Catalyst with Shayle Kann - Making DERs work for load growth

Episode Date: January 9, 2025

To meet AI-driven load growth utilities and big tech companies have been building — or reopening — big power plants. Georgia Power, for example, is planning to expand its fleet of natural gas plants. And Microsoft signed a deal last September to re-open Pennsylvania's Three Mile Island nuclear plant But could we meet a portion of that load growth with distributed energy resources? Pier LaFarge thinks so.  In this episode, Shayle talks to Pier, co-founder and CEO of Sparkfund. (Energy Impact Partners, where Shayle is a partner, invests in Sparkfund). DERs can come online much faster than large, centralized generation, Pier argues. He makes the case that utilities are especially well-positioned to lead what he calls “distributed capacity procurement” (DCP) of customer-sited solar, storage, and other assets. Shayle and Pier cover topics like: How host agreements work, using utility-owned assets sited at customer locations How the effective load carrying capability (ELCC) of DERs compares to large, centralized power plants The relationship between DCP and VPPs The key tradeoff of DCP: DERs are faster to build, but cost more and have lower ELCC than large, centralized plants Who should pay for those higher costs? Why vertically-integrated utilities are best-positioned to take advantage of the value DCP creates for capacity, distribution, and transmission The limitations of DCP at a systems level Recommended resources Latitude Media: Can distributed energy answer AI’s power problem? Latitude Media: Jigar Shah: It’s time for VPPs to get simpler Catalyst is brought to you by EnergyHub. EnergyHub helps utilities build next-generation virtual power plants that unlock reliable flexibility at every level of the grid. See how EnergyHub helps unlock the power of flexibility at scale, and deliver more value through cross-DER dispatch with their leading Edge DERMS platform, by visiting energyhub.com. Catalyst is brought to you by Antenna Group, the public relations and strategic marketing agency of choice for climate and energy leaders. If you're a startup, investor, or global corporation that's looking to tell your climate story, demonstrate your impact, or accelerate your growth, Antenna Group's team of industry insiders is ready to help. Learn more at antennagroup.com.

Latitude Media, podcast at the frontier of climate technology. I'm Shail Khan, and this is Catalyst. It's easier to build lots of small things quickly than it is to build a few really big things slowly. Coming up, why are we talking so little about distributed energy to solve our load growth problems? 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. I'm Shail Khan. I invest in revolutionary climate technologies and energy impact partners. Welcome and happy new year. So I think by now, probably every listener to this podcast is familiar with the general

state of affairs, which is that we have a lot of electricity load growth in the Western world and in the United States that has taken the industry somewhat by surprise. It's becoming a bottleneck as it pertains to the growth of AI and data centers and manufacturing and so on. And everybody's trying to figure out what. to do about this. And there's lots of components to it. One of the ones that I think is sort of overlooked, though, is that clearly we need a lot more electricity capacity. And the discussion around that, at least most of the discussion around that that I've seen, has been, okay, how do we build enough new big power plants? And then how do we build enough new transmission distribution

infrastructure to deliver that power to customers? And so that's where you get to these things like the spate of recent announcements about opening shuttered nuclear plants or building new nuclear plants and then obviously building a lot of new natural gas and building a lot of new renewables and storage too, but all at the centralized level. What we've been talking about less in this particular regard is whether distributed energy, small-scale resources generally cited at customer premises, can help alleviate that bottleneck as well. It's not a new concept, right? This idea of virtual power plants and so on, has been around for a long time. But I do think it gets less attention

as it pertains to what it can offer, which is speed. You can generally build this stuff pretty fast because you're building in smaller increments and you don't have as long a timeline around permitting and interconnection, all this kind of stuff. So if the biggest problem in the market is speed,

why don't we look more at distributed energy? Or maybe we will. Anyway, somebody who is is Pure Lafarge, who is the founder of Spark Fund, Spark Fund, by the way, a portfolio company of my firm, Energy Impact Partners,

but Spark Fund has been in the distributed energy game for a long time. More recently, thanks in large part to the dynamics in the market that we see today, Spark Fund has been promoting this concept of distributed capacity procurement, which is basically utilities

saying, okay, I'm going to procure a bunch of resources to meet all of my load growth needs and to replace retiring generation and so on. Some of that should be distributed, not all of it centralized. There's a lot of nuance to what that would have to look like and the value would actually offer and so on. So I brought Peer on to talk about what that looks like and more broadly how distributed energy

resources can and can't help meet the load growth needs of our modern times. Here's Pier. Peer, welcome. Hi, Shell. Nice to see you. Hi. Nice to see you. It's been a long time coming to have you on this.

But the timing is good because you've been thinking a bunch about something that I've been wanting to cover here, which is I think that the average catalyst listener is probably well aware of the phenomenon going on in the power sector right now, driven by a whole lot of unexpected load growth predominantly from data centers and to a lesser extent from other things. And oh, my God, how are we going to meet all this load growth? And what are the implications on the market and so on? I don't think we need to rehash all of that. But I guess before we get into how distributed energy may provide at least part of a solution to that, maybe at least more so than I think we're generally hearing in the discourse, anything you would add from your vantage point? Like what are you hearing from the market, from utilities about how this is playing out right now?

Well, look, I think you're right that the concept that we're in this holy cracker's load growth moment is well established. The point I'd make about it is how quickly that became conventional wisdom and how quickly the large macroeconomic trends like new manufacturing and data centers roared into being. And simply, 24 months ago, electric vehicles were the biggest driver of electrification growth. And now it's a distant third. And that happened stunningly quickly. And I just think that's really worth pausing on. And it's been fun and exciting.

and I think we should give a lot of space for how much the entire energy transition market, from utilities to regulators, to state legislatures, to startups and investors, have to adapt to what that new shift means. So I think my kind of my point would be downstream of that new conventional wisdom. There's still a lot to figure out when it comes to the so what. Yeah, the other thing I've heard a few times that has resonated with me about, not just how quickly it has become the conventional wisdom, but sort of the sense that like the industry was a little flat-footed in responding. I think one of the reasons for that is that it took a little while for it to be clear how different this is than even pretty recent previous waves.

Like, you know, utilities saw a lot of many utilities, not all. Now it's basically all. But a few years ago, Bitcoin miners, like a ton of Wild West-type Bitcoin miners were coming to them in their territory saying, I'm going to put hundreds of megawatts of load on your grid, and I can be super flexible and all this. And then a lot of that, actually, especially when Bitcoin prices crash, a lot of that disappeared. And so they got kind of burned, some of them on that. And so they were a little slower this time. Same thing with, like, cloud data centers. There was a lot of load growth coming from data centers. They had been seeing it already.

And so there was a trajectory that now is just steeper, a lot steeper, than it was before. But you can understand how, you know, it took a while to sort of come around after, even after GPT3 or whatever your seminal moment was. It took a little while for everybody to come around to like, oh, this is a different paradigm. And we got to figure out how to adapt to it. Yeah, great point. I mean, even going back a whole generation further, the Internet and, personal computing was once forecast to create a legendary amount of new electric demand, and it didn't.

And efficiency cut faster down than a huge wave of new devices in the home increased, right? So in some ways, I think it's really understandable when people say, okay, fool me once, fool me twice, will this happen again? I think that that's a sober and well-anchored way to ask a question. But even when you think about it seriously, I think what a lot of people miss in this moment is even if you haircut the forecast growth in data centers in manufacturing by 80 or 90 percent,

you still double the grid. And something I think we need to say more as an industry is doubling the grid is not the high-end reference case here. It's not the sort of what might happen if it all comes to pass. Doubling the grid is increasingly a eroded basis, line infrastructure case that has to be responded to, and in and of itself is unprecedented, almost. Okay, so we are in this new paradigm now, and there is all this expected load growth, and at least

enough of it seems real. To your point, doesn't all have to be real for it to be pretty game-changing. I think what a lot of the broader discussion in the industry is focused around is, okay, how do we build enough new generation and enough T&D capacity to meet all this new load growth? What you've been focused on, which you've been focused on for much longer, but now has sort of new applications in this new world, is how can utilities take advantage of distributed energy resources, DERs to deliver some of the power that they need to deliver, I guess, to meet this moment. So I want to talk a little bit about what that looks like, what it can actually offer, compare and contrast a little bit. But talk to me about this concept that you've been promoting, which is you're calling distributed capacity procurement.

It's pretty simple in some ways. The first layer of a distributed capacity procurement is just asking a utility to be a utility, which is plan how much it needs to generate and move electricity, where it needs it, and what type of assets would do that, and then go buy them and put them into the world and run the grid. So at its simplest, it's really just an extension of the thing that has been happening, for a century in terms of utilities. But there is obviously, you know, that first letter, right, the distributed piece of it is really different. It's a different type of asset. And I think

the focus that we have on it really comes from the fact that it's easier to build lots of small things quickly than it is to build a few really big things slowly. And building big things in the country is hard for permitting, for environmental regulations, and interconnect cues and capital formation, all sorts of different, of well-understood reasons, certainly by the folks who listen to Catalyst. And that time lag of building new big central generation and transmission and distribution projects, I think is a big reason why distributed resources have an opportunity. When you talk about distributed resources, are you talking about, is the delineation for you,

is it scale? like, I don't know, anything under 20 megawatts or something like that or anything at the distribution level, not the transmission level, or is it about it being customer cited? I think that drives a big difference because on one hand, so like what utilities, you know, if you remove the D from distributed capacity procurement, right, it's just capacity procurement, what utilities traditionally do, they say, okay, I'm going to file my integrated resource plan, I'm going to determine what resources I need. I'm going to say, okay, I need, you know, whatever, I'll give a small number. I need 500 megawatts of new capacity. okay, I'm either going to build that and rate base it, or I'm going to go off and I'm going to buy power from some third-party owner. And that's the model. The thing you could imagine being very similar, but just smaller, is we're going to do the exact same thing. We're just going to build a bunch of smaller things, or we're going to buy power from a bunch of smaller things.

The thing that's a little bit more disruptive, I guess, to the model is where you've got something that has dual use, I think, because it is cited at a customer site, and the customer also wants to, use that thing for something. That's what makes it a little bit more complicated in my mind. So are both of those included in the model you're describing, or is it predominantly the latter? That's a great question. It's a really well-phrased way to get at this basic tension. And look, you know, the exciting answer is we're all figuring this out in real-time together, and it's going to be different in different utility territories, right? But our view, or my view, is that it's more the later, the latter, that most of distributed capacity will end up being customer-sighted and have some aspect of dual use, even if that dual use is primarily just a new way the grid functions.

And this is where it gets a little nuance, right? If you put batteries and solar all over a region, let's say one feeder that has 900 buildings, if you put batteries in solar on 500 of those 900 buildings, you've super saturated that feeder with the ability to generate and store electrons in a way that makes. that feeder so reliable that I think it blurs the distinction. And we need new ways to talk about then what is resilience, what is reliability, you know, sort of what is the boundary between the grid and the building services? We've talked about the two with a lot of delineation when we sell resilience to a customer as a service that is sort of the inverse of the service they get from

the grid. And I think that boundary, along with a couple of other boundaries, like behind the meter and the front of the meter, I think are going to start to blur. The real reason that a distributed capacity procurement focuses more on customer-cited assets than just size format is actually a pretty pragmatic reason, which is in a lot of the places of the grid where you need the capacity, there just isn't space to put that many assets unless you use customer addresses, right? You sort of have to. It's like if you look at a downtown in Atlanta or Minneapolis, the place you could put batteries that is relevant to the distribution grid is on or around buildings.

People have been talking about in this sector for, I don't know, well over a decade, the concept of virtual power plants. And at first blush, I think they sound kind of similar to what you're describing. Just taking your first example there, you've got a feeder, 900 buildings, you're going to put solar in storage on 500 of them. You're going to sort of control them. We haven't talked about control yet, I guess, which we will. but presumably you're going to control them in concert, in an aggregated fashion.

That sounds like a virtual power plant. Is there, apart from terminology, is there any difference in what you're thinking distributed capacity procurement looks like versus just a bunch of virtual power plants? We see the distributed capacity procurement concept as a part of the virtual power plant moment. I think a DCP is just one way to achieve that outcome. And the assets would be installed on customer location. They're paid for by a utility as part of their infrastructure to run the grid. They are operated and dispatched by the utility, whether there's a third party that has some sub-derms

or a kind of aggregator that then feeds into a utility derms, I think, is an open question. So there's space for a couple layers of control, probably, but ultimately it's the utility that needs to know when it needs capacity and of what type and make the decision to, dispatch or absorb energy. And in that context, you know, we think that a DCP is basically a utility-led VPP. One other distinction I draw is that when we talk about distributed capacity procurements, it's the conversation is starting with but not limited to batteries and solar. The kind of hard assets, right, stuff you install that's net new capacity, either in storage as a distribution asset primarily

and or solar as a generating asset. But there's lots of room for distributed capacity procurements, including downstream of that, thermostats, connected assets, water heaters, even vehicles.

Yeah, well, I think it makes sense because, you know, as we said before, the sort of traditional, what a utility does is procures generation and capacity, which is effectively, you know, generation and storage, if storage is acting as a capacity resource,

to some extent, or at least shifting generation. So this is doing that at a smaller scale and a different paradigm. It gets a lot more complicated when you add thermostats and electric vehicle chargers and things like that

because you're shifting load around, you have counterfactuals, all these other things. But you did get to the sort of core of, I guess, the business model piece here, which is, as you think of distributed capacity procurement, this utility is owning and operating stuff at customer sites.

This is obviously going to be situation-dependent, but so what is the contract or what is the, between the utility and the customer whose site you're putting this at? It's a host agreement. What we've seen work in the first procurements that we've, as Spark Fund, have helped utilities deploy is a hosting agreement where you go to a customer and say, can we put this asset on your building and we will pay you,

we will rent the space from you, and give you a long-term risk-free annuity. So it's great for the building owner or the landowner because you get money, with no debt. You don't have to sign up for any sort of financing. You don't have to sign up for maintenance or any other obligation. You're really just getting a payment stream that's risk-free for the duration of the asset life, which could be 10, 15, 20 years. So it's a nice long-term annuity to the customer, but that customer then becomes a host, and they're hosting a piece of the grid. And are they being offered any, are they getting backup, for example? It can, yeah. I mean, this is up to every utility program design, and to regulators to some extent.

But, yeah, in most cases, what we're seeing is utilities giving either first priority to backup to a customer in an outage event or some sort of residual charge. Like, say, you know, the customer gets a guaranteed access to 20% or 50% of the battery or the fuel. So, yeah, the customer gets that resilience benefit. that, again, I'll go back to my feeder sort of example where if you have a feeder that has so much storage and solar on it, that it becomes basically totally reliable, like fractal, I think of that as like fractal reliability. All of a sudden, how often they need that resilience is another question. You know, if all of your neighbors have these things, right? Like, is that just the grid being reliable? or is that everyone having resilience?

I mean, I think you can talk about it both ways. But that's kind of back to my point, if we need some new ways to talk about some of the distinctions that have been with this industry for decades but are starting to blur. 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, 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

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Let's talk about the capacity value, I guess, that this is offering. I mean, in your mind, does a kilowatt of solar at a customer site or a kilowatt of energy storage or kilowatt hour or whatever, is it the same? Should we think of it from a capacity value perspective as being the same as centralized procurement? If a utility says, for example, in their IRP, we think we need two gigawatts of solar and a gigawatt of four-hour energy storage. just in the next five or ten years. Is your idea just like sleeve off a quarter of that or whatever the number is and do that through distributed means? And do you think of that as being equivalent or are there key distinctions we should be thinking about? So yes, I think about it as taking a piece of the needed growth and delivering it through distributed resources.

But there's definitely some other key considerations. Like fundamentally, the ELCC ratings, right, for distributed resources like solar and batteries. are not as high as they are for, say, a gas plant, right? I mean, they're just simple reality of all renewables. I suspect 25% of Catalyst listeners know what ELCC is. This is a scientific gas, but can you explain effective load carrying capacity? Yeah, so effective load carrying capacity is when, you know, you have groups like PJM and MISO, right, that say, here is what this asset is allowed to count towards what you need. So if a utility says I need a gigawatt, if your carrying capacity factor is 50%,

well, then you need to build two gigawatts of that thing to have the gigawatts. It's like the capacity credit you get for a given resource. You times nameplate times a percentage, and you get less than what you hoped. It's the, I always think of it as like the regulatory version of sort of entropy in the world where this doesn't work quite how you think it works as much of the time.

So you're saying ELCC for, distributed stuff is lower. In other words, it's sort of been determined that a given resource with the same nameplay capacity will have less capacity value at the distributed level, which means you need to build more of it for the same value, which I guess gets to maybe a bigger picture question for me, which is all things equal. My presumption is that building out a suite of distributed resources is going to be more expensive just from a KAPX perspective than building. I mean, I know this to be true, right? Of course it is true that it is cheaper.

There's economies of scale. It's cheaper to build big things. So in aggregate, it's going to be more expensive, and there's a little bit less capacity value. So you've got to build even a little bit more of it for the same value. So is the trade here faster time to power or faster time to capacity in exchange for a slightly higher cost? And if so, is that the kind of thing you think should be borne by the new large load

customers in the way that some of these, you know, utilities have been thinking about these differentiated tariffs for the hypers and things like that, where they do have higher willingness to pay in exchange for faster time to power. So does this fit into that paradigm in your mind? So I'll start with the end and then work backwards. Yes, I think that high load customers, like manufacturing and data center operators, can and will be a really big part of this moment in grid history. They will pay in much of the incremental cost because of the, of how they value time to power and total availability of power. And just to pause on that for a moment, I think there's a really simple but really interesting reason why they're willing to pay. It's not

because they're rich. It's not because they have tons of money. It's actually because to get the economy we want that has more onshoreing manufacturing that can compete with China, that has data centers that are in Kansas and Ohio, not in Saudi Arabia. There are reasons we want these buildings in the United States. They're economically valuable. They're geopolitically important. And we want them here. So to have that economy, right, they create jobs, they create municipal tax revenue. To unlock that economy from 2025 to 2050, say, we need to build a bunch more power infrastructure. So everyone, including society, has an incentive to build the power infrastructure that unlocks that economy with new onshoreed American manufacturing and data centers to fuel

generative AI. The metaphor I would draw is 1947. We invested furiously in our power infrastructure through the electric grid because we wanted the economy that would be created by auto manufacturers and tire companies and, you know, washing machine appliance makers, right? You know, General Electric Ford, they delivered the post-war economy, and it was unlocked by a historic upfront investment in the U.S. electric grid. That's the moment we're in, and electric infrastructure in the United States in 2025 is now a gating item to have the flourishing economy we want for the next 20 or 50 years. Back to the question, though, is it a trade? Do you think that, is it appropriate to think if this is a trade between faster time to power, slightly higher cost of capacity?

Yes. With a couple of steps, the way to think about it is a value stack. Distributed energy resources are much more expensive than centralized resources, and their accredited capacity is much lower. A gas plant in PGM is close to 80% accredited load, and solar with no storage is 8%. So it's not even that close. Well, but I guess I was trying to compare, I mean, that's not even, that's not a fair comparison, right? The fair comparison would be a rooftop solar project as compared to a centralized utility scale solar project. Sure. That's true. Yes, that's a good point. And then you have a little bit more similarity.

And really what you're talking about is overcoming the incremental cost of installing a smaller amount of things, in which case, the cost of the project is divided over fewer megawatts. So yeah, for sure. It is both less accredited than centralized fossil resources, but also if you're comparing renewables to renewables, it's just more expensive per megawatt because of the construction cost. Yeah, and I think soft costs as well notoriously higher for small stuff. The smaller you get, the more your soft costs start to really hurt. The good news, though, is when you pair solar with storage,

your accreditation rating goes back often into the high 50s or even low 60s. So part of where I was going with that is solar and storage together have a pretty strong contribution to grid needs. So let's just take that example where you need a gigawatt of capacity. And let's just say that to achieve that gigawatt of capacity, you need 1.6 gigawatts of nameplate solar and storage. I'm sure there are people who listen to your podcast who know how to do the math kind of more sophisticatedly than I do. But that's roughly how I think about it. It's like to get one, you need to build 1.6. And the way to decide in a given utility territory,

if that's a good idea or not, is to stack value. So you can say, okay, if I have an accredited gigawatt of solar and storage, how does that compare to the cost of a paker plant, right, or other generation? So there's already some value you can compare there. The next step is because I put that solar in. storage because it's distributed now all over my grid in the places it needs it most that also target places that have congestion. Then I have a capacity or congestion value that a lot of utilities and grid operators know how to price, so that adds some money. Next, you say, well,

if I had transformers that were going to overload with this grid growth or because they're old, and now I don't need to replace them because the battery can absorb the times where there's a big spike in usage or transmission that would otherwise overload them, well, great, I can take the money that I was otherwise going to spend on a bunch of transformers out of my budget. And that's good, because transformers are both very expensive and very supply chain constrained, and we're going to need to build a ton of them anyway. And then after that, you have that same experiment of like avoided infrastructure costs repeated for, well, do I not need to rebuild this substation? Do I not need to double the size of a feeder, and even into transmission.

So you start with generation, you go through the capacity and congestion of a grid, and then you go into the distribution and transmission where by putting a bunch of solar and storage everywhere, how much less money do you need to spend and how much value do you create to achieve the same grid outcome that then supports those manufacturing facilities and data centers. And when you run that math, as far as we can see, and look, it's early days. A lot of utilities are in the process. A lot of regulators right now are starting to get their hands around that math. But it seems like when you stack up that value, kind of stacking bricks of value, it's actually a pretty good idea and a pretty cost-effective idea to put solar and storage everywhere.

It seems like you could also, this rests in the hands of the utility, but the utility should have visibility into where it has most value in their system, right? You mentioned the feeder with the 900 buildings. Well, if that's the feeder that would see the highest distribution cost value, then that's where you start potentially, where the value stacking is strongest. That's right. Although I would say having, you know, being in real conversations with real utilities and regulators right now about, okay, which feeder, it is amazing in some ways how they're just starting to do some of that thinking and modeling. The grid was run big centralized stuff out into big straws,

which are transmission, that push into lots of little straws, which are distribution, and then you turn on your oven or your toaster. And running that with more steps backwards of where do I put lots of small things that can change the need of each piece of those system of straws, I think is very new thinking and has some real complexity. there are definitely companies out there that know how to do that math that have software for it. And, you know, this is work that's going to get done. But I actually think one of the real values of the distributed capacity procurement idea is that when a utility brings a gigawatt of distributed resources into their central planning process, they put it in to that plan.

All of a sudden, they then ask the question, okay, what work do I need to do downstream of that to know where to put it and how to optimize the value? because that's actually what utilities and regulators do in an IRP, is they say, how much do I need of what type, where do I put it, and how do I optimize the value? I guess just to wrap it up, I mean, you mentioned this can be faster. How scalable is it? In theory, you could do the like, well, how many buildings can we put solar on and how much space is there for batteries?

And like you can imagine, right? Lots of buildings. It's a huge number. But from your experience, like, what is the actual, what are the rate limiters on scalability here? Well, no one knows because we haven't tried this experiment at this scale. I am proud to say that I think SparkFund has some insight into that from the decade we've been doing this with utilities in some ways that are very similar and some that are

different. But the way I'd answer the question is really a thought experiment show, which is, let's think about the Three Mile Island example, right? Microsoft famously contracted for the power from a resurrected Three Mile Island, right, through with constellation. And that was 800 megawatts at baseload capacity with a really high accreditation rating. So when that turns on, they'll get 800 megawatts. And that'll go onto the grid. They're not going to build a data center right next to it, as far as I know, right? So it goes onto the grid, and then they just buy that much power.

So theoretically, that 800 megawatts could be anywhere on the grid. It just has to be in the grid so you can buy it. So the thought experiment would be, well, if you had 800 buildings and you could build 1.6 megawatts of solar and storage, which you can in some buildings, medium size and big buildings, then great, go find 800 buildings that can host 1.6 megawatts each of solar and storage. And there you go.

You've got a new legacy nuclear power plant that's just located on 800 buildings. Yeah, I think as a first sort of thought experiment, that makes sense to me. I guess the pushback you would get is, like, absent outages, nuclear is operating 24-7, And solar plus storage, even with higher accreditation thanks to the storage, is still not. I mean, so you can't, you can do that at the individual level.

You can't do that at the full system level, that analysis, right? You can say, okay, could this amount of solar plus storage replace a single three-mile island? Probably, yes. But at the system level, ultimately, you know, you're still going to need. some kind of, either more storage, more generation and more storage, if you wanted to go 24-7, or some backup of some sort, probably natural gas. And so I think that does make sense. This is where things always get wonky when you get into these debates about this kind of stuff,

is like these things work at the micro level. And micro can be big. Micro can be 800 microlots for sure. But there's some limit to it, right? look, I think this is a really exciting boundary of understanding. And I think this is where my expertise in how accreditation, for example, works in the physics part of the grid. The way I understand a capacity rating is that if you take the nameplate of solar and storage and times it by that number, you should get the amount of energy and capacity that you can use on the grid like anything else.

It's a way to standardize that variability with that calculation. But I would honestly love to hear in the comments of this from the readers. I don't know if that breaks down at some system scale because of the details and the physics from inertial balancing to load management and conductivity, right, temperature. The grid is a really, really, really complicated machine, as you well know. And I think that at a simple-ish level, the accreditation math should allow you to say, okay, by building 1.6 megawatts of solar and storage on 800 buildings and timesing it by that

factor, that's the amount of capacity you should be able to sell. But I think you're right, that it's possible that that's a little bit more of like a contract and market function than it is a physics reality. And I think this is also going back to sort of my core argument here, one of the reasons why utilities, and particularly vertically integrated utilities, are so well suited to this, is that they are the grid operators

that can see the whole darn grid at once, transmission, distribution, and generation. And their job, day in and day out, is to live in those nuances, in those physics, in the unironic act of having the grid keep your lights on and your showers warm and all that stuff, right? So it is grid operations that ultimately is where the rubber is going to meet the road because the grid is not a metaphor or a set of contractual optimizations or just a commodity environment,

right? It's a very physical thing that does real work for real people. Yeah. And regardless, I think, you know, the more immediate point, right, to my, I'm talking about like long-term macro replace the whole grid kind of thing, but realistically in the near term, it is clear to me that we're entering this period. of what appears to be really high load growth. It is an all-hands-on-deck kind of a situation throughout the power sector. Obviously, we should be considering distributed energy

within the mix of the things that can help solve that problem, and it does have some unique advantages in time-to-power in particular, but others as well has unique challenges. But for every conversation that we see publicly about a three-mile island or a nuclear restart or something like that, there should certainly be one about,

the 900 buildings on a feeder that can host a megawatt of solar and storage. So happy to you. I completely agree. Pushing that idea forward. And as always, very fun to chat with you. So thank you so much for the time, Pierre. Of course. Thanks, Joe. Thanks for having me on. Pierre LaFarge is the co-founder and CEO of Spark Fund. This show is a production of Latitude Media. You can head over Latitudemedia.com for links to today's topics. Latitude is supported by Prelude Ventures. Prelude Beck's visionary is accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at Preludeventures.com. This episode was produced by Daniel Waldorf, mixing by Roy Campanella and Sean Marquan, theme song by Sean Marquan.

Stephen Lacey is our executive editor. I'm Shail Khan, and this is Catalyst.