Of blue water, yeah

...

if you go back in history, you know, people don't, you know, people watch, you know, Disney movies, and they think about pirates in a romantic way.

But actually, the Barbary Coast was a place where pirates stopped the kind of traffic we're talking about now, you know, at the turn of the century.

So the United States Navy, first the British Navy, and then after it, the United States Navy had, uh, has always played this role, and what's changed, and I think it gets to the point we're all making about, you know, what does the day after look like? What's changed is if we were talking just about the Iranian Navy, the strait would be open, okay? But we're talking about asymmetric warfare with drones and automated boats that are robot boats, and we're talking about other kind of robot stuff.

And so we have not adjusted ourselves to this new world.

And, and, and we could have, because I'm not-- It wasn't clear what hit the Saudis in twenty nineteen.

Amy, final thought.

Is it plausible they could do something like that again, Amy, do you think? Is that what we're heading for?

I mean, we're definitely heading for that.

And just to remind people, not only did we have this military escort of the tankers through the Strait of Hormuz, but we had these wonderful minesweeper, uh, ships that went through and got rid of the mines 'cause the Iranians had mined the Gulf.

And so it wasn't even just that you had to worry about being shot at from your tanker, you had to worry that it would hit a, a, a sea floating mine.

I think, again, not to harp on, you know, uh, how the technology has changed.

You know, absolutely, we're looking at, um, different kind of plans for escorts.

You have, uh, some NATO countries sending shipping down.

Do you think that the world of energy is gonna be very different as a result of it?

If the claim from the administration is that it's about drugs, but that's a hard case to make, and then if the claim from the president himself is that it's about oil, but what I'm hearing you say is that's also kind of a hard case to make, then what is this military intervention in your mind really about?

Well, it's complicated, but...

The United States is in a very delicate negotiation with Russia about a peace agreement in Europe.

So the geopolitical context is not a small one because Russia had backed Maduro.

And had brought a warship into the hemisphere.

I mean, literally a warship into the hemisphere.

It's not even about Alaska.

What I hear you say from your previous point, these actions on a global scale in terms of climate may actually be reinforcing the need to remove jurisdictions from natural gas and investing even more heavily into clean tech.

It's also about the trust we've been able to build with customers and with, uh, utilities, of course." And kind of step into the moment and show off, you know, what we can do to put that downward pressure on rates.

Well, and I mean, I think the- the point also to the- to- to the point here is that, uh, the utilities can't actually control what consumers do, and so, especially at the residential level, but- but even, you know, when we're talking about the tech companies and- and other kinds of big industrial users.

And so, you know, when people feel like it's not reliable, they go on their own, you know, and they're gonna put in a solar system.

They're gonna put in storage, um, and then, you know, I was talking to, um, some people from the trading side, right, and, you know, the problem we have on the trading side too is you've got people gaming certain markets.

Um, and so someone was telling me an interesting story where they were studying trading markets, and they found that this couple of big traders that have been moving in and out of markets don't go to Vermont because Vermont has used all these assets, has visibility within Vermont, not necessarily doing an ISO, but within Vermont, so, you know, super small market.

And they've completely eliminated the duck curve, and so there's nothing to arbitrage anymore, so no one's trading around in that market.

These are all known problems in some sense, and I think that's why I have a lot of confidence in our scaling.

So I, I, I have a, a, a futuristic, uh, uh, uh, issue to bring up because Apoorv, part of the, part of the reason that I called you is I was at a dinner and we were in a, you know, heated debate about VPP and, um, and I said, "Well, I was at some conference keynoting and somebody came up to me at the sidelines and said, 'You know, you really need to know as we go AV from the ride sharing world, they are gonna have a business model where they're going to have a whole fleet of AVs and then they're going to know that they can arbitrage between mobility services and plugging all those batteries from those AVs into the grid all at one time and providing, you know, a flex battery system for a distressed grid or a capacity market or whatever.'" Uh, like an hour, you know, had to be an hour ahead market.

And energy efficiency can be rapidly deployed for that.

I think the speed at which some of these things can be deployed is really a pivotal thing.

If you got a particular location that has some kind of congestion on their grid or, or even countries that have experienced severe fuel shortages in 2022 also, you know, have that front of mind.

And then just competitiveness.

You know, if, if you...

The less energy you're using to produce a product, the more cheaply you're producing it, basically.

And so, you know, I'm seeing that as being a big driver everywhere, especially as we go into this competitive landscape with new AI and so forth.

So I hope we get to the point, Ed, that this is gonna be a problem, but I think we got a lag and we got a lot of work to do, and, uh, you know, would love Metrix (laughs) to be part of it, but it's, it's an interesting discussion.

Amy, so what, so what's your take then on this issue of reliability, resilience on the grid? Where do you stand on what the issues are, what the key trends are, and what the administration's doing about them?

I'm gonna second, uh, Neil and Upim in the sense that, you know, I'm a university professor.

Uh, people do, you know, power engineering modeling.

Um, we just have a new FERC order that all transmission planning processes need to be 20 years and need to be very forward-looking, need to do scenarios.

One of the scenarios needs to look at extreme weather, which is vitally important at this point.

I actually have a group of students, graduate students at NYU who've been fooling around with the different data.

We've been improving the dataset on virtual power plants and where they're going in in the United States.

What happened in Nantucket?

Why is AI an effective optimizer for transportation?

Well, if you think about your own life, you might be using Waze or some other kind of program when you're driving to avoid traffic.

When you actually do stop and go driving in traffic, that wastes a lot of fuel, but there's also other variables as well.

Some of the research shows that when we all drive to a mall or to this grocery store or whatever, that uses a lot of fuel, but when we let an Amazon or UPS or FedEx deliver those goods to us, or Instacart, that can be optimized by a program using AI.

And the companies are starting to take it to the next level, which is since I know roughly when you're gonna order paper towels, then I can stack those goods based on my projected purchasing patterns in a distribution center to minimize not only the distance that these goods have to go, but also not over manufacture.

That also saves a lot of emissions.

What does that mean?

Let's talk about the two different things.

I know this is kind of your old stomping ground, isn't it? You actually began your career, Amy, looking at the oil market and interpreting what's going on.

Yeah, well, I think, Ed, really, for the listeners that don't follow oil very closely, the one thing that people who trade oil are always thinking about is, could some war in the Middle East cause a supply catastrophe that would send prices through the roof to $200 a barrel or something like that? And ironically, uh, we came to a moment in time when literally there was a tiny little collision, uh, near the Strait of Hormuz, uh, between two ships that had had their GPS mechanisms jammed, and there was a small oil spill.

The Strait of Hormuz, it's 90 miles wide, so a tiny oil spill is not material, but a big oil spill could be very devastating because you have, uh, countries along the waterway that use ocean water and desalinated to use water for national purposes, including, you know, all the regular things we do with tap water.

And so it would be really disastrous to have there be a big accident in the Strait.

And so that set off all these alarm bells, and people started talking about catastrophic scenarios, and other people started commenting that it would be suicidal for Iran to do something to close the Strait because they need the Strait to get their own oil out.

And so there was this speculation that oil prices were gonna go way up, and then when you had the US step in and do the bombing, and then nothing happened in the Strait that day, and the Iranians made this bombing on the US base in Qatar, the oil market actually collapsed because it wasn't the Strait of Hormuz, and it didn't wi- quote-unquote "seem to be widening the war." Um, and so this sort of speculative frenzy that you tend to have amidst the belief that there's gonna be geopolitical risk pushed the price way up, and then it couldn't sustain itself.

And, and for those who listen who are technical people and know a lot about the futures market, there were a lot of traders who were short.

Yeah.

Amy, what do you think?

Well, I'm obviously not gonna contradict someone who's a scientist.

Uh, but what I would say is, as Sarah kind of alludes to, the question is, how many years would we need to be at a certain level to say, "Okay, it's over.

We're not gonna get there"? And I agree that having the United States take the turn that it has means that it's gonna be very difficult to get to the milestones that everybody thought we need to reach by 2030.

But where I kind of part ways with the sort of narrative that- uh, that you're casting is that people then take that as, "Okay.

Well, we're not gonna be able to do anything, so we're not gonna do anything, so nothing's gonna happen." Um, and that's kind of like a very constant view you'll hear in c- certain segments, uh, sort of a popular view in the United States, but I step back from that because I deal a lot with countries who are really doing stuff.

Uh, and I'm not just talking Europe, you know, everybody knows that Europe is on track, but even this latest thing we talked about on a different show where the IMO has put together the first global carbon price for marine, which is a hard-to-abate sector that everybody would have assumed is not gonna decarbonize.And I see things like that and I say to myself, "Well, if everybody believed that having a four-year administration in the United States is gonna throw off the whole global effort, then no one would be bothering to decarbonize the entire marine sector." And I think there's a possibility once the marine process gets- takes hold, and as I- I've discussed, you know, China is- is committing to its shipbuilding in- in decarbonized ways, then I think it's a hop, skip, and a jump to put some kind of tax on airlines and, uh, and- and so forth.

(laughs) You've maybe just been really lucky.

Yeah.

So I, I wanna weigh in here on a geopolitical issue.

I'm gonna be a little bit controversial, but we wouldn't be having a full-fledged discussion if I don't bring up this point.

Let's just say the Congress people go in, there's everything that's been explained here today is explained to beyond ways and means, and we stay the course, okay? And th- and the bill doesn't get changed.

They find the money someplace else.

And then a year from now, we find ourselves continuing in this sort of economic warfare aspect where we're using economic warfare and China's using economic warfare, and Russia's using kinetic and economic warfare.

We're all in this conflict that doesn't get resolved between differences in the solution for peace in Ukraine or other kinds of conflicts, borders, the Arctic, et cetera, and we get to the point where the relationship with China really deteriorates.

(laughs)

But while low prices may throw a wrench into new drilling plans, they may not be too much of a threat to the overall industry, says Amy Myers Jaffe at NYU, because it's consolidated a lot in recent years and bigger firms are better able to weather a bad market.

I think that it would take a much more prolonged and much lower price, um, to get a shakeout than it has in the past.

Based on the conversations that I'm seeing, I think most legi- you know, serious credible market players are talking about that eventual glide path down. Again, like, you know, the current environment suggests that people might be a little more lax in terms of like, you know, the prior administration had this rule where in the early 2030s if you were operating beyond a 40% capacity utilization, you pretty much needed CCUS. So, I think what I've heard from our participants today is that, you know, any customer that's thinking about procuring turbines, especially like the hyperscale type customers to like, you know, like a GE, Vivre Nova type turbine maker, are talking about, you know, what they need to do in order to have this be kind of the most sustainable option that they have today, but also kind of, you know, align with that long-term trajectory. Because again, and I think, and this is why it's so important to tie the capital risk with the, the person that's willing to take the bet, uh, in terms of the plant going up. I think otherwise, again, if there was no ramifications for owning this 20-year asset and all the embodied carbon associated with it, you'd see deals everywhere, right? But you don't, 'cause I think people are, you know, actually being really careful about like, "What am I actually signing up to on a long-term time h- horizon? I may have this problem for the next 12 to 24 months, but am I gonna create a larger liability over the next 10 to 20 years if I, you know, happen to do this?" And so I, I, you know, I think folks are thinking about it, to be honest, and that's honestly why we've seen a little bit more measure to maybe not as seen in as many deals just yet. And I think that's a good thing, um, just 'cause again, people ha- need to factor in both the short term and long term when building kind of long-lived infrastructure.

I agree with what Can was saying, and I'll take it a step further. So, in my conversations with utilities, they are actually really going back and actually analyzing, you know, how many hours at peak do I really have a problem? And is a new plant actually the best solution? Because in the end, we said all these negative things about clean tech, but virtual power plant, demand management software, batteries, a lot of these things these guys figure can actually clean up, even going to more, more solar, can actually clean up some of these, you know, peak summer or congestion in a particular location. Right? You could even have these sort of congestion solutions for transmission, enhancing the amount you can get through your transmission equipment, right? By, by reconductoring or something like that. So, the utilities are looking for these technical solutions depending on how big their gap is in terms of how many hours, what time of day, when. Right? And the second thing is that when you talk to the hyperscalers, I'm not gonna name names, 'cause there's one hyperscaler that's pretty committed to natural gas and, you know, that they've made that decision. Right? But when you talk to the other hyperscalers...They don't really trust the oil industry. I mean, there's been this distrust of the oil industry for a decade. And now all of a sudden, I need you, so we're having conversations. But if you tell me, "Hey, I'm gonna build you a thermal plant right next to my natural gas asset, and you can put your data center here. And I promise you, I'm gonna write it in a contract that three years from now, I'll organize CCS for that plant for you." The hyperscalers feel like they're going to get the plant, they're gonna be dependent, and then these guys are gonna say, "Hey, guess what? We just don't think CCS is gonna work. It's uneconomic, we're not gonna do it." Right? See, one of the things that's holding up some of these deals is actually a trust issue, right? You know, do I really believe that you will accept a decarbonization plant for this facility I am gonna pay for after I pay for it, and after it's built, right? So that's the second part, right? And then the third part is, when we're talking about electrification... At NYU, we just had a major conference on sustainable real estate, you know, 3, 400 people, phenomenal panels. And one of the things that struck me the most is we had some great speakers from the private equity space, and there's a new terminology, which I guess isn't new. I mean, I, I, we had that at UC Davis, but... Called building circularity. And what is building circularity? That's a new term for the same thing that's been done, which is having a building have its on, on-site energy solution, and having it be, you know, somewhat... I mean, self s- I mean, um, it'll still be connected to the grid, but it's basically self-sufficient. It has on-site renewables, or maybe it's using sort of underground geothermal solutions. That was like a popular topic. And you could say, well, it's only New York City because, you know, we have that crazy law in '97 that everybody has to electrify, but I think it's like an attractive solution.

So, look, I wanted to go back to something we were talking about earlier, which is the role of the big oil companies in supporting investment in low carbon energy. Very well known that we've had a very big shift in strategy from some of the big European oil companies, in particular, over the past year or so. We had Shell, for instance. Shell used to talk about being the world's largest power company, and they set that goal for the 2030s. They don't have that goal anymore. They've been cutting back in power, sold some of their electricity businesses and so on. Now, we've seen BP taking a similar course, said last month it would increase its investment in oil and gas, and cut spending on renewables by 70%. Murray Auchincloss, who's the chief executive of BP, he said that the company was having a fundamental reset of its strategy. And the quote here, he said, "Our optimism for a fast transition was misplaced, and we went too far, too fast." So, I'm interested in your thoughts on this. I mean, Aimee, how do you interpret what's been going on then at these companies?

Well, first of all, let us point out that in BP's case, they have an activist investor pushing them in that direction. But let me just point out that we had an activist investor push Exxon in the opposite direction. Like, Exxon wasn't doing anything in alternative energy, and now that stock is much better performing than it was before their activist investor, right? And you have to, in my opinion, you know, I know this is like not as interesting a theme as the way everybody likes to say, "Oh, look at BP. That's an example that just proves that no oil company should do anything in alternative anything." I don't think it proves that. You know, BP was a company that was a troubled company, that had two or three major accidents that cost it a lot of money and that had a restructure. And it keeps pivoting back and forth between its strategies, and when you can't pick a strategy that looked like it's gonna be successful and stick with it long enough to make it successful, and you have implementation risk, right? So, you know, when I look at the companies that pivoted into offshore wind and everybody's saying, "Oh, look. Oh, look. Oh, look, they made a mistake," you know, did they make a mistake or did they have poor execution? Because let's not forget that ExxonMobil had a disaster when they tried to do deep water. Huge disaster, because their completion technology did not work. And it wasn't until Shell succeeded with the Tension Led platform that deep water took off. And so we've had the same thing in execution in offshore wind, where we've had these huge problems. You know, Orsted and others have had these problems. The companies that were trying to do deals off in New England faced a lot of different risks, including interest rates and so forth, that they didn't manage well. So, I think we have to step back from this whole, what's the baby, what's the bathwater thing, because we have to look at, is the management of this company doing a good job? Exxon is completely reorganized. They have a totally different carbon strategy. It's a really interesting strategy. Chevron has only knuckled down on biofuels, and the company doesn't have a great forward-looking strategy, even in oil and gas. And so, I think we do this across the pond thing, and we lump all the companies together because of their size class, and my view is, I'd be interested to hear Seano's take and your, Ed's take, my view is if I'm an energy investor today, I need to look at the actual management. Do I have confidence in this management? Do I have confidence that this management is looking geographically at their strategies? Do they have the same strategy for the whole world? That means it's already wrong, right? You know, when we're talking about different kind of energy solutions, it's different depending on where you're looking at. You know, hydro is a big growing, booming business in parts of Africa, right? So, but, you know, you wouldn't wanna have a hydro strategy for the United States per se. So, you know, my point is, you have to have a management that can actually do strategy. Saying, "Oh, there's a war and I'm gonna make a lot of money because the commodity prices are going up," you know, that is not a strategy. Benefiting from a rise in oil price is not a strategy, and we're gonna see that if President Trump pushes to get lower oil prices and he's successful, or we just go into a recession, which is gonna take us there anyway. Then we're gonna know who has a strategy and who doesn't. ConocoPhillips is a company that had a strategy, and they survived 2020 really well, and they got out of oils. They were the first out of oil sands. They totally got their money out. Like, they had a strategy to short cycle before it was popular. So, you know, I look at the management.

existing natural gas plants?

Well, I think the point is, and so every utility in the United States has to file something called an integrated resource plan, right? And that is how they're saying they have to define load, which is what we call demand, right? So what's the profile for how much electricity is going to be needed in my service area? And here's how I'm going to meet it, right? So DOE last year said, said that across the entire United States, there'll be 20 new natural gas plants coming online for 7.7 gigawatts.

So a giant data center could need something as much as a whole one gigawatt.

So we have these 20 new natural gas plants coming online.

And that was part of the planning.

That's a change in the sense that, you know, a few years ago we had no natural gas plants coming on.

In 2023, six new natural gas plants came on.

And some of those places are fossil fuel powered or generation facilities.