The Big Beautiful Bill is close to passing. What would it mean for clean energy in the US?

25:35So we'll see what happens. And if they make any changes, then we'll go back and forth. Jeremy's experience will be helpful in guiding us through maybe where we're headed here. Yeah, I was about to ask you, Jeremy, what do you expect now? Yeah, well, so yesterday was, well, the weekend was a long weekend. And Monday was a long day into Tuesday for the Senate. The House got right after it. So the House Rules Committee actually started meeting yesterday, I believe, at 1.30. And they went late into the night, not accepting amendments. And so this morning, the House is in as we speak to begin debate.

26:10And so we'll see where things go. I mean, to Robbie's point, there are a bunch of statements from folks in the House, a sufficient number if they all stick to it to at least hold things up and potentially push for changes. But, you know, we've sort of seen this movie before. And, you know, I think one thing I would just, you know, remind folks is like this, these sort of budget reconciliation initiatives are team efforts. And your quarterback wants this done by Friday. And so we're going to have to see how how that goes. You know, the Senate, as Robbie mentioned, you mentioned passed on the narrowest margin.

26:46So we'll have to see if the House decides to make changes. Right. And to be clear, the quarterback and team coach and probably owner as well is President Donald Trump, right? He's the one who's been saying, we must get this bill through. This is absolutely central to my policy agenda. And I want it done quickly at pace to get a bill on my desk to be signed by Friday, July the 4th. So to push you on this, Robbie and Jeremy, both of you, do you think that's going to happen? As we're sitting right now, does it look likely that there will be a bill to be signed on July the 4th? I don't know. I think the president has softened his tone a little, basically saying, I love it on July 4th, but it's complicated.

27:32So I think he's given space for that to get pushed out. that said like to Jeremy's point you know the house is already in session debating it and it really will depend on whether or not they can get it through without members demanding changes or not I think if they can do that there's a good chance we'll see it done by the 4th and if not it will definitely go beyond the timeline Jeremy what do you think yeah I think Robbie's got it right I mean they have all day today and all day tomorrow to to try to get everybody in line to meet the deadline. So we'll see.

28:12Ed Crooks:Well, there's also the other element, which is, you know, do you want to have this hanging over your head for your holiday weekend? So I think there's a human element, depending on whether or not there's like a member of Congress that has something they really need. Because as we know, from the sort of the Democratic side with the IRA and other bills, Manchin just kept holding out, holding out, holding out. And I don't know, Jeremy, if you have a view, I don't have the sense that there's someone holding out in that way for a particular line item on the House side now. Yeah. I mean, my sense is that if this gets held up, primarily it'll be a mix of sort of the Medicaid moderates that everyone's talked about, who are very concerned about the changes the Senate made and how that's going to impact healthcare delivery in their districts.

29:06You know, there's so much in this bill. After the House passed it the first time, you may recall, there were a couple of members who did town halls or gave statements saying, well, I didn't have a chance to read everything in it, and I don't like that thing. And so, you know, there is a challenge there. But then you also have Ralph Norman and Chip Roy, who are sort of fiscal hawks, They voted against the rule in the rules committee and have said they're a no on the spending cut piece. And then Chip Roy, of course, on the clean energy credit piece, he's been very clear on that. So there's a mix of things.

29:39And again, it's going to take some rah-rah team. We got to get this done to overcome those. But, you know, I think on the Medicaid piece, there is there is a question that these members who are in the more purpley districts are going to have to decide, you know, is this a risk for my reelection or not? So we'll see. There's a lot of calculations. The House is a little bit better rested. So they may have they may have some more juice in the tank to have some long, angry discussions behind closed doors. But we'll see. Yes. So, Robbie, as you were saying, then this bill has very significant implications for energy.

30:14The implications of the latest text, the current text, seem very different even from what we had over the weekend, right? I mean, so from way back, from the version of the bill that was passed in the House, it was clear that tax credits for low carbon energy were going to be cut back. In particular, the tax credits for wind and solar were going to be phased out quickly. What happened over the weekend then was there was a whole new tax apparently got invented, which was going to be imposed on wind and solar. That seemed likely to have a hugely significant impact on the industry. I saw estimates saying it would push up the cost of wind and solar projects by 10 to 20 percent.

30:59And then almost as quickly as it appeared, that new tax has gone away again. And in the version we now have, it seems not to be an issue. Do you want to just talk us through what happened there? What was your understanding of where that came from, why that came up and why it's now gone away again? Yeah, quite the roller coaster ride. Love it when Congress drops legislation on Friday evening and then text is gone within 48 hours. But you're right. The Senate Budget Committee released their version of the text, which is ultimately what went then was used for the voter Rama. And it did a couple of things.

31:37It not entirely, but largely reverted to House text on moving back to placed in service versus commenced construction. It kept the Senate version of the foreign entity of concern language. And then, yeah, it added this new excise tax on wind and solar, which basically the way that works is the tax credits still expired by the end of 2027. But the FIAC rules basically were maintained so that even after the tax credits are gone, if you build a project that doesn't meet FIAC requirements, now it actually goes from you don't just not get an incentive, you actually get penalized. And it's the estimates I saw were about that, like the kind of upper bound on the potential size of the tax would be around 20 percent on a solar project and 10 on wind.

32:28And you'd have to be like basically fully non-compliant with the FIAC requirements to hit that. So yeah. And then as quickly as that came, it disappeared from the text in the final bill. And I think one interesting thing, maybe two interesting things. Nobody claimed credit for that. There was a lot of finger pointing yesterday. They were trying to figure out who put that in there. And everyone was like, it wasn't me. I don't know. So someone held the pen on that. I don't think it was just the person typing up the legislation. But, you know, the other thing is just it was it's been widely reported that Alex Epstein has been, you know, in the back rooms talking with members and and the current legislation reflects a lot of his thinking.

33:12But he came out publicly and said, I don't agree with taxing wind and solar like I that that is beyond what I would suggest. So I just it didn't have support even amongst one of the most ardent supporters of the types of changes that are in the bill. And so I'm glad to see and not surprised that it dropped out in the final text. Right. Success has many parents, but failure is an orphan, as they say. A bit like that, doesn't it? Just wanted to post three quick footnotes. So the voterama you mentioned. So that's this big session of the Senate. This is marathon where they vote on different clauses of the legislation over and over and over again to kind of shake out exactly what will pass, what is acceptable to people and what isn't, right?

33:56I mean, that's what a voterama is. And as you were saying, Jeremy, that was the previous record was held by a bill in 2008. This is now the record holder for the longest voterama, I think. Am I right in saying that? I think that's my understanding. Certainly does seem to have been an epic. FIOC, you mentioned, this is something we've talked about a lot on previous shows. But just in case anyone has missed that discussion, this is foreign entities of concern. And these are various rules basically intended to ensure that companies and governments from certain countries, China, Russia, Iran, North Korea, in particular, don't benefit from tax credits, subsidies and breaks.

34:42And the other one, Alex Epstein, sort of a campaigner for fossil fuels. He'd been in Congress talking to senators about sort of fossil fuels versus renewables, I guess, basically. There was speculation, though, maybe that because of that, they came up with this idea for the new tax on wind and solar, but then he disavowed it. Is that basically how that played out? I think that's right. Yeah. Yeah. Got it.

35:09Ed Crooks:So in testament to his effectiveness, the American Petroleum Institute, which is the main mouthpiece for the oil and gas industry, at least the large companies, came out and praised the bill now, saying how important it was to our energy complex, which I assume they meant oil and gas. And they got a 10-year reprieve on having to think about capturing any of the methane that leaks out of their operations. They should be happy. I'm sure that made that happy, though I always point out to people that was only going to cost them five cents a barrel, whereas the drop in oil prices to$66 is costing them a lot more.

35:48Ed Crooks:But further to the point, to try to garner attention from the base and also representatives from Alaska, they started talking about leasing in Alaska and even in the Arctic National Wildlife Refuge, which I, as a person who've watched the oil industry for many, many years, really question whether it's open or not open, whether there's really an oil company on the planet that's a real company that would actually go and take a lease inside the ANWR. But anyway, a lot of goodies in there, restoring previous goodies and so forth. This bill also, I mean, we put out our analysis of the bill last night, and it's terrific for natural gas.

36:41We're seeing the electricity fleet is going to be running way more gas with the changes to the credits. So.

36:49Ed Crooks:And Robbie, is that even, even given the fact that there's not too much gas in the queue anywhere in the country? Yeah. The, the capacity factors for the fleet, which we're expected to kind of start ticking down with a lot more clean coming on, uh, down into the like thirties, basically low thirties, maybe by 2035. So low 30 % capacity factor by 2035, at least in our modeling, that number is now up to like around 50%. So basically running the gas fleet 50 % more. So right. So for the listeners, if you're using natural gas as sort of a balancer of the market, so you're going to raise the natural gas in existing plants.

37:33Ed Crooks:It's not about new construction so much. It's about how much utilization we're getting in each of the existing plants. That's right. More natural gas companies will be able to sell their gas because the demand from these peaking plants would go up over time. Yes. And it's not just the peaking plants. There's so much less clean electricity deployment that we're running the existing, kind of the combined cycle. I don't know if we're still using the term baseload, but more kind of baseload plants. Those are getting run a lot more because that clean energy isn't displacing gas. So there's a huge, huge increase in gas demand in the US from this legislation.

38:14Should we spend a minute talking about what's in the text as passed for each of these? Yeah, let's go into some of the details then, as you say, that are going to be driving these effects. Do you want to walk us through it? I'll attempt and Jeremy, please, please correct me or fill in. So the final text from yesterday has a few important changes. So So the new language has the commence construction timeline for full credits basically through next year, through July 1st next year. So what that means is as long as a project commences construction in the next year, it's actually eligible for the full tax credits.

38:52It gets safe harbored and it can be when exactly it has to be placed in service depends on whether it begins construction this year or next year. but it has a few years to actually be placed in service and still get the full tax credit. That's for wind and solar. All the other qualifying technologies have a much more lenient, longer timeline without the phase out. Now for wind and solar, there is no kind of step down in the credit value. It's a full phase out immediately after that timeline. So that's a change as well. And then the foreign entity of concern language is also applicable beginning next year, although projects that have already commenced construction are safe harbored again from that.

39:36So there's no going back and retroactively penalizing projects that have already commenced construction. They're called cost ratios. And so you basically, the cost ratios escalate over time, which means that over time, you're allowed to have some of your manufactured materials come from foreign entities of concern by value. But over time, that number shrinks. And the idea, this is a big improvement over prior text because it does create that long-term kind of runway and planning horizon to...

40:07Ed Crooks:Well, also, there was one version that said, we can go back 10 years later and tell you you have a piece of something. That's still there. Oh, no. No, really? Oh, that's bad. Yeah, the recap, that's still there. But at least this gives a little bit more of like a runway and clear horizon towards the supply chain requirements, which, of course, also, I mean, the tax credits for wind and solar expire much sooner. The upshot is there's a little bit more time for developers. They now have a year to commence construction. So I think, I mean, Jeremy probably agrees. We expect to see a lot of pull forward of projects to meet that safe harbor requirement, which again is just, they just have to incur 5 % of their project costs and take delivery of whatever that is.

40:55And then they do that and they're eligible for the credit, provided it's placed in service in time and provided based on when that happens that they meet foreign entity of concern requirements.

41:04Ed Crooks:I have to say, given where we are today in electricity, getting people to step out of the queue if they're not real and getting the people who are real to be hastening themselves into the queue isn't a bad thing. Yeah, I mean, I think the flip side of that is also maybe it will help accelerate the queue. I think one concern we have is even if you hit that commenced construction target, that the challenge with actually being placed in service with the interconnection queues is going to be, I mean, that's going to be a problem, I think, given the time delay right now to actually interconnect and now the new requirement that dictates kind of when you have to be placed in service.

41:44So, you know, all of this is to say wind and solar are in the near term in a better spot than when we started. But I think in the longer term, probably about the same, obviously not as bad as with the excise tax. You know, I think a lot of this is something we talked about last time, but just what happens here will depend a lot on what the different developers can do to pull forward projects. I think the really large ones, maybe like NextEra with huge balance sheets, will be able to do a lot to save Harper. But undercapitalized, smaller developers might have a harder time doing that. And I think only time will tell.

42:21One other thing, which is also something we mentioned, is the FIAC language that's in there is an improvement. And certainly those ratios are easier than saying like not the house text. It was like one penny that triggers any of these things disqualifies the project. However, the language is so complicated. It's going to take a long time to figure out. And even if developers think that they're very likely to meet that, I think a big question is when they're going getting financing for projects, is a bank going to rely on that? Or I think that risk is going to have to be priced in somehow. Now, every business has priorities to protect, goals to reach and decisions that need to hold up.

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43:42Yeah, I think that's really interesting. And Jeremy, this is something which your ACOR colleague, Ray Long, has talked to us quite a bit about. I don't know if you've heard in earlier shows, but as Robbie is saying, just the administrative burden of complying with FIOC And then the uncertainty that that creates in terms of, as Robbie was saying, when you're raising financing, other potential implications, issues for getting your project to make progress, even if the rules aren't perhaps as onerous as they were in earlier versions of the legislation, they could still have a pretty material impact.

44:19What do you think? Yeah, no, I agree. And I think, honestly, one thing, the speed of this process has been challenging because I think people have focused a lot, rightly, on the material assistance piece. But the prohibited foreign entities, that is a web that's going to be a real challenge. So a prohibited foreign entity is actually several different things, right? So prohibited foreign entity, the easy ones are the specified foreign entities. Those are a bunch of companies that are already on U.S. government national security lists or foreign controlled entities. So the governments, sub-level governments and companies that are primarily operate within or are constituted under the laws of, as you said earlier, China, Russia, North Korea, and Iran.

45:02Those are the specified foreign entities. The other prong is the foreign influence entities. And that's where it gets really tricky, because foreign influence and effective control are the other two pieces that people really need to try to understand. And it's challenging. So a foreign influence entity, there's a bunch of different prongs. But, you know, theoretically, that could, you could have US companies that are become foreign influence entities. There's still payment licensing and other restrictions and other things. And so this is going to be a really tricky place to comply because I don't think a lot of companies have to do right now, even if you're doing your due diligence for all the existing laws.

45:44So one other thing I just wanted to mention is there are already a bunch of national security laws that every U.S. company has got to comply with. So you've got foreign investment screening procedures, depending on your project and where you're getting financing from. You potentially have to go through the CFIUS process to screen that. You've got existing banking laws that govern like anti-money laundering and all of that stuff. So you've got some stuff there. There's also U.S. government, if they had a national security concern with the imports of certain things, we've got tariffs. But there's also other things.

46:19When I was serving, the Treasury Department banned the importation of Russian seafood and Russian seafood. We can ban any items that might be of particular national security concern. So I just mentioned that because there's already a web of things and tools that could have been used. putting this in the tax code is challenging. And then, you know, making sure companies understand, are they a foreign influence entity? Could they be a foreign influence entity? That's going to be due diligence and extra compliance costs that I think people are really going to have challenges with.

46:52Ed Crooks:The lawyers always win in this thing. Jeremy, quick question here. So we're talking about complicated things like there's a bank that's doing the financing and there's a Chinese entity that has a small or large, I don't know, share of that bank? Or what are the kinds of things? I have a great example. So the Tax Law Center at NYU has, I think, what is the best summary of this. And if I can, I'm just going to read a section of what they have here because it gives a great example. So one payment in the prior year is sufficient to render the taxpayer a foreign-influenced entity for all purposes in the current year.

47:31and the rules are very broad in certain ways where they would be triggered by circumstances that don't implicate actual influence from a specified foreign entity and where achieving certainty that an entity does not trigger one of the tests would be exceedingly difficult. So the example they give here is the rule that an entity is deemed a foreign influence entity if at least 40 % of its debt is held by a specified foreign entity in the aggregate poses major compliance challenges for many entities. And here's the example. Entities such as public power utilities issue municipal bonds through underwriters with the bonds publicly traded.

48:06Therefore, it would be wholly impracticable for the utility to run the SFE test on a large universe of bondholders that are not known to them. So I think if you're a municipal utility and you rely on municipal bonds, you're probably not going to be looking to the tax credit.

48:22Ed Crooks:Well, but it also affects a lot of other places because, you know, there are a lot of places, including in Latin America, where they accepted funds under the Chinese belt and rope. And so all of those entities could potentially be subject to this restriction. Yeah, that's a really interesting point. That is probably an important point to flag is that, you know, everyone's focused on the material assistance. It's not just stuff from China. You have to look at the ownership of the company that's producing it. So I think to Amy's point, I think that's one thing people will be will be looking at. It'll take some time.

48:57Yeah, no, that's a really interesting point. One sector to flag up where it looks like this could be particularly significant, I think, is in battery storage. So one of the things that the bill does in its current version is keeps tax credits for what you might broadly call dispatchable low-carbon technologies. So So storage, hydro, geothermal, and nuclear, those are all extended out to 2033 and then phased out after that. So actually, good news for battery storage, it looks like, because you're going to be able to claim that tax credit for another eight years.

49:36Ed Crooks:Remember, last show, I said battery, battery, batteries. Exactly. All of that is great. However, you do have to comply with these Fiat requirements, which particularly in the battery supply chain, as we've said many times, China has a hugely significant position in that supply chain, right from the mining of the commodities through processing down to making the sales and so on. That might be one area where developers might be particularly likely to fall foul of those restrictions, don't you think? I think that's right. The only slight mitigating factor is that because of the requirements for the 30D consumer clean vehicle credit, RIP, because that credit's gone, the battery supply industry has a three-year head start on the supply chain tracing and sourcing.

50:30Now, that's combining grid scale and vehicle batteries. But I think that it's an interesting, like it will be more challenging for them and they have a little bit of a head start on everyone else. So it's a little hard to know exactly where that nets out. But I think you're right, Ed. And Ed, if I could just add, you know, so in the definition of prohibited foreign entities, I mentioned there's a whole bunch of U.S. government national security lists that are, you know, you have to look at. just in the battery space, you've got Cattle or CATL. I should know what that is, but CATL, largest in the world, Goshen, BYD, EVE Energy Company, Hithium Energy Storage Technology.

51:10Those are specified. One of the lists that they link to is DOD can't buy from these companies. So those are right off the bat if you're looking at those companies. And there's probably others as well. I haven't done an analysis of the whole thing, but those are just clear ones. Yeah, sure. So I wanted to think also a bit about potential good news for the renewable energy industry in this bill in terms of permitting reform. So obviously, this is something that's been rumbling around for a long time, questions about making it easier to invest in infrastructure of all kinds, including energy in the US.

51:48And there are some changes here, right, Robbie? I mean, How significant do you think they are? You know, I have to go look at the final texts from the Energy and Natural Resources Committee, because I think that's where a lot of this was, or maybe Environment and Public Works as well. There were changes to leasing, and I believe the parliamentarian struck some of the language about paying. Basically, there were some provisions where you could basically pay to circumvent environmental review or to expedite environmental review. I believe that some of that, but not all of it was struck. I don't know, Jeremy, if you have a sense for kind of where that netted out.

52:25So there were a couple of prongs of what they had tried to do, which was developers could pay a certain premium in order to get their project reviewed more quickly and to inoculate against judicial review. The judicial review piece, I believe, was knocked out. So I think they retained some of the payment, but you have to make the decision, do you want to pay extra to maybe get something to move a little faster, but you're still going to be subject to any judicial review that's out there. So I have to go back and look at where things landed in the final final, but I don't know that what was ultimately included will be a huge game changer.

53:05Now, I think the judicial review piece and the litigation risk is what, at least what I've heard over and over and over again, is the kind of binding constraint, if you will, or the biggest concern to developers. Right. And that could be addressed by future legislation, but feels like that legislation has been in the future for quite a long time, may remain in the future for quite a long time to come. We'll have to see. So going back to that question then of the impact of this, if it does pass in this form, what it ends up meaning for the renewables and low carbon energy industries. Jeremy, you used the expression, I think, kind of jogging along or something.

53:45As you've both been saying, we are going to see this kind of burst of activity as projects try to get in under the wire. Longer term, though, what does this mean for renewables and low carbon energy in the US? Does it mean that the industry is going to be significantly weaker? I actually – I mean I hope – to the point I made earlier, I hope that the progress we've been – the head of steam that we have right now will carry forward and that we'll have the bill as written, not as draconian as the House initially put out. will definitely be roadblocks and slow things down. But my hope is that we built up a good head of steam, a lot of success, a lot of capacity.

54:27And there's still going to be a tremendous need for affordable, secure American electricity. So hopefully this gives us the time to metabolize these changes and really chart a new path as needed. That's my hope. But again, we're still waiting for the ink to be final and dry so we can understand exactly what it means.

54:46Ed Crooks:Well, just to make the point, you know, not to belabor it, when you look at supply chains, whether you have the lesson of COVID, whether we don't resolve the conflict between Russia and Ukraine, or things go even more south in the Middle East, you know, when you look at all those issues and how complicated it is, you can imagine that supply chains, new pandemic, whatever, that supply chains could get disrupted again. So I think it behooves the clean energy industry to organize itself in a way that they lower their exposure, hopefully in the timeframe when all of this comes to pass. And so I think really the big downside that I see, which has kind of been alluded to by Robbie and Jeremy, is that just the sort of legislative response, like I got to hire a lawyer, I got to figure out what's in the bill, I got to get 100 interns to use ChatGPT or Claude to go through the bill and figure out what this means for me.

55:47Ed Crooks:My students are going to be in high demand, I think, for analyzing this. But, you know, because we're talking about all these nuances and as you're all talking about the nuances and I'm thinking about the fact that Elon Musk weighed in again, criticizing this bill. And, you know, he said a lot of political things about the deficit and so forth and so on. But I'm thinking to myself, as you're describing these FIAC rules and thinking about his general businesses, you know, you have to step back and say, you know, like take a major company. Some of these rules are going to be very difficult to comply with.

56:27Ed Crooks:If you already set your business up in such a way that you had Chinese partners or you wanted to sell a lot of material in China, you're going to have to rethink that whole strategy. And I think it's a very difficult puzzle because the Chinese market, whether it's for vehicles or other things, is much bigger than the small U.S. market by comparison. But you have a lot of historical ties in your businesses that are already built up here. So I think it's a very complicated landscape. Just want to jump in because I maybe have a slightly different take. So like I said, we put this all into our modeling yesterday.

57:05And I think this has come up in numerous calls with different reporters and stuff, just like the mechanism by which this operates, right? So we know that demand is growing fastest it's grown in at least 20 years for electricity. And we know that there's a supply chain constraint for new gas. So you're not going to be able to get more gas than's already earmarked over the next five to seven years. So if we're going to have to build stuff, the only thing that can be built on that timeline is wind, solar, and battery storage. So some of the demand for those projects will remain for sure. And there still will be wind and solar and storage deployed, especially in the next five years.

57:47That said, there's also a lot of projects that, especially with the tax credits, penciled, even if they're not strictly for reliability, right? And you look at the independent power producers and the restructured markets, there's a lot of expected growth there. And so now I saw this analysis from Jeffries, the equity research group. Their estimate was that for a solar project, the loss of the investment tax credit, basically not being able to take it and or the fact that it's being phased out, coupled with the loss of accelerated depreciation, which we haven't talked about yet, but that being in there as well.

58:21that increased the project costs by$31 per megawatt hour. And that's compared to like roughly $40 per megawatt hour today with existing incentives. So it's not quite doubling the cost of those projects, but it's coming close. And if you add in some of what we've been talking about with, I guess the excise tax is gone now, but some of the fiat risk, if you are taking any of the credits. Just that is an enormous increase, obviously. And so a lot of projects that might have penciled well are going to fall out. They're not going to make sense anymore. So given all that, what we found when we ran this yesterday is by 2035, so over the next 10 years or so, we see more than 300 gigawatts fewer capacity additions to the grid that would otherwise be online.

59:13And that is predominantly wind and solar and some storage. So there still will be some wind and solar and storage deployed to help meet growing demand, especially because of the gas constraint. But this is going to really reduce the amount of wind and solar, especially stuff that's getting developers are bringing because of the just purely on the kind of financials of participating in markets. I think that affects power prices and consumers. Right. And to the extent that utilities are going out and getting new capacity, it's going to be a hell of a lot more expensive to do that. It's going to be passed right through to ratepayers.

59:49Ed Crooks:Well, I mean, natural gas is, you know, through the roof in terms of the cost of bringing on new capacity as well. So this is what I would say. You know, we're already in a situation in this country where in many locations people have to worry all the time about do they have sufficient stability in their electricity supply. So if we start having even more worse brownouts and blackouts across the country, then there'll have to be a change to the legislation because I just don't think that's going to stand. You know, it can't be that the data centers can't be built. It can't be that manufacturing plants can't go forward.

1:00:30Ed Crooks:We're not going to be like sub-Saharan Africa where you have two days, the power's off, and so you're just turning off all your manufacturing plants. Like in the end, it will have to be fixed if it turns out to, you know, the model is what the model is predicting where to take place. I don't think it can stand. And so it would have to be changed. To your point, too, like on data centers, right? We already know that a lot of data centers are hearing from their utilities, like, get in line. You can't, we're not going to connect you to the grid because we don't have the power supply. So a lot of them are increasingly looking to source their own supply.

1:01:05I think we mentioned it on the show like a year ago, the bring your own new clean energy, Beyonce. That is something that's increasingly happening. But I think that what's kind of ironic about all this, right, the current administration and Congress have been really outspoken about wanting to bring AI here, make the US competitive for AI, right? And so now if you're a data center and you need to go source your own energy, it basically just got twice as expensive to go do that, right? And so it's kind of the opposite of what is the stated intention.

1:01:36Ed Crooks:But they were saying that they weren't willing to go with intermittent renewables in the first place. So I don't think in that regard, I don't think anything's changed. I mean, in the future, in the next year, it has to be batteries, right? Really, truly, because there's nothing else you can bring online, which I think is reflected in the new version of the bill that because old versions, you know, they were going to tax batteries too, because, you know, the natural gas industry recognizes that batteries is a competition. But, you know, in the end, batteries had to stay because that's all we have in the short term.

1:02:10Ed Crooks:And I think moving forward, it's not clear what can actually, frankly, perform to really meet load, you know, three-year timeframe. I mean, there's not much out there. And you see that in what the hyperscaler tech companies are doing that want to put on a data center. They're looking for a plant that's closed, like Three Mile Island, to reopen it. They're looking for things that they can do. Robbie, you mentioned that you'd have a higher natural gas utilization rate in existing plants. So we're all going to be looking at how to demodelnack existing infrastructure as opposed to new builds. You're raising a lot of really interesting and important points.

1:02:54Unfortunately, we are just about out of time. I think this question of what is the grid going to look like in the US with a lot less wind and solar on it than we had previously expected is a really important one. And we should definitely come back to it in a future show. But I think we should do it in a future show, partly because there's one other question just before we go that I'm really interested in getting all of your opinions on, which is just about this whole process that we've seen in Congress. And the idea of this as the way to make energy policy and to decide on these incredibly important decisions for the economy of the country and for people's lives and for the environment and for everything else, that, as you say, Robbie, you have these kind of huge changes that appear on a Friday night and are gone 48 hours later.

1:03:47Everything happening at this very, very hectic pace, as people said, legislation passed in the House without people really knowing what was in it. I'm sure the same will be true for the Senate as well. We've got whatever it is, nearly a thousand pages of legislation that's just been passed in that bill. This can't be a good way to set the nation's energy policy? It just feels like there ought to be a better way to do it than this, or am I just being hopelessly naive? I don't know. Jeremy, what do you think? No, I mean, and I think you're totally right. I mean, trying to do such sweeping policy changes through the budget reconciliation process, which, I mean, we didn't even get into the whole bird process and compliance of the budget rules and all of that.

1:04:35I mean, you had Seth Hanlon on one of your previous shows, he was talking about the challenges of implementing. The thing I think he probably should have mentioned is the IRA was a budget reconciliation bill. And so they had to do a lot of extra work because you can't write the best policy using this process. And so I think, you know, you get imperfect policy outcomes just from a drafting perspective, but you also, you're doing a lot in not a lot of time. And, you know, I think the senators, you know, trying to digest all of this and figure out what's best for their states across all of the different issues that were addressed and the House members.

1:05:13It's hard. It's hard to digest all of this this fast and really understand. So speed is a challenge here. Yeah. Yeah. And the crucial factor being that in a Senate that is divided very roughly 50-50, I mean, a bit more than 50 for the Republicans at the moment, a bit less than 50 for the Democrats. If you have the filibuster, which means that for sort of this non-budget reconciliation legislation, you need to get 60 votes in the Senate for the legislation to pass, means that you have to typically build a bipartisan consensus of support for your plan. That was what happened under the Biden administration for the Infrastructure Investment and Jobs Act, but they couldn't get that for the IRA.

1:05:56As you say, so these things happen quickly. is the conclusion then that actually, if you're ever going to get to sound energy policy in the US in the future, you really have to do it on a bipartisan basis, you have to get legislation that can pass in the Senate with 60 plus votes. Or again, is that just a council of perfection? Yeah, I mean, clearly, this is not sustainable. I've seen it in different forms with tax credits It's expiring and they get extended. I mean, at least in that case, you're not pulling the rug out from under, you know, investment decisions that have already been made. But no, it would be great to get to a point where we could have kind of a reconciliation proof thing here.

1:06:43I'm not sure it exists in today's. Obviously, you have this is true for everything, right? It's like you get regulations passed and you get a new EPA administrator or a new head of DOE and all the programs and rules that have been set are erased. And then the next administration comes in and puts something pretty close back in. So it's, I don't know if we're going to solve it on the show. Seems like a feature of our democracy, not a bug, but it is clearly not good for creating a stable, secure investment environment in the US. Yes. One thing I did want to mention is we did a bunch of, you know, Hill engagements over the last several months and we did hear from different offices.

1:07:29Well, that law was a Democrat law. And you're sort of like, well, you know, from a business community perspective to Robbie's point about investment and certainty, it's like, well, how it got enacted doesn't really matter when we have to be the ones to, you know, develop our businesses and provide consumers with affordable, reliable electricity and all of that. getting out of that mindset would be really good and add to your point, you know, more bipartisanship. It's hard, but I think from the private sector perspective, making sure you're talking to both sides, making friends on both sides, it's a long process, but it's work that's got to get done.

1:08:05Ed Crooks:And let me just emphasize, Jeremy, I really like what you're saying, and I just want to add a point onto it. Back in the day when we were just arguing about are we or aren't we going to drill somewhere in Alaska or offshore Florida or something like that. It was something that if an American citizen had an interest in wildlife or had an interest in oil and gas prices, it was a pretty easy issue to understand. But the way electricity is sold and priced in the United States, the different range of different kinds of fuels and technologies that can be used today, it's so complex that the idea that we're going to hold hostage our grid to some kind of a partisan debate when so much is at stake, either you just can't come out onto TV or even hear in the sort of long form podcast and explain the whole electricity system.

1:09:09Ed Crooks:Even on this show, we mentioned whether we are regulated vertically integrated state or you're in a service area that allows independent power producers to sell in. I mean, just what I just said, if you're on the Hill and you don't know anything about electricity, you don't even know what I mean. So I think that there's a whole educational campaign here in helping people understand the complexities of the electricity system. As we move forward and electricity is more and more important, it's going to be almost impossible to do a bill that's smart unless people really understand the basics. Yeah, that's a great point.

1:09:47And as you say, it certainly means we have a big job for ourselves on this podcast, doesn't it? Doing a small amount, hopefully, to try and broaden and increase public understanding of some of these issues. Unfortunately, we do for the moment have to leave it there, though, that it's been great talking to you all. Jeremy, thanks very much for joining us. Thanks for having me. Robbie, great to see you again. As always. Thanks for having me, Ed. Amy, thank you very much indeed. See you soon.

1:10:13Ed Crooks:Yes, everybody. Great to be be visiting on this important legislation. Absolutely. Thanks very much to our producer, Toby Biggins-Gilchrist. And above all, of course, as ever, many thanks to all of you for listening. We really value your feedback. Please do keep it coming. And we'll be back very soon with all the latest news and views on the future of energy. Until then, goodbye.