Interview with Energy Expert Dr. Michael Webber

Dr. Michael Webber is one of the best known energy experts in Texas. He’s the John J. McKetta Centennial Energy Chair at the University of Texas at Austin, an author of multiple books on energy, and the Chief Technology Officer of Energy Impact Partners, a cleantech venture fund. 

Michael has a way of explaining and breaking down even the most complex energy concepts and topics into terms that are understandable and engaging to novices and experts alike. 

We started the conversation with Michael’s views on common misconceptions about energy and what Michael sees as the future of the grid in Texas. We explored the role of fossil fuels and oil and gas companies in the energy transition; talked through the history of energy transitions (there have been several) and what we can learn from the past; and went over the steps to achieve decarbonization. Michael also went into some detail on energy efficiency, demand response, baseload power, hydrogen, heat pumps, electric vehicles, and much more. 

I hope you enjoy this conversation as much as I did. If you like the episode, please don’t forget to recommend, like, and share on Substack, Apple Podcasts, Spotify, or wherever you listen.

I look forward to hearing your thoughts; don’t hesitate to share them with me and fellow listeners in the comments. Thank you for listening and for being a subscriber! Transcript, show notes, and timestamps are below.

Show Notes

Powering Humanity: Essays on Energy and Society by Michael Webber

Power Trip: The Story of Energy by Michael Webber

Power Trip: The Story of Energy documentary series

The Webber Energy Group at the University of Texas Austin

You Should Be Getting Paid to Prevent Heat Wave Power Outages, New York Times Op-Ed by Michael Webber

The Innovator's Dilemma: When New Technologies Cause Great Firms to Fail by Clayton Christensen

The Obstacle is the Way by Ryan Holiday

How ExxonMobil Is Planning For A Future Of EVs: Interview with CEO Darren Woods

More about Michael:

https://twitter.com/MichaelEWebber

https://michaelwebber.com/

https://www.energy101.com/

Timestamps

3:39 Michael’s roles at UT and Energy Impact Partners

4:37 History of energy, PBS series, and books

6:12 Conventional wisdom regarding the energy system that is wrong and/or misunderstood. 

8:11 Where the Texas grid will be in 10 years and what he hopes will happen

11:27 Carbon pricing 

14:34 Why oil and gas companies should not be worried about the energy transition, what role they can play, and political dynamics in Texas

17:45 The Four Steps to Decarbonization

19:30 What role oil and gas companies will play in the energy transition future and political dynamics in Texas

26:40 History of energy transitions and sources in the US

31:51 Environmental, labor, and national security benefits and challenges of renewables, including precious metals

36:18 Unpacking baseload power

42:51 Energy efficiency and building codes, challenges for investing in energy efficiency and need for policy

51:41 Heat pumps and resistance heat: market signals, effectiveness, challenges, and benefits. 

1:03:47 Residential Demand Response and the need for market innovation

1:08:16 Hydrogen explainer 

1:13:40 Interconnecting ERCOT

Doug Lewin

Michael Webber, welcome to the Energy Capital Podcast.

Michael Webber 

Thank you so much for having me. It's good to be in a conversation with you in this format after all our conversations in person over the years.

Doug Lewin

Yeah, I mean, one of the reasons I so wanted to do this podcast just to have conversations like this, I always enjoy talking to you, but I'm not, I'm not sure we've ever just had an hour to talk. So this is, this is great. I've been really looking forward to this. And just before we jump in, you know, just want to acknowledge the influence you've had on me and so many people around the state and around the country. I think it was your, was it Energy Policy and Technology short course back in like 2000? 

Michael Webber

Yeah, energy. The energy technology policy, which you took like in 2008 or something? It was a while ago, so yeah.

Doug Lewin 

I think that's right. That's right. And that was one of the first times that I really felt like I could really understand this stuff. Your ability to kind of translate really difficult concepts into plain language and help dumb people like me understand it is so appreciated. So thanks, and thanks for being on the podcast.

Michael Webber

Oh, my pleasure. And thanks for the kind words. It's exciting to be a collaborator with you after all these years.

Doug Lewin

Let's start just with, if you would, just kind of describing in your own words, who you are and what you do.

Michael Webber

So that’s great. So I'm a professor of mechanical engineering at the University of Texas at Austin. So I do research and teaching on energy and the environment, really at the convergence of commercialization, technology and policy. I'm really an engineer. But I say the words describe me are engineer, entrepreneurship and energy, the three E's, so to speak, and maybe add the fourth E of environment. I'm also Chief Technology Officer at Energy Impact Partners, which is a four billion dollar cleantech venture fund. And I was formerly Chief Science and Technology Officer at NG in Paris, France. So I was there for about three years, 2018 to 2021. So I was an executive in charge of research innovation for one of the world's largest multinational electric and gas utilities. So I've got a lot of corporate experience, some venture and entrepreneurship experience, and a lot of academic perspective.

Doug Lewin

Yeah, and also just this kind of quintessential, like public intellectual, right? Talk also about, just for a minute about the PBS series, because I want people to be able to find that if they want to learn more after this conversation.

Michael Webber

Yeah. So I'm a public intellectual, which means I mouth off in public. I write op-eds and give speeches and publish essays. I've written several books. And one of the books, Power Trip: The Story of Energy has been turned into a 12 part PBS series over two seasons. Season one came out in 2020 and season two just came out a few months ago. It has 12 hour long episodes on energy. You can get it on PBS and Amazon prime and Apple TV. And if you fly American Airlines, it's in their in-flight entertainment. Season One is, you can watch it while you're captive on the tarmac or something.

And then I've got a new book coming out on Valentine's Day called Powering Humanity: Essays on Energy and Society, which is a collection of like 65 of my 200 plus op-eds and essays I've written over the last 15 years. And that one's a fun one because I go back and actually assess when I was wrong or when I was right because I made a lot of predictions about the future in those essays. So that's my upcoming book.

Doug Lewin

Yes, and you were gracious enough to provide me an advanced copy and I love it. I've been looking through it over the last couple of weeks and it's great, highly recommended to everybody as well as Power Trip: Thirst for Power. Anything Michael's ever written or recorded is worthwhile. 

All right, let's start with, usually Michael, I save a few questions for the end to kind of wrap up conversations, but I actually wanna invert the order today and start with these because you are an expert in such a wide range of different topics related to energy.

I'm really curious to hear what your answers are to these, and I think that'll help guide our discussion. So I wanna start with this question that I ask on most of the podcasts. What is something that's conventional wisdom among energy people that you think is wrong or commonly misunderstood?

Michael Webber

There's, I've got so many, there's like three things that come to mind that are conventional wisdom that I think might end up being wrong. 

One is that, to decarbonize economy, we have to get rid of oil and gas, or oil and gas companies. And I can see a lot of ways we could decarbonize economy with molecules still in the mix, and with those companies still in the mix. 

Another piece of conventional wisdom is that we will have to have base load power in the future. And I think the whole concept of base load actually is going to go away. And we're going to replace it with dispatchable. But that means dispatchable on and dispatchable off. So we could talk about demand response for things you could turn off, as well as power plants or batteries or things you could turn on. So the concept of base load, I think, is just going to feel very antiquated. 

And then a third piece of conventional wisdom is that hydrogen or other clean options will always require subsidies to be cost competitive. I don't think that's true. I don't even think it's true today for wind and solar. And I don't think it's gonna be true for hydrogen in the near future. I think instead, what we'll do is instead of subsidizing one form of energy another, we'll quit letting emissions pollute for free. I think like you think of like a dumping waste in the atmosphere for free is a form of subsidy. I think if we eliminate that subsidy, then we'll move towards the right answer and won't need to subsidize the clean stuff. So there's this notion like, oh, we gotta have hydrogen tax credits, that kind of thing, make hydrogen competitive. Not really, we maybe just can't let people pollute for free anymore.

Doug Lewin

We're going to come back to all three of those as we go through. Those are great ones. As I suspected, your answer would be interesting there. 

Another question I like to ask, and this isn't like asking for big predictions, but just kind of in general, what will the grid look like in 10 years and how will it be different for consumers? 

Just for people that don't think about energy every day, but obviously depend on the grid, rely on the grid, and pay for it. What's it going to look like in 10 years? How will it be different for them?

Michael Webber

I've got a couple thoughts and I've got to be careful to be honest and I'm mixing partly what I wish for and what I actually think will happen. So what I think will happen is coal will continue its decline. Coal's already dropped like 60% in the last 15 years. I think it drops another 50% from where it was in the next 10 years. So coal about a decade from now will be about 10% of where it was in 2006. 

And that's really phenomenal that coal will end up dropping about 90% in two and a half to three decades. A lot of that's because of the natural asset life of the coal plants. The coal plants are coming up at their end of life retirement window and we just won't replace them. There are a few newer coal plants that might hang in there, but most of the coal we use in America will be for like steel and cement, not for power. It'll be very limited coal and power. And I'm pretty confident that will happen. 

A thing that I kind of wish will happen, but I don't know if it will happen, is that we pass through a lot of the market reforms we've done on the wholesale side to the retail side. So if you look at places like Texas, there's a lot of competition on the wholesale side. A lot of new power plants can come in like wind and solar or clean gas or whatever it is. But most of us on the retail side still pay bills the same way we did 10 or 20 years ago. Our bills look kind of the same. And I think we need to have a lot of evolution there where we can be paid to turn off our power certain times a day. We can be paid to sell power back to the grid if we have solar. We'll have much more net metering, we might even have peer-to-peer markets where we can sell power to our neighbor. There's a lot of things that could happen on the distribution end of the power sector that haven't happened yet. That would be great if they happened, but that's my wishful thinking. Like that's what I wish will happen in a decade. I don't know if that will really happen or not. 

And then the thing that I do think will happen and I wish will happen is I think we'll have a lot more distributed generation, a lot more rooftop solar panels. However, as a warning to everybody, that distributed generation will also include natural gas generators, maybe fuel cells and things like that, it won’t be just rooftop solar. But I think we're going to have a lot more distributed generation, a lot more generation at the end of the line because of all the difficulties we're having building transmission and for other reasons. So that's kind of a mix of things I think will happen and things I kind of hope will happen. In that middle one, this evolution of having more sophisticated and efficient markets at the distribution end would really enable that third piece of distributed generation.

Doug Lewin

Yeah, that's right. I think it's interesting, you mentioned both solar and gas. And of course, I think storage will probably be part of that mix to battery storage would be part of that mix to whether any of these are on the wall. Yeah.

Michael Webber

Absolutely, and that battery's, exactly. And we actually, when we remodeled our house a decade ago, we built it a place in a crawl space for battery storage, like a power wall or something. And we will probably never use it because the battery in my electric vehicle is so much larger than whatever power wall I could have bought.

Doug Lewin

Yeah, yeah, a lot happening in that space. All right, good, we'll come back to all of those things as we begin to talk too. 

And then the third question I like to ask when we have time, and I knew if we started talking about other things, we'd never have time. And I wanted to ask you these questions because you do teach a class on policies and technology. So what are the two or three, one, two or three, whatever you like, energy policies that you think could have the biggest impact to increase reliability, lower costs for consumers, and reduce pollution?

Michael Webber 

That is a great question. So I kind of give a hint at this with the first question and part of my answer, which is I think we need to put a price on pollution. Like if I think of the policy we need that's missing today is we allow people to pollute for free. They can dump their greenhouse gas emissions in the atmosphere for free and use our atmosphere as a common dumping ground. That is inappropriate for so many reasons. It's inappropriate economically and ethically and morally and environmentally, you name it. 

And that's the one policy I really wish we had. And if you ask like 99 out of 100 economists, they would say, put a price on carbon. That's the most important thing you do. And that carbon emission is a proxy for some of the other problems we have around domestic security of our energy sources, reliability of everything else, because that CO2 ends up driving climate change, which becomes a forcing function of strain on the grid. So if we put a price on pollution, it will lead us to cleaner, domestic mix of sources that will end up being more reliable. 

And then the counterpoint to that is we should have a reliable services price, like a market for reliability services. And we have some of that, like in ERCOT, we'll have spinning reserves and non-spinning reserves and reg up and reg down these different types of markets that pay people for the reliability services they provide. And I would like to see a more enhanced, bigger market for that. Most of the market is just for buying and selling electrons or electricity in the power markets and a little bit of the market is to do so reliably. And I think the reliability part of the market should grow and will grow. And that will incentivize not only more capacity to more things we build, but more things like storage and demand response and dispatchable, firm, clean power and this kind of thing. And so I think having a price on pollution so you can't pollute for free anymore and a value or reward for reliability, those two things hand in hand will do a lot to solve our grid.

And we don't really put a price on pollution at all. There's sort of a price on some of the pollutants like NOx and SOx, but not CO2. And we have a little bit of a price or a little bit of value that we attribute for reliability, but I think we need to do more of those.

Doug Lewin

Yep. All right, so this is great. I think my instincts were good on this. Asking these questions sort of tees up, because as I was preparing for this, there's like so many things I wanna ask you, but kind of getting a sense of where you wanna head is helpful. So I actually wanna go back to the first thing you said about what is commonly wrong, taken as conventional wisdom, that, the decarbonization requires the end of oil and gas.

I want to talk more about that. So obviously you and I both live in Texas. This podcast is focused on Texas. Texas has, back to spindle top, taken a very large share of its wealth. It's not as much now as it was 80 years ago or whatever, but it's still a very large share of the wealth generated in the state. The tax revenue in the state is tied to oil and gas. So I think a lot of people that either... have derived well from that continue to, or tax revenue or whatever, get very worried when they hear energy transition. Why should they not be worried? Why do you think that it could continue? Is this even potentially an opportunity as well as a risk?

Michael Webber

It's absolutely an opportunity for oil and gas companies if they choose to be part of the future and not all oil and gas companies wish to be part of the future to be very clear about that. Some of them are at war with the future and I think the future is going to win, frankly. But there are a lot of companies that feel like they have a role to play. There are a lot of solutions in the decarbonized economy that require subsurface expertise. Might include geothermal energy or below ground storage of hydrogen or even extraction of hydrogen from natural reservoirs.

It might include CO2 sequestration. It might include pipelines that move different molecules around, including CO2. It might include offshore solutions like wind or solar. It might include a lot of the things that the whole gas industry already knows how to do better than anybody. And so there's like a certainly a skillset that oil and gas has a capability that we're going to need in a decarbonized future. 

And that includes things as basic as project finance and project management. And how do you do complex engineering projects in hostile environments and make them work? That's something oil and gas knows how to do. So there's a skill set that's very valuable and the people they have on the team, the geologists, the engineers, you name it. 

In addition, the product they sell, the molecules might also be important. Now the molecules might be different in the future and they might be sourced differently. The methane might not come from below ground fossil reserves or if it does, it might be converted into hydrogen or it might be methane that's manufactured from biological processes like decomposition of animal manure or something like that, or might be other molecules like ammonia, formic acid, or hydrogen methanol, you name it, but the world of moving molecules around and converting molecules is something that oil and gas knows very well. So these molecules might play a role. And then as you especially think about the molecule of CO2 and removing it from the atmosphere and putting it somewhere else, that's something oil and gas companies might know how to do. 

So that I just feel like there's a bucket of incredible capability and expertise and assets like rights of way and pipelines and platforms and ships and welders. There's… welding equipment, there's a lot of assets as well as skill sets that can be really useful. 

So that's kind of my view, but you don't have to take my word for it. You can listen to ExxonMobil CEO Darren Woods, who said on the record in the middle of 2022 in an interview that his view and therefore ExxonMobil's view, because this was on the record, is that 100% of light duty vehicles sold in the world in 2040 will be electric. So this is a man who sells gasoline for a living saying…the new cars that you buy by 2040 will be electric and will not need gasoline. And he said, that's okay. Those cars are gonna need a lot of lightweight materials like plastics and other base materials. Well, we make those materials, we'll be fine. And so if one of the world's biggest sellers of gasoline says the market for gasoline will disappear, but that's okay because we'll make the materials those cars need, for example. He didn't say this, but they'll also produce the natural gas that will make the electricity for those cars. They're fine. 

And so that's one view. Another view tends to be like smaller independent oil and gas companies who don't care and are gonna ride to the fossil tail. Like they're just gonna ride the curve down and make a lot of money before they retire and that kind of thing. So they're not gonna switch to the future, but some of the big ones, the multinational companies for sure are switching to the future. So that's my view and that's their view, frankly. 

But the way I put this in sort of a logical hierarchy of decarbonizing is it's kind of a four step process. Step one is efficiency. We should make things as efficient as possible. Light bulbs, cars, homes, you name it. We need to reduce the height of the hurdle we have to clear or reduce the height of the mountain we have to climb, whatever your analogy is. We have to use less. That is the best thing we need to do. By the way, that's a very hard thing to invest in as a venture capitalist. And so efficiency doesn't always get there with market forces alone. It's a great place for policy, especially around building codes and fuel economy standards and that kind of thing. But efficiency is where we start.

The second thing is electrification. We need to electrify as much as is reasonably possible, especially light duty vehicles are a great example. Building heat for new buildings in mild climates is really obvious, we should use heat pumps, this kind of thing. And those light duty vehicles and the heat pumps actually help fulfill that first goal of efficiency because the light duty electric vehicles and the heat pumps in mild climates are more efficient than your alternatives. 

Then the third priority is clean molecules for the parts of the economy that are hard to electrify. And I'm thinking industrial heat, maybe building heat in cold climates in old buildings, aviation, marine shipping chemicals. And then the fourth one is carbon management, which is to remove the carbon that we couldn't avoid through clean molecules and electrification. So, like the first few steps are kind of like do your best, and then the fourth step is, clean up the rest. So that's kind of saying “do your best, clean up the rest.” So the four steps, efficiency, electrification, clean molecules, carbon management.

Well, those last two, clean molecules and carbon management are in the molecules business, probably gonna be oil and gas companies or oil and gas adjacent companies. And those clean molecules could be biomolecules, biomethane, it could be fossil molecules, a carbon capture, that looks pretty expensive to me. Could be hydrogen from a variety of sources, ammonia, methanol, formic acid, you name it. There's a variety of ways to get clean molecules. 

But in our analysis, if you wanna get to zero carbon or net zero as quickly, affordably, reliably and equitably as possible. It's cheaper, faster, more reliable and equitable to keep molecules in the mix and to exclude them. If you have to go 100% electrons, it delays the path, makes it more expensive and might make it more fragile or less robust because you have single point vulnerabilities and that kind of thing. So that's kind of my long sweet, I think molecules have a role and I think it's in our interest that molecules have a role and I think it's certainly in our interest for the companies that know molecules to be on board with decarbonizing and we can sort of map out a pathway, here are all the ways an oil or gas company might make money in a decarbonized future, because I'd much rather have those companies on board with the future than against it.

Doug Lewin

Yeah, I think two things are true here. One, electrifying everything possible, everything that makes sense from an engineering and physics and financial perspective. That's good. There generally is energy efficiency, as you pointed out, right? The electric car is what, you're the engineer, what 80, 90% efficient versus an internal combustion engine car that wastes so much heat, right? And is only 30 or 40% efficient. So that's great.

It's also, I think, important for people to understand that at this point, only 20% of all energy is electric. Even in International Energy Agencies’ net zero scenarios, at the very high end of the spectrum, you're talking 50 to 60% electrified energy. You still have a lot of molecules. Having those molecules be clean molecules, whether it's 40% or whether it's 70%, that's still a lot and they need to be clean, right?

Michael Webber

It's a lot that need to be clean and even beyond that, we want those companies who know how to do it to be a partner for all the other things we need them to do, drilling and offshore and everything. So it's the same companies often. And I see this role for molecules in the future. Now, another way I'd say it is, I think the total volume of molecules is gonna be much lower in the future because we're gonna replace a lot of molecules with electrons. But the use of those molecules will be more valuable.

And so when I talked to oil and gas, I was like, okay, would you rather sell more oil and gas or molecules, or would you rather sell fewer molecules, but more profitably because you're selling them for very valuable procedures or processes, making cement or whatever it is, or doing backup power if you have no other options. So you're only using it for really critical times or valuable times or valuable goods. I think like, backup power is a great use of molecules. But when you need backup power, the prices tend to be very high. So that's a very profitable time to have natural gas for a natural gas power plant. 

But if you're using natural gas when it's really windy and sunny, well, that's a pretty dumb time to use natural gas because it doesn't really add value to society and you're not making money off the gas itself either. So we burn a lot of natural gas that we don't really need to burn when we could be using wind and solar. And so I'd rather save the gas for the high value critical times. And I think that's better for the gas sellers too. I think they'll make more money.

Doug Lewin

Yeah, I think it's really interesting on this question of oil and gas companies and what their role in the energy transition is. You know I named my company Stoic Energy. I'm very into Stoic philosophy and for instance, the books of Ryan Holiday, a fellow Austinite, or nearby in Bastrop. He wrote a book where the title is The Obstacle is the Way. And I think there's something really true there… a lot of people view this as oil and gas companies are in the way. And sometimes that's quite true.

But some of them are trying to figure out how to get through this transition. And I think the ones that just continue to be stubborn and intractable, eventually there's gonna be a decline there. This is like Clayton Christensen, Innovator's Dilemma stuff. They have to look around for the other things that are gonna start to grow. Clean molecules, hydrogen, carbon capture. Exxon bought a lithium mining operation, right? Not long ago. I mean, it's fascinating what is starting to happen and it's slow. It's too slow. There's probably a lot of people listening right now that are like, “What are you talking about?” and are frustrated by this. And I acknowledge it's too slow, but that's not the same as saying it's not happening at all.

Michael Webber

We actually, the good news is we're making progress. The bad news is we need to pick up the pace a lot, right? It's just way too slow. On the oil and gas companies, there is a big distinction between the multinationals and then the independents, the smaller mid-majors or domestic producers.

 And even among the multinationals, there's a distinction between the European multinationals and the American multinationals. Although the American multinationals are catching up to the European multinationals. European multinationals, Equinor, Total, others are fully on board. They're investing money. They have ambitious plans to ramp up their electrons business, to decarbonize their molecules business, that kind of thing. Equinor is really doing it. Orsted we think of as an offshore wind company. Orsted used to be Danish oil and gas company, right? That's a European oil and gas company that is now fully on board with offshore wind and electrons. So I think we can look to the European multinationals for leadership on this. 

The American multinationals, you mentioned ExxonMobil, but there's others like Chevron and others who are also doing it.

The smaller invaders tend to be the laggards on this. They don't have the resources for it, but sometimes the leadership is just not on board philosophically with this. Or they're in a position where like, I'm gonna retire in 20 years, that sounds tough. I'll just kind of ride the tail and make a lot of money in the next 20 years and not worry about it. 

So there's a myth that, the oil and gas industry is not quite monolithic on this. There's a lot of disagreement within it. And it's fascinating to me as a Texan, I think you see the same thing. The multinationals in Texas, are not influential with Texas government, which is kind of a fascinating thing that the local independents have much more say with the Governor, Lieutenant Governor, other people than the ExxonMobiles. And that's not true for ExxonMobil, I would say in every other place where they're active, they're probably very influential. So we have some unique to Texas experience that might inform our opinion on this too.

Doug Lewin

It is a fascinating dynamic here, as so many things in Texas are. 

I want to back up and just kind of widen the aperture here. In your book, Power Trip, you talk about, and I'm kind of a student of history, I love talking about history, I love taking sort of this broader view, and you do this so well, sort of the evolution of energy sources and how we have seen better and sort of better, however, you can define that different ways, more energy dense, I guess, would be the best way to define that in this context, but cleaner as well, sort of one after another supplant energy sources before them. Can you just kind of run through that and bring us up to where we're at right now with the energy transition?

Michael Webber

Yeah, and the history teaches us that transitions are common in energy, and there tend to be episodes where transitions happen faster. So I think we're 10 years into a 30 year transition right now. And we've had them before with the rural electrification from like 1930s and 1960s, with the second industrial revolution in the 1800s, the industrial revolution of the 1700s. So we have these episodes where innovation happens more quickly, innovation on the energy conversion devices, making new machines like a steam engine or gasoline car or electric computers, we have new devices that convert or consume energy and new forms of energy available. And when you have rapid convergence of changing forms of energy and changing uses of energy, that's an energy transition. So we're in one, this is to my eye, at least the fourth or more. So they're more common than we think and the prior ones instruct us on what to expect. 

If I take just one example, in the United States when we cut down most of the virgin forests in America, we deforested and cut down these trees to get the wood as both a building stock and material for fence posts on the prairie and also to build our homes, but also for heat, for cooking, home heating, as well as industrial uses. We would like use the wood to make industrial heat, but also to do coking, to make different charcoal or different things. So we use wood as a fuel and a feedstock for materials and energy. 

And we cut down so many trees. We did so much environmental damage that trees became very expensive. So if you go to Maine today, they're a beautiful forest by the way. Those are all second growth and regrowth forests. Those are not the original forest, we cut them down. And as we cut down the forest in New England, then the Eastern Seaboard, we moved further west through Pennsylvania. Eventually we cut down most of the trees in the upper Midwest, like Wisconsin and Minnesota. Well, it's getting harder and harder to cut down the trees and move them to the markets. The markets being Philadelphia, New York, and Boston. The trees are farther and farther away, and you have to go longer and longer distances to get the trees. That wood became very expensive.

Meanwhile, coal in Pennsylvania is closer to market. Coal is a higher performing fuel than wood. It gives you more energy density per pound and it burns more cleanly than wood. It gives off less smoke and generates less ash and gives you less CO2, frankly, per unit of energy as well. So coal comes along and it's closer to market. It's higher performing, it's cleaner and it's cheaper. So we start to use a lot of coal in the 1800s and that leads us to stop cutting down the trees and the forest grow back. It's an incredible environmental solution at the time.

Same kind of concept with whale oil as an illuminant, where we used whale oil, we'd kill these whales just to get the blubber, to get the whale oil as an illuminant, as a lighting fuel. And we killed so many whales, whale populations declined so rapidly, it became much more expensive to get the whales and therefore the whale oil, the expeditions would take like two years instead of two months. And so whale oil became more expensive. 

Meanwhile, Pennsylvania comes to the rescue again, drill for oil in 1859 in Titusville, Pennsylvania, and we get the oil out of the ground. And if you refine or distill, think about it that barrel of oil, the middle slice the middle distill it is kerosene, which is a great illuminant, and it burns brighter and more cleanly and without the pungent smell of whale oil. And it's closer to market and it's cheaper. So with wood to coal and whale oil to kerosene we went to these fossil fuels because they were cheaper, cleaner better higher performing closer to market and that let whale populations recover and let the trees grow back. 

And that was a great environmental solution. But now we're trying to clean up those messes. So one of the lessons here is there are solutions. We tend to move towards cleaner, cheaper, higher performing options. We tend to introduce new problems with those solutions. So coal and kerosene were solutions, but now are problems. And now we're trying to solve that with electricity or wind and solar, which is great. But if we do a lot of solar and a lot of wind at scale, they will introduce different problems, land impacts or mining or blight on the land or whatever your concerns might be. So you have to think about how to avoid those problems of doing them at scale and what we might do in the future to clean up whatever problems they introduce. And by the way, wind and solar are cheaper and cleaner. And I would say even higher performing in a variety of ways. They're not dispatchable the same way, but they're domestically located and they have all these security benefits, which is China and Vladimir Putin can't turn off the wind or the sun, right? So they give us some other performance benefits. So that's where we're headed. But because they all have their limits, we'll do more than wind and solar. We'll do… these clean molecules or geothermal, or we'll have other options because they all have their different upsides and downsides. So that's kind of the story of energy transition is they happen quite often. It gives us some lessons. We typically move to a better place.

Doug Lewin

Yeah, and there's a couple different places I want to go from there, but let's actually, there's something you just said there that was really interesting at the end, and I do want to ask you about this. So, yes, China can't turn off the wind or the sun, but something like 90 plus percent of solar panels are coming from China. There was a major change in US policy in the Inflation Reduction Act, which I've heard described as not so much a climate bill as an industrial policy bill.

Are you starting to see, I know you, again, through not only being a professor, but with Energy Impact Partners, you see things going on in the market. Are you seeing that have an impact on manufacturing here in America?

Michael Webber

Absolutely. So first of all, the wind world is different because most of the wind turbines are made by Vestas or GE or Siemens. So these are Danish, German or American companies. So the wind turbine manufacturing is not dominated by China the way solar panel manufacturing is. And one of the reasons why solar panel manufacturing is dominated by China is partly because of the mines for the silicon, the raw materials. The bigger concern I have is the, I don't know, lithium or cobalt, or different, name your material material. China probably dominates the market for the upgrading and refining of it, if not the original extraction. 

So China has a stranglehold on particular materials that are very important. And those materials might go in that wind turbine made in Germany, but they will go into things like batteries and solar panels as well. So there is a national security risk for these new options, but it's a capitalized risk. Like it's a risk in the manufacturing, not in the operation. So China might be able to turn off the flow of solar panels, but won't turn off the sunshine.

And so, they could disrupt our ability to build solar, but they don't disrupt our ability to operate solar. That's a pretty important security benefit. So there's still some security risk. It just shifts in terms of scale of disruption and where in the supply chain or the lifecycle of a facility it might be impacted. And because of that concern, and this is not a new concern, I was at a briefing in 2007 or 8 with the Department of Energy where they were talking about this back then. They're like, we're really concerned about molybdenum and yttrium and erbium, like these different rare earth materials, as well as the silicon, the lithium, the cobalt, and graphite and things like that. So they've been concerned for a while. They've been raising the flag of concern. So there's been a while to look at it and bipartisan interest in solving this. And the latest policy push with the Inflation Reduction Act and others has these domestic sourcing requirements or supports for domestic manufacturing capacity. In effect, there's been tremendous uptick in domestic manufacturing capacity of electric vehicles and batteries and things like that. Probably won't go to solar panels that much, frankly, it'll be a little bit for solar, but. It's more likely on the other materials. And where my venture capitalists had, we're seeing some producing startups on domestic sourcing capabilities for new alternatives to graphite or new ways to manufacture anode, geocathodes for batteries, that kind of thing. We absolutely see startups that are ready to solve this problem. And not only is there like a federal policy support potentially for the startups, but there are a lot of buyers who are willing to pay more for a shorter, more secure supply chain. But it's just like they wanna have a supply chain that works.

Doug Lewin

Michael, is that specifically about cobalt or are there other issues? When you talk about anodes, cathodes and the, and the different ways of…

Michael Webber

Graphite. I think like so there might be ways to do the lithium ion or the graphite to produce you want. Cobalt's fascinating. Cobalt, there it's less about China more about the Congo for example. Where, in there it's more of a labor justice issue than environmental justice. You have to worry about both: you have to worry about dirty minds, extracting materials that pollute the environment. You have to worry about labor justice issues which might be 12 year old boys in these mines in Africa getting cobalt out of the ground. Or prisoners or slave labor in China making solar panels.

You also worry about the security risks of bad actors turning off the supply of the materials we want to make things. And China has already said they're gonna do that. So these are all real risks. 

Cobalt's a little interesting, different to me in my perspective. When I was at NG in Paris, we were very sensitive to labor issues. And for NG, it was easier just to find an alternative to cobalt, like use a different material than it was to find an alternative cobalt source. So you could either find a different place to mine cobalt so you don't have the child labor issues or you just find an alternative to cobalt. And companies are looking at, okay, how do we avoid that material? Or how do we avoid that country or that mine or that company, that kind of thing?

 So you can do a combination of the two, but there's some materials like graphite and lithium there. It's going to be hard to avoid those materials. And frankly, of all the things I just said, the one I'm actually worried about the most in terms of total volume is copper. I don't know how you avoid copper in an electrified future. And I'm less worried about the environmental labor risks there, but more just the… volume, like is there enough and can we get it at a price that's manageable without depending on countries who hate us.

Doug Lewin

I want to come back to something else you were talking about earlier. One of the things you thought that was wrong or commonly understood is the need for base load power. That's interesting, because I do think there is a very, very common perception out there, like maybe 90%, even to people still in the industry, that you gotta have base load power, you gotta have stuff that's always on. Why is that wrong?

Michael Webber

I think it is hard for people to let go of that term because we've built up the concept of it over a century plus. The way we built our grid in the United States and elsewhere is to be load following. So you and I, we're turning on our lights on and off, we're turning things on. So people like you and me, multiplied by hundreds of millions in America, we're turning on or off our loads. And then we ramp the power plants up and down to follow the loads. So we set up the power sector to be load following. The loads change, however the loads change based on the weather or temperature or time of day, whether we're at work or home or how big our refrigerator is or whatever, and the power plants must follow. So it's load following. 

And then there's certain minimum load that happens throughout the year. We call that the base or the base load, and we have enough power plants that are on all the time to be base load to meet that minimum demand. And then we have peakers or mid-merit dispatch or other things we ramp up and down to meet the variability in the load above the base load. 

We built up that concept over a hundred years and we had trouble letting go of it. We need baseload power plants. And we might need baseload power plants, but we're moving into this new world where we don't just have variable load, you and I changing our habits and patterns during the day with light bulbs, things like that, but variable supply, because we have more supplies that depend on meteorological or astronomical conditions, like the weather or position of the Earth relative to the sun with wind and solar or hydro and that kind of thing. So add to the mix variable supply and variable load. I think load following doesn't make as much sense. In fact, I think we probably need supply following loads. Rather than turning power plants on and off to match when the load is, we should turn the loads on and off to match when the supply is. And those loads could be some non-critical data centers, water treatment, certain types of steel mills. There's a lot of things, cool pumps, water heaters, a lot of things we can turn on and off to match when the power is available, rather than turn the power on and off to match when the load is desired. So I think we need to switch our mindset from load following to supply following. And then if you do that, base loads are a ridiculous concept.

The way Brad Jones used to say it, and I miss Brad dearly, and I'm really sad that he died not too long ago. Brad was just a great executive in the power sector. He was a public servant at ERCOT. He was a public servant in New York, ISO, and at New York Power Authority. Then he came back to ERCOT, just as a gentleman to be an interim CEO after Winter Storm Uri, and recently died. And the way Brad would say it, and I really liked it, he said, I need things I can turn on and off. He didn't use the word baseload.

And it's like, it was way, almost like the way he was addressing this, like we need to change our thinking and our language even, because I need dispatchable things. And a thing that I can turn off is dispatchable and a thing I can turn on is dispatchable. And Brad would say nuclear power plants are not dispatchable because I can't turn them down. Months are all on their own. At least that's true for American nuclear, by the way. French nuclear is very different. And so we would talk about nuclear as baseload because it's on all the time, it serves its need, but Brad would not call it dispatchable, and I agree, frankly. And so we need to get to this dispatchability, things we can turn on and off. And I think that's the future and the dispatchability terminology should replace the base load terminology. And by the way, designing nuclear power plants to turn on and off is entirely possible. We do it in other places around.

Doug Lewin

Yep. And I think it's dispatchability. I think it's also important to consider, right there next to it, like a twin, flexibility. Right? 

Michael Webber

Flex, absolutely. Yeah, agility, absolutely. Yeah, that's right.

Doug Lewin 

Yeah. Right. So and if you start to think about, I mean, you went through a list of the sort of demand that is flexible. It's, I'll just add a few to it because we were talking earlier about carbon management, you know, big carbon dioxide capture machines, right, can be flexible. You don't need to run them 100% of the time. If you run them 90%, that's more carbon than we were capturing before, right? 

Michael Webber 

Totally.

Doug Lewin