00:00 Josh
you look at these higher electricity prices, Dave. Do you look at that and say, okay, that that’s cyclical or no, this is something, this is something more structural. These higher prices, they’re here to stay.
00:10 Dave
Josh, thanks for having me and it’s a great question. Um, and so those higher prices I think are here to stay, at least in the in the near term.
00:21 Dave
We’ve seen in a run up in electricity prices across the US, partly driven by by AI and and data centers, but there’s a number of other factors, capital costs for new build power plants are increasing. We’ve seen the retirement of some aging infrastructure. Um, we have additional transmission and distribution lines that need to to be upgraded. And that all being said, on any given year, weather can be a really important factor in what overall power prices are. But in general, I think we’re we’re in an era of of rising prices.
00:54 Josh
So if if those electricity prices are here to stay, Dave, and they’re going to keep rising in in in throughout the US, how far do you think those prices could go, Dave?
01:08 Dave
It’s a it’s another great question there. So, there’s a couple of factors at play. Um, so certain markets have price caps limiting how high prices can go. That being said, the political appetite for pricing at those top levels is really challenged at at best. And so we are seeing a number of different system operators, policy makers, regulators across the country start trying to change the rules, which always happens within these competitive markets to help really focus in and hone in on on affordability. Um, so we’re going to see I think some some evolution in market rules. Um, but in general, in any given given given hour prices can go within each market up to the the price cap.
01:52 Josh
Did you Dave, are there, you know, someone who thinks a lot about this. I mean, are there is there a solution or solutions that that would help, you know, perhaps mitigate the cost shock for consumers?
02:05 Dave
So, there’s a lot of different potential solutions. There’s no silver bullet, right? If it was easy, we’d already be doing it. One of the most interesting things that I think we’ve seen over the last 12 months is PJM, which is the grid operator from college Chicago through New Jersey. covers 13 different states. um, at least portions of 13 different states. It’s the largest wholesale energy market in the world. Um, for for electricity.
02:22 Dave
They have implemented what they call their critical issue, um fast path, which is really a stakeholder process trying to accelerate the innovation of new ideas to mitigate one cost to consumers, two, bring new power generation onto the the system quicker and three ensure a a much more highly reliable grid.
02:40 Dave
Typically within these processes, um in sort of a standard process, it takes 12 to 18 months to start working through the regulatory pathway. Sometimes it can take years to to see change. And so what they’re trying to do with this a critical issue fast path is throw a bunch of ideas on the table, argue about them, figure out what may work, what may not work, and really move forward with some of those solutions. So some of that is yet to be seen, but we’re seeing a lot of interest in demand response.
02:59 Dave
So essentially, for example, if data centers don’t um need to have um capacity backing them, so a power plant backing them essentially to to turn the light switch on um when they’re they’re needed. Demand response essentially allows um the system operator to to to shut them off in in periods of real high grid stress.
