Electricity affordability has become the defining energy issue of 2026. As policymakers scramble for solutions, two very different playbooks are taking shape.
On one side, a blunt-force federal approach led by the Trump Administration that treats affordability like an emergency. Keep coal plants open. Force markets to change. Make large power users pay directly for new power plants through market interventions.
On the other, a quieter, asset-light strategy is emerging at the state level. In places like Illinois, Virginia, and New Jersey, governors and legislatures are increasingly looking to virtual power plants to meet growing peaks and avoid overbuilding the grid.
This week on Open Circuit, we break down these two paths. What actually lowers costs, and on what timelines?
We start with the federal push to reshape PJM capacity markets and make big energy users pay for new supply. How would that actually work? Is it real market reform, or political signaling?
Then we turn to the state level, where VPPs and distributed resources are increasingly central to affordability plans. We compare how Illinois, Virginia, and New Jersey are approaching the problem.
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Transcript
Stephen Lacey: Caroline, it’s your birthday.
Caroline Golin: It’s my birthday.
Stephen Lacey: Amazing.
Caroline Golin: Yeah.
Stephen Lacey: Do you believe in astrological signs?
Caroline Golin: I do believe in astrological signs and only because it’s so prescriptive and I think usually dead on. So, it’s the age of the Aquarius right now.
Stephen Lacey: What does that even mean?
Caroline Golin: It actually means planetary alignment essentially. And so, the way the planets are lining up in the cosmos is, in theory, opening up an energetic, I guess, portal for people who were born in the Aquarian age, so.
Jigar Shah: You just have to sing it and then the verses explain the answer.
Caroline Golin: Apparently it’s going to be my age.
Stephen Lacey: If there’s a portal somewhere, can I jump through it? I need to get the hell out of the real world.
Caroline Golin: That’s sort of how I feel most days.
Stephen Lacey: From Latitude Media, this is Open Circuit. In 2025, we saw a major shift in the energy conversation. Suddenly everything was filtered through the affordability lens. Now in 2026, the plans are coming in and two very different paths are emerging. The first is a blunt force approach led by the Trump administration. Keep coal plants open, force markets to change, make big energy users pay for new power plants. The second path is quieter, but getting more attention. It’s what we’re seeing play out in states like Virginia and Illinois, an asset-light approach that leans on distributed energy, virtual power plants, and grid tech to help lower bills and avoid overbuilding the grid. Both pathways claim to be about affordability, but they imply very different futures for utilities, regulators, and rate payers. So, this week we’re asking, are these plans forcing real change or just buying time?
Stephen Lacey: I’m Stephen Lacey. I’m executive editor at Latitude Media. Welcome all. I am here with Jigar Shah and Caroline Golin. Jigar is the co-managing partner of Multiplier and you look like you’re in like a spaceship or something. Where are you today?
Jigar Shah: It’s the age of Aquarius. It’s for Caroline.
Caroline Golin: Always.
Stephen Lacey: You found the portal.
Caroline Golin: You found the portal. I guarantee the portal is not in San Francisco. I guarantee you, it’s not.
Jigar Shah: Oh, I mean, I feel like that’s where they were singing the song.
Stephen Lacey: Definitely.
Caroline Golin: Oh, actually that may be true.
Stephen Lacey: They opened up the office early for you.
Jigar Shah: Yeah, yeah. They’re very sweet. It’s a great incubator.
Stephen Lacey: What’s cut you on the West Coast?
Jigar Shah: Well, I mean, this conversation. I feel like we’re in the middle of finally having people take affordability seriously. And so, there’s a couple of big events where we’re going to try to get this stuff done into the legislature.
Stephen Lacey: Caroline is the CEO of Envision Energy Advisors. How are you on this birthday?
Caroline Golin: I’m great. I’ve already gotten so much done and it’s only 9:30 our time.
Stephen Lacey: I always front-load my day. I like to say by 9:30 I’ve had a productive day.
Caroline Golin: Good. Good. I mean, you will probably live longer because of that. That’s what all the studies say. It’s the people who sleep in and stay up late. They’re in trouble.
Stephen Lacey: You both made it out of Texas without a problem. Thank goodness. I was one flight away from being stuck there. Thank you to everyone who came to the Power Resilience Forum. We had a great live show there. Especially the folks who stayed to the end while Winter Storm Fern approached, it was quite the backdrop to the event. And we came home, of course, to a different backdrop. Scenes in Minneapolis of masked officers beating up protestors, spraying them point-blank in the face with chemicals and killing yet another unarmed American, who in his last moments was directing traffic and making sure an onlooker who had been pushed was okay. It is the American government turning against the American people and then falsely, shamelessly labeling them terrorists. And it has ignited an intense backlash to the administration that we really haven’t seen in the last year. It feels like it’s a much different kind of response.
Stephen Lacey: And for the first time since the president started his blitz over the last year, corporate leaders are actually starting to use their voices. And just this week, for example, Xcel Energy signed onto a letter calling for an end to the escalation in Minnesota. So, before we get started, I just wanted to acknowledge all of this and talk about it a little bit. Caroline, how are you processing it all?
Caroline Golin: Yeah. Thanks for saying that, Stephen. I think it’s hard. And as we discussed, I’m new to sort of being in a world where I can theoretically say what I want or how I feel or what I think. And I believe that every person in this country, irrespective of your political posture, is nervous about where our country is going at a micro level, and I think also at a macro level. And I don’t think we’re going to download from Davos here, but there were some pretty powerful speeches at Davos that hit on sentiments that we haven’t heard before about the geopolitical order, the US’s role in the world, who we are to our neighbors.
Caroline Golin: And I think that that’s playing out with who we are to our neighbors on a community level. And so, I’m processing it with hope still in who we are as a country and a lot of belief that the people here are good and we all want to see the same future, but there’s a lot of heartache for me and for my friends, and I have a lot of friends in Minnesota, and I think everyone was hoping that 2026 would start off with a little more positivity than maybe it has. Yeah. But thanks for asking.
Stephen Lacey: Yeah. Go watch Mark Carney’s speech from Davos, the Prime Minister of Canada. He had a really powerful speech about the reshuffling of the world order. Highly recommended watching or listening. Jigar, how about you? How are you thinking about this moment?
Jigar Shah: Yeah. I mean, I’m so proud of my friends in Minnesota. I mean, I think that the administration was deliberately trying to goad them into doing things that would fracture the community. And in fact, that they’ve invested so heavily into the community, the community came together in this moment to reject the tactics here. Look, I think that it’s very obvious that the Trump administration won the presidential election based on immigration first and foremost. So, there are a lot of people in this country who want this type of aggressive activity to occur to make sure that criminals or whatever it is are taken out of the country. But now I think that there are people who are just trying to work who are getting picked up in Home Depot parking lots and there are people who are just trying to assert basic human dignity that we all enjoy that are now getting shot in the face with tear gas.
Jigar Shah: And there are people who are being accused of being domestic terrorists and put down. And as somebody who is a person of color, where even like Vivek Ramaswamy wasn’t spared from all the vitriol and hatred from the MAGA folks. And so, you’re in this weird spot right now where for people like me who are naturalized citizens, you worry that like not only are they going too far here, but they’re going to come after naturalized citizens and take them and kick them out of the country. Where does it end? I mean, how much do I want to invest in the United States when the United States doesn’t want to invest in me potentially, right? And so, I think that we’re in a very dangerous place and the people of Minnesota showed us how to act with just like intentionality and grace in a moment that could have been far worse.
Stephen Lacey: Yeah, absolutely. Yeah. We try not to drop politics outside of energy into these conversations. It’s extremely important for us to make this show a place where we can have reasonable reality-based conversations about the future of energy for people of all political persuasions. So, much of the clean energy industry is perceived as progressive, but it is very diverse, often more conservative than people realize. So, I don’t take it very lightly when I say what is happening now is not okay. This is not about left versus right or about immigration policy per se. It’s about standing up for like a humane reality based, true freedom-driven principles. And so, Latitude itself is going to be closed on Friday in solidarity with the nationwide strike to deescalate the conflict. And so, that’s what it means to us.
Caroline Golin: Thank you, Stephen, for just holding that space for us to talk about before we get into the riveting conversation of PJM auction.
Stephen Lacey: Yes. So, with that, we got so much to tackle this week. Let’s roll into it. We are talking about starkly divergent approaches to lowering electricity prices. And gosh, there’s a bunch of elements to this. So, I want to just look quickly at the Trump administration’s approach to reliability during Winter Storm Fern. And then we’re going to talk about the PJM capacity auctions. So, Energy Secretary Chris Wright issued this statement saying that the grid operators should coordinate with DOE on utilizing 35 gigawatts of unused backup generators and batteries scattered across the country to help keep the grid up. This seems pretty reasonable on its face, but Jigar, your take was that this was kind of meaningless. It was like a meaningless exercise in virtual signaling. Explain your reaction.
Jigar Shah: So, not meaningless. It’s just another example of where this administration has good ideas and no intention of executing on them. When you think about it, this whole backup generator issue has been going on since the Obama administration. The EPA has not provided clarity around what to do with backup generators and how they can be used to help with the grid. I mean, obviously there’s some folks who at the state level have said, “If you’re in a true emergency, you can run them,” et cetera. But it’s unclear. So, then the EPA issued some guidance, I think in March of last year to a response that Duke Energy had asked to be able to use these backup generators during an emergency situation and they provided a limited approval there. Now, the 35 gigawatts of backup generators are real, right? We have friends like Enchanted Rock and others who do this for a living, right?
Jigar Shah: You’ve got folks like Voltus or CPower, others who’ve been doing this for years, right? I mean, Tim Healy at EnerNOC was like running backup generators way back in the day, right? So, this is not a new issue, but when you announce that you want this to happen, what normally happens is you have a group called CESER within the S3 vertical at the Department of Energy. They help manage all these things. They put together frequently asked questions for everybody. They get all the grid operators on the phone and they say, “Well, this is what we intend to do.” For instance, when Gavin Newsom allowed for this to happen, he said, “We’re waiving the air quality requirements and then we’re paying you $2 a kilowatt-hour, for instance to operate your diesel.” What were the guidelines here? When I talk to people in Virginia, they’re like, “Well, my permit doesn’t allow me to run this thing.”
Jigar Shah: Did EPA actually say that, “Well, we’re superseding your permit and you now can run it?” No, of course they didn’t. And then when folks said, “Well, how do I get compensation for this?” They’re like, “Well, we haven’t thought that through.” “How do I actually get onto the queue?” So, they did this 202(c) designation for their friends at Calpine and LS Power. Fantastic. But if you had a 10 megawatt behind the meter diesel at a hospital or a campus or whatever, do you have to tell PJM to specifically do a 202(c) for this? Well, it turns out they did. And so yesterday, PJM said, “We are going to do this for everybody. So, if you have a generator that you want to run, email us at whatever it is, behind the meter at pjm.com and then do it by 5:00 PM close of business.” And this is on Monday, right?
Jigar Shah: And so, you could imagine that they could have done this a week earlier had they actually had half a brain cell and thought this through, but it was clearly some 24-year-old that was just issuing vibes based press releases to own the libs. And I’m like, “What are we doing? People’s lives are at stake here. Take your job seriously.”
Stephen Lacey: Caroline, do you agree that this was performative?
Caroline Golin: I mean, I think it’s a mismatch in a well-intentioned approach and a misunderstanding of who has the direct line into a lot of these industrial customers. So, we actually saw some of this in Europe too, right? So, when we had the European energy crisis, at first there were policymakers calling left and right, but the TSOs at the same time were saying, “We’re good. We actually don’t need you to turn down. If you want to do so out of political goodwill, please go ahead and maybe we’ll create something out of it.” And I think that you have that a bit more of a dire perspective coming on… “Oh, my doorbell just rang. Can everybody hear that?”
Stephen Lacey: Yeah.
Caroline Golin: Perhaps it’s a large thing of flowers waiting for me for my birthday. No, but what I think is happening is on the data center side and the industrial side, they’re waiting from a call from their retail utility provider. So, if they’re in Virginia, they’re waiting for a call from APCo or from Dominion or alike, and they’re waiting for whoever their customer rep is to call them and say, “We need you to turn down by X percentage or X number of megawatts.” And then there’s a process in place to do that. Most industrial customers have a process in place to do that. And the first thing they ask, to Jigar’s point is what’s the timeline? What’s the environmental permit situation here? Are we going to be fine? How long can we run? I will add that a lot of diesel gen is not built to run for more than a day or in a blackout situation. So, relying on it for multiple days is a real problem. And if the roads are closed and snowed in, getting diesel to those operations is even a harder problem.
Caroline Golin: So, there’s a logistical issue here. And if you’re not getting that direct call from that customer up that knows you, knows your system, knows your total voltage, knows what’s going to happen, there’s a lot of misunderstanding from an operations perspective. And like at Google, we tried to get the energy team completely out of this because they would be calling me, they’d be calling other members of the team, and we made sure that it was at an operational level. And from what I understand, most of the data center fleet throughout PJM at the operational level was very unclear, well outside of Google, like throughout the entire industry, was very unclear how this was going to take place, who they should listen to. I don’t think so much payment was an issue, Jigar. I don’t think anyone was thinking, “How am I going to be compensated for this?”
Caroline Golin: I think what everyone was concerned about is, “If I do this in two months and all of a sudden am I going to get $100 million fine for going over air permit.” Right? And there was no clarity on that. So, I get the intention, which is like, let’s use large load as a flexible asset and let’s use all this backup gen as a critical floating resource, but there’s just no line of communication. And going back to my point we made last week at the conference, this can be done seamlessly with the right technology, with the right software, with the right communication, but we’re not there yet as a grid or as a community in the way we operate whatsoever.
Stephen Lacey: Yeah, that’s really helpful. So, that brings us nicely into the conversation around PJM, speaking of well-intentioned policy that is not fully thought out. This administration is developing policy in emergency mode. And so, if we look to this other emergency mode approach, the administration brought together this bipartisan group of governors to try to force big energy users to pay directly for new power plants in PJM. And they proposed doing this through an emergency auction to make up for a capacity shortfall. And on paper, I guess it sounds pretty simple, build more supply, make the biggest customers pay and protect everyone from higher bills, but the big question is how it will actually work. And it was interesting to note that this was sort of established without PJM’s input initially. Caroline, what is this coalition trying to do?
Caroline Golin: I mean, I think what this coalition is trying to do is speed up the process of paying for and building infrastructure. And I think that for over two years now, there has been a sentimentality that started actually before the Trump administration amongst many of the governors in PJM that regulation, bureaucracy, red tape, inefficient markets were slowing down what was waiting and patient capital to invest in power plants. I think that is an over simplistic view of what’s actually happening, but it’s a very politically salient view, right? So, what I see actually happening is a divergence in the way the supplier market really thinks about the future of building power. And on one hand, you have suppliers who believe the future is bilateral negotiations, co-location, and sort of carving up existing power plants to either serve the market or serve large load. And then you have another portion of the industry that truly believes that in order to actually build new power plants, you have to secure long-term price signal or else the cost of capital is going to be way too high.
Caroline Golin: And to do that, you need capacity prices to go really, really high in order to hit that signal because the truth is we just haven’t built a ton of power in this country. We haven’t built a ton of baseload power. And so, that waiting and patient capital, I think is a little more skeptical than everyone politically wants to be attuned to. And I get it. I completely get it and I understand the frustration and the motivation. I think on the other side here, what’s happening, and this is a bit of a nuance, but I think it’s important to understand, is that throughout PJM, most of the retail utilities are collecting very, very, very high minimum system cost payments through a demand charge and requiring an extreme amount of upfront collateral to even get in the queue, the load queue, which is a fictitious phrase that I’m coming up with, which is basically just to try to interconnect, right?
Caroline Golin: And that is what is tying up developer capital. So, if you are simultaneously saying, “For you to get in line for an ESA, you need to post $2 billion, $3 billion of collateral and you need to be able to shell out 90% minimum charge on your demand day one, irrespective of your ramp,” that doesn’t leave a ton of development capital to participate in a bilateral auction and it doesn’t leave a lot of creditworthy offtake for that bilateral auction as well. So, you have these two forces working against each other. At the one hand, you have the administration saying, “Let’s just connect suppliers and buyers.” Suppliers have a different view of where the world should go and where the market should go. And on the other hand, you have utilities who frankly have sort of taken care of this use it… We used to be in a use it or lose it situation where utilities like if you just don’t use the amount of energy that you’ve contracted for, we’re going to give it to someone else.
Caroline Golin: Now it’s a take or pay situation. And they’ve done that through upfront charges, collateral requirements, minimum system charges. And then you’re layering this other part onto it. And I don’t see how the different parts are going to work with each other. I think one’s going to have to give versus the other. And it’s just a determinant of where you think the market should go. Do you think it should be co-location and this load should be siphoned out of the existing market? Do you think it should be part of the market and it should drive power development across multiple states? Do you think it should go through electric regulated utility model who are all vying for rereg, by the way, and they should be in charge of collecting the upfront capital, or should it be open to a bilateral contract negotiation? So, there’s wildly different views across the entire system and multiple forces at work that are in real conflict with each other.
Caroline Golin: And I think it’s tying up capital and I think it’s confusing and it’s going to be hard to figure out where and how to invest. And I haven’t even gotten to the point where everything that everyone wants to do still takes four to five years to come online.
Stephen Lacey: Yeah. Yeah. Well, let’s have Jigar unpack that. Yeah-
Caroline Golin: I think I’ve talked a lot and that was my Aquarian moment and now I’m done.
Stephen Lacey: I mean, that was so helpful to unpack the nuances of this. Jigar, do you fall on any one of those approaches and like what’s posturing and what’s actual policy here?
Jigar Shah: So, I think we start with the same conversation we just had with the PJM emergency generator order, right? They clearly don’t have a plan and there’s nobody in charge of actually creating a plan. When I was serving in government, Caroline knows, like I demanded that the hyperscalers come in like every month and we would have this conversation with the Secretary of Energy in the room. And when the utilities were there, et cetera, and they all gave their talking points and they sucked in whatever it was, and then we’d like have write-ups and then we would have like bilateral conversations with everybody to say, “Hey, could you move a little? Can you move a little?” And then we would have another meeting, right? So, there’s a process by which you do this if someone is actually serious about trying to unpack all the complexity that Caroline went through and then trying to find a way forward, right?
Jigar Shah: And then you provide guidance because like according to the president’s notes, he is expecting an auction to occur by September, right? And so, okay, at least we have a date and this auction is going to be exempt from the PJM cap, right? So, my sense is it’s going to clear it much higher than the cap. And so, now you’re in a place where you’re probably going to have a bunch of bilateral contracts that clear above $333 per kilowatt day. And then the question becomes to Caroline’s point, like what can get built in a timely fashion, right? Probably bring your own capacity solutions, right? And all of the hyperscalers have either negotiated a bring your own capacity solution or signed a bring your own capacity solution. And so, then the question becomes, how much work should the bring your own capacity people do? Like for instance, I could probably build three gigawatts worth of batteries in 12 to 18 months in PJM just by putting a battery at a community solar project, right?
Jigar Shah: They’ve already got a five megawatt interconnection, they’re already operating, they already have an extra acre of land that’s just sitting there that they already own. They could just put batteries there and they’ve got an interconnection. So then they just have to update their interconnection. Should I do that? How much money and development costs should I incur before the September auction? Should I wait for those folks to win the auction and then like say, “Okay, now I’m going to speed up to try to deliver within a year.” These are conversations that could be happening, like not at a restaurant like I was having one yesterday, but instead like actually having them in some sort of official capacity, but you need somebody on the other side who actually wants to take the process seriously.
Caroline Golin: Yeah.
Stephen Lacey: Do you get the sense that the hyperscalers are talking to the administration and trying to figure this out or project developers like-
Caroline Golin: Yeah. Yeah. I mean, yes, the hyperscalers are always talking to every administration. That’s sort of our job and Jigar failed to ever provide us with good lunch whenever we came in. I will say that.
Jigar Shah: I am on a government budget, Caroline.
Caroline Golin: Just like maybe some potato chips or something.
Jigar Shah: I mean, come on, hangry. That’s how I like to see all of you guys.
Caroline Golin: But I really think it’s important for the administration and for PJM to think through the legal and regulatory consequences of when we say that driving load is exempt from historical market mechanisms. And because we’re treating this as if it’s a blip in the system, but I don’t believe it’s a blip in the system. It may be the highest spike over the next couple of years, but every single global report says the trend is upwards in terms of electrification, EVs. And so, I think what you’re going to see is this real fracturing where it used to be, are you for hybrid markets, full retail deregulation or vertical integration? And even among those three sort of camps, you’re going to have this huge fracturing of what is the role of the customer? And then if the customer is co-locating and then paying full system cost for its interconnection, line, poles, wires, everything, transformer, and it’s doing a bilateral negotiated off market contract for its generation capacity, you’re just going to build a bunch of loops and they’re going to be completely separate from the reliability of the grid moving forward.
Jigar Shah: And that’s bad for everybody.
Caroline Golin: And that is potential… Back to our initial conversation about what do you do with extreme weather last week, that’s not a good place for us to grow into, right? So, I mean, I think what happens is the well-intentioned narrative here is these are the richest companies in the world. There’s more capital going into fixing this problem than any other problem in our country right now. It automatically makes sense. They should just pay for it. And I think they should. I mean, I don’t think anyone’s arguing that, but I think how we set up the structures to see that happen, and more importantly, which technologies and which solutions get to play in solving that problem has demonstrative impact on what our grid and the reliability of our grid, the interoperability of our grid is going to look like over the next five to 10 years.
Caroline Golin: And I don’t think that that is truly being thought through by the administration to be honest, and Jigar, as wonderful and lovely as you are, very few administrations have been responsible for thinking through that because none have been forced with this type of monstrous threat to their political platform, right?
Stephen Lacey: And what do you… I mean, so what are we saying exactly that the general approach to these bilateral deals is not workable? Or if we think about the loops in the system that you just described, what is your stance on whether we should encourage this kind of deal making?
Caroline Golin: I mean, I think that this type of deal making is happening is what I’m trying to say. I actually think there are entities going out to market outside of the PJM auction and trying to secure their own pipeline of turbines, storage, whatnot. The problem is there’s no mechanism for them to legitimize it within their footprint, right? Unless they go behind the meter. And it’s funny, but this is on a big level, this is like the solar net metering wars of a decade ago, except with-
Jigar Shah: Bite your tongue Aquarius. Bite your tongue.
Caroline Golin: It is. I mean, if you think about it, should they be able to be responsible for that? What’s the compensation? And it’s the flip side here, but we are in a weird space where a lot of capital right now in the powered land industry, and I think there’s been a couple of articles about this comparing Nvidia or Google vertical integration versus kicking the market from all sides, is that a lot of capital right now is tied up in regulatory cost requirements to interconnect to the grid. I think that unless you ease some of that, it’s going to be very hard for that same capital to then say, “Yep, we will secure offtake for a billion dollars on a power plant.”
Jigar Shah: The thing I think people have a hard time wrapping their brain around is that when you use lizard brain thinking, you think, “If I just have my own backup generator, I’m good. It’s me against the world. I can just do it.” But those backup generators that they’re buying, they run 50% of the time, 60% of the time. They’re not designed to run 8,760 hours a year. So, that’s why you have a grid. And on top of that, remember, we’re talking about the learning data centers. We’re not really talking about inference data centers in the future. And so, for the learning, like data centers, the training data centers, Nvidia chips can actually spike for 50 milliseconds from 1.4 kilowatts to 2.1 kilowatts. And batteries cannot handle those spikes. And so, the best way to handle those spikes is inertia. So, you actually want spinning mass or whatever it is.
Jigar Shah: But the best way to get inertia is the grid. The grid itself is inertia with all the inertia on the grid. And so, just solving it by having a 31 different types of natural gas generators behind the meter at a Meta facility in Ohio is not ideal. So, then you put that to the side, that’s physics and we can go through that. But then on the other side, who holds the spare parts to those 31 different types of natural gas generators? They break all the time, like all the time. And so, who actually holds all those spare parts? Do you actually have Meta do that? Meta’s going to outsource it to this group. This group does that. Are they doing it for the entire region or just for Meta? I just think that when you think about what the electric utility has accomplished in 35 years, right?
Jigar Shah: My friend Chris Vlahoplus, who worked with me, he was at ScottMadden, he invented the approach to shutting down a natural gas plant, doing a full diagnostic and turning it back on in seven days to like… No matter what went wrong with it, he can fix it. That took 35 years to perfect.
Jigar Shah: The utility companies built a ton of natural gas generators in the 90s did not know how to operate them. And it took 35 years to figure out where we are today, where everyone knows how to operate natural gas generators at the level of sophistication that we’re at right now. These data centers have no idea how to manage a fleet of natural gas generates, particularly 31 random ones that they put behind the fence. And so, I just think that the level of complexity for these loops has multiple layers. There’s the physics part of it, then there’s the affordability part of it, but then there’s just the practical cost of running these units, which it took us a long time to figure out.
Caroline Golin: And we haven’t said this yet, but if you actually look at the numbers, let’s say we fix for the generation issue, which I think that is a whole separate conversation if we can actually fix that. The vast majority of what’s driving up costs for the residential and commercial customer today is distribution level investments and transmission costs. And that is still going to be handled through a CPCN at the state level, which has a hodgepodge of different approaches throughout PJM. And so, I need to actually think and reflect about it more and maybe by next week, I’ll have a much clearer vision of exactly what to tell the administration to do with a external-
Jigar Shah: You got to find that portal, that portal, Caroline.
Caroline Golin: You got to find the portal because I want to believe that a special market can work, but my fear is based on where the supplier industry is, based on where capital is, participation may not be as high as the administration thinks it will be, and the solution set could end up being long-term very bad for the grid, and it doesn’t fix what is ultimately going to continue to drive up costs, which is poles and wires.
Stephen Lacey: Yeah.
Jigar Shah: And this is an important point because if you have a BYOC contract or bring your own capacity contract, I mean, then you could put the batteries in the middle of a field and like actually just connect it a transmission voltage, but you can also put those batteries in the back of Walmart stores across New Jersey, right? And then those Walmart stores can actually use those batteries to help with the distribution system challenges, as well as dispatch for capacity for the hyperscalers, right? And so, you’re in this weird spot where with a little bit of work and planning, you could get one plus one equals three or four or five.
Caroline Golin: Yeah, I think so.
Jigar Shah: But instead, you’re going to get one plus one equals 1.1 and you’re like, “What the hell did we do there?”
Caroline Golin: Yeah. But I also think, and I’ve said this before, I don’t agree with the methods necessarily, but the administration is forcing everyone to figure this out, right? They are saying, “If you don’t figure this out, we’re going to figure it out.” And in some ways-
Jigar Shah: Which is an empty threat because there’s only madness over there. They’re not going to figure out crap.
Caroline Golin: Well, but at the same time, I do think they have shown that they have a coalition of the willing when it comes to a handful of governors to pass policy, when it comes to the hyperscalers to do investments. I just want to ensure that that strategy doesn’t leave us with stranded assets in eight years and a less reliable grid and an overinvestment in capital on the wrong type of solutions.
Stephen Lacey: Well, you both peeled back a few layers that I hadn’t really thought through, and I guess it sounds like I’m in good company with the administration, but I guess to just wrap this up, is there a world in which we get the right participation, the right incentives align, and we do lower prices in PJM under this approach?
Caroline Golin: I think that’s going to come down to what resources are able to play, and I think it’s going to come down to what are the restrictions around interconnection and the topography of where there’s no resources are placed. And if there are thoughtful guidelines around where generation should be placed for overall system reliability and stability, and if there are thoughtful guidelines around minimizing the additional amount of transmission infrastructure that would need to be applied, and if there are real carrots and sticks around to the utilization of the grid accompanying at the regulatory level, then it could happen. I do still think though, and I don’t know this across all players, but I know for a fact that those regulatory requirements are inhibiting a lot of investment. There’s a lot of data center capital out there right now that would much rather use a billion, $2 billion they have to hold in collateral on their balance sheet in order to just interconnect that would rather use that and go spec on new gen, interesting new gen, but they can’t. So, I think there’s going to have to be a reckoning there as well.
Jigar Shah: That was a long way of saying no.
Caroline Golin: No. No.
Stephen Lacey: Thin line to walk.
Caroline Golin: That was a long way of saying do this.
Jigar Shah: Literally every single part of the planetary alignment has to happen.
Stephen Lacey: Yeah. She’s an Aquarius. She believes in the alignment.
Caroline Golin: I’m an Aquarius. I’m in my planetary alignment.
Stephen Lacey: No, it’s a thin line to walk. I mean, you don’t think it’s possible, Jigar?
Jigar Shah: No, no. I mean, it is possible, but the reason I’ve been on this for so long is that it takes this long for us to succeed at this big quest. When you think about how many years you’ve been working on grid edge, right? And then everyone’s going to DISTRIBUTECH, I think this week or next week, and how many people have never gotten contracts out of that conference, right? Or like how many of these things are occurring? As Caroline suggests, this traverses PJM and the local utilities and the way that in which they make decisions. So, do I think that the Rewiring America reports are completely and utterly serious? Not really. I don’t know that you’re going to accommodate a bunch of hyperscaler data centers by just paying for people to have heat pumps in their house.
Jigar Shah: But there’s a grain of truth to some of that, which is that if you actually take the circuits that are near the hyperscalers and say to them, “We’re going to put assets on those load entities,” whether it’s a Walmart store or a church or a school or whatever, they now get valuable tech. They get a battery backup, which they could use because a lot of schools are emergency centers, et cetera. They actually even get other monetary benefits because they can potentially use that battery to shave demand charges on their bill, for peak demand charges that they’re being charged anyway on their tariff. They can then use those batteries for deferral of distribution system investment, so they can do that and they can help the data centers who now have helped to finance it with a 15-year contract out of this auction in September.
Jigar Shah: Do I think that that is going to happen? I’m not a pool shark and so I can’t do one of those trick things where it pops over the thing and then gets the thing into the corner pocket, but there are people who are capable of doing those kinds of trick shots and I’m rooting for them to use this opportunity to get that done.
Caroline Golin: Maybe the quickest way to avoid my laundry list here is to say it’s a market outside of the PJM auction that the variable is not base load, gas, nuclear, coal, as we’ve defined it, but the variable is speed to capacity with the minimum amount of new poles and wire needed to produce that. That type of market would one be fascinating. I’d love to see what shows up. We can put the money where their mouth is in terms of all the aggregators and all the innovators in the space. And I think if you can show that that would work, that’s what we want right now as an industry.
Jigar Shah: And that’s the legislation that the governor of Virginia-
Caroline Golin: And that’s the pivot into the state legislation.
Jigar Shah: … is passing right now in the legislature.
Caroline Golin: Yeah. But again, what’s interesting, and then we need to get into the state legislature, is that the state legislature is still dependent on the existing regulatory structure of their utilities.
Jigar Shah: Totally.
Caroline Golin: What this is saying is just bilaterally negotiate it and produce it. And maybe that is the ticker. So, if the administration is listening to us, Jigar, let’s see if we can get them to do that type of auction.
Stephen Lacey: That is a great segue into our state-level conversation. So, we talked in the fall of last year about how the affordability question was influencing elections, and it did play a role in the outcome of elections from New Jersey to Virginia. We’ve seen a bunch of action in Illinois. So, let’s just kind of break down what’s happening at the state level right now. Many of these folks are responding with a very different instinct than what we just talked about. Leaning more on distributed resources, virtual power plants, try to shave peaks, use existing infrastructure more efficiently. Jigar, can you just break down on what you think the most interesting components of state-level plans are right now? Are there any commonalities you’re seeing?
Jigar Shah: Well, I think we start with the extraordinary work that Katie and the Vote Solar folks did in Illinois. So, that was sort of a two-year effort to pass legislation that just passed last year that basically was done, I think implicitly. I don’t know if it was explicitly done with ComEd, but ComEd definitely supported it. I just don’t know whether they came out and loudly supported it, but it was like three gigawatts of batteries, right?
Stephen Lacey: So, that passed last year, not this year?
Jigar Shah: It passed… Well, I mean, we’re only in January, so it passed last year.
Stephen Lacey: Right, right. Yeah.
Jigar Shah: Yes. So, Gil Quiniones, who’s the CEO of ComEd, is now pushing really hard to use that for deferral of distribution system investments. And so, you’re starting to see that. And I think part of the thing that I learned within my time at the Loan Programs Office is that, is a lot of this comes down to the electrical unions for the utilities because they don’t want a lot of this infrastructure to be outside of their work scope, right? Because on this side, if you’re upgrading the distribution substation, that’s union work. On this side, if you’re building a bunch of Tesla power walls in people’s houses and using it to dispatch, then that’s not union work. And so, part of this was actually getting the unions on board and getting them to understand that this was actually going to create net, net more work for them, which they now, I think, largely believe.
Jigar Shah: Most of the unions are saying, “We’re going to be fully employed. There’s so much maintenance work to be done that we’re not threatened by this.” But that was a solid year of conversations that… I created a new organization with Arnab Pal, my political advisor at LPO called Deploy Action. And that’s a lot of what we did was just talk to the IBEW and the utility unions to get them on board. And so, I think that the actual substance of the bill, we can go through and it features batteries and demand flexibility and some of that stuff. But I think the politics of this moment is figuring out how we get the three traditional Democratic constituents, right? So, the union folks, the environmental folks, and then the poverty-related folks to all come to the same table and say, “Can we come up with a set of solutions that we think would actually solve this problem, but not piss off any of our constituencies?” And so, I think that’s the big breakthrough in Illinois.
Jigar Shah: Then you go to New Jersey and Virginia where you had explicit governors races where they were spending actual money on campaign ads talking about how they were going to lead on this area. So, when Spanberger got inaugurated, she was like, “This is my number one issue. We’re going to have a bill.” I’ve been working a lot with her team through Deploy Action and this bill, we’ll see. It got through one chamber. I think it should get through the next chamber and hopefully it’ll get to our desk in a couple of weeks. And so, we’ll see. But what that bill does is simply say the public service commission and the utilities now have an obligation to measure grid utilization, which our friend, Astrid Atkinson can do from Camus and others and then improve it because if you improve grid utilization by 10 percentage points, then you can onboard all these large loads, which then increases utility sales and decreases bills for everybody by 5%.
Jigar Shah: And so, I mean, that’s a win-win-win if I’ve ever seen one, but it starts with the data and unlocking the data out of the utilities, which they have been reticent to provide. Remember, we tried to do this under the REV with Richard Kauffman in 2012 and got our assets handed to us. And so, that’s that next piece. And then I think you’re seeing Governor Sherrill in New Jersey looking to do similar things, although her timeline is, I think, a little delayed from what Spanberger’s doing in Virginia. And then California, we passed SB 541 last year to do very similar things here and Governor Newsom vetoed it because he’s like, “It wasn’t my idea and I don’t like to do things that aren’t my idea.” And so, we’re going to go through the process again this year, hopefully with him actually claiming it to be his idea and then maybe it’ll pass.
Jigar Shah: We’ll see, or it might take two years. You don’t know. Some of these things just need to get socialized. But I think that the goal of all these programs is to help with all the stakeholder management. Because what the utilities are saying to me is they’re saying at the CEO and CFO level, the staff level are mixed, but they recognize that they can’t raise enough money actually at Wall Street. Wall Street has told them that you’re cut off. You can’t keep just spending like drunken sailors because some of your budgets, the next five years, you’re going to raise more money than you’ve raised in the entire history of your utility. We don’t believe that that’s something that we can support. And so, the CEOs and CFOs are like, “We need to start doing some of these cost-effective measures and not just running up the scoreboard with expensive stuff.”
Jigar Shah: But they’re like, “We can’t just do that by ourselves. We need regulatory support on this.” And then the regulators are saying, “I can’t tell you how to run the utility, so I’m not going to force this on you. We need state legislation that actually forces us to regulate you in this way.” And so, that’s why a lot of these bills are coming forward because people recognize that to achieve affordability, the utilities actually have to operate in a way that’s different, that doesn’t reward them just for spending more money, but rewards them for grid utilization.
Stephen Lacey: So, Caroline, what are you seeing in the states that you like right now?
Caroline Golin: I love that the conversation around how consumer value and consumer empowerment on the residential, commercial, and even on the industrial side is now seen not as a pilot program, but like as a real solution and demonstrative part of where our markets need to go. And I think that’s the thread throughout much of this state legislation. I think the other part that I’m loving is that we are no longer treating generation as one siloed investment structure and grid as another siloed investment structure too, to Jigar’s point about grid utilization, which is a very seamless and I think eloquent solution around solving a lot of these problems. Where I think it falls down is that, and Jigar sort of alluded to this, is that it’s unclear that the carrots and the sticks are going to be seamless throughout these states. And Jigar’s right, you need state-level legislation to not only provide the cover, but provide the policy signals that give investors confidence that the utilities are going to start earning money differently and they should.
Caroline Golin: They should be able to earn money differently and they should be given that challenge and then they should be rewarded when they meet that challenge, but there needs to be more clarity around what that looks like. The reality is for most utilities, it’s a 50/50 debt-equity split. It’s somewhere between 9% and 12% return on investment based on whatever our existing capital costs in large chunks of steel. You can change that, but it needs to be sort of uniform across different states in order for capital to really open up and in order for, I think the solutions to be done at scale in a way that fixes the problem within PJM. So, that’s where I think some of this falls down.
Caroline Golin: The other concern I have is on the EM&V of all this, like how are you going to measure this and-
Stephen Lacey: It’s always been a problem.
Caroline Golin: … how are they going to be… Pardon?
Stephen Lacey: That’s always been a problem.
Caroline Golin: Yeah, it’s always a problem.
Jigar Shah: That’s why you bring in the big brains. That’s why you bring in astronaut.
Caroline Golin: You bring all the big brains, but what I… Similarly to encouraging the governors who are trying to get together to figure out nuclear, the governors who are trying to get together to figure out this PJM auction, consistency and clarity around basis points, around return schedules, around transitioning things from the O&M bucket to the capital bucket and that return model for the utilities and around the sticks and the EM&V to hold utilities accountable, but it’s more so than holding utilities accountable, it’s giving very clear guidelines and posts for capital to invest and to assess. And I think if we can do that, we’re sitting here and all the tools are there, this could be really, really, really powerful. And I still believe in all of this mess, I still believe if we do this right, this huge load growth that we’re seeing from AI, this huge capital infusion can leave the residential and commercial customer in a better position over the long run if it’s done well, in terms of resilience, in terms of cost control, in terms of value streams. And I think you’re seeing the pieces of that.
Jigar Shah: But who has to lead that, right? Because I think that the Trump administration is like, “We want to choose the most expensive solutions possible at every single turn.” They’re like, “Bring back the coal at nine and a half cents a kilowatt-hour that has four years of life left on it that will probably cost a billion dollars to retool in four years.” Let’s take those natural gas turbines that were built in 2003 that are being held together with duct tape and let’s run them longer. And so, look, I mean, I’m all for baseload power generation, but I think it’s just critical to understand what different people are solving for and what is actually in their model and in their spreadsheet. And I generally feel like the Trump administration is running on vibes and just trying to get people to burn more coal and natural gas. And I think a lot of these state governors I think are trying to figure out what this threading of the needle looks like in ways that I think were way more thoughtful.
Caroline Golin: I also think there is some real artificial scarcity conversation going on between the administration and some of the traditional fossil fuel providers. And I think no one wants to say to the administration, “We can’t figure this out. We don’t have the ability to do this.” So, they all want to say, “We can do it. We just need you to do X, Y, and Z.” And I think that that is potentially making this seem, as Jigar’s pointing out, the simplest and most eloquent answer is just do what we did for the past 50 years. And I think that when you break it down, it’s just not the case. I will also say here on the VPP solution, because I think it’s important to push the community on this. When I was at Google, we got really serious about this and Jigar and I were on the phone many hours, many nights about this, and we sort of ran our own RFP and talked to a dozen different companies and providers.
Caroline Golin: And I will tell you, there was only one within PJM that was willing to take accreditation risk, that was willing to do all the customer acquisition and was willing to make what we signed look like every other PPA we’ve ever signed.
Jigar Shah: And she’s amazing.
Stephen Lacey: Was that Voltus?
Caroline Golin: And she’s amazing. And that was Voltus. And everybody else needed Google to do help with customer acquisition, needed Google to fund demonstratively the way that this would look from an aggregation and from a policy movement space. And what that says to me is that we sit here and we talk and we complain about how none of the traditional generators want to go merchant and yada, yada, yada, but this is an ailment that’s sort of across the ecosystem. And my hope is that this signal can help this part of the community invest in what clearly needs to be a very simple contract structure and something that a hyperscaler can pick up or data center developer can pick up and sign tomorrow. It’s not there yet. The VPP industry is just not there yet.
Jigar Shah: Well, but to be-
Caroline Golin: I want it to be there. I really want it to be there, but it’s not there yet.
Stephen Lacey: Yeah, but you riff on that Jigar. I mean, you spent a lot of time thinking about setting the agenda for VPPs with the commercial liftoff report at DOE. I know you’ve been focused on them with Deploy Action. Yeah, just what is the health of the market right now and is the situation that Caroline just described with only one VPP provider being really ready for-
Caroline Golin: That’s within PJM. I’m just limiting to PJM.
Stephen Lacey: Okay. Yeah. Yeah. What do you think about what Caroline said?
Jigar Shah: So, I had over 50 of these companies come into the loan programs office, right? Part of the reason I was on the phone with Caroline so much was I was saying to them, “These contracts are not bankable. Let’s figure out how to make them bankable.” So, we were helping them get to where they want to get to, right? The way this stuff always works, and I think you’ve been in the solar industry long enough that you’ve sort of seen it, is that one person figures it out and then their law firm somehow leaks their contract and everyone else uses it, right?
Caroline Golin: Yeah, it’s true.
Jigar Shah: So, I don’t think that this is going to be a difficult process. Once the first group figures it out and Dana’s in the market right now raising money and she’s already oversubscribed by 3X. And so there’s clearly a lot of investors who want in on this action, right? And so if investors are sending the signal that they’re in on it, well then other VPP companies are going to be like, “Hey, we’re Voltus 2 or we’re Voltus 3,” or whatever it is. And so, they’re going to come in. Now the other problem that we had though was remember that part of this in the EM&V side of things is that you needed a data stream from the utilities. One of our big problems in New Jersey, for instance, is that they have systematically shut down any access to AMI data to any of these folks. So, they can’t settle in the PJM under FERC Order 2222 unless they have meter data.
Jigar Shah: And so, one of the companies who’s coming out swimming out of this is UtilityAPI and what do they do? They scrape the data from the utilities with their permission because the utilities admit freely that they can’t fix their IT systems to get the data to the VPPs. So, they’re like, “Devon, why don’t you just scrape my data and then give it to them through the back door?” And I was like, “Devon, how have your sales doubled?” He’s like, “Well, the utilities want this to happen. They don’t know how to solve it within their IT system, and so they’re hiring me to scrape their data.” So, the utilities have to also do their job and figure out how to take all of these billions of dollars of smart meter investments that they made and provide a lot of that data to these folks so that they could clear their transactions.
Jigar Shah: So, the way that Voltus does this, just to be crystal clear, is they put an additional $2,000 worth of equipment at every single commercial site and they have their own metering that they settle with because they can’t trust that they’re going to get it out of the utility, but you can’t put $2,000 worth of equipment in every single residential home. The numbers don’t work, right?
Caroline Golin: Well, you can if you think this is where you are willing to be exposed because you think that you’ll make it on the backend. And that’s sort of what I’m getting at, which is this type of policy-
Jigar Shah: $2,000 is a lot of money. Well, they’ve already rate based a smart meter. It’s already there.
Caroline Golin: Right. Right. Absolutely. Well, this is what I’m saying, which is this type of legislation is what is going to give companies the big ones and the small ones, I think, the signals where they can go and raise the debt to do the customer acquisition and to do the investments that’s needed to really grow this real capacity. And so, that’s why these are so great. And my only point is the industry hadn’t been there. So, there wasn’t a menu. It wasn’t like Google or Microsoft or anyone was saying, “We don’t want to invest in VPPs as a capacity solution, that doesn’t make any sense to us.” Is that the menu wasn’t there to do it at scale, to do it at an amount that was even going to make a difference in our ramp rate. And a lot of that, if you circle the drain, is again, it’s just like investor confidence in the offtake. And I think that that’s what this could do. And I hope that’s what this-
Jigar Shah: Oh, I think these companies are all gearing up to bid 1,000 megawatts in the September auction. I think that they are going to go for broke on this stuff. And I think it’s time, right? Because there is nothing else that can actually deliver in a 12 to 18-month period. And so, I think that there’s going to be a lot of alignment.
Caroline Golin: And are you the customer better off? That’s the other thing and hit the affordability.
Stephen Lacey: Yeah. Yeah. So, just to really simplify this, Jigar, what is the case for VPPs lowering bills across the system? And are any of the states creating a pathway for VPPs to actually substitute new generation or wires?
Jigar Shah: So, I think there’s two or three different angles to this. And so, we’ll cover the first one and then the second one. So, the first one is basically we have a ton of load growth. Load growth is usually a good thing. You want to sell more kilowatt-hours, right? But you don’t want it to actually put an excess burden on the existing system. So, you want to be able to handle those like $100 to $300 for the peaks. We’ve had this conversation with Tyler Norris and all that stuff. And so, VPPs basically form a strategic reserve that can be dispatched to meet those peaks. That’s in its plain, simplest form. You have the ability to do that. That increases grid utilization, that reduces the costs of what we’ve already paid for because it’s peanut butters, those costs across more kilowatt-hours. The formula is investment on the numerator, kilowatt-hours sold in the denominator. You want to reduce the investment.
Jigar Shah: So, the second layer to this though is reducing the investment. So, part of this is just increasing the kilowatt-hours. Rates can go down. You do have the strategic reserve. The reducing of the numerator though requires the utility to actually agree with reducing and deferring investment, which the CEOs and CFOs have all agreed to, but the people who work below them have said, “Old habits die hard and we don’t think that these solutions are as robust as just building new infrastructure.” Now, they have a three-year wait list for some of their supply chain parts. And so, they don’t have a choice and so they have to do these things, but it’s hard. I mean, and it’s not just the stuff that we’ve talked about. So, you have thermal storage, right? So, that’s like thermostats and water heaters, right? Then you’ve got battery storage, which is operating more like a power plant and already meets the Huels test according to sort of EnergyHub. And then you’ve got-
Stephen Lacey: The Huels test is-
Jigar Shah: It basically runs like a power plant. You have telemetry, you have all these things, you can put it into the corporations. Then the third piece is EV charging, which we’ve agreed some of those guys are doing. But the fourth piece, which I think people are not recognizing is the smart panels, right? So, SPAN.IO, Schneider Electric, et cetera. So many of the utilities are upgrading pole transformers that they don’t need to upgrade because they think that they need to put everybody on 400 amp service to be able to accommodate heat pumps and electric vehicles. When you can just have smart panels that actually manages your amps in the way that you’re using them across your circuits in that smart panel, and it’s one third the cost. And so, figuring out all of these different technologies, which are at DISTRIBUTECH, visit their booth and please give them a contract for the first time in 15 years and that reduces the numerator.
Jigar Shah: And so, you have to reduce the numerator. You can’t keep investing $1.1 trillion, which is what EEI is bragging about between 2025 and 2029 they want to invest, and belief rates are going to go down. That’s just too much money. It’s an enormous amount of money for them to invest. And so, the numerator’s got to go down with better technology and the denominator’s got to go up, which means you have to accommodate more load growth.
Caroline Golin: And I think the one thing I would add here is if we just zoom out for a second and say, “Where do we want to invest in what could be a risky signal around load growth?” I said it before, and I will continue to say it. I think the trajectory is going to continue to go up. How steep that line is on the graph, I think is questionable in the long run, but wouldn’t you rather want to invest in something that ultimately ends up in the customer being better off and the grid being more resilient than overinvesting in large capital speculative projects that may or may not come online within the next six years where there’s going to be, within that timeframe, a lot of consolidation in the market that’s driving up load. It’s going to be a lot of consolidation in the financial players and there’s going to be a lot of change in the way training operates, the efficiency of training.
Caroline Golin: And so, I think that the important aspect here to think about from an investment perspective is that the way you get the most returns out of your money, so if you’re Third Capital investing in this space, the way you’re going to get the most returns out of your money is going to be a lower CapEx investment with a higher upsell, right? And right now you can charge… Wait, what’s the highest we’ve seen, Jigar? 25, 26 cents per kWh if you can get online tomorrow. If you can’t get online tomorrow, that number drops year by year by year, right? And so, to me, why wouldn’t you invest the capital in the low CapEx solution and still extract the same returns?
Stephen Lacey: That to me is one of the most compelling cases for VPPs. I mean, I totally agree and there is a lot of risk in the upside numbers. Jigar.
Jigar Shah: And then the one other thing that I’d add to what you’re saying, Caroline, which I think is embedded in what you said is that, I mean, one in five households in the United States now are behind on at least one energy bill, right? And so-
Caroline Golin: Yeah. It’s heartbreaking.
Jigar Shah: So, on this side, you’re like, “I’ll pay 25 cents a kilowatt-hour to get interconnected tomorrow.” On this side, you have hundreds of thousands of homeowners who are in weatherization queues with no grant money to do weatherization of their homes. You could just weatherize their homes, reduce their bills, and actually free up a bunch of capacity in the market. And you’re just like, “Why do you…”
Caroline Golin: And we tried to do that. We tried to do that at Google and we actually couldn’t get accreditation for it. That was the problem-
Jigar Shah: I know.
Caroline Golin: Yeah.
Jigar Shah: But this is what I’m saying, right? Is like whether it’s like grid-enhancing technologies with line vision and advanced conductors or whether it’s like helping weatherization occur for people who’ve already signed up to be on this list, but like there’s just not enough money coming to do the work. I just think that like this whole concept of VPPs is a broader definition than I think what we’ve been using it for.
Caroline Golin: Yeah, agreed. Yeah.
Stephen Lacey: So, to wrap this up, we’ve been talking about really wildly divergent approaches to affordability and electricity abundance. And this is like the most wild time I’ve ever seen in the power sector. I guess to ask sort of an unknowable question, I mean, how do you both see these paths colliding? Where are we going to with these two very different approaches to solving the problem?
Caroline Golin: I mean, my hope is, and I’ll go back to what we talked about earlier with the divergent views from the supplier industry. I mean, my hope is that the supplier industry sort of takes back their role in terms of producing innovative capacity solutions in the market and structures that in a way that allows not only for data center capital investment, but third party investment in the way I know we all want to see. And I think that that can happen and I think it will happen. My concern is in the middle, there’s going to be a lot of fighting over who’s going to get their pound of flesh at the political level and that that could slow things down.
Caroline Golin: And I truly believe this. There isn’t a capital… I mean, there isn’t a fund out there and there isn’t a hyperscaler out there, data center developer out there that is going to say, or even necessarily has the intelligence to be discerning around electrons right now.
Caroline Golin: And so that forcing function is going to make innovation happen. Whether or not it happens seamlessly at the political level so that it can be a widespread scalable solution, I don’t know. I don’t really know. Because I think what we’ve seen historically, I mean, we live through New York REV. What we’ve seen historically is that entities want their pound of flesh and that pound of flesh can slow down good solutions. But I am hopeful that this is going to happen because there isn’t a lot of other options. We have to build new power, we will build new power, but in the next five years, we also have to create it.
Stephen Lacey: Jigar, where’s this collision course headed?
Jigar Shah: Yeah. I mean, I am super bullish and optimistic because I mean, luck is preparation meets opportunity. I mean, Lord Almighty, I’ve been prepared for this moment, and so I’m going to hit it hard, right? I mean, whether it’s legislation in all the states that we’re passing legislation in or working with the hyperscalers and others who’ve already negotiated these contracts just for smaller megawatt amounts, right? So they can now make them larger megawatt amounts or with all of the capital funds. I mean, I’ve been working with them for years, specifically for the last three years to get them to be comfortable with merchant risk, because a lot of them were really just wanting PPAs and not really doing merchant, but batteries are always merchant, right? Because even if you get a long-term contract from the hyperscalers, that’s only going to be one revenue stream.
Jigar Shah: There’s five other revenue streams that you need to get on top of that, which are going to be merchant. And I think you’re starting to see a huge number of funds in the $20 billion, $30 billion scale that are coming in that want to take some of that merchant risk. And so, we’re prepared for this moment. We can mobilize the capital, we can mobilize the people. We have already figured out the supply chain so we can actually deliver enough product over the next 12 months. Obviously, there’s some requirements, so we’re going to have to navigate that, but we’re ready. We’re ready for this moment. And I just think that a lot of things have to come together. I’m not suggesting it’s a foregone conclusion, but I don’t think we’re taking this moment lightly. I think everybody is laser focused.
Stephen Lacey: Jigar Shah is the co-managing partner of Multiplier. Thanks, Jigar, for spending your early morning with us on the West Coast. It was kind of fun watching the sun rise behind you.
Caroline Golin: The sun come up. Yeah. Yeah.
Stephen Lacey: Although I know that you would probably be dreaming about this subject anyway if you were in bed, so. Caroline Golin is the CEO of Envision Energy Advisors. Thanks for sharing your birthday with us.
Caroline Golin: Aw, no better way to start the morning, truly.Stephen Lacey: Thanks everyone for being here. Open Circuit is produced by Latitude Media. Jigar Shah and Caroline Golin are my co-hosts. I am Stephen Lacey, your co-host and executive editor. The show is edited by me, by Sean Marquand and Anne Bailey. You can find all of our episodes of Open Circuit on YouTube, subscribe to the Latitude Media YouTube channel. You can also, of course, find the audio version of Open Circuit anywhere you get your podcasts, and we’ve got transcripts at Latitude Media, so find us everywhere. And of course at Latitude Media, we’ve got linked stories for all the topics that we cover here, and you can subscribe to our newsletters to get them in your inbox. Thank you so much for being here. We’ll see you next week.
