Elon Musk built Tesla with help from government loans and carbon credits. Today, he’s swinging a chainsaw at the very agencies that launched his empire — while directly undermining President Trump’s “energy dominance” agenda.
In this episode of Open Circuit, we examine the impact of the Department of Government Efficiency’s indiscriminate cuts. When these cuts hit nuclear security teams and grid operators at the Bonneville Power Administration, officials had to hastily reverse course. What are the real-world impacts to critical infrastructure?
We also explore how a sweeping executive order could restructure federal energy regulation. FERC — traditionally an independent, technical body — will now require White House approval for decisions. How could it slow down decisions and impact electricity markets?
And at EPA, officials are attempting to claw back $20 billion in legally committed green bank funding, prompting a federal prosecutor to resign rather than pursue what she saw as a baseless investigation. What does the EPA’s approach tell us about the administration’s lack of strategy?
Then we turn to Texas, where market forces are telling a different story. Despite a $5 billion subsidy program for gas plants, developers are walking away. French energy giant Engie recently abandoned two projects, citing equipment shortages and rising costs.
Meanwhile, clean energy is thriving without subsidies. Solar and batteries set new performance records last year, with zero-carbon power now providing 47% of Texas electricity. What does Texas tell us about the role of gas in the new era of load growth?
Open Circuit is brought to you by On.Energy. As one of the fastest-growing battery storage IPPs, On.Energy delivers turnkey resiliency solutions for utilities and enterprise customers. Whether you’re managing data centers or local grids, we help bring storage to your fleet. Learn more at on.energy.
Credits: Co-hosted by Stephen Lacey, Jigar Shah, and Katherine Hamilton. Produced and edited by Stephen Lacey. Original music and engineering by Sean Marquand.
Transcript
Stephen Lacey: All right, I’m back from vacation. Did I miss anything?
Katherine Hamilton: What five things did you do when you were gone?
Stephen Lacey: Unfortunately, one of them was sitting by the pool in Costa Rica watching Elon at CPAC brand a chainsaw.
Katherine Hamilton: That sounds like five right there.
Stephen Lacey: Katherine, what did you do last week?
Katherine Hamilton: Well, the first thing I did was hire someone to do the other four things, so that was very productive. And this incredible new director at my firm, Tyler Clevenger, that we found at the Department of Transportation is also helping me prep for the show, which is going to be super wonderful because as you know, I get a little stressed when I prep.
Jigar Shah: Well, that’s all that preparation. You should just wing it like I do.
Stephen Lacey: From Latitude Media. This is Open Circuit. This week: the Trump team continues gutting the very agencies it needs for energy dominance.
At the DOE, mass layoffs hit nuclear security teams and grid operators only for officials to realize they jeopardize critical infrastructure. At FERC, a sweeping order puts an independent technical commission under White House Political Control. And the EPA is systematically erasing climate programs while trying to claw back billions in legally committed funds. We’ll summarize the latest.
Plus, a market reality check from Texas. Despite a $5 billion state program designed to boost gas-fired power plants, developers are walking away from projects, citing equipment shortages and soaring costs. What does it tell us about the role of gas in the new era of load growth?
I’m Stephen Lacey, executive editor at Latitude Media, joined by my co-hosts Katherine Hamilton and Jigar Shah. Katherine Hamilton is the co-founder and chair of 38 North Solutions. How are you?
Katherine Hamilton: I am doing great. Thank you so much.
Stephen Lacey: I got a call from you this morning while you were out on a run to talk about the run of show. You’re not out of breath.
Katherine Hamilton: Yeah, I was able to chill out a little bit after you talked me down.
Stephen Lacey: Is that how you do your show prep by going for a run?
Katherine Hamilton: Yeah, and listening to podcasts. I just want to have somebody talking in my ear and try to make me smarter.
Stephen Lacey: Jigar, have you been on a run today?
Jigar Shah: No. I mean, I was running this morning. I had to get my son to school. The whole process is stressful, right. But yeah, it was good.
Stephen Lacey: Jigar Shah is a clean energy investor and former director of the DOE’s loan programs office. Everything good? Keeping up with the flood?
Jigar Shah: Well, as we talked about last week, I don’t read it until 10 days after it occurs. I find that so much has changed 10 days later that it preserves my sanity to not know what happened in the change in policy during the intervening nine days.
Segment 1: Federal agency cuts and restructuring
Stephen Lacey: So in our very first episode, we pointed to a glaring contradiction. The Trump team says it wants energy dominance, but it is systematically pushing policy that will hinder that goal and that contradiction is personified by Elon Musk, a man who once took a half billion dollar loan guarantee that saved Tesla, which then became profitable by selling $10 billion of carbon credits through a government created incentive program.
Elon’s Department of Government efficiency has laid off thousands of workers with plans to cut hundreds of thousands more — approximately 2,000 employees. 11% of the DOE workforce were terminated, and the indiscriminate cuts hit nuclear security specialists at the National Nuclear Security Administration, grid operators at the Bonneville Power Administration and climate scientists across multiple divisions. In some cases, like at NNSA where over 300 staffers were fired, the administration had to hastily reverse course when they realized they’d compromised critical functions. And Katherine’s going to tell us a little bit more about that.
Meanwhile, the EPA is systematically erasing climate initiatives for moving terms like environmental justice from its website, repealing climate focused executive orders, and most dramatically attempting to claw back 20 billion in green bank funding that was legally committed months before the election. That is an ongoing story. It’s kind of a weird story. We’re going to touch on it a little bit here. And then I think later we’ll devote an episode to talking about the state of the Greenhouse Gas Reduction Fund.
But perhaps most consequential is the February 18th executive order asserting Direct White House control over independent agencies like FERC. This fundamentally restructures energy governance in America by subjecting what has traditionally been a technical market-based regulatory body to political oversight, former FERC chairs from both parties have sounded alarms.
So we’re going to walk through these three areas. In my view, this creates three really distinct challenges. First is the immediate disruption to agency operations. Second is the regulatory uncertainty for energy markets and infrastructure investments. And the third is the long-term implications for politicizing technical decisions about grid reliability and market structure.
So let’s start with the layoffs. Katherine, tell us about what exactly happened at the Bonneville Power Administration.
Katherine Hamilton: Well, I want to first just set the stage a little bit for how these happened. Remember, these were all considered probationary employees, and that doesn’t mean employees that are considered to have not been doing a good job and therefore they’re on probation. It just means they were in their jobs for one or two years or had just been promoted to a new job or had just changed agencies. Some of them had been in the government for decades.
So some of them were real experts in their jobs and they were sent emails that said things like “your knowledge, skills and ability don’t meet our current needs.” “Your performance has not been adequate to justify further employment at the agency” or “based on your performance, your employment is no longer in the public interest.”
These are people who dedicated their lives to public service, and for many of them, it was their dream job. They had worked their way up into a job that they really, really loved and wanted to do. So that’s just to give you a sense of the public servants that are out there. These are not just faceless bureaucrats. These are people who had really important jobs and wanted to do those jobs. So that’s just to kind of give you some context on what this felt like as an employee.
Stephen Lacey: And to jump in. Actually, that’s a really good point. A lot of people see the federal workforce as a lot of Washington bureaucrats, but the vast majority of the federal workforce are people outside of Washington who are performing really critical functions. And these are the people that have been hit. So continue.
Katherine Hamilton: Absolutely right. So I was able to talk with Steve Wright, who spent 32 years at the Bonneville Power Administration. And just to give you a sense of who Steve is, he wrote a book called “Inspired Public Service.” And this book that you can get on Amazon really talks about how to find meaning in public service, how to become highly productive, and how to build a culture that is inspired and really gets to reinforcing democracy. Small D, right? So he believes in public service. He’s been a public servant all of his life.
He also wrote a piece with Randy Hardy, who was also an administrator of Bonneville. And to let you know a little bit about Bonneville, the public marketing administrations were built in – Bonneville was the first one that was built in 1937. It was really to manage the dams. So Bonneville was built to manage Bonneville and Grand Cooley dams.
But basically all of the power marketing administrations are there to, first of all, they don’t cost anything to run because they get their fees from the people who purchased their electricity. They’re there to run large projects mostly in areas, and they don’t cost the federal government anything. So when you lay people off from these administrations, you’re not actually saving the government any money.
And Steve and his colleague Randy wrote a piece that was not meant to be critical at all. It was really meant to be informative and to also let the Bonneville folks know that their jobs are really important to the grid and to the way our system functions. So he kind of pointed out three big pieces: public health and safety impacts.
Staff reductions really do cause issues and could potentially cause disruptions to the grid. And I harken back to my days at a utility where if you have a crew, and I was on crews quite a bit, you have several people that are really important to being on an electricity crew. You have a lineman, a groundman, an operator. You need often if you’re going up onto a pole, you need a cherry picker to get up there. You have a foreman, and if one of those people is pulled out, you’ve basically lost your crew. You really have to combine with another crew.
And so what you’re going to do is have less people out there monitoring lines in very, very rural settings. So it means that you’re going to lower reliability and resilience. And also these folks are very highly trained. These are technical jobs, they’re very dangerous jobs, and they require years of apprenticeship.
So if you remove someone who is a lineman, first class or a foreman, you’ve lost a huge amount of real expertise and understanding. And getting people trained up takes years to do. Certainly the public health and safety is huge because of workforce issues, because you’re not delivering reliability as well as you could.
Another is really serving economic development. So they had just hired a bunch of new transmission planners and project designers to decrease processing time for building new generation and transmission infrastructure for processing interconnection. So all those things that we need to promote AI and to meet all the demands of our new manufacturing needs, that would not happen.
And then also just the economic lost opportunities. So the hydro and nuclear power resource base, which a lot of these especially Bonneville has, they keep customer rates low and those are also in jeopardy by having people lost. So this is something that shouldn’t be overlooked and something we should see as these are people who are critical to allowing our grid to function and to actually meeting the goals of this administration.
Stephen Lacey: So a day later, the administration realized this after getting a lot of criticism and then brought many of those people back to the job. This is what we feared the most. Elon was very transparent about how he was going to make these indiscriminate cuts, and he of course did this at Twitter now X. But obviously the consequences are different when you’re operating critical infrastructure versus just a website that people are using to send messages to each other.
So they realize, oh, BPA controls 75% of the high voltage transmission lines in the Pacific Northwest. They manage the flow of electricity from over 30 dams and a nuclear plant. Jigar. What are the consequences, the national security and reliability implications of losing this kind of institutional knowledge at agencies like this?
Jigar Shah: Well, I think as Katherine mentioned, a lot of this stuff is not academic in nature. It’s actually experiential. And so there’s a lot of people who’ve been through it before. And so then when it happens again, they know how to respond in a timely fashion or they know how to predict that these kinds of things could go wrong and therefore they should be prepared for them.
And so you think about a lot of the electricity outages or emergencies that we have that deal with the electricity sector has experts from the Department of Energy who fly out there the next day, whether it’s the LA wildfires or whether it’s the hurricanes in North Carolina, and they help to make sure that federal resources get to the right places. FEMA does broad things, but when it comes to the energy nexus and the electricity nexus, I mean that’s really DOE.
But I think one of the things that we have to be mindful of though, is that it also took years to convince people to join the administration for a lot of the best people that we needed that had a different set of experiences than are typical for government employees. Convincing them to leave the private sector and come into the government in this moment took a long time to convince them to come in.
So many of those people finally got convinced to come in, and then they had been there less than a year, and then they were terminated. And so they’re like, well, I’m never going to do that again. And so part of this is just if you want to bring in people with a different type of background in the government, having this kind of indiscriminate policy just causes people to be like, yeah, I’m never going to give that experience a five star rating. And so the next time a friend calls me about an opportunity like this, I’m going to tell them not to do it.
Katherine Hamilton: So this is all in what is supposed to be a move for more efficiency, but I would argue that efficiency has to do with a fully functional government. So in a move to try to be efficient, they’re simply cutting jobs. It’s the big chainsaw thing, rather than trying to figure out, alright, what is it that we can legitimately try to make more efficient?
And I would say there’s some things like approving interconnection, transmission planning, approving siting and permitting that really require additional capacity. You need more people to do that to become more efficient. It’s like you have to spend in order to save. And that’s being lost here.
Stephen Lacey: That’s actually a really good point, Katherine. And I was going to ask, how would you go about this if you wanted to reduce the federal workforce in a logical way? We have a bipartisan audience. I know historically having done this show, we have a lot of people across the political spectrum, and I’m sure many of them have supported Trump.
So I don’t want to sit here and reflexively say that all layoffs are bad. I think there are very strong arguments to be made for bringing efficiencies to the federal workforce. Of course. I think that’s an idea that everyone can get behind, and there’s a thoughtful way to consider how you downscale in certain areas. It’s just the callousness and the thoughtlessness behind this that feels so jarring.
Jigar, based on what you know about how the government works now, having been at DOE for years, what do you think is the reasonable way to go about this?
Jigar Shah: There is no reasonable way of going about this. I mean, that is the problem is that we’ve had three blue ribbon commissions. They’ve all suggested exactly how to cut, right? We’ve had deals between President Obama and the Congress around how we keep budgets flat or maybe going down by 1% a year, and then the Congress figures it out.
But if you look at under the first Trump administration, the first Trump administration zeroed out a lot of programs including the loan programs office and the president’s budget to Congress. All of those programs were reinstated by the Congress when they passed a budget and probably increased.
And so, look, part of the problem with this is could there be a more reasonable way of doing that? Yes. And it should certainly be less cruel and arbitrary as this has been. But I think there’s a lot of people out there who are like, this never happens.
It never works. We just keep spending more money. We keep hiring more people. We never implement next generation technologies. Look at the FAA, right? When you think about how advanced aviation is in Asia and Europe, we are not allowed to use any of that advanced technology here in the United States. You could land planes in an automated way. We do it through physical humans with air traffic control. And it’s one of those things where every plane is outfitted with this next generation technology, but we’re not allowed to use any of it.
So I mean, look, this is absolutely the wrong way to do it, a hundred percent the wrong way to do it. But I think there’s a lot of people who are like, there are no right ways of doing it. Everyone has tried – the Bush administration, the Obama administration, Republican Congresses, Democrat congresses, and every single program has a sponsor. And this is how you pass a budget is you make deals and you’re like, you vote for my deal and I vote for your deal.
Stephen Lacey: Katherine, what else stood out to you about the layoffs either at DOE or elsewhere?
Katherine Hamilton: Yeah, I think one of the things that it’s doing, and some of it is by design, is really making the folks who are left fearful and not have faith in their organization, not have loyalty essentially, even though there is a loyalty test.
And I think there’s a way in which you could actually have the federal workforce become much more efficient and loyal by simply having them come up with some of like, alright, if you are going to try to remove this, this, and this friction point and make things better, what would you do? Because a lot of those folks are stuck with the processes that are in place at their agencies when they come into their jobs. And having them start to solve that I think would be really helpful. And that’s not really the way they’re going about it. I mean, I’m hopeful some people will stay.
I’m seeing a lot of people retiring who have a lot of brain trust, and I hate to see that because they’ve been there. They’ve been the stalwart public servants that bring the technology expertise to, especially the Department of Energy, for example.
And I hate to see them leaving, but I also see that Secretary Wright and others have pushed back on some of that. For example, that email that was sent out by DOGE saying, if you don’t give us the five things that you did last week, you’ll be fired. And the agency heads were like, no, no, no, no, no. You guys need to ease up a little bit. Let’s let us be in charge. We were hired to do this job. We were confirmed by the Senate, let us do our jobs. So I’m hoping that there’s going to be some settling down of that.
Stephen Lacey: And what you just described, Katherine, is what I meant by a reasonable way of doing this. And I understand Jigar, there are these institutional barriers that make it really difficult, but of course we know that that’s never how Elon has run his companies. So I don’t know if we expected any differently, but it surely is an extremely callous way of going about it.
And I wonder, Jigar, since we’re seeing thousands of DOE layoffs and there was a lot of hiring that went on to help implement the IRA parts of the bipartisan infrastructure law, how does this impact that kind of work?
Jigar Shah: Yeah, it’s not clear. I mean, on the one hand, the US Congress and the incoming administration has made it pretty clear that they expect all unspent money to get swept and used to offset other expenses in the tax bill. So I don’t think they expect to do a lot more new grants or new loans, even though I think Chris Wright has said that he wants to do new loans.
There’s a tremendous number of grants that are already in place, and it does look like money has started to be released from those grants as well as loans. And those have to be managed for the next three years, five years, 20 years in case of loans. And so that has to continue to happen.
But as Katherine suggested, I don’t think that Chris Wright in particular, or Doug Burgum at Interior would have done these cuts in this way. And so now they have to figure out who’s left and what expertise they have left in the department and how they reorient those people who want to stay to be able to implement all of the requirements that the Department of Energy has to undertake.
And some of that might actually be reducing some of the requirements that the Department of Energy has to take. But remember, they continue to actually be bold in the goals that they have, whether it’s energy dominance or energy abundance, but also figuring out how to commercialize geothermal and new nuclear and fusion and all of these other technologies.
So I mean, one of the big challenges I see in front here is that I don’t know when Chris Wright and Doug Burgum will actually be able to run their respective agencies. And if they don’t get to run their respective agencies soon, then I don’t know how much longer they’ll stay. Why would you stay there and take full responsibility for all the outcomes? Many negative if you have no control over what the agency’s doing, it’s a huge reputation risk for them.
Stephen Lacey: Okay. Speaking of lack of control, let’s go to the situation at FERC. And that is where a new order now requires the agency to submit its decisions to the White House for review and theoretically align its legal interpretations with the administration’s views. Katherine, what’s going on there?
Katherine Hamilton: Yeah, so just as you got into the way back machine with me before with Bonneville, we’re going to do that with independent agencies as well. They were created, the first one was created in 1887 as the Interstate Commerce Commission, and it was built to control and regulate railroad rates.
And the reason they started with these and Congress decided to do independent agencies was that even though technically they’re under the executive branch, they’re very technocratic, they’re adjudicated, they’re very regulatory and fair competition minded. They’re not subject to the politics of any given administration.
So just to give you a sense of where they are, they usually have an odd number of commissioners. In FERC’s case, it’s five commissioners, three of one party, two of another, whoever the president is gets to decide who the chair is. Right now, FERC has five commissioners, two are Republicans, and three are Democrats simply because of the way the terms have been staggered.
But the chair is a Republican, Mark Christie. And so that allows for a very fair process, and it allows this not to become under such political influence. That doesn’t mean that Mark Christie doesn’t come with a point of view. And of course, all of the staff at FERC then report to him. So they’ll come with a certain point of view, but it also means that it isn’t subject to vast swings of political whims.
And FERC is not funded by Congress. Again, FERC, just as the power administrations are funded, is funded not by the taxpayer, but by the fees that the folks that are regulated by FERC pay into it. So again, it’s not a matter of fiscal responsibility.
But some of the things that they do that we’re watching are all of these AI co-location decisions, right? Hydropower licensing order, 2222 implementation, interconnection rules, transmission incentives, gas pipelines. There are so many things that come under FERC, and they have so many decisions to take, and let me tell you, they do not take them quickly. It takes forever. It is a long regulatory process. It’s very stakeholder heavy. It’s very much about input at every single step of the way.
And in that way, I think you build a record, you have to make a case. It’s adjudicated on the other end. It makes for a process that is thoughtful. It may not be fast. So that’s one thing. Of course, hydro licensing, wow, I wish that could be faster. There are some things that are hopefully happening in the background that can make that faster.
But putting it directly into the president and having all of those decisions go through the office of management and budget is not going to speed things up. It’s going to slow things down drastically, and a lot of things just simply won’t get done.
Stephen Lacey: So Jigar, what are your biggest concerns about what could happen here either by rejecting decisions or putting political pressure on certain decisions or just creating a bigger backlog?
Jigar Shah: Well, I mean, part of my challenge has been that I do think that both sides comes to the party with their own set of facts, right? It is very obvious, for instance, that we need clean firm power generation and that you’re not going to be able to do all of this stuff with an inefficient using of the grid.
And we have a lot of rules that frankly were put in place in the late nineties, probably popularized by Pat Wood, who was the FERC chair under George W. Bush, and they’re just outdated now. They just don’t work. Given where we are today, the value of the independent agencies is they actually bring a lot of that expertise to both adjudicate the craziness coming out of the solar and wind industry and the craziness that comes out of the coal industry or the natural gas industry around having fuel on site or all the other stuff that we talked about during the first Trump administration.
And so I think that this independence matters because I don’t think they would have made great decisions if the Biden administration was telling them what to do on all these things as well. And so I don’t think that people should get colored by Trump here. I think both presidents and senior officials in OMB and the White House are just completely unprepared for the technical detail that these agencies have to deal with.
Stephen Lacey: Katherine, how could this play out? Can you walk me through a potential scenario? In 2018 then energy secretary Rick Perry pressed FERC on a plan to bail out coal plants. You could see how then it was rejected. Maybe just walk us through that example and then how that could play out differently under this new scenario.
Katherine Hamilton: Yeah, that’s a really interesting story because of course there was somebody who’s a friend of mine actually at DOE, who’s a Trump person in the first administration, and he was tasked with doing this report, the outcome of which would need to be that coal is the most reliable and resilient asset, and they hired a really good person to do that analysis, and it did not come out that way.
And they couldn’t hide the fact that coal did not end up being the winner in that analysis. And so everything kind of ground to a halt with that. The report was out there, but it was certainly not touted by the administration because of the way it turned out.
I do think a couple of things could play out. One is it’s really Congress’s job to manage the independent agencies and to provide the rules and regulations. So Jigar, certainly Congress could put forward amendments to the Federal Power Act that created FERC and try to streamline some of those processes.
Congress has yet to step up on any of this right now. I dunno what’s going to be the Rubicon over which we need to cross for them to do that. But that would be one way to do it, which would be really helpful. And in fact, they could have some really interesting conversations in the Senate Energy Committee or the House Energy and Commerce Committee to talk through what’s going to make these agencies work more efficiently and better and make rules work for everybody. That’s what—
Jigar Shah: And this is what they did for the Nuclear Regulatory Commission with the Advance Act last year.
Katherine Hamilton: Exactly. Yep. Yes. You’re exactly right. That’s a great example of something that happened.
The other thing is, I’m assuming that won’t happen so it will be brought in to be much more under the White House control. And I think they’re looking, I’ve just been listening to some chatter at NARUC and the thought that they would bring in a state commissioner, one of the state commissioners from a red state to come in and replace Willie Phillips. His term doesn’t expire. He was the chairman and now he’s back to commissioner until 2026.
But they would fire him and bring in another Republican instead. So you’d have three and two, you would still have two Democrats at FERC. I mean, I will say that Chairman Christie, because he comes from a state, and this happens with a lot of folks that come in from being state regulators into being FERC commissioners – they bring a state perspective, so they really believe in being deferential to states.
And I think that would simply grow, and that may not be the worst outcome in the world because even though state regulators are a little bit like deer in the headlights right now, I think, and they don’t have enough capacity in their states to do everything that they need to do, I still believe that means that their states are going to still move forward. If they give more deference to states, it just means that it will erode FERC’s authority even more.
Stephen Lacey: What we’re seeing here is literally almost word for word, the Project 2025 blueprint for FERC. It’s coming to life now. It calls for barring commissioners from favoring carbon free power, justifying costs for what they call the “vague social benefits of climate change.”
And so at a moment when 90% of everything hitting the grid is clean, you could imagine this having wide reaching consequences. Jigar, what do you think the potential – I mean, we’re talking in theoreticals still right now, but what do you think the possible business or market impacts could be?
Jigar Shah: Yeah, it’s the weirdest thing I’ve ever seen, right? On the one hand, the Trump administration is talking about reducing people’s electricity bills, and on the other hand, they’re pushing the most expensive solutions that can possibly be made, which are the ones that the electric utilities want to do.
What the electric utilities want to do is put in the most expensive stuff possible. That is what they’re used to doing. And you’re seeing that with Sempra’s electricity, with Sempra’s stock price coming down with other folks getting hit because a lot of the utilities are telling the Trump administration, we can handle load growth. What they’re not telling the Trump administration is we’re going to do it by raising people’s rates by 10% a year every single year.
And when you talk to Chairman Christie, he’s like the most concerned person in the entire country with rate increases. His whole mantra is affordability above climate change, above energy transition above everything else. He just cares about affordability.
And so this is a train wreck. I don’t exactly know where this is going to go, but forcing everyone to do natural gas when it’s coming in at such expensive prices and nobody wants to build merchant natural gas. You see that in Texas. You see that in lots of places.
And then everything that’s being added to the grid right now, which is the cheapest, are battery storage and solar, and obviously folks are working on new geothermal and new nuclear and some other stuff. And then hopefully God willing, hydro finally catches up at some point if FERC figures out how to relicense these things.
We are in a really weird place where the politics are pushing the most expensive solutions possible, and FERC is trying really hard and the person running FERC actually really wants to prioritize affordability.
Stephen Lacey: Let’s finish this segment up with a quick look at what’s happening at EPA. We’re seeing removal of environmental justice and climate change from its website. That is not really much of a surprise, but we’re seeing also the review of the endangerment finding attempts to claw back the 20 billion in funding for the Greenhouse Gas Reduction Fund.
As I said, we’ll talk about the Greenhouse Gas Reduction Fund in more detail as the story evolves. But Katherine, what is jumping out to you about the biggest changes at EPA right now?
Katherine Hamilton: Yeah, so EPA’s mission is to protect the environment and human health. And every study out there that I am aware of shows that the biggest and most dangerous health impacts are in communities where the most water and air pollution is in. Those are communities that are generally disadvantaged because wealthy communities do not allow those projects to be built in them.
And so removing the environmental justice piece to me, it then doesn’t give you a way to focus. How do you focus your remediation? How do you focus protecting the environment and human health if you don’t know who is being impacted?
And I would just say one of the things that they had launched was a screening tool for climate and economic justice, and it was really just data on where are these communities where the ones that are the most impacted. Luckily, the Public Environmental Data project has pulled that and has that information on their website, but that was brought down.
And what’s ironic about that is that the whole DOGE mantra is we want AI to run everything, but you’ve just taken out all the data. So AI is only as good as the data that go into it, and I just think removing that just doesn’t give them anything to focus on, and I think that is a feature, not a bug.
The other piece, of course, is the Greenhouse Gas Reduction Fund, which was not really designed initially to go into EPA. It’s more of in the rubric of Department of Energy, but EPA did as good a job as they possibly could setting all of that up. The funding from that and the Solar for All, which was a 7 billion fund, all of those projects are under contract and those accounts have been unfrozen.
But the Greenhouse Gas Reduction Fund, the 20 billion, the bigger piece is housed at what you’d call a financial agent, Citibank, and it’s housed in that fund on purpose. This has happened dozens of times when there are complex interactions, financial interactions, the government often uses a financial agent who knows how to do this.
So there’s nothing wrong with it being in Citibank, but of course, the Department of Justice and it’s committed, so it’s not any longer the EPAs funding, it’s sitting somewhere else and it’s committed. A DC federal prosecutor resigned because they were told to launch criminal investigation into Citibank, and they said, there’s nothing to see here, and I’m going to leave rather than being forced to do this.
So I think this is a story that is really ongoing and remains to be seen. What will happen, of course, the hope is that Citibank doesn’t cave and that keeps going with all the contracts that it executed on.
Stephen Lacey: This is actually a really bananas story and a great example of how differently things are playing out than I expected to or a lot of people expected them to.
So EPA administrator Lee Zeldin claimed to have discovered these gold bars of climate funding parked at Citibank. And that reference to gold bars comes from this Project Veritas video where an EPA official was surreptitiously recorded saying that by kind of getting the 20 billion out the door to these other institutions that would distribute the funding to local green banks, they said it was like throwing gold bars off the Titanic.
And so then there was this wild conservative response on social media, and Lee Zeldin is out there talking about finding these gold bars. And then there was this internal pressure, as you said, Katherine, to get this federal prosecutor to open up a criminal investigation into Citi. She abruptly resigned because she didn’t want to do it.
So Jigar, this is a really wild story. What are you following as part of it right now, if anything? Because I know you’re 10 days behind the news cycle.
Jigar Shah: I am following none of it. I talked to all of the green banks and whatever, the folks who got money this week, and they have said that it’s all business as usual. Folks are getting the grants that they’re supposed to get.
Stephen Lacey: As part of Solar for All?
Jigar Shah: No, as part of the actual 14 billion of allocations for the Climate United and CGC and some of those folks. And they’re all meeting the obligations that they’ve met. So if they have a valid loan and they’re ready to wire money, they’re wiring money.
So in general, everything’s working. Nothing has been paused, nothing has been stopped. And so to me, all of this is in some sort of TMZ news page. This is not actually – this is a legal contract. Congress gave money to EPA, EPA ran a valid process. They awarded…
Katherine Hamilton: Very public, by the way.
Jigar Shah: Very public.
Katherine Hamilton: Very public process.
Jigar Shah: A valid process, very public. The people who won these awards are extraordinarily qualified for the work that they’re doing. They are being very careful about how they put the money out the door and making sure that the projects meet the original intent of Congress.
And so everything’s being done exactly as it was intended to be done. I don’t understand exactly what world we’re going into, but at the moment at which you decide that you being against something means that it has to stop happening, energy abundance goes out the window. I don’t know what it is that they think is happening, but this is having a chilling effect on the entire business of energy. So I don’t know what’s happening, but it’s not good for investor confidence.
Stephen Lacey: Yeah, I mean, I think that’s the scariest piece of all of this is that they don’t care. There’s zero logic to any of it.
Jigar Shah: I think they do care. This is what I’m saying. I think that they do care. I don’t think that they understand, and I don’t even know who “they” is. To be clear, I think that the people who wrote Project 2025 who are running OMB and the people who are doing Doge are different. And I just found out that Elon’s not running Doge. There’s some woman named Amy Gleason who’s running it. I don’t know what’s happening. And then I think there’s some sort—
Stephen Lacey: Did you get that news alert while we were recording?
Jigar Shah: Too? Yeah.
Katherine Hamilton: Then what is he cutting with his chainsaw?
Jigar Shah: I mean, I have no idea. I don’t even know if it’s a real chainsaw or if it might be a prop from some movie studio, and then you’ve got some National Energy Dominance Council who seems like another “they,” right? I don’t think that three “they’s” actually have one unified approach, and I feel like this is some sort of weird reality television show. And so I don’t quite understand it at all.
But it matters a lot to people. I mean, if we are going to have the amount of economic development that we think is necessary for America to continue to compete in the world, we need these projects to actually get built. And I don’t think that these actions are providing a lot of confidence in the market.
Stephen Lacey: We’ll do our best to make sure this is not a reality show recap podcast. Oh God, no, no, go ahead, Katherine.
Katherine Hamilton: And I would also watch out for the Department of Agriculture’s REAP program that has also been having its funds frozen, and that funding goes to rural communities to build clean energy projects. And these are all projects that are going to help people. And I hope that at some point someone starts paying attention and understands that these are the people that elected this president and we want to make sure that they get the most affordable clean energy they can.
Stephen Lacey: So to wrap this section up, I just want to ask about manufacturing investments and how some of this uncertainty is impacting many of those investments. The New York Times had a really good story looking at the $130 billion that’s flowed into factory construction for clean technologies. And I believe you were quoted in that story. Is that right? Did you talk to the—
Jigar Shah: Yeah, it was the end positive quote, optimistic quote.
Stephen Lacey: The story well catalogs a lot of factories that have been delayed or scrapped, some of which were a result of the political situation and the uncertainty, but you have a positive spin. So you’ve seen a lot of these many manufacturing facilities get planned and started construction. What’s at stake and do you think we’re going to see a lot more investments scaled back?
Jigar Shah: Well, I mean there’s 950 or so manufacturing facilities in energy that were announced, and some of them were expansions of existing manufacturing. And when you look at each and every one of them, many of which I did underwriting on and have looked at, I mean they’re moving forward. They actually have real customers, they have real offtake agreements, they have all these things.
Now obviously their economics might be changed based on how the Inflation Reduction Act might get modified in the future. And so many of them are reminding their local congressmen or senators that their long-term viability depends on some of those rules staying in place.
But this is the other “they,” right? I don’t actually know who represents “they” in this White House, but Steve Bannon’s whole national populism thing, and America First and the first term of President Trump when he went to that washer and dryer factory in Indiana and said, we need to keep manufacturing jobs here in the United States and all of the bluster with tariffs on Canada and Mexico or around manufacturing here in the United States.
And so I don’t quite understand exactly how this squares with the talking points coming out of the White House. And so there’s been a couple of folks who’ve paused, and I think half of the 955 might pause, right? Because that’s normal. And that may have happened frankly even without Trump.
I mean, things happen and markets change, but like Aspen Aerogels just put out a press release saying that they have paused their facility in Augusta, Georgia, and they’re going to wait until they figure out what’s going to happen to the loan programs office and whether this secretary and the new head of loan programs office is honoring loans. And so these decisions all have consequences around people’s confidence levels.
Stephen Lacey: Katherine, final thoughts on the consequences?
Katherine Hamilton: It should get the attention of, as Jigar said, the politicals who have to answer for this. I dunno if you saw, but a lot of folks are going back to town halls not hearing happy thoughts from their constituents and their leadership is telling them, well, they just don’t do any more town halls. But in the end, those people vote.
And so I do think that people are going to be hearing whether it’s in town halls or not, or just snail mail, that they need to not cut back on these incentives or it will really damage the economies of a lot of these places.
Segment 2: Gas vs. renewables in Texas
Stephen Lacey: Let’s turn our attention to a story playing out in Texas. It’s kind of an extension of last week’s conversation about the role of gas to serve the data center boom.
According to Doug Lewin, who writes the Texas Energy and Power Newsletter, and then some reporting from Latitude Media, French Energy Giant Engie has withdrawn two natural gas projects Perseus and Spencer from the Texas Energy Fund. That’s this $5 billion program designed to finance new dispatchable generation — i.e. gas — with low interest loans.
And Engie notified the Texas PUC director that equipment procurement constraints and rising costs would make it impossible to meet a deadline. And while gas plants struggle with equipment shortages and these spiraling costs, solar and battery storage are continuing to break records across the state and performing really, really well. And zero carbon power now makes up 47% of the ERCOT grid up from 40% just a year ago.
So what I want to talk about here is what’s going on with these gas projects in Texas? Does it tell us anything about the economics of gas nationwide? Jigar, let’s start with you with the nuts and bolts here. What are the constraints being identified that are delaying these gas plants? What does it tell you?
Jigar Shah: Well, can we start with the first constraint? I feel like we’re skipping it.
Stephen Lacey: What’s that?
Jigar Shah: The state of Texas basically said because the private sector has no interest whatsoever in building new natural gas in the state of Texas that they are going to guarantee a $5 billion fund from the state of Texas to subsidize natural gas production and that they couldn’t get enough people to actually even sign the contracts to do this work. They had to twist arms of people to beg them to build natural gas in the state.
So I just want to start with that first right before we go on to what’s actually happening in natural gas right now that the state of Texas is being saved every single day by new battery storage and solar that’s getting added to the grid. Their load growth has been phenomenal in the last two to three years.
Engie has gone out and said, great, we will sign up to do this gas plant. We will build this gas plant. And there’s a requirement in the loan that you have to start drawing on the loan by the end of this year. And GE, Mitsubishi, and Siemens are sold out. They are completely sold out. And they basically said, if you didn’t put an order in 18 months ago, then we cannot ship you a turbine until at least 2029 if not 2031.
And so Engie is like, why would I start drawing on this facility by the end of 2025? To do what exactly on the land when none of the equipment’s coming until 2029 or 2031? Let alone yes, Bechtel and Kiewit and all of the different players fired up to use, maybe a reference here, their natural gas deployment arms that have been basically doing no work at all since 2018. But some of those people have gone to other jobs.
Some of them are not interested in going back to the natural gas division, and so they’re having to hire up and find people to do this. And then on top of that, what you find is that the entire natural gas grid is kind of full. And so you have to upgrade the natural gas pipeline capacity to be able to handle this, right?
Because what I didn’t know is that electric utilities rarely pay a capacity payment for gas. So the way the gas market works, and I know this, we funded a bunch of Bloom Energy stuff when I was at Generate Capital, is you have to secure the rights to the pipeline and then you pay for the gas through the pipeline. The utilities don’t secure the rights to the pipeline. They only just buy the gas on an as available basis on the pipeline. And so if the pipeline is full of other people’s gas, you could potentially not get gas for your plant at that moment when you need to burn gas.
And so now they’re going like, wait, we need to upgrade the pipelines to actually be able to handle more gas. That goes back to FERC, and that goes back to all of the other conversations there.
And so on top of that, GE is like, because I’m so sold out and we’re a recently spun off company from the mothership, GE, we’re charging top dollar for these turbines. And so was everyone else in the pipeline. So now for gas plants that were built last year, they were $1,700 to $2,000 a kilowatt. Today they’re now quoting $2,400 a kilowatt installed for new gas plants.
So by the time you add that plus natural gas costs plus pipeline upgrade costs, you’re definitely at that a hundred dollars a megawatt hour. We talked about this last episode and then people are like, is this the cheapest way for us to do this or the fastest? I don’t know. And so yes, everyone is rethinking their position right now.
Katherine Hamilton: Yeah, it was so funny. I was googling around looking for stories and I was like, oh, listen to this “Turbine production bottleneck threatens plans for new German gas power plants,” and it’s talking about Siemens, Mitsubishi, GE, Carbon Electric. And I realized as I was reading this story, which is basically what Jigar is talking about, that it was February 27th, 2024. So this is not new. This is something that has been happening for a while.
And I would just say about the gas situation also, they’re doing it in the name of dispatchability and flexibility, but that is exactly what wind and solar and batteries provide. Even the CEO of NextEra says, look, you can build a wind project in 12 months, a storage facility in 15 and a solar project in 18 months. Gas plants take years to build, and so why not use what we already have? And it’s working, it’s working really well.
So we need more of that. And maybe you can do a few things on a longer term, but they’re really dicey and as Jigar says, they haven’t really thought through everything as they clamor to build more assets. And I would just harken to Entergy’s application for AI data center growth with natural gas facilities, and they haven’t even built in the cost and the volatility of the fuel pricing as they look at putting all of the cost of this onto the shoulders of the rate payers in Louisiana.
Jigar Shah: Oh, it’s nuts. The other thing is that during the first Trump administration, we doubled LNG exports from four BCF to maybe it was eight BCF or 10 BCF. And then the Biden administration got it up to about 14 billion cubic feet. And with all of the LNG facilities already under construction, we’re going to be up at 28 BCF by the end of this four years. And so I don’t know what that’s going to do to natural gas prices, but I don’t think it’ll have zero impact on natural gas prices.
Stephen Lacey: Jigar, you made a comment earlier about how solar and battery storage are saving the Texas grid every single day. And that’s actually not hyperbole. The state is seeing that solar and batteries together are really working and doing what they’re supposed to do.
We actually have a great interview. We do this show called “With Great Power” in partnership with GridX and Keith Collins, who is the vice president of commercial operations at ERCOT, joined the show and sort of talked about how renewables and batteries are working together.
And he detailed a variety of examples. When solar is dropping wholesale market rates, retail rates are going down, and also batteries are meeting the late daytime peak and during record breaking heat waves. Last summer for example, Texas avoided any conservation notices as solar and batteries, more solar and batteries were deployed.
So Jigar, how would you actually characterize the way renewables and batteries are working together on Texas’s grid?
Jigar Shah: It’s amazing when you think about who the smartest developers in all of Texas are. It’s the solar and battery storage developers. They’re the ones that are going through all the hoops, figuring out how to get the land rights, figuring out how to meet the transmission requirements, figuring out all of those pieces. They’re doing all that work.
But the part that you didn’t mention is that Texas is the world leader now, second probably only to the UK on virtual power plants. And so when you think about how they’re using behind the meter batteries, I mean today if you are on Tesla Electric, you can set your app to say, whenever wholesale prices go above this price, dispatch my Powerwall. And there are people getting negative $600 bills in the summertime from that.
So when you think about the fact that the new NEMA standard finally came out for the vehicle to grid architecture for connecting your electric vehicle to the grid, the first place people are going to do that to monetize their new electric car is Texas. Whenever you have a crisis, they don’t have a capacity market. So prices can go to $5,000 a megawatt hour, and if that happens, that power in your electric vehicle is probably worth putting back into the grid.
And so there is this extraordinary amount of innovation happening in Texas, which is why I find the fact that the legislature had to create this ridiculous boondoggle for the natural gas industry to beg them to build natural gas plants is ludicrous.
Katherine Hamilton: Yeah, I totally agree with Jigar. And remember, Texas has a great competitive, super competitive market structure. Their ancillary services are really valuable. It’s easier to interconnect. Land is cheaper. There’s also just this ability to do things a lot faster there given you have so much solar and batteries.
And I would point to a report that RMI did called “Power Couples.” And what it shows is, alright, let’s take an existing gas plant, they’ve got a good interconnection, use that interconnection because that’s always a hangup. Less so in Texas than in other places, but let’s use that and then let’s use the gas plant only after all the other grid obligations are met. And let solar, wind, and the batteries do all of the main stuff. You won’t be using that gas plant for very long.
Stephen Lacey: So Bloomberg New Energy Finance released numbers on Texas. They added nearly 10 gigawatts of utility scale solar last year, plus another 10 gigawatts of rooftop installations. Battery storage discharge hit an unprecedented 3,900 megawatts during peak demand. And that really helped during a lot of grid emergencies in the summer particularly.
The question is: can this keep pace with demand in Texas? So Texas itself is witnessing a big jump, 17% since 2021 with an 86 gigawatt peak. And that’s data centers, it’s electrification, it’s oil and gas operations in the Permian Basin. Jigar, can renewables and batteries realistically keep pace with that growth?
Jigar Shah: Well, basically where we are is Texas needs more capacity, and whether you’re subsidizing gas or whether you want more solar and battery storage, you need to pay for capacity. And so Texas has to figure out what that looks like.
So if it wants the solar developers to not just do two hours of battery storage, but instead do eight hours of battery storage, they need to say, here’s how you’re going to get paid for that eight hours of battery storage. Because right now the marketplace is paying for two to four hours of battery storage and saying, I don’t know that we’re going to fully compensate you for eight hours of battery storage.
If Texas wants that extra capacity, it needs to figure out how to compensate folks. And that same thing is true for new nuclear or new natural gas or for all of these things as Katherine’s suggesting, right? Because why would they pay for all that CapEx if they’re not going to be able to run enough and be profitable enough to get paid back?
And so I don’t think there’s a problem with the amount of assets that are in the queue in Texas. I think they have enough assets in the queue for interconnection to be able to meet the growth, but the economics are challenged in their energy only market.
Stephen Lacey: So Katherine, if I’m in the Trump administration and I say, let’s look to a state with no official mandate, it’s a free market, and understand what the market is telling us, what does the Texas market tell them is happening?
Katherine Hamilton: It tells ’em: Go for it. Clean energy is the way to go. And I think it’s really important. I think it’s also important to differentiate that ERCOT is not in FERC jurisdiction. In FERC jurisdiction there are a lot of things you can’t do that Texas does. And so Texas has a market that’s very amenable and open to these technologies and open to really kind of this free market world. Other states have a much harder time of it, and that’s what we have to continue to work on.
Jigar Shah: And this is the conflict, frankly, between the FERC story and the Texas story, right? Because folks are blaming FERC and their regulatory powers for why the rest of the markets are not as nimble as Texas are.
But the other state that you would point to that loves clean energy is North Dakota, and Doug Burgum knows a lot about that. And so I think everywhere you turn you’re like, gosh, so much wind, so much solar, so much battery storage getting added right now.
And make no mistake where the solar and wind industry are headed is towards capacity, right? So they’re moving away from just building solar and wind, and they’re moving towards building batteries, and it just happens to be that solar and wind are the most affordable ways to fill the battery with electrons, but you’re actually just building batteries. That’s where the capacity comes from, and I just feel like people are missing that big change. The amount of solar and wind that’s being added right now that doesn’t have batteries associated with it is almost zero.
Stephen Lacey: Good episode. This was a lot of fun. Katherine Hamilton, always a pleasure.
Katherine Hamilton: It was a pleasure to be here with you too.
Stephen Lacey: Jigar Shah, same.
Jigar Shah: I look forward to it every week. It’s amazing.
Stephen Lacey: This wraps up this week’s episode of Open Circuit. Open Circuit is produced by Latitude Media. Jigar Shah and Katherine Hamilton are my co-hosts. The show is edited by me. Sean Marquand is our technical director, and he wrote the theme song.
Latitude is supported by Prelude Ventures. Prelude backs visionaries accelerating climate innovation that will reshape the global economy for the betterment of people and planet. Learn more at preludeventures.com.
For more in-depth reporting on the topics we cover on this show, sign up for Latitude Media’s Daily, Weekly, or AI-Energy Nexus newsletter. You can just go to Latitude Media and hit subscribe, and of course you can find this show anywhere you get your podcast.
We’d love for you to spread the word. It’s been really remarkable to see how fast the audience has grown because so many of you had listened to us previously and we really appreciate you spreading the word, giving us a rating and review, telling your friends and colleagues to listen to the show.
So thank you. Thank you. Thank you for doing that and for being a listener. Of course, you can find transcripts at Latitude Media as well. If you want to revisit anything that we have said and share this wherever you are sharing things, we will catch you next week. Thanks for being here.
