The politics of AI and electricity came to the White House this week.
On Wednesday, the biggest tech companies in the world — Amazon, Google, Meta, Microsoft, OpenAI, and Oracle — gathered in Washington to sign what the administration is calling a “ratepayer protection pledge.” The promise: data centers will pay for their own power and grid integration costs.
But is anything actually changing? Or is it just political theater?
This week, we’ll look at the politics and intention of the announcement, along with some real-world models emerging for powering the AI economy.
In Minnesota, Google is pulling together a package of renewables, long-duration storage, and distributed batteries for a planned data center.
In Mississippi, xAI continues to build unpermitted gas engines and explicitly flouting air quality regulations.
And the Energy Department is also backing a grid modernization project that includes gas, nuclear, batteries, hydropower, and transmission upgrades.
Three models. Three very different bets on what the future of AI power looks like. Which one wins out? And more importantly, who pays?
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Transcript
Caroline Golin: Latitude Media, covering the new frontiers of the energy transition.
Stephen Lacey: Jigar, what time is it there in Copenhagen, like 10:00 PM?
Jigar Shah: 10:00 PM, the witching hour.
Caroline Golin: Is it still light out? No, just kidding.
Stephen Lacey: I admire the fact that you’re doing this show at 10:00 PM while you’re traveling. It’s like 4:00 PM here on the East Coast and I’m already really tired.
Jigar Shah: That’s how we do. The show must go on.
Caroline Golin: That’s how you do. I would be in bed.
Stephen Lacey: I thought you would be here stateside for the Ratepayer Protection Pledge ceremony, Jigar.
Jigar Shah: I mean, I wouldn’t miss it for the world, but for the fact-
Caroline Golin: You weren’t invited? You weren’t invited to give special remarks at the beginning?
Jigar Shah: I mean, I should have been.
Stephen Lacey: From Latitude Media, this is Open Circuit. There’s a well-known playbook in Trump’s Washington. Take something you’re already doing, package it up in a neat, simplistic way, let the president take credit and then hope that gives you political cover until his next fixation. That is what is happening with data centers and energy right now.
This week, the top tech firms building the biggest AI data centers were at the White House pledging to buy their own power. Americans are increasingly pessimistic about data centers, AI, and rising electricity prices, and this is the White House’s version of damage control. But if you look beneath the pledges, is there actually anything new here, or is it just a clever rebranding of what’s already happening?
This week, we’re going to look at the political theater playing out around data centers and energy. But while that theater plays out on stage, the more interesting action is happening in the wings, with or without the White House. In Minnesota, Google is pulling together a package of renewables, long duration storage, and distributed batteries for a planned data center.
In Mississippi, xAI continues to build unpermitted gas engines in a Mississippi neighborhood, explicitly flouting air quality regulations. And the Energy Department is backing a grid modernization project that includes gas, nuclear, batteries, hydropower, and transmission upgrades. Three models, three very different bets on what the future of AI power looks like, which one wins out? That is what we’re digging into today right after this.
Welcome to the show. I’m Stephen Lacey. I am the executive editor at Latitude Media. I am joined as always by Jigar Shah and Caroline Golin. Jigar is the co-managing director of Multiplier. He’s also the host of the Energy Empire podcast. You are coming to us from the most livable city in the world, Copenhagen. How are you, sir?
Jigar Shah: I’m amazing. And this mood lighting is doing wonderful for the skin.
Stephen Lacey: We got the weird flicker and something about the Danish fluorescent lights. Caroline Golin is in Atlanta, Georgia. Caroline, let’s just cut to the chase here. You’ve got some big news to share. This is a career changing week. What is it?
Caroline Golin: Yes, it is. I got a new cat. I’m adding to my hobby farm. No, that feels life changing to me. This week, I started as the new chief growth and policy officer for NRG, and I’m really excited about it. And it’s been sort of in the works for a little while, and it’s a new adventure. And it’s one that I’m taking with a lot of enthusiasm. Yeah.
Jigar Shah: And it couldn’t have happened to a classier lady.
Caroline Golin: Oh, thank you, sir. Thank you, thank you, thank you.
Stephen Lacey: Well, you are still going to be doing the podcast but you will be showing up on the podcast a little less frequently, and we’ll still save the seat for you. But you can expect Caroline not to be here every week, which makes us very sad, but we’re super excited about your role.
I’m kind of curious about what you think it will entail. What’s your mission? NRG has gone through a lot of different evolutions. It went bankrupt in 2003 after the market fallout of the Enron scandal. It went headfirst into renewables and rooftop solar in the 2010s. Today, it’s focused a lot more on retail consumers and VPPs, and thinking about a cautious gas buildout to data centers. What kind of company is NRG today and what’s your mandate?
Caroline Golin: Yeah, I think that energy of today will not be the energy of the future. And there’s new leadership. There’s been excellent leadership, but Rob Gaudette has taken over and will start as CEO sort of at the end of April. And his vision is really to take NRG to be the supplier, to be the partner, to be the provider of where the grid needs to go over the next 20 years.
And I’ve spent the last 10 years on the side of thinking that the customer needed to be setting the tone. And I don’t think there was a single person in the industry who grabbed the platform that the tech companies provided and ran with it and demanded what I thought the market should look like and what I thought product should look like and really pushed to say, “This is where our industry needs to end up.”
I did that somewhat unapologetically, but I do believe it’s time for the supplier community to take that back. I believe it’s time for the entities that are building the steel, putting the workers to work, making the investments that are going to last the next 20, 30, 50 years to really be dictating the innovation and to take that mantle.
And so that’s what I hope to do at NRG. I hope to be a voice for innovation, like I always hope to be. But more importantly, I hope to really drive an agenda that meets the market where it is right now in terms of affordability, customer savings, the ability to bring power to the table and do so in a way that leaves the community and everyone better off, and then start building for the future of where we need to go.
And I believe in where Rob wants to take the company. The people there are the nicest I’ve ever met. And other than the fact that I’m having to learn how to work off a PC for the first time in my life, I’m doing okay, day three.
Jigar Shah: Just remember, batteries today, batteries tomorrow, batteries forever.
Caroline Golin: Yes, I know. We need the sweatshirt forever. But no, in all seriousness, we all know the opportunity. And I think the customer segment has set the demand signal and it’s time now for the suppliers to rise with the creativity. And that’s what I hope to do.
Stephen Lacey: Yeah. We’re incredibly happy for you. We’re bummed that you won’t be here every week, but we’ll continue to rely on your insights, particularly from this new perch. But you will be with us at Transition-AI on April 13th and 14th in San Francisco. So if you want to come see Caroline and Jigar and me come to Transition-AI, it’s shaping up to be a great show.
We’re going to have a live episode of Open Circuit, a live episode of Catalyst with Shayle Kann, a bunch of presentations and panels and workshops. So check out the agenda at latitudemedia.com/events, and you can get a discount pods, P-O-D-S, PODS10 at checkout. That’s a little bonus for our listeners and viewers.
Okay, onto the rest of the show. I said a while ago that we’re not going to be a data center podcast, but here we are talking about data centers again. And the reason, I think, is because they have become obviously the center of the US energy economy, but they become like a battleground where we see renewables and batteries going head-to-head or pairing with fossils. They’re a proving ground where we’re seeing new contract structures and portfolios of clean energy that are getting built and tested. We’re going to talk about some of those today. And they’re a Rorschach test for how you think we should build the energy economy.
And so they are really driving US federal energy policy right now. And that was on full display this week at the White House, where just a few minutes before we hit record, execs from Amazon, Google, Meta, Microsoft, OpenAI, and Oracle were at the White House on Wednesday signing what is called a Ratepayer Protection Pledge. And they’re basically saying their data centers are going to cover their own power costs and grid upgrades.
And it’s a direct reaction to the anxiety people are feeling right now. A new poll found that more than half of Americans oppose data center construction near their communities and rising utility costs are their number one concern. Two governors won landslide elections last November running on a platform to reduce electricity prices. And the White House might have a hard time getting Trump to talk about the economy sometimes, but he’s really latched onto this issue and he used his State of the Union address to declare that he’s going to put together this pledge.
So I just want to talk about the politics of this and is there anything new here? Caroline, what is your understanding of what the White House and the tech companies are trying to do here?
Caroline Golin: Well, I think that it’s important for the audience to understand that a lot of these tech companies have been doing good in their communities for a very long time, either because of a desire not to look self-serving or honestly because of a failure to invest in their storytelling. It’s gotten lost over the last several years.
And so what I see happening is the administration saying, “We are going to be respondent to the populace, we’re going to be respondent to a major political threat and a legitimate issue around cost when the entire economy is increasing in costs, whether it’d be healthcare or consumer goods.” And the one way about going about that is to corral 40% of our economy in these tech company investments and say, “You’re going to promise to do good. You’re going to promise to do good by our communities.”
As far as I can see, 90% of that do-good is what these companies have been doing for a very, very long time, most of them at least. There are a few bad actors in there, but most of these companies have been doing this good for a while.
The novel piece of this is the administration’s decision that a bring your own power solution is going to be the fix for all ailments on the grid. And I think we can debate whether or not that is the fix, but that is the only thing that’s really novel here because if you think about the energy strategy for most of these companies, it was really an energy-only strategy. It was taking a market tariff and then offsetting it through a renewables portfolio, or in some cases, an investment in other types of clean energy.
And so the idea that you are now in charge of power procurement and power development and bringing power plants to the table, that is a new feat and new challenge for these companies to rise to. And some are doing it very poorly and some are muddling through as best they can. But 90% of this do good in the community are, one, things that every company has already been doing, and two, already exist within the regulatory structures of most of our states. They just haven’t been exercised because the volume wasn’t scary enough before.
Stephen Lacey: Yeah. I think that’s somewhat, if that’s an accurate but somewhat positive way to frame it, I think there’s also a cynical way to frame it.
Caroline Golin: I’m always a positive framer, Stephen.
Stephen Lacey: I mean, I think there’s also a cynical way to frame it, which is like the administration is desperate to do something on this and the tech companies are looking to repackage this because it’s a great PR move, even though they’re already doing this stuff. Jigar, where do you fall in the spectrum?
Jigar Shah: I guess what I would say is I think this is another example of the administration having no idea what they’re doing. I think when you think about the fact that Caroline is going to NRG because we need to figure out how to bring in demand flexibility and VPPs and all this other stuff.
It is very obvious that the vast majority of tariffs in the United States do not include the best technologies that the utilities can deploy to minimize the rate increases on customers. It can be, on the one hand, accurate to say that the data centers are paying their way, and on the other hand, saying that the utilities are deliberately doing things in the most ham-handed way possible to not actually achieve the lowest possible costs.
Google has announced that they want to pay for advanced conductors for utilities, and the utilities are like, “Hells, no, we’re not letting you do that.” People have said, “We want you to do grid-enhancing technologies.” They’re like, “How about no freaking way?”
Stephen Lacey: Is that true that Google has gone and asked to fund that?
Jigar Shah: Yes. They had a big press release, of course.
Caroline Golin: Yeah, we did. We did. We tried very hard to push that all throughout PJM.
Jigar Shah: Right. And then on top of that, you’ve got people who basically are like, “Well, we’re going to put a 300 megawatt battery right next to our data center.” That is not the best way to do it. The best way to do it is to put 250 kilowatt batteries at schools, hospitals, at community centers, churches. Then people are like, “Hey, maybe I actually want this stuff in my town,” as opposed to just having 18 months’ worth of construction jobs and then no real resiliency in my community.
I just think that it could be on the one hand true that they are doing what they are being told to do to try to not shift costs and on the other hand going, “We have 12 great ideas that are way better than what they’re doing.” And the White House is not coordinating that in any way, shape or form because they really desperately want everyone to build natural gas plants behind the meter and there’s not enough turbines to do that. And so they can’t see past the fact that those turbines aren’t there and they forgot to read the liftoff reports for VPPs and grid-enhancing technologies.
Stephen Lacey: I mean, predictably, the president did explicitly talk about clean, beautiful coal, natural gas, and nuclear. So those are the technology sets that they are hoping this promotes. Caroline, when we say data centers are going to pay their own way, what do you think the administration is trying to say here? And do they pay their own way when they’re integrating into the grid and what more could they do?
Caroline Golin: Yeah. So I think what the administration is dangerously potentially saying is data centers are going to build their own mini-grids or microgrids, right? They’re going to island. And in fact, I think they did say that at one point, right? And I think the danger in that, of course, and anyone who’s studied the grid before and power dynamics is building a bunch of little microgrid loops is dangerous for overall reliability.
Stephen Lacey: Yeah. We talked extensively about that a few weeks ago.
Caroline Golin: It’s dangerous for that, yeah. And so I think that what the administration is backing themselves into is a very scattered view of how the grid gets planned.
I think what they want is, I think they want to show that they have an answer. I think that their answer needs to involve improving the market value of the technologies that they want to see utilized. And I think that they’re not going to bother themselves with thinking through strike prices and speed to capacity and market signals that should probably be thought through in order of fixing these problems.
And I think the fear is-
Jigar Shah: I wonder, it would be great if they had 10,000 engineers, scientists, and experts that worked somewhere in the system, maybe at the national laboratories that could model this for them and actually tell them how to do this. But oh my God.
Caroline Golin: At the same time though, I do think there are a number of folks on the AI data center side that are also telling them that this is the way they need to go. And I’m not surprised that it’s being reinforced in the way it’s being reinforced.
Where I get frustrated is to see PJM not push back for clarity on certain things, not say, “Well, what do we actually really, really mean by bring your own power and what power counts and what power doesn’t count? And is it really only going to be behind the meter turbines and nuclear that counts for this?” And I think the sheepishness on that side is frustrating for me to see.
Stephen Lacey: I just want to take a step back and ask the simplest version of this question possible for people who are maybe seeing clips of the Trump administration talking about how they’re going to save ratepayers’ money or not pass on costs. Will this do anything?
Jigar Shah: I mean, no. Have you met this administration? No. Literally, I’m just saying that like after this big polar vortex that just went through the country, everyone is going to open their electricity bill or gas bill and see a doubling of their bill. And then you’ve got this showman on stage basically saying, “The data centers are going to pay their own way. They said they’re going to pay their own way.” I trust them. Don’t you trust them? No. The polling says that no one trusts them.
So the question becomes, how do you build that trust? It’s not by just dictating that clean coal is going to solve the problem. It’s by having the US Department of Energy do a study, figure this out. How do we get more stuff out of the stuff that we’ve already paid for like Governor Spanberger just passed this week in the Virginia House and Senate where now they’re demanding grid utilization, data being submitted by Dominion to the regulator? And now they’re going to have to increase grid utilization using the data centers.
I just think that you can both be accurate and say that data centers are paying their own way and end up with 9% rate increases for everybody if you don’t do it the right way. And so I don’t think Americans are stupid when they get rate increases that are $31 billion, right? Is that what Powerline said, like the utilities filed for over the last 12 months? And the president says, “Don’t worry, I’ve wrangled up all these data center companies and I’ve fought them to submission.”
I mean, sorry, I don’t believe you when there’s $31 billion worth of rate increases in my bill.
Stephen Lacey: Caroline, it looked like you were winding up for a more nuanced answer.
Caroline Golin: So here’s, it’s a both-and answer. I think that this will create the political pressure for utilities and regulators to both ring-fence costs that are directly attributed to data centers. It will also, if unchecked, do nothing for a continued poor investment model in the overall buildout of the grid. And that has been a runaway train for quite some time and will continue. And if you actually look at what’s driving up customer costs, that’s 50% of it.
So yes, Jigar is right. You can pay your own way and the grid costs can still go up. I think this will minimize the top end of what that could do because now utilities and now special auctions will force a ring-fence. But it is completely disingenuous anywhere to say that rates are not going to go up over the next couple of years, irrespective of this or anything.
Stephen Lacey: Let’s actually just turn to what is happening on the ground and work through a few examples in this context. I had to chuckle when the president used the signing ceremony to talk about how he invented the idea of on-site power plants for data centers.
So there’s a lot of activity going on in this space and there’s a lot of different types of projects. Let’s talk about this big project announced by Google first. This week, Google announced that it’s building its first data center in Minnesota in a small town called Pine Island. There’s been a bit of local resistance to the data center, but Google is moving ahead with the clean energy, very ambitious clean energy strategy and partnership with Xcel that includes a couple of gigawatts of clean power, which also includes 300 megawatts of long duration storage from Form Energy.
And it’s investing $50 million into a new distributed energy, distributed battery and connected device program with Sparkfund. Google also says it will pay 100% of the grid infrastructure costs through a financial structure that was… Was it invented by you, Caroline, or just worked on?
Caroline Golin: I would say I was the inventor but not the full-time engineer. That role belongs to Briana Kobor.
Stephen Lacey: Well, it is.
Jigar Shah: And the President of the United States.
Stephen Lacey: Yes, exactly. Make sure you give credit. They’re using this financial structure called the A Clean Energy Accelerator Charge, which is based off of this rate that Caroline helped build in Nevada when she was at Google called the Clean Transition Tariff. So let’s just dig into the details of this announcement. How unique is this Pine Island procurement relative to Google’s other procurement?
Caroline Golin: Well, it is almost exactly what Google did in Nevada with the CTT. I think we just like new nomenclature. Every utility wants to have their own special sauce nomenclature. But from what I know and what I can see, it’s the exact same structure, which is a very different version of bring your own power where instead of Google going off and building something behind the meter and ring-fencing it.
Google worked directly with the utility and the grid planners, worked with the resource planners to say, “What actually is the transformative technology that’s going to drive decarbonization across your system? Let us invest in that in the same way we identified Vrbo and Geothermal in Nevada.” The Google team this time identified long duration energy storage and said, “Well, we will invest in that. We’ll be the catalytic investor in that. And in return, we get to accelerate capacity being brought on the grid to service our system.” And it’s really a win-win.
And if you think about it in terms of a financial product or a contract, the CTT is really just a contract for differences on capacity within a traditional utilities resource plan. And while the actual tariff hasn’t been filed and for all the regulatory and sort of contract nerds out there, I’m sure once that’s filed, dig into the docket and you’ll see sort of the math and how it’s structured.
But it’s a very different perspective. And I know it’s the perspective that I had and Briana continued to carry on after I left Google, which was that ultimately the win-win situation is when Google’s capital and ambition was working hand in hand with the needs of what that overall system really needed. And this is a great showing of that and my hats off to the team.
And I think what it also shows is that we can do innovative contracting in this industry. I mean, for such a long time, 90% of the volume of anything that was purchased was the exact same contract structure. And this is a proof point that Google can create something, pilot it, and then have it scale.
And I think what isn’t really in the news too much is that they’re expanding the CTT in Nevada as well. So I think it’s catching on and I think it’s a great structure. And Briana and the rest of the team that worked with her on this deserves so much praise.
Stephen Lacey: Jigar, what stands out to you about this deal?
Jigar Shah: Well, first, Briana is amazing, so shout out to her. I think the world of her. Look, I think that I’ve had a good chance to talk to Google Tapestry to GridCARE, which Amit Narayan has started with Arun Majumdar over at Stanford. When you look at the data that’s out there right now, you can structure tariffs like this to accommodate 100,000 megawatts of new data centers at a fraction of the cost of what they’re doing now.
That is what this deal shows. It’s like basically here are the two choke points. If we pay for these choke points, can you let us interconnect faster? Yes. Fantastic. How about we just get that done? And that’s what Amit just helped negotiate with Portland General with Maria out in Oregon. And so you have all this capacity where it’s available 99.7% of the time, like Tyler Norris was suggesting. And now it’s like Google, because they have a sucking sound of hiring the best people in the country. And then basically you can negotiate these clean transition tariffs.
And it is very obvious that they wouldn’t have done this but for the clean transition tariff, right? As much as I love Xcel Minnesota and I love all these folks like Nevada Power, et cetera, they would have gone into old bad habits if it wasn’t for Google saying, “How about this? And we’ll pay for it.” And they’re like, “Okay, I guess you’re right. We could build long duration energy storage at this substation and actually power through the 200 hours where it’s congested without upgrading it and all these other things.”
And so I love that they’re using this. I love the fact that Google took the time and effort to actually push this solution through. I hate the fact that it has to be this level of effort every single time. It’s not clear to me that it’s like now a snowball going downhill that’s actually paving the way for everyone else to do it easier.
Caroline Golin: A very good point. And I think the CTT in Nevada took 18 months, and I think this one took about nine. That’s too slow. And so the struggle that you have here is that every regulatory structure, every utility wants to be a snowflake. And to some degree they are, because we’ve got 5% tweaks here and there about how they do resource planning or rate forecasts and all that stuff.
And so the problem that Jigar is pointing to is that just the regulatory calendar does not move fast enough in order to capitalize on the innovation that’s flooding into the market right now on crowd contracting. And as we’ve said before, and I’ve said several times, it is actually the contracting for power and the regulatory process which slows deals down.
Jigar Shah: And I’m not sure who the person is at Oracle that’s supposed to replicate this. I mean, this is the thing that I-
Caroline Golin: Maybe they’ll hire you.
Jigar Shah: Well, they clearly are hiring StarPlus to do weird ass stuff in places around the country, like with backup natural gas generators. It irks me to no end because it’s tied to the White House event, where it’s like you could do it this way which is amazing, or you could do it this way that is not amazing. And the not amazing way is what the White House is suggesting everyone do.
Caroline Golin: Well, and I think that there’s opportunity to grow there. And my hope is that… I mean, you can do a CTT in PJM. The structure works, and actually the CTT is part of MISO. So I mean, it works. My hope is that, and this I kind of go back to my previous comment, is that the wholesale markets, the RTOs, they need to push back with solutions that are even bigger win-wins because ultimately it’s their neck on the line if the administration plans don’t work.
And the real threat there, and I think we have to call it, is the real threat to PJM and everyone else is that these governors are just going to re-reg and say, “Oh, fine. If the rate increase isn’t happening in Xcel or it isn’t happening in Nevada because the tech companies have figured out a way to bring capacity there and ring-fence it well and actually it’s doing better for the grid, okay, well then let’s just re-reg.”
And so there’s an existential threat there for these RTOs if they don’t figure out how to thread this needle correctly and they’re going to need to.
Stephen Lacey: Let’s talk a little bit about the distributed capacity procurement through Sparkfund and Xcel. This is essentially utility owned and operated batteries, distributed devices to open up grid capacity. I know that there’s been some criticism to this approach. Jigar, you’ve been really supportive of it. Can you just talk through like what has been the debate around the DCP and how important is it that Google invested $50 million into it?
Jigar Shah: Well, let’s start by what it represents, which is that we have been saying for the better part of my entire career that putting distributed DERs on the distribution circuit can defer upgrades and/or help free up capacity to bring more capacity online faster. And everyone is like, “No, it can’t. Stop talking about it.”
And so now for the first time ever, we have a utility that says, “Yes, you’re right. We can do that with strategically placed batteries front of the meter.” So it’s not like behind the meter providing backup power to these folks. It’s like on land that’s near a building and they’re getting paid rent.
And part of the reason why Xcel Minnesota was so eager to do this is because Tim Walz was pissed. And the governor was like, “I brought all these new manufacturing facilities and all these other people to Minnesota and you’re giving them four-year interconnection timelines. What the hell? You’re of one job. I give you a monopoly, you’re supposed to promote economic development. Get it done.” And so Xcel was like, “Well, the only way to get it done is to put these batteries front of the meter.”
So that’s why Ryan Long led the charge, and he and I and Pier LaFarge did a big panel over at SPI and it was great. And now they’re trying to get to the finish line on that stuff. And so I think it’s great. The pushback comes from a lot of solar developers and others who just don’t want to see utilities own infrastructure. And they’re like, “Why can’t you just send a signal and pay us to do it? Community solar, now we do community batteries.”
And I think that ultimately that may be where this goes. This is only a phase one and phase two approval, and then phase three, four, and five still have to be done. And so in phase three, four and five, the regulator might say, “Hey, I don’t think this came in as cheap as we wanted it to. Let’s have some more competition from the private sector.”
So I don’t think that we’ve closed off the ability for the private sector to own these batteries and respond to a signal. But right now, what the utility feels comfortable with is them owning it, them dispatching it, and then they are fully willing to admit that DERs play this role. I’m taking the win. Lord, almighty, it’s been 20 years, I’m taking the win.
Stephen Lacey: Caroline, how much of a win is this for the idea of strategically placed distributed batteries? Is this a scalable approach? Was it unique to Minnesota?
Caroline Golin: I think it’s scalable. I think it is a win. I think it’s something that has been in the works at Xcel for a while. I don’t believe that Google did not have to do the conversion on that side. I think the concept that the DERs and customer interoperability was going to be a solution set in the future was there.
Where Google came in was as an anchor customer, which is the role that they should be playing. And then they get to count the savings and show a tangible response to, we are working to keep customer rates low. And the affordability question is paramount right now, and it shows that Google is taking it seriously.
I think that the concept in general is incredibly scalable. It’s part of the reason why I’m going to NRG is because I think the smart home and storage is part of the solution here. I hope, and I think it goes back to the previous statement, is that it doesn’t take three years to build that internal championship everywhere we go. And what that is going to take is the Sparkfund model becoming really standardized in a bilateral market, and to be able to do that and rinse and repeat.
And so far, that’s had some fits and starts and is a bit bumpier and changes in market rules aren’t helping. But that’s really what it’s going to take. But absolutely, it’s a big deal and hats off.
Stephen Lacey: So if this is the way it should be done, let’s look at the other end of the spectrum. I mean, at this event, this Ratepayer Protection event, Trump was talking extensively about gas and scaling gas as quickly as possible. And so you look at xAI, which has been placing unpermitted gas turbines in Memphis and in Southaven, Mississippi, dozens of gas turbines with no permits, no warnings to neighbors, running around the clock with higher than average air pollution levels, schools nearby.
There are recently, there have been thermal drone images showing the turbines still burning after the EPA said these machines do actually require the Clean Air Act. These are just turbines sitting on tractor trailers. And the argument was that they’re temporary and that they’re not bound to the Clean Air Act.
But I guess the worry is that this is kind of the vision that the White House imagines, like this is what data centers paying their own way could unlock. How worried are you that this could be a model that starts to dominate?
Caroline Golin: I don’t think it’s going to be a model that dominates.
Stephen Lacey: Is it just exclusive to Elon?
Caroline Golin: I mean, I don’t know when he has held reverence for precedent in the past, so for better or worse. I don’t think it’s going to be a model. I know the leadership, well, not at Oracle as we’ve clearly identified, but at most of these other companies, and I don’t see that. And I think it is a rogue, risky outlying model.
I think the bigger potential is, we’ve talked about this before, but it’s more like the five gigawatt middle of nowhere training sites that just look like their own municipality and maybe have one tie-in back to the grid. That I think is going to happen.
But this Frankenstein approach, there’s too much risk in it on the supply side and there’s too much political damage. I don’t see it being a model. In fact, I think it’s something that will be used sort of as a whipping post moving forward.
Stephen Lacey: Yeah. Jigar, do you agree with that? I love the description of it being the Frankenstein approach. Is it sort of exclusive to xAI? Do you worry about it being a more common development model?
Jigar Shah: So I think this level of egregiousness is xAI, but there’s a lot of other people doing something just as dumb. I mean, the JUUL project in Utah is building 2.9 gigawatts of small solar turbine natural gas projects that are just lined up. I just think that it wasn’t but three years ago that we were talking about how natural gas doesn’t burn cleanly and puts pollution in your kitchen.
All these people who live around it, it’s not victimless. There’s all these people that have to breathe the air around where these piled up natural gas turbines are. Meta put 31 different types of turbines next to each other in Ohio, so it’s not just an xAI problem.
I just think that in general, when people do things and have blatant disregard for the people who live in those communities, believe them and actually believe that that’s who they are inside. Then those are the values that they hold, that winning that AI race is more important than that community’s health.
And I just think that people just gloss over this. It’s not a problem. It is a problem. There’s a reason why we have an EPA. That’s a reason why these power plants are sited where people don’t live. I don’t understand the callousness by which people just get away with this stuff.
Stephen Lacey: Caroline, we just described the Google method, which is really taking seriously the health of the grid and the local impact and procuring lots of different kinds of clean resources. Recent polling shows that people are theoretically more accepting of data centers when there’s clean energy attached to it. Do you think that in this environment where people really distrust data centers and they’re concerned about prices, can a company like Google move the needle when it is doing something the right way?
Caroline Golin: I think Google is moving the needle. I think the question you’re beating around is like, will Google have to or want to invest in turbines and will those be co-located and will it go down that path? I think the answer is yes. I think they will do it with a greater attention to a larger vision on a product that they want to develop.
And I think they will do it in a way with the utmost attentiveness to the community. I think we can’t dance around the fact that, and we shouldn’t, that there’s going to be turbines and there should be turbines built to meet this load growth. That’s just a fact. And there is a cap on that market, but it’s one that is going to grow.
How you do that, Frankenstein versus purposeful and part of a larger product, those are sort of the two ends of the spectrum. And I think Google will be on the more purposeful side. And I think those that are on the Frankenstein side risk a moratorium being run, and that’s Google’s biggest risk.
So the reality of this marketplace is that you don’t pass legislation that says all data centers except for Google. That’s very rare, right? You pass a moratorium, it’s going to apply to everyone, especially when 50% of market development is by third party initiation. We are only as secure as our worst actor.
Stephen Lacey: So let’s bring this back to one more example and tie it closer to the Trump administration. Last week, the Department of Energy’s loan programs office closed a very large loan guarantee, $26.5 billion for Georgia Power and Alabama Power, two utilities owned by Southern Company. The money is going toward new gas plants, battery storage, grid-enhancing technologies, transmission lines, expansions of existing nuclear and hydropower sites.
Jigar, this is something that you worked on and the administration decided to carry the torch. They changed it a little bit, or Southern Company changed it a little bit. Just explain the project itself and does it say anything about the administration’s priorities?
Jigar Shah: Yeah. So it was something that we had put together before we left office. I think that in general, the way that the loan program works is it’s guaranteed by the utilities. So it’s a pretty easy loan to get done because the utilities are creditworthy.
In general, the purpose of the loan is to basically be at 80% loan-to-value, so then that helps change the dynamics around the overall equity-to-debt ratio for the utility. So it’ll save $7 billion of ratepayer costs over the life of the loan. So it’s a big deal.
In this loan, they added natural gas. I want to make sure people understand that they’re not actually funding natural gas. This is just a $26 billion loan that’s being taken out by Southern. And so it’s not actually for anything.
The statute says it has to be for new stuff. So they figured out what new stuff are we building? And natural gas funds were one thing, and they just basically are borrowing the money, but it’s just guaranteed by Southern and they’re paying it back. And so had we been in office, we would’ve also given them $26 billion. We would’ve just named a different list.
And weirdly, the press release that the administration put out did not mention batteries in the press release, even though it is a prominent part of the overall mix. And my understanding was the loan was delayed by over five months because the administration wasn’t sure they wanted to include batteries in the loan. And Southern Company to their credit said, “We’re not closing unless you include batteries in the loan.”
The last thing I’d say is that I think that to Caroline’s point, Southern Company does this stuff very thoughtfully. These gas plants are going to be placed in the right locations. They paid GE Vernova for these turbines two and a half years ago, and so they got them for a pretty decent price. They’re installing them in the right places where you minimize any emissions or pollution for local communities.
I just think that in general, this is like how you want this to happen is through a structured planning process that is going through the regulated utility, that’s evaluated by the regulator, all of the things that we did not see in the xAI and Meta examples.
Caroline Golin: But Jigar, can I ask you a question?
Jigar Shah: Of course.
Caroline Golin: What does this say when the third, is it third largest balance sheet, second largest balance sheet in the country is using this type of program to invest in things that arguably there’s very little risk? What do you think that means for where we think capital costs are going to go moving forward or supply is going to go? I mean, if I’m looking at that and going, okay, if Southern doesn’t think they have the balance sheet to incrementally do this, what does that say?
Jigar Shah: So I don’t think that’s what Southern is saying. I don’t think Southern is saying that they couldn’t get the money out of Wall Street. They’re saying the money out of Wall Street would have been 75 basis points more expensive, so that would cost ratepayers more because whatever interest costs they pay has to be passed down to ratepayers.
And if they were going to raise money from their normal sources, they would have had to stick to their 50% equity, 50% debt ratio. Whereas with this loan, they could say, “Well, because the federal government’s mandating, we do 20% equity, 80% debt, we’re doing it that way.”
And just so no one is confused, the law itself says that 100% of all of the ratepayer of the Southern Company interest savings has to be passed on a ratepayer.
Caroline Golin: Has to be passed on. That’s right.
Jigar Shah: And so I think this is Chris Womack saying, “I want to do my ratepayers a solid.”
Caroline Golin: Yeah, I agree. And I think it was important that you point that out because I think that you can look at this in a lot of different ways from a cursory perspective. But I agree with you that this is Southern being thoughtful and they plan to be around for a very long time and they care about their communities. But thank you for clarifying that for everyone.
Stephen Lacey: So where do you guys think this is all headed politically in terms of structuring policy? I think this is a big moment that the administration put together this signing ceremony because it says that they’re really reacting to something that is happening out in the world, a real concern about data centers. They see it as a lever for their energy dominant strategy.
But I don’t know. If you’re a ratepayer out there and you’re not sure how to think about this, how is this going to play out?
Caroline Golin: Well, you know what I think is interesting is like all the other areas of the economy where costs are going up, we’re not seeing the same type of signing. So this has been singled out because the administration thinks it will be able to place its thumb.
And in truth, if it works, I’m not going to say it’s a rounding error because it’s definitely not a rounding error in the total cost of meeting this AI goal, but it’s not worth the political blowback because there is a difference between the increased cost to build and the deletion or the removal of the opportunity to build through political just moratoriums and blowback.
And I think that is ultimately what the administration is trying to avoid. Is it artful or surgical in the ways we hope that it would be? I think probably not, but ultimately what it’s trying to avoid is getting in a fight with state legislature and county commissioners forcing them to build data centers on farmland and in communities where his voter base is, and that’s what he doesn’t want to deal with.
And I think he could avoid some of that with this, but I think this is only one piece of an overall puzzle and it will get a lot of fanfare and I think the administration will like that as well.
Stephen Lacey: Yeah. Jigar, what do you think it says about the path ahead, the likely scenarios ahead?
Jigar Shah: I think this administration is dumber than doornails. I think when you think about 81 million people that were affected by the polar vortex in the last 30 days and are going to see a bill any day now that’s double what they expected it to be, I don’t think this issue is going away. And the fact that the Google approach in Minnesota is one tenth the cost of everyone basically overbuying and bidding up natural gas behind the meter, mini microgrids as Caroline will call them.
And the only way to reduce costs, anybody with a bachelor’s degree knows this, is you have to limit the amount of expense in the numerator and greatly expand the number of kilowatt-hour sales. That’s the formula. They are not doing that. We have the best companies in the world who know how to do that. Tapestry can do that. GridCARE can do that. There’s a lot of people who’ve mapped out the entire grid. We know exactly where to put all these data centers and like minimize the cost for ratepayers.
But now you’ve got an administration who literally can’t figure out that these people are employed at the national laboratories. And so we are in a place where they’re doing things deliberately in the most expensive way possible because it actually makes them feel more like a man. It’s like the Mark Zuckerberg masculine energy meme from the inauguration. And I’m tired of it. One in five households are now behind on at least one energy bill. It is getting worse, not better.
And I don’t think people believe that this charade at the White House means that they’re looking after those people. I think they’re going to look at their bill and go like, “I don’t know. The president said this thing, my bill says this thing.” It’s like nuts, completely and utterly nuts.
Stephen Lacey: One final question on this. I guess that the tech companies are playing the administration’s game right now. The administration has a very specific goal in mind, which is build lots and lots of gas and nuclear. Is there an opportunity for a Google to show the administration the Minnesota approach that we’re talking about? And do you think the administration over the course of the next few years will be more receptive to these solutions?
Jigar talked about that they wanted to delete battery storage from the Southern Company loan guarantee, but will there be a point where they realize like, “Oh shit, yeah, we shouldn’t delete that. This approach is actually working”?
Caroline Golin: Yeah, I think there’s an opportunity. I don’t think it’s their job. I mean, I think it’s Xcel’s job. I think it’s Berkshire’s job. I think it’s the supplier community job.
Jigar Shah: And the PJM’s job, right?
Caroline Golin: And the PJM job.
Jigar Shah: The PJM in the special auction is saying that they’re not going to allow behind-the-meter batteries to qualify in the special auction because they think the White House doesn’t want them to qualify. And that is the fastest way to deploy batteries. Building batteries on the transmission grid is a multi-year interconnection process.
I think Eolian took them five years to put their big battery facility in Cleveland. And so if you want the special auction to deliver gigawatt hours and gigawatt hours of batteries by 2028, you do them behind the meter, right? I don’t know what’s happening here, but the PJM doesn’t want to stand up to the White House.
Caroline Golin: No, and also I think that if you look at the supplier community in PJM, it’s incredibly fractured right now. So there isn’t a unified view on how to meet this threat or this opportunity and that’s slowing it down.
But I really, I don’t think it’s Google’s job, and I didn’t think it was our job when I was running it to say, “We’re not only going to create the solutions and finance those solutions, then we’re going to go market the solutions and do the political cover solutions.” I mean, come on. The rest of the ecosystem has to step up.
Stephen Lacey: Well, I find this whole scenario endlessly fascinating. And I think it is the thing that is getting people to pay attention to where they’re getting their energy costs in a way that they haven’t before. And so hopefully there is a window of opportunity to talk about the real clean set of solutions that are cheaper and faster. And that’s what we’re here to do.
So Caroline Golin is the chief growth officer at NRG. Got to get used to saying that one. Congrats on the job, really good to see you. And I guess we’ll see you in a couple of weeks.
Caroline Golin: Mm-hmm.
Stephen Lacey: Excellent.
Jigar Shah: Where drinks are on Caroline.
Caroline Golin: Right, with my cat. But I totally made that up. I didn’t get a new cat. I just thought it was a funny line to say.
Stephen Lacey: We’re psyched for you. And Jigar Shah is the co-managing partner of Multiplier. Check out his other podcast, Energy Empire. Jigar, thank you so much for recording late at night in Copenhagen. Really appreciate it.
Jigar Shah: Not a problem. Always a pleasure.
Stephen Lacey: Open Circuit is produced by Latitude Media. Jigar Shah and Caroline Golin are my co-hosts. I am Stephen Lacey, your co-host and executive editor. The show is edited by me, Sean Markwand, and Anne Bailey. And you can of course find all of our episodes on YouTube at Latitude Media’s YouTube page. You’ll see shorts, like cutdowns of the episodes and full episodes. And of course, find the audio version anywhere you get your podcasts.
For more in-depth stories on what we cover, go to latitudemedia.com and subscribe to our newsletters. And we are really hitting the AI-energy nexus hard. We’ve got a great newsletter over there that digs into all the stuff that we often talk about on this show. So thank you all for listening and watching again. We will catch you next week.
