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Sustainability now: Powering through the energy transition · PwC's accounting podcast

0:00
SPEAKER_00: Thought Leadership from PWC's National Office.
0:06
SPEAKER_04: Welcome to PWC's Accounting Podcast.
0:09
SPEAKER_04: I'm Heather Horn, PWC's U.S.
0:11
SPEAKER_04: Sustainability Technical Leader, and I'm so happy to be back with another video podcast.
0:16
SPEAKER_04: So if you're listening to the audio only version and you'd like to see us, head on over to the show notes for a link to watch today's conversation.
0:24
SPEAKER_04: So interesting topic we have today.
0:28
SPEAKER_04: The pendulum is swinging when it comes to sustainability reporting, something we spend a lot of time talking about.
0:33
SPEAKER_04: However, one thing is very clear the world of sustainable energy is still moving forward.
0:39
SPEAKER_04: Today we'll explore where energy transition is headed, how emerging technologies like AI and nuclear are shaping the landscape, and the evolving risk companies should keep an eye on.
0:50
SPEAKER_04: Today I'm very excited to welcome back Casey Herman, senior partner in our utilities and sustainability practice to cover it all.
0:57
SPEAKER_04: So welcome, Casey.
0:58
SPEAKER_01: Thank you, Heather.
0:59
SPEAKER_01: And I am an audit partner and a CPA, but we don't have to talk about accounting, do we?
1:03
SPEAKER_04: No, definitely no accounting.
1:05
SPEAKER_04: Definitely no accounting today.
1:06
SPEAKER_01: Thank goodness.
1:07
SPEAKER_04: Yes.
1:07
SPEAKER_04: And I think it's interesting, you and I were just briefly chatting before the webcasts that, you know, we're talking about the energy transition.
1:14
SPEAKER_04: And if I think back 20 years ago when you and I were first doing these types of maybe not podcasts, but webcasts, uh, the only people interested in this topic were people in our industry of power and utilities.
1:26
SPEAKER_04: But now, I mean, you can't escape the headlines about the energy transition.
1:31
SPEAKER_04: Obviously, we saw the outage in Spain and Portugal a week or two ago, and there's a lot of discussion of the cause of that.
1:38
SPEAKER_04: And so I think it'll be interesting today to kind of explore what it means.
1:42
SPEAKER_04: But for our listeners' benefit, this is going to be coming from the non-expert perspective.
1:47
SPEAKER_04: So I thought, Casey, before we started, just to help people understand even some of the terminology or words we're using, is there some level setting we can do of what we're talking about when we talk about some of these terms related to energy transition, renewable energy, any of these terms you think might be helpful for our discussion?
2:07
SPEAKER_01: Sure.
2:08
SPEAKER_01: We have a whole book of acronyms and definitions, but at a very high level, um, you know, energy electricity is measured in watts, right?
2:19
SPEAKER_01: And a thousand watts is a kilowatt.
2:21
SPEAKER_01: And uh you have megawatts, right?
2:24
SPEAKER_01: And gigawatts, and you keep moving up the scale.
2:27
SPEAKER_01: Now, interestingly, you talked about AI.
2:31
SPEAKER_01: Uh, the measure of data center size is in the amount of electricity they take.
2:36
SPEAKER_01: So they don't talk about necessarily computational power, they talk about energy usage.
2:41
SPEAKER_01: So that really reinforces a trend that I'm very focused on right now, which is convergence, and that there are so many different parts of our economy that are converging and colliding with the restrictions on energy usage.
2:58
SPEAKER_01: And, you know, everyone is talking about compute and AI and the demand that it's going to place on electricity usage in the US as well as globally.
3:10
SPEAKER_01: But it's it's a built environment.
3:12
SPEAKER_01: As we talk about reshoring production, you know, it takes a lot of electricity to run a chip foundry, right?
3:19
SPEAKER_01: It takes a lot of electricity to build um uh electric vehicles or any kind of vehicles, or to process lithium if we want to bring critical minerals processing back to the United States.
3:31
SPEAKER_01: That's all very energy intensive.
3:34
SPEAKER_01: This convergence of compute with industrial processes, with the built environment, with mobility.
3:40
SPEAKER_01: Uh, you know, maybe residential or commercial electric vehicles aren't taking off quite as fast as people hope, but fleets are electrifying.
3:50
SPEAKER_01: You know, uh the big package distribution companies, delivery companies are electrifying their fleets.
3:58
SPEAKER_01: So mobility is electrifying, even if it's not residential mobility quite as quickly as some had had maybe projected, it's still growing at a pretty high pitch.
4:09
SPEAKER_01: So that convergence to me is such um a key fact and such a fascinating factor in our economy that that it's driving a lot of this.
4:19
SPEAKER_01: So electricity is measured in watts.
4:21
SPEAKER_01: Um, generally, our electric system has enough electricity for about 75, 80 percent of the time.
4:30
SPEAKER_01: Um, it's that those few hours of a few days that we call peak demand.
4:36
SPEAKER_01: So that's when uh actually, in a lot of areas, we're seeing winter being the peak now.
4:42
SPEAKER_01: So, so as more heating has gone to electrification heat pumps as opposed to to fossil fuel natural gas fired or oil fired, we're seeing a lot of winter peaks now as opposed to summer peaks.
4:55
SPEAKER_01: It used to be the air conditioning that drove it.
4:58
SPEAKER_01: Um, so on that really cold day, uh, when the sun may be not shining as bright, so you you have a little less solar power, and the data centers are humming and the factories are humming, um, you get this peak of demand.
5:13
SPEAKER_01: And how do you meet that peak?
5:15
SPEAKER_01: And and the systems are designed for that.
5:18
SPEAKER_01: You only hit that peak 20 times a year.
5:21
SPEAKER_04: Yeah.
5:21
SPEAKER_01: And when you hit it, it's for an hour, two hours.
5:24
SPEAKER_01: But that's a constraint on the system because when you hit that peak and you can't make it work, it, you know, the system fails.
5:32
SPEAKER_04: Yeah.
5:32
SPEAKER_04: So if I'm uh someone running a business, maybe we'll get to AI and I want to talk about the data centers, but let's pause on that for a moment.
5:41
SPEAKER_04: So if I'm just maybe I am thinking about restoring a factory, maybe I just need to make sure that my building is going to be able to accommodate my employees, or if they're still working at home, that they're gonna be able to get electricity in their homes.
5:54
SPEAKER_04: How does the the fact that the move to renewable energy and the fact that you do now have these periods where there is the strain on the system?
6:04
SPEAKER_04: Well, first of all, are there strategies to deal with that?
6:06
SPEAKER_04: But second of all, do you, as you look ahead, do you think the energy planning is going to be able to address that?
6:12
SPEAKER_04: Or given there's so much cost involved and otherwise, that it's it's going to be hard to deal with from sort of a grid perspective.
6:21
SPEAKER_01: Uh it is going to be hard to deal with from a grid perspective.
6:24
SPEAKER_01: And um I think of this as both a spatial challenge in terms of where is your electricity and how do you get it where you need it, and a temporal challenge in terms of how long will it take to build some of the resources necessary to bolster the system in places that are needed.
6:45
SPEAKER_01: So, you know, electricity is kind of straightforward.
6:50
SPEAKER_01: Um the storage is more difficult, and the amount of storage out there is relatively small.
6:57
SPEAKER_01: So essentially, you have to produce the electricity that is demanded by the system at the moment it's demanded, right?
7:04
SPEAKER_01: And uh you talked about the Iberian power outage.
7:09
SPEAKER_01: Uh, what folks don't necessarily understand is that the grid is all interconnected and it has to be run at a certain voltage and a certain frequency.
7:18
SPEAKER_01: And disruptions in that voltage or frequency can cause portions of that grid to fail.
7:25
SPEAKER_01: And that could be caused by either abnormal spikes in demand that are unexpected, or the supply gets interrupted temporarily for whatever reason, a squirrel chewing on a transformer on a distribution system, a tree falling on a line, or a power plant tripping, right, for whatever reason, which is an outage, an unexpected outage, causing this causing that power to go off the system and suddenly things are out of balance.
7:53
SPEAKER_01: We don't really know what caused the problems in Spain and Portugal.
7:57
SPEAKER_01: There's a lot of research being done, but it looks like a couple of power plants tripped within a few minutes of each other.
8:05
SPEAKER_02: Yeah.
8:05
SPEAKER_01: And it caused um fluctuations in the grid.
8:10
SPEAKER_01: And because of those fluctuations, the interty between Spain and France was severed.
8:16
SPEAKER_01: So France said, we don't want our grid going down.
8:18
SPEAKER_01: Right.
8:19
SPEAKER_04: They did what they're supposed to do.
8:20
SPEAKER_04: Yes, exactly.
8:21
SPEAKER_01: Right.
8:21
SPEAKER_01: They did exactly what they're supposed to do.
8:23
SPEAKER_01: You you try and avoid a cascading outage.
8:26
SPEAKER_01: So the interconnect from Spain to France was severed, and that that just exacerbated the problem with Spain because now suddenly you're even more out of balance.
8:37
SPEAKER_01: And uh the grid started to fail.
8:40
SPEAKER_01: And it and it became a rolling problem that just exacerbated itself until the whole interconnected grid was was out.
8:48
SPEAKER_01: And then you have to talk about well, how do I restart it?
8:52
SPEAKER_01: Right.
8:52
SPEAKER_01: And they were able to use hydroelectric plants to restart some gas plants, to restart other resources, and it's called a black start capability, and it's really important on the industrial scale grid to have a black start.
9:06
SPEAKER_01: So you've got to maintain that that system balance, right?
9:10
SPEAKER_01: Um, so so that's number one.
9:12
SPEAKER_01: But but other than that timing, the the grid's pretty simple, right?
9:17
SPEAKER_01: Supply has to equal demand at all times.
9:19
SPEAKER_01: And there's only two things you can do.
9:21
SPEAKER_01: You can up the supply by turning on more plants or building more plants or building more solar or building more wind or putting more batteries on, or you can reduce demand.
9:34
SPEAKER_01: The fact is we're gonna have to do both of those.
9:36
SPEAKER_01: We're gonna have to reduce the peak when we get to peak, those peak hours, and we need to build both more generation, maybe not as much more generation as people think, more transmission and distribution to get it to the right spots, more storage to provide flexibility, um, and more demand response or demand variability, flexibility to allow us to shave that peak in those certain hours when we need to shave it.
10:05
SPEAKER_01: So that's what the future is going to hold, and it has to be all of the above.
10:08
SPEAKER_04: Yeah, so it's interesting, Casey.
10:10
SPEAKER_04: We just recorded an episode about the Inflation Reduction Act.
10:13
SPEAKER_04: You and I have talked a lot about the Inflation Reduction Act and how that investment did spur, you know, well, how that bill did spur a lot of investment.
10:22
SPEAKER_04: So, how are potential shifts related to that, other potential shifts in the regulatory landscape, and then kind of combined with what we're seeing from climate risk, like all the severity of wildfires?
10:34
SPEAKER_04: Um, how is that changing how people are thinking about investment and risk as they look at making investments into the grid, into power plants, into you know other types of technology?
10:46
SPEAKER_01: For the last 30 years, electricity demand in the United States was basically stagnant.
10:52
SPEAKER_01: Um, it went up slightly, but less than our economy grew.
10:56
SPEAKER_01: So we decoupled electricity usage from GDP.
11:01
SPEAKER_01: And the reason for that was energy efficiency.
11:04
SPEAKER_01: And a great example of that an LED light bulb is about 80 or 90 percent more efficient than an incandescent light bulb.
11:11
SPEAKER_01: And lighting represents between 15 and 20 percent of all power usage.
11:16
SPEAKER_01: So as all of those light bulbs changed over time, power demand went down.
11:20
SPEAKER_01: Yes, HVAC units get more efficient, water heaters, space heaters get more efficient, everything got more efficient.
11:28
SPEAKER_01: TVs, everything gets more efficient, and the life cycle of those things ranged from three to five years to 10 or 15 years.
11:36
SPEAKER_01: So they've turned over.
11:37
SPEAKER_01: So that energy efficiency brought down demand.
11:40
SPEAKER_01: Suddenly, that's ended, and it's ended because of the things we just talked about.
11:46
SPEAKER_01: Yes, right?
11:47
SPEAKER_01: Data centers, AI, mobile electrification of mobility, uh uh reshoring of uh of in of industry.
11:58
SPEAKER_01: And for the first time in a long time, um, electricity demand is projected to go up, right?
12:03
SPEAKER_01: So over the last 30 years, electricity demand went up less than a percent a year, right?
12:09
SPEAKER_01: GDP was going up two or three percent, right?
12:12
SPEAKER_01: It's projected to go up uh two to three percent over the next 10 years, right?
12:18
SPEAKER_01: So it's doubling or tripling its growth rate, but more importantly than that, peak is going up even faster, right?
12:26
SPEAKER_01: So uh peak demand is is anticipated to go up about twice the amount of total demand.
12:32
SPEAKER_01: So it becomes more important to how do you manage that peak.
12:36
SPEAKER_01: So that's fact one.
12:38
SPEAKER_01: Fact two is we have an old system.
12:40
SPEAKER_04: I well, that I was getting to that question.
12:42
SPEAKER_04: Yeah.
12:43
SPEAKER_01: So we have an old system.
12:44
SPEAKER_01: Our the average age of the generation fleet in the United States, power plants, right, is 35 to 40 years old.
12:51
SPEAKER_01: Now, remember, a lot of renewables have gone on in in the last 10 years.
12:55
SPEAKER_01: So that tells you how old the coal plants are.
12:59
SPEAKER_01: There's still a few oil plants out there, a lot of natural gas plants, nuclear plants are 30 years old now, 40 years old.
13:05
SPEAKER_04: Well, and some hydro plants.
13:07
SPEAKER_04: I had clients that had 100-year-old hydro plants.
13:10
SPEAKER_01: So the transmission system is 40 to 45 years old.
13:15
SPEAKER_01: Yeah, right.
13:16
SPEAKER_01: So all those towers you see along the highways, the high voltage transmission systems, more importantly, the substations and the control switches, those are 40 to 45 years old.
13:26
SPEAKER_01: The distribution system, what you see in your alley that's connecting your house, that's 30 years old.
13:30
SPEAKER_04: Yeah, so all past or getting close to their useful lives.
13:34
SPEAKER_01: And they're being stressed by climate change.
13:37
SPEAKER_04: Yeah.
13:37
SPEAKER_01: So as temperatures become more extreme, if you're in a hot zone and it gets hotter, those they weren't designed to operate in those temperatures.
13:48
SPEAKER_01: And temperature is really hard on an electric system.
13:51
SPEAKER_01: And then in zones that are cold, you're getting more ice storms, you're getting more storms in general.
13:56
SPEAKER_01: And again, the system wasn't necessarily designed to deal with it.
14:00
SPEAKER_01: So you've got growing demand and you've got an older system, which means you've got to invest, right?
14:06
SPEAKER_01: And there are some challenges to that investment, right?
14:12
SPEAKER_01: One is supply chain.
14:14
SPEAKER_01: So if you know, you talked about tariffs.
14:17
SPEAKER_01: Well, a lot of things like photovoltaic cells, turbines for wind farms, uh, batteries, all the components of batteries, those are currently imported.
14:28
SPEAKER_01: We're building facilities in the US to build them, but building that takes, you know, quite some time.
14:35
SPEAKER_02: Right, three, four, five years.
14:36
SPEAKER_02: Yeah.
14:37
SPEAKER_01: Um, so as the tariffs go in on these items, if they go in on these items, then that's going to increase the cost.
14:46
SPEAKER_01: Uh, most of our high voltage transformers, right?
14:49
SPEAKER_01: That's that's the piece of equipment that takes high voltage coming out of a plant and steps it down to a voltage that you can put on the grid.
14:56
SPEAKER_01: They're they're manufactured overseas, either Germany or Japan or Korea.
15:01
SPEAKER_01: Um, and there's currently a three to five year backlog to get those.
15:06
SPEAKER_01: So there's a shortage of them.
15:07
SPEAKER_01: There's a shortage of copper to put transmission and distribution wires out there.
15:13
SPEAKER_01: Um, I understand the backlog to build a natural gas plant now.
15:17
SPEAKER_01: If if you put your order in now, your plant won't start manufacturing for three to four years, right?
15:24
SPEAKER_01: Then you got to build it at the end of, you know, after the turbine blades and the generator.
15:29
SPEAKER_01: So you've got a you've got a timing issue on how long it's gonna take to get these assets in place.
15:36
SPEAKER_01: Um, and you've got a supply chain issue, driving a timing issue, and you've got to pay for it.
15:42
SPEAKER_04: Well, I was gonna say there's a money issue too.
15:45
SPEAKER_01: Yes.
15:46
SPEAKER_01: Um, so we can talk about some of the different types of generation that that folks are looking to build, but some of them are not necessarily shovel ready.
15:57
SPEAKER_01: Um, there is the the first several of them you build are gonna be more expensive, right?
16:03
SPEAKER_01: Because you haven't learned, you haven't bent the cost curve yet.
16:07
SPEAKER_01: You don't have economies of scale in your supply chain.
16:10
SPEAKER_01: You don't have a common design that everyone can build consistently.
16:15
SPEAKER_01: Um so there is delivery risk, construction risk, and who's gonna bear that risk?
16:22
SPEAKER_01: Um, investors don't necessarily want to take on that risk.
16:26
SPEAKER_01: IRA and the Infrastructure Act and some of the federal programs were taking on some of that risk, but but you still had to have equity, right?
16:36
SPEAKER_01: Um, you know, it's great to have a federally insured loan, but you still have to have equity in the project.
16:41
SPEAKER_01: And who wants to put that kind of equity um at risk?
16:46
SPEAKER_01: And then, you know, Heather, we're talking about 30 year assets, right?
16:51
SPEAKER_01: So there, yes, demand is growing over the next decade, but but you know, it's it's hard to make a bet over 30 years that that takes 30 years to get a payoff.
17:03
SPEAKER_04: I was mentioning this to you before we started.
17:05
SPEAKER_04: If I go back to the 90s when I started auditing, and we were auditing, I was auditing wind farms, and they the cost of wind was extremely expensive.
17:17
SPEAKER_04: And it was only possible for utilities and their customers, and otherwise, because there were so many subsidies for those.
17:23
SPEAKER_04: And then the customers obviously were bearing the extra cost.
17:26
SPEAKER_04: But now, because of all that investment, you know, we've seen that the cost of wind and solar is just the reduction.
17:34
SPEAKER_04: Where it is.
17:35
SPEAKER_04: And now, you know, again, I know there's some questions about the long term and how they're managed and peak.
17:41
SPEAKER_04: But so without the investment and some of these new types of technology, you're never going to achieve that same level of uh benefit.
17:51
SPEAKER_01: Yeah, that's the catch 22 of all this, right?
17:54
SPEAKER_01: If you don't build multiple units of something, you can't bend the cost curve.
17:59
SPEAKER_01: But nobody wants to go first to take on that construction risk and that design risk.
18:07
SPEAKER_01: You know, if you think about nuclear power in the US, a lot of it was funded.
18:11
SPEAKER_01: A lot of that risk came out of the federal government through Tennessee Valley Authority building power plants.
18:17
SPEAKER_01: TVA is a corporation, but it's owned by the United States of America, right?
18:21
SPEAKER_01: So they could take on some of that risk.
18:24
SPEAKER_01: Um, I think we need something similar to that now.
18:28
SPEAKER_01: I'm I'm involved in an organization called the Electric Power Research Institute.
18:32
SPEAKER_01: And they have a project called uh, you know, the the X of Nth, right?
18:38
SPEAKER_01: And what they mean by that is until you build 10 of something, you don't really perfect the cost curve.
18:45
SPEAKER_01: And it can't be 10 different things.
18:48
SPEAKER_04: Yes, because then you need to build 100 if you build 10 of different ones.
18:53
SPEAKER_01: Right.
18:53
SPEAKER_01: So you need 10 of something to figure out how do you build it efficiently and how do you get the right supply chain to get you the parts on time and to de-risk it.
19:03
SPEAKER_01: So that's a big initiative now.
19:05
SPEAKER_01: It doesn't have to all be in the US, but globally we need to build multiple versions of something, multiple, you know, multiple uh locations of a similar design to bend that cost curve.
19:20
SPEAKER_01: And the issue is not the technology, um, the supply chain is an issue, but it's the financing.
19:26
SPEAKER_01: It's it's who's gonna put the money behind those first, because the first one, two, three, four are gonna be expensive.
19:32
SPEAKER_01: Yes, right, but the sixth, seventh, eighth, ninth are gonna get cheaper, and then then it really starts to to bend the curve.
19:39
SPEAKER_01: And nobody wants to be on the front end of that, understandably, if you're an investor.
19:44
SPEAKER_01: Uh, but if you don't get those first half dozen done, you never get to the second half dozen.
19:49
SPEAKER_01: So, so that's an issue.
19:51
SPEAKER_01: Um sighting is an issue, especially in the United States, especially to build transmission, right?
19:59
SPEAKER_01: It's just so hard to get siding and right-a-ways to build high voltage transmission.
20:05
SPEAKER_01: Then you've got supply chain issues as well.
20:08
SPEAKER_01: Um, so those are all challenges.
20:11
SPEAKER_01: But, you know, if you're if you're thinking about having uh to really add to the fleet and to the transmission, um, it's gonna take time and it's gonna take money, which is why cutting that peak is so important because it buys you time to build those assets, right?
20:30
SPEAKER_01: So the ability to control that peak to have flexible demand that you can, when it makes sense and when the right price signals are there, you can curb down your demand to get through that peak couple hours is so important because it buys you time to build those other resources.
20:48
SPEAKER_04: So I want to come back to that, KCB.
20:50
SPEAKER_04: Let me ask, because you mentioned nuclear and we've talked about this before.
20:53
SPEAKER_04: So, like small nuclear or hydrogen, are are we still in the that experimental, the first 10 stage for both of those, or do you think we're getting closer on them?
21:05
SPEAKER_01: Well, um, there are some small modular nuclear reactors under construction, but not in the US.
21:10
SPEAKER_01: I think there's a couple in Poland.
21:12
SPEAKER_01: I think Canada is building one, um, maybe Korea.
21:17
SPEAKER_01: I can't remember all of them.
21:19
SPEAKER_01: Uh, we did a previous uh interview with Sama, uh I Bel Boa, she talked about it.
21:25
SPEAKER_01: Um, I think that technology is ready, um, but it's gonna take a while because at least in the US, you have to get it licensed.
21:34
SPEAKER_01: Um uh and then you've got to start construction.
21:37
SPEAKER_01: Uh, you've got to build the supply chain to both build the components and get the nuclear fuel uh that you need for it.
21:45
SPEAKER_01: So I'm very bullish on nuclear.
21:47
SPEAKER_01: I think it's it's important.
21:48
SPEAKER_01: Um, equally bullish on small modular reactors as I am the need to build more big thousand megawatt unit.
21:56
SPEAKER_04: Yeah.
21:57
SPEAKER_01: Um uh I think we're gonna need both.
22:00
SPEAKER_01: Different parts of the country and different parts of the world.
22:03
SPEAKER_01: I think people are being a little optimistic on the timing.
22:07
SPEAKER_01: I can't see more than a unit or two being in service within the next 10 years.
22:12
SPEAKER_01: And it's sort of the back end of that 10-year period.
22:15
SPEAKER_01: There is one company that has a license to build, but again, they need an investor, they need a site, they need interconnects.
22:23
SPEAKER_01: You got to put it somewhere where there's transmission.
22:26
SPEAKER_01: And it's just going to take a little while.
22:29
SPEAKER_01: So I think nuclear is coming.
22:32
SPEAKER_01: And I think it's critically important.
22:35
SPEAKER_01: Hydrogen, I think, is a little bit different.
22:40
SPEAKER_01: I think hydrogen, especially blue and green hydrogen, cleaner hydrogen, has proven to be pretty expensive.
22:46
SPEAKER_01: Yes.
22:47
SPEAKER_01: But more importantly, you gotta produce it where people need it.
22:52
SPEAKER_01: And it's not all that easy to transport.
22:55
SPEAKER_01: So I think we are going to see hydrogen, but it's going to be very localized.
22:59
SPEAKER_01: It's going to be where you have, for instance, perhaps you're making sustainable aviation fuel, and you use that hydrogen and combine it with oxygen and make you know uh low carbon sustainable aviation fuel.
23:11
SPEAKER_01: It's places where you're already using hydrogen to make fertilizer or in chemical manufacturing.
23:17
SPEAKER_01: I think there will be hubs that work, but the idea that it's going to be a source for the use of for the production of electricity, I just don't think the economics work.
23:28
SPEAKER_01: By the time you burn the electricity to run the equipment to make it, and then you convert it back to electricity, you've lost too much.
23:37
SPEAKER_01: Yeah, you've lost too much energy.
23:38
SPEAKER_04: Yeah.
23:38
SPEAKER_04: So, Casey, if I'm uh maybe a skeptic of climate change or and listening to this, then it's just like, well, why don't we just start building coal plants again?
23:48
SPEAKER_04: Like if we have these peaks, we know coal plants are reliable, you know, we know we can build them big.
23:54
SPEAKER_04: You know, so how does that fit into this conversation?
23:58
SPEAKER_01: Well, a number of companies that had announced plans to retire their coal plants um have delayed those retirements.
24:07
SPEAKER_01: So we're keeping those coal plants going, again, to bias time to build these other resources.
24:13
SPEAKER_01: Um Frankly, natural gas is more economical than coal.
24:17
SPEAKER_01: So I think we're gonna see construction of natural gas, which again is 50% or less carbon.
24:24
SPEAKER_01: But what I really like to talk about in coal is the other stuff that comes out of the smokestack, right?
24:32
SPEAKER_01: The particulate matter that comes out of coal plants, yes, yeah, is pretty nasty stuff.
24:37
SPEAKER_01: And um, you know, the health, the the detrimental health effects of that is is really pretty bad.
24:46
SPEAKER_04: And more immediate, I guess, than good than if people are saying, oh, climate change, that's you know, that's in the future, but this the impact of all the particulates is is now.
24:57
SPEAKER_01: I I think so.
24:58
SPEAKER_01: You also have to get coal to the plant.
25:00
SPEAKER_01: So now you're running diesel trains and you and that's putting particulate matter in.
25:06
SPEAKER_01: So I personally, whether you believe in carbon or not, the particular the particulate output is just killing people.
25:15
SPEAKER_02: Yeah.
25:16
SPEAKER_01: Right.
25:16
SPEAKER_01: And and it's not as economical.
25:19
SPEAKER_01: So I I yes, now in parts of the world, they're gonna build coal planes, right?
25:23
SPEAKER_01: Because you can build them, they have coal, they work, um, you know, the construction risk is a little bit less.
25:30
SPEAKER_02: Right.
25:31
SPEAKER_01: But I think ultimately there will be cheaper sources of energy.
25:35
SPEAKER_01: Um, you know, one source of energy I think is really pretty interesting is advanced geothermal, right?
25:41
SPEAKER_01: So you drill a hole down into, you know, down into the earth and you pump water down there, and then the earth is hotter down there and it heats it up.
25:51
SPEAKER_01: And you take that hot water and steam and you run a generator and there's no emissions.
25:56
SPEAKER_01: And you can you can get pretty efficient on these advanced hydro by either doing horizontal drilling, right, to give you more surface area, or some companies are looking at really deep drilling, and then you could build those plants anywhere.
26:11
SPEAKER_01: So you don't need a geological formation if you can drill deep enough.
26:15
SPEAKER_01: So I think advanced geothermal is gonna be important.
26:18
SPEAKER_01: I think it could be relatively cheap.
26:20
SPEAKER_01: We have to bend the cost curve.
26:21
SPEAKER_01: Yeah, it's clean, it's dependable, right?
26:25
SPEAKER_01: Because the temperature of the earth doesn't change, right?
26:28
SPEAKER_01: As long as you can keep pumping water through that closed system, you're gonna get steam.
26:32
SPEAKER_01: And steam drives turbines and turbines drive generators, and you get electricity.
26:36
SPEAKER_02: Yeah.
26:37
SPEAKER_01: So I think it's gonna be that.
26:40
SPEAKER_01: It's gonna be energy storage connected with solar, it's gonna be, you know, we need long-duration batteries.
26:46
SPEAKER_01: Um, it's gonna have to be all of the above.
26:48
SPEAKER_01: But first, I think we got to get the peak down.
26:51
SPEAKER_04: Yep.
26:51
SPEAKER_04: So that was my next question.
26:53
SPEAKER_04: So, what what steps need to be taken, or what should companies be thinking about from that perspective?
26:59
SPEAKER_04: Or is this not an individual company?
27:01
SPEAKER_04: This is a more policy issue.
27:03
SPEAKER_01: It's both.
27:05
SPEAKER_01: Maybe policy, but also market design.
27:07
SPEAKER_01: How do you reward companies for reducing their peak?
27:10
SPEAKER_01: How do you reward individuals for reducing your peak?
27:13
SPEAKER_01: And it's technology.
27:15
SPEAKER_01: So think about your cell phone and think about Bluetooth.
27:19
SPEAKER_01: Regardless of who your cell phone manufacturer is, who builds your headphones, who, what car you drive, Bluetooth is Bluetooth and it works.
27:28
SPEAKER_01: So there is a data interconnection protocol that works everywhere.
27:33
SPEAKER_01: We don't have that in electricity.
27:35
SPEAKER_01: So every space, you know, every heat pump and water heater that you could control has a different technology protocol.
27:45
SPEAKER_01: So there's a project out there uh by EPRI to try and get a common protocol among all the manufacturers.
27:52
SPEAKER_01: So, so when um a company, it could be a utility, it could be somebody that's just aggregating these loads, say, hey, we're gonna cut peak for this hour, they can send a signal out and all of these pieces of equipment work.
28:07
SPEAKER_01: Everybody says, I don't want my air conditioner turned off.
28:10
SPEAKER_01: But it's not a matter of that, it's a matter of cooling your house down the hour before peak, so you don't have to run it during that hour.
28:17
SPEAKER_01: It's about heating your hot water at four in the morning instead of six when you're taking your shower.
28:23
SPEAKER_01: So you're shaving that peak.
28:25
SPEAKER_01: Big project around data centers.
28:28
SPEAKER_01: And there's the perception that data centers can't reduce their electricity usage.
28:34
SPEAKER_01: And to some extent that's true.
28:36
SPEAKER_01: Uh, to some extent it's not true if you give them enough warning and the right price signal.
28:41
SPEAKER_01: But every data center has very reliable backup generation on site because they can't afford to have it go down.
28:49
SPEAKER_01: To have it go down.
28:50
SPEAKER_01: Now, what if you could turn that generation on for an hour?
28:53
SPEAKER_01: Right?
28:53
SPEAKER_01: What if you could turn those those generators or those batteries on for an hour and basically take that data center offline or reduce the amount it's taking for an hour, an hour and a half, right?
29:06
SPEAKER_01: Um again, EPRI has a project called Data Center Flex that is designed to test can this actually work?
29:15
SPEAKER_01: Um, you know, can you get the EPA rules to change?
29:18
SPEAKER_01: Because most data center backup power is diesel.
29:20
SPEAKER_01: Oh, so you don't want to run it for that long, right?
29:23
SPEAKER_01: Because of the emissions, but for an hour, okay.
29:26
SPEAKER_01: Yes, right?
29:27
SPEAKER_01: Um, if it means you're not turning on something even worse, um, or or maybe having to curtail load and do a brownout.
29:36
SPEAKER_01: The technology is hypothetically there, it has to be scaled and implemented and controlled.
29:43
SPEAKER_01: All that means now you have more digital control on a system, so you have more cyber areas of attack.
29:49
SPEAKER_01: So as you do all these things, you got to think about cyber as well.
29:53
SPEAKER_01: Um, the transmission system, right?
29:56
SPEAKER_01: That's a big constraint on how much electricity you can put on a transmission wire.
30:00
SPEAKER_01: Well, technology can up that efficiency, right?
30:03
SPEAKER_01: So if you do things like they call it dynamic line rating, transmission is kind of um affected by the heat, right, that's going through the line and the heat of the air around it.
30:15
SPEAKER_01: And heat causes transmission line to sag, right?
30:19
SPEAKER_01: It stretches, right?
30:20
SPEAKER_01: And you get too much sag, and then the wind can whip it and bad things happen, right?
30:25
SPEAKER_01: Bad things happen.
30:26
SPEAKER_01: So, but if you can measure the air temperature and the wind speed, you can have a better idea of what the actual sag is on that line.
30:35
SPEAKER_01: Maybe you can put more power through it, right?
30:37
SPEAKER_01: You can get better efficiency.
30:39
SPEAKER_01: So all of these efficiencies are just critical to bias time to build new transmission, to build new generation.
30:48
SPEAKER_01: And it's easier to do those things than to build those big, expensive assets.
30:54
SPEAKER_04: So, Casey, this goes way beyond than like rate design, because I think if we again go back 10, 15, 20 years, the the everything around peak was about, okay, well, we're gonna have customers who can curtail, we're gonna let you have a cheaper rate because you know we you agree you can get shut off.
31:11
SPEAKER_04: I mean, this is all going way beyond that.
31:13
SPEAKER_04: But does rate design still have a place?
31:16
SPEAKER_01: Absolutely, right?
31:17
SPEAKER_01: How do you reward somebody for for curtailing their power?
31:20
SPEAKER_01: Yeah.
31:20
SPEAKER_01: Right.
31:21
SPEAKER_01: And if look, these are current, these are for-profit companies that are taking the power, they're gonna do what's best for their company.
31:29
SPEAKER_01: They will occasionally do what's best for their community, right?
31:32
SPEAKER_01: But that's more of a one-off.
31:34
SPEAKER_04: But you need an incentive, yeah.
31:35
SPEAKER_04: Yeah.
31:35
SPEAKER_01: I mean, you were in California when the last set of brownouts occurred.
31:39
SPEAKER_01: Yeah.
31:39
SPEAKER_01: You know, the CEO of one of the large utilities sent a text out asking people to adjust their thermosets, and they did.
31:45
SPEAKER_01: Right.
31:46
SPEAKER_01: But how many times?
31:48
SPEAKER_04: Yes.
31:48
SPEAKER_04: Yeah, exactly.
31:49
SPEAKER_01: Right.
31:50
SPEAKER_04: All right, yeah.
31:51
SPEAKER_01: So look, I think it's a fascinating time.
31:53
SPEAKER_01: So it is just, I think it's just such an interesting time to be in the industry.
31:59
SPEAKER_01: The demand growth is real.
32:02
SPEAKER_01: It's happening.
32:03
SPEAKER_01: You know, there's a lot of skepticism.
32:05
SPEAKER_01: Well, how real is it?
32:06
SPEAKER_01: Well, you know, the executives I talk to, if you listen to the earnings calls, um, it's happening, right?
32:13
SPEAKER_01: They're there, it it's happening.
32:15
SPEAKER_01: Um, you know, we talked a lot about data centers.
32:18
SPEAKER_04: Yeah, I mean, I wanted to follow up with you on the data center specifically, because I think, you know, again, it depends, the press goes kind of up and down on those, but they have added to the load.
32:30
SPEAKER_04: There's no question to your point.
32:32
SPEAKER_04: And they are 24-7 for the most part.
32:35
SPEAKER_04: Again, I know you said that they can have some fluctuation.
32:38
SPEAKER_04: So, you know, for individuals who are saying, well, I just don't want those in my community.
32:43
SPEAKER_04: I mean, and the that doesn't ultimately seem like the solution.
32:48
SPEAKER_04: I think that's what you're saying.
32:50
SPEAKER_01: Yeah, you know, I was at a conference and one of the data center operators made a great quote.
32:56
SPEAKER_01: He said, you know, 60 years ago, there were communities who said that I don't want an airport or an interstate going through my community.
33:03
SPEAKER_01: And they all regret it down.
33:05
SPEAKER_04: Yes, because now they're cut off.
33:07
SPEAKER_01: Data is going to be the same thing, right?
33:09
SPEAKER_01: Is you have an uh an opportunity to really build something accretive to your community.
33:17
SPEAKER_01: Um, it brings property taxes, brings some jobs, right?
33:21
SPEAKER_01: But it brings a big demand that you can then use to reduce the cost of everybody else.
33:28
SPEAKER_01: So electricity is an average cost game, right?
33:31
SPEAKER_01: The more you produce, the lower the average cost per unit goes down.
33:36
SPEAKER_01: And if you, you know, these data centers and hybrid scalers, they understand they have to pay their fair share.
33:42
SPEAKER_01: Right.
33:43
SPEAKER_01: So I think it has an opportunity to actually lower the cost of energy in the community, not raise it.
33:49
SPEAKER_01: And I think it will happen.
33:51
SPEAKER_01: And then you got to remember they're different kind of data centers, right?
33:55
SPEAKER_01: There are enterprise data centers that run servers for PwC or whoever, right?
34:00
SPEAKER_01: And they're located where they're located.
34:03
SPEAKER_01: And those are fairly inflexible because when we need to call in those data centers, we need it to work, right?
34:09
SPEAKER_01: But they're also not as big, right?
34:11
SPEAKER_01: They're smaller, right?
34:13
SPEAKER_01: Then you have things like um uh think about um uh online streaming of video, uh, traditional, you know, queries on search engines.
34:26
SPEAKER_01: Um, again, not as big.
34:29
SPEAKER_01: You can localize them, you can move that data load around the globe as you need to because the latency and the speed is a little less important.
34:39
SPEAKER_01: Um, so that's a different type of data center.
34:42
SPEAKER_01: And then you've got AI data centers, but even in AI, you've got two different types.
34:46
SPEAKER_01: You've got training, right?
34:48
SPEAKER_01: Which is actually very variable.
34:50
SPEAKER_01: You can stop a training run if you have warning and start it again the next day, right?
34:56
SPEAKER_01: Um, training of AI models is very energy intensive, but it's a little more flexible.
35:02
SPEAKER_01: Um, once the model is trained, then you have inference, which is you type in a question and you get it back.
35:09
SPEAKER_02: Yeah.
35:09
SPEAKER_01: So an AI inference request is about 10 times more energy intensive than a non-AI request, right?
35:20
SPEAKER_01: So if you type something into your regular search engine, it's not using AI, it uses a lot.
35:26
SPEAKER_01: If you type in an AI query, it uses 10 watts, right?
35:31
SPEAKER_04: Oh, so we all have to be smart about when we're using AI and when we're not.
35:35
SPEAKER_01: Well, one of the companies said, quit putting please and thank you in your queries because you have to we have to process those words and throw them out.
35:44
SPEAKER_01: So the more extraneous things you put into your inference requests, the more energy it takes.
35:50
SPEAKER_01: So be more efficient, right?
35:51
SPEAKER_04: So although then there's the whole other side of it, is that do you want AI to be completely rude?
35:57
SPEAKER_04: So I mean, I guess that there's both sides of that.
36:00
SPEAKER_01: There definitely is.
36:01
SPEAKER_01: So will will AI become more energy efficient?
36:05
SPEAKER_01: Absolutely, right?
36:06
SPEAKER_01: I mean, I I think like 30% of the energy for AI is used to cool the racks, the chips, right?
36:13
SPEAKER_01: Technology gets better on that.
36:15
SPEAKER_01: You can rotate which servers are going to spread the heat out.
36:19
SPEAKER_01: You can use that heat for other purposes, like to hot, you know, to heat water, right?
36:25
SPEAKER_01: Uh either for cooling of your building or maybe even for you know to produce electricity.
36:30
SPEAKER_01: So will efficiency grow?
36:32
SPEAKER_01: Absolutely, but demand will grow.
36:35
SPEAKER_01: I mean, we just see at PwC.
36:37
SPEAKER_01: Um, as we use AI, um, we're finding more and more uses.
36:42
SPEAKER_01: Right.
36:42
SPEAKER_01: And it used to be like an and, like, I'm gonna do my job, and I'll ask an AI query.
36:48
SPEAKER_01: Well, now the AI is becoming fundamental to what we do.
36:52
SPEAKER_01: Um, so the use is just gonna go up.
36:54
SPEAKER_01: There are different kinds of data centers that will have different ability to flexor load, that will have different ability to uh to move between data centers.
37:04
SPEAKER_01: And all of that, first of all, AI will be used to make all of that more efficient.
37:09
SPEAKER_04: Um, it's like a self-perpetuating.
37:12
SPEAKER_01: Yeah.
37:13
SPEAKER_01: So you'll operate them more efficiently to get more um output out of the same asset, uh, using less energy, which is the biggest cost of one of the biggest costs of compute, but the demand will go up as well.
37:27
SPEAKER_01: So um it's real.
37:30
SPEAKER_01: And, you know, we're hearing from our clients, yeah, they're building these data centers now, and they're breaking ground on even more.
37:38
SPEAKER_01: And we don't know how to keep up with the load.
37:41
SPEAKER_01: It's particularly acute in northern Virginia, uh, but it's happening in Ohio.
37:47
SPEAKER_01: They're building a huge data center in North Louisiana.
37:51
SPEAKER_01: Um, there's talk, and I think it's really interesting of putting data centers out in the fracking shale field because a lot of times they're just flaring gas.
38:01
SPEAKER_01: Yes, right.
38:01
SPEAKER_01: If you could take that gas and put it through a turbine and then have a data center right there with a satellite hookup.
38:08
SPEAKER_01: So I know people that are developing those projects, there will be clever and ingenious ways to meet to meet this computing demand increase with power, uh, but it's gonna have to be all of the above.
38:20
SPEAKER_01: All of the above.
38:21
SPEAKER_04: So, Casey, we mentioned cyber.
38:22
SPEAKER_04: So I wanted to come back to that.
38:24
SPEAKER_04: Uh, because again, even when I mentioned the the outage in uh Spain and Portugal, and even initially, at least there's a question this is the cyber attack.
38:32
SPEAKER_04: And then obviously we we talked about where they think the source was, but nonetheless, cyber and electricity, there there's definitely potential issues there.
38:43
SPEAKER_04: So, what is happening from that front, and how are companies thinking about managing that risk?
38:50
SPEAKER_01: Well, it's an evolving area, and frankly, um it's one that needs a lot of um energy and speed behind its evolution, no pun intended on the energy, but um, I think that cyber has historically been focused on um intellectual property protection.
39:08
SPEAKER_01: So, how do you, you know, you have data on a server.
39:11
SPEAKER_01: Right, that you need to yeah, how do you protect that server and that data?
39:16
SPEAKER_01: Um, so it's very localized.
39:19
SPEAKER_01: Um, it's easier to monitor because you know what's going in and out of those servers.
39:24
SPEAKER_01: Operational technology, the the technology that controls grids and pipelines and and um uh manufacturing facilities and chemical plants and refineries, that technology is embedded in a thousand different things around that facility.
39:45
SPEAKER_01: So it's harder to actually monitor, it's harder to even know what those thousand things are.
39:51
SPEAKER_01: Um, you try and and they call it air gap them, so have them not connected to something, but things ultimately somehow get connected or or they're certainly that risk.
40:01
SPEAKER_01: So the strategies around cybersecurity for operational technology or industrial control systems is very different than the cyber strategies around IT, and it's not as evolved.
40:14
SPEAKER_01: And I think what we're finding, what we're learning is um there probably are vulnerabilities.
40:21
SPEAKER_01: Um, the consequences are severe because if you have, if you have an IT cyber issue, you lose data.
40:29
SPEAKER_01: But that's bad.
40:30
SPEAKER_01: I'm not minimizing that, but the grid doesn't go down, which causes you know all kinds of harmful things to happen.
40:37
SPEAKER_01: A factory doesn't explode, a refinery doesn't have something really bad happen.
40:42
SPEAKER_04: Well, and not to mention all the other things but people on life support, and there's just so many implications when the grid goes down.
40:49
SPEAKER_01: Right.
40:50
SPEAKER_01: So there is really a growing appreciation of the need to protect those very distributed operational technology technologies.
41:00
SPEAKER_01: The first thing is to actually know what's on your system and then to monitor what's happen what's going in and out.
41:06
SPEAKER_01: And you know, these are very stable, right?
41:08
SPEAKER_01: You don't you don't see a lot of variation in signals going to them or signals coming out of them.
41:15
SPEAKER_01: So you can monitor that, you can see something happening very quickly.
41:19
SPEAKER_01: Now, the problem is, you know, if you have a data center that's under attack, you can go to another data center and just turn it off.
41:25
SPEAKER_01: You can't do that for an electric grid or a gas pipeline or an oil pipeline or you know, a fertilizer plant or whatever.
41:33
SPEAKER_01: So um you've got to be able to sort of fend off that attack a little bit more easily.
41:39
SPEAKER_01: To do that, you have to see it coming.
41:40
SPEAKER_01: You have, and to do that, you have to know what is the equipment that they can attack.
41:44
SPEAKER_01: It's also harder to patch them, right?
41:47
SPEAKER_01: Because again, you can take down a server farm and install patches, and God forbid you have a bad patch, life will go on.
41:55
SPEAKER_01: If you have a bad patch in a power plant and the power plant goes down, you get an outage.
42:00
SPEAKER_01: Yes, right.
42:01
SPEAKER_01: So patching is more difficult.
42:03
SPEAKER_01: Um, it's all a little bit more difficult and a different strategy for operational technology.
42:09
SPEAKER_01: And I think it's an area that we really need to invest in.
42:12
SPEAKER_01: And it's it's you know, it's it's critical um to to to our safety, right?
42:18
SPEAKER_01: And I think, you know, we need to think of it as like a mission, yeah.
42:22
SPEAKER_04: Right?
42:22
SPEAKER_01: We got to protect this stuff because this stuff is keeping our life going.
42:26
SPEAKER_04: Well, and I guess that's maybe the the my question, Casey, is if again, if I'm listening and I'm not an executive at a utility company where this is sort of my my bread and butter, but I, you know, I'm paying attention to the news and I'm looking ahead of the implications.
42:42
SPEAKER_04: Like, what are the key things that people should be sort of cluing in on, paying attention to, particularly as we look out over the next year?
42:50
SPEAKER_04: Like, what are some of the important things that developments or otherwise that you you know would suggest?
42:57
SPEAKER_01: Well, I would say um, look, if you're a financial institution, a bank, you probably don't have a lot of industrial control systems, maybe heating and cooling and a building, you know, but but it's fairly limited.
43:09
SPEAKER_01: But if you're an industrial company, I would do an inventory of okay, what's mission critical in my facilities?
43:17
SPEAKER_01: And how have I thought about protecting those mission critical industrial assets from a cyber event?
43:24
SPEAKER_01: Right.
43:24
SPEAKER_01: So first of it, it starts with just awareness.
43:27
SPEAKER_01: And again, there's so much attention to IT cybersecurity.
43:31
SPEAKER_01: I'm gonna protect my server, my employee data, my customer day.
43:35
SPEAKER_01: And that's super important.
43:37
SPEAKER_01: I'm not suggesting that's not important, but I think the industrial stuff has been a little more ignored.
43:44
SPEAKER_01: So I would just say ask the question, right?
43:48
SPEAKER_01: What industrial control systems are critical to my business and how we thought about protecting?
43:54
SPEAKER_04: Yeah.
43:54
SPEAKER_01: So start there.
43:55
SPEAKER_04: So then, Casey, if we kind of bring all of this together, because we hit a a lot of Different points.
44:01
SPEAKER_04: I guess other thoughts in terms of observations that you've had, or uh, you know, what you sort of see coming next that we should share with the audience.
44:11
SPEAKER_01: Well, um, you know, there's a lot of talk about sustainability and decarbonization.
44:17
SPEAKER_01: And, you know, we talked about timing issues.
44:20
SPEAKER_01: Well, what you can build fastest right now is solar and storage.
44:25
SPEAKER_01: So that's gonna that's gonna we're gonna build more solar with storage to put more energy on the grid and storage to give us some flexibility in when it can be used, right?
44:36
SPEAKER_01: That's not gonna be enough because we're gonna need dispatchable plants, right?
44:42
SPEAKER_01: So we're gonna build more gas plants.
44:44
SPEAKER_01: You know, a lot of people say, oh, gas is bad.
44:47
SPEAKER_01: Well, it is a fraction of the carbon of coal and other sources, but more importantly, we need it.
44:53
SPEAKER_04: And it's reliable.
44:54
SPEAKER_04: It's reliable.
44:55
SPEAKER_04: If you want your electricity to stay on all the time, you need those types of resources.
44:59
SPEAKER_04: So right.
45:00
SPEAKER_01: And that hopefully builds us a bridge to things like next generation nuclear, next generation um uh geothermal, um, and all of it's going to need to be bolstered by better efficiency.
45:14
SPEAKER_01: What I would say is for a long time in this country, we didn't think about energy.
45:18
SPEAKER_04: No, it was just there when you turned on the light.
45:21
SPEAKER_01: It was just there.
45:22
SPEAKER_01: We had plenty of oil, right?
45:23
SPEAKER_01: I mean, we had the oil shortages in in you know the 70s and 80s, and we have occasional spikes in gasoline prices, but for the most part, we don't have any shortages.
45:33
SPEAKER_01: No, right?
45:34
SPEAKER_01: And the electricity grid in the United States and North America is the most reliable in the world.
45:40
SPEAKER_01: Costs have been relatively cheap because natural gas prices have gone down because of fracking.
45:45
SPEAKER_01: That set the cost of electricity.
45:47
SPEAKER_01: We didn't have to build new capacity, so you didn't have new assets, expensive assets coming on the grid.
45:52
SPEAKER_01: Interest costs were low, so you could finance it economically.
45:56
SPEAKER_01: Well, all that is changing now, right?
45:58
SPEAKER_01: Demand is going up, so we got to build new assets.
46:00
SPEAKER_01: Those new assets by just because of inflation over 30 years are going to be more expensive than the assets that they're replacing.
46:08
SPEAKER_01: Interest costs, return on equity are going up because of geopolitical and other risks.
46:14
SPEAKER_01: Um, siding is so difficult.
46:17
SPEAKER_01: Uh, you could have tariff impacts.
46:20
SPEAKER_01: Um, so it we have to think about energy now in a way we haven't thought about in a long time.
46:27
SPEAKER_01: Energy independence is not just petroleum independence, it's also electricity independence.
46:33
SPEAKER_01: And a lot of that has to do with our supply chain because so much of that supply chain comes from overseas, but you can produce it in the US.
46:41
SPEAKER_01: So I it's just I'm I mean, I've been in the electric, you've been in the electricity business a long time.
46:47
SPEAKER_04: Well, yes.
46:48
SPEAKER_01: I've I've got a few years on you, and I think it's the most fascinating and and vital time to be in this industry that we've ever that we've ever had.
46:59
SPEAKER_01: There are amazing investment opportunities.
47:02
SPEAKER_01: That means there's investment risk out there.
47:05
SPEAKER_01: We haven't even talked about the impact of climate on the operation of these assets and the risk that climate change.
47:14
SPEAKER_01: So, you know, we need to spend a lot of money to harden the systems, to be prepared for either extreme heat or extreme water or extreme wind or extreme uh, you know, whatever is coming down the pipe, droughts if you're you know relying on hydroelectric, or maybe too much water if you're relying on hydroelectric and you can't dam it because there's so much coming.
47:37
SPEAKER_01: And all these things are converging.
47:39
SPEAKER_01: And it's just, I think it's fascinating.
47:40
SPEAKER_04: See, yeah, so you think it's fascinating, but are you optimistic or pessimistic?
47:44
SPEAKER_01: Absolutely, I'm optimistic.
47:45
SPEAKER_01: Where the we have the technologies to do this, our constraints are building the supply chain and financing.
47:53
SPEAKER_01: And we have there's money out there to build this stuff.
47:57
SPEAKER_01: We just have to send the right price signals.
47:59
SPEAKER_01: Um, and we have the know-how on how to build it.
48:03
SPEAKER_01: So I'm incredibly optimistic if we just get out of our own way and we put in the right policy signals and market signals to enable it.
48:13
SPEAKER_01: It'll get built, it'll get built economically.
48:15
SPEAKER_01: Look, the first couple are going to be expensive, but you can't stop.
48:19
SPEAKER_01: You got to keep going.
48:21
SPEAKER_01: You gotta, you gotta soldier through those first expensive ones to get the cost curve built.
48:27
SPEAKER_01: And and I think it's just an amazing opportunity.
48:30
SPEAKER_01: It used to be that we were the leader in America, right?
48:35
SPEAKER_01: Um, you know, we were the undisputed leader in nuclear technology.
48:38
SPEAKER_02: I don't know that we are anymore.
48:40
SPEAKER_02: No, yeah.
48:40
SPEAKER_01: Um, we were the leader in things like energy storage or building trans.
48:45
SPEAKER_01: We're not anymore.
48:46
SPEAKER_01: Um, but but we have the intellectual capital.
48:49
SPEAKER_01: We know how to do it better than anybody else.
48:51
SPEAKER_01: Now we just have to retrain our muscles on how to actually do it ourselves.
48:55
SPEAKER_04: You said you're optimistic, so I think this might be a good note to end on.
48:59
SPEAKER_04: But Casey, it's always such a pleasure to talk to you.
49:02
SPEAKER_04: Appreciate all the insight and wisdom you've brought to us.
49:04
SPEAKER_04: And thanks so much for joining me today.
49:06
SPEAKER_01: Well, you can tell I love this stuff.
49:07
SPEAKER_01: So it's a pleasure to get together and talk about it.
49:10
SPEAKER_04: All right, excellent.
49:11
SPEAKER_04: Thanks, Casey.
49:12
SPEAKER_04: And to our listeners, thank you so much as well for joining us today.
49:16
SPEAKER_04: And if you're interested in hearing more, please check out our runway at viewpoint.pwc.com or wherever you listen to your podcasts.
49:25
SPEAKER_04: Thanks again.
49:27
SPEAKER_03: That's our show for today.
49:29
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49:32
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49:35
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49:39
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49:49
SPEAKER_03: From Thought Leadership at PwC, I'm Heather Horn.
49:53
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50:04
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50:06
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