Latest / Columbia Energy Exchange / Michael Webber on What's Behind Rising Energy Costs

Transcript

Michael Webber on What's Behind Rising Energy Costs · Columbia Energy Exchange

• 5:17
  ): And so I think it's incumbent on us to be useful. We should use new tools to do it. I'm not sure it's expected, though. So if you look at promotion at the University of Texas, they might or might not care if you're a public intellectual, so to speak. It might not help you get promotion and tenure. In fact, it makes a lot of academics suspicious if they think you're too policy-engaged because doing your part to inform policymaking and being an advocate—the lines can get blurry sometimes, and people feel like, oh, you're an advocate, you're not an objective, rigorous researcher. So it's actually quite tricky within academia to engage, but I do think we have a responsibility to do it. Jason Bordoff [05:50]: Yeah, it's one of the things we think about a lot here and was the reason we started the center, and our former president—well, a few presidents ago; there's been a lot going on at Columbia lately—but Lee Bollinger used to talk about the fourth purpose, where universities exist to produce new knowledge through rigorous research, educate, community service for us, our neighbors in Harlem, for example. And then the fourth purpose is solving humanity's greatest challenges and being more intentional about that. But I think your point is that actually sometimes gets lost in the focus on peer-reviewed publication as the coin of the realm to get promotion and move up the academic ladder. Michael Webber [06:28]: And I think in the engineering world we feel this especially, where the point is to get the paper, then you put the paper on the shelf and you say, okay, good, I got a paper done. The leap is taking that paper to broader society, which usually in my opinion shows up in two ways, either in the markets with new products and services or companies or in policies, better policies. And so engineers especially are bad at that. I feel like the policy schools are a little bit better because they're a little more externally facing, they're more engaged with policymakers, but you still have to do that bridging to get it from the archives of the library or your brain, wherever the knowledge sits, to people who can put it into work. And for me it's policies and markets. We have better policies and better market participants. That's the outcome. Jason Bordoff [07:07]: This is not actually what the purpose of the podcast was, but that's what I love about talking to you. Just super-interesting conversations on a broad variety of topics. You mentioned something that I also think about a lot, which is how to make sure that kind of research—when you do that kind of research, you have views on what the right answer is. What should policymakers do? Because you've done research, you didn't start with a predetermined conclusion, but you did the analysis. And then once you know that, if you want your research to have impact in the world, you want to put those ideas out, you want to go advocate for them. I don't know if that's the right word. You want to make sure policymakers have some prescriptive actions that would make sense because it comes from a place of evidence and experience and research.
• 7:46
  ]: But as you said, there is a line where maybe if you go too far in that direction, you come to be seen as an advocate in ways that are perceived to undermine the independence and credibility of the research. Maybe because people perceive you have a predetermined view, whatever that is, you're the pro-nuclear person and you'll always be pro-nuclear no matter what. It's not that it came from a place of objective research in the first instance. Is there a tension between making sure academic research is policy relevant but not going too far in the direction of advocacy, and how one—and how should we as a center give us advice—navigate that? Michael Webber [08:18]: This is a huge challenge. It's very important. I think this is sort of the challenge of the day, and I feel like everything is so politicized right now. In many ways energy is politicized, certainly higher ed is politicized, and so you will be accused of being advocates or being agenda-first or something if you're doing work. But if you do your research, you should have some knowledge that's useful and you should come up with some understandings that you think will lead to better policy design, for example. And so the way I think about it is our research reveals certain principles that might be good for a good policy design, and we should share those principles. So let's talk about decarbonizing Texas. We did a big study three years ago on how to get Texas to net zero, and there were a couple of questions.
• 8:57
  ]: One is can we get Texas to net zero? I mean, Texas is a big energy producer and consumer and a big emitter. We're the number six emitter of CO2 in the world. And so there's this kind of question, could we even get to net zero? And we found that we could. In fact, there are many pathways to net zero and all of them are economically beneficial. Okay, this is a pretty good set of findings, though we weren't prescribing policy. We're just going to policymakers saying actually net zero is possible. There are many pathways to get there. They're all good for the economy. So that's the type of thing we should share without even getting to the point of therefore you should do this. It's more like, let me just educate you that you don't need to be afraid of net zero even in Texas because it's actually quite good for the economy.
• 9:33
  ]: We'll still be able to export oil and gas. There's a variety of things we can do. And so that's a finding or a principle. If we go to say, therefore you must ban this or mandate that, that's getting a little prescriptive and that's a little too much. Although I would say that our research finds that in general energy bans are pretty bad. And so we see Democrats often want to ban natural gas. Republicans want to ban electric vehicles, wind, or solar. We're like, okay, we know from history that the bans don't work well. So we feel like we have an obligation to advise policymakers on that. Jason Bordoff [10:04]: That last comment is interesting. As you said, that seems to be a focus on both sides of the aisle, but when you talk about getting to net zero, one might say, of course we should ban oil and gas production, exports, pipelines. Is that not what your research shows? Michael Webber [10:18]: Our research shows that in a place like Texas, which depends a lot on oil and gas production for the economy and exports a lot of oil and gas, that it just means more carbon capture and carbon removals and better capture. So a place like Texas might care more about that. If you're in the Pacific Northwest where you have a lot of hydro and maybe a lot of wind but not a lot of oil and gas, you might not use that pathway; you'll use a different pathway. So in Texas we are like, yeah, no, let's export gas to China to help them get off coal. That's beneficial from a climate change perspective. And the more wind and solar we build in Texas, the more gas we can export, which helps us as well. But our scenarios included carbon capture and direct air capture, carbon removals, things like that to get there. So we didn't prohibit options like that. Jason Bordoff [10:59]: So remind people, when you offer these perspectives, the experience it comes from. I'll read your—people will have heard your bio at the opening of this, but to put some flesh on that, because you are a highly regarded academic with a tenured position at a major university, but you've also worked in the private sector, you've worked at some of the major energy companies in the world, at clean energy investment firms. Just remind people your background, and does that give you a somewhat unique perspective on kind of the challenge we're talking about, about how to bring academic research to the policy community? Michael Webber [11:35]: I think it does. So primarily I'm a Texan, born and raised in Texas. I studied undergraduate engineering at the University of Texas, and I'm a professor in Texas, so being in Texas is probably the most important context for me because I'm in the oil and gas patch. I'm surrounded by people who work in oil and gas. A third of my students are from Houston. A third or more of my students have a parent or an aunt or an uncle who works in oil and gas. And so I'm just surrounded by oil and gas, and that gives me a different perspective than you might get, say, if you're in a non-oil-and-gas-producing region. That's important. I also worked for a while in Paris, France, as chief science and technology officer at Engie. Engie is one of the world's biggest energy companies, and they have operations in sixty countries and there are a hundred thousand-plus employees, and I ran global research and innovation for them.
• 12:14
  ]: So that gave me sort of the multinational corporate view as well, which is very important. And for a while I was chief technology officer at Energy Impact Partners, which is a $5 billion cleantech venture fund, and at the University of Texas, as a professor, I also teach entrepreneurship and help run our incubator. So I've got this view as a Texan, I've got a view from Paris, I've got a view of a multinational corporate executive. I've got a view of a cleantech venture investor. I've got the view of an entrepreneur launching startups or advising startups or teaching entrepreneurship. So these different angles all sort of reveal to me the complexity of energy, which is no surprise. I think people would've known that anyway without that background. But it puts me in a situation where I don't hate any form of energy. I really want to reduce emissions. I really want to enhance economic prosperity. I really want to improve our national security. But I get there through a portfolio approach, like, okay, what's the right mix for different regions or different needs, as opposed to saying must eliminate that or must ban that. I tend to think that all these fuels all have a role to play, and what's the right mix. Jason Bordoff [13:10]: Talk a little bit about what's going on in Texas. What you see with the national conversation is about rising power demand, rising power prices, AI. Texas is unique in many respects. It's kind of its own grid, a lot of oil and gas in the economy, as you said, but also a place that's deployed a huge amount of renewables. What's the current landscape for how Texas is going to navigate the challenges we're facing when people have a national conversation? Michael Webber [13:39]: Texas is a funny place to work because we do everything. We got a lot of everything except hydroelectric power. We don't have much water, but we have oil and gas and wind and solar and nuclear and coal and hydrogen and carbon capture, and we got liquefied natural gas exports. We even have some wood pellets. You name it, we got it, we make it, or use it in Texas, and that's part of the culture and spirit of Texas is making money from our land but also making money with energy and upgraded products and refined products and other things. So we see energy in many ways. This means we're a preview of the future because we build everything. And if you just put some numbers on it, we're number six in the world for CO2 emissions. We're number three in the world for natural gas production. We're number four in the world for refining.
• 14:17
  ]: We are top ten in the world for hydrogen, number one in the world for carbon capture and sequestration. We are number one in America for large-scale batteries and large-scale solar. It's just kind of crazy because it's not the reputation that we're just an oil and gas state. We just build everything. And the consequence of building things is a nice preview of what it might be if we get permitting reform across the nation. If you just make it easier to build stuff, you tend to build a lot of clean stuff. You also build some of the dirty stuff, but you build a lot of the clean stuff. And I think that's what happens when you have an open market, the ability to build. And if you look at the markets, the markets have signaled very loudly in Texas, they don't want more coal, so coal is declining, and what's rising: wind, solar, batteries, and gas.
• 14:56
  ]: So I think that's really interesting. We also are doing some hydrogen and other things. So Texas just has this wild open marketplace: build whatever you want, and then if you could do that, you build the clean stuff. We have no state mandates on clean stuff. We don't have any statewide tax support for clean options. We don't have incentives or requirements, yet we do it anyway because wind and solar and batteries are market winners. So I think that's kind of an interesting indication. Even a state like Texas, which officially doesn't believe in climate change, thinks climate change and carbon management is like a Chinese communist hoax to take your money or whatever. So if you take Texas's skepticism but then look at what we're building anyway, that gives me some confidence that markets will get us the right solution, or at least pretty far along the way to the right solution, if we just let ourselves build some things. Jason Bordoff [15:40]: When you say build some things, I'm wondering what lessons you think the country—we're having a real conversation about permitting reform at the national level. Possible legislation could pass next year in Congress, and abundance is a movement, and there's a broad recognition we need to build, make it easier to build. And there's also a need when you build things—you can have impacts on communities, you can have impacts on tribes, you can have impacts on the environment, which is why we have environmental reviews. I'm curious how—and there's concern, as you know, particularly on the left, that some of these conversations about permitting reform just means running over that environmental review process and discarding it by the side of the road. I'm curious if you see lessons in Texas about how to navigate the right path between those competing tensions. Michael Webber [16:28]: It's really tough. We don't have very strong environmental review requirements in Texas. We do have them. You still need to get a water permit, you still need to get your permit. So it's not like we have zero environmental rules, but the rules are simpler. We have a lot more private land in Texas, less federal land. We do have a lot of state land, so you'd have to negotiate with the state if you want to use the state lands, but the reviews are simpler. Instead what we have are private land rights. So it's less so much you have community engagement as much as like you got to figure it out with the landowners what they're going to do. And eminent domain can be used aggressively for pipelines, for example. But we don't use eminent domain quite as much for the other things. So it's more transactional, but you can get to the right answer most of the time with this transactional approach.
• 17:09
  ]: The problem is what happens when you don't? We have this example—there's data centers, there's factories, there's power plants, there's transmission lines, there's pipelines. The one that's really outraged the most people I know of in my orbit now—my orbit's limited of course—is one of those distribution warehouses for Amazon or something like that. Those warehouses have a lot of trucks, a lot of noise. They have a lot of lights. They operate twenty-four hours. And it’s like, oh yeah, warehouses and distribution centers are a big deal too. That was built. It was built in a rich neighborhood. People are angry; it's too late. So certainly mistakes happen and people get angry about it, and so you need to have some process, but it's just simpler and faster in Texas. That means there's going to be mistakes. That means communities will get trampled on, without a doubt, that will happen, but it also means most of the time we get it right.
• 17:52
  ]: Most people want to do the right thing, I think generally speaking. And so if you move more quickly, then 90 percent of the time or more you're building the right stuff, but 10 percent of the time or less, you're building the wrong stuff in the wrong location that's going to make people angry. I feel like the permitting discussion the last fifty years has gotten to the point of never build the wrong thing in the wrong place ever. And so we make fewer mistakes, but then we also just build less stuff. So at some point you have to figure out what your comfort level is. My comfort level is I feel urgent about all the problems in the world and I'd rather move more quickly and make some mistakes. But a lot of people who are more concerned about the long-lasting impacts of making a mistake don't want to build anything. And that's kind of the NIMBYism versus YIMBYism and that kind of thing. But I'm more of a YIMBY guy, like, hey, let's just get rolling. We'll make some mistakes, but waiting for twenty years doesn't help. Jason Bordoff [18:40]: Yeah, very Texas of you, although it does seem to be a sentiment that is growing, including because of the need to build more power generation. We have rising power demand, not just for—well, I'm curious, you can tell me why that is happening. It gets attributed to data centers, but is that actually why power demand is going up and power prices are going up? Michael Webber [18:59]: Data centers for artificial intelligence—there's two phases of AI. There's the training, then there's the inference. Training is where you train up a large language model of some sort; that might take six to nine months. And then inference is where you deploy it and you need data centers for both. And deploy, I mean you might use a search that's AI-enhanced or something like that or use ChatGPT or whatever your favorite AI tool is. So data centers are a key part of the AI economy. They're growing rapidly, they're rich, they're headline grabbing. They're also just one of many factors driving up load growth. Another one is Elon Musk's Tesla gigafactories, all these factories. Almost all of them are electrically operated. We don't build factories based on heat the way we used to. We also have rise of electric vehicles, heat pumps, induction cooktops, other devices.
• 19:38
  ]: We just have electric appliances and devices everywhere. And so that's all increasing demand. And then in Texas we see rising demand for electricity from oil and gas, which is huge. So if we take the peak demand in Texas, it's about eighty-five gigawatts on a hot afternoon in August in the summer. In Texas, we might add another five to fifteen gigawatts of demand just for oil and gas. That's a big number, five to fifteen gigawatts out of eighty-five gigawatts. We might also add five to twenty gigawatts of data centers. The data centers are big, but they're not that different than oil and gas. Then you add in electric vehicles, and electric vehicles, if we plug them in all at the same time, will blow away data centers. And you add in heat pumps and other things. So there's a lot of reasons why demand for electricity is growing.
• 20:18
  ]: AI is just one of them, but AI is headline grabbing because they are the most urgent, they're the richest, they're willing to outbid municipalities and other people for the power. So we feel the tension from AI today in a way we don't feel from, say, heat pumps or electric vehicles, which we'll feel more in five years or later. So AI is just one of many reasons why the demand's growing, but it's a here-and-now reason. You overlay it with a national security lens of must win the AI arms race so that China doesn't beat us, and then it gives a different sense of urgency to it. Then you add in the class of customers—Microsoft, Meta, Google, Amazon—they all look like rich companies. And there's a real concern in Texas and other places that you're going to raise rates on grandmothers and retirees to make these companies even richer. So there's a real tension, but they're just one cause of load growth, I would say. Jason Bordoff [21:04]: You're very dismissive. I mean having built a whole institute on the intersection of energy and national security, you sort of threw that out. You were like, and then there's all the national security stuff, but we don't really have to pay attention to that. Michael Webber [21:13]: No, I think we should. I actually think, well, so I didn't mean to be dismissive, more like the reason why we care so much about AI in a way maybe we don't care about electric vehicles is because the national security implications of AI are higher, and therefore the national security implications of transformer backlogs and power access is huge. And the national security elements of energy are as ever-present as ever, but have shifted. Thirty years ago we cared about strategic liquids like oil, and now we care about strategic solids like cobalt or something or graphite. And then we care about the outcomes of that energy in terms of ability to build weapons systems, which we would've said in the eighties and nineties, and now building AI systems. So the national security implications are huge, and that gives us another sense of urgency: must win this. But I don't think people are applying the same national security urgency to electric heat pumps, for example, the way they are with AI. Jason Bordoff [22:06]: There's a lot of focus on what this increasing power demand is doing to power prices, which were a big political issue in many of the elections that just happened, like New Jersey right next door to where I am. Tell me if I'm wrong. I don't think you've seen that same surge in electricity prices in Texas. And I'm wondering what is happening there and why are we seeing this in some places but not others? Michael Webber [22:30]: So a couple of things. Prices have gone up in Texas, but they haven't gone up nearly as much as elsewhere. And that's a lot of it because we've built a lot of new generating capacity, new power plants, primarily wind, solar, and then tools like batteries. So prices have gone up everywhere. There's no place in the United States where prices have dropped, but some places they go up more than others. And if you're especially exposed to fuel oil or natural gas prices, then your prices have probably gone higher. But if you've built a lot of wind, solar, and batteries, your prices have not gone up as much. In Texas, we built a lot of wind, solar, and batteries, even though we have a lot of gas and use a lot of gas, and that helps us mitigate the price spikes. And so I think that's the key. If you can build at a pace that keeps up with demand, your price rises might not be as much.
• 23:11
  ]: The real driver of price increases, though, have been the wires and poles, transmission and distribution. We had delayed maintenance for decades. We're finally catching up. We have more windstorms and hurricanes and wildfires, higher risks, more density of users, more peak demand. And so it's the hardware of the T and D system, the transmission and distribution system, that's really driving up cost. And a lot of that's because we haven't expanded the wires and poles the same way we've improved or increased demand, and we have a backlog of things we should have done for the last few decades we haven't. Jason Bordoff [23:42]: So I was at the National Petroleum Council meeting in DC last week, where Secretary Wright was talking about this stuff and sort of observed that prices have gone up fastest in places like the Northeast and California, blue states, although he didn't call them blue states, and noted that what those areas have in common is that load growth has not gone up as much as it has in other places like Texas. The idea being that spurs you to, I think, invest more in new generation. And I'm guessing he was referring, although he didn't mention it, to this new Lawrence Berkeley National Lab study—maybe you've seen it—trying to look at why power prices have gone up. I saw a recent piece just a couple of days ago by Chris Nelder at MIT looking at the same, and I was just curious if you'd seen studies like that and what you think explains the rise. I think what you said—transmission, and it's not as much about are we building enough power generation capacity. You talked about the poles and wires, and then I think both of those papers note that in states where we have shifted more to net-metered behind-the-meter solar, more of those costs get shifted to fewer consumers. Wondering if that story sounds right to you? Michael Webber [24:54]: So there's a variety of things happening. So the Northeast is, I think it's more specifically due to limited gas transmission capability. They have limited gas pipelines. So the Northeast, their situation is very different. California and the Northeast has blocked many gas pipelines and as a consequence, gas is more expensive. They also rely on fuel oil, which is also very expensive, and they have cold winters. So they have a lot of problems in the Northeast that are very different than California, and prices are high. And so I think that's part of their problem, and that's why offshore wind is appealing up there. They have higher prevailing prices, so offshore wind or other alternatives might be good—more gas pipelines. Jason Bordoff [25:26]: But just to be clear, they have higher prevailing prices because your point a moment ago about saying yes to infrastructure: there was an opportunity for cheaper gas, but for various reasons have decided not to do that. Michael Webber [25:40]: Yes, correct. So wires and poles is a problem in many places. In the Northeast it's more pipelines, although they also blocked a Canadian transmission line for many years, although that now is getting built. So as they expand more gas pipeline infrastructure to the Northeast and they expand transmission, electric transmission infrastructure to the Northeast, prices will come down. They also should build some of their other local options. They've got all that cheap gas in Pennsylvania, not that far away, so that's an option there. In California it's a little bit different. California, they turned down one of the two nuclear sites. They also have less hydro than before. So if you have less hydroelectric than before because of lower snowpack, and you have one of your nukes offline because that's the San Onofre Nuclear Generating Station, or SONGS, then you have lost a lot of capacity.
• 26:26
  Jason Bordoff [30:31]: It's interesting you mentioned that view from Europe. I mentioned I was in DC last week, and Secretary Wright noted in his remarks at the NPC meeting, sometimes he hears from European colleagues, well, we don't want to be dominated. That sort of characterization of energy dominance. And then explained what the administration means by it, which is keeping energy affordable at home and making it available to allies abroad to help with their security, which makes sense as a vision. I will say it seemed like a dissonance to me between that and then the national security strategy that came out of the White House the next day that really characterized Europe in quite adversarial terms. So I don't know if that'll give comfort to Europeans about America—including not just in energy, but otherwise.
• 26:27
  Michael Webber [31:16]: Yeah, I agree. I think the word dominance—I mean I get it as a political slogan, but it doesn't make our customers feel better about us if we're going to dominate them. Does that mean we're going to cut off gas or whatever to get a higher price later on? And then that national security strategy release kind of bookending that comment—it's kind of crazy. I'm sure Europe's looking at us differently now, and they've relied on us a lot. They've relied on Texas gas and other gas to help get off Russian gas, but are we going to look like an unreliable partner to them now?
• 26:28
  Jason Bordoff [31:46]: There's a risk, and I think our relationship with Europe is pretty important, particularly in a world of competition with China. And we need everybody—lots of other people, India, Europe, others—to have strong alliances. You were in DC last week also meeting with policymakers, briefing members of Congress. I'm curious what you heard there and what you told them. I think you were talking about what you think the federal government—we've talked a lot about Texas—what the federal government should do on this challenge of AI and electricity and power demand and prices.
• 26:29
  Michael Webber [32:17]: So it was great. I did a congressional breakfast on Thursday. Twenty members of Congress showed up, which is great, all from the House side. A lot of questions. The topic was AI and energy, certainly a hot topic. I know they're getting questions from their constituents, and some of them have bills they're considering on this. So they wanted to be there to talk about it. A lot of great questions like what is load growth? Why is it growing? What do we need to do? And we talked about permitting reform, and I'll say there was a lot of enthusiasm, at least in that room of those twenty members of Congress, for permitting reform, getting things to move quickly. So one thing I talk about is we spent fifty years developing the muscle memory for how to stop bad projects, but we've forgotten how to build good projects, and we can do both at the same time.
• 32:55
  ]: We haven't had this rate of construction in the power sector since the 1930s. So all the planners, all the regulators, all the investors, all the developers, all everybody in the power sector who have developed their professional reputation over the last twenty-five years have done so in an era where we didn't have load growth, and now we have load growth like the 1930s. So we have to figure out how to move quickly. Again, the whole apparatus needs to change, and congressional intervention can be quite helpful just to say, hey, we need to move more quickly and here are the tools you can use more quickly. And it could be incentives or loan programs or overriding permit authority or transmission corridors. There's all sorts of things you can do. But just—I was trying to convey just that urgency is important, we need to move quickly, and I think there was some agreement in the room that we need to win the energy race, then we can win the AI race, and we have to win the AI race as a sense.
• 33:42
  ]: Now a quick comment on AI: I shared with them, and I'll share with you now, is AI is kind of funny to me. I've been studying the math of AI since 1999 when I was a grad student. I took a class on neural networks and I've been bumping into AI. I don't even really know what AI is, even though I've been taking the classes or thinking about it for decades. And AI reminds me of the race for nuclear weapons in the 1930s and forties where we haven't even decided it's good, but we know we must win the race. And with nuclear weapons, we didn't even stop to have the moral or ethical conversations like, is a nuclear world good or bad? We don't know. But we know that we don't want the Nazis to have it without us having it. And we're having the same conversation with AI, like, is AI good or bad?
• 34:21
  ]: We don't know, but we don't want China to have it and for us not to have it; we need to have it. And so there's this urgency. If we want to win the AI arms race, we have to win the chips and algorithms and electricity race. We're ahead on chips and algorithms, maybe falling behind on energy. We need to pick up the pace; that's the bottleneck. So there's just this urgency, and I think they felt—at least those twenty members of Congress—we need to move quickly. And then they talked about it. We talked about what does the desired fuel mix of the future. And I'm like, the markets are calling for today: wind, solar, gas, and batteries. In five years and out, they want geothermal. Ten years and out, they want nuclear. I know there's a push for nuclear. I love nuclear. I'm very pro-nuclear. I do not think nuclear does much for us in the next five years. It just takes a while. We need the fast options, which is really wind, solar, gas, and batteries, and then we need the other options as soon as possible. And by the way, gas is becoming slower. Jason Bordoff [35:14]: Is that view of nuclear kind of acceptance of what you said today, which is we don't know how to build things and everything takes a long time? Or if we had a warp speed for nuclear, is it still necessarily the case just because of how these projects work and the technology that you're still talking about a decade from now? Michael Webber [35:29]: We'll see. It's kind of interesting. I think the biggest success out of the first Trump term was Operation Warp Speed with the vaccine. If we got to move quickly, you can do it. And there is a warp speed effort for nuclear with this energizing nuclear reactors by July 4, 2026, in collaboration, Idaho National Lab and others. This is pretty interesting. And so if there really are new reactors getting energized for the first time now—they won't be generating power for the grid; they won't just energize reactors—that means maybe we can get stuff built by the early 2030s, which would be awesome. I am not optimistic we're going to build any new nuclear in the 2020s. We might bring on some old nuclear that's happening right now through Three Mile Island and elsewhere, and I'm very excited about that. So I think a Trump administration warp speed effort for nuclear will be incredible. I think so far they're on it. He seems pretty serious about it. Governor Abbott in Texas, other places are like, hey, we want to be part of this too. So there's a lot of enthusiasm. It still just takes a few years to build something like a power plant, especially— Jason Bordoff [36:25]: When you don't have a lot of muscle memory with building these things and everything is a first-of-a-kind project. Michael Webber [36:29]: Yeah, first of a kind, or you need access to a water cooling reservoir or this and that. I think the fastest place will be brownfield sites that already have nuclear, plussing up existing large nuclear with some small modular reactors. So I think the Trump administration is pushing for nuclear. I think that will make a difference. We'll find out July 4 whether anyone energizes, but let's say you energize a reactor in 2026. It's not like you're going to build a reactor power plant by the next year. That's what I think we'll see. There are some companies that made bold pledges for 2030 to 2032, like X-energy and some of the others. So we'll probably have some coming on in the five years from now timeframe. But large scale still feels like a decade. And that's from—I'm an enthusiast saying five to ten years in the near term. If you place an order for a gas turbine today, you're not going to take delivery until 2030. So gas is also a five-year thing. If you didn't already order your turbine, it's a five-year delivery for the gas turbine. If you don't have a gas pipeline, then it'll take five years to get the pipeline. It takes four or five years to get the transformers. There's just sort of this backlog we need to move more quickly on. I think that's why we'll see other tools like wind and solar, batteries, demand response, flexibility. We'll see other things happen sooner because we can't build other things quickly enough. Jason Bordoff [37:41]: So you mentioned the market is demanding solar, wind, and batteries. Is policy significantly changing the trajectory for what the market would do in those spaces? We've seen incentives pulled back in the Inflation Reduction Act, permits harder to get for certain wind projects. Is that a small issue or are you seeing that significantly change what would otherwise happen driven by market forces? Michael Webber [38:08]: I think it's right. Let's take wind and solar, for example. Wind and solar, the markets are calling for it. You can finance them. The supply chains are robust. You can get them built within two years or less. So they're just really fast and you could do it. And I think a lot of the Trump administration policy actions, together with Congress and others, have been sand in the gears. They slow it down. It doesn't stop those industries for onshore wind and solar, but it's bad. It slows them down. And when I talk to developers, they say, hey, we actually don't need the tax credits. Of course we love the tax credits. We need the permission to exist and the permitting red tape for us that's new is bad, and that will not kill us, but it makes us more expensive. It slows us down. The offshore wind permitting issues are more existential because that's got more federal touch.
• 38:48
  ]: So the Trump administration can kill offshore wind essentially. It's harder for it to kill onshore wind and solar, but it can slow it down. That's a real problem because the administration is doing those things to kill offshore wind or slow down onshore wind and solar but not kill onshore wind and solar. But it's not speeding up the gas section. Gas can't move faster because it's got other problems. And so we're in this situation where we need to build everything we can more quickly. The administration's slowing down wind and solar, killing offshore wind, and not doing anything to expedite gas in a way that's material. So what does that mean? We're going to build less in the next few years. What does that mean? Electricity affordability crisis that will have political blowback. So the administration's under pressure now. People are like, you're telling us electricity is more expensive; you're making it more expensive for us to build things to bring down the costs. How do you reconcile that? And that's coming. I think that's showing up in districts where you have Republican members of Congress saying, actually we'd like to build this stuff because it's good for our local economy and will lower prices. So the administration's been bad on some stuff, existentially bad on others, but good on geothermal and nuclear, for example. So it's kind of a mixed record. Jason Bordoff [39:55]: For people listening who may wonder that they will have often heard renewables are the cheapest form of new electricity. You just told me a lot of these hyperscalers and others are desperate to put new power generation capacity on the grid. Solar and wind can be done quickly. You said just in two or three years. And then at the same time, you look at some of the estimates for how catastrophically bad for clean energy the big beautiful bill will be, and Rhodium Group and others' estimates of, if we get rid of these tax credits, I think they estimated clean capacity additions to the grid fall by more than half. How are both of those things true? This is what you can do quickly and is cheap. And yet the outlook for clean energy is dramatically worse if we don't subsidize it. Michael Webber [40:43]: I think if you talk to the clean energy industry, they'll say, yeah, we probably shouldn't have been saying we're that cheap for so long. They kind of regret using that framing. Although wind and solar still are cheaper than natural gas. Gas prices, by the way, have doubled in the last year. Gas turbine prices have doubled in the last year, so gas is becoming much more expensive, and that moving target of gas becoming more expensive is very helpful for wind and solar, which is the opposite of what happened around 2014 where falling gas prices were very bad for wind and solar. So we're now in an era of rising gas prices. We'll see how long that lasts because that could change tomorrow. But the rising price of gas and gas turbines helps wind and solar. But the cuts to the tax credits and the policy changes are also bad for wind and solar.
• 41:22
  Michael Webber [44:42]: I think that's great. So efficiency is often the cheapest, fastest tool in the toolbox. And it's been underdeployed the last couple of years, say. But we had a really good run for twenty years. And I think as we have price spikes, scarcity, prevailing prices that are going higher, we'll see more efficiency of the solutions just as a quicker solution. You can implement efficiency in two years or less, but it takes more than two years to build new power plants and more than seven years, say, to build new transmission. So efficiency will come back. The other thing that's a companion to efficiency is demand flexibility where you can change when your loads are. Let me talk about both. One of the reasons why electric load was flat for twenty years in America for the first—for the last twenty years or so of this century is partly because of the energy efficiency standards that came out of the Bush administration and the Obama administrations. Light bulb efficiency standards were dramatic.
• 45:30
  ]: That came out of the end of the Bush administration. Fuel economy and other standards, appliance standards came out of the Obama administration as well. And so we have a lot of efficiency that let us keep our energy consumption level in America for the last twenty-five years, despite the population growing 20 percent and the economy basically tripling. So we've had incredible population and economic growth, but no increase in energy consumption at the top level or in the power sector. That's because of efficiency, but those straightforward efficiency gains have already been had. So now we need the next wave of efficiency gains, which might be switching from combustion engines for cars to electric drivetrains. That will have a big effect on efficiency. Going from natural gas furnaces to electric heat pumps. There's a variety of things left that we'll do as we have different price spikes and things like that.
• 46:16
  ]: So I think that's a good opportunity for us, and I think we'll start to do it again—that we've done the easy things on efficiency, start to do the harder things on efficiency. Demand flexibility as the companion is very important. If you take the power sector, which is a multitrillion-dollar asset mix of power plants and wires and poles and different devices, historically we've used it about 45 percent of the time. We've underutilized this multitrillion-dollar sector because we designed it for the peak hours of afternoons in August, but the rest of the year we underutilize it. So having demand flexibility where we dial back at peak times on our factories or data centers or whatever it is, we can start to use the whole power sector more. Maybe we can use it 50 percent of the time or 60 percent of the time or 80 percent of the time. If we take a multitrillion-dollar asset base and use it 80 percent of the time, that will lower the cost for everybody. So that demand flexibility—changing when we treat water, changing when we train our AI models, training when we make our chemicals or metals or whatever it is—if we add flexibility along with efficiency, we'll get more out of the existing system, and that will be faster and cheaper than just doubling the system, say, and those will go hand in hand. Jason Bordoff [47:19]: What's needed to do what you just said? Is it policy intervention? Do we need some technological breakthrough? What do we have to do to do that? Michael Webber [47:28]: I think where policy shows up, you have to have rate-making that accommodates this. That's often at the state level with public utility commissions and regulators. We need real-time prices or time-of-use prices. For a lot of people, their price doesn't change by hour of day or day of the year, even though the supply and demand might be very different. And so having prices move more like a market and be less regulated—and that requires a regulator to intervene to change regulations or the rate-making, file prices change. That's a big part of it. There are also regulatory opportunities to help make it easy to install some of those technologies, which might be batteries or new devices in our homes. This could be loan programs. There are a lot of things you can do. There are a lot of policy levers there to get new devices out there. And I'm a big fan of R&D; prime the pump of the innovation ecosystem. Let's do more research on these solutions, but it's kind of silly that we don't have more demand flexibility and more efficiency. Those are going to be great solutions for us. Jason Bordoff [48:15]: I saw you asked recently what some common misperceptions, misconceptions, are about energy and the transition. And you said one is that to decarbonize the economy, we have to get rid of oil and gas or oil and gas companies. I think each of the last several COPs, the focus has been a debate about how we phase out fossil fuels. Why is that wrong? Michael Webber [48:40]: I feel like there's a lot of focus by people who are worried about climate change or the national security implications of oil and gas imports or just pollution in general really hate oil and gas and really hate oil and gas companies. And in Texas it's hard to hate oil and gas, oil and gas companies, because these are my students' parents and stuff. Their parents aren't evil. So I just have a different view, like, well, oil and gas isn't evil and oil and gas companies aren't evil and oil and gas company employees aren't evil, but the emissions suck. So what can we do about the emissions? And there are a lot of ways to handle the emissions. I really hate the oil and gas emissions, but I don't hate oil and gas. And oil and gas have great performance features, right? They're easy to store, easy to move, and easy to use.
• 49:17
  ]: So how can we use those options more cleanly? Well, that might be by adding scrubbers or carbon capture or other technologies. It might be by using them less often, but in more critical times. It might be by using them in different ways or using them as a carrier to make hydrogen. There's a lot of ways to use oil and gas that are cleaner, and let's focus on the cleanliness. Let's not focus on the religion of the oil and gas molecule itself. We don't have to hate the molecule. Let's hate the emissions that come out of it. And there's a way to deal with that. Coal's really in the toughest bind. Coal really probably should be in the future just for steel and cement and a few critical things, maybe for making carbon and other things. But it's harder to clean up coal. I can think of many ways to clean up oil and gas at the same time.
• 49:58
  ]: Those companies, those oil and gas companies, they're investing in hydrogen, they're investing in carbon capture, they're investing in carbon pipelines, they're investing in new materials. I take Darren Woods, the CEO of ExxonMobil—he said on the record in 2022, like over three and a half years ago, basically, that he thinks in 2040, 100 percent of all the light-duty vehicles sold in the world will be electric. And this is coming from a man who sells gasoline for a living. And he goes, no problem. Those electric cars need lightweight materials. Who makes lightweight materials? We do. And then when he was at the University of Texas just a couple months ago, and he spoke—and actually very polite of him as a Texas A&M Aggie to come speak at the University of Texas Longhorn campus—but he spoke like, we have to reduce emissions. He says it's an imperative. That doesn't mean no oil and gas sales. We know how to capture carbon. We can do this. So I don't hate oil and gas. I don't hate oil and gas companies. I do hate the emissions. And I think that's becoming the view of the multinationals as well. They also think about the emissions. Jason Bordoff [50:50]: Yeah, look, I share the view and agree with a lot of what you just said. A company like ExxonMobil is putting huge amounts of money into clean energy. Also, all of these companies are putting huge amounts of capital into growing oil and gas production capability. Demand is going up globally, and people who talk about—who are focused on climate—would criticize that. Your reaction to that is what? Michael Webber [51:14]: So I am more nervous about the investments in oil than I am about gas. I think as long as there's coal in the power sector, we need more gas to help displace that coal, and that would be good. And then someday, when there's no coal left in the power sector, we'll focus on reducing gas. So I think the rise of nuclear, geothermal, wind, solar, and gas to displace coal is a good thing for all of us. I like that. The rise of oil does not—as much rise of oil. Oil demand's been kind of a bumpy plateau for a couple decades. So it's really—what I see as a split in the barrel where there's rise in demand for diesel and jet fuel, but declining demand for gasoline, especially in the United States. This is pretty interesting because if you own a refinery that gives you about half the barrel as gasoline and half the barrel as other stuff—materials, diesel, and jet fuel—and then demand for half your barrel is declining, but the demand for the other half is growing, then the investment needs to be at the downstream of the refinery to change your distillates or change your cracking splits and other things to get more jet fuel, which is harder to electrify, but less gasoline, which is easy to displace with electricity.
• 52:14
  ]: So if you look at ExxonMobil and others, I think they're all leaning into gas more than oil, but they're certainly leaning into both. Jason Bordoff [52:21]: Your point also—I just come back, I want to double-click on it. When you talked about students and parents, I just think that's a really important point. It comes to the point of why engagement and dialogue and discussion, including with people who hold very different viewpoints, is so important. I mean, I spend a lot of time talking to leaders. I know many of them, many are friends, in the oil and gas industry and also environmental activists, and all are good—nearly all are good and smart people who generally care about the same things. They may have different views, they may disagree on things, but when we don't engage and see other people on a human level, it's easier to vilify someone. Michael Webber [53:02]: It's easy. I mean, there are villains out there, but really, most people just want to have an interesting job and a career that does well for their family. Most people in oil and gas came from outdoorsy backgrounds. That's why they became geologists or something, and they got there. But when I talk to the rank-and-file employees, they are generally concerned about climate change. And so they also are concerned about getting energy access for Sub-Saharan Africans or whoever doesn't have energy access. And so they might put more priority on energy access than climate change. I might put more priority on climate change than energy access, but we all need to care about both. But I think vilifying doesn't help. But the thing is the markets are set up right now where it makes it hard for them to take action. So I don't want to be too sympathetic because there have been some bad actors over the decades, but right now the markets say there's no punishment for polluting.
• 53:48
  Jason Bordoff [56:54]: There's a nuclear disaster and the movie came out and Three Mile Island happened a few weeks later.
• 53:49
  Michael Webber [56:59]: Exactly. It even calls out potential nuclear accidents in Pennsylvania of all things. So the role that movies can play in shaping what we think about energy or reflecting what we think is interesting, and I'll take oil as an example. Oil was presented in a very positive light before the 1970s. Oil men were dashing. They got the girl, they got rich, they were good. And then it got real complicated in the seventies. And then after the seventies, eighties, oil movies almost always present oil as bad. So oil was good, now bad. And that reflects some of our changing tone about oil over the decades.
• 53:50
  Jason Bordoff [57:31]: Maybe Landman is contributing to that. I don't know.
• 53:51
  Michael Webber [57:33]: Yeah, Landman. I haven't watched that yet. I've been holding, but I need to watch that. So if in Texas questions, I need to get to that. Definitely have to watch that.
• 53:52
  Jason Bordoff [57:41]: So I think Ezra Klein ends his podcast by asking people to recommend three books. So let me end it by asking you to recommend three energy movies.
• 53:53
  Michael Webber [57:48]: Three energy movies. Okay. I really love the movie Tulsa from the late 1940s. It is unusual as an oil movie because it has a woman CEO. It addresses Native Americans' oil positions in a way that was way ahead of its time. And it was an environmentally themed movie way ahead of schedule. So that's a great oil movie. For a coal movie, I love Billy Elliot. It's a really great movie. It's really about Billy the dancer, but it's all about coal in England and strikes and Margaret Thatcher. That's a great coal movie. There's also How Green Was My Valley and October Sky and things like that. And then Monsters, Inc. is just a great movie in general, but it's a great energy movie. It's all about having to—scream scarcity, peak scream, and replacing scream energy with laugh energy. So you can think of it as some sort of analogy, but there are many. I can give a movie recommendation—I've got hundreds of movies to recommend. But those are three that come to mind.
• 53:54
  Jason Bordoff [58:38]: This discussion for the last hour, for people listening, sort of encapsulates why a decade ago, hard to believe it's been that long, I wanted to do this podcast. It is just an excuse to talk to the most interesting friends I know and learn from people I want to learn from. And hopefully everybody else finds it interesting too and enjoys the conversation. So this did not disappoint. Michael, thanks so much for being with us.
• 53:55
  Michael Webber [59:01]: Thanks for having me. A lot of fun as always.
• 53:56
  Jason Bordoff [59:07]: Thank you again, Michael Webber. And thanks to all of you for listening to this week's episode of Columbia Energy Exchange. The show is brought to you by the Center on Global Energy Policy at Columbia School of International and Public Affairs. The show is hosted by me, Jason Bordoff, and by Bill Loveless. Mary Catherine O'Connor, Caroline Pitman, and Kyu Lee produced the show. Gregory Vilfranc engineered the show. For more information about the podcast or the Center on Global Energy Policy, please visit us online at energypolicy.columbia.edu or follow us on social media at @ColumbiaUEnergy. And please, if you feel inclined, give us a rating on Apple, Spotify, or wherever you get your podcasts. It really helps us out. Thanks again for listening. We'll see you next week.