For the one-year anniversary of the Texas Blackouts, our second guest this week is Brent Bennett, the policy director for Life:Powered, an initiative of the Texas Public Policy Foundation. In this episode, Bennett explains why the ERCOT market is “broken,” how it is being distorted by federal subsidies for wind and solar, why there’s no Moore’s law for batteries, and why there is an “oversupply of capital” being directed toward alternative energy sources.
Robert Bryce 0:04
Hi, everyone, welcome to the power hungry Podcast. I’m Robert Bryce. On this podcast, we talk about energy, power, innovation and politics. And we’re going to talk about a lot of those today with my guest, Brent Bennett, Dr. Brent Bennett. He is the policy director for life powered, which is an initiative of the Texas Public Policy Foundation. Brent, welcome to the power power hungry podcast.
Brent Bennett 0:25
Thank you, Robert. Glad to be on.
Robert Bryce 0:27
So I did warn you, I don’t warn some guests. But I warn you that guests on this podcast introduce themselves. So I’ve given your title. But imagine you’ve arrived somewhere you don’t know anyone. And you have less than a minute to introduce yourself, please.
Brent Bennett 0:40
All right, yeah. So I was born and raised in Midland, Texas, sun, wood, oil and gas entrepreneurs. So energy has been in my blood, so to speak. But I was also very interested in science as a kid, I was the nerdy science kids, I went to the University of Tulsa, got a bachelor’s in physics, and then came to UT to get a PhD in material science. And specifically, I want to study batteries. This was back about 1213 years ago, when I started, I really was was starting to see the uptake of wind and solar onto the grid. And really could see even at that time, that you know, the batteries were going to need to improve dramatically in order to make that even remotely possible. And so I thought, Well, if there’s going to be something that’s where I can apply my my science nerdiness to a real world problem, this would be the field to do it. And at the time, there was actually the of course, there’s always been a lot of research going on at UT. There’s also a company in Austin called extreme power. That was, I don’t know if you’re familiar with their story. But this is this was supposedly going to be a really big hotbed for energy storage. And now we finally have Tesla coming to Texas, and supposedly going to build batteries here, in addition to cars. But, you know, 1213 years later, we’re still trying to crack that nut. So I’d be looking forward to getting into that. But after I after I graduated, I started with a startup that sold carbon nanotubes to battery manufacturers as a sales engineer. When that didn’t work out, I wanted to avoid leaving Texas. So I actually went into finance for a little while and did that. But then when that didn’t work out, and in this job care available. My My wife actually found that she’s in Texas politics herself and suggested I applied for it. And here we are three and a half years I’ve been in been in politics now doing energy policy. And it’s been a it’s been a fun ride. This is a great group, your life powered and we really are excited about what we’re doing and also happy that we get to work with folks like you and so many others that are really doing great stuff.
Robert Bryce 2:42
Well, thanks. You mentioned University of Tulsa go golden hurricane. I’m Tulsa guy, sir. Yeah. Oh, you’re still I can still do the cheer t you? That is yes.
Brent Bennett 2:55
Yes. smallest division one. FBS football team in the country. Football team. Yeah, you know, 4000 people,
Robert Bryce 3:04
they try hard. But they, they they don’t win as often as they might. But that’s but nevertheless proud of
Brent Bennett 3:11
when I was there. When I was there, we had a good coach, but we, you know, comes and goes, yeah.
Robert Bryce 3:17
So let’s jump in. This is the one of the episodes we’re doing for the one year anniversary of the Texas blackouts. So we did several shows right after the blackouts last year. And now we have one year passed. So what happened and why?
Brent Bennett 3:34
Yeah, it’s, it’s
Robert Bryce 3:36
in an in an hour or an hour or less.
Brent Bennett 3:41
An hour or less? Talk about batteries a little bit
Robert Bryce 3:43
too. We do want to talk about batteries. But so what’s what’s your brief explanation for why this happened?
Brent Bennett 3:50
Yeah, um, well, and we’re fortunate that, you know, we’ve had a front row seat to a lot of the, a lot of the action that’s happened both before and after, you know, being in policy and being, you know, very close to Texas politics and everything that’s going on. So even though we’re not a market participant, right, we don’t represent anyone that operates in the market, we’re just here is representing, you know, normal people in a certain sense. We do get to see that, you know, up close and personal and for me is very interesting to me and somewhat of an outsider again, but as I just told you, my background is not in the utility space. So, you know, a little bit done a little bit of that with with my research and my, my work in batteries, not a whole lot. So it’s been a really interesting to see to study and have the ability to study both what got us here, and then also what the responses and I’d say, you know, the the main thing is that it’s a function of two things that got us to this point. One is is our market design. And then two is how our market design has been distorted and, and broken. You know, so I think that’s really and we could go in each of those if you want right now or but But I don’t know how much you want to spend. Sure, sure. But well, yeah,
Robert Bryce 5:04
well, that market design is a key issue because you know, one of the guests this week is Ed hearse who said that, you know, one of the fundamental problems that the way the market was designed and this is something I wrote last year in the Dallas Morning News on August 1, I just said, this is a government failure. This was a badly designed market and what hers, hers his bottom line is that this was all designed to reward volatility. And that’s a bad what been heard was a guest or one of the people in our last film, he said, you don’t want something that’s that’s exciting. You don’t want something when you want something dead, stupid, boring, that just assures 24/7 365 power. So you don’t but So briefly, tell us what so why was this badly designed market? What’s the fundamental flaw here?
Brent Bennett 5:48
Yeah, it. And really, I would say that it’s a market that could function well, but it’s been so distorted by subsidies regulation. So on that, you know, the concept of energy only market that relies on prices doesn’t work when those prices aren’t correctly, reflecting what’s you know, what supply and demand are? Right. So that’s, that’s fundamentally where we’re at. And I was actually at the pleasure of being on a paddock panel with him back in July. And so we had a little bit of this back and forth. You know, so So as a market, Texas market, we call it an energy only market where you don’t pay for power plants to stay online, and just paying for them straight up. That’s called a capacity market, but we only pay for the energy they produce. And the energy that produce is, is given a price that reflects the scarcity in the market. Right. So. So power plants that produce when times are scarce, have a higher price. You know, the problem is that we’ve had, you know, is that we have both a lot, a lot of subsidies that reflect both the, you know, the existing way that we pay for transmission, and also the subsidies that go directly towards wind and solar, right, that then have led to this what we consider to be an overbilled of wind and solar, right, you subsidize something, you get more of it than what the market would demand, right. And you have less of everything else. But those price, the prices that are in the market now are not are saying that, well, we have a lot of supply at certain times a year. But in those rare times, like last year, when when there’s no wind and solar and demand is high, we don’t have enough. But there’s so much supply during the rest of the year that we’re not building enough of the generators that can be there when we really need them. Right. So you know, other generators,
Robert Bryce 7:43
right. So let me interrupt you. But so the short word there for that is thermal that we need thermal generation. Right, right. And in art Berman made one of the best slides. I mean, there have been a bunch of graphics that have been produced, but and many of them show this very same thing that at 2am. On February 15. It’s almost exactly a year ago, that wind and solar were just were not available. I mean, they just disappeared, and there were $66 billion was spent on them in the years before the blackouts. And yet all of that does. My joke is all that wind and solar went to Cancun with Ted Cruz, right. Not available. Yeah.
Brent Bennett 8:17
Yeah, that’s a that’s a that’s a good point. It’s exactly right. I mean, again, we’re spending all this money, the way our market has been distorted is that we’re spending all this money on on production that produces when we don’t need it. So keeps prices really low at certain times. But then there are those occasions when really do need, it’s not there. And so you’re losing, you’re losing reliability, it’s increasing volatility and a loss of reliability. And that’s, that’s fundamentally what, what led to, you know, the storm being as bad as it was? I mean, I don’t think it’s not our opinion that we would have been able to avoid everything entirely had we had, you know, you just can’t plan for a storm of that magnitude without some outages. Sure. But it would have been much more manageable, had we had the correct market design, and had we not been ahead of market not been so distorted towards, you know, variable energy sources?
Robert Bryce 9:10
Right. Well, so I want to just hit on that one point that you made, because I think it’s really important that they’re producing a lot of energy when it’s not needed. But then when crunch time comes, it is needed, but because they’re producing a lot of energy, then they’re reducing, is it correct to say that they reduce the profitability of the incumbent thermal generators is that and therefore and not only do they reduce the profitability of the existing generators, they make it effectively impossible to finance new thermal generation, right, because this has been the ongoing litigation around panda power and the rest of them. But is that a fair assessment?
Brent Bennett 9:44
Yeah, that’s absolutely fair. Yeah. I mean, you go look at the the independent market monitors reports. You look at prices over the last 10 years, and really only 2019 And then when we had the, the emergency situation August really high prices in August and then 2021 are the only Two years over the last 10, where prices were high enough to, to finance make to make it possible to build a new gas generator, right or prices were above that, that lower limit to build a new gas generator. So if you’re if you’re a if you’re a gas generator, and you want to you want to build and you’re more capacity, then you’re you’re relying basically on a couple years out of every decade to finance your entire operation. And that’s really tough. And not only a couple of not only a couple years, but really just a few weeks out of each of those years. Right. So a
Robert Bryce 10:38
few weeks, we may wait a few weeks on a decadal timespan that’s that’s a difficult thing to get a banker to say, oh, yeah, sure. We’ll lend you money on that. Is that I mean, yeah, isn’t that isn’t that I mean, the fundamental issue is just the, the financing of the of the projects, right? I mean, you can have all the good intentions, but you can’t finance him if the market is not going to reward you for all the expenditure. Is that fair?
Brent Bennett 10:59
Yeah, that’s totally fair. And and again, it’s, you know, if there wasn’t, if prices weren’t so low during the rest of the year, then you would see more, you know, it would the ability of thermal generators to be more profitable, right would be there, right? There would be less volatility and more times when prices were a little higher, that would allow them to, you know, to make a profit, but now it’s like they have they need prices to be really high in at certain times at those times of scarcity in order to make any money. So it’s really so it’s like, we’re rewarding scarcity in a certain sense, right? Yeah.
Robert Bryce 11:34
Well, it’s interesting you say that, because I ran into a guy I know, from back in the Enron days, in fact, I interviewed him for my first book, which was on Enron now 20 years ago. But yeah, he’s doing a power plant in Wichita Falls. And he said, Oh, yeah, we would, you know, we would, he said, What do we are up to the wind, we are arbitrage the wind. And he said, We didn’t run a lot. We ran, we made a lot of money, and now sold that plant. But the this will. So let me ask this question, because it’s one that I wrote down. So in the wake of the storm, there was a lot written. And there’s still a lot written now and including a recent article in Texas Monthly. Oh, this blame renewables. It’s a lie. Oh, it’s the natural gas industry’s fault. Is the natural gas industry to blame here?
Brent Bennett 12:15
Well, the the it’s not the renewables fault market design, that doesn’t account for the renewable, you know, that the the nature of wind and solar and the subsidies, right. I mean, it’s not the wind generators fault. They’re just playing in the market,
Robert Bryce 12:27
and just clear those stocks. For us the subsidies, you’re talking about the production tax credit for when the the federal production tax credit, and the federal investment tax credit, which is what the solar industry uses those, that’s what you’re referring to?
Brent Bennett 12:41
Correct? Yeah. And so when you combine those two, the way those are structured, so the production tax credit is the most intrusive, because it actually induces wind generators to produce when prices are, you know, below their marginal cost or even negative, right all the way up to the value of the subsidy, especially because their fuel is free. Right. So they have very low marginal cost, which is good thing sometimes. But when you suppress, when you suppress prices even further with a subsidy, then that starts again, that creates these huge distortions and volatility in the market. And in solar with investment tax credit, you have a lot of there, a lot of their capital costs are being paid for with both the investment tax credit, and the and just the financing agreements are able to get. And so they’re, you know, that’s how they make money, right? They’re not making money based on really directly on how high prices are, right? They’re not making money based on producing when prices are high. They’re making money just by producing, right? Because their marginal costs are so low, their capital costs are mostly paid for. So that’s how they’re able to thrive in this market, right? Where we were in a market where we don’t pay for generators to be online at certain times. Right, right. We’re just paying them for their energy. So they just produce energy. And that’s it right? It’s not doesn’t matter if it happens when you know, when we need it or not. Now, it might come you know, we might get to a point where there’s finally an equilibrium reached, right? where prices are so low when wind and solar producing and so high, when they’re not that we’ll start to see some equilibrium. But right now, we’re not there. Right. That’s why we’re seeing, you know, in the future, only wind and solar for the next few years are going to be getting built. Well, that’s that’s the problem that the public utilities commission is trying to solve right now.
Robert Bryce 14:26
Well, let’s talk about that. Because I’ve looked at those numbers. And it actually created a chart I’ve been meaning to write about it. I’ve been distracted on other things. But if all of this wind and solar gets built by what’s in the ERCOT cube by the end of next year, by the end of 2023, we can have more installed capacity for wind and solar than we have installed capacity for gas. Is that a good thing?
Brent Bennett 14:48
It’s not a good thing when it’s not dispatchable right? If we can make that wind and solar more dispatchable with energy storage, which we might talk about later or, you know, we’re having to build you know, backup power and serve Ways that okay, that’s fine. But right now, yeah, that’s that’s half our, you know, we’re gonna have, you know, a lot of our install capacity is going to be not dispatchable. So that’s a huge problem. And it’s, it’s not just about not having enough energy when needed. It’s also about the stability of the grid, the frequency, you know, problems that are going to result from that and some other things. So there’s, it’s just a Yeah, it’s a big engineering problem that’s being caused by a distorted market. So we didn’t answer your question about gas generator.
Robert Bryce 15:30
Yeah, sure. Go ahead. So the gas and then we’ll know, we’ll go ahead because I want to come back to the frequency issue, because that was the the drop in frequency was what Bill Magnus. And everyone’s pointed to now it took nearly about 2am, on February 15, when the frequency dropped below 59.3, or 59.4. and stayed there, that the grid was really on the verge of collapse, because of this lack of, well, I hope we can talk about grid inertia as well. But the but that ability to keep that frequency in that narrow band, but come back to the let’s come back to the gas fire. So is the gas industry to blame here because Kinder Morgan and energy transfer, they made a ton of money. And there are a lot of people are saying, Oh, well see, they made a ton of money, and they gave money to the governor. So they’re the bad guys. How do you what’s your reply to that?
Brent Bennett 16:16
Well, the problem there is that, you know, you’re again, you’re trying to plan for a once in a generation event, right? So nobody’s planning for that. And so to say that to say that we’re going to, you know, require a gas generator, gas pipelines and gas infrastructure to do all this weatherization, to basically prepare for a once in a generation event is kind of, it’s kind of silly, it’s a lot of it’s a lot of money to spend on a problem, a very specific problem. You know, that, yeah, it is a problem. But it’s also not something that, you know, how much money do you really want to spend on that? And so that’s what these companies are all, you know, they’re all out there making these decisions, right? I mean, gas is an intern, unlike our electricity market, which is closed, it’s just Texas gas is a competitive commodity, international commodity market. And so if you’re getting the, you know, these guys are not are not going to spend a lot of money on winterizing unless they really can see a profit for that in the future. And if you
Robert Bryce 17:16
were, unless they’re required to write in that, and that’s the issue now.
Brent Bennett 17:21
Right. But if you’re required to and it’s so expensive, well, then they’re just going to shut those wells soon. Right, or shut that or shut down that, you know, that, you know, small pipeline that’s out to a bunch of wells that are not really that, you know, marginally profitable, right. So then you’re just going to have lower production. And that’s not going to help anybody. So it’s, so it’s really a thorny problem. Right. And, I mean, in Kinder Morgan For their part, I mean, they obviously they did something, I don’t, we haven’t spoken to them about it, but they obviously did something to where they were able to supply gas, you know, an prices, the prices were what they were, I mean, there might be some investigation, the price fixing, which always happens after an event like that we have we’re not I’m not aware of what’s going on right now in that regard. But, you know, they obviously, they did something that enabled them to continue delivering gas, and they got rewarded for that. So from our point of view, it’s not, that’s not a bad thing. We want to incentivize that. And then the reason price is that they made so much money was because it’s so happens so rarely. Right? Right? That it, it’s just something that if there were if there, whatever, whatever that was, that was just the market saying this was such a rare event, and they were able to continue delivering gas that they got rewarded for that. Right. And so
Robert Bryce 18:35
well, it seems to me, tell me if you think I’m on the right track here, because the the other part of this that in the reporting that was done, you know, in the New York Times, oh, how dare those stupid Republicans blaming renewables? And oh, geez, you know, and then, you know, we’ve seen it from, you know, people at the University of Texas at Austin repeating the same thing. All of it seems to me kind of a historical in that there’s a seemingly easy to forget that there were 6060 200 megawatts of coal fired capacity that were retired in the four years, but from 2016 to 2020. And And why does that matter? It was because the coal, the coal plants were among the most resilient forms of generation that we had. So I’m bringing that up, because it seems to me Well, oh, we retired all this coal and then suddenly, oh, we’re going to require we’re going to we’re going to rely solely on or more intensively on natural gas. We’ll know what he made spell that out, as far as I know, is this is that line of reasoning makes sense to you
Brent Bennett 19:31
know, your spot on there. I mean, it’s, it’s again, and the the problem was even from the you know, being a conservative think tank, right, even from our side, so to speak, of the debate. There’s too much focus on what broke during the storm, rather than like I said at the beginning, the market design problems that lead into everything that happened, right. And so and that’s just what the media is still fixated on to this day. And, and that’s not really what’s not being told as well. This is all these things were everything that happened was a function of certain incentives that were put into the market. Right? It’s not it’s not gases fault. It’s not the renewable generators fault. It’s the fault of our, you know, regulatory policy, like you said, it’s a government failure. That is really
Robert Bryce 20:17
and where do you go to get that fixed? That’s, yeah, that’s.
Brent Bennett 20:20
So that’s, you know, it’s the job of the legislature. And, and, you know, in the Public Utility Commission, right. I mean, that’s where that’s where the failures happen, right? Is our failure to foresee this coming and to do something about it ahead of time?
Robert Bryce 20:34
So, sure, well, you’re looking at these and you’re following it. And I was on a panel at the public policy Foundation’s event in January with Peter lake. And he was saying all the right things about they’re doing what they need to do is the legislation and the policy response to the regulatory response been enough so far? And to prevent this from happening again? How do you see the lay of the land now?
Brent Bennett 20:55
Yeah, it’s, it’s, uh, you’re
Robert Bryce 21:00
putting you right on the spot here. Just
Brent Bennett 21:01
I know, right? I know, this is this is this is a sensitive subject, as we know, right. With, with everything going on. And I mean, I would I would give first of all, we I would give our legislators and my new commissioners credit for how hard they’re working. I mean, we like so we get to see every day, what they’re doing and how hard they’re working on the problem. I think the problem is that I think there’s a, there’s a hesitancy to really tackle the problem of countering the sudden the investment tax credit and production tax credit, the effect of those carrying that directly. And also, it also countering the kind of the reliability loss that comes from that distortion, right. So there’s this tendency, there’s this tendency to just do what we’ve been doing and try to make customers pay for reliability, cost, right? backup power, the ancillary services that need to be brought online to adjust to account for the variability as ancillary services I’m talking about, you know, basically programs that pay for emergency prep emergency power for, you know, ramping, when there’s a you know, drop in the wind or the sun and you got to ramp up the ramp up the gas generators really fast things like that, right. Right now there’s all those all those costs are being charged to customer ratepayers on they call it on a load ratio basis. So based based on how much energy use, right, you pay for that, right, which makes sense in a market where all the generators are kind of on a level playing field. But when you have generators that contribute inordinately to those costs, and they’re also being subsidized, right, then that creates an uneven playing field. And so far, you know, we’ve, we’ve seen, you know, I think there’s a recognition of that problem, especially from the chairman, and a lot of our legislators, but there’s been an unwillingness to directly attack it. Instead, we’re kind of moving towards a lot of programs that are basically well, we need to build more backup power, we need to design these programs to, you know, to account for all these, this variability, which is good, but then we’re gonna, we’re going to charge all customers and therefore the markets still going to remain in balance.
Robert Bryce 23:11
Well, let me let me turn to your October report that you wrote about ERCOT. And I’m quoting here, you said that ERCOT and or the PUC, they work together should implement a requirement for variable generators to I’m quoting here provide a minimum amount of electricity during high demand periods. Why would that? How would that help?
Brent Bennett 23:32
Yeah, well, it helps twofold. One is one one thing is that again, bye, if we can, all we need to do is we need to figure out exactly what is the what is the amount of of backup power that we need from wind and solar, to to properly you know, to give a to properly account for, you know, peak demand, right. So that if they if they drop off during peak demand times, do we have enough there, right, so the kind of the physical problem of just having enough capacity, right. The second problem is, is again, balancing the distortions caused by the investment tax credit production tax credit, right? That’s really so again, you know, do we what is it going to take to do that, right? So there’s so there, when you if you’re going to fix that you got to impose some costs on them, you got to post on those reliability costs. Let’s see, that’s really the only way to us that makes sense to do it. Right. If we thought if we could think of a more efficient way to do it, we would we would be happy to support that. But in our view, that’s what you have to do to balance the market because of the way that is the way that it’s been distorted. That we completely shelve the energy only market and we move towards you know, just paying for capacity and thereby, you know, just paying extra for thermal generators right and less for wind and solar right in a totally regulated market.
Robert Bryce 24:55
But they’ve already made that clear. I mean, the the wind and solar producers have already made it clear. They don’t want to pay any more for what they’re doing. I mean, this was made clear in the in the April 6 Letter of last year they sent to the governor, the Speaker of the House and the lieutenant governor. They said, Oh, no, no, no, no, no, no, no, no, we don’t. I mean, I’m paraphrasing here when they said no, don’t don’t charge us. But they’re they’ve had it pretty good in Texas, and they don’t want to provide power. Wind power is dear. And I guess. Well, and in some ways I Okay. I can’t can’t blame you. But let me go on you said that. The this is from your same October, your report, you said are kind of spacing generated short generation shortages and increasing reliance on wind and solar generation, which is directing investment and revenue away from dispatchable. And reliability measures is the primary cause of the shortages that we’ve seen. Now, you’ve kind of talked around this before. But it seems like this problem is only if the if the if the the amount of generation in the queue is right. It seems like this only gets worse from here on is that is that is that? Is that a correct assessment? In your view?
Brent Bennett 25:59
Yeah, I mean, that’s that’s the problem. And I give the give the legislature and commissioners credit for at least recognizing that problem. Even though so far they’ve they’ve been I think, they’re I think the tendency is again, to to move towards solutions that are more expensive than what’s necessary, not directly targeted at the problem. They’re trying to get at it, you know, in a in a more indirect way, by having, you know, us as consumers buy more backup power, right, trying to direct more money into that side of the market, without addressing the fact that we already have too much of what we don’t need, or too much. Or if we’re going to have more wind and solar needs to be more dispatchable. Right. So that’s so that’s really I think, what it boils down to and, and again, this feeds into everything, because, you know, again, if you’re going to ask generators to spend money, gas and coal generators to spend more money on protecting their equipment for winter weather, you know, weatherizing right, well, they need money to do that. And they might have been more inclined to do that if they weren’t already losing money. In the market, we we’ve heard that from a lot of Mark participants like, but we’d like to invest more to prepare for storm like URI, but we can’t we don’t we don’t have the you don’t have the revenue to do it. And so that’s that’s a fundamental problem. You can’t just impose those those mandates on them without enabling, you know, revenue source that, you know, the firm fuel product that the PUC is working on right now that incentivizes generators to have more gas storage, or more dual fuel capabilities to having you know, oil or something like that as a backup, or having secure gas supply. That’s a critical piece because that that will essentially again, you can you can ask them to weatherize all their pipelines and whatnot, try to ensure that but if you don’t, if you don’t give them any money to do that, then they’re just they’re just going to shut down. And so that’s a really so that’s a really key reform, to fixing the gas supply problem, right. It’s not about necessarily weatherizing. It’s about providing the market incentive to get to get generators to do that, to guarantee that that fuel supply when you need it, right,
Robert Bryce 28:06
well, I’m glad you brought that up, because that’s one of the other issues that I think and completely well, what’s said online have used it a lot. But amateurs borrow professional steel. Well, very variously attributed to John Lennon and Pablo Picasso. But Meredith Angwin, who’s been one of the guests this week, on the one year anniversary, she talks about this very clearly about the the fatal Trifecta too much reliance on renewables too much reliance on imports and too much reliance on just in time gas. And so what’s the solution? Will you need power plants that have onsite fuel, and so that’s the other part. And as I said before, which plants did the best was the coal and nuclear plants. So then, then the PUC or ERCOT, could then provide an incentive would have to be an out of market payment, right? If you had a dual fuel fuel plant that would have diesel fuel or fuel oil that they could run instead of net gas? Right? And so how would that how would that work? If they if they if they to incentivize that on site fuel?
Brent Bennett 29:07
Yeah, you’re basically getting a payment to, to have that capability, right. So a generator that has that onsite fuel storage will will get money for that, it’s very similar to how we do the Blackstar program. So say, if the entire grid were to go down, we pay generators to to certain generators to provide the service of restarting the grid. Right. Right. So it’s kind of an emergency measure, right? It’s not it’s not something that’s ideal, right? In ideal ideal market, we would be generators would have it instead of through price through market prices to to do this to store fuel on site to a certain extent, and to have firm fuel supply their gas generator, right. But obviously, that’s not there. That wasn’t a problem that storm exposed. So we, you know, the only the only fix that’s available is regulatory one and this is and adding this extra program that’s that’s really just entirely regulated programs outside of the normal market system. Right?
Robert Bryce 30:09
Well, so I’ve thought this friend of mine, Jim walls, Ill who worked at Houston natural gas before it was bought by before it became Enron. And back when I was 20 years ago, he said, he said, Brian, I think this deregulated electricity thing is good for consumers. Has deregulation been good for consumers in Texas?
Brent Bennett 30:29
Well, good, it’s been a mix, I would say, you know, prices prices have been pretty low in Texas. I mean, they’ve had prices until now. Until now, right? Which, which is, well, that’s the bad part, right? You’re getting ahead of me here. But it’s, you know, we had a run up in prices in the 2000s, as we built a lot of generation and gas prices were really high too. But since gas prices have dropped, you know, prices have fallen Texas retail price electricity for, you know, all consumers is lower now than it was in 2007 2008.
Robert Bryce 30:58
In real, real in real terms,
Brent Bennett 31:01
in real terms, that’s right. And, and both nominal in real terms, and, and prices are only in real terms, and prices are in nominal terms, only about 13% More than they were when we started deregulation, the rest of us nominal prices have gone up about 40%. Since that time, so industrial consumers in particular seem to most benefit from it. The market is really, really geared toward helping industrial consumer, which is roughly half of our, our consumption in Texas industrial, petrochemical complexes, all those things, right. Huge part of the market, and they’ve really benefited from the market. So. So there’s, there’s been that that benefit there. The downside is that now we’ve had, you know, we’ve had, in our opinion, the market could work, and was functioning. And, you know, to a pretty good degree, until we started seeing these distortions really have an effect, right? We weren’t really concerned about not having enough, you know, generating capacity until, you know, roughly three or four years ago. And then we’ve seen since that time, we started to see things get tighter and tighter.
Robert Bryce 32:13
And now you’re talking more and more and more. And you’re, and you’re talking about reserve margin here. Right?
Brent Bennett 32:18
Right. Right. And not just the reserve mark, the raw reserve margin, but just the, the the number of times that we’re getting close to having shortages, right? Because the reserve margin is just a number. What really matters is how many times a year are you seeing tight conditions, right? Because the way they calculate the reserve margin is based on total capacity of thermal and the average output of wind and solar. But what’s happening is you’re seeing that margin is is is growing, actually, but it’s becoming more volatile. So what happens is, you see more times when it gets it goes from, you know, being where it should be at 15 to 20%, down to zero. So it’s really the volatility of that reserve our reserves that matters, and wind and solar, obviously, is much more volatile. At during peak demand times we don’t know how much of it is going to be produced, we have some idea, right? There’s a you know, it’s a distribution, right? But it’s much more it’s, you know, it’s it can vary by 30 40% of its output. Whereas, you know, thermal, especially in the summertime is only going to vary by three or 4%. It’s usually about 90% availability of our thermal generation, right? You have outages, for sure. But generally, it’s in the range of three to 4% variability compared to 30 or 40%. For wind and solar, right. So we add more of that than that reserve, that reserve margin becomes less reliable, right, that number is not as good. It’s really what matters is how many times are we seeing shortages throughout the year? We’ve seen that increase in 2018. A lot.
Robert Bryce 33:45
Well, it’s interesting, you bring up that point, too, because I’ve you know, I’ve been monitoring this. I mean, really, for the last year, obviously very closely, but even you know, several years ago writing about it for National Review and other outlets, but that when when demand is high when when when demand zigs when generally zags. I mean, we saw that exactly, in fact, four months to the day on June 15 of last year, when we had ERCOT warning about supply problems, and that day wind effectively went to zero. Yeah, which which, which I think is to the, you know, directly to your point about how we, so how do we account for that as a system? So yeah, one of the when, when the guy I met recently, we talked about this idea about and I think it’s right as well, that was something that just as a quick aside, when I was in Beirut, and we in my film juice, we went to Beirut, and I wrote about it in my latest book, a question of power. Consumers don’t pay watt hours, they’re no meters that they that the generator mafia put on the consumers homes, they sell them amperage, they sell them a certain amount of amps, how much power how much power, you know, how much flow do you want, right is essentially what they’re doing, how they’re charging their customers. Is a lot of the root of this the last understanding of what what electricity is about the nature of the thing itself.
Brent Bennett 35:07
I think about the public Yes. And in terms of how we, you know, because ultimately it’s up to us to elect legislators to elect a governor who appoints the public utility commissioners that understand the problems and are responsible to them. Right. So yeah, if you’re, if you’re, if you want to go back that far, then I think, yes, it is incumbent upon us to understand where our energy comes from.
Robert Bryce 35:32
Well, I guess I meant it a different way. And I wasn’t explicit enough in that. We’re misunderstanding this system as a very complex system. Right. But that exists. But it wasn’t just Beirut, but a guy from a Western Area Power Administration said this, he said, No, we’re selling electricity, like a commodity. It’s not a commodity, it’s a service. And the service can’t be interrupted. Does that does that rhyme with you? Does it make sense to you?
Brent Bennett 35:56
Yeah. And I mean, and it might be what you’re talking about is, you know, what, we don’t have a lot of our time of use rates and other types of products that would make consumers more responsive to the, the conditions of the market. Right. That’s one thing. That’s that’s one thing, that’s a problem, right? We don’t have, we don’t have a lot of price responsiveness from consumers, we rely entirely upon, you know, the generators to be price responsive. Right. Right. Which, you know, which is something that’s definitely needs to be into, although, to certain extent, you know, we want, you know, consumers are only going to be so responsive to prices, right, we still want our heat on, we still we’re still going to consume a certain amount, right? So there’s a limit to that. But there’s definitely more that can be done in that regard. And we’ll call demand response, right. So that’s, I mean, that’s probably more prevalent in places like Beirut, where you have, you know, don’t really have a reliable grid. You don’t have generators that are really better able to respond to demand. And so consumers have taken it upon themselves right to to make more to be more responsive to prices. Right.
Robert Bryce 37:07
Right. So how much in percentage terms we’ve talked about the amount of wind and solar that is being added to the Texas grid? And it’s a tremendous amount? I mean, I think in terms of solar alone, between 2020 and 2023, Texas, could add nearly as much solar as now exists in California. I mean, it’s just a massive amount, 28,000 megawatts, 28 gigawatts. So how much terms in percentage terms? Could ERCOT absorb of wind and solar without the grid being destabilized? Or are we already there?
Brent Bennett 37:38
It’s a great question. I mean, the market has already stabilized. Right. But if you want to talk about physical, the physical aspects of the grid, right, you know, Can we can we handle that much? That much input into the grid that’s not asynchronous? Right? Because with a with a with a Thermal Generator, you’re you’re turning a turbine that provides inertia that inputs into the grid, right? And that and that sets the that sets the frequency of the grid that keeps the grid synchronized. And that’s that’s a whole separate physics discussion. But when you add in this, this energy from winds from wind and solar that doesn’t have that, then that’s that’s, we can we can they can there’s there’s technologies now coming out with inverters and things we can replicate it a little bit. And how much of that gets incorporated? We’ll see. But it’s it is an important question. A lot of people will say that once you get beyond about 60% When the solar input into the grid, then it’s becomes hard to maintain the frequency of the grid. But it’s still a question that kind of remains unanswered, because we’re not sure. We haven’t gotten there yet. Right. In terms of the physical destabilization, I’ve heard, I think ERCOT has said before that if we get more than 20 gigawatts of solar input into the grid, at any one time that they’re going to probably, they’re going to probably start curtailing it because at least in localized areas, it’s going to cause where there’s a lot where there’s a lot of solar, you know, as a percentage of the total input into the grid, that’s going to cause localized frequency problems. And so we’re going to have to start curtailing it so that 28 gigawatts I would, we’ve heard her cut say that they’re probably if they if that 28 produces more than 20 then they’re probably going to have to start curtailing it.
Robert Bryce 39:22
Was it where you’re sending like California?
Brent Bennett 39:25
Yeah. California? Yeah, I mean, California is already kind of there. They already have done some curtailing because because they’re they’re there. They have that much already. And they’re a smaller demand, right? They don’t demand they don’t have as much Patricia demands, Texas does. So
Robert Bryce 39:44
we’re about to say. So what you’re talking about here is grid inertia, which to me is a fascinating concept. And I think about it as a flywheel right that this idea of 60 Hertz in the grid has to maintain that 60 hertz at 60 cycles back and forth every second, but that that the This was the really the result of decades of engineering on the grid, but that by adding all of this wind and solar, it doesn’t it contribute to that grid inertia? Is that a good way to think about it?
Brent Bennett 40:12
Yeah, yeah, that is, it doesn’t Yeah, it doesn’t. It doesn’t, it doesn’t, it doesn’t help maintain that, right. And so you have to have, again, there’s, they’re coming up with inverters right to convert the DC output from, from a solar unit into an AC output that has that can kind of mimic the grid frequency. But you still need, you still need secret of synchronous generation to generate that, that even frequency that allows that keeps the grid stable. And so what we saw it and what happens is, if you lose too much of that generation, which is what happened, you know, the night of the morning of February 15, last year, you start losing too much of that and the frequency gets too low, then you have to cut demand in order to in order to level it out, right? If you’re losing too much of that, that that synchronous supply, then the frequency gets too low, then the grid could ultimately collapse, the whole thing would go down. Yeah. It’s like a it’s like a traffic. It’s like a traffic jam, where if you know if the cars in front or are not going at a certain speed, and they suddenly stopped and everything behind it just collapses. And that’s what almost happened. We were a few minutes away from that last year. And so we have to, you know, that that’s just a necessity that those ERCOT says they’re going to curtail at 20 gigawatts. I mean, that just means like, they have to do that in order to keep the grid from collapsing entirely. It’s not a market problem. But
Robert Bryce 41:39
there’s a problem. Right, but that idea of ERCOT will will curtail it at 20 gigawatts. I mean, we’re It sure looks like we’re barreling toward that very same outcome. When one quick aside, a few years ago, I was moderating a panel, Bill Magnus was on the panel. And I we talked about asynchronous generation, I just come back from Australia, and they were having all kinds of grid problems there. And I said, What do you think about this, Magnus? I mean, we know about he said it? Well, and I quote him almost exactly said, at a certain point, he said, I just want a big hunk of spinning steel. Right, that he knew that that was essential for the for the grid to to maintain that inertia so that it doesn’t fall apart. But it just seems like that there. I go back to this idea about the grid as a complex system that still seems like policymakers aren’t quite understanding these physical matters in a way that a depth that they should Is that am I wrong?
Brent Bennett 42:31
No, that’s absolutely right. And, and it’s, and it’s again, like we can, we can fix that problem, like the grid operator will do what it has to do to keep the grid stable, right, or cod will do that. And they understand it. But I think there’s a lack of understanding on the part of the public and policymakers that we need to create market mechanisms to really to make this so that the market can function right in the situation, the markets already broken. And we don’t want to get to the point where we need just a straight up, you know, lay the hammer down, or else the grids going to break. That’s not a solution. I think anybody wants certainly not the renewable generators. And so that’s, so that’s something I think that’s going to be incumbent upon us. Over the next few years, we’re considering market redesign. Again, this goes back to what we were talking about in our proposal is that you need some kind of check on the growth of wind and solar and natural check on it so that it only grows to the extent that the rest of the grid can support it. Both the market perspective and also from a physical perspective. And so we’re seeing, you know, ERCOT develop new ancillary services to figure this out their voltage support, more reserves, you know, other things, but right now, there’s not really there’s, since there’s no check on the growth of wind and solar, eventually, we’re just going to barrel into that limit. We’re not sure. I mean, they say 20 gigawatts now might not change. Right. That’s their estimate right now. Yeah, we’re not sure exactly where it is. But eventually, we’re just gonna barrel into that limit, and then have to put a hard stop on it. And that was a situation that anybody wants,
Robert Bryce 44:04
right. But it’s something Texas can’t control because these are federal subsidies, right, and the wind and solar industries and want to make sure they continue. I mean, they’re, they’re arguing or they’re lobbying for that right now. So
Brent Bennett 44:16
they’re, they rely on it to keep their operations going. So of course, yeah, they’re not gonna, they’re not going to give that up.
Robert Bryce 44:22
So you’re a battery guy. Could batteries have saved the grid last year?
Brent Bennett 44:27
The short answer is no. Now there are some things that batteries can do, which, especially in the summertime, when we have, you know, or even what would have happened, if supposing let’s say, you know, a couple weeks ago when we had the cold weather a couple of weeks ago, and there was some concern about whether the, the grid was going to be tight, half tight conditions are not turned out. We had a ton of wind generation prices never even went above $100 in the real time market, which is crazy. They’re actually prices were lower that week than they were the week Before because the wind was blowing less than a week before, just But supposing we had had low wind that week. And we’d had Friday morning, we had been, you know, a few gigawatt short for a few hours, batteries can handle that, you know, there, you can build enough batteries to supply a few gigawatts of power for a few hours. But the duration is really the issue. Because when you go from and in the summertime, that’s the case too, right? If we’re going to have a shortage during the summer, then you can, it’s usually going to be for a few gigawatts for a few hours. And so you’ll have rolling outages for a few hours, right. But if you want to go from that to, you know, 30 gigawatts, like we’re in February, last year, for several days, you go from few hours and several days. I mean, that’s 1000 fold difference in scale, right. And that’s really it’s I always say, it’s not a tough problem with technology, it’s one of scale, I have a whole presentation I do on this. When when I go to conferences, and it’s really in, that’s really it, it’s, you know, we need we have technologies that work on the grid, we can put lithium ion batteries on the grid, and they can perform all kinds of services that are great. But they only have the duration to be able to handle a little bit of, of, you know, backing up the few hours basically backing up a wind and solar farm, right, you can shift a few hours, but not for several days. And so when we get when we get above, so when we get above 50%, wind and solar on a grid, that need for having backup power for several days starts to become more and more that need grows. So if we can get, you know, various betas up to 50% and address some of the, like I said, the smaller problems that we might see for wind solar variability, but it’s not going to get us to we don’t have the scale, not even close to the scale to have, you know, really high wind and solar penetration.
Robert Bryce 46:55
Sure. Well, you wrote this about batteries. And because you’re a material science guy, and you’ve obviously got a lot of experience with this, you said that to to create a day of storage, you would need then a day of storage for the Texas grid, you would need to build 100 megawatt battery every day between now and 2035 at a cost of roughly $100 billion a year. That’s a skiff. That’s a scale problem.
Brent Bennett 47:25
Yeah, I don’t know if that number is quite right. 100 billion a year but
Robert Bryce 47:29
okay, maybe I maybe. Let me see if I’m yeah, looking for your, your numbers here.
Brent Bennett 47:35
I don’t exactly remember. The the total cost so so in a paper we did a couple years ago, the total cost the grid for going 100% wind and solar would be roughly on the order of 120 billion a year. I think, if I’m not mistaken. Okay. Yeah. And so that’s, you know, between now and that would be like between now and 2030. But it would be Yeah, it would be the but you got that you got the part right about 100 megawatt battery every every day for the next. You know, I guess now 13 years, roughly speaking. Yeah, that’s about what it would take. And so that’s
Robert Bryce 48:16
where we are today. Right? And where do you get the cobalt? Where do you get the nickel? The you know, whatever, Chip, just pick your pick your mineral, your metal? Well, let’s talk about that since I mean, this the scale problem course, that’s an issue that is always in when it comes to energy and power networks is in my book, power, hungry, power, density, energy, density, cost and scale. Those are the four imperatives always everywhere, always will be. But let’s talk about batteries. Because, you know, one of my guests on the podcast has been Donald Salloway. Who you you’re familiar with? I asked him this question. I’ll put it to you. So why batteries still stink? Why are they still so finicky? What the Why is what is the fundamental problem with batteries?
Brent Bennett 48:59
Yeah, I love I love it when he said on your on your podcast that you know that bad batteries don’t there’s no Moore’s Law for batteries. I’ve been saying that for a long time. I don’t know if I picked it up from one of his lectures perhaps or from somewhere else. Our friend Mark Mills likes to say that as well. So but that’s that’s really his batteries are fundamentally different from any other kind of technology that we have out there right now. That the types of chemistry problems that have to be solved. It’s it’s really the complexity, the inter the you know, the the interplay of all the different factors, right, you get better energy density, but you might have to give up cycle life. You get better, you get cheaper materials, but you might end up with a battery that’s not as safe. It’s I mean, just goes on and on and on. Whereas, you know, silicon semiconductors are a very unique technology in terms of being able to scale them now reaching the limits of that now, because we’re getting down to the atomic level. semiconductors. But it’s, it’s really such a unique technology and nothing else behaves like that. I mean, the price declines that we’ve seen wind and solar and batteries to the last decade are purely been economies of scale, it’s not been really a technology driven improvement, like what you see in the semiconductor business. So now we’ve kind of we’ve kind of reached the end of that. I mean, there’s they’re saying already that the prices for winter months are actually going to go up next year, this year, sorry, we’re in 2022. Circuits supposed to go up this year because of supply chain costs, right. So we’ve reached kind of the limits of what the supply chain can do in terms of squeezing out costs. And the same goes for lithium ion batteries. And so from here, the gains and prices really going to come from the slow development of technology, which is really more akin to like cars, right? If you think of a car or a car engine, there’s so much complexity that and if you if you want to improve fuel economy, you need to give up some safety. You know, if you want to, if you want to make the car, you know, perform better, you might give up some fuel economy, right. And so there’s, you know, and you see kind of fuel economy approved, maybe 5%, a year rate of about 5% a year. And that’s kind of what we see in batteries, energy density improves by about five 10% a year. And that’s an that hasn’t changed, since, you know, at least the last 40 years since before developments, lithium ion battery. And so in each, because as we get better at building them, it also gets harder to improve them. Right? It’s always pushing, you’re always pushing up against the limits of physics. And as Dr. Salloway said, you know, the periodic table is, the periodic table is all we have, we haven’t invented new elements beyond the periodic table. So you’re kind of you know, physics kind of limits, chemistry kind of limits us in terms of what we can do. So that’s, again, that’s just the nature that’s that’s, that’s just that’s why batters are so hard. You know,
Robert Bryce 51:48
we had Chris Wright say it he said, We haven’t the energy transition hasn’t failed for lack of effort, and the energy transition has failed, because energy is hard. And I thought that was a really good way to think about it. But Ray, you know, what, what? What is also clear, it seems and one of Saturday’s points that I thought was great was he said if you want to make batteries, dirt cheap, then make batteries out of dirt. And so he’s, it’s idea, well, we need different elements from the periodic table that are going to be low cost. And as he says, aren’t mal distributed? You know, cobalt from Congo, for instance. But, but that’s a long way to the question. I mean, how much of this is going to be constrained by the cost of the raw materials themselves? Because the price of lithium is skyrocketing? I mean, yeah. And and when I look at it, so here’s my question. So on that price of lithium is, is Tesla and Elon Musk is that? Is this all just a big bet on? Is their entire business a big bet on the price of lithium?
Brent Bennett 52:47
I mean, he could say that I mean, look, you know, lithium, is that a pretty abundant element? So we’ll see, it remains to be seen really, how much of it we can produce at scale? I think I think a lot of the price increases right now are because we’re seeing, again, this kind of this almost out of market demand for electric vehicles, right? A lot of subsidies that go into that, as well. A lot of people buying electric vehicles just because they want one, not necessarily because of the price. And so it’s taking it takes the the mining aspect, right takes a long time to catch up. It’s just like with old prices. Right now you’re seeing, you know, demand is demand is increasing. But we’re seeing a slow, slow response in the supply side. And so that’s, I think that might sort itself out. But yeah, it is what what you’re what you’re saying is correct. I mean, he is betting that lithium will, we’ll be able to take a lot of lithium out of the ground. Because there’s with electric vehicles, there’s no way around looking at you can maybe use sodium. But really, you got to stick to that upper left hand of the periodic table, because you need like light elements, right? Energy density is so key with vehicles. You can’t that now aluminum, like Dr. Sally said, that might be another option. But again, that’s right up there in that left hand side. So that’s, that’s you’re pretty limited there with girt. With the grid, you have more options, because energy density doesn’t matter as much, right? But you’re still but then there’s other trade offs, right? Then your cost, your cost barrier for the grid is roughly five to 10 times lower, if you want, if you want that long duration, really large scale storage, you need to be fine, at least five times cheaper than what you need for electric vehicle, you know, so that’s, and so that’s what he’s going after with his idea. But the problem is, you know, yeah, use cheap materials, but the trade off is that you have to have high temperature, you have operating issues, you know, and there’s other other things around the battery, you’re going to cost more because you’re using really cheap materials for the battery itself. Right. Right. So it’s a it’s a really thorny problem. And probably I’ll say one thing, you know, one of his one of his competitors is a company form energy, which you might be familiar with. Yeah. And they’re, they’re tackling the problem with, with iron. And so iron iron is another element that is really being looked at a lot, because there’s so much of it. The problem there is is getting those batteries to recite, to to be able to recharge to be able to cycle and last a long time. Those are really, that’s a really tricky thing with any iron battery is getting it to a cycle lasts a long time. So again, there’s all these trade offs, everything that you have you try and do with a battery. There’s trade offs to it. Well, that’s
Robert Bryce 55:33
interesting. I did look at form energy in their iron air battery. And I’ll ask you to explain that in a minute. But that it’s one of the things I talked about with with sad away was this energy and energy density issue, right. So in in automotive applications, you want a high energy density that is high and a large number of energy per kilogram is the key issue, right? You also want a small, you wanted high energy density in per cubic meter, or pure cubic centimeter as well, right? So you want high volumetric and gravimetric power, energy density. But when you pursue that higher energy density, you’re risking a lot because it’s more reactive, right? And that’s one of the things that I thought was interesting. Salloway as well, he was, he did not shy away from criticizing lithium ion in that it’s, if it catches fire, look out. So that reactivity is that I mean, you mentioned all the trade offs. But the goal is that if your battery has higher energy density, you’re going to have other trade offs that are going to make it problematic. Is that Is that Is that a fair way? To summarize what you’re saying?
Brent Bennett 56:33
Absolutely, yeah, there’s, there’s always those trade offs there. And, you know, in the problem with with the safety of electric vehicle batteries, not so they don’t, they don’t catch fire that often. But when they do, it tends to be unexpected, you know, like a gas tank, a gas tank is not going to explode sitting in your driveway. While it’s, you know, it’s your skin. And typically, it’s going to catch fire when the car is already on fire. We’ve been in an accident, right? Now, the problem that we’ve seen with some lithium ion batteries is that, you know, they tend they can actually catch fire when they’re charging. That’s a common, that’s a common failure mode for lithium ion batteries. So it can happen while they’re sitting in your garage. Or it can happen when you actually, you know, it can happen in situations where you might not think that it’s going to catch fire. So what we’ve seen is not that they’re necessarily do do it more often than gas powered vehicles that it happens when you don’t expect it. And that really catches people off guard. And they’re also very hard to put out, right? You can’t put out lithium fire with water. That’s water reacts with lithium. So that’s, that’s it’s really hard to do that you have to you have to get the oxygen, you have to use special materials to get the oxygen out of the system so that it will stop burning. Right?
Robert Bryce 57:48
Yeah, well, I know it was here in Austin was it last year there was a kid ran into something had an accident. And then the fire department came and they spent send us something like 30 or 40,000 gallons of water, but I guess they just finally just had to let it let it let it burn out. You know, what
Brent Bennett 58:03
they did was they poured so much water on it that eventually the water reacted away all the lithium and it finally died. Oh, okay. That’s, I mean, that’s what happens, right? Because yeah, you don’t you can’t put out a lithium battery fire with water. That’s what you can. But you’re basically what you’re doing is basically letting it burn until it’s all the way done. Gotcha. Like letting the gas tank burn until it’s all the gas is burned up. Right.
Robert Bryce 58:24
So what is the iron air battery? Because you mentioned form? What does that mean? It just seems like an odd combination. And it’s one that I’m not familiar with. Explain that if you don’t mind?
Brent Bennett 58:33
Yeah, well, it’s basically it’s taking the process of rusting and reversing it. So when when you leave when you leave pure and out and air forms rust iron oxide, and then and then their battery that’s they do that they they have your iron on one side, they let air in. And the iron forms iron oxide, and then they reverse it back. The reversing is the hard part. And I’m not I’m not familiar I know people that work there. But I’m not intimately familiar with how they do that. Obviously, that’s a closely guarded secret
Robert Bryce 59:06
should only be for stationary only for stationary applications then, right? So
Brent Bennett 59:10
the thing there is, yeah, there are two there are two challenges there. One is yes, low energy density, because you have iron is very low energy density, you’re never going to see that on a vehicle. It also it also can’t recharge very quickly. or discharged for that matter, that’s a slow or charges you tried. If you try and speed that up, then what’s going to happen is you’re gonna degrade your material quickly, you’re gonna lose cycle life. So it’s really there. So really they are what they did, I think they’re very smart about it is they said, Look, we’re going to design a product specifically for the long duration storage. And we’re going to try and attack that with we’re going to design we’re going to pick the chemistry it’s best suited for that. And I think they’re on the right track. The question is, again, is can they actually hit their cost goals, they understand that it’s going to that they got to get to that you know, that level they’ve talked about it very bluntly that they have to get to that some some guys try and hide it, they don’t really say like, they don’t really openly talk about trying to get down to 10 or $20 per kilowatt hour, which is five times less than where electric vehicle batteries are today. They’re pretty blunt about it. The question remains is whether they can hit it. And it’s gonna take time. I mean, he looked at I mean, Dr. Sato is a great example. He’s been that with Ambree, for 12 years now since he started that,
Robert Bryce 1:00:25
and that’s what raised $120 million. And they still don’t know, sure and don’t still don’t have a commercial product, you’ve got to have some patient capital for that kind of project. I mean,
Brent Bennett 1:00:34
Tesla took, what, 20 years to reach profitability, something, something close to that. And then they’re still only profitable because regulatory credits. So that’s, I mean, oh, yeah. When you’re somebody that when you have politicians talking about net zero by 2050, and trying to get rid of all, you know, all new sales of gas powered cars by 2035. There’s this complete disconnect from how long things actually take to evolve. And that’s something we fight every day in the policy space. It’s it’s really, it’s really just challenging that. Again, the Publican, like you said before, in what you do so so well, what’s why it’s so important is that the public and policymakers need to understand where energy comes from and how hard it is to get energy to us in the ways that we that we expect, I mean, fossil fuels have done such a good job of that, that we are kind of immune to how hard it is, right? And so this energy transition that’s supposedly going to happen, no one really understands how long and how difficult it’s going to be if it happens at all.
Robert Bryce 1:01:36
Well, I, you’ve taken some of my thoughts out of my head and put them into words, because I think that that’s exactly right, that there’s this this kind of Bly the assumption that oh, well, if only we strangle hydrocarbons, then something else is going to step in and replace them. Well, no, I mean, we see that already in Europe, that is not the case, you can strangle hydrocarbons, and you can build a lot of renewables. But you can’t make the wind blow. And that’s a real problem. That’s a real problem.
Brent Bennett 1:02:02
Yeah, and fossil fuels a really cheap energy storage, and we you know, batteries haven’t stepped in to replace that, you know, because we can make we can we can make, you know, we if we can make batteries so cheap that they can store energy as cheaply as fossil fuels, then it wouldn’t matter if the when blue or the sun shone, you know, how much the wind blew the sunshine, right? Because we could store it cheaply, right? You know, the problem is, it was so expensive to collect, TriCity is really hard to store whereas fossil fuels are really cheap energy storage, the Mother Nature has already done the work for us.
Robert Bryce 1:02:34
So I like that idea. And it I guess it goes back and it’s something I discussed with Meredith Angwin. It’s easier to move molecules and electrons easier to handle molecules and electrons. Oh, yeah. That’s a good way to put an old saw in the utility business as I understand it. Well, so just to come back to touch the ERCOT issue again, then because we’re talking about batteries. The way I’ve thought about it, is that the that suddenly without anyone kind of discussing it, it was this assumption that oh, the gas industry is going to be the battery. And yet no one kind of the regulatory system didn’t make that clear. Right away. Yeah. Is that a fair way to think about that? How the gas industry now because of the decline of coal, right, six gigawatts closed, nuclear hasn’t grown. And we added all a lot of this intermittent renewables into the system that suddenly the the, the the performance was put on to the gas industry to be the battery. Is that a fair way to think about it?
Brent Bennett 1:03:33
Yeah, that’s absolutely right. I mean, you’re if you don’t have batteries in the system, then you need something there. And that’s effectively what our battery is, right now is is a lot of Quickstart gas generation. That that is already it’s already overmatched, we already were already lacking in what we need. And it takes several years to build one of those things. So we’re already a few years behind that curve, and we’re going to get further behind as we you know, demand is growing, and we’re not building any more, any more of it. So that’s, that’s absolutely a good way to put
Robert Bryce 1:04:09
it. Well, so just a couple more questions. My guest I haven’t done a station break. Although we’ve been talking for about an hour my guest is Brent Bennett. He’s the policy director for life powered and initiative of the Texas Public Policy Foundation. You can find out more about them at Texas policy.org So just a couple of last questions Brent and I’m sure appreciate your time so I always asked my guests to What are you reading what I know you have a young child right a baby boy is that right? Yeah two year old sir you’re not really you’re reading time is crypt somewhat but nevertheless what what’s on your nightstand or on your bookshelf? What are you reading these days?
Brent Bennett 1:04:45
Yeah, I mean, 15 minutes a night is kind of how I do it. But you can get through a lot of books if 15 minutes a night. So skim
Robert Bryce 1:04:54
them like I do. Yes, you can.
Brent Bennett 1:04:56
Yeah. So now what I’m reading now is a book called Welcome corporated by Robert Ramaswamy. I don’t know, with that. But yeah, that kind of shareholder cat shareholder versus stakeholder capitalism. That’s a huge thing in terms of right now in terms of affecting the capital flows in the energy business. People trying to Direct Capital away from oil and gas and into wind and solar. And that’s a big issue for our team right now, too, is, is what’s going on there. So that’s a book I’m reading now. And then, really excited about our friend Alex Epstein, his book fossil future futures coming out in April. So hopefully, by the time I get done with this book I’ll be about about time, I just started this book. So hopefully, it’ll be about time to read Alex’s book when it comes out. So
Robert Bryce 1:05:43
it’s interesting what you say about that effort to push more capital, I’ll just one quick thought, which is our Arvind Subramanian, who I guess is now at Brown and was a top advisor in India, in the in the energy ministry in India, I guess a top adviser to the Indian Prime Minister had a great piece that was published last month in January on the potential for a financial bubble in the green investment world, we were rather in these alternative energy investments, because there’s going to be a lot of money sloshing around, it’s gonna find its way into bad projects that aren’t going to have any return. So just Just one quick thought about that. So the way that rhymes with anything you’re thinking about either.
Brent Bennett 1:06:21
Yeah. Well, and also, I mean, it’s I think, you know, from our point of view, what we’ve seen in the folks that we talked to in the energy business that, you know, part of the reason that the business has been slow to ramp up production after COVID is because there’s, there’s been a unwillingness of investors to put more capital into the business, right. And so you know, fracking has improved our ability to respond to prices, you can get a lot of oil and gas out of the ground quickly with a frack Well, compared to a conventional well, but it still takes capital to go out and drill those wells. And we’re just not seeing drilling has been kind of slow to pick up. And I think it will, actually, we’re starting to see more now in the last few months, you know, people starting to put more money into into drilling wells, but it’s, it’s definitely I think, been a for the first time, I think we’ve been able to see it actually, in effect, this this dearth of capital, right, and the oversupply of capital to the renewables business, which has been already been in effect in the electricity market, in Texas, right. To go back to our original point for the last decade. Plus, I think we’re seeing a little bit now in the broader energy market as
Robert Bryce 1:07:27
well. an oversupply of capital.
Brent Bennett 1:07:31
Yeah. To an oversupply, too. Yeah. That’s what you when you when you have when you have a bubble, right, that’s an oversupply of capital. Right, was certain business. Right. Right. So that’s, I think it’s I think we, you know, well, I think that’s kind of what we’re seeing in a lot of the renewable space right now.
Robert Bryce 1:07:44
Right? So last question, what gives you hope,
Brent Bennett 1:07:50
um, you know, just regular people give me hope, when I go out and talk to people and explain kind of what I do, and you hear from people that may not even agree with me on the policy issues, but that, you know, really, you know, do have a desire for, you know, fordable reliable energy and the fact that people continue to demand that. And, and that, that, to me, gives me hope that, you know, we’re still going to, even as we stumble our way through the policy space right now and have a lot of bad ideas out there that ultimately, the markets and people are going to continue to demand that, especially in the developing world, they’re going to continue to demand that and that’s going to ultimately drive us towards, you know, drive us towards the right policies and the right kinds of energy, even if we make bad decisions in the near term, that at least in the long term, we continue to have the right direction, you know, the last 100 years have seen fantastic growth of human prosperity, in large part, thanks to, you know, our ability to get energy out and get to get energy, right to use and to produce and use energy. And so I still remain optimistic that’s going to be the case for next 100 years.
Robert Bryce 1:09:02
Well, I think that’s good place to stop then. Well, thank you. My guest is Brent has been Brent Bennett. He’s the policy director for life powered, which is initiative, the Texas Public Policy Foundation. You can find out more about him at Texas. policy.org. Brent, thanks for your time. Sure. Had fun talking to you. Yeah, thank you, Robert. And thanks to all of you in podcast land, tune in for the next episode of power hungry podcast until then, see you