The Volts/Catalyst pod crossover you didn't know you were waiting for

In this episode, Shayle Kann, cleantech investor and host of the
podcast Catalyst, shares his educated opinion on the most
overhyped and underhyped technologies and trends in clean energy.


(PDF
transcript)


(Active
transcript)


Text transcript:


David Roberts


If you listen to Volts, you probably also listen to — or at the
very least, should also be listening to — Catalyst, the Canary
Media podcast hosted by veteran cleantech investor Shayle Kann.


Like Volts, it features fairly nerdy deep-dive interviews, though
they are mercifully shorter, and they’re more focused on
cleantech, less likely to drift into politics and activism.
(Shayle is a partner at Energy Impact Partners, where he assesses
and funds cleantech companies for a living, so unlike me he
brings some expertise to the table!)


Anyway, our pods have been mutual admirers for a while now and we
thought it would be fun to do something together. So the
following episode features Shayle and I discussing a few
technologies and trends we think are overhyped, and a few we
think are underhyped.


We get into electric stoves, interest rates, thermal batteries,
and much more. It was just as fun and enlightening as I expected
— especially where we disagreed — so I hope you enjoy it as much
as I did.


All right, here we are. I'm here with Shayle Kann, the host of
Catalyst. Shayle, welcome to the greatest crossover event in
podcast history.


Shayle Kann


Man, I had already written down that joke. I had written down
that literal joke for my monologue. I got to come up with
something else.


David Roberts


It's the Infinity War of podcasts for nerds. You know, Shayle, I
have been listening to Catalyst for a long time, a big fan, and
we've been talking for a long time now about how we ought to do
something, do some sort of crossover, have some sort of chat,
especially since we're both quasi under Canary now. So what we
decided on was to chat a little bit about the clean energy
landscape via the lens of a couple of what we feel are overhyped
trends or technologies and a couple that we think are underhyped.
And so we're just going to walk through things that way and have
a little chat along the way about what we're seeing and doing.
So, Shayle, are you ready to go?


Shayle Kann


I am. But before we start, can I ask you a question?


David Roberts


Yeah, please.


Shayle Kann


So when I was trying to come up with my overhyped and underhyped
things, I was having, like, a surprisingly difficult time
determining what I think is overhyped or underhyped relative to
whom? You know, I kept coming up with things where I was like
things that are overhyped to the people who care about energy on
Twitter, which is not representative of anything important. So I
was trying to figure out overhyped or underhyped by whom and to
whom. And I don't know if you struggled with the same thing?


David Roberts


I did struggle with that. We do live in a weird, tiny, little
insular world in which many things are overhyped that normal
people have never heard of. And vice versa. So I think I did a
mix. So you'll just have to explain the context of your answer
while you're answering. You have to explain underhyped or
overhyped to whom while you're answering. Some of mine are
definitely overhyped or underhyped to our audience.


Shayle Kann


Right? Yeah, exactly.


David Roberts


Which, as you say, does not mean much to the wider world, since
we both have audiences of energy nerds, handsome, viril,
unusually intelligent energy nerds —


Shayle Kann


Of course.


David Roberts


in our audiences.


Shayle Kann


Yeah, I also struggled a little bit with, like, there's some
things that I think might be overhyped because I overhyped them.
Just a bit circular.


David Roberts


I know one of my underhyped is something that I have been
relentlessly trying to hype for years, but I just don't think I
have the hype power to bring it up to the hype level, where it
would be sufficiently hyped. So we'll discuss those along the
way. So we starting then with your first underhyped trend. So
tell us what it is and perhaps to whom it is underhyped.


Shayle Kann


Okay, so I think this is underhyped by almost everybody outside
of a relatively small corner of the clean energy world that's
like trying to pound the drum as loud as possible about this,
which is the trend of onshoring of manufacturing in clean energy
supply chains. Onshoring, and I guess I would add near shoring or
friend shoring, but predominantly onshoring. So let me
contextualize a little bit, which is I know you were around for
the whole solar story as solar was just starting to mature, but
the short version of that story in my mind, if you go way back in
solar history, was Japan was really the first market that both
installed any meaningful amount of solar and produced it.


Right. You had these companies like Sharp and others, way back in
the '90s. And Japan had this feed-in tariff for residential
solar, and that was small and steady for a long time, and not a
whole lot happened. And then what really kickstarted the solar
market was demand in Germany, first because of their feed-in
tariff, and then in the US. Predominantly in California, thanks
to the California Solar Initiative and the renewable portfolio
standards here. And then it spread through other parts of Western
Europe, as other countries like Spain and the Czech Republic and
Italy and others started introducing their own policies.


But demand was clearly coming from Western Europe. Manufacturing
followed briefly. Right. In Germany in particular, you had some
of the big early solar manufacturers were German companies, and
the US looked like it might be on the verge of a domestic
manufacturing renaissance, largely of the next generation of
technologies thin film solar. And then, of course, everybody
knows how the story ended up playing out, which is that basically
all of that manufacturing moved to China and then kind of spread
into Southeast Asia as trade barriers started to get enacted and
has stayed there. Right. And the thing that I think is underhyped
that people don't appreciate starts with solar but doesn't end
with solar, which is that thanks predominantly to the Inflation
Reduction Act, but not exclusively, we are seeing a crazy
renaissance in domestic manufacturing of clean energy components.


I woke up this morning to another announcement. This is Canadian
Solar, which, despite the name, is really a Chinese solar
manufacturer, setting up a five-gigawatt cell manufacturing
facility in Indiana.


David Roberts


Yeah, it's crazy. They're one after the other these days. I've
almost become numb to them already, and it's only like a year. A
year? But it's just one after the other.


Shayle Kann


That's the key point. Right. We're barely over a year since the
IRA. And yeah, it's solar cells and modules, but obviously the
battery and EV supply chain is the other places is playing out in
a huge way and it's an enormous amount. And we've never seen
anything like this in the history of clean energy.


David Roberts


Yeah, this is one of the things I struggle to convey to people
outside our world. I think it's gotten out that the IRA is a
climate bill, but I do not think it has appreciated the sort of
brashness or the sheer ambition involved in attempting to stand
up a domestic supply chain for these things out of almost
nothing. Right. And it's just a huge, conjuring feat accomplished
with a boatload of money. And it's happening right in front of
us. It is quite remarkable. I do wonder. As big as the growth
seems from our end, since we're starting from a relatively sort
of desiccated manufacturing base, as people have been complaining
about for years, do you think we're going to get to a meaningful
chunk?


I mean, China is like 90, 95% on most of these materials, most of
these manufacturing, most of these supply chains — other than it
brings us jobs, and it employs a lot of people in a lot of areas
that are hurting, and so it's good for that reason, manufacturing
is good. But do you think we're going to be able to build up
enough of the manufacturing on our shores that we can throw
weight around in the actual market? Or do you think it's more of
like an insurance policy we're doing? I struggle to conceive the
scale here that we're shooting for.


Shayle Kann


Yeah. And I don't think it's going to be consistent across
various parts of the supply chain. Right. We may end up
assembling a lot of our EV battery packs in North America, but
that doesn't mean that we're going to be producing all of our
lithium chemicals here, for example. Right, there's places where
China's stranglehold on supply chain is stronger than other
places. Rare earth elements is another one. Right. Like China's
super dominant. And it's going to take a lot for us to play a big
role there. But in other places. Like I said, battery assembly
and maybe solar, interestingly enough, we've got a ways to go
there.


Now, to be clear, I don't think there's a future wherein the US
produces as much of any of these things as China does. But we
don't need to if our point is to get high on our own supply,
basically.


David Roberts


It's resilience, right? Mostly it's just sort of having a little
buffer in case China tries to play games. I think that's sort of
how it's being viewed in the administration.


Shayle Kann


Which is happening. Right. Like we just saw China just announced
that it's going to curb or at least require licensing of exports
of graphite to other countries. That's a big deal. Graphite is a
predominant anode —


David Roberts


And they utterly dominate graphite. It's like 99%. I think on
graphite it's something ludicrous.


Shayle Kann


Exactly. So I think the geopolitical element of this is
definitely a dri... It's a combination of the geopolitics and the
China-thing, along with the "economic development in regions that
need it"-thing that make this so attractive.


David Roberts


And plus, not to rant, but here we have in this country, we've
been complaining and complaining about parts of the country that
have been hollowed out by globalization, right? Especially a
cliche now. And those parts have gone red. It's the white working
class, it's angry at Democrats because of globalization, blah,
blah, blah. So here is a huge multi hundred billion dollar, very
direct effort to reverse that, to send, to get manufacturing
going back in exactly those parts of the country. Like, you've
seen the maps. These are red areas where these jobs are going.
Here we have a multi billion dollar effort precisely targeted at
reviving manufacturing precisely in those areas.


And it's like you can't get the news to talk about it.


Shayle Kann


I think that's true. You said you think people woken up that the
IRA is a climate bill. I'm not sure. I think people don't pay any
attention to the IRA.


David Roberts


Might be optimistic. Okay, well, we could talk about that
forever. Because another aspect of that is the sort of sort of
Europe being kind of having its butt up on its shoulders about
our industrial policy and our supposed protectionism and the sort
of trade tensions that this is sparking with Europe. But we can't
get too sucked into it. We've got a lot of items to get through.


Shayle Kann


Yeah, save that one. Okay, so that's my first underhyped. What
about you? What's your first underhyped trend or technology?


David Roberts


Well, this one people will laugh at me about this one, as you did
when I emailed it. But my first underhyped is thermal storage.
Anyone who's been listening to either of our podcasts —


Shayle Kann


Yeah, I was going to say, you and I have both been hyping this
one. This is the one where you're reflecting a failure on our
collective part.


David Roberts


I know, a failure of our scale. I think this deserves — I'll say
this right now, thermal storage is having a little bit of a
moment in our audiences, right? In our energy world, in our sort
of kind of nerd circles. But I personally think that it is
eventually going to be a sufficiently big piece of the puzzle
that it's going to sort of escape our world and become — I think
normal people can sort of grope around with batteries now. I
think normal people get, "oh, you have wind and solar, you need
some batteries." I think that's like escaped our world into the
general understanding.


I think thermal batteries are going to play a big role in this
for the simple reason, as you know, we've both interviewed the
head of Rondo. I interviewed the head of Antora. I don't know if
you talked to him too. I think the reason it's going to be a big
enough deal that even normies will hear about it is that it is
going to be this kind of skeleton key that unlocks the
decarbonization of industrial heating, industrial heating and
cooling. Which is one of the big, quote unquote, difficult to
decarbonize sectors, this sector that everybody's worrying and
fretting about and tearing their hair out about.


Like, we know how to do electricity, we know how to do
transportation, we know how to do home heating and cooling
industry is the big unsolved problem. And I'm not sure the news
has gotten out that I just don't think it's unsolved anymore. I
think thermal batteries alone get you some large chunk of it, 80%
or whatever. There are lots of process emissions in some of these
processes that still have to be hashed out. And by the way,
Canary is in the midst of running a great series of articles
about exactly this, about concrete and steel and the specifics of
how to decarbonize them.


But basically, if you think of replacing, for a given industrial
application, replacing a natural gas pipeline and a natural gas
boiler with an electricity pipeline, an electricity line, and a
thermal battery, they get you basically the same thing. And so
voila. There like half the final energy we use is heat. Half of
that is industrial heat. Voila. There's your industrial heat. To
me, thermal, in addition to just being delightful
technologically, I love the whole just the simplicity of heating
up a box of rocks until you need the heat. I love the technology
of it. I don't feel like the news has gotten out.


It also basically tackles the industrial heat problem and there's
not a ton left over after this, I think.


Shayle Kann


So, I have one comment and then two questions for you on this
one. The comment is, I obviously generally agree with you. We and
I have both been very bullish on thermal storage. Listeners of
this podcast, for full disclosure, know that we're investors in
Rondo. The way that we think about it actually is — for your
industrial heat, the world ends up splitting into two categories:
There's high-temperature industrial heat and then low-temperature
industrial heat. I think for high-temperature industrial heat,
thermal storage is awesome. And exactly as you said, it may end
up being the solution. For low-temperature industrial heat you
may just be able to electrify directly. We like heat pumps for
low-temperature industrial heat. So, you kind of split the world
that way. My first question for you, thermal storage is not a new
concept. These companies are new and they have new —


David Roberts


One of the oldest in all of energy, really.


Shayle Kann


But there was a wave of excitement around thermal batteries maybe
ten years ago. And I'd say two things were different about those
attempts than the new ones. One is the materials they were using.
They're often stuff like molten salts that are highly corrosive
and tough to handle. But two is that they were all talking about
electrical to electrical storage, right? So they were serving the
function that a lithium-ion battery would serve on the grid,
albeit maybe with different duration and costs and so on. What
you're talking about and what we find most exciting as well is a
different thing.


Right. You turn electricity into heat, you store it as heat, you
deliver it as heat rather than turning it back to electricity. Is
that —


David Roberts


Which gets you way higher efficiency? Like you can get 95% of
your heat back out.


Shayle Kann


That's the key point. Yeah, I think when people talk about
thermal batteries or thermal storage, if they're not already
clued into this, they're thinking of a battery that goes power to
power. And we're talking about a battery that goes power to heat,
but has storage in the middle.


David Roberts


Yeah, you got to start thinking about heat. I mean, a lot of my
answers today, and I think a lot of the pod lately, a lot of both
our pods lately are about heat, about just like got to start
thinking about heat more. It's kind of the forgotten energy, like
saving it, using it, reusing it, using waste heat, all these kind
of things. So yes, I agree, it's using heat for heat. That is
going to be the sort of killer app because another thing I think
this unlocks and we could do a whole pod on this too, but I'll
just sort of kind of throw it out there and mention it is this
enables — it's very difficult, right now. The most difficult part
of building electricity generation is getting hooked up to the
grid.


It's not cost or financing or anything anymore; it's just waiting
for your slot on the grid. So the beauty of this concept is you
can just build some renewables out in the middle of nowhere and
instead of hooking them up to the grid at all, you just hook them
up to your heat battery, right. Store all the energy they store
as heat and then use the heat directly in some industrial
application. Then all of a sudden you have renewables providing
heat that do not have to go through the grid, do not have to wait
for grid interconnections.


And if you can make that work, that's a huge, huge, huge new
market for renewable energy developers that they can just start
building now and they don't have to wait in interconnection
queues. To me, that's one of the most exciting aspects of it.


Shayle Kann


Yeah, I mean 100%. And just to add on to why that would be such a
big deal as it stands right now, if you're trying to develop
renewable energy, if you're trying to develop any electricity
generation, you're extraordinarily location constrained, because
you need to go not only where the resource is, obviously, but you
need to go where there's land available. And you need to go where
you can get interconnection, as you said. And that's hard now,
but if you remove that constraint, you can go where the cheapest
land is the easiest permitting, don't need to worry about
interconnection, and you can direct connect to load.


You can actually cut some physical costs out of the system, too.
So it's just like, theoretically, this massive unlock.


David Roberts


Yeah. All your TND costs vanish, right? There's no TND costs.
It's just the cost of the power itself, which, as we know, is
super, super, super cheap these days. I mean, that's kind of what
all the heat battery guys say. The reason this one is a bigger
deal than the last one, the reason so many things are changing is
just the renewables have gotten so cheap that there's just lots
more to do with them now.


Shayle Kann


Yeah, though one of my underhyped things, which we'll come back
to, is one of the reasons why the renewables have gotten so, so
cheap thing is not really true today. But I'll come back to that
one.


David Roberts


Okay, intriguing. All right, so we could talk about thermal
storage forever, but let's go move on to your you've got
onshoring and friendshoring underhyped. I've got thermal storage
underhyped. What's your first overhyped?


Shayle Kann


All right, so, this admittedly, I can't tell this is the one that
I was struggling with. Like, is this really hyped or was this
just like a brief flare up in energy Twitter world? I don't
really know. So I guess my first question to you is going to be,
do you think this is hyped? But my answer is electric stovetops.
And the reason for that is because maybe, I don't know, six
months ago, something like that, there was this just like, raft
of articles and they weren't just in energy Twitter-land. This
showed on the New York Times and a bunch of other places talking
about induction stoves and this debate between induction stoves
and gas stoves, and then it wrapped in even a little bit —


I think I saw something about it on Top Chef and how the Top Chef
chefs hate induction stoves. And it seems to be this big thing.
And assuming it is this big thing, the reason that I think it is
overhyped is that from a climate context, I don't think it really
matters. At the end of the day, your stove is not a significant
load in your home and so you can electrify it or not. And I guess
maybe it matters if you care about shutting off the gas
altogether. But the end of the day, the total impact on energy
consumption, where that comes from, and ultimately on emissions
is going to be negligible.


And I would like much rather spend — if we're going to talk about
consumer choices that affect climate, what car you drive, how you
commute, how you heat your home, those things matter. How you
cook doesn't really matter.


David Roberts


Yes, I'll push back a little bit on when I first saw this on your
list, I thought you were specifically talking about these
electric cooktops with batteries embedded in them.


Shayle Kann


I think those are cool, actually. I like those more for a bunch
of reasons.


David Roberts


Those are super cool. And that was going to wound me if that was
your overhyped one, because I love hyping those.


Shayle Kann


I don't think those are hyped enough because nobody really knows
about them yet. But no, I mean, induction stoves in general and
electric cooktops.


David Roberts


Yeah, the one thing I push back on is I absolutely agree that
relative to greenhouse gas emissions or energy use or any real
physical metric, stoves are very low on the list of concerns.
You're much better off switching out your car, et cetera, et
cetera. But there's a reason it's on your overhyped list. And I
think the reason is that it was drafting on the gas stove hype,
basically, like on the gas stove controversy. I think that —


Shayle Kann


Which was more about local air quality health stuff.


David Roberts


And about jack-booted liberal thugs coming to take all the things
that you love and hold precious.


Shayle Kann


Well, but just for a second on that, I guess what I'm saying is,
like, yeah, you could characterize the people who are doing gas
stove bans as jack-booted liberal thugs. But why the gas stove
ban in the first place? Why is that the fight to pick?


David Roberts


Well, I think you mentioned it in passing. It is about whether to
hook homes up with gas at all, right? Like, if you've got the
electric car, you've got your solar panels and your heat pump,
the only reason you're still hooked up to the gas system at all
is the stove. So in a sense, it's like the mopping up remainder
of home energy use. But is it a binary thing? You either can cut
off your gas connection to your house or you can't. This reflects
sort of in some sense, an admirable kind of quantitative carbon
brain.


Like we're going after the carbon. This is not where the carbon
is. Why are we spending time on this? But I feel like the right
they don't care that gas stoves are a relatively small part of
gas use. They've recognized that this is a cultural battle that
resonates beyond energy people. And I feel like the energy world,
climate and energy world is full of, like, wonks and technocrats
and quants who are not as literate as they should be in the
language of these cultural battles and lacks what I think ought
to be like the desire to fight them.


We just run away from them. The right starts a huge fuss about
gas stoves and we run away and talk about something else. I feel
like we need to start learning how to win these things, even
though, as you say, in some sense, the amount of hype on stoves
generally wildly outpaces their real significance.


Shayle Kann


Yeah, I mean, I don't know, we could probably move on from this
one, but I guess all I'd say is maybe you've characterized me
right as this overly quantitatively minded climate person. But my
only reaction to that is like the climate doesn't really care who
wins this battle. Right? I don't think it really matters in the
context of climate change and that's the thing I'm focused on. So
we could do a gas stove ban. It's not really going to matter. You
could do a gas boiler ban that would be a much more difficult to
pull off thing, but a much more impactful thing if you wanted to
do something that mattered. I get confused.


David Roberts


Yeah, and they are doing — there are broader gas bans, gas hookup
bans out there. It is a little odd that they started with stoves,
but I think hearts and minds matter. Even in the long term
battle. I think hearts and minds matter and this is a hearts and
minds — like if you convince people to think in those jack-booted
liberal thug terms, then they're just going to apply that frame
to the next thing we come up with. You know what I mean? At some
point we got to fight that fight, but let's move on. Your first
overhyped is electric stoves.


So my first overhyped, I hesitated a little bit with this because
in a sense as much hype as there is about them, there's almost an
equal amount of people out trying to unhype them. Anti-hype.
There's almost as much anti-hype as there is hype. So I don't
know if this sort of counts, but mine is SMRs or just small
modular nuclear reactors. They are incredibly hyped, I think well
beyond our circles. Right. Like something about the idea of SMRs
has grabbed onto the imagination of —


Shayle Kann


Of who? I think they're hyped in two circles.


David Roberts


Normies.


Shayle Kann


I don't know about normies. I think they're hyped in — my sense
is they're hyped in some clean energy climate person circles and
then they're hyped in a corner of tech world. Like there's a
bunch of VCs who really hype the s**t out of them. But I don't
think "normies", so to speak, with quotation marks so that
normies don't get mad at me, but I don't think that the average
person knows what a small modular reactor is, do you?


David Roberts


Clearly this is a theme in our show, is our utter mystification
about what normal people do and don't think about or know. I
don't know. I feel like advanced nuclear, like nuclear
renaissance, nuclear is better now. It's smaller and cooler and
safer. I feel like some of that has drifted beyond but you're
right. I think the hype that is most bothering me is among, but
it's among some powerful people. Powerful people in corporations
looking for ways to decarbonize themselves are ordering these
things. Like you have cities and utilities pretty seriously — you
had this weird announcement from Microsoft the other day, I don't
know if you checked that —


Shayle Kann


They didn't announce anything. They just put out a job spec and
then a bunch of people started writing articles about it. They
just said we're hiring for somebody to look into SMRs.


David Roberts


So so the tech people are very serious about it and I think the
DOE is extremely enthusiastic about it.


Shayle Kann


Okay, so tell me, why is this overhyped?


David Roberts


I just think, well, two reasons. One concept I'm trying to bang
on to the point that I can push it out to wider circles, beyond
our circles, is simply yes, we have variable renewable energy
that is going to be the heart of our grid. Yes, that means we
need balancing. And I just want people to see nuclear not as some
sort of special unique kind of power but simply one of the
options on the table for balancing longer term renewable energy.
One among others. There are other options. There's geothermal,
there's longer term storage, there's e-fuels, whatever.


And there are I think lots and lots, there's lots and lots of
action and development and innovation in this space in the longer
term firm power space. So one, I just want people to reframe
nuclear as not THE option, but an option for balancing out
renewable energy because I think a lot of people have it in their
heads that renewable energy is just useless because you have to
back it up 100%. And so why not just go straight to nuclear which
is more familiar? I think I want to break people of that. And two
more on the details.


It's just that we haven't really seen a lot of nuclear plants get
built that are actually small or actually modular. Right? I think
that the whole notion of shrinking the overall size of the
project and then shrinking the subparts of the project so that
they can be constructed in factories and shipped to the site.
That's the vision. Right? That's how you're going to reduce costs
is you start making things in factories over and over again the
same way you get learning curves because nuclear has resisted
learning curves. And it's a great idea but it's not really
panning out the way I think people think it's panning out.


There aren't a lot of small or modular — if you talk to the
people at the DOE, the loans office, they'll tell you what needs
to be replicated and done the same way over and over again is not
necessarily the hardware, the chunks of hardware. It's
construction practices. It's the construction subparts of
building a giant project. Our problem is that we keep doing,
first of a kind, bespoke one-off construction projects where
everybody's figuring everything out as they go, and they're all
going over. So what DOE wants is to systematize that stuff, the
sort of the operational and construction part of — they think
that's a bigger deal than the actual pieces of the plant.


So even on nuclear, even within nuclear itself, I'm not sure SMRs
are necessarily the answer to getting more nuclear. But that's
controversial, maybe.


Shayle Kann


So when you sent over your list so we sent lists ahead of time,
obviously, so we would know we wouldn't cross over too much. I
was ready to disagree with you 100% on this one. And now upon
your explanation, I'm ready to disagree like 25%, I think.


David Roberts


Well, good. I got 75% of the way there.


Shayle Kann


Yeah, you mostly got there. I mean, I think that I agree with
your framing that the right way to think about nuclear and SMRs
as a subcategory within nuclear is as a suite of options. And I
agree with you that there are other options there as well. Now,
there is no silver bullet there. Every one of those options,
including nuclear, has a host of challenges to overcome. So it
should be in that mix, but it should be considered as an option
in that mix. And it has some unique characteristics that are
particularly attractive in theory about it.


And this is nuclear, not just SMRs, but obviously it's
extraordinarily energy dense. If you are talking about a real SMR
or microreactor, if you want to go even smaller than that, you
could put it closer to load. You can site it anywhere in theory.


David Roberts


In theory, they're super awesome. I mean, I definitely will not
argue with that. In theory, they answer a lot of very specific
difficulties with other sources.


Shayle Kann


Well, now I think you get to the crux of the thing, which is like
there's this wide gulf between the theory of what an SMR could do
and the reality of what we've seen them do. And then this is
where I think the discourse always unravels, because the question
is, why is there such a gulf there? No one disagrees that there's
a gulf. And the answer, depending on who you talk to, is either
because the US can't get its — and many countries, in fact —
can't get their act together to license these things and get them
built such that we will start to see that learning curve that
you're describing and reach that promised land or it's that these
things were never meant to be cheap and sitable anyway, and so
it's a failed promise. And I don't know how to bridge that divide
exactly, except to say that if I'm leaning in a direction right
now, it is that I know we need this class of thing. I know that
this is one of the relatively few options we have to solve this
class of problem. And so I'd like to see what we can do to give
it a real shot.


David Roberts


Yeah. My only worry, and this will just be my final comment, is I
totally agree. Let's give it a shot. I'm all for R&D. I'm all
for first of a kind demonstration projects and things like that.
What I don't want is the sort of generalized hype around SMRs to
translate into just yet another round of a large and historically
corrupt and incompetent industry getting another giant round of
subsidies dumped on its head for ultimately nothing, which is the
nuclear industry, basically the history of the nuclear industry.
And I don't want this to be a wedge issue where you just end up
with more of the same kind of historical flailing we've had in
that — the industry itself needs, badly, needs some discipline
imposed on it.


And I don't want this to be an excuse to get more just to get
more substance.


Shayle Kann


Yeah.


David Roberts


Okay, let's move on.


Shayle Kann


Fine. I feel like every one of these we should do like an entire
episode on.


David Roberts


I know. This is what I'm realizing. What have we bitten off here?
What are we doing? Your second underhyped. Go for it.


Shayle Kann


All right, so this one's underhyped, but not in a positive way. I
think it's underappreciated how big an impact this is having,
which is the impact of interest rates being higher for longer on
clean energy, both the industry and deployment of the
technologies.


David Roberts


Yeah, I'm glad you put this on your list because I have a vague
spidey sense that it's a big deal. But I think to your point,
perhaps I have not actually stopped and taken a close look at
what it means and what it's doing.


Shayle Kann


Yeah, I mean, I've been meaning, and I probably will at some
point do a whole episode on this. It's concerning. Right. So high
level: Most clean energy technologies, the thing about them is
that they are high capex, low opex. And so you finance the thing
upfront, you pay more upfront for it, you finance it, and it ends
up being hopefully cheaper over the long term. Right.


David Roberts


For our amateur listeners, that's capital costs and operating
costs, they're high capital cost, but cheap to operate.


Shayle Kann


Right. So think of solar and wind. You pay a lot to get your
solar panels or wind, but then the wind is free and the solar is
free. And that's contrast to, say, natural gas: You build the
thing, the thing may be cheaper to build, but then you got to
keep paying for natural gas over time. And because they're high
capex, low opex, that makes them particularly sensitive to the
cost of financing. And of course, the cost of financing is tied
to the cost of capital, which is tied to interest rates. And
that's just for those technologies.


It's also true of other technologies that are coming down the
cost curve, starting more expensive, like electric vehicles, for
example. And this has been known, this is not a new thing,
everybody for years, I remember talking about this a decade ago.
We were saying, "oh, look at all this growth in wind and solar,
but someday interest rates are going to rise and then it's going
to be tough" and we're there and it's having a real impact. Just
to give you a few data points —


David Roberts


And can I just insert here? I'd be remiss if I didn't. We had a
whole decade of insanely low interest rates during which we
really should have taken advantage of that. Like now that they're
rising, now that we're hitting all these problems, I think we're
going to be looking back like, "Boy, those were nice times,
weren't they? We really should have gone gangbusters while we
could, while we had low interest rates instead of faffing about
with austerity and deficit hysteria and the rest of it."


Shayle Kann


I mean, if you're talking about in a macroeconomic sense, I have
no ability to comment. In the context of clean energy, I think we
did make some hay while the sun was shining. At least this is
what got these technologies to the point where they're at today.
But let me just spend a minute pointing out what I think we're
starting to see in the market. So there's lots of different ways
that you could point to this, but an easy one obviously is in the
public equities sector, right? So far this year, the S&P 500
is up 8% as of this recording.


The S&P Clean Energy Index is down 35%. And it's basically
true across the board, right? So this is the residential solar
companies. This is the manufacturers, like First Solar, and if
you want to broaden it out, it's the independent power producers
like NextEra and a bunch of others. This is not a great time.
Now, it's coming off of what was historically a great time,
right? And that's true of everything. It's particularly true
here. But it's definitely a tougher road at the moment because
again, for probably a few reasons, but I think the biggest one is
interest rates.


That's one thing. A second thing in the electric vehicle world —
I think this is tied, but not exclusively because of this —
you're seeing EV manufacturers, some of the big OEMs, pulling
back a little bit on their manufacturing expansion plans, citing
kind of weak demand for EVs right now. And then I'll give you one
more data point, which is just that, in the oil and gas world,
the super majors, at least some of them, are announcing at least
sort of moderate pullbacks in their plans to expand their clean
energy businesses because they're getting a lot of shareholder
pressure to focus on the more profitable part of their operation,
which remains oil and gas right now.


So I just think it takes a while for this stuff all to bleed
through and for you to really see it. But when you take a step
back this was predictable and I think a lot of people predicted
it, but I don't see a lot of people talking about right now how
challenging an environment it is for clean energy thanks to high
interest rates.


David Roberts


Well, yeah, well, briefly, what should people do with that
knowledge? What can be done about it other than suffer? Is there
a checklist of things that you should do in atmospheres of high
interest rates?


Shayle Kann


That's a good question. I mean, I think it's worth noting this is
to the point you made earlier. I think one thing that we have
grown accustomed to saying is, "Oh, thank God renewables are so
cheap now" and they're not actually today. The PPA prices for
renewables have been going up for the past year in the US. Both
because of interest rates and because some component prices had
been rising as well. I think we should be careful in the long
term, I think we probably agree that the trajectory of renewable
costs continues to be down. But in the short to maybe midterm the
actual delivered cost of energy or mobility, if you're an
electric vehicle owner or whatever it is, it might go up if
you're choosing the clean option.


David Roberts


Yeah. "How midterm?" is the $6 billion question, right there, I
think, on everybody's mind. I think everybody, not everybody,
most people, I think, agree that this is a bump on a longer
downward trajectory. One believes and hopes. But of course, in
the long run, we're all dead. Like Keen said, a long enough bump
is going to disrupt a lot of companies. And I think opponents of
the clean energy transition will make great hay out of it while
they can.


Shayle Kann


Right, okay, so we should move on probably. Okay, so that was my
second underhyped thing, interest rates. What's your second
underhyped thing?


David Roberts


I went back and forth on this one too, because I have hyped these
in the past and they are getting a little bit of hype in our
world, but I think are totally unknown in the larger world, which
are and to this point, I don't think they even have a standard
terminology yet sometimes they're called geogrids. It's basically
heating, district heating using rather than one central source of
heat, they drill a series of boreholes, a series of small
boreholes to take advantage of the high temperatures that exist,
whatever, 50ft down. And then you have a network of pipes that
carries that warmed water to each house. Each house has a heat
exchanger to pull the heat out.


And basically, if you can build one of these things, you have
what I think is easily the cheapest and cleanest and most
efficient way of heating and cooling buildings that exists in the
world, as far as I can tell. And so I did a pod on this a year,
two years and a half ago. They're building a test one in
Massachusetts now. I think maybe some campus — I should have
looked this up before we started — but some campus I think is
building one. And to know as I said earlier, I've been thinking a
lot about heat lately and this gets to that.


But also district energy is difficult in the sense that it's much
easier to build when you're building a new neighborhood or
whatever. You just build it in underneath as you're building it
and much more difficult to do in a retrofit way, retrofitting
existing neighborhoods and communities. But this I think ideally
can piggyback a little bit off of natural gas infrastructure
either using the natural gas pipes themselves or using all the
rights of way and the holes and the tunnels and the whatever
else. This is exciting to me for a lot of reasons. One, just the
efficiency and cleanliness of it and the and the kind of the
neatness of it, the cleverness of it.


But also this is theoretically something that a natural gas
utility could be charged with running and that's an alternative
to natural gas utilities slowly withering and dying, which is
what all the natural gas utilities across the country are facing
right now. And of course is creating enormous political blowback,
enormous controversy, et cetera. This at least gives natural gas
utilities some vision of the future that they can look toward and
argue about rather than just death. So I'm excited for both those
reasons and I don't know how much a form of district energy is
ever really going to be hyped in the larger society but I at
least want people to be aware that there is a way for natural gas
utilities to transition to something else clean that exists.


Shayle Kann


Well, setting aside the natural gas utility death spiral thing,
which I think we should have a separate conversation about
another time, I don't agree that that is what they are facing
otherwise at least —


David Roberts


Oh really?


Shayle Kann


Yeah. But that aside, I do agree with you that whatever you want
to call these geogrids or district heating —


David Roberts


"Underground thermal heating networks" is the boring term.


Shayle Kann


I agree that they are underhyped because I think they are barely
discussed at all in the US. I think they are more in Northern
Europe. Right? Like this is where there's a real market for it.
You mentioned in the US. You could literally count on one hand, I
think.


David Roberts


Yeah, they're nascent at best in the US.


Shayle Kann


Yeah, but I agree with you. I think they're actually quite
interesting. I think that you're right that in theory if you
could do it, it's maybe at least in some places going to be the
most efficient way to heat buildings in a region. I also though
agree with you that it's a really tall order if it's not a
greenfield development. And so that's what I've always struggled
with is like how do you — "awesome," and maybe some campuses and
things like that could pull it off. But if you want this to
really scale, is it realistic to imagine that's going to happen
anywhere other than new developments and then these campuses that
sort of control the entire district themselves?


David Roberts


Yeah, this is why I was a little iffy on including this, because
I'm charmed by it and I love it and I have high hopes for it. But
it's one of those things like you mentioned, one I think signal
feature of technologies. But another thing I think that you find
in common across a lot of these technologies is they're cheaper
and they work better if you plan up front. They require a lot of
planning and coordination, often across jurisdictional lines,
across entities, across different kinds of entities owned by
different people. They just require a lot of planning and
coordination, and we're not great at that.


I think you could retrofit neighborhoods to put these in, and I
think on some time horizon, probably relatively quickly as these
things go, it would pay itself back. But you got to just get all
those ducks in a row, all those entities lined up, all those
different layers of government and all the households. So I
agree, it's a steep climb. I guess it's going to come down to
sort of how severe the need for clean heat gets and how cheap
heat pumps get, et cetera, et cetera. What are the other options
in this space? But I love them, so I like to hype them whenever I
can.


Shayle Kann


Fair enough. I mean, it's underhyped relative to very little
hype, so it's hard to disagree with.


David Roberts


Yeah, I know. It could hardly be zero hyped by definition, under.
Okay, we've got three of our four here, so your second overhyped
all right.


Shayle Kann


My second overhyped thing is voluntary carbon markets. And what I
mean by overhyped is like, okay, so what's happening right now is
that there is a series of extraordinarily painful exposés about
all the follies of the voluntary carbon market, particularly
forestry related carbon credits in Africa, especially. There's
been a bunch of articles —


David Roberts


I mean, you say a series now, but I feel like that series of
exposés has been going on for decades now. There's been nothing
but exposés for decades now. It's not like there's any other kind
of story about these things.


Shayle Kann


I think it comes in waves, right? There was like a big wave of
that. And this is getting to my own history. I was involved in
voluntary carbon markets in 2007, 2008. There was a wave then
which that, along with the economic collapse, basically killed
the market. And then there's a new wave now. And yeah, maybe
there's been some in the meantime, too, but it's getting louder
and louder at the moment, and it looks like it's getting worse
and worse. And the reason that I say and I agree with basically
all of those, I agree with the exposés.


I agree that that market is a mess and broken and there's a lot
of vaporware there. I totally agree with all of that. The reason
I think it's overhyped is it's a pretty small market. At the end
of the day, it's about a $2 billion total global market for
voluntary carbon credits. There's a much bigger compliance market
you could talk separately about, but it's just not that big. And
it's been growing a bit, but it's not growing that fast. And so
there's a part of me that just thinks, look, absolutely we should
be calling out these absolute BS carbon projects that are
delivering no value to anybody.


But at the same time, I just want to be clear that it's not a big
piece of where spending is going when it comes to
decarbonization, and I don't think it was going to be a big
piece. Now, maybe I want to separate out this kind of new world
of carbon removal purchases which hopefully won't get too wrapped
up in this stuff because I think there is promise there. But I
just think it's overhyped because right now it's in the news and
this is very much in the mainstream news and it's just pretty
small at the end of the day.


David Roberts


Well, I thought that corporate procurement of renewables via
these markets was actually a pretty big chunk of renewable
buildout.


Shayle Kann


So those are two different things, right? So the voluntary carbon
markets are the purchases of carbon credits, which are mostly
forestry and stuff like that, and then corporate renewables
procurement generally does not get counted within that same
category. And yes, that has been, and I would argue has been
actually quite a net positive, like really has been beneficial to
the renewable industry.


David Roberts


Yeah, I had those confused, which is why this one confused me.
But I see now what you're saying. And also, I think in that
latter market, the move away from yearly RECs to hourly — to this
attempt to build a 24/7 portfolio that a lot of corporations are
involved in, I think that's also a big deal. But as you say,
voluntary carbon markets are — it's funny, I think this is
probably the best answer for overhyped because this is one that
definitely has gotten out of our world and exists in the larger
world because probably one of the most common — I bet it's the
same for you —


it's one of the most common questions I get still to this day,
which is like, "I'm buying an airplane flight. Is it worth
offsetting?"


Shayle Kann


"Should I click the thing?"


David Roberts


Right? "Should I click the thing? Is this offset worthwhile? Is
this program through my utility worthwhile?" All these kind of
things. And yeah, I think — although I do think the turn to
carbon removal in that market is interesting. And to repeat a
theme, we could do a whole episode on that. I have some hope and
some skepticism about how far voluntary markets are going to get
on carbon removal.


Shayle Kann


Yeah, I guess the only point I wanted to make here is I'm all for
this continued — I think what's happening now is this big
shakeout in that market, specifically voluntary carbon markets,
and mostly the sort of nature based and particularly the forestry
stuff. I think that's a good thing that that is happening. But I
just want to remind everybody it's a very small market in a
global context. Okay, last one, I think. Which is your final
overhyped thing?


David Roberts


My final overhyped, my second overhyped, is the whole discussion
of minerals.


Shayle Kann


I wish we had more time. I'm ready to go to war on this one. All
right, you go ahead.


David Roberts


You think it's appropriately hyped?


Shayle Kann


Totally.


David Roberts


I'll just say two things, and by necessity, I have to be a little
bit glib here. We don't have much time. But I'll just say two
things. One is this has definitely escaped our world, I think, at
this point. The idea that batteries and electric vehicles use
materials that are mined in horrible ways and that are
environmentally destructive, that notion has escaped our world
and now comes back at me all the time from randos online and
whatever. So I think that idea has grabbed on to the public
imagination. And on that score, I just think it's incredibly
important to remember that there is no story, no matter how
negative, about the materials needed for the clean energy
transition that adds up to anything close to the ongoing
day-to-day destruction of the fossil fuel system.


I think that you probably agree on. I think that's starting to
come out in more and more papers and more and more studies. Just
if you tally up pure environmental damage, digging up fossil
fuels every day to keep shoveling in our engines is just way
worse than any conceivable alternative I see. Okay, but I'm going
to go the other way now. The way you're going to disagree with is
my second point. The second point is about shortages. Is this
going to be a meaningful handbrake, you might say, on the clean
energy transition?


Is the availability of materials and minerals going to be a
meaningful constraint on the speed of the clean energy
transition? And I just think here this is a big sprawling area.
There's lots of general things you could say about it; it's hard
to generalize. But my just basic — I go back to first principles
here — my basic instinct is that of all the things capitalism
does well, finding ways around material shortages is genuinely
its number one thing that it does well. This is what markets know
how to solve. And I just think between finding new sources and
substituting, of course, historically, substitution is one of the
huge answers here.


It has defanged a lot of sort of hyped materials problems in the
past. I just think substitution plus new sources over the
midterm, mid to long term is going to solve this. I agree that
there will be years, a couple of years, choke points here and
there, as we've already seen a couple of materials get tight. But
I just think in the fullness of time, the multibillion-dollar
global market, the entire global transition that's running now is
just going to stampede over those problems. And in retrospect,
we'll look back and I think that will not be as big of a deal as
we are now expecting it to be.


You disagree?


Shayle Kann


I will say, well, yeah, once again I was ready to disagree 100%
back down to 25%. I do agree. I mean, the way I put it to people
is like, look, there is no free lunch in decarbonization.
Whatever we transition to from what we do today, there's going to
be some cost to that. One of the big costs is going to be a lot
more mining and dealing with a lot more minerals. That's true and
I do not think that should be a reason to slow down. So I agree
with you on that first point generally.


On the second point, I also agree with you in the fullness of
time comment. I think what I would say is that the time periods
during which we are able to do, particularly to unlock more of a
particular mineral or to do the substitution are not generally
one to two years. What scares me is that the average time it
takes to build a new mine right now, pretty much everywhere in
the world, is 15-20 years. Right. And these markets do move, but
they move at that pace. And so what worries me is not like we'll
never figure out a way to expand the clean energy economy because
we're going to run out of name your mineral.


It's that we'll have periods of more like five years or ten years
where we do have a shortage and the shortage doesn't translate to
we can't sell any more electric vehicles. It translates to higher
costs for electric vehicles and that translates to lower demand.
And that's five to ten years of stalled growth that we can't
afford. So for me, it's not that I agree with you we'll have
enough stuff to make the things that we need to make. But because
this transition is occurring so quickly and you can already start
to see the geopolitical impacts and all these other things, I
think that there are real possibilities of crunches that have a
meaningful impact on the pace of adoption of key technologies.


And that's what I think we need to keep an eye out for in the
world of minerals.


David Roberts


Yeah, that'll be interesting. I think that is the real question
here. It's definitely an environmental advance to do this
transition that I think is obvious to both of us and not obvious,
I don't think, to the general public. Now because of this spate
of hysterical, bizarre anti-EV articles that have come out really
recently. I don't know if that's just a function of EVs growing
now and starting to pose a real threat or whatever, but it seems
like there's been a surge of those. So that, I think, is
nonsense. It all comes down to how big are those periods of
tension?


How big are those periods of choke point or slowdown or higher
costs? And do they mount on one another in such a way as they
exacerbate one another? Or is it the opposite effect? Do we find
ways around within markets or shift to other markets? The one
other thing I'd throw out here is just that the danger you're
raising is a great reason to think more seriously and
systematically about minimizing our need for materials generally,
and that'll be different sector to sector. But I did a whole
podcast on this question having to do with EVs. And one of the
things we could do is walk and bike more and drive less and try
to reduce VMTs generally, and then you reduce the need for
lithium, et cetera.


If you improve building codes and make every building airtight,
maybe even energy-positive, you reduce the need you can reduce
the need for materials in a lot of different ways in a lot of
different sectors. And I feel like that's kind of been moved to
the back burner, and I think the whole materials issue might move
it back to the front burner.


Shayle Kann


Sure. Or you lightweight a vehicle so you get more miles traveled
per amount of material.


David Roberts


Totally. Yeah. Maybe to wrap up, I'd love to just hear your
thoughts on you've been in this business for 20 some years now,
going on 20. I don't know what the exact number is.


Shayle Kann


Approaching 20.


David Roberts


A lot of swings up and down. You've interviewed a lot of people.
You've tracked this very closely. What's your sort of general
feeling about where we are right now in this whole thing?


Shayle Kann


I feel like most of me is still riding this cresting wave of
like, "oh my God, the IRA is such a —" at least for the US, I
won't say globally, "— the IRA is such a big deal". And even
within our industry, I feel like we don't talk enough about how
it's the biggest climate bill ever by orders, orders of
magnitude. And it's just like transforming all these markets.


David Roberts


And also, let me just throw one thing in there. It's not just
discussing it itself, but the thing is, the IRA put aside all
this money, and what you're seeing now is that money trickling
out. So almost every day I get an email from the DOE or the IRS
or some agency like $407 billion going out to this, $500 billion
going to this, $2 billion more for whatever power line
monitoring. So IRA is translating into this constant stream of
money going out the door to cool things. And I feel like one of
the things that's incumbent on you and I and people in our world
generally, is to not just say like, "we did this great thing,
IRA, and now let's move on," but to talk about the stream, the
sort of floodgates that have opened because of IRA, just keeping
track of that money on a day to day basis because it's just
pouring out now.


Shayle Kann


Right. So I guess all I was going to say is mostly that's the
sort of upwelling of that opportunity is the predominant feeling.
It is tempered to some degree by I am nervous about the interest
rate thing and what impact that's ultimately going to have on
this market. So things are pushing in opposite directions. I
think the overall trendline is still up and to the right, but
it's not going to be an easy journey. And I guess the very final
thing that I will say is my current bee in my bonnet is people
talking about, quote unquote, hard to decarbonize or difficult to
decarbonize sectors.


David Roberts


That was almost one of my overhyped. That was my runner up.


Shayle Kann


Okay, maybe we agree on this. My reason I'm annoyed about that is
because by implication, it implies that energy is an easy to
abate sector and I do not see that being remotely true. So I
don't want to make it come across like it's easy and especially
just because we passed this big bill that didn't solve it.


David Roberts


Yeah, I think the way to say that is technologically hard to
decarbonize sectors are going to be easier to decarbonize than I
think is expected, technologically speaking. And I think that's
been a theme in the clean energy transition now for decades, is
that the technological challenges turn out to be a lot more
solvable than we think in advance.


That's almost always —


Shayle Kann


I'm almost saying the opposite.


David Roberts


Oh, really?


Shayle Kann


I'm saying nothing about the hard to decarbonize stuff. I'm
saying the easy, quote unquote, easy to decarbonize stuff is
going to be hard.


David Roberts


All right, Shayle, this was a delight. As expected, I'm a big fan
of the show, even though I frequently tune into the latest
episode and feel that feeling in the pit of my stomach where I'm
like, "man, I wish I had done this episode. I wish I had gotten
this guest." So I may continue duplicating your episodes in the
future, but thanks for coming on and good luck to you with
Catalyst.


Shayle Kann


Thanks, Dave. This was a lot of fun for me as well, and I think
we should do it again sometime.


David Roberts


Awesome. For sure. Thank you for listening to the Volts podcast.
It is ad-free, powered entirely by listeners like you. If you
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