The PUCT approved the southernmost of three 765 kV paths into the Permian on September 13. It has not approved the center path: administrative law judges recommended denying it in August, and chairman Thomas Gleeson sent it back asking what the lines are needed for and what they would save customers.

Michael Webber’s answer is that Texas has run this experiment. CREZ, the Competitive Renewable Energy Zone program finished around 2014, was primarily 345 kV and lowered costs, cut emissions and improved reliability. His case for 765 kV is right of way: more capacity per corridor means fewer corridors, and corridors are what landowners object to.

The same answer runs through most of what is moving on the grid. On this week’s Energy Capital Podcast, Joshua Rhodes talks with Webber, a professor at the University of Texas at Austin.

* The case for AI: Anthropic, OpenAI and xAI leaders called for a global slowdown in September. Webber says nobody has explained what the technology is for. “The case has not been made strongly.”

* Who is resisting, and why: degrowth politics on right and left, a youth movement against data centers, and law firms pushing associates toward AI while the partners who would have trained them work remote. Webber reads the water-and-noise objections as displaced anxiety about AI.

* Where the gas goes: a bigger grid lets Texas sell gas at $8 to $15 rather than burn it at $3, and lets Houston draw West Texas solar instead of adding gas plants to its airshed.

* Hormuz: about 20 percent of world oil moves through the strait, plus fertilizer and chip inputs. US diesel averaged $6.06 a gallon on September 11. Texas will be fine, Webber says; Bangladesh and Pakistan will not.

* Affordability in November: electricity bills creep up through distribution costs, transformers and wildfire hardening, while fuel prices move by the day. Webber expects an anti-incumbent mood.

* Scarcity and abundance: US electricity demand was flat for 20 years and is growing again. Webber wants data centers treated as a way through scarcity, not its cause.

* Plus: why the headline numbers frightened everyone inside six months, what the next six months hold, and why the grid needs helicopter pilots.

Chapters

* 00:00 – Introduction

* 01:03 – Where Texas is building fast, and where it is not

* 02:19 – Why the data center mood flipped

* 05:18 – The AI slowdown letter

* 08:45 – Why younger workers are pushing back on AI

* 12:32 – Junior lawyers, junior engineers, and mastering the fundamentals

* 16:42 – Whether energy for AI is a social good

* 19:26 – The case the hyperscalers have not made

* 21:51 – The argument for 765 kV

* 26:34 – West Texas solar and Houston's peak

* 28:54 – Hormuz, molecules, and what Texas exports

* 33:00 – Affordability heading into November

* 39:05 – Scarcity, abundance, and a drama-free summer

* 42:02 – What the next six months hold

Resources

People & Organizations

* Joshua Rhodes (LinkedIn)

* Webber Energy Group (Website - LinkedIn)

* IdeaSmiths (Website - LinkedIn)

* Energy Capital (LinkedIn - YouTube)

* Michael Webber (Website - LinkedIn - X)

* LBJ School of Public Affairs (Faculty page)

* Walker Department of Mechanical Engineering (Faculty page)

* Kay Bailey Hutchison Energy Center (Website)

Company & Industry News

* Regulators approve controversial southern 765-kV transmission line

* Texas grid expansion splinters conservatives as data center backlash grows

* Facing an estimated 474 GW of interconnection requests, Texas hits pause on data centers

* The AI industry faces a bipartisan grassroots fight

Books, Articles & Filings Discussed

* Economic impacts of 765kV transmission development in support of Texas and Houston-area reliability

* ERCOT - Trending topic: 345-kV and Texas 765-kV strategic transmission expansion

* ERCOT - Reliability plan for the Permian Basin region

* PUCT - Approval of the first extra high voltage transmission lines in the ERCOT region

* Judges recommend regulators reject proposed 765-kV line

* Top regulator recommends remanding transmission project to administrative law judges

* Costs and emissions reductions from the Competitive Renewable Energy Zones wind transmission project in Texas

* Anthropic, OpenAI CEOs call for slowdown in AI development

* Using AI, mathematicians find hidden glitches in fluid equations

* EIA - Strait of Hormuz is chokepoint for 20% of world’s oil

Related Podcasts by Energy Capital

* Build Fast or Fall Behind with Michael Webber

* Texas competes on everything except transmission

* Inside the PUC’s Cost-Allocation Overhaul with PUC Chairman Gleeson

* What the Sierra Club wants from the Texas grid

* Texas Got Tested, Grid Stayed Upright

Related Posts by Texas Energy & Power

* Data centers say they pay their way; Texas will hold them to it

* More Generation, More Transmission, More Load, More Challenges: Texas Grid Roundup #90

* A Tale of Three Performance Reviews: Texas Grid Roundup #94

Transcript

Joshua Rhodes: Hey everyone, and welcome back to another edition of the Energy Capital Podcast. I’m really excited to have Michael Webber back. I think we’re probably gonna get on some kinda six-month rotation with him just to kinda talk about all things energy in Texas, ‘cause there is never a shortage of things to talk about related to those.

But for those who may have not seen the first episode that we’ve had about six months ago, we’ll put that in the show notes. But Michael’s a professor at the University of Texas at Austin, where he’s a Sid Richardson Chair at the LBJ School of Public Affairs, as well as the Cockrell Family’s Chair in Mechanical Engineering in the Engineering Department.

He’s also the former CTO at Energy Impact Partners, a former Chief Science and Technology Officer at ENGIE in Paris, and the founding partner of IdeaSmiths. Since then, has been— is now running an energy opinion column regular every couple weeks for the Houston Chronicle. His work sits at the intersection of energy, engineering, policy, and commercialization. Michael Webber, welcome back to the Energy Capital Podcast.

Michael Webber: Thank you. It’s always fun to have a chance for a conversation with you.

Joshua Rhodes: For sure. So about six months ago, you know, one of the big themes in the podcast when we were talking was that Texas needed to build faster or kinda fall behind, or one of your big things was Texas needed to build fast or fall behind.

So looking back since then, do you think we’re building fast enough? Or are we falling behind? Challenges changed? What’s really changed in the last six months?

Michael Webber: We are building quickly on some things. We’re building new power plants, especially solar and some power capacity like batteries and a little bit of wind and gas.

So we’re doing a good job building new sources of power. Doing a pretty good job building load, new factories, gigafactories, advanced factories or data centers. So that’s a good news story in terms of our ability to keep up with things. We are not as fast today at building transmission, although we have been fast in relatively recent history, so I’m optimistic we can do that again.

And we’ve had issues building gas pipelines and sometimes water facilities we’ve been slow at. So there are places where we have a lot of success on the power side, some success on the gas infrastructure side, but also some shortages on transmission and other things. So it’s like we got a mixed record, but still pretty good.

We’re better at it still than anywhere else in the United States and almost as good as anywhere in the world.

Joshua Rhodes: Absolutely. Are there two or three developments in the past six months that have maybe has challenged your view the way Texas is headed? You have any idea what they’d be?

Michael Webber: Yeah. The two big political things that have emerged that I see is sort of a anti-development or degrowth movement on the right and the left politically around data centers and transmission.

So we’re seeing non-traditional political bedfellows in opposition to getting some things done, so that feels relatively new, especially the flipped opinion on data centers. That’s gone from very exciting to data centers are gonna pay all our property taxes and save the world, to now a lot of suspicion and concern around data centers and also the environmental impacts or anything else.

So a lot of flipped mood on data centers, some of that’s rippled over to transmission lines. So that has changed. I haven’t really perceived that to happen as much for batteries and solar. We’ll see if that happens there as well. So some changes in the last six months since we’ve spoken before that I really didn’t see coming.

Joshua Rhodes: The conversation really kind of went pretty quickly from how do we attract these projects? And so I’m talking about data centers, like, how do we attract these projects to, can the grid actually accommodate all of this stuff that’s gonna come to, wait, do we actually want all that? Do we need to slow this down?

And that’s really kind of happened over the past kind of six months. What do you think is really happening there to really shift something so big, so fast?

Michael Webber: I think there are so many things happening, it’s hard to fully digest in real time what’s going on. But part of it, the pace of construction and the pace of the headlines is really jaw-dropping.

The headlines especially, and I don’t believe that we’ll build anywhere close to what the headlines say. So if we put numbers on it, data centers might require over 400 GW of new power. You’ve talked about that on your show several times already. I don’t believe we’ll build all that. We might only build 10 percent or 20 percent.

Even 10 or 20 percent is still a lot, but it’s really just incredible headlines. And so that has freaked people out, like, whoa, that’s a lot. Can we really do that or not? And we’re already concerned maybe about reliability of the grid or cleanliness of the grid or cost of the grid, and then you add in 400 GW of headline load, that is a challenge.

So I think that’s part of the change, just the numbers and this kind of this race to get things built has changed things. Another thing that’s changed is more and more sort of blinking red lights about whether AI is good or bad for humanity. I think there’s more concern about the ethical implementation of AI.

Will AI be good because it will help us get pharmaceuticals and cancer treatments, or it will be bad because it will lead to the devastation of the planet and the world? So I think we’re confronting the ethical sort of lack of guardrails on AI at the same time. And then there’s a tech villainy, like the tech villains and the oligarchs and the big companies, so a lot of suspicion around the companies.

So there are a lot of factors converging all at once around power, and I think we mentioned water, noise, and light, all the other issues. The headlines, concerns about the people, the individuals or the companies that are implementing AI, it all converges together, and now we have a campaign afoot with major races underway with elections already November.

And so it’s a campaign issue, and that means we’ll give more attention. So all these things are happening now in a way they weren’t six months ago, and I feel like that’s bringing a lot of attention to it.

Joshua Rhodes: Yeah, I mean, just recently as we’re recording this episode or kind of over the weekend, some of the big AI companies just kinda released a letter, yet a letter originally was coming from Anthropic, but signed on or at least, you know, given some cheerleading by OpenAI and even xAI to slow down, calling for a global slowdown in AI development.

You’ve had folks calling for this for a long time. Like, you’ve had a bunch of folks like talking about like the dangers of AI and other types of things, and we’ve had calls to slow down before, but we never have. But w— now we’ve got this other one. One, do you think this will slow down data center development at all if we slow down, like, you know, the development of AI?

Or do you think this is kinda like some of the previous ones where we’ll say we should slow down and then not slow down?

Michael Webber: I feel like this call for a slowdown is different because it’s internal. It is from the AI companies. It’s not the outside ethical watchdogs who are saying, “Whoa, you guys need to slow down.”

It’s people developing going, “We need to slow down.” It reminds me of the Manhattan Project and developing nuclear weapons, where there was a moment where the scientists basically came together and said, “Good God, what have we done? We’ve unleashed this new capacity that could end all of humanity.” And there was this really dark realization of that.

And this AI letter or this internal AI call to slow down its development reminds me of that, where they’re like, “Good God, what have we done? We’ve created this new capacity, and is this good or bad?” And frankly, I don’t think you can slow it down. I think the genie’s out of the bottle, so I think it’s too late.

However, maybe we can take their warning sign seriously, and I think it is serious, and it makes me wonder, what do they know that we don’t know? Makes me think that there’s something they are aware of internally that hasn’t made it to the news yet. So we probably can’t slow that down, but we could speed up the regulations, and we could speed up other things.

And so with nuclear weapons, once they were developed, the genie was out of the bottle. There was a race for other countries to get it. We couldn’t really stop it. Once the knowledge was available, the knowledge was available. It’s hard to go back to ignorance once you have knowledge. But we could speed up the development of strong international institutions and watchdogs and inspector groups and treaties.

There are other things we could do that would make us feel safer. It took decades, frankly, to feel safe. It took things like mutually assured destruction. These are horrible phrases. Maybe we need mutually assured AI destruction or something. But I doubt it we’ll be able to slow it down, but maybe we can speed up these other things.

And I would say if the internal experts are saying this is serious and we need to take it seriously, I think we should listen.

Joshua Rhodes: So what do you think the name of the movie’s gonna be about this? It was Oppenheimer

Michael Webber: for the nuclear scientist. Yeah. It was American Prometheus or something. What was the name of it?

Right? The person that stole fire from the gods. I r— can... I can’t remember. I’m mixing my different Greek mythologies. But I feel like there’ll be some movie about this for sure. There are already documentaries emerging. I don’t know if it’ll be about the character or the person, is it Sam Altman or someone else, or is it about the industry as a whole.

But the fear with World War II and weapons development during and after World War II was bad countries would have nuclear weapons, but now we’re not talking about countries. We’re talking about companies or individuals. It’s a little bit different in terms of who is developing, who has access to it. And I feel like that concern is part of the context that people are absorbing and expressing angst.

Like, AI, like AI as a tool, it’s really handy. I use it in my day to day life, but by the way, it might lead to the end of humanity, or it’s really bad for the environment. And so I think it’s, like, all wrapped up at the same time. These concerns from the AI tech leaders aren’t gonna make it easier to do it. Hopefully it’ll make it easier to develop the guardrails. I

Joshua Rhodes: mean, do you think, you were talking about genies out of... Genie is out of the bottle. Genies typically don’t go back into bottles, so we’re probably gonna, you know, continue to build this stuff. Yeah, I mean, that was some of the pushback. A long time in AI is, like, the last year, last month or so.

But, I mean, one of the things is, right, around some of the pushback against, like, data centers and siting is more than just about the infrastructure that’s in your community, but it’s about the thing that it’s creating, right? The AI. Is the AI gonna take 50% of white collar jobs away or other types of things?

Sometimes it feels like that’s what people feel like is the only lever they have to pull, right? Is to, like, push back against, like, this infrastructure. And so you hear these stories about, like, different firms and things around, like, you know, the older folks in the firms are maybe pushing for more AI use, and it seems like it’s some of the younger generation that’s kinda pushing back against, like, some of the AI use.

Like, I haven’t seen people pushing back against AI use in college. I feel like they’re using it as much as they possibly can, but maybe that’s a separate sphere. But, like— You... Different use case kind of.

Michael Webber: Yeah. This is fascin— Yeah, so there was a New York Times article a few weeks ago about how younger generation is among the loudest activists fighting against data centers, so there’s a movement.

It’s an anti-authoritarian movement. You know, every youth movement has some anti-authoritarianism structure. They don’t wanna be told what to do by other people, so now it’s around data centers. So there is a youth movement against data centers. You and I have been part of conversations with students we know who’ve been interns in the firms.

Elders are pushing AI, and the junior members of the firm are resisting that, which kinda jinks with what we find at the university environment, is students are using AI comprehensively. By that I mean every student’s using AI just about. They might not use it for every class or every assignment, but it shows up a lot.

So I look at younger students as AI natives who use it quite frequently, yet it seems like a lot of resistance to AI is also by younger generations. So I can’t quite square that circle. I don’t know what’s going on, but I think it reflects a variety of concerns around control and who gets access to what.

Does this democratize access to intelligence? Is this consolidated control around a government? You might be suspicious if the government has control. You might be suspicious if it’s the five oligarchs or the magnificent seven or whatever names we have for the companies and individuals. It’s kinda messy right now as people are finding their way.

I think it’s triggering every concern that people might have, so elderly people who retired in the rural areas might not like the way data centers are disrupting their way of life. Younger students or younger career entrants might be worried about AI taking away their power or sense of control. Other people might not like it because of who gets the money from all the AI.

Like, it might take my job and make someone else rich, and that person who gets rich might get even richer. So it’s like triggering every concern. It’s like a uniquely unifying part of society. Unifying in that a lot of people are resisting it. You and I have talked before about, we wonder, is this gonna undermine the ability for people to master the fundamentals of engineering and sciences, or just make it easier, right?

So we all have some of the concern. It doesn’t matter who you are, you’ll look at AI and go, “Yeah, there’s something in there that’s triggering some fear,” right?

Joshua Rhodes: There’s a couple things. So you know, you and I were talking to... Or hearing from the student who had the inter— who had the internship over the summer, where they were talking about the older folks wanting it, the younger folks not.

I was thinking through that. There was a couple things were kinda coming up. One is like, in this case, they were architects, right? And it felt like the younger folks, they wanna be architects, not computer scientists. They actually want to, like learn the craft and do the thing. And then there was like, typically in those types of environments, you have, like the younger folks doing a lot of the work, and then you have the older, more senior folks who come in and ask questions and like point out and say, “Why’d you do this?”

Or, you know, “Change this and that and the other.” And they’re expected to know what they did, right? I mean, there was no way to do it without knowing what you did. But now with some of these tools, you can do it without knowing what you did, which can be an awkward conversation if, like your superior’s asking you, like, “What did you do here?” Have you seen any of that with students?

Michael Webber: Yes. So I heard this similar a couple years ago in law firms, but it’s almost from a different sort of context. So law firms have two contexts that have changed in the last few years. One is the rise of AI and pressure to be more productive. And if AI makes you more productive as a lawyer, then you should use AI.

It’s like better for the client, better for everybody, better for the billable hours, for the firm, everything else. But also with COVID and beyond, not as many lawyers are working in the offices. A lot of them are working remote, especially the senior partners who are often wealthy, have a second house at the coast of Cape Cod or whatever.

So you have the senior partners working remotely more often and putting pressure on everybody to use AI more often, but they’re not there to mentor the junior partners. And so the junior partners are not getting the mentorship. A way to become a good lawyer is to get a lot of interaction with senior partners.

You can learn from their mistakes, you get a lot of guidance. And if the senior partners are not in the firm or not in the office because they’re at their coastal home or whatever, and they’re putting pressure to use... on you to use AI, so you’re not even mastering that through your own sort of suffering through the different cases and precedent-setting decisions that have been made.

That is like a double whammy for junior lawyers. So I think like the rise of remote work and AI is a double whammy for entry-level lawyers. And now that kind of thing might be happening for engineers, maybe not as much the work from home thing, but AI, where putting pressure on junior engineers and firms or elsewhere to be more productive, to move faster, maybe even in the research environment. But there’s something about taking the time to master the material that will lead to fewer mistakes, we hope.

So AI makes it easier to learn, makes it faster to learn, but might make it a little harder to master the fundamentals because you’re not as close to it. It’s a magic black box. However, the AI might have mastered the black box, like it might have mastered the fundamentals, and so actually mistakes might go down because there’s some calculations that are pretty standard across different settings, so this all might be fine.

And I don’t think I know, and I think we’re in that sort of awkward adolescence of AI where we haven’t quite gotten on the other side of it, so we don’t know if it made it better or worse. But I do worry that AI will make us think we’re smarter while making us dumber. So that’s the risk we have, right?

That we will have bridges and buildings fall down because we didn’t know we made a mistake and AI didn’t catch it. But we thought we were smarter because we were able to design the bridge or building faster. And so that’s like kind of this metaphor, yeah. And I know this is sort of an energy podcast, but it’s hard not to talk about those other elements because this is actually the anxiety that people might be having, but they don’t know how to express that, so instead they say, “Well, I don’t like the energy, water and noise and light and everything from the data center,” which is also a concern.

Not to say that those aren’t real concerns. Anyway, so I feel like you and I are grappling with this as instructors and mentors and researchers, like, okay, when is the AI tool appropriate because it’s accelerant and it’s a good check on our work? Where is AI inappropriate because it undermines the sanctity of our analysis?

Like, does it make our analysis worse or better? And that will come a time, I think, and we used to say the same thing going from slide rules to calculators and from T-squares and drafting tables to CAD or whatever. So these kind of technology transitions have happened. This one feels different because the pace feels faster and because it’s not replacing a tedious task, it’s replacing an intellectual task, a mental task.

So we’ll see. I’m apt to be an optimist on this, but it makes me nervous, frankly. I’m nervous about whether students in my classroom are learning. It makes me nervous about whether the students in our research projects are learning as well.

Joshua Rhodes: The pushback I always have against like that calculator slide rule thing is like, you know, that’s a deterministic thing and, you know, it doesn’t matter how you do it, the answer like is gonna be the same, you

Michael Webber: know? There is a right answer, and we know if it’s right or wrong.

Joshua Rhodes: Yeah, there is a right answer. Every other revolution just got you information faster, and this one is actually trying to, you know, approximate synthesizing that for you, which is definitely feels new to me. But yeah.

Michael Webber: Yeah, it’s a ca— Like if you do a calculator, you know, if you put in four times eight, it gives you the same answer every single time.

But if you ask an AI agent, platform, bot, whatever it is, a question, you might not get the same answer every time because there’s some natural variability by design. And so there’s not a predetermined fixed answer that it will give you, even though you and I might know what the right answer is, we could test it.

So, and also has hallucinations and everything else. So yeah, it’s not deterministic in the same way, and that’s one reason why this transition’s gonna be different.

Joshua Rhodes: So one of the things in the last time I taught my data analytics class is we actually trained a very small large language model neural network, and you could watch it go through like there was some randomness in the number of like, I’m blanking on the terms now ‘cause it’s been a while, but it would trim off pieces of the model as it was building, like randomly just to try to like add some of that stochasticity in there, like, so it’s not always getting you to the same thing.

I’m butchering that, but anyways, it’s one of the reasons why you never get the same thing. But we’re using this stuff. But this is an energy podcast, but it’s one of the things is like the big story in energy has been AI, but then, you know, now it’s kind of a whole like societal story and become a, like a political story.

Michael Webber: It’s worth asking these other questions because it does tie into is the energy provision or the energy made available for AI going to be a social good or not? And with all the other expansions of the energy system for the last 160 years, there was a very clear and obvious societal good that came out of it.

You got better steel or you got better railroads, you got cars and personal mobility, or you got heating and cooling a lot. Like, there are all these things you can say, “Yes, this expansion of the energy system gives me something that’s very obviously good that I crave.” The expansion of the energy system to serve AI is more nuanced because there are some certainly good things in there.

Like it makes my searches better on the internet. I can do a little bit of analysis here and there, and maybe it can help us accelerate the development of treatments and vaccines and everything else, but it has all these bad things with it too. And the societal good is not as obvious. The societal bad is really hanging in there.

The prior expansion of energy had a societal bad, really land impacts or water pollution or air pollution, but they were less visible or less obvious, or they’re far away, like the energy I’d feel in my home and that felt good, but the pollution was somewhere else. But with AI, we don’t have the separation of the downside physically the same way.

Like we’re just like, we see it with our algorithms or human. So I feel like this is part of the challenge is every prior expansion of energy came with obvious personal and societal good. This one, because of our suspicions, concerns, whatever it is, our skepticism about the companies and the people makes it more of a discussion, for sure.

And I think there’s maybe responsibility on AI companies to explain what the social good is, and not just better cat videos. You and I have joked about some of the tweets out there. They’re gonna use AI, a major airline now said they’re gonna use AI to extract more money out of travelers by fine-tuning their preferences, and that didn’t feel like a simple supply and demand argument of we’re gonna use price changes to fill our planes to get better performance for everyone.

It felt more like we’re gonna use everything about you to find your weak point and your vulnerabilities and manipulate you. This was something that a CEO of a major airline said. That doesn’t build a lot of confidence. And sorry, okay, what’s the social good here?

Joshua Rhodes: We were just both at the KBH Energy Conference this past week and ran into...

There was a bunch of different hyperscalers and things there, and we ran into one and were just having a conversation, and this is one of the things that I was a little blunt. I was like, “We’re waiting for you to make the actual argument for th—” Like, there’s a bunch of pushback. Why haven’t you made the value proposition? If you have one, why haven’t you made one?

Michael Webber: And clearly they believe there’s one. The level of CapEx is so high, so they believe that there’s something there, and maybe it’s just because they think there’s a lot of money to be made. But, like, we’re ready to be told or, you know, at least give them their best shot to make their pitch, right?

So I think we can be a willing audience for that. Okay, make your pitch why this is good. I’m listening. But in the meantime, we’ll fill it with our own stories.

Joshua Rhodes: Yeah. I mean, do you think they’re saying anything? You think good things are being said about it, but we’re just ignoring them because we’re, like, so fixated on the initial downsides?

Michael Webber: There’s some— I mean, there have been some pretty interesting mathematical sort of advances in the last few months. There’s been some development of better understanding of discontinuity in the Navier-Stokes equation. By the way, almost no one cares about the Navier-Stokes equation, but it’s a deeply important scientific principle of fluid mechanics.

It’s kind of cool that AI can help find a point where it doesn’t hold up the way we thought it did. There have been development of vaccines have been accelerated, so th-there’s some pretty interesting scientific stories and some pretty good advances. It gets coverage. There’ll be a news article and kind of people forget about it the next day.

So it’s not like there’s a steady drumbeat of successes, and that’s part of the problem because we feel the impacts today, but the successes come tomorrow. And so there’s a real mismatch in time between the negative impact and the positive benefit. There’s also a mismatch in location, at least for the data center.

The data center will impact a location where it’s built, and you and I might not feel that if we’re not living next to the data center, but we might use the AI tool or platform. So there’s mismatches in time and place for this, and that’s part of the problem. But I think the mismatch in time between the impact is felt today, the risks are felt today, but the benefits will be enjoyed tomorrow, that’s a problem.

And it’s almost like the opposite of climate change, where the benefits of energy are felt today, but the downside risk of climate change are felt tomorrow. So we have like a flipped problem with AI. And interestingly, AI could be an accelerant for solving climate change if we can do it. So I feel like the case has not been made strongly.

There are some positive examples. They’re here or there. They get a one-off story. They’re not going viral the same way as a noisy data center might, and that’s part of the challenge.

Joshua Rhodes: Yeah. Bringing things back to kinda like more core of Texas energy and infrastructure, one of the things we will need to build infrastructure to build the data centers, to site the data centers in terms of we’re gonna need to build transmission, but not just for data centers.

In fact, we’re still now trying to figure out how much for the 765 transmission lines that we’re gonna build in the state. I saw the Public Utility Commission just the other day approved another line. I think there’s two out of the three paths that are going out to the Permian have been approved, and the other one’s been kinda kicked back for reanalysis.

You just wrote an op-ed piece about transmission 765, like, what are you looking to make?

Michael Webber: The short argument I made is that we’ve expanded the transmission system before. We did it with CREZ, the Competitive Renewable Energy Zone program that was really launched in the 2000s and then came to fruition around 2014 or so.

We expanded the grid. It was good for us in terms of lowering the cost, improving reliability, which is not something people believe easily after Winter Storm Uri, by the way. But it improved reliability, lower costs, and lower emissions. Like, it really helped enable the rise of new power infrastructure that was good for all of us.

We did it before, then we had a slowdown, and I just basically say we should do it again. If we expand the grid, then we will get economic, environmental, and reliability benefits. But what we did with CREZ was primarily 345 kilovolts with some upgrades to the 138-kilovolt system, so we did upgrades on the legacy system, expansion of the newer higher voltage system.

This time we should go even higher voltage, 765 kilovolts, because you get more throughput or more capacity per right of way. And the thing that I’m most sensitive to and that I think a lot of landowners are sensitive to is the rights of way. The corridors where you’re gonna build this, they’re ugly, they’re impactful.

You take a lot of land. You might degrade the views or the vistas in different places. And so the fewer of those corridors we need, the better, and one way to get fewer corridors is with higher voltage. So I basically said, “Look, we’ve done this before. We know how to do it. We had a lot of benefits. Let’s just do it again, but let’s go even higher voltage.”

And then this will facilitate better performance, reliability of the grid, lower cost, more cleanliness. It also lets us inject more wind and solar into the grid, which is something I really like because that will reduce emissions and reduce water use while making more gas available for export, and I think that’s really important from a geopolitical and national security perspective.

But frankly, that’s actually one of the things some people are worried about. They want to burn more gas. They don’t want to use less gas. So this trigger is one of those things like, yeah, people have their preferred fuels and technologies, and I keep thinking our gas is most useful in Europe or China.

It’s not really that useful in Texas, but there are people who really wanna burn it in Texas. That’s maybe an aside, but I feel like expanding the infrastructure is something that’s good for us. We’ve done it before. We’re actually pretty good at it. We shouldn’t be afraid of it. We know what the outcome will be ‘cause we’ve seen this story before, and the sooner the better.

The data centers tie in because they are one of the high-profile sets of customers that really want this, in addition to oil and gas and factories and cities and just people with all our population growth and use of air conditioning and electric vehicles and everything else. So there are a lot of customers who want the bigger, better grid.

The data centers are the most visible ones, and they’re the richest, and so these stories get coupled together in ways that are sort of not obvious to a typical consumer.

Joshua Rhodes: Also really resonate with that argument about, like, having more, not necessarily getting more gas out of the ground, but putting it to better use, right?

It’s like, because we can’t really export wind and solar. Texas is an island of electricity, like we can’t export that really to anyone, anyone else, but you can export molecules. And so if we could have all the electricity that we need here, and also then be able to sell something to someone else who will pay more money for it, it makes a...

I don’t know. I’ve written op-eds on that. I know you’ve written op-eds on that, that it makes a lot of sense, right?

Michael Webber: I think it’s, like, why would we buy and burn gas for $3 in Texas when we can sell it for $8 to $15 to Europe or Japan? It’s like, they’ll pay us so much more. I know there’s transport fees, everything else, but I feel like the story of Texas molecules liberating countries was the story of World War II, where we had the Allies float to victory on Texas oil, and people say, “Let’s burn Hitler and Texas oil,” this kind of thing.

We can do it again by using Texas molecules and gas to liberate Europe from under the thumb of Vladimir Putin and Russian exports, or we can export to Asia to get them out from under the heavy environmental burden of coal. So there’s just, like, such high value from Texas gas. It’s so clean compared to some of those other options.

We’re so secure and safe compared to bad actors out there. And if we have a bigger, better grid, then we’ll have more gas to export, which means we need to improve the export facilities also. That’s the companion piece. You can’t export gas if you don’t have the facilities, but we’re building those. We just need to free up the gas for it, so to speak.

Joshua Rhodes: Yeah, totally. You and I are both on a report looking at the benefits of the 765, or looking at the impacts and the trade-offs, and we, you know, came across that it was, you know, had a lot of benefits to build out the entire, not only the western, but also the eastern, being able to better move that energy around.

It’s like Zephyr CREZ. We built the CREZ to nominally get the wind, and ended up electrifying oil and gas. And so now we’ve got the step or the 765 lines to nominally electrify oil and gas, but it does unlock a lot of resources in parts of the state that are currently, basically have no backbone, have no access, but have some of the best solar resources in the state, and they’re even further, you know, west than our current system, right?

So they’re, like, even better aligned with places like Houston’s peak and other places. So I think, yeah.

Michael Webber: That point’s really subtle but important, which is West Texas solar around El Paso or Pecos County or wherever it is aligns really well with Houston’s peak demand. Whereas solar in Florida does not.

It’s kind of the opposite. You wanna go further west for your solar resources to get better alignment with the peak. And so bigger, better grid lets us do that. And it makes much more sense for Houston to tap into western solar than in location solar. And also with Houston, with the airsheds as filled as they are with refineries and everything else, it’s not great to build natural gas plants locally either, because you don’t want to add even more pollution to a busy or full airshed.

It’s better to push your natural gas further out, which means you need a bigger, better grid. So the bigger, better grid lets us site resources where they are less environmentally damaging or lets us access resources where they are more naturally and abundant and at a more convenient time. So just all of it is good, and kind of no surprise that we found benefits from the transmission.

Most analysts find that if you make a better grid, a bigger, better grid, you get nice results out of that. Same thing’s true for natural gas infrastructure. If you have a bigger, better gas grid with more pipelines and more connectivity, you get more market efficiency. You tend to have less of the price spikes that happen on occasion and less of the glut where you have low prices or negative prices.

A bigger, better gas grid smooths out the volatility, improves the efficiency of the market. A bigger, better power grid does the same. We have gluts of wind and solar with curtailment that lowers the prices falsely, or we have price spikes in some locations where you have a lot of demand, but you can’t get the power to it. So having a better market system is really the result of an improved infrastructure.

Joshua Rhodes: Yeah, speaking of bigger, better grid, gas grids, getting gas to other places or pay more for it anyways, put it to better uses, like, you know, on the other side of the world, there’s also a lot of things going on in terms of like the movement of energy.

Like, you know, Strait of Hormuz has been kind of choke point for a while now. It looks like other straits are getting choked out with, you know, Houthis and stuff and blocking off access to the Red Sea. Can Texas molecules help in this? Are we able to tie anything there?

Michael Webber: It’s hard to sort of talk about. The disruption that’s happening right now is so large and so unprecedented because the Strait of Hormuz is like the worst possible closure you can have in the world because it’s like 20 percent of the world’s flow of oil, but you also have flow of gas, urea, and fertilizers like ammonia, sulfur, and helium.

There’s like so many things that come through that strait that affect certainly energy prices, but also food security, the ability to manufacture semiconductor chips, the ability to extract copper out of mines in Africa, like you name it. There’s so many things affected by that closure. Oil had some other routes they could use with the East-West pipeline, for example, through Saudi Arabia or the pipeline to bypass the strait through UAE, the United Arab Emirates.

But those pipelines are under attack, as you mentioned, or other choke points are getting attacked. So this looks like it’s going to be sustained. It doesn’t look like the negotiations are making progress between Iran and the rest of the world, so prices might be high for a while. The buffers that we had, strategic reserves at different countries, commercial reserves, the ability to change patterns with refining or switch to electric vehicles.

A lot of things happen to reduce demand and tap into those reserves, but those reserves are often hitting their bottoms now. Like they’re running out of additional capacity. That’s especially true in the United States. The other routes are getting attacked, and it seems like now we’re starting to see a lot higher prices.

Prices have gone up tens of cents per gallon for gasoline in the last few days alone, gone up like 5 to 15 cents per day. Like this is pretty dramatic for gasoline, even more for diesel. So th-this is very consequential for the world. The buffers in the system that we’ve had for the last six months have been very helpful.

Those buffers are running out of their capacity to be useful, so that’s a challenge. What does that mean for Texas? Well, Texas, as a major molecule producer, will feel this less than others, but we’ll probably make more money. There are a lot of oil and gas extraction companies that are making plenty of money because prices are higher.

Refineries are especially making money. The crack spread is like $100 a barrel. The crack spread is the difference between what you pay for the crude, say $100 a barrel today, and what you sell the refined products at. Diesel’s selling for $200 a barrel. So $100 per barrel profit on the diesel, but also other products and distillates is really across.

So this is a big moneymaker for parts of the Texas economy. The parts of the economy that depend on those outputs, say farms that use diesel or semiconductor manufacturing that needs helium, will see a lot of inflation in prices, but this will be bad for Texas. All in all, we’re still a major producer and exporter of molecules, so we’ll be okay in Texas.

I’m more worried about like Bangladesh and Pakistan, India, places where people will starve because they can’t get the fertilizer, and that might be millions or tens of millions of people. But Texas will be okay. This is one of the advantages of Texas having electrons and molecules, is that we can adjust our behaviors to match what the markets are making available to us.

Joshua Rhodes: Yeah, totally. I mean, one of the things I was, even kind of the beginning of some of these conflicts, was kind of talking was like, “Well, are you tired of the price of, you know, gasoline going up? Get an electric vehicle.”

Michael Webber: I mean, my prices for my transportation have not gone up in my electric vehicle, right? I got solar panels on my roof and my electric car, and that’s a very privileged situation, but that is no longer the, be the privileged situation. It’s gonna be the smart situation.

Joshua Rhodes: Yeah.

Michael Webber: And that’s the normal situation in Norway and China and other places that have electrified transportation specifically to get away from this price exposure to the volatility. So some of us in the United States, we’re a laggard compared to everywhere else in the world because we don’t have access to the cheaper EVs, or we don’t have the high prices for gasoline the way other countries do, or at least not quite as high.

So yeah, EVs are a great solution. Electrification in general of industrial processes will be one solution as well.

Joshua Rhodes: Yeah, totally. We’re heading into a political season. Feels like in the US we’re always in a political season. Yeah, I was like—

Michael Webber: Do we ever? Yeah, it’s like, it’s like when does the political season end? ‘Cause that’d be awesome if we had that.

Joshua Rhodes: Seriously, a break would be great. But it feels like there’s two... That energy is like front and center in political races, like all across. And we’ve seen this in other regions. I think, you know, Georgia flipped a public service commissioner seat from, you know, Republican to Democrat, a long-serving commissioner there.

But now there’s all this pushback against like data centers, infrastructure, people worried about electricity prices. I think diesel’s on average $6 a gallon. Used to $200 a barrel, $6 a gallon for like the first time, I think ever. And just it feels like there’s two big pieces of energy, like the two big ways that people consume energy, you know, electricity, you know, and transportation fuels, like are both kind of front and center in ways where we were both of them being at the same time, although maybe you can correct me if I’m wrong. But like how do you see this going into November?

Michael Webber: I think there will be political upheaval that happens November. It’s already happened. You mentioned the public service commissioner in Georgia. I mean, you and I follow those things closely because we’re energy nerds, so most people aren’t paying that close attention to who their public utility commissioner or public service commissioners are.

The fact that people were so mad they threw out a long-serving incumbent is a sign that people are frustrated. It’s mostly around the discussion of affordability. President Trump in 2024 ran and won on a platform of affordability. A lot of frustration with the Biden administration around inflation, for example.

So talking about and running on affordability helped his electoral chances, and I would say is a major explanation for why he won. It’s a major vulnerability for him now because everything’s gotten more expensive, so that’s a challenge. And so you’re seeing James Talarico running for Senate in Texas or Gina Hinojosa running for governor of Texas talk about affordability.

And so affordability is a political issue for sure. The incumbents are different, so the affordability story will play out differently now than in 2024 ‘cause now Trump’s not the insurgent, he’s the incumbent. Governor Abbott is the incumbent, has to defend his record on affordability. And the affordability shows up for the power sectors, the molecule sectors a little bit differently.

For the power sector, it’s been a slow-moving crisis where prices have been going up every year, mostly because of additional expenses at the distribution level. Distribution level being the wires and poles in your neighborhood or your homes. They’re expanding or replacing or updating transformers to accommodate new loads like electric heating or electric vehicles, accommodating solar panels, and that’ll drive up distribution costs, but especially wildfire costs, extreme weather costs have driven up distribution.

So higher costs for electricity has been a creeping story for a couple years now. And then you add in the sudden price spikes in gasoline and diesel. So oil and gas and diesel prices move much more quickly. You can see it every day as you drive by a gasoline station. The prices are very visible. They’re very large numbers and pronounced by, “Here’s our price today,” and you can remember what it was last week or a few weeks ago.

So the movement is much faster, much more obvious and visible. The movement in electricity bills is on a monthly rate with the bills. It kind of creeps up bit by bit, but a slow-moving crisis. So you combine the slow-moving affordability crisis of increasing distribution costs and electric bills, the very obvious and visible price spikes for especially diesel, but also gasoline in a visible way, and it’s all converging together.

And when that happens, people get frustrated and scared and angry, and it tends to translate into an anti-incumbent mood. We’ll see how it goes in November, what the outcomes are, but people look upset. And the way the political candidates are talking about it means that they see it’s something that people are concerned about, and so they’re talking about it. And especially the challengers are talking about it.

Joshua Rhodes: Yeah. What do you think on the energy front is a winning stump speech? Like, what does that look like?

Michael Webber: I’m pretty bad at politics, so I don’t know, but I just feel like there is room for a can-do attitude and optimism like, “Hey, we hear you. Affordability is a big issue.

Here’s how we’re gonna tackle it. We’re gonna tackle it by making the system bigger and better and cheaper by making it more reliable, ‘cause one thing that’s really expensive is outages. We’re gonna make sure the cheapest resources have a way to connect online. We’re gonna make sure that new customers, these gigafactories or data centers, pay their fair share and maybe even help subsidize the system to lower the cost.”

There’s a variety of ways to go about it, but I would say affordability can be solved, but the way to solve it is not to quit building stuff, actually. And this is counterintuitive because building things sounds expensive. Building transmission lines costs tens of billions of dollars. Building data centers costs tens of billions of dollars.

It all sounds expensive, but actually, if we build and operate it the right way, it will lower the cost for everybody. So I think there’s a story that if we work together to build it all and expand the system, it will actually lead to better outcomes and lower prices for everybody, ‘cause then you don’t have scarcity.

If you have abundance, prices go down. If you have scarcity, prices go up. And we’re in this kind of scarce moment, and I think we need to address that, and the way to deal with scarcity is expand the system. I’m actually kind of excited about the convergence of data centers and transmission because the data centers might pay to help us get through the scarcity.

We think of them as a cause of scarcity because they will demand so much power, but if they invest in expanding the system, they can help be a pathway to abundance. Let’s make sure they’re a pathway to abundance and not a pathway to scarcity. And I think that’s a challenge. People feel like power is scarce ‘cause we haven’t had to expand it very quickly in a long time.

Let’s do that. For the price spikes, volatility of oil and gas, the thing I’ve been saying for a long time is what you said earlier is like, well, let’s make sure you have options, that you have the option to have an electric vehicle or to work from home or to use mass transit or to have a walkable city.

There’s a lot of ways to deal with the exposure to the price spikes of gasoline, for example, for commuters, or the price spikes to diesel for an industry as a whole and logistics. That is harder, but we can think about more efficiency of the diesel trucks or electric long-haul heavy-duty trucking. There are other things we could do, and we’ll probably have to do all of it.

There’s gonna be no one solution. We’ll have to do every single solution we can. We’ll have to implement them all together.

Joshua Rhodes: When you bring up the concept of scarcity when it comes to electricity, can you unpack that a little bit? Like, what are some of the time those scarcity but help us get it to a time of abundance? What are you meaning there?

Michael Webber: So one of the challenges with electricity is that overall consumption in the United States hasn’t grown for about 20 years, and now it’s growing rapidly. And if we cannot expand the system as a whole to meet that growth, then we’ll have scarcity, which is we have more demand than supply, and if you have more demand than supply, then prices should spike.

We already have that a few hours of a few days of the year when it’s really hot outside and the air conditioning’s going, and we don’t have as much supply maybe, and so we might have scarcity then that may lead to price spikes. But if we expand the system really quickly, and we have abundant energy, and then actually prices should go down because then we have plenty of excess and plenty of spare reserves and everything else.

So part of it is the rate at which we expand. Part of it is the time and location. The scarcity only happens some times during the year. Most of the year we have abundance, so we have to think about what resources we build that are available at the times we need them, and with the summer cooling season with air conditioning, that tends to be solar.

With the winter heating season, that might be wind or some other option. We gotta think about what we’re building for which region based on what time of day we have scarcity or abundance. But there’s also the location of scarcity or abundance. We have parts of Texas where we have so much wind and solar that they get curtailed even though we might need the power in Houston.

And so there’s a location where we have abundance here, but scarcity there, or there’s constant negative prices in West Texas, but high prices in Houston. Well, that’s where the transmission comes in handy. We can mash the places of scarcity abundance together across great geographies, and then if we have energy storage or flexible workloads, we can match the time to scarcity abundance by time of day.

And so if we can bridge the gaps in scarcity abundance by time and location, that will be the great system. And that’s kind of what we’re moving toward. We’re building more storage, we’re building flexible loads, we’re building some transmission, but we kinda need to do all of it. And I think right now we’re acting as if there’s a scarcity mindset, like there’s not enough to go around.

I’m like, “No, no. Seek abundance mindset. Let’s expand and build and operate better.” We’ve had that mindset before. We had that mindset with rural broadband in the 2000s. In the Bush administration, we expanded rural broadband and fiber optics. We did that with highways in the ‘50s. We did it with canals and railroads in the 1800s.

We’ve had abundance mindset before, and I think it’d be good for us to have that mindset again.

Joshua Rhodes: I definitely agree. Looking at the grid this past summer, the grid, it grew for actually for the first time in a couple years, but it seems like there wasn’t that much drama around it.

Michael Webber: I mean, the best grid is a drama-free grid, right? You actually don’t wanna think about the grid. Yes, when you’re thinking about it, it’s because something went wrong or prices are high or failed and people are dying, so it’s nice to have a drama-free grid. And the primary reason is because we’ve been able to expand the number of power plants on the grid, which is great, primarily solar, but also some additional capacity support for batteries and then wind and gas.

And that’s a good news story that we’ve been building faster than demand has grown, and therefore hasn’t been a problem for the most part.

Joshua Rhodes: Absolutely. Okay, when I have you back on six months from now, what’s gonna be the big Texas energy story that we’re gonna be talking about?

Michael Webber: I think we’ll talk politics again because by then, the outcome of the elections this November will be known, and new officers’ position will be in place, or the same officers’ position will be in place.

Although there are some incumbents that are have retired, so we’ll at least have some change. But either the story will be the political leadership’s the same, and what does that mean? Or the political leadership is different, and what does that mean? So we’ll be talking about the new leadership at the state and federal level because I think that will be consequential no matter which way it goes.

I think we’ll talk about, in six months, a little bit of the winter heating season as we have the rise of solar, which is an excellent performer in the summer. We’ll wanna see how that performs if we have a winter cold snap. And El Niño and weather patterns will affect whether that’s a cold snap we need to worry about or not.

There’s gonna be a lot of growth in data centers by then that have broken ground will be connected to the grid. We might have a few data points, additional data points on whether those data centers are good or bad for grid performance and everything else. So I think we’ll talk with more data with a different season, a different political season for sure, and we’ll talk more about all those things and how they might affect Texas.

By then, we might have broken ground on some transmission as well. Like, with these approvals happening now, we might have shovels in the dirt for a few places by, say, March. So I think that’ll be pretty interesting. There’s always something we don’t expect. I don’t think you and I expected six months ago the change in attitudes around data centers.

So what will be the change in attitudes by six months from now? I guess that’s hard to predict as well. Maybe we’ll have a massive geothermal renaissance or nuclear renaissance. We’ll see. We’ll have plenty to talk about, that’s for sure.

Joshua Rhodes: Yeah, if they’re breaking ground on the lines, I wonder if, like on the, some of these by helicopter again.

Did you ever see that? Do you ever see them, like, stringing the CREZ lines by a helicopter?

Michael Webber: I did. I drove in West Texas once when they were stringing the lines by helicopter. This was not 2014 when they were doing the massive build out. It was a little later. I’ve seen that. They’ve also— I didn’t see this, but they had done hot live reconductoring, where you actually don’t de-energize the transmission and you lay new conductors.

And so they workers have to wear special Faraday suits to make sure they don’t get electrocuted. So some of those different approaches accelerate the development of the transmission lines. The hard part’s the permitting and approvals. But then once you’re going, it’s just a matter of years, really, a couple years to get things built. So we should see progress month by month, which will be kind of exciting.

Joshua Rhodes: Yeah. I remember seeing it. It was, like, in 2012 during the CREZ lines when they’d hook up a line to a helicopter, and the helicopter would almost turn, like, sideways and just, like, pull the cable or at least the leader line to, like, the next tower that they were, like, pulling through.

It was insane to watch. So if we’re gonna string long, long lines again, I imagine we’ll see some more of that, yeah.

Michael Webber: Incredible. Super skilled pilots, a lot better than doing a bunch of ladder trucks, especially as the pylons get so tall. So helicopter’s really, really specialized, really high risk, but really expedites the whole process.

So that’s one thing when I talk to, like, high schoolers and others, like, the energy industry needs everybody. You wanna be a pilot? The energy industry needs you. You wanna be an artist? Well, we need you as well. You wanna be an engineer? Okay, there’s places for engineers. But helicopter pilot is one of the places that’s a growing industry for the power sector.

Joshua Rhodes: Michael Webber, thank you for coming back on the Energy Capital Podcast.

Michael Webber: Thank you for having me.

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Everything moving on the Texas grid

Energy Capital Podcast (private feed for [email protected])

Everything moving on the Texas grid