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U.S Bank Earnings, Energy in Focus · Bloomberg Intelligence

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Speaker 2: In terms of earnings outs, it's another big day for
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Speaker 2: the big banks Bank of America and Morgan Stanley Alson
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Speaker 2: Williams joins us. She is the senior bank analyst for
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Speaker 2: Bloomberg Intelligence. She is the expert on these big banks. Alex,
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Speaker 2: let's start with one of my former employers, Bank of America,
0:42
Speaker 2: Merrill Lynch. I'm going to keep that name in the
0:44
Speaker 2: in the name, there wouldn't be an investment bank that
0:47
Speaker 2: work for Merrill Lynch.
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Speaker 3: Talk to us about what we saw the Bank of America, Allison, So.
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Speaker 4: I think the Merrill Lynch side of things did very well,
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Speaker 4: so making you proud there. Thank the wild fees came
1:00
Speaker 4: in better than expected. Equities trading and equities fees also
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Speaker 4: better than expected. So continuing to build on some of
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Speaker 4: those investments in the investment banks. So everything going well there,
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Speaker 4: and actually on the net interest income sort of a
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Speaker 4: standout result in the sense that their net interest income
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Speaker 4: actually increased from the prior quarter. It was better than expected.
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Speaker 4: So that all sounded great until we got to the
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Speaker 4: conference call and the bank really just kept their guidance
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Speaker 4: study and so I think that's what the stock maybe
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Speaker 4: reacting to today. But really, I mean, that's consistent with
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Speaker 4: the other banks, and frankly, I think makes sense. We
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Speaker 4: had look at the change we had since the last
1:44
Speaker 4: time the banks reported. Last time they reported, it was
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Speaker 4: six to seven cuts expected. Today, I mean it's been
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Speaker 4: three and drifting lower, right, So those expectations keep getting
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Speaker 4: pushed out, and with things changing so dramatically, I don't
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Speaker 4: think it's surprising that they kept their guidance stable. I
2:01
Speaker 4: would point out that their guidance is a little bit
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Speaker 4: more positive in the sense that they do expect growth
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Speaker 4: in the second half. I think just maybe ahead of
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Speaker 4: the call, people got excited and thought, you know, could
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Speaker 4: we have already seen the trough and they're saying, no,
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Speaker 4: second quarter is going to.
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Speaker 3: Be the troughs.
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Speaker 5: Maybe it was the seventeen uses of strong in a
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Speaker 5: statement that kind of raised that expectation. Also, what was interesting, though,
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Speaker 5: was the charge off so that increased by about three
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Speaker 5: hundred and six million dollars to one and a half billion.
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Speaker 5: Can you talk us through I know that's the that's
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Speaker 5: the bank side of the business, the everyday banker side
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Speaker 5: of the business.
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Speaker 6: But what's that what's that going on there?
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Speaker 4: And that you know, that is the other part of it.
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Speaker 4: And so you know, when we think about core lending income,
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Speaker 4: it's the net interest income is the revenue side, and
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Speaker 4: provisions are a key part of the cost side of things.
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Speaker 4: Obviously operating costs the other part. And what we saw
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Speaker 4: was charge us came men higher than expected. Part of
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Speaker 4: that was Card. We do expect that from Card. It's
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Speaker 4: a seasonally higher quarter. Delinquencies tend to be lower, and
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Speaker 4: they are signaling improvement from here. So that's a negative.
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Speaker 4: But as I said, sort of in line with the
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Speaker 4: trends on the commercial real estate, charge offs higher than expected,
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Speaker 4: and the bank talked about changing some of their revaluation
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Speaker 4: and their models sort of feeding into this. But basically,
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Speaker 4: you know, looking forward to the future quarters, they think
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Speaker 4: that things might look a little bit better, but for
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Speaker 4: the quarter, things weaker. On commercial real estate. We know
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Speaker 4: that that's a hot button issue for investors. It's something
3:44
Speaker 4: we've said, it's going to be a long story to
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Speaker 4: play out, so sometimes a little better, sometimes a little worse.
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Speaker 4: But Wells Fargo we did actually see some improvement in
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Speaker 4: their non performers, and so I think that was more
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Speaker 4: negative for Bank of America.
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Speaker 3: Also, what is Bank of America saying about loan growth?
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Speaker 3: I mean, are their.
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Speaker 2: Corporate bankers are they making loans or do the customers
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Speaker 2: need capital?
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Speaker 3: What are they seeing they are?
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Speaker 4: But it's your friends at Merrill Lynch that are making
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Speaker 4: the loans and not you know, sort of that middle back,
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Speaker 4: middle market, asset based type of business. So we saw,
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Speaker 4: you know, the debt issue ince this quarter we saw
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Speaker 4: very strong and we've heard mixings from banks in terms
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Speaker 4: of if they think some of that has been pulled forward.
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Speaker 4: But the bottom line is capital markets very strong, but
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Speaker 4: you know, the bread and butter lending business, those loan
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Speaker 4: balances coming in weak and weaker than expected. And so
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Speaker 4: that's another piece to the interest income is you know,
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Speaker 4: how much of it relates to securities and higher yielding securities,
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Speaker 4: whereas the loan growth you know, has been weak, and
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Speaker 4: if we don't get those fed cuts, you know, are
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Speaker 4: we going to get some improvement, and so Bank of
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Speaker 4: America I think has some improvement baked into its net
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Speaker 4: interest income guidance. But I think there could be some
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Speaker 4: skepticism out there, you know, if the rates stay high.
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Speaker 4: You know, we're already seeing that impacting demand. Could that
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Speaker 4: continue to be soft?
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Speaker 5: And then wrapping up here, Morgan Stanley, that stocks up
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Speaker 5: by about three point seven percent.
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Speaker 6: What stood out to you? They seem to kind of
5:27
Speaker 6: fire on all the cylinders they did.
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Speaker 4: I mean, they delivered on all of their key metrics.
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Speaker 4: Number one, the wealth flows. We had really strong wealth
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Speaker 4: flows first half of last year. That's softened, so we're
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Speaker 4: showing a little bit of a rebound. So that's definitely
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Speaker 4: a positive. Equity trading coming in better than expected, Equity
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Speaker 4: fees coming in better than expected pretty much, you know,
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Speaker 4: all of the investment banking lines except for M and
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Speaker 4: A coming in better, so that's all good. And then
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Speaker 4: the profit margin, which is the other key thing investors
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Speaker 4: focus on, coming in you know, about twenty six percent,
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Speaker 4: and so that's in line with the revised guidance. Keep
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Speaker 4: in mind they do have a thirty percent target near term.
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Speaker 4: They said, excuse me, long term near term, they said
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Speaker 4: it's going to be a little bit lower because of investments,
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Speaker 4: So coming in beating the consensus and within their target.
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Speaker 4: So you know, there are some select modest negatives in
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Speaker 4: the quarter, but in general hitting all the high points
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Speaker 4: and some I think restoring some confidence for Morgan Stanley.
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Speaker 2: So Allison, where are we just in terms of the
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Speaker 2: big investment banks in terms of headcount? Are they where
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Speaker 2: they need to be? Do they need more downsizing?
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Speaker 3: Where are they?
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Speaker 4: I think, Paul that really is going to depend on
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Speaker 4: if we can get some sustained momentum investment banking fees.
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Speaker 4: So you know, all the managements generally spoke very positively
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Speaker 4: in terms of what we're seeing, you know, talking about
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Speaker 4: the IPO is getting better reception. Maybe there's some better
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Speaker 4: outlook there. Morgan Stanley today just talking about the fact
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Speaker 4: that you know, at some point companies need to execute
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Speaker 4: on things that they need to do in terms of
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Speaker 4: either going public or doing deals, et cetera. But I
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Speaker 4: do think that a lot of the headcount has really
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Speaker 4: been conservative in terms of the cuts we've seen since
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Speaker 4: the boom, because we had such a scramble in that
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Speaker 4: you know, record a twenty twenty one time period. As
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Speaker 4: you recall all the headline stories about the scramble for
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Speaker 4: talent and ratcheting up of pay of junior talent, and
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Speaker 4: so it's really going to depend on if we can
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Speaker 4: see that sustained momentum and investment banking, and then that
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Speaker 4: that headcount gets put to work. If we are disappointed,
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Speaker 4: there could be sort of another look at things.
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Speaker 5: Unfortunately, and didn't they all they paid up for that though,
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Speaker 5: right Like I feel like they had to definitely shell
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Speaker 5: out the money to those bankers this quarter in a
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Speaker 5: different way, No.
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Speaker 4: And compensate revenue in general has been a lot stickier,
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Speaker 4: and so we definitely saw that last year. This quarter
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Speaker 4: we saw the compensation ratios coming in, you know, about
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Speaker 4: in line, showing some good cost control at companies like
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Speaker 4: Morgan Stanley and Goldman where we have the most visibility. However,
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Speaker 4: keep in mind it was a really strong revenue quarter,
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Speaker 4: so again we're going to want to see that revenue
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Speaker 4: continue to support the compensation.
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Speaker 3: Hey, just real quickly thirty seconds.
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Speaker 2: I see the City Group is the best performing of
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Speaker 2: the big banks here here to date. Is this finally
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Speaker 2: Jane Fraser getting listening moving?
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Speaker 4: I mean I think it is, and I think they
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Speaker 4: do have you know, they have a positive story and
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Speaker 4: they have the most potential for improvement. So even though
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Speaker 4: their returns are the weakness, they have a path and
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Speaker 4: you know, Jane Frasier really making some tough moves. We
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Speaker 4: know that City Group has been you know, a story
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Speaker 4: of restructuring it seems like forever, but really making some
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Speaker 4: dramatic cuts and layers, you know, focusing on the core businesses,
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Speaker 4: you know, really taking an acts to some poor markets.
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Speaker 4: So I think there there is a story there.
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Speaker 3: Also.
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Speaker 4: Credit Card, as we said, you know, we've talked about
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Speaker 4: cart is the business that's growing in loans, not the
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Speaker 4: commercial and so that's helping City Group.
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Speaker 3: They're the most exposed. They're a big player there. Yep.
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Speaker 2: All right, Allison, great stuff has always Alison Williams, senior
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Speaker 2: bank analysts for Bloomberg Intelligence breaking down some of the
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Speaker 2: big banks again today Morgan Stanley Bank of America.
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Speaker 3: We had JP Morgan.
9:36
Speaker 2: Last week, So some pretty solid results coming out of
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Speaker 2: the big banks.
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Speaker 5: So we're here at the Bloomberg and EF Annual Energy
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Speaker 5: and Climate Summit. So it brings together corporate executives, government officials,
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Speaker 5: industry leaders to talk about the stuff that's going on
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Speaker 5: in the energy industry, in particular clean power, trade, federal
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Speaker 5: US policy, hydrogen, clean tech, all the stuff. Now, a
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Speaker 5: key figure in all of this comes from DC and
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Speaker 5: his name is David Crane. He's Under Secretary for Infrastructure
10:23
Speaker 5: in the US Department for Energy. He was also CEO
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Speaker 5: of NRG for about twelve years back in the day.
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Speaker 5: And his job is to make all of this stuff
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Speaker 5: work in a realistic fashion.
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Speaker 6: Good luck, David, that's a gun.
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Speaker 3: Thank you. Well. I said, there's a lot of stuff, a.
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Speaker 6: Lot of stuff.
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Speaker 5: So something was you had a speech and a panel
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Speaker 5: and something that you said that really stuck out. You said,
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Speaker 5: demand growth in the US for power is going to
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Speaker 5: be more than we thought for the last ten years.
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Speaker 5: So twenty twelve to twenty twenty two, power demand was
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Speaker 5: up just fifty basis points a year, and now we're
10:55
Speaker 5: looking at five to six percent a year.
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Speaker 6: I tell that to Paul and his eyes glaze over.
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Speaker 6: But it's really important. What does that actually mean?
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Speaker 7: Well, five to six percent in our world is huge.
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Speaker 7: I mean that's that's like tiger economies from the nineteen nineties.
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Speaker 7: And because of the long lead time of most things
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Speaker 7: in the electricity sector, those five to six percent per
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Speaker 7: year pile up if you're not if you're not getting
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Speaker 7: after it. So what it means is and what's very
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Speaker 7: important all this as we look at these transitioning to
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Speaker 7: the clean energy economy, all these new technologies, is you
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Speaker 7: always have to ask the time question, what you need
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Speaker 7: and what time frame, and what are the solutions that
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Speaker 7: fit that land within that time frame?
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Speaker 3: You know.
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Speaker 2: A couple of summers ago, my summer read was the
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Speaker 2: Grid Frame Wires between Americans and our Energy Future. I
11:46
Speaker 2: read that on the beach and people are laughing me
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Speaker 2: like a geek. So I feel like I know what
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Speaker 2: I'm talking about here, and what I know is we
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Speaker 2: need constant investment in our energy grid. And if Alex
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Speaker 2: is right, the energy demand is going to keep increasing.
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Speaker 3: That's even more so.
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Speaker 2: What are some of the key issues that you need
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Speaker 2: to tackle or trying to tackle at least in the
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Speaker 2: short term.
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Speaker 7: Here, Well, first of all, I need to tackle what
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Speaker 7: your summer reading is each Paul, I think you got
12:10
Speaker 7: to get a life exactly.
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Speaker 3: If that's what.
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Speaker 7: I think, well, I mean one big one, the missing link,
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Speaker 7: and I mentioned this on stage as well, is permitting reform.
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Speaker 7: I mean, we're very supportive permitting reform. It takes a
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Speaker 7: lot of different permutations. I'm personally not a policy person.
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Speaker 7: I'm the implementation person. But we just need to do
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Speaker 7: things faster because just the scale of infrastructure that exists
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Speaker 7: under this new legislation, just in my area, by the
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Speaker 7: end this year, we will have invested in over one
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Speaker 7: hundred infrastructure projects that are over one hundred million dollars
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Speaker 7: each and so we're straining the system in many different ways.
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Speaker 7: But permitting it should not be the bottleneck.
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Speaker 5: So to break that down a little bit. When we
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Speaker 5: say permitting, what are we talking about? I say that
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Speaker 5: in terms of like, are we going to have to
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Speaker 5: move power lines underground? For example, do we need more
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Speaker 5: transmission lines if we're going to set up that hydrogen
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Speaker 5: hub or a new nuclear facility, and we need to
13:09
Speaker 5: get that to the grid. Does it mean we need
13:12
Speaker 5: to just try less start over and like do a
13:14
Speaker 5: new grid. Like there's a lot of ways that infrastructure
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Speaker 5: can be used. What does it actually mean for you?
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Speaker 7: Well, of the two that you mentioned specifically, any of them, okay, Well,
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Speaker 7: I would leave aside undergrounding wires because that's more of
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Speaker 7: a climate mitigation thing.
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Speaker 3: It's where you need to do it.
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Speaker 7: It's very important. But in terms of solving the demand issue,
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Speaker 7: the transmission thing breaks into sort of two parts, and
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Speaker 7: the answer is yes and yes we need both. One
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Speaker 7: is we need more transmission lines to move the energy
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Speaker 7: around the country or at least around regions. But then
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Speaker 7: we also need this thing which is grid innovation, which
13:53
Speaker 7: is a series of technologies which are not in the
13:56
Speaker 7: popular mindset, things like reconductoring, where you basically taking existing
14:01
Speaker 7: rights away in the towers and you take down the
14:04
Speaker 7: ceramic circular things and in some cases the wires and
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Speaker 7: you what we call reconductoring, and you can get two
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Speaker 7: to three times the amount of power over the same
14:16
Speaker 7: line and you don't need a ride away. It's cheaper
14:18
Speaker 7: and that's good for rate payers. And we just in
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Speaker 7: fact publish a report about this today at the DOE
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Speaker 7: called the Grid Innovation Liftoff Report, and so there's that,
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Speaker 7: and there's a host of other things, but basically we
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Speaker 7: need all of the above right now.
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Speaker 2: And is this a federal funded issue or is this
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Speaker 2: a federal end state issue?
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Speaker 3: Doesn't go how local does it get? Because I think of.
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Speaker 2: Texas with its own grid, and I'm wondering how should
14:41
Speaker 2: they be integrated, for example, the national grid.
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Speaker 7: I mean going to want that, Yeah, exactly, Yeah, Paul,
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Speaker 7: that's what I'm not touching. I mean, there's a reason
14:50
Speaker 7: that Texas is a sovereign onto itself when it comes
14:53
Speaker 7: to their electric system. But most so, we have a
14:58
Speaker 7: lot of financing tools in the tool chest, but most
15:01
Speaker 7: of them are set up as sort of matching funds.
15:04
Speaker 7: We put up up to fifty percent against fifty percent
15:08
Speaker 7: coming from basically anywhere else that's not federal government. So
15:11
Speaker 7: we say fifty plus percent from non federal sources, and
15:15
Speaker 7: if it states, if it's the private sector, that's all
15:18
Speaker 7: good with us.
15:19
Speaker 6: And that's what you need to see in order to
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Speaker 6: commit the money after that. Yes, yeah, so how does
15:23
Speaker 6: this all square?
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Speaker 5: So the stuff you're talking about, like reconstituting the grid
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Speaker 5: like that, Like that's not sexy cool stuff like clean
15:29
Speaker 5: tech and hydrogen.
15:30
Speaker 6: Right, how much of your job.
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Speaker 5: Is on the energy that we're going to need in
15:35
Speaker 5: fifty years, and how much of that is how do
15:37
Speaker 5: we get more transmission mechanisms, how do we get that
15:40
Speaker 5: plug that we can't get so we can change the grid?
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Speaker 7: You know, Alex, I was getting a little hung up
15:46
Speaker 7: on what's actually sexy in the world of electricity. But
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Speaker 7: I'm glad that you can distinguish between hydrogen on one
15:53
Speaker 7: in transmission. But what I'd say is, first of all,
15:55
Speaker 7: nothing that if I thought that what I was doing
15:59
Speaker 7: was just affecting the twenty fifty like you know, at
16:02
Speaker 7: my age, I wouldn't be doing it.
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Speaker 3: But we are.
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Speaker 7: We're aiming for the Biden administration goal of zero carbon
16:09
Speaker 7: electric sector by twenty thirty five, and so, but you're
16:13
Speaker 7: the premise of your question is correct because of this
16:16
Speaker 7: new awareness of demand issues. I would say that what
16:20
Speaker 7: I've been focused on my two years at the DOE
16:23
Speaker 7: is what does the system look like sort of between
16:25
Speaker 7: twenty twenty eight to twenty thirty five, first of a kind,
16:29
Speaker 7: fast following commercial but because of this new concern, I
16:34
Speaker 7: think we're gonna be even looking at more three to
16:38
Speaker 7: five year solutions. And that's where things like the grid
16:40
Speaker 7: innovations are important, because that's a three to five year solution.
16:44
Speaker 2: David, what are you seeing from the major utility companies
16:46
Speaker 2: in the United States? Are they making the investments they
16:49
Speaker 2: need to make to make this transition?
16:52
Speaker 6: Will they be allowed to maybe allow exactly.
16:56
Speaker 7: Well, it's I mean, first of all, I think what
16:58
Speaker 7: I would say just in the last year and talking
17:00
Speaker 7: to the utility cos and I would bet a lot
17:05
Speaker 7: of money that you're going to be talking to some
17:06
Speaker 7: here on your show today so they can probably speak
17:10
Speaker 7: for themselves, is first of all, there's now universal concern
17:14
Speaker 7: about this, where that didn't exist a year before. I
17:17
Speaker 7: think they're still in the situation where their chief financial
17:21
Speaker 7: officers are saying, look, this is a really expensive time
17:24
Speaker 7: to raise money in the private sector. And we have
17:27
Speaker 7: a program within our Loan Program Office called the seventeen
17:31
Speaker 7: oh six program, which utilities qualify for and at current
17:35
Speaker 7: prevailing interest rates, the interest advantage, but I'm told by
17:40
Speaker 7: utilities is somewhere between one hundred and fifteen and two
17:44
Speaker 7: hundred basis points and we go large. I mean, we
17:47
Speaker 7: have two hundred and fifty billion dollars of loan capacity.
17:50
Speaker 7: So we're working with a bunch of utilities to see
17:53
Speaker 7: if that could become part of their cap structure. But
17:56
Speaker 7: as you say, they're under pressure not to raise rates.
17:59
Speaker 7: And it's just the nature of investment in electric infrastructure
18:03
Speaker 7: is like you build something today, you know it has
18:05
Speaker 7: to be paid for today. The benefits of it, you know,
18:08
Speaker 7: play out over fifty years.
18:10
Speaker 3: But so it is attention.
18:12
Speaker 7: But no one wants to run out of power.
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Speaker 5: No, And I guess one of the key issues that
18:17
Speaker 5: I feel like has really pivoted interest in the sector
18:21
Speaker 5: is AI and data centers. Right, Like we all knew
18:23
Speaker 5: you got to plug in an EV that's going to
18:25
Speaker 5: use electricity. We all knew that stuff. But now that
18:27
Speaker 5: people really seem to care, because tech companies care. Do
18:31
Speaker 5: you spend a lot of time talking in tech companies?
18:33
Speaker 5: Do they call you oral they call someone else in
18:34
Speaker 5: your office?
18:36
Speaker 7: Increasingly? If you would, I would say, you know the
18:40
Speaker 7: dee why I got their head? Sort of their natural constituencies,
18:43
Speaker 7: like you know, traditional energy companies, new energy companies, but
18:48
Speaker 7: the tech companies have loomed larger and larger and have
18:50
Speaker 7: become more and more frequent visitors and at very high
18:54
Speaker 7: levels too, not just you know, the data center person,
18:57
Speaker 7: like the senior executives of these and that's very important
19:00
Speaker 7: because I think they're a huge partner in this. And
19:04
Speaker 7: you know, the thing about electricity is we always say
19:07
Speaker 7: the era of big power plants, supply would be added
19:11
Speaker 7: in big chunks, but demand would grow and there'd be
19:13
Speaker 7: occasional imbounces. But now with these data centers, demand is
19:17
Speaker 7: growing in these big chunks and in specific places which
19:21
Speaker 7: they won't tell you where they are, right because that's
19:25
Speaker 7: that's one of their competitive secrets, right, So we need
19:29
Speaker 7: to have a partnership with them, and overall, I think
19:31
Speaker 7: it's a great thing.
19:32
Speaker 5: All right, David, thanks a lot. It was really great
19:34
Speaker 5: to get your perspective. I really enjoyed talking to you.
19:36
Speaker 5: Thank you so much for David Crean, Undersecretary for Infrastructure
19:39
Speaker 5: at the DOE.
19:40
Speaker 6: You really read that book, I'm I did.
19:43
Speaker 3: Yep. Keith grossmaner recommendation, you win, yeps. Very good.
19:49
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
19:53
Speaker 1: weekdays at ten am Eastern on fo car Play and
19:56
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19:59
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.
20:03
Speaker 5: Paul and I we are here in our Continental Hotel
20:06
Speaker 5: right here in midtown Manhattan at the Bloomberg a NEF Summit.
20:08
Speaker 5: We have global leaders, you have thought leaders, you have
20:11
Speaker 5: CEOs kind of getting together and discussing the clean energy,
20:14
Speaker 5: green energy transition, how to get there, and also how
20:17
Speaker 5: to satisfy the demand for power that we're seeing right now,
20:19
Speaker 5: which is enormous. Joining us here now on site is
20:23
Speaker 5: Pedro Pizarro, President and CEO of Edison International. And that's
20:28
Speaker 5: just two buckets for you, right like, how do you
20:30
Speaker 5: decarbonize the grid and get to that goal? And then
20:33
Speaker 5: how do you match the power demand today from data
20:35
Speaker 5: centers AI to people wanted charging their evs at home.
20:40
Speaker 5: Let's go to the ladder first. What kind of demand
20:43
Speaker 5: are you seeing? Who's calling you up?
20:45
Speaker 8: Well, I can tell you from a Southern California Edison perspective,
20:48
Speaker 8: our utility we had had flat growth for the last
20:52
Speaker 8: fifteen years. We're now seeing something like two percent load
20:54
Speaker 8: growth and in our state, a lot of vatas transportation,
20:57
Speaker 8: electrification I'm also chair of the Edison Electric Constitute, which
21:01
Speaker 8: represents the investor own utilities across the country, about seventy
21:03
Speaker 8: percent of the load UH. Two years ago, EI members
21:07
Speaker 8: were forecasting something like a two percent load growth over
21:10
Speaker 8: the next years ahead. The most updated numbers are four
21:13
Speaker 8: point seven percent, and I have colleagues in some states
21:16
Speaker 8: that are seeing five six seven percent. So who's who's
21:19
Speaker 8: calling it is electrification in places like California more broadly
21:23
Speaker 8: across the country, but I think we're more leading edge there.
21:26
Speaker 8: It is data center growth that you read a lot
21:28
Speaker 8: about that. And then it's also the repatriation of manufacturing.
21:32
Speaker 8: You know, the bipartisan Infrastructure Law is working and it's
21:35
Speaker 8: bringing back a lot of you know, manufacturing into the country.
21:38
Speaker 8: And that's another source.
21:40
Speaker 2: Oh interesting, So can you, being your company and your industry,
21:44
Speaker 2: can you handle that increase in load?
21:47
Speaker 9: Yes?
21:48
Speaker 8: There will be there, yes, and there will be some
21:51
Speaker 8: bumps in the road, right. I was sharing with Alex
21:54
Speaker 8: earlier that it's not the first time in our history
21:56
Speaker 8: of the industry we've seen this, right, rural electrification, air
22:00
Speaker 8: conditioning load, So we lived through these periods. It's been
22:04
Speaker 8: the last fifteen years or so that it's been fairly flat.
22:07
Speaker 8: So how do we handle it in the near term? Right,
22:10
Speaker 8: you see a lot of focus of utilities working in
22:12
Speaker 8: their various regions' power companies, working with regional transmission organizations,
22:17
Speaker 8: and you know, working with customers to make sure we're
22:20
Speaker 8: using every tool available. Demand site management is important. Energy
22:24
Speaker 8: efficiency is important, but so is making sure that we
22:27
Speaker 8: can maintain and in some cases expand existing resources, and
22:30
Speaker 8: ultimately we need to add new resources to the system.
22:33
Speaker 6: How do you pay for that?
22:34
Speaker 5: Because as yields have moved higher, stock moves lower and
22:38
Speaker 5: then it's more expensive to borrow.
22:40
Speaker 6: How do you do it?
22:41
Speaker 8: Well, you know, it is an investment in infrastructure that's needed,
22:44
Speaker 8: and this is an industry that's been investing for a
22:45
Speaker 8: long time. Our members at EI have invested over a
22:49
Speaker 8: trillion dollars over the last decade on infrastructure, one hundred
22:52
Speaker 8: and sixty eight billion dollars last year alone.
22:54
Speaker 6: Right, So it's eventually the right pair, right.
22:55
Speaker 8: It isn't eventually the rate pair, right, and so we
22:57
Speaker 8: have a responsibility to make sure that that investment is
23:00
Speaker 8: economics being done thoughtfully. It's been doing done efficiently, but importantly,
23:05
Speaker 8: this investment has multiple users. Right, there is the near
23:09
Speaker 8: term need to keep up with demand, but there's also
23:12
Speaker 8: the longer term need for investing tordsy carbonization.
23:16
Speaker 9: Right.
23:16
Speaker 8: Then, the industry's been going as clean as we can,
23:19
Speaker 8: as fast as we can, but while maintaining reliability and affordability.
23:22
Speaker 8: And so those investments are the same investments that are
23:25
Speaker 8: needed to build out the transmission grid, to add renewable resources,
23:28
Speaker 8: to add storage, and that helps with climate change mitigation.
23:33
Speaker 8: There's also investment that we're needing to put in to
23:35
Speaker 8: deal with climate change adaptation, right, the effects of extreme weather,
23:39
Speaker 8: the effects we've seen initially in California and now across
23:42
Speaker 8: the country in wildfire. Right, so my own company has
23:45
Speaker 8: been investing billions of dollars to redesign the system to
23:48
Speaker 8: harden it against wildfires. Other colleagues are having to do
23:51
Speaker 8: that now. So all of these investments accrue to the
23:53
Speaker 8: customer customer benefit, whether it's to keep the system safer,
23:58
Speaker 8: keep community safer, and also to support the demand growth
24:01
Speaker 8: that we're seeing.
24:02
Speaker 2: So Pedro just before early this morning, Alison and I
24:05
Speaker 2: spoke to David Crane, under Secretary for Infrastructure at the
24:08
Speaker 2: US Department of Energy and he said, one of his
24:10
Speaker 2: major goals over the next several years is to make
24:13
Speaker 2: permitting easier, presumably to allow companies like yours to make
24:17
Speaker 2: these investments that maybe in a quicker manner.
24:20
Speaker 3: Are you seeing that or what do you need to see?
24:22
Speaker 8: Absolutely need it? Okay, And so if you gave me
24:24
Speaker 8: a magic one, then gave me one wish for the industry,
24:27
Speaker 8: it would be that.
24:27
Speaker 6: Okay, I don't blame you, all right, And.
24:29
Speaker 8: We have other challenges supply chain, labor availability, but it's
24:32
Speaker 8: really citing and permitting the needs the most help. Just
24:35
Speaker 8: to frame it for you little bit, Paul, the analysis
24:37
Speaker 8: that we've done as Edison for California and what we'll
24:40
Speaker 8: take to the carbonics the whole California economy by twenty
24:44
Speaker 8: forty five, you know, it says stas net zero goal
24:46
Speaker 8: still feasible, right, but it will require significant investment for renewables,
24:51
Speaker 8: for storage for the grid, three hundred and seventy billion
24:54
Speaker 8: dollars of investment state wide through twenty forty five. That analysis,
24:58
Speaker 8: by the way, from an affordability person, back to your
25:00
Speaker 8: comment earlier, Alex, we do see that that will put
25:03
Speaker 8: pressure pressure on electric rates and bills, but because it's
25:07
Speaker 8: a transition, right, A lot of that electrification will be
25:10
Speaker 8: removing uses in the economy that they are using combustion
25:14
Speaker 8: processes with fossil fuels. These are more efficient technologies, right.
25:17
Speaker 8: The electric car is more efficient than an internal combustion
25:20
Speaker 8: engine car. We see the total energy build for our
25:23
Speaker 8: average customer electric plus gas plus gasoline going down by
25:27
Speaker 8: forty percent in real turns between now and twenty forty five.
25:30
Speaker 8: So that goes to these investments having a co benefit
25:33
Speaker 8: of affordability. And so as we look at how we,
25:39
Speaker 8: you know, proceed with this kind of investment, you know,
25:42
Speaker 8: we have to keep in mind that it has those
25:44
Speaker 8: multiple benefits.
25:45
Speaker 5: So all of it has to work at the same
25:47
Speaker 5: time for that to be that forty CLINEB.
25:50
Speaker 8: Solute, and we need to be able to get the
25:51
Speaker 8: steel in the ground through setting and permitting, and so
25:54
Speaker 8: part of our analysis showed that the rate at which
25:57
Speaker 8: we add transmission will need to be four times the
25:59
Speaker 8: annual rate that it's been historically. The rate at which
26:02
Speaker 8: we add distribution the lower voltage wires will it to
26:06
Speaker 8: be ten times a rate. So when David Crane talked
26:08
Speaker 8: about its heading on permitting, absolutely needed and it's help
26:11
Speaker 8: that we need at both the federal and the state
26:13
Speaker 8: and even the local levels.
26:14
Speaker 6: Before we let you go.
26:16
Speaker 5: When you talk about types of energy, what are you
26:19
Speaker 5: looking at? What means green to you?
26:22
Speaker 8: A lot of things and we need all of it right.
26:24
Speaker 8: It's the traditional renewables that are commercially available today, like
26:28
Speaker 8: onshore wind, solar, geothermal. It's new technologies offshore wind, next
26:34
Speaker 8: generation geothermal that might be using you horizontal drilling techniques.
26:38
Speaker 8: It's nuclear right because nuclear is carbon free, and so
26:42
Speaker 8: investments needed their storage.
26:44
Speaker 3: Today we're really.
26:45
Speaker 8: Relying on lithium ion chemistry. We need different chemistries and
26:48
Speaker 8: the Department of Energy has been a prime mover in investing,
26:52
Speaker 8: putting our tax dollars to good work to find alternate chemistries.
26:56
Speaker 8: So it really is all of the above.
26:58
Speaker 2: If I'm an investor, do I invest in the utility industry?
27:03
Speaker 2: It seems like you guys got years and years and
27:05
Speaker 2: years of investment. What do you tell investors as to
27:08
Speaker 2: the returns that you try to deliver.
27:11
Speaker 8: It's a long, good road ahead in terms of the
27:14
Speaker 8: infrastructure investment that's needed through our industry. At our company,
27:18
Speaker 8: we talk about how we have set a you know,
27:20
Speaker 8: growth rate guidance five to seven percent earnings per share
27:24
Speaker 8: growth rate from mouth through twenty twenty eight. We see
27:28
Speaker 8: that that need for investment is supported both by these
27:32
Speaker 8: immediate needs but also by long term state policy in California.
27:37
Speaker 8: I think, you know, my peers across the country are
27:39
Speaker 8: all seeing a similar sort of phenomenon where the investment
27:42
Speaker 8: is absolutely needed. It's core to the economy. The electric
27:46
Speaker 8: sector is five or six percent the GDP, but it
27:48
Speaker 8: powers the other ninety four to ninety five percent.
27:50
Speaker 3: There you go, all right, Pedro Pizzaro, thank you so
27:52
Speaker 3: much for joining us. Really appreciated.
27:54
Speaker 2: Pedro Pisato, President and Chief executive Officer of Edison International,
27:58
Speaker 2: here at the Bloomberg New Energy Finance Conference here in
28:02
Speaker 2: the Intercot at the Hotel in Midtown Manhattan, looking at
28:07
Speaker 2: the energy transition to cleaner energies.
28:12
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
28:16
Speaker 1: weekdays at ten am Eastern on applecar Play and Android
28:19
Speaker 1: Auto with the Bloomberg Business app. You can also listen
28:22
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28:26
Speaker 1: just Say Alexa, playing Bloomberg eleven thirty.
28:30
Speaker 5: We are live from an Intercontinental Hotel right here on
28:33
Speaker 5: fortieth Street in Midtown Manhattan. We're at Bloomberg's any F
28:36
Speaker 5: annual Energy and Climate Summit, bringing together corporate executives, government officials,
28:40
Speaker 5: and industry leaders all to talk about how we get
28:43
Speaker 5: to clean energy, what the policy is like, what the
28:45
Speaker 5: clean power is like, and how we get there. A
28:48
Speaker 5: big part of that story is actually going to be technology.
28:51
Speaker 5: It's the AI and the data centers that are in
28:53
Speaker 5: part responsible for the huge bump and power demand that
28:56
Speaker 5: we're going to see over the next few years. So
28:58
Speaker 5: luckily we have someone who has to deal with this
29:00
Speaker 5: on a day to day basis. We're joined now by
29:03
Speaker 5: Amanda Peterson Coreo. She's a global head of Data Center
29:06
Speaker 5: Energy at Google.
29:08
Speaker 6: So great to be here with you.
29:09
Speaker 10: Thank you so much for having me.
29:10
Speaker 3: My pleasure.
29:11
Speaker 5: So you're the person that has to power the data
29:14
Speaker 5: centers and call up the power providers and energy companies
29:16
Speaker 5: and be like, guys, help me out.
29:18
Speaker 6: It's not me, it's a whole team of people.
29:20
Speaker 10: So I am not the sole person doing that, but
29:22
Speaker 10: yes that our job is really to figure out how
29:25
Speaker 10: do we enable Google to grow and how do we
29:27
Speaker 10: do that in a way that's sustainable load growth over time.
29:30
Speaker 2: All right, So what we hear what Alex and I
29:33
Speaker 2: hear from really we've just started learning about this over
29:36
Speaker 2: the last couple of years, is the demand from a
29:38
Speaker 2: lot of these technology companies. And we've had CEOs of
29:41
Speaker 2: utilities say, I'm talking to you tech executives these days.
29:44
Speaker 3: I've never talked to them in the past. Yeah, what
29:46
Speaker 3: are you trying to do?
29:47
Speaker 2: You think about the next five to ten years of
29:49
Speaker 2: Google's energy needs.
29:51
Speaker 3: You're not just going to plug into a coal plant,
29:53
Speaker 3: I'm guessing now, absolutely, what are you thinking about these days?
29:56
Speaker 10: So I think we're doing a number of things, right.
29:59
Speaker 10: We see, as you mentioned, a wave of demand growth
30:01
Speaker 10: that we haven't seen in the last two decades in
30:03
Speaker 10: the US, it's been pretty flat to stagnant. Data centers,
30:07
Speaker 10: as you mentioned, are getting a lot of attention. But
30:09
Speaker 10: actually they're just a part of really what's reindustrialization and
30:13
Speaker 10: electrification of manufacturing, transport, heating, right, and digitization is just
30:19
Speaker 10: one role of that. And so we have to look
30:22
Speaker 10: at that and think about how are we going to
30:23
Speaker 10: grow in this new market landscape.
30:25
Speaker 3: We do a few things.
30:26
Speaker 10: We see our role in working in partnership with our
30:29
Speaker 10: utilities to figure out how can we bring new firm capacity,
30:35
Speaker 10: so not just clean energy, but firm clean capacity to
30:39
Speaker 10: the grid so that we can really meet those demand
30:43
Speaker 10: needs over the next decade. We also look at how
30:45
Speaker 10: we can do things more efficiently because really what we're trying,
30:48
Speaker 10: what the challenge we're seeing is the amount of growth
30:52
Speaker 10: we have over the next decade total collectively on the system.
30:55
Speaker 10: So what we're trying to do is make new efficient processes.
30:58
Speaker 10: So last year we innovate a new way to buy
31:01
Speaker 10: and sell electricity, reducing the time by eighty percent with
31:04
Speaker 10: our partners at Level ten Energy, and this enabled us
31:07
Speaker 10: to get one and a half gigawatts again in eighty
31:09
Speaker 10: percent of the time it used to take us in
31:11
Speaker 10: just one year. So things like this is how we're
31:13
Speaker 10: working in partnership to meet that need.
31:16
Speaker 6: Oh so many questions.
31:17
Speaker 5: Okay, so the first one is do you is it
31:20
Speaker 5: going to be just for the data centers we take
31:22
Speaker 5: that Is it going to be let me just plug
31:24
Speaker 5: that data center into the grid, or is it going
31:26
Speaker 5: to be that these data centers become their own sort
31:28
Speaker 5: of mini power generators, either by having like a small
31:31
Speaker 5: nuclear reactor near them to power it.
31:34
Speaker 6: How do you see that relationship evolving?
31:37
Speaker 10: Yeah, I mean there's many forms to get power as
31:39
Speaker 10: you as you pointed out, the most efficient and the
31:42
Speaker 10: best is to be grid connected.
31:43
Speaker 3: Right.
31:43
Speaker 10: The reason we have an electricity grid is the evolution
31:46
Speaker 10: of is it doesn't make sense to have all of these.
31:49
Speaker 5: But does that imply that if you turn on your
31:51
Speaker 5: data center, I lose my electricity?
31:52
Speaker 10: Absolutely not, not at all. Actually, data centers actually provide
31:57
Speaker 10: a lot of voltage stabilization to the grid because as
32:00
Speaker 10: we're a firm and constant load over time. Now when
32:02
Speaker 10: we connect to a grid, we ensure that we're also
32:05
Speaker 10: bringing in new generation, new transmission to help power and
32:08
Speaker 10: expand the grid. Definitely not take away from the electricity
32:11
Speaker 10: that's already providing services to others.
32:13
Speaker 3: So I'm guessing you can't do it alone.
32:15
Speaker 2: I'm guessing there's can be some partnerships along the way,
32:17
Speaker 2: and they've got one with Microsoft and new Core.
32:20
Speaker 3: Yeah. Tell us about that and how that could be
32:22
Speaker 3: a template for Yeah.
32:23
Speaker 10: So one of the challenges we saw is exactly what
32:26
Speaker 10: I just touched on, that we're seeing a lot of
32:31
Speaker 10: intermittent capacity from new clean generation but we're not seeing
32:34
Speaker 10: the same uptick and firm clean capacity onto the grid.
32:38
Speaker 10: And that's because this technology is still more nascent relative
32:41
Speaker 10: to more traditional thermal assets like gas generators. And so
32:46
Speaker 10: we said, we've got to show that the demand is there,
32:48
Speaker 10: and so we've partnered with Microsoft and new Core to say,
32:52
Speaker 10: let's aggregate our demand and think about how we can
32:55
Speaker 10: can drive scale basically for this new and get that
33:00
Speaker 10: onto the grid faster. So we announced this a few
33:03
Speaker 10: weeks ago. We're here with them today. We're going to
33:05
Speaker 10: speak out a lunch session today to say more about
33:07
Speaker 10: what we're looking for, how we can help and really trying.
33:10
Speaker 6: To drive that.
33:11
Speaker 5: Going back to how data centers provide stability to the grid,
33:14
Speaker 5: how I've heard that a lot that like a data
33:17
Speaker 5: center can help provide electricity because you price sensitive, I
33:21
Speaker 5: don't know, I've heard lots of things.
33:22
Speaker 6: How do you help?
33:23
Speaker 10: I mean part of it is that unlike you who
33:27
Speaker 10: may be turning on your lights early in the morning
33:29
Speaker 10: or late at night and then dropping the day, that's
33:32
Speaker 10: hard for the grid to manage and frequency regulation, a
33:35
Speaker 10: data center is predictable and having predictable load is something
33:39
Speaker 10: that utilities and the grid greatly value because then they
33:42
Speaker 10: can plan better around it and not have to turn
33:45
Speaker 10: on and off generation resources.
33:47
Speaker 6: I see, okay, all.
33:48
Speaker 2: Right, So when I look at the capex line of
33:50
Speaker 2: Google and it's the GDP of more than most countries
33:53
Speaker 2: here and a lot of us building new data centers
33:56
Speaker 2: and capacity there, do they come to you like day
33:59
Speaker 2: one and say we're going to get the cheapest energy,
34:01
Speaker 2: We're going to get the most efficient energy. How does
34:04
Speaker 2: the energy aspect come into all the capex that they're
34:07
Speaker 2: spending in terms of day data entergy.
34:09
Speaker 3: Yeah.
34:09
Speaker 10: Absolutely, they were part of the data center team that
34:12
Speaker 10: goes out and decides where do we cite our next
34:14
Speaker 10: data center? What makes sense and power is absolutely at
34:16
Speaker 10: the core of everything we do. As mentioned, it's where
34:20
Speaker 10: do we have access to that clean capacity that can
34:24
Speaker 10: really deliver us growth, but also what markets can we
34:28
Speaker 10: participate in that give us the ability to have customer choice.
34:32
Speaker 10: We operate in over eighty electricity grids around the world.
34:35
Speaker 10: No two unfortunately are the same, but some we have
34:40
Speaker 10: a lot of choice and deregulated markets and ourtos, But
34:45
Speaker 10: there's a lot more we can do and partner with
34:48
Speaker 10: and in markets that are fully regulated we were looking
34:51
Speaker 10: to partner with our utilities to say, hey, how can
34:54
Speaker 10: we innovate, how can we evolve? How can we take
34:57
Speaker 10: what the same old tariff that we did for ten years,
35:00
Speaker 10: how do we make that different to meet the needs
35:02
Speaker 10: of our time.
35:02
Speaker 6: That's what I was wondering about.
35:03
Speaker 5: Being your own little power generator, like partnering with a
35:06
Speaker 5: company and having its own your own nuclear power station,
35:09
Speaker 5: for example, to power that data center. Is that something
35:11
Speaker 5: that we're going to see that kind of model.
35:13
Speaker 10: I think we're exploring absolutely all options. As you've seen,
35:17
Speaker 10: it's been very hard to grow nuclear in this country,
35:20
Speaker 10: so we have to look at that and we're hoping
35:23
Speaker 10: that's one of the technologies we're absolutely looking at in
35:25
Speaker 10: this partnership with Microsoft and New course.
35:27
Speaker 6: Have you had to be turned away at all?
35:29
Speaker 5: Like have you like been sourcing an area and then
35:31
Speaker 5: you talk to the utility and until he's like, I
35:33
Speaker 5: can't do this for you.
35:34
Speaker 6: I'm sorry. Is that happened yet? I think it's more.
35:37
Speaker 10: You know, I like to talk about the grid and
35:39
Speaker 10: meeting capacity is you can do it with time. So
35:42
Speaker 10: it's just a matter of when do you need to
35:45
Speaker 10: serve load versus how quickly can you build whatever it is,
35:48
Speaker 10: transmission or generation to serve that load. And so what
35:52
Speaker 10: we have found is maybe we can't always meet our
35:54
Speaker 10: time schedules on the time that we would like, and
35:56
Speaker 10: so we have to look at a tion that's interesting.
35:59
Speaker 3: How's the US grid versus others you've seen around the world.
36:03
Speaker 10: Oh boy, that is a big question that we do
36:05
Speaker 10: not have time today. Well, first of all, the US
36:07
Speaker 10: is it one grid, as you know, it's minigrids and
36:09
Speaker 10: so I think in explaining that to people, it's hard
36:12
Speaker 10: for them to understand. Again, you have a mix of
36:15
Speaker 10: everything here in the US, which is very different when
36:17
Speaker 10: we talk about the rest of the world.
36:18
Speaker 3: We talk about Europe.
36:19
Speaker 10: Europe is a really interesting integrated system because you're actually
36:23
Speaker 10: going cross countries and I think it actually there's a
36:27
Speaker 10: lot of things that work really well there within our
36:29
Speaker 10: own country. We have trouble going across states y Okay
36:33
Speaker 10: and building that transmission to deliver the generation to where
36:37
Speaker 10: the loads are actually located. So I think that's some
36:40
Speaker 10: of the interesting challenges other places in the world. Each
36:42
Speaker 10: country really has its own unique system. It's only Europe
36:46
Speaker 10: that you really see that multi country grid really playing out.
36:50
Speaker 6: Something that works for Europe.
36:51
Speaker 5: Honestly, that's something you're usually known here before we let
36:55
Speaker 5: you go. When you talk about sort of the advanced
36:56
Speaker 5: clean technology and how you're working with Microsoft and new Core,
37:00
Speaker 5: what do you think those advanced clean technologies are.
37:02
Speaker 10: Yeah, there's a number of them. We talked about maybe
37:06
Speaker 10: seeing advanced nuclear. We already last year just had our
37:09
Speaker 10: first enhanced geothermal extraction project come online with Ferbo here
37:15
Speaker 10: in the US, and so we're buying energy from that project.
37:19
Speaker 10: We're also looking at new texts, including carbon sequestration. It's
37:22
Speaker 10: going to have to be part of the solution in
37:24
Speaker 10: our view, and we continue to look at hydrogen and
37:27
Speaker 10: in long duration energy storage.
37:29
Speaker 6: So interesting, Amanda, Thank you so much.
37:31
Speaker 5: Madam Peterson COOREO, Global head of Data Center Energy over
37:34
Speaker 5: at Google.
37:35
Speaker 6: You don't get much sleep, do you?
37:36
Speaker 3: I do not.
37:37
Speaker 6: Actually I took a red eye here, so.
37:39
Speaker 3: Oh, there we go.
37:40
Speaker 6: Okay, I was just kidding, but I guess that's true.
37:42
Speaker 5: That's just so interesting because I feel like when I
37:44
Speaker 5: talk to my energy guys, you need these guys. You
37:46
Speaker 5: need big tech companies to say take this seriously or
37:48
Speaker 5: else it's gonna be very hard to move the needle.
37:50
Speaker 3: So what is your summer book going to be? The Grid?
37:53
Speaker 6: The Grid, The Grid. I will read it and we
37:55
Speaker 6: will compare notes.
37:55
Speaker 2: Yes, the could talk to now, we could talk to Amanda,
37:58
Speaker 2: like at a little higher level.
37:59
Speaker 6: Okay, we'll do that. We'll do that.
38:00
Speaker 3: It's actually a pretty good grid.
38:02
Speaker 2: I learned a lot about electricity in the United States.
38:07
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
38:11
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38:15
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Speaker 1: just say Alexa playing Bloomberg eleven thirty.
38:25
Speaker 5: I'm Alexi alongside paulse meeting. We are at Bloomberg Intelligence
38:29
Speaker 5: Radio and we are live in an Intercontinental hotel right
38:32
Speaker 5: here in Midtown Manhattan for Bloomberg an ef summit where
38:35
Speaker 5: we talk to all the leaders and policymakers and CEOs
38:38
Speaker 5: and how we get from where we are now and
38:40
Speaker 5: then to decarbonize in the next three decades. Well, joining
38:43
Speaker 5: us now is a very special guest, Ethan Zindler, Climate
38:46
Speaker 5: Counselor for the US Department of Treasury, which is already cool.
38:49
Speaker 5: But the cooler part is he used to work at
38:50
Speaker 5: Bloomberg an EF and it's been a while, so they've
38:52
Speaker 5: seen you.
38:53
Speaker 6: How are you?
38:53
Speaker 9: I'm good? How are you?
38:54
Speaker 6: How's your different job in DC?
38:57
Speaker 9: It's definitely different.
38:58
Speaker 3: But it's great.
38:58
Speaker 6: Do they have snacks like they did?
39:01
Speaker 9: I bring bags of almonds.
39:03
Speaker 3: In from time to time. He doesn't get them, which
39:05
Speaker 3: we share.
39:06
Speaker 6: Well, that's one that's so nice. All right, So let's
39:09
Speaker 6: talk about what you're working on right now.
39:10
Speaker 5: What is your job as a climate counselor to the
39:12
Speaker 5: US Department of Treasury.
39:14
Speaker 9: So you know, the Treasury Department is across a lot
39:16
Speaker 9: of different things in the climate space, and we have
39:19
Speaker 9: multiple divisions that are working on things everything from the
39:22
Speaker 9: International Affairs Office, Domestic Finance Office. We have a Federal
39:26
Speaker 9: Insurance Office that thinks about some of these climate issues
39:28
Speaker 9: as well. So my job really is to try to
39:31
Speaker 9: coordinate some of those activities across the department, to collaborate
39:35
Speaker 9: on some of the key issues, and most often that's
39:37
Speaker 9: been on the Inflation Reduction Act, but other things as well,
39:40
Speaker 9: and also to provide some council to the Secretary, as
39:43
Speaker 9: the title implies, on some of these key issues.
39:46
Speaker 2: What are the key issues you guys are focusing on now?
39:48
Speaker 2: What are the most important mandates right now as we
39:51
Speaker 2: try to navigate this change.
39:53
Speaker 9: Yeah, so there's a lot of things going on, but
39:55
Speaker 9: certainly the implementation of the Inflation Reduction Act as front
39:59
Speaker 9: and center for US Treasury a good deal, and the
40:02
Speaker 9: majority of the funds overall that are aimed at clean
40:06
Speaker 9: and green initiatives would go through the tax code with
40:10
Speaker 9: all the rules written and implemented over time, and so
40:13
Speaker 9: a lot of what we spent our time on doing
40:16
Speaker 9: is writing some of those rules. So that's one thing.
40:18
Speaker 9: Other things, indeed, on the international front, working with some
40:22
Speaker 9: of our partners and some of the multilateral development banks
40:25
Speaker 9: on some of the work that they're doing around evolution
40:27
Speaker 9: and thinking more around climate issues. The Treasury also works
40:30
Speaker 9: very closely with the Green Climate Fund and the other
40:32
Speaker 9: funds that are focused on multi climate development, so working
40:37
Speaker 9: with them on that stuff. And then finally, maybe one
40:39
Speaker 9: last topics on insurance, which you've been doing a lot
40:42
Speaker 9: of work and thinking about as well.
40:43
Speaker 5: So let's go the IRA for a moment, because the
40:45
Speaker 5: big hubblebloo was about hydrogen for a little while, so
40:48
Speaker 5: was how do you qualify for the hydrogen tax credit.
40:50
Speaker 5: Does a hydrogen need to come from clean energy? Can
40:53
Speaker 5: it be sort of carbon captured natural gas or can
40:56
Speaker 5: it be to straight up natural gas? That part of
40:59
Speaker 5: it sort of skated by, okay, But then everyone started
41:02
Speaker 5: talking about how you qualified clean energy when it comes
41:05
Speaker 5: to hydrogen an hour for hour or like sort of
41:07
Speaker 5: a yearly base load, and that was a big deal
41:10
Speaker 5: for a lot of these producers. And talk me through
41:12
Speaker 5: how you guys thought about it, would you think about it?
41:14
Speaker 6: What the problem was?
41:15
Speaker 3: Sure?
41:16
Speaker 9: So first I'm going to stop and take credit for
41:17
Speaker 9: the fact that the IRA is, to be clear, the
41:20
Speaker 9: most important piece of climate legislation ever passed in the
41:23
Speaker 9: United States, and the level of investment that we've seen
41:26
Speaker 9: overall has been really pretty terrific. Two hundred and fifty
41:30
Speaker 9: billion by one count in the first twelve months after
41:33
Speaker 9: it passed, and we've seen over six hundred billion in
41:35
Speaker 9: manufacturing since the start of this term. On the specifics
41:39
Speaker 9: of the forty five V Hydrogen Tax Credit, look, the
41:42
Speaker 9: way we wrote the rules, and to be clear, a
41:45
Speaker 9: draft version of the rule and we've drafted it, was
41:48
Speaker 9: that we effectively took our Q entirely from the law,
41:53
Speaker 9: and the law is very clear about saying that you
41:56
Speaker 9: had to think about what CO two emissions were and
41:59
Speaker 9: referenced the clean air. It also referenced not to get
42:02
Speaker 9: too wonky, a particular model for tracking emissions called the
42:05
Speaker 9: Greek model, and so we really wrote our draft guidance
42:08
Speaker 9: to be as compliant with that as we could, and
42:11
Speaker 9: that included taking into account what we called induced emissions,
42:14
Speaker 9: that's emissions that might be created by taking some of
42:17
Speaker 9: existing zero carbon generation and allocating it to something else.
42:21
Speaker 9: So we really sought to be, you know, as clear
42:24
Speaker 9: as we could. But again, to be clear, it's draft guidance,
42:27
Speaker 9: and we've certainly received comments. We've received I would say
42:30
Speaker 9: no less than thirty thousand comments plast I checked. So
42:33
Speaker 9: we're working our way through those and standby will eventually
42:37
Speaker 9: have the final rule drafted this this year.
42:40
Speaker 2: So Ethan, as we make this transition to a cleaner
42:44
Speaker 2: sourcing of energy, one of the objectives I think is
42:47
Speaker 2: to reduce reliance on China and maybe some other folks
42:50
Speaker 2: around the world and maybe Onshore or Friendshire more of
42:54
Speaker 2: our energy infrastructure.
42:56
Speaker 3: How does that factor into your work?
42:58
Speaker 9: Quite a lot, I mean, and I think it's something
42:59
Speaker 9: that the second Scretary has been very out front on.
43:02
Speaker 9: I was with her last month in Chile where we
43:05
Speaker 9: were having conversations with government leaders there about some of
43:08
Speaker 9: the opportunities around so called French shoring, and we visited
43:12
Speaker 9: a lithium hydroxide processing plant where those that lithium is
43:15
Speaker 9: being exported to the US and elsewhere to make batteries.
43:20
Speaker 9: We are also the Secretary has also had some very directing,
43:23
Speaker 9: candid conversations with Chinese leadership and just got back from
43:27
Speaker 9: Beijing last Wednesday, and these issues around over supply and
43:31
Speaker 9: ore for capacity or things that have come up. But
43:33
Speaker 9: it's also our view that it's a very important and
43:36
Speaker 9: productive to continue to have conversations, and so actually at
43:39
Speaker 9: this literally almost at this very moment, we're continuing with
43:42
Speaker 9: those back at the Treasury Department through two working groups
43:45
Speaker 9: that we have ongoing with the Chinese to continue those conversations.
43:49
Speaker 5: I was at an energy function in Houston a couple
43:51
Speaker 5: of weeks ago and Secretary of Grand Home was there
43:54
Speaker 5: and she was basically like, guys, there is money in DC,
43:56
Speaker 5: come get it. Are we spending too much money in
43:59
Speaker 5: a short of amount of time, like, not that we
44:01
Speaker 5: don't need the money over time, but there's a condensed
44:03
Speaker 5: period with which it can be spent. Are you worried
44:06
Speaker 5: about throwing money into bad stuff for things that aren't
44:08
Speaker 5: going to get the job done? Are things that not
44:10
Speaker 5: going to return as much?
44:11
Speaker 9: I would just say this that I think this is
44:13
Speaker 9: a really critical and important time. I think the Inflation
44:17
Speaker 9: Reduction Act has created an inflection point where we have
44:20
Speaker 9: an opportunity now to be supportive of these technologies in
44:23
Speaker 9: the way we've never done before. And it's important that
44:26
Speaker 9: we see that going forward. And I think we feel
44:28
Speaker 9: pretty good that we're doing that.
44:29
Speaker 3: At this point.
44:30
Speaker 9: There's a lot more work to be done, and to
44:32
Speaker 9: be honest with you, we're working around the clock the
44:34
Speaker 9: rest of this year and beyond. But no, I think
44:37
Speaker 9: that this is a unique opportunity. And look that the
44:40
Speaker 9: clock's not you know, the clock's not getting any quieter
44:43
Speaker 9: on climate change, and we really need to have these
44:46
Speaker 9: technologies developed further and deployed further, particularly some of the
44:49
Speaker 9: ones and the harder to decarbonized sectors like industrial processes.
44:54
Speaker 2: Ethan just thirty seconds, what's the next mile post? People
44:58
Speaker 2: like me should be looking for people that don't track
45:00
Speaker 2: this every day.
45:02
Speaker 3: Good question.
45:03
Speaker 9: I mean, I think you know, we work in increments,
45:07
Speaker 9: I guess of the Treasury Department, where you're kind of
45:08
Speaker 9: on a day to day basis trying to get as
45:10
Speaker 9: much out as we can. I think I certainly would
45:13
Speaker 9: want to keep an eye on the levels of private
45:15
Speaker 9: capital flows. And like I said, we feel quite good
45:18
Speaker 9: about that and we want to see more of that
45:19
Speaker 9: going forward. There was a lot raised by venture funds
45:22
Speaker 9: several years ago. I think we'd like to see more
45:24
Speaker 9: of that investment taking place. We'd like to continue to
45:27
Speaker 9: see financial institutions think about how they can take into
45:31
Speaker 9: account the energy transition. But I wish I could pick
45:33
Speaker 9: a single moment, but we're kind of working data down.
45:36
Speaker 3: It's a big story.
45:37
Speaker 5: Arthin thanks a lot. It's so good to see you
45:39
Speaker 5: in a different role. Really good to catch up with you.
45:41
Speaker 5: We give Smiler from the Treasury Department. He is a
45:43
Speaker 5: Climate counselor the West Treasury Department, formerly of Bloomberg and
45:47
Speaker 5: ef YEP.
45:48
Speaker 2: That's right enough here at the Enough conference here in
45:52
Speaker 2: midtown Manhattan, talk about the transition to cleaner energy.
45:56
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