You’re listening to A Climate Change. This is Matt Matern, your host. I’ve got Jigar Shah, Director of the Loan Programs Office with the Department of Energy.

Mr. Shaw had previously worked in the Carbon War Room, which was a nonprofit started by Richard, Sir Richard Branson, which has merged with the Rocky Mountain Institute. He was also a founder of Generate Capital, a leading sustainable infrastructure investment and operating platform. Went to a school University of Illinois, I believe, at Chicago, which I went to for a year and then went on and got your MBA. So, welcome to the program.

Oh, thanks for having me. And I’m, I’m definitely a big fan of this boy, but I was at the Urbana Champaign campus.

Oh, okay. Well, I had some brothers who went there. So I’m still a fan goalline I grew up in Chicago. So what area did you Where are you from Illinois, or…

Yeah, Igrew up in rural on Sterling, Illinois, about two hours west of Chicago.

Okay, so, well, it’s great to have you on the program. Tell us a little bit about your background? And what, what led you to the path of working in the environmental movement?

Yeah, no, you know, I, I started early I, my, my dad got me books. As a kid, I don’t know if you remember, but those, you know, strapping college students that worked for the southwestern company would come around with like 80 pounds of books in their backpack and sell door to door in the summer, my dad was a sucker for all of those books.

And so he’d buy the reference books, the encyclopedias, the, like, whatever it was, and one of them was on energy, and I just really fell in love with solar, and nuclear at the time. And, and so got me thinking, you know, the solar panels work, you know, why aren’t people using them. And so that led me to a journey to get my engineering degree.

And, you know, my specific secret sauce in there has been around financing and figuring out how to get banks and, and the financing community to get involved sooner, with technologies that, frankly, have solved the risk issues, but are still perceived to be risky. And, and so that’s been my journey, right.

And whether it was, you know, working at BP solar and, and BP broadly on technology, commercialization, or at SunEdison, to get the private sector doing solar power, or generate capital, where we invested. We were the first money into green hydrogen and the first money into renewable natural gas, and the first money into carbon black and all sorts of other areas.

In the you know, that’s been sort of the through line for me is that there’s really not judging all the players around the table, but actually figuring out, alright, what is the bottleneck that’s holding you back.

And as an engineer, let’s just like map it out and figuring out how to solve it as opposed to judging and so I’d say that the environmentalism piece of it didn’t come until later in my career, a lot of it was problem solving in the beginning. And then as I learned more about climate change, and the environment and other things, then it became more about climate and the environment. But that was later in my career.

Tell us a little bit about starting this nonprofit, the Carbon War Room with Sir Richard Branson, certainly an interesting character.

Yeah, it was, he was an amazing guy and continues to be a mentor today. You know, I think that there was a sense by Richard in particular that entrepreneurs really matter. And if you remember, around that time, everyone was ramping up for the Copenhagen negotiations in 2009. And, and it was all big business. There was like no real innovation lens. There was no real finance lens. It was really just how do we cut a deal between big business and governments to get this done?

Just like we did the Montreal Protocol where it was like six manufacturers of you know, those was a chloro fluoro hydrocarbons and, and you know, closing the ozone layer. And, and so I think Richards real stake in this, which, of course, I believed in because I was an entrepreneur, was it entrepreneurs brought the level of a disruptiveness to the conversation and their investors actually didn’t have the same cash cow that they were protecting while they were trying to convert to a decarbonize. iced world, they were happy to just to break things.

And, and so was there a way to really stand up their enthusiasm in this fight. And it was super amazing. I mean, I met 10,000 companies and engineers and scientists and, and entrepreneurs there. And then we, we did them, we separated them into sectors, and looked for market failures in each sector. I think our biggest accomplishment there was in the shipping industry, where we realized that the way that Walmart hired ships was just like, you hire a U haul, you pay like 2995 a day. And then you pay for the gas yourself.

And, and so Walmart should care whether the ship that they’re hiring had good fuel economy or not. But they didn’t have the data to make decisions. So we published the fuel economy ratings of every ship in the world. And Walmart, shifted all of their shipping traffic to the ship set, use the least amount of fuel, and so did many other companies.

And so we shifted 3% of global shipping traffic with that database, and suddenly created a market for inefficient ships to go into port to install technologies that they knew existed for 20 years to make their ships more efficient, but they never bothered to do it. Because that’s not why people were hiring them. And so like, it was fascinating.

Yeah, certainly, I’ve been following this development of essentially business driving the train in terms of like, what you just the example you just said. And then at COP 26, they were talking about how businesses are basically setting the standards down the supply chain, to say, hey, we want you down the supply chain to be doing the right thing.

And so it’s, it’s, it’s affecting business to say in Brazil, in the way that there may be logging or doing things there. Because they can say to the suppliers, we don’t want you to be sitting down, say, the rain forest in order to deliver this product.

Yeah, I think that’s right. I think that, you know, what I would say, though, is that in every one of those situations, is a set of complications that make good behavior difficult.

Right. So, you know, I’ll give you an example. Like I was working a lot with Nike, at the time. And I remember Nike, you know, I mean, they had been beat up a lot, right?

With the Kathie Lee Gifford stuff, and like, you know, forced labor and like, all these things, right. So they were, by the time I met them very proactive around figuring out how to manage their risks in this area, but, but a lot of it was voluntary. And when I would ask the CFO and say, Well, can you put specific financial bonuses in the procurement contract? With the supplier?

They would say, oh, no, that’s sacrosanct like we can’t do that. We’ll create $100 million fund over here to help them improve their facilities, or we’ll figure out a way to try to teach them about best practices. But we’re not actually going to give them a 3% higher payment, if they actually meet these requirements, right, or a penalty if they don’t meet the requirements, right, that we’re not going to do. And some of that has changed today.

But I would say that, you know, that, as you know, there’s a lot of great ideas that don’t get executed well. And you have to like really understand how each group in the supply chain works like Nike, for instance, has extraordinary credit. But a lot of their suppliers don’t.

And so figuring out how they get trade credit, and how they get financing, to be able to fulfill a Nike contract is super hard.

Right? And so, like, you want to work at that level of detail, and not work at, oh, we want them to sign on to this pledge. Okay, great. But like, do they have the tools necessary to implement their promises?

They’re right, the devils in the details, so you have to create, I love what you said about execution. And I think that lots of entrepreneurs talk about execution being the key factor in success. So what are you looking for when you’re, when you’re judging a loan application and your current position, determining whether or not this company is going to be able to deliver and execute on the promise that they have of improving you know, Are climate or having a greener, more sustainable economy?

Well, there’s I mean, three or four different layers to that question, but just the simplest layer, we have 84 applications active in our, in our pipeline right now seeking 86 and a half billion dollars of loan proceeds. Right? I’m not working on these 84 applications, because some of them, they submit an application, but we said, here are the 12, things that are missing.

And we’re waiting on month two, for them to fill in those 12 blanks, because they’re not really capable of filling those blanks with the current team that they have. Right? Because their team is an equity team. They know how to go rah rah rah and raise money from venture capitalists, but they’re not a debt team.

A debt team is like super in the weeds minutia. Like, did you fill out all of these different things in this checklist? There’s 84 things on the checklist, right? So we’re actively processing loans for, let’s say, nine of those 84 people, because they’re the ones who’ve been able to execute and get everything that we need to start due diligence.

And once that occurs, we can process a loan in three and a half months, but but that level of execution, and then you’ve got the next level of them getting permits, and then doing all the rest of it, right. So there’s many layers there.

Well, you’re listening to A Climate Change. This is Matt Matern,your host, and I’ve got Jigar Shah, Director of the Loan Programs Office at the Department of Energy, quite an important position. And we’ll be back in just one minute. Stay tuned.

You’re listening to A Climate Change. This is Matt Matern, your host and I’ve got Jigar Shah, Director of the Loan Programs Office with Department of Energy. Maybe you could tell us a little bit about the position that you have Jigar? And how did you come about getting it? And is this a new position at the government and kind of what the range of your responsibilities are there?

Yeah, I mean, the office was envisioned by, you know, several folks, but led by Senator Pete Domenici back in the 2005 Energy Act. And we were really active in 2009 to 2011, where those about $35 billion, were the loans that were put out the door, your office largely went dormant in those intervening years, or 2012, to 2021.

And and yeah, I mean, I don’t, I don’t know how I got the job, honestly, like, no one’s told me the story. I, I got a phone call, I think in November, after the election, and they said, Hey, would you ever consider this? And I said, Honestly, I actually don’t even know where to start. I’m doing great over here at Generate Capital, why are you giving me these tough questions?

And yeah, I mean, I think after thinking through where I could have the most impact, I ended up taking the job. But it’s been, it’s been an extraordinary position. I mean, I’ve had full support, not only from the Secretary, but also from the White House and others around all tough changes that we’ve had to make to this office to make it relevant to our loan applicants. And so it’s been it’s been a great experience.

So tell us a little bit we were talking about execution and and what that entails on the state city permitting law firms. We I’m glad to hear that you’re kicking the tires hard. And I think taxpayers want to hear that, that we’re doing a lot of due diligence to make sure that that the money that we’re loaning out to these companies is is underwritten in a in an effective way.

But I guess there’s there’s a question there in terms of risk and reward and public policy, and that we may want to lend to a company that is cutting edge and may fail, I guess. I mean, there’s isn’t that kind of some of the purpose of a government program is is entering into a space where maybe private lenders wouldn’t lend? Is that part of the argument? Or, or do you do view this from the same lens as a, as a private lender would?

Yeah, it’s a it’s a great question, and one that is difficult to answer because it’s so esoteric, I’d say like, you know, you know, I think that I would say that our standards are the same as a commercial bank. Right, we want to have a reasonable prospect of repayment. And, and so, you know, we’re not here to lose money. And in fact, the program has made money. We’ve made about three and a half billion dollars more than the money we’ve lost, right?

And we’re only halfway through our average loan life. And so once we complete that loan life we’ll probably have made An additional $5 billion for the for the American taxpayer. In general, what we’re looking for is for us to lean in, where the commercial banking sector is leaning back.

So I’ll give you a couple of examples where we’re willing to take risks that commercial banks are not willing to take. We’re not willing to take technology risk. So we’re not willing to say, well, we’re not sure if that technology is going to work. If it does, great, if it doesn’t, I don’t know, like, so that is a demonstration project.

And there are other groups within the Department of Energy that do that. But we have 10,000 engineers, scientists and experts that can tell us that that technology is going to work now mind you, many commercial banks may believe that that technology is too risky. While we feel that that technology is not risky, right?

So there’s an arbitrage there. So there’s a place where we can lean in where the commercial banking sector won’t do it. The other thing that we find, though, is that the we take real operations risk, right?

So there’s a lot of technologies where the technology works, we all agree, it works. But there’s never been a team of people who’ve actually operated that technology at a 90% capacity factor, right? Where it runs all the time. Right?

Like it there, for instance, on black carbon, where we did a conditional commitment for monolith materials and a methane pyrolysis technology, that technology splits natural gas into carbon, black and hydrogen, literally splits the atom. Right? And if it runs 90% of the time, oh, my god, is that a home run financially for the equity investors.

But if it only runs 50% of the time, and 50% of the time they have to be fixing the plant? Well, then it’s not such a great home run, we’ll take that risk. Right. And a commercial bank won’t the commercial bank is like, ah, prove to me that that thing is running at 90% of the time for four years before we do that deal, right? So. So we’ll take that risk. And then some of the other risks we’ll take are like merchant risks.

And so we, so there’s a lot of technology sectors that won’t do offtake agreements, right. So like, when I did solar, you would get a 20 year fixed price offtake agreement, right, the electric utility will buy the power, for a fixed price for a fixed volume. That’s perfect everybody’s dream, right. But there are some places where like an airline might say, well, we’ll buy the fuel from you from the sustainable aviation fuel facility.

But the price has to vary based on where the price of oil is. So we’re not going to guarantee you a price, we’re just going to like, let that float, but we’ll guarantee you that we’re going to buy volume, well, we’re willing to step into that risk. Obviously, we’re going to, you know, hire a consultant to tell us what they think the price of oil is going to be in the future and some of those things and, and we’ll figure out how we protect ourselves.

So there are lots of places where we’re willing to take risks with the commercial banks won’t for the purpose of commercializing those technologies.

Right. Well, that’s, I think that’s a worthy goal and a great use of government capital. And we see our competitors doing that on a grand scale and China and other places. And I guess the question is, how much to the state intervene? Does the state have a role in this?

Does the state make good decisions? Or is the state kind of helping cronies or, or just making poor choices and the loans not being paid back? So that, that those are the questions out there? How do you how do you answer those questions?

Well, I mean, it, I don’t know that I’m answering them in the exact order that you asked. But like, I mean, we certainly have very high standards for our loans, right. So we haven’t reduced those standards in any way, shape, or form for any of the applicants. Instead, what we’ve done is hire an additional 20 People in the outreach and business development group, to train those entrepreneurs on how to meet our high standards, and how to hire maybe different people to actually complement their executive team to be able to meet those high standards.

And so, so we haven’t dropped our standards for any of the applicants. And I think that’s an important premise for us to start from. I think, in general, in terms of our comparison with what is being happening, it’s been happening around the world. I mean, I don’t know that I can tell you definitively that our system is better than others. But I would say that our system is well defined. Our system is private sector led and government enabled. Right?

So we are not making things happen, that the private sector doesn’t want to do. Right, we can pass more tools like we did in the inflation Reduction Act or the bipartisan infrastructure law. And I can explain to the private sector, why I think those tools should attract them to come into a sector. But if they choose is not to come into the sector, our system of government, which I fully support in our system of economics, does not allow for the federal government to say, Well screw you, we’re gonna do it anyway.

And we’re gonna make it happen anyway. And you guys will come along later, we have to show the discipline of convincing the private sector to come along. And frankly, you know, it hasn’t been that hard. I think, for you know, most folks don’t really engage with the private sector at the level of detail that we’ve been doing. But as we do that, they’re absolutely, you know, more confident, and then they do show more enthusiasm for coming into the marketplace.

But what I saw in, you know, doing a little research on your background was looking at Generate Capital and all the deals that you have done, and invested hundreds of millions of dollars, maybe billions, probably billions of dollars in various technologies, is that we have a very robust sector, which is growing, that is meeting environmental needs, throughout the country and around the world.

So there are lots of companies in this space, or so it seems. And so it seems like, as you said, the market, the private sector is leading the charge into this area, because the private sector already sees this is the future, right?

Oh, yeah, they see this as the largest wealth creation opportunity of the next couple generations. And so I mean, you know, I mean, this is where all of the future billionaires are gonna come from all the, you know, communities that of the future are gonna come from. And, you know, as we’ve discussed, probably 10 million additional jobs. And these are jobs that, you know, pay well, and, you know, our careers, not gig, you know, gig jobs.

And so, yes, but I, but I do think that where this breaks down is that we, in general, have an equity mindset in this environment, right, which is that this company is awesome. And they are going to solve all of their issues over the next five years. Right. And I fully subscribe to that. I think that’s awesome. But we don’t have a debt culture, in this, you know, in this country around teaching those same entrepreneurs, here’s how you manage risk.

Well, here’s how you reduce risk of projects. You know, we have we, we, you know, put on pedestal, people who take more risks, who break more things. So, you know, go through the barriers. But if you want to create clean drinking water, reliable trash pickup, you know, ways of heating your home, we don’t want those things to break very often.

So we want low risk things, where people are actually focused on trillion dollar scale and gigaton scale climate reduction in the sectors. And so that’s where the ying and yang come in.

Well, you’re listening to A Climate Change is Matt Matern, your host, and I’ve got Jigar Shah on the program. And we’ll be back in just one minute to talk to him about these very important issues facing our country facing the world. So stay tuned.

You listen to A Climate Change, this is Matt Matern, your host. I’ve got Jigar Shah, with the Department of Energy on the program. And we were just talking about the dead culture of companies. And normally that kind of has a, you know, negative connotation there with it’s creating a debt culture.

Why would that be good? I mean, that sounds that sounds negative. We don’t, you know, debt seems wrong. But I hear what you’re saying is that you want a company that can manage debt that can cash flow that has a has a manageable business model that we can kind of go to the bank on, right?

Yeah, you want to be able to rely on these essential services that make a modern lifestyle worth living?

Right. So let’s let’s talk about the various sectors that you’re lending into and at 6.5 billion the current amount of loans requested broken down by the LPO tech sectors and you’ve got advanced vehicle components nuclear energy, biofuels, virtual power plants, carbon management, onshore offshore wind storage, transmission, critical materials, renewable energy, hydrogen and Evie charging.

So that’s a that’s a lot on your plate. One of the things that kind of catches my eye is virtual power plants. So what’s a virtual power plant?

Yeah, I mean, you know, we’ve got 20 plus sectors that we’re attracting loans into but these are the ones that have come into the office all Ready. And on the virtual power plant side, I mean, I think for those folks who have been hearing about the grid, you know, in Texas and in California and the Pacific Northwest, and, you know, some of these issues that people have been having, one of the tools that people have been using is an ability to shift load, right.

So instead of actually heating and cooling your home, between four and 9pm, or when the grid is hitting its peak, you’re cool, you’re home between noon and 4pm. And then the home rides out the four to 9pm timeframe. So that’s a virtual power plant, right, that’s able to shift demand, from times of high demand, to two times a low demand, because most people don’t care as long as they are living in the comfort comfortable home. For as long as they’ve got hot water, and their water heater, when they’re needing and take a shower.

They don’t care whether that, you know, water heating occurred during the peak time, or during the off peak time. Same thing is true with evey charging, right? I mean, you don’t really care when your gas tank is full, you got it plugged in, in your garage, or wherever it is, and you don’t care whether it you know, charges between four and 9pm, or whether it charges in the middle of the night. Right, you just put the hose in, and you plug it in, and then you just, you know, go back into your home.

Right? And so that there’s a hardware component to that, right. And then there’s a software component to that. And, and this is huge. I mean, we’re talking about virtual power plants that are larger than natural gas power plants that are operating, right. So when you aggregate all these loads together, you’re you’re talking about controlling three, four or 5000 megawatts of load, that you have the ability to shift around.

Now, you gave the example of somebody’s home being the virtual power plant. What about are we talking all small scale changes that we all can make that would make that big of a difference? Are we also talking about very large plants as well?

Well, in general, we’re mostly talking about things that you won’t notice. Right? I mean, you know, you, what you say is, you know, I’m comfortable with my house being anywhere between 69 and 74 degrees, and you guys have at it, you know, you you do what you need to do, and just make sure you pay me that rebate in my electricity bill.

So instead of paying 100 bucks a month, I’m now paying 80 bucks a month for my electricity bill, and you guys have the flexibility to move my house temperature around between 68 and 7469 74. And then the same thing shows Evie charging, right, I’ll let you turn on and off my charger. You know, but you give me a $20 discount every month in my electricity bill. The same thing with water heating, the same thing is true with refrigerators.

Okay, so you have essentially a monitor on your, on your Ctrl stat that that basically says off at this time on on this time. So the power company basically switches it on and switches it off to maximize.

You know, the yeah. And in any given day or week, you can opt out, you can say, You know what, I don’t want to save $20 A month anymore. This is too disruptive to my lifestyle. I’d like to go back to paying 100 bucks a month. And, and you know, and what you find is, is that the power company only needs to do this 1015 times a year. So, you know, most of the year they’re not even doing it.

Right. Right. So that that’s a huge savings. And you know, something that is a fairly easy fix, right?

Well, absolutely. And as electric vehicles become more ubiquitous, I think that people just missed the scale of what we’re talking about here. Right? So the President wants half of all cars sold in 2030 to be electric. Right? To do that we need 800 gigawatt hours worth of batteries.

Right. To put that in perspective, California has about 50% of all the electric cars in the United States today. Right? With the electric cars that it already has. It can shift about a quarter of the entire grid in California. Wow. Right. And so as it keeps getting bigger, and you move to and that’s only 1 million cars, by the way.

So as you get to 5 million cars in California with electric or 10 million cars in California to electric, you could shift the entire grid just with electric vehicles not counting air conditioning loads, water heating loads, refrigerator loads and other loads.

Well, it seems as though that one thing that would help in power crisis is in the future is that we We could use those batteries on the electric cars to kind of return power back to the home, which it hasn’t done today. Like if you need it, you kind of hit a hit a crisis point in, you could feed back power into your home as a battery.

Oh, absolutely. Now, I mean, there’s some definitions here. So what I was talking about was just modulating when your car charges and when it doesn’t charge, right, there’s a separate set of tools, which Ford is is highlighting in their Superbowl commercials last year, right or earlier this year, right, where you can run your entire house off your car, right.

And people did that in Texas during the polar vortex, right. And so you could literally just use your car as a backup generator, right? That’s called vehicle to home. And then the last thing you could do is called vehicle to grid, where you’re actually just putting power into the grid. Very few people are looking to do that I doubt very much that that’s going to become common, not for personal vehicles.

There’s a lot of school buses that plan that as a central feature, because school buses are largely used for an hour in the morning and an hour in the evening and then parked all day. But I don’t see a lot of personal cars doing that. Now in terms of hydrogen, what, what projects, if any, are you working on potentially funding?

So we’ve already approved two hydrogen projects, one is the monolith materials deal, which is splitting natural gas into hydrogen and carbon black, right. And there’s no emissions off of that, right? Because the because it’s not, it’s not something where we’re capturing co2 and putting it in the in the ground. In that case, you’re physically splitting a natural gas molecule and the carbon and hydrogen and the hydrogen is being made into ammonia there and Carbon Black is being made into tires, which even electric vehicles still need.

And then we have the Delta aces project, which is in Utah. And in that project, we’re literally storing hydrogen in a salt cavern. And the amount of hydrogen we’re storing there is equivalent to all of the utility scale batteries that we expect to be on the grid and 2030 in that one salt cavern. And so that salt cavern would provide reliable electricity to the city of La plus, provide hydrogen to make clean ammonia, clean chemicals and other things in that region.

And so we’re seeing a number of these business models go forward. One is, you know, hydrogen storage and the other one is in industrial process, but we’re also seeing stuff where people are like decarbonizing cement, decarbonizing steel, or supplying clean hydrogen to refineries. And so it’s, it’s quite an exciting time in hydrogen.

Yeah, in terms of the project in Utah, where do you see that at in terms of its lifecycle and rolling it out? And are there other projects similar to that, that are being considered in using other salt caverns around the US?

Yeah, I mean, so that that project got approved a final loan closing over the summer. And it’s already, you know, been awarded to different subcontractors. They’re already moving dirt around and starting construction.

They’re ramping up, you know, the the folks that they’ve been hiring to do the work and, and so yeah, so it’s under construction, and we’ve got probably 12, more salt caverns already, that have been identified by that developer in the West, that can do similar things.

And it’s huge, right? I mean, that much storage, actually a seasonal storage, not just daily storage, which a lot of batteries are used for. But you could literally take all the excess wind and solar production in the spring in the fall, because, you know, electricity demand is very low in the wind in the spring in the fall, because there’s not a lot of heating or air conditioning being used there.

But you get the same amount of solar and wind, and so you produce a lot of it. And so you could take a lot of that excess power that would be curtailed otherwise, and stick it in a salt cavern. Right? And so it plays this really critical role as we ramp up more variable renewable energy onto the grid.

Well, in terms of while they’ve got a lot of other projects that you’re working on, you’re listening to A Climate Change with Matt Matern, your host, and I’ve got Jigar Shah, Department of Energy, talking with us about a lot of fascinating projects they’re working on and we’ll be right back to talk to Jigar some more.

You’re listening to A Climate Change. This is Matt Matern, your host I’ve got Jigar Shah, Department of Energy, the man who’s giving out 10s of billions of dollars, get your application in now. And you might you To my become a huge change maker in the world. So, Jager tell us a little bit about what impact this is having across the world.

We talked a little offline about the Ukraine and the liquid natural gas that the US is exporting to its allies in Western Europe, and also the challenges of nuclear, small reactors, and what are you? What are you doing and the Department of Energy doing to help in those efforts that will be helping our allies and friends deal with this crisis there?

Well, you know, I do think that, you know, we start by saying that we have a extraordinarily healthy venture capital market here in the United States, right, I think we put out over $60 billion of venture capital last year into the clean energy sector. And we’re probably on track to, you know, to try new approach that number this year. And so when you think about how many companies have thrown their hat in the ring, to, you know, to be able to solve these really big problems, it’s a lot of companies.

And so a lot of what we’re doing is helping those companies with first of a kind deployments and, and secondary for deployments, etc. But I think that when you go to the next stage, and you start thinking at a global level, you know, look, we’re going to be shipping an enormous amount of liquefied natural gas to Europe. And you see that already affecting natural gas prices here in this country, right, natural gas prices have gone up, because because, you know, our friends and allies in Europe really desperately needed to keep warm this winter.

And so part of what we’re looking at doing is really scaling up all the rest of the tools in our toolbox. Right? I mean, you know, the US has the world’s largest nuclear fleet, we have the best trained folks in the world working at those fleets. I mean, just to put in perspective for you, you know, our nuclear fleet runs over 90% capacity utilization, right, the French nuclear fleet or is below 70%. capacity utilization, right.

And so we have the best and brightest, the world and the best technologies in the world, we have 40 reactors that have been ordered by the Eastern Europeans, to help them with their electricity crisis, and to wean themselves off of Russia. But they don’t want to deploy those nuclear reactors, unless we do it first. Right. And so they want to see us deploying new nuclear as well. So you got the Vogel nuclear reactor that’s, you know, finally gotten its NRC approval, and we’ll be loading fuel next month, and you know, and then be turning itself on next year.

And so we’re super excited about that. And, you know, the loan programs office played a central role there. Clearly, that reactor is taken longer to put in place and is is over budget. But we trained over 13,000 people on how to build a nuclear reactor there. There are people who work there who graduated from high school as an apprentice, and are now a journeyman, making more money than both of their parents combined and have helped their their their parents go debt free.

Right. And so when you think about creating good quality jobs, there’s been a huge resurgence there. And the other thing I’d say is that you’ve got 600 plus communities in this country that have a coal plant, in those communities, and those, those communities 50% of their property taxes come from that coal plant. Right.

So if that coal plant shuts down, that’s less money for schools, and a lot of those workers are union workers, who wants to keep up weren’t running a coal plant, right? They don’t want to go out and build solar projects. And so nuclear plays a very deep role in keeping, you know, those those power plant communities continue to contribute in a low carbon economy. And so we play a central role there.

Now, in terms of, you know, rolling that out in terms of, are we going to build big reactors to these 40, Eastern European reactors? Are those kind of similar to the ones we have in the US? Are we talking about the smaller reactors, the nuclear reactors?

Yeah, I mean, one of the things we learned about the Vogel experience is that and you’ll see this as well as Hinkley in the UK or in Finland and other places, even in China. Is it you know, I think the traditional nuclear reactor these really large scale nuclear reactors have been built like airports, right? Very custom. Or or, or like sports stadiums, right?

Every one of them’s unique, got their own features, and that cost a lot of money and you get a lot of cost overruns, get a lot of change orders. You want to move things around. What we need to do is to instead of making airports when you start making your planes, right, very complex, many supply chains, highly regulated.

But once you get the design, completed and perfected you make Get 500 of the same exact thing in a factory over and over and over again, right? So the amount of civil works that happens at the site is far less because most of the manufacturing is done in a controlled environment. In a manufacturing facility, you bring pieces to the site.

And then you put them in the other thing that you have with small modular reactors, though, which is somewhat crazy. When you think about it. It’s like, why haven’t we been doing this for the last 50 years? That seems like such an obvious fix?

It does. But the last century was filled with people who thought the bigger was better, bigger was always better. And now we know that small is beautiful. Right? And, and, you know, making things into products is how you get cost reduction. That’s how you unlock innovation and the learning curve, right? I mean, the cell phone in our pocket is more powerful than all the computers it took to put a man on the moon.

Right. And so, so I think people’s thought process has changed today. But it was exactly the opposite. 25 years ago, right, which is when a lot of these projects were envisioned. But the other thing I’d say is also, you know, when I went to visit the Vogel nuclear plant, some of those valves are 34 inches. That’s a custom made valve in a natural gas plant. Those valves are eight inches.

Right. So these small modular reactors, guess what, they use eight inch valves, right? And so you can use the existing supply chain at scale. So all these components are 90%. Cheaper?

Wow. I mean, it Yeah, just all runs downhill when you’re making better decisions. So what’s the chances that we’re going to roll out small nuclear reactors around this country in the next five to 10 years?

Look, I mean, right now, there’s a very small chance, it’s going to take a miracle learning how to do big things again. And that’s what came out of the bipartisan infrastructure law and the inflation Reduction Act that we recently passed. But it also goes to industrial strategy, right?

We’re not picking winners and losers. But once we decide that a sector needs to actually get there, what are the 147 steps we have to take to get them there? Right, on nuclear, for instance, we’re partnered with the Canadian government on the G Itachi. Design. And they’re going to build eight reactors there, they’ve already allocated $4 billion from their federal government to help build those we’re building to at the Tennessee Valley Authority Clinch River site.

And then you’ve got a bunch of utilities saying, we want to be reactor number 11, actually, number 12. Because they don’t want to do the first 10. Right, but we partner with the Canadian government to roll that out, right. And there’s still a lot of steps to be taken with the Nuclear Regulatory Commission, with mapping out the entire supply chain with with ramping up fuel we imported 28% of our low enriched uranium fuel from Russia last year, can’t be doing that much more in the future.

So we gotta be ramping that up here in this country, right. So all these micro steps have to be mapped out. And that is industrial strategy. And then we’ve got to figure out how we use American tools to do it. But this is not as we discussed earlier, this is not big government.

This is the private sector leading the way. And the government enabling the private sector, to be able to protect itself from some of the risks so we can actually confidently move forward.

Now in terms of where we’re at, or where you’re at, in determining whether to loan to companies that are creating these small reactors, where where do you stand on that front?

Well, we’re still a commercial bank, as we talked about, right? I mean, I like things as much as the next person. But I can’t be a cheerleader. Right, at the end of the day, they have to fill out the paperwork properly. And they have to figure out a way to get all of these pieces lined up. So we have this new 1706 program that we got out of the inflation Reduction Act that allows us to convert old energy infrastructure into new infrastructure that actually plays well with the decarbonisation scenario, many utility companies are looking to convert their old coal plants to nuclear.

Right. But gosh, almighty, right, they have to like not only propose it and do all the work, but they have to go to the Public Service Commission and get it approved. Not a lot of Public Service Commission’s want to approve that project right now, given the cost overruns of the Vogel nuclear plant. So we have to do a bunch of studies and work around you know, all of that work, but also like California changed his mind on Diablo Canyon.

Why? Because they believe that a diverse set of tools are going to keep resiliency up during you know, all these frequent wildfires. Right. And so, what is that worth? Is it worth paying a slight premium for nuclear power to have that level of diversity, particularly while natural gas prices have more than doubled from less than $3 a million Btus to over $6 Emily Beatty, right?

This is a complex world we live in And every single stakeholder has a say in it. And I can’t do anything unless those stakeholders all agree that they want to move forward on a project. And that goes back to, can America do big things again? Well, yes, if we all work together to figure out the fact base, and then figure out what we need, and then we all confidently move forward together?

Well, it certainly is a challenging set of things that we face here. And you’ve done a great job at telling the listeners about these challenges that we face. And and, you know, as you were talking, I was thinking about whether or not wind and and solar could replace nuclear to the extent that we do really well with the batteries and the hydrogen storage that you were talking about doing in Utah. So like, nobody has the exact answer, but I think, probably just like investing, we want to have a diverse pool.

That’s exactly right. Diversity is our friend, right? And be trying on all of these different strategies. So that some of them may work better, and some of them may not work. And and if we are going down all those paths, we’ll start to figure it out as we move forward.

Exactly. Well, it’s been great having you on the program, Jigar. I appreciate your time and also appreciate your great work and service to the country.

And I assume it was probably a salary cut going to work for the government versus Generate Capital. And we really appreciate that and the work that you’re doing and thank you and love.

My pleasure, but you know, whatever salary cut, I got my son replaced with additional pride in my work. And so that’s worth unlimited amounts of money. Right?

Yeah, they say some things are priceless. So that’s important. I think all of us need to start looking at that as what’s the most important thing and money isn’t and saving our planet is so whatever it takes, we should be looking at doing that.

Thank you.

Stay tuned, everybody next week with lots of great guests to listen to as to how we can affect this problem and, and help solve it.