Relentless
00:27:24 · Chris Wright
[00:27:24] S1: Going back to China, they've had very rapid growth in their electricity production, good on them, but they've had the opposite story. They've had relatively modest growth in their oil production, relatively modest growth in their natural gas production and relatively meaningful growth in their coal production but in percentage terms not that rapid growth. So China replaced The United States of twenty years ago as by far the world's largest importer of oil and by far the world's largest importer of natural gas. And they're also a net importer of coal. And so they get nuclear. They're moving ahead, but their economy even more than The US and the world, which are sort of think around 85% hydrocarbons, China's closer to 90% hydrocarbons, and they're a massive importer of those. So they have an inherent energy dependence and an energy weakness that we don't have in The United States. Our weakness is easier to fix. It's bureaucratic and rules. But we have the people, we have the capital, we have the smarts to do things fast in America. We just to get the system out of the way and let it go. I think one of the challenges coming up is going to be humans. We pushed large industry out of The United States, energy intensive industry, Scott was talking about that earlier saying we moved to less energy intensive industry. This all starts when we admitted China to the World Trade Organization and unilaterally granted them most favored nation status. Our manufacturing in dollar terms continued to grow after that in dollar terms but as a percent of our economy it shrunk dramatically. The rest of our economy grew much faster. It didn't mean the world needed less manufacturing products, it just meant energy intensive large scale manufacturing all went to Asia. We displaced so much of it out of our country. If you look at the European nations, they did it even more dramatically. They don't have flat electricity production from twenty years ago. They produced 20% or more less electricity than they did twenty years ago, and almost all of their heavy industry left. In the name of being greener or fighting climate change, you just move emissions from one place to the other. There's nothing green about that. It's just impoverishing. Western Europe in dollar terms has had zero per capita economic growth since 2010, since they went crazy on energy policy.
00:29:40 · Chris Wright
They shrunk their energy production and completely stopped their economic growth. I believe they will pivot. They're not going to be players in AI, they're not going to be players in advanced manufacturing without a pivot. Now maybe this is a loud enough wake up call. Some of them are saying all the right things now and hopefully they're pivoting. We may not have been stars in the industrial world and electricity world the last twenty years but we weren't the worst actors. But I think we are pivoting to be among the best actors. We're going to have speed here in the Department of Energy. We're thrilled to get the benefit of this AI revolution to help push scientific advancement to a much faster pace. There are still cancers and many other diseases that you get that news, it's a death sentence. You may have a year, you may have a few years. We can fix those problems. We can solve those problems by leveraging human mind and human creativity and supercharging it with AI. And I could not be more optimistic about the speed at which we're going to see improvement in science, improvement in engineering, improvement in human quality of life. It's been a tremendous story over the last two centuries. I think the next decade is going to be outstanding. I know there's anxiety associated with it, which is a real thing, but the improvements I think are going to be simply tremendous.
00:31:00 · Scott Nolan
[00:31:00] S2: Yeah. That's... It's it's a great point. The electric grid only being a part of the story. You know, you look at the growth. Yes. It's... The grid's been pretty flat, but US is a net exporter of fossil fuels and of energy. Completely different completely different story. Now the economy has been running on the grid for the most part, and so that is highly correlated with our economic growth. So we do need to grow it if we're looking at any ways that we've been running the economy to date. I do think as we really expand energy production, a lot of it will be consumed behind the meter. It won't have to go through those transmission lines. I think there's actually a huge opportunity to do something with that, though. You ask, What are the stoppers gonna be? What are the brakes gonna be? I think there are huge benefits that everyone will experience from AI. There's gonna be a bunch of changes, but there's examples on the cancer side. Think a lot of people saw it. Someone used AI to cure their dog's cancer. They sequenced it. They looked up what things could actually target this, and they came up with a cure. I think that was a few months ago we saw that. So there's going to be a lot of specifics. I think as people really start using AI for benefit, there's going be a bunch of stuff that gets solved. But there still is a lot of anxiety around it. And I think one of the biggest anxieties... There's really been two that you've heard about, and one's water usage, which I think is becoming a thing of the past as people design and use and deploy closed loop water data centers. You fill them up once, and you don't need to really consume water after that. But then the grid question, and are these data centers going to actually consume all my community's electricity and drive up the electricity price? And I think if that's allowed to happen, that will have been a failure of regulation. And so I think it's also a failure on the part of the companies deploying data centers. If you think, Okay, company A versus company B, we're in an arms race. We need to really expand energy production. We really need to deploy these data centers. How do you actually win over a community? You actually give them some benefit. It shouldn't be neutral or cost. It should be benefit. And so you look at some of these data centers, and it's $10 $20.40 dollars per watt.
00:33:10 · Scott Nolan, Ty Morse
You could say maybe a third or half of that is the energy production that they might do behind the meter. Well, instead of doing 1x your production, why don't you do 110%, 1.1x? The cost of the project doesn't change that much. It changes three percent to 5%. But now you can pitch a community and say, hey. We're not actually consuming your power. We're actually providing power onto the grid, driving down your rates. So that's... I mean, that's an idea that I've had, I think, is a good one, but you could do it through regulation, or you could let the company sign up for it themselves. I think the the free market way is you let the companies outcompete each other, and who's gonna give the most back? So I think I think the whole how do you get communities on board with this? How do you let them say yes to new power production and and consumption at data centers is it's things like that, which to me sound... Seem very simple, and it's it's this one way that you can help people see a lot of benefit from it as we go through this transition. [00:34:08] S0: Is there any other things on kind of the matter of incentives? And if you design the incentives to be massively beneficial to communities then they're probably going be very excited about it. Right now on social media, AI is fucking hated. People just hate it for some reason. How do we kind of flip that?
00:34:25 · Chris Wright
[00:34:25] S1: And time forth, it's not just on social media, it's reflected in the polls. Mean the opposition to AI and data centers is pretty tremendous and I think President Trump right at the start of his administration I think he knew AI was going to be a big deal. He knew we could not let it go to China, which was the trajectory we were on. We've got to lean in in The United States. And he immediately and our whole administration engaged with the hyperscalers. Scott talked about it in a market way, not in a mandatory way, not in a law way, about what they can do to bring immediate benefits, first on energy costs, but on economic development to communities. Hence Trump's rate payer protection pledge. All of the large hyperscalers have signed on to this. Many others have said, Hey, we'll follow those same rules. And it's back to the point Scott made, which is that the cost all in for a data center, like energy is a big consumption thing, but it's not a giant cost driver. And all of the developers have said, Yes, we'll pay above market price for power. We'll bring money to the table before we even get any power to help build upgrades to transmission lines. If we're going to consume a gigawatt of power, we'll build or fund 1.2 gigawatts of power generation. So we put additional capacity onto the local grid that allow other businesses to grow and will keep prices down. Almost all the big deals that have been signed have had multi year rate freezes. Rate freezes in nominal dollars, so in real terms it means they're declining every year. In Indiana, we've already seen applications for rate reductions. We're going to see more of those. That fear that data centers drive up electricity prices, the reality is actually the opposite. If you look at the states with the fastest growing electricity prices, California, New York, Massachusetts, Maryland, they all shine in the fast growing electricity prices, they all produce less electricity today than they did five or ten years ago. The states with fast demand growth, Texas for example or Nebraska or North Dakota, are the states that have had declining in real terms and some of them even declining in nominal terms price of electricity. Here we are sitting here in Utah, very low electricity rates in Utah, and as the grid has expanded for industrialization here, we'll likely see electricity prices go down even more.
00:36:47 · Chris Wright
So new demand loads are actually your friend to fix rising electricity prices. Electricity prices were driven up because the Obama and Biden administrations wanted to shut down as much existing power plants as they could and they wanted to subsidize the construction of intermittent sources, politically favored sources that ended out distorting electricity markets. This production tax credit, if you pay people three or four cents to produce a kilowatt hour, whether it's needed or not, guess what? They'll produce a lot and they drive these wholesale prices at low demand times negative. That killed the economics of nuclear. It killed the economics of firm power. Just government subsidies distorting a marketplace. The Trump administration came in with just a common sense, pro business, pro America, pro innovation attitude. So a lot of damage, a lot of things to be reversed. And the biggest one, which I'm dancing around, is this public opinion. You're absolutely right. For it to win in the long run we have to win in that space. That is a very active dialogue with hyperscalers. We have to lean in. My last thing is philosophically it's very much like the campaign against fracking when it started. It's very much about the climate change campaign. COVID, we've got to lock down and stop everything. It's very easy to scare people and we have a whole industry in The United States who collect money and they scare people to make them oppose it. They oppose fracking. They oppose any industrial development for climate change reasons. They oppose businesses and kids going to school during climate change. They were successful at selling this fear. Those same people, those same organizations are opposing data centers. It's not that they're fundamentally opposed to fracking or fundamentally opposed. We have a very large fear mongering industry that fits like human psychology. We have to be careful and so fear is a strong reflex in humans and it's very powerful politically. And our side, the data we think is compellingly on the side that the advantages are going to be much bigger than the disadvantages. But that's a more in-depth, that's a harder argument to sell. We're going to have to sell it. We're going to have to lean in. We're going to have to be honest and credible. Are negative things going to come from AI and data centers? Absolutely. There will be.