Catalyst with Shayle Kann - Mailbag episode! Interest rates, carbon dioxide removal, load growth, and more

Episode Date: November 9, 2023

It’s about that time again. You sent in great questions for Shayle, and in this episode we’re tackling them with the help of Sarah Golden, vice president of energy at GreenBiz. Together Shayle and Sarah cover topics like: Load growth and whether data-center demand is good or bad for decarbonization. The crash in photovoltaic module prices and what it means for the solar industry. The impact of interest rates on climatetech. The challenges of siting carbon dioxide pipelines. Why there’s no clear winning technology for carbon dioxide removal. European energy companies acquiring U.S. companies. Why Shayle is bullish on the macro grid, despite the slow pace of interconnection and transmission buildout. Plus: volcanoes, Frankenstein, and Shayle’s childhood with geodes. Recommended Resources: Catalyst: Navigating the electrification gauntlet Canary: The US offshore wind industry faces a moment of reckoning S&P Global: Cancellation of Navigator CO2 pipeline raises critical issues for several industries Catalyst: Growing the carbon dioxide removal market Sign up for Latitude Media’s Frontier Forum on January 29, featuring Crux CEO Alfred Johnson, who will break down the budding market for clean energy tax credits. We’ll dissect current transactions and pricing, compare buyer and seller expectations, and look at where the market is headed in 2024.

From the studios of Latitude Media and Canary Media. I'm Shail Khan, and this is Catalyst. The urban legend states that Mary Shelley wrote Frankenstein in, I think, 1916 in Lake Geneva, because the volcano erupted in 1915 in Indonesia, and that caused basically global cooling. So that's the story. It may or may not be true, but I like it. I like the story.

I don't think it completely answers Ben's question. It definitely does not. But what I guess I would say is, like, you might have lower solar production. I have no idea what you'd expect to see in terms of solar generation. But what you definitely would see happen, if there was a volcano that erupted at that scale, is a temporary but significant global cooling effect. When utilities need flexible capacity they can count on, they turn to Energy Hub. Energy Hub works with more than 170 utilities, coordinating over 2.5 million devices,

to manage 3.4 gigawatts of flexibility built for the moments when utilities can't afford uncertainty. Energy Hub builds and operates virtual power plants that utilities actually stake their grid planning on, coordinating EVs, batteries, thermostats, and more through a single platform built for utility scale. Predictive, verifiable, and designed to perform when it counts. Learn more at energyhub.com. Trillions of dollars are flowing into clean and critical infrastructure, but those investments aren't driven by technology alone. They're shaped by markets, by policy, by capital, and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, and host of a brand new podcast, Critical Capital. Each episode, I talk with people deploying capital, shaping policy and building the clean economy.

Tune in as we unpack how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. Catalyst is supported by Fish Tank PR, an award-winning PR firm focused on climate, and energy tech, renewables, and sustainability. Fish Tank is known for generating prominent and effective media coverage for the brands they work with. If you want a PR partner that's thoughtful, shoots straight, and gets results, you'll like Fish Tank PR. To learn more about Fish Tank's approach, visit fish tankpr.com. That's F-I-S-C-H-Fish-Tankpr.com.

This week, you asked? We answered. Or tried, anyway. I'm Shail Khan. I invest in revolutionary climate technologies and energy impact partners. Welcome. All right. We are back with our third ever edition of a mailbag episode or an Ask Me Anything episode. I guess that's the Reddit version of what we're doing here. But for the third time, my friend and colleagues, Sarah Golden from GreenBiz, joined us to aggregate a bunch of questions that you all sent in over the past few weeks. Thank you so much for sending in questions. We got a bunch of questions. are really good ones that were fun to answer. So keep sending those in. Don't feel like you need to wait around for one of these periodic Ask Me Anything episodes. We'll try to do it once in a while,

no matter what, as soon as good questions come in and significant enough volume. But in the meantime, here is Sarah taking over host duties. I'm Sarah Golden, VP of Energy at GreenViz, and welcome to Catalyst. I am here with your usual host, Shale Khan, partner at Energy Impact Partner, doing our third ever Ask Me Anything with Shale. Shale, welcome to your podcast. Thank you. That was a very nice formal introduction. It's better than I normally do. Well, I love doing these. I love being able to be behind the microphone and ask you questions. And I have a kickoff question for you. So there was a study a few years ago that said that people tend to choose professions unconsciously, that resemble their own names.

And they found that there was a higher likelihood of, like, Dennis becoming dentists. And my question for you, Shale Khan, is do you think having the name Shale has anything to do with you seeking a career in energy? I was born, when I was born, it predated, like, the Shale Gas Revolution really taking off, but it was definitely true as I was growing up.

Actually, the closest version of a true story that ties to that is that I was obsessed with rocks as a kid. Not so much energy, but as a little kid, I had a rock collection. And I remember one time I had a, at some point my parents had gotten me a bank account, and I had like a $50 in a bank account. I had access to it, which was their mistake. And then I went down to our local rock shop at, it was called Bernie's rock shop that I could walk to in Madison, Wisconsin, where I grew up. And I spent my entire savings all $50 on a single geode, which was an awesome rock that I think still exists at my parents' house, so I'm not sure about that. Anyway, I was super into rocks, which maybe like ties to now I spend time in a bunch of subsurface things like mining and, I don't know, geothermal and geologic hydrogen and other stuff like that. So yes is the answer, I guess.

That is an incredibly nerdy splur. It was really cool, though. Like, it was a big, I don't even know how I could carry it. It was like a very big geode. Okay. Well, let's jump into some real questions from listeners. And I want to start out with a question from James Hewitt, who works on policy at Breakthrough Energy's. James loved your episode on the electricity gauntlet that played back in August. And I agree. I think this is a great episode that outlines the different buckets of electricity demand increases in the coming decades. And all the challenges. of meeting them. And James asks, how are you thinking about the load growth near term and long term? And I think specifically what he's referring to is how different technologies will be maturing at different rates and how that will have different impacts on load growth. So in addition to that, he's also

curious of whether you think that these spurts will be like regional variations and what shape that will actually take. Yes, that is a good question. I think that, so everything in electricity tends to be regional. Like there are very few trends that you can point to that occur everywhere in the country, certainly not in the world all at the same time. Some of that has to do with resources. Some of that has to do with the nature of our electricity sector, which is extraordinarily balkanized and regulated differently in different locations. As it pertains to the load growth, I guess the way that I, my prior for how this is going to play out is that there's some load growth that is going to be consistent and sort of a building wave.

So think of electric vehicles as being an example there. Like the rate of electric vehicle adoption is going to vary from place to place. Obviously, there's places in this country where you have much higher adoption rates than others today. But in kind of everywhere that EVs start to take off, you probably see a similar S-curve-type trajectory, and the trajectory of EV adoption is going to have a very direct correlation. with the load impacts of that. So EVs are this like steadily building wave

that you can measure on a typical S curve. And then there's the things that are going to be very regionally focused but are going to be much more immediate short-term crunches in terms of ability to deliver against that load. That is things like today, you know, manufacturing, right? The manufacturing renaissance in the U.S. tends to be clustered in a few regions. That actually takes a lot of load.

I think coming in the next few years, green hydrogen is going to be another example. That's also going to be sort of regionally focused in a few key regions for a number of reasons. And that's going to be a bunch of large projects all trying to get grid connected at the same time. And then there's the one that's happening right now and will continue to happen that is like the most intense, crazy version of it, which is data centers. Right. And you can see this is extraordinarily regional because there are these data center, they're literally called. regions that pop up. And once hyperscalers enter those markets, then more hypers enter, then the colos and developers enter, and it just gets out of hand really quickly. And you

can see this in like the places that are completely overrun now, which is places like northern Virginia, where like there is a, the queue for new load coming from data centers alone, I think is larger than the entire capacity of the system today in that region. You know, other places like Atlanta, Georgia Power just filed an amended integrated resource plan that's going to add, I want to say it's something like another six gigawatts of capacity over the next few years to meet new load that is some data centers, some industrial load. So like those things, they're much more location specific, but they happen much faster than what you'll see with something like electric vehicles or heat pumps for that matter, where there's going to be like

a traditional consumer adoption curve that takes five, ten years to play out. I have a question about data centers. I get pitched on data centers a lot in different innovations that are happening there for cleaning, making them run on clean energy and just how they're going to get energy generally. How much do you see data centers as being on this leading edge of driving innovation for some of these challenges versus being a problem in themselves? I think there's some of both. They're a problem in the sense that they're just very power hungry. They require a lot of power, and that has to get served somehow. And they're very time-sensitive, very price-insensitive, and so they can soak up a lot of capacity. That's the extent to which they're a problem. They're on the vanguard of solutions in a number of ways.

I mean, the obvious version is the corporate procurement of renewables, really, at any meaningful scale, largely started with the tech companies. And then the next stage of corporate procurement of renewables, which is moving. from annual procurement of renewable energy credits or power to hourly 24-7, that also is being led by the tech companies. And so they're using the fact that they are large consumers of power to push the entire industry in the direction that I think we probably would agree is the right direction. And I think you'll continue to see that happen. You'll see some of that happen with the way that they procure backup power and resiliency. And so, you know, though it is a large source of

load that that needs to get met somehow. I generally think on balance it's good because those customer sets tend to be particularly progressive when it comes to climate issues and they're willing to put their money where their mouth is and take some risks that others will not. I mean, another example, this would be like the first PPA that ever got signed for enhanced geothermal in the United States from Fervo was with Google. And, you know, first of a kind PPA for a thing that's never been built, that's always hard to do. Google is the one who stepped up for it. So, you know, there's a lot of stuff like that that I think is generally good. Yeah, and I'd imagine there's a long history of innovation coming out of what

is initially a challenge. So I guess those things work hand and glove. So our next question comes from Andrew Kriegler, from Toronto, Canada. And in his question, he references the Bloomberg New Energy Finance Outlook from September on solar photovoltaics. And in the that report, it says that global solar markets is hitting new lows in the price of modules at about 16.5 cents per watt. And Andrew characterizes this as a crash in the price of PVs and says that in other past crashes around solar, there's been knock-on effects in manufacturing. So my first question for you is, do you characterize this as a crash in prices of PV? And Andrew's question is, could you talk about your views on whether the input price drops will supercharge the IRA effect or just make it a little safer for those companies who have already decided to invest?

Well, okay, I guess to the first question, have module prices crashed? I think the answer is yes. I mean, you know, solar modules have for quite a while now been a pretty cyclical market. And so, prices run up, they crash, they run up, they crash. This has happened a bunch of times now. So we're in a crash part of that cycle today. As to the question of the IRA effect, I mean, I guess there's two versions of the IRA effect, right? the IRA incentivizes the hell out of deployment of solar because it extends the ITC much further.

It allows solar to take the PTC instead of the ITC. It introduces the concept of energy communities where you can get a booster and domestic content where you can get a booster. It makes the tax credit transferable, which should unlock more tax equities. It does all these things to incentivize solar deployment. And obviously, lower solar module prices is also good for incentivizing deployment, lower the cost of solar. So will it supercharge that effect? You know, to some degree, I think definitely yes, and particularly in the context of combating the one force that is pushing in the other direction, which is inflation. So you've got, you know, what matters at the end of the day for solar

is not the cost of the panel. It's the cost of delivered electricity. And so inflation is increasing that all else equal. So falling module prices can counteract that to some extent. If you're talking about the impacts of the IRA on manufacturing a solar in the United States, you could make an argument it's going to have the opposite effect, right? Because the IRA introduces a bunch of incentives for solar manufacturing here, but all things equal, at the end of the day, you're still competing, albeit on a subsidized basis, against imports, which are historically lower priced. And when the global module price crashes, that just lowers the benchmark against which you have to compare yourself if you're a domestic manufacturer. So you could make an argument that, you know,

module prices crashing today actually makes it harder to invest in manufacturing capacity in the U.S. for solar. Realistically, I don't know that that's actually going to be the case, in part because these are smart companies who recognize these markets are cyclical and they probably have a view as to the long-term cost trend and the incentives are really rich for manufacturing in the United States. But, you know, if module prices stay depressed for an extended period of time, I think you would assume relative to an alternative scenario where module prices had been higher, that probably would put a dampening effect on the manufacturing buildup. And due to the cyclical nature, it sounds like you're not very concerned about this?

I'm not that concerned about it having a big effect on manufacturing, I don't think. I think it's a really good thing in the context of competing against rising. I'm more concerned about high interest rates impacting the solar market than I am about low module prices dampening domestic manufacturing. So on balance, I'll take lower panel prices. So the IRA has been in place for over a year now. And I'm curious what you're seeing right now. What did you not see coming from this law that is now coming to be? I mean, a lot of things are still to come. You know, there's still a bunch of guidance that we're waiting on from Treasury, which, I mean, one thing I did not see coming is how long it was going to take Treasury to issue

the guidance on stuff like the hydrogen production tax credit and a number of other areas. Like, that's a, it's a long time. And, you know, the tax credits were extended for 10 years or introduced for 10 years. So one year out of 10 is not the end of the world. But it's a meaningful amount of time in, like, investment decision-making scale. So I certainly didn't see that coming. And hopefully that, you know, we're done with that question in the next couple of months,

but we'll see. There's no firm date on anything at this point. I think, you know, if you were reading the legislation closely when it passed, the impacts that we've seen on the market for renewables and energy storage, pretty predictable, you know, generally very positive. I think one thing that has been interesting is the 45Q, which is the carbon capture credit. You know, it made point source carbon capture way more lucrative. You know, the credit went from, I think, $45 a ton to $80 a ton.

And that predictably has had a big impact on that market. Lots more excitement about that. But the thing that has been interesting in the meantime is that there were two big CO2 pipelines that have been planned for the Midwest, largely to take. take CO2 from ethanol plants in the Midwest to class six wells that you can sequester the CO2 underground, both of those have turned out to be incredibly difficult to get built, to get permitted, more like, which I guess was sort of predictable. You know, we don't permit pipelines a whole lot these days in the U.S., but you might have thought CO2 is a different thing. Instead, these two pipelines

summit navigator, one of them I think is canceled now, and the other one is rerouting. It's a, it's difficult. And so it raises an interesting question for the future carbon management economy of, okay, like maybe we can make it economic to capture the CO2. And maybe the EPA will get its act together and license and permit Classics Wells so that we can inject that CO2 underground. If those two things are not happening in the same place, are we going to be able to build pipelines to get them from one place to another? And that appears to be an open question. You mentioned a moment ago the higher interest rates. I want to jump to a question from Michael Downey with energy features in this. initiative. And Michael asks, to what degree do you think higher interest rates could impact our ability,

both in the U.S. and globally, to reach our decarbonization goals? And as one example, Michael points to the recent Orsted Offshore Wind Project that was canceled in part to higher interest rates. Yeah, I mean, there was more going on with offshore wind than just interest rates, but that was, that appears to be the straw that broke the camel's back. And like the offshore wind industry is reeling, basically, as a result of that. I will say on this question of, like, how big an impact will interest rates have? I have an active ongoing debate with Jigger Shah, who our listeners will know about this. He thinks it's less of a big deal.

He thinks I've been overhyping the impact of interest rates. But I will continue to overhype it because I do think it is going to be challenging, just because it takes time for the market to settle out, right? Like every asset needs to get repriced, lots of PPAs needs to get repriced. Some developers are going to lose a bunch of money because they price things. you know, rates that are untenable today. Like, it's just going to be a painful shakeout at the, at the asset level for some period of time.

I don't know exactly how long, partially because I don't know how long interest rates stay high, but let's say a couple of years. So in the grand scheme of things, in the great arc of history, you know, are we going to look back on interest rates in 2023? Is the thing that sent us off track on our climate trajectory? Probably not. But it will have a meaningful, impact on the market. And there's specific places where it'll have a bigger impact than others.

Offshore wind is an obvious one. Residential solar is another one, right? Which the residential solar market between interest rates and some policy changes, particularly in California around net metering, that's a market that might be down over the next year relative to this year. And I think this year might be down relative to last year. So, you know, the impact is real. It's not going to kill any of these markets save for maybe offshore wind. But I think it's tough. It sounds like you're saying two things. One is the money's more expensive, making these things harder to build. And the other, which is when I haven't thought as much about, is everything will take longer to build because we're needing to figure out what the higher interest rates mean. Is that what you were saying?

I don't know that it means you'll necessarily take longer to build everything because I think there are other factors that are the long pole in the tent, particularly for utility scale things. We've talked a lot about interconnection as an example. As long as it's going to take you to refinance a project, interconnection is probably going to take longer. So it may not be the thing that slows the individual project down, but I think as we adjust to the new interest rate environment and as unit economics adjust and as PPA prices adjust and so on, I think it might just slow down the growth in the overall market. Sure.

Our next question is from Susan Abrams, and Susan says she lives in a rural community that's at the edge of her grid's service area, and her town recently passed a net zero resolution, which will require more electrification and therefore more electricity. So the challenge is she says the town's existing transmission infrastructure is already close to capacity, and she is wondering, where is our advocacy better aimed, upgrading and expanding grid capacity, or increasing battery access and deployment in order to establish a local microgrid? I mean, I think it's probably going to be a somewhat unsatisfying answer to say some of both, probably. I'm generally still a fan of the macro grid. Like, I've never been a person who believes

that the future will be or should be this balkanized system of lots of small microgrids that don't interact with each other whatsoever. And if you're at the edge of the grid and you've got a connection already, you're probably best off from a cost and reliability standpoint, upgrading the capacity such that the macrogrid can continue to deliver power at whatever scale that you need. With that said, those also tend to be the locations where resiliency is most challenging and most important. If you really do care about resiliency, then some version of a microgrid, which is basically to say, you know, backup generation plus the ability to island it, potentially with other resources attached, can be good. So if I could choose, I would say, look,

upgrade the big grid and try to install basically a resiliency. driven system at the local level. But don't try to say we're going to take our whole community or whatever it is off grid. You just don't see that working out economically for any customer who has access to the macro grid. That's interesting to hear because I also know that you are quite concerned about all of the interconnections headwinds and the challenges of getting new projects online. Has your view around this shifted at all with all? With all the the new studies coming out with the interconnection queue? You mean like the interconnection reforms, all the, like,

miso is reforming the queue and all those kinds of things? Is that what you mean? I mean, as far as how long it takes to connect a project. Well, I continue to think that that is, generally speaking, getting worse before it gets better. I don't know that a microgrid solves that. It's sort of situational, right? But like, first of all, the big challenge with interconnection is either big generation or big loads. That's where the problem is the biggest. If you're big, it's a bigger problem.

You know, if you're going to still have a grid connection, again, if you're not going to be fully islanded all the time from the grid, you need to be able to deliver the capacity that you need at peak. That's like the whole system is built for peak. So you still need to be able to deliver that. the purpose of the microgrid or whatever you want to call it is to be able to island in the event of a grid outage or a demand response event.

So there's a little bit of nuance here, right, where you can maybe introduce a scenario. I don't know if this works at the town level, but you could certainly do this for individual customers, where you say, you know, I need 100 megawatts of peak capacity, but I'm willing to participate in demand response events that look like X, Y, and Z, I can downrate my capacity or shut down for limited periods of time. So there's something in between there.

But I generally do not think that like the primary solution to our interconnection problem is not interconnecting, if that makes sense. In the last few months, you've had a few episodes that have hit on the, that this, we may be actually entering a microgrid moment because of some of these challenges run. interconnection. And Alex Schoenko asks about the role of distributed energy resources as a potential stopgap measure for these interconnection headwinds. And he asks, are technologies that enable robust always on microgrids that could be relatively quickly set up undervalued? Asked another way, will microgrids play a significant role in the electrification of our economy, or will they continue to be niche? This is where I think terminology kind of matters a little bit.

Let's not talk about microgrids in the context of this question. Let's talk about distributed generation or distributed energy resources. Because microgrids are a very specific thing. There are a combination of those resources that you can island. And the islanding component of it, which is the core component of the making it a microgrid, that's a resiliency thing. And it's good. And there's a lot of customers who want that for a bunch of reasons.

But I think the question that Alex is asking is more about can we use distributed generation and or storage and or load control? Can we use distributed energy resources to, to some degree, alleviate the electricity delivery bottleneck that we're starting to see in some places? And I think the answer to that is yes. It's probably not a full-scale solution. We still need the big picture reason why this is a challenge is that we're trying to turn over a massive fleet of electricity generation relatively quickly because we're retiring lots of coal, we're not building a lot of new natural gas, we're trying to add a lot of renewables, we're trying to add a lot of batteries, all the things, right? And that still needs to happen.

I don't see a scenario where you distribute a generation your way out of that. But with that said, every behind-the-meter megawatt that is delivered, if it is delivered at the right time and the right place can help alleviate the need for a megawatt or megawatt hour that's going to get delivered from some generator further away that's hard to get the power to, or from, rather.

So I do think that that is valuable. And I think that actually, you know, to the question of is this stuff undervalued, you can make an argument in either direction about this. But for example, the changes to the net metering policies in California, which as I alluded to before is sort of making it more challenging to install residential solar. The purpose of them is to really incentivize

adding batteries if you're going to do residential solar in California and to use the solar plus battery to deliver that power to the home or to the grid at the right time, which is when the grid needs it, right, in that evening peak and the neck of the duck, so to speak. In my mind, high level, without sort of getting into the nuances of that specific policy, like that is appropriately valuing those resources. It's saying if the resource can actually alleviate a challenge on the grid, which is a real thing in California in those evening peaks, then it has more value than if it's delivering in the middle of the day when, you know, there's an oversupply and we're curtailing a bunch of power. Virtual power plants are becoming a reliable way for utilities to manage

capacity, but enrolling devices is just the start. What really matters is confidence. You knowing those resources will perform when dispatched and being able to prove it, from the control room to the living room. Energy Hub's platform handles the full picture, from near-real-time forecasting, locational dispatch, and the kind of rigorous verification that holds up when regulators, grid operators, or leadership ask, did it deliver? Easy enrollment creates momentum, proven performance builds trust. That's why more than 170 utilities rely on Energy Hub to manage over 2.5 million devices

delivering 3.4 gigawatts of flexible capacity. See what that looks like at energy hub.com. We're living through a profound economic shift, and energy sits at the center of all of it. Trillions of dollars are flowing into power plants, transmission lines, battery factories, data centers, but the future of energy isn't shaped by technology alone. It's shaped by markets, by policy, by capital,

and by the institutions that connect them. I'm Alfred Johnson, CEO of Crux, the capital platform for the clean economy. Join me for my brand new show, Critical Capital. As I talk with people deploying capital, shaping policy and building projects. Together, we unpack how risk is priced, how incentives are structured, and how progress is actually made. Listen to Critical Capital on Spotify, Apple, or wherever you get your podcasts. Are you tired of overpaying for big-name PR firms, but not really knowing what they're delivering?

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Check out fish tankpr.com. That's F-I-S-C-H-F-T-T-P-R.com. Our next question is from Ben, who left a voicemail, saying that he's been watching a lot of climate disaster movies lately, and it got him thinking about this solar transition that we've been doing. And he asks, has anybody thought about what happens if we have a major volcanic event and put a lot of pollutants into the atmosphere and how that would impact solar production? And I like this question because it points to how we sort of collectively failed to anticipate all the way things can go wrong when we're mapping these giant transformations. And so I'm curious. Take it away. I have no idea the impact on solar production that you would expect from a volcanic eruption. But I do have a volcano climate-related story, actually.

So, you know, what we're talking about doing when we talk about solar radiation management or geoengineering, that portion of geoengineering is very similar to deliberately doing what volcanoes accidentally do, which is speeding a bunch of these sulfur-based compounds into the atmosphere. And the story that I like that relates to this, if you want to take an extreme version of what we'd be talking about doing with geoengineering. So I'm going to butcher this a little bit. So listeners don't Google too closely, but broad strokes. One of the largest volcanic eruptions in history was in 19, I want to say it was 1915. This is where I'm going to get it wrong. But it was a huge eruption in Indonesia. And it was so big that it effectively cooled the planet by something like half a degree

Celsius for like the next year and had all sorts of weird climatic. effects all over the world, including, so the next summer, after that volcano erupts, while the world is still feeling all those effects, Mary Shelley is in Switzerland in the summer at Lake Geneva, where she's supposed to be vacationing. You know, Lake Geneva in the summer is supposed to be very pretty and sunny and so on. She's with Lord Byron and a bunch of these other famous people, now famous people, I should say. But instead of being like a sunny, you know, Lake Geneva East Summer that she expected, it's gloomy and it's dark and it's cold. And because it's gloomy and dark and cold, she stays inside and she writes and she ends up writing Frankenstein. And so the people believe,

or the urban legend states that Mary Shelley wrote Frankenstein in, I think 1916 in Lake Geneva, because the volcano erupted in 1915 in Indonesia, and that caused basically global cooling. So that's the story. It may or may not be true, but I like it. I like the story. I don't think it completely answers Ben's question. And I think that there's also a way we've...

It definitely does not. But what I guess I would say is, like, you might have lower solar production. I have no idea what you'd expect to see in terms of solar generation. But what you definitely would see happen, if there was a volcano that erupted at that scale, is a temporary but significant global cooling effect. Right. As far as the solar production side goes, we've seen the sun with wildfires as well as blocking the sun and reducing our anticipated solar production. Do you have an idea of how meaningful that is or how we are starting to factor that into models?

I don't know that it's really getting factored into models. I mean, one thing I will say in general is that we've not yet woken up to how much we need to be modeling these more extreme weather events into electricity reserve allocation modeling, basically. There's a bunch of data around, so, like, Texas, another example of this, right, where you see these kind of multi-day weather events now, basically every three years or so, pretty predictably. but each one of them is individually considered to be a one-in-a-hundred-year event or something like that. And so we don't yet fully account for them, and that causes issues. Wildfires maybe being one among that broader category. You know, we haven't yet, I don't think, face. There were some concerns when there were wildfires here in California a couple years ago about reserves on the grid.

We haven't yet had blackouts or brownouts that you have. would, I think, ascribe to wildfires. But again, it sort of falls into this category of, like, the closer we are to the razor's edge in terms of having enough predictable capacity on the grid, the more things like that or other weather events start to really matter. Yeah, there does seem to be an irony around becoming more reliant on weather-dependent energy infrastructure at a time when weather is becoming less predictable, which is the thing that that weather-dependent infrastructure is is intended to address in part. Yes, I think that is definitely true.

And that is in part why, you know, in addition to the focus on the weather-dependent stuff, which is wind and solar for the most part, there's also now a big focus on decoupling, at least part of our expected capacity requirement from the weather. Whether doing that through storage or doing that through other types of generation, you know, geothermal is not really weather-dependent, right? as nuclear, nor is a hydrogen-fired gas turbine or whatever. So there are things that are not tied to weather. But it's true that like we are tethering ourselves to weather more in order to avoid the thing that we know is going to happen to weather, which is that it's going to get

more volatile. Our next question comes from Sam, also via voicemail. And Sam points out that our categorization of carbon dioxide removal technologies is unhelpfully large. And it includes includes things like direct air capture and biomass and kelp farming and forestry practices and land use management. And he says given the urgency of figuring out CDR, he's wondering why we can't just pencil out what works and what doesn't and then focus our resources accordingly. And he says, I feel like we should have some clear winners, yet in reality it seems like it's very up in the air. We don't know what's going to work and we don't know what they should be priced. What do you think? I sort of agree. I mean, I don't, like, I think the thing that's happening

right now in carbon removal world is that there's kind of a Cambrian explosion of different methods that's showing up all the time. So every week, there's some new, either new process to remove CO2 from the atmosphere or certainly new companies that are pursuing a pathway to do that. And part of the result has been, I think, what he's alluding to, which is that, like, how do you keep track of all the different things you can do from, you know, big machines that sucks CO2 out of the atmosphere to, uh, to, like you said, biomass sinking and, you know, dropping it into anoxic zones in the bottom of the ocean or the sea or mineralization on agriculture land or whatever it might be. Like, there's a lot out there now, and it is confusing. And I think one of the reasons that

we can't, or no one has, I think, really credibly said here is the winner, is that it's not clear to me that there is, first of all, it's not clear to me there ever will be a winner, nor is it clear to me that there is anything that could be a winner. The reason for that is, the way that I think about CDR is that you're looking, your mythical unicorn solution for removing CO2 from the atmosphere has four characteristics. It is cheap, which is, you know, let's just call it sub $100 a ton, but like ideally some $50 a ton, who knows, but it's cheap by whatever metric. It is eminently scalable, so you can do gigatons worth of it without disrupting some other ecosystem or causing some really big knock on effect. So it's cheap, it's scalable. It's durable.

So whatever, you know, the mechanism that you use to sequester the CO2 will remain sequestered for, and this is where there's debate, right? Is it hundreds of years? Is it thousands of years? Is it 10,000 years? I don't know, but it's durable by whatever definition you want to use there. And then it's eminently and easily measurable and verifiable. And if you take those four criteria as the four criteria,

basically everything fails on at least one of them. or if not fails, then, like, struggles on one of them, right? You can imagine super-scalable mineralization on agriculture lands, difficult to measure and verify. So lots of companies trying to figure out how to do that better. Direct air capture, incredibly scalable. You could theoretically do it anywhere. You know, easily measurable and verifiable.

Like, fits a lot of those characteristics. Open question price. Can it be cheap enough? So the way that I see it today, like, there are a lot of really promising options, but the reason why we're pursuing all of them simultaneously is that none of them have yet fully disproven the notion that they're going to fall down on one of these four pillars.

And until we know, and realistically again, I don't think there's going to be one that's going to win out. We're going to do some combination of a bunch of them. We need to be pursuing a bunch of paths. But the result is a situation that I totally sympathize with Sam's question because it is kind of a mess. And it's really hard to, you know, unless you're deep, deep in it, which very few people are,

it's really difficult to figure out, like, what's real, what's not, what's actually happening, versus what's theoretical. How should I think about ocean capture? You know, like, it's just, it's very confusing. Yeah, it does seem like one of those things where we don't know what's wrong until we know what's right. And what's right will probably be a ton of different things. I'm curious about innovations in that fourth pillar you mentioned. around being able to verify what works.

This feels increasingly important when we think about land use considerations and biodiversity and properly valuing these things. I know somebody that's working on a project where she is aiming to work with dairy farmers in California to have them participate in carbon markets and verifying that different practices that that farm uses actually leads to sequestration of carbon.

And in order to verify this, they have like a team of PhDs out at this farm. And I hear this, I'm like, well, that's not scalable. Like, if we actually want to make this a market, then we need to be able to know this works better and faster and cheaper. So are you seeing anything in that fourth pillar? Totally.

I mean, there's, and I should be clear that, like, there are really smart people working on all of the, both all the pathways and all the solutions to the problems with each pathway. I agree with you that in some of the, like, generally speaking, the things that are cheaper today are harder to verify, because they, tend to be nature-based. This is a broad strokes, but let's just, you know, I think this is true to a first approximation. And the things that are more expensive today tend to be easier to verify because they're engineered and you basically get a pure stream of CO2 you're going to do something with.

On that first category of generally cheaper, generally harder to measure and verify, there's a lot going on, right? You're talking about maybe, I don't know, what practices those farmers are going to change, but if it's soil related, there's a bunch of companies who are, you know, introducing new soil measurement, soil carbon measurement techniques, whether via physical infrastructure you put in the ground or through hyperspectral imagery from satellites or whatever it might be, there's, you know, we're getting better and better at like imputing estimates from samples. You know, it's still not perfect and it's a challenge, but there's work being done there and there's work being done on all

these other ones. Can you, like, if you're mineralizing something, can you introduce an isotope that, you know, can be recognized? It'll tell you definitively how much CO2 you sequestered in the rock. You know, these things are all kind of exciting, but there's a long way to go, I think, to build the trust that's going to be required for the carbon removal market to really scale with any of those technologies. Our next question comes from Phil Keys at InterTrust Technologies, and Phil has been noticing this trend in the last few years where European energy conglomerants like NL and RWE and

Shell and National Grid and Schneider are buying up all these small and small, energy assets and are also acquiring different climate tech startups in the U.S. And he says that this isn't being covered very much by industry outlets and asks, is this an important trend or am I reading too much into this? Well, I guess first question is for you, Sarah, since you represent an industry outlet at GreenBiz, do you feel like it's undercover? Have you covered it? Yeah, I see this a lot in press releases.

And generally speaking, I see this. as companies recognizing this enormous potential within investing in the clean energy transition and acting quickly. And in the last year, I've seen this supercharged from the IRA. But I also hear about this in press releases, which seems like, you know, not the place you would put information if you're trying to hide it. So I kind of think of it as more of like an opportunity to be just expanding into new markets. And so partly I'm curious, like, am I missing something? Is there also something that is there a larger story there that should be covered or a larger trend that you think is worth highlighting? I don't know if this is a larger story that needs to be covered or not,

but I can tell you why I think you do see a lot more M&A from European energy companies buying U.S.-based companies, mostly project developer types. You know, first of all, the U.S. is a big market, and it is generally, strategic for companies to enter the U.S. if they are international. And we have a lot going on here. And especially today, right, now thanks to the IRA in part, like the U.S. is the epicenter of some of these markets. Related to that, specifically on the energy company side, I mean, one thing that I'm not sure everybody appreciates is that the European utility conglomerates or electricity conglomerates,

tend to be more international by nature and more global by nature than the U.S.-based ones. So if you think about U.S.-based, not oil and gas, but just like electricity companies, very few of them have significant operations outside the United States.

AES would be an exception to that, but very few others. Whereas if you look at the European majors and you named a bunch of them, EDF and NL and so on, forth, most of them do. And so that's one of the reasons why you see it go in that direction and not in the other direction. And then the third, I'd say is that, and this is true more of sort of molecule world, the early movers, the early significant movers in terms of like building

up a real meaningful business in clean energy or new energies, as they often call it, have been the Europeans. So think BP and Shell and Total, you know, they, they are all European super major oil and gas companies, and they all got into this game in a more significant fashion relatively early and were pretty acquisitive when they were getting into it and things like EV charging and so on. So for those three reasons, I do think it is true that if you, like, added up on a ledger on one side, all the European energy companies that have acquired American clean energy enterprises of one kind or another, and then the American ones that have acquired Europeans, it would be a long list on one side and almost none on the other side. I don't think there's

anything particularly nefarious about it, but I do think it's just a result of sort of the structure of the markets and the players in those markets that differs between the U.S. and Europe. Interesting. I think I tend to romanticize the prescience of the European mindset. So there's also part of it for me where it's like, oh, these European companies are recognizing this opportunity that some U.S. companies may not have fully internalized yet. And it's sort of like, well, if they can do for health care and furniture, who knows what they can do for clean energy? Furniture, yeah. Is like, do you think I have IKEA as prescient or?

I think if Scandinavia is just working on the margins now, they're just working on furniture, just perfecting furniture is what they have left. Yeah, right. Yeah, I mean that you could make the argument that they're pressing. You can make the argument that they're too early, right? And then what's going to happen, you know, I think that the alternative to that is like they got into it before it was profitable. And so they have to kind of like at least a profitable on the scale that they are used to. And I'm speaking more about the sort of shells and BPs and totals of the world. And so they've got to build up these businesses that have returned profiles that don't look like their core business

and kind of hold those two things simultaneously for a while while one market is maturing and the other one is very, very mature. And if they can navigate that, then they will have this time advantage and investment advantage that they've built up. But it's no small feat. You see this happen over and over again where they have to decide whether to double down on investing in this stuff or pull back on investing in this stuff, either when times are particularly good in oil and gas. world or when times are particularly bad in oil and gas world. So it is like a, they're walking a tightrope of a sort. The next question we have is from Stefan Suhanskai, who works at an agricultural startup in rural Ghana. And Stefan points out that most climate tech VC investments are focusing on

developed countries. And he is wondering whether in your thinking about investing in climate tech, Are you sort of trusting that these climate tech startups will then pivot to the developing world when the time's right? Or how are you thinking about the global south when you are considering different climate tech investments? I think that's a good question. And I think, you know, it's probably undercovered by everyone, but including myself. I think from the question about when I'm thinking about investments, it's sort of sector-specific. There are some sectors that are kind of inherently very global in nature and generally are like big industrial stuff. And you hope that a successful technology, if it wins out, is going to end up winning out globally.

So steelmaking would be a good example of this. We're like, you know, we've made a couple of investments that can impact decarbonization of steelmaking. One in a company called Boston Metal, which is an electrification process for steelmaking. You know, others in hydrogen production, which you can use. hydrogen to produce steel, another in a carbon capture company. So, like, there are various pathways. I think whichever one wins out, or if multiple of them win out, they will win out on a global scale, including the global south. So in that industry, I do think so, but in many other industries, realistically, it's going to be its own whole thing, right? And, like,

there's a big universe, for example, electrification of two-wheelers, whether in sub-Saharan in Africa or in India, which is just like taking off in this really cool, crazy, oh, and China as well, for that matter. Taking off this is totally awesome, exciting to see Wei. And that, I think, is not going to be the same companies that, like, sell electric scooters here in the United States. So some sectors maybe, yes, you see global companies. Some sectors definitely not.

I know Breakthrough Energy Ventures is really based around this idea of reducing the cost of the green premium by creating new technological pathways for some of these different sectors with the idea that we can drive down the cost and then it'll be just naturally adopted because it'll be the cheaper thing within the global south. And I'm curious whether you think there's other sort of infrastructure challenges that get in the way beyond just the price point of these new technologies and also whether this is something you think about at EIP as well. Yeah, I mean, of course, right? Prices, it's like table stakes. ultimately to reach the promised land, but it's insufficient. It's necessary, but insufficient.

So, you know, I think you need to reduce the green premium. Ideally, you have a negative green premium, ultimately, in as many of these markets as possible. But as we've seen, you know, the world doesn't behave totally rationally. And oftentimes price is not the only variable, right? Something can be more expensive, but better for a bunch of other reasons. Like in the, in the utility context, the way that utilities have to make decisions here in the U.S. often, the term that gets used is least cost best fit. So it's a combination of two things to determine whether a particular purchase of an asset or PPA is the right thing to do. So least cost is one of them. You've got to sign the cheapest thing, but also least cost

best fit. So just being the least cost is not enough, right? It has to actually be the right fit for your system, for your needs. And I think you can apply that more broadly, right? We want climate tech at the end of the day to be least cost best fit in whatever sector the individual technology is in. Least cost is probably the harder part to achieve in many of these cases. I think it's right to focus on it. But like I said, it's not enough.

Thanks for that, Shale. That is all the questions we have today. But everyone, please keep sending them. these are fun, and I like being able to ask Shale these questions. So keep it up. Sarah, thank you again for the third but not final. Ask me anything at Catalyst. Happy to come back anytime. Sarah Golden is the VP of Energy at Greenbiz. This show is a co-production of Latitude Media and Canary Media. You can head over to canarymedia.com for links to today's topics.

Latitude Media is supported by Prelude Ventures. Prelude backs visionaries, accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more about their portfolio and investment strategy at www.prelutventures.com. This episode was produced by Daniel Waldorf. Mixing by Roy Campanella and Sean Markwan, theme song by Sean Markwan. Help on this Ask Me Anything episode from Anna Raider. And this is Catalyst.