As an investor in industrial scale RenEng, Grid. Grid. Grid. My obsession during the Biden Admin where they were not taking this seriously - time to build out this infra is not like playing in IT.
Transmission (long distance), Distribution (local)
Interconnections (regional interconnects) expanded and reinforced to enable at-scale power exchange and RenEng timing arbitrages to reduce issues of wasted production and equally
Capacity on existing lines (lower cost up-front capital upgrade w new tech) increased to reduce congestions.
Expanded lines
Without grid expansion like crazy, RenEnergy is going nowhere, prices are going to skyrocket overall no water generation sourcing.
It would be highly appropriate to have a national funding backing this rather than putting on the backs of local and regional ratepayers
PJM has been spectacularly incompetent at this to the point where Shapiro is trying to persuade the governors of other states within the interconnection to *sue them to force transmission development.*
How fucking incompetent does a quasi-governmental organization need to be to have a bunch of state governments, including those of *New York* and *New Jersey* sue it for failure to do its job?
Transmission expansion is slow, expensive, ugly, and thus extremely unpopular politically. I just saw a post from a Louisa County substack detailing a pretty lively political fight to build a new transmission line within Virginia. It sounds like it will have a very visible effect on the affected communities.
Maybe look at more generation closer to where it gets used instead. At data centers, in brownfields and over parking lots and offices for residential. Some data centers have proposed building their own dedicated power plants.
It's no easier to get gas pipeline permits than transmission line permits.
Now, if the Maine NECEC precedent were applied generally - once a permit is issued and work begun, the permit can't be revoked or the project made more costly made more costly by any changes afterward - the problem would be 90% solved. But that was clearly a "one law for things MA wants and a different law for everyone else" situation.
Oh, and I should add - best guess as to WHY Dominion Power would be trying to build a major power transmission line from Louisa to Northern Virginia would be that they anticipate expanding nuclear capacity at Lake Anna.
So this specific plant probably would not stop that specific line.
The links are to projects announced as having current agreements.
Lake Anna already has two existing nuclear power plants. Putting another in is not a fantasy, especially as it is currently seen as a more publicly acceptable option than the alternatives.
Honestly, just substantially upgrading existing corridors would be a huge improvement, but at the end of the day this is the same NIMBY crap that this Substack was founded to decry.
Upgrading existing corridors isn’t adequate for the demand or the distribution of that demand. Not even close.
No, it’s not NIMBY to point out that generating power closer to ultimate usage greatly speeds up its availability, and avoids costly and destructive construction. You’re building it either way. A lot of the opposition is not local to the lines. It is a real and growing political problem.
Transmission is a huge bottleneck to getting power used. Doesn’t help to build it out if no one is using it.
The goal is to get power where needed, not to destroy the maximum amount of attractive countryside possible. Doing the latter just costs you support.
If Matt decided to focus exclusively on transmission line construction, I think it’d be very useful. This is a place where nationalization is practical, government power is very useful, and concretely targeted “abundance” policies could make a visible difference in a short time. Better yet: the people who pursued those policies could plausibly take credit, whereas broad permitting and housing reform will get you zero political credit in future elections.
Loved the wonkiness of this and glad Matt is digging into this. Utility regulation doesn't get much attention aside from occasional superficial "the rates are too dam high" takes.
My opinion on the competitive generation vs centrally planned generation debate is that the electricity sector more dynamic and less predictable than it's been in decades. When times are uncertain and rates of innovation and risk are at their highest, market competition generally does much much better than central planning.
IMO, looking at a paper analyzing electricity restructuring in 2008 misses the biggest stress test of restructured markets we've had so far. When fracked gas dramatically lowered the cost of gas generation vs coal, restructured markets proved themselves much better at reacting to the shift and at saving ratepayers money quickly. Uneconomic coal plants were retired much faster in restructured markets because investors knew their plants were sunk costs that couldn't and wouldn't be able to compete. They ate the losses and moved on. In monopoly markets, regulators didn't want to admit to the huge losses that would show up on ratepayer bills as stranded costs. So they kept the uneconomic plants running for much longer at ratepayers' ultimate expense.
The example above shows the real benefit of competitive generation. The main distinction between the two models is who holds onto risk. In the competitive generation model, investors hold risk and if things don't go as expected (eg a plant becomes uneconomic), they take the hit rather than ratepayers. In the monopoly model, ratepayers hold all the risk and have to guarantee payments to utilities even if a plant turns out to not be economic down the road.
The thing is, we're in a period of rapid load growth from data centers and electrification. On top of that, innovation on the generation side is rampant We're currently in the most dynamic and uncertain times for electricity generation. Ten years out, we just don't know what load will be or what the most economic generation mix will be. This dynamic environment is where competitive markets outshine central planning by a huge margin.
IMO, anyone that thinks monopoly regulation of power generation is going to serve ratepayers better over the next 10 years is badly mistaken.
You’re a bit off on this one. Deregulating grids has consistently lowered prices. It also makes it easier to build because you can finance speculative power generation based on hedged forward merchant curves. A lot of power gets built in Texas not just because they let you build, but because you can secure financing based on a forward hedge of the market price. If you need a power purchase agreement for every new build, it increases the time to build significantly. In Texas, you essentially have the power version of wildcatters building speculative generation capacity without having to sign a power purchase agreement first.
The winter power spike issues Texas experienced weren’t because their grid doesn’t work. They happened because Texas intentionally chose not to have a capacity payment structure.
Actually keeping customer power bills down with all this new demand is going to be incredibly difficult and could require a complete market restructure. I’ve been out of the industry for too long to have a strong current view, but I’d talk to some people about this. For regulated utilities, power is priced on a return on capital investment. For states with deregulated utilities, which is a lot of them, it’s a reverse auction system. Since the marginal cost of new build is above the cost of existing infrastructure that has been fully depreciated, any additional power consumed on a sustained basis will push up the market clearing price.
See if you can find some investment bankers to talk to about this. After you’ve bought and sold a bunch of power assets across different markets, you develop a good feel for what buyers are looking for and what the market can bear. I worked on a deal about 10 years ago where a large wind farm was built in Texas instead of California, even though California was offering significant subsidies, simply because the cost of construction and the construction risk in Texas were so much lower.
Bankers have their issues, but they have a very neutral “what makes money” view. They look at the market the exact same way the decision makers at large utilities and development companies do, because that’s what they’re paid to do.
The piece doesn't explain the headline "Democrats need to think bigger on utilities." It outlines a serious problem that government policies need to address, be it Republican or Democrat government. That is, unless Republicans have already figured out a good solution.
The comparison to China is a little misleading because per capita electricity generation is what matters to standard of living. It’s interesting to compare this across countries: https://en.wikipedia.org/wiki/List_of_countries_by_electricity_consumption. In some ways it might even be a better measure of standard of living than GDP per capita (like if you go off of GDP per capita, Cuba is close only slightly poorer than China while being dozens of times richer than North Korea, while going by electricity consumption per capita, Cuba is close to North Korea while only being a fraction as rich as China—that seems a lot more realistic). And because nearly all our modern goodies are based on electricity, the fact that many countries are consuming almost no electricity is shocking and suggests that the people living there are suffering the harms of modernity without any corresponding benefits and may be worse off than their preindustrial ancestors. There’s a lesson about the risk of AI apartheid in there.
It is reasonable to not want ratepayers to bear the costs of additional utility infrastructure — higher household electricity costs are one of the most regressive financing mechanisms on Earth.
That does not seem "reasonable" at all and certainly not if it means residential ratepayers. Yes there is dilemma of wating users to pay marginal costs in a highly capital intensive activity where marginal cost is not going to cover total cost, but there is nothing special about electricity in this. And we do want ratepayers as a group to pay for the costs of additional infrastructure -- electricity, transportation, water and sewerage, whatever.
We do in fact regularly ask new customers to bear the infrastructure cost for water, sewage, and transportation -- this is written into the zoning and development rules for many places. And to the degree that we don't it's a major argument used against new development.
Rural and exurban areas typically don’t have public water and sewer. Well and septic are private.
If I remember correctly, it costs about 60k for enough solar and battery storage capacity to independently power an average sized home (at least when I priced it out.)
Really more thinking of it as an analogy to more decentralized power generation in general, which removes the lag and expense of major transmission costs.
No, it’s not. People should pay for what they use, and that’s not a controversial statement, it’s literally the basis of the entire economy.
We would NOT say the same thing about agriculture, smartphones, or ANY other consumer product. “It’s reasonable for people to not want to bear the costs of Apple building an iPhone plant” sounds ABSOLUTELY FUCKING BRAIN DEAD, because it IS.
The plain fact is, the biggest source of utility infrastructure costs is the “last mile” problem. And guess what exacerbates that? Sprawl and low density! The best way to minimize per-person infrastructure costs is to build dense housing. Period. This is a no-brainer.
I took him to be saying that long distance transmission, not last mile distribution, is the bottleneck in our grid today.
I don’t know which of you is factually correct, but his contrary claim seems perfectly coherent to me so I don’t know why you are yelling at him instead of refuting him (for my benefit since I am too lazy to look into the issue myself!).
Even if he’s superficially on the right track, I’m not going to reward kookery. SB here is an inherently intellectually snobby space — there’s a reason why we’re not inundated by cranks like ACX or FdB.
You don't necessarily want to build all of your residential areas right next to your power plants; he's not talking about inefficiently distributed rurals requiring wasteful levels of infrastructure. Falous has an odd way of writing but it's fully intelligible with careful reading (and it's good stuff too!).
The fixed costs of power transmission infrastructure are mostly geographic in nature. More people in a piece of lands means that you can divide those fixed costs more easily.
Even conceding his point, though, as soon as we fix transmission — which is a SINGLE national permitting bill away — we’re right the fuck back to fixing the last mile and building more actual capacity.
Transmission suffers from one big man-made obstacle to an otherwise difficult but totally solvable problem. Last-mile is only solvable if we fix density — in fact, if we fix transmission, last-mile all of a sudden becomes a HUGE problem, because transmission is bottlenecking sprawl in lower-tier cities that are currently facing the same densification pressure as higher tier ones.
IMO, you're oversimplifying the transmission challenge.
Permitting is a big problem and a national fix would help for sure, but imo an equal challenge is opposition from skilled lobbyists working for incumbant generators..
Power plant owners generally don't like competition and more tx means more competition. These folks are very adept at using political power and even astroturfing to block tx projects to protect profits. Permitting reform may make their job tougher, but they'll likely seek out other ways to block projects that put profits at risk.
Sprawling rural areas have LOWER - not higher - electricity costs - compare KY and MA. Yes, it's less miles of infrastructure per kWh, but it's vastly cheaper to maintain infrastructure where there's enough space that you don't need to bury powerlines, and close roads to service them.
It’s not “MA = cities vs KY = rural”; MA’s rural areas are undoubtedly more costly even than KY’s, and that’s mostly due to differences in state regulations and price levels.
But what I was talking about is that it’s cheaper per unit to wire up a 300-unit 5-over-1 apartment building with a single interconnect than a SFH subdivision with several miles of cabling to build out and maintain. A city that packs 500k people into 5-over-1’s on the same footprint as a 100k SFH suburb may still have higher total costs and “look” more expensive, but the per-unit cost is lower.
To the extent it’s “reasonable” from a political reality standpoint can’t it be addressed by some simple regulation in electricity pricing structure? E.g. a household’s first X MWh are at a base price and above a certain usage level the rate increases?
On the utility ROI question, I have a radical and hugely unpopular take. Under current monopoly regulation model, regulators set a guaranteed ROI that utilities earn on all capital investments. The flaw with this approach is that the ROI is a one-size-fits-all blanket rate that isn't tied to the riskiness (to the utility) of specific projects.
This results in misaligned incentives. Finance 101 says ROI should be tied to the riskiness of future cash flows. Meanwhile, utilities earn the same ROI for replacing a 70 year old transformer with a new one that uses the same tech as they do for overseeing a risky reconductoring project using state of the art tech they've never used before. This gets the incentives all wrong and makes utilities shun new tech in favor of more tried and true, and often less efficient, solutions.
One way to fix this is to restructure utility ROI to make it project based and tied more closely to risk of a specific project. This gives utilities some skin in the game to try innovative and riskier tech rather than relying on outdated tech. As an extreme example, utilities could be forced to finance mundane capex expenditures like transformers using ratepayer backed muni bonds instead of getting any ROI. After all, this sort of capex is really more like opex from a risk standpoint. Why should utilities earn any ROI for what's essentially a risk free project management task?
Democrats have routinely opposed “everything” for decades. The Sierra Club even opposes Fusion Reactors, which produce no radioactive material. When you have a party that wants everyone on bicycles and believes energy should be free, you are right. Where do you go?
NYMBYism is not strictly a one tribes problem. I remember when Sen Kennedy opposed a wind farm off of Martha’s Vineyard. Now, Trump opposes wind generated enegery and wants even more coal plants. CA politicians wanted to lower fossil fuel inputs to its grid, so it closed down nuclear plants and oil-fed plants, only to now be dependent on out-of-state utilities.
This has disrupted energy supply in the state and, at times, caused brownouts. I am in favor of making date centers produce their own energy through small modular reactors and or natural gas-fed generators. Of course, the issue is that we cannot manufacture the numbers required.
Just recently, Utah is going to run a test on an SMR, but like everything else, it will take time, and I have no doubt some environmental group will sue.
None of this may matter. While Germany is deliberately starving itself of energy by shutting down their nuclear reactors, with their insistence on wind and solar, it may be effectively shutting itself out of the AI boom. The same here.
The anti-AI numbers among the public in America are growing. The demand for electricity is only growing and is a problem we are unable to meet. China generates twice the electricity, they may win the AI race because of it.
The Sierra Club basically just wants a world with some roof top solar and living standards that hover right around where they were before the industrial revolution.
"And we need new financing mechanisms — like taxes, potentially on new commercial users such as data centers — to ensure that the infrastructure buildout doesn’t burden household users in a way that defeats the goal of promoting electrification."
Possibly new ones and possibly taxes and subsidies to someone should be involved, but two-part tarrifs where the user pays more of a flat rate for access plus a marginal rate probably need to be in the mix, especially since we ought to want customers to face and adjust their behavior to varying marginal cost of generaton over the day and season.
This is what made me so annoyed at MassSave here in Boston: they came and told us all about how great heat pumps are and walked us through the process, only to find out we don’t have enough service to our building and would require a new transformer and other costly equipment. All of which was on a manufacturing backlog from China. (We’re in a triple decker with 100A per unit and 200A supply to the building.)
Speaking as a natural gas market analyst, the dirty little secret of why the ERCOT approach works is that the places where people live (Texas Triangle) are close enough to the producing basins (west Texas, east Texas, south Texas) that the oil and gas producers can reasonably backstop the needed gas pipeline capacity investments to move their gas to the liquid markets near where people are.
The Southeast utilities fund gas pipeline capacity investments because they have a rate base. Pennsylvania and Virginia are similar to Texas in that the producers can afford to fund it, same with the Rockies.
Everywhere else is kind of screwed--there's plenty of gas in the ground, but the gas pipeline development model (committing to pay $X/MMBtu for 15+ years, so the midstream company can raise project finance) and the deregulated power industry model really don't work together at all. Gas-fired generation has grown so far by free-riding on gas pipeline capacity funded by either producers or gas utilities (who do have a rate base), but this is not going to work in an environment when gas utilities' demand isn't growing but gas-fired generators' is. It's why the DOE plans to keep coal plants around aren't as insane as they seem--the coal plants have a stockpile on site.
Nothing will undermine the role of gas as a decarbonization fuel faster than a reliability crisis sparked by having enough gas plants but not having enough pipeline capacity to get the gas both to them and to utilities.
Distribution is hard - many years ago, I did a simulation course put on by an electrical engineer with a title something like "Electricity for Regulators and Lawyers". We tried to run the Texas grid - everyone crashed it within a few minutes. Texas gets distribution in part because we have a grid that is pretty much just Texas. So Texas regulators have to understand what is going on. In most states, the grid is run by a giant multistate operator. There's less local knowledge as a result and politicians can focus on what gets them votes.
Getting power for data centers is a trivial issue. Big tech is swimming in capital. All it needs to build captive solar and wind farms is permitting reform. Ideally, it would be able to sell excess load to the grid at a Pareto optimal price, but the big boys have enough capital to eat a bit of waste.
Not trival as congestoin in grid unless co-sited is a huge issue - this is a physical infra problem.
Capitive self-gen - which is what I finance in part - unless it is co-sited (which is not always possible, and almost always nowadays not investment optimal on overall sizing) needs to be able to wheel power to consumption point.
this needs at minimum back-bone distribution reinforcement and typically transmission upgrade.
There is significant new grid tech (even wire advancements) to enable this even within existing footprint, but it requires immediate investment action as physical infra needs time,
Not that permitting reform is not also massivley desirable for the generation assets, but reform on Grid, that's the ignored point - the overall grid regulatory set-up is set for a slow moving incremental situation that has prevailed since the 1970s or so. It needs to change and rapidly and at scale.
Yesterday: The party needs fewer big ideas, not more
Today: Democrats need to think bigger on utilities
Today's take is better :)
Good ideas are good. More good ideas are more good. They don't have to be expensive, and in fact might be money saving. Might include institutional, administrative, legal reforms. Having your brand identity be that of generating and executing good ideas is good.
As an investor in industrial scale RenEng, Grid. Grid. Grid. My obsession during the Biden Admin where they were not taking this seriously - time to build out this infra is not like playing in IT.
Transmission (long distance), Distribution (local)
Interconnections (regional interconnects) expanded and reinforced to enable at-scale power exchange and RenEng timing arbitrages to reduce issues of wasted production and equally
Capacity on existing lines (lower cost up-front capital upgrade w new tech) increased to reduce congestions.
Expanded lines
Without grid expansion like crazy, RenEnergy is going nowhere, prices are going to skyrocket overall no water generation sourcing.
It would be highly appropriate to have a national funding backing this rather than putting on the backs of local and regional ratepayers
Analagous to the 1950s-1960s highway expansion.
Except it's energy super-highways.
PJM has been spectacularly incompetent at this to the point where Shapiro is trying to persuade the governors of other states within the interconnection to *sue them to force transmission development.*
How fucking incompetent does a quasi-governmental organization need to be to have a bunch of state governments, including those of *New York* and *New Jersey* sue it for failure to do its job?
Transmission expansion is slow, expensive, ugly, and thus extremely unpopular politically. I just saw a post from a Louisa County substack detailing a pretty lively political fight to build a new transmission line within Virginia. It sounds like it will have a very visible effect on the affected communities.
Maybe look at more generation closer to where it gets used instead. At data centers, in brownfields and over parking lots and offices for residential. Some data centers have proposed building their own dedicated power plants.
Powered with what?
It's no easier to get gas pipeline permits than transmission line permits.
Now, if the Maine NECEC precedent were applied generally - once a permit is issued and work begun, the permit can't be revoked or the project made more costly made more costly by any changes afterward - the problem would be 90% solved. But that was clearly a "one law for things MA wants and a different law for everyone else" situation.
AWS has signed up for dedicated small nuclear reactors in multiple states, including Virginia. https://www.aboutamazon.com/news/sustainability/amazon-nuclear-small-modular-reactor-net-carbon-zero
There is also an experimental fusion reactor being built in Virginia, with publicly discussed hopes of data center usage longer term. https://cfs.energy/news-and-media/commonwealth-fusion-systems-to-build-worlds-first-commercial-fusion-power-plant-in-virginia
Oh god we’re three comments in and into nuclear fantasies.
Oh, and I should add - best guess as to WHY Dominion Power would be trying to build a major power transmission line from Louisa to Northern Virginia would be that they anticipate expanding nuclear capacity at Lake Anna.
So this specific plant probably would not stop that specific line.
The links are to projects announced as having current agreements.
Lake Anna already has two existing nuclear power plants. Putting another in is not a fantasy, especially as it is currently seen as a more publicly acceptable option than the alternatives.
Fusion is the exact opposite of "small and local."
Not really, no. The Chesterfield plant mentioned is both small and local.
Honestly, just substantially upgrading existing corridors would be a huge improvement, but at the end of the day this is the same NIMBY crap that this Substack was founded to decry.
Upgrading existing corridors isn’t adequate for the demand or the distribution of that demand. Not even close.
No, it’s not NIMBY to point out that generating power closer to ultimate usage greatly speeds up its availability, and avoids costly and destructive construction. You’re building it either way. A lot of the opposition is not local to the lines. It is a real and growing political problem.
Transmission is a huge bottleneck to getting power used. Doesn’t help to build it out if no one is using it.
The goal is to get power where needed, not to destroy the maximum amount of attractive countryside possible. Doing the latter just costs you support.
If Matt decided to focus exclusively on transmission line construction, I think it’d be very useful. This is a place where nationalization is practical, government power is very useful, and concretely targeted “abundance” policies could make a visible difference in a short time. Better yet: the people who pursued those policies could plausibly take credit, whereas broad permitting and housing reform will get you zero political credit in future elections.
Loved the wonkiness of this and glad Matt is digging into this. Utility regulation doesn't get much attention aside from occasional superficial "the rates are too dam high" takes.
My opinion on the competitive generation vs centrally planned generation debate is that the electricity sector more dynamic and less predictable than it's been in decades. When times are uncertain and rates of innovation and risk are at their highest, market competition generally does much much better than central planning.
IMO, looking at a paper analyzing electricity restructuring in 2008 misses the biggest stress test of restructured markets we've had so far. When fracked gas dramatically lowered the cost of gas generation vs coal, restructured markets proved themselves much better at reacting to the shift and at saving ratepayers money quickly. Uneconomic coal plants were retired much faster in restructured markets because investors knew their plants were sunk costs that couldn't and wouldn't be able to compete. They ate the losses and moved on. In monopoly markets, regulators didn't want to admit to the huge losses that would show up on ratepayer bills as stranded costs. So they kept the uneconomic plants running for much longer at ratepayers' ultimate expense.
The example above shows the real benefit of competitive generation. The main distinction between the two models is who holds onto risk. In the competitive generation model, investors hold risk and if things don't go as expected (eg a plant becomes uneconomic), they take the hit rather than ratepayers. In the monopoly model, ratepayers hold all the risk and have to guarantee payments to utilities even if a plant turns out to not be economic down the road.
The thing is, we're in a period of rapid load growth from data centers and electrification. On top of that, innovation on the generation side is rampant We're currently in the most dynamic and uncertain times for electricity generation. Ten years out, we just don't know what load will be or what the most economic generation mix will be. This dynamic environment is where competitive markets outshine central planning by a huge margin.
IMO, anyone that thinks monopoly regulation of power generation is going to serve ratepayers better over the next 10 years is badly mistaken.
You’re a bit off on this one. Deregulating grids has consistently lowered prices. It also makes it easier to build because you can finance speculative power generation based on hedged forward merchant curves. A lot of power gets built in Texas not just because they let you build, but because you can secure financing based on a forward hedge of the market price. If you need a power purchase agreement for every new build, it increases the time to build significantly. In Texas, you essentially have the power version of wildcatters building speculative generation capacity without having to sign a power purchase agreement first.
The winter power spike issues Texas experienced weren’t because their grid doesn’t work. They happened because Texas intentionally chose not to have a capacity payment structure.
Actually keeping customer power bills down with all this new demand is going to be incredibly difficult and could require a complete market restructure. I’ve been out of the industry for too long to have a strong current view, but I’d talk to some people about this. For regulated utilities, power is priced on a return on capital investment. For states with deregulated utilities, which is a lot of them, it’s a reverse auction system. Since the marginal cost of new build is above the cost of existing infrastructure that has been fully depreciated, any additional power consumed on a sustained basis will push up the market clearing price.
See if you can find some investment bankers to talk to about this. After you’ve bought and sold a bunch of power assets across different markets, you develop a good feel for what buyers are looking for and what the market can bear. I worked on a deal about 10 years ago where a large wind farm was built in Texas instead of California, even though California was offering significant subsidies, simply because the cost of construction and the construction risk in Texas were so much lower.
Bankers have their issues, but they have a very neutral “what makes money” view. They look at the market the exact same way the decision makers at large utilities and development companies do, because that’s what they’re paid to do.
Our rates in New Mexico are much lower than they were in Texas. Part of that may be the large chunk that Ercot adds on to every bill.
The piece doesn't explain the headline "Democrats need to think bigger on utilities." It outlines a serious problem that government policies need to address, be it Republican or Democrat government. That is, unless Republicans have already figured out a good solution.
The comparison to China is a little misleading because per capita electricity generation is what matters to standard of living. It’s interesting to compare this across countries: https://en.wikipedia.org/wiki/List_of_countries_by_electricity_consumption. In some ways it might even be a better measure of standard of living than GDP per capita (like if you go off of GDP per capita, Cuba is close only slightly poorer than China while being dozens of times richer than North Korea, while going by electricity consumption per capita, Cuba is close to North Korea while only being a fraction as rich as China—that seems a lot more realistic). And because nearly all our modern goodies are based on electricity, the fact that many countries are consuming almost no electricity is shocking and suggests that the people living there are suffering the harms of modernity without any corresponding benefits and may be worse off than their preindustrial ancestors. There’s a lesson about the risk of AI apartheid in there.
It is reasonable to not want ratepayers to bear the costs of additional utility infrastructure — higher household electricity costs are one of the most regressive financing mechanisms on Earth.
That does not seem "reasonable" at all and certainly not if it means residential ratepayers. Yes there is dilemma of wating users to pay marginal costs in a highly capital intensive activity where marginal cost is not going to cover total cost, but there is nothing special about electricity in this. And we do want ratepayers as a group to pay for the costs of additional infrastructure -- electricity, transportation, water and sewerage, whatever.
We do in fact regularly ask new customers to bear the infrastructure cost for water, sewage, and transportation -- this is written into the zoning and development rules for many places. And to the degree that we don't it's a major argument used against new development.
Rural and exurban areas typically don’t have public water and sewer. Well and septic are private.
If I remember correctly, it costs about 60k for enough solar and battery storage capacity to independently power an average sized home (at least when I priced it out.)
Sure but that means they aren't imposing those costs on others either.
Really more thinking of it as an analogy to more decentralized power generation in general, which removes the lag and expense of major transmission costs.
No, it’s not. People should pay for what they use, and that’s not a controversial statement, it’s literally the basis of the entire economy.
We would NOT say the same thing about agriculture, smartphones, or ANY other consumer product. “It’s reasonable for people to not want to bear the costs of Apple building an iPhone plant” sounds ABSOLUTELY FUCKING BRAIN DEAD, because it IS.
The plain fact is, the biggest source of utility infrastructure costs is the “last mile” problem. And guess what exacerbates that? Sprawl and low density! The best way to minimize per-person infrastructure costs is to build dense housing. Period. This is a no-brainer.
Re Sprawl: Distribution infra is not the binding constraint. It is almost at this time irrelevant.
Transmission is, and the US is mechanically geographically an enormous country
so plopping this with dense housing is ... Not Even Wrong.
Nor is it a relevant solution to the structural need on transmission and reinforced back-bone distribution, not in actionable timelines.
The housing hobby horse s/b saved for the housing problem.
Yeah get back to me when you can write a coherent sentence.
I took him to be saying that long distance transmission, not last mile distribution, is the bottleneck in our grid today.
I don’t know which of you is factually correct, but his contrary claim seems perfectly coherent to me so I don’t know why you are yelling at him instead of refuting him (for my benefit since I am too lazy to look into the issue myself!).
He’s writing like a kook.
Even if he’s superficially on the right track, I’m not going to reward kookery. SB here is an inherently intellectually snobby space — there’s a reason why we’re not inundated by cranks like ACX or FdB.
Both are different problems causing cost burdens. They are each of different solutions.
You don't necessarily want to build all of your residential areas right next to your power plants; he's not talking about inefficiently distributed rurals requiring wasteful levels of infrastructure. Falous has an odd way of writing but it's fully intelligible with careful reading (and it's good stuff too!).
The fixed costs of power transmission infrastructure are mostly geographic in nature. More people in a piece of lands means that you can divide those fixed costs more easily.
Even conceding his point, though, as soon as we fix transmission — which is a SINGLE national permitting bill away — we’re right the fuck back to fixing the last mile and building more actual capacity.
Transmission suffers from one big man-made obstacle to an otherwise difficult but totally solvable problem. Last-mile is only solvable if we fix density — in fact, if we fix transmission, last-mile all of a sudden becomes a HUGE problem, because transmission is bottlenecking sprawl in lower-tier cities that are currently facing the same densification pressure as higher tier ones.
IMO, you're oversimplifying the transmission challenge.
Permitting is a big problem and a national fix would help for sure, but imo an equal challenge is opposition from skilled lobbyists working for incumbant generators..
Power plant owners generally don't like competition and more tx means more competition. These folks are very adept at using political power and even astroturfing to block tx projects to protect profits. Permitting reform may make their job tougher, but they'll likely seek out other ways to block projects that put profits at risk.
Here are some examples:
https://www.nhpr.org/nh-news/2024-12-02/lawsuit-filed-against-owners-of-seabrook-nuclear-plant-over-alleged-project-sabotage
https://www.pressherald.com/2018/09/13/dark-money-and-blurred-alliances-drum-up-resistance-to-cmp-project/
This isn't consistent with observation.
Sprawling rural areas have LOWER - not higher - electricity costs - compare KY and MA. Yes, it's less miles of infrastructure per kWh, but it's vastly cheaper to maintain infrastructure where there's enough space that you don't need to bury powerlines, and close roads to service them.
You’re comparing costs at the wrong level.
It’s not “MA = cities vs KY = rural”; MA’s rural areas are undoubtedly more costly even than KY’s, and that’s mostly due to differences in state regulations and price levels.
But what I was talking about is that it’s cheaper per unit to wire up a 300-unit 5-over-1 apartment building with a single interconnect than a SFH subdivision with several miles of cabling to build out and maintain. A city that packs 500k people into 5-over-1’s on the same footprint as a 100k SFH suburb may still have higher total costs and “look” more expensive, but the per-unit cost is lower.
To the extent it’s “reasonable” from a political reality standpoint can’t it be addressed by some simple regulation in electricity pricing structure? E.g. a household’s first X MWh are at a base price and above a certain usage level the rate increases?
On the utility ROI question, I have a radical and hugely unpopular take. Under current monopoly regulation model, regulators set a guaranteed ROI that utilities earn on all capital investments. The flaw with this approach is that the ROI is a one-size-fits-all blanket rate that isn't tied to the riskiness (to the utility) of specific projects.
This results in misaligned incentives. Finance 101 says ROI should be tied to the riskiness of future cash flows. Meanwhile, utilities earn the same ROI for replacing a 70 year old transformer with a new one that uses the same tech as they do for overseeing a risky reconductoring project using state of the art tech they've never used before. This gets the incentives all wrong and makes utilities shun new tech in favor of more tried and true, and often less efficient, solutions.
One way to fix this is to restructure utility ROI to make it project based and tied more closely to risk of a specific project. This gives utilities some skin in the game to try innovative and riskier tech rather than relying on outdated tech. As an extreme example, utilities could be forced to finance mundane capex expenditures like transformers using ratepayer backed muni bonds instead of getting any ROI. After all, this sort of capex is really more like opex from a risk standpoint. Why should utilities earn any ROI for what's essentially a risk free project management task?
Frankly, the generating capacity should be private and the grid should just be a series of SOEs owned entirely by consortiums of state governments.
Democrats have routinely opposed “everything” for decades. The Sierra Club even opposes Fusion Reactors, which produce no radioactive material. When you have a party that wants everyone on bicycles and believes energy should be free, you are right. Where do you go?
NYMBYism is not strictly a one tribes problem. I remember when Sen Kennedy opposed a wind farm off of Martha’s Vineyard. Now, Trump opposes wind generated enegery and wants even more coal plants. CA politicians wanted to lower fossil fuel inputs to its grid, so it closed down nuclear plants and oil-fed plants, only to now be dependent on out-of-state utilities.
This has disrupted energy supply in the state and, at times, caused brownouts. I am in favor of making date centers produce their own energy through small modular reactors and or natural gas-fed generators. Of course, the issue is that we cannot manufacture the numbers required.
Just recently, Utah is going to run a test on an SMR, but like everything else, it will take time, and I have no doubt some environmental group will sue.
None of this may matter. While Germany is deliberately starving itself of energy by shutting down their nuclear reactors, with their insistence on wind and solar, it may be effectively shutting itself out of the AI boom. The same here.
The anti-AI numbers among the public in America are growing. The demand for electricity is only growing and is a problem we are unable to meet. China generates twice the electricity, they may win the AI race because of it.
The Sierra Club basically just wants a world with some roof top solar and living standards that hover right around where they were before the industrial revolution.
"And we need new financing mechanisms — like taxes, potentially on new commercial users such as data centers — to ensure that the infrastructure buildout doesn’t burden household users in a way that defeats the goal of promoting electrification."
Possibly new ones and possibly taxes and subsidies to someone should be involved, but two-part tarrifs where the user pays more of a flat rate for access plus a marginal rate probably need to be in the mix, especially since we ought to want customers to face and adjust their behavior to varying marginal cost of generaton over the day and season.
Taxing data centers per se seems hare-brained.
With the current makeup of Congress it's politically unrealistic. Add that to MY's non-existent Project 2029 agenda...
PUCs are one of the biggest sources of corruption in state governments. This tends to color people's views of the industry.
This is what made me so annoyed at MassSave here in Boston: they came and told us all about how great heat pumps are and walked us through the process, only to find out we don’t have enough service to our building and would require a new transformer and other costly equipment. All of which was on a manufacturing backlog from China. (We’re in a triple decker with 100A per unit and 200A supply to the building.)
Speaking as a natural gas market analyst, the dirty little secret of why the ERCOT approach works is that the places where people live (Texas Triangle) are close enough to the producing basins (west Texas, east Texas, south Texas) that the oil and gas producers can reasonably backstop the needed gas pipeline capacity investments to move their gas to the liquid markets near where people are.
The Southeast utilities fund gas pipeline capacity investments because they have a rate base. Pennsylvania and Virginia are similar to Texas in that the producers can afford to fund it, same with the Rockies.
Everywhere else is kind of screwed--there's plenty of gas in the ground, but the gas pipeline development model (committing to pay $X/MMBtu for 15+ years, so the midstream company can raise project finance) and the deregulated power industry model really don't work together at all. Gas-fired generation has grown so far by free-riding on gas pipeline capacity funded by either producers or gas utilities (who do have a rate base), but this is not going to work in an environment when gas utilities' demand isn't growing but gas-fired generators' is. It's why the DOE plans to keep coal plants around aren't as insane as they seem--the coal plants have a stockpile on site.
Nothing will undermine the role of gas as a decarbonization fuel faster than a reliability crisis sparked by having enough gas plants but not having enough pipeline capacity to get the gas both to them and to utilities.
Distribution is hard - many years ago, I did a simulation course put on by an electrical engineer with a title something like "Electricity for Regulators and Lawyers". We tried to run the Texas grid - everyone crashed it within a few minutes. Texas gets distribution in part because we have a grid that is pretty much just Texas. So Texas regulators have to understand what is going on. In most states, the grid is run by a giant multistate operator. There's less local knowledge as a result and politicians can focus on what gets them votes.
To what extent is this article driven by local complaints about recent winter electricity bills in the DMV?
Getting power for data centers is a trivial issue. Big tech is swimming in capital. All it needs to build captive solar and wind farms is permitting reform. Ideally, it would be able to sell excess load to the grid at a Pareto optimal price, but the big boys have enough capital to eat a bit of waste.
Not trival as congestoin in grid unless co-sited is a huge issue - this is a physical infra problem.
Capitive self-gen - which is what I finance in part - unless it is co-sited (which is not always possible, and almost always nowadays not investment optimal on overall sizing) needs to be able to wheel power to consumption point.
this needs at minimum back-bone distribution reinforcement and typically transmission upgrade.
There is significant new grid tech (even wire advancements) to enable this even within existing footprint, but it requires immediate investment action as physical infra needs time,
Not that permitting reform is not also massivley desirable for the generation assets, but reform on Grid, that's the ignored point - the overall grid regulatory set-up is set for a slow moving incremental situation that has prevailed since the 1970s or so. It needs to change and rapidly and at scale.
Yesterday: The party needs fewer big ideas, not more
Today: Democrats need to think bigger on utilities
Today's take is better :)
Good ideas are good. More good ideas are more good. They don't have to be expensive, and in fact might be money saving. Might include institutional, administrative, legal reforms. Having your brand identity be that of generating and executing good ideas is good.