Al Gore on the $4.5 Trillion Clean Energy Opportunity

0:00Hi, I'm Connie Loizis. And this is Alex Gove. And this is Strictly VC Download.

0:15Hello and welcome back to Strictly VC Download. Today, Alex and I are joined by former Vice President Al Gore and Lila Preston, co-head of Growth Equity at Generation Investment Management. In this conversation, we get into the massive energy demands of AI and data centers, why Gore thinks the backlash deserves concern but not panic, and where he and Preston see some of the biggest opportunities for investors and founders as the energy transition accelerates even faster than Gore imagined it would, due largely to some unhappy world events, including the war in Ukraine and the fight over the Strait of Hormuz as part of the U.S.

0:55war with Iran. We relatedly talk about the surprising pace of solar adoption, the challenges facing nuclear power, and why advances in AI could ultimately help make industries from agriculture to energy far more efficient, even as those data centers needed to support it face growing opposition. This has become something of an annual chat with Gore and Preston, one we always enjoy. We hope you enjoy hearing from them, too, and we will see you back here next week.

1:27Guys, thank you so much. I know it's a busy week for you, Lila. We were just talking about how crazy your schedules are. So thank you both so much for making time for us. I love your report. Always fascinating to read through. This one certainly sounds, I don't know, more optimistic even than in recent years. But Mr. Gore, I wanted to start with the headlines first, which of course is AI and data centers. So much focus on this right now. You have called the data center backlash a cause for deep concern, but not panic. That the strain on land and water and grids is real, but also that the build out is probably inevitable.

2:09So this fight should really be about forcing data centers to pair with renewable power rather than trying to just stop construction outright. right? This fight is getting much bigger and escalating really quickly. What do you make of what's happening out there? Well, the list of concerns where advanced AI is concerned is a long list. And the comments that I've made about energy use and emissions from AI data centers is really focused on that concern. And I do think it's not a cause for panic where the emissions are concerned. It is a matter of deep concern that some of the hyperscalers are jumping into new methane turbines.

2:56And I much prefer those who are supplying their energy needs with renewables and batteries. And I think there's going to be a continued shift in that direction for a lot of reasons, not least because they're more competitive when they get the cheapest sources of electricity. But of course, there are other concerns related to advanced AI that have been much in the news just in the last few days. And I do think that regulating the frontier models is one of the two issues most appropriate for a renewed cooperation between the U.S. And China, just in the last few days, one high official in China expressed concern about the implications of advanced AI for the Communist Party's continued dominance of that country.

3:56And other than Donald Trump, most everybody else in the U.S. is concerned about some of the risks that people inside the industry have raised, both at Anthropic and OpenAI, and Elon Musk joined in as well. And I think that it's unfortunate that Donald Trump is probably not going to be able to reawaken U.S.-China cooperation. I hope I'm proven wrong about that. But I think the agenda for the years ahead is very clear. And I think that the elections coming up in November will also contribute to that shift. But, you know, overall, the increased electricity production from renewable energy plus batteries now matches and even exceeds the increase in global energy use.

4:54So we are seeing the momentum continue to build and we're seeing the beginnings of displacement of fossil fuels by renewable energy, even as overall energy use increases. One reason, as this year's Sustainability Trends Report highlights, is that the interruption of oil and gas supplies from the Persian Gulf, and now, of course, the Red Sea route, is threatened also. So this is the second time in four years that the world has been brutally reminded that fossil fuels are a very difficult and unreliable source of energy. Price volatility has increased dramatically. The cutoff of supplies, again, the second time in four years.

5:48This has caused a break in the previous pattern. The president of South Korea said just recently, this shows us we can no longer put off the transition away from fossil fuels. Just a few days ago, the leadership in Thailand made a dramatic announcement that they're switching from LNG to solar. We've seen the surge in solar panel sales with reports that now hidden from the public statistics, Africa's installing 100 ,000 panels per day. The common dowry in Pakistan and parts of Pakistan is now three panels and an inverter. So I think we're at a real turning point. Getting back to the U.S. for a second, we have not embraced solar and wind, at least in recent years.

6:44And it seems that integrating these power sources into the grid is also becoming a real issue. What do we need to do to improve our grid in the way that we can accept these power sources? Well, as this year's STR points out, the electrical grids around the world are the principal limiting factor of this transition now. But it's worth remembering the only technology that's come down in price faster than solar electricity is utility scale batteries. And they are now being dotted around many of the grids, even as other improvements are also easing the task of upgrading the grids. But it remains a serious challenge for sure.

7:34I was just going to add, Alex, that I believe that the move from the supply being the challenge to the grid resilience being a challenge, we recognize that in the report. And we talk a lot about the imperative of grid flexibility, interconnection, and the now optimization of the mix because it's increasingly diverse. And that is actually linked to the imperative to move to more renewables, but also secure, durable power sources. And that's been a core focus of ours also from the investment side. And fossil fuels are becoming an intermittent source of energy for many regions, particularly Southeast Asia, which depends so heavily on exports from the Persian Gulf.

8:18And unfortunately, in too many countries, nuclear is becoming somewhat intermittent as the rivers become too hot and the water levels drop too low. So the reliability of solar and wind and batteries, even as the price continues to decline, guarantees that their share of the production of electricity will continue to increase. 86 % of all new electricity production worldwide last year was renewables. 91 % in the U.S. in spite of Donald Trump's best efforts to slow it down. You mentioned nuclear. There's tremendous venture enthusiasm around small nuclear reactors and newer nuclear technologies. Do you see this as a real investable opportunity?

9:09Or do the timelines and the regulation and the capital requirements make nuclear particularly difficult? Well, some of the safety engineering required for nuclear doesn't scale down in cost as the output of electricity scales down. And you may have noticed that some short sellers made a windfall betting against these small modular reactors just a couple of months ago. Hal Harvey, one of the leading energy experts, has famously said that the new modular reactors are quite amazing. They're smaller, safer, cheaper, and don't exist. And I hope they will exist. And I'm optimistic that some of the pilots will prove to be feasible, but it's still quite a long ways out.

10:00And the early pilots have been disappointing. That's why the short sellers have bet against them successfully. But I recently visited Oak Ridge, Tennessee, where nuclear energy began. And there are 100 different designs, but none of them are poised to play a significant role anytime very soon. Again, I hope they will develop them safely and profitably, but it's quite a ways off, in my opinion. Your report says clean energy investment has reached $2.2 trillion annually, but needs to roughly double to$4.5 trillion by the early 2030s. Where are the biggest investable gaps today? Areas where technology is ready, but the capital still isn't showing up.

10:50Well, if you look at the global market, there is now twice as much investment in clean energy as in fossil fuel energy. I expect those trends to continue. But I think that this transition is inevitable. The remaining question is whether we will accomplish the transition in time to avoid some of the negative tipping points out there, like the Gulf Stream, part of the Atlantic meridional overturning current, like the loss of the warm water coral reef systems, like the transition of the Amazon from a rainforest to a savanna. There are unfortunately eight or nine other major negative tipping points.

11:38So we need to get on with this as quickly as possible. You know, there's been a lot of focus on the grid. So both the supply of energy and now grid resilience, as I mentioned. But there's equally massive industries that need to be redesigned. And again, we have the benefits of now AI in the mix to potentially do this. But think about, you know, transportation. You know, EVs have been up and one in four of the global automotive fleet is an electric vehicle. That's a really good indicator despite... Those are new sales. New sales. Yes, exactly. And despite in the U.S. it's maybe slower globally, this is a trend that's taking off.

12:16But now think about all of the infrastructure that's needed around the EV. It's charging. It's battery optimization. It's the software that does preventative maintenance. Like there's a whole swath of requirements, especially as autonomy meets EVs. and thinking about simulation software and physical world AI, think about those pockets of the economy that definitely could benefit from investment. The other area within the report I'll cite is around agriculture. And, you know, we saw with the Strait of Hormuz closure, the fact that with 30 % of nitrogen supply passing through the straits, there was a spike of over 50 % in the short term after that of nitrogen prices.

12:54And so that really hurts farmers. Where is the capital flowing to help farmers with resilient regenerative practices, whether it's using biology instead of chemistry, using advanced robotics, using data sets and computer science to drive yield improvements? Like these are massive investment opportunities that we see related to these trends. You mentioned in the report that your firm is invested in a synthetic fertilizer company. Could you elaborate on that? It's actually a company using biology to replace chemistry in agriculture. It's a company called Pivot Bio, and it's an example of not relying on fossil feedstocks for the production of nitrogen for growers.

13:34What's interesting about that is certainly that it is using a fraction of global resources, energy required, as well as production assets to deliver value for growers. And regenerative agriculture is one of the most effective tools in the toolbox of climate solutions. There's three times as much carbon in the first meter of topsoil than in all the trees and all the vegetation in the entire world. And heavy plowing and industrial agriculture models have depleted the carbon in soils, making them less fertile, less productive. But farmers are finding it can be restored. And as they adopt these new techniques, including innovations like that mentioned by Lila, produced by Pivot Bio, are making farms more resilient to the increasingly destructive extreme events that cause wind and water erosion of topsoil and the polluting of underground water aquifers with nitrates and other chemical residue from industrial agriculture.

14:42Do you think there are enough downstream investors who are focused on the same opportunities that you are? Yes, I think we're seeing an increase in the investments going toward the sustainability transition. We're seeing it all over the world. And some of them are accelerating in developing countries with panel solars, solars, you know, the panel technology that can be plugged into a regular household grid. This is accelerating everywhere. Lila mentioned in the transportation market that one in four vehicles sold this year will be EVs. In China, last month, 65 % of all new vehicles were EVs, on the way to 82 % in the next two years.

15:32And if I could add, while I mentioned China, There have been three significant changes in the last six to eight months where, first of all, China announced that it no longer wants to be measured on the basis of improving carbon intensity, but rather they want to be measured on the basis of actual carbon reductions. Secondly, the signals have come from Beijing that China is now willing to provide diplomatic leadership in the world on climate. Previously, they did so only when they were part of a G2 with the U.S., which helped to produce the Paris Agreement. But now they're willing to step out and be a forceful leader, which I see is very encouraging.

16:18Their emissions appear to have peak. They're on the way down now. They've installed so much solar and wind and batteries. A year ago, July, in the peak of their installation, they were installing three gigawatts of solar every day, 93 gigawatts in the month of July alone. It's incredible. And we're seeing that kind of leadership now extending into other areas. So I'm optimistic that they will be a much more positive force in the years going forward. And the coal plants they've built have been used at less than 50 % utilization, partly to offset the loss of hydroelectric power due to the extreme droughts they've had during the last few years.

17:08So the U.S. is about to change. I hope. I'm knocking on wood superstitiously here. But the November elections, according to the prediction markets, may be very beneficial for those in favor of sustainability. And Donald Trump is now a lame duck, lamer with each passing hour. Well, those prediction markets seem to get things right a lot of the time. I wanted to go back just really quickly to the data center story because it is so dominant. And, you know, you talked a little bit about new methane turbines. Elon Musk has said he's going to develop a hard to make part. But you also, so you said you're concerned about these methane turbines, which I think is widely true.

17:56But you also said that you think maybe people are overreacting to emissions. Or I think maybe you said that. Can you explain to people who don't understand what's happening and who do think these data centers are going to poison their communities, whether they have legitimate reasons for concern? Well, I think that part of the reason for the growing bipartisan opposition to data centers in so many parts of the U.S. is being driven by the underlying concerns about job losses and some of the other threats that experts inside open AI and inside Anthropic have been trying to alert the public to. but where the emissions themselves are concerned.

18:40The reason I've said that ought to be viewed with concern but not panic is that you need to put it in perspective, in my opinion. It is a cause of concern for sure, particularly those who are seeking to power these data centers with fossil fuels. But if you look at the emissions of all of the AI data centers put together, it's only a fraction of the emissions from uncovered landfills in the world. If you look at the expected increase in air conditioning in regions that never felt they needed it in the past, but now with the increasing temperatures and increasing humidity levels, there's going to be a build out there.

19:19The challenge is to make sure that we optimize the use of renewable energy to power these data centers. But the deeper and more serious concerns are the ones that have been highlighted just again in recent days, where, you know, Anthropic announced that it has stopped the use of Claude to make biological weapons in different countries around the world. These are the kinds of concerns. And of course, the threat of cognitive atrophy and the impact on societal institutions. These are matters that really need to be addressed for sure. But where the emissions are concerned, we need to focus that concern on encouragement to shift over to renewable energy as the source of power.

20:14Now, the water use is also a concern, but closed-loop systems are gaining in popularity. In some regions, the noise experienced by people near the data centers is an issue. But the deeper concerns are the ones that these experts have been warning us about just in the last few days. And they need to be addressed. Again, the U.S. and China should adopt a two-issue agenda. solving the climate crisis together and establishing appropriate regulations for the frontier models in AI. I just wanted to add one final piece while we have to, you know, increase the renewable baseload power for the data centers.

20:59At the same time, there's a lot of innovation, activity and investment opportunity in decoupling the energy intensity of compute at every step of the chain. Right. right, in the power supply, in building the data centers, green cement, green steel, in the storage optimization software you use, in the optimization of the database design. Like there's so many pockets. We think even like demand response across the states, there's an opportunity for investors to really accelerate the efficiency so that as we build, we build with the most resilient and sustainable data center infrastructure possible.

21:38That's an economic opportunity. How competitive or not are those spaces right now? So there's quite a few companies, but also places where we've already used our roadmap research to invest behind a few. For example, Weka is a company that helps to optimize that storage layer, driving up like 10x performance, which reduces the need by up to 90 % for the hardware and energy use of the storage layer. It's a software company sitting on top of that hardware. We have companies like Volu over in Europe that are optimizing the ability of utilities to pull more renewables into the grid. So as the grids become more complex, we're going to need better software systems, sort of like control center for that.

22:20Companies even at the edge. So think about the importance of buffering our grid from disruption risks related to climate such as wildfire. The report shows quite a bit around the advances of global wildfire risk. And there's a company like Gridware, which has sensors on utility poles and can provide monitoring, but also ability to shift load and protect pockets of the grid associated with wildfire risk. Those are a few of the examples, just to cite a few. And yes, I think these are interesting areas. Co-founded by a former lineman who used to climb those poles in Australia. But anyway. Interesting.

22:58Mr. Gore, you mentioned that Trump won't be around forever and the political climate may be changing, but it is what it is right now. And if you're a clean energy founder, how do you make your company politically durable? How do you insulate it from the current administration and what seem to be changing goals? Well, one strategy we've seen quite a bit of in the last year and a half is the one called green hushing, where companies, Some keep their heads down and keep quiet about the sustainability transition, but actually accelerate their pace in moving forward into that transition. It's different with different companies, but green hushing has been playing a prominent role.

23:45You know, you talked a little bit about President Trump dismissing AI doom warnings. And I wonder what you both think of the fact that so many investors out there seem to be, well, are you at all surprised by the reaction to these warnings? Well, I think we went through a phase where some cynically suspected that the apocalyptic warnings were some kind of bizarre marketing strategy. If that was ever the case, I don't think it is now. I do think that Dario Amadai is very sincere, and I think that Sam Altman and Elon Musk were sincere in seconding his warning of a few days ago. I'm reminded of the famous saying from Maya Angelou when she said, when someone tells you who they are, believe them the first time.

24:39And I think they are sincere because they obviously have a front row seat in assessing the rather startling advances being made by the frontier models. And of course, the recent examples of models escaping confinement, collaborating secretly, covering their tracks, engaging in deceptive behavior, that doesn't inspire a lot of confidence. but but i would also point this out you know nick stern for whom i have a tremendous amount of respect one of the leading economists in the world at lsc he and his colleagues published a very influential study just recently showing the expected reductions in emissions coming as a result of AI being applied to the development of new approaches to efficiency and the elimination of energy waste.

25:42I think that his prediction of six to nine percent declines in emissions per year starting in the next decade, I think that's encouraging. I believe, Nick, he has the reputation to warrant that confidence. I think they're just telling us what they've been saying for a long time and that we're kind of closer to this juncture than maybe they thought we would be at this point. Mr. Gore, I also just wanted to ask, you know, big question, but 10 years of this report and Lila, what is the number one trend that's moved furthest from where you expected it to be? For me personally, the scope and scale of the solar revolution is the breakout star of the sustainability transition.

26:29If you go back and look at the projections from the IEA over the years, and they're excellent, you know, at what they do, but even they have been startled by how fast the price of solar has declined. 0.09 cents now. It's just incredible. By far the cheapest source of power in the history of the world. One of my friends in Tennessee jokes, he said, if God had intended us to have a limitless supply of cheap, clean energy, he or she would have put a fusion reactor in the sky. Well, the joke makes itself because you have this being discovered all over the world. And the pace and speed and scope of that particular part of the change has been heartening and surprising to me.

27:24My only addition would be around the system interaction of these technology cost down curves. I think what's encouraging to see, and again, there's steps forward and steps back, but now you have the combination of, say, solar plus battery storage, plus grid optimization, organization plus, you know, EV charge. Like there's actually a whole constellation and it's starting to work together. And I can only expect with the advances around AI, we can accelerate this even faster. So that's what we're excited about. As you know, we have an audience of entrepreneurs. And I'm just wondering if a 25-year-old founder came to you today and said, I want to spend the next decade building a company that can become enormous and materially affect the climate problem, what would you tell them to work on?

28:07I'd tell them to consult with Lila Preston. There are so many of those, actually. It is an enormous pool of entrepreneurs who are solving these problems at scale. I mentioned, you know, simulation software to design how we interact with autonomous vehicles and in the future, robotics. I mean, it is exciting times. So I would hope that they, you know, plug in. I think industrial decarbonization is still a massive need. buildings, you know, hasn't seen as much innovation. Agriculture we talked about still, you know, biology is moving in with data science, but we can create huge, big companies that can solve these problems at a systems level.

28:45So we're excited to support them and help them along the way with our ecosystem anyway we can. Yeah, you know, we led the latest investment round in the largest green steel facility in the world under construction now in northern Sweden. And And the developments are so positive there. It's really, really heartening. And the hard-to-abate sectors that were on the list a few years ago, some of those subsectors are being taken off that list now. You know, the IEA used to say we could reduce emissions by 50 % in 10 years. Now that's 65 % in 10 years. I would also come back to regenerative agriculture as one of the areas where we could make tremendous progress.

29:32Lila mentioned PivotBio, but the revolution in biology is almost as startling as the revolution in AI. And some of those solutions are going to make a huge difference in recarbonizing topsoils, making farms more resilient, increasing yields without such reliance on fossil fuels and synthetic nitrogen fertilizers, which are 90 % methane, and without harmful chemicals that end up creating health threats as well. In terms of industrial building, to what do you attribute that slowdown? that sort of relative lack of, I guess, focus or progress. Well, building efficiency has been a latent opportunity for many companies for a long time because, you know, it takes time and it takes investment.

30:26But the scale of the savings that are now achievable is causing many companies to revisit how they can make their physical plants much more efficient. Lila, you want to take a stab at that one also? I think that there's been less innovation in the built environment. Truly, there's an agent principle problem, you know, who owns a building versus who inhabits a building where behavior shifts can lie. Again, there's really interesting market opportunities for building optimization software. We have an investment called IFS, which focuses on industrial machinery and focusing on preventative maintenance so that you can reduce downtime and optimize productivity at the manufacturing level.

31:06Like these are really tough, you know, getting into the plumbing of heavy industrial machinery is not easy to do. And you have to earn trust. And that's where we think the breakout can be is, you know, these very solid technologists who can build trust at every step of that value chain. But it takes time. Sure. It's just so interesting to me. It just it seems like it's such a cyclical sector. And I'm kind of, you know, always puzzled by why that is. Anyway, guys, thank you so much. Really, really a pleasure to talk to you. Again, I know you're in the middle of a lot in New York right now. So thank you again for making time for this.

31:39Always a pleasure, Connie. Thank you, everybody. Appreciate it.

31:47The Strictly VC Download podcast is hosted by TechCrunch Editor-in-Chief Connie Loizos and me, Alex Gove of Strictly VC. Strictly VC Download is produced by Maggie Nye with editing assistance by Teresa Lancansolo and Kel. Thanks for listening. We'll see you back here next week.