New England Short Circuit: Distorted Incentives Drive Energy Prices Up and Reliability Down

[00:00:00] Joe Selvaggi: This is Hubwonk. I’m Joe Selvaggi.

[00:00:09] Welcome to Hubwonk, a podcast of Pioneer Institute, a think tank in Boston. The first crisp fall days in New England serve as a reminder that cold weather is on its way, and with it, the region’s unique energy challenges. Over the past five years, both residents and businesses have faced energy costs substantially higher than the average.

[00:00:28] Natural gas bills are 56 percent higher. And electricity bills are 76 percent higher, largely driven by New England’s reliance on global fuel markets and inefficiencies in the local grid. However, the issue goes beyond just high prices. It’s the growing fragility of our electricity infrastructure that’s putting consumers at risk.

[00:00:48] New England’s aging electricity grid is increasingly strained by rising energy demands and the threat of extreme weather. At the same time, aggressive investments in renewable energy, such as wind, solar, and other clean sources are creating new challenges for grid stability owing to the intermittency of their supply.

[00:01:07] Energy experts now warn that without comprehensive reform to improve our region’s grid, the threat of rolling blackouts could soon be as real as our high energy bills. Why is energy so expensive in New England? Why is our grid becoming more vulnerable even as we increase our use of renewables? And what can policymakers do to improve the capacity, reliability, and affordability Of our energy systems for the future.

[00:01:32] My guest today is Travis Fisher, Director of Energy and Environmental Policy Studies at the Cato Institute. With nearly 20 years of experience in energy policy, Mr. Fisher has held leadership positions at the Federal Energy Regulatory Commission, the Institute for Energy Research, the Department of Energy, and the Electricity Consumers Resource Council.

[00:01:51] He has written extensively about the paradox in the U. S. energy market that despite an increase in domestic energy production. Consumer prices remain high and grid reliability continues to deteriorate. In today’s conversation, we’ll dive into the complexities of New England’s energy supply, explore the reasons behind the region’s exceptionally high energy costs, and discuss the impact of integrating renewables like wind and solar on both price and grid stability.

[00:02:18] We’ll also examine the economic toll of New England’s energy premium on its residents and businesses, and the tough decisions legislators and regulators face. to ensure affordable, reliable power in the future. When I return, I’ll be joined by Travis Fisher from the Cato Institute.

[00:02:45] Okay, we’re back. This is Hubwonk. I’m Joe Selvaggi and I’m now pleased to be joined by the Director of Energy and Environmental Policy Studies at the Cato Institute, Travis Fisher. Welcome to Hubwonk, Travis. Thanks for having me. Great to be here. Well, we’re, I’m thrilled to have you. You’ve written extensively about the challenges of producing power for our thriving U.

[00:03:05] S. economy. What I have enjoyed reading your work particularly is that you’ve helped me and I suppose other non experts understand it’s not just merely about power generation. It’s a much more complex question. It also has to do with transmission, for instance. I want to talk about some of the themes of a very recent piece you did for Cato entitled Barriers to energy supply are everywhere.

[00:03:26] Let’s get serious about permitting, about permitting reform. Um, you, you talk about some topics that I was unfamiliar with that made me understand perhaps why in New England energy is expensive and perhaps in our near future is going to become more fragile. That is, At risk of perhaps blackouts or inconsistent deliveries.

[00:03:45] I’ll throw that out there for the, to, uh, pique the, uh, interest of our listeners, but I want to start at the beginning. Let’s get very basic and talk about our, our power supply here in New England and in the U. S. Um, just at the very highest level, how much power is needed to run the country? Uh, how is that measured? And where are we? How big is this, uh, power grid of ours?

[00:04:08] Travis Fisher: The short answer is A lot, it takes a lot of energy to run the U. S. economy, and we’ll use some energy metrics like British thermal units is a common one, but the energy use in the U. S. is so large that we have to talk about quadrillion British thermal units, so you’ll hear people talk about quads.

[00:04:27] It takes about a hundred quads a year to run the U. S. economy. Now, the power sector is a hugely important piece of that, but it’s also important to note it’s only about a third of the overall energy use, so there’s everything from Industrial use, transportation, we use a lot of oil and gasoline to drive our cars around.

[00:04:44] So the full energy pie in the U. S., even though a lot of attention goes to the power grid, only about a third of it is the power grid, and it takes a lot of energy, a ridiculous amount of energy to run the U. S. economy. So it’s a large challenge, and I think it is an underappreciated challenge when you talk to folks who do policy.

[00:05:04] Joe Selvaggi: Indeed. Okay, so we were talking about quadrillion BTUs, that’s a lot of BTUs, but you said about a third of it is electricity. We like to focus on that because it seems that policymakers like to talk about that. When we talk about green energy, again, we turn our lights on in our house. If we are lucky enough to have an electric car, we want to plug that in.

[00:05:20] This is all sort of. A shift towards electrification, so we’re going to focus on that right now. That power that we use for electricity comes from many sources. We’re trying to, for environmental reasons, move from more fossil focused, fossil fuel focused towards Um, to renewables or green energy, what’s the source of our power mix here? I know you’re not in New England, but in New England, where do we get our power now?

[00:05:43] Travis Fisher: The New England grid right now is about half gas. That really is the story for a lot of the U. S. The broader picture in the U. S. is something like 60 percent fossils. That’s a split between both coal and gas. New England specifically is about to close its last coal mine.

[00:05:59] A couple of coal, coal plants that are in operation, they’ll be shut down around the year 2028. New England is primarily natural gas fueled. There is a significant amount of everything from imported, hydro is a good resource, some offshore wind and that’s a growing share, but it’s important to keep in mind we’re about Half fossil still, and in terms of the total economy, so not just the power sector, we are still something like between 80 percent fossil fuel, so that’s coal for power mostly, oil mostly for transportation. There is a decent chunk in New England that actually is oil fired power generation, and that is unique to New England. The lion’s share, the largest resource on the power grid, is gas.

[00:06:47] Joe Selvaggi: One of the interesting features of your article, you make a link to our reserves. I guess I always knew that the U. S. was rich in resources. God bless. We have quite a bit of natural resources. You point out, or research points out, that we have more, I’ll just throw this out there, more oil, known oil reserves in Saudi Arabia. I think it’s like something like five and a half times Saudi Arabia’s supply. We’ve got more natural gas than Russia. Uh, we’ve got coal for another 150 years if we cared to use it, what, where, is it the case that we are completely, or could be completely self sufficient if it were just fossil fuels we’re relying on, or do we have an abundance of fossil fuels at this point?

[00:07:25] Travis Fisher: We have an abundance, and in fact we have begun to export more than we import, so becoming a net energy exporter is a re a very recent thing. And one thing to point out about reserves is really that counts what is recoverable under the economic situations that we have right now. So under current prices and under current technology, the real game changer on oil and gas, especially in the U. S., is now we’re getting it from shale formations where we always knew that it was there. We always had that knowledge that, hey, there’s probably hydrocarbons in shale rock that’s over a mile deep and you have to fracture it first and then draw the oil and gas out of it. We knew that. The ability to get it is what’s new and that that’s only in the past dozen years or so. So we’ve actually seen oil reserves and gas reserves both increase in the U. S. due to that technological change.

[00:08:15] Joe Selvaggi: That’s an important point. I find it a phenomenal thing that the argument in the past, we’re talking about 20 years ago, was not so much about global warming more. It was about, look, Yeah, these are finite resources.

[00:08:25] We’re going to have to come up with alternatives anyway. We’re going to run out. But by my estimation, the more we keep using these resources, and I think the per capita use of fossil fuel or of energy remains about constant in the last 40 years, we keep using this finite resource, and yet it seems that the resources are going up. Are you saying that it’s because our technology gets better, our ability to access resources with Technology like fracking, that’s why we keep using more and yet having more.

[00:08:54] Travis Fisher: Yeah, so that is how reserves go up. The technology keeps getting better. And yeah, I think the arguments about running out of resources, those have gotten very quiet in recent years, and I think in part due to the the shale boom.

[00:09:07] And what’s interesting is when we zoom out a little bit and think about the theory of resources, there’s an economist named Julian Simon. I believe he was a Cato adjunct at one point, so I’m picking up the thread where he left it. We think of resources as natural resources, but there’s nothing natural about them.

[00:09:25] We, the first, instance of crude oil entering our lives was in cropland. It was spoiling crops. It would bubble up and destroy crops. That is not a resource. A thing, a physical thing only becomes a resource when you figure out how to use it. And we have figured out that crude oil is incredibly useful, not just as an energy feedstock, but as a chemical feedstock, we can produce a wide variety of things from it.

[00:09:50] So this idea that we’re running out of resources, that’s really, even if we were to run out of hydrocarbons as we know them? There’s, it’s basically impossible to run out of resources unless you run out of imagination and new ways to use technologies. But the specific question is also incredibly valid. We are not running out of hydrocarbons. And now the conversation has shifted more towards what do we do now that we’re awash in them?

[00:10:15] Joe Selvaggi: Right, indeed. We’ve covered this sort of concept of superabundance, or the come, you know, the argument between, I think it was, as you mentioned, Gillian Simon and Paul Ehrlich about what, you know, if, if we’re soon going to run out of energy, let’s, it should show up in commodity prices, which is a good segue to my question, which is, okay, if in theory, things become more expensive as they become more rare, right?

[00:10:34] Water is free and gold is, you know, Precious, why is it then, if our resources are growing, meaning we have more power and more energy, more resources than we ever have in history, why is it, would it be the case that energy, which is reliant on these natural resources, seems to be going up in cost? In theory, as every new capability brings us more oil, more gas, more capability to produce power, why shouldn’t our electricity bills be going down? What accounts for this cost that keeps going up?

[00:11:02] Travis Fisher: This is a complicated question and this is one that has frustrated me for about a decade now. So ever since we had the shale boom, so more production of gas, and you would expect very low cost gas, it often sets the margin in power markets. It really does drive the wholesale price of electricity.

[00:11:20] The frustrating thing for me is that it really hasn’t translated into retail savings. And you and I don’t pay the wholesale price of electricity. So it’s an interesting phenomenon and it’s an interesting set of prices to track. But really what everybody cares about is what’s in their power bill, the bill that hits you every month.

[00:11:37] That actually has not really budged downward in the era of abundant and cheap gas. I think part of that is due to the regulatory structure, where utilities are very good at not charging less. They’re always good at finding new ways to increase rates. And in fact, that can be a problem in terms of padding rates with a bunch of creative things.

[00:11:57] But it’s also true that the fuel cost savings, the savings from abundant natural gas really have not translated into lower retail electricity rates. And that is a huge problem. And I think it’s one worth exploring further. When I’ve raised this issue in the past, so it was part of a 2017 study I did at the Department of Energy.

[00:12:17] There have been various attempts to sort of pick up the argument and flesh it out and see what exactly is happening. The short version is there’s always new investment. Things like transmission lines, or you can always replace poles. There’s always a way to basically inflate the cost of electricity so that the consumer always pays more.

[00:12:37] It’s a very frustrating thing, especially when we’re in a place now where we have such abundant fuel stocks. It’s, it really, it should be different. And I think if we change the regulatory paradigm, it would be different.

[00:12:49] Joe Selvaggi: Yes, indeed. It seems to buck the trends of technology in general to make our smartphones cheaper. Gas, it seems resistant, or power seems resistant to deflation. I guess it’s the natural monopoly. We could all come up with ideas of why it might not go down. But in your piece, you point to an interesting phenomenon. You actually mention our beloved region of Boston, particularly Everett, the natural gas terminal.

[00:13:10] And you say, at the top of your piece, what caught my eyes is a giant tanker full of natural gas that has been, it brings it into Everett here for our natural gas uses here in Boston. And yet we just mentioned, this is a ship that comes from overseas, brings it from another country, imports it. Even though, as you’ve mentioned, we have an abundance of natural gas, we have more than we can use. And yeah. Here in Boston, we import ours. What effect is the fact that we need to import, A, A, why do we need to import it instead of using the domestic source, and B, what is the effect of needing to import gas that we would otherwise should be able to just use from our domestic resource?

[00:13:45] Travis Fisher: Well, this is a very complicated story, and I’ll try to boil it down as New England is not doing itself any favors. Really, the ideal case, because a lot of these shale resources are coming from nearby. In fact, the shale resource itself goes into New York State. There’s a significant amount. of shale in New York that’s not being explored. Where it is being explored and produced, places like Pennsylvania and Ohio, those are close enough that you would expect you could just build a pipeline and ship the gas via pipeline into New England, where it’s very much needed.

[00:14:16] That is not the case for a host of reasons. I won’t get into it, but my personal blame, I mostly blame New York State. They’re using a section of the Clean Water Act to basically say, we’re not going to give you the state approvals to go through the state of New York. And I believe that’s coming from climate philosophy where any new fossil fuel infrastructure is inherently bad and therefore can’t be approved.

[00:14:38] One other reason that we can’t get it domestically, because you would think, okay, pipelines are out. What’s the next best option would be take the liquefied natural gas that is leaving from the Gulf of Mexico. There’s also an export terminal in Georgia. There’s another one in Maryland. Those are all options or would be if you could ship from U. S. to U. S. There is no such thing as a domestic LNG tanker that is going to make that trip that’s compliant with the Jones Act. And this is where the Jones Act keeps coming up. It’s this really annoying law from 1920 that was supposed to be, it’s supposed to keep our domestic shipping infrastructure healthy.

[00:15:16] It clearly hasn’t worked. But the impact as it relates to New England and, you know, natural gas is instead you’re importing from other countries. So back in 2016, I believe was the last time New England imported gas from Russia. More frequently, it comes from Trinidad. So you’re basically importing gas from much farther away. So the trip from Trinidad is like 2200 miles, when you could be building a pipeline and safely transporting it from a U. S. state across one other U. S. state and essentially getting it from your neighbor. And that’s just not happening, but it’s a purely a regulatory problem.

[00:15:52] Joe Selvaggi: The idea, so we’re going to, I want to talk about the Jones Act, although it comes up often in our, you know, it’s the bad idea of all bad ideas, and it touches on a lot of issues, but just, you mentioned that the pipelines are not built for environmental reasons, but forgive me, for an environmentalist looking at this holistically, it has to be more environmentally friendly to run gas through a pipeline than it is to put it on a giant tanker and sail it across the seven seas. We’re polluting the world bringing Our resources here, rather than just simply, I guess there’s energy friction, pumping, but it seems as zero emissions going through a pipeline. Are environmentalists literally trying to shut down all gas or is it, do they not see it the same way? What is the argument for ships versus pipes?

[00:16:37] Travis Fisher: Ironically, I think environmentalists are in denial about how much fossil fuel infrastructure is going to be needed going forward. I think the play, from their point of view, if I could steelman it, it’s something like, we can’t build any new fossil infrastructure. Ships seem temporary. You can get a shipment here or there, and you’re not committing yourself to decades of fossil fuel shipments.

[00:16:59] With a pipeline, you would essentially be conceding the fact that you need fossil fuels, you need natural gas for decades, which I think is true, but that’s a tough pill for an environmentalist to swallow, even though I think it’s one that very much needed, especially in the case of serving the people of New England.

[00:17:19] It’s a question of whether you allow a new fossil fuel project. Pipeline is a good example to even be built in the first place, but you’re absolutely right. The shipping of LNG, I mean, the liquefaction process is energy intensive itself. You have to freeze it, negative 270 degrees before it becomes a liquid, and then, But you have to basically regasify it on the other end. So it is a very intensive process. It’s, it’s energy intensive at every stage. Um, I still think it’s absolutely worth it. And especially when we’re talking about supplying the world with gas. But in the case of New England, it does seem like a bit of a waste when, when you could just ship it via pipeline.

[00:18:01] Joe Selvaggi: Yes. And again, not to bang on the same drum, but if you mentioned the Jones Act, which you actually could ship from US to US, but you’d have to use a US built pipeline. Ship, right? And the Jones Act, the intent was to protect the U. S. shipping, uh, industry, uh, by saying, by requiring, uh, if you’re going to ship from a port to a port, it has to be on a U. S. ship. So, this is, again, we, we bang on about this issue. Protectionism, generally, is a bad idea. I think last year, the U. S. produced something like six total number of ships domestically. China produced roughly 232 times as many ships last year. So, the Protectionist Act, uh, It doesn’t work, but this is not a show about protectionism.

[00:18:39] It’s a show about energy. I want to talk about, we, you had mentioned environmentalists not being keen on the long term prospects of fossil fuels. They, as you say, may be naive. We, as to how much we will need in the future. So let’s talk about the alternatives to fossil fuels. I’m talking about it. Wind and solar. The research I’ve done, or what you said at the top of the show, that represents roughly 10 percent of our overall energy needs in the U. S. Where are those produced, and how do they get to the end user? We talked about natural gas, how it gets here. How does wind and solar get to our grid?

[00:19:10] Travis Fisher: Wind especially, if you’re building it where the wind resource is good, and it’s best essentially in the Midwest. And there’s some good wind resource offshore too. We have very little offshore wind right now, but in general, wind is pretty far, the wind resource is pretty far away from demand centers. So if you’re thinking about the heavy energy use on the east coast, a lot of the wind resource would have to be transmitted basically halfway across the country.

[00:19:36] In that sense, you do need a lot of new transmission to bring that energy to where people are going to use it. Solar has similar issues. The siting, because it’s More land use intense than other resources, you would tend to go where the land is cheaper, things like that, so it does also take more transmission.

[00:19:55] The other thing to think about is these resources are intermittent, in the sense that they produce on average something like 20, 30, 40 percent of the time, but you can’t necessarily count on them to produce at any given moment, and especially at times of peak demand. So, they are transmission intensive, and they require a certain amount of balancing.

[00:20:16] Joe Selvaggi: Indeed, I want to ask, you say there, and often times, the power is far from the user. It seems to me, as we move away, both from big power plants to distributed systems like wind and solar, and as you say, they require, you can put a power plant anywhere you want, you can’t put a solar panel or a windmill anywhere you want.

[00:20:34] So that to me seems like there’s a huge number of, Questions as far as transmission goes. Again, this is an issue you bring up that many people don’t analyze, which is, if the wind farm is in Kansas, because we don’t have enough wind or solar in the U. S., in New England, and our, the cost of our land is much higher here, doesn’t this mean that the whole grid would be crisscrossed with transmission lines?

[00:20:58] And A, that seems like a huge cost. B, it seems like it’s going to take a lot of work to do that. And C, that doesn’t sound very environmentally sound to have. Power lines go in every direction, this is a highly distributed system.

[00:21:09] Travis Fisher: You touched on something interesting, which I think is a rift within the environmentalist camp. Some people want to be sort of in the techno optimist camp, where they want to just overbuild the system, build all the wind, all the solar, all the transmission you need, plus batteries, and they see no issue with that. There are a lot of people who don’t want to see transmission lines, certainly don’t want them in their own backyard.

[00:21:34] And so there’s a tension there between the folks who would rather see us more in harmony with nature in the sense that we wouldn’t be building new projects, especially new, very long, hundred mile transmission lines across, you know, Greenfield sites. There is some tension there. It would require a lot of new building.

[00:21:53] It begs that fundamental question of, should we allow that type of new build? And the folks who come from an environmentalist background might not be keen on turning the countryside into a wind farm, a solar farm, or using that to put a transmission line through.

[00:22:11] Joe Selvaggi: Yeah, it seems to me that if they object to an underground pipeline, transmission lines and going every which way seems also not wise. But you bring up a great point, of course, if there’s a rift between, let’s say, build, baby, build, as far as green infrastructure and those people who are, I might argue, on the border of degrowth or anti industrialization. Nevertheless, we have some environmental legislation that provides lots of incentives for Green or New Deal.

[00:22:35] If we’ve not gotten it, we’ve gotten close. More recently, I’m thinking about the Inflation Reduction Act that’s about two years old. And we’ve been told there’s a lot of incentives for new, renewable energy, green, New Deal type things. Let’s not assign any normative value to any of it. What’s the underlying view of these kinds of incentives?

[00:22:57] We’re told arguably close to a trillion dollars of incentives. What is the underlying philosophy? Are they degrowth or are they more the, as you described, let’s build as many wind farms and solar panels and transmission lines as we possibly can?

[00:23:09] Travis Fisher: I think it’s more the latter, and one thing that’s important to note, so in 2022, when the Inflation Reduction Act was being considered, and there was the Build Back Better, and everybody knew there was going to be an environmental, a climate related component to that, the original idea was something like a Clean Energy Standard, where you would, as some states have done, where you would say 100 percent of our electricity has to be green and then however you define that.

[00:23:36] That was actually jettisoned because they wanted to do something that was budget reconciliation friendly. So they knew they had a very thin margin. So the Democrats in Congress essentially said, we’re going to do the partisan version of this and pass it on thin margins. And it’s going to be exclusively a budget action. That, what that turned into was a set of subsidies. The climate law that we have now, I hesitate to call it the Inflation Reduction Act because it doesn’t do that at all, and it’s not even You can cover that topic on other

[00:24:07] Joe Selvaggi: Yeah. You’re right, it’s a bit of a misnomer, but

[00:24:09] Travis Fisher: Yeah, we’ll leave the name aside for a moment. It really is a massive spending package through tax credits that you can turn into cash. If you basically, if you connect your wind farm to the grid, you can Every megawatt hour that you produce, you get a tax credit. And oftentimes the tax credit is larger than the price of electricity itself. One of my concerns with this is not only the massive spending, it was originally scored around 370 billion, I thought that was already expensive enough.

[00:24:36] It may end up being 5 billion. Seven, 10 times that amount. And we don’t know, because these amounts aren’t capped and they don’t end any dates certain. It’s an open-ended tax credit regime. I’m certainly opposed to it. So there, there’s, there’s the judgment part. But it is, it is essentially the budget only the, the tax credit version of climate policy.

[00:24:59] Joe Selvaggi: Okay, and now I will let you interject some normative value, evaluation of this. That, the intent was, okay, let’s give people effectively free money to produce green energy. That’s the express intent of the incentives. What are the actual practical outcomes? Let’s say, you know, you pay people, Twice what it’s, you know, what they can sell their energy for. What’s the end result? What, two years later, what’s going on?

[00:25:24] Travis Fisher: Well, you’re talking to a guy with an economics background, and I’ll say things like incentives matter. You get what you pay for. What the policy incentivizes is just production of renewable energy. At any time, at any place, without much regard to the specifics of time and place and value and things like that.

[00:25:41] So, you pull it away from true market value and you just give it the subsidy value. So, my concern is that you turn what should be well functioning wholesale electricity markets based on Prices, and there are very sophisticated ways to essentially capture the needs of the market through the price signal.

[00:26:00] What the subsidy paradigm does is it completely destroys the well functioning market signals, the prices that we have already. In practical terms, you get companies chasing subsidies instead of value, you get a massive amount of spending, and you get a very distortionary problem on the power markets.

[00:26:20] Joe Selvaggi: Now we talked about the, okay, this is a distorted market for producing, your paper touches on the fact that you’re incentivizing the production, but not so much the in between stuff, the transmission.

[00:26:29] This to me seems odd. I guess it’s less sexy to tell somebody to build a transmission line than build a wind farm. But in your paper, you point out the fact that the infrastructure needed to connect all these ambitious green power generation. of projects falls to people other than those who are actually making the energy. They fall to other people. Who pays for all these wires and lines to connect this grid of new green entrepreneurs?

[00:26:54] Travis Fisher: So first, it’s important to point out that we already had, the term of art is interconnection queue. We already had a large backlog of generators trying to connect to the grid. That queue, in terms of the time it takes, is something like four or five years already.

[00:27:08] So what the Inflation Reduction Act subsidies do, just puts more people in that line. So the line is growing. The amount of energy that we can take on the grid is not necessarily expanding. So there’s incredible pressure now to build new transmission. So that there are a few different ways to do it.

[00:27:27] There is a Federal Energy Regulatory Commission order that addresses this, that tries to expand the transmission system. There’s also acts of Congress. There’s bills floating around. There are different proposals to address this, but fundamentally, It’s going to take a lot more transmission and in most cases, unless you also do some sort of tax credit policy for the transmission itself, which again is expensive and would hit the, the federal taxpayer, usually what happens is these costs get rolled into the retail rates.

[00:27:55] It ends up hitting our power bill. So that’s part of the reason too, that when you would expect Abundant resources to put downward pressure on power bills, why are they going up across the country? That is a significant piece of it. The spending, the total spending on transmission is already going up and could go up even faster. That is ultimately a cost that is going to hit Retail rates.

[00:28:16] Joe Selvaggi: In the, in the form of like, say, the Inflation Reduction Act, that’s, that hits taxpayers in the form of taxes. The government doesn’t have its own money, so it’s giving credit to people to produce power. But, of course, if it comes to us in our bill, that’s, again, rate based taxation, if you will.

[00:28:28] Our bills will go up, our taxes will go up, and our bills will go up for this new energy. I, I, but I can imagine, again, in my head, I’m listening to, in my, I hear the voice of listeners saying, hey, yeah, you know, guys, look, It’s expensive, but this is the energy transition. We’re going from the old dirty world to the new clean world.

[00:28:45] You know, there’s going to be a little pain in the process, but once we get this all figured out, once we get the windmills built and the transmission lines built, we’re all set. The power from the wind and the sun will be free. It’ll be too cheap to meter and all this will be forgotten once it’s all done. Do you see that as the probable or possible future for this ambitious goal towards green, uh, energy?

[00:29:09] Travis Fisher: There is something poetic about that vision of just powering ourselves with the wind and the sun. And I do, it sounds nice. The problem, if I can rain on that parade a bit, the problem is these resources, it’s not like once you build them and most of the costs are up front.

[00:29:26] So it is true that for the life of the asset, most of the costs are up front. And once you build them, it’s basically you get free energy from the wind or the sun. The trouble is we don’t know how long these assets are going to last. Something between 20 and 30 years, maybe. So, we’re looking at an incessant, sort of a constant need to build more of this.

[00:29:46] So, more wind turbines, more solar panels, and it’s not like it’s a set it and forget it. The old Ronco, like, it’s not like that at all. It’s rebuild every 20 years. You know, ad infinitum. So it’s basically the vision of a set it and forget it future. It’s just not reality.

[00:30:06] Joe Selvaggi: As you mentioned, if you have to, if it takes you 20 years to build it and it needs to be replaced in 20 years, as you say, you’re on a never ending treadmill of expense.

[00:30:15] Given that reality, and again, the promise, potential promise of wind and solar, Do you see going forward, again, you have a grasp of the total amount of power needed, and again, we’re moving towards more electrification, our cars and appliances, our gas stoves are going away, perhaps in the interest of electric stoves.

[00:30:32] Do you see this, albeit more expensive power future, are all these green, uh, additions going to replace the fossil fuels or, or just simply complement or add to them, meaning we’re not getting any greener, we’re just getting more power?

[00:30:47] Travis Fisher: Well, I want to be consistent in the fact I am a strong believer in technology, and I’m open minded about a technological innovation, especially in energy storage, that would make a heavy wind and solar future more agreeable with the way that we use energy, which is we need on demand energy.

[00:31:06] And in fact, for the growing process that you’re talking about, we have all sorts of new uses for energy. New data centers, new manufacturing, just economic growth in general is an energy intensive thing. We have to be honest, though, about where we are right now. And energy storage, we’re really just talking about, to some extent, pumped hydro is great.

[00:31:26] Um, batteries are sort of the other option. There really isn’t the amount, the quantity, and the cost effectiveness. Storage is really just not quite there yet. As it stands right now, I think it’s more of a supplement. And folks talk about things like, well, we need to build two grids. The one that allows for wind and solar and the one that gives us the power when we need it.

[00:31:47] Joe Selvaggi: Yeah, so two grids is twice as expensive as one grid, if I dare say that. Again, I read a recent article talking about, it’s actually a union leader talking about, bemoaning the fact that there aren’t any data centers being built in New England. I read an interesting article that we spend, that our data centers in the U. S. use more power than our entire economy. Airline network. So our cat videos are using more than our airlines and AI is going to perhaps increase the power needed by 10 times. That’s a lot of power. So it’s no surprise that if our power here in New England is. More expensive than other parts of the country.

[00:32:19] We’re not going to see any data centers. Um, but let’s just say again, we’re going to move, go down this road of more expensive, but greener power. What effect does more expensive power, regardless of its source, have on the economy, on individuals? Do you go that far into your analysis and say, okay, if power is 20 percent more expensive, The U. S. is going to be 20 percent less industrialized, less prosperous, less job oriented. What is the effect of this expensive trip down this green or renewable fossil power road?

[00:32:54] Travis Fisher: So it’s important to remember, industrial consumers are very picky when it comes to price, they’re very cost sensitive, and in many cases they can go wherever they want.

[00:33:02] So if we’re competing against, for example, China, we want power that’s 3 cents per kilowatt hour. That’s a fraction of what we pay at the residential level. Industrial power is a cutthroat industry. And within the U. S., if there are places where you can get power that’s that cheap and other places where you just can’t, it’s no surprise to me that New England is having trouble drawing those types of customers who are both very sensitive to cost and very protective when it comes to, if your industrial process needs high quality power and just cannot tolerate blackouts or blips for even a second, You’re going to go to the place that has the strongest grid at the lowest cost.

[00:33:42] And our real competition is with places like China. And I hate to say we’re, overall, we’re losing that battle in part because we have prioritized other things in front of, we would like to think that grid reliability is job one, cost always being front of mind, but you see a lot of policies that go more towards the, this third aspect where we need concept of sustainability or greenness. That is actually counter to. The idea that we would draw business to the U. S. or certain parts of the U. S., it really is, it comes down to fundamentals, cost and reliability.

[00:34:16] Joe Selvaggi: Yeah, we haven’t really hit too much on reliability. Again, I read a new article in researching this conversation about the fact that whereas in the past the summer had been peak use, and now again with electrification and the nature of our grid and using electricity to heat our homes instead of gas or oil, our peaks are going to come in the winter.

[00:34:32] But of course Renewable energy is less reliable in those kinds of seasons. So as you say, I think our, not only will our power become more expensive, but perhaps more fragile. That is, we will literally see blackouts here in New England on the course we’re on. Is that, am I being hysterical?

[00:34:49] Travis Fisher: You’re not being hysterical. Unfortunately, we’ve seen that from both the federal regulators in charge of this, the regulators in charge of the New England grid itself. I think it’s more, at this point, unfortunately, it feels more like a matter of When rather than if, and I hope that we can fix things before you get any sort of catastrophic event, sort of, we point to the really catastrophic event, Winterstorm Uri in Texas, the prolonged cold spell.

[00:35:17] And pretty much everything freezes, and even in an energy abundant place like Texas, you can still have grid problems, so that was just an example of how fragile the grid is, I’m very glad that New England has not experienced that yet, but it’s possible, and I think the more New You put on the grid, so it’s basically green the grid, electrify everything, and then I’m concerned that you’ll have to brace for blackouts. That is the pattern that we’re looking at, and I wish we could zoom out a bit and say, no, actually, liability is job one, we don’t want people freezing to death, what can we do to fix the problem? And there are some people working on that problem, I don’t want to play that down, but I don’t think enough has been done.

[00:35:57] Joe Selvaggi: Okay, so let’s talk about that. We have folks in Washington. Maybe they get it, maybe they don’t. From your perspective, you do spend some time on Capitol Hill and trying to persuade legislators to do the right thing. Where are we and who, up there, who seems to understand the challenges from a national perspective? Do we get it or are we just, you know, is this sort of hopelessly partisan, blinded by our partisan leanings and everybody’s full steam ahead in their own agenda?

[00:36:23] Travis Fisher: I think one thing that would clarify a lot, because there is hyper partisanship and it’s a shame, I think a problem that a lot of policymakers have fallen into is they fall in love with the technology, they take sides, we call it the fuel wars, so there’s like the Trump camp really loves coal, and the Biden team loves wind and solar, etc.

[00:36:45] I think we need to abstract away from that and talk about what consumers need. We really need reliable, abundant, affordable electricity. And so anything that gives us that, sort of drop the whole technology battle that we’re seeing and just focus on what Americans actually need. I think that would put a lot of things in perspective. And unfortunately, that’s not the approach that I’ve seen a lot of people make.

[00:37:11] Joe Selvaggi: Is the problem ignorance? Technical ignorance? We know congressmen are not selected for their knowledge, but rather their salesmanship, perhaps. Is it ignorance? Is it political self interest? Is it environmental fanaticism? What do you think is really driving this sort of blindness to what seems to be a colossal problem coming?

[00:37:28] Travis Fisher: Well, I think on the one hand, people don’t necessarily have the hands on experience with energy. You plug stuff in and it works, and you don’t have a full appreciation for the underpinnings. I think that’s true across the board. Certainly, there are people that think hamburgers come from the grocery store.

[00:37:44] And I’m guilty of that in a bunch of other fields. But when it comes to energy, the need for a robust infrastructure, and the policies in place that would allow people to explore and produce and transmit things as basic as can we build a pipeline, to places where people really need gas. That is a fundamental issue that it shouldn’t necessarily be a problem and I think some people are overly optimistic about alternatives.

[00:38:08] I’ve heard folks say that New England doesn’t need any more gas because it’s about to be 100 percent green. People have been saying that for a decade. It’s still, the grid is still half powered by gas. It’s just, I think folks would do better to recognize that, hey, this, this vision of the future, let’s, let’s allow for alternatives.

[00:38:30] It might not come as fast as people think, and we should certainly be open to building new infrastructure, even if it enables fossil fuels to move across state lines. That is, it might be a tough pill for some environmentalists to swallow, but it’s, it’s, it’s reality.

[00:38:45] Joe Selvaggi: We’ll get run out of time, but I always like to give our experts a chance to say, okay, if you’re king for a day, or at the very least, you had the undivided attention of all 535 members of Congress in front of you, and they’re all listening, they’re saying, okay, we see this as a problem, what should we do? What would you like to let them understand?

[00:39:03] Travis Fisher: I’d love for people to get a better grasp of how important energy is to daily life, and how much energy is baked into the cost of everything. Just think about, if you go to the store, it’s the energy that it takes to create something, or move something from A to B, and everything, the energy is baked into the cost of transportation, trucking, it hits your family budget in terms of gasoline and your power bill, I think that recognition that energy is fundamental, that it really is, the, if we zoom out a bit and talk about the physics of it, energy is the ability to do work.

[00:39:40] If you want Americans to get up and do a bunch of work, it takes a lot of energy. We’re not talking like human calories to do human tests. We’re talking about machine calories to do big things, industrial things. So the fundamental nature of energy, I think that’s lost on a lot of people. And again, you get back to this very parochial view of like, what sources of energy are good versus bad. We’re probably going to need all of it.

[00:40:03] Joe Selvaggi: Yeah, indeed. I can imagine some avocado toast eating hipster listening to this and saying, look, I’m not part of the problem. I ride my bike to the coffee shop and do my programming from the table in the corner. Like that, the grid that’s running that computer data center is enormous. And that avocado doesn’t fly itself here from Peru.

[00:40:21] Travis Fisher: Well, actually the that’s a perfect example. Have you ever seen videos where somebody tries to power a toaster with a bicycle and how hard you have to pedal to even get it to where the toaster is functional? That’s a great example. We have no concept of how much effort it takes, how much, how precious energy actually is when it comes to like, this is actually tough to do. We make it look really easy. And the U. S. is a very energy abundant place, but it’s not easy and the underpinnings can be fragile too. I think we do better to have a fuller appreciation of exactly how hard it is to get as much energy as we have right now.

[00:40:55] Joe Selvaggi: Well, I hope we don’t have to learn that by the hard way, which is you flip on the switch and the lights don’t come on and it starts to get really cold. It gets cold here up in Boston. I hope we don’t have to learn it the hard way. Okay, we’ve run out of time. I’m sorry I could go on longer with you, Travis. I really have appreciated this conversation. I hope we’ve piqued the interest of this topic for our listeners. If they are interested in reading more about you and the research of your team over at Cato, where can our listeners find your work and read more about your work?

[00:41:23] Travis Fisher: I encourage folks to check out the Cato blog. I post on there pretty frequently, and everything I put on there I also cross post onto my Substack. It’s travisfisher. substack. com. I also have an open door policy, so if anybody heard something they either really like or really didn’t like, you can send me an email at tFisher@cato.org.

[00:41:42] Joe Selvaggi: Wow. That good? I I give out my email, but be, be careful what you wish for you, you may get some good responses there. Okay. Well, thank you very much for joining me today, Travis. This has been a great conversation. I really appreciate your ti time. I hope to have you back in the future.

[00:41:54] Travis Fisher: It was great talking to you. Thank you so much.

[00:41:59] Joe Selvaggi: This has been another episode of Hub Wonk. If you enjoyed today’s show, there are several ways to support Hub Won and Pioneer Institute. It would be easier for you and better for us if you subscribed to Hubwonk on your iTunes Podcatcher. It would make it easier for others to find Hubwonk if you offer a 5 star rating or a favorable review.

[00:42:15] Of course, we’re grateful if you share Hubwonk with friends. If you have ideas or comments or suggestions for me about future episode topics, you’re certainly welcome to email me at hubwonk@pioneerinstitute.org. Please join me next week for a new episode of Hubwonk.