Chuck Yates Needs A Job

0:20 Hey everybody, welcome to Chuck Yates needs a job, the podcast in my never ending quest to talk about stuff. I know absolutely nothing about, I know nothing about Hurcott, but I tweet about it

0:32 all the time. So I want to welcome my guest Campbell Faulkner on from OTC Global Holdings to actually tell me where I'm wrong and where I'm really stupid about Hurcott. So thanks for coming on.

0:42 Yeah. Thank you for having me on Welcome, Hurcott went from being something nobody knew what the hell it was to kind of, unfortunately, the problem child. So I work for

0:56 OTC Global, we're a commodity, energy or broker. So get that part out of the way. We kind of facilitate block trades in between institutions. So we see the large block trades and we are not in

1:08 retail. We don't have an interest and we frankly don't care about the different generators and policy and things like that outside of the fact that it affects Texas customers. I'm the senior vice

1:18 president there, run the data and analytics and also help run the technology division. We pay attention to it because we have a lot of load service customers, a lot of hedge funds, a lot of people

1:28 interested in what is ERCOT? So most people now think of it as the not reliability commission of Texas. ERCOT is basically the entity that has been tasked by the state of Texas to manage our own

1:41 independent power grid. So unlike the rest of North America outside of Quebec, we do have to make that caveat We operate our own independent grid. It's quite different. The Eastern and Western

1:51 interconnects, they're many states, they're huge. They have large control districts and regions. We need to find some of those because unfortunately a lot of the word salad that's in both news

2:01 media and frankly what we'll talk about here is confusing as hell. But ERCOT manages the Texas reliability entity, which doesn't even cover all of Texas. There's parts that touch different things.

2:12 El Paso is not in ERCOT Durkott manages to bulk a power and load for the Texas. interconnect, which covers Houston, Dallas, Austin, and so on. So the bulk of Texans live in Urquhat. Most Texans

2:24 didn't really know about Urquhat until February 21. We had days of rotating outages, which went from bad to worse. People unfortunately passed away. It was bad. Now, we're in another situation

2:37 this summer, again, due to a wide variety of reasons that we're worried about how much capacity we have. You're being asked, you know, most afternoons the last couple of days to reduce

2:47 consumption Pull back your thermostat, turn off your lights. Again, why? Well, large number of reasons, but the management and grid management entity, Urquhat, is trying to make sure that we

2:58 don't have to shed power. We don't have to shed a load. Let's break down what you mean by grid management. So we have Urquhat. We have entities that generate power. We have transmission. I think

3:12 everybody kind of understands you got to have wires to get from the power to certain places. Is that the grid? Is that what we're talking about? Or have I dumbed it down too much - No, no, and

3:22 see that's the problem is it's, how, the best way to say this, there's gonna be generators, which basically service the load. Load is industrial, homes, things like that. People who are

3:33 consuming power, then we have the transmission, then our connect set. Variety different entities across the state own it. It's no longer a, we'll be considering monolithic regulated market. We

3:43 now have competitive power, so that's why you get to choose on powertochooseorg Not a plug for the state, but just what it is. You're a retail energy provider. There's a wide variety of these

3:53 different apparatuses that connect, if you live in Austin or San Antonio, you are going to be using a municipal power provider or Denton, Texas versus Houston, which I don't even know who mine is

4:03 right now, which is bad.

4:06 So what really is the grid in Texas is both the generators and then basically the load service, which is gonna be the lines delivering load to you, or promoting electric service to you to serve your

4:15 load. your load is your air conditioning, your computer, so on and so forth. Or if you have a Tesla, your electric car. That is kind of the bare bones of what is going on. Erk cut, make sure

4:26 that generators fire up to service that load, make sure that the grid is balanced. And if there is a severe imbalance, they will actually tell people to turn off customers. And that is all to keep

4:38 the grid stable, keep frequency stable, all the things that really matter to keep power on And unfortunately, if a grid operator is doing its job really well, you have no idea who they are, you

4:50 literally never talk about them. They're doing it poorly, you become very angry and irate, and then people start tweeting at Erk cut saying, why are the lights off? So it's kind of one of those,

4:58 they're damned if they do, damned if they don't. You don't really know about them unless they screw up bad - Right, so okay, so basically that is Erk cut, that's the grid system Let's talk.

5:14 Maybe a little bit of history on that just to, and only because I went to Wikipedia this morning and looked at it, so I'm gonna look like I know some of the, but it was back in the 1930s when

5:27 people started

5:29 putting together grids through the monopolies. I mean, that was one of FDR's big thing, the electrification in the United States. And Texas at that point made the choice not to be regulated by the

5:42 feds So this is why Texas orcod stand in services 90 of Texas, like you said, but is actually not regulated by the federal government, I think. Is that right - It's back to a regulated. So what

5:59 they say when they're not directly regulated is they're not directly under FERC per view. So federal energy regulatory commission deals with basically interstate energy transmission, pipelines,

6:08 things like that. It gets far more complicated in that There are also NERC rulings, which NERC is. and kind of a super national entity that touches Mexico, Canada, and the United States, started

6:20 in the United States. Really what makes Texas separate and unique is that it is not part of the Eastern or Western Air Connect. So they are not part of the broader FERC overview, broader FERC

6:31 approval. Now, that does not mean that ERCOT just does whatever the hell it wants. There are standards, NERC standards that ERCOT follows There's a lot of backdoor regulation for multiple reasons

6:43 because of both power, exchange trading, and things like that. So it's kind of murky. The best way to say it is FERC doesn't have its direct thumb on it, but it's definitely in the room, kind of

6:54 watching closely. And it's not necessarily a bad thing. And FERC regulation in and of itself does not mean Orbeget grid liability, aka the 2003 Northeast Blackout. Highly regulated All nine yards.

7:08 The point is that ERCOT stands alone, and we mentioned Quebec because they're kind of their own stand alone island grid too. where we are not interconnected with AC phase. We only have DC, so we

7:18 really do operate as our own distinct grid, our own distinct control, whole nine yards. If we're having a shortfall, we can't import anything more than what our DC ties can import. So it's not

7:29 like we can import across 1, 000 different points through Texas, we can only import through four, technically five, but there's four active. So that makes us very unique. We really do look like

7:40 an island in the middle of the ocean in terms of electrical power - So when we think of kind of regulation, we really look to Austin. I mean, this is the state house. And as I understand it, but

7:53 correct me, basically when George Bush was governor, we did a big overhaul on the grid and we basically created a competitive power generation market. What happened then - So there was a multi-step

8:08 process to basically Best way to say it is I use liberalized in a very classic liberalized, not a, you know, 19th century definition. Yes, 19th century definition. They liberalized the power

8:19 market. So the power markets before were essentially monolithic. You have basically your generator, your transmission, and basically the - That was HLMP. Yes, that was Houston power. They had

8:30 their own cars. They had their own grid. Obviously, ERCOT existed before that. Basically Texas, kind of largely by the '70s, is fairly interconnected within our own little grid. We could move

8:40 power from basically South Texas to Houston and across. But outside of that, we didn't have that where we had people building independent power plants. That was a model that kind of spread out of

8:50 California. Set aside any political innings you have of California, California kind of led the modern - I'm going to say investment paradigm in electric power, but we're going to build an

9:00 independent power plant, gas power plant, the guy who started ice, Jeff Sprecker. That was really, really where he made his name in the beginning And what we're going to do with that power point

9:08 is we're going to then sell power into the market. So prior to that, prior to the liberalization of the Texas power market, this is step one before we get to retail, was I have load service, I

9:20 gotta worry about it, I gotta generate for my own customers, we're gonna deliver to our own customers, and then we're gonna build our customers directly. That was the service model. Then in the

9:28 90s, we said, well, we're gonna have a competitive power market, so there's just gonna be power available, so we'll incentivize people to go build new plants and things like that Power plants are

9:38 exceptionally capital intensive. If you're a regulated utility, you wanna invest, but you don't really wanna invest to the same degree that maybe private equity would. You're not looking for an

9:49 edge, you kinda have a regulated business model, there's only so much money you can make being a regulated utility. So because of that, there was always kind of that tension of, we didn't really

9:58 have enough development. So the theory behind basically the deregulation of Texas was we'll get new, less expensive generation sources, which will lower prices competitively for Texans. We can

10:10 argue if that's actually the case. Largely it has been, but obviously there's other problems within that. And that was kind of the design of the original market liberalization was we'll get

10:21 independent generation, one of ERCOT, make sure that we can schedule that and get it online, make sure that it's load service. So Houston, Paranalite, now Reliant and also a number of other

10:32 entities, they can focus on what they want to specifically do, distribution, retail, etc. That kind of de-linking doesn't mean that entities didn't still own generation, it just meant that there

10:41 was a more competitive market to dry prices down. Again, the theory, not always perfect, but that was what 1994 was supposed to do. Gotcha. Then what happened? So basically we said, okay,

10:54 we've got all these wires that are utilities hooked together, we're going to allow independent power producers to pop up throw electricity into that grid. they're gonna be competing with each other,

11:08 it's gonna lower costs. So that happened, what happened on the retail side? 'Cause I went from buying from HLMP to buying from 12 different companies over seven years, I think - So the best way to

11:22 think about that is, which is, if you're outside of maybe the energy industry, it's a little weird. Essentially, it turned the pipeline companies, the transmission companies into common carriers

11:35 Basically, we're gonna buy power from the grid to load service our customers. I have to pay a transmission fee. You'll see a transmission fee in your bill, like I pay a transmission fee for living

11:45 in the city of Houston. And that's because I'm essentially using reliance wires and things like, we're probably the older reliance wires and things like that, center point now. And so because of

11:56 that, it looks kind of like a deregulated entity where basically, I'm gonna go out and start a company I'm gonna go get customers. I have to buy their load. I'm gonna buy power on the market. I

12:09 then have to pay basically a schedule fee to basically get power to the customers. That's your retail energy distribution fee. And that's my new business. So what's the theory behind that? Well,

12:19 if you have a monopoly, you're gonna get the same price across the entire zone. You also don't get the product mix you want. A lot of people now wanna buy a renewable mix, photovoltaic or wind.

12:32 That's a product that a retail energy provider can offer Kind of one of the difficult parts of that market is you see a lot of retail energy providers go bankrupt, gritty and so on and a lot of

12:41 others, some customers of mine along the way, because it is so competitive and it's difficult. I keep mentioning NRG because at least within Texas, they've kind of become the 800 pound gorilla.

12:53 They buy a lot of these retail energy providers and then they resell it. So what they're really doing is they're getting in between the customer and basically the generators and also the power

13:04 distribution and transmission. and they're basically hedging power for you. That's your standard plan. And that's one of the things a lot of folks kind of forgot when they were using people like

13:13 Gritty, we're gonna tamp on them a lot, was that retail energy providers essentially there to buy an in-sell you a fixed price. So because of that, or maybe a variable price depending upon a

13:24 certain different things, but if you go on Power to Choose, I'm gonna get a 14 cent rate either per month or for a three year period, whatever product mix they wanna offer. They're there to

13:33 basically buy power and hedge it for you So you don't all of a sudden accidentally pay what the LNP is, which yesterday spiked up to 3, 000. I think so, yeah, somewhere in there, but the point

13:44 is when it's hot and volatile, you as a consumer don't wanna have to worry about Urkhod overall. You wanna have a relatively fixed price every month that you understand, you're not gonna get a 3,

13:55 000 power bill, you're gonna get your 250 power bill. So that's really what the competitive market design of having all those retail providers was supposed to entice to do. So, sorry for the long

14:08 windiness - No, no, no, that's really good because I used to work for Stevens, the Little Rock Arkansas investment bank in

14:16 John Jacoby, or John Jacoby who invested all the Stevens money for years used to always say every bank will go broke. And the reason they go broke is their capital base is basically deposits -

14:28 Correct - That customers can take out any day And then their assets are a five year loan to Chuck to Clayton to go buy a car, right? And so we have 10, 000 worth of deposits. We loan it to Chuck

14:42 to go buy the car. He's paying us back over five years. When they take the 10, 000 away, we go away as a bank. And I think that's what we saw somewhat historically in the retail market is you

14:56 would sell, you'd give a one year fixed rate to your customers. And then if you didn't lock it as the retail provider. your toast - Your toast, potentially. Or you made a ton of money if it

15:11 dropped - Correct. I mean, the best way to think about it is if you're thinking about it in finance, you're selling, in theory, you should be selling if you're a retail provider and you're doing

15:19 it correctly, if a fix, fix swap. So each end is fixed, you kind of know you're spreading your margin. Okay, maybe not great. So then the whole theory is we have to go get all these customers

15:29 and we do it through scale. That's been a successful model. The other model has been we're gonna fix it to the customer and then we're gonna kind of float up and down. Okay, that's fine if you're

15:40 naturally long or short. You're neither naturally long nor short. And by that, I mean, you are, you're naturally short if you're the retail energy provider. But the problem is if you're just

15:47 trying to float it, you don't really have any asset exactly like you said with a bank. The only thing you're getting is that fee from the customer each month, that does not cover your entire net

15:56 exposure. So if you're a smart retail energy provider, which to be honest, there's a lot of really smart people working in these companies - Oh, sure that have gone bankrupt. tons of others that

16:06 have bright individuals, they understand this, they're hedging and doing things like that. Where I start, you know, crapping on a firm called Gritty, which thankfully, Urcott dissolved and said

16:16 they can't operate anymore, they were passing the wholesale price on to you plus a small adder. So you, the retail customer, were just paying 1, 000 a megawatt, 500 a megawatt

16:29 that you're going to get for however many hours per day So before, well, in 2019, they had people saying, Oh, well, you should maybe switch providers right before the winter storm. Gritty came

16:38 out and said, Oh, you should probably get on a fixed rate plan for this next week. Bananas, you know, from a customer standpoint, it's really aggressive. I mean, there's even people within my

16:49 firm who are trading firm, you know, we have bright individuals there who use Gritty because it was cheap, but they hadn't thought all the way through the complications of, Oh, hell, if power

16:58 prices spike, I'm toast I may have saved 20 over the last year. I'll lose that plus a multiple in five minutes. So that's really where the competitive market has had a few failures like that. By

17:11 and large, it's not, it's a good market. The retail energy providers are good guys. Unfortunately, you do have some of that lack of customer knowledge, which has not ended well. And fortunately,

17:22 there's, I think more, especially since you went to a brewery, more of an emphasis from the Public Utilities Commission to ensure that there's not entities operating and doing that. Because in

17:32 theory, the customer knew what they were doing - Right - That has never worked in pretty much anything facing a retail average customer. I can't expect them to understand exactly how dispatch and

17:43 haircut works and why they should care - I mean, I graduated Magna Cum Laude from Rice and I will do my semi flex brag about that right now. I actually would read the contracts periodically from my

17:59 electric provider and I didn't understand it - No, and it doesn't have, like I said, There were people at my firm. people who've been involved in the trading industry for years, people who know

18:09 their stuff really smart people, they didn't think about the fact that you're floating the LNP. So that's why the retail market gets some bad rap, largely because of a couple bad entities. There's

18:19 always going to be something like this. This is not California in 2001 with Interon. Entirely separate. It's bad for consumers if they do get surprised 5, 000 power bills when they're expecting,

18:32 they were sold basically the promise that it was less expensive. So as part of the deregulated market, you kind of have all these moving pieces and then you have the market designer of a car and

18:43 when we say the market designer of a car, market designer of the Texas reliability entity, I'm using this specific language because there will be somebody who knows this who will try to yell at us

18:52 about it. But that's really where a lot of the consumers get confused, particularly if they're from out of state, they're thinking, well, I should just be paying one price I get it from this,

19:02 you know, the grid operator. Not really how it works here. So there's a lot of good that's come of that. What we've had realistically up until the last 18 months, two years, really inexpensive

19:14 power prices in Texas. For their example of that, there would not be all the crypto miners moving here if our prices weren't cheap. Our relative spark spread, dark spread, and just general power

19:25 prices are low.

19:28 But consumers can't get hurt. That's why, unfortunately, if you work in the industry, it behooves us to try to not let that happen. The less regulation, the better, not because we want zero

19:40 regulation. We don't need to have people filling out extra paperwork to go to a different grid operator if they're working in electric power, so forth. If you're a land man, you already know how

19:50 bad it is to fill anything out for either the EIA or just state submissions. So trying to keep and control cost around that's good. So I'm not gonna say it's incumbent upon us in the industry, it's

19:60 good to not only be out ordering consumers and things like that because. You know, why does my mother care what the hell the power price is going to do in Urkot? She just wants to buy power a lot

20:10 of weight, roughly know what it's going to cost if it's really hot in the summer and not pay a ridiculous bill. Right. And it's not insulting my mother. She just, why does she care about electric

20:19 power? Yeah. I care because I work in it. Most people don't need to worry about it. And that's kind of the difficulty of we have this grid operator. It failed. We blame Urkot. We're mad at

20:30 Urkot. Urkot's bad. Right And there's a lot of good folks who work there. So my one funny retail story and then we'll go to winter storm areas. So I buy this old house in Richmond, Texas about

20:46 seven years ago. And the previous 30 years, it had actually been a wedding reception venue, you know, old Annabelle house. And the lady that had run the wedding reception venue hadn't done

20:59 anything at the house for the previous two years Unfortunately, she had been sick and. probably set the thermostat at 85 degrees and just kind of left it there, right? So I buy the house. So the

21:11 first thing when I'm setting up electricity, I think I call reliant and they offer me, well, you know, for 500 a month, we'll give you as much electricity as you want. And I said, that sounds

21:22 like a great deal. So I sign up for that program. It was a one year contract. I drive a Tesla, so I'm charging my car. I keep the house at 65 degrees 'cause it feels great And it's an old house.

21:36 So I'm air conditioning the whole neighborhood through the old house. So at the end of the year, I get a letter that says, hey, your contract's up, please call us. We need to chat. And I had my

21:47 assistant, I was like, Stacy, will you call and just renew that? That's been a great deal. She calls and the lady's like, oh yeah, let's pull up that account number. I'm sure we're happy to.

21:57 Oh my God, what is he doing there?

22:01 So yeah, the retailer lost money on me. in that scenario. They withdrew that offer to continue that contract - I actually have a similar story, not crapping on her line. So I had basically a

22:15 spark spread plan. It was basically gas index, 'cause what was really cheap up until recently, natural gas. So I had exceptionally inexpensive electricity, and in the last fall, I was like, oh

22:25 no, gas prices are going up. Kind of had a view of the market starting last summer. I was like, all right, we're gonna get, didn't think it would get quite as expensive as it did, but it's like

22:34 we need to switch to a fixed price plan because reliant for years have been trying to get me off this plan because it was not economic for them. So that's one of the difficulties of being a retailer,

22:44 or if you work at a retail energy provider and you may not be on that particular side of procurement, things like that, it's a hard business. And you can have a couple of customers wipe out your

22:53 profit from 150 - Yeah - And that's why we've seen kind of a consolidation across, and you'll see a lot of smaller retailers start up and for Chagata business, it's very competitive. very difficult.

23:06 But the upside of that is it's saved consumers money. The competition really has benefited, you benefited greatly from essentially a bad deal. I'm not saying we want these companies to do bad deals

23:18 for customers, but that competition aspect really has been far. It's why they offered it in the first place. Correct. Competition. Yeah. They want you on that plan. They want to get your load

23:27 under management and it works. It's a great business.

23:32 If you mess up, you're going to pay the price. We had for us as Valley Electric Co-op, one of the largest cooperative bankruptcies ever because they did not have basically their power managed

23:44 during Winter Storm Yuri. That's one of the things is if you do have an aberrant, I use that in quotes, an aberrant event, man, you can go completely upside down overnight We've basically covered

23:57 what our cut is, how it works. We talked about deregulating power generation. we talked about deregulating the retail side. So I think we've covered kind of fundamentals. Now the issue, and it's

24:12 Yuri related, it's Monday related where I think, you know, four dozen, yep, today, four dozen times in the last, you know, five years, Urkot has sent out load management type language on,

24:29 Hey, watch this and all that. How did we get there? And I kind of want to know that because we're freaking Texans. We ought to be able to run a grid where Houston is the energy capital of the

24:41 world. How did we get there? Sleepwalking. The entire, all of North America and Europe, well, Europe was a little more deliberate because of Germany, but largely by sleepwalking into it. The

24:54 market's a sign of Urkot, and we can argue if energy only is the way to go versus having.

25:00 basically paying for reliability and things like that and having different market design. Our market design is energy only. So you get paid as a generator to generate via price signal. It's

25:12 supposed to be relatively pure. If you're operating a Pico plan, you'll maybe run a couple hours a year. Okay, if it's operating at 3, 000 or 4, 000 or megawatt hour, oh, excellent. Yeah,

25:23 we'll make our entire year margin, your net Pico margin within that short period. That's great That worked prior to really 2005. What's drastically changed through 2005 is the massive influx of

25:36 renewables, particularly in Texas, but it's a cute kind of all over the United States simultaneously with the retirement of traditional coal plants. And just in general, not what we call

25:49 dispatchable build. Dispatchable resources is something a five-cent of a millimeter signal that thing is going to kick on. If it doesn't kick on, it's either because it's offline or it had an

25:57 oopsie. And some market designs very much punish them. Texas, it's a little complicated around it. Um, but essentially it's, we need more power. We're going to deliver it. We're going to get

26:07 it on. Well, the issue with renewables are you can't dispatch them. We know roughly because of the weather, how much power we're going to generate today, when I was coming in, we were sub a

26:16 megawatt on wind, or probably sub a gigawatt, sorry, which is very low. Cause what we've got 30 gigawatts of, uh, approximately about so that's the name. I mean, that's approximately the name

26:27 plate name plate It's not reliability, you know, so on and so forth. There are a lot of complications, but that's exactly the point. If I have an 800 megawatt gas plant, I may be able to eke out

26:36 900 megawatts depending on if I'm willing to run turbines hot. Yeah. That's pretty dispatchable. Now we could have this very dispatch like we did back there in winter, winter storm. Murray,

26:45 we're designed around summer peak.

26:49 don't fail to dispatch and if they do it's an issue - So let's really simplify this down 'cause I think this is the crux of where you're gonna go with this and I have a tendency to agree. You have

26:60 what will say a nuclear power plant, you have natural gas fire generation, you have coal fire generation, that's what you mean by dispatchable - The best way to say it is dispatchable resources are

27:15 those that if I'm ERCOT and I call and say, get online, they're gonna get online and we're not gonna guarantee it, but it's pretty damn close. We're gonna say greater than 95 confidence, that

27:25 unit's gonna come online, it's gonna provide 100 megawatts into the grid. Non-dispatcherable resources, again, there's a lot of complications around when you start talking about it - Yeah, we can

27:35 simplify it, yeah - If we're talking about non-dispatcherable, just say photovoltaics, which is solar panels and wind. Those are not dispatchable. If I call up a wind farm and say, Hey, I need

27:46 50 megawatts,

27:48 you're going to get what you're going to get. We either have wind today or we don't. Or in some cases, we'll overproduce. You know, it may be rated for 100 megawatts on average. We may produce

27:58 200 because we have a lot of wind today. So what that does, those non-dispatcheral resources entering the grid mean that essentially when times when you really need to be able to control and demand

28:09 things are online, you're kind of at the mercy of the weather - Right - And the issue with that is we've had Urkot glowed basically how much power we demand every day grow tremendously in the last 20

28:21 years - I've got some stats on that.

28:25 If you look at our population just in Texas, we've gone in 2001 from just over 21 million to almost 30 million today. So we're up, call it almost 40. And the retail electricity market parallels

28:41 that almost directly. It's, we had 318 billion kilowatt hours in 2001 Last year was 427 billion kilowatt hours. So that's up, call it 35. So it's almost paralleled with, so that's what's

28:58 happened over the last 20 years - Correct. And we've added a lot of generation. It's been non-dispachable. And so what that's done, and that's all across North America and Europe, we've added

29:10 generation because we've had low growth, we've had demand growth, which are good things Typically, one of the best ways to look at productivity, we were down 3 on low during weather adjusted, but

29:23 we were down about 3 during basically COVID. Why? Economic productivity was down. So low growth is a good thing. So a lot of folks who argue we need to be worrying about conservation, all this

29:34 stuff, no. Let's just dollars to donuts. Really, what

29:38 matters is you look at economic utilization, you look at electrical growth, you look at demand, Those two things basically are correlates for each other.

29:50 The fact that our population's grown, good thing says Texas is a great place. Secondly, the other good thing that's happened is we've had electrical demand growth, more economic output, we're

29:57 becoming wealthier. Texas is a better place to live. And that's standard of living. Standard of living. Right. I mean, the fact is this isn't 1950. Damn near everybody has air conditioning.

30:06 Thank goodness. It's not here. 1950 when my grandfather was at University of Houston, he didn't have air conditioning. He didn't have air conditioning. I don't think until the '60s My parents at

30:16 Rice, Dad, I believe graduated undergrad in '62, mom was 64. They didn't have air conditioning in the dorm. No, it's hot. It's hot. It's miserable. Yeah, Houston is a hellish place. Houston

30:30 is relatively comfortable if you get from your air conditioning car into your air conditioning office and then you go back to your air conditioning home. Right. I don't care about 100 degrees,

30:38 nearly the way I would, if I had to just open my windows and suffer So because of all those, because we're wealthier, we can afford all of that. We've had a lot of demand growth. and we haven't

30:48 replaced it with dispatchable controllable resources - So let me make one point here, and I'll say it as a statement, but it's really a question for you. One of the things that I read somewhere is

31:01 you've got a wind turbine out there. The wind's got to be blowing at least 10 to 12 miles per hour to even generate any electricity. That's kind of number one. And number two, you probably got to

31:13 be blowing, call it 20, 25 miles per hour to even get close to your name plate capacity. And so if we say we've got a gigawatt of wind over here, that's dependent on 25 mile per hour wind or 30

31:28 mile per hour wind. And there's even an upper limit where they won't be able to run beyond that. So I know we're getting kind of into some nuance and some subtleties there, but it's not as simple

31:39 as just wind blowing or not blowing. It's how many miles per hour - Correct. And the other thing that's also kind of It's becoming more known, even within kind of, you know, my industry directly

31:50 dealing with like electric power and commodities trading inertia. So wind and photovoltaics are what are known as asynchronous generators. So why does that matter? Well, one of the most important

32:02 things of our grid is it operates at 60 Hertz. It's very predictable. That's basically the operating frequency of the grid. Asynchronous sources basically require a synchronous source to keep

32:14 everything in line, keep all basically, and to use a really nerdy way set, generator excitation, basically the magnetic fields and the generators rotating. Another thing, photovoltaics, yeah,

32:25 does generate its own magnetic field because it's basically DC inverter than hitting it. But that still needs a signal from the grid to operate. Wind turbines and most generation sources need power

32:35 from the grid to create the magnetic field to generate power So that's why asynchronous versus synchronous generators really matters. A synchronous generator, gas turbine, nuke plant, things like

32:47 that coal plant, those are required to tie, we use the word tie, but tie and sink. So get the basically the sine wave and sink and then tie it into the grid so it can be used. Ancillary services

32:58 is what we call the pricing mechanism in the grid. That costs money. And just adding wind and photovoltaics to the grid is not a free lunch. That's one of the big things that I kind of scream into

33:10 the void about. We can add as much as many renewable, you know, generation sources we want, behind the meter, rooftop solar, things like that. At the end of the day, wire places in California,

33:21 a lot of other even Texas getting rid of things like net metering for rooftop solar. Because the ancillary services went from being kind of an afterthought because you already had a bunch of rotating

33:31 sources, you know, generating sinking and tying to we really have to pay to keep either that gas plant online, that nuke plant online, or that coal plant to be able to pull that extra power into

33:41 the grid. And so that's one of the big

33:45 As we've seen more wind come on, like in the wintertime and things like that, we've seen basically the operating reserves and things like that look okay, but we've actually had the system inertia

33:56 come down. And why that matters is as you add loads on, it actually slows down in a very minute scale, slows down the generation sources. So if you have fewer things providing that reactive power,

34:10 the whole system kind of gets unstable And so as we've added renewables, a lot of people are saying, well, we've added renewables, we're going to keep adding renewables, we're going to add

34:17 another 10 gigawatts of solar, we'll be fine, you know, we're not going to have these issues. It's no free lunch. It's a very expensive to operate those turbines to tie that back. And as we add

34:28 load without adding more spinning reserves and spinning resources, you set the grid up, as I said, sleepwalking into failure. You set the grid up for more problems where we have to have emergency

34:39 conservation or we're we're going to lose the grid. So to dummy this down. the simplest level in analogy. And I'm kind of making this up on the fly. We have a pot that's holding water and maybe

34:55 the dispatibles are putting water in at a steady state so that you have in effect a pot filling up calmly are renewables, sitting there spewing water in kind of randomly at different things shaking

35:12 up the water. Is that the way to think about - So that's gonna be a good way to think about their generation, basically their load service where they're basically putting power into the grid. The

35:20 inertia thing, which is, you know, if you're not, I'm not an electrical engineer, I'm just a statistician by, you know - I'm worse, I'm a political science major - That's how I stand - So

35:30 that's actually my, yeah, that's my undergrad and a master's, but we did a whole bunch of statistics. So the best way to think about it is you have a big old flywheel rotating, you know,

35:40 gyroscopic effect. It takes a lot of torque to actually change. direction or slow it down, you know, think it's heavy and it's spinning. As you add load to that, you're going to minutely slow it

35:50 down. The problem is if you don't have enough inertia, so basically spinning, rotating mass, energy basically stored in the system, as you add load, as you've had generation sources, you can

36:01 actually cause the system to get out of sync. So one of the issues we have in ERCOT, all of our wind is in south and west. Most of our load services in Dallas, Houston and Austin You have to

36:12 transmit it. Those imbalances mean that requires more horsepower to keep those renewables on the grid. And that's an important factor that a lot of people don't, I'm not going to say don't think

36:24 about it, it's just not as discussed. Well, and I like to think of myself somewhat educated, although I'm an oil and gas guy by background, I like to think of myself somewhat educated. I'd never

36:35 heard that portion of the story. Well, and respectfully, why would you? I don't mean that in any sort of derogatory way. This is something that people who manage the plants worry about. This is

36:46 something that the policymakers who sit on the ERCOT board worry about. I hope people at the PUC worry about it. I'm not insulting them. I don't know how if you're an unelected bureaucrat, you

36:56 necessarily know this. And again, these are the kind of details of grid management, grid operations that even go well beyond me. I'm fundamentally data-driven and we have data-driven products. We

37:09 trade in these markets and we care about the wholesale side There's a lot of details that if you don't really pay attention, you're like, Well, shoot, yeah, we just add photovoltaic. No big deal.

37:18 More wind, load service, good to go, bingo. Don't have to worry about it. Actually planning and operating the grid is a difficult job. And ERCOT in particular has a very difficult job, given

37:30 that we've, like I said, we've kind of slept locked into this. New York has these issues. SPP, which manages power from Oklahoma up through North Dakota and kind of the center part of the country.

37:40 They're having these issues. mid-continent independent system operator connects into, well, touches Texas, partially connects with DC, goes all the way up into Saskatchewan, Canada, in between

37:50 PJM. They have these issues. We had issues where New York almost went down last year. This is not something that's unique to Texas. Texas has not done a particularly bad job. It's just difficult

38:02 when we've added these new generation resources and there's been large political pushes. Kind of, I'm going to say, in absence of any real thought and the theory is to, oh, hell, what happens

38:13 when we do really push the grid?

38:16 We have issues. So we'll talk just a little bit about winter, Yuri, because every winter storm, Yuri, because everybody remembers that. But just to sort of summarize what we just talked about,

38:29 the 35 up in electric retail sales over the last 20 years, I was eyeballing a graph So tell me if I was generally correct about it. feels like dispatchables have stayed about the same. That's

38:46 additions of natural gas fired, retirement of nuclear and coal, but if you just looked over the last 20 years, it stayed about the same. And that

38:56 35 has really been filled up by renewables, primarily wind being built. That's. And side power the on grid our built we how of kind

39:05 so we've gone from, and I'll just say it's about 30 of our generation is wind even - Name plate, name plate - Name plate, that's really good - Any given day is different, but we've basically gone

39:19 from a world where damn near 100 was dispatchable nuclear coal, et cetera, to now two-thirds is, something like that. And so the day that wind doesn't blow, the day that it's cloudy, where we

39:36 don't pick up the solar, it's an issue we have to deal with. Yes, not only is it an issue we have to deal with, there's a lot of proposed solutions for it, batteries. Again, there's a lot of

39:48 different solutions. The problem is unfortunately a lot of people representing like we had Tesla batteries to the grid, it'll magically fix it because it can provide ancillary services. No,

39:58 there's a lot of control and other issues. We can't just keep adding photovoltaics and just expecting it to be okay. You know, by the same token, a lot of people are adding PV to their house.

40:07 Well, I'm okay because I'm reducing my load Well, no, it doesn't directly work. You're behind the meter or things like that. There's a lot of - I've got to take you off to tell you this story.

40:16 So I live in Richmond, Texas. I have police department, fire department, the hospital surrounding me. So I think I'm never going down. I'm that part of the grid or that part of the system that's

40:28 never going to go down. Winter storm, Yuri happens, boom, lights go out. And my house starts freezing. So anyway, that's kind of fact number one.

40:40 My dad has always been the early adopter of technology. He bought the first VCR ever made. He's just that guy. So anyway, dad goes out and on the vacant lot next to his house buys solar panels,

40:53 has the Tesla batteries on the house. And we're talking about it and I go, Hey dad, that's great, but how much did that cost? He said, 125, 000 dollars - Exactly - And I said, Okay. And he

41:06 goes, But I never have to buy electricity ever again And I go, Well, what does that mean, dad? Did you do some math on that? He goes, Yeah, it's a 123 year payback. And I go, Dude, you're

41:18 80. I love you. I want you around to see payback - Right - But anyway, so that's fact number two. So I put my cat in the cat carrier with my house, Pitch Black, freezing cold, and I go over to

41:32 my parents' house 'cause of course they have power. So I walk in, I sit down. And my dad under his breath goes, 123 year payback doesn't sound so bad right about now. Does it, Jack -

41:46 And see that's okay if you're maybe like us. We went to college, we earn well above the median income of like 73, 000 a year. I think it's that. I think it's increased from 43 over the last 20,

41:59 whatever status - I don't, I'm still unemployed, but yes - So that's the point is it's fine if you've been professionally successful or you own a small business, you can have a natural gas

42:09 generator because I don't want to go down during a hurricane - Right - A lot of other people are like that. The problem is you live in an apartment, you work a normal job, you work hard. You

42:19 shouldn't have to worry about that eventuality. And that's kind of the issue that a lot of the average customer has to worry about is, well shoot, what happens if my high-rise loses power? I can't

42:28 put a gen set that'll power my whole apartment on my patio - Right.

42:33 Really, that's kind of the pernicious issue is what do you do about the average customer, the average person, the average load entity? Not everybody can have a generator. Not everybody can really

42:44 rely on that. So that's why from a policy standpoint, you look at ERCOT and you look at across all the control districts in North America, you're like, Hey, these prolonged outages are bad. They

42:55 hurt people. They can kill people. We kind of have to say as much as we want renewable penetration And that's the problem is it sounds like I think renewables are some bogeyman, not at all. We

43:06 just haven't really anticipated our plan for how do we onboard all of this onto the grid. Like right now, we're kind of stressed on the grid because we have a low wind day. That's not good. It's

43:17 very hot here. It's 100 degrees. So we talked about this yesterday on the BDE show, Colin and I do a weekly summary on the energy business We talked about the grid and I'm not anti-wind either.

43:34 we haven't priced reliability into the system. Correct. And I don't know the whole tax code well enough, but I know I've been pitch deals where, hey Chuck, invest in this wind farm and through

43:46 tax credits, we get all our money back. So if it makes any money, that's our upside. And so there's definitely been a big push from the federal government to have wind assets out there. And so I

44:00 think that's distorted the economics of power generation competing somewhat, the subsidies. Am I fair there? No, you are fair there. And that's one of the things where I say we slap walk into

44:12 this because fundamentally we look at a market design of ERCOT, it's an energy only design. If I have a generation resource that can bid in less expensively, you're kind of anti-consumer. If

44:23 you're saying, oh no, no, I don't want you bidding in

44:26 So the mechanism's been, yeah, add the PV, that's way less expensive for consumers. It's gonna run, yeah, in the middle of the day, it's gonna have a heavy load service, may have some ramp at

44:35 the end of the day, whatever. We'll deal with those issues. Same thing with wind. Yes, it's far less expensive, we're gonna bid it in. It's essentially, it's not free. There's ongoing capital

44:44 costs, all sorts of other things, but functionally it looks free. We get it in there, we don't have to worry about their liability, we got enough thermal that'll pick it up, no big deal. The

44:53 problem is that works in small scale See, I'm just using SPP because they're directly north of us. What's servicing the bulk of their load right now? It's 30, excuse me, 30 natural gas and about

45:06 35 coal. So that's a teeny tiny sliver of the rest of their load service that has to be renewables. Texas, kinda like California, we are heavily renewables. So when we get down to it, we bid in

45:18 less expensively. It's always a good thing, less expensive, prices for consumers are good, but there is no reliability component. So there are some grid operators in North America that have that.

45:29 I'm not necessarily suggesting that we need that. The problem is because of, as you said, subsidies, other market design issues, it bids in less expensively. So by default, we have to add this

45:40 to the resource list. We have to add this to the dispatch. So because of that, we've kind of slept walk into this where now we're saying, whoa, why all of a sudden is the grid unreliable? Well,

45:52 you had these resources over so many years you don't really change the composition, you don't have an excess ancillary services component. I'm using Texas example to cover that for generation tie

46:03 and so on. You end up with not gonna say a fully distorted market, but things get a little weird in the extreme times. The bulk of the year, not much of a concern. It's becoming more of a concern

46:14 because of the renewable composition of

46:18 basically the generation profile. But

46:21 three years ago, we wouldn't have been having this conversation. So I got a message from a listener of the podcast who basically said this, so what do we do? Do we light a pile of capital on fire

46:34 to build enough renewables that it's not an issue? The shale plays say hello, or do we try to build 10 gigawatts of natural gas that the feds are trying to regulate out of existence over the next 10

46:49 years? Also setting a pile of capital on fire since the plants won't pay out before the feds crush 'em I mean,

46:57 he was obviously being very funny. Sure. And somewhat cynical, but I

47:02 mean, is that kind of our choices going forward? Well, and that's gonna be the unfortunate thing. There is an easy solution to this, and we've known the solution for years, it's build more

47:12 dispatchable thermal. That is just out of vogue. It's basically been denuded either through, I mean, the polite way to say it is, even if there's not necessarily a regulation around it. talk of

47:24 regulation is, well, why would we go invest capital? If I'm a public company, that's a bad thing to do to go burn a bunch of cash building renewable power plants. Even though independent private

47:33 renewable power plant developers, historical like Tenaska and things like that, they aren't building large coal plants anymore. They aren't building huge gas power plants. Jeff Sprecker runs ice.

47:43 He doesn't build power plants anymore. That's kind of where we get to a point where we either have to start doing brownfield redevelopment, which somebody's got half a billion bucks. They want to

47:54 stake me with, I'll go build some gas turbines. And the newest generation are fantastic. But that's really what we need. We either need redevelopment of brownfield. We need to basically backfill

48:03 for more gas generation. Why am I saying gas generation? Even at the current spark spread, it's relatively cheap. Sure, coal's less expensive. I'm just realistic. We're not going to get more

48:14 coal plants built. Well, and this is your point earlier of your backdoor regulation because it's the EPA and the furk sitting there saying sure go ahead. And so it's not as simple as Austin can

48:29 solve it.

48:31 No, this has been really interesting. Kind of one other thing and it may take forever and we don't do it, but do you have a short version of kind of what happened during winter,

48:41 Yuri - Absolutely, yeah. The short version

48:47 was, and I'll use my own personal experiences at caveat, I watched the weather closely because I'm involved in energy trading. So I saw this coming. This was, if you looked at basically the

48:59 weather chart, I'm still befuddled and everyone was caught so off guard by it. We knew cold weather was coming, but largely what happened was during the winter time, during either extreme event,

49:10 let's barbell it, extreme heat, extreme cold, which Texas does get. We had some more event in 2011 where we had thermal plants trip up by Dallas because we, I shouldn't say trip. They basically

49:21 had their gas storage freeze up It was a problem. It was not a large prolonged problem. And typically when we've had cold spells, maybe 12 hours max, bad, very bad, but not nearly the three day

49:33 duration that we had with Yuri. So really what happened starting that Sunday night was, we knew it was gonna be bad. And by we, I mean, people watching power closely. We knew there was gonna be

49:43 excessive demand. And even though we didn't eclipse the all time load record, I'm pretty sure if we could have supported it, we would have been pushing close to 90 gigawatts I know that's a

49:53 controversial thing to say. Most people argue or cod said it was, you know, instantaneously maybe like 78. It was pushing 90. So that Sunday night as temperatures started dropping, our plants

50:03 here are not rated to run below freezing. Why would our, you know, peak or plants be rated to run below freezing? They run in the middle of the summer. They run maybe, you know, for a very -

50:14 It's August. I mean, that's like - Yeah - They run for maybe 100 hours a year. They do not care about the other, you know, 8, 300 hours per year. or whatever it is, apologies. They don't care.

50:25 They're not designed to do that. We don't pay for a liability. So we aren't, you know, we as the, you know, consuming public are not paying grid operators. We're not paying a variety of folks

50:36 to maintain those plants in a fashion that can run below freezing. So if you look at our plants, especially our gas peakers

51:00 and things like that, they're open. They aren't shrouded, they aren't enclosed. You go to Colorado, North Dakota, New York, they're enclosed to keep things from freezing Cooling water, things

51:01 like that, turbine gas, basically flow and things like that for cooling. Not insulated here because it's hotter in hell. Why would you want to insulate a power plant? You're going to basically,

51:04 you know, deal with decreases of efficiency because you can't rent the plant is hot, so on and so forth. So there's engineering, good engineering reasons why. So as the prices started dipping,

51:13 what also started ramping? Well, most people heat their homes with natural gas here, but most of our homes are not really that well insulated So what do people go plug into the wall? Space heat.

51:24 Well, yeah, because you don't want your pipes to freeze, your kids are cold, some of the things like that. So the power just started skyrocketing in price. And the reason it's skyrocketing in

51:33 price was that was a signal to get the plants online. Well, then a lot of the plants, because it became so cold so quickly, and parts north Texas below zero, plants froze up. Couldn't get gas

51:46 out of the gas storage fields, set aside all the issues in the Permian, but the Permian was freezing out We don't have glycol heaters on compressor stations, because again, why the hell do you

51:56 have glycol heaters on all our compressor stations? So all of those - There's a lot of water in produced natural gas. There's a ton. Yeah. Well, and then if you have any sort of hot gas and you

52:05 got a NGL fraction, that's going to form ice. I mean, there's all these things that, yes, we know how to deal with it, but that's such an exceptional cold event that we don't really design

52:17 around that. From an reliability engineering standpoint - Why would you go torch 100 billion designing our grid to deal with? Let's just say like two standard deviations below the average

52:28 temperature. So I'm sorry, I'm being one of the basically what happened was you had all those nice little events hit start Sunday, Sunday night. So to actually keep the grid from islanding, which

52:39 means basically disconnects all your plants trip, like what happened to Northeast blackout. No three. They basically, or caught the control district said, we have to start turning off load as a

52:50 very drastic measure, EEA three, which is what we call it,

52:55 is kind of scary because you start shutting off load. It's not really easy to get it back on. And this isn't something where a guy, you know, sitting in downtown Houston for, you know, center

53:05 point says, I hit a button and this goes off. Now you have somebody driving a truck go out and flip basically a re-closer on a substation and then you shut off however many, you know, thousands of

53:16 users So once you start doing that, that's why the duration was so long. because as long as the temperatures were so low, we couldn't get enough generation to turn everything back on. So that's

53:27 why they're called rotating outages. They basically rotate through the substations to keep the total load low enough that Urkhat would stay up. And the reason why people are saying, well, we

53:37 should have just risked it. Absolutely not. If we had an islanding event, which is where we actually take the entire grid down, it worked in '03 to get a backup after about five days. We don't

53:47 know how long it could have taken to get backup And the problem is that you have to go with Darkstart. There's a lot of things there that we've actually never tested for good reason. You can

53:57 simulate and model this, but we don't know what would happen. We don't know. It's bad wrong. It's bad wrong. We don't know if we could get the grid back within a month. And a lot of people say

54:07 that was a very dire prediction. No. So what Urkhat did was the self-preservation technique started shutting off load, just shut it off. And we'll have to deal with the consequences because it

54:18 could have been so much worse. and even significantly more costly to consumers. So it's kind of, that's really what it came down to. And people, Urkaw could have had a better communication

54:29 strategy. The basically load serving entities could have done a better job rotating people instead of keeping it out for 12 hours an hour here or there. That would have prevented problems. It's

54:40 just, it's a complicated scenario that people were doing the best they could and really unprecedented times. And unfortunately, people did die And that's one of the things that, why the state,

54:52 Public Utilities Commission, state Senate and House have had to work with the governor to try to prevent.

54:59 You can't have 100 reliable electrical grid. If you need 100 reliable electricity, you either need to spend the money and get Tesla powerwalls and photovoltaics or you need a gas generator. And

55:10 unfortunately, that's not a solution for everyone. So really what it boiled down to was really cold weather, way too much demand. We have a grid that doesn't have a lot of dispatchable resources.

55:22 Add all those in and you just have outages and rotating. And again, I don't want to come off as bashing wind, but I was going to, I think it's the FAA websites at the various airports. So I was

55:36 using Amarillo as a proxy for some wind. I was using South Texas, the big wind farm down there. There's a local airport near, because you get miles per hour of wind And I can't remember exactly my

55:49 statistics. So I'll sort of make this up, but it's close. I think during that four or five day period, there was only one eight hour block where wind was over 20 miles per hour in any of what I

56:03 was using as the proxies for wind. So I mean, and so, and I'm again, not bashing wind. It's just the nature of it. If the wind doesn't blow, it doesn't blow So we didn't have the wind resources.

56:16 The natural gas did not fire up. Nope - Because it wasn't designed to do that. The story I heard, and I don't know if this is true, but it's such a funny story. Well, it's not a funny story

56:29 'cause there were bad consequences of it, but the nuclear plant that had to shut down in South Texas because the sensor went out and it couldn't measure the water temperature, I heard there was an

56:41 engineer saying there, Guys, I'll put my hand in the water. I'll let you know when it's warm. Let's not shut this in, but they had to Well, and that's one of the, we won't go into this because

56:54 I could probably talk for four hours about, basically our idiocy across the world about turning away from nuclear generation. It's because of the rules from the Nuclear Regulatory Commission as to

57:04 how plants can operate. Nuke plants are fundamentally safe. Set aside Fukushima Daiishi, or I mean Chernobyl's a horrible example. Those are exceptionally rare, and nuclear energy is incredibly

57:18 safe. terawatts of power generated a year, no issues. I mean, there's less radioactive release from those in a banana. I mean, I know that's a bit of a hyperbolic statement, but they're very

57:28 safe. But because of that safety aspect, you have the sensor go out, you have any little thing go out, a plant's going to go down. And we were building reasonably safe, we're not going to save

57:39 with our modern design series, reasonably safe plants starting in the 60s and 70s, and then we just stopped. So a lot of our plants are old We have sensor issues, they're just complicated beast.

57:51 And so we've kind of turned a blind eye to that. And if you have a grid like ours where you have one unit go down at South Texas nuclear facility, that's a big issue when you're in the cold. And

58:03 because we only have one new plant, it's not like we have a lot of other base low generation that really would help make the additional renewable build make sense. I know that's a word you would say

58:15 it.

58:16 We're kind of missing that piece. We're missing either gas turbines, coal plants or nuke to really bring more renewables onto the grid. And I'm deeply skeptical of batteries as the magic solution -

58:28 Yeah. Have you heard Joe Rogan's take on nuclear - No, I have not - So Joe Rogan's take on nuclear, similar to yours, it's fundamentally safe. He says, The problems we had, you know, Three

58:40 Mile Island, Chernobyl. He goes, They were built in the 70s, you know, The 60s and 70s. And he goes, We fundamentally, as a world, sucked manufacturing in the 60s and 70s. Have you driven a

58:52 car from the 70s? They were horrible. So it's not nuclear per se, that's the issue. The issues we had is just, we were really bad at building stuff back then, that we wouldn't be bad at today -

59:04 Excellent example of how to operate a nuclear fleet without killing anyone, US Navy - Yeah. We've done it for almost 70 years now There's tons and tons of additional resources. I should say

59:16 engineering resources that make Nukeplant safe. Yeah, I'm not some nuclear evangelist. I don't have, you know, unlike a lot of people working renewables or batteries and things like that, I

59:27 don't have a dog in this fight. I'm just your average Texas consumer. I write, you know, power pricing models is part of my day to day. You know, I don't really care. Nuke is a good way to do

59:36 it. Nuke allows more renewables onto the grid. And that's why you've seen a lot of people fighting like in California to keep Diablo Canyon open, which is a huge Nuke plants on the beach. It's

59:46 really pretty. Go Google it if you haven't seen it before. A lot of people pushing to keep things like that open because we've slept walked into this crisis. You know, we have a huge drought going

59:57 on in the Western United States right now. That's a problem. A lot of the Western grid is hydro. So we've kind of moved to this point where we've increased load. We haven't really increased our

1:00:08 investment in fundamentally what we need to keep the lights on and the solution of conservation doesn't work. If it's hot, I'm sorry, people need to be able to stay cool. We need to be able to

1:00:20 keep our computers running, our economy running, so on and so forth. Asking people just to cut back is not going to keep us safe. It's not going to keep us lit. We can definitely do a little bit

1:00:30 of that with technology, but not in a big way. Everybody wants their iPhone. No, and even worse, at the end of the day,

1:00:39 how do you tell a nursing home that we need to cut power consumption 30? He kills elderly. It's a lot of simple things like that that when you sit down and think about it, we do not have the

1:00:50 capacity to cut 25 to meet whatever target. I promise I won't get on the soapbox, but let's even step that up to how do we tell Africa that? We're getting to live over here with MTV and Coke and

1:01:04 all that sort of stuff, but you guys. We've gotten ours. You go to hell, essentially. It's not a good strategy Unfortunately, a lot of the bluster in talk. is not engineering based or practical

1:01:19 based as how do we keep the lights on? How do we do it for the least marginal production cost the cheapest way to do it? It's more we need this, you know, we're shoving a round peg into a square

1:01:28 hole. We need renewable. You don't just randomly add it and expect everything to stay fine. So that's really where we are. We're having another low wind performance day even though it's not quite

1:01:40 as hot. So we're probably going to have some conservation awards That's just kind of our reality now. Yeah, the two things I'll close on. Colin and I were talking about nuclear probably three or

1:01:52 four months ago on the BDE show. And Colin said, you know, if we invented nuclear yesterday, we'd all be heralding that we'd solved it. You know, and it really is the baggage of the past. And

1:02:04 then Monday, yeah, we got bailed out because of the rain in central Texas. I mean, Central Texas averaged 80 instead of 110 'cause it

1:02:12 happened to rain - I can't ask farmers about depending on rain. It's not a good thing - No, and I'm, you know, if you're listening, I'm rubbing my face and head mostly because we got lucky.

1:02:24 We've been getting lucky. If you get a little bit of rain over big loads and you're like used to metal, instantaneously cut load, the problem is we keep patching it along, we keep not really

1:02:34 worrying about the market design. Oh, we're gonna end up with another winter stormy hurry Maybe this summer may not be for another five, 10 years. And it's not necessarily saying it'll be in the

1:02:42 winter. Good thing is we have rotating out just this time of year and only be a couple hours, things will be back. That's still not great if you have little kids at home or you have, again,

1:02:52 elderly, things that matter, produce so on and so forth, expecting everyone to basically either have battery backups, their own battery backups, their own localized generation. Just isn't the

1:03:03 solution. We kind of have reached a point where we need to sit down from Paul's Istanbul in say. How do we fix the market design to incentivize basically cooperative work between the renewables and

1:03:13 thermal instead of having renewables and thermal kind of on opposite ends of the generation spectrum? Yeah, you're absolutely right. Well, Campbell, you were really cool to come on. I appreciate

1:03:23 this a lot.

1:03:26 Like I was saying, I wish we could check politics at the door and actually have a thoughtful conversation because we're freaking Texans. We ought to be able to run a grid It's hot. We need to be

1:03:38 able to keep the lights on. That's the issue. Hopefully, I think the dialogue is changing and I think it will change because at the end of the day, it doesn't matter if you're a Democrat or a

1:03:49 Republican, your state representatives are catching help for good reason. They got to make sure that the Public Utilities Commission steps on top of our cut and make sure they're doing their job.

1:03:57 And I really do think that we'll find a solution to it and it'll probably be our own solution, which I like better anyway.