following the governor’s directive.

University of Texas energy researcher Joshua Rhodes said data centers are likely to be a central focus of the next legislative session.

“Data centers are not polling very favorably in public opinion,” he said. “And so it’ll be an indication that there will be some bills trying to inject some discipline into this market.”

Rhodes said there’s been a lot of discussion about how to prevent data centers from passing on the costs of new infrastructure to consumers, but state regulators are still fleshing out the specifics of concrete policies.

This Texas coal mine will soon be home to a 1.2GW solar farm | Canary Media

A new solar project has found a home in Bremond, Texas, at the Twin Oaks coal-fired power plant and Calvert coal mine. Panamint Capital, backed by KKR, acquired the coal plant in 2019 and announced last week it broke ground on the solar farm.

Panamint’s clean energy project will be among the largest in the nation — and, the developer claims, the biggest solar array ever built at a brownfield site in North America.

“We believe deploying new capacity at existing energy sites is the clearest way to benefit communities, ratepayers, and the environment alike,” said Apolka Totth, CEO of Panamint, a Nevada-based investment firm.

The giant installation will further boost Texas’ thriving solar sector, which this year is expected to generate more electricity than coal in the Lone Star State.

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That works out to roughly 10 gigawatts of export capacity. In ERCOT the value of tapping it splits three ways, because transmission and distribution utilities own the wires, competitive retailers sell the electricity, and generators sell the power. A TXU Energy customer in Oncor territory can collect free overnight charging from the retailer and a separate rebate from the utility, with nothing combining the two.

On this episode of the Energy Capital Podcast, Matt Boms talks with Joseph Vellone, chief executive of ChargeScape, the vehicle-grid venture owned by BMW, Ford, Honda, and Nissan, about what it takes to move a parked car from load to capacity. The core argument: the hardware is arriving on its own, and what holds the resource back is incentive design and interconnection policy.

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For years EVs have been cast as a threat to grid stability. Vellone calls that a misconception and points to record adoption without failure: “we haven’t brought the power grid down.” During the episode, Boms and Vellone work through:

• Split incentives in ERCOT, why a deregulated market gives the wires company, the retailer, and the generator each a reason to pay an EV driver and none of them a reason to coordinate.

• Grid-parallel interconnection, the argument that a vehicle backing up a home without exporting to the grid should not need an interconnection agreement.

• V1G, V2H, and V2G, the three tiers of vehicle-grid integration, what each requires in hardware, and which are running commercially today.

• The lease-return wave, Cox Automotive’s forecast of 300,000 EVs coming off lease in 2026 to second owners more price-sensitive than the first.

How the Public Utility Commission draws the line between grid-parallel operation and export will shape how much of that parked capacity ERCOT can call on.

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Timestamps

• 00:00 – Introduction: Joseph Vellone and ChargeScape

• 02:34 – Why competing automakers built a shared platform

• 05:49 – When an EV becomes a grid resource

• 07:35 – V1G, V2H, and V2G in plain English

• 10:48 – Six million EVs and 10 gigawatts of export capacity

• 12:07 – The consumer progression to bidirectional charging

• 15:57 – Texas incentives and what moves customer behavior

• 18:07 – The changing profile of the American EV driver

• 21:04 – Policy barriers: unstacked value and interconnection queues

• 24:58 – Splitting EV value across ERCOT wires, retail, and generation

• 28:00 – Grid-parallel interconnection at the PUCT

• 30:05 – Scaling from pilots to full market participation

• 32:50 – Secondhand EVs, multifamily, and fleets

• 37:15 – Why record EV adoption has not strained the grid

Resources

People & Organizations

• Matt Boms (LinkedIn)

  • Texas Advanced Energy Business Alliance (Website - LinkedIn)

• Joseph Vellone, CEO of ChargeScape, previously North America head at ev.energy and a consultant at Boston Consulting Group (LinkedIn)

  • ChargeScape (Website)

• Energy Capital (Podcast - LinkedIn - Apple Podcasts - Spotify)

Company & Industry News

• BMW, Ford and Honda Agree to Create ChargeScape, the 2023 agreement forming the joint venture, built on the Open Vehicle-Grid Integration Platform

• ChargeScape Welcomes Nissan to Its Alliance of Automakers, making Nissan an equal 25 percent investor alongside BMW, Ford, and Honda

• PUCT Project No. 54233, Technical Requirements and Interconnection Processes for Distributed Energy Resources, the rulemaking covering new 16 TAC 25.210, amendments to 25.211, and the repeal and replacement of 25.212

• Vehicle-Grid Integration Council comments in Project No. 54233, addressing grid-parallel bidirectional charging and the V2G DC and V2G AC configurations

Transcript

Matt Boms: Hi, everyone. Today we’re joined by Joseph Vellone. He’s the CEO of ChargeScape, the automaker-backed company helping turn electric vehicles into flexible grid assets. Joseph has spent more than 15 years at the intersection of energy and technology. Before ChargeScape, he helped launch and scale the EV charging platform called ev.energy, and advised utilities and energy companies at Boston Consulting Group. His career began in clean energy research, including work on hydrogen fuel cells. Joseph, thanks so much for joining us today and being on the podcast.

Joseph Vellone: Thanks for having me, Matt.

Matt Boms: Of course. I wanna jump into your origin story a little bit, and if you could help us understand how you got to where you are today, and maybe just giving us a quick intro to ChargeScape.

Joseph Vellone: Yeah, sure. So I have been interested in clean transportation since I was in high school. I grew up in the New York City metro area and had an incredible opportunity to actually do some research at the Columbia University School of Engineering on hydrogen fuel cells, which I’m dating myself here, but back when I was in high school, hydrogen fuel cells were actually the promising clean transportation technology at the time. This was well before, uh, Tesla or any other EV manufacturer came onto the scene. So after doing that research in high school, continued studying clean energy and energy policy in college, actually worked for the United Nations right out of college, doing a bunch of different work, including some energy and poverty alleviation work, where really access to affordable clean energy made me realize it’s so fundamental to economic development no matter where you are in the world. So went and did a master’s in energy economics after that, ended up in management consulting, as you mentioned, consulting for some of the world’s largest energy companies, including power utilities. Back at the time, distributed energy resources were first starting to pop up onto the grid, so helping them kind of navigate things like solar and batteries. And then actually left the Boston Consulting Group to join a couple of colleagues at a brand-new startup called ev.energy, as you mentioned. They were quite early. This was, uh, back in Europe, actually, when, uh, EV adoption in Europe was a bit ahead of the United States and sort of building a smart charging platform and then left to come and run ChargeScape a couple of years ago.

Matt Boms: Awesome. Thank you for running us through your story, and it’s an interesting journey that you’ve had to get to where you are today. Can you help listeners understand more about ChargeScape and the company’s mission and the role it’s playing right now in EV charging? I think you’re really at the inflection point of what’s going on right now with electric vehicles across the country.

Joseph Vellone: Yeah, absolutely. So ChargeScape’s mission is to unite automakers and utilities and their shared customer, which is the EV driver, to make electric transportation simple, scalable, affordable, and reliable. And now what that means in practice and, like, what ChargeScape does is we operate this software platform that is the connective tissue between power utilities across North America and electric vehicles on American roads and in American driveways. And so we’re this platform that essentially allows electric vehicles and the power grid to talk to each other. Something that I think makes us very unique in this space is that we are an automotive joint venture. So a lot of other companies is— in this space are venture capital-backed. We’re very different. We’re a joint venture of automakers, actually competing automakers, who pooled their money together to build this common platform for the industry. And so what that means is we have this unparalleled access into automakers’ boardrooms across the country, across the world. We work hand-in-hand with them on vehicle grid integration. It also just means that we are really well-capitalized and kind of provide, like, a stable partner to utilities looking to do this long-term.

Matt Boms: That all sounds really interesting, Joseph. I want to really dig in on ChargeScape and how you’re working with these auto companies right now, really at the intersection of utilities and EVs, as you mentioned. So can you run us through why the platform is backed by automakers? Because I think you mentioned that really briefly, but I think it’s important to emphasize how different the company is and kind of the origin story there of how you started partnering with these different auto companies.

Joseph Vellone: Yeah. So why did automakers pool all of this money to form ChargeScape? Well, a couple of reasons. You know, firstly, they formed ChargeScape to sell more electric vehicles. Their goal as automakers is to sell cars. Now, electric vehicles have something kind of unique about them, where their fuel costs can be a lot cheaper than a combustion engine vehicle. And there’s this additional potential to unlock more savings for the consumer, the EV driver, through smart charging. So anything that ultimately lowers the total cost of ownership for an electric vehicle is gonna help an automaker sell more cars. So it’s very much a strategic play. Now, why doesn’t each automaker just do this themselves? Well, there’s this many-to-many problem. An automaker doesn’t want to partner and contract with dozens or hundreds of power utilities across America to make sure that their customers have access to smart charging and smart charging savings. And at the same time, a utility doesn’t want to contract with the 10 to 20-plus automakers selling cars in the United States and have different contracts and APIs with each one. So ChargeScape really kind of serves as this common platform, solving that many-to-many problem.

Matt Boms: I’m happy that you’re getting into this because that’s really the meat of the conversation I wanted to have with you today, which is: When does an electric vehicle stop being simply a source of new demand and become a useful resource for the grid?

Joseph Vellone: Yeah, the answer is the moment that that EV is plugged in and connected to ChargeScape. So data from our platform shows that a typical EV is parked for about 95 percent of the time. It’s only mobile 5 percent of the time, and most drivers only need about a few hours of charging per night. So more data from our platform, you know, typical EV is, is plugged in somewhere between 12 to 14 hours at a time, but only requires 2 to 3 hours of charge on average. So that gives us a very long window in which to kind of optimize when those 2 to 3 hours of charge gets delivered. And when you think about also like the size of an EV battery, you know, they’re well above 50 kWh, some of them larger than 100 kWh, which is several times larger than a typical home battery. So just being able to, you know, number one, kind of shift when an EV charges, when it’s plugged in, can deliver really meaningful value to the power grid. And then when you actually unlock bidirectional charging and actually connect that EV back into the grid and export electrons from the battery to actually power the grid, it essentially turns an electric vehicle into a little mini power plant on wheels.

Matt Boms: Yeah, and that’s really exciting for nerds like me who track these issues really closely and are looking forward to the day where we have millions of electric vehicles juicing the grid. Let’s get into the weeds a little bit. So there’s a whole bunch of acronyms out there. We’ve got V1G, V2H, V2G. There’s a, a whole alphabet soup that I’m hoping you could help us understand for the average listener that maybe just isn’t familiar with all the technicalities of bidirectional charging. But start from the beginning and then maybe get a little more granular. Are most of these EVs bidirectional? Because I remember a few years ago we were getting there, but there were still plenty of electric vehicles that didn’t have that capability yet.

Joseph Vellone: Yeah, great questions. So actually, maybe let’s break down these terms into plain English to start. So V1G, just an acronym for managed charging, and that’s the very simple technology of just optimizing the vehicle’s power draw a little bit to align with the power grid’s needs. So that could be maybe just delaying when a vehicle starts charging because it doesn’t need to start charging immediately to still get the battery charged to where the customer needs by the time they need it. It could also mean it’s charging immediately, but maybe reducing its power draw slightly so it’s a longer charge session at a lower power, or maybe even temporarily pausing charging for a little bit if the grid is kind of really overloaded. So think about a hot afternoon in the summer when there’s a lot of air conditioners running. That’s V1G managed charging. You mentioned V2H. That stands for vehicle to home. So this is where you’re actually using your car as backup power for your home. So instead of buying a generator, you’ve actually got this really big battery inside of your car that can power your home for days. And so quite a few automakers, including Ford and their F-150 Lightning, have rolled out vehicles that are capable of vehicle to home. And so this is actually, in a lot of ways, kind of one of the emotional gateways for the EV driver to kind of start smart charging. It’s the idea of having resilience to blackouts, and we’re doing this in many parts of the country, including in the Pacific Northwest with Puget Sound Energy, where, you know, they experience both winter storms and summer storms, and the utility’s really interested in increasing customer resilience to blackouts. Blackouts are just a part of life in the United States. I think anyone who grew up here, you know, has experienced power outages before. And sometimes they, you know, they can last a while. They can last hours or days. And to the extent that a customer’s already bought a vehicle, they’ve already got an asset that can provide backup power without the need for an additional generator. Then finally, V2G stands for vehicle-to-grid. That’s what I was describing before, the actual export of electrons from the EV battery, not to the home, but back into the power grid, essentially selling electrons back into the power grid. And this probably the earliest stage kind of technology, but it is real. It’s happening today. We’re doing it currently in, in Silicon Valley. We’re using EVs to actually power data centers, and so this is probably the furthest away. It does require, you know, some special hardware, some special interconnection with the grid. But we do think it’s gonna be actually increasingly commonplace toward the end of the decade.

Matt Boms: That’s great. And we’re getting to the point now where the EVs are really penetrating the market. Like here in Texas, in the next 5 or so years, I think we’re gonna hit the 1 million mark of, uh, EVs on the road. So there’s huge potential when you do the napkin math and add up all the potential gigawatts of power that might bring to the grid.

Joseph Vellone: Yeah, and just to make that math real, there’s about 6 million EVs on the road in America today. About 1 million of those already have that bidirectional power capability. So you think about a million EVs with, you know, maybe a nameplate capacity of 10 kW of power export, that’s 10 GW of power, which is the equivalent of 10 nuclear power plants. So imagine, you know, we’re talking about building new power plants for data centers and stuff, and nuclear power plants can take decades to actually build and cost billions and billions of dollars, but we’ve actually got all of that energy potential just kind of sitting idle in American driveways and on American roads today that we could be tapping into.

Matt Boms: Yeah, for sure. These are just batteries on wheels. You mentioned the Puget Sound program, and I know there’s a few other programs that we could talk about across the country that are really promising. I think we can get into those, Joseph, and I think it would really help the listener understand from a practical standpoint what’s happening on the ground. But the first question I have for you on this would be, is it crawl before you can walk? Because you just walked us through 3 really practical examples of how, uh, EVs could help power up the grid. But do we first need to figure out, you know, how we use these things to back up our homes and businesses and then move on to the V2G, V2X, and all the fancy technologies?

Joseph Vellone: I think it depends on what perspective you’re looking at this from. I think what we see from the average American consumer is there is that kind of natural transition that they go through, right? I think, you know, first of all, just buying an EV in the first place feels like a big first step for a lot of Americans, and we’re getting there, and there’s more EVs on the roads than there ever have been in America that are on the roads today, and just kind of overcoming, right, that kind of emotional hurdle of, “How do I charge, and how do I charge at home, and what happens on a road trip?” Then as people start to get a little bit more comfortable, they become comfortable with the idea of, you know, having their automaker kind of optimize their charging at home, especially if it’s gonna save them money. And we’re talking about Texas here, so I would be remiss if I did not talk about our free EV miles program with TXU Energy across Texas that offers, uh, TXU customers unlimited free at-home EV charging that they do on this plan. And so that just requires a little bit of scheduling, making sure that you’re charging your EV during the hours of 10 PM until 1 PM the next day, so you have a very long window to play with there. That’s usually a pretty clear financial decision for a consumer to make, right? If they’re going to get free charging, the idea of just like setting a schedule or letting their automaker kind of maybe delay charging for a few hours to align with off-peak hours, if that means, again, they’re going to get free charging or a lot of cash back maybe from the utility. You know, we run another program in New York, which is— it’s a very different program. It’s with Con Edison. You know, their customers get cash back for every kilowatt hour of charging they do off-peak. And we have customers who are earning over $1,000 a year in cash just for doing that. So that’s kind of like the first step as a consumer, and then you start to get comfortable with this idea of managed charging, and maybe you’re living in a part of the country where there are frequent power outages, and you realize that your vehicle can actually serve as backup power for your home. And so there is probably a little bit of electrical work that you need to do to be able to get that EV plugged into your home, the same way you would need to do for a generator. A lot of automakers kind of offer a kit that allows you to do that. You could also have an electrician come and do that. And then you’re starting to get comfortable with actually having a backup power source, draining your EV battery a little bit to power your home, provide that backup resilience. We’re starting to see, you know, some Americans get comfortable with is, “Okay, well, there’s not a power outage right now, but I know how it works in terms of draining my EV battery. I know what I’m comfortable with as, as a consumer. I know that I never want my battery level to go below, I don’t know, 30 or 40%. There’s usually quite a few kilowatt hours to play with. I could actually sell a little bit of power back to the grid, right? And I’m gonna sell it back when power prices are really expensive, and then I’m gonna have my automaker charge my car when power prices drop later.” I’m actually gonna engage in some energy arbitrage that you don’t need to be sophisticated to do because through ChargeScape, your automaker is kind of doing that for you behind the scenes. And that’s kind of the progression that we see the consumer go through, and we also see a lot of power utilities, the power utilities that we work with across the country. When they’re kind of launching propositions and programs for their customers, they go through kind of like a similar phase of, let’s start with just the basic managed charging first. Let’s get the consumer comfortable with backup power, and then let’s actually start to do vehicle-to-grid.

Matt Boms: Absolutely. And the Texas customer is extremely savvy because there are a bunch of different factors, but the fact that we have competitive retail choice, we deregulated our energy market back in 2002. Winter Storm Uri certainly plays a factor in that when you’re talking about blackouts and folks wanting to have backup power. The fact that millions of Texans are now looking at, uh, residential batteries as potential source of backup power, but now EVs are kind of entering the scene as this new alternative way to back up your home. So when you speak about these programs, Joseph, that ChargeScape is currently offering, what are the incentives that you’ve noticed actually move the needle and actually encourage customers to shift their behavior? Because one thing you said really caught my attention, which is most people don’t want to be bothered. Their vehicle can be charged at 9:00 PM or 3:00 AM or whatever it might be, as long as they wake up in the morning and they’ve got their battery juiced and ready to go. So is it simply just taking that away and allowing the retail provider to manage the charging, or what’s been kind of the silver bullet here for getting customers enrolled in these programs?

Joseph Vellone: Yeah. Look, as you mentioned, Americans are very savvy, very financially motivated, and so it all comes down to the financial incentives. That’s what we see time and again in every state from the South in Texas to New England, where we work with Eversource Energy in Massachusetts and Connecticut. And generally, like, the programs that are most successful offer customers a very kind of like reliable financial incentive, and that can take different forms. So I mentioned free EV charging in Texas. Yeah, really easy to understand. You knew as a consumer when you plug in at home and you plug in during those hours, you’re never gonna pay for EV charging. Super simple to understand. Similarly, in New England, we run programs with Eversource Energy across Massachusetts and Connecticut, where customers get like a very sort of predictable $25 monthly incentive, and that’s paid as cash back to them in their Venmo account at the end of every month. And they know that if they allow the, the automaker to just kind of optimize their charging at home within certain parameters, they’re gonna get that financial incentive. That’s generally what we’ve seen work best.

Matt Boms: Yeah, it makes a lot of sense. And for the typical American EV driver, has that changed since you started working in this industry? Like, when you first set out there, I think there was a certain image of, like, who drives an EV in America. From my point of view, that has changed a lot over the past several years, but how have you seen it? What does a typical ChargeScape customer look like these days?

Joseph Vellone: Yeah, great question. And, you know, having operated in this industry for almost a decade now, it’s been really interesting to kind of see the evolution of the EV consumer across this adoption curve. So, you know, I think when EVs first came to market, we saw these early adopters, right, who skewed very affluent, very tech-forward, tech-savvy, tend to living, be living in single-family homes. But now, I think following the EV tax credit and also just the wave of secondhand EVs that we’ve seen hit the market, EVs have become much more mass market. You know, the average consumer looks a lot more like the median American household.

Matt Boms: Yeah, and I think there was concern around the EV tax credits and thinking that folks would stop adopting the technology. But I think what we have seen is, like something you mentioned, that the more folks use the technology and get used to it, the more they’ll adopt it. I think the same thing with the charging element, which is like you get comfortable with it as you use it. We saw something similar here in Texas, Joseph, with smart thermostats, where there was a concern that Texans wouldn’t give away control of their thermostats because of privacy concerns and, like, not wanting the retail provider to have access to their smart thermostat. But actually, when you look at the numbers, it’s— those programs have been really successful because of exactly what you’re saying, which is if the financial incentive is there, then absolutely folks will be willing to participate if it ends up saving them money at the end of every month.

Joseph Vellone: Yeah. And I think the other critical thing is keeping the consumer in control. So in a smart thermostat program, if it’s hot, it’s summertime, and you start to get warm inside your house, you can override it, right? And you can, like, turn the AC on. Similarly with smart charging, automakers allow the consumer to opt out or temporarily override a smart charging schedule to charge now whenever they need it. So of course, even when managed charging is happening in the background, there are certain parameters that are always respected, right, which no matter what, no matter how little flexibility we may have in a short window, we’ll make sure your car is charged fully to the battery level you specify by the time you need it. But we’ve seen time and again, EV drivers will set a smart schedule, thinking that they have until the next morning, and then something comes up. Suddenly they’ve got to go pick their kid up or, you know, they need to go run an errand soon, and they need a quick charge. And so there is always that button that the automaker offers to override. So maintaining that element of customer control, I think psychologically is so important for broader scale participation.

Matt Boms: Yeah, it absolutely is. And I want to jump into the policy a little bit with you because we talk a lot of energy policy on this podcast, and I think our listeners are comfortable with getting in the weeds a little bit on this. I just want to know, like from a bird’s eye perspective, what needs to change? Like, what are you seeing, not just in Texas, but across the country when it comes to whether it’s utilities that are maybe reluctant to adopt these programs? Is there some policy switch that can be made to really encourage folks to enroll in these programs? Like, do you see it as a policy challenge, or is it more of a cultural challenge that we’re facing?

Joseph Vellone: I think it’s more of a policy challenge than anything, and kind of thinking about the most common issues that I see in, uh, utility regulators across America. Well, it’s a couple. You know, firstly, this has been eye-opening for me. Utilities extract different value streams from managed EV charging. There is value that they extract at what we call kind of like the system level, which is like kind of just keeping the system stable and reducing what we call peak demand so that they don’t need to switch on expensive peaker plants during maybe just like an hour or two in the afternoon or evening. There’s also this additional distribution value that EVs can really deliver. I think what’s really interesting about EVs is that their adoption continues to be clustered. I think we talked about like skewed affluent for a while, so more kind of affluent zip codes. That’s changing now, but it’s certainly clustered in more, you know, residential neighborhoods or areas where like a big EV fleet, whether it’s Waymos or Amazon delivery vans are charging. And the power grid is made up of millions and millions of pieces of equipment and wires, and there are certain pieces of equipment within a utility service territory that might get particularly strained, whether that’s by EVs or because there’s also like a big factory or there’s other sources of demand operating on that feeder or that substation, and there’s an additional source of value there that EVs can unlock. So, you know, maybe you don’t need to do managed charging for all EVs across the state. Maybe in a certain, at a certain time, you just need it in a specific pocket of your service territory. So that’s another value stream that EVs can provide. And then there’s additional kind of energy market services in ERCOT, in CAISO in California. I think what I’ve seen is that utilities, as they’re kind of like planning and valuing smart charging, these different value streams are not necessarily kind of coming together and being comprehensively quantified and considered. And so I think that’s a barrier. Part of that just comes back to the way that utilities are organized and structured, and you have kind of these different teams realizing different sources of the value, but not talking to each other. I think another, you know, sort of like major policy barrier is a little bit more on like the bidirectional side. So as I mentioned, you know, if you’re gonna export power back to the grid, just like with solar, you know, you do need to have what’s called a, a grid interconnection. And I think what we have seen is that interconnection processes and pathways vary widely by utility and state, but do tend to take quite a long time. So there’s currently just like a backlog of EV drivers who want to be exporting to the grid, but who are waiting for their utility to approve it. And look, we hear similar stories as well about data centers and data center capacity. There’s this backlog of power generation that we’re trying to get connected to the grid that’s just stuck in a queue. I definitely would like to see, uh, regulators and FERC, you know, do a little bit better to streamline and speed up that process.

Matt Boms: Yeah. I always say that like the technology moves a lot faster than the policy does, and I think this is a great example of that, right? Because technology’s come such a long way in the last 5 or 10 years, but in some ways it feels like the policy is a little bit stuck in the mud. I want to just double down on a couple of things you mentioned, which is, at least in ERCOT, we have utilities that manage the poles and wires, right? So they don’t get any incentive for the stuff that we’re talking about today, which is, you know, managed charging, V2G, deferring the transmission and distribution costs that we have in ERCOT, which are substantial and necessary, right? But if you can deploy EVs or at least manage that charging a little bit better around a substation that you know is overloaded because of, let’s say, data centers coming to town or any other cause of load growth, then why wouldn’t you take that option, right? Like as... For the rate payer, this is a no-brainer because, um, ultimately it’s gonna reduce the energy costs at the end of the month. Like we spoke with someone from NRG on the podcast a couple months ago who mentioned, you know, there are 3 components of the energy bill, and they only control 2 of them because the third one is the T&D cost, right? So ultimately the retail provider has no control there. So I guess all of this is leading to a very complicated question, Joseph, which is like how do you align those incentives? In another region of the country it might be a lot easier because you have a vertically integrated utility. But in our case in Texas, we’ve got the poles and wires companies on one hand and then the generators and the retailers on the other. So is there a way to make those stars align a little bit better?

Joseph Vellone: I think what those 3 different entities have in common is that they serve the same end customer, and that’s the EV driver. And so that’s like the single, you know, kind of connection point between a power generator, a distribution utility, and the electricity retailer. And so how does that all need to come together? Well, these are independent companies operating independently, right? And still there’s a Public Utilities Commission in Texas that kind of unites some of these stakeholders. But I think just, like, really realistically, those different stakeholders are gonna probably continue to operate somewhat independently, uh, for the foreseeable future. But that doesn’t mean that the consumer can’t receive some sort of financial incentive from each one. It’s a little bit disjointed, perhaps, like a little bit more piecemeal than we would see in a vertically integrated state. Like, we work with Duke Energy in North Carolina, where Duke is the power generator. They operate the poles and wires, and they sell the electricity and bill the end customer. So a lot simpler there. But, you know, I, I know for a fact, I believe Oncor and our CenterPoint to the distribution utilities in Texas do operate managed charging programs and smart charging programs. So, you know, you could be a TXU Energy customer living in, in Oncor’s kind of service territory, and you could be getting free EV charging from your electricity retailer and potentially some additional cash back as well from Oncor. Not ideal, right? You would want those incentives bundled together, and I think there’s probably room for that to happen. But, you know, for the time being, Texans, I think, uh, in particular, are very financially savvy and will continue to seek out, like, the financial incentives and the value wherever it is.

Matt Boms: Absolutely, yeah. And, and most people are not tracking these policy issues as closely as we are. There is one going on at the commission being led by Ford on, you mentioned interconnection being an issue, right? So this one would be like, if the EV is operating in parallel to the grid, then why should the customer need an interconnection agreement with the utility? Like, that’s a low-hanging fruit in my mind because if you’re just using this vehicle for backup power, then you’re not even trying to export to the grid, right? There, there should be no reason to, uh, request interconnection there.

Joseph Vellone: Yeah. And we share Ford’s stance on this topic. I’ve talked about it a lot. This is, as you said, low-hanging fruit. There is no clear safety need for interconnection when a vehicle is operating in what we call grid parallel mode, so not exporting to the grid, but just kind of working in sync with the grid to, for example, maybe reduce the household’s total energy consumption and essentially do what like a smart thermostat program would do times 10, ‘cause an EV is a lot bigger, and just to help the grid when it’s needed, right? Take the home maybe off the grid for a little bit, even when there’s not a blackout, to help reduce demand on the grid. If the household is getting compensated for that, it makes a lot of sense for them, and we don’t necessarily see any pressing need to require an interconnection. It’s causing artificially long lines and delays, and it’s also forcing those customers to get in line with the customers who wanna actually export power back to the grid, where there is a legitimate need for a grid interconnection, and it’s delaying them as well.

Matt Boms: That’s right. Yeah. At a time where speed to power is what it’s all about, right? So you need, you need that speed.

Joseph Vellone: Yeah, speed to power and, you know, every utility in America that you talk to and every grid operator is just, uh, focused on more megawatts. How many more megawatts can we get connected to the grid? You know, we’re seeing load growth in this country for the first time in 20 years, largely coming from data centers, and so there’s this kind of like urgency on the one side to like connect more megawatts, and then on the other hand, you have all these megawatts in a queue that desperately want to be serving the grid, you know, who are forced to wait in line.

Matt Boms: That’s right. Yeah. Well, with the time we have left, I want to talk about how you see this playing out over the next decade. I think we’ve made some significant progress across the country. You’ve spoken to several pilot programs that are currently underway in different states under different models, right? Like the vertically integrated utilities, the ones that aren’t. Where do you see this heading? Like, what is it gonna take to scale these programs and go from, you know, pilot programs to full-scale market participant?

Joseph Vellone: Yeah, I think there’s a few things there. Well, firstly, we need to get more EVs on the road, and I think we’re seeing a lot of progress there. Certainly a recent slump in sales, but we do see— start to see those numbers picking back up. So there’s a supply issue and a demand issue, right? And on the consumer side, managed EV charging just needs to start to feel normal, right, to the typical EV driver. And, you know, I think certainly if I forecast out, I don’t know, 4 years to 2030, I do think that something that feels, like, relatively experimental today, it will start to feel, I think, much more normal for the typical American, the typical EV driver, this concept of just your car earning money for you while it’s parked. And, you know, part of that is just, like, getting the consumer enrolled at the point of EV sale or lease. And some of our automakers, including Ford, is already doing that today in their dealerships, which is fantastic. And then there’s also the kind of the behind-the-scenes optimization and the— just the consumer comfort with it. I always like to use the analogy, if you’re an iPhone user, of Apple’s optimized charging feature. That’s something that has become the default for an iPhone charging, right? And you plug it in at night, it gives you a little pop-up, “Optimized charging. Your phone will be charged by, I don’t know, 3:30, 4 in the morning.” Probably looks at your alarm as well and makes sure it’s charged by then. And it just happens in the background while you sleep, and you don’t really care about it. And in that case, I’m not even earning money from it, but I know that it’s helping my battery health, and as a consumer, I don’t really mind. It just sort of becomes second nature. So I think that’s, like, a really big part of it. I think the other part is, you know, again, just this bidirectional charging becoming a little bit more mainstream. So we’re seeing a lot of automakers now bring new cars to market that are bidirectional-capable or rolling out software updates that unlock the bidirectional capability. Tesla’s made announcements there. Rivian has made announcements about over-the-air updates for its R2 fleet of vehicles. BMW’s rolling out bidirectional-capable vehicles starting with the 2027 model year. And then you’ve got the automakers who have been doing it for a while, including GM, Ford, Hyundai. So more and more vehicles that are bidirectional-capable, I think is gonna go quite a ways in getting more megawatts of flexible capacity on the grid.

Matt Boms: Yeah, it’s becoming more of the norm. And how does ChargeScape view the growing pool of used EVs? But, like, how much do you think about the life cycle of these vehicles as far as how do we take advantage of not just the newer ones that are being released, but the used ones that could also serve the grid?

Joseph Vellone: Yeah. We see this kind of wave of secondhand EVs that’s hitting the market now as a huge opportunity for us. So just to throw out some numbers, Cox Automotive forecasts that about 300,000 EVs will return from lease in America this year in 2026. That number will jump to 600,000 next year in 2027 and 700,000 in 2028. And this is all a result of a lot of Americans taking advantage of that EV tax credit loophole, where no matter your income level or the type of EV, you could get the $7,500 rebate essentially applied to your lease and made for a very cheap lease. Those leases last 2 to 3 years, and those cars now are returning to market. And so we at ChargeScape view this as a great opportunity to kind of reengage that next owner of the vehicle, right? They’re probably gonna buy a certified pre-owned vehicle from their dealership lot. This EV driver is almost certainly going to be a little bit more price-conscious and financially sensitive than the one who bought the new $60,000 vehicle. You now have the person buying it for $25,000 and much more likely to sign up for a smart charging program and earn the financial incentives to further reduce the total cost of ownership. So this is something that ChargeScape and our automaker partners are investing a lot of time and money into, and we’re already starting to see it bear fruit today in our enrollment. We’re seeing quite a few secondhand EV drivers sign up for our platform, kind of getting reengaged at the dealership when they’re picking up the keys to their EV.

Matt Boms: Great. And, Joseph, you mentioned earlier that it’s not just about single-family homes, that obviously there’s the multifamily home experience, and we haven’t talked much about, like, EV fleets. So can you speak a little bit to, you know, whether it’s electric trucks or electric school buses, how much does ChargeScape work with EV fleets in general?

Joseph Vellone: Yeah, I’ll start with multifamily. Actually, a third of US households are located in multifamily dwellings like condos and apartment buildings. This is a huge swath of the country, and again, particularly as EVs become more mass market, more and more of those households have got at least one EV in them. And so this is a really important thing for ChargeScape and for our automaker partners who want EV charging savings to be available to all of their customers no matter where they live. And so we’ve already kind of built out capabilities to serve EV drivers who are living in multi-tenant properties and allow them to participate in managed charging programs and enjoy all the same incentives and savings that their single-family colleagues are enjoying. On the fleet side as well, you know, we see this as, like, a really kind of interesting area. Fleets continue to electrify across the United States as companies are making decisions to go electric, if not based on ESG targets, then just based on pure financial savings and operational efficiency. Fleets are a little bit different, right? They typically have shorter dwell times back at depot, and so there’s a little less flexibility to kind of optimize their charging there. But there is still flexibility, and I think a lot of interesting stuff that you can do, particularly on the vehicle-to-grid side when those cars are sitting idle and could potentially be powering back the grid. As a matter of fact, what we’re doing in Silicon Valley with Silicon Valley Power right now is we’ve got actually a commercial fleet of Nissan Leafs that return to depot and export power back to the grid when called upon. So I think a lot of interesting things you could do on the fleet side. And then there’s also this category of fleet called the take-home fleet vehicle that not a lot of people talk about, but there’s actually a lot of cars like that that are corporate cars that the employee actually drives back home and charges at home. And so, you know, they’re paying for that car’s fuel essentially on their own electricity bill. So there’s a reimbursement service that we provide to the EV driver, but then there’s also the additional savings that we can offer back to the company who owns and ultimately pays for the charging by smart charging that vehicle at home.

Matt Boms: Very cool. Yeah, that’s all really exciting, and I want to leave you, I guess, with one futuristic question before we wrap up. If you could leave our listeners with one idea about the future of EVs and the grid, what would you want them to understand?

Joseph Vellone: I think for a number of years, EVs have been painted as a threat to the stability of the power grid, and I think that’s a fundamental misconception. I think what we’ve seen in the past few years with record levels of EV adoption is that with more and more EVs on the road reaching 6 million-plus, we haven’t brought the power grid down. The power grid is still stable. It’s still standing. And as a matter of fact, part of the reason why it is still stable and still standing is because of EVs. EVs are this great flexible resource. They’re batteries on wheels, and they can actually play a role in helping keep the power grid stable. And if the EV driver is able to save money on their charging as a byproduct of that, even better.

Matt Boms: Awesome. Thank you so much, Joseph. Really appreciate your time today and walking us through all these different concepts and looking forward to having you on again as EVs continue to proliferate in Texas and across the country. So thank you so much, Joseph. Appreciate it. Thank you.

Baseline models from Goldman Sachs suggest $765 billion will be the annual capital expenditure for chips, transmission lines and cooling equipment for AI. And that this will grow to $1.6 trillion annually by 2031. All for something as ethereal as an AI query.

We talk about the infrastructure of AI, but we need to talk more about the data centers, power infrastructure to support the data centers, the water, and how we are having to renegotiate and rewrite what constitutes public use and property rights. We are making permanent physical decisions to satisfy the needs of a business model that we are still trying to collectively figure out.

Utilities offer history lessons

This is not the first time in our history that a technology has come along, and we have had to totally change our property laws to meet the moment. The railroads were an early technology that forced wholesale changes on us. Congress granted millions of acres of public land, and legislatures gave private corporations eminent domain power.

Courts stretched the meaning of public use to enable commerce. This went on until the railroad companies got too big for their breaches and started gouging the farmers they had obtained the lands from with astronomical freight rates. Government had to step back in with the Interstate Commerce Act in 1887. The railroads became the first industry to be subject to federal regulation. The act required fair rates, no discrimination and rate transparency. This is where we started to see regulation of technologies considered utility.

A subsequent rewriting of the rules came about for the electricity industry. Power companies, formerly monopoly franchises who got easements to U.S. farms had to accept the new rules that came with regulation after electricity was finally considered a utility. Power companies had to cap their returns on equity, become transparent about their rate setting and honor their legal obligation to serve everyone.

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