First principles in electricity policy
And other updates from Abundance Institute’s energy team
TL;DR: 1) Some media hits, 2) Jesse Peltan speaking in Houston, and 3) Your talking points for chatting energy issues at family dinner.
I went on the First Principles podcast earlier this week to discuss why energy matters for a future of abundance. The bumper sticker idea that host Saagar Singh Sachdev and I discussed is simple: prosperity is energy-intensive.1
I also went on the Lars Larson show to talk about artificial intelligence, load growth, and energy demands.
Podcasts and radio are night-and-day different formats. Saagar and I talked for about an hour, and Lars had me on for about 5 minutes. Yet they are precisely the same in that you kick yourself in for poor wording choices and what you get wrong in the moment.
My big mistake with Saagar was calling PJM a northern regional transmission operator–PJM abbreviates Pennsylvania-New Jersey-Maryland! The other member states are Delaware, Illinois, Indiana, Kentucky, Michigan, North Carolina, Ohio, Tennessee, Virginia, and West Virginia, for 13 states plus Washington DC in total. However, I also think my explanation in the podcast of connect and manage, Texas’ operating philosophy, pales compared to reading the work of people like Jacob Mays and Tyler Norris.
With Lars, I wish I had emphasized the value of natural gas for a system with more non-dispatchable renewables joining the grid. I tried to make this point, but given Lars’ response, I don’t think I made it clearly or compellingly enough. Natural gas continues to be the unappreciated middle child in energy policy. For what it’s worth, it looks like the opposition to natural gas comes from the small-loud-and-onlines (SLOs) rather than a meaningful proportion of Americans.
That suggests a somewhat strange politicization of energy sources. Some commentators have painted red and blue on top of specific sources. None of that matters on the grid itself—electrons spend like dollars because one is as good as the other. If you have simple price signals, as Saagar and I discussed, then investments in different energy sources follow without regard to the politicized paint color.
For media appearances, I always prep a list of talking points. To give you an idea of what I talked about with Lars and Saagar, I cleaned up those points and put them at the end.
Catch Jesse Peltan speaking in Houston
Another big presentation from the Abundance Institute’s energy team was last week but was not recorded. Jesse Peltan had a friendly debate and discussion with Jason Isaac of the Texas Public Policy Foundation and the American Energy Institute. We hosted this debate as part of the State Policy Network annual meeting. I’d summarize Jason’s core argument as reliability is fundamental in electricity systems. Jesse’s central point is that we need prices that reflect reality to encourage reliability and innovation. Those summaries aren’t fair to either of their positions, given they talked for about an hour, but hint at what you’ll get following either of them.
You are in luck! Jesse will join Arushi Sharma Frank and J.T. Thompson to talk energy policy in Houston on Wednesday, September 11, 2024. Arushi helped set up the rules around virtual power plants in Texas. It’s an experience she details in her interview with the DER Task Force that is worth your time. J.T. is the Chief Revenue Officer of Edge Zero, an Australian energy company. J.T. is leading the expansion of the US branch.
Talking points and resources on energy policy
I didn’t cover all of these in my conversations with Lars or Saagar, but these combined and cleaned-up notes highlight what we had planned to cover. I’ll organize these with just a bit of formatting. The big ideas:
Prosperity is energy-intensive.
Rates should reflect reality.
Don’t let the vegetarians win on permitting reform.
Fears about AI and load growth are a crisis of our own making.
Prosperity is energy-intensive
Prosperity is energy-intensive
Energy powers all of our magic machines.
Hans Rosling’s washing machine.
It requires 7 Calories of input to create 1 Calorie of food.
Energy use is good. Only the related pollution is a problem.
When cars replaced horses, we got rid of their emissions. This made cities and roads much nicer. Technological innovation will do the same for cars and today's energy system.
No energy technology is free from its downsides. Coal pollutes. The sun doesn’t shine all the time. Batteries don’t fit all use cases. Fracking can cause earthquakes.
Market systems solve this by knitting together an adaptive solution as conditions change.
What electricity policy should look like
Prices that reflect reality
Focusing on energy density, mineral uses, and other factors largely distracts from the role of prices. Would you stop eating spinach because it contains just a few calories? You’re better served using each energy source to create a balanced diet than trying to ban or mandate solutions.
Three Es of Progress: Experimentation, Evaluation, Evolution
Experiment, evaluate, evolve. That’s the path to progress. This is a line I’m borrowing from the economist Arnold Kling.
The key question: How can you inject this into the energy system?
The value of connect and manage is that it allows much faster experimentation, evaluation, and evolution.
This makes me excited about the small and the big. We need a lot more room for folks to experiment with nuclear plant designs. We also should have a system that I can hang a solar panel from my balcony and plug it directly into the wall.
Up Wing VS Down Wing arguments about energy
A lot of energy arguments have been Down Wing. Paul Ehrlich’s long, misanthropic shadow over debates about population, humanity’s future, and resource conservation is one depressing example. Misguided complaints about land use and materials use around energy sources are another. Curiously, this latter critique comes from both the degrowthers and some free market advocates.
A better form of both should be trusting in prices to guide investment. That means removing a lot of barriers to let people experiment, evaluate their results, and then evolve their responses.
Prices capture all the relevant information about the value of materials uses and land uses.
Energy-only markets best guide innovation
Simple, clear signals.
Clear, price-driven entrepreneurship
Capacity markets will always be even more administrative judgments layered on top of others necessary for the energy-only system to work
Best to buy insurance on the side, not make it co-equal with energy
Solutions to high prices will be many
Natural gas is great for ramping up as solar power fades with the sunset.
Buying low and selling high is a tale as old as time. This is what batteries do.
More than 40GW of batteries coming online by 2025 in Texas
Energy-only markets do this best.
Energy efficiency expands energy abundance by giving humanity greater agency over its energy use. Jason Crawford made this point more broadly about human agency’s role in abundance and progress studies, which deserves more attention.
Permitting reform and the need to build!
Dynamism vs stasis in energy policy
Being for dynamism means wanting a world where experimentation can happen. We want to be on the side of dynamism and not stasis. Therefore, arguments that emphasize that lots of materials are required should be viewed dubiously. The price signals capture all the relevant information anyway.
Not to be Pollyannaish—mining is harder in the US than it should be. The US takes the longest in the world to permit a new mine except for Zambia, but we can fix that. And that’s the upwing conversation.
The Down Wing conversation is one that says, “Renewables require lots of cobalt. That’s bad, so we should keep boiling water to create electricity.”
Down Wing arguments against energy lead to bad policy. The Conservative Futurist emphasizes that Up Wing argument emphasizes the dynamism created by prices and permissionless innovation.
Don’t let the vegetarians ruin things for the rest of us - permitting reform
I am a vegetarian, which sometimes makes me a difficult guy to get lunch with.
The problem with a lot of permitting reform conversations is that they give the vegetarians a say over not just what they eat, but what you eat as well.
To give the analogy a clear point, there are a limited number of loud folks online who are against any and all fossil fuels use that think the permitting deal is a Trojan horse. Most folks, according to a recent Heatmap poll, don’t belong in that loud camp.
Permitting reform seems likely to be a huge win for environmental goals. Too many clean energy projects are caught in delay as well.
We wrote an entire paper about ways to boost solar without subsidies. We can spend existing dollars more efficiently if we pair it with permitting reform. We might be able to entirely eliminate the subsidies!
NEPA and other permitting processes do not serve the (laudable) goals of environmental justice advocates.
We need to build
Build nothing anywhere. This affects everything! 1 in 10 counties limits or bans renewable energy development in some way—according to a February 2024 USA Today report. They find that 15% of counties have restrictions on wind and solar. This is a violation of property rights and unnecessary red tape.
Impact fees are ok when they internalize externalities or work like user fees. And they can be abused, as the Pacific Legal Foundation’s work winning a recent Supreme Court case shows.
PJM capacity auction will be a short-term price increase if we let people build. Or there will be a long-term price increase because of the vetocracy.
All red tape is ripe for cutting.
Artificial intelligence, load growth, and forecasting
AI and load growth is a crisis of our own making
The call is coming from inside the house.
Doubling a pebble doesn’t give you a mountain.
2.6% over 5 years to 4.7% over 5 years. This is a large percentage change but not a huge absolute change.
Two drops don’t make a flood.
We had similar growth rates in the past. But have had flat load growth for the last 20 years or so.
In 9 out of 10 hours, ERCOT provides cheap and plentiful power. System peaks will need to be navigated, but flexible arrangements make this manageable and could allow incredibly fast rollouts of data centers and simultaneously make the system more robust.
In 1999, computers were predicted to consume 50% of the US’s electricity supply by 2008. They actually consumed closer to 1% by 2008.
A search in Google vs in ChatGPT does use about 10 times the electricity, but that’s ok!
Running your AC uses a lot more electricity than sweating it out.
There will be concentrated pain points in data center development. But those largely reflect bad policy.
Data Center Alley in Virginia saw a problem coming 3 years before. Now, here we are, and they are saying it will be at least 3 more years before they solve the problem.
Collaborative and mutually beneficial solutions
237 MW backup system is available for the utility to turn on as the grid gets congested
Microsoft paid for that, not other ratepayers in the system
Why AI development matters
Healthcare improvements
AI-enabled glasses that provide speech-to-text for deaf people in real time during conversations. What’s possible now? A deaf person can have a normal phone call. Subtitle the world.
NYT has a good piece about a man who may be able to get his voice back because of AI. It’s not just helping him speak by reading his brain’s impulses, it’s designing the voice to sound like him.
Quality of life improvements that you won’t even notice as they become commonplace
Amazon review summaries
Better chat help bots
Remember, science fiction is not a good guide for policy.
Saagar was a great host. He’s looking for more pitches to bring on his podcast! You can send him a note on X (formerly Twitter).