Chuck Yates Needs A Job

0:21 So, the thing you said the other day, 'cause we, I don't think we had met. I mean, the problem with - No, no, you've been blowing me off. You've been ignoring me for like a year and a half. I

0:29 thought you didn't like me. Well, I finally get to be on the famous Chuck Show. God, you should aspire to so much more. But anyway, the, yeah, part of the problem being a 56 year old

0:43 degenerate alcoholic, 'cause I can't remember who I've met and who I haven't met. But we met the other day and we were sitting there talking and you said something and I wanna know if this is

0:52 actually true. You said that basically within two to three years theoretically solar could overtake, solar batteries could overtake the whole grid. All right, well, let's ask. So break that down.

1:04 I got my little factoids for you. 'Cause I knew you were gonna ask this. Okay, so you like to gas stuff, right? Yeah. You've done gas before, right? Okay. I eat Mexican food. And gas goes

1:16 into a lot of things And one of the things it goes into is power plants. So we have our gas gen fleet in the US. Right. How big is it? I don't know. You don't know? No. But you have fit your

1:27 whole life in gas. How big, this is like your core customer. How big is it? Dude, they kicked me out of the club, I forgot all of that stuff. 500. Now I just blow V8. 500 gigs. Okay, so

1:38 we've got 500 gigs, all right? Yeah, maybe 450, somewhere they're about. It used to be a little bit lower. It's plus or minus 40 of the power gen. Right, so we're like one, three gigs now in

1:49 the US Now, this is capacity, that's not energy, right? So we're gonna, we'll work in both numbers. Let's just make sure we work in common stuff, right? So, how much capacity to manufacture

2:03 solar cells? Actually, let's go, what do you think renewables are at in the US right now? If gas is 500 gigs, where's renewables? So, I mean, it's, isn't it basically gases, 400 coal or 40

2:18 Kohl's call it.

2:20 30, 35, and then renewables are what, 20, 25, depending on - So now you're thinking energy. Those numbers are closer for energy, but let's start with capacity and then we'll work down to energy,

2:31 right? Just so we've got a common lexicon here, so. So they're like, I just looked it up, they're like 350 gigs of renewables on the US. grid. Now, when I started, that was like 35 gigs,

2:47 except it wasn't a gig It was hundreds of megawatts. It was nothing. It was waterfalls, basically. Yeah, basically, right. And for the longest time, there was renewables, hydro, and then

2:58 non-hydro renewables, because the hydro number swamped, everything. Now we just call it all renewables, because well, frankly, the solar and wind got bigger. Okay, so gas in the last decade

3:10 and a half, plus or minus, yeah,

3:14 wind and solar went from basically zilch they had some, but it was close enough to zilch for us energy people to consider it zilch to 350 gigs, right? Just in the US. Okay. Gas went from like 350,

3:28 400 gigs up to 500 gigs. It's grown a little bit. Now capacity factor, solar capacity factor, like 24 or something, 23. There's something low mid 20s, right? We can get it a little bit higher.

3:40 The sun actually sets. Right. So 24 hours, one quarter, you get, you get four or six hours a day. Yeah, some of it better than others. Right. The wind capacity factor, if I recall, and I'm

3:51 not speaking from memory, this may be maybe off somewhere in the mid 30s. Yeah. So is the gas fleet. Because a bunch of that gas speakers and stuff doesn't run, right? The newest, best, most

4:04 efficient, combined cycle, right? No, those guys, you know, in the 60s, whatever. They really hide, you know, nukes, maybe in the, you know, I was looking up that three mile island thing.

4:14 Its last year of operation was like 90 something percent capacity.

4:19 Yeah, on its average over its history, it's like 70. Okay, so you still put this stuff in perspective. Yeah, so what that means. What was the last year that a three mile of generated? A few

4:29 years ago, I can't remember. 2019. Yeah, yeah, not that long ago. Now unit two has been shut since the meltdown. Right, right, half have been shut down for a while. But the plan is still

4:38 running until two thousand. Exactly, okay. I love that. But anyway. We'll go back to like this, is solar gonna take over the world. Renewables, but so, yeah, that were 500 gigs, 350

4:50 renewables. Now, here's the fun factoid. Now, how much batteries? 'Cause the other thing that's chewing gas is batteries to basically go after the peak of business. Yeah, and this was about 10,

5:01 12, 15 years ago, AES energy storage, which created the energy storage market grid scales, we know, if they invented it. Yeah, and if you have not had Chris Shelton on the show, you have to

5:10 have Chris Shelton on. He is literally the granddaddy inventor of that sector. And - Chris, standing invite to come on Yes, Chris, you should come on and meet Chuck. There you go. So back then,

5:21 you know, they doing all these power projects, AKA, they got a power plant site, and this power plant site is, you know, burning thermal in order to keep some spinning reserve. And the

5:31 thermal's just going down the drain. So you don't need it, just need to spin and reserve on that particular grid, that particular location, whatever. And so what they figured out is there are

5:39 places where you're burning that thermal, and you only need eight hours a year worth of, or some very small amount worth of actual energy delivered So yeah, but you gotta have that power there,

5:48 and so you could do that with batteries, and they could pencil like a bandit. And when everybody else was just screwing around, pretending that storage was coming in the future when a new

5:56 technology, they took off shelf batteries, off shelf boxes, wired 'em up, put some inverters on 'em, yeah, and started making money and created the industry. So, and back then, their first

6:06 projects were in the 20, the tens of megawatts, okay. And then they had a couple of projects they bid, and they said, we're just gonna replace a whole, hundreds of megawatts of gas speakers,

6:16 the whole thing.

6:18 that that'll never happen. Batteries too expensive, they won't last long enough. It's like, no, no, it's gonna happen. Those projects didn't go. The

6:26 numbers weren't there, it was too young, but they are now. So now, every battery guy in the US. is basically got the gas-peaker guys in their sights. 'Cause those gas-peaker's real-oke,

6:38 fast-fetched, real expensive to run marginally. And the battery's 90 odd percent efficient. You can buy, power it, you know, cheap to negative to whatever and flip it And you get paid on your

6:49 few hours a year, so although all the money's in a few hours on the power capacity, but it's coming. So how many batteries do you think are on the US. grid right now? And that grid scale one's

6:59 not little ones in my cell phone Bye!

7:05 10 megawatts. About 30 by the end of the year. Really? Yeah. The gigawatts. Gigawatts. Sorry. And adding at the clip of, you know, 20, 30 a year capability. Now, this is still young. So

7:18 we're talking a few percent of the, so we're like, so solar or renewables broadly, what's a bunch of wind, but we'll just lump them together for this tiny little exercise, renewables at 70 of

7:30 nameplate of the entire US. gas fleet. Yeah, storage at, you know, seven percent. But if you put storage compared to peakers, I don't know, twice, two, three times that, like, because

7:46 that's who it's really competing with. Yeah, and then capacity factor for wind and gas on average, very similar. But that hides the fact that, you know, some wind plants don't do well, some do

7:59 really well, some gas plants you want to run, because they're efficient, some gas plants you don't. but this all happened for economics. This wasn't true X number of years ago. It's the battery

8:09 and the solar, once the solar plant's on, it's going to run. Yeah, so we're going to answer your question. We're just going to really long. Yeah, no. So, but let's give that. So the first

8:19 part of your question was like, what's, you know, is it really going to displace? Well, what happens when you put, yeah, a 400 megawatt solar farm on the line? In the loading order, its

8:31 marginal cost is zero Right. It is an always run resource. If you, if it can run, it runs. You always take it first.

8:43 Wind, same way, marginal cost, pretty close to zero. There's, oh, an amp, so you don't really count it that way, but it's the marginal cost, pretty close, yeah. Periodically, but not much.

8:54 Right, so when it's on, it always runs. So what these look like, if you're an EP guy, and I did this big massive study on this topic Conoco Phillips in 2012 told them by 2017, their world was

9:05 changing. They did not believe me. Yeah, but they got white in the face when I walked them through it. Yeah. You know how to do an RP ratio, right? 'Cause like all these little EMP guys, they

9:15 can, yeah, right? I remember my little RP ratio things from back when I was in oil and gas stuff, 25 years ago. So imagine that you have a production stream that is always on and always runs.

9:30 'Cause this is gas Who's gonna get that build if it wasn't the solar plant? It's gonna be another gas, a common cycle, right? And then that, well, who's gonna feed that? Well, somebody's gonna

9:39 have to go drill some wells and stick 'em in the pipes, do the little

9:42 gathering system, get the gas over there. And so on the other end of that gas plant, there is a production that I need right now, and there is an RP against it, right? There's a resource and a

9:52 reserve against it. You can kind of model it the same way. What happens when a solar plant comes online, unlike a gas plant which will only run if it can win. and be bid into that market if the

10:04 pricing makes sense. And sometimes it's pricing isn't good enough. Solar farm always runs. So that solar farm takes away all future gas production that the gas plant it was going, it replaced was

10:19 going to need. So it's essentially a demand - Yeah, I'm planning so far, I'm phoned. And I forget the conversion factors in my head, but this is what I did for COP back then, I'm like, look,

10:31 if you just add this stuff up, convert it to a BCF or MCF Day type number, and then capitalize it at the RP of a major, essentially we're building a whole bunch of new majors that the oil field

10:48 doesn't even realize you're getting built because like, you, you're in this business and you don't even think about how much gas on the gas fleet there is It just doesn't matter. It's like this

10:59 production business. Um, you'd think about, okay, was there a new LNG thing come online is going to suck down some volume and, and ship it to Europe, but really what we've been doing is building

11:10 new shells and conical Phillips, like every year or so for the last decade.

11:15 All that reserve is now sitting in those solar cells. So this is important because it has created a massive amount of demand destruction. So why is gas cheap today? It's because this in a list, in

11:27 a last, it curves, right? You know, you got big changes in volume versus change in price and all this, all this little microeconomic stuff. So we're in a world where we have created a new

11:36 substitute in a supply-demand curve that's got a bunch of inelasticities in it. So small changes in volume, big changes in price, and we are removing incrementally faster and faster changes in

11:49 volume that gas was going to get. And so that's why Henry Hub, not high. Henry Hub should be 20 bucks If we had to handle all the volume we've brought online, over the last 15 years,

12:04 350 gigs plus those batteries with just a gas fleet 'cause nothing else was gonna get it. Cole wasn't gonna get that. We couldn't bring enough nukes online to handle all that in that timeframe. So

12:13 that was gonna go to gas. So all that marginal, it's gone, right? Imagine what the price of gas would be today if those renewables didn't exist. Yeah, so then how much more can we have? Are we

12:29 done? Well, the wind, we may be done. Yeah, there's only, wind is a, we're in the, what I used to call the challenged resource layer of wind. You know, it's like back in the day when we

12:39 called it challenged resources. I don't remember when that term stopped, you'd probably know the, yeah. All right, we got our cheap wells and so these resources, they're just natively more

12:49 expensive. We're drilling into more expensive layers every decade. Yeah, and there's no more4 lifting costs, you know, what it feels out there. Yeah, so wind's done the same thing. The first

13:03 places you build a wind farm are the good ones. Really high wind speeds, that sort of thing. The more you move down into slightly more marginal resources or things that are farther out, gotta

13:13 build the economics aren't as good. So wind has actually been coming down a very aggressive cost curve on the cost, on the price it hasn't because we've been coming down a cost curve and moving into

13:24 challenge resources. Kind of like the Permian, right? You know, we've been getting cheaper and cheaper and cheaper doesn't mean the overall cost structure is that much cheaper because the resource

13:33 might be get harder, you've done the easy ones. Well, wins has seen that in steroids and has hidden the fast that it has come gotten cheaper just on a linear curve. Solar is different. Solar and

13:44 battery has been coming down on an exponential curve. When I got in this business 40, 50 cents a kilowatt hour, wholesale at plant gate for solar was like good, right? today. You and I want to

13:58 do too. We could. Yeah. Is that what's averaging now? No, 'cause labor costs gone up, the farmers selling their land, dear, cost of capital is a little higher. So the clearing price for solar

14:10 these days may be in the fours, high threes, high fours somewhere in there. Cost structure probably still in the twos to threes, a lot of fat and margin in that business now, that there wasn't a

14:22 couple of years ago. So that's why this stuff goes on, because gas struggles to compete at any price much higher than where it is today, whose price has been held down because all these renewables

14:34 have been taken demand that gas was gonna get out of there. And once that solar farm goes on, it permanently destroys three decades of production. For it, and since energy's regional, right, you

14:48 throw all that on in Texas, this Texas gas that's getting future displaced. Now we can offset that and we have building LNG and shipping it to Europeans and Korea and Japan. And that works. But of

15:02 course, what's the landed price for LNG in Spain or Germany or whatever? What do we at right now? I would guess, because it trades off more an oil price than it does, you know, because the local

15:15 market here, right, is whatever you can get in a pipeline. Right. Once you put it on the water and liquid form, it trades off oil type prices So I'm going to guess it's like 18 or 20. Am I wrong?

15:30 I don't know. It's just those are very high numbers. Yeah. Right. And so all of our customers overseas, they pay in really rich prices for power. And yeah, but let's say you could get down to

15:41 six, right? It's a three or four times, you know, sitting in a well head. I don't know what the right long term ratio is there because you said it's all about the transportation and differentials

15:53 and all and all that. But it's expensive. So we have been hiding the fact that solar, not necessarily wind has been holding its own.

16:05 Solar has been eating everybody's lunch, but it'd been hidden by the fact that we had a whole new export market that never existed before, that kind of has held up some demand. But of course, that

16:12 export market's chunky, 'cause you gotta have the terminal, right? It comes on as a big one. You just can't add a few bucks of incremental capacity in LNG easily to ship overseas. It's an

16:23 infrastructure thing. So I'm buying off on all this, but keep going One factor, I didn't want you to comment, okay. How much capacity,

16:35 so remember, we had 350 total in the US today, entire US grid, 1, 300 gigawatts. How much capacity, new solar cells coming off the line in the world today exist this coming year? No idea. 1,

16:54 500 gigawatts. That's worldwide worldwide. 80 in China. We don't see it over here because what's happened is all that gas that was supposed to go to China back when I was talking about this stuff

17:08 that Cello doesn't years ago, China not taken because they've been busy destroying demand over there in the core growth market for gas. So what do you think happens when they're full? They ship it

17:19 over here. Right now, we're putting on I think three, 400 gigs a year of solar. Like 15, headed really within like 12, 24 months, 1500 gigs or so of capacity. So what do you think happens when

17:35 the plants are only at 30, 40 capacity? They cut price and they sell, sell, sell, sell, sell. So that's what's coming, which means the globe today can rebuild a US power grid by capacity.

17:48 We'll get the energy in a second. A US power grid every 10 months right now. And the manufacturing capacity keeps growing. All right, 13. So that's, that's Asian L and. We just like taking

18:02 money away from European and Asian customers. That doesn't seem very nice of us. Well, well, that's why we put a ban in place, or a stance still in place so that we can't do that anymore. That

18:14 seems unfair. I mean, look, we have the best renewable resources in the world. And not just we being America, we being Texas. This is like, this is the Saudi of renewables We have a combination

18:30 of solar, wind, biomass, et cetera, whatever way you want to count. That is just bigger and better than almost, we're unique. It overlays the shale, actually. It does. If you look at a map,

18:42 Colin and I've made that point numerous times on here. So, and if you look at the, whereas the best wind in the world, it's the great place. Yeah, it's kind of the panhandle. It's all the way

18:53 from Texas to Canada. Like, we're just, we are unique. There's no real reason that gas people and renewables people should fight, except that they feel like getting in a fight. They just, where

19:07 the well has been poisoned, so now we just shoot at each other for no good reason. So I'll buy off on your arm. Question I

19:14 have first, and then we'll get to forward, but just historically, did we get there though? Because in effect, the US tax code just subsidized that. No. That's bullshit. No The US was never

19:29 been the big customer until recently, until the cost curve came down. But I used to always, and I was always an oil and gas guy, so this would be third hand that I would get the deal. But the

19:40 deal was always we build wind, we build solar, and through tax credits, we get our money back. Okay, you're talking about 15 year old data. So here's what happened, right? There was a point in

19:52 time where everything, Um, we probably ought to separate wind and solar wind is a, you almost.

20:00 It's not a uniquely American thing, but we're a much bigger portion of that market than we were of, we have been of solar. So you got to kind of look at them a little separately, and they have

20:07 different tax basis things. So back originally in the day, like 25 years ago, the solar market was American. We invented it. It was Sun Power and First Solar, which started in money DOE, '80s

20:17 the, you know, like, well, 20 years to get this stuff built and, yeah, astral power. There are a bunch of really good names I was really pissed off that I wasn't chosen as an underwriter

20:28 forever green solar. Well, that ribbon stuff was quite cool. Didn't ever get really big. That

20:36 was one of those techniques that could improve. Do you remember the CEO's name? I blanked on this. It's a good question. I should know that. I should know that deal. We pitched that and we

20:46 didn't get it. So, yeah, that was one of the good. So, you actually invented this industry Right. Yeah. And that's just fantastic. Great. And then we had our little. our little. little tax

20:58 stuff, but it wasn't very big this way back in the day, as what was carrying the whole industry was wraps, remote area power. Yeah. Yeah. And these were street signs at your ranch, you know,

21:08 like out in the oil, oil fields, a big player in a very small market at the time. There was no grid link to anything. It made no sense. And BP was a major player. So the Japanese, BP and Shell

21:22 were, BP was the biggest. They had best distribution network in the world. Well, then the Japanese came on and the Japanese put in some, yeah, some subsidies in Japan. And that held up the

21:35 industry for like early late 90s to early 2000s. It was all Japan. It was the lion sure of the world. Kia, Sarah's sharp, the big top tier player. These were the big names, right? And so then

21:49 what happened, I want to say is about 2003 for the Japanese subsidy Maybe it was a one. Actually, probably then because that's when I started working on this about a one. The Japanese subsidies

21:59 were in decline. Like they basically were designed to tail off after the industry had been built. All right, fine. US just didn't, there wasn't much money. Our market was medium-ish, but we

22:08 were 20 they were 80 or something on that order. Yeah, so the Japanese manufacturers were like, shit, we're gonna die. Our market is now basically saturated because this is back when it's still

22:21 like like a kilowatt hour. I mean, it's just, you know, 10, 20 a watt all. And it was expensive Yeah. And so they'd soak down all the Japanese subsidies. They need to keep their plants full.

22:31 So they started looking for new markets. There were two markets they were looking at. You're up in the US. So they started coming over here and offering prices that nobody'd seen. And so that kind

22:41 of helped kickstart the next generation. So then we have three things. We have the US. ITC. And I'm struggling to remember kind of the, what years that changed. But that was always about a 30.

22:55 It just didn't matter. And then we had the US renewable portfolio standards, which are not subsidies, they're quotas. So let's differentiate the policy. And then we had the German feed-in tariff.

23:08 Now, the ITC in the US wasn't enough. It was, and it's complicated and clunky and a pain in the neck. And the RPS is what broke wind and solar opened. The ITC and the PTC helped pay for some of

23:22 it. But the RPS was the quota like, look, this state, and it was state level, not federal. A state would say, y'all must put on this much renewables. How are we gonna get it? So you told,

23:33 all right, utilities allowed a rate basis 'cause utilities, customers, the PUC, not UNI. And so their PUC, it's like, state spoken, we're supposed to go put this stuff on, go figure out how.

23:43 Yeah, and so then dawned to me now, I wanna say it's about 0304, about your evergreen solar top, those time frames. And I become a big deal like Rogan, we'll have a fact. checker in here. We

23:53 need a fact checker. That would be looking things up. And if I weren't so fundamentally lazy, I'd be looking at it as you talking, but I'm being directionally right. My factoids are close enough

24:03 for government work, right? Yes, exactly. Yeah, so the RPSs got so

24:11 profligate, if you will, that there was like 30 odd states or so. It wasn't everywhere, but it was enough RPSs, states with RPSs, that if you won all those states in the electoral college,

24:25 you're gonna be president. And that was the point when I'm like, oh, this sum, or you can kind of overlay it with GDP, or like, okay, this is hit a critical mass. And it's not like the ITC,

24:35 which was always under threat to get canceled or the PTC, these state things tend not to go away. And if one goes away, script will just sell the next state. So it had some of this critical,

24:44 that's what really got the US under its belt, is we had the RPSs and the Japanese guys bring it down cost because. had more capacity than that their local market could handle. Then the German

24:55 feed-in tariff hits, and this is what made the world. The German feed-in tariff was like 30, 40 cents a kilow an hour. Germans, if you could put solar on there, you could sell it. You just got

25:06 paid bank. It was way too rich. And then all the Europeans started to copy the German feed-in tariff. And now the big market emerges. So the US is still not a great market. At this time, the

25:18 Chinese enter. And so we had the BP's, we had the shells, we had a bunch of Kiasara, you know, the sharp, really good companies, great products and all that. But the man, they were not pure

25:31 place. They were divisions of big organizations. They got to go fight for capital. And the big organizations are like, oh, this is all like subsidized government stuff. It's just not going to

25:41 last. I won't invest. And we had run out of silicon

25:47 So the venture capital aside, let's make thin film. It's turned out to be. basically a cul-de-sac, 'cause what we didn't, we had plenty of silicon, it's sand, right? It's just, we can get the

25:57 resource. What we didn't have was refining capacity and wafer capacity, because no refining person was stupid enough to go build this big plant with no take or pay. And so the big companies, and

26:12 BP Solar and all these guys, they're like, I'm not going to go give you a 10 year take or pay guarantee on your new plant thing, because like, no, right? The market may not be there. And then a

26:24 bunch of new Chinese upstarts backed by a bunch of Chinese government money and Chinese policies said,

26:30 I will guarantee you 10 years of supply for that. Why not? I'll just go out of business if the market disappears. So they were pure plays. They were kind of judgment proof, right? So they stole

26:44 share in months and quarters, massive shares share, all to sell to the Germans. For Solar, one of the champion American companies, making thin films, CAD and Teleprog, really neat product,

26:57 help create the whole market. They help create the utility scale market. They go public basically selling all their supply into Europe at a very low cost, and they promised our prices for our

27:10 modules every year for the next five years in our contracts and they'll pull that S1, we'll get cheaper every year. Roll 24 months forward, if they do not hit their own cost down target, they're

27:20 gross margin negative within like 18 months. But they did, and they knew we got a scale, right? So this is what launched the sector, yeah? The ITC in the US has helped keep the US in the game,

27:35 but it wasn't, it was never been the big one globally. Well, then what happened is we now have this renewable energy push, the RPSs are kind of, you know, proliferating, you know, the

27:47 utilities are getting used, you know, excited We're seeing bigger and bigger projects. And now all these Chinese solar manufacturers, they need to dump product. 'Cause everyone's in these markets,

27:59 they build capacity in front of demand. And then they, oh, we have too much capacity, we got to sell. So this capacity demand, yin yang, is what tends to create the price opportunities. For a

28:11 short period there, even at one point, prices were going up. You see the cost curve, and

28:17 then what was happening, the costs underneath were still falling, but we had some artificial supply chain kinks. Do you think about it? It's like production through refining. There are, you can

28:28 find some capacity limiting things where somebody's making more margin here than this guy here, and then that'll shift as capacities unlock. We were seeing the same thing in solar. Yeah, and then

28:38 all of a sudden these prices drop back down and you see explosion in demand. We then had a messiness in the US market because on when we have the PTC and the PTC was

29:46 in the construction started, so you could go do this thing, so you'd have, then you'd have these big bursts of like, oh, pricing on turbines is high, you can't get them for 24 months, right?

29:54 Because they were trying to get in to meet this government program thing. Now, arguably the costs were coming down enough that the industry may not have grown quite as fast, but it was already

30:04 competitive, and our subsidies lasted too long. Arguably today, yeah, we don't need any subsidies, we frankly don't. And you don't actually get all the subsidy, 'cause by the time you do all

30:14 the tax structuring and all that stuff, it costs you money to deal with the government. Yeah, so there was a crossover point. So we didn't look at, when I was underwriting in our firm, we didn't

30:23 look at subsidized price market by market. That obviously told you where you wanted to go sell. We looked at cost, raw, unsubsidized cost, 'cause we were interested in when cost curves crossed

30:36 and where, and then about 2012, a bunch of the solar companies, Canadian Solar is the one that I used to use their stuff on They started publishing. these cost curves of unsubsidized, where the

30:48 LCOE is cheaper thans, for solar in which markets, 'cause energy's regional, global market, but everything's always hyper-regional, solar is the same way. There'd be places where, okay, I can

31:00 make money on solar farm here, but not over here, because power wholesale, power price higher there, cost structure lower, yeah, a lot of good solar resource And so you'd see in its best markets

31:15 by about 2015, solar was cheaper than gas, but only in its best. It's average, it's still. And then you'd see the cost structure of wind and solar with per unit per watt, they'd be like 50 delta

31:29 from the bottom to the top. So when you say cost structure in that moment, 2015, that's not dispatchable versus solar. Correct, we're not yet at dispatch. Like yes, let's - Okay, I gotcha.

31:43 'Cause we're walking down a curve towards the ultimate. If I generate the electricity, it's cheaper, got it. Correct,

31:54 yeah, so we'll get what the world needs is cheap, green, dispatchable, firm power. Right. Right, that's what it needs, right? Or cheap, clean, I should say, green's the wrong term there Um,

32:10 what it has, 'cause this is energy, everything's a mess. What it has is a lot of awesome resources capable of doing really good things, but they can't do other people's jobs. You know, gas will

32:22 give you to statuability, but it comes with a marginal cost and it comes with volatility and feedstock price and other stuff, right? Yeah, so each of these resources is good at what they're good

32:31 in. Some places the gas is cheap and it was poor Europeans, they gotta buy from us at 13. Yeah And so you got these loading order concepts. that are very regional and even hyper-regional, because

32:44 nodal pricing, you make money on a gas plant on this side of one node, but not on this side, just because there's congestion on the grid, right? So there's a very rich, interesting environment.

32:57 So that's why we started to try and unpack and look at, all right, where does, if I go put a solar plant on now, is this LCOE cheaper, the one where I can bid and not lose money, cheaper than

33:10 the marginal gas. And more accurately, the next gas plant, 'cause a lot of these gas plants been paid for, they're depreciations there. Some of them have cheap gas contracts, some of them don't.

33:22 So these, the next marginal plant that I have to go then buy gas, build, new construct and build and buy gas for. Oh, and by the way, why don't you just run the forward curve on that? Because

33:35 I'm gonna, my plant model is a forward model, not a backward looking model. And then by the way, how good is that forward curve? What if I want to give you a firm price, right? Have you ever

33:48 tried hedging gas out for 10 years? It gets a little dicey after about 18 months, two years. The traders laugh at you. They make like, I used to, when I was at Shell, like we had a really

34:00 awesome trading desk and you know, like trade anything. I was watching, there was literally trading power congestion. They, they were good. They were really good structures And I have this

34:09 conversation like, how long can I get a hedge for? If I just want firm price, I don't want any price volatility. And how prices get, well, you want to go out 10 years, you got to triple your

34:21 gas price. Like go, go to, go to Germany and say, I would like a guaranteed gas price until 2045. What's the price? It's not 13. Yeah. Right? Solar and wind come with a multi-decade hedge

34:37 built in in that price. The market doesn't always value that, but sometimes it does. So they don't come with dispatchability, but they do come with a hedge. So it's unfair just to kind of rip out

34:51 and say and penalize them for one and not give them credit for the other, just like it's not fair to penalize gas for its volatility and not give it credit for its firmness when you're in this power

34:60 business. So you have these, and our grid is a mix. There are no pure play grids It's not very few pure play grids of any power sort and they're, and they don't need to be. These things work well

35:13 together. So somewhere in this 2015 to send, what we said in 2012 to Conoco was by 2017, the curves will cross in a decent chunk of markets, solar and possibly wind will be fundamentally cheaper

35:28 than gas and they will never look back And then over the next decade, they're going to destroy a massive amount, like world scale

35:38 gas. They're taking gas as best customers. Yeah, it turns out LNG and other markets created a new best customer. And AI is now creating a data center. It's now creating another new best customer

35:50 for gas. So the world keeps moving on. But this has hidden the fact that since 2017, we no longer call it alternative energy. We only did that because it was more expensive than conventional.

35:60 Yeah, now we just call it renewables for solar and it's cheaper. And when you can put solar on the grid, you do and it wins because it's cheaper. Then you solve the shoulder problem of, okay,

36:12 what do I do when the sun isn't shining or the wind isn't blowing? But if you go back in about 2008 or so, in rail, put out a study on, well, what's it cost to gridside firm up all these

36:24 renewables? I've got to go do it with basically change TD stuff so that I can move gas or hydro or something else in mix and match. And they're like, it's, I think it was half to one and a half

36:38 It's expensive, but it's not massive expensive. It's well inside, so the price to firm renewables was getting down to where it was well cheaper than the hedge on gas to go long. This is when the

36:52 world started to get interesting, but we've been in Texas, gas people don't believe it. They honestly just don't believe it's happening. They don't believe the cost curve. They think it's fake.

37:03 And renewable people think all the gas guys should go out of business because they're evil, spawn of the devil, destroy in the world. And so the two worlds don't talk. And so it's like the

37:13 communication's not happening, but the industry marches on. So for a while there, each of these subsidies or quota programs, whatever, played a role in catalyzing demand. For a while there,

37:27 we'd have these insane prices and then we'd have these yen yangs as capacity, 'cause this is like more like semiconductor like, or refining. where you have capacity versus demand, changing

37:41 marginal cost or price structures all over the place. So it's easier to more understand solar if you think about it as a refining business. Yeah, almost than an EP business. But it has elements of

37:53 both because to get those farms, you gotta go send out the land man, get control of something that's under transmission line. And it's good, the site matters. The rock matters and the Permian,

38:03 the site and the transmission are the dominant variable in solar and wind with wind, you have an extra dominant variable if I need transmission and I need the wind blowing hard and fast in that

38:13 location, right? These are, these industries are not as different as we pretend they are. So after all of that, it may not matter how we got here, we got to the point where solar is not only

38:27 cheap, but it was cheap, but it wasn't yet at real scale. And since we're still just talking power, not energy, yeah. It's not cheap at primary energy scale yet because that lags, yeah, you

38:42 can kind of think of, yeah, if you look at those capacity factor differences, take capacity, double it, and that'll have it whichever way you wanna go, and that gives you a feeling for the

38:52 relative bit. So when I say 1500

38:56 gigawatts of capacity, really that's the equivalent of say 750 gigawatts of energy capacity, yeah, compared to the gas fleet 'Cause that next gas fleet will be two, three times higher capacity

39:09 factor if you added it all in gas. So that's why you square the circle. So we could say, yeah, we can't rebuild the US grid. We can rebuild the US grid by power in 10 months. By energy, it's

39:19 gonna take us two years. But that's still only two years. Yeah. So one, I need to go research willing to take you at your word, but I need to go research the tech stuff. 'Cause it's just, I got

39:34 so many deals that were basically paid back through tax credits if we just build the thing. So yeah, I get it at that point, your marginal cost is zero, right? 'Cause the wind blows and the sun

39:49 shines and it creates power and all that. If you turn off all subsidies for all energy right now, nothing really changes. We're still going to add as much solar as we can put on 'cause it's cheaper.

40:02 We are going to still gonna have a problem firming 'cause you always thought that's why we had gas speakers. So now we're gonna add as many batteries as you can. Then we will shoulder that and

40:11 they'll take the next chunk of the shoulder. Then we'll take the rest of it with gas or hydro, whatever we need to firm it up. We still are having AI demand creating new pull, new demand and

40:21 electrons in OECD that has not happened in my lifetime. So it's creating a full employment act. There's probably almost no transmission and maybe no power or energy project In America that would not

40:34 pencil right now, you just build it all.

40:38 Yeah, so that's how big this demand growth is. So that's covering a lot of stuff. But we are beyond the point where the subsidy or the tax matters. I would be happy if it just went away 'cause I

40:46 think it's coming up the market. Yeah, I think it's, yeah, there was a point in time where solar did not make sense without some help. Yeah, the German feed-in tariff was the one that put it on

40:58 the map because that was, okay, I can make an electron for 20 cents and the government will make you buy them for 40, right? The ITC, you're only getting a third back. It's good, but until you

41:11 can get cheap anyway, it's not great. The real challenge is solar tends to be, and renewables tend to be a cost to capital business because marginal cost, right? You got to buy no fuel, all my

41:24 costs is capitalized, and then I uncapitalize, I got to pay rent on my money. So the interest rate is what it's really sensitive to. Yeah, and that's somewhat akin to the EP world, right? Your

41:36 cost to capital has mattered for that over time. We talked on that, that in effect renewals really just to call on low interest rates, you know. Yeah, so they're hurting right now because

41:46 interest rates are high. When you could secure 2 debt, it made a lot of things work. Correct, right, and so the industry is having to learn, oh, you don't get free money. Okay, now some of

41:57 these projects don't make sense Yeah, but it's also having to figure out how to build the incremental one. And right now, like the data center people, they're gonna pay any price to get power,

42:09 they need it. They're, they make so much money off that power.

42:14 They almost don't, what's another penny or two per kilowatt hour on a data center in AI today? Yeah, there will come a time when they need to penny pinch again. There was a time when they were

42:24 real cheap. Next few years may not be that time Before we go there, 'cause I do want to get there, 'cause I think that's the topic. But one more quote. Okay, go ahead. So how many batteries do

42:37 you think get manufactured a year, say next year? What's the capacity? Same? No idea. Like 8, 000 gigawatt hours a year. Enough to take every one of those solar modules, build the whole US.

42:47 grid and store every single electron for like four, five, six hours each year. And I can do that in one year, which means over the next decade and a half, we can rebuild with just solar and

42:60 storage the entire world grid and double it. Okay. Then say we're going to, but we can. Okay, so we can butt and I want to fill in the butt and hear your take on transmission 'cause I don't get

43:14 to, you know, put the solar on top of my roof. I kind of go out, I got to go out where the shale is out in West Texas and I got to have big old fancy power lines to get it to me 'cause I can't do

43:27 that in downtown Houston Agreed.

43:32 where I spend most of my time and have for a huge chunk of my career as this topic. Transmission, distribution, what we used to call the yellow iron in the middle, because we could see coming,

43:41 the solar panel is basically free. The battery module is basically free in the overall amortized economics of today. Yeah, people gonna sell you solar modules on Facebook for 19 to 24 cents right

43:55 now with the tariffs in the US. It's half of that in China. So they can ship it to the Saudis at 12 cents, right? The Saudis does not show up in the cost equation. Yeah, what shows up in the

44:05 cost equation are soft costs, delivery, labor, cost of capital, land, this is what's showing up now. So that's where we're all been attacking storms. Hail storms. So yeah, transmission

44:18 matters. And that's why the reason the solar is expensive right now to relative to say 24 months ago, part of its cost capital, part of it's because what the solar guys sent out their land bin,

44:30 and they didn't go looking for. resource and rock, and what can I, mineral rights, can I get my hands on? They went out looking for land under a transmission line. And wind, you had to have

44:44 places where good winds are, and then you got to go build a transmission to that. Solar and storage are different. Solar and storage, sun shines everywhere. The batteries can be put anywhere.

44:53 The question is, where is the congestion? And where is there a transmission line with capacity? Because I'm not waiting, I want to build it now So if you own land under a transmission line that

45:05 has excess capacity near a congestion point where there is value, your land just went up by 10x in value. The solar people will, hey, to get it. Now, solar people cannot make money on a small

45:17 farm. Yeah, so

45:21 cup one to two, three, 400 megawatts. That's the minimum for which the solar costs make sense. Well, you need about

45:29 five acres per megawatt That means you need like a thousand acres.

45:32 contiguous, flatish, under that transmission. Willing to not be used. Willing to not be used or sell to you. Right. And so, give an example of my sister. My sister owns a ranch in Tennessee.

45:48 She lives up there, and we own a number of ranches. She has one that happens to have a transmission line across. And she sent me some just snapshots. People trying to buy her stuff sometimes

45:58 entertains me and her And

46:01 some guy was like, you know, 13, five for your land or1, 300 a year forever in rent. This is cattle land. And I'm like, Becca, sell. And she's like, No. And I'm like, Becca, just buy

46:16 three more ranches. That's like way more than your land is worse. She says, I know, but where am I gonna goget 700 contiguous acres in this countyright down the road from my housethat I feel like

46:26 running cattle? And then I'm gonna have to move the cattle and I'll say, this is a pain. Well, the solar dude. they can't aggregate a plant. So when they see a big parcel, this is not like the

46:36 Permian land man where it's all subsurface. I got to get the surface rights to all of this. So that has proven to be an interesting conundrum. I think the land is four times what it should be right

46:48 now. Yeah, 1, 300 an acre per year for 30 years guaranteed with an escalator? Just do the NP, that's an insane price for this land. Yeah, screw the cow Screw the cow, but my sister won't

47:03 'cause she wants the cows and she doesn't want it on her property and she doesn't have to. So we're seeing some weird kinks. Now, we could fix that by just green lighting transmission everywhere,

47:17 yeah, but we don't because who does the transmission, PUCs, that's who signs off on it who pays for it, it's rate-based utilities. And those people are destroying our ability to have nice things

47:28 Frankly, the only thing protecting gas are dumb PUCs and lines companies that won't build transmission. If they unlocked that, and then building codes on, yeah, that make it expensive to put it

47:43 on rooftops for no reason, except cities have annoying building codes and expensive permitting people, you remove that, gas is in pain, at least in the US. And other markets where the resource in

47:53 is good, they'll just chip our gas to them. Yeah, but that's what we were absolutely right. That is the critical factor. Now, we need more transmission. I founded a company 15 years ago called

48:04 Smartwires, whose sole job in life was to make virtual transmission capacity. We were making basically the fishery body for the transmission grid. Yeah, and it works. It does not sell in the US

48:16 because the US utilities, we could put on transmission capacity at 1 to 10 of the cost of a new transmission project. But nobody buys. Well, not nobody. US rate-based utilities struggle to buy.

48:37 You can put on the equipment to add gigs of transmission capacity cheaper than they can hire the lawyers to do the right case in Austin.

48:41 It's economic suicide for them to put on that transmission. And this is zapping through the air, no wires? It's better than that. It is a, I'm sorry, a virtual capacity. You have a network

48:54 that's congested. The US transmission grid is some run somewhere around 60 capacity Yep. Think about that. 60.

49:06 Congestion is what keeps us from getting to 100. There are no valves on the grid. Imagine running a refinery or a gas gathering system where you didn't have any valves and you had very few gauges.

49:19 Okay. How much extra pipe are you gonna need? Give me an example of that. So we, I mean, 'cause we've gotta be, we have moving parts on the grid So you've got to be in sync. Oh, this that's a

49:33 fun concept. We don't we that is a really cool important point. Yeah We were an inertial world where that was like the thing We're now moving to a solid state world, and we haven't really aligned

49:44 what that means This is interesting. My steps were going. Okay, talk about the loss of transmission now Talk about the loss of the grid having to be in sync. Oh, you are you are you had these are

49:58 the exact right Questions we should all be be talking about. Yeah, so I'm and I only know enough to ask the question I have no idea. Well, the important thing is to ask the right questions We

50:10 don't all ask the right questions. What what drives me nuts about my town and I am from Houston I started off an oil and gas investment banking. I grew up here my my grandfather and father-in-law or

50:22 uncle were refiners My father-in-law was a refining engineer. You know, I'd like I I love this town people just don't want to admit what's changing in the world. Then they're making so much money

50:32 in the all field in our EP business, they don't need to admit it. But it's happening under our noses. We are missing the biggest, like this is even bigger than shale. And shale is massive, right?

50:43 That's one of the world scale changes of all time. But we're talking in the last 15 years, the capacity to rebuild the entire US grid, not just 10 of global wall production, like the entire US

50:56 grid, right? Because that's how big these sectors are. And it's not that we can't make money in oil and gas right now, it's that we are missing opportunity that we should be taken to sell even

51:07 more things to the Europeans and the Asians. Oh, I should mark it. So those are awesome, right? So this is what drives me nuts, right? We don't have to fight about it, but we do 'cause we

51:16 don't even have these conversation to ask the right questions. Yes, for 25 years, the core challenge that's been coming is if you bring a ton of renewables on the grid.

51:27 all of a sudden you're putting generation where it wants to be because one of the limitations of renewables, they need to be where they want to be with when that's where the wind blows. With solar,

51:38 they can be anywhere, but the cost of solar has a heavy transmission component to it relative to other things and same with batteries. So they need to be where there's, you can't, you don't want

51:48 to go build a new transmission line for that. On the advantage side, I can have a solar farm up, we can have it up in 120 days, they're easy to build. Yeah Um, gas, you put the gas, we drill

52:00 the wells with those gas, we pipe it to where we want. Then we build the plant where we need the power. You don't do that with these. So it's different. So we're stressing a grid that was built

52:11 for coal on its original design and then had nuke added and in the last 30 years gas added it real scale. And now it's being like, oh, you now need to adapt to AI demand on one side.

52:28 generation that is marginal costs zero, sometimes average cost negative, but is going and it has to run or just get shut off or get stored and it's only in it's in these specific locations. You

52:41 can't put it over here. You don't have the lines or you don't have the wind resource. So it's been stressing the TD question, not just transmission, but also now we're moving into distribution.

52:53 So we found it smart wires because we could see that coming. We knew this was a problem. We were working on grid stability and other devices and we'd found this tech that was invented at Georgia

53:02 Tech that said, and it was at one guy's paper named Frank Creekenbaum. And he worked, he was on a postdoc for a guy by named Deepak Devan. And Deepak had figured out I can make a valve that is

53:14 essentially an impedance generator. You clamp in around on the power line or run the power through it, whichever we want, and you turn it on, and it will shove impedance down the conductor. which

53:27 makes that element look like it's

53:29 got more resistance than the element to the left. So the power, 'cause it's electrons, they go the path of least resistance, they say, Oh, don't wanna go there, I go this way. Okay, that's

53:40 just one of them. What happens if you then say, Hey, I'm gonna go put another job guy over here. Raise that impedance, Paris is all, I'll go this way. And what you find is that 60 capacity is

53:50 limited by the elements, like the pipes are of a certain size And you could go rebuild a pipe, but that's kind of the main thing, just give me a bigger pipe, right? Or you can valve it. Then

54:05 what Frank's paper asked was, Hey, what happens if I could not just increase the impedance? What if I could lower it? Now, what if I could do it dynamically? And what if I've valved the entire

54:17 grid, like every point we put a valve on itso we can go just optimize? Then is that, what matters, worth anything on this 60 and what he found you could go from 60 to over 90. That is a 50

54:31 improvement in any transmission network, the one we've got in the next one, whatever else you'll build, just by valving.

54:39 Gigawatt, the first big project was in the UK, like a gigawatt and a half. So do this real quick just 'cause I'm on the verge of understanding this point, I think. Maybe that's optimistic of me.

54:50 But give me one real simple example of, okay, we've got a wire here. We have a transmission line going here. We have a plant here that needs a lot of electricity and one that doesn't need this

55:07 much here. Are we running so slow just to keep the load up here where can we run faster to this plant 'cause it has the bigger load.

55:20 Tell me that down for me in a simple example. Well, we need to get you a good nodal pricing person on, 'cause I've been explained it to me, I'm not a really good nodal pricing person, and I'm not

55:31 really a good grid ops person, and both of those, you gotta have that expertise at the table, I mean, simplify, right? I got two lines, right? And I got a node, and this line is underutilized.

55:43 This line is tapped, because conductor's only so big, it's hot, it's sags, they limit it, right? And I have, so I've got load over here, and I need to get some more load here, right? So I

55:56 could build another line, I could here build, points congestion my, I could go build

56:02 a generator here on the other side of the congestion. I could go to these guys over here below the city and say, or the plant and say, hey, can you just dial down your need at the peak point?

56:12 Maybe this is a chronic problem, and maybe it's a spiky load problem. So I could do demand response over here. I could build a power line from there to there and route the power that way. I could

56:26 add generation next to the load. There's a lot of things I could do. I could just rebuild the substation so it can handle more. Yeah, there's a lot of tons of options. That was an aha moment for

56:37 me a long time ago was if you ask a TD engineer, can you solve this problem? They say, you're gonna give me budget? You give me, can you tell me what problem you wanna solve? Okay, it's lions

56:51 and iron, I'm still, I'll handle it. Now, some of these big power transforms, some of this takes a lot of time to build, there's a lot of planning, so it tends to be slow, but it's all

56:59 solvable. Yeah, and so now what happens if you just go put a valve there? And now I can say, oh, I'm gonna choke back, think about as a choke valve, I'm gonna choke back the power here, so

57:11 that it runs that way. It's not really a choke valve, in fluid terms, it's close enough, right? So now I put one little valve and valve is cheaper than redoing a whole line, and I just turn it

57:21 back, and now all of a sudden the capacity here goes out. The power just goes this way. And I have to do nothing but the valve. And this makes sense when we sold the original business case for the

57:31 company, yeah, the concept was, well, what if you could valve the grid? We can't run a refinery or a gas facility or a process plant without valves. Why are we doing that on the grid? So back

57:45 in the late '90s, you and I talked about this the other day. I was an oil and gas guy, and oil went to8 a barrel or whatever it did. So I became a power technology guy. The internet was taking

57:57 off. So I was like, internet plus hydrocarbon. I can do that, I can talk that. And anyway, we did wind up developing a thesis. We basically said the grid was designed for three nines power,

58:11 you know, and lo and behold, the microchips gotta be. five or seven nights, whatever it is. So we need to upgrade the grid somehow to deal with these outages 'cause it was something ridiculous.

58:23 Like the grid's out eight hours a year, but the average time was five seconds. Except in Houston was CenterPoint. Yes, exactly, probably. And so one of the other part of the thesis is we liked

58:38 companies that actually sold to end users as opposed to sold to utilities Yeah, utilities kill companies, and so

58:46 that's why your wire thing's not working. So what? Or it's potentially working, but the struggle is - In the US. Because the monopolistic nature of wires - Oh, there's little gigawatts of this

58:58 stuff around the globe, just it's tough sale here. Because of this rate-based model is not very good at enabling a utility to do things cheaper, because they have to vote against their economic

59:08 interest to do it, and it's like insane. Plus you lose your job when the grid goes down. Right. You don't lose your job because you charge more expensive electricity. But you're right, we're in

59:22 a digital world. We're still running an analog grid. The latest, we have two companies in our portfolio now working in this area, actually, yeah. One of them is we're making a solid state

59:32 transformer, very similar unit to the smart wire device, except for the distribution grid, eventually we'll make some big power transformers. This is a transformer that does not have any copper

59:42 windings in it and can go straight for just a regular transformer, go straight from the three phase AC lines, and we can go into DC or AC outputs at pick your favorite voltage or power. It's a

59:55 micro, it's a substation or micro grid in a box, right? And you can gang those up together and you can clean up power on the way through, island it, do bidirectional thingamajigs off your EVs and

1:00:06 what, you can build mesh networks of power grids, Just like we would. in comms or internet or something else, which you couldn't do with the old technology, at least not cheap, right? And then

1:00:18 we're working on another company, we just invested in, it's a little, and that company's called Resilient Power, we're making those in Austin. You have did that investment with Amazon. And we

1:00:28 got another company we're invested in that is built in grid software. Well, it turns out, so you know how we have those smart meter things. And you've seen the little memes on Facebook or next

1:00:40 door, take your favorite, hey, center point. My power's out. You got a meter on the house. You should know, how come I call and you didn't know my power was out? Literally, you have a smart

1:00:52 meter at my house. Well, all that data was built over the years and stuck in their billing system. There is no operating system. There is no SCADA for the low voltage grid. They don't know that

1:01:05 you have a transformer there. If you call and say it's popped somebody calls a roll a truck. Like they were completely blind south of the substation. It didn't matter for a hundred years. These

1:01:18 units were designed to last forever. The power quality wasn't that big a deal. And your refrigerator's cycled back up out of here, which is so who cares? Right, so now we're in a new world. Now

1:01:30 we have EVs everywhere. We have solar on some of these roofs. Your utility knows probably there's a solar system on your roof, maybe that you have an EV there if they, because there's an

1:01:42 interconnect, or they had to go do a permit approval for the charger, maybe their storage, but they don't know what's doing what, and they don't know what you're actually being used or if your

1:01:52 EV's home or somewhere else. They have no clue. They know there's a transformer there. Their asset system may tell them what size and type transform it is, maybe it doesn't. They don't tell them

1:02:01 if it's utilized. It never mattered. Today it does So a new class of companies has emerged. And these companies are taking that AMI data, throwing it into AI ML models, and building a complete

1:02:17 power flow model of the low voltage distribution grid. So now, I know that transformer is hurting right now. That one just popped. There's a fault on that network. There's a fire over here.

1:02:31 There's, you can see things that you couldn't see before. US utilities are just, I mean, this tech is two years old The companies that are doing it are brand new. Really cool. If you marry that

1:02:43 with our solid state transformers, which we're using for EV fast chargers, as well as for data

1:02:49 center power packs, our customers are, as well as for grid and

1:02:53 microgrids. If you marry those things together, then with solar on the roof and a test of a powerwall or a battery pack and a vehicle, because where's all those 8, 000 kilowatt hours of batteries

1:03:04 a year headed? not all being sold, that we're also at a kind of a multi-x capacity to demand. on that market, they're getting cheaper and cheaper and they're going into boxes on wheels, AKA cars.

1:03:14 But once you park that car there, capable of running your neighborhood or your four houses around, just your car can run it for days. And then you have a lot of these cars. Now, if you rewrite

1:03:25 the power electronics on the house, rewrite the transformer at the end of the neighborhood into a solid state one that can manage all of this, we can have all of our nice things. So Smartwires was

1:03:36 kind of the goal of that company We found it to rewrite the transmission grid to allow you to stuff large generation on and manage congestion. Now we're getting to where the low voltage network is

1:03:49 also a problem. And we've invested in these companies, I'm not founding anymore, I'm just writing checks to start up in cheerleading them. We've invested in these companies to rewrite and unblind

1:03:58 us on the distribution grid so that we can all have nice things and the power stops going out. you can pop it back on and self-heal and do interesting fun stuff. And so we're about to build enough

1:04:12 batteries to start storing every solar electron that can be made all night overnight, but they're gonna be sitting in cars. And if we don't change what we do in the grid topologies and in the

1:04:23 interconnects at your house and all that, it's gonna get trapped in the cars. So we're about to take the oil market, which was going into our cars and stuff and replace some chunk of it with EVs

1:04:34 and a power market, some which fed off gas, hydro, yeah, solar. Then we're gonna put solar on your roof and we're gonna park those cars at your house and then we can gang them together to run

1:04:44 much more interesting grids. This is young, this isn't gonna happen next year. But the technology to do it is power electronics whose chips are now cheap and didn't used to be. Solar cells whose

1:04:57 chips whose cells are now cheap and didn't used to be. And lithium ion class batteries whose cells now cheap and didn't used to be, and in compute. and comms, which is now cheap and didn't used to

1:05:08 be. So we are getting the tools to rebuild everything. Right into the teeth of this AI demand, driving new massive demand, and a decarbonization pushed by customers in a world that is going to

1:05:23 need a lot more BTUelectrons to supply

1:05:27 it while emerging markets are still trying to grow up and get their energy demand. What rich world? So go ahead and put your crystal ball on and tell me how this plays out, 'cause I do think the AI

1:05:43 stuff and the demand there is real. My running joke is when I'm out at the bar all night and I'm headed home and I stop at Taco Bell and I get home and my toilet's warmed and the seat is down, I

1:05:58 will know the true benefits of AI. You could have that today to just be annoying to set up. But you could be done But no, I think - I think it's like the internet. Once we experience it, we're

1:06:09 all gonna want it everywhere. You know, your girlfriend leaves you, runs off with your best friend or whatever. You don't wanna have to go look for a song on Apple Music. You want Apple Music to

1:06:20 know that I used to love her by Guns N' Roses needs to be playing, right? I mean, we're gonna embed AI everywhere. I totally believe that and I think we'll pay whatever costs we have to do And I

1:06:32 also believe that when AI starts running, it's on itself building its data centers, they're actually gonna be way more efficient than they are today. I still think we're in the third inning of our

1:06:47 efficiency building those AI centers. We're so young in that. So many of these things are ending one question. Yeah, so we're early days on all that. So tell me how all this plays out And then

1:06:59 give me a heavy duty dose of. what sort of regulatory changes we have to have. And I don't wanna blindside you with it, but where I'm gonna go with this after we talk through that is 'cause you're

1:07:14 gonna say here are some regulatory things that have to happen, I'm gonna tell you the only people on the planet that can do that are big tech. 'Cause oil and gas guys can't do it, energy guys can't

1:07:24 do it. Look, I don't, now we're getting the point where I don't know, right? It's like, I'm still trying to digest that, we set our fund up in 2021. Yeah. And AI was arguably not a thing.

1:07:40 What's it called? Energy transition ventures. We're venture fund, we invest in startups, anything that benefits from or drives energy transition. And since there's energy in everything, yeah,

1:07:49 it's anything we like. Right. Yeah, so AI wasn't in our deck. It was, I mean, it was kind of there, but it was there, oh, some AI ML I think we had like AI ML tools or something like that,

1:08:00 right? And now some of these AI modeling things, they are

1:08:07 much, much more sophisticated variants of things that I was working on with some of our teams that I was, the firm I was

1:08:14 at 25 years ago in the internet boom had some early AI tool sets. But it's not just like two orders of magnitude, it's like 50 orders of magnitude difference in sophistication. So, and even from

1:08:27 three or four years ago, these tool sets that they weren't really there, yeah. And it's come on so fast. And then it's created demand for energy so fast. And what's so crazy is they don't

1:08:39 actually know how it learns. You know, that's the amazing thing. But it's happening exponentially. I mean, and again, I'm not a real AI expert. Like I'd even play one on TV or a podcast. I

1:08:50 kind of play one around here. Good, as long as you do. So, when I did this, you know, this is a grid site company, You know, when the diligence hadn't taken me through their tech stack and

1:09:00 architecture, pretty deep and I'm, I mean, the guys will tell you my head was hurting. I mean, this is, I'm okay at software and this was, this was, there's a lot of, a lot of code there, a

1:09:12 lot of depth, these, this sophistication and, and I'm not saying other people can't do it. There's plenty of them that are. I'm saying the whole industry has a level of sophistication and tool

1:09:19 sets and tools upon tools that is just amazing, but that's not what we focus on in our business because our business is energy, right? That's fun Because you'll use those AI tools to do interesting

1:09:33 stuff like warm up chucks, toilet seat for them because that'll make him happy. But what's interesting from the energy transitions perspective is for the first time in my entire life, we have power

1:09:46 demand growth, real growth, unlinked from GDP

1:09:51 in the OECD, not just emerging markets. Yeah. I mean, this is huge. Yeah back to kind of 1950 to 2000.

1:10:02 Yeah, it was almost 15X. We are in a positing a world where, so we think solar costs continue to fall. We think battery costs continue to fall. Impasses on cost, yeah. We think power prices,

1:10:14 which I've been telling people are, energy and power prices are always deflationary. Yeah, they're always, you know, the real terms, it's flat down, it does not go up. There's some spikes,

1:10:25 but yeah, that doesn't happen. That may have changed We may see so much demand growth. We just outstripped capacity for supply, even if you can drop all the solar and all the batteries everywhere

1:10:38 you want. The manufacturing capacity for the module, power modules may be there. We could completely disrupt the entire energy sector within less than a decade now. That was not possible 15 years

1:10:49 ago. The capacity to add new capacity wasn't there. But the messiness, like, if you're gonna double the grid,

1:10:58 you're gonna be able to build every gas plant, you want to be, that's why we're talking nuke. I mean, this is just, this is rewriting things. We may see price growth and costs falling. So we

1:11:10 may see companies making money in interesting new ways. You may be able to just afford to rebuild the entire grid. You probably could, I was joking with, you know, one of our PSE members the

1:11:20 other day. Yeah, and won't name him, but you know, it's just, I said, you know, I think, correct me if I'm wrong, we could probably green light every transmission project in North America,

1:11:32 and they would all pencil, like all of just build them. Yeah, and it's like, yeah, probably, now doesn't mean it's happening. The utilities aren't doing it, the PUCs aren't doing it, you know,

1:11:42 but every single one of them probably makes money. That's how big this demand growth is. That's why we're talking about turning on Three Mile Island at a cost that'll cost more to turn it back on

1:11:53 than you could build two gas plants for And it's like a couple billion dollars just to get. 800 megawatts, right? Just to refer the thing. That's not a new one. That's just refurbished, but it

1:12:05 still makes sense to Microsoft. Imagine what they're having to pay to do that. Yeah. And their alternative, well, they got to get gas from, you know, somewhere Appalachia here up there to, you

1:12:15 know, build another gig and that's just one gig. So we're already moved into world scale world of everything. I think, and you know, I'm libertarian, right? You know, these little government

1:12:28 people are there the problem to. I've only voted for the libertarian my entire life for president. Yeah. Since I was 18 years old. Just because. Yeah, because I always took the point of view of

1:12:40 that's because everybody says you're throwing your vote away and I'm always not throwing your vote away. Your vote. Yeah, exactly. Well, and then the other thing too is some real person one day

1:12:49 will go, God, if there's nut job libertarians, dope smoking hippies that that they put up every year can get 4 of the vote. 50 if I run is that. That's why I want to show you. I still got

1:13:02 destroyed. That's like, so we are in a world where our regulatory regimes were built for the 1950s. Like these natural monopolies and like, okay, let's, that we didn't build with this regulatory

1:13:18 regime. Our power grid, our gas fleet, all this stuff was built before and then the regulation gets added after. It's what happens. Internet's same way. The regulation added after it all gets

1:13:27 built out Roads same way, right? Yeah, but we're in a world where, yeah, we can't innovate as an industry. We can't come together and work because we're in a fight with the regulatory regime on

1:13:40 the infrastructure side and the climate versus, you know, fossil kind of fight on the policy side and we're busy pouring cash into this setup. So here's what's going to happen. The venture

1:13:55 capitalist gonna make a lot of money. Some company's gonna make a lot of money. Yeah, gas people in Texas gonna make a lot of money. Yeah, the customer's gonna pay and the consumer's gonna pay

1:14:07 the price because the regulator, not only will they not get out of the way, they won't fix the core problems. They just, they can't, they don't know how and they can't. Right, they don't

1:14:17 realize what has to be done. And when they do, there's absolutely no mechanism to make that happen. So we are going to solve climate change, fix our grid, handle all this stuff, the most

1:14:29 expensive possible way that you can imagine. Like, you just imagine the most expensive way to do energy for the next 20 or 30 years. We're going to double that and do it. So you and I, we're

1:14:39 going to get rich off this. It's not good, that's just, I won't, I don't have a job, but the - Well then get a job. I thought you were looking. Somebody texted the other day, this shtick's old.

1:14:50 Can we change the name of the podcast? After four and a half years, we get it. All right, what are you going to change it to? I do not know that. Here's actually what I think, unfortunately. I

1:14:59 used to always say America, when it comes down to it, does day-to-day really shitty. We're not great. Oh, I like this. But, throw a crisis at us, we kick ass, you know, bring the Nazis on,

1:15:12 we got it. We took care of World War II, you know, et cetera. That's why I've never worried about these big, you know,

1:15:20 calamities happening, 'cause we do a crisis like nobody. I'm not sure we have the stomach in us to do the crisis that we're gonna need to do to do all those things, to even do it three times more

1:15:32 expensive than we should. Like you just said. We're already solving it. We're just gonna do it the messy way. Like this, that's, I think the, well, I'm an outgranted. So you're the optimist?

1:15:41 Absolutely, like, because I've been working on this technology for so long. And if I liked this in 2005, you're kidding, the candy store today. Like we're orders of magnitude bigger. The tech

1:15:54 that we have to play, Like, as I said, I'm sitting there. our grid site guys are out of Australia. My solid state transformer guys are out of Austin. I've seen what's inside our boxes. And

1:16:05 check, I may be a little arrogant. I'm also very, very, very good at what I do. I've been doing this for a long time. There's very few people that have been doing energy and technology and

1:16:14 startups and venture longer than I have. So I've seen a lot and I've seen bodies buried. And I've seen really cool tech that didn't get there. And I'm looking at some of the things just in our own

1:16:26 portfolio and the people that we've had a chance to back. And then I'm looking at some of the things other investors and other founders have done. And this stuff, it is mind-bogglingly farther

1:16:38 along. Like just then, I couldn't even imagine this 20 years ago. We are at a point where my imagination in 2008 of what the world could be, we are way beyond, right? So it's like, wow, I mean,

1:16:54 I watched these guys and sit there, walk me through their tech stack. I have seen inside the first ever solid state transformer for the grid. Yeah, I was there, nobody else hasn't, come here and

1:17:05 show people, I'm on the board. You know, they will show me, but just barely. Yeah. And I'm not the engineer, I don't have the capability to put that together, but I can see what they've done

1:17:15 and I can see the implications. And so when we talk to regulators or energy people or power people about their whining little problems about what is gonna be a challenge. And I'm like,

1:17:29 that's not even on a roadmap. We already have it. Let me give you the cautionary tale real quick. Okay. So one of dad's best friends from high school, Jim Wazell. I assume this you're a dad. My

1:17:41 dad. And what do you do for 11? My dad was a doctor. He's a doctor, okay. Yeah, radiologist. But anyway, what is we gonna talk about? Superconductors next. There we go I found one of those

1:17:51 companies back in the day too.

1:17:55 Well, what was it called? Americans. It's energy. Well, the American super doctor was one of the original big ones. And it got public, right? Yup. Yeah, it did. All right, well, no, your

1:18:02 dad's throw. That's what we'll get to that table. So one of dad's best friend, Jim Wazzell. Jim Wazzell was president of Houston Natural Gas that merged with Inner North. Yes. Became Enron,

1:18:12 right? And so Jim was Ken Lay's number two for about six months, I think, is how the story goes. And Jim likes to say, well, Ken didn't like dirt under his fingernails, operating type guys like

1:18:24 me, liked his fancy MBAs, consultant types. So Jim got shown the door. But, so anyway, we found - We as an industry are missing Enron. We are missing what that brought to the table for all of

1:18:37 its warts and challenges. Yeah, that's what was needed. And if that did not die, we would be in a different world. Yeah, no, I agree with that too. There were a lot of smart people there doing

1:18:48 a lot of really cool stuff They were pushing the world in the way. it needed to eventually be before it was ready and before it was needed. Yeah. And the problem today is there is nobody in the

1:19:01 power sector, in the energy sector, leading like them, not leading on a tactical thing, but leading on the vision. Even the big solar and wind development companies, that it's amazing companies,

1:19:14 they're building things. They're not reinventing the markets and the mechanisms and the regulations and the tech and all at once You almost, that's a good point. You almost need the Aubrey

1:19:26 McClendon of power. We don't have that person. You are right, because who's the future? After Enron, no power company in America had the guts anymore, no CEO. And that

1:19:43 collapse took the wind out of the sails of true innovation in the electric sector, which has been rebuilt by these renewables people, but they come from, I can make this widget and do this stuff.

1:19:58 They don't come from, let me do the grid, the trading. They like this, they don't think like that. So this like - Now they slide it into the existing grid. Yeah. Yeah. They didn't change. We

1:20:10 need to rewrite everything. There's no real point in running these modern pieces of tech on 100 year old architectures. It's stupid, but we're doing it because we're locked into a regulatory

1:20:25 infrastructure, payment mechanism, funding, yeah, battle between gas people. And we can't have reliability in Texas because gas people and renewable people and battery people hate each other. So

1:20:37 my power goes out in energy corridor. This is nuts, it's 2024. I know. That really bumps me out that Houston, Texas, the energy capital of the world can't run a grid. I mean, it's like, good

1:20:49 God. They don't wanna try They're just not trying. It's not brain surgery anymore, but they're not working on the problem or the vision and the strategy. Well, and I will actually flip sides and

1:21:06 defend our caught a little bit. Say what you want about our caught? I believe it's more a leading indicator of what's to come everywhere. He's the carry in the caught on. Yeah, yeah, I don't

1:21:18 necessarily think that they're the worst member, but it is a leper colony You're absolutely right. Yeah, as an operating capability, they dealt with what the rest of the world is gonna get, right?

1:21:31 This is, and we saw some canaries in the coal mines, the German prices 15 years ago, you know, the wind prices, we've seen this coming and Texas just randomly had to deal with it early before

1:21:44 other places, but it's coming. And it's not coming because of renewables. It's coming because of gas. There was a really, I can't remember, I really ought to go find the little article on it.

1:21:53 We are arguing that basically, so gas is not what our electric transmission fleet was built for either. Gas, it was built for coal and sort of nukes. Yeah, gas is not the same as coal. It's not,

1:22:07 they're not a mountain of storage sitting right there on the plant. Yeah, it's different. So gas is a destabilizing element on one hand while it's stabilizing on the other. Then, and gas is only

1:22:20 a 20 year phenomenon as a real big fleet. Wasn't a big thing in the early '90s and the '80s. It was a '90s to 2010s type thing. And then we started to replace it even faster with renewables and

1:22:34 then with batteries. And we haven't moved from this inertial thing with lots of mountains of storage that's slow moving and doesn't have to take punches and then has really big

1:22:46 safety margins built in. And now we're moving to a world where we have to run tighter than the margin. The tech is there. We now have a mix of gas, which has to be a flow. If the flow isn't

1:22:57 coming through the pipe to that power plant, the power plant doesn't turn on. Yeah, that's not true with coal. With electrons, we have a different from us. We have a much more rich, interesting

1:23:07 phenomenon. And we need to learn how to run a modern grid with gas. Now we also need to learn how to run a modern, modern grid with gas plus renewables and digital and solid state. Then we need to

1:23:19 learn how to rewrite it so that they all work together. And then so we can get the least cost of power and the cleanest supply at the same time. This is very doable, but we're not starting with a

1:23:34 blank sheet of paper. We're starting with a 150, 100 year old grid, largely built in the '40s through the '70s that has been had gas clued on it for 40 to

1:23:48 take the place of coal And now is having. demand pockets pop up and he's creaking and we're completely blind on what's happening on it. And so

1:24:01 we need to rewrite everything. So here's our cautionary tale. So Jim Wazell, dad's good friend, who's president or number two at Enron for six months or whatever. He and I used to go eat lunch,

1:24:18 call it once or twice a year And catch up, chat about things. So in the late 90s, I'm going to eat lunch with Jim and I'm regaling him with all this energy technology stuff going on. And we're

1:24:32 talking about all the different types of fuel cells. I mean, I was a, I interest in period, you know, I don't know fuel cell energy. I know energy resource corporation, right? Right. I tried

1:24:43 to do a, I tried to do a private, these are old names for those guys back in the 90s. Yeah sitting there and Jim is just carrying on we're talking all about these different. So I'm like, this is

1:24:53 so amazing, Jim, that you keep up with all this sort of stuff and he goes, oh, I'm not keeping up. This stuff's been around forever. Yeah. He's like, this stuff's all been there, you know,

1:25:06 kind of forever. So, yeah. Well, and that's what I think is, it's interesting, one of one of our heuristics, right? We're doing electrolyzers now. We've invested in a company called Omeum,

1:25:16 which has been on one of the Digital Wildcatters podcasts. And CEO is, he was the guy behind the Bloombox.

1:25:25 He was a VP of Engineering at Bloom. And before that, he and his CTO, who also was at Bloom, were some of the early employees at PlugPower in the late '90s. And he learned electrolyzers and fuel

1:25:33 cells from people that were doing it in the '80s and '90s, right? And back then, there were only a handful of companies. And so, when I listen to some people talk, it's all a new shiny object.

1:25:44 When I listen to Arnie talk, he's like. Like you and Jim, he's going back, right?

1:25:51 Because. PlugPower in GE. Yeah, GE, right, it all goes back to those GE programs. And so we are standing on shoulders of giants. Yeah, and when I talk, like some of the things I'm talking

1:26:01 about, these are companies I was working on 15, 20 years ago. Yeah, and it took that long for them to get a significant product in the market. We're now at some inflection points on some of these

1:26:13 technologies. Others are super young. Yeah, and some of them are sitting in cul-de-sacs I do think we'll eventually get to a fuel cell world. If I had my druthers of where to spend RD money and I

1:26:25 was, yeah, the US government - Energy czar. If I'm the energy czar and I get to like, what do we want to have? Let's go make it. And we knew just give enough money, we'll figure it out

1:26:35 eventually. I'd go do Fusion and Solidox on fuel cells. 'Cause I think those would be game changers. Yeah, and some of those will eventually get there, right? And so, but you think about it,

1:26:47 How much money went into the Permian? Just total cash in. Well, this, I do know this stat. Did you know the East Texas oil field? So we basically won World War II off the East Texas oil field.

1:27:04 Spindle top, all that, never has actually hit payout. There were so many wells drilled in there 'cause you didn't have rules back then. You're a neighbor. I've seen some pictures of them. Yeah,

1:27:14 I mean, yeah, as well as ever, has not hit payout to this day. And there have been literally billions and billions of barrels of oil So I guess what I'd say is, so some of these things like,

1:27:25 yeah, if you think about just the aggregate dollar revolution the create to order in shale into go to had has that volume

1:27:35 and the phenomenon. Right. Yeah. We are now talking numbers that are reaching that level of scale in solar and batteries. But that wasn't true even eight years ago, right? So these are, yeah,

1:27:48 there's some of these things. There's a quantum of money resource units, it's got to be spent to take your shot. And hydrogen, 25 years ago, it got billions, but billions was a drop in the

1:28:00 bucket for what was needed for that area. You know, some things are just big. Yeah, and, but technology disruption tends to come as a, it starts small and then you just watch the incremental

1:28:13 growth rates, not the scale, 'cause by the time it gets to scale, you already lost the battle. So we've - Innovators to one month Yeah, exactly. And so that's what we were seeing 10, 12 years

1:28:24 ago. You could see the big problem. You could see what was going to come if success happened in some of these things. And then you could see, okay, oh, some of them are actually like reaching

1:28:35 the first orders of scale. Like the one in power sector was new capacity ads, all of a sudden, renewables, and they weren't big in overall primary energy terms, they were nothing. They weren't

1:28:46 even big in capacity terms, they were nothing. Capacity adds portion of the US. fleet, all of a sudden, solar and wind were significant. And then they got over half of it. And then they got to

1:29:01 all of it. And then we wake up and it's 2021-ish and oh, this is nobody's even, nobody's whining that solar's not at scale anymore. They're whining like, oh, it can't compete because it's

1:29:15 intermittent. Like, dude, I know you six years ago, you were telling me it couldn't compete 'cause it was too small. Now you've changed your story because it just beat your ass at this game. And

1:29:26 that's what's happening. Yeah, but it's not a dynamic world. Gas, we've got AI, we've got grids, we got LNG. I did not see LNG coming. I just didn't get it. I just wasn't thinking about that

1:29:39 until we stepped back and realized, yeah, every molecule story was right. There were places in the world where there are no renewables. fossil reason, they're going to have to import and they

1:29:51 want to grow. And LNG became this massive awesome thing. But there were people who saw that and placed their right bets there. Yeah. So yeah, we're not very rich, integrated world. My big

1:30:05 complaint is my friends in Texas, my friends who understand energy and molecules, and they don't understand power and

1:30:17 PUCs and solar manufacturing, and they've never been in a battery manufacturing plant. They've never looked at a solar cell, you know, tech stack. They've never seen the roadmaps inside. They've

1:30:28 certainly never looked at a solid state transformer or AI software.

1:30:34 They're busy. They have their their day job. The podcast I dropped today with Paul Clark. We talked a lot about it because I think what natural gas is totally missed is they needed to think that

1:30:47 they're selling electronic.

1:30:50 not natural gas and whether that means Bitcoin mining, AI data centers, co-locating, manufacturing facilities, all that stuff. They need to be straight talking to end users 'cause at the end of

1:31:03 the day, big tech is gonna make the decision on what this power is gonna be that's gonna fuel AI. They're gonna make the decision where in the world they put those data centers. Exactly. Which

1:31:15 state, and they're gonna make that decision Like, why would you go do this at Three Mile Island? Because you need every gig you can find, right? Yeah. So like hydrogen, for example, green

1:31:30 hydrogen. We're big believers in this. E-fuels, all these, they're not gonna get built where power prices are high, because that's economic suicide. They're gonna get built where you can get a

1:31:41 lot of sun, a lot of electrons, a lot of transmission, a lot of land. They're gonna get built in Texas, North Africa, Australia, India, we are, the Texans are competing globally in a new

1:31:56 battlefield. And we're not making the widgets. I'm getting made in China. Yeah, and so we need to stop pretending that energy stops at the border of the Harris County and realize you screw this up,

1:32:09 you're gonna lose the plants of the future to Saudi. Because they got a lot of cheap CO2, they got a lot of cheap solar, they got a lot of land, and they got a lot of money. And as much as I am a

1:32:24 libertarian, they also have the ability to say, we're gonna put the power line right there. They are the customer. Yeah, they are the customer. They are the customer in the cash. So we could

1:32:32 lose the, as a state, the energy capital title for the next way. Like what scares me is we have very limited solar or battery manufacturing capacity in Texas at all, let alone Houston. It's like

1:32:45 one or two plants and they're not very big.

1:32:48 We are not a big player in EVs and in power electronics. We're minor players in the hyper growth markets. AI data centers, Texas is what? Fifth or eighth or whatever on the list, but it's not a

1:33:02 very big fifth or eighth, right? We should be because all a data center person wants is power. And we're really good at making that when we want to be, but we're fighting over it. Yeah, no,

1:33:15 that's - And we could lose to the freaking Californians and the Saudis and the Australians, and I don't want to lose to them. No, I think you're absolutely right. I've joked that the Mayor of

1:33:26 Monahan's needs to go on a charm offensive through Silicon Valley and talk about how his binigans is great and

1:33:37 get stuff built out there 'cause it's, you're right. I mean, you overlay the shale revolution with the renewable resource.

1:33:47 coin mining. Right. It can run off renewables if need be. It can also run off power. So now you're absolutely all right. This is fun. Right. So we need to do a show on hydrogen. Hydrogen in

1:34:00 the ground. Okay. And this gold hydrogen stuff. I mean, either. This is why we need to show it. I've looked at oil and gas. And I've looked at I've seen helium deals. Yeah. But I've never

1:34:10 seen hydrogen in the ground. Do we need to do it? And maybe and also on geothermal. And we get like some surface things that are interesting and could be big. I'm I'm not a really good subsurface

1:34:22 person. I've done enough of it to be dangerous. And I always know that when the geologist shows up and they're wearing a tie, they're lying to you. Is that is that how it works? You want the

1:34:32 rumpled ones? Yeah. When they show up wearing a piece of shit t-shirt, you're like, okay, this guy knows what he's talking about. When the map has been generated by the computer, you're getting

1:34:40 screwed. When it's handwritten with crayons, you're like oh okay this is the real stuff. Here's my simple, high-level understanding of the problem with that stuff from my, and then energy storage

1:34:51 underground as well. And it's like, I was, as one of my friends used to be at Chell, she explained to me that wells are hard, wells suck, wells are bad, wells don't do what you want them to do.

1:35:01 If they're wells, like her answer, yes, it's wells, don't do that, right? It's meaning it's underground, you can't see it. It's, subsurface is hard. And now, why do we do it? because those

1:35:14 freaking wells deliver like cash, just shooting out, right? You either have an oil well, which we're getting paid a crap ton per barrel for that stuff, or you got a gas well, maybe this thing

1:35:25 pays out like, okay, it's making all its money in 18 months. What do you, what's a typical primary oil? You put in seven mil, you get back 20 over 18 months, and that's mostly MPV, something

1:35:34 in my, something. We're close enough. Yeah, we're close enough. So like, wow, that's a lot of cash. It's a lot of cash in. It's also a lot of fast cash out. Whereas the old school well, I

1:35:43 spent, okay, I'll go do an offshore, 100 million, and I'll get 300 million out, but it comes over 15 years. I'm making up numbers, but now let's talk about power. Power, then I'll send you as

1:35:54 much cash back, right? So what's always fun, like, okay, if I gotta go down hole to get the cash just to make an electron, those electrons, like, it's not like gas where I can get a lot of it

1:36:05 and go put it in a big power plant. I need a big well, or I need a cheap well Yeah, and wells suck, they chew people up. Yeah, why do you rob banks? 'Cause that's where the money is. Right,

1:36:17 so I've been unclear if geothermal, if gold, hydrogen, some of this stuff, like, is there enough cash in a hole somewhere to justify the hell of top-side and wells and infrastructure? Yeah,

1:36:29 'cause little ones, you know, I'm looking at it, I'm like, that just doesn't look like a very rich project compared to what I know a good, draw and crew and completion screw it all, I'm gonna,

1:36:39 I'm frat crew, they're gonna need to make money. You can throw cash and oil or gas well, 'cause there's enough there to get it back when you're right. I'm a little unclear on geothermal or this

1:36:50 gold hydrogen. If there's enough there to get back, that's the question I'm really curious to answer. 'Cause I think a lot of the, a lot of power people underestimate how painful subsurface

1:37:00 thingamageings are, and subsurface people overestimate how much value there is in any incremental power. So just like offshore wind people, oh, the oil and gas sector does it Yeah, but not cheap.

1:37:12 Yeah. Offshore wind people, it got to be cheap, or you lose money. Right. The shells, the, yeah, the NOVs, the drill and drillers, they're like, you want it for what? Like, let me walk

1:37:25 you through a day rate for my drill ship, right? It's like, and they're like, hey, but this is only 15 megawatts. Yeah, that's a big offshore wind turbine, but that's all you get. Yeah. Yeah.

1:37:36 And you get your money back over 30 years, thought over two or five. there's no upfront cash, big payment thing. So that's pretty expensive for those make-a-wats. And so this is the question I

1:37:50 think would be fun 'cause everybody in Houston wants to talk about sub-surface-y adjacent things that are supporting power and energy transition. And I'm trying to figure out if they're rich enough,

1:38:00 those resources are valuable

1:38:05 enough to afford what it takes for real all people to do. So we have some real thermal folks. So Mike Umbras out there leading the charge in California Okay. So, and

1:38:16 we've done some podcasts with geothermal dudes. I have not looked at hydrogen. So if I have a hydrogen expert out in the audience, please. An underground hydrogen expert. Yes, underground

1:38:26 hydrogen expert. What do you want to call it? Gold hydrogen, yep, somebody who's done an actual resource study on, oh yeah, yeah. There's gold to go get. Yeah. That would be fun. And do we

1:38:38 even know that there is any

1:38:41 hydrogen there question. That's my question. I know a lot of people in the oil and gas world and a lot of really smart ones and a lot of people that do geology exploration, pick your favorite

1:38:54 portion of it, but part of it, right? Yeah. I worked on the

1:38:60 in-situ oil shale program for shale. I spun that company out. We're sticking heaters down on the ground, cooking the earth and build a refinery underground. We were doing it in Jordan. It works.

1:39:09 And there's enough oil shale in Jordan in those seams basically to build like 10 shells. Yeah. That was why it was worth the pain of power down whole type things. Yeah. So, but I have not met any

1:39:22 of people in my set that are like, oh, yeah, I've done a resource study on gold hydrogen. There is this, this is what we know. This is, right? We've seen business plans, but I'm like, and

1:39:32 decks, but I'm like, this doesn't, this looks like theoretical. So I'm just really interested to meet some people that, Like who are the old guard dudes? that knew this from back in the day.

1:39:44 And like, oh yeah, there was always hydrogen on these seams. Here's the, what we'd try if I was like, let me get to some meat. That would be fun. And I think your audience would really, they

1:39:53 have a lot of value to add to the conversation. We could have Tim Wazell. That's who we should go ask. Ask, is Jim still around? Jim's still around. Yeah, he

1:40:00 might even be listening. He periodically emails about, oh, I listened to the podcast with such a section. Did you know Daniel Hoofed? No, who's he with? Anyway, he just came on the podcast.

1:40:12 He runs a kelp company of all things. Kelp, okay. In Namibia, offshore growing kelp. Okay. But he did the stuff in Jordan you were talking about. Ah. And we talked about that on the podcast.

1:40:27 There was a big team, I mean, I was, I was like, the very, very tail tail and I managed to spin out. And it was super fun. I got to work with some really, really smart, smart people and dump.

1:40:40 won't quote how much money she'll spend to figure it out. But like, I used to tell people, yeah, we're building a refinery underground and it works. I watched the final pilot out of Jordan,

1:40:48 they'd sit there in that Gasmor War room down there. And yeah, and the team was finishing up the pilot and they were producing, basically kerosene up the pipe. Yeah, it was like straight out of

1:40:57 rock. He, he, yeah, he talked, he talks to all about it. So I just went to perplexity and I asked him, can you drill for hydrogen like oil and gas? Yes, it is possible to drill for hydrogen

1:41:11 in a manner similar oil and gas extraction, geological hydrogen, also known as gold hydrogen or white hydrogen. And then we need like the top experts in this topic sitting around this table. So

1:41:24 what is the why are we not doing this? So the US Department of Energy has allocated 20 million to companies like Columba and natural hydrogen energy are actively exploring potential hydrogen reserves.

1:41:39 So maybe if you're CEO of one of those two companies, come on. We need somebody to walk through, hey, like, so when I was in college, I was at AM, I was a bit of a nerd. I don't know if you

1:41:52 can believe that, but now. Shocking. So I went to this - In fact, if you made people guess, which one of us went to RICE, which one of us went to AM, it might be reverse if people asked. Did

1:42:03 you go to RICE? I went to RICE. Oh, yeah So, product of when RICE nerds in breed, my parents went to RICE too, so. There's so many jokes, I'm just gonna let them all go. Okay, so, find a

1:42:18 little story. So, I'm a sophomore year. There's a post on some message, bulletin board, with a thing at the Catholic Student Union across the street, not on campus. So I troop across and we're

1:42:31 two people talking at this little talk. One was some dude from some non-profit in Austin talking about the. renewable resource of Texas, how much biomass existed, how much wind, how much, you

1:42:46 know, title, how much solar, like, it was a resource study, right? That was the first time I'd ever heard in this stuff. And it was eye-opening, right? It wasn't, it wasn't very, I'm

1:42:55 thinking back, it was probably very simplistic. One, 'cause this is the late '90s is, but no, it was real, hey, how much, is there a target big enough to care? Yeah, the other was John

1:43:05 Bachras, the cold fusion professor at AM who had been highly discredited, though all that work is now back in vogue, yeah, giving his final retirement talk. So I got to listen, I had no idea who

1:43:16 this dude was, I got to listen to him and then watch this study. And decades later, right? I'm still thinking about those things. And I think it's, when I think about this geologic hydrogen,

1:43:28 I'm thinking in terms of that resource study, I just like to walk through, all right, even if it's not perfect, let's talk about the resource, the way Shell would think about when, 'cause when

1:43:38 they went after that all shell thing. The question was, Hey, we may not have enough, yeah, we're worried about peak oil. We may not have enough resource. Where are the big resources, big

1:43:49 enough to care? And okay, the heavy's in jail is one of them? Can we go work on that? Yeah, and in solar, the reason I like solar, the resource is just insane. Wind, big resource, not as big

1:44:04 as solar. So I think when we talk about hydrogen, we're either taking solar and turning it into hydrogen or if you've got another big honking resource to go after, great, I don't care if it's like

1:44:14 the shales and it's all broken up and hard to get too fine, that's a target worth. But I'd like to talk about the resource. Yeah, if that makes sense. 'Cause back when I did VC, the way I always

1:44:26 kind of looked at it and right or wrongly, and I stole this from Burt McMurtry, so it's not Chuck Yeats original, right? Okay. But Burt and used to always say, you know, if somebody comes up

1:44:36 with something, basically always ascend, yeah, the engineers will be able to build it, they'll spend more. Yes. They'll spend more than they say they're going to spend and all, but eventually

1:44:46 they'll get it built. The idea is the value, but this. Well, and then it's not here. Well, who cares? Does a market actually develop for it? And you're just saying, is there a big huge market,

1:44:57 the big huge resource there somewhere? Because when our world sometimes should be able to figure out how to get it out. If it's there, right? In our world, there are cul-de-sacs. Part of why ETV

1:45:09 does really well is we know how to stay out of cul-de-sacs. Oh, that's a cool technology, but it's in a cul-de-sac. And some markets, it is. Yeah, you can't, it's hard tech. The tech doesn't

1:45:23 just respond to throwing engineers at it. Some types of technologies do. A lot of software, you just throw bodies at it. And for SAS, that was the model e-commerce, that was the model. So you

1:45:34 got to kind of figure out which one it is. And I could be wrong. I'm just I'm interested in, I think, y'all's audience ought to have the expertise to discuss the question of, is there a geologic

1:45:45 hydrogen resource big enough to care, and can we make money in geothermal? Is it, is it, is the resource good enough? Like, the idea of drilling miles down, many miles down, in order to make a

1:45:59 little bit of power seems very painful to me. It just doesn't seem like, how am I going to get paid unless Google going to go throw a bunch of cash because they can't get power from anywhere? Okay.

1:46:09 Um, yeah, the other one we liked that fascinates me so superconductors, I founded a company that many years ago. There's only one, only handful of companies left doing it, huge game changer

1:46:23 and fusion. These are, so it's only these really big, interesting topics. Not that we're going to invest in them necessarily. We invest in teams and I want to go back some teams that'll make me

1:46:29 rich, but some of these tech topics, they're worth the conversation And we're seeing it all around the bleeding edge of our sector. I find this more interesting than stuff like CCS. Let's go pump

1:46:41 some CO2s down hole. Okay, so yeah, we got all those CO2s. What are we going to do? Pull them out later and turn them into things. CCU, we like CCS, that's interesting. But Houston has been

1:46:53 working on these adjacency things. And I don't like the adjacency things for Houston. I think we're working on them because we'd like them to be true. While the rest of the world does boring solar

1:47:04 and batteries, manufacture stuff and puts it in a box and wires it in. And we want to build kind of fancy subsurface things because we want it to be true. That's my fear. What were the ultimate

1:47:17 grift industry, right? We take it out of the ground and then we'll get paid to put it back in, sure. So hopefully then we take it out, we get paid to put the CO2 back in. And then we've got one

1:47:26 company that turns CO2 into fuels and chemicals. So great. So then electrolysis. So great. Once you put it back in, eventually I want to pull it back out, run it through our electrolyzers.

1:47:37 crack water and turn that into more fuels. We'll do it three times. Yeah. Hey, we're in an interesting rich world. This is, these are, this is cool. Right.

1:47:48 No, that's exactly right. All right. Dude, this was fun coming on. Absolutely. Thanks for finally getting on the famous podcast. I've been waiting for three years to be on your podcast. Dude,

1:47:58 all you had to do was ask questions. Why didn't you know that? I mean, I'm not really complicated. It's like, like you did this morning. Hey, I'm bored. I'm bored. Sure. Tell Craig I said hi.

1:48:09 We still have our, we still have our bet going. I forget about it. Does he remember your bet? I don't know. It's on Twitter somewhere. He usually won't bet with me. We try and bet about the

1:48:18 Aggie Texas game and he won't bet. He just, I don't think he has the guts to place his bet on Texas. That's funny. We used to always do our bets when we would go sell a company or an asset. We'd

1:48:31 always say, who's gonna buy them? What price are gonna pay? And all the years of us doing that, Exactly zero times, yeah.

1:48:38 Sound good. Cool. Good to see you.