Stress test: the Iran war and a US grid under pressure | Live from the ACORE Finance Forum, Day two

29:14What's your expectation? There are places where offshore wind doesn't make any sense in the south of the country, in the Gulf of America. If you just place offshore, it will be competing with solar, very cheap solar. So what is the point to put there offshore wind? I don't see it, right? Also in the West Coast is a floating offshore wind that probably will take a lot of years to develop, right? So there is specific places where offshore wind makes sense and the Northeast is the place. So let's see what the administrations are thinking about it, but it's a place where from the technical point of view, the economical point of view, it makes sense.

29:54And what about the big transmission line then coming down from Canada? that's also been quite controversial, a few fights over that. What lesson do you learn from that in terms of what needs to happen to get transmission built? Well, in order to get transmission built again, you need to be very resilient because you are going to find probably a lot of blocked roads in the way. But when you understand the fundamentals, in this case, hydro resources in Canada, that they are affordable, that they are clean, right? And you have the need of the load in Massachusetts, and the fundamentals are very clear.

30:35So at the end, it's just a question of being resilient and continue with what is right. And now we have a wonderful 1 ,200 megawatts line that is supporting the system, again, with a price of energy that is very affordable, super affordable, and that is saving billions of dollars to Massachusetts repayers. And we will always continue to do things that make sense economically and technically for the country. If you were sending a message to regulators, to state governments, to the federal government, about what they could do to expedite that, to help those investments get made, to get to that goal we all want to get to, what would you say to them?

31:17Certainty. The only thing that we need is to be sure that the rules of the game, they are going to change in the middle of the game. And when you have certainty, companies like our company that we know how to do, we have the knowledge and we have also the capital in order to be invested in the country. And we are happy to invest in this country. So at the end, what you need is certainty that you are going to be able to get the return that you were foreseeing in your dossier. So it's certainty is to be sure that there is not going to be retroactivity or crazy new things, changes in law, etc., that are going to derail the investment.

31:58Yeah, and I think that's a fantastic point, a very important message, certainly, for people to hear. Jose Antonio Miranda, thank you very much indeed. Great talking to you. Thank you. It's been a pleasure. Thank you for having me today. I next spoke to a former government official who's an expert in national security. Harry Kresser is the Director of Studies at the Carnegie Mellon Institute for Strategy and Technology, which is a Washington-based think tank. I asked him first about how the disruption to global fossil fuel supplies caused by the closure of the Strait of Hormuz was encouraging countries around the world to invest more in electric vehicles and renewable energy.

32:30And I wondered whether, given China's dominance of those low-carbon value chains, they were just exchanging one dependence on imported energy for another. It's a reasonable question, and it's one that I hear a lot. this one of just switching one critical dependency for another. You know, Iran is not a super friendly nation to American and allied interests, nor is the PRC. So is this a, you know, a swap worth making? And I, you know, I came from a tour in government before I joined Carnegie Mellon, where I was essentially a professional China hawk. So I can get where that intuition is coming from.

33:04But just to check on that role in government, you served in what the Trump administration, So the first Trump administration and also then the Biden administration after that, right? That's right. I was at the first Trump Pentagon where I worked on counter-China cyber military doctrine and then the Biden White House where I oversaw development of the national cyber strategy. And I'd say that that kind of swapping dependency question, it boils down to what you think your vector of threat is here. And I'd argue that if we're being precise about what our concerns are, This is a, you know, a quote unquote trade I'd make seven days a week.

33:42The flow of oil leaving the Middle East to the rest of the world, if that gets disrupted, you are in an energy crisis on day one, right? You need regular flows of oil every single day for most of the global economy to work the way we expect it to. This is not how electrotech works. This is not how, you know, solar and batteries and the kinds of clean tech or electrotech that most of the world gets from overwhelmingly and admittedly the PRC for now. That's not how it works. That if, you know, heavens forbid, we went to war with China tomorrow and our ability to import Chinese solar panels and batteries went to zero overnight, the solar panels and batteries that we have today would keep working exactly as you might expect.

34:33This is distinct from your oil crisis kind of scenario. The fact that ships got turned around with batteries on them does not affect the batteries we have here today. at least in terms of like supply issues, which is distinct from the tech security issues. Right, indeed. And that's a really interesting distinction. But as you say, in that energy supply sense, that narrow sense of energy security, as you say, the case for electrification, for shifting to electrotech is overwhelming, you would say, even if that means using Chinese technology. Indeed. If I would say, you know, putting back on my China Hawk hat here, if deployed well.

35:15There are technical considerations, there's risk mitigation considerations, and there's long-term industrial dependency considerations, right? Like over enough timelines, a supply chain dependency is a national security dependency. But there's different mechanisms there that we need to pick apart to be able to mitigate them properly. Right. So let's get into that then. So what are the real risks then? I mean, maybe come on to the questions about industrial capacity and manufacturing in a moment. But first of all, in terms of kind of technology risk, and as you say, what the threat vector is, what are the issues there with the use of Chinese technology in America and other Western countries?

35:56So when I was in government, one of the big issues that we worked on was PRC designs on our critical infrastructure, right? Like the audience has probably heard that the People's Republic of China has a big focus on Taiwan, the Republic of China. Breakaway, they see as a breakaway province. And reportedly, Chinese President Xi Jinping has instructed the Chinese military to be ready for a potential invasion of Taiwan by the end of this decade. And one of the key pieces of that preparation of that plan is to make sure the United States can't mount a rescue mission. That is the thing that they fear would derail this kind of existential objective that they have.

36:43And I worked on this in the first Trump administration, and then it became more widely known and declassified during the Biden administration that the PRC has been, to use somewhat hyperbolic language here, planting digital time bombs on our critical infrastructure, seeking to get access to be able to disrupt our defense mobilization, but also to disrupt civilian critical infrastructure, to kind of harm the American public's political will to sustain a rescue mission. Right, because that's something which I'd sort of seen reported and heard rumors of. And I've sometimes, I think, been somewhat skeptical about that and thought, can that really be right?

37:25And if it was happening, why was it not detected until apparently pretty recently? but that is definitely something that's kind of established fact, is it? Yes. That has been happening. Indeed. Testimony before Congress by senior administration officials across the last two administrations. It is clear capability and intent. We, the United States, believe that we've done a lot to remediate that, but we now have a greater sense of PRC capability and intent to be prepared to do that when they feel a crisis is upon them. So give us some examples then. And what kind of techniques have they been employing?

38:05In the cybersecurity world, this is known as like living off the land techniques, where they'll employ social engineering, you know, phishing kinds of activities to get legitimate credentials from infrastructure operators who are in charge of the sort of digital componentry that monitors and operates a lot of our critical infrastructure, and use that to log in, to establish persistent presence, like phone home and install new pieces of software to allow them to get more access over time with the intent to turn it off, to disrupt it when the time comes. And so could that include then equipment imported from China?

38:46So if you buy a transformer or something like that, some critical piece of kit and then use it, But is it possible then that that'll have a backdoor installed where you can use it for years and years and years and it'll be absolutely fine until the decision is taken remotely to switch it off and they could then switch it off? Is that something that's happening? I would say that we do not have evidence that there are intentional hardware spy chips being installed on things, right, for a variety of reasons. One is the PRC is, in many respects, the world's manufacturer, right? They have a lot of economic incentive to remain a trusted manufacturer.

39:25A lot of people look at their stuff. And so if it became more widely known that, oh, look, the Chinese military was installing spy chips on equipment used around the world, it would be the end of the businesses that were producing that equipment. But the other side of that coin is you don't need spy chips to be able to get into critical infrastructure. You don't need intentional insertions like that. You can just use errors in software, bugs. You can socially engineer the owners' operators to get their credentials, right? And so there's, you don't need something so diabolical as that. The other side of that is that there are antennas and communication devices turning up in a lot of critical infrastructure equipment that is undocumented, but is not necessarily an intentional kind of quote unquote spy chip.

40:16There was stories a few years ago of port cranes in the United States and more recently in electrical infrastructure where we're uncovering, wow, the blueprints don't say that there's a cellular module here and yet here I'm looking at one. And we're pretty sure that that is more a case of sloppy inventory management than it is diabolical James Bond sort of state activity. But even if it is sloppy inventory management and is widespread, that's a Chekhov's gun hanging on the wall. You know, if the PLA knows there's a bunch of undocumented antennas on our infrastructure that we may not be aware of, that is a tempting target.

41:00So, question, what can be done about it then? In policy terms, what are the right steps that the US government, other governments can take to reduce their vulnerability? Yeah, we know that a lot of it is modernization and re-architecting your infrastructure with security in mind. And that's hard. So much easier said than done. And we now know from a lot of what we've seen of the PRC's activities in Volt Typhoon, Salt Typhoon, other sort of code names around the PLA military campaigns to get into our infrastructure, is that there's often seams between old tech and new tech, between operational technology, OT that was never designed for the level of ubiquitous connectivity that they're now being asked to operate in.

41:53and that creates opportunities for bad guys to get in. So you'd say, well, modernization, right? Make everything new, right? If you do that haphazardly, if you do that without security in mind, then you might just dramatically worsen the situation. You might slap a bunch of Wi-Fi connectivity onto a bunch of things that didn't have it before. And if you don't think to architect it with security in mind, then you might be worsening things. Right. Right. And are people then designing those architectures at the moment with security in mind, or is the industry still lagging some way behind here? It's very inconsistent.

42:32There are some sectors that are doing better than others. But one of the areas of both great promise and peril is the transformation of our electricity sector in particular right now. When I was in the Biden administration, we were working on how the clean energy transition could be a vector for that kind of modernization and defensibility that we knew that our infrastructure needed, right? Like decarbonizing technology is also disproportionately digitizing technology, right? Your solar and battery facilities are inherently much more digital because you are telling it when to capture and store electricity, when to release it back onto the grid.

43:15Your VPPs and DERMs and all that, it is a great vector opportunity for that. But the flip side of that coin is the clean energy space is full of lots of young and dynamic entrepreneurs who haven't spent 50 years in national security spaces, who don't have an intuition for bad guys. And the kind of climate and utopian activist pipeline and the dour national security dragon slayer pipeline don't have a lot of organic overlap. So what about the FIOC rules and foreign entities of concern? We've been here for less than a whole day and already about half a dozen people who work in the low carbon energy industry, people who are developers, finances in that industry have been complaining about the FIOC rules.

44:07These are intended to prevent the benefits of tax credits going to projects that have involvement from from these four countries of concern, Russia, China, North Korea, and Iran. Three of those countries aren't really much of an issue, but China clearly is a big problem because it is so dominant in those supply chains for batteries, for solar power, and so on, on a global scale. What's your view of those FIOC rules? Do they perform a useful service? Is it one of those things where, yeah, the industry complains and people don't like it and they say it's very complicated and hard to know how you comply and all that kind of thing.

44:50But actually, we need something like that to restrict China's presence in these key supply chains. Or are the rules actually kind of not really serving a valuable purpose? I think that these foreign entity of concern rules and related ones could be useful tools for supply chain diversification efforts and things like that. But they're being hobbled because they're being mashed together and combined with these technical security concerns that we were talking about earlier, right? I think when people express anxiety about dependence on China for electrotech, for clean energy and other kind of advanced technology sources, I think that we're too often combining two issues that are, in fact, very different.

45:44There's the technical security conversation, the cyber risk that we were discussing about preparations for war and PLA hackers trying to be prepared to turn off the lights. And then there's the input dependence conversation, whether I want to have to source all of my lithium from China, right? And these are different problems with different solutions that are too often getting mashed together, right? If I'm concerned about cyber risk from, you know, Chinese battery management systems, the computers that control battery charging and discharging, if I'm concerned about that, then that's a different issue set than what percentage of the lithium in that battery was refined by China.

46:31My kind of ominous fears of China combined together to maybe try and use those in both directions, right? One of my colleagues was recently talking to some Texas state legislators who were concerned about Chinese solar panels on the grid and the ominous nature, ominous threat that they posed out there. and realized that they were conflating the kind of cyber risk, all the news about Volt Typhoon and the very real and grave risks of Chinese technology risk to stuff that is smart with these conversations about commodities that are dumb, right? I don't need to fear solar panels and other kinds of dumb componentry that has critical minerals from China for the same reasons as the cyber risk.

47:18But you're saying worrying about those kind of dumb components and commodities can be a reasonable thing to do if you're concerned about industrial capacity and having enough domestic manufacturing to make solar modules. And I mean, is that the right thing to do? I mean, on a global scale, if market forces would dictate that solar modules would be produced in the lowest cost jurisdictions around the world, very often that would be in China. if you were trying only to get the lowest possible cost solar power to consumers all over the world one thing you would definitely not do is have extensive solar manufacturing in the united states so question is it worth it then you know what are the kind of the trade-offs and the things to think about, given that having solar manufacturing might seem like a good idea, but actually has very substantial costs attached to it.

48:24Indeed, I think that the answer to the question is not an all or nothing one. I think we saw during the COVID-19 pandemic and subsequent supply chain disruptions around the world, that a global commercial order tuned to maximum efficiency is also extremely brittle. And you can be disrupted by a pandemic, but you could also be disrupted by war. I do not think we are on the verge of war with China tomorrow. I do not think it is likely, and I hope that it never is. However, it is significantly non-zero. And I think it is also higher than most Americans have internalized. And the conversation about cyber risk versus dependency for componentry and inputs and manufacturing, they're both national security concerns, but they're over, I would say, different timelines and thus have different kinds of approaches to them.

49:19If, heaven forbid, World War III breaks out tomorrow, the day one concern is whether Beijing has the ability to turn off the lights. the supply chain concern, the dependency on getting more inflows of electricity equipment, of other electronics and things like that, that is a chronic condition that will become an emergency over time. And so in the new paper that my colleagues and I just put out with Carnegie Mellon called Electrotech Moneyball, with apologies to Michael Lewis and Sony Pictures, we are attempting to lay out how one would use those risk prioritization frameworks, that sense of urgency, to decide what matters today and what to plan on for the future.

50:03Right. And that calculus is presumably changed by AI and everything that goes with it, in the sense that if you accept that there is an AI race and that that race is kind of an existential issue for the United States, as people in the administration and many other people say, that it's vitally important for the US to kind of stay ahead of China in terms of AI capabilities. And developing those AI capabilities depends on having enough data center capacity and having enough data center capacity depends on having enough power generation and grid infrastructure to support those data centers. So therefore, you should be very much kind of erring on the side of allowing stuff to get built, not putting new barriers in the way of investment, because if you do, you're kind of handicapping yourself in that race and making it harder to win.

51:02I mean, is that a reasonable argument, do you think? It's a reasonable argument, and I'd put it that if you're concerned about our geopolitical competition with China, like I am, I would want to make sure that we're mitigating cyber risk to our increasingly digitized infrastructure, but also on par with that concern is avoiding paralysis and panic. Seeing terror under every made in China stamp is going to tie us into knots and slow down that industrial and AI infrastructure build out, we would need to remain competitive with China. If you're afraid of China and you have concerns about PRC threat and dependence over time, then you need to be precise about what it is you're afraid of.

51:47You know, our tagline we say is guard the smart stuff, buy the dumb stuff, and build the future with what time and resource headroom you've bought yourself to do so. Harry Kresser, thank you very much indeed. I then spoke to a colleague of mine at Wood Mackenzie, Cara McNutt. Cara is our head of power and renewables consulting for the Americas. I asked her about the issues raised by rising electricity demand in the U.S. at a time when additions of new generation capacity have been dominated by intermittent renewables, solar and wind. It fundamentally comes back to reliability. So Woodmac forecasts the power markets out to 2060.

52:25Our team looks at new additions, retirements. We take a look at all the technologies and the role they need to play and fundamentally try to make sure that the system will work. Right. And that's partly why our view is supply constrained. But but when we unpeel the onion and we look at, you know, simply put the share of dispatchable technologies, those technologies that can flexibly respond to the changing market needs as opposed to the intermittent renewables. you know, that's declining over time. And that's a really interesting part of the market dynamic that I don't think is getting quite as much attention.

53:03It's just really the need to consider reliability and thinking about how dispatchable technologies can play a role both today, and also maybe more acute in the future as the grid becomes even more heavily saturated with renewable energy. So what does that mean then in terms of grid reliability? You're still on this pathway, as you say, where dispatchable generation is in long term decline. Is that something that's very alarming then in terms of grid failures, the risk of blackouts and so on? Is that something which you would be very worried about? You know, especially put in context of the, you know, forecasts I think our research team put together a chart that shows the the the Q requests and in ERCOT are three to four times greater than the amount of supply that can come on to meet them so so really just to kind of show you that this contrast so meeting you know the reliability challenge in context of the amount of generation that needs to be added and replaced and maintain that reliability is a real challenge and the renewable energy alone is not going to be able to meet that.

54:25Right. And that, so just run those numbers in a car, pass me again. So this is sort of requests to add loads. So this is what large load in particular is basically data centers. And you're saying that is three to four times what the capacity that's been proposed in terms of additional generation to be added or three to four times what we think the market can can can can meet got it right so how does that get resolved then i mean ultimately then just these data centers are not going to be able to get power are they well i mean some of that demand is speculative demand so some of that will fall away i think is the first part of that um if you're familiar with Senate Bill 6 in Texas, this is something that really has caught attention around the need for data centers to essentially be able to handle unlimited curtailment, right?

55:20And what that really does is it shifts the emphasis away from the front of the meter solutions and kind of shifts it back to behind the meter solutions as you need to handle unlimited curtailment means you need to have a pretty robust backup system in place to be able to operate your business. So seeing a lot of interest and activity and not behind the meter solution space as well. Right. So basically, if you're going to run a data center in Texas, you're going to need what batteries to cover your full demand as much power as you think you're going to need batteries or diesel generators or gas generators with a dedicated supply, whatever it might be, so that you can at times just disconnect from the grid.

56:03When the grid needs you to disconnect, you'll drop off. Yeah, increasingly seeing these, you know, backup power solutions, you know, being prepared for primetime power, which is, you know, kind of a response to the gas turbine supply constraints that we're all aware of. But seeing, you know, some combination of more modular gas solutions combined with batteries, either as bridge power or as in some cases, you know, indefinite supply of power, given just the constraints we see. Right. So how do you think this is going to change patterns of investment in generation capacity in the US then? If you've got, say, this strong growth in demand, and this growing concern about reliability, what does that mean in terms of where investment goes?

56:54Yeah, so I think, I mean, to use the term we're all familiar with it's the all of the above approach need all the supply that can be built but need to also consider the role those different generation sources play in the near term we're seeing a lot of the queue dominated by solar plus storage projects and referencing that 79 % metric from 2025 that you started with. I think that's a good indicator that that is commercial today, that is driving a lot of the supply additions. Gas will play a role. It will play a role both in terms of the existing fleet stepping up to meet reliability needs where it can, but then also some new build gas, which our view is that new build gas doesn't even offset gas retirement in the near term.

57:49So although there's a lot of talk about gas, the role it's playing, it may not be changing as much as we think. And then in longer term, I mean, I kind of bucket this as innovation, but innovation is not just technologies like hybrids or combinations of technologies. is something I am personally really excited about is the role nuclear can play in the longer term. But there's also innovation in business models, right? So seeing, you know, VPPs and other concepts come to life to kind of make sure the markets can solve. And it's not just a supply story, right? It's where supply meets demand and how the system all works together.

58:34Right, just to put a footnote on that for people who may not be familiar with VPPs, virtual power plants. So that's essentially aggregating a lot of distributed resources, which might include demand response, local generation, local storage, and so on, and to kind of use those as a dispatchable resource for the grid so it can sort of behave effectively like a power plant. although I know that's very contested. We had a guest on the show recently who said, the thing about a virtual power plant is it doesn't provide power and it's not a plant. But, you know, it's so controversial subject. But yeah, as you say, I definitely think there's some potential there.

59:12And it's very, very interesting to see what could be done. Final thought, I wanted to go back to the point you raised about nuclear. As you say, there is a lot of technological innovation happening. There's a whole new generation of advanced nuclear projects out there, which could be part of the solution. And I wonder, again, that's a controversial subject. There is a very active debate about how big a role nuclear can play, and also how quickly some of these new generation of plants can be available to meet this challenge of growing demand, which is really very urgent in the near term just over the next few years.

59:53What's your view on that? I'm really excited about the role nuclear can play, but I recognize it's not a story today, right? Today we're in the stage of building political momentum support. I think you'll see, I mean, there's probably a new announcement every day, whether it's a new initiative of government support or a testing milestone or X-Energy's IPO. So, you know, recently, you know, we're seeing this industry for SMRs really start to form in an exciting way. Our team tracks the global pipeline for projects and SMRs, and that pipeline nearly doubled in the last year. And that's really a testament to all the activity that's taking place.

1:00:35And the majority, more than half of that pipeline is in the United States. So I think the U.S. will really be a first mover there. When we'll start to see that happen, at the scale of a 300 megawatt SMR, that's really kind of a 2030s and potentially mid-2030s story. But more so than some technologies that we've seen in the past, we really see support from all sides. We see hyperscalers committing from an investing perspective, from an offtake perspective. And we see a really strong fit of the needs that nuclear can provide with the needs they have for their business and their sustainability targets.

1:01:25So I'm excited and watching this space. Thank you very much. I then spoke to Ben Oithanjan, who is the founder and CEO of Renew Energy, which is a solar developer. He also has his own podcast, The Solar Maverick. I started off by asking him about the importance of battery storage when developing solar projects. That's the great thing about storage. We've seen like storage costs go down, you know, significantly the past two to three years. So it's definitely like something that, you know, we're looking to educate, you know, our customers or potential clients. It's still pretty early in the behind the meter solar and storage.

1:02:07It takes a long time to get first customers comfortable with solar, but surprisingly, they're getting comfortable a lot quicker. They're a lot more educated. But then once you add the storage component, which is the real game changer, right? Because then you could manage the load. Then you could basically sell into the grid other services related to the battery, which is now becoming more important because of, I'm probably preaching to the choir, but load was pretty constant. meaning that generation was pretty constant but now we're seeing obviously an exponential increase in generation obviously you mentioned about hyperscalers and ai and just consumption in general people are consuming more electricity so it's very strategic to have like batteries and obviously behind the meter batteries through like a you know some sort of long-term contracting agreement with that customer so it's definitely you know really important now And what makes the economics of that attractive then to a customer?

1:03:08Yeah, so that's the challenging part of the equation is really, you know, like what the numbers are. It depends like what state you're talking about, whether they have time of use, which not all states have that. And then obviously we talked about ancillary services, you know, battery backup. there's you know like three or four different revenue streams that the batteries have and it's you know how you're able to like maximize that where it makes energy storage beneficial but what we're finding is like now especially with everything happening in the u.s especially with the you know conflict in iran like customers are willing it's not just purely a financial decision they would like to have some sort of energy independence from the grid or certain critical functions within their operations hopefully you know a lot of them have generators but they're obviously you know looking at you know batteries to do that in the future we're obviously seeing that on the residential side even though we don't do residential but then on the commercial industrial side a lot of customers asking i still think it's really in the early days when you talk about like behind the meter solar and storage and i've i've been seen just storage it's all been solar plus storage when it comes to behind the meter and that's really interesting you're saying that the iran war is sort of generating interest in this presumably not because there's any direct connection there's no direct and natural gas prices of course have been very very stable uh in north america they haven't really been affected at all by the disruption to supply through the straight-to-form moves, I suppose you could say that oil prices and therefore diesel prices have gone up.

1:04:56And so if you're thinking about diesel generation possibly as your backup, that is something which has become significantly more expensive. Oh, yeah. But you're saying more than that, more it's just what. It's kind of like an awareness that people have got about issues around energy security. It's just something that's more on people's minds. Oh, it's more on people's mind. I think energy independence too from the grid. People are hearing about, you know, the old infrastructure that we have and that, you know, there needs to be major upgrades to the grid. And potentially people are focused on making sure nothing happens with the operations of their businesses or more than before, I think.

1:05:33And then also to the concept of energy independence. People like to hear that idea where they're not dependent on the grid for power. you know it's interesting because it depends on the customer and depends how sophisticated the customers are and a lot of times like energy is not their primary part of what they're doing and so it's a big like education process and then also two states are rolling out new incentive programs so you know trying to explain that and just things are happening so and then trying to explain like fiat or foreign entity of concern and how the you know most of the supply chain is coming from china and then you know to kind of explain all the complexities and also to some of the issues we've like feedback that we've gotten from customers is oh you know what it happens if there's a fire you know i think like the fire issue with lithium ion batteries have been overblown in a certain sense but you know when there's a fire in the press it seems to you know and i've seen like the technology has gone better with lithium and then really it's like in place and it's a very low percentage that happens also battery manufacturers are offering other chemistries that are less flammable to get over sort of those concerns that you know the behind the meter customer have because there's a lot it's complicated actually the behind the meter sale people don't realize there's so many different aspects of it and the type of businesses and if the owner of the building actually is leasing it out to another company as well.

1:07:12That's a whole other layer of complexity right there. Complexity that's involved, yeah. Going back to that point about Fioc, as you say, the foreign entity of concern rules basically intended to shut China, North Korea, Iran, and Russia out of the U.S. clean energy supply chain. Most of those countries don't matter very much. China does matter significantly. Is that something which you're finding is a concern for your customers? If you say, we're going to have, just because China dominates the supply chains for so many of these things, for batteries, for solar modules as well, we're going to have to have some element of Chinese equipment in here.

1:07:53Otherwise, the project's not going to happen. Or maybe it could happen, but it's going to be a whole lot more expensive. Is that something that people are worried about? uh so i don't think they're worried about it the way they you think they're worried about it like so everyone obviously wants u.s manufactured equipment uh but once you start telling them the prices compared to chinese equipment uh obviously they have a preference because there's like usually a significant difference in the price of panels or the batteries um i think uh i think the fiac actually legislation's well intended i think we saw that in covid where we weren't able to get equipment and crucial supplies and within the solar space as well or renewable energy or energy during COVID.

1:08:39So I definitely think it's important to have like the manufacturing capabilities here in the U.S. I think the challenge that I've seen from even in this conference and as a developer of CNI projects is that the guidance is just so quick, meaning that basically starting in 2026, a certain portion of the materials have to be made in the US, which is challenging when most of it is really in China, especially when you talk more about batteries than solar panels. Yeah, absolutely. So US production can ramp up over time, and actually the US has made enormous strides in producing solar modules, and it is coming up a lot in terms of producing lithium-ion batteries as well.

1:09:27But as you say, it can't happen overnight. There's always that transition period. Oh, yeah. And it does still seem to be the case, doesn't it, that even if you're paying the tariffs and even if you're not eligible for tax credits because of the FIOP rules, the Chinese equipment can be so much lower cost. It's still worth taking that. even without all those various kind of policy measures that are designed to push people towards buying American equipment instead. Yeah, it's interesting because I hear multiple different thoughts about this because now we're hearing from large investors or IPPs that in certain types of projects like community solar, which are higher margin because it's a discount to retail rate versus a utility rate, that they're looking at projects where they don't get any of the investment tax credit or the depreciation benefits because it's just easier to not deal with all these other issues.

1:10:26And then also, too, the panels are actually getting to be a lower part of the whole cost of the installation. And actually, labor is becoming a bigger and bigger cost. And then also, too, the requirements of unionized labor. so you know like that also makes it more expensive so it's interesting uh yes there's a huge difference with the it's interesting because i see like distributors calling us all the time with hey these are fiac panel prices and then non-fiac and there's a huge you know difference within pricing related to that and that's also including multiple tariffs as you mentioned it on the non-fiac compliant panels it's still uh there's still a big difference in the cost differential as people get more experienced people will get more comfortable with this kind of technology that should help increase deployment oh definitely and i think too um you know in the inflation reduction act obviously them including storage as part of the investment tax credit was a huge thing and then with the big beautiful bill that was signed by president trump in july 4th of last year the extension of the investment tax credit for storage and now every solar developer including us are saying solar plus storage developer or microgrids and so i still think it's early i mean we've been talking about storage for years but now we're actually starting especially on the utilities side which we're not involved in as much we're seeing a lot more procurement than in certain markets like where there's like when you talk about from the meter where there's a fixed sort of like VITR or the smart program or utility RFP processes.

1:12:09Yeah. So for instance, in California and in Texas in particular, that market's really taken off. Oh, yeah. Yeah. It's been very, very strong. But behind the meter, I think, hasn't been as big as like the utility. Obviously, it can't be with the utility scale deployments. But I think like every building owner is now asking about storage. And obviously, data centers, you know, it's interesting too, because we talk to data centers and their landowners who reach out to us about, hey, can you develop data centers for us? And then also trying to come up with energy for those data centers. And obviously we're seeing similar sort of moratoriums that we saw in solar for community solar in New York.

1:12:50We're seeing the same thing with data centers. And it seems obviously solar and storage is not enough for these data centers. So they're trying to come up with creative ways of producing more energy on site so it won't impact the cost. Yeah, sure. Or even their prices as well, right? And are concerns about grid reliability also driving adoption of distributed storage? There has been a steady drumbeat, probably increasing in volume in terms of people raising concerns about grid reliability in particular. as dispatchable generation gets shut down, old coal plants in particular retiring, we're adding a lot more variable renewables to the grid, wind and solar, which obviously have their limitations, are not dispatchable.

1:13:46And a lot of people out there saying this increases the risk of grid failures, blackouts, and so on. Is that something which you're hearing as something that's kind of driving people to think, well, okay, if these risks are rising, then we need to have our own distributed local solutions that will make us resilient if we have that kind of a shock. Yeah, definitely. Grid reliability is like a question that we get all the time from, you know, behind the meter customers. I think, you know, the current grid was made for basically a huge power plant and going through, you know, power lines or transmission distribution to transmission lines and then now you're having more distributed power sources you're having a lot more generation as well that's required you know uh so it's definitely a big issue and people don't want their operations affected by like a blackout so i think people are trying to be more creative with distributed assets and you know looking at many different types of generation and obviously storage solar and storage is like the cheapest form of power the fastest to come online and you're you know you're not you're not dependent on fuel it's a technology so people are focused on that and grid reliability is a huge thing and then as you have more distributed assets it actually helps with the grid in a sense that you know it helps relieve obviously you know electricity generation from large energy users if they're able to basically you know have their own sort of systems.

1:15:23Benoith Anjan, thank you very much indeed. Finally, I spoke to Ray Long, who is the president and chief executive of ACOR, our hosts here at the forum this week. And I asked him, first of all, what were his key takeaways from the event? So Ed, we released two studies and we talked about them yesterday in day one of the finance forum. And basically they conclude the same thing, which is investment in clean energy in the United States remains strong. In 2025, in the investment trends report that we put out, It showed that 2025 was a banner year. We had more investment in clean energy projects than ever before in the United States.

1:15:57The other study we released is a survey that we do annually of leading players that are financial institutions and developers in the United States. And what that showed is in 2026 and looking forward to 2029, that interest in investing in clean energy projects in the United States remains very strong. Now, there are also – this is also a cautionary tale there too, which is some of the – there are headwinds that are potentially preventing those technologies from – and those projects from coming to fruition. And those main headwinds are all policy related. So I would say – I would sum it up this way.

1:16:37Investors, developers, buyers in the United States for energy remains very strong. The first half of this year, we expect there to be another potentially record setting with respect to projects coming online and investments that are taking place in those. However, there are a few things that are preventing more of that happening for the next four years. I want to come on to those policy-related headwinds in a moment. Before we do, though, just to think about the reasons why the industry apparently is pretty robust at the moment, and perhaps is more robust than people would have thought when the big, beautiful bill was passed last year, signed into law by President Trump on July the 4th, and obviously undid the tax credits in particular for wind and solar that came out of the Insulation Reduction Act.

1:17:28and so that was seen as a real blow i guess to the renewable energy industry in the united states but things have been strong and when we think about the reasons why things are still relatively strong i guess two reasons one is that um the eligibility window for those wind and solar tax credits is still open if you can get your project to begin construction quickly enough by july the 4th then you can still be eligible for those credits so perhaps we're seeing a slightly artificial kind of bulge of activity while that's going through. And then the other thing, which is probably more long lasting is strong growth in power demand driven in particular course by AI data centers and everything to do with that.

1:18:10So I suppose my question is, how durable are those factors? I say, particularly given some of this deadline stuff set by tax credit eligibility, that is going to go away. And the power demand stuff and AI and data centers and how that unfolds, clearly a lot of uncertainty around that. It's a very volatile, very fast moving industry. Certainly four years ago, we would never have predicted that this would be where we are now. Who knows, four years from now, again, we may be somewhere completely different. What are your expectations about how these forces are going to play out? Sure. So the interest by banks, financial institutions and developers to do all this work in clean energy development in the United States, I think, Ed, is driven predominantly by economics.

1:18:58And you touched on it. It's the demand growth. So in the next four years alone, we expect about the need for about 166 gigawatts of new power to be added to the grid. And that's a lot. I mean, you keep in mind that previously demand's been flat in the United States for about 20 years. So every new electron that was coming on it up until about a year or two ago was replacing something else that was retiring, right? We're in a different situation now. We need to build the equivalent of the peak load of New York City 15 times over in the next four years. It's massive, but it's also a huge opportunity.

1:19:36And it's an economic signal to banks and developers and others that you can go out and should be going out and building. It's pure supply and demand economics. There's a need. And so banks, developers will come to fill that need. And that's what we're seeing. And that's why the survey that we put out for the next four years is so optimistic about the banks and the developers that want to do that work and lean into it. Now, you mentioned tax credits. And, yes, tax credits, the IRA tax credits roll off mid-year this year or start to roll off mid-year this year. Even with that happening, we're seeing, particularly on the utility scale side, so the large-scale project side, massive interest in investing and developing.

1:20:24Now, what are the headwinds? You're saying policy is putting barriers in the path of clean energy development. So we can break this down several different ways. I look at it in terms of three buckets of things that could be done, policy changes that could be done now that would significantly reduce the friction preventing those from moving forward. The first is federal permitting reform legislation. So putting it simply, it just takes too long to permit projects right now. We're talking about transmission as well as electric generation projects. Just before we get off that subject, we're recording a show on exactly that issue, federal permitting reform.

1:20:59We're going to be recording it next week. It'll be going out soon. What are your sort of expectations on that? What are your hopes and fears for permitting reform? It's a great question. Well, you know, the thing is, this has been actively discussed in Congress between the House and the Senate and the administration for the last two and a half years. And we know that there's interest from Republicans, Democrats, as well as in the House and Senate, as well as the White House, to do permitting reform. And there's good reason for it. It takes too long in the United States to permit power generation, and it takes too long to permit transmission in the United States.

1:21:38So those discussions are very active. They're ongoing. We know that both sides are negotiating in good faith. And the question is, can they come together on a package of policies that can move forward, be signed by the president? And I don't have the answer to that question. Yeah, because we've had some false storms before, right? There have been previous bipartisan efforts that ended up going nowhere. We have, but I'll tell you there's good reason to do it and to do it now. We talked about the need, right? The need to get it done. But at the same time, you know, when you look at the two major goals that everybody, whether it's an elected official or an energy buyer, really anybody that touches or needs electricity, it's, hey, I don't want to pay too much for my power, so I want better prices and everybody wants to talk about affordability.

1:22:23And then the second one is reliability. And the way to get there right now with so much demand is just to start building everything that's out there. So there's good reason for them to come together more, even more now, even more so than in the last couple of years. So that was one issue is permitting reform. What are the other two? Sure. So permitting reform is number one. Number two is clarity of some of the regulations that are on the books now. So you think about treasury guidance as it relates to very specific things like a foreign entity of concern. I was going to say, the dreaded FIOC, which we have talked about quite a bit with other people, it's clearly a very big concern in the industry right now.

1:23:05It is. And, you know, it's very detailed. It's very esoteric. You know, we could spend a lot of time unpacking this. But suffice it to say that when banks are putting, you know, billions of dollars in investment out there, you really need to make sure that the rules that they're playing by, which are embedded in the regulatory code, are as clear as possible. And just putting it simply, that's what this is about, is having the rules in place so that the banks don't have risk is a result of ambiguity that exists in the code. And that's what we're trying to fix there. And then the third one is just simply government roadblocks that are out there.

1:23:45So you think about the Interior Department basically running all permits through the secretary's office before they move forward. It's very slow. Secretary Burgum testified this week in Congress, and he said that, you know, we're doing that. It's moving through, and we're trying to do it in an intentional way. But it's still too slow. So you think about solar projects that are moving through and others and that sort of thing. Right. And wind in particular, there have been big issues with, right, in terms of the administration granting federal permits. And I gather people have been talking about objections raised by Department of War saying that there are issues with wind farms being built near military installations and so on.

1:24:28Is that a real problem? Is that actually genuinely holding up development? It is. There was some great reporting two weeks ago by the Financial Times and others that actually put a number around 165 projects that they identified that were being held up at the Department of War for different reasons. So, but it's, there are several choke points, if you will, throughout government, Department of Interior, Department of Defense, the DOE, et cetera. And, you know, the concept here is just, you know, back in the 80s, there was a great book out there that was called Streamlining Government or something to that effect.

1:25:02And it was all about removing choke points in government so that things move quicker and that the private sector could take over and just get things done. And putting it simply, this is really just the same concept. It's, look, at the end of the day, there are certain things that need to move through government in a very efficient way, and they need to be resourced properly to do it, and the processes need to be put in place to do that. And when you look at Department of Interior and the Department of War and the Department of Energy, when it comes to these things, they just should be moving a lot faster than this.

1:25:33And at the end of the day, if the goal really is to put downward pressure on energy prices and to make sure that we have the power we need and therefore it's more secure, more reliable, then those things should be happening. I mean, do those arguments land when you go to Washington and talk to people in the administration and Congress about these things? Do you think they're taking these points on board? Well, we'll see. You know, you know, Bergam this week talked about the importance of being able to have the supply that we need for data center growth, for example, and other electrification around the country.

1:26:11Now, we can argue we can argue all day long about, geez, what is the desired fuel mix here? You know, should we have more natural gas? Should we have more solar? Should we have any number of technologies? But look, the bottom line is we have a challenge in the next four years. There's a lot of folks out there who want to frame this issue in a 10-year window. They talk about 2035. Well, look, 2030 and out is fairly easy to solve for. Why? Because manufacturers that are ramping up now on things like gas turbine availability and then new technologies becoming more commercial like advanced geothermal and other things.

1:26:52Advanced nuclear being another one. which again, you know. Great suggestion. Yeah. But that's a long-term solution. It's not, or a medium-term solution, at least it's not a five-year solution. Absolutely. In the next four years, there are five technologies that can actually get built at scale and at speed to meet that challenge. First one is transmission. Second one is solar. Third one is natural gas. Fourth one is wind. And the fifth one is, what did I miss? Storage. Storage. Battery storage. Yeah, absolutely. And why? It's all about equipment availability at this time. And we know it can be done.

1:27:30And, you know, you and I have talked about this before. You know, you compare this with China right now, right? They've got the same demand challenge that we do for the same reasons. Electrification, AI, data centers, and all that. And, you know, China's really built out everything. But they've done it at scale, and they've done it intentionally. So transmission, they outspent us four to one last year in terms of transmission upgrades. the amount of long distance transmission HVDC lines for the techies out there. They've produced thousands of miles of this line. We're in the tens to hundred mile range here in the United States.

1:28:10We've got a long way to go in terms of upgrading the grid. And then on the supply side, they really are building everything. The interesting thing is, you hear people say, oh yeah, but they're doing coal, they're doing nuclear, they're doing all that stuff. But if you look at the volume of each technology that they're doing, solar is about triple what they're doing on the natural gas side. So it goes solar, batteries, wind is right in there, natural gas is in there. And then, you know, coal for new is very small in China, all these other ones. So when I look at that, it tells me what we know here in the United States through studies that have been done, that things like solar, solar with batteries, wind, wind paired with batteries, natural gas really are the things that can be built at scale quickly.

1:29:01They're the most cost-effective forms of power out there. And it's adding a huge element of reliability to the system. So when you think about driving down costs and you think about reliable and secure systems, that's the way to go. And that's playing out in China and in other countries right now. Right, exactly. Because when you talk about comparisons with China, that brings up a theme that's been clearly an issue for a lot of people here. It's something we've talked to quite a few people about over the past couple of days, which is energy security and reliability and resilience of energy systems.

1:29:36In the power industry, clearly, gas is more important. There's more of an issue than oil. and so maybe you're not seeing that kind of direct impact from the crisis on the power industry. But how do you view it and how do you think people in the industry are seeing it? What are the implications for the power industry in the US of what we've been seeing in the Middle East over the past couple of months? Sure. So, I mean, without mincing words, we're in the middle of a power crisis in the United States. Folks just aren't focused on it yet because there's so much else going on. And it stems from the fact that we just don't have enough power right now and we don't have the transmission to move around to where it's needed.

1:30:19Now, it's starting to show up in different ways. The first way is we are seeing electricity prices going up. It's happening all over the country. You and I both live in areas where we've seen a lot of increase in our power prices over the last couple of years. Yeah, I mean, of course, I mean, my joke with utilities is that they should be relieved about what's been happening to gasoline prices, because that's now turned into the issue that's front of mind for people. Up until three months ago, I guess it was power prices going up was the issue that I can see was really cared about the most. Now, perhaps that's fallen to second place.

1:30:52But yeah, clearly, it's still an issue, right? It's definitely still something that people are worried about. It's totally an issue. And you're right. I mean, when it comes to power prices in the United States, there's not a direct correlation to oil prices going up as a result of Iran. But there's a knock-on effect there where those prices are rising, and as a result, the worldwide price of energy is going up, and that is impacting power prices here in the United States. So I go back to, so what do we ultimately want? What does the consumer at the end of the day want? And by extension, what do politicians want as a result as it relates to price reliability, right?

1:31:37Clean energy provides a hedge against power prices going up. It just does. There's no incremental costs associated with renewables by wind and solar because it's free. There's no fuel costs associated with it. And building that out at scale in an all-of-the-above world where we are building the gas that we can build, building the wind, building the solar, building the batteries that go with it, And then everything else that we can do in 2030 out, advanced geothermal, SMRs, nuclear, etc., that's really going to provide the best hedge against any one particular fuel going up anywhere else in the world.

1:32:19There's some – I've heard this cheeky comment a few times with the war going on that, oh, well, you know, nobody ever went to war over wind or solar. And it's not really fair just to say it like that, but there's some truth to it in that wind and solar provide diversity of fuel mix. With no fuel costs at all associated with that generation, it provides a hedge against other international variables pushing prices up. So that's all from us from the ACOR Finance Forum for this year. Thanks very much to all of our guests, Laurie-Anne LaRocco, Antonio Miranda, Harry Kreiser, Bernard Thangian. Thanks to my Wood Mackenzie colleague, Cara McNutt.

1:33:03And above all, many thanks to Ray Long and everyone at ACOR for hosting us at this fantastic conference. Many thanks to our producers, Dan Cottrell, Molly Mowen, Toby Beakins-Gilchrist. And above all, as ever, many thanks to all of you for listening. We really value your feedback, so please do keep that coming. And we'll be back very soon with all the latest news and views on the future of energy. Until then, goodbye.